Company/Index 9/30/11 9/30/12 9/30/13 9/30/14 9/30/15 9/30/16
100.00 157.87 226.48 254.78 335.07 400.66
100.00 130.20 155.39 186.05 184.91 213.44
100.00
142.00 198.30 225.94 269.30 313.95
2014
12 months ended September 30 (except where noted)
$2.84
$2.62
$2.27
$6,862
$6,438
$5,721
$10,022
$9,064
$8,147
$5,060
$4,816
$4,555
$15,082
$13,880
$12,702
$7.3 trillion
2015
$7.4 trillion
2016
$8.2 trillion
Indexed Returns
Base
period
$200
$250
$300
$350
$400
The accompanying graph and chart compares the cumulative total return on
Visa's common stock with the cumulative total return on Standard & Poor's 500
Index and the Standard & Poor's 500 Data Processing Index from September 30,
2012 through September 30, 2016. The comparison assumes $100 was invested
on September 30, 2011, and that dividends were reinvested. Visa Inc.'s class B
and C common stock are not publicly traded or listed on any exchange or dealer
quotation system.
FY 2016
Stock Performance
2.4 billion
2.3 billion
83.2 billion
71.0 billion
65.0 billion
$5.8 trillion
$4.9 trillion
$4.7 trillion
2.5 billion
(Fiscal Year Ended)
FY 2015
In millions (except for per share data)
Net income
Operating income
Operating expenses
Operating revenues
Financial Highlights (ADJUSTED)
Diluted class A common stock earnings per share
Stockholders' equity
Net income
Operating income
Operating expenses
Operating revenues
$15,082
FY 2016
In millions (except for per share data)
Financial Highlights (GAAP)
VISA
Annual
Report
2016
Diluted class A common stock earnings per share
Operational Highlights*
Total volume, including payments and cash volume²
Payments volume²
Transactions processed on Visa's networks
Cards³
$2.58
$2.16
$32,912
$29,842
$27,413
$5,991
$6,328
$5,438
FY 2014
$7,883
$7,697
$7,199
$4,816
$5,005
$13,880
$12,702
FY 2015
FY 2014
$9,064
$150
$2.48
S&P 500 Index
S&P 500 Data
Processing Index
2. Digital Wallets: We are working closely
with partners and clients to launch
new digital payment solutions. We
supported partners including Google,
Samsung, and Microsoft, in launching
their payment solutions -AndroidPay,
Samsung Pay, and OnePay, respectively
- in markets including Australia, Brazil,
1. Visa Checkout: Approximately two years
ago, we launched Visa Checkout to
enable cardholders a simple, safe way
to make digital purchases. We ended
fiscal 2016 with over 15 million consumer
accounts in 21 countries, and over
1,400 participating financial institution
partners across the globe. More than
300,000 merchants, including some
of the largest global retailers offer Visa
Checkout. And recently we've rolled out
a redesigned checkout experience to all
global merchants and announced that
we're opening the platform to clients
and partners, allowing them to integrate
their digital wallets into Visa Checkout
for streamlined authentication and
checkout.
Our goal is to put Visa in a position to be as
successful in the digital world as we have
been in the physical world. We have made
great progress against this goal:
Enabling digital commerce
This is a multi-year transformation but we
have made great progress.
We have also built a series of innovation
centers around the world where we
highlight new capabilities, show our vision
of the future, and co-create with our
clients.
A critical part of our technology
transformation has been to insource
core technology functions and grow our
own technology capabilities. We've been
adding resources in the U.S. and Singapore
and now have a facility in Bangalore with
over 850 people focused on innovative
development efforts including the Visa
Developer Platform, our data platform, and
digital products.
towards open access software so we can
be a platform that enables our partners
to rapidly launch new products and
experiences. We are in the midst of this
evolution and just this year, we launched
our Developer Center which gives partners
access to our APIs.
We have worked to create a technology
first culture inside Visa. More specifically,
we have developed a software first culture
with a focus on open access for our clients
and partners. This has been a big change
as our rich history was built on the closed
physical network and data centers we had
built. But to be the payments partner of
choice going forward, we had to move
Technology Transformation
We have redefined what partnership
means at Visa and who our partners
are. Partnership is about always putting
our clients' interest first. It's about using
our capabilities to help them grow their
business. We seek to deliver all of our
capabilities to our partners every day.
Internally, we call this delivering "Visa 360"
to our partners. We have also redefined
who our partners are. We are here to
support our issuers and their clients, our
acquirers and their merchants, our co-
brand partners, and governments. We will
also work with third parties when those
third parties are supportive of our clients
and their goals.
Partnership
Our Strategic Priorities We have defined
clear strategic goals and a set of actions to
achieve them.
8. Client delight will drive our success
9. Do the right thing—always
7. Partnership is critical - externally and
internally
6. Deliver the benefits of scale, but think
and act like a startup
4. Continually innovate-it is our lifeblood
5. Execute relentlessly
Canada, Singapore, the UK, and the
U.S.. We also have helped banks around
the world launch their own proprietary
digital payment solutions.
4. CyberSource: In 2010, we acquired
CyberSource, a pioneer in online
payment and fraud management
services. The CyberSource brand caters
to medium and large-sized e-commerce
merchants, while the Authorize.Net
brand services small businesses. Since
the acquisition, the company has tripled
its annual transactions and covers over
400,000 businesses worldwide ranging
from sole proprietorships to the largest
global brands.
Our goal is to put Visa in a position to be as
successful in the digital world as we have been
in the physical world.
Security
Visa Inc.
This also means creating a truly diverse
and inclusive company. We have made
progress in upgrading our understanding,
strategies and approach to diversity and
inclusion. Thinking more broadly about
people both our employees and
those with whom we work and partner,
is not only nonnegotiable, it's a strategic
imperative. It's good for business because
it harnesses the broad perspectives we
need to have across the company to
achieve better solutions for our clients.
It's good for the organization because we
need to access the best talent possible to
push ourselves every day to deliver for our
clients - and we will only have the best
talent if our employee base looks like the
communities where we do business. We
have much more to do but we have placed
a high priority on being successful here.
We have made significant internal
investments in online and physical learning
platforms and we have greatly increased
our college intern and recruiting programs.
We've also improved employee benefits
programs and are constantly focusing on
bringing new productivity tools to our
employees.
we can attract a different group of people
than we otherwise could.
This includes initiatives such as
transforming our physical work
environment to informal, open, and
collaborative work spaces and building
new facilities in places like San Francisco,
Palo Alto, Manila, and Bangalore where
I have consistently said that we are only as
good as the people who work at Visa. We
have been so successful because we have
attracted the best in the business around
the world and that can only continue if
we retain and attract the best and the
brightest. We are lucky today that our
global talent runs deep - we have people
with depth and breadth of payments
knowledge that is second to none. We
are doing much to ensure we remain
the employer of choice for the best and
brightest in payments.
People
Most importantly, over the past two years,
we have provided payment accounts
to more than 120 million people who
previously did not have access to the
formal financial system. Our ambitions
here are large and we have great tools to
accomplish these goals.
3. We believe our business model is the
best platform for growth
launched this service in India, Kenya and
Rwanda and are in discussions to launch in
additional markets in 2017.
A huge part of our future is about
expanding access to our services. We
believe that our products are good for all
who use or sponsor them - our clients
and partners, consumers, merchants, and
governments. We are in a position to
do a good thing for all by creating more
access to our network and we need to
focus both our philanthropy and our
business resources to driving this goal.
To accomplish this, we have been refining
our business model and approach to meet
local market and client needs (products,
services, pricing) where appropriate. We are
developing and supporting new methods
of acceptance to drive growth in a manner
that recognizes the circumstances of local
markets. And we are partnering with non-
traditional participants (e.g., governments,
non-governmental organizations) in local
markets to achieve shared goals.
Access
4. New Visa Consumer Authentication
Service: In 2012, Visa launched Visa
Consumer Authentication Service
(VCAS) to accelerate the adoption of
stronger e-commerce authentication.
VCAS utilizes an enhanced risk scoring
model to deliver increased protection
against e-commerce fraud, minimizing
consumer friction, and providing
the ability for issuers to use dynamic
authentication. VCAS has been
implemented by approximately 80
issuers with plans to expand to Europe in
2017. Approximately 40% of e-commerce
transactions in North America and over
25% in Latin America is processed using
VCAS. In 2017, VCAS will also support 3D
Secure 2.0, the new global standard for
e-commerce authentication.
fraud management rules and strategies
in real time using their own historical
transaction data. The product has seen
significant uptake since launch.
3. Decision Manager Replay: Through our
Decision Manager suite of products,
we offer merchants fraud tools, which
are increasingly important given the
migration of fraud to digital channels.
In 2015, CyberSource launched Decision
Manager Replay, the industry's first
fraud tuning analytics tool, which allows
merchants to quickly adjust their online
chip card issuance and the activation
of chip-enabled terminals, and the U.S.
is now the largest chip card market
in the world. 64% of credit and 44%
of debit cards are now chip enabled
and approximately 30% of merchant
locations that accept Visa at the physical
point of sale are now enabled as well.
We continue to work to improve the
merchant and accountholder experience
and are also working with merchants
and acquirers to address challenges
related to getting terminals certified and
activated. We have seen a 47% reduction
in fraud when a chip card is used at a
merchant who accepts chip cards.
2. U.S. EMV: In the U.S., we've made
meaningful progress on the rollout
and adoption of EMV chip payment
technology, and are working to address
the challenges which exist. Over the last
year, there has been steady growth in
1. Tokens: The Visa Token Service makes
digital transactions more secure by
removing card numbers from the
transaction and replacing the card
number with a token - a substitute
number that cannot be used if it is
stolen or compromised. We recently
streamlined access to the Visa Token
Service for Internet of Things (IoT)
companies and announced new
specifications that allow certified third
party service providers to provide a
range of services for Visa tokens. By
expanding access to the Visa Token
Service to new partners, Visa issuers will
be able to more quickly and easily offer
secure digital payment services across a
wide range of devices.
We now have more tools than ever to help
achieve our goals here. For example, mVisa,
a mobile phone push payments product,
allows consumers to transfer money to
merchants in real time using their mobile
phones, and merchants are able to accept
Visa transactions without having to install
any card acceptance hardware. We have
2. Value those who came before us
3. Visa Commerce Network: We launched
Visa Commerce Network, an offers and
loyalty platform that allows merchants
to create online and in-app commerce
experiences to acquire customers,
drive loyalty, and increase sales. More
than a dozen leading merchants have
successfully used VCN, including Uber,
which launched Uber Local Offers, a
new way for riders to earn discounted
rides by using the same Visa credit card
on file with Uber at local merchants.
Our Culture We value actions over words.
Too many companies talk about culture
but operate to a different standard. We
want to do the opposite. We want our
actions to define our culture. Those actions
include:
As we look ahead, we continue to believe
our global opportunity for growth is
huge. Our business grows with the global
economy and there is still enormous
opportunity to displace cash and checks.
The safety and efficiency of electronic
payments is almost always a better
solution for individuals and merchants
- of any size and any wealth level. Most
exciting, today we have more ways to
displace that cash than ever before.
payments capabilities to our clients. In
the near-term, we expect to improve our
yields, reduce costs and very quickly deliver
more digital solutions for our clients.
Longer term, Europe represents a new
attractive opportunity for ongoing growth,
with over $3.0 trillion of Europe's personal
consumption expenditure still transacted
with cash and checks.
We also completed the acquisition of Visa
Europe during the year. Reuniting our
companies was extremely important for
us, most importantly because we operate
as one brand with shared global clients,
and we, as one integrated global company,
can deliver a much more robust set of
Despite the headwinds, we have delivered
very strong underlying franchise growth
and continued to invest in new capabilities
and partnerships across the globe.
Normalized for Europe results² and on a
constant dollar basis, payment volume
increased 9.9% and processed transactions
grew 10.5%. We invested heavily in our
strategic priorities while holding overall
adjusted' expense growth to 5.1%
(including the addition of Visa Europe
discussed below). I will talk more about
progress against these priorities below.
began to dissipate towards the end of the
calendar year and we expect this trend to
continue in 2017.
Visa delivered good financial results for
2016 in a less than robust global economic
environment. We reported adjusted'
earnings per share growth of 8.5% and net
revenue growth of 8.7% in the full fiscal
year. We were able to deliver this growth
despite the headwinds of the strong U.S.
dollar, low oil prices, and the uneven global
economic recovery. These growth rates are
below what you should expect of us over
the longer term. In fact, these headwinds
Our position working with issuers and
their customers and acquirers and their
merchant clients enables us to connect
over 3 billion payment accounts to
44 million endpoints - a network that
has extraordinary value. However, the
continually changing landscape requires
Visa to constantly re-define how we
interact with our clients and partners and
to continually add capabilities that can be
delivered through our clients.
It has been another year of great change
within the payments industry and Visa
continues to work to position itself as the
global payments leader.
Adjusted earnings per share and operating expenses for the fiscal full-year 2016 exclude the impact of significant non-recurring items primarily related to the acquisition of Visa Europe. Please see reconciliation in Item 7 - Management's
Discussion and Analysis of Financial Condition and Results of Operations - Overview - Adjusted financial results in this Annual report.
Dear Shareholders,
4 Includes Europe results in fiscal fourth quarter 2016.
3 These figures represent data for the quarters ended June 30, 2016, June 30, 2015 and June 30, 2014.
1 For further discussion of fiscal years 2016, 2015 and 2014 non-GAAP adjusted operating expenses, operating income, net income and diluted earnings per share, see Item 7-Management's Discussion and Analysis of Financial Condition and Results
of Operations-Overview-Adjusted financial results in this Annual Report. The per share amounts for the prior periods presented have been retroactively adjusted to reflect the four-for-one stock split effected in the second quarter of fiscal 2015.
2 Total volume is the sum of payments volume and cash volume. Payments volume is the total monetary value of transactions for goods and services that are purchased on Visa-branded cards and payment products. Cash volume generally consists
of cash access transactions, balance access transactions, balance transfers and convenience checks. Payments volume for the 12 months ended June 30 is the basis for service revenue for the 12 months ended September 30. For further discussion,
see Item 7-Management's Discussion and Analysis of Financial Condition and Results of Operations-Overview-Nominal payments volume and transaction counts in this Annual Report.
S&P 500 Data Processing Index
S&P 500 Index
Visa Inc.
9/30/11 9/30/12 9/30/13 9/30/14 9/30/15 9/30/16
1. Operate with integrity
$100
A letter from Charles W. Scharf
2 Includes Europe results in both current and prior year.
2016 Performance
d. Lead the industry in payment security
e. Expand access to our network and
services
outstanding management team today. We
have individuals with long tenures at Visa,
people who joined Visa at the IPO, and
people who joined more recently from
banks, technology companies, and other
great brands/companies. Simply stated, the
talent across Visa is exceptional.
Global
Management Team We have an
acquiring Europe on terms and with a
structure that made sense for all parties
We have made great progress across each,
and while there is always more to do in a
business which is changing rapidly, what
follows is a brief reflection.
4. Create a true global company by
f. Create an environment inside Visa
focused on attracting and retaining
the best and brightest people in
payments
c. Enable digital commerce as effectively
as we had enabled commerce at the
physical point of sale
b. Transform our technology platform
and how we use it with clients and
partners
3. Define a clear set of strategic priorities
that we organize and execute around -
including:
a. Continue to be a great partner to
issuers, but embrace merchants and
third parties who support our four
party model
1. Ensure that we have the best
management team in the business for
the challenges and opportunities in
front of us.
My priorities were clear:
When I arrived in November 2012, much
of the heavy lifting had been completed.
We had made so much progress under Joe
Saunders' leadership as CEO that I had the
luxury of looking towards new challenges
and opportunities. For years, payments
had been something few had focused
on, but that was dramatically changing.
With both Visa and MasterCard going
public, people saw what a great business
payments was. And, with e-commerce
growth accelerating and beginning to
migrate to mobile devices, there were
more opportunities for people to insert
themselves into the payment chain.
In 2007, all the regional associations except
Europe merged into a single company
and went public in 2008 in the second
largest U.S. public offering ever. The next
four years were focused on merging
these entities, learning to act like a for
profit company where you have to earn
your clients' partnership every day, and
working to act as a single integrated global
company.
Our first fifty years as a series of regionally
owned and controlled bank owned
associations was a model which allowed
us to build one of the most recognized
brands around the world. The benefits
of the single brand and a common
interoperable operating platform, matched
with locally driven strategies, proved to be
a winning combination.
As I reach the end of my tenure at Visa, I've
had a chance to reflect on our rich history,
our current position, and where we go
from here.
Reflecting on our progress
2. Create a culture inside Visa where we
value our past but move with haste
towards the future by taking appropriate
risks
U.K. loss sharing agreement. On November 2, 2015, the Company, Visa Europe and certain of
Visa Europe's member financial institutions located in the United Kingdom (the “U.K. LSA members")
entered into a loss sharing agreement (the “U.K. loss sharing agreement"). Each of the U.K. LSA
members has agreed, on a several and not joint basis, to compensate the Company for certain losses
which may be incurred by the Company, Visa Europe or their affiliates as a result of certain existing
and potential litigation relating to the setting and implementation of domestic multilateral interchange
fee rates in the United Kingdom prior to the Closing (the "U.K. covered claims"), subject to the terms
and conditions set forth therein and, with respect to each U.K. LSA member, up to a maximum amount
of the up-front cash consideration received by such U.K. LSA member. The U.K. LSA members'
obligations under the U.K. loss sharing agreement are conditional upon, among other things, either (a)
losses valued in excess of the sterling equivalent at the Closing of €1.0 billion having arisen in U.K
covered claims (and such losses having reduced the conversion rate of the U.K.&I preferred stock
accordingly), or (b) the conversion rate of the U.K.&I preferred stock having been reduced to zero
pursuant to losses arising in claims relating to multilateral interchange fee rate setting in the Visa
Europe territory. See Note 3-U.S. and Europe Retrospective Responsibility Plans.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
September 30, 2016
Litigation management deed. On June 21, 2016, the Company and Visa Europe entered into a
litigation management deed (the “litigation management deed”), which sets forth the agreed upon
procedures for the management of the VE territory covered litigation, the allocation of losses resulting
from the VE territory covered litigation ("VE territory covered losses”) between the U.K.&I and Europe
preferred stock, and any accelerated conversion or reduction in the conversion rate of the shares of
U.K.&I and Europe preferred stock. The litigation management deed applies only to VE territory
covered litigation (and resultant losses and liabilities). Subject to the terms and conditions set forth
therein, the litigation management deed provides that the Company will generally control the conduct
of the VE territory covered litigation, subject to certain obligations to report and consult with the newly
established litigation management committees for VE territory covered litigation ("VE territory litigation
management committees"). The VE territory litigation management committees, which are composed
of representatives of certain Visa Europe members, have also been granted consent rights to approve
certain material decisions in relation to the VE territory covered litigation.
Preferred stock. In connection with the transaction, three new series of preferred stock of the
Company were created:
We recorded $191 million, $255 million and $226 million of revenue in accordance with the
Framework Agreement during fiscal 2016, 2015 and 2014, respectively. As a result of the acquisition,
the fee recognized in fiscal year 2016 was pro-rated for the period prior to the Closing, and no fees
related to the Framework Agreement were recognized in the three months ended September 30, 2016,
nor will they be recognized in future periods.
VISA INC.
Acquisition-related costs. The Company incurred $152 million of non-recurring operating expense
during fiscal 2016. This amount is comprised of $60 million of transaction expenses recorded in
professional fees, and $92 million of expense related to U.K. stamp duty, which was recorded in
general and administrative expenses.
Framework Agreement. In connection with the Company's October 2007 reorganization, the
Company granted to Visa Europe exclusive, irrevocable and perpetual licenses to use the Visa
trademarks and technology intellectual property owned by the Company and certain affiliates within the
Visa Europe region for use in the field of financial services, payments, related information technology and
information processing services and participation in the Visa system (the "Framework Agreement").
83
•
The Company issued 2,480,466 shares of U.K.&I preferred stock to Visa Europe's member
financial institutions in the United Kingdom and Ireland entitled to receive preferred stock at the
Closing, and 3,156,823 shares of Europe preferred stock to Visa Europe's other member financial
institutions entitled to receive preferred stock at the Closing. Under certain conditions described below,
the U.K.&I and Europe preferred stock is convertible into shares of class A common stock or class A
equivalent preferred stock, at an initial conversion rate of 13.952 shares of class A common stock for
each share of U.K.&I preferred stock and Europe preferred stock. The conversion rates may be
reduced from time to time to offset certain liabilities, if any, which may be incurred by the Company,
Visa Europe or their affiliates as a result of certain existing and potential litigation relating to the setting
of multilateral interchange fee rates in the Visa Europe territory (the “VE territory covered litigation"),
where, generally, the relevant claims (and resultant liabilities and losses) relate to the period before the
Closing. Only seventy percent of such liabilities may be offset where the liability arises from a claim
related to inter-regional multilateral interchange fees applied to transactions where the issuer is located
outside the Visa Europe territory while the merchant outlet is located within the Visa Europe territory. A
reduction in the conversion rates of the U.K.&I preferred stock and the Europe preferred stock have the
same economic effect on diluted class A common stock earnings per share as repurchasing the
Company's class A common stock because it reduces the as-converted class A common stock share
count. Additionally, the shares of U.K.&I and Europe preferred stock are subject to restrictions on
transfer and may become convertible in stages based on developments in the VE territory covered
litigation. The shares of U.K.&I and Europe preferred stock will become fully convertible on the 12th
anniversary of the Closing, subject only to a holdback to cover any then-pending claims. Upon any
such conversion of the U.K.&I or Europe preferred stock (whether by such 12th anniversary, or
thereafter with respect to claims pending on such anniversary), the holder would receive either class A
common stock or class A equivalent preferred stock (for those who are not eligible to hold class A
common stock pursuant to the Company's charter). The class A equivalent preferred stock will be
freely transferable and each share of class A equivalent preferred stock will automatically convert into
100 shares of class A common stock upon a transfer to any holder that is eligible to hold class A
common stock under the charter. See Note 3-U.S. and Europe Retrospective Responsibility Plans.
series C convertible participating preferred stock, par value $0.0001 per share (the "Europe
preferred stock").
series B convertible participating preferred stock, par value $0.0001 per share (the "U.K.&I
preferred stock"); and
generally designed to be economically equivalent to the Company's class A common stock (the
"class A equivalent preferred stock");
series A convertible participating preferred stock, par value $0.0001 per share, which is
September 30, 2016
•
84
The holders of the U.K.&I and Europe preferred stock have no right to vote on any matters,
except for certain defined matters, including, in specified circumstances, any consolidation, merger or
combination of the Company. Holders of the class A equivalent preferred stock, upon issuance at
conversion, will have similar voting rights to the rights of the holders of the U.K.&I and Europe
preferred stock. With respect to those limited matters on which the holders of preferred stock may vote,
approval by the holders of the preferred stock requires the affirmative vote of the outstanding voting
power of each such series of preferred stock, each such series voting as a single class. Upon
issuance, all three series of preferred stock will participate on an as-converted basis in regular
quarterly cash dividends declared on the Company's class A common stock.
VISA INC.
Less: Visa Europe Framework Agreement loss (3)
September 30, 2016
Less: Treasury stock(4)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(1,856)
20,810
$
Total consideration before adjustments
1,236
Fair value of deferred cash consideration(2)
19,574
$
Total upfront consideration
5,692
13,882
Fair value of preferred stock(1)
Cash payment
(in millions)
Consideration
Accounting Purchase
Accounting treatment for the acquisition. The following table details the purchase consideration:
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
VISA INC.
79
88
made to provisional amounts recognized in a business combination. The Company elected to early
adopt this guidance on a prospective basis effective October 1, 2015. The adoption did not have a
material impact on the consolidated financial statements.
September 30, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
VISA INC.
60
80
In September 2015, the FASB issued ASU No. 2015-16, which simplifies the accounting for post-
acquisition adjustments by eliminating the requirement to retrospectively account for the adjustments
In April 2015, the FASB issued ASU No. 2015-05, which provides guidance about a customer's
accounting for fees paid in a cloud computing arrangement. The amendment will help entities evaluate
whether such an arrangement includes a software license, which should be accounted for consistent
with the acquisition of other software licenses; otherwise, it should be accounted for as a service
contract. The Company will adopt the standard effective October 1, 2016. The adoption is not expected
to have a material impact on the consolidated financial statements.
In April 2015, the FASB issued ASU No. 2015-03, which simplifies the presentation of debt
issuance costs by requiring that debt issuance costs be presented in the balance sheet as a direct
deduction from the carrying amount of debt liability, consistent with debt discounts and premiums.
Subsequently, in August 2015, the FASB issued ASU No. 2015-15, which adds SEC staff guidance on
the presentation of debt issuance costs related to line-of-credit arrangements, allowing for the deferral
and presentation of debt issuance costs as an asset and subsequent amortization of the deferred debt
issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are
any outstanding borrowings on the line-of-credit arrangement. The Company elected to early adopt the
standards effective October 1, 2015 and the carrying amount of the Company's debt liability is
presented net of issuance costs on the consolidated financial statements. See Note 9—Debt.
In June 2014, the FASB issued ASU No. 2014-12, which requires a performance target in stock
compensation awards that affects vesting, and is achievable after the requisite service period, be
treated as a performance condition. The Company will adopt the standard effective October 1, 2016.
The adoption is not expected to have a material impact on the consolidated financial statements.
In May 2014, the Financial Accounting Standards Board ("FASB") issued ASU No. 2014-09,
which requires an entity to recognize the amount of revenue to which it expects to be entitled for the
transfer of goods or services to customers. The ASU will replace existing revenue recognition guidance
in U.S. GAAP when it becomes effective. In August 2015, the FASB issued ASU No. 2015-14, which
defers the effective date of ASU No. 2014-09 by one year. In March 2016, the FASB issued ASU 2016-
08, which clarifies the implementation guidance on principal versus agent considerations under the
new revenue recognition standard. In April 2016, the FASB issued ASU 2016-10, which clarifies the
implementation guidance on identifying promised goods or services and on determining whether an
entity's promise to grant a license with either a right to use the entity's intellectual property (which is
satisfied at a point in time) or a right to access the entity's intellectual property (which is satisfied over
time). In May 2016, the FASB issued ASU 2016-11, which rescinds certain SEC staff observer
comments upon adoption of ASU 2014-09, including the SEC comments related to consideration given
by a vendor to a customer. In May 2016, the FASB also issued ASU 2016-12, which provides narrow
scope improvements and technical expedients on assessing collectibility, presentation of sales taxes,
evaluating contract modifications and completed contracts at the time of transition and the disclosure
requirement for the effect of the accounting change for the period of adoption. The Company will adopt
the standard effective October 1, 2018. The standard permits the use of either the retrospective or
cumulative effect transition method. The Company has not yet selected a transition method and is
evaluating the full effect that ASU 2014-09 and all of its related subsequent updates will have on its
consolidated financial statements and related disclosures.
Recently Issued Accounting Pronouncements
September 30, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
VISA INC.
Earnings per share. The Company calculates earnings per share using the two-class method to
reflect the different rights of each class and series of outstanding common stock. The dilutive effect of
incremental common stock equivalents is reflected in diluted earnings per share by application of the
treasury stock method. See Note 15-Earnings Per Share.
Share-based compensation. The Company recognizes share-based compensation cost using the
fair value method of accounting. The Company recognizes compensation cost for awards with only
service conditions on a straight-line basis over the requisite service period, which is generally the
vesting period. Compensation cost for performance and market-condition-based awards is recognized
on a graded-vesting basis. The amount is initially estimated based on target performance and is
adjusted as appropriate based on management's best estimate throughout the performance period.
See Note 16-Share-based Compensation.
Guarantees and indemnifications. The Company recognizes an obligation at inception for
guarantees and indemnifications that qualify for recognition, regardless of the probability of occurrence.
The Company indemnifies its financial institution clients for settlement losses suffered due to the failure
of any other client to fund its settlement obligations in accordance with the Visa Rules. The estimated
fair value of the liability for settlement indemnification is included in accrued liabilities on the
consolidated balance sheets and is described in Note 11-Settlement Guarantee Management.
(170)
In November 2015, the FASB issued ASU 2015-17, which simplifies the presentation of deferred
income taxes by requiring that deferred tax assets and liabilities be presented as non-current. The
standard impacts presentation only. The Company elected to early adopt the standard on a
retrospective basis effective October 1, 2015 and all deferred tax assets and liabilities are classified as
non-current. Previously, current deferred tax assets had been presented separately and current
deferred tax liabilities had been included in accrued liabilities on the consolidated balance sheets. All
prior period amounts within the consolidated financial statements have been reclassified to conform to
current period presentation. The reclassification did not affect the Company's total equity, operating
revenues, net income, comprehensive income or cash flows as of and for the periods presented. The
adoption did not have a material impact on the consolidated financial statements.
In January 2016, the FASB issued ASU 2016-01, which amends certain aspects of recognition,
measurement, presentation and disclosure of financial instruments, including the requirement to
measure certain equity investments at fair value with changes in fair value recognized in net income.
The Company will adopt the standard effective October 1, 2018. The adoption is not expected to have
a material impact on the consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, which requires the recognition of lease assets
and lease liabilities arising from operating leases in the statement of financial position. The Company
will adopt the standard effective October 1, 2019 and does not anticipate that this new accounting
guidance will have a material impact on its consolidated statement of operations. The Company
estimates the value of leased assets and liabilities that may be recognized could be in the hundreds of
millions of dollars. The actual impact will depend on the Company's lease portfolio at the time of
adoption.
In March 2016, the FASB issued ASU 2016-05, which clarifies that a change in the counterparty
to a derivative instrument that has been designated as the hedging instrument under Topic 815,
Derivatives and Hedging, does not, in and of itself, require dedesignation of that hedging relationship
provided that all other hedge accounting criteria continue to be met. The Company will adopt the
standard effective October 1, 2017. The adoption is not expected to have a material impact on the
consolidated financial statements.
agreed to pay an additional €1.0 billion, plus 4% compound annual interest, on the third
anniversary of the Closing.
a value of €5.3 billion ($6.1 billion) at the closing stock price of $77.33 on June 21, 2016; and
79 million shares of class A common stock of the Company, as described below, equivalent to
issued preferred stock of the Company convertible upon certain conditions into approximately
paid up-front cash consideration of €12.2 billion ($13.9 billion);
•
•
On June 21, 2016, the Company acquired 100% of the share capital of Visa Europe, a payments
technology business. The acquisition positions Visa to create additional value through increased scale,
efficiencies realized by the integration of both businesses, and benefits related to Visa Europe's
transition from an association to a for-profit enterprise. At the closing of the transaction (the "Closing"),
the Company:
Note 2-Acquisition of Visa Europe
82
In October 2016, the FASB issued ASU 2016-16, which requires that entities recognize the
income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer
occurs. The Company is evaluating the effect that ASU 2016-16 will have on its consolidated financial
statements and is considering early adoption of the standard.
In May 2016, the FASB issued ASU 2016-13, which amends guidance on reporting credit losses
for assets held at amortized cost basis and available-for-sale debt securities. The amendment requires
a financial asset measured at amortized cost basis to be presented at the net amount expected to be
collected. The amendment in this update also requires that credit losses on available-for-sale debt
securities be presented as an allowance rather than as a write-down. The measurement of credit
losses for newly recognized financial assets and subsequent changes in the allowance for credit losses
are recorded in the statement of income. The Company is evaluating the full effect that ASU 2016-13
will have on its consolidated financial statements and will adopt the standard effective October 1, 2020.
In March 2016, the FASB issued ASU 2016-09, which simplifies several aspects of the
accounting for share-based payments, including immediate recognition of all excess tax benefits and
deficiencies in the income statement, changing the threshold to qualify for equity classification up to the
employees' maximum statutory tax rates, allowing an entity-wide accounting policy election to either
estimate the number of awards that are expected to vest or account for forfeitures as they occur, and
clarifying the classification on the statement of cash flows for the excess tax benefit and employee
taxes paid when an employer withholds shares for tax-withholding purposes. The Company will early
adopt the standard effective October 1, 2016. The adoption is not expected to have a material impact
on the consolidated financial statements.
basis of the investor's previously held interest and adopt the equity method of accounting as of the
date the investment becomes qualified for equity method accounting. The Company will adopt the
standard effective October 1, 2017. The adoption is not expected to have a material impact on the
consolidated financial statements.
September 30, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
VISA INC.
81
In March 2016, the FASB issued ASU 2016-07, which eliminates the requirement that an entity
retroactively adopt the equity method of accounting if an investment qualifies for use of the equity
method as a result of an increase in the level of ownership or degree of influence. The equity method
investor is required to add the cost of acquiring the additional interest in the investee to the current
In March 2016, the FASB issued ASU 2016-06, which clarifies the requirements for assessing
whether contingent call/put options that can accelerate the payment of principal on debt instruments
are clearly and closely related to their debt hosts. An entity performing the assessment is required to
assess the embedded call/put options solely in accordance with a four-step decision sequence. The
Company will adopt the standard effective October 1, 2017. The adoption is not expected to have a
material impact on the consolidated financial statements.
In August 2016, the FASB issued ASU 2016-15, which provides guidance on eight specific cash
flow issues, including debt prepayments or debt extinguishment costs. The Company will adopt the
standard effective October 1, 2018. The adoption is not expected to have a material impact on the
consolidated financial statements.
Total accounting purchase consideration
2.93 $
18,784
(243)
(1,184)
(41)
299
$
(in millions)
Total impact of Visa Europe acquisition on consolidated net income
Remeasurement of currency forward contracts
Remeasurement of euro deposits
Revaluation of Visa Europe put option
Add acquisition-related gains recorded by Visa Inc., net of tax, upon:
Transaction costs incurred
Interest expense incurred on $16.0 billion debt, net of interest income
earned
Less acquisition-related expense recorded by Visa Inc., net of tax, upon:
Effective settlement of the Framework Agreement
by Visa Inc. under the Framework Agreement, net of tax
Less approximately $65 million of revenue that would have been recorded
Impact of Visa Europe acquisition on fiscal 2016 consolidated net income:
Visa Europe net income included in consolidated net income
Total consolidated Visa Inc. net income for the fiscal year ended September 30, 2016 includes
$299 million from Visa Europe's operations for the three months ended September 30, 2016. This
includes the non-cash, non-recurring $88 million tax benefit upon remeasurement of a deferred tax
liability to reflect a tax rate change in the United Kingdom. In connection with the acquisition, Visa Inc.
recorded several significant items that would not have been incurred had we not acquired Visa Europe.
Therefore, the acquisition of Visa Europe reduced Visa Inc. fiscal year 2016 consolidated net income
by approximately $872 million, as follows:
September 30, 2016
(96)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
255
47
87
80
conversion of Visa Europe's historical results of operations from euro to U.S. dollar, and from
International Financial Reporting Standards to U.S. GAAP;
The pro forma financial information above reflects the following material pro forma adjustments:
2.06
15,425
5,210
Non-derivative financial instrument designated as a net investment hedge. The Company
designated the euro-denominated deferred cash consideration liability, a non-derivative financial
instrument, as a hedge against a portion of the Company's euro-denominated net investment in Visa
Europe. See Note 2-Acquisition of Visa Europe. Changes in the value of the deferred cash
consideration liability, attributable to the change in exchange rates at the end of each reporting period,
partially offset the foreign currency translation adjustments resulting from the euro-denominated net
investment, are reported as a component of accumulated other comprehensive income or loss on the
Company's consolidated balance sheet. See Note 12-Derivative and Non-derivative Financial
Instruments.
$
16,090
7,072 $
(in millions, except per share data)
Fiscal 2015
Pro Forma Consolidated Results
Fiscal 2016
$
$
E
Diluted earnings per share
Net income
Total operating revenues
The following table presents supplemental pro forma information as if the acquisition and related
issuance of senior notes had occurred on October 1, 2014. The pro forma financial information is not
necessarily indicative of the Company's consolidated results of operations that would have been
realized had the acquisition been completed on October 1, 2014, nor does it purport to project the
future results of operations of the combined company or reflect any reorganizations, or cost or other
operating synergies that may occur subsequent to the Closing. The actual results of operations of the
combined company may differ significantly from the pro forma results presented here due to many
factors.
(872)
91
VISA INC.
98
86
$
Current assets(1)
(in millions)
Preliminary Purchase Price
Allocation
The following table summarizes the preliminary purchase price allocation.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
September 30, 2016
VISA INC.
85
95
Total purchase consideration has been allocated to the tangible and identifiable intangible assets
acquired and liabilities assumed based on a preliminary valuation as we continue to gather additional
information necessary to finalize the valuation. These preliminary values may further change in future
reporting periods until finalization of the valuation, which will occur no later than the third quarter of
fiscal 2017.
the fair value of the Visa class C common stock held by Visa Europe as of the Closing.
the loss upon consummation of the transaction resulting from the effective settlement of the Framework Agreement between
Visa and Visa Europe. The Visa Europe Framework Agreement provided Visa Europe with a perpetual, exclusive right to
operate the Visa business in the Visa Europe region in exchange for a license fee paid to Visa. Under the terms of the
Framework Agreement, the license fee paid by Visa Europe has increased modestly since inception in 2007, while the value
of the Visa Europe business has increased at a greater rate. Using an income approach, the Company assessed the
contractual terms and conditions of the Framework Agreement as compared to current market conditions and the historical
and expected financial performance of Visa Europe. Based on the analysis performed, the Company determined that the
terms were not at fair value as determined under U.S. GAAP at the Closing. The present value of the expected differential
between payments required by the Framework Agreement and those that would be required if the contract were at fair value
under U.S. GAAP was calculated over the Framework Agreement's contractual perpetual term, resulting in a loss of $1.9
billion recognized within operating expense in the Company's consolidated statement of operations during the third quarter
of fiscal 2016, and a reduction to the purchase accounting consideration; and
(4)
(3)
Total consideration has been adjusted to account for the following items to arrive at the
accounting purchase consideration:
This amount reflects the fair value of deferred cash consideration of €1.0 billion, plus 4.0% compound annual interest,
payable on the third anniversary of the Closing, discounted at a rate of 1.2%. At September 30, 2016, the deferred
consideration of $1.2 billion reflects interest accretion recognized during the three months ended September 30, 2016, more
than offset by the impact of changes in the euro to U.S. dollar exchange rate from the Closing.
The fair value of preferred stock was determined based on its as-converted value of $6.1 billion on June 21, 2016, less a 6%
discount for illiquidity as these shares are subject to limitations on transferability. The fair value was also adjusted to reflect
$25 million of "right to recover for covered losses" related to VE territory covered losses prior to the Closing. See Note 20-
Legal Matters.
(2)
(1)
4,457
Non-current assets(2)
258
Current liabilities(3)
Current liabilities assumed mainly include settlement payable, client incentives liabilities and accrued liabilities.
The excess of purchase consideration over net assets acquired was recorded as goodwill, which represents the value that is
expected from increased scale and synergies as a result of the integration of both businesses.
Current assets are largely comprised of cash and cash equivalents and settlement receivable.
Intangible assets consist of customer relationships and reacquired rights, which have been valued as a single composite
intangible asset as they are inextricably linked. These intangibles are considered indefinite-lived assets as the associated
customer relationships have historically not experienced significant attrition, and the reacquired rights are based on the
Framework Agreement, which has a perpetual term. Non-current assets and liabilities include deferred tax assets and
liabilities that result in net deferred tax liabilities of $2.4 billion, which are primarily related to these indefinite-lived intangible
assets, and are not expected to be realized in the foreseeable future.
(4)
(3)
(2)
(1)
18,784
$
Fair value of net assets acquired
$
3,268
16,137
customer relationships and reacquired rights (2)
-
Intangible assets
(621)
Tangible assets and liabilities
(2,605)
Non-current liabilities(2)
(2,731)
Goodwill(4)
Derivative financial instruments. The Company uses foreign exchange forward derivative
contracts to reduce its exposure to foreign currency rate changes on forecasted non-functional
currency denominated operational cash flows. Derivatives are carried at fair value on a gross basis in
either prepaid and other current assets or accrued liabilities on the consolidated balance sheets. At
September 30, 2016, derivatives outstanding mature within 18 months or less. Gains and losses
resulting from changes in fair value of designated derivative instruments are accounted for either in
accumulated other comprehensive income or loss on the consolidated balance sheets, or in the
consolidated statements of operations in the corresponding account where revenue or expense is
hedged, or to general and administrative for hedge amounts determined to be ineffective. Gains and
losses resulting in changes in fair value of derivative instruments not designated for hedge accounting
are recorded in general and administrative for hedges of operating activity, or non-operating income
(expense) for hedges of non-operating activity. See Note 12-Derivative and Non-derivative Financial
Instruments.
Actual and pro forma impact of acquisition. The Company did not include Visa Europe's financial
results in the Company's consolidated statements of operations from the acquisition date, June 21,
2016, through June 30, 2016 as the impact was immaterial. Total consolidated Visa Inc. net revenue
for the fiscal year ended September 30, 2016 includes $554 million from Visa Europe's operations for
the three months ended September 30, 2016. Had the Company not acquired Visa Europe,
approximately $65 million of revenue would have been recorded under the Framework Agreement
during the fourth quarter of fiscal 2016. Therefore, the acquisition of Visa Europe resulted in a net
increase of $489 million in net revenue.
September 30, 2016
sheet date and for revenue and expense accounts using an average exchange rate for the period.
Resulting translation adjustments are reported as a component of accumulated other comprehensive
income or loss on the consolidated balance sheets.
VISA INC.
September 30, 2016
assets and liabilities, and operating loss and credit 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. In assessing whether deferred tax
assets are realizable, management considers whether it is more likely than not that some portion or all
of the deferred tax assets will not be realized. A valuation allowance is recorded for the portions that
are not expected to be realized based on the level of historical taxable income, projections of future
taxable income over the periods in which the temporary differences are deductible, and qualifying tax
planning strategies.
Where interpretation of the tax law may be uncertain, the Company recognizes, measures and
discloses income tax uncertainties. The Company accounts for interest expense and penalties related
to uncertain tax positions as non-operating expense in the consolidated statements of operations. The
Company files a consolidated federal income tax return and, in certain states, combined state tax
returns. The Company elects to claim foreign tax credits in any given year if such election is beneficial
to the Company. See Note 19-Income Taxes.
Pension and other postretirement benefit plans. The Company's defined benefit pension and
other postretirement benefit plans are actuarially evaluated, incorporating various critical assumptions
including the discount rate and the expected rate of return on plan assets (for qualified pension plans).
The discount rate is based on a cash flow matching analysis, with the projected benefit payments
matching spot rates from a yield curve developed from high-quality corporate bonds. The expected rate
of return on pension plan assets considers the current and expected asset allocation, as well as
historical and expected returns on each plan asset class. Any difference between actual and expected
plan experience, including asset return experience, in excess of a 10% corridor is recognized in net
periodic pension cost over the expected average employee future service period, which is
approximately 9 years for the U.S. plans and 12 years for the Visa Europe U.K. pension plan. Other
assumptions involve demographic factors such as retirement age, mortality, attrition and the rate of
compensation increases. The Company evaluates assumptions annually and modifies them as
appropriate.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Foreign currency remeasurement and translation. The Company's functional currency is the U.S.
dollar for the majority of its foreign operations except for Visa Europe whose functional currency is the
euro. Transactions denominated in currencies other than the applicable functional currency are
converted to the functional currency at the exchange rate on the transaction date. At period end,
monetary assets and liabilities are remeasured to the functional currency using exchange rates in
effect at the balance sheet date. Non-monetary assets and liabilities are remeasured at historical
exchange rates. Resulting foreign currency transaction gains and losses related to conversion and
remeasurement are recorded in general and administrative expense in the consolidated statements of
operations and were not material for fiscal 2016, 2015 and 2014.
Where a non-U.S. currency is the functional currency, translation from that functional currency to
the U.S. dollar is performed for balance sheet accounts using exchange rates in effect at the balance
78
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
The Company recognizes the funded status of its benefit plans in its consolidated balance sheets
as other assets, accrued liabilities and other liabilities. The Company recognizes settlement losses
when it settles pension benefit obligations, including making lump-sum cash payments to plan
participants in exchange for their rights to receive specified pension benefits, when certain thresholds
are met. See Note 10-Pension, Postretirement and Other Benefits.
September 30, 2016
2016
(in millions)
2015
2016
Level 3
Level 2
Level 1
Fair Value Measurements at September 30
Using Inputs Considered as
Assets and Liabilities Measured at Fair Value on a Recurring Basis
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
Note 4-Fair Value Measurements and Investments
92
92
The Company measures certain assets and liabilities at fair value. See Note 1-Summary of
Significant Accounting Policies.
Fair Value Measurements
2015
The as-converted value of preferred stock is calculated as the product of: (a) 2 million and 3 million shares of the U.K.&I and
Europe preferred stock outstanding, respectively, as of September 30, 2016; (b) the 13.952 class A common stock
conversion rate applicable to both the U.K.&I and Europe preferred stock as of September 30, 2016; and (c) $82.70, Visa's
class A common stock closing stock price as of September 30, 2016. Figures in the table may not recalculate exactly due to
rounding. Earnings per share is calculated based on unrounded numbers.
(2)
(1) Figures in the table may not recalculate exactly due to rounding. As-converted and book values are based on unrounded
numbers.
5,683
VISA INC.
2016
securities
Assets
Foreign exchange derivative
Other Assets:
instruments
Foreign exchange derivative
Prepaid and other current assets:
Auction rate securities
Corporate debt securities
Equity securities
U.S. Treasury securities.
2015
securities
sale:
Investment securities, available-for-
Equity securities
Investment securities, trading:
6,470 $
U.S. government-sponsored debt
$ 196 $ 280
$ 4,537 $ 3,051
Cash equivalents and restricted cash:
Money market funds ....
U.S. government-sponsored debt
$
6,504 $
(34)
Europe Retrospective Responsibility Plan
On August 26, 2014, Visa entered into an amendment to the omnibus agreement. The omnibus
amendment makes applicable to certain settlements in opt-out cases in the interchange multidistrict
litigation the settlement-sharing provisions of the omnibus agreement, pursuant to which the monetary
portion of any settlement of the interchange multidistrict litigation covered by the omnibus agreement
would be divided into a MasterCard portion at 33.3333% and a Visa portion at 66.6667%. The omnibus
amendment also provides that in the event of termination of the class Settlement Agreement, Visa and
MasterCard would make mutually acceptable arrangements so that Visa shall have received two-thirds
and MasterCard shall have received one-third of the total of (i) the sums paid to defendants as a result
of the termination of the Settlement Agreement and (ii) the takedown payments previously made to
defendants.
September 30, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
VISA INC.
90
90
Omnibus agreement. Visa entered into an omnibus agreement with MasterCard and certain Visa
U.S.A. members that confirmed and memorialized the signatories' intentions with respect to the loss
sharing agreement, the interchange judgment sharing agreement and other agreements relating to the
interchange multidistrict litigation, see Note 20—Legal Matters. Under the omnibus agreement, the
monetary portion of any settlement of the interchange multidistrict litigation covered by the omnibus
agreement would be divided into a MasterCard portion at 33.3333% and a Visa portion at 66.6667%. In
addition, the monetary portion of any judgment assigned to Visa-related claims in accordance with the
omnibus agreement would be treated as a Visa portion. Visa would have no liability for the monetary
portion of any judgment assigned to MasterCard-related claims in accordance with the omnibus
agreement, and if a judgment is not assigned to Visa-related claims or MasterCard-related claims in
accordance with the omnibus agreement, then any monetary liability would be divided into a
MasterCard portion at 33.3333% and a Visa portion at 66.6667%. The Visa portion of a settlement or
judgment covered by the omnibus agreement would be allocated in accordance with specified
provisions of the Company's U.S. retrospective responsibility plan. The litigation provision on the
consolidated statements of operations is not impacted by the execution of the omnibus agreement.
On October 22, 2015, Visa entered into an amendment to the loss sharing agreement. The
amendment includes within the scope of U.S. covered litigation any action brought after the
amendment by an opt out from the Rule 23(b)(3) Settlement Class in MDL 1720 that arises out of facts
or circumstances substantially similar to those alleged in MDL 1720 and that is not transferred to or
otherwise included in MDL 1720. On the same date, Visa entered into amendments to the interchange
judgment sharing agreement and omnibus agreement that include any such action within the scope of
those agreements as well.
The Company obtained certain protections for VE territory covered losses through the U.K.&l and
Europe preferred stock, the U.K. loss sharing agreement, and the litigation management deed, referred
to as the "Europe retrospective responsibility plan." See Note 2-Acquisition of Visa Europe and Note
20 Legal Matters. The plan covers VE territory covered litigation (and resultant liabilities and losses)
relating to the covered period, which generally refers to the period before the Closing. Visa's protection
from the plan is further limited to seventy percent of any liabilities where the claim relates to inter-
regional multilateral interchange fee rates where the issuer is located outside the Visa Europe territory,
while the merchant is located within the Visa Europe territory. The plan does not protect the Company
against all types of litigation in Europe, only the interchange litigation specifically covered by the plan's
terms.
Loss sharing agreement. Visa has entered into a loss sharing agreement with Visa U.S.A., Visa
International and certain Visa U.S.A. members. The loss sharing agreement provides for the
indemnification of Visa U.S.A., Visa International and, in certain circumstances, Visa with respect to: (i)
the amount of a final judgment paid by Visa U.S.A. or Visa International in the U.S. covered litigation
after the operation of the interchange judgment sharing agreement, plus any amounts reimbursable to
the interchange judgment sharing agreement signatories; or (ii) the damages portion of a settlement of
a U.S. covered litigation that is approved as required under Visa U.S.A.'s certificate of incorporation by
the vote of Visa U.S.A.'s specified voting members. The several obligation of each bank that is a party
to the loss sharing agreement will equal the amount of any final judgment enforceable against Visa
U.S.A., Visa International or any other signatory to the interchange judgment sharing agreement, or the
amount of any approved settlement of a U.S. covered litigation, multiplied by such bank's then-current
membership proportion as calculated in accordance with Visa U.S.A.'s certificate of incorporation.
obligations of Visa U.S.A.'s members for such excess amount, including but not limited to enforcing
indemnification obligations pursuant to Visa U.S.A.'s certificate of incorporation and bylaws and in
accordance with their membership agreements.
September 30, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
VISA INC.
89
Indemnification obligations. To the extent that amounts available under the U.S. litigation escrow
arrangement and other agreements in the plan are insufficient to fully resolve the U.S. covered
litigation, the Company will use commercially reasonable efforts to enforce the indemnification
Conversion feature. Under the terms of the plan, when the Company funds the U.S. litigation
escrow account, the shares of class B common stock are subject to dilution through an adjustment to
the conversion rate of the shares of class B common stock to shares of class A common stock. This
has the same economic effect on diluted class A common stock earnings per share as repurchasing
the Company's class A common stock, because it reduces the class B conversion rate and
consequently the as-converted class A common stock share count. See Note 14—Stockholders'
Equity.
An accrual for the U.S. covered litigation and a change to the litigation provision are recorded
when loss is deemed to be probable and reasonably estimable. In making this determination, the
Company evaluates available information, including but not limited to recommendations made by the
litigation committee. The accrual related to the U.S. covered litigation could be either higher or lower
than the U.S. litigation escrow account balance. The Company did not record an additional accrual for
the U.S. covered litigation during fiscal 2016. See Note 20—Legal Matters.
(1) These payments are associated with the interchange multidistrict litigation. See Note 20-Legal Matters.
Interchange judgment sharing agreement. Visa U.S.A. and Visa International have entered into
an interchange judgment sharing agreement with certain Visa U.S.A. members that have been named
as defendants in the interchange multidistrict litigation, which is described in Note 20—Legal Matters.
Under this judgment sharing agreement, Visa U.S.A. members that are signatories will pay their
membership proportion of the amount of a final judgment not allocated to the conduct of MasterCard.
Unlike the U.S. retrospective responsibility plan, the Europe retrospective responsibility plan does
not have an escrow account that is used to fund settlements or judgments. The Company is entitled to
recover VE territory covered losses through a periodic adjustment to the class A common stock
conversion rates applicable to the U.K.&I and Europe preferred stock. The total amount of protection
available through the preferred stock component of the Europe retrospective responsibility plan is
equivalent to the as-converted value of the preferred stock, which can be calculated at any point in
time as the product of: (a) the outstanding number of shares of preferred stock; (b) the current
conversion rate applicable to each class of preferred stock; and (c) Visa's class A common stock price.
This amount differs from the value of the preferred stock recorded within stockholders' equity on the
Company's consolidated balance sheet. The book value of the preferred stock reflects its historical
value recorded at the Closing less VE territory covered losses recovered through a reduction of the
applicable conversion rate. The book value does not reflect changes in the underlying class A common
stock price subsequent to the Closing.
Visa Inc. net income will not be impacted by VE territory covered losses as long as the as-
converted value of the preferred stock is greater than the covered loss. VE territory covered losses will
be recorded when the loss is deemed to be probable and reasonably estimable, or in the case of
attorney's fees, when incurred. Concurrently, the Company will record a reduction to stockholders'
equity and operating expenses, which represents the Company's right to recover such losses through
adjustments to the conversion rate applicable to the preferred stock. The reduction to stockholders'
equity is recorded in a contra-equity account referred to as "right to recover for covered losses."
VE territory covered losses may be recorded before the corresponding adjustment to the
applicable conversion rate is effected. Adjustments to the conversion rate may be executed once in
(34)
Less: Right to recover for covered losses
5,717
instruments
$
Total .....
3,201
3,642
Europe preferred stock
2,516
2,862 $
U.K.&I preferred stock
(in millions)
Book Value of Preferred
Stock
September 30, 2016
As-Converted Value of
Preferred Stock(2)
The following table sets forth the as-converted value of the preferred stock available to recover
VE territory covered losses compared to the book value of preferred shares recorded in stockholders'
equity within the Company's consolidated balance sheet as of September 30, 2016(1):
any six-month period unless a single, individual loss greater than €20 million is incurred, in which case,
the six-month limitation does not apply. When the adjustment to the conversion rate is made, the
amount previously recorded in "right to recover for covered losses" as contra-equity will then be
recorded against the book value of the preferred stock within stockholders' equity. As of September 30,
2016, the Company had recorded $34 million in the "right to recover for covered losses" related to VE
territory covered losses, of which $25 million was incurred prior to the Closing. There were no
adjustments to the conversion rate in fiscal 2016.
September 30, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
VISA INC.
91
Total recovery for covered losses available
Total
Foreign exchange derivative
Accrued liabilities:
17,158
The following financial instruments are not measured at fair value on the Company's consolidated
balance sheet at September 30, 2016, but require disclosure of their fair values: time deposits
recorded in prepaid expenses and other current assets, settlement receivable and payable, and
customer collateral. The estimated fair value of such instruments at September 30, 2016 approximates
their carrying value due to their generally short maturities. If measured at fair value in the financial
statements, these financial instruments would be classified as Level 2 in the fair value hierarchy.
Investments
Trading Investment Securities
Trading investment securities include mutual fund equity security investments related to various
employee compensation and benefit plans. Trading activity in these investments is at the direction of
95
95
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
15,882 $
September 30, 2016
Available-for-sale Investment Securities
The amortized cost, unrealized gains and losses and fair value of available-for-sale investment securities
are as follows:
September 30, 2016
Amortized
Cost
Gross Unrealized
Gains Losses
Fair
Value
Amortized
Cost
September 30, 2015
Gross Unrealized
Gains Losses
Fair
Value
the Company's employees. These investments are held in trust and are not available for the Company's
operational or liquidity needs. Interest and dividend income and changes in fair value are recorded in non-
operating income, and offset in personnel expense on the consolidated statements of operations. As of
September 30, 2016 and 2015, trading investment securities totaled $71 million and $66 million, respectively.
U.S. government-sponsored debt securities
4,045
1,698
income approach. As the assumptions employed to measure these assets on a non-recurring basis are
based on management's judgment using internal and external data, these fair value determinations are
classified as Level 3 in the fair value hierarchy. The Company completed its annual impairment review
of its indefinite-lived intangible assets and goodwill as of February 1, 2016, and concluded that there
was no impairment. No recent events or changes in circumstances indicate that impairment existed at
September 30, 2016. See Note 1-Summary of Significant Accounting Policies.
Other Fair Value Disclosures
Long-term debt. In December 2015, the Company issued fixed-rate senior notes in an aggregate
principal amount of $16.0 billion, with maturities ranging between 2 and 30 years. See Note 9-Debt.
These debt instruments are measured at amortized cost on the Company's consolidated balance sheet
at September 30, 2016. The fair value of these notes, as provided by third-party pricing vendors, is
based on quoted prices in active markets for similar, not identical, assets. The pricing data obtained
from outside sources is reviewed internally for reasonableness, compared against benchmark quotes
from independent pricing sources, then confirmed or revised accordingly. If measured at fair value in
the financial statements, these instruments would be classified as Level 2 in the fair value hierarchy.
The following table presents the carrying amount and estimated fair value of the Company's debt
in order of maturity:
September 30, 2016
Estimated Fair
Value
1.20% Senior Notes due December 2017
2.20% Senior Notes due December 2020
2.80% Senior Notes due December 2022
3.15% Senior Notes due December 2025
4.15% Senior Notes due December 2035
4.30% Senior Notes due December 2045
Other Financial Instruments not Measured at Fair Value
3,461
Carrying
Amount
1,746 $
1,754
2,988
3,077
2,238
2,359
3,964
4,225
1,485
(in millions)
$ 4,693 $
VISA INC.
94
$ 6,839 $ 5,777 $ 5,200 $ 3,504 $
6
76
50
$-$7
533
249
2,656
4
2,178
53
-
2,615
66
71
instruments
Total
1,072
Other liabilities:
instruments
Foreign exchange derivative
Visa Europe put option.
4,699
$ 7
$ 116 $ 13
EA
If the Company were required to perform a quantitative assessment for impairment testing of
goodwill and indefinite-lived intangible assets, the fair values would generally be estimated using an
Non-financial assets and liabilities. Long-lived assets such as goodwill, indefinite-lived intangible
assets, finite-lived intangible assets, and property, equipment and technology are considered non-
financial assets. The Company does not have any non-financial liabilities measured at fair value on a
non-recurring basis. Finite-lived intangible assets primarily consist of customer relationships, trade
names, and reseller relationships, all of which were obtained through acquisitions. See Note 7—
Intangible Assets and Goodwill.
Non-marketable equity investments and investments accounted for under the equity method.
These investments are classified as Level 3 due to the absence of quoted market prices, the inherent
lack of liquidity, and the fact that inputs used to measure fair value are unobservable and require
management's judgment. When certain events or circumstances indicate that impairment may exist,
the Company revalues the investments using various assumptions, including the financial metrics and
ratios of comparable public companies. There were no significant impairment charges incurred during
fiscal 2016, 2015 and 2014. At September 30, 2016 and 2015, these investments totaled $46 million
and $45 million, respectively. These assets are classified in other assets on the consolidated balance
sheets.
Assets Measured at Fair Value on a Non-recurring Basis
Visa Europe put option agreement. On June 21, 2016, the Company acquired 100% of the share
capital of Visa Europe, effected by the Visa Europe board of directors' exercise of the amended Visa
Europe put option. Therefore, the Visa Europe put option was contractually terminated as a result of
the transaction. During the first quarter of fiscal 2016, the Company recorded a $255 million non-cash
decrease in the fair value of the put option as non-operating income in the Company's consolidated
statements of operations, reducing the fair value of the liability to zero. See Note 2-Acquisition of Visa
Europe. The liability was classified within Level 3 as the assumed probability that Visa Europe would
elect to exercise its option in its unamended form, and the estimated P/E differential were among
several unobservable inputs used to value the unamended put option.
Level 3 assets and liabilities measured at fair value on a recurring basis. Auction rate securities
are classified as Level 3 due to a lack of trading in active markets and a lack of observable inputs in
measuring fair value. There were no substantive changes to the valuation techniques and related
inputs used to measure fair value during fiscal 2016.
Level 2 assets and liabilities measured at fair value on a recurring basis. The fair value of U.S.
government-sponsored debt securities and corporate debt securities, as provided by third-party pricing
vendors, is based on quoted prices in active markets for similar, not identical, assets. The pricing data
obtained from outside sources is reviewed internally for reasonableness, compared against benchmark
quotes from independent pricing sources, then confirmed or revised accordingly. Foreign exchange
derivative instruments are valued using inputs that are observable in the market or can be derived
principally from or corroborated by observable market data. There were no substantive changes to the
valuation techniques and related inputs used to measure fair value during fiscal 2016.
Level 1 assets measured at fair value on a recurring basis. Money market funds, publicly-traded
equity securities and U.S. Treasury securities are classified as Level 1 within the fair value hierarchy,
as fair value is based on quoted prices in active markets.
September 30, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
VISA INC.
33
93
There were no transfers between Level 1 and Level 2 assets during fiscal 2016.
136 $ $ 13 $ - $ 255
$
$
-
$
20
$ 255
Liabilities
(426)
Balance at September 30
$
$
31
75 $
(in millions)
2014
2015
2016
For the Years Ended
September 30,
Other-than-temporary impairment on investments
Investment income
25
Realized gains, net . .
Realized gains, net .
Unrealized gains (losses), net
Investment securities, trading:
Gain on other investments
Interest and dividend income on cash and investments
Investment income is recorded as non-operating income in the Company's consolidated
statements of operations and consisted of the following:
Investment Income
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
September 30, 2016
VISA INC.
Investment securities, available-for-sale:
3
8
(6)
Prepaid operating expenses and maintenance
(in millions)
2015
2016
September 30, September 30,
Prepaid expenses and other current assets consisted of the following:
Note 5 Prepaid Expenses and Other Assets
35
46 $
82 $
(3)
(5)
(4)
1
21
3 N
$
(2)
2
26
-26
7,126
151
$
$
Total..
-
Auction rate securities
Corporate debt securities
533
533
248
4
4
$ 7,124 $ 55 $
- $ 2,615
2,656
2,652
2,179
53
46
3
2,176
7
248
Equity securities
U.S. Treasury securities.
(in millions)
$ 4,699 $ 2,612 $
6 $
3 $
4
- $ 7,179 $ 5,808 $
7 $
—
3,931
3,195
$
3,193
3,925
(in millions)
Fair Value
Amortized Cost
96
96
Total
Due after 1 year through 5 years
Due after 5 years through 10 years
Due after 10 years
Due within one year.
September 30, 2016:
The available-for-sale investment securities primarily include U.S. Treasury securities, U.S. government-
sponsored debt securities and corporate debt securities. Available-for-sale debt securities are presented below in
accordance with their stated maturities. The majority of these investments, $3.9 billion, are classified as non-
current, as they have stated maturities of more than one year from the balance sheet date. However, these
investments are generally available to meet short-term liquidity needs.
$ 3,384
$ 3,931
Long-term available-for-sale investment
securities
(2,431)
(3,248)
Less: current portion of available-for-sale
investment securities
$ 5,815
7,118
(45)
1,027 $
$
Income tax receivable (See Note 19-Income Taxes)
U.S. Retrospective Responsibility Plan
Note 3-U.S. and Europe Retrospective Responsibility Plans
The pro forma results also reflect the applicable tax impact of the pro forma adjustments. The
taxes associated with the adjustments reflect the statutory tax rate in effect during the respective
periods.
For purposes of preparing this pro forma financial information, the fair value of the Visa Europe put option is
presumed to have been reduced to zero prior to October 1, 2014. Therefore, gains or losses associated with
changes in the fair value of the Visa Europe put option liability are not included in pro forma net income for either
period presented.
o $74 million of gains for the twelve months ended September 30, 2016 related to
currency forward contracts entered into to mitigate a portion of the foreign currency
exchange rate risk associated with the upfront cash consideration.
• $145 million of foreign exchange gains related to euros held during the twelve months
ended September 30, 2016; and
o $152 million of acquisition-related costs for the twelve months ended September 30,
2016;
o $1.9 billion Visa Europe Framework Agreement loss related to the effective settlement
of the Framework Agreement recognized in the twelve months ended September 30,
2016;
the inclusion of non-recurring amounts on October 1, 2014, the date the acquisition is
presumed to have occurred for purposes of presenting pro forma results, and a
corresponding reduction of these amounts in the period originally recognized, as follows:
an increase in non-operating expense for additional interest expense and amortization of
debt issuance costs resulting from the issuance of the $16.0 billion senior notes;
exclusion of a $255 million gain in the twelve months ended September 30, 2016 and $110
million loss in the twelve months ended September 30, 2015 related to the revaluation of the
Visa Europe put option (1); and
elimination of transactions between Visa and Visa Europe upon consolidation, primarily
related to annual license and various other fees paid by Visa Europe to Visa in accordance
with the Framework Agreement;
September 30, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
VISA INC.
(1)
•
•
The Company has established several related mechanisms designed to address potential liability
under certain litigation referred to as the "U.S. covered litigation." These mechanisms are included in
and referred to as the U.S. retrospective responsibility plan and consist of a U.S. litigation escrow
agreement, the conversion feature of the Company's shares of class B common stock, the
indemnification obligations of the Visa U.S.A. members, an interchange judgment sharing agreement,
a loss sharing agreement and an omnibus agreement, as amended.
U.S. covered litigation consists of a number of matters that have been settled or otherwise fully or
substantially resolved, as well as the following:
.
the Interchange Multidistrict Litigation. In re Payment Card Interchange Fee and Merchant
Discount Antitrust Litigation, 1:05-md-01720-JG-JO (E.D.N.Y.) or MDL 1720, including all
cases currently included in MDL 1720, any other case that includes claims for damages
relating to the period prior to the Company's IPO that has been or is transferred for
(in millions)
1,072 $ 1,498
Fiscal 2015
$
Fiscal 2016
September 30, 2016
Payments to opt-out merchants(1)
Balance at October 1
The following table sets forth the changes in the U.S. litigation escrow account:
•
U.S. Litigation escrow agreement. In accordance with the U.S. litigation escrow agreement, the
Company maintains an escrow account, from which settlements of, or judgments in, the U.S. covered
litigation are paid. The amount of the escrow is determined by the board of directors and the
Company's litigation committee, all members of which are affiliated with, or act for, certain Visa U.S.A.
members. The escrow funds are held in money market investments along with the interest earned, less
applicable taxes, and are classified as restricted cash on the consolidated balance sheets.
any claim that challenges the reorganization or the consummation thereof; provided that
such claim is transferred for coordinated or consolidated pre-trial proceedings at any time to
MDL 1720 by the Judicial Panel on Multidistrict Litigation or otherwise included at any time
in MDL 1720 by order of any court of competent jurisdiction; and
coordinated or consolidated pre-trial proceedings at any time to MDL 1720 by the Judicial
Panel on Multidistrict Litigation or otherwise included at any time in MDL 1720 by order of
any court of competent jurisdiction;
September 30, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
VISA INC.
•
•
88
any case brought after October 22, 2015, by a merchant that opted out of the Rule 23(b)(3)
settlement class pursuant to the 2012 Settlement Agreement in MDL 1720 that arises out of
facts or circumstances substantially similar to those alleged in MDL 1720 and that is not
transferred to or otherwise included in MDL 1720. See Note 20—Legal Matters.
137
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
353
40
97
76
10
$
555
63
$
50
Total
77
232
Other
Foreign exchange derivative instruments (See Note 12-Derivative
Financial Instruments) ..
122
Fiscal Year
Commercial Paper Program
(in millions)
Future principal payments on the Company's outstanding debt are as follows:
•
2045 Notes
2035 Notes
2017
On or after the applicable par call date, the Notes, except the 2017 Notes, may be redeemed as a
whole or in part, at the Company's option at any time, at a redemption price equal to 100% of the
principal amount of the Notes being redeemed plus accrued interest.
$
—
2018
1,750
Other material terms are:
a financial covenant which requires the Company to maintain a Consolidated Indebtedness to
Consolidated EBITDA Ratio (as defined in the Credit Facility) of not greater than 3.75 to 1.00;
customary restrictive covenants, which limit the Borrowers' ability to, among other things,
create certain liens, effect fundamental changes to their business, or merge or dispose
substantially all of their assets, subject in each case to customary exceptions and amounts;
• customary events of default, upon the occurrence of which, after any applicable grace period,
the requisite lenders will have the ability to accelerate all outstanding loans thereunder and
terminate the commitments; and
.
or an alternative base rate, in each case plus applicable margins that fluctuate based on the applicable
rating of senior unsecured long-term securities of the Company. The Borrowers have agreed to pay a
commitment fee which will fluctuate based on such applicable rating of the Company.
The Borrowers had no borrowings under the Credit Facility and the Company was in compliance
with all related covenants as of and during the year ended September 30, 2016. The participating
lenders in the Credit Facility include certain holders of the Company's class B and class C common
stock and U.K.&I and Europe preferred stock, certain of the Borrowers' customers and their affiliates.
Note 10-Pension, Postretirement and Other Benefits
The Company sponsors various qualified and non-qualified defined benefit pension and other
postretirement benefit plans that provide for retirement and medical benefits for substantially all
employees residing in the United States. The Company also sponsors other pension benefit plans that
provide benefits for internationally-based employees at certain non-U.S. locations. As a result of the
acquisition of Visa Europe, the Company assumed the obligations related to Visa Europe's defined
benefit plan, primarily consisting of the U.K. funded and unfunded pension plans.
Disclosures presented below include the U.S. pension plans and the non-U.S. plans, comprising
only the Visa Europe plans. Disclosures relating to other non-U.S. pension benefit plans are not
included as they are immaterial, individually and in aggregate. The Company uses a September 30
measurement date for its pension and other postretirement benefit plans.
Defined benefit pension plans. The U.S. pension benefits under the defined benefit pension plan are
earned based on a cash balance formula. An employee's cash balance account is credited with an
amount equal to 6% of eligible compensation plus interest based on 30-year Treasury securities. In
October 2015, the Company's board of directors approved an amendment of the U.S. qualified defined
benefit pension plan such that the Company discontinued employer provided credits after
December 31, 2015. Plan participants continue to earn interest credits on existing balances at the time
of the freeze. As a result, a curtailment gain totaling $8 million was recognized in fiscal 2016 as part of
the Company's net periodic benefit cost.
The funding policy for the U.S. pension benefits is to contribute annually no less than the minimum
required contribution under ERISA.
.
September 30, 2016
VISA INC.
102
The Credit Facility provides the Borrowers with a borrowing capacity of up to $4.0 billion.
Borrowings under the Credit Facility are available for general corporate purposes. Interest on the
borrowings under the Credit Facility would be charged at the London Interbank Offered Rate (LIBOR)
On January 27, 2016, the Company, Visa International Service Association and Visa U.S.A. Inc.,
and subsequently, Visa Europe Limited and Visa Europe Services Inc. (collectively, the "Borrowers")
entered into a 5- year, unsecured $4.0 billion revolving credit facility (the "Credit Facility") with Bank of
America, N.A., as administrative agent and the lenders party thereto. JP Morgan Chase Bank, N.A.,
acted as syndication agent in connection with the Credit Facility; Bank of China, Los Angeles Branch,
Barclays Bank PLC, Citibank, N.A., HSBC Bank USA, N.A., Royal Bank of Canada, Standard
Chartered Bank, The Bank of Tokyo-Mitsubishi UFJ, Ltd., U.S. Bank National Association, Wells Fargo
Bank National Association, Deutsche Bank Securities Inc. and Toronto Dominion (New York) LLC,
acted as Documentation Agents; and J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner &
Smith Incorporated, Bank of China, Los Angeles Branch, Barclays Bank PLC, Citigroup Global
Markets, Inc., HSBC Bank USA, N.A., RBC Capital Markets, Standard Chartered Bank, The Bank of
Tokyo-Mitsubishi UFJ, Ltd., U.S. Bank National Association, Wells Fargo Securities, LLC, Deutsche
Bank Securities Inc. and TD Securities (USA) LLC, acted as joint lead arrangers and joint book
runners. The Credit Facility, which expires on January 27, 2021, replaced the Company's prior $3.0
billion credit facility, which expired on January 27, 2016.
Credit Facility
Visa maintains a commercial paper program to support its working capital requirements and for
other general corporate purposes. Under the program, the Company is authorized to issue up to $3.0
billion in outstanding notes, with maturities up to 397 days from the date of issuance. The Company
had no outstanding obligations under the program at September 30, 2016.
3,000 11,250 $16,000
Total
2021 Thereafter
2020
2019
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
other customary and standard terms and conditions.
Projected benefit obligation in excess of plan assets
Pension Benefits
Foreign currency exchange rate changes
(105)
(64)
16
1
(6)
118
$ 1,022 $ 1,117 $
Benefit payments.
Company contribution
Actual return on plan assets
Fair value of plan assets-end of fiscal year.
Fair value of plan assets-beginning of fiscal year.
Visa Europe acquisition..
Accumulated benefit obligation.
Benefit obligation-end of fiscal year.
Foreign currency exchange rate changes
(1)
(3)
86
(2)
3
1
381
20 $
Change in Plan Assets:
$ 1,077 $ 1,022 $
| | | || | ||
EA
(9)
(9)
Current liability
36 $
22 $
$
Non-current asset
Recognized in Consolidated Balance Sheets:
(59)
415
SASA
(18) $
(14) $
17 $
5 $
$
Funded status at end of fiscal year
$
2
(1)
102
25
33
287
SA
2-
ཆེ|
18 $
474
September 30,
2015
2016
Pension Benefits
Non-U.S. Plans
U.S. Plans
Plan amendment
Benefit payments
Actuarial loss (gain)
Interest cost
Service cost
Visa Europe acquisition..
Other
Benefit obligation-beginning of fiscal year
20 bps
Change in Benefit Obligation:
Summary of Plan Activities
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
VISA INC.
104
Postretirement benefits plan. The postretirement benefits plan provides medical benefits for retirees
and dependents who meet minimum age and service requirements. Benefits are provided from
retirement date until age 65. Retirees must contribute on a monthly basis for the same coverage that is
generally available to active employees and their dependents. The Company's contributions are
funded on a current basis.
Under the Visa Europe U.K. pension plans, presented below under "non-U.S. plans", retirement
benefits are provided based on the participants' final pensionable pay and are currently closed to new
entrants. However, future benefits continue to accrue for active participants. The funding policy is to
contribute in accordance with the appropriate funding requirements agreed with the trustees of the U.K.
pension plans. Additional amounts may be agreed with the U.K. pension plan trustees.
September 30, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
VISA INC.
September 30, 2016
September 30,
Postretirement Benefits
Pension
NA $
ΝΑ
474
18 $
14 $
$ 1,072 $ 1,005 $
994
$ 1,072 $
4
(8)
(105)
(64)
40
86
40
47
13
40
444
$ 1,005 $ 983 $
(in millions)
2016
2015
2016
September 30,
Benefits
0 | | -2 | ||±±
2016
Non-current liability
(10)
(in millions)
Non-U.S. Plans
September 30,
2016
2015
2016
U.S. Plans
September 30,
106
Fair value of plan assets-end of year
Benefit obligation-end of year.
Fair value of plan assets-end of year . .
Accumulated benefit obligation-end of year
Accumulated benefit obligation in excess of plan
assets
(16) $
Benefit obligations in excess of plan assets related to the Company's U.S. non-qualified
plan and the non-U.S. pension plans:
(3) $
$
15
$
(2)
2
(1) $
$
15
$
(in millions)
2
(19) $
(474)
- $
Postretirement Benefits
Pension Benefits
Other
Non-U.S. Plans(1)
U.S. Plans
1
42
40
40
Expected return on assets
Amortization of:
Interest cost
$ 13 $47 $ 46
Service cost
Net periodic pension and other postretirement plan cost:
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
September 30, 2016
VISA INC.
415
- $
$ - $
474
(19) $
(16) $
A GA
415
- $
Benefits
(8)
Benefits
Other
Postretirement
2015
2016
September 30,
September 30,
Postretirement Benefits
Pension Benefits
Other
U.S. Plans
Non-U.S. Plans
Amounts recognized in accumulated other comprehensive income before tax:
September 30, 2016
2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
105
(59)
(18) $
(14) $
17 $
5 $
$
Funded status at end of fiscal year
(53)
(15)
(11)
VISA INC.
2015
Pension Benefits
September 30,
2016
(in millions)
Pension
Benefits
Non-U.S. Plans
U.S. Plans
Total
Prior service credit
Actuarial loss (gain)
Amounts from accumulated other comprehensive income to be amortized into net periodic
benefit cost in fiscal 2017:
66
(10) $
(7) $
$
223
$
241
$
Total ......
(5)
(2)
(9)
66
(5) $ (5) $
$
103
$ 241 $ 232
Net actuarial loss (gain)
Prior service credit
Pension
June 14, 2045
At September 30, 2016, estimated future amortization expense on technology was as follows:
June 14, 2035
Reseller relationships
125
(67)
192
112
(80)
192
Trade names
155
(196) $
$
131 $ 351
(220) $
$
$ 351
Customer relationships
Finite-lived intangible assets:
(in millions)
Net
Gross
Net
September 30, 2015
Amortization
Accumulated
Accumulated
Amortization
September 30, 2016
Gross
Indefinite-lived and finite-lived intangible assets consisted of the following:
Note 7-Intangible Assets and Goodwill
95
(70)
25
95
Total Indefinite-lived
1,520
2,564
2,564
1,520
Visa Europe franchise right
$ 6,925
$ 22,873 $ 6,925 $
4,084
4,084
Visa trade name
$ 22,873 $
reacquired rights
Customer relationships and
assets:
Indefinite-lived intangible
Depreciation and amortization expense related to property, equipment and technology was $452
million, $431 million and $369 million for fiscal 2016, 2015 and 2014, respectively. Included in those
amounts was amortization expense on technology of $259 million, $251 million and $198 million for
fiscal 2016, 2015 and 2014, respectively.
352
(379) $ 277 $ 691 $
656 $
$
assets
Total finite-lived intangible
36
(17)
53
9
(9)
18
Other
36
(59)
(339) $
intangible assets
September 30, 2016
VISA INC.
Construction-in-progress
Furniture, equipment and leasehold improvements
Buildings and building improvements
Land
Property, equipment and technology, net, consisted of the following:
Note 6-Property, Equipment and Technology, Net
The Company elected to early adopt ASU 2015-17 on a retrospective basis effective October 1, 2015 and all deferred tax
assets and liabilities are classified as non-current. Previously, current deferred tax assets had been presented separately
and current deferred tax liabilities had been included in accrued liabilities on the consolidated balance sheets. See Note 1-
Summary of Significant Accounting Policies and Note 19-Income Taxes.
(1)
22
778
893 $
13
57
45
36
36
46
72
☐
627
22
22
(in millions)
731 $
September 30,
2015
September 30,
2016
Non-current deferred tax assets (See Note 19-Income Taxes) (1)
Total
Long-term prepaid operating expenses and other
Other investments (See Note 4-Fair Value Measurements and
Investments)
Non-current income tax receivable (See Note 19-Income Taxes)
Pension assets (See Note 10-Pension, Postretirement and Other
Benefits)
Other non-current assets consisted of the following:
Technology
Total property, equipment and technology
Accumulated depreciation and amortization
Property, equipment and technology, net
98
$274 $ 209 $ 161 $ 108 $ 84 $ 836
Estimated future amortization expense
Total
2021 and
thereafter
2020
2019
(in millions)
2018
Fiscal: 2017
Technology consists of both purchased and internally developed software. Internally developed
software primarily represents software utilized by the VisaNet electronic payments network. At
September 30, 2016 and 2015, accumulated amortization for technology was $1.5 billion and $1.4
billion, respectively.
1,888
2,150 $
$
(2,395)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(2,648)
4,798
2,022
2,378
120
125
1,267
1,382
803
839
71
74 $
(in millions)
September 30,
2015
September 30,
2016
4,283
20 bps
$ 26,957 $
$ 27,613 $
3,964 3.26%
(36)
4,000
2,238 2.89%
2015
(12)
2,250
(4) $ 1,746 1.37%
(12) 2,988 2.30%
(in millions, except percentages)
Carrying
Amount Rate
Interest
Effective
Costs
Discounts
and Debt
Issuance
Principal
Amount
September 30, 2016
Unamortized
3,000
$ 1,750 $
1.20% Senior Notes due December 2017 (the "2017 Notes")
2.20% Senior Notes due December 2020 (the "2020 Notes")
2.80% Senior Notes due December 2022 (the "2022 Notes")
3.15% Senior Notes due December 2025 (the "2025 Notes")
4.15% Senior Notes due December 2035 (the "2035 Notes")
4.30% Senior Notes due December 2045 (the "2045 Notes")
Total long-term debt . .
The Company had outstanding debt as follows:
Note 9-Debt
September 30, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
VISA INC.
100
The increase in non-current accrued income taxes is primarily related to the increase in liabilities for uncertain tax positions.
Current year balance includes amounts assumed from the Visa Europe acquisition related to uncertainties around foreign
non-income tax obligations. Prior year current deferred tax liabilities have been retroactively reclassed to non-current
deferred tax liabilities on the consolidated balance sheets upon adoption of FASB issued ASU 2015-17. See Note 1-
Summary of Significant Accounting Policies and Note 19-Income Taxes.
Interest expenses accrued as at September 30, 2016 is related to the issuance of long-term debt in December 2015. See
Note 9-Debt.
Increase includes accrued operating expenses assumed from the Visa Europe acquisition.
On June 21, 2016, the Company acquired 100% of the share capital of Visa Europe, effected by the Visa Europe board of
directors' exercise of the amended Visa Europe put option. Therefore, the Visa Europe put option was contractually
terminated as a result of the transaction. See Note 2-Acquisition of Visa Europe.
897
1,500
(15)
1,485 4.23%
3,500
15 bps
September 14, 2025
12.5 bps
October 14, 2022
10 bps
November 14, 2020
5 bps
December 14, 2017
Maturity/Par Call Date
2025 Notes
2022 Notes
2020 Notes.
2017 Notes.
Spread
1,162 $
Series
September 30, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
VISA INC.
101
the sum of the present value of the remaining scheduled payments of principal and interest
through the maturity or par call date for each of the Notes below at the treasury rate defined
under the terms of the Notes, plus the applicable spread for such Notes (as set forth in the
table below),
100% of the principal amount of such Notes; and
•
Each series of the Notes may be redeemed as a whole or in part, at the Company's option at any
time, prior to, with respect to the 2017 Notes, their maturity date, and with respect to the 2020 Notes,
the 2022 Notes, the 2025 Notes, the 2035 Notes and the 2045 Notes, the applicable par call date (as
set forth in the table below), at a price equal to the greater of:
In December 2015, the Company issued fixed-rate senior notes (the 2017 Notes, 2020 Notes,
2022 Notes, 2025 Notes, 2035 Notes and 2045 Notes, or collectively, the "Notes") in conjunction with
the acquisition of Visa Europe, in an aggregate principal amount of $16.0 billion, with maturities
ranging between 2 and 30 years. Interest on the Notes, at a rate ranging between 1.20% and 4.30%, is
payable semi-annually on June 14 and December 14 of each year, commencing June 14, 2016. The
Company recognized related interest expense of $399 million in fiscal 2016 as non-operating expense.
The net aggregate proceeds from the issuance of the Notes, after deducting discounts and debt
issuance costs, were $15.9 billion. The discounts and debt issuance costs are amortized over the
respective term of each note using the effective interest method. The indenture governing the Notes
contains customary event of default provisions. The Notes are senior unsecured obligations of the
Company, ranking equally and ratably among themselves and with the Company's existing and future
unsecured and unsubordinated debt. The Notes are not secured by any assets of the Company and
are not guaranteed by any of the Company's subsidiaries. The Company was in compliance with all
related covenants as of September 30, 2016.
Senior Notes
(118) $15,882
$16,000 $
3,461 4.37%
(39)
plus, in each case, accrued and unpaid interest to, but excluding, the date of redemption.
Total intangible assets, net
$
114
Visa Europe put option (See Note 2-Acquisition of Visa Europe)(2)
Accrued interest expenses (3)
Accrued operating expenses (1)
Accrued liabilities consisted of the following:
Note 8-Accrued and Other Liabilities
on the acquisition date. Related indefinite-lived intangible assets recorded totaled $16.1 billion
consisting of customer relationships and reacquired rights. Upon consummation of the acquisition, the
Visa Europe franchise right of $1.5 billion, previously acquired as part of the Company's October 2007
reorganization, was reclassified as a Visa trade name intangible asset as the franchise right permitted
Visa Europe's use of the Visa trade name and technology prior to acquisition. Goodwill of $3.3 billion
was recorded to reflect the excess purchase consideration over net assets acquired. Intangible assets
and goodwill recorded as a result of the Visa Europe acquisition are denominated in euros and
translated into U.S. dollars. As such, the change in goodwill balance from the acquisition date to
September 30, 2016 primarily includes the impact of $39 million resulting from changes in the euro to
U.S. dollar exchange rate during the period. See Note 2-Acquisition of Visa Europe.
September 30, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
VISA INC.
99
The increase in total net intangible assets during 2016 was primarily related to the Company's
acquisition of Visa Europe. Total purchase consideration of $18.8 billion was allocated to the tangible
and identifiable intangible assets acquired and liabilities assumed based on their respective fair value
There was no impairment related to the Company's indefinite-lived or finite-lived intangible assets
during fiscal 2016, 2015 or 2014.
111 $ 277
40
(in millions)
40
40
$ 46
Estimated future amortization expense
Total
2021 and
thereafter
2020
2019
2018
Fiscal: 2017
Amortization expense related to finite-lived intangible assets was $50 million, $63 million and $66
million for fiscal 2016, 2015 and 2014, respectively. At September 30, 2016, estimated future
amortization expense on finite-lived intangible assets is as follows:
(339) $ 11,361
$ 11,009
-
$
$ 26,957 $ 11,009
(379) $27,234 $11,700 $
Accrued income taxes (See Note 19-Income Taxes)
Other(5)
Total
Other non-current liabilities consisted of the following:
77
137
752
(in millions)
911 $
2015
2016
September 30, September 30,
849
1,128 $
$
262
483
75
-
68
153
257
255
-
347 $
(in millions)
2015
September 30, September 30,
2016
(5)
(4)
(3)
(2)
(1)
Total
Other
Accrued income taxes (See Note 19-Income Taxes) (4)
Employee benefits.
145
2014
VISA INC.
$ $ $ - $ 1
Net benefit cost
Curtailment gain
Settlement loss
9 $
-
(3)
| |
13 $ (4) $ (4) $
32
3 - ——- ——- —
(3)
(3)
(3)
(2)
(2)
(1)
(3) $
Total net periodic benefit cost
(4)
$
1
(8)
Fiscal
2016
2015
2014
2016
$
(in millions)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
September 30, 2016
- 3
1
1
(69)
(72)
(68)
Prior service credit
(1)
Actuarial loss (gain)
E-
(7)
1
(5) $
$ (10) $
(8)
13 7
13 $ (4) $ (4) $ (3) $
7
₪ 23
Total recognized in other comprehensive
income
$
19 $
118 $
3 $
9
5 $
Total recognized in net periodic benefit cost and
other comprehensive income
$
14 $
134 $
(1) $
16 $
66
107
66
(20)
1 $
$ 30 $ 119 $
(8)
(1)
Other changes in plan assets and benefit obligations recognized in other comprehensive
income:
Non-U.S.
U.S. Plans
Plans
Other
Pension Benefits
2016
2015
Postretirement Benefits
2016
(in millions)
Represents Visa Europe's U.K. pension plans' net pension benefit cost recognized from the Closing through September 30,
2016.
2015
2016
(2) $
-
$
66
Pension
Benefits
Current year actuarial loss (gain)
Amortization of actuarial (loss) gain
Current year prior service credit .
Amortization of prior service credit .
Level 1
Non-U.S. Plans
Fair Value Measurements at September 30, 2016
Level 3
Level 2
(in millions)
105
$
Asset-backed securities
52
Equity securities ..
116
Multi-asset securities (1)
Total
U.K. Treasury securities
29
39
Cash equivalents .
Corporate debt securities
Equity securities.
$ 756 $ 215 $ 235 $ 51
29
100
74
100
74
Asset-backed securities
$ 51 $ 31
51
31
672
671
672
671
Total
$ 811
$ 31 $1,077 $1,022
74
September 30, 2016
113 $
Not presented
62 Not presented
9.93
19 $
$ 185
9.94
19 $
4.09
$
245
$ 1,004
2.48
2,414 (3) $
$ 5,991
2.49
4.10
$
61 Not presented
Not presented
$ 5,991
29
$
Total
105
39
52
29
273 $
116
415
(1) Multi-asset securities represents pension plan assets that are invested in funds comprised of broad ranges of assets.
Level 1 assets. Cash equivalents (money market funds, time deposits and treasury bills), U.S.
and U.K. Treasury securities and equity securities are classified as Level 1 within the fair value
hierarchy, as fair value is based on quoted prices in active markets.
Level 2 assets. The fair values of U.S. government-sponsored, corporate debt and multi-asset
securities are based on quoted prices in active markets for similar assets as provided by third-party
pricing vendors. This pricing data is reviewed internally for reasonableness through comparisons with
109
VISA INC.
117
74
66
Primarily based on the targeted allocation, and evaluated for reasonableness by considering such factors as:
66
Postretirement
Expected long-term rate of return on plan assets(2)
Rate of increase in compensation levels for:(3)
Benefit obligation
4.33% 4.27% 4.81%
2.43% 2.59% 2.76%
7.00% 7.00% 7.00%
3.10%
ΝΑ
3.92%
ΝΑ 4.00% 4.00%
NA 4.00% 4.50%
3.20%
3.00%
Net periodic benefit cost
(1)
(2)
(3)
Represents a single weighted-average discount rate derived based on a cash flow matching analysis, with the projected
benefit payments matching spot rates from a yield curve developed from high-quality corporate bonds.
245 $
Pension
(i) actual return on plan assets; (ii) historical rates of return on various asset classes in the portfolio; (iii) projections of returns
Discount rate for net periodic benefit cost:
2.40%
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
September 30, 2016
Weighted Average Actuarial Assumptions:
Discount rate for benefit obligation:(1)
U.S. Plans
Non-U.S. Plans
2016
2015
Fiscal
2014
2016
Pension
Postretirement
3.62% 4.33% 4.27%
1.91% 2.43% 2.59%
ΝΑ
on various asset classes; and (iv) current and prospective capital market conditions and economic forecasts.
This assumption is not applicable for to the U.S. plans in fiscal 2016 due to the amendment of the U.S. qualified defined
benefit pension plan in October 2015, which discontinued the employer provided credits effective after December 31, 2015.
The assumed annual rate of future increases in health benefits for the other postretirement
benefits plan is 8% for fiscal 2017. The rate is assumed to decrease to 5% by 2021 and remain at that
level thereafter. These trend rates reflect management's expectations of future rates. Increasing or
decreasing the healthcare cost trend by 1% would change the postretirement plan benefit obligation by
less than $1 million.
2015
2016
2015
(in millions)
Cash equivalents
$ 39 $ 11
$ 39 $ 11
Corporate debt securities
$ 185
$ 169
185
169
U.S. government-sponsored
debt securities
30
2016
2015
2016
2015
Pension Plan Assets
Pension plan assets are managed with a long-term perspective to ensure that there is an
adequate level of assets to support benefit payments to participants over the life of the pension plan.
Pension plan assets are managed by external investment managers. Investment manager
performance is measured against benchmarks for each asset class on a quarterly basis. An
independent consultant assists management with investment manager selections and performance
evaluations.
Pension plan assets are broadly diversified to maintain a prudent level of risk and to provide
adequate liquidity for benefit payments. The Company generally evaluates and rebalances the pension
plan assets, as appropriate, to ensure that allocations are consistent with target allocation ranges. The
weighted average targeted allocation for U.S. pension plan assets is as follows: equity securities of
50% to 80%, fixed income securities of 25% to 35% and other, primarily consisting of cash equivalents
to meet near term expected benefit payments and expenses, of up to 7%. At September 30, 2016,
U.S. pension plan asset allocations for these categories were 62%, 34% and 4%, respectively, which
were within target allocation ranges.
108
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
September 30, 2016
30
The weighted average targeted allocation for non-U.S. pension plans is as follows: equity
securities of 40%, fixed income securities of 20% and other of 40%, consisting of cash, multi-asset
funds, and property. At September 30, 2016, non-U.S. pension plan asset allocations for these
categories were 28%, 22% and 50%, respectively. The actual allocated percentage to other category
exceeding the target is attributed to the $102 million cash contribution made in September 2016.
U.S. Plans
Fair Value Measurements at September 30,
Level 1
Level 2
Level 3
Total
2016
The following table sets forth by level, within the fair value hierarchy, the pension plan's
investments at fair value as of September 30, 2016 and 2015, including the impact of transactions that
were not settled at the end of September:
1,006
185
U.S. Treasury securities
(A)/(B)
September 30, 2016
(in millions)
The balances above included collateral held by Visa Europe as follows:
3,326
4,194 $
$
Total
971
1,418
Guarantees.
1,178
1,311
Letters of credit
1,023
154
170
Pledged securities at market value
(in millions)
1,295 $
Cash equivalents
September 30,
2015
September 30,
2016
The Company maintained collateral as follows:
The Company's settlement exposure is limited to the amount of unsettled Visa payment transactions
at any point in time. The Company's estimated maximum settlement exposure was $67.8 billion for the
period ended September 30, 2016, including Visa Europe, compared to $43.5 billion for the period ended
September 30, 2015, which excludes Visa Europe. The increase in the Company's estimated maximum
settlement exposure for the period ended September 30, 2016 is due to the Visa Europe acquisition. Of
these amounts, $2.9 billion and $2.2 billion at September 30, 2016 and 2015, respectively, were covered by
collateral. The total available collateral balances presented below were greater than the settlement
exposure covered by customer collateral held due to instances in which the available collateral exceeded
the total settlement exposure for certain financial institutions at each date presented.
The Company maintains and regularly reviews global settlement risk policies and procedures to
manage settlement exposure, which may require clients to post collateral if certain credit standards are
not met.
estimated number of days to settle plus a safety margin; (2) four months of rolling average
chargebacks volume; and (3) the total balance for outstanding Visa Travelers Cheques.
September 30, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Cash equivalents (1)
Pledged securities at market value
Letters of credit
294
Subsequent to the acquisition of Visa Europe, the Company entered into currency forward
contracts to offset Visa Europe hedges outstanding at the date of the acquisition that did not qualify for
cash flow hedge accounting treatment in accordance with U.S. GAAP or the Company's accounting
policy. The fair values of both the original currency forward contracts and the offsetting hedges are
classified in prepaid expenses and other current assets, non-current other assets, accrued liabilities
and non-current other liabilities on the consolidated balance sheet.
Non-designated derivative financial instrument hedges. The Company entered into currency
forward contracts during the second and third quarters of fiscal 2016 to mitigate a portion of the foreign
currency exchange rate risk associated with the upfront cash consideration paid in the Visa Europe
acquisition with additional offsetting currency forward contracts entered into subsequently to eliminate
its risk-mitigation positions. All contracts matured during the third and fourth quarters of fiscal 2016. As
these contracts were not designated in hedging relationships, related gains and losses were recorded
directly in earnings as part of non-operating income in the consolidated financial statements. The
Company recorded net gains of $74 million related to these contracts in fiscal 2016.
September 30, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
VISA INC.
112
The effective portion of changes in the fair value of derivative contracts is recorded as a component
of accumulated other comprehensive income or loss on the consolidated balance sheets. When the
forecasted transaction occurs and is recognized in earnings, the amount in accumulated other
comprehensive income or loss related to that hedge is reclassified to operating revenue or expense. The
Company expects to reclassify $58 million of pre-tax losses to earnings during fiscal 2017.
The Company uses regression analysis to assess hedge effectiveness prospectively and
retrospectively. The effectiveness tests are performed on the foreign exchange forward contracts
based on changes in the spot rate of the derivative instrument compared to changes in the spot rate of
the forecasted hedged transaction. Forward points are excluded for effectiveness testing and
measurement purposes. The excluded forward points are reported in earnings. For fiscal 2016, 2015
and 2014, the amounts by which earnings were reduced relating to excluded forward points were $30
million, $29 million and $27 million, respectively.
To qualify for cash flow hedge accounting treatment, the Company formally documents, at
inception of the hedge, all relationships between the hedging transactions and the hedged items, as
well as the Company's risk management objective and strategy for undertaking various hedge
transactions. The Company also formally assesses whether the derivatives that are used in hedging
transactions are highly effective in offsetting changes in the cash flows of the hedged items and
whether those derivatives may be expected to remain highly effective in future periods.
Designated derivative financial instrument hedges. The Company maintains a rolling cash flow
hedge program with the objective of reducing foreign currency exchange rate risk from forecasted net
exposures of revenues and expenses derived from and payments made in non-functional currencies
during the following twelve months. The aggregate notional amount of the Company's derivative
contracts outstanding in its hedge program was $1.6 billion at September 30, 2016 and $1.2 billion at
September 30, 2015. The increase in the aggregate notional amounts of the Company's derivative
contracts includes the addition of $189 million notional of derivative contracts entered into for Visa
Europe after the Closing. As of September 30, 2016, the Company's cash flow hedges in an asset
position totaled $17 million and were classified in prepaid expenses and other current assets on the
consolidated balance sheet, while cash flow hedges in a liability position totaled $78 million and were
classified in accrued liabilities on the consolidated balance sheet. These amounts are subject to master
netting agreements, which provide the Company with a legal right to net settle multiple payable and
receivable positions with the same counterparty, in a single currency through a single payment.
However, the Company presents fair values on a gross basis on the consolidated balance sheets. See
Note 1-Summary of Significant Accounting Policies.
Derivative Financial Instruments
Note 12-Derivative and Non-derivative Financial Instruments
VISA INC.
The fair value of the settlement risk guarantee is estimated using a proprietary model which
considers statistically derived loss factors based on historical experience, estimated settlement
exposures at period end and a standardized grading process for clients (using, where available, third-
party estimates of the probability of customer failure). Historically, the Company experienced minimal
losses, which has contributed to an estimated probability-weighted value of the guarantee of
approximately $2 million and $1 million at September 30, 2016 and 2015, respectively. These amounts
were reflected in accrued liabilities on the consolidated balance sheets.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
VISA INC.
111
Cash equivalents collateral, excluding cash collateral held by Visa Europe, is reflected in
customer collateral on the consolidated balance sheets as it is held in escrow in the Company's name.
All other collateral is excluded from the consolidated balance sheets. Pledged securities are held by
third parties in trust for the Company and clients. Letters of credit are provided primarily by client
financial institutions to serve as irrevocable guarantees of payment. Guarantees are provided primarily
by parent financial institutions to secure the obligations of their subsidiaries. The Company routinely
evaluates the financial viability of institutions providing the guarantees.
Cash collateral held by Visa Europe is not included on the Company's consolidated balance sheet as its clients retain
beneficial ownership and the cash is only accessible to the Company in the event of default by the client on its settlement
obligations.
813
375
144
$
(1)
Total
Guarantees
September 30, 2016
110
The Company indemnifies its clients for settlement losses suffered due to failure of any other
client to fund its settlement obligations in accordance with the Visa Rules. This indemnification creates
settlement risk for the Company due to the difference in timing between the date of a payment
transaction and the date of subsequent settlement. Settlement at risk, or exposure, is estimated based
on the sum of the following inputs: (1) average daily volumes during the quarter multiplied by the
Note 11-Settlement Guarantee Management
9 $
$
2017.
Expected employer contributions
3 $
16 $
$
102
3 $
1 $
SA SA
2015
EA
2016.....
Actual employer contributions
Pension Benefits
Benefits
Other
Postretirement
Pension
Benefits
Non-U.S. Plans
U.S. Plans
Cash Flows
There were no transfers between Level 1 and Level 2 assets during fiscal 2016 or 2015. A
separate roll-forward of Level 3 plan assets measured at fair value is not presented because activities
during fiscal 2016 and 2015 were immaterial.
Level 3 assets. Asset-backed securities are bonds that are backed by various types of assets and
primarily consist of mortgage-backed securities. Asset-backed securities are classified as Level 3 due
to a lack of observable inputs in measuring fair value.
benchmark quotes from independent third-party sources. Based on this review, the valuation is
confirmed or revised accordingly.
1,906 $
(in millions)
The Company utilizes foreign exchange derivative contracts to hedge against foreign currency
exchange rate fluctuations related to certain monetary assets and liabilities denominated in foreign
currency held by Visa Europe. As of September 30, 2016, the aggregate notional amount of these
balance sheet hedges was $1.1 billion. The Company did not have any balance sheet hedges
outstanding at September 30, 2015. Gains and losses on the derivative contracts partially offset gains
and losses on the hedged monetary assets and liabilities denominated in foreign currency. These
amounts are recorded in general and administrative in the Company's consolidated statement of
operations as these instruments are not designated for hedge accounting.
3 $
Expected benefit payments
The Company sponsors a defined contribution plan, or 401(k) plan, that covers substantially all of
its employees residing in the United States. Personnel costs included $55 million, $49 million and $46
million in fiscal 2016, 2015 and 2014, respectively, for expenses attributable to the Company's
employees under the 401(k) plan. The Company's contributions to this 401(k) plan are funded on a
current basis, and the related expenses are recognized in the period that the payroll expenses are
incurred.
Other Benefits
44555N
27
2 $
350 $
2 $
81 $
2 $
84 $
2 $
$
6
85
3
88 $
$
3 $
165 $
$
2022-2026
2021
2020
2019
2018
2017
$
Credit and market risks. The Company's derivative financial instruments are subject to both credit
and market risk. The Company monitors the credit-worthiness of the financial institutions that are
counterparties to its derivative financial instruments and does not consider the risks of counterparty
nonperformance to be significant. The Company mitigates this risk by entering into master netting
agreements, and except for derivative instruments entered into by Visa Europe, such agreements
require each party to post collateral against its net liability position with the respective counterparty. As
of September 30, 2016, the Company has received collateral of $8 million from counterparties, which is
included in accrued liabilities in the consolidated balance sheet, and posted collateral of $54 million,
which is included in other assets in the consolidated balance sheet. Notwithstanding the Company's
efforts to manage foreign exchange risk, there can be no absolute assurance that its hedging activities
will adequately protect against the risks associated with foreign currency fluctuations. Credit and
market risks related to derivative instruments were not considered significant at September 30, 2016.
SASASASA SASA
Non-derivative Financial Instrument Designated as a Net Investment Hedge
Adjustment of the conversion rate occurs upon: (i) the completion of any follow-on offering of
class A common stock completed to increase the size of the U.S. litigation escrow account (or any
cash deposit by the Company in lieu thereof) resulting in a further corresponding decrease in the
conversion rate; or (ii) the final resolution of the U.S. covered litigation and the release of funds
remaining on deposit in the U.S. litigation escrow account to the Company resulting in a corresponding
increase in the conversion rate. There were no deposits into the U.S. litigation escrow account in fiscal
2016 or 2015. See Note 3-U.S. and Europe Retrospective Responsibility Plans.
Class B common stock. The class B common stock is not convertible or transferable until the date
on which all of the U.S. covered litigation has been finally resolved. This transfer restriction is subject to
limited exceptions, including transfers to other holders of class B common stock. After termination of
the restrictions, the class B common stock will be convertible into class A common stock if transferred
to a person that was not a Visa Member (as defined in the current certificate of incorporation) or similar
person or an affiliate of a Visa Member or similar person. Upon such transfer, each share of class B
common stock will automatically convert into a number of shares of class A common stock based upon
the applicable conversion rate in effect at the time of such transfer.
September 30, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
VISA INC.
115
Visa Europe held approximately 550,000 shares of the Company's class C common stock valued
at $170 million at the Closing, which was recorded as treasury stock at the time of the acquisition.
The Company's board of directors authorized share repurchase programs in October 2015 and
July 2016 at $5.0 billion each. As of September 30, 2016, the programs had remaining authorized
funds of $5.8 billion. All share repurchase programs authorized prior to October 2015 have been
completed.
(3)
(2)
(1) Shares repurchased in the open market reflect repurchases settled on or before September 30, 2016. The Company
repurchased an additional 1 million shares for $120 million at the end of September, which did not settle until October 2016.
All shares repurchased in the open market have been retired and constitute authorized but unissued shares.
Figures in the table may not recalculate exactly due to rounding. Average repurchase price per share is calculated based on
unrounded numbers.
2,910
Class C common stock. As of September 30, 2016, all of the shares of class C common stock
have been released from transfer restrictions. A total of 134 million shares have been converted from
class C to class A common stock upon their sale into the public market and approximately 550,000
shares held by Visa Europe were recorded as treasury stock at the time of the acquisition.
6,987 $
65.98
$
77.05
$
44
91
2015
2016 (1)
Total cost
Average repurchase price per share(3)
Shares repurchased in the open market(2)
(in millions, except per share data)
$
Common stock repurchases. The following table presents share repurchases in the open market
during the following fiscal years:
Preferred stock. Preferred stock may be issued as redeemable or non-redeemable, and has
preference over any class of common stock with respect to the payment of dividends and distribution of
the Company's assets in the event of a liquidation or dissolution. The Company had 5 million shares of
U.K.&I and Europe preferred stock outstanding at the end of fiscal 2016 and no shares of preferred
stock outstanding at the end of fiscal 2015. The shares of U.K.&I and Europe preferred stock are
subject to restrictions on transfer and may become convertible in stages based on developments in the
VE territory covered litigation. See Note 2-Acquisition of Visa Europe.
Class A common stockholders have the right to vote on all matters on which stockholders
generally are entitled to vote. Class B and C common stockholders have no right to vote on any
matters, except for certain defined matters, including (i) any decision to exit the core payments
business, in which case the class B and C common stockholders will vote together with the class A
common stockholders in a single class, and (ii) in specified circumstances, any consolidation, merger,
combination or similar transaction of the Company, in which case the class B and C common
Earnings per
Share=
Outstanding (B)
Additional disclosures that demonstrate how derivative instruments and related hedged items
affect an entity's financial position, financial performance and cash flows have not been presented
because the impact of derivative instruments is immaterial to the overall consolidated financial
statements.
Shares
Weighted-
Average
Income
Allocation
(A) (2)
Share=
(A)/(B)
Outstanding (B)
Shares
Earnings per
Average
Income
Allocation
(A) (2)
$ 4,738
Voting rights. The holders of the U.K.&I and Europe preferred stock have no right to vote on any
matters, except for certain defined matters, including, in specified circumstances, any consolidation,
merger, combination or similar transaction of the Company in which the preferred stockholders would
either (i) receive shares of common stock or other equity securities of the Company with preferences,
rights and privileges that are not substantially identical to the preferences, rights and privileges of the
applicable series of preferred stock or (ii) receive securities, cash or other property that is different from
what our class A common stockholders would receive. With respect to these limited matters on which
the holders of preferred stock may vote, approval by the preferred stockholders requires the affirmative
vote of the outstanding voting power of each such series of preferred stock, each such series voting as
a single class. In either case, the U.K.&I and Europe preferred stockholders are entitled to cast a
number of votes equal to the number of shares held by each such holder.
Weighted-
Diluted Earnings Per Share
Basic Earnings Per Share
Class A common stock
Class B common stock
Class C common stock
Participating securities(4)
Net income
The following table presents earnings per share for fiscal 2016.(1)
Diluted earnings per share is computed by dividing net income available by the weighted-average
number of shares of common stock outstanding, participating securities and, if dilutive, potential class
A common stock equivalent shares outstanding during the period. Dilutive class A common stock
equivalents may consist of: (1) shares of class A common stock issuable upon the conversion of
U.K.&I and Europe preferred stock and class B and C common stock based on the conversion rates in
effect through the period, and (2) incremental shares of class A common stock calculated by applying
the treasury stock method to the assumed exercise of employee stock options, the assumed purchase
of stock under the Employee Stock Purchase Plan and the assumed vesting of unearned performance
shares.
Basic earnings per share is computed by dividing net income available to each class by the
weighted-average number of shares of common stock outstanding and participating securities during
the period. Net income is allocated to each class of common stock and participating securities based
on its proportional ownership on an as-converted basis. The weighted-average number of shares of
each class of common stock outstanding reflects changes in ownership over the periods presented.
See Note 14-Stockholders' Equity.
Dividends declared. The Company declared and paid $1.4 billion in dividends in fiscal 2016 at a
quarterly rate of $0.14 per share. In October 2016, the Company's board of directors declared a
quarterly cash dividend of $0.165 per share of class A common stock (determined in the case of class
B and C common stock and U.K.&I and Europe preferred stock on an as-converted basis), which will
be paid on December 6, 2016, to all holders of record of the Company's common and preferred stock
as of November 18, 2016.
stockholders will vote together as a single class. In either case, the class B and C common
stockholders are entitled to cast a number of votes equal to the number of shares of class B or C
common stock held multiplied by the applicable conversion rate in effect on the record date. Holders of
the Company's common stock have no right to vote on any amendment to the current certificate of
incorporation that relates solely to any series of preferred stock.
September 30, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
VISA INC.
116
(in millions, except per share data)
The class B to class A common stock conversion rate is presented on a rounded basis. Conversion calculations for dividend
payments are based on a conversion rate rounded to the tenth decimal.
Note 15-Earnings Per Share
Class A common stock shares outstanding reflect repurchases settled on or before September 30, 2016. The Company
repurchased an additional 1 million shares at the end of September, which did not settle until October 2016.
VISA INC.
114
Class A common stock split. In January 2015, Visa's board of directors declared a four-for-one
split of its class A common stock. Each class A common stockholder as of the record date received a
dividend of three additional shares for every share held as of the record date. Holders of class B and C
common stock did not receive a stock dividend. Instead, the conversion rate for class B common stock
increased to 1.6483 shares of class A common stock per share of class B common stock, and the
conversion rate for class C common stock increased to 4.0 shares of class A common stock per share
of class C common stock. Immediately following the split, the class A, B and C stockholders retained
the same relative ownership percentages that they had prior to the stock split. All per share amounts
and number of shares outstanding in these consolidated financial statements and accompanying notes
are presented on a post-split basis. As a result of the stock split, all historical per share data and
number of shares outstanding presented have been retroactively adjusted.
Visa Europe acquisition. In connection with the Visa Europe acquisition, three new series of
preferred stock of the Company were created. Upon issuance, all of the preferred stock participate on
an as-converted basis in regular quarterly cash dividends declared on the Company's class A common
stock. Additionally, Visa Europe holds shares of Visa Inc.'s class C common stock, which were treated
as treasury stock in purchase accounting. See Note 2-Acquisition of Visa Europe.
Note 14-Stockholders' Equity
A significant portion of Visa's operating revenues is concentrated among its largest clients. Loss
of business from any of these clients could have an adverse effect on the Company. The Company did
not have any customer that generated greater than 10% of its net operating revenues in fiscal 2016,
2015 or 2014.
Revenue by geographic market is primarily based on the location of the issuing financial
institution. Revenues earned in the United States were approximately 52% of net operating revenues in
fiscal 2016, 53% in fiscal 2015 and 54% in fiscal 2014. No individual country, other than the United
States, generated more than 10% of net operating revenues in these years.
1,888
2,150 $
$
1,806
82
323
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in millions)
1,827 $
September 30, September 30,
2016
Total
United States
International
The Company's long-lived net property, equipment and technology assets are classified by major
geographic areas as follows:
Note 13―Enterprise-wide Disclosures and Concentration of Business
against a portion of the foreign currency exchange rate exposure of the Company's euro-denominated
net investment of $18.8 billion in Visa Europe. Changes in the value of the deferred cash consideration
liability, attributable to the change in exchange rates at the end of each reporting period, partially offset
the foreign currency translation of the Company's net investment recorded in accumulated other
comprehensive income in the Company's consolidated balance sheet. Changes in the euro exchange
rate against the U.S. dollar from the acquisition date of June 21, 2016 to the balance sheet date of
September 30, 2016 resulted in net foreign currency translation adjustments of $218 million.
September 30, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
(3)
The Company designated the euro-denominated deferred cash consideration liability of $1.2
billion (see Note 2-Acquisition of Visa Europe), a non-derivative financial instrument, as a hedge
VISA INC.
113
$
September 30, 2016
2015
The number of shares of each series and class and the number of shares of class A common
stock on an as-converted basis at September 30, 2016, are as follows:
2,422
67
Figures in the table may not recalculate exactly due to rounding. As-converted class A common stock is calculated based on
unrounded numbers.
As-converted class A common stock. The U.K.&I and Europe preferred stock, issued in the Visa
Europe acquisition, is convertible upon certain conditions into shares of class A common stock or class A
equivalent preferred stock, at an initial conversion rate of 13.952 shares of class A common stock for
each share of U.K.&I preferred stock and Europe preferred stock. The conversion rates may be reduced
from time to time to offset certain liabilities. See Note 2-Acquisition of Visa Europe and Note 3-U.S.
and Europe Retrospective Responsibility Plans.
(2)
405
1.6483 (3)
4.0000
17
1,871
245
44
13.9520
35
13.9520
2
1,871
Common Stock
As-converted
Class A Common
Stock (1)
Class B common stock
Europe preferred stock.
U.K.&I preferred stock
Class C common stock
Class A common stock (2)
(in millions, except conversion rate)
Total
(1)
Shares
Outstanding
Conversion Rate
Into Class A
(in millions)
2017
The table below sets forth the expected future reduction of revenue per fiscal year for client
incentive agreements in effect at September 30, 2016:
2018
Client incentives
2019
Thereafter
2021
Total
$ 4,211 $ 3,752 $ 3,211 $ 2,628 $ 2,245 $ 4,617 $ 20,664
The amount of client incentives recorded as a reduction of revenue in future periods under the
Company's incentive arrangements, will be greater or less than the estimates above due to changes in
performance expectations, actual client performance, amendments to existing contracts or the
execution of new contracts. Based on these agreements, increases in incentive payments are
generally driven by increased payment and transaction volume, and as a result, in the event incentive
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
VISA INC.
Payments made that qualify for capitalization and obligations incurred under these programs are
reflected in the consolidated balance sheet. Client incentives are recognized primarily as a reduction to
operating revenue in the period the related volumes and transactions occur, based on management's
estimate of the client's performance in accordance with the terms of the incentive agreement. The
agreements may or may not limit the amount of client incentive payments.
123
2020
Client incentives. The Company has agreements with financial institution clients and other
business partners for various programs designed to build payments volume, increase Visa product
acceptance and win merchant routing transactions. These agreements, with terms ranging from one
year to sixteen years, can provide card issuance and/or conversion support, volume/growth targets and
marketing and program support based on specific performance requirements. These agreements are
designed to encourage client business and to increase overall Visa payment and transaction volume,
thereby reducing per-unit transaction processing costs and increasing brand awareness for all Visa
clients.
$ 82
$ 252 $ 231 $ 202 $ 171 $ 95 $ 223 $ 1,174
Note 17-Commitments and Contingencies
Commitments. The Company leases certain premises and equipment throughout the world with
varying expiration dates. The Company incurred total rent expense of $134 million, $136 million and
$134 million in fiscal 2016, 2015 and 2014, respectively. Future minimum payments on leases, and
marketing and sponsorship agreements per fiscal year, at September 30, 2016, are as follows:
September 30, 2016
2017
2018
2019
Operating leases.
$ 126
$ 103
Marketing and sponsorships
Total
126
128
120
2020
(in millions)
2021 Thereafter Total
$ 61 $ 57 $ 190 $ 619
110
38
33
555
Select sponsorship agreements require the Company to spend certain minimum amounts for
advertising and marketing promotion over the life of the contract. For commitments where the
individual years of spend are not specified in the contract, the Company has estimated the timing of
when these amounts will be spent. In addition to the fixed payments stated above, select sponsorship
agreements require the Company to undertake marketing, promotional or other activities up to stated
monetary values to support events which the Company is sponsoring. The stated monetary value of
these activities typically represents the value in the marketplace, which may be significantly higher than
the actual costs incurred by the Company.
payments exceed the above estimates, such payments are not expected to have a material effect on
the Company's financial condition, results of operations or cash flows.
Total income tax provision ..
Note 18-Related Parties
State and local
Non-U.S.
Total deferred taxes
124
2016
2015
2014
(in millions)
2,250 $ 1,991 $
2,353
181
168
237
368
300
September 30, 2016
274
U.S. federal
Deferred purchase consideration. On June 21, 2016, we acquired 100% of the share capital of
Visa Europe. In connection with the purchase, we will pay an additional €1.0 billion, plus 4% compound
annual interest, on the third anniversary of the Closing. See Note 2-Acquisition of Visa Europe to our
consolidated financial statements.
Deferred:
Non-U.S.
Visa considers an entity to be a related party for purposes of this disclosure if that entity owns
more than 10% of Visa's total voting common stock at the end of the fiscal year, or if an officer or
employee of that entity also serves on the Company's board of directors. The Company considers an
investee to be a related party if the Company's: (i) ownership interest in the investee is greater than or
equal to 10% or (ii) if the investment is accounted for under the equity method of accounting. At
September 30, 2016 and 2015, no entity owned more than 10% of the Company's total voting common
stock. There were no significant transactions with related parties during fiscal 2016, 2015 and 2014.
Note 19 Income Taxes
The Company's income before taxes by fiscal year consisted of the following:
U.S.
Non-U.S.
Total income before taxes
2016
2015
2014
(in millions)
$
5,839
2,173
$
$ 7,214 $ 6,140
1,781
1,584
8,012 $ 8,995 $ 7,724
U.S. income before taxes included $2.5 billion, $2.4 billion and $2.3 billion of the Company's U.S.
entities' income from operations outside of the U.S. for fiscal 2016, 2015 and 2014, respectively.
Income tax provision by fiscal year consisted of the following:
Current:
U.S. federal
State and local
Total current taxes
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
1,442,522 $54.09 $53.80
2,735,115 $
$79.77
(789,180) $49.06 $51.58
(241,503) $59.34 $73.02
122
4,064,687
Granted
Vested
Forfeited
(2,061,406)
(236,699)
-
Outstanding at
September 30, 2016
1,766,582
3,146,954 $59.26 $75.48
0.8
1.7
$146
$260
(1) Calculated by multiplying the closing stock price on the last trading day of fiscal 2016 of $82.70 by the number of
instruments.
At September 30, 2016, there was $54 million and $140 million of total unrecognized
compensation cost related to unvested RSAs and RSUs, respectively, which is expected to be
recognized over a weighted-average period of approximately 0.8 years for RSAs and 1.7 years for
RSUs.
121
2015
VISA INC.
Outstanding at October 1,
RSA
2,799
Average
Remaining
Aggregate
Restricted Stock
Weighted- Average
Grant Date
Fair Value
Contractual
Intrinsic
Term
Value (1)
(in years)
(in millions)
Awards
Units
RSA
RSU
RSA
RSU
RSU
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
September 30, 2016
Performance-based Shares
The following table summarizes the maximum number of performance-based shares which could
be earned and related activity for fiscal 2016:
(123,387) $
54.59
Forfeited
(57,462) $
73.07
Outstanding at September 30, 2016
1,042,012 $
78.24
0.9
$86
(1) Calculated by multiplying the closing stock price on the last trading day of fiscal 2016 of $82.70 by the number of
instruments.
(2)
Represents the maximum number of performance-based shares which could be earned.
For the Company's performance-based shares, in addition to service conditions, the ultimate
number of shares to be earned depends on the achievement of both performance and market
conditions. The performance condition is based on the Company's earnings per share target. The
market condition is based on the Company's total shareholder return ranked against that of other
companies that are included in the Standard & Poor's 500 Index. The fair value of the performance-
based shares, incorporating the market condition, is estimated on the grant date using a Monte Carlo
simulation model. The grant-date fair value of performance-based shares granted in fiscal 2016, 2015
and 2014 was $92.71, $69.78 and $56.37 per share, respectively. Earned performance shares granted
in fiscal 2016, 2015 and 2014 vest approximately 3 years from the initial grant date. All performance
awards are subject to earlier vesting in full under certain conditions.
Compensation cost for performance-based shares is initially estimated based on target
performance. It is recorded net of estimated forfeitures and adjusted as appropriate throughout the
performance period. At September 30, 2016, there was $18 million of total unrecognized compensation
cost related to unvested performance-based shares, which is expected to be recognized over a
weighted-average period of approximately 0.9 years.
Employee Stock Purchase Plan
In January 2015, the Company's class A stockholders approved the Visa Inc. Employee Stock
Purchase Plan (the "ESPP”), under which substantially all employees are eligible to participate. The
ESPP permits eligible employees to purchase the Company's class A common stock at a 15%
discount of the stock price on the purchase date, subject to certain restrictions. A total of 20 million
shares of class A common stock have been reserved for issuance under the ESPP. The first offering
date was April 1, 2015. The ESPP does not have a material impact on the consolidated financial
statements.
Unearned
54.59
(645,320) $
Vested and earned
Weighted-
Average
Shares
Weighted-
Average
Grant Date
Fair Value
Remaining
Contractual
Term
Aggregate
VISA INC.
Intrinsic
(in years)
(in millions)
Outstanding at October 1, 2015
1,263,962 $
57.61
Granted(2)
604,219 $
92.71
Value (1)
2,459
- %
(508)
(88)
(1)%
%
%
Reversal of prior years tax reserves related to
the resolution of uncertain tax positions
Revaluation of Visa Europe put option.
Other, net
- %
(239)
(2)%
Weighted-
(89)
(1)%
- %
- %
(188)
(3)%
(109)
(1)%
Remeasurement of deferred tax liability
(78)
(2)%
- %
U.S. federal income tax at statutory rate
State income taxes, net of federal benefit
Non-U.S. tax effect, net of federal benefit
Prior years U.S. domestic production activities
deduction
$ 2,804
Dollars Percent Dollars
(in millions, except percentages)
35% $3,148 35% $2,704
35 %
135
2 %
194
2%
129
2%
(553)
(7)%
(327)
(4)%
(278)
(4)%
- %
(191)
Percent
(1)%
$ 2,021
In accordance with Accounting Standards Codification 740—Income Taxes, the Company is
required to inventory, evaluate and measure all uncertain tax positions taken or to be taken on tax
returns, and to record liabilities for the amount of such positions that may not be sustained, or may only
partially be sustained, upon examination by the relevant taxing authorities.
At September 30, 2016 and 2015, the Company's total gross unrecognized tax benefits were $1.2
billion and $1.1 billion, respectively, exclusive of interest and penalties described below. Included in the
$1.2 billion and $1.1 billion are $926 million and $859 million of unrecognized tax benefits, respectively,
that if recognized, would reduce the effective tax rate in a future period.
A reconciliation of beginning and ending unrecognized tax benefits by fiscal year is as follows:
Beginning balance at October 1
Increases of unrecognized tax benefits related to prior years
Decreases of unrecognized tax benefits related to prior years
Increases of unrecognized tax benefits related to current year
Reductions related to lapsing statute of limitations
Ending balance at September 30.
2016
2015
(in millions)
$ 1,051 $ 1,303
153
(180)
44
(413)
138
120
(2)
(3)
$ 1,160 $ 1,051
127
The Company's largest operating hub outside the United States is located in Singapore. It
operates under a tax incentive agreement which is effective through September 30, 2023, and is
conditional upon meeting certain business operations and employment thresholds in Singapore. The
tax incentive agreement decreased Singapore tax by $235 million, $192 million and $168 million, and
the benefit of the tax incentive agreement on diluted earnings per share was $0.10, $0.08 and $0.07 in
fiscal 2016, 2015 and 2014, respectively.
Income tax provision
Cumulative undistributed earnings of the Company's international subsidiaries that are intended
to be reinvested indefinitely outside the United States amounted to $8.3 billion at September 30, 2016.
The amount of income taxes that would have resulted had such earnings been repatriated is not
practicably determinable.
a $264 million tax benefit recognized in fiscal 2014 related to a deduction for U.S. domestic
production activities, of which $191 million was a one-time tax benefit related to prior fiscal
years.
25% $2,667
30 % $ 2,286
30 %
The effective income tax rate was 25% in fiscal 2016 and 30% in fiscal 2015. The effective tax rate in
fiscal 2016 differs from the effective tax rate in fiscal 2015 primarily due to:
•
the effect of one-time items related to the Visa Europe acquisition, the most significant of which was
the $1.9 billion U.S. loss related to the effective settlement of the Framework Agreement between
Visa and Visa Europe. These one-time items impacted the geographic mix of global income,
resulting in a reduced effective tax rate;
an $88 million one-time tax benefit due to the remeasurement of deferred tax liabilities as a result of
the reduction in the U.K. tax rate enacted in fiscal 2016;
the non-taxable $255 million revaluation of the Visa Europe put option recorded in fiscal 2016; and
the absence of a $296 million tax benefit recognized in fiscal 2015 resulting from the resolution of
uncertain tax positions with taxing authorities. Included in the $296 million was a one-time $239
million tax benefit that related to prior fiscal years.
126
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
September 30, 2016
The effective income tax rates were 30% in fiscal 2015 and 2014. The following highlights the
significant tax items recorded in each respective year:
•
•
the aforementioned $296 million tax benefit recognized in fiscal 2015; and
Current income taxes receivable were $232 million and $77 million at September 30, 2016 and
2015, respectively. Non-current income taxes receivable of $731 million and $627 million were
included in other assets at September 30, 2016 and 2015, respectively. See Note 5-Prepaid
Expenses and Other Assets. At September 30, 2016 and 2015, income taxes payable of $153 million
and $75 million, respectively, were included in accrued income taxes as part of accrued liabilities, and
accrued income taxes of $911 million and $752 million, respectively, were included in other long-term
liabilities. See Note 8-Accrued and Other Liabilities.
Percent
Dollars
2014
Accrued litigation obligation
Client incentives
Net operating loss carryforwards
Federal benefit of state taxes
Federal benefit of foreign taxes
Other ....
Valuation allowance
Deferred tax assets
Deferred Tax Liabilities:
Property, equipment and technology, net
Intangible assets
Foreign taxes
Other
2016
2015
(in millions)
277 $
Comprehensive (income) loss
141
Accrued compensation and benefits
The tax effect of temporary differences that give rise to significant portions of deferred tax assets
and liabilities at September 30, 2016 and 2015, are presented below:
181
(576)
(63)
1
(31)
(207)
26
29
(778)
208
(578)
$
2,021 $ 2,667 $
2,286
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
September 30, 2016
Deferred Tax Assets:
106
51
373
(4,432)
Deferred tax liabilities
Net deferred tax liabilities
$ (4,786) $ (3,260)
The increase in the net deferred tax liabilities primarily reflect the deferred tax impacts of the
intangible assets acquired in the Visa Europe acquisition. At September 30, 2016 and 2015, net
deferred tax assets of $22 million and $13 million, respectively, are reflected in other assets on the
consolidated balance sheets.
In November 2015, the FASB issued Accounting Standards Update 2015-17, which simplifies the
presentation of deferred income taxes by requiring that deferred tax assets and liabilities be presented
as non-current. The standard impacts presentation only. The Company elected to early adopt the
standard on a retrospective basis effective October 1, 2015, and all deferred tax assets and liabilities
are classified as non-current on the Company's consolidated balance sheets. All prior period amounts
have been reclassified to conform with the current period presentation.
In assessing the realizability of deferred tax assets, management considers whether it is more
likely than not that all or some portion of the deferred tax assets will not be realized. The ultimate
realization of the deferred tax assets is dependent upon the generation of future taxable income during
the periods in which those temporary differences are deductible. The fiscal 2016 and 2015 valuation
allowances relate primarily to foreign net operating losses from subsidiaries acquired in recent years.
As of September 30, 2016, the Company had $17 million federal, $21 million state and $117
million foreign net operating loss carryforwards. The federal and state net operating loss carryforwards
125
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
September 30, 2016
will expire in fiscal 2028 through 2035. The foreign net operating loss may be carried forward indefinitely.
The Company expects to fully utilize the federal and state net operating loss carryforwards in future years.
As of September 30, 2016, the Company had $15 million of federal foreign tax credit carryforwards,
which will expire in fiscal 2026. The Company expects to realize the benefit of the credit carryforwards in
future years.
The income tax provision differs from the amount of income tax determined by applying the applicable
U.S. federal statutory rate of 35% to pretax income, as a result of the following:
2016
For the Years Ended September 30,
2015
(7,498)
(101)
(153)
(106)
391
266
191
32
50
195
203
1,214
2,864
280
(31)
(40)
2,712
1,172
(278)
(315)
(7,013)
(3,964)
185
The following table summarizes the Company's RSA and RSU activity for fiscal 2016:
1,993 $
The fair value and compensation cost before estimated forfeitures for RSAs and RSUs is
calculated using the closing price of class A common stock on the date of grant. The weighted-average
grant-date fair value of RSAs granted during fiscal 2015 and 2014 was $63.71 and $49.98,
Share =
Shares
Earnings per
Weighted-
Average
Income
Allocation
(A) (2)
(A)/(B)
Outstanding (B)
Earnings per
Share =
Shares
Average
Income
Allocation
(A) (2)
Weighted-
(in millions, except per share data)
Diluted Earnings Per Share
Basic Earnings Per Share
The following table presents earnings per share for fiscal 2014.(1)
$ 6,328
Net income
Not presented
Outstanding (B)
(A)/(B)
Class A common stock
$ 4,307
Not presented
16 Not presented
$
8.62
$
26
8.65 $ 221
3.62
245 $
15 Not presented
$ 890
2,523 (3) $
$ 5,438
2.16
3.63
245 $
26 $
Not presented
17 Not presented
222
Class C common stock
Participating securities(4)
Net income
892
Class B common stock
2.16
$ 5,438
$
15 Not presented
respectively. No RSAs were granted during fiscal 2016. The weighted-average grant-date fair value of
RSUS granted during fiscal 2016, 2015 and 2014 was $79.77, $62.88 and $49.44, respectively. The
total grant-date fair value of RSAs and RSUs vested during fiscal 2016, 2015 and 2014 was $142
million, $132 million and $126 million, respectively.
Earnings per
Weighted-
Average
Income
Allocation
(A) (2)
(A)/(B)
Outstanding (B)
Share=
Shares
Earnings per
Average
Income
Allocation
(A) (2)
Weighted-
(in millions, except per share data)
Diluted Earnings Per Share
Basic Earnings Per Share
The following table presents earnings per share for fiscal 2015.(1)
September 30, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
VISA INC.
Share=
Outstanding (B)
(A)/(B)
Class A common stock
10.30
$
22
$ 223
10.33
22 $
224
4.25
245 $
Not presented
$1,042
245 $
1,045
Class B common stock
Class C common stock
Participating securities(4)
2.58
2,457 (3) $
$ 6,328
2.58
1,954 $
$ 5,044
4.26
(1)
Shares
(3)
(463,378) $
1,438,048 $ 79.98
Outstanding at September 30, 2016 ...
Options exercisable at September 30, 2016
Options exercisable and expected to vest at
September 30, 2016(2)
Exercised
Forfeited
Granted
Term
9,677,717 $ 28.07
Outstanding at October 1, 2015
Options
(in millions)
(in years)
Value (1)
Intrinsic
Aggregate
Weighted-
Average
Exercise Price
Per Share
Contractual
Weighted-
Average
Remaining
The following table summarizes the Company's option activity for fiscal 2016:
21.76
(1,775,903) $
20.00
8,876,484 $
6,204,589 $ 24.87
(2)
(2)
Applies a forfeiture rate to unvested options outstanding at September 30, 2016 to estimate the options expected to vest in
the future.
For the options exercised during fiscal 2016, 2015 and 2014, the total intrinsic value was $103
million, $134 million and $187 million, respectively, and the tax benefit realized was $35 million, $86
million and $65 million, respectively. As of September 30, 2016, there was $19 million of total
unrecognized compensation cost related to unvested options, which is expected to be recognized over
a weighted-average period of approximately 1.4 years.
Restricted Stock Awards and Restricted Stock Units
RSAS and RSUs issued under the EIP primarily vest ratably over 3 years from the date of grant,
subject to earlier vesting in full under certain conditions.
Upon vesting, the RSAs are settled in class A common stock on a one-for-one basis. During the
vesting period, RSA award recipients are eligible to receive dividends and participate in the same
voting rights as those granted to the holders of the underlying class A common stock. Upon vesting,
RSUs can be settled in class A common stock on a one-for-one basis or in cash, or a combination
thereof, at the Company's option. The Company does not currently intend to settle any RSUs in cash.
During the vesting period, RSU award recipients are eligible to receive dividend equivalents, but do not
participate in the voting rights granted to the holders of the underlying class A common stock. The
company discontinued granting RSAs in fiscal 2016 but will continue to grant RSUs under the EIP.
120
VISA INC.
Based on the Company's annual dividend rate on the date of grant.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(1) Calculated using the closing stock price on the last trading day of fiscal 2016 of $82.70, less the option exercise price,
multiplied by the number of instruments.
5.1
37.35
8,582,576 $
$359
3.8
$393
5.2
38.42
September 30, 2016
(4)
$389
(3)
Fair value per option granted
Expected dividend yield(4)
Expected volatility(3)
Risk-free rate of return(2)
Expected term (in years) (1)
During fiscal 2016, 2015 and 2014, the fair value of each stock option was estimated on the date
of grant using a Black-Scholes option pricing model with the following weighted-average assumptions:
Options issued under the EIP expire 10 years from the date of grant and primarily vest ratably
over 3 years from the date of grant, subject to earlier vesting in full under certain conditions.
Options
All per share amounts and number of shares outstanding presented below reflect the four-for-one
stock split that was effected in the second quarter of fiscal 2015. See Note 14—Stockholders' Equity.
2016
Share-based compensation cost is recorded net of estimated forfeitures on a straight-line basis
for awards with service conditions only, and on a graded-vesting basis for awards with service,
performance and market conditions. The Company's estimated forfeiture rate is based on an
evaluation of historical, actual and trended forfeiture data. For fiscal 2016, 2015 and 2014, the
Company recorded share-based compensation cost related to the EIP of $211 million, $184 million and
$172 million, respectively, in personnel on its consolidated statements of operations. The related tax
benefits were $62 million, $54 million and $51 million for fiscal 2016, 2015 and 2014, respectively. The
amount of capitalized share-based compensation cost was immaterial during fiscal 2016, 2015 and
2014.
2007 Equity Incentive Compensation Plan
Note 16-Share-based Compensation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
VISA INC.
118
Participating securities include preferred stock outstanding and unvested share-based payment awards that contain non-
forfeitable rights to dividends or dividend equivalents, such as the Company's U.K.&I and Europe preferred stock, restricted
stock awards, restricted stock units and earned performance-based shares. U.K.&I and Europe preferred stock were issued
as part of the purchase price consideration in connection with the Visa Europe acquisition and are convertible into a number
of shares of class A common stock or class A equivalent preferred stock upon certain conditions. Participating securities'
income is allocated based on the weighted-average number of shares of as-converted stock. See Note 2-Acquisition of
Visa Europe and Note 14- Stockholders' Equity.
Figures in the table may not recalculate exactly due to rounding. Earnings per share is calculated based on unrounded
numbers. The number of shares and per share amounts for the prior periods presented have been retroactively adjusted to
reflect the four-for-one stock split effected in the fiscal second quarter of 2015. See Note 14-Stockholders' Equity.
Net income attributable to Visa Inc. is allocated based on proportional ownership on an as-converted basis. The weighted-
average number of shares of as-converted class B common stock used in the income allocation were 405 million for fiscal
2016 and 2015 and 413 million for fiscal 2014. The weighted-average number of shares of as-converted class C common
stock used in the income allocation was 75 million, 87 million and 103 million for fiscal 2016, 2015 and 2014, respectively.
Weighted-average diluted shares outstanding are calculated on an as-converted basis, and include incremental common
stock equivalents, as calculated under the treasury stock method. The computation includes 5 million, 6 million and 7 million
common stock equivalents for fiscal 2016, 2015 and 2014, respectively, because their effect would have been dilutive. The
computation excludes 2 million of common stock equivalents for fiscal 2016, 2015 and 2014 because their effect would have
been anti-dilutive.
Based on the Company's implied and historical volatility. The expected volatilities ranged from 20% to 23% in fiscal 2016,
21% to 23% in fiscal 2015, and 22% to 26% in fiscal 2014.
(4)
The Company's 2007 Equity Incentive Compensation Plan, or the EIP, authorizes the
compensation committee of the board of directors to grant non-qualified stock options ("options"),
restricted stock awards ("RSAs"), restricted stock units ("RSUs") and performance-based shares to its
employees and non-employee directors, for up to 236 million shares of class A common stock. Shares
available for award may be either authorized and unissued or previously issued shares subsequently
acquired by the Company. The EIP will continue to be in effect until all of the common stock available
under the EIP is delivered and all restrictions on those shares have lapsed, unless the EIP is
terminated earlier by the Company's board of directors. In January 2016, the Company's board of
directors approved an amendment of the EIP effective February 3, 2016, such that awards may be
granted under the plan until January 31, 2022.
2015
September 30, 2016
4.35
(2)
2014
Based upon the zero coupon U.S. treasury bond rate over the expected term of the awards.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
September 30, 2016
VISA INC.
(1) This assumption is based on the Company's historical option exercises and those of a set of peer companies that
management believes is generally comparable to Visa. The Company's data is weighted based on the number of years
between the measurement date and Visa's initial public offering as a percentage of the options' contractual term. The
relative weighting placed on Visa's data and peer data in fiscal 2016 was approximately 77% and 23%, respectively, 67%
and 33% in fiscal 2015, respectively, and 58% and 42% in fiscal 2014, respectively.
11.03
12.04 $
15.01 $
$
119
25.2%
22.0%
0.8%
0.7%
21.7%
4.55
1.3%
1.5%
1.5%
0.8%
4.80
September 30, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
VISA INC.
129
On January 14, 2014, the MDL 1720 court entered a final judgment order approving a settlement
with class plaintiffs in the interchange multidistrict litigation proceedings, which is subject to the
outcome of any appeals. Following the payment of approximately $4.0 billion from the U.S. litigation
escrow account into settlement funds pursuant to the class settlement agreement, on January 27,
2014, Visa received and deposited into the Company's U.S. litigation escrow account "takedown
payments" of approximately $1.1 billion, which Visa was entitled to receive under the class settlement
agreement based on payment card sales volume attributable to merchants who opted out. The deposit
into the U.S. litigation escrow account and a related increase in accrued litigation to address opt-out
claims were recorded in the second quarter of fiscal 2014. An additional accrual of $450 million
associated with these opt-out claims was recorded in the fourth quarter of fiscal 2014. Payments
totaling $528 million were made from fiscal 2014 through 2016 from the U.S. litigation escrow account
reflecting settlements with a number of individual opt-out merchants, resulting in an accrued balance of
$978 million related to U.S. covered litigation as of September 30, 2016. See further discussion below
under Individual Merchant Interchange Litigation and Note 3- U.S. and Europe Retrospective
Responsibility Plans.
1,023
(426)
$
(45)
Balance at September 30
Accrual Summary-VE Territory Covered Litigation
1,023 $ 1,449
(in millions)
978 $
Visa Inc., Visa International and Visa Europe are parties to certain legal proceedings that are
covered by the Europe retrospective responsibility plan. Unlike the U.S. retrospective responsibility
plan, the Europe retrospective responsibility plan does not have an escrow account that is used to fund
settlements or judgments. The Company is entitled to recover VE territory covered losses through a
periodic adjustment to the conversion rates applicable to the U.K.&I preferred stock and Europe
preferred stock. An accrual for the VE territory covered losses and a reduction to stockholders' equity
will be recorded when the loss is deemed to be probable and reasonably estimable. See further
discussion below under VE Territory Covered Litigation and Note 3-U.S. and Europe Retrospective
Responsibility Plans. The following table summarizes the activity related to VE territory covered
litigation.
Beginning in May 2005, a series of complaints (the majority of which were styled as class actions)
were filed in U.S. federal district courts by merchants against Visa U.S.A., Visa International and/or
MasterCard, and in some cases, certain Visa member financial institutions. The complaints challenged,
among other things, Visa's and MasterCard's purported setting of interchange reimbursement fees,
their "no surcharge" rules, and alleged tying and bundling of transaction fees under the federal antitrust
laws, and, in some cases, certain state unfair competition laws. The Judicial Panel on Multidistrict
Litigation issued an order transferring the cases to the U.S. District Court for the Eastern District of
New York for coordination of pre-trial proceedings in MDL 1720. A group of purported class plaintiffs
subsequently filed a Second Consolidated Amended Class Action Complaint which, together with the
complaints brought by individual merchants, sought money damages alleged to range in the tens of
billions of dollars (subject to trebling), as well as attorneys' fees and injunctive relief. The class plaintiffs
also filed a Second Supplemental Class Action Complaint against Visa Inc. and certain member
financial institutions challenging Visa's reorganization and IPO under the antitrust laws and seeking
unspecified money damages and declaratory and injunctive relief, including an order that the IPO be
unwound.
Accrual for VE territory covered litigation
settlement agreement (the “2012 Settlement Agreement") to resolve the class plaintiffs' claims. The
terms of the 2012 Settlement Agreement include, among other terms, (1) a comprehensive release of
claims asserted in the litigation and protection against future litigation regarding default interchange
and other U.S. rules; (2) settlement payments from the Company of approximately $4.0 billion and a
further distribution of 10 basis points of default interchange for an eight-month period; (3) certain
modifications to the Company's rules, including modifications to permit surcharging on credit
transactions under certain circumstances; and (4) the Company's agreement to meet with merchant
buying groups that seek to collectively negotiate interchange rates. On December 10, 2012, Visa paid
approximately $4.0 billion from the U.S. litigation escrow account into a settlement fund established
pursuant to the 2012 Settlement Agreement.
$
September 30, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
VISA INC.
130
Balance at October 1
In addition, Visa Inc., Visa U.S.A., Visa International, MasterCard Incorporated, MasterCard
International Incorporated, various U.S. financial institution defendants, and the class plaintiffs signed a
Interchange Multidistrict Litigation (MDL)
2
2
Fiscal 2016
(in millions)
U.S. Covered Litigation
Balance at September 30
The Company and certain individual merchants whose claims were consolidated with the MDL
signed a settlement agreement to resolve their claims against the Company for approximately $350
million. This payment was made from the U.S. litigation escrow account on October 29, 2012, and the
court has dismissed those claims with prejudice.
Fiscal 2016 Fiscal 2015
VISA INC.
Balance at October 1
On January 14, 2014, the court entered a final judgment order approving the settlement, from
which a number of objectors appealed. On June 30, 2016, the U.S. Court of Appeals for the Second
Circuit vacated the lower court's certification of the merchant class and reversed the approval of the
settlement. The Second Circuit determined that the class plaintiffs were inadequately represented, and
remanded the case to the lower court for further proceedings not inconsistent with its decision. Prior to
November 23, 2016, class plaintiffs may file a petition for writ of certiorari with the U.S. Supreme Court
seeking review of the Second Circuit's decision. Until the appeals process is complete, it is uncertain
whether the Company will be able to resolve the class plaintiffs' claims as contemplated by the 2012
Settlement Agreement. However, the case is still U.S. covered litigation for purposes of the U.S.
retrospective responsibility plan. See Note 3-U.S. and Europe Retrospective Responsibility Plans.
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
September 30, 2016
It is the Company's policy to account for interest expense and penalties related to uncertain tax
positions in non-operating expense in its consolidated statements of operations. The Company
recognized $15 million and $10 million of interest expense in fiscal 2016 and 2014, respectively, and
reversed $6 million of interest expense in fiscal 2015, related to uncertain tax positions. The Company
accrued $3 million, $1 million and $2 million of penalties in fiscal 2016, 2015 and 2014, respectively,
related to uncertain tax positions. At September 30, 2016 and 2015, the Company had accrued interest
of $61 million and $33 million, respectively, and accrued penalties of $17 million and $6 million,
respectively, related to uncertain tax positions in its other long-term liabilities. At September 30, 2016,
accrued interest and penalties balances included amounts related to the Visa Europe acquisition.
The Company's fiscal 2009 through 2012 U.S. federal income tax returns are currently under
Internal Revenue Service ("IRS") examination. The Company has filed a federal refund claim for fiscal
year 2008, which is also currently under IRS examination. Except for the refund claim, the federal
statutes of limitations have expired for fiscal years prior to 2009. The Company's fiscal 2006, 2007 and
2008 California tax returns are currently under examination. Except for certain outstanding refund
claims, the California statutes of limitations have expired for fiscal years prior to 2006.
During fiscal 2013, the Canada Revenue Agency (CRA) completed its examination of the
Company's fiscal 2003 through 2009 Canadian tax returns and proposed certain assessments. Based
on the findings of its examination, the CRA also proposed certain assessments to the Company's fiscal
2010 through 2015 Canadian tax returns. The Company filed notices of objection against these
assessments and, in fiscal 2015, completed the appeals process without reaching a settlement with the
CRA. In April 2016, the Company petitioned the Tax Court of Canada to overturn the CRA's
assessments. The Company continues to believe that its income tax provision adequately reflects its
obligations to the CRA.
The Company is also subject to examinations by various state and foreign tax authorities. All
material state and foreign tax matters have been concluded for years through fiscal 2002. The timing
and outcome of the final resolutions of the federal, state and foreign tax examinations and refund
claims are uncertain. As such, it is not reasonably possible to estimate the impact that the final
outcomes could have on the Company's unrecognized tax benefits in the next 12 months.
Note 20―Legal Matters
The Company is party to various legal and regulatory proceedings. Some of these proceedings
involve complex claims that are subject to substantial uncertainties and unascertainable damages.
Accordingly, except as disclosed, the Company has not established reserves or ranges of possible loss
related to these proceedings, as at this time in the proceedings, the matters do not relate to a probable
loss and/or the amount or range of losses are not reasonably estimable. Although the Company
believes that it has strong defenses for the litigation and regulatory proceedings described below, it
could, in the future, incur judgments or fines or enter into settlements of claims that could have a
material adverse effect on the Company's financial position, results of operations or cash flows. From
time to time, the Company may engage in settlement discussions or mediations with respect to one or
more of its outstanding litigation matters, either on its own behalf or collectively with other parties.
The litigation accrual is an estimate and is based on management's understanding of its litigation
profile, the specifics of each case, advice of counsel to the extent appropriate and management's best
estimate of incurred loss as of the balance sheet date.
128
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
September 30, 2016
The following table summarizes the activity related to accrued litigation.
Balance at October 1
Fiscal 2016 Fiscal 2015
(in millions)
$ 1,024 $ 1,456
Visa Inc., Visa U.S.A. and Visa International are parties to certain legal proceedings that are
covered by the U.S. retrospective responsibility plan, which the Company refers to as the U.S. covered
litigation. See Note 3-U.S. and Europe Retrospective Responsibility Plans. An accrual for the U.S.
covered litigation and a charge to the litigation provision are recorded when loss is deemed to be
probable and reasonably estimable. In making this determination, the Company evaluates available
information, including but not limited to actions taken by the litigation committee. The total accrual
related to the U.S. covered litigation could be either higher or lower than the escrow account balance.
The following table summarizes the activity related to U.S. covered litigation.
1,024
981 $
$
(446)
(47)
Payments on U.S. covered litigation.
2
2
Accrual Summary-U.S. Covered Litigation
Balance at September 30
Payments on legal matters
Accrual for VE territory covered litigation
Provision for uncovered legal matters
14
Consumer Interchange Litigation
VISA INC.
On February 24, 2016, the MDL court denied plaintiffs' motion for reconsideration of the dismissal
of plaintiffs' federal claim and dismissed plaintiffs' state law claim based on defendants' cross-motion
for reconsideration. On October 17, 2016, the U.S. Court of Appeals for the Second Circuit affirmed the
dismissal of plaintiffs' claims, and on October 31, 2016, plaintiffs sought rehearing by the Second
Circuit.
Federal Trade Commission
On March 13, 2012, the Antitrust Division of the United States Department of Justice (the
"Division") issued a Civil Investigative Demand, or "CID," to Visa Inc. seeking documents and
information regarding a potential violation of Section 1 or 2 of the Sherman Act, 15 U.S.C. §§ 1, 2. The
CID focuses on PIN-Authenticated Visa Debit and Visa's competitive responses to the Dodd-Frank Act,
including Visa's fixed acquirer network fee. Visa is cooperating with the Division in connection with the
CID.
U.S. Department of Justice Civil Investigative Demand
September 30, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
VISA INC.
135
Voluntary Access Letter. The Bureau of Competition of the United States Federal Trade
Commission (the "Bureau”) has closed its inquiry regarding potential violations of certain regulations
associated with the Dodd-Frank Act focusing on Visa's optional PIN Debit Gateway Service.
On February 18, 2016, the National ATM Council moved for a preliminary injunction to prohibit
Visa and MasterCard from imposing ATM access fee non-discrimination rules. On June 28, 2016, the
U.S. Supreme Court granted defendants' petitions for writ of certiorari seeking review of the decisions
of the U.S. Court of Appeals for the District of Columbia Circuit, and the district court issued an order
on July 21, 2016, staying the cases pending that review. The U.S. Supreme Court is scheduled to hear
oral argument in these cases on December 7, 2016.
Consumer Class Actions. In October 2011, a purported consumer class action was filed against
Visa and MasterCard in the same federal court challenging the same ATM access fee rules. Two other
purported consumer class actions challenging the rules, later combined, were also filed in October
2011 in the same federal court naming Visa, MasterCard and three financial institutions as defendants.
Plaintiffs seek treble damages, restitution, injunctive relief, and attorneys' fees where available under
federal and state law, including under Section 1 of the Sherman Act and consumer protection statutes.
National ATM Council Class Action. In October 2011, the National ATM Council and thirteen non-
bank ATM operators filed a purported class action lawsuit against Visa (Visa Inc., Visa International,
Visa U.S.A. and Plus System, Inc.) and MasterCard in the U.S. District Court for the District of
Columbia. The complaint challenges Visa's rule (and a similar MasterCard rule) that if an ATM operator
chooses to charge consumers an access fee for a Visa or Plus transaction, that fee cannot be greater
than the access fee charged for transactions on other networks. Plaintiffs claim that the rule violates
Section 1 of the Sherman Act, and seeks damages “in an amount not presently known, but which is
tens of millions of dollars, prior to trebling," injunctive relief and attorneys' fees.
U.S. ATM Access Fee Litigation
On November 19, 2010, a consumer filed an amended class action complaint against
Webloyalty.com, Inc., Gamestop Corporation, and Visa Inc. in Connecticut federal district court,
seeking damages, restitution and injunctive relief on the grounds that consumers who made online
purchases at merchants were allegedly deceived into incurring charges for services from
Webloyalty.com through the unauthorized passing of cardholder account information during the sales
transaction ("data pass”), in violation of federal and state consumer protection statutes and common
law. On October 15, 2015, the court dismissed the case in its entirety, without leave to replead. Plaintiff
filed a notice of appeal on November 12, 2015.
Data Pass Litigation
The pending lawsuits largely seek unspecified monetary damages and injunctive relief, but some
allege substantial damages.
Appeal allowed the class proceedings to advance but limited the time period of plaintiff's main price-
fixing claim to prior to March 2010. A motion by the plaintiff to amend its claim to include the post-
March 2010 period was dismissed by the British Columbia Supreme Court and that ruling is under
appeal. The related lawsuits in Ontario, Alberta, and Saskatchewan have effectively been stayed
pending further proceedings in British Columbia. The timing of the lawsuit in Quebec is also being
considered in light of the proceedings in British Columbia.
On February 13, 2013, the court granted the defendants' motions to dismiss and dismissed all of
these cases without prejudice. On plaintiffs' appeal, the U.S. Court of Appeals for the District of
Columbia Circuit vacated the lower court's decisions and remanded for further proceedings.
September 30, 2016
Notice Regarding EMV Chip Debit Cards. On July 28, 2016, the Bureau notified Visa that the
Bureau is conducting an investigation into whether Visa's requirements for EMV chip inhibit merchant
routing choice for debit card transactions. Visa is cooperating with the Bureau.
On November 25, 2014, Pulse Network LLC filed suit against Visa Inc. in federal district court in
Texas. Pulse alleges that Visa has monopolized and attempted to monopolize debit card network
services markets. Pulse also alleges that Visa has entered into agreements in restraint of trade,
engaged in unlawful exclusive dealing and tying, violated the Texas Free Enterprise and Antitrust Act
and engaged in tortious interference with prospective business relationships. Pulse seeks unspecified
treble damages, attorneys' fees and injunctive relief, including to enjoin the fixed acquirer network fee
structure, Visa's conduct regarding PIN-Authenticated Visa Debit and Visa agreements with merchants
and acquirers relating to debit acceptance. On January 23, 2015, Visa filed a motion to dismiss the
complaint. On December 17, 2015, the court denied Visa's motion to dismiss the complaint, and the
case remains pending.
137
On July 12, 2016, Broadway Grill, Inc. ("Broadway Grill"), on behalf of itself and a putative class
of California merchants that have accepted Visa-branded cards since January 1, 2004, filed a lawsuit
against Visa Inc., Visa International and Visa U.S.A. in California state court. Based on allegations
similar to those advanced by plaintiffs in MDL 1720, Broadway Grill pursues claims under California
state antitrust and unfair business statutes. Broadway Grill seeks damages, costs and other remedies.
On July 18, 2016, the case was removed to the U.S. District Court for the Northern District of
California. On September 27, 2016, the district court granted leave to amend the complaint and
entered an order remanding the case to California state court. Thereafter, Broadway Grill amended its
complaint and Visa sought permission from the U.S. Court of Appeals for the Ninth Circuit to appeal
the district court's decision. On October 17, 2016, the district court ordered the case remanded to
California state court, and Visa's request for permission to appeal is pending.
Broadway Grill
On June 27, 2016, The Kroger Co. ("Kroger”) filed a lawsuit against Visa Inc. in the U.S. District
Court for the Southern District of Ohio. In its complaint, Kroger seeks a declaratory judgment that
certain of Visa's rules related to the acceptance of Visa debit cards are inconsistent with the Dodd-
Frank Act. Kroger also seeks damages and other relief related to certain state law claims. On August
11, 2016, Visa filed a motion to dismiss the complaint. On September 15, 2016, Kroger filed its
opposition to Visa's motion to dismiss, arguing, among other things, that Kroger seeks a declaratory
judgment that Kroger has not breached its contract with Visa.
Kroger
On May 10, 2016, Wal-Mart Stores Inc. and various affiliates ("Walmart”) filed a lawsuit against
Visa U.S.A. in New York County Supreme Court. Walmart seeks a declaratory judgment that certain of
its practices related to the acceptance of Visa debit cards did not previously and would not in the future
constitute a breach of the acceptance agreement entered into between Walmart and Visa. Walmart
also seeks attorneys' fees and a declaratory judgment that certain of Visa's actions violated the same
agreement. On June 29, 2016, Visa answered the complaint and filed counterclaims seeking
declaratory and injunctive relief, as well as costs and other remedies. In its counterclaims, Visa alleges
that certain of Walmart's conduct and practices relating to the acceptance of Visa debit cards constitute
a breach of the acceptance agreement and a breach of the implied duty of good faith and fair dealing,
and that Walmart fraudulently induced Visa to enter into the acceptance agreement. On August 19,
2016, Walmart moved to dismiss Visa's counterclaim for fraudulent inducement.
Walmart Acceptance Agreement
Pulse Network
consumer credit card transactions from defendants to the purported class of merchants, defined as
those merchants throughout the United States who have been subject to the "Liability Shift" from
October 2015 to the present. Plaintiffs claim that the so-called “Liability Shift" violates Sections 1 and 3
of the Sherman Act and certain state laws, and seek treble damages, injunctive relief and attorneys'
fees. On September 30, 2016, the court granted motions to dismiss the amended complaint filed by
EMVCO and the financial institution defendants, but denied motions to dismiss filed by Visa Inc., Visa
U.S.A., MasterCard, American Express and Discover.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
VISA INC.
136
Following their initial complaint filed on March 8, 2016, B&R Supermarket, Inc., d/b/a Milam's
Market, and Grove Liquors LLC filed an amended class action complaint on July 15, 2016, against Visa
Inc., Visa U.S.A., MasterCard, Discover, American Express, EMVCO and certain financial institutions in
the U.S. District Court for the Northern District of California. The amended complaint asserts that
defendants, through EMVCo, conspired to shift liability for fraudulent, faulty or otherwise rejected
EMV Chip Liability Shift
On December 23, 2014, a case similar to MDL 1720 was filed in New Mexico state court by New
Mexico's attorney general on behalf of the state, state agencies and citizens of the state, generally
pursuing claims on allegations similar to those raised in MDL 1720. On May 15, 2015, defendants filed
a partial motion to dismiss, which the court granted in part and, among other things, narrowed the state
antitrust damages claims.
New Mexico Attorney General
September 30, 2016
On December 16, 2013, a putative class action was filed on behalf of all Visa and MasterCard
payment cardholders in the United States since January 1, 2000, against certain financial institutions,
identifying non-defendants Visa, MasterCard and certain other financial institutions as co-conspirators.
Plaintiffs allege primarily a conspiracy to fix interchange fees and seek injunctive relief, attorneys' fees
and treble damages in excess of $54.0 billion dollars annually arising from purported overcharges.
Originally filed in federal court in California, the case was transferred to MDL 1720. On November 26,
2014, the MDL court dismissed plaintiffs' federal law claim and declined to exercise jurisdiction over
plaintiffs' state law claim. Both sides asked the court to reconsider aspects of its decision and filed
notices of appeal.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
On March 26, 2014, the British Columbia Supreme Court, in one of the class action suits noted
above, Watson v. Bank of America Corporation, et al., granted the plaintiff's application for class
certification in part. On appeal from both the defendants and the plaintiff, the British Columbia Court of
While the Company believes that it has substantial defenses in these matters, the final outcome
of individual legal claims is inherently unpredictable. The Company could incur judgments, enter into
settlements or revise its expectations regarding the outcome of individual merchant claims, and such
developments could have a material adverse effect on our financial results in the period in which the
effect becomes probable and reasonably estimable.
September 30, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
VISA INC.
132
On June 13, 2016, The Home Depot, Inc. and Home Depot U.S.A., Inc. filed suit against Visa
Inc., Visa U.S.A., Visa International, MasterCard Incorporated and MasterCard International
Incorporated in the U.S. District Court for the Northern District of Georgia. On October 3, 2016, the
Judicial Panel on Multidistrict Litigation issued an order transferring the case to MDL 1720.
A settlement agreement was reached with Wal-Mart Stores Inc. and its subsidiaries, which will
terminate if, following all appeals, the 2012 Settlement Agreement in MDL 1720 is reversed or vacated
with respect to certification of the Rule 23(b)(2) settlement class or the consideration provided to or
release provided by that class. Including this settlement with Wal-Mart, as of the date of filing, Visa has
reached settlement agreements with a number of merchants representing approximately 51% of the
Visa-branded payment card sales volume of merchants who opted out of the 2012 Settlement
Agreement. Except for the settlement with Wal-Mart, these settlement agreements remain effective
despite the outcome of any appeals from the district court's order approving the 2012 Settlement
Agreement in MDL 1720.
VE Territory Covered Litigation
All the cases filed in federal court have been either assigned to the judge presiding over MDL
1720, or have been transferred or are being considered for transfer by the Judicial Panel on
Multidistrict Litigation for inclusion in MDL 1720. The court has entered an order confirming that In re
Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, 1:05-md-01720-JG-JO
(E.D.N.Y.), includes (1) all current and future actions transferred to MDL 1720 by the Judicial Panel on
Multidistrict Litigation or other order of any court for inclusion in coordinated or pretrial proceedings,
and (2) all actions filed in the Eastern District of New York that arise out of operative facts as alleged in
the cases subject to the transfer orders of the Judicial Panel on Multidistrict Litigation. Cases that have
been transferred to or otherwise included in MDL 1720 are U.S. covered litigation for purposes of the
U.S. retrospective responsibility plan. See Note 3—U.S. and Europe Retrospective Responsibility
Plans.
including the honor-all-cards rule; and various transaction fees, including the fixed acquirer network
fee. One merchant's complaint also asserts that Visa, MasterCard and their member banks conspired
to prevent the adoption of chip-and-PIN authentication in the U.S. or otherwise circumvent competition
in the debit market, and at least two merchant groups have requested permission from the MDL court
to amend their complaints. The cases name as defendants Visa Inc., Visa U.S.A., Visa International,
MasterCard Incorporated and MasterCard International Incorporated, although some also include
certain U.S. financial institutions as defendants. Wal-Mart Stores Inc. and its subsidiaries filed a
complaint that also adds Visa Europe Limited and Visa Europe Services Inc. as defendants.
September 30, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
VISA INC.
131
Beginning in May 2013, more than 50 cases have been filed in various federal district courts by
hundreds of merchants who had opted out of the damages portion of the 2012 Settlement Agreement,
generally pursuing damages claims on allegations similar to those raised in MDL 1720. A number of
the cases also include allegations that Visa has monopolized, attempted to monopolize, and/or
conspired to monopolize debit card-related market segments. In addition, some of the cases seek an
injunction against the setting of default interchange rates; certain Visa Rules relating to merchants,
Individual Merchant Interchange Litigation
Visa, MasterCard, and certain U.S. financial institution defendants in MDL 1720 filed a complaint
in the Eastern District of New York against certain named class representative plaintiffs who had opted
out or stated their intention to opt out of the damages portion of the 2012 Settlement Agreement. In
addition, Visa filed three more similar complaints in the Eastern District of New York against Wal-Mart
Stores Inc.; against The Home Depot, Inc. and Home Depot U.S.A.; and against Sears Holdings
Corporation. All four complaints seek a declaration that, from January 1, 2004 to November 27, 2012,
the time period for which opt-outs could seek damages under the 2012 Settlement Agreement, Visa's
conduct in, among other things, continuing to set default interchange rates, maintaining its “honor all
cards" rule, enforcing certain rules relating to merchants, and restructuring itself, did not violate federal
or state antitrust laws.
134
U.K. Merchant Litigation
In addition, over 30 additional Merchants have threatened to commence similar proceedings.
Standstill agreements have been entered into with respect to some of those Merchants' claims. While
the amount of interchange being challenged could be substantial, these claims have not yet been filed
and their full scope is not yet known. The Company has learned that several additional European
entities have indicated that they may also bring similar claims and we anticipate additional claims in the
future.
Merchant Litigation. Beginning in December 2010, a number of class action lawsuits were filed in
Quebec, British Columbia, Ontario, Saskatchewan and Alberta against Visa Canada, MasterCard and
ten financial institutions on behalf of merchants that accept payment by Visa and/or MasterCard credit
cards. A separate action was filed against Visa Canada Corporation and Visa Inc., two MasterCard
entities and smaller Canadian issuing banks, but that case has been stayed. The remaining cases
allege a violation of Canada's price-fixing law and various common law claims based on separate Visa
and MasterCard conspiracies in respect of default interchange and certain of the networks' rules. Four
of the named financial institutions, only one of which is a significant Canadian issuer, have now settled
with the plaintiffs.
Canadian Competition Proceedings
DCC Investigation. In 2013, the EC opened an investigation against Visa Europe, based on a
complaint alleging that Visa Europe's pricing of and rules relating to Dynamic Currency Conversion
(DCC) transactions infringe EU competition rules. This investigation is pending.
All issues relating to intra-regional or domestic consumer debit and credit card transactions
acquired in the EEA have been settled by commitments offered by Visa Europe Limited in 2010 and
2014 and endorsed by the EC. Following its acquisition of Visa Europe Limited in June 2016, these
commitments are now binding upon Visa Inc. The EC's case regarding Visa Inc.'s inter-regional
interchange fees is still ongoing.
Inter-regional Interchange Investigation. Following the issuance of a Statement of Objections in
2009 concerning, among other things, the alleged default application of Visa Inc.'s inter-regional
interchange fees to intra-regional and domestic consumer debit and credit card transactions in the
European Economic Area ("EEA"), the European Commission ("EC") served a Supplementary
Statement of Objections ("SSO") on Visa Inc. and Visa International in 2013. The SSO concerned, in
particular, the application of Visa Inc.'s inter-regional interchange fees to transactions involving a Visa
credit card issued outside the EEA and a merchant located in the EEA. The EC claims that these fees
violate competition law in the EEA. The SSO indicates that the EC may impose fines. The potential
amount of any fine cannot be estimated at this time.
European Commission Proceedings
On December 1, 2015, the objector's appeal from the trial court's order regarding the distribution
of certain settlement funds was dismissed. The appeal of the denial of the objector's motion for
attorneys' fees and costs is pending.
Since July 2013, in excess of 100 Merchants (the capitalized term "Merchant," when used in this
section, means a merchant together with subsidiary/affiliate companies) have commenced proceedings
against Visa Europe, Visa Inc. and Visa International relating to interchange rates in Europe, and seek
damages for alleged anti-competitive conduct primarily in relation to U.K. domestic and/or Irish
domestic and/or intra-EEA interchange fees for credit and debit cards. As of the filing date, Visa
Europe, Visa Inc. and Visa International have settled the claims asserted by two Merchants, and one
Merchant has dropped all claims that relate to debit cards. After a successful application for summary
judgment and an unsuccessful appeal by the claimants, the claims of U.K. merchants should be limited
to the six-year period immediately preceding the issuance of each claim.
In California, the consolidated Credit/Debit Card Tying Cases were resolved pursuant to a revised
settlement agreement that received final approval and was affirmed on appeal. Certain objectors filed
petitions for rehearing and for review by the California Supreme Court that were denied on February
11, 2015, and the judgment approving the settlement agreement is now final. One objector has
appealed the trial court's orders regarding the distribution of certain settlement funds, and the denial of
that objector's motion for attorneys' fees and costs.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
VISA INC.
133
From 2000 to 2004, complaints were filed on behalf of consumers in nineteen different states and
the District of Columbia against Visa and MasterCard. The complaints alleged, among other things,
that Visa's "honor all cards" rule and a similar MasterCard rule violated state antitrust and consumer
protection laws and common law. The claims in these class actions asserted that merchants, faced
with excessive merchant discount fees, passed on some portion of those fees to consumers in the form
of higher prices on goods and services sold. Plaintiffs sought money damages and injunctive relief.
Visa has been successful in the majority of these cases, and has resolved the cases in all jurisdictions
but California.
"Indirect Purchaser" Actions
Other Litigation
Although not all of the merchant claims have been served and thus the full scope of the claims is
not yet known, and there are substantial defenses to these claims, the total damages sought in the
claims that have been issued, served and preserved likely amounts to several billion dollars.
September 30, 2016
In November 2016, claims filed by a number of Merchants in 2013 are scheduled to go to trial to
determine whether Visa has infringed U.K. competition law and is liable for having set interchange fee
rates during the relevant time period. If the Merchants prevail, the amount of any loss they have
suffered will be determined in a separate trial in the future.
VISA INC.
2.1
Name:
By:
VISA INC.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf
by the undersigned, thereunto duly authorized.
SIGNATURES
144
Refer to the Exhibit Index herein.
3. The following exhibits are filed as part of this report or, where indicated, were
previously filed and are hereby incorporated by reference:
None.
2. Consolidated Financial Statement Schedules
See Index to Consolidated Financial Statements in Item 8-Financial Statements
and Supplementary Data of this report.
1. Consolidated Financial Statements
(a) The following documents are filed as part of this report:
ITEM 15. Exhibits and Financial Statement Schedules
Title:
PART IV
The information required by this Item is incorporated herein by reference to the section entitled
"Independent Registered Public Accounting Firm Fees” in our Proxy Statement.
ITEM 14. Principal Accountant Fees and Services
The information required by this item concerning director independence pursuant to Item 407(a)
of Regulation S-K is incorporated herein by reference to the section entitled "Independence of
Directors" in our Proxy Statement.
142
The information required by this item concerning related party transactions pursuant to Item 404
of Regulation S-K is incorporated herein by reference to the section entitled "Certain Relationships and
Related Person Transactions" in our Proxy Statement.
For the information required by item 201(d) of Regulation S-K, refer to Item 5 in this report.
ITEM 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this item pursuant to Item 403 of Regulation S-K is incorporated
herein by reference to the section entitled “Beneficial Ownership of Equity Securities" in our Proxy
Statement.
The information required by this item pursuant to Item 407(e)(5) of Regulation S-K is incorporated
herein by reference to the section entitled "Compensation Committee Report" in our Proxy Statement.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
The information required by this item pursuant to Item 407(e)(4) of Regulation S-K is incorporated
herein by reference to the section entitled "Compensation Committee Interlocks and Insider
Participation" in our Proxy Statement.
The information required by this item concerning director and executive compensation is
incorporated herein by reference to the sections entitled “Compensation of Non-Employee Directors"
and "Executive Compensation" in our Proxy Statement.
ITEM 11. Executive Compensation
Our Code of Business Conduct and Ethics, Code of Ethics for Senior Financial Officers and our
Corporate Governance Guidelines are available on the Investor Relations page of our website at
http://investor.visa.com, under "Corporate Governance." Printed copies of these documents are also
available to stockholders without charge upon written request directed to Corporate Secretary, Visa
Inc., P.O. Box 193243, San Francisco, California 94119.
The information required by this item regarding compliance with Section 16(a) of the Exchange
Act pursuant to Item 405 of Regulation S-K is incorporated herein by reference to the section entitled
"Section 16(a) Beneficial Ownership Reporting Compliance" in our Proxy Statement.
The information required by this item concerning the Company's directors, executive officers, the
Code of Business Conduct and Ethics and corporate governance matters is incorporated herein by
reference to the sections entitled “Director Nominee Biographies," "Executive Officers" and "Corporate
Governance" in our Proxy Statement.
143
ITEM 10. Directors, Executive Officers and Corporate Governance
Date:
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report
has been signed below by the following persons on behalf of the registrant in the capacities and on the
dates indicated:
/s/ Alfred F. Kelly, Jr.
Gary A. Hoffman
/s/ Gary A. Hoffman
Francisco Javier Fernández-Carbajal
/s/ Francisco Javier Fernández-Carbajal Director
November 15, 2016
November 15, 2016
Mary B. Cranston
Director
/s/ Mary B. Cranston
Lloyd A. Carney
Director
/s/ Lloyd A. Carney
November 15, 2016
/s/ Charles W. Scharf
Charles W. Scharf
Chief Executive Officer
November 15, 2016
Independent Chair
Global Corporate Controller and
Chief Accounting Officer
(Principal Accounting Officer)
(Principal Financial Officer)
November 15, 2016
Chief Financial Officer
Robert W. Matschullat
/s/ Robert W. Matschullat
/s/ James H. Hoffmeister
James H. Hoffmeister
/s/ Vasant M. Prabhu
Vasant M. Prabhu
Chief Executive Officer and Director November 15, 2016
(Principal Executive Officer)
Charles W. Scharf
/s/ Charles W. Scharf
Date
Title
Signature
November 15, 2016
Alfred F. Kelly, Jr.
Certain information required by Part III is omitted from this Report and the Company will file a
definitive proxy statement pursuant to Regulation 14A under the Exchange Act (the "Proxy Statement")
not later than 120 days after the end of the fiscal year ended September 30, 2016, and certain
information included therein is incorporated herein by reference. Only those sections of the Proxy
Statement that specifically address the items set forth herein are incorporated by reference. Such
incorporation does not include the report of the Audit and Risk Committee included in the Proxy
Statement.
141
Our unaudited consolidated statement of operations include the impact of several significant one-time items. See Overview
within Item 7-Management's Discussion and Analysis of Financial Condition and Results of Operations of this report.
The Company did not include Visa Europe's financial results in the Company's unaudited consolidated financial statements
of operations from the acquisition date, June 21, 2016, through June 30, 2016 as the impact was immaterial. The dilutive
impact of the outstanding shares of series B and C convertible participating preferred stock from June 21, 2016 through
June 30, 2016 was also not included in the calculation of basic or diluted earnings per share as the effect was immaterial.
See Note 2-Acquisition of Visa Europe and Note 15- Earnings Per Share to our consolidated financial statements. During
(2)
(1)
$
0.69 $ 0.63 $ 0.63
2.58
1.14 $ 1.04 $ 1.04 $ 4.25
2.77 $ 2.52 $ 2.53 $ 10.30
$ 1.02 $
$ 2.48 $
$ 0.62 $
10.33
$
2.54
2.53 $
4.26
$
1.04 $ 1.05
138
$ 1.02 $ 1.14 $
$ 2.48 $ 2.78 $
$
0.63 $ 0.63
$
$ 0.62 $ 0.69
$ 6,328
$ 9,064
$ 13,880
$ 2,283 $ 2,262 $ 2,281 $ 2,238
$1,697 $1,550 $ 1,569
(in millions, except per share data)
$3,518 $ 3,409 $ 3,382
$ 3,571
$ 1,512
Class C common stock
Class B common stock
Class A common stock
2.58
PART III
(3)
(5)
Not applicable.
ITEM 9B. Other Information
In preparation for management's report on internal control over financial reporting, we
documented and tested the design and operating effectiveness of our internal control over financial
reporting. During fiscal 2016, there were no significant changes in our internal controls over financial
reporting that occurred during the year ended September 30, 2016, that have materially affected, or
are reasonably likely to materially affect, the Company's internal control over financial reporting.
Changes in Internal Control over Financial Reporting
The effectiveness of our internal control over financial reporting as of September 30, 2016, has
been audited by KPMG LLP, an independent registered public accounting firm and is included in Item 8
of this report.
Our internal control over financial reporting is designed to provide reasonable, but not absolute,
assurance regarding the reliability of financial reporting and the preparation of financial statements in
accordance with U.S. generally accepted accounting principles. There are inherent limitations to the
effectiveness of any system of internal control over financial reporting. These limitations include the
possibility of human error, the circumvention or overriding of the system and reasonable resource
constraints. Because of its inherent limitations, our internal control over financial reporting may not
prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are
subject to the risks discussed in Item 1A-Risk Factors of this report.
Based on management's assessment, management has concluded that the Company's internal
control over financial reporting was effective as of September 30, 2016 using the criteria set forth in
Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (2013 framework).
140
The Company's management is responsible for establishing and maintaining adequate internal
control over financial reporting for the Company. Management assessed the effectiveness of the
Company's internal control over financial reporting as of September 30, 2016. Management has
excluded Visa Europe from its assessment of the effectiveness of internal control over financial
reporting as its acquisition was completed in the last half of fiscal year 2016 on June 21, 2016. Visa
Europe represented 4% of net operating revenue for the fiscal year ended September 30, 2016, and
7% of total assets at September 30, 2016, after excluding goodwill and intangible assets recorded
upon Visa Europe's acquisition. The recognition of goodwill and intangible assets is covered by our
internal controls over mergers and acquisitions, which were included in management's assessment of
the effectiveness of the Company's internal control over financial reporting for the fiscal year ended
September 30, 2016. Management expects to include Visa Europe in its assessment of internal control
over financial reporting beginning in fiscal year 2017. See Note 2-Acquisition of Visa Europe to our
consolidated financial statements included in Item 8-Financial Statements and Supplementary Data
of this report for pro forma information.
Management's Report on Internal Control over Financial Reporting
There are inherent limitations to the effectiveness of any system of disclosure controls and
procedures. These limitations include the possibility of human error, the circumvention or overriding of
the controls and procedures and reasonable resource constraints. In addition, because we have
designed our system of controls based on certain assumptions, which we believe are reasonable,
about the likelihood of future events, our system of controls may not achieve its desired purpose under
all possible future conditions. Accordingly, our disclosure controls and procedures provide reasonable
assurance, but not absolute assurance, of achieving their objectives.
Under the supervision and with the participation of our management, including our Chief
Executive Officer and Chief Financial Officer, we conducted an evaluation of our disclosure controls
and procedures. On June 21, 2016, we acquired Visa Europe Limited ("Visa Europe”). Management
has excluded the acquired business from its assessment of the effectiveness of disclosure controls and
procedures as of September 30, 2016. Based on this evaluation, our Chief Executive Officer and our
Chief Financial Officer concluded that, as of September 30, 2016, our disclosure controls and
procedures were effective, at the reasonable assurance level. Management expects to include Visa
Europe in its assessment of the effectiveness of disclosure controls and procedures beginning in fiscal
year 2017.
We maintain a system of disclosure controls and procedures (as defined in the Rules 13a-15(e)
and 15(d)-15 (e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act")) that is
designed to ensure that information required to be disclosed in our Exchange Act reports is recorded,
processed, summarized and reported within the time periods specified in the SEC's rules and forms,
and that such information is accumulated and communicated to our management, including our Chief
Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding
required disclosures.
Evaluation of Disclosure Controls and Procedures
(4)
ITEM 9A. Controls and Procedures
ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosures
139
The per share amounts for the first quarter of fiscal 2015 presented have been retroactively adjusted to reflect the four-for-
one stock split effected in the fiscal second quarter of 2015. See Note 14-Stockholders' Equity.
In the third quarter of fiscal 2015, the Company recorded a $110 million, non-operating loss related to an increase in the fair
value of the Visa Europe put option. This amount is not subject to income tax. See Overview within Item 7-Management's
Discussion and Analysis of Financial Condition and Results of Operations.
During the three months ended December 31, 2015, the Company recorded $255 million non-operating income related to a
decrease in the fair value of the Visa Europe put option. This amount is not subject to income tax. See Overview within Item
7-Management's Discussion and Analysis of Financial Condition and Results of Operations of this report.
During the second and third quarters of fiscal 2016, the Company recorded a net gain of $116 million and a net loss of $42
million, respectively, before tax, related to currency forward contracts associated with the euro cash consideration paid in the
Visa Europe acquisition. See Overview within Management's Discussion and Analysis of Financial Condition and Results of
Operations within this report.
See Overview within Item 7-Management's Discussion and Analysis of Financial Condition and Results of Operations of
this report.
$145 million of foreign exchange gains on euro deposits held for a short period prior to the Closing.
$152 million of acquisition related costs; and
$1.9 billion Visa Europe Framework Agreement loss related to the effective settlement of the Framework
Agreement;
the quarter ended June 30, 2016, the Company recorded several one-time items associated with the Visa Europe
acquisition as follows:
September 30, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
VISA INC.
Not applicable.
/s/Cathy E. Minehan
Cathy E. Minehan
Director
November 15, 2016
2020
12/14/2015
4.3
001-33977
8-K
Form of 2.200% Senior Note due
4.6
2017
12/14/2015
4.2
001-33977
8-K
Form of 1.200% Senior Note due
4.5
4.7
2015 between Visa Inc. and U.S.
Bank National Association
4.1
001-33977
8-K
Indenture dated December 14,
4.4
class C common stock of Visa Inc.
1/28/2009
4.2
000-53572
8-A
Form of specimen certificate for
4.3
1/28/2009
4.1
12/14/2015
000-53572
Form of 2.800% Senior Note due
001-33977
1
6/21/2016
3.1
001-33977
8-K
Certificate of Designations of
Series A Convertible Participating
Preferred Stock of Visa Inc.
4.11
12/14/2015
4.7
001-33977
8-K
Form of 4.300% Senior Note due
2045
4.10
2035
8-K
12/14/2015
001-33977
8-K
Form of 4.150% Senior Note due
4.9
2025
12/14/2015
4.5
001-33977
8-K
Form of 3.150% Senior Note due
4.8
2022
12/14/2015
4.4
4.6
8-A
Form of specimen certificate for
class B common stock of Visa Inc.
4.2
Form
Description
Number
Exhibit
Exhibit
Incorporated by Reference
EXHIBIT INDEX
146
November 15, 2016
Director
/s/ Maynard G. Webb, Jr.
Maynard G. Webb, Jr.
John A. C. Swainson
November 15, 2016
Director
File
Number
/s/ John A. C. Swainson
November 15, 2016
Director
/s/ David J. Pang
November 15, 2016
Date
Title
Director
/s/ Suzanne Nora Johnson
Suzanne Nora Johnson
Signature
145
November 15, 2016
Director
Director and Chief Executive Officer November 15, 2016
Designate
November 15, 2016
David J. Pang
Exhibit
Filing
Number
9/13/2007
4.1
333-143966
S-4/A
Form of stock certificate of Visa
Inc.
4.1
11/20/2015
3.3
001-33977
10-K
Amended and Restated Bylaws of
Visa Inc.
3.3
2/27/2015
3.1
001-33977
8-K
Certificate of Correction of the
Certificate of Incorporation of Visa
Inc.
Date
2.1
Amended and Restated
8-K
001-33977
5/10/2016
Diluted earnings per share
Transaction Agreement, dated as
of May 10, 2016, between Visa
Inc. and Visa Europe Limited #
Sixth Amended and Restated
Certificate of Incorporation of Visa
Inc.
8-K
001-33977
3.2
1/29/2015
3.2
3.1
Class C common stock
(6)
Class A common stock
0.79 $
$ 1.31 $
3.17 $
$
Class C common stock
Class B common stock
$
Class A common stock
Basic earnings per share
$ 5,991
$ 7,883
$2,434 $ 2,396
428
412 $ 1,707 $ 1,941
$ 1,931 $
Net income
Operating income
0.17 $ 0.71 $ 0.80
$ 15,082
$ 4,261
Operating revenues
2016 Total
Dec. 31,
2015 (4)
June 30, Mar. 31,
2016 (2),(3)
2016 (3)
Sept. 30,
2016(1)
Visa Inc.
Fiscal Year
Quarter Ended (unaudited)
The following tables show selected quarterly operating results for each quarter and full year of
fiscal 2016 and 2015 for the Company:
Selected Quarterly Financial Data (Unaudited)
September 30, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Class B common stock
(in millions, except per share data)
$3,630 $ 3,626 $ 3,565
0.29 $ 1.17 $ 1.32
0.69 $ 2.85 $ 3.20
$ 2,625 $
$ 2.49
2.48
$
4.09
$
Fiscal Year
Sept. 30,
2015
SASSA
June 30, Mar. 31,
2015(5)
2015
2015 Total
Visa Inc.
Operating revenues
Operating income
Net income
SASSA
Basic earnings per share
Dec. 31,
2014 (6)
3.20
9.93
Class A common stock
0.71 $
Quarter Ended (unaudited)
$
0.28 $ 1.17 $ 1.32
$ 3.16 $ 0.69 $ 2.84 $
Class C common stock
$ 1.30 $
Class B common stock
0.17
$ 0.79 $
Diluted earnings per share
$ 9.94
4.10
0.80 $
$
Media Relations
http://investor.visa.com
Transfer Agent
Visa Inc.
ir@visa.com
+1 650 432 7644
globalmedia@visa.com
http://corporate.visa.com
Wells Fargo Shareowner Services
P.O. Box 64854
Visa Inc.
PO Box 193243
San Francisco CA, 94119 USA
corporatesecretary@visa.com
Independent Registered
Public Accounting Firm
KPMG LLP
Visa Inc.
Corporate Secretary
Investor Relations
Chief Risk Officer
San Francisco, CA 94128-8999 USA
10.51*
St. Paul, MN 55164-0854 USA
Oliver Jenkyn
North America
Jack Carsky
Investor Relations
Kamran Siddiqi
Central & Eastern Europe,
Middle East & Africa
+1 650 432 3200
James Hoffmeister
Chief Accounting Officer
Visa Inc.
One Market Plaza
San Francisco, CA 94105 USA
http://corporate.visa.com
Mailing Address
Visa Inc.
P.O. Box 8999
Corporate Headquarters
+1 651 306 4433 or +1 866 456 9417
Executive Committee
http://shareowneronline.com
Founder, Webb Investment Network
Agreement for awards granted
after November 1, 2015
Alfred F. Kelly, Jr.
CEO
Lynne Biggar
Marketing & Communications
Nicolas Huss
CEO, Visa Europe
Kelly Mahon Tullier
General Counsel and
Corporate Secretary
Jim McCarthy
Innovation and Strategic Partnerships
Ryan McInerney
President
Vasant M. Prabhu
Chief Financial Officer
Ellen Richey
Vice Chairman
Risk and Public Policy
Michael Ross
Human Resources
William M. Sheedy
Strategy, M&A, and
Government Relations
FSC
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MIX
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Technology
© 2016 Visa. All rights reserved.
Incentive Compensation Plan
Restricted Stock Unit Award
Form of Alternate Visa Inc. 2007
Equity Incentive Compensation
10.2
10.45*
11/21/2014
10.43
001-33977
10-K
Form of Visa Inc. 2007 Equity
Incentive Compensation Plan
Restricted Stock Unit Award
Agreement for awards granted
after November 1, 2014
10.44*
6
Agreement for awards granted
after November 1, 2014
Incentive Compensation Plan
Restricted Stock Award
11/21/2014
10.42
001-33977
10-K
Form of Visa Inc. 2007 Equity
10.43*
11/21/2014
001-33977
10.8
1/30/2014
10.41*
Form of Visa Inc. 2007 Equity
Incentive Compensation Plan
Director Restricted Stock Unit
Award Agreement for awards
granted after November 1, 2014
10-K
Form of Visa Inc. 2007 Equity
Incentive Compensation Plan
Performance Share Award
Agreement for awards granted
after November 1, 2014
001-33977
11/21/2014
10.42*
Form of Visa Inc. 2007 Equity
Incentive Compensation Plan
Stock Option Award Agreement
for awards granted after
November 1, 2014
10-K
001-33977
10.41
10.40
10-K
001-33977
10.44
001-33977
10.47
11/21/2014
10.49*
Form of Visa Inc. 2007 Equity
Incentive Compensation Plan
Stock Option Award Agreement
10-Q
10-K
001-33977
1/28/2016
for awards granted after
November 1, 2015
10.50*
Form of Visa Inc. 2007 Equity
10-Q
001-33977
10.1
1/28/2016
Form of Alternate Visa Inc. 2007
Equity Incentive Compensation
Plan Restricted Stock Unit Award
Agreement for awards granted
after November 1, 2014
11/21/2014
11/21/2014
10.46*
Maynard G. Webb, Jr.
10-K
001-33977
10.45
10.48*
11/21/2014
Agreement for awards granted
after November 1, 2014
10.47*
Form of Alternate Visa Inc. 2007
Equity Incentive Compensation
Plan Restricted Stock Award
Agreement for awards granted
after November 1, 2014
10-K
001-33977
10.46
Plan Stock Option Award
Director
XBRL Taxonomy Extension
CEO, Kerry Group Kuok Foundation Limited
Consulting Agreement, dated
8-K
001-33977
99.2
10/21/2016
October 17, 2016, between Visa
Inc. and Charles W. Scharf
10.58*
Offer Letter, dated October 17,
2016, between Visa Inc. and
Alfred F. Kelly, Jr.
8-K
001-33977
99.1
10/21/2016
10.59*+
Aircraft Time Sharing Agreement,
dated November 9, 2016, between
Visa Inc. and Alfred F. Kelly, Jr.
10.60*
Offer Letter, dated May 20, 2013,
between Visa Inc. and Ryan
McInerney
8-K
001-33977
10-K
Offer Letter, dated November 6,
10.62*
and Ryan McInerney
11/21/2014
10.57*
10.53
10-K
Sign-On Bonus Agreement, dated
May 22, 2013, between Visa Inc.
10.61*
5/23/2013
99.2
001-33977
001-33977
between Visa Inc. and Charles W.
Scharf
effective December 13, 2013,
Time Sharing Agreement,
11/9/2010
10.2
001-33977
8-K
Form of Letter Agreement relating
to Visa Inc. Executive Severance
Plan
10.53*
10.54*
7
10.52*+
1/28/2016
10.3
001-33977
10-Q
10-Q
Form of Visa Inc. 2007 Equity
Incentive Compensation Plan
Restricted Stock Unit Award
Agreement for the CEO, for the
Make-Whole Award.
10.54
Offer Letter, dated October 23,
2012, between Visa Inc. and
Charles W. Scharf
001-33977
11/21/2014
10.51
001-33977
10-K
Amendment No. 1 to the Aircraft
10.56*
8-K
11/9/2012
001-33977
8-K
Aircraft Time Sharing Agreement,
dated November 7, 2012, between
Visa Inc. and Charles W. Scharf
10.55*
10/24/2012
99.2
10.1
John A. C. Swainson
11/21/2014
10.63*
101.DEF
Definition Linkbase Document
101.LAB
XBRL Taxonomy Extension Label
Linkbase Document
101.PRE
Form of Visa Inc. 2007 Equity
Incentive Compensation Plan
Performance Share Award
Agreement for awards granted
after November 1, 2015
XBRL Taxonomy Extension
t
*
#
+ #
Presentation Linkbase Document
Confidential treatment has been requested for portions of this agreement. A completed copy of
the agreement, including the redacted portions, has been filed separately with the SEC.
Management contract, compensatory plan or arrangement.
Filed or furnished herewith.
Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any
omitted schedule will be furnished supplementally to the SEC upon request; provided,
however, that the parties may request confidential treatment pursuant to Rule 24b-2 of the
Exchange Act for any document so furnished.
9
Board of Directors
David J. Pang
Suzanne Nora Johnson
Director
Cathy E. Minehan
Director
Independent Chairman, Visa Inc.
Robert W. Matschullat
CEO, Visa Inc.
Calculation Linkbase Document
Alfred F. Kelly, Jr.
Gary A. Hoffman
Francisco Javier Fernández-Carbajal
Consultant and CEO, Servicios
Administrativos Contry SA de CV
Director
Mary B. Cranston
CEO, Brocade Communications
Lloyd A. Carney
CEO, Hastings Insurance Group
XBRL Taxonomy Extension
101.CAL
XBRL Taxonomy Extension
Schema Document
8
Statement of Computation of Ratio
of Earnings to Fixed Charges
12.1+
2/2/2015
99.2
001-33977
21.1+
8-K
10.64*
11/21/2014
10.55
001-33977
10-K
Sign-On Bonus Agreement, dated
November 12, 2013, between Visa
Inc. and Rajat Taneja
Offer Letter and One-Time Cash
Award Agreement, dated January
27, 2015, between Visa Inc. and
Vasant M. Prabhu
2013, between Visa Inc. and Rajat
Taneja
23.1+
31.2+
101.SCH
XBRL Instance Document
101.INS
Sarbanes-Oxley Act of 2002
pursuant to Section 906 of the
Certification of the Chief Financial
Officer pursuant to 18 U.S.C.
Section 1350, as adopted
31.1+
Sarbanes-Oxley Act of 2002
Certification of the Chief Financial
Officer pursuant to Exchange Act
Rules 13a-14(a) and 15d-14(a), as
adopted pursuant to Section 302
of the Sarbanes-Oxley Act of 2002
Certification of the Chief Executive
Officer pursuant to Exchange Act
Rules 13a-14(a) and 15d-14(a), as
adopted pursuant to Section 302
of the Sarbanes-Oxley Act of 2002
Consent of KPMG LLP,
Independent Registered Public
Accounting Firm
List of Significant Subsidiaries of
Visa Inc.
32.2+
32.1+
Certification of the Chief Executive
Officer pursuant to 18 U.S.C.
Section 1350, as adopted
pursuant to Section 906 of the
Form of Visa Inc. 2007 Equity
Incentive Compensation Plan
Director Restricted Stock Unit
Award Agreement for awards
granted after November 18, 2013
11/9/2010
1/30/2014
Form of Litigation Management
Agreement by and among Visa
Inc., Visa International Service
Association, Visa U.S.A. Inc. and
the other parties thereto
S-4/A
333-143966
10.18
8/22/2007
10.15
8-K
001-33977
10.2
7/16/2012
10.16
Omnibus Agreement, dated
February 7, 2011, regarding
Interchange Litigation Judgment
Sharing and Settlement Sharing
by and among Visa Inc., Visa
U.S.A. Inc., Visa International
Service Association, MasterCard
Incorporated, MasterCard
International Incorporated and the
parties thereto
Amendment, dated August 26,
2014, to the Omnibus Agreement
regarding Interchange Litigation
Judgment Sharing and Settlement
Sharing by and among Visa Inc.,
Visa U.S.A. Inc., Visa International
Service Association, MasterCard
Incorporated, MasterCard
International Incorporated and the
parties thereto
3
10-K
10.17
001-33977
10-K
October 19, 2012, by and among
Visa Inc., Visa U.S.A. Inc., Visa
International Service Association,
MasterCard Incorporated,
MasterCard International
Incorporated, various U.S.
financial institution defendants,
and the class plaintiffs to resolve
the class plaintiffs' claims in the
matter styled In re Payment Card
Interchange Fee and Merchant
Discount Antitrust Litigation, No.
05-MD-1720
Settlement Agreement, dated
Litigation Judgment Sharing and
Settlement Sharing
10.14
10.18
October 22, 2015, to Omnibus
Second Amendment, dated
10.17
11/21/2014
10.14
001-33977
Agreement regarding Interchange
11/20/2015
10.13
001-33977
10.11
11/20/2015
10.10
001-33977
10-K
Amendment of Interchange
Judgment Sharing Agreement
Form of Loss Sharing Agreement
by and among Visa U.S.A. Inc.,
10.10
10.2
001-33977
8-K
Interchange Judgment Sharing
Agreement Schedule
10.9
and the other parties thereto †
2/8/2011
11/20/2015
S-4/A
10.14
10-K
Amendment of Loss Sharing
Agreement
10.13
Schedule
2/8/2011
10.1
333-143966
001-33977
Loss Sharing Agreement
10.12
financial institutions
Association, Visa Inc. and various
Visa International Service
7/24/2007
8-K
Association and Visa U.S.A. Inc.,
10-Q
10.3
10.24*
Visa Inc. 2007 Equity Incentive
Compensation Plan, as amended
and restated as of February 3,
2016
Visa Inc. Incentive Plan, as
amended and restated as of
February 3, 2016
DEF 14A 001-33977
Annex B 12/11/2015
4
10.25*
Visa Excess Thrift Plan, as
amended and restated as of
January 1, 2008
10-K
001-33977
10.31
11/21/2008
10.26*
Visa Excess Retirement Benefit
10-K
001-33977
10.32
001-33977
8-K
Visa Inc. Executive Severance
Plan, effective as of November 3,
2010
10.28*
Excess Retirement Benefit Plan,
as amended and restated as of
January 1, 2008
January 1, 2011, of the Visa
Annex A 1/12/2016
11/18/2011
001-33977
10-K
First Amendment, effective
10.27*
Plan, as amended and restated as
of January 1, 2008
11/21/2008
10.34
001-33977
DEFA 14A
10.23*
001-33977
8-K
Litigation Management Deed,
10.20
Schedule 1 thereto, Visa Inc. and
Visa Europe Limited
the UK Members listed on
10.1
11/2/2015
001-33977
8-K
Loss Sharing Agreement, dated
as of November 2, 2015, among
10.19
2/6/2013
10.1
10.1
001-33977
6/21/2016
Representative, Visa Inc., the
Compensation Plan, as amended
and restated as of July 22, 2014
11/21/2014
10.17
001-33977
10-K
Visa Directors Deferred
dated as of June 21, 2016, by and
among the VE Member
10.22*
10.21
001-33977
10-K
Visa 2005 Deferred Compensation
Plan, effective as of August 12,
2015
10.21*
LMC Appointing Members, the
UK&I DCC Appointing Members,
the Europe DCC Appointing
Members and the UK&I DCC
Interested Members
11/20/2015
10.40*
7/24/2007
333-143966
001-33977
10-Q
Form of Visa Inc. 2007 Equity
10.34*
for awards granted after
November 18, 2013
Stock Option Award Agreement
Incentive Compensation Plan
1/30/2014
10.1
001-33977
10-Q
Form of Visa Inc. 2007 Equity
10.33*
2/6/2013
10.4
001-33977
10-Q
10.30*
10-K
001-33977
10.40
11/19/2010
Form of Visa Inc. 2007 Equity
Incentive Compensation Plan
Stock Option Award Agreement
for executive officers, other than
the CEO, for awards granted after
November 1, 2010
10.2
10.31*
10-K
001-33977
10.35
11/18/2011
10.32*
Form of Visa Inc. 2007 Equity
Incentive Compensation Plan
Stock Option Award Agreement
for the CEO, for awards granted
after November 1, 2012
Form of Visa Inc. 2007 Equity
Incentive Compensation Plan
Stock Option Award Agreement
for executive officers, other than
the CEO, for awards granted after
November 1, 2011
1/30/2014
Incentive Compensation Plan
Restricted Stock Award
10.5
1/30/2014
Agreement for awards granted
after November 18, 2013
10.38*
Form of Alternate Visa Inc. 2007
Equity Incentive Compensation
Plan Restricted Stock Award
Agreement for awards granted
after November 18, 2013
10-Q
001-33977
001-33977
1/30/2014
10.39*
Form of Alternate Visa Inc. 2007
Equity Incentive Compensation
Plan Restricted Stock Unit Award
Agreement for awards granted
after November 18, 2013
10-Q
001-33977
10.7
10.6
Appendix 12/12/2014
B
10-Q
10.37*
Agreement for awards granted
after November 18, 2013
5
10.35*
Form of Visa Inc. 2007 Equity
Incentive Compensation Plan
Restricted Stock Unit Award
Agreement for awards granted
after November 18, 2013
10-Q
001-33977
Form of Alternate Visa Inc. 2007
Equity Incentive Compensation
Plan Stock Option Award
10.3
10.36*
Form of Visa Inc. 2007 Equity
Incentive Compensation Plan
Performance Share Award
Agreement for awards granted
after November 18, 2013
10-Q
001-33977
10.4
1/30/2014
1/30/2014
10.13
001-33977
Visa Inc. 2015 Employee Stock
Purchase Plan
Amendment No. 1 to the Visa
Europe Put-Call Option
Agreement, dated May 10, 2016,
by and between Visa Inc. and Visa
Europe Limited
10.5
Form of Escrow Agreement by
and among Visa Inc., Visa U.S.A.
Inc. and the escrow agent
S-4
333-143966
10.15
6/22/2007
10.6
Form of Framework Agreement by
and among Visa Inc., Visa Europe
S-4/A
333-143966
10.17
7/24/2007
Limited, Inovant LLC, Visa
S-4/A
Form of Interchange Judgment
Sharing Agreement by and among
Visa International Service
10.8
2
JPMorgan Chase Bank N.A., as
syndication agent, and the lenders
referred to therein #
Visa International Service
Association, Visa U.S.A. Inc., as
borrowers, Bank of America, N.A.,
as administrative agent,
5/10/2016
Agreement, dated January 27,
2016, by and among Visa Inc.,
10.1
001-33977
10-Q
Five Year Revolving Credit
10.7
International Services Association
and Visa U.S.A. Inc. †
4/25/2016
2.2
001-33977
8-K
10.29*
Mahesh Aditya
4.12
Certificate of Designations of
Series B Convertible Participating
Preferred Stock of Visa Inc.
8-K
001-33977
3.2
6/21/2016
4.13
Certificate of Designations of
Series C Convertible Participating
Preferred Stock of Visa Inc.
8-K
001-33977
3.3
6/21/2016
DEF 14A
10.1
Form of Indemnity Agreement
Amended and Restated Global
Restructuring Agreement, dated
August 24, 2007, by and among
Visa Inc., Visa International
Service Association, Visa U.S.A.
Inc., Visa Europe Limited, Visa
Canada Association, Inovant LLC,
Inovant, Inc., Visa Europe
Services, Inc., Visa International
Transition LLC, VI Merger Sub,
Inc., Visa USA Merger Sub Inc.
and 1734313 Ontario Inc.
Amended and Restated
10.4
Annex B 9/13/2007
333-143966
S-4/A
Form of Visa Europe Put-Call
Option Agreement between Visa
Inc. and Visa Europe Limited
10.2
10.3
333-143966
S-4/A
10/25/2012
10.1
001-33977
8-K
Annex A 9/13/2007
Other Corporate Officers
Visa Europe Acquisition. Prior to our 2007 reorganization, Visa operated as a collection of
member-owned associations, with each region serving its member financial institutions and
administering Visa programs within a global framework. In 2007, Visa reorganized, with all of the
regions except Visa Europe coming together to form Visa Inc., a Delaware corporation. Visa Europe
remained owned by its European member financial institutions.
On June 21, 2016, we acquired Visa Europe. We believe the acquisition positions our Company
to create additional value through increased scale, efficiencies realized by integration of the
businesses, and benefits related to Visa Europe's transition from a member-owned association to a for-
profit enterprise. We plan to bring Visa's global capabilities to our European clients, deliver a more
seamless experience operating as one single global company and grow our business in that region. As
part of the acquisition, we acquired 100% of the share capital of Visa Europe for €12.2 billion ($13.9
billion) and €5.3 billion ($6.1 billion) in preferred stock, with an additional €1.0 billion, plus 4%
compound annual interest, to be paid on June 21, 2019.
(State or other jurisdiction
Legal Proceedings
Item 3
Properties ....
Item 2
Unresolved Staff Comments
Business
Item 1B
Risk Factors
Item 1A
PARTI
Item 1
Page
TABLE OF CONTENTS
Portions of the Registrant's Proxy Statement for the 2016 Annual Meeting of Stockholders are incorporated herein by
reference in Part III of this Annual Report on Form 10-K to the extent stated herein. Such Proxy Statement will be filed with the
Securities and Exchange Commission within 120 days of the Registrant's fiscal year ended September 30, 2016.
DOCUMENTS INCORPORATED BY REFERENCE
As of November 9, 2016, there were 1,867,580,597 shares outstanding of the registrant's class A common stock, par value
$0.0001 per share, 245,513,385 shares outstanding of the registrant's class B common stock, par value $0.0001 per share, and
16,814,896 shares outstanding of the registrant's class C common stock, par value $0.0001 per share.
The aggregate market value of the registrant's class A common stock, par value $0.0001 per share, held by non-affiliates
(using the New York Stock Exchange closing price as of March 31, 2016, the last business day of the registrant's most recently
completed second fiscal quarter) was approximately $145.5 billion. There is currently no established public trading market for the
registrant's class B common stock, par value $0.0001 per share, or the registrant's class C common stock, par value $0.0001 per
share.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes ☐ No ☑
Accelerated filer ☐
Smaller reporting company ☐
(Do not check if a smaller reporting company)
Non-accelerated filer ☐
Large accelerated filer ☑
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See
the definitions of "large accelerated filer" "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
(Check one):
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files). Yes ☑ No ☐
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the
Act. Yes ☐ No ☑
Item 4
Mine Safety Disclosures
4
18
PART III
59
35
FAA GGG ww
141
Other Information
Item 9B
140
Controls and Procedures
Item 9A
140
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure ..
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes ☑ No ☐
Item 9
Quantitative and Qualitative Disclosures About Market Risk
Item 7A
Item 8
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Selected Financial Data...
Item 6
Item 7
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
PART II
Item 5
30
30
30
88888
30
Financial Statements and Supplementary Data
Securities registered pursuant to Section 12(g) of the Act:
Class B common stock, par value $0.0001 per share
Class C common stock, par value $0.0001 per share
(Title of each Class)
New York Stock Exchange
(Name of each exchange on which registered)
(Title of each Class)
Dear Shareholders:
A Letter from Alfred F. Kelly, Jr.
Chule Schf
Former Chief Executive Officer
Visa Inc.
Charles W. Scharf
5. And finally, on a personal level, I would
ask you all to continue to do all you can
for your clients by working hard day
in and day out. But at the same time,
make sure to have fun at work and don't
put your personal lives second. Life is
precious, balance doing what you need
to do with doing what you want to do.
4. And most importantly, always do the
right thing. Written values are only as
good as the actions you take every day.
Live them, don't just say them.
3. Balance the long term with the short
term. The short term gives you the
opportunity to compete in the long
term, but be careful of sacrificing
the long term for the short term. If
you continue to feel as I do, that the
opportunity for growth is even greater
in the future than it has been in the past,
then you have an obligation to all —
shareholders, clients, employees, etc.—
to build for the long term.
consequences.
2. We always talk about putting our clients
first. We say if we put our clients first, our
results will follow. I challenge all of you
to be brutally honest and ask yourselves
whether our decisions are always made
with the goal of delighting our clients.
If not, be prepared to live with the
To close, I thought I'd share a few words of
parting advice I wrote to our employees
recently when announcing my resignation.
1. Continue to execute relentlessly on
your strategies and plans, but force
yourself to be open minded to change.
Remember General Eric Shinseki said, "If
you don't like change, you're going to
like irrelevance even less."
You are fortunate to have a great leader in
Al Kelly. I have rarely met anyone with such
a great following among those who have
worked with him in the past. He has been a
great source of knowledge and judgment
as a board member and he is unique
in his broad knowledge of all aspects
of the payments industry—including
understanding networks, issuers, acquirers,
merchants, co-brand partners, etc. And
most importantly, he is a truly good
person. I am confident that his leadership
will serve you well along with our strong
management team. They will preserve
what should be preserved, but will always
take a fresh look and create the best path
forward for Visa.
On December 1st, I had the distinct honor and privilege of becoming the third Chief Executive Officer of
Visa. I am returning to my professional roots, having spent twenty-three years in the payment space, and I
am excited about it.
Thank you to our Board of Directors. They
are smart, engaged, and care deeply
about doing the right thing for Visa. They
provide oversight, guidance, and wisdom
and they strike the right balance between
challenging me and the management
team while being supportive when
appropriate. Their involvement makes
Visa a better company. They have been
incredibly understanding of my personal
situation and they went about the CEO
selection process with the same rigor as
they do with everything else. I believe they
have achieved a terrific result with Al Kelly
as the new CEO.
Thank you to my 14,200 partners at the
company who come in every day and
try to do what's right for our clients. I am
proud to have been part of this very special
team. I always remind us that we are able
to be successful today because those who
came before us built this incredible brand
and great business. Many of our current
employees were part of creating this great
company, and I have so much admiration
and respect for what they have done. At
the same time, we have been fortunate
to create an environment where so many
amazing new people have chosen to
join Visa. While our brand and existing
platforms are great assets, our people will
determine our success and there is no
question in my mind that we have the best
in the business.
Thank You
Thank You
I have had the honor of leading Visa for
the last four years and I couldn't be more
proud to have been associated with this
amazing company and these outstanding
people. We have accomplished a lot.
As we look towards the future, we
believe our opportunities to grow are
as big as they've ever been - there is
still an enormous amount of cash to
disintermediate. And we have more ways
to capture that opportunity than we've
ever had-driven primarily by e-commerce
and mobile. So we have created a culture
where long term growth is more important
than short term results - but we know we
will be judged each and every quarter.
Internally, the past four years have been
defined by continuing to mature as an
integrated global company as well as
moving our business towards capturing
digital commerce. The change has been
dramatic and we have done well, but
there is so much more to do. We remind
ourselves regularly that few companies
have continued to be leaders over a long
period of time. We need to preserve the
good of our history while bringing about
change. Striking this balance is hard but
necessary.
Our Future
We need to preserve the good of our history
while bringing about change. Striking this
balance is hard but necessary.
We believe that we have a broader
responsibility as one of the worlds most
recognized brands. This year we published
our first corporate responsibility report,
outlining how we help improve lives and
economies around the world through
financial inclusion initiatives, operating
responsibly, and being a responsible
corporate citizen. We were also proud to
join the White House and other companies
in committing to equal pay with the Equal
Pay Pledge and forming Employers for Pay
Equity, a private organization that will look
at ways to address many of the barriers
that lead to unequal pay.
Corporate social responsibility
The acquisition of Visa Europe creates
an integrated global company, and we
are well underway on combining our
functions where appropriate and operating
seamlessly as one global entity. We are
excited about the opportunity to provide
significantly enhanced value for Europe-
based clients and already have good
engagement with them on our product
and digital roadmap. As I mentioned
above, Europe is an important new
platform for growth for us.
Europe
Thank you to our clients and partners. I
have been so fortunate to meet so many
outstanding leaders and I have learned
much from you. All of us at Visa are
thankful for your partnership.
Item 10
Item 11
The payments ecosystem is very dynamic, and Visa plays a very important role in this system and in the
enablement of commerce globally. Every year, every month and even every day, more people around the
world are participating in electronic payments and alternatives to cash and check.
As a board member, I have also participated in the development of the company's current strategy and
I continue to endorse it as we look ahead to 2017 and beyond. Additionally, I have worked with all the
members of the executive team and they are a strong and impressive group of professionals, and I am
thrilled to join their ranks.
Class A common stock, par value $0.0001 per share
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
94128-8999
(Zip Code)
(IRS Employer
Identification No.)
26-0267673
(650) 432-3200
San Francisco, California
(Address of principal executive offices)
P.O. Box 8999
of incorporation or organization)
(Exact name of Registrant as specified in its charter)
VISA INC.
Commission file number 001-33977
Visa's incredible acceptance network and its powerful global brand are the foundation on which we
will continue to grow our company. The competitive environment is diverse and growing, but we are as
committed as ever to play a lead role in payments. As a board member for the last three years, I have had a
front row seat to observe Visa's incredible focus on innovation, convenience, security and the brand. I have
seen the management at Visa energize their teams to think ahead with the goal of helping our many clients.
We will continue to invest in the resources required to move the industry and our company forward.
The payments industry is complicated and involves thousands of different players. At Visa, we are also
committed to being a strong and dependable partner for our clients as well as governments around the
world. Our relationships with issuers, acquirers, merchants, and other industry partners are very important to
us and we will continue to work hard every day to deliver tangible value and service excellence.
to
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
OR
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 2016
FORM 10-K
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
v
Type 7 Keyp
Visa Inc.
Chief Executive Officer
Alfred F. Kelly, Jr.
Let me finish with where I started - I am very energized to
join and lead the team at Visa. In the few weeks that I have
been with the company, I am struck by the dedication of
our people and together we will work hard to build our
business for our client partners and you, our shareholders.
The architect of this team and Visa's success over the past four years is Charlie Scharf, who I have succeeded.
Charlie has been a terrific Chief Executive Officer. He has had a hugely positive impact on our company, and
I look forward to building on the strong foundation he has
put in place. I am grateful to Charlie that he has agreed to
remain available for the next several months.
Delaware
Directors, Executive Officers and Corporate Governance
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K. ☑
Executive Compensation
US $8.2 trillion*
total volume
(payments & cash
volume) for the 12
months ended
September 30, 2016
65,000+
VisaNet transaction
messages per second
(capacity) as of
August 18, 2016
Visa
44 million
merchant locations
globally as of
June 30, 2016
-160
currencies as of
September 30, 2016
VISA
3.1 billion
Visa cards worldwide
as of June 30, 2016
A
* Total volume includes Europe for the fourth quarter.
4
We do not earn revenues from, or bear credit risk with respect to, interest or fees paid by account
holders on Visa products. Interchange reimbursement fees represent a transfer of value between the
financial institutions participating in our open-loop payments network. We administer the collection and
remittance of interchange reimbursement fees through the settlement process, but we generally do not
receive any revenue related to interchange reimbursement fees. In addition, we do not receive as
revenue any of the fees that merchants are charged directly for acceptance by the acquirers.
VISA
Account Holders
•Individuals and
businesses that
conduct
transactions
to pay for goods
and services
Issuers
Financial institutions
that issue Visa products
to account holders
• Assume account
holders' credit risk
Network Processor
Visa operates in a four party model, which includes card issuing financial institutions, acquirers
and merchants. We are not a bank and do not issue cards, extend credit or set rates and fees for
account holders on Visa products. In most cases, our financial institution clients are responsible for and
manage account holder and merchant relationships.
clients as of
September 30, 2016
financial institution
16,800
This Annual Report on Form 10-K contains forward-looking statements within the meaning of the
U.S. Private Securities Litigation Reform Act of 1995 that relate to, among other things, our future
operations, prospects, developments, strategies, growth of our business, integration of Visa Europe,
anticipated expansion of our products in certain countries, plans to issue additional debt, industry
developments, expectations regarding litigation, timing and amount of stock repurchases, sufficiency of
sources of liquidity and funding, effectiveness of our risk management programs and expectations
regarding the impact of recent accounting pronouncements on our consolidated financial statements.
2
Forward-looking statements generally are identified by words such as “believes," "estimates,"
"expects," "intends,” “may,” “projects,” “could,” “should,” “will,” “continue” and other similar expressions.
All statements other than statements of historical fact could be forward-looking statements, which
speak only as of the date they are made, are not guarantees of future performance and are subject to
certain risks, uncertainties and other factors, many of which are beyond our control and are difficult to
predict. We describe risks and uncertainties that could cause actual results to differ materially from
those expressed in, or implied by, any of these forward-looking statements in Item 1-Business,
Item 1A-Risk Factors, Item 7-Management's Discussion and Analysis of Financial Condition and
Results of Operations and elsewhere in this report. Except as required by law, we do not intend to
update or revise any forward-looking statements as a result of new information, future events or
otherwise.
3
PART I
ITEM 1. Business
OVERVIEW
Visa is a global payments technology company that connects consumers, merchants, financial
institutions, businesses, strategic partners and government entities in more than 200 countries and
territories to fast, secure and reliable electronic payments. We enable global commerce through the
transfer of value and information among these participants. Our advanced transaction processing
network facilitates authorization, clearing and settlement of payment transactions and enables us to
provide our financial institution and merchant clients a wide range of products, platforms and value-
added services.
Our vision is to be the best way to pay and be paid for everyone, everywhere. To deliver on this
vision, we focus on six strategic goals:
•
Evolve our client interactions to build deeper partnerships with financial institutions,
merchants and new industry partners;
•
•
•
•
Transform Visa's technology assets to drive efficiency and enable innovation;
Achieve success as a leading partner for digital payments comparable to what we have
achieved in the physical world;
Expand access to Visa products and services globally;
Champion payment system security for the industry; and
.
Be the employer of choice for top talent.
Visa is one of the world's largest retail electronic payments network based on payments volume,
number of transactions and number of cards in circulation.
Visa Network
• Provides processing
and operational
systems
Forward-Looking Statements:
•
management
83.2B processed transactions
Up 9% over prior year
Down 5% over prior year
Up 7% over prior year's adjusted results*
Up 17% over prior year
Up 17% over prior year
S
Paid $8.5B in dividends and share buybacks
Up 107% over prior year
~14,200 employees in 107 office locations around the world
$5.8T in payments volume
*Please see Item 7-Management's Discussion and Analysis of Financial Condition and Results of
Operations for a reconciliation of our adjusted financial results.
7
Credit: Credit cards are issued by banks to allow consumers to access credit to pay for goods
and services. Visa does not extend credit; however, we provide combinations of card benefits and
brand support, that financial institutions use to support and enable their credit products. We also
partner with our clients on product design, customer segmentation and customer experience design to
help financial institutions better deliver products and services that match their consumers' needs. In
fiscal 2016, we saw significant volume growth from the conversion of the USAA portfolio to Visa and
opening of credit acceptance at Costco membership warehouses in the U.S.
Debit: Debit cards are issued by banks to allow consumers to access funds held in their demand
deposit accounts (DDAs). Debit cards allow consumers to transact without needing cash or checks and
without accessing a line of credit. Visa provides the network infrastructure, product support and
industry knowledge to help issuers optimize their debit offerings and help consumers and merchants
efficiently transact for the purchase of goods and services, whether in person or through online or
mobile channels. Across all Visa's core products, Visa offers security protections that help prevent,
detect and resolve fraud. Where applicable, Visa's zero-liability policy protects consumer cardholders
from any unauthorized charges.
Core Products
142
How We Work with Partners - Innovation Centers, VDP & API Suite. To drive new
technologies in the payments space and accelerate the proliferation of safe and fast digital payments,
we opened new innovation centers in Dubai, Miami and Singapore in fiscal 2016. Along with the San
Francisco innovation center and European innovation hubs in London, Tel Aviv and Berlin, these
centers foster collaboration with our financial institution clients, partners and developers across the
regions to spur creation of the next generation of payments and commerce applications and solutions.
In 2016, VDP became generally available, offered application developers around the globe access to
Visa technology, services and tools, and provided safe testing environments for the development of
new digital payments and commerce solutions. By exposing new and modified APIs through a variety
of channels, Visa has made digital payment solutions available to support hundreds of financial
institutions and technology partners such as Google, Microsoft and Samsung.
college graduates, replacing a significant percentage of our contractor and vendor spend. We are
making steady progress on our technology strategic roadmap, resulting in enhanced services for our
ecosystem stakeholders and positive impacts to our infrastructure. Since the launch of Visa's
Developer Platform (VDP) in 2015, more than 180 of Visa's product or service functions are available
in API or application program interface format to our clients and partners. We added new services to
enable clients to develop support for tokenized transactions and create new and innovative solutions in
mobile, ecommerce and digital face-to-face transactions. Cybersecurity remains a top focus and in
fiscal 2016 we launched our new Threat Intelligence Fusion Platform, a cyber command and control
center that provides integrated cybersecurity operations to further help protect our data and assets. At
the same time, new open technologies have been added systematically to our infrastructure and
platform components and we continue to bolster the resiliency of our infrastructure and application
services to provide high availability of our services for our clients.
6
Technology Transformation. At its heart, Visa is a technology company. With the intensifying
digital economy and the ubiquity of mobile technology, data and enhanced security driving the future of
payments, we embarked on a multi-year journey in 2015 to transform technology at Visa with the main
areas of focus on opening our network and creating a digital platform for innovation while at the same
time adding layers of security and operational resilience. We have executed on our workforce plan by
hiring a total of 1,700 technology employees globally over the past two years, including nearly 750 new
Capital Structure. In December 2015, we issued $16 billion of senior notes with maturities
ranging between two and 30 years, and in June 2016, we issued two new series of preferred stock to
Visa Europe's member financial institutions that are convertible into approximately 79 million shares of
class A common stock as part of the Visa Europe transaction. We also have plans to raise an
additional $2 billion in debt by the end of calendar year 2016, subject to market conditions.
KEY INITIATIVES
GAAP Net Income of $6B
Adjusted Net Income of $6.9B*
Net Operating Revenue of $15.1B
$6 B
•
Provides risk
Set and collect fees and
interest rates from
account holders
Provide customer
•
Builds and manages
global brand
Acquirers
• Companies that
contract with
merchants to accept
Visa products
⚫ Generate recurring
reports and statements
for merchants
•Provide customer
service for merchants
Merchants
Retailers, billers
and others who
accept electronic
payments as
a method of
payment for their
goods or services
•
service for account
holders
Develops new
market opportunities
(acceptance)
Visa Brand
The Visa brand is one of the most well-known and valuable brands in the world. Anchored on the
notion that Visa is 'everywhere you want to be,' the brand stands for acceptance, security, convenience
and universality. In recognition of its strength among clients and consumers, the Visa brand is ranked
highly in a number of widely recognized brand studies, including the 2016 BrandZ Top 100 Most
Valuable Global Brands Study (#6), Interbrand's 2016 Best Global Brands (#61) and Forbes 2016
World's Most Valuable Brands (#30). We leverage our brand strength to deliver added value to
financial institutions, merchants and other clients through compelling brand expressions, expanded
products and services, and innovative marketing efforts.
Payment Security
Security is critical to maintaining trust and confidence in electronic payments. To ensure that Visa
remains one of the safest ways to pay and be paid, we deploy a multi-layered security approach
focused on eliminating vulnerable data from the payments environment, securing the data that
remains, preventing fraud and empowering system participants to protect themselves. This approach
has historically kept fraud rates low as payment volumes have grown. With commerce moving to digital
channels, we are investing in new technologies and solutions in order to maintain the trust that
consumers, clients and merchants place in Visa. This requires innovation, leadership and cross-
industry collaboration.
LO
Fiscal 2016 Key Statistics
Develops products
"Visa" and our other trademarks referenced in this report are Visa's property. This report may
contain additional trade names and trademarks of other companies. The use or display of other
companies' trade names or trademarks does not imply our endorsement or sponsorship of, or a
relationship with these companies.
PRODUCTS & SERVICES
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters..
142
Item 12
142
Item 13
Item 14
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
143
142
Exhibits, Financial Statement Schedules
144
Unless the context indicates otherwise, reference to "Visa," "Company,” “we,” “us” or “our” refers
to Visa Inc. and its subsidiaries.
PART IV
Item 15
• Provides access to the
broader electronic
financial system
VISA
Accepted virtually
everywhere Visa cards
are accepted
1. MILLER
12/20
• Behaves very similarly to
a debit card in use and
consumer value
• Used by both under-
served as well as people
seeking products to help
with budgeting
VisaNet is capable of handling more than 65,000 transactions per second reliably, conveniently
and securely. In fiscal 2016, Visa processed over 83 billion payment and cash disbursement
authorization transactions, which included Europe during the fourth quarter. VisaNet is built on a
centralized architecture, enabling us to analyze each authorization we process in real time and provide
value-added processing services, such as risk scoring and tokenization. It provides the infrastructure
for delivering innovation and other payment system enhancements for domestic payment systems and
cross border international transactions globally.
DEBIT
=12/20
DEBIT
VISA
1. MILLER
• Alternative to receiving
paper paychecks
4000 12345678910
4000 12345678910
Visa Government
12/20
4000 123456789010
Health Savings Account
Healthcare
•
Government
Visa Payroll
Visa Prepaid
Payroll
General
Purpose
Prepaid: Prepaid products draw funds from a designated pool of funds. Prepaid cards can be
funded by individuals, corporations or governments. Prepaid cards address many consumer use cases
and needs:
NET OPERATING REVENUES
Our gross revenues are principally comprised of service revenues, data processing revenues,
international transaction revenues and other revenues. Net operating revenues are gross revenues
reduced by costs incurred under client incentive arrangements. We have one reportable segment,
Payment Services.
12
A. MILLER
•
Provides access to the
broader electronic
financial system
Reduces the need for
We are also enabling push payments in developing economies to electronify payments. We
recently launched a new service called mVisa in Kenya. First launched in Rwanda in 2014 and India in
2015, mVisa allows consumers to transfer money to merchants in real time using their mobile phones
and merchants are able to accept Visa transactions without the need to install card acceptance
hardware.
9
Visa Token Service: The Visa Token Service replaces the card account numbers from the
transaction with a token. Tokenization helps to protect consumer financial information and lessen the
risk of stolen card credentials. In fiscal 2017, we announced new specifications that allow certified third
party service providers such as Gemalto, Giesecke & Devrient and Inside Secure to connect directly to
our Token Service and become Token Service Providers (TSP). These TSPS will be able to provide a
range of services to support Visa tokens for issuers and token requestors participating in the Visa
Token Service, including new account provisioning and life cycle management. By expanding access
to the Visa Token Service to new partners, we expect Visa issuers will be able to more quickly and
easily offer secure digital payment services across a wide range of solutions.
Merchant Products
Visa has a suite of products and services to help merchants reduce their payment fraud and
improve their customer engagement. Visa Advertising Solutions, Visa Commerce Network and
CyberSource's product offerings are examples of Visa's continued investment to deliver industry-
leading products and capabilities to our merchant partners.
Visa launched Visa Advertising Solutions, a service that allows merchants to better target and
track the efficacy of their digital campaigns. Visa has partnered with strategic advertising technology
leaders to help deliver targeting and measurement capabilities using aggregated and anonymous
spend insights. The Visa Commerce Network (VCN) uses Visa's global payment network to enable
merchants to promote relevant offers to acquire new customers, drive loyalty and increase sales. For
example, Uber uses the platform to provide its customers with card-linked offers from local restaurants
and retailers. Qualifying purchases are recognized at the point of sale and rewards are applied to the
riders' Uber accounts - eliminating the need for coupons.
CyberSource offers a suite of products and services for merchants to manage online, mobile and
in-store payments. CyberSource gateway services enable global payment acceptance of cards and
other digital payment types. CyberSource Decision Manager is a comprehensive solution for fraud
management including a merchant risk model, rules engine, managed services and solutions for
specific categories such as airline fraud. Decision Manager Replay is an analytical tool that allows
merchants to compare fraud strategies in real-time using their historical data to test and quantify the
expected impact of various risk management strategies. CyberSource additionally offers payment
security services including tokenization and payer authentication, commerce services such as tax
calculation and recurring billing, and merchant reporting and analytics. CyberSource also offers
products and services tailored to the needs of small and mid-sized merchants under the Authorize.Net
brand. CyberSource and Authorize.Net capabilities are offered through Visa and our partners.
Risk Products & Payment Security Initiatives
Visa continues to develop our suite of risk products and services to help clients minimize risk and
enable secure commerce. Visa Risk Manager is a decision making solution that helps issuers improve
loss prevention and profitability through effective, enhanced risk evaluation capabilities. Products like
Visa Advanced Authorization evaluate the risk associated with every participating VisaNet transaction.
Our case studies have shown that an issuer employing Visa Advanced Authorization can significantly
improve fraud detection. In addition to reducing fraud, approval rates can be increased by accepting
transactions that were once deemed too risky. For example, in fiscal 2016 we introduced Mobile
Location Confirmation, a service that enhances Visa Advanced Authorization by adding geolocation
intelligence in real time. Mobile Location Confirmation informs issuers if their participating account
holder's mobile phone is near a purchase location. This new data improves the issuer's ability to make
more informed approve or decline decisions.
10
We have also extended our fraud prediction capabilities to merchants via Visa Transaction
Advisor. Our first implementation of this product is at fuel pumps, whereby we provide a risk indicator
to the merchant for each Visa card transaction so the merchant can decide if they would like to require
incremental authentication for risky transactions. Fuel merchants using our Visa Transaction Advisor
product have seen a significant decline in counterfeit fraud rates and in lost and stolen fraud
chargebacks.
Verified by Visa is a solution designed to make online transactions safer by authenticating an
account holder's identity at the time of purchase. It is designed to improve account holder and
merchant confidence in online purchases and to reduce disputes and fraud related to the use of Visa
payment products. Visa Consumer Authentication Service is a hosted solution for issuers on Verified
by Visa transactions delivering protection against online fraud through risk-based authentication.
Issuers have full control of when and how they decide to authenticate based on their transaction risk
threshold, existing fraud-detection tools, operational requirements and user demands.
We also launched Visa Consumer Transaction Controls in fiscal 2016, which allow account
holders to place restrictions on their enrolled cards that define when, where and how those cards can
be used to better manage account spending and security. Issuers can utilize this solution across their
entire card portfolio.
EMV Migration in the United States: To enhance payment security and mitigate counterfeit
fraud, we have been working with U.S. merchants and financial institutions to encourage the adoption
of EMV chip payment technology. EMV, which stands for Europay, MasterCard and Visa, is a global
standard for chip cards and chip terminals. Chip technology generates a one-time use code for every
transaction that is used to authenticate that the transaction is originating from a valid (i.e., not
fraudulent) card. Under policies announced by Visa in 2011, effective October 2015, the party that has
not adopted the more secure chip technology is responsible for any resulting counterfeit fraud. Over
the last year, there has been steady growth in chip card issuance and in the activation of chip-enabled
terminals. As of September 30, 2016, more than 373 million Visa chip cards have been issued, making
the United States the largest chip card market in the world. Nearly 1.6 million merchant locations in the
United States are now chip-enabled, or roughly 30% of all U.S. merchants that accept Visa cards at the
physical point of sale. Over 30% of U.S. in-store payment volume is now being processed as chip
transactions. We continue to work to help improve the merchant and account holder experience, with
the roll out of Quick Chip, a solution designed to reduce the time it takes to complete a chip
transaction. We are also working with merchants and acquirers to simplify the terminal certification
process, and have taken steps to limit merchants' exposure to counterfeit fraud liability for those that
have had challenges getting terminals certified and activated.
SIGNIFICANT BUSINESS DEVELOPMENTS
CEO Succession. On October 17, 2016, we announced that Alfred Kelly, Jr. will become CEO,
effective December 1, 2016, replacing Charles Scharf. Mr. Scharf will serve as an advisor to Mr. Kelly
for a period of several months to assist with the transition.
Interchange Multidistrict Litigation. Visa, MasterCard and various U.S. financial institutions are
defendants in class and individual actions challenging, among other things, Visa's and MasterCard's
purported setting of interchange reimbursement fees and certain network rules. In 2012, Visa,
MasterCard, various U.S. financial institution defendants, and class plaintiffs signed a settlement
agreement to resolve the class plaintiffs' claims. On January 14, 2014, the U.S. District Court for the
Eastern District of New York entered a final judgment order approving the settlement, from which a
number of objectors appealed. On June 30, 2016, the U.S. Court of Appeals for the Second Circuit
vacated the lower court's certification of the merchant class and reversed the approval of the
11
Visa Direct: Visa Direct is a push payment product platform that facilitates payer-initiated
transactions that are sent directly to the Visa account of the recipient. It supports faster payments use
cases like person-to-person (P2P) payments, and disbursements. We are working with key partners,
including processors like Fiserv, FIS and Jack Henry & Associates, and originators like Early Warning
(EWS), Ingo Money, Hyperwallet, Wells Fargo and QIWI, along with merchants to expand the
distribution and usage of push payments.
Visa Checkout: Visa Checkout offers consumers an expedited and secure payment experience
for online transactions wherever Visa Checkout is enabled. Visa Checkout helps merchants convert
higher numbers of consumers to sale, a particularly important issue as digital commerce shifts from
desktop devices to mobile devices which have lower conversion rates. At the end of fiscal 2016, Visa
Checkout had over 15 million consumer accounts in 21 countries, seven languages and over 1,400
financial institution partners across the globe participating. More than 300,000 merchants, including
some of the largest global retailers accept Visa Checkout. In October 2016, we rolled out a redesigned
Visa Checkout experience, making it easier for consumers to enroll and complete purchases on mobile
devices. We recently announced that we are opening the Visa Checkout platform to clients and
partners, allowing them to integrate their digital wallets into Visa Checkout for streamlined
authentication and checkout.
Digital Products
Our core transaction processing services involve the routing of payment information and related
data to facilitate the authorization, clearing and settlement of transactions between our issuers and
acquirers. Our processing services also address the varied needs of other participants in the evolving
payments ecosystem, through such offerings as our merchant gateway and Visa DPS issuer
processing. Merchant gateway services, provided through CyberSource, enable merchants to accept,
process and reconcile payments, manage fraud and safeguard payment security online and in-store.
CyberSource additionally enables acquirers and other partners to offer these services to their
merchants. DPS provides comprehensive issuer processing services for participating issuers of Visa
debit, prepaid and ATM products. Value-added offerings by DPS to issuer clients include: fraud and
risk services, data analytics, marketing campaign management, mobile and digital solutions, back
office tools and services, card fulfillment and management, network gateway services, call centers and
web hosting solutions. These and other services support our issuers and acquirers and their use of our
products, and promote the growth and security of our payments network by expanding the payment
value chain and increasing network utilization.
check cashing services
DEBIT
VISA
• Provides recipients of
government benefits with
an efficient way to
receive and use their
funds
Unemployment insurance
and child care are
common uses for
Government prepaid
cards
4000 123456789010
1. MILLER
12/20
DEBIT
12
VISA
• Provides easy access to
funds for consumers to
pay for out-of-pocket
expenses, co-pays and
deductibles
• Allows control of spend
by merchant category,
helping ensure that funds
are used for permitted
healthcare expenses
Commercial: We offer a portfolio of corporate (travel) cards and purchasing card (P-card)
products covering all major segments. The Commercial category is not one single product but a
portfolio of products designed to bring efficiency, controls and automation to corporate and government
travel and procurement processes ranging from employee travel to fully integrated, invoice-based
payables. We support financial institutions, accounts payable platforms, like Bottomline and
MineralTree, and technology companies as they build and expand their business-to-business
platforms.
Processing Infrastructure
VisaNet authorizes, clears and settles transactions processed by Visa, excluding European
domestic transactions, which are routed through the European processing platform. VisaNet consists
of multiple synchronized processing centers that are linked by a global telecommunications network
and engineered for minimal downtime and uninterrupted connectivity. While Visa Europe's systems are
being integrated with our systems, we will continue to maintain mostly separate authorization, clearing
and settlement systems from Visa Europe while ensuring interoperability with their processing centers
in the United Kingdom (U.K.).
We own and manage the Visa brand, which stands for acceptance, security, convenience and
universality. Our portfolio of trademarks, in particular our family of Visa marks, our PLUS mark and our
Dove design mark, are important to our business. We give our clients access to these assets through
agreements with our issuers and acquirers, which authorize the use of our trademarks in connection
with their participation in our payments network. We also own a number of patents, patent applications
and other intellectual property relating to payment solutions, transaction processing, security systems
and other matters. We rely on a combination of patent, trademark, copyright and trade secret laws in
the U.S. and other jurisdictions, as well as confidentiality procedures and contractual provisions, to
protect our proprietary technology.
8
A typical Visa transaction begins when the account holder presents his or her Visa product to a
merchant as payment for goods or services. The transaction is then sent to the acquirer and routed
over VisaNet or Visa Europe's processing platform to an issuer for an authorization decision. The
transaction is either approved or declined and routed back to the acquirer and merchant usually in a
matter of seconds.
Transaction Processing Services
Mainly focused on tax-
advantaged health
benefit accounts: Health
Savings Accounts and
Healthcare Flexible
Spending Accounts
settlement. The Second Circuit determined that the class plaintiffs were inadequately represented and
remanded the case to the lower court for further proceedings not inconsistent with its decision. Prior to
November 23, 2016, class plaintiffs may file a petition for writ of certiorari with the U.S. Supreme Court
seeking review of the Second Circuit's decision. Until the appeals process is complete, it is uncertain
whether the Company will be able to resolve the class plaintiffs' claims as contemplated by the
settlement agreement. See Item 1A-Risk Factors-We may be adversely affected by the outcome of
litigation or investigations, despite certain protections that are in place and Item 8-Financial
Statements and Supplementary Data—Note 20—Legal Matters of this report for more information.
Revenue Details
~$6.7B
We generally do not experience any pronounced seasonality in our business. No individual
quarter of fiscal 2016 or fiscal 2015 accounted for more than 30% of our operating revenues in those
years.
SEASONALITY
We also face increasingly intense competitive pressure on the prices we charge our financial
institution clients. We believe our fundamental value proposition of acceptance, security, convenience
and universality offers us a key competitive advantage. We succeed in part because we understand
the needs of the individual markets in which we operate. We do so by partnering with local financial
institutions, merchants, governments, non-governmental organizations and business organizations to
provide tailored solutions to meet their varied needs. We believe Visa is well-positioned competitively,
due to our global brand, our broad set of Visa-branded payment products and our proven track record
of processing payment transactions securely and reliably through VisaNet.
Payment Processors, where we face competition for the processing of Visa transactions or are
not permitted to do so under local regulation. For example, as a result of regulation in Europe under
the Second Payment Services Directive (PSD2), we may face competition from other networks,
processors and other third-parties who could process Visa transactions directly with issuers and
acquirers.
Other Electronic Payment Networks like the ACH in the U.S. are often created and governed by
local governments. Historically focused on interbank transfers, many are adding capabilities that may
make them more competitive for retail payments. We also compete with closed-loop payment systems,
wire transfers and electronic benefit transfers.
14
Alternate Payment Providers, which often have a primary focus of enabling payments through
ecommerce and mobile channels. These companies may process payments using in-house account
transfers between parties, electronic funds transfer networks like the Automated Clearing House
(ACH), or global or local networks like Visa. In some cases, these entities are both a partner and a
competitor to Visa. Examples include PayPal and Alipay.
Local and regional networks, that operate in many countries, often with the support of
government influence or mandate. In some cases, they are owned by financial intuitions. These
networks typically focus on debit payment products, have functionality or their brand marks present
with the Visa brand on the card or payment device, and may have strong local acceptance and
recognizable brands. Examples include STAR, NYCE, and Pulse in the United States, Interac in
Canada, and EFTPOS in Australia.
MasterCard, American Express, JCB and Discover/Diners Club data sourced from The Nilson Report issue 1085 (April
2016). Includes all consumer and commercial credit, debit and prepaid cards. Some figures are estimates and currency
figures are in U.S. dollars. MasterCard excludes Maestro and Cirrus figures. American Express includes figures for third-
party issuers. Discover figures consist of U.S. data only and include third-party issuers. JCB figures include third-party
issuers and other payment-related products.
The data presented are provided by our financial institution clients. Previously submitted information may be updated and all
data are subject to review by Visa. Visa Europe data are included.
(3)
(2)
(1) UnionPay, which operates primarily within the Chinese domestic market, is not included in this table as Visa currently does
not compete in that market under local law. Although we are uncertain how UnionPay reports certain volumes, reportedly its
numbers could approach or exceed some of those listed in this chart.
58
94
118
1,574
3,009
Cards (M)
WORKING CAPITAL
2.3
Payments settlement due to and from our financial institution clients can represent a substantial
daily working capital requirement. Most U.S. dollar settlements are settled within the same day and do
not result in a receivable or payable balance, while settlement in currencies other than the U.S. dollar
generally remain outstanding for one to two business days, which is consistent with industry practice
for such transactions.
For more information on the concentration of our operating revenues and other financial
information, see Item 8-Financial Statements and Supplementary Data—Note 13-Enterprise-wide
Disclosures and Concentration of Business included elsewhere in this report.
17
We are subject to the reporting requirements of the Securities Exchange Act of 1934, as
amended (Exchange Act) and its rules and regulations. The Exchange Act requires us to file periodic
reports, proxy statements and other information with the U.S. Securities and Exchange Commission
(SEC). Copies of these reports, proxy statements and other information can be viewed at
http://www.sec.gov. Our corporate website is accessible at http:// corporate.visa.com. We make
available, free of charge, on our investor relations website at http://investor.visa.com our annual reports
on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K and any
amendments to those reports as soon as reasonably practicable after they are electronically filed with,
or furnished to, the SEC. We also may include supplemental financial information on our investor
relations website at http:// investor.visa.com and may use this website as a means of disclosing
material, non-public information and for complying with our disclosure obligations under Regulation FD.
Accordingly, investors should monitor such portions of our investor relations website, in addition to
following SEC filings and publicly available conference calls. The information contained on, or
accessible through, our corporate website, including the information contained on our investor relations
website, is not incorporated by reference into this report or any other report filed with, or furnished to,
the SEC.
AVAILABLE INFORMATION
There are other regulations in the E.U. that impact our business, as discussed above, including,
privacy and data protection, anti-bribery, anti-money laundering, anti-terrorism and sanctions. Other
recent regulatory changes in Europe such as the PSD2 could reduce perceived barriers to entry for
emerging, non-card payments.
European Regulations and Supervisory Oversight. In addition, following the Visa Europe
acquisition in June 2016, we are subject to complex and evolving regulation of our business in the
European Union. Visa Europe has been designated as a Recognized Payment System, bringing it
within the scope of the Bank of England's oversight to ensure the financial stability of the U.K. Visa
Europe is also subject to the Eurosystem's oversight, including the security of payment instruments
and ecommerce security policies and scheme rules. Furthermore, Visa Europe is regulated by the
U.K.'s Payment Systems Regulator (PSR), which has wide ranging powers and authority to review our
business practices, systems, rules and fees with respect to promoting competition and innovation in
the U.K., and ensuring payments meet account holder needs. It also is the regulator responsible for
monitoring and enforcing the IFR in the U.K. Outside the U.K., in relation to IFR, Visa is also subject to
compliance monitoring by national competent authorities in all markets. The IFR regulates interchange
rates within Europe, requires Visa Europe to separate its payment card scheme activities from
processing activities for accounting, organization and decision making purposes within the E.U. and
imposes limitations on network exclusivity and routing.
Additional Regulatory Developments. Various regulatory agencies also continue to examine a
wide variety of other issues, including mobile payment transactions, tokenization, money transfer,
identity theft, account management guidelines, disclosure rules, security and marketing that could
affect our financial institution clients and us.
16
Internet Transactions. Many jurisdictions have adopted regulations that require payments
system participants to monitor, identify, filter, restrict or take other actions with regard to certain types
of payment transactions on the Internet, such as gambling and the purchase of cigarettes or alcohol.
Anti-corruption, Anti-money Laundering, Anti-terrorism and Sanctions. We are subject to
anti-corruption laws and regulations, including the U.S. Foreign Corrupt Practices Act (FCPA), the U.K.
Bribery Act and other laws, that generally prohibit the making or offering of improper payments to
foreign government officials and political figures for the purpose of obtaining or retaining business or to
gain an unfair business advantage. We are also subject to anti-money laundering and anti-terrorist
financing laws and regulations, including the U.S. Bank Secrecy Act and the USA PATRIOT Act. In
addition, we are subject to economic and trade sanctions programs administered by the Office of
Foreign Assets Control (OFAC) in the U.S.
Privacy and Data Protection. Aspects of our operations or business are subject to privacy, data
use and data security regulations, which impact the way we use and handle data, operate our products
and services, and even impact our ability to offer a product or service. In addition, regulators are
proposing new laws or regulations which could require Visa to adopt certain cybersecurity practices. In
many jurisdictions consumers must be notified in the event of a data breach, and such notification
requirements continue to increase in scope and cost. The European Union's General Data Protection
Regulation, which will become effective in May 2018, will create new individual privacy rights and
impose worldwide obligations on companies handling personal data.
No-surcharge Rules. We have historically enforced rules that prohibit merchants from charging
higher prices to consumers who pay using Visa products instead of other means. However, merchants'
ability to surcharge varies by geographic market as well as Visa product type, and continues to be
impacted by litigation, regulation and legislation.
Network Exclusivity and Routing. In the U.S., the Dodd-Frank Act limits network exclusivity and
preferred routing for the debit and prepaid market segments. Other jurisdictions impose similar
limitations, such as the IFR's prohibition on restrictions that prevent multiple payment brands or
functionality on the same card.
Interchange Rates and Fees. An increasing number of jurisdictions around the world regulate or
influence debit and credit interchange reimbursement rates in their regions. For example, the Dodd-
Frank Act in the U.S. limits interchange reimbursement rates for certain debit card transactions, the
E.U.'s Interchange Fee Regulation (IFR) limits interchange rates in Europe (as discussed below) and
the Reserve Bank of Australia has regulated average permissible levels of interchange for over a
decade.
Government-imposed Market Participation and Restrictions. Certain governments, including
China, Russia and India, have taken actions to advantage domestic payments systems and/or certain
issuers, payments networks or processors, including by imposing regulations that favor domestic
providers or that mandate domestic processing be done entirely in that country.
Consumer Financial Protection Bureau (CFPB) as a service provider to the banks that issue Visa-
branded consumer credit and debit card products. Central banks in other countries, including Russia,
Ukraine, Hong Kong and Europe (as discussed below), have recognized or designated Visa for
purposes of various degrees of financial stability regulation as a retail payment system. Visa is also
subject to oversight by banking and financial sector authorities in other jurisdictions, such as Brazil,
Mexico and Colombia.
15
Supervisory Oversight of the Payments Industry. Visa is subject to financial sector oversight
and regulation in substantially all of the jurisdictions in which we operate. In the U.S., the Federal
Financial Institutions Examination Council (FFIEC) has supervisory oversight over Visa under
applicable federal banking laws and policies. The federal banking agencies comprising the FFIEC are
the Federal Reserve Board, the Comptroller of the Currency, the Federal Deposit Insurance
Corporation and the National Credit Union Administration. Visa also may be examined by the
As a global payments technology company, we are subject to complex and evolving global
regulations in the various jurisdictions in which our products and services are used. The most
significant government regulations that impact our business are discussed below. For further
discussion of how global regulations may impact our business, see Item 1A-Risk Factors-
Regulatory Risks.
GOVERNMENT REGULATION
FINANCIAL INFORMATION ABOUT GEOGRAPHIC AREAS
2.9
7.4
69.5
The global payments industry continues to undergo dynamic change. Existing and emerging
competitors compete with Visa for consumers, financial institution clients and merchant participation in
our network and payment solutions. Technology and innovation is shifting consumer habits and driving
growth opportunities in ecommerce, mobile payments, block chain technology and digital currencies.
These advances are enabling new entrants, many of which depart from traditional network payment
models. In certain countries, the evolving regulatory landscape is changing how we compete, creating
local networks or enabling processing competition.
COMPETITION
Paid to financial institution clients, merchants and
strategic partners to build payments volume, increase
Visa product acceptance, win merchant routing
transactions over our network and drive innovation.
Includes license fees for use of the Visa brand, revenues
earned from Visa Europe prior to the completion of the
Visa Europe acquisition, fees for account holder services,
certification, licensing and other activities related to our
acquired entities.
Earned for cross-border transaction processing and
currency conversion activities.
Earned for authorization, clearing, settlement, network
access and other maintenance and support services that
facilitate transaction and information processing among
our clients globally.
Earned for services provided in support of client usage
of Visa products.
~$15.1B
NET
OPERATING
REVENUE
~$3.4B
Client
Incentives
~$18.5B
GROSS
REVENUE
~$800M
Other
Revenues
~$4.6B
International
Transaction
Revenues
~$6.3B
Data
Processing
Revenues
13
We compete against all forms of payment. This includes paper-based payments, primarily cash
and checks, and all forms of electronic payments. Our electronic payment competitors principally
include:
Global or Multi-Regional Networks, which typically offer a range of branded, general purpose card
payment products that can be used at millions of merchant locations around the world. Examples
include MasterCard, American Express, Discover and JCB. These competitors may be more
concentrated in specific geographic regions, such as JCB in Japan and Discover in the U.S., or have a
leading position in certain countries. For example, UnionPay operates the sole domestic acceptance
mark in China. Based on available data, Visa is one of the largest retail electronic funds transfer
networks used throughout the world. The following chart compares our network with these network
competitors for calendar year 2015(1):
Discover
148.5
Total Transactions (B)
$154
$207
$1,040
$4,564
$9,905
Total Volume ($B)
$144
Service
Revenues
$200
$3,360
$6,843
Payments Volume ($B)
Club(3)
Diners
JCB(3)
American
Express(3)
MasterCard (3)
Visa Inc. (2)
$1,028
INTELLECTUAL PROPERTY
Increased regulation of the global payments industry, including with respect to interchange
reimbursement fees, operating rules and related practices, could harm our business.
27
We face intense competition in our industry.
The global payments space is intensely competitive. As technology evolves, new competitors
emerge and existing clients and competitors assume different roles. Our products compete with cash,
checks, electronic funds, virtual currency payments, global or multi-regional networks, other closed-
loop payments systems, and alternative payment providers primarily focused on enabling payments
through ecommerce and mobile channels. As the global payments space becomes more complex, we
face increasing competition from our clients, emerging payment providers and other digital and
technology companies. Many of these providers have developed payments systems enabled through
online activity in ecommerce and mobile channels, and are seeking to expand into other channels that
compete with or replace our products and services.
Additionally, some of our competitors may develop substantially better technology, more widely
adopted delivery channels or have greater financial resources. They may offer a wider range of
programs, products and services, including some that are more innovative. They may use advertising
and marketing strategies that are more effective than ours, achieving broader brand recognition, and
greater issuance and merchant acceptance. They may also develop better security solutions or more
favorable pricing arrangements.
Certain of our competitors operate with different business models, have different cost structures
or participate in different market segments. Those business models may ultimately prove more
successful or more adaptable to regulatory, technological and other developments. In some cases,
these competitors have the support of government mandates that prohibit, limit or otherwise hinder our
ability to compete for transactions within certain countries and regions.
Some of our competitors, including American Express, Discover, private-label card networks,
virtual currency providers, technology companies that enable the exchange of digital assets and certain
alternate payments systems, operate closed-loop payments systems, with direct connections to both
merchants and consumers. Government actions or initiatives such as the U.S. Dodd-Frank Act or the
21
U.S. Federal Reserve's Faster Payments initiatives may provide them with increased opportunities to
derive competitive advantages from these business models. Similarly, regulation in Europe under
PSD2 and in the U.K. through the PSR may require us to open up access to, and allow participation in,
our network to additional participants, and reduce the infrastructure investment and regulatory burden
on potential competitors. We also run the risk of disintermediation due to factors such as emerging
technologies, including mobile payments, alternate payment credentials, other ledger technologies or
payment forms, and by virtue of increasing bilateral agreements between entities that prefer not to use
our payments network for processing payments. For example, merchants could process transactions
directly with issuers, or processors could process transactions directly with issuers and acquirers.
Regulators around the world have been establishing or increasing their authority to regulate
certain aspects of the payments industry. See Item 1. Business-Government Regulation for more
information. In the U.S. and many other jurisdictions, we have historically set default interchange
reimbursement fees. Even though we generally do not receive any revenue related to interchange
reimbursement fees in a purchase transaction (those fees are paid by the acquirers to the issuers),
interchange reimbursement fees are a factor on which we compete with other payments providers and
are therefore an important determinant of the volume of transactions we process. Consequently,
changes to these fees, whether voluntarily or by mandate, can substantially affect our overall payments
volumes and revenues.
⋅
Business Risks
•
•
•
•
competitors, clients and others are developing alternative payment networks or products that
could disintermediate us from the transaction processing or the value-added services we
provide to support such processing. Examples include initiatives like The Clearing House, an
ACH-based payment system comprised of large financial institutions, and EWS, an
alternative to an ACH payment system that provides faster funds or real-time payments
across P2P, corporate and government disbursement, bill pay and deposit check
transactions;
similarly, multiple countries are developing or promoting ACH-based real-time payment
systems or mandating local networks with clients that also present a risk of disintermediation
to our business;
parties that process our transactions may try to minimize or eliminate our position in the
payments value chain;
parties that access our payment credentials, tokens and technologies, including clients,
technology solution providers or others might be able to migrate account holders and other
clients to alternate payment methods or utilize our payment credentials, tokens and
technologies to establish or help bolster alternate payment methods and platforms;
competitors, clients and others may develop methods to use our payment credentials,
tokens and technologies to compete with, impair or replace digital payment products that
use and support our network and processing over our network;
we may need to adjust our local rules and practices to remain competitive amidst evolving
regulatory landscapes and competitors' practices;
we may be asked to develop or customize certain aspects of our payment services for use
by our customers, processors or other third parties, thereby increasing operational costs;
.
For certain litigation matters like the U.S. covered litigation and the VE territory covered litigation,
which are described in Note 3-U.S. and Europe Retrospective Responsibility Plans and Note 20—
Legal Matters, we have certain protections provided for in the respective retrospective responsibility
plans. The two retrospective responsibility plans are different in the protections they provide and the
mechanisms by which we are able to either fund the settlements and judgments in the case of the U.S.
covered litigation or recoup covered losses in the case of the VE territory covered litigation. The failure
of one or both of the retrospective responsibility plans to adequately insulate us from the impact of
such settlements, judgments, losses or liabilities could materially harm our financial condition or cash
flows, or even cause us to become insolvent.
Details of the claims and the status of those proceedings are described more fully in Note 20-Legal
Matters. Legal and regulatory proceedings and investigations are inherently uncertain, expensive and
disruptive to our operations. In the event we are found liable in any material litigation, proceedings or
investigations, particularly in a large class action lawsuit or an antitrust claim entitling the plaintiff to
treble damages, we may be required to pay significant awards or settlements. In addition, settlement
terms, judgments or pressures resulting from legal proceedings or investigations may require us, to
modify the default interchange reimbursement rates we set, revise the Visa Rules or the way in which
we enforce our rules, modify our fees or pricing, or modify the way we do business, which may harm
our business. Finally, we are required by some of our commercial agreements to indemnify other
entities for litigation asserted against them, even if Visa is not a defendant.
20
Regulatory Risks
ITEM 1A. Risk Factors
Interchange reimbursement fees, certain operating rules and related practices continue to be
subject to increased government regulation globally, and regulatory authorities and central banks in a
number of jurisdictions have reviewed or are reviewing these fees, rules and practices. For example, in
2011, in accordance with the U.S. Dodd-Frank Act, the U.S. Federal Reserve capped the maximum
U.S. debit interchange reimbursement rate received by large financial institutions at 21 cents plus 5
basis points, plus a possible fraud adjustment of 1 cent. This amounted to a significant reduction in the
average system-wide interchange reimbursement fees received by large issuers. The Dodd-Frank Act
also limited issuers' and our ability to adopt network exclusivity and preferred routing in the debit and
prepaid area, which also impacted our business. In 2015, the E.U.'s IFR placed an effective cap on
consumer credit and consumer debit interchange fees for both domestic and cross border transactions
(30 basis points and 20 basis points, respectively), significantly reducing the fees received by E.U.
issuers. E.U. Member States have the ability to further restrict these interchange levels within their
territories. More recently, in September 2016, Argentina's Senate approved a bill to reduce existing
caps on the merchant discount rate charged by acquirers to 1.5% for credit transactions and zero for
debit transactions.
In addition to the regulation of interchange reimbursement fees, a number of regulators impose
restrictions on other aspects of our payments business. For example, government regulations or
pressure may require or allow other networks to be supported by Visa products or services or to have
the other network's functionality or brand marks on our products. As innovations in payment technology
have enabled us to expand into new products and services, they have also expanded the potential
scope of regulatory influence. In addition, the E.U.'s requirement to separate scheme and processing
adds costs and could impact the efficient integration of Visa Europe; the execution of our commercial,
innovation and product strategies; our ability to provide effective customer service; and the amount of
data available for use in fraud and risk systems and loyalty services.
We are also subject to central bank oversight in the U.K. and the E.U. This oversight could result
in new governance, reporting, licensing, cybersecurity, processing infrastructure, capital or credit risk
management requirements. We could also be required to adopt policies and practices designed to
mitigate settlement and liquidity risks, including increased requirements to maintain sufficient levels of
capital and financial resources locally. Increased central bank oversight could also lead to new or
different criteria for financial institution participation in, and access to our payments system.
Additionally, regulators in other jurisdictions are considering or adopting approaches based on similar
regulatory principles.
18
Regulators around the world increasingly take note of each other's approaches to regulating the
payments industry. Consequently, a development in one jurisdiction may influence regulatory
approaches in another. The risks created by a new law or regulation in one jurisdiction have the
potential to be replicated and to negatively affect our business in another jurisdiction or in other product
offerings. The U.S. Dodd-Frank Act and the E.U. IFR are developments with such potential, as are
approaches taken by regulators in Australia, Canada and other countries. See Note 20—Legal Matters
of this report. Similarly, new regulations involving one product offering may prompt regulators to extend
the regulations to other product offerings. For example, credit payments could become subject to the
same regulation as debit payments. Additionally, regulation in an individual country could continue and
expand. For example, in Australia the Reserve Bank of Australia (RBA) initially capped credit
interchange, but subsequently capped debit interchange as well.
When we cannot set default interchange reimbursement rates at optimal levels, issuers and
acquirers may find our payments system less attractive. This may increase the attractiveness of other
payments systems, such as our competitors' closed-loop payments systems with direct connections to
both merchants and consumers. We believe some issuers may react to such regulations by charging
new or higher fees to consumers, making our products less appealing to consumers. Some acquirers
may elect to charge higher merchant discount rates regardless of the Visa interchange reimbursement
rate, causing merchants not to accept our products or to steer customers to alternate payments
systems or forms of payment. In addition, in an effort to reduce the expense of their card programs,
some issuers and acquirers have obtained, and may continue to obtain, incentives from us and
reductions in the fees that we charge, which may directly impact our revenues. For these reasons,
increased global regulation of the payments industry may make our products less desirable, diminish
our ability to compete, reduce our transaction volumes and harm our business.
Government-imposed restrictions on payment systems may prevent us from competing against
providers in certain countries.
Governments in various jurisdictions, such as in Asia and the Gulf Cooperation Countries in the
Middle East, protect certain domestic payment card networks, brands and processors. These
governments may impose regulatory requirements that favor domestic providers or that mandate
domestic payments processing be done entirely in that country, which would prevent us from
overseeing the end-to-end processing of certain transactions. In China, for example, UnionPay
continues to enjoy advantages over other international networks, remains the sole processor of
domestic payment card transactions and operates the sole domestic acceptance mark. Though the
Chinese State Council has announced that international schemes, such as Visa would be able to
participate in the domestic market and be eligible to apply for a license to operate a Bank Card
Clearing Institution (BCCI) in China, the full implementation guidelines for BCCI's have yet to be
finalized. In Russia, legislation has effectively prevented us from processing in the domestic market
and mandated that we migrate our domestic processing business to the state-owned NSPK (or
national payment card system), which is the only entity allowed to process domestically.
Due to our inability to oversee the end-to-end processing of transactions for cards carrying our
brands in these countries, we depend on our close working relationships with our clients or third party
processors in these regions to ensure transactions involving our products are processed effectively.
National laws that protect domestic processing may increase our costs, decrease the number of Visa
products issued or processed, impede us from utilizing our global processing capabilities and control
the quality of the services supporting our brands, restrict our activities, force us to leave countries or
prevent us from entering new markets, all of which could harm our ability to operate our business,
maintain or increase our revenues globally and extend our global brands.
19
We are subject to complex and evolving global regulations that could harm our business and
financial results.
As a global payments technology company, we are subject to complex and evolving regulations
that govern our operations. See Item 1-Business-Government Regulation for more information on
the most significant areas of regulation that affect our business. The impact of these regulations on us
(and on our clients and other third parties) could limit our ability to enforce our payments system rules
or require us to adopt new rules or change existing rules, and it may increase our compliance costs
and reduce our revenue opportunities. We may face differing rules and regulations in matters like
interchange reimbursement rates, preferred routing, domestic processing requirements, currency
conversion, point-of-sale transaction rules and practices, privacy, data use or protection and
associated product technology. As a result, the Visa Rules and our other contractual commitments may
differ from country to country or by product offering. Complying with these and other regulations
increases our costs and can reduce our revenue opportunities. Further, as regulations change, they
may affect our existing contractual arrangements.
If widely varying regulations come into existence worldwide, we may have difficulty rapidly
adjusting our product offerings, services and fees, and other important aspects of our business in the
various regions where we operate. Our compliance programs and policies are designed to support our
compliance with a wide array of regulations and laws, and we continually enhance our compliance
programs as regulations evolve. However, we cannot guarantee that our practices will be deemed
compliant by all applicable regulatory authorities. In the event our controls should fail or we are found
to be out of compliance for other reasons, we could be subject to monetary damages, civil and criminal
penalties, litigation and damage to our global brands and reputation. Furthermore, the evolving and
increased regulatory focus on the payments industry could reduce the number of Visa products our
clients issue, the volume of payments we process and our revenue; negatively impact our brands and
our competitive positioning; and limit the types of products and services that we offer, the countries in
which our products are used and the types of customers and merchants who can obtain or accept our
products, all of which could harm our business.
We may be subject to tax examinations or disputes, or changes in the tax laws.
We exercise significant judgment in calculating our worldwide provision for income taxes and
other tax liabilities. Although we believe our tax estimates are reasonable, many factors may limit their
accuracy. We are currently under examination by, or in disputes with, the U.S. Internal Revenue
Service, the U.K.'s HM Revenue & Customs as well as tax authorities in other jurisdictions, and we
may be subject to additional examinations or disputes in the future. Relevant tax authorities may
disagree with our tax treatment of certain material items and thereby increase our tax liability. Failure to
sustain our position in these matters could harm our cash flow and financial position. In addition,
changes in existing laws, such as recent proposals for fundamental U.S. and international tax reform or
those resulting from the Base Erosion and Profit Shifting (BEPS) project being conducted by the
Organization for Economic Cooperation and Development, may also increase our effective tax rate. A
substantial increase in our tax payments could have a material, adverse effect on our financial results.
See also Note 19-Income Taxes to our consolidated financial statements included in Item 8 of this
report.
Litigation Risks
We may be adversely affected by the outcome of litigation or investigations, despite certain
protections that are in place.
We are involved in numerous civil actions and government investigations alleging violations of
competition and antitrust law, consumer protection law and intellectual property law, among others.
20
we may need to agree to business arrangements with terms less protective of Visa's
proprietary technology and interests in order to compete with others, including those with
issuers and with competing networks;
participants in the payments industry may merge, form joint ventures or enable or enter into
other business combinations that strengthen their existing business propositions or create
new, competing payment services;
We expect the competitive landscape to continue to shift and evolve. For example:
22
our revenues.
A decline in economic conditions could impact our clients as well, and their decisions to reduce
the number of cards, accounts and credit lines of their account holders, which ultimately impact our
revenues. They may also implement cost-reduction initiatives that reduce or eliminate marketing
budgets, and decrease spending on optional or enhanced, value-added services from us.
Any events or conditions that impair the functioning of the financial markets, tighten the credit
market or lead to a downgrade of our current credit rating could increase our future borrowing costs
and impair our ability to access the capital and credit markets on favorable terms, which could affect
our liquidity and capital resources, or significantly increase our cost of capital. If clients default on their
settlement obligations, it may also impact our liquidity. Any of these events could adversely affect the
growth of our volumes and revenue.
Our indemnification obligation to fund settlement losses of our clients exposes us to
significant risk of loss and may reduce our liquidity.
We indemnify issuers and acquirers for any settlement loss they suffer due to the failure of
another issuer or acquirer to honor its settlement obligations in accordance with the Visa Rules. In
certain instances, we may indemnify issuers or acquirers even in situations in which a transaction is
not processed by our system. This indemnification creates settlement risk for us due to the difference
in timing between the date of a payment transaction and the date of subsequent settlement. Our
indemnification exposure is generally limited to the amount of unsettled Visa payment transactions at
any point in time. Concurrent settlement failures involving more than one of our largest clients, several
of our smaller clients or systemic operational failures lasting more than a single day could cause us to
exceed our available financial resources, which could negatively impact our financial position. Even if
25
we have sufficient liquidity to cover a settlement failure, we may be unable to recover the amount of
such payment. This could expose us to significant losses and harm our business. See Note 11—
Settlement Guarantee Management to our consolidated financial statements included in Item 8 of this
report.
The United Kingdom's proposed withdrawal from the European Union could harm our business
and financial results.
In June 2016, a referendum was held in the United Kingdom to determine whether the country
should remain a member of the E.U., with voters approving withdrawal from the E.U. (commonly
referred to as Brexit). The U.K. government is working towards triggering Article 50 of the Lisbon
Treaty, which will commence the official E.U. withdrawal process. Uncertainty over the terms of the
U.K.'s departure from the E.U. could harm our business and financial results. In addition, other E.U.
member countries may consider referendums regarding their E.U. membership. Any of these events,
along with any political changes that may occur as a result of Brexit, could cause political and
economic uncertainty in Europe. As a result, our operations in the U.K., resulting from the recent
acquisition of Visa Europe, as well as our global operations, could be impacted.
The announcement of Brexit caused significant volatility in global stock markets and currency
exchange rate fluctuations that resulted in the strengthening of the U.S. dollar. The strengthening of
the U.S. dollar relative to the British pound and other currencies may harm our results of operations as
the local currency results of our international operations may translate into fewer U.S. dollars.
Uncertainty over Brexit and currency fluctuations could also impact our clients, who may curtail or
postpone investments in growing their credit portfolios, limit credit lines, modify fees and loyalty
programs, or take other actions that harm our volume and revenue.
In addition, Brexit could lead to legal uncertainty and potentially divergent national laws and
regulations in the U.K. and E.U. We, as well as our clients who have significant operations in the U.K.,
may incur additional costs and expenses as we adapt to potentially divergent regulatory frameworks
from the rest of the E.U. and as a result, our Visa Rules and contractual commitments in the U.K. may
be impacted. In addition, because we conduct business in and have operations in the U.K., we may
need to apply for regulatory authorization and permission in separate E.U. Member States. These
factors may impact our ability to operate in the E.U. and U.K. seamlessly. Any of these effects of
Brexit, among others, could harm our business and financial results.
Technology and Information Security Risks
Failure to anticipate, adapt to or keep pace with new technologies in the payments industry
could harm our business and impact our future growth.
competition may increase from alternate types of payment services, such as mobile payment
services, ecommerce payment services, P2P payment services, faster payment initiatives
and payment services that permit ACH payments or direct debit of consumer checking
accounts;
26
A failure in or breach of our networks or systems, including as a result of cyber-attacks, could
harm our business.
Our information security and processing systems, as well as those of our clients, merchants and
other third-party service providers, may experience damage or disruption from a number of causes,
including power outages, computer and telecommunication failures, computer viruses, worms or other
destructive software, internal design, manual or usage errors, cyber-attacks, terrorism, workplace
violence or wrongdoing, catastrophic events, natural disasters and severe weather conditions. Our
visibility and role in the global payments industry may also put us at a greater risk of being targeted by
hackers. In the normal course of our business, we have been the target of malicious cyber-attack
attempts. Additionally, several merchants have encountered substantial cybersecurity breaches and re-
breaches affecting their customers, some of whom were Visa account holders. Although these
merchant breaches have not had a direct, material impact on us, we believe these incidents are likely
to continue and we may be unable to predict the direct or indirect impact of these future attacks to our
business. We may also be impacted by breaches of our financial institution clients and third-party
processors that affect the broader payment system.
In addition, numerous and evolving information security threats, including advanced and
persistent cyber-attacks, particularly on our internet-facing and reliant applications, could compromise
the confidentiality, availability and integrity of our data. The security measures and procedures we, our
clients, merchants and other service providers have in place to protect sensitive account holder data
and other information may not be successful or sufficient to counter all data breaches, cyber-attacks or
system failures. Although we devote significant resources to our information security program and have
implemented security measures to protect our systems and data, there can be no assurance that our
efforts will prevent these known or unknown threats.
If we are sued in connection with any data security breach, we could be involved in protracted
litigation. If unsuccessful in defending such lawsuits, we may have to pay damages or change our
business practices, any of which could harm our business. In addition, any reputational damage
resulting from an account data breach, cyber-attack or system failure at one or more of our clients,
merchants or other third parties could decrease the use and acceptance of our products, which could
harm our payments volume, revenues and future growth prospects. Finally, a breach may also subject
Visa to additional regulations or governmental or regulatory investigations, which could result in
significant compliance costs, fines or enforcement actions or potential restrictions imposed by
regulators on our ability to process transactions.
We may experience errors, interruptions, delays or cessations of service in our information
technology infrastructure and processing systems, which could significantly disrupt our operations;
impact our clients and customers; damage our reputation; result in litigation, violations of applicable
privacy and other laws, and regulatory fines or penalties; decrease the overall use and acceptance of
our products; and be costly, time consuming and difficult to remedy. In the event of damage or
disruption to our business due to these occurrences, we may not be able to successfully and quickly
recover all of our critical business functions, assets and data through our current business continuity
program. Furthermore, while we maintain insurance, our coverage may not sufficiently cover all types
of losses or claims that may arise.
27
Our revenues are dependent on the volume and number of payment transactions made by
customers, governments and businesses, whose spending patterns may be affected by prevailing
economic conditions. In addition, almost half of our operating revenues are earned outside the U.S.
International transaction revenues represent a significant part of our revenue and are an important part
of our growth strategy. Therefore, adverse macroeconomic conditions, including recessions, inflation,
high unemployment, currency fluctuations, actual or anticipated large-scale defaults or failures, or
slowdown of global trade, could decrease consumer and corporate confidence and reduce consumer,
government and corporate spending, which have a direct impact on our revenues. In addition,
outbreaks of illnesses, pandemics or other local or global health issues like the Zika virus, political
uncertainties like Brexit, international hostilities, armed conflict, or unrest, and natural disasters could
impact our operations, our clients and our activities in a particular location. These events could also
reduce cross-border travel and spend, which impacts our international transaction revenues, which are
generated by processing cross-border payments and cash volume transactions, as well as from foreign
currency exchange transactions. Any such decline in cross-border activity could impact the number of
cross-border transactions we process and our foreign currency exchange activities, and in turn reduce
Global economic, political, market and social events or conditions may harm our business.
The global payments industry is undergoing significant and rapid technological change, including
mobile and other proximity payment and acceptance technologies, ecommerce, tokenization, crypto-
currency, distributed ledger and blockchain technologies, and as a result we expect new services and
technologies to continue to emerge and evolve. In addition to our own initiatives and innovations, we
work closely with third parties, including some potential competitors, for the development of and access
to new technologies. It is difficult, however, to predict which technological developments or innovations
will become widely adopted. It is also difficult to predict how these technologies may be regulated.
Moreover, some of these new technologies could be subject to intellectual property-related lawsuits or
assertions, potentially impacting our development efforts and/or requiring us to obtain licenses. If we or
our partners fail to adapt or keep pace with new technologies in the payments space in a timely
manner, I could harm our ability to compete, decrease the value of our products and services to our
clients, impact our intellectual property or licensing rights, and harm our business and impact our future
growth.
24
institution companies could result in consumer confusion or brand disintermediation and decrease the
value of our brand. In addition, our brands and reputation may be negatively impacted by a number of
factors, including data security breaches, compliance failures, negative perception of our industry or
the industries of our clients, actions by clients or other third parties, such as sponsorship partners, that
do not reflect our views or are inconsistent with our own business practices, and fraudulent or other
illegal activity using our payment products. If we are unable to maintain our reputation, or if events
occur that damage our reputation, the value of our brands may be impaired, which could harm our
relationships with clients, customers and the public, as well as impact our business.
22
•
new players and intermediaries in the payments value chain may redirect transactions or
steer participants away from our network;
as this landscape is quickly evolving, we may not be able to foresee or respond sufficiently
to emerging risks associated with new business, products, services and practices; or
new or revised industry standards related to EMV-chip payment technology, cloud-based
payments, tokenization or other technologies set by organizations such as the International
Organization for Standardization, American National Standards Institute and EMVCO may
result in additional costs and expenses for Visa and its clients, or otherwise negatively
impact the functionality and competitiveness of our products and services.
Our failure to compete effectively in light of any such developments could harm our business and
prospects for future growth.
Our revenues and profits are dependent on our client and merchant base, which may be costly
to win, retain and maintain.
Our financial institution clients and merchants can reassess their commitments to us at any time
or develop their own competitive services. While we have certain contractual protections, our clients,
including some of our largest clients, generally have flexibility to issue non-Visa products. Further, in
certain circumstances, our financial institution clients may decide to terminate our contractual
relationship on relatively short notice without paying significant early termination fees. Because a
significant portion of our operating revenues is concentrated among our largest clients, the loss of
business from any one of these larger clients could harm our business, results of operations and
financial condition.
In order to stay competitive, we offer incentives to our clients to increase payments volume, enter
new market segments and expand their use and acceptance of Visa products and services. These
include up-front cash payments, fee discounts and rebates, credits, performance-based incentives,
marketing and other support payments that impact our revenues and profitability. In addition, we offer
incentives to certain merchants or acquirers to win routing preference in situations where other network
functionality is enabled on our products and there is a choice of network routing options. Market
pressures on providing incentives, fee discounts and rebates could moderate our growth. If we are not
able to implement cost containment and productivity initiatives in other areas of our business or
increase our volumes in other ways to offset the financial impact of these incentives, fee discounts and
rebates, it may harm our net revenues and profits.
we may face increasing risk of others asserting their intellectual property rights and potential
litigation, as market entrants include technology companies and companies from industries
where patent rights are actively asserted;
In addition, it may be difficult or costly for us to acquire or conduct business with financial
institutions or merchants that have longstanding exclusive, or nearly exclusive, relationships with our
competitors. These financial institutions or merchants may be more successful and may grow more
quickly than our existing clients or merchants. In addition, if there is a consolidation or acquisition of
one or more of our largest clients or co-brand partners by a financial institution client or merchant with
a strong relationship with one of our competitors, it could result in our business shifting to a competitor,
which could put us at a competitive disadvantage and harm our business.
23
23
Merchants' and processors' continued push to lower acceptance costs and challenge industry
practices could harm our business.
We rely in part on merchants and their relationships with our clients to maintain and expand the
acceptance of Visa products. Certain large retail merchants have been exercising their influence in the
global payments system to attempt to lower their acceptance costs by lobbying for new legislation,
seeking regulatory enforcement, filing lawsuits and in some cases, refusing to accept Visa products. If
they are successful in their efforts, we may face increased compliance and litigation expenses and
issuers may decrease their issuance of our products. In the U.S., the cost of payment card acceptance
has emerged in the context of payment security. A number of merchant trade associations claim that
EMV cards without PIN cardholder verification are not worth the investment. The October 2015 liability
shift and ongoing transition to EMV resulted in calls for a PIN verification mandate. More recently, U.S.
merchant-affiliated groups and processors have expressed concerns regarding the EMV certification
process. Some policymakers have called upon U.S. competition authorities to consider potential
concerns arising from the roles of industry bodies such as EMVCO and the Payment Card Industry
Security Standards Council. Additionally, some merchants and processors have pushed for changes to
industry practices and our requirements for Visa acceptance at the point of sale, including the ability for
merchants to accept only certain types of Visa products, to mandate only PIN authenticated
transaction, to differentiate or steer among Visa product types issued by different financial institutions,
and to impose surcharges on customers presenting Visa products as their form of payment. If
successful, these efforts could adversely impact consumers' usage of our products, lead to regulatory
enforcement and/or litigation, increase our compliance and litigation expenses, and harm our business.
We depend on relationships with our financial institution clients, acquirers, merchants and
other third parties.
We depend significantly on relationships with our financial institution clients and on their
relationships with customers and merchants to support our programs and services and thereby
compete effectively in the marketplace. Our relationships with industry participants are complex and
require us to balance the interests of multiple third parties. For example, in the U.S., the EMV migration
has been resisted by certain merchants, leading to conflicts and litigation concerning the timing and
scope of the liability shift, chargebacks and debit routing, among others.
We engage in discussions with merchants, acquirers and processors to provide incentives to
promote routing preference and acceptance growth. We engage in many payment card co-branding
efforts with merchants, who receive incentives from us. As these and other relationships become more
prevalent and take on a greater importance to our business, our success will increasingly depend on
our ability to continue to engage these discussions in order to sustain and grow these relationships.
In addition, we depend on third parties, including suppliers, and our financial institution clients to
provide various services associated with our payments network, on our behalf. To the extent that such
parties fail to perform or deliver adequate services, our business and reputation could be harmed.
If we are not able to maintain and enhance our brands, if events occur that damage our
reputation or brands or we experience brand disintermediation, it could harm our business.
Our brands are globally recognized and are key assets of our business. We believe that our
clients and customers associate our brands with acceptance, security, convenience and universality.
Our success depends in large part on our ability to maintain the value of our brands and reputation of
our products and services in the payments ecosystem, elevate the brand through new and existing
products, services and partnerships, and uphold our corporate reputation. The increased use or
popularity of products that we have developed in partnership with large technology and financial
•
•
Provisions contained in our certificate of incorporation and bylaws, and our capital structure could
delay or prevent a merger, takeover attempt or change in control that our stockholders may consider
favorable. For example, except for limited exceptions:
Delaware law, provisions in our certificate of incorporation and bylaws, and our capital
structure could make a merger, takeover attempt or change in control difficult.
other than class A common stock are our current and former financial institution clients, they may have
interests that diverge from our class A common stockholders. As a result, the holders of these classes
of capital stock may not have the same incentive to approve a corporate action that may be favorable
to the holders of class A common stock, and their interests may otherwise conflict with interests of our
class A common stockholders.
29
The market price of our class A common stock could fall as a result of many factors. Under our
U.S. retrospective responsibility plan, upon final resolution of our U.S. covered litigation, all class B
common stock will become convertible into class A common stock. In connection with the acquisition of
Visa Europe, we issued series B and series C preferred stock, which will become convertible into class
A common stock in stages based on developments in current and potential litigation and will become
fully convertible no later than 2028 (subject to a holdback to cover any pending claims). Conversion of
our class B and class C common stock into class A common stock, or our series B and series C
preferred stock into class A common stock, would increase the amount of class A common stock
outstanding, which could adversely affect the market price of our existing class A common stock and
would dilute the voting power of existing class A common stockholders.
Although their voting rights are limited, holders of our class B and C common stock and, in certain
specified circumstances, holders of our series B and series C preferred stock, can vote on certain
significant transactions. With respect to our class B and C common stock, these transactions include a
proposed consolidation or merger, a decision to exit our core payments business and any other vote
required under Delaware law. With respect to our series B and series C preferred stock, voting rights
are limited to proposed consolidations or mergers in which holders of the series B and series C
preferred stock would either (i) receive shares of stock or other equity securities with preferences,
rights and privileges that are not substantially identical to the preferences, rights and privileges of the
applicable series of preferred stock or (ii) receive securities, cash or other property that is different from
what our class A common stockholders would receive. Because the holders of classes of capital stock
Holders of our class B and C common stock and series B and series C preferred stock may
have different interests than our class A common stockholders concerning certain significant
transactions.
We may be unable to attract, hire and retain a highly qualified and diverse workforce, including
key management.
The conversions of our class B and class C common stock or series B and series C preferred
stock into shares of class A common stock would result in voting dilution to, and could impact
the market price of, our existing class A common stock.
The talents and efforts of our employees, particularly our key management, are vital to our
success. Our management team has significant industry experience and would be difficult to replace.
We may be unable to retain them or to attract other highly qualified employees, particularly if we do not
offer employment terms that are competitive with the rest of the labor market. Failure to attract, hire,
develop, motivate and retain highly qualified and diverse employee talent, or failure to develop and
implement an adequate succession plan for the management team, could disrupt our operations and
adversely affect our business and our future success.
no person may beneficially own more than 15% of our class A common stock (or 15% of our
total outstanding common stock on an as-converted basis), unless our board of directors
approves the acquisition of such shares in advance;
29
no competitor or an affiliate of a competitor may hold more than 5% of our total outstanding
common stock on an as-converted basis;
Refer to Note 20-Legal Matters to our consolidated financial statements included in Item 8 of
this report.
our stockholders may only take action during a stockholders' meeting and may not act by
written consent; and
PART II
anticipated benefits or value of the investment or acquisition not materializing.
50
30
Not applicable.
ITEM 4. Mine Safety Disclosures
the affirmative votes of the class B and C common stock and series B and series C preferred
stock are required for certain types of consolidations or mergers;
ITEM 3. Legal Proceedings
In addition, we own and operate two primary processing centers with adjacent office facilities in
the United States, totaling approximately 0.8 million square feet.
At September 30, 2016, we owned and leased approximately 3.9 million square feet of office and
processing center space in 67 countries around the world, of which approximately 2.0 million square
feet are owned and the remaining 1.9 million square feet are leased. Our corporate headquarters is
located in the San Francisco Bay Area and consists of four buildings that we own, totaling 0.9 million
square feet, and 0.1 million square feet of office space that we lease. We also own an office building in
Miami, Florida, totaling approximately 0.2 million square feet.
ITEM 2. Properties
Not applicable.
ITEM 1B. Unresolved Staff Comments
only the board of directors, Chairman or CEO may call a special meeting of stockholders.
We believe that these facilities are suitable and adequate to support our ongoing business needs.
•
$ 32,912 $ 29,842
potential incurrence of debt, including the substantial amount of debt incurred in connection
with the Visa Europe acquisition;
ITEM 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
Failure to maintain interoperability with Visa Europe's systems during the integration phase of
our acquisition could damage the business and global perception of our brands.
While Visa Europe's systems are being integrated with our legacy systems, we and Visa Europe
will continue to maintain mostly separate authorization, clearing and settlement systems. As a result,
we have to ensure that the two systems can process every transaction involving both of our territories,
regardless of where it originates. Visa Europe's independent system operations could present
challenges to our business in the event of increasing costs or difficulties in maintaining the
interoperability of our respective systems during the integration phase. The separation of payment card
scheme and processing may also exacerbate this risk. Any inconsistency in the payment processing
services and products between Visa Europe and our legacy operations could negatively affect the
experience of customers using Visa products globally. Failure to authorize, clear and settle inter-
territory transactions quickly and accurately could harm our business and impair the global perception
of our brands.
We may not achieve the anticipated benefits of the Visa Europe acquisition or those of our
other strategic investments or acquisitions, and may face other risks and uncertainties as a
result.
In June 2016, we acquired 100% of the share capital of Visa Europe. We believe the acquisition
positions us to create additional value through increased scale, efficiencies realized by the integration
of both businesses, and benefits related to Visa Europe's transition from an association to a for-profit
enterprise, although there can be no guarantee that we will realize these benefits. In addition, we may
make other strategic investments or acquisitions, which like the Visa Europe acquisition are inherently
risky and subject to many factors outside our control. The Visa Europe acquisition involves, and any
future strategic endeavors may involve, significant risks and uncertainties, which could include:
•
disruption to our ongoing business, including diversion of resources and management's
attention from our existing business;
⋅
greater than expected investment of resources or operating expenses;
•
failure to develop the acquired business adequately;
•
difficulty implementing controls, procedures and policies at the acquired company;
•
•
•
challenges of integrating new employees, business cultures, business systems and
technology;
dilutive issuance of equity securities, if new securities are issued;
with that litigation will not exceed the value of such preferred stock;
the issuance of the preferred stock, there can be no guarantee that the liabilities associated
•
•
•
negative impact on our financial position and/or statement of operations; and
28
failure to mitigate the liabilities of the acquired business; for example, while we have
discovery of unidentified issues after the acquisition or investment was made;
•
•
in the case of foreign acquisitions such as the acquisition of Visa Europe, risks related to the
integration of operations across different cultures and languages, and the economic, political
and regulatory risks associated with operating in new regions or countries. For more
information on regulatory risks, please see Item 1-Business-Government Regulations and
Item 1A-Risk Factors-Regulatory Risks above;
failure to retain employees, clients or partners of the acquired business;
attempted to mitigate the risk of loss associated with certain Visa Europe litigation through
All per share amounts and number of shares presented below reflect the four-for-one stock split
that was effected in the second quarter of fiscal 2015. See Note 14-Stockholders' Equity in Item 8—
Financial Statements and Supplementary Data of this report.
0.22
Our class A common stock has been listed on the New York Stock Exchange under the symbol
"V" since March 19, 2008. At November 9, 2016, we had 362 stockholders of record of our class A
common stock. The number of beneficial owners is substantially greater than the number of record
holders, because a large portion of our class A common stock is held in "street name" by banks and
brokers. The following table sets forth the intra-day high and low sale prices for our class A common
stock in each of our last eight fiscal quarters:
Dividend declared and paid per common
share(6)
$
0.56 $ 0.48 $ 0.40 $ 0.33 $
(1)
We did not include Visa Europe's financial results in our consolidated statement of operations from the acquisition date,
June 21, 2016, through June 30, 2016 as the impact was immaterial. Our consolidated statement of operations for fiscal
2016 does include Visa Europe's financial results for the three months ended September 30, 2016. Further, our financial
results for fiscal 2016 include the impact of several significant one-time items. See Overview within Item 7-Management's
Discussion and Analysis of Financial Condition and Results of Operations of this report.
(2) During fiscal 2013, we made payments from the U.S. litigation escrow account totaling $4.4 billion in connection with the
U.S. covered litigation. During fiscal 2014, the court entered the final judgment order approving the settlement with the class
plaintiffs in the interchange multidistrict litigation proceedings. Certain merchants in the settlement classes objected to the
settlement and filed opt-out claims. Takedown payments of approximately $1.1 billion related to the opt-out merchants were
received and deposited into the U.S. litigation escrow account, and a related increase in accrued litigation to address the
opt-out claims were recorded in the second quarter of fiscal 2014. An additional accrual of $450 million associated with
these opt-out claims was recorded in the fourth quarter of fiscal 2014. Payments totaling $528 million were made from fiscal
2014 through 2016 from the U.S. litigation escrow account reflecting settlements with a number of individual opt-out
merchants, resulting in an accrued balance of $978 million related to U.S. covered litigation as of September 30, 2016. See
Note 3-U.S. and Europe Retrospective Responsibility Plans and Note 20—Legal Matters to our consolidated financial
statements included in Item 8-Financial Statements and Supplementary Data of this report.
(3)
During fiscal 2015, we recorded a tax benefit of $296 million resulting from the resolution of uncertain tax positions with
taxing authorities, of which $239 million relates to prior fiscal years.
(4) During fiscal 2014, we recorded a $264 million tax benefit related to a deduction for U.S. domestic production activities, of
which $191 million was a one-time tax benefit related to prior fiscal years.
(5)
(6)
During fiscal 2012, we recorded: a one-time, non-cash tax benefit of $208 million related to the remeasurement of our net
deferred tax liabilities; a U.S. covered litigation provision of $4.1 billion and related tax benefits; and the reversal of
previously recorded tax reserves and interest, which increased net income by $326 million.
$27,630
The per share amounts for the prior periods presented have been retroactively adjusted to reflect the four-for-one stock split
effected in the fiscal second quarter of 2015.
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations
This management's discussion and analysis provides a review of the results of operations,
financial condition and liquidity and capital resources of Visa Inc. and its subsidiaries ("Visa,” “we,” “us,”
"our" and the "Company") on a historical basis and outlines the factors that have affected recent
earnings, as well as those factors that may affect future earnings. The following discussion and
analysis should be read in conjunction with the consolidated financial statements and related notes
included in Item 8 of this report.
Overview
Visa is a global payments technology company that connects consumers, merchants, financial
institutions, businesses, strategic partners and government entities in more than 200 countries and
territories to fast, secure and reliable electronic payments. We enable global commerce through the
transfer of value and information among these participants. Our advanced transaction processing
network facilitates authorization, clearing and settlement of payment transactions and enables us to
provide our financial institution and merchant clients a wide range of products, platforms and value-
added services.
Overall economic conditions. Our business is affected by overall economic conditions and
consumer spending. Our business performance during fiscal 2016 reflects the impacts of continued
uneven and tepid economic growth.
Visa Europe acquisition. On June 21, 2016, we acquired 100% of the share capital of Visa
Europe. The purchase price consisted of: (a) at the closing of the transaction (Closing), up-front cash
consideration of €12.2 billion ($13.9 billion) and preferred stock convertible upon certain conditions into
class A common stock or class A equivalent preferred stock, equivalent to a value of €5.3 billion ($6.1
billion) at the closing stock price of $77.33 on June 21, 2016, and (b) following the third anniversary of
the Closing, an additional €1.0 billion, plus 4% compound annual interest. The preferred stock
conversion rates may be reduced from time to time to offset certain liabilities, if any, which may be
incurred by us, Visa Europe or its affiliates as a result of certain existing and potential litigation relating
to the setting of multilateral interchange fee rates in the Visa Europe territory before the Closing. As
part of the acquisition, we also entered into the U.K. loss sharing agreement with Visa Europe and
certain of Visa Europe's members located in the United Kingdom to compensate us for certain losses
which may be incurred by us or Visa Europe as a result of certain existing and potential litigation
relating to the setting and implementation of domestic multilateral interchange fee rates in the United
Kingdom before the Closing. Our consolidated balance sheets reflect the consolidation of Visa Europe
as of September 30, 2016. We did not include Visa Europe's financial results in our consolidated
statements of operations from the acquisition date, June 21, 2016, through June 30, 2016 as the
impact was immaterial. Our consolidated statements of operations include the financial results of Visa
Europe for the three months ended September 30, 2016. See Note 2-Acquisition of Visa Europe,
Note 3-U.S. and Europe Retrospective Responsibility Plans and Note 20—Legal Matters to our
consolidated financial statements.
Debt issuance. In December 2015, we issued fixed-rate senior notes in an aggregate principal
amount of $16.0 billion, with maturities ranging between 2 and 30 years. Interest on these notes, at a
rate ranging between 1.20% and 4.30%, is payable semi-annually on June 14 and December 14,
commencing June 14, 2016. The net aggregate proceeds of $15.9 billion, after deducting discounts
and debt issuance costs, were used to fund the upfront cash portion of the purchase price for the
acquisition of Visa Europe and for general corporate purposes, including share repurchases. See
Note 4 Fair Value Measurements and Investments and Note 9-Debt to our consolidated financial
statements.
35
55
Financial highlights. Our financial results for fiscal 2016 include the impact of several significant
one-time items. Our as-reported U.S. GAAP and adjusted non-GAAP net income and diluted earnings
per share are shown in the table below.
Fiscal Year Ended
September 30,
% Change(1)
2016
34
2015
$4,386
$ 38,002
Net income
$ 5,991 $
$ 7,199 $ 4,816 $ 5,005 $ 4,539 $ 8,282
$ 7,883 $ 9,064 $ 7,697 $ 7,239 $ 2,139
6,328 $ 5,438 $ 4,980 $ 2,144
Basic earnings per share-class A common
stock(6)
$
2.49 $
2.58 $
Price Range of Common Stock
1.90 $
0.79
Diluted earnings per share-class A common
stock(6)
2.48 $
$
$26,870
2.58 $
1.90 $
0.79
At September 30,
Balance Sheet Data:
2016 (2)
Total assets
Accrued litigation
$ 981 $ 1,024
Total equity..
2015 (2),(3) 2014 (2),(4)
(in millions, except per share data)
$ 64,035 $ 39,367 $ 37,543 $35,495
$ 1,456
5
$27,413
2013 (2)
2012 (5)
2.16 $
Operating income
VS.
2016
(2)
The per share amounts for the prior periods presented have been retroactively adjusted to reflect the four-for-one stock split
effected in the fiscal second quarter of 2015.
(3) Adjusted net income and diluted earnings per share in fiscal 2016, 2015 and 2014 exclude the impact of certain significant
items that we believe are not indicative of our operating performance, as they are either non-recurring, have no cash impact
or are covered by the U.S. retrospective responsibility plan. For a full reconciliation of our adjusted financial results, see
tables in Adjusted financial results below.
We recorded net operating revenues of $15.1 billion for fiscal 2016, an increase of 9% over the
prior year driven by continued growth in processed transactions, nominal payments volume as well as
the fiscal fourth quarter operating revenues of Visa Europe. The effect of exchange rate movements,
as partially mitigated by our hedging program, resulted in a negative three percentage point impact to
our total operating growth.
Total operating expenses for fiscal 2016 were $7.2 billion, compared to $4.8 billion in fiscal 2015.
The increase over the prior year was primarily due to the $1.9 billion loss resulting from the effective
settlement of the Framework Agreement between us and Visa Europe upon consummation of the
transaction, combined with acquisition-related costs of approximately $152 million. See Note 2—
Acquisition of Visa Europe to our consolidated financial statements.
During fiscal 2015 we recognized a tax benefit of $296 million resulting from the resolution of
uncertain tax positions with taxing authorities. Of the $296 million benefit, $239 million relates to prior
fiscal years. Our financial results for the year ended September 30, 2014 reflect a one-time tax benefit
of $191 million associated with a deduction for U.S. domestic production activities related to prior fiscal
years. See Note 19-Income Taxes to our consolidated financial statements.
Adjusted financial results. Our financial results for fiscal 2016, 2015 and 2014 reflect the impact of
certain significant items that we do not believe are indicative of our ongoing operating performance in
the prior or future years, as they are either non-recurring, have no cash impact or are covered by the
U.S. retrospective responsibility plan. As such, we believe the presentation of adjusted financial results
excluding the following items provides a clearer understanding of our operating performance for the
periods presented.
•
Severance cost. In the fiscal fourth quarter, we recorded a $110 million charge for severance
costs related to personnel reductions including planned reductions at Visa Europe. Although
we routinely record severance expenses, these charges are larger than any past quarterly
accrual due to the acquisition and integration of Visa Europe. Net of related tax benefit of $38
36
•
.
(1) Figures in the tables may not recalculate exactly due to rounding. Percentage changes are calculated based on unrounded
numbers.
.
.
.
•
million, determined by applying applicable tax rates, the adjustment to net income was an
increase of $72 million.
Remeasurement of deferred tax liability. In September 2016, we recorded a non-cash, non-
recurring $88 million gain upon the remeasurement of a deferred tax liability, recorded upon
the acquisition of Visa Europe, to reflect a tax rate change in the United Kingdom.
Acquisition-related costs. During fiscal 2016, we incurred $152 million of non-recurring
acquisition costs in operating expense as a result of the Visa Europe transaction. This amount
is comprised of $60 million of transaction expenses recorded in professional fees, and $92
million of U.K. stamp duty recorded in general and administrative expenses. Net of related tax
benefit of $56 million, determined by applying applicable federal and state tax rates, the
adjustment to net income was an increase of $96 million. See Note 2-Acquisition of Visa
Europe to our consolidated financial statements.
Visa Europe Framework Agreement loss. Upon consummation of the transaction, on June 21,
2016, we recorded a non-recurring loss of $1.9 billion, before tax, in operating expense
resulting from the effective settlement of the Framework Agreement between us and Visa
Europe. Net of related tax benefit of $693 million, determined by applying applicable federal
and state tax rates, the adjustment to net income was an increase of $1.2 billion. See Note 2—
Acquisition of Visa Europe to our consolidated financial statements.
Net gains on currency forward contracts. During fiscal 2016, we entered into currency forward
contracts to mitigate a portion of our foreign currency exchange rate risk associated with the
upfront cash consideration paid in the Visa Europe acquisition. As a result, we recorded non-
recurring, net gains of $74 million, before tax, in other non-operating income. Net of related tax
expense of $27 million, determined by applying applicable federal and state tax rates, the
adjustment to net income was a decrease of $47 million. See Note 12-Derivative and Non-
derivative Financial Instruments to our consolidated financial statements.
Foreign exchange gain on euro deposits. During fiscal 2016, we recorded a non-recurring
foreign exchange gain of $145 million, before tax, in other non-operating income as a result of
holding euro-denominated bank balances for a short period in advance of the Closing. Net of
related tax expense of $54 million, determined by applying applicable federal and state tax
rates, the impact to net income was a decrease of $91 million.
Revaluation of Visa Europe put option. During the first quarter of fiscal 2016 and the third
quarter of fiscal 2015, we recorded a decrease of $255 million and an increase of $110 million,
respectively, in the fair value of the Visa Europe put option, resulting in the recognition of non-
cash income and expense in other non-operating income. These amounts are not subject to
income tax and therefore have no impact on our reported income tax provision. See Note 2—
Acquisition of Visa Europe and Note 4-Fair Value Measurements and Investments to our
consolidated financial statements.
Litigation provision. During fiscal 2014, we recorded a litigation provision of $450 million and
related tax benefits of $167 million associated with the U.S. interchange multidistrict litigation.
The tax impact is determined by applying applicable federal and state tax rates to the litigation
provision. Monetary liabilities from settlements of, or judgments in, the U.S. covered litigation
will be paid from the U.S. litigation escrow account. See Note 3-U.S. and Europe
Retrospective Responsibility Plans and Note 20—Legal Matters to our consolidated financial
statements.
37
.
VS.
16%
8 %
2015
2014
2015
2014
(in millions, except percentages)
Net income, as reported
$
5,991 $
6,328 $ 5,438
(5)%
16%
Diluted earnings per share, as reported (2)
Structural and Organizational Risks
$
2.58 $ 2.16
(4)%
20%
Net income, as adjusted (3)
$
6,862 $
Diluted earnings per share, as adjusted(2),(3)
$
2.84 $
6,438 $ 5,721
2.62 $ 2.27
7 %
13%
2.48 $
Operating expenses
2.16 $
(in millions, except per share data)
$13,880 $12,702 $11,778
31
Dividend
Per Share
$
0.14
0.14
$
0.14
$
0.14
Fiscal 2015
First Quarter
Fourth Quarter
Second Quarter
Fourth Quarter
Dividend
Per Share
SASA SA EA
$
$ 10,421
0.12
$
0.12
$
0.12
Additionally, in October 2016, our board of directors declared a quarterly cash dividend of $0.165
per share of class A common stock (determined in the case of class B and C common stock and
U.K.&I and Europe preferred stock on an as-converted basis) payable on December 6, 2016, to
holders of record as of November 18, 2016 of our common and preferred stock.
Third Quarter
Third Quarter
Second Quarter
First Quarter
Fiscal 2016
First Quarter
Second Quarter
Third Quarter.
Fourth Quarter
Fiscal 2015
First Quarter
Second Quarter.
High
$ 81.01 $ 68.36
Low
$ 77.00 $ 66.12
$ 81.73 $ 73.25
$ 83.79 $ 73.83
High
Low
$ 67.33 $ 48.80
$
69.66 $ 61.29
$
70.69 $ 64.35
76.92 $ 60.00
Third Quarter
Fourth Quarter
There is currently no established public trading market for our class B or class C common stock.
There were 1,656 and 676 holders of record of our class B and class C common stock, respectively, as
of November 9, 2016.
Dividend Declaration and Policy
During the fiscal years ended September 30, 2016 and 2015, we paid the following quarterly cash
dividends per share of our class A common stock (determined in the case of class B and C common
stock and U.K.&I and Europe preferred stock, on an as-converted basis) to all holders of record of our
common and preferred stock on the respective record dates.
Fiscal 2016
Subject to legally available funds, we expect to continue paying quarterly cash dividends on our
outstanding common and preferred stock in the future. However, the declaration and payment of future
dividends is at the sole discretion of our board of directors after taking into account various factors,
including our financial condition, settlement indemnifications, operating results, available cash and
current and anticipated cash needs.
Issuer Purchases of Equity Securities
0.12
Period
Plan Category
Equity compensation plans approved by
stockholders
(a)
Number Of Shares Of
Class A Common
Stock Issuable Upon
Exercise Of
Outstanding
Options And
Purchase Rights
The table below sets forth the Company's purchases of common stock during the quarter ended
September 30, 2016.
Weighted-Average
Exercise Price Of
Outstanding
Options And
Purchase Rights
38.42 (2)
Number Of Shares Of
Class A Common
Stock Remaining
Available For Future
Issuance Under Equity
Compensation
Plans (Excluding
Share Reflected
In Column (a))
170,655,889 (3)
The table below presents information as of September 30, 2016, for the Visa 2007 Equity Incentive
Compensation Plan (the “EIP”) and the Visa Inc. Employee Stock Purchase Plan (the “ESPP”), which
were approved by our stockholders. We do not have any equity compensation plans that have not
been approved by our stockholders. For a description of the awards issued under the EIP and the
ESPP, see Note 16-Share-based Compensation to our consolidated financial statements included in
Item 8-Financial Statements and Supplementary Data of this report.
(1) Includes 8,876,484 outstanding options under the EIP and 344,905 outstanding purchase rights under the ESPP. In
addition, the EIP authorizes the issuance of restricted stock, restricted stock units, performance shares and other stock-
based awards. The maximum number of shares issuable as of September 30, 2016, pursuant to outstanding restricted stock
units and performance shares, totals 3,146,954 and 1,042,012, respectively.
(3)
Does not include the weighted-average exercise price of the outstanding purchase rights under the ESPP as the exercise
price is based on the future stock price, net of discount, at the end of each monthly purchase over the offering period.
In January 2015, the Company's class A stockholders approved the ESPP which permits eligible employees to purchase
shares of Class A common stock at a 15% discount to the stock price on the purchase date, subject to certain restrictions.
See Note 16-Share-based Compensation to our consolidated financial statements included in Item 8-Financial
Statements and Supplementary Data of this report. As of September 30, 2016, 152 million shares and 19 million shares
were available for issuance under the EIP and the ESPP, respectively.
ITEM 6. Selected Financial Data
The following table presents selected Visa Inc. financial data for the past five fiscal years. The
data below should be read in conjunction with Item 7-Management's Discussion and Analysis of
Financial Condition and Results of Operations and Item 8-Financial Statements and Supplementary
Data of this report.
Selected Financial Data
Statement of Operations Data:
2016 (1),(2)
Fiscal Year Ended September 30,
2015 (2),(3) 2014 (2),(4) 2013 (2)
2012 (5)
Operating revenues
$15,082
(2)
EQUITY COMPENSATION PLAN INFORMATION
9,221,389 (1) $
33
July 1-31, 2016
August 1-31, 2016
September 1-30, 2016
Total..
33
2,597,645 $
77.65
8,280,851 $
79.85
Average Price Paid
Per Share
Total Number Of
Shares Purchased
As Part Of Publicly
Announced Plans Or
Programs (2),(3)
Approximate
Dollar Value
Of Shares That
May Yet Be
Purchased
Under The Plans Or
Programs (2),(3)
2,574,980 $ 7,122,065,457
Total Number Of
Shares Purchased (1)
9,648,865 $
8,279,268 $ 6,460,797,525
32
32
(3)
(2)
The figures in the table reflect transactions according to the trade dates. For purposes of our consolidated financial
statements included in this Form 10-K, the impact of these repurchases is recorded according to the settlement dates.
Our board of directors from time to time authorizes the repurchase of shares of our common stock up to a certain monetary
limit. In October 2015 and July 2016, our board of directors authorized share repurchase programs for $5.0 billion each.
These authorizations have no expiration date. All share repurchase programs authorized prior to October 2015 have been
completed.
9,648,865 $ 5,665,815,457
20,503,113
80.76
20,527,361 $
82.37
(1) Includes 24,248 shares of class A common stock withheld at an average price of $78.23 per share (per the terms of grants
under the Visa 2007 Equity Incentive Compensation Plan) to offset tax withholding obligations that occur upon vesting and
release of restricted shares.
net gains of $74 million in fiscal 2016 related to currency forward contracts entered
into to mitigate a portion of our foreign currency exchange rate risk associated with
the upfront cash consideration paid in the Visa Europe acquisition. As these
contracts are not designated in hedging relationships, related gains and losses are
recorded directly in earnings as part of non-operating income (expense);
•
Our non-operating income (expense) for fiscal 2016 does not reflect the financial results of Visa Europe from the acquisition
date, June 21, 2016, through June 30, 2016 as the impact was immaterial. Fiscal 2016 non-operating income (expense)
includes financial results of Visa Europe for the three months ended September 30, 2016. See Note 2-Acquisition of Visa
Europe to our consolidated financial statements.
•
Other non-operating income (expense) in fiscal 2016 and 2015 was primarily comprised of
the following:
Interest expense increased during fiscal 2016 primarily due to the issuance of $16.0 billion
fixed-rate senior notes in December 2015. See Note 9-Debt to our consolidated financial
statements.
46
46
Figures in the table may not recalculate exactly due to rounding. Percentage changes are calculated based on unrounded
numbers.
198 $
(1)
NM
NM
(96)
27 $
$ 129 $ (69) $
(expense)
Total non-operating income
a foreign exchange gain of $145 million in fiscal 2016 on euro deposits as a result of
holding euro-denominated bank balances for a short period in advance of the
Closing;
(2)
a non-cash adjustment of $255 million in the first quarter of fiscal 2016 to decrease
the fair value of the Visa Europe put option, which is not subject to tax, reducing the
fair value of the liability to zero; and
$ 7,199 $4,816 $ 5,005 $ 2,383 $ (189)
See Note 4-Fair Value Measurements and Investments and Note 12-Derivative and Non-
derivative Financial Instruments to our consolidated financial statements.
NM
47
Adjusted effective income tax rate. Our financial results for fiscal 2016 reflect the impact of
certain significant items that we do not believe are indicative of our ongoing operating performance in
the prior or future years, as they are either non-recurring or have no cash impact. As such, we have
presented our adjusted effective income tax rate in the table below, which we believe provides a
a $264 million tax benefit recognized in fiscal 2014 related to a deduction for U.S. domestic
production activities, of which $191 million was a one-time tax benefit related to prior fiscal
years.
the aforementioned $296 million tax benefit recognized in fiscal 2015; and
•
•
The effective income tax rates were 30% in fiscal 2015 and 2014. The following highlights the
significant tax items recorded in each respective year:
of uncertain tax positions with taxing authorities. Included in the $296 million was a one-time
$239 million tax benefit that related to prior fiscal years.
the absence of a $296 million tax benefit recognized in fiscal 2015 resulting from the resolution
the non-taxable $255 million revaluation of the Visa Europe put option recorded in fiscal 2016;
and
an $88 million one-time tax benefit due to the remeasurement of deferred tax liabilities as a
result of the reduction in the UK tax rate enacted in fiscal 2016;
the effect of one-time items related to the Visa Europe acquisition, the most significant of which
was the $1.9 billion U.S. loss related to the effective settlement of the Framework Agreement
between Visa and Visa Europe. These one-time items impacted the geographic mix of our
global income, resulting in a reduced effective tax rate;
•
•
.
•
The effective income tax rate was 25% in fiscal 2016 and 30% in fiscal 2015. The effective tax
rate in fiscal 2016 differs from the effective tax rate in fiscal 2015 primarily due to:
Effective Income Tax Rate
a non-cash adjustment of $110 million in the third quarter of fiscal 2015 to increase
the fair value of the unamended Visa Europe put option, which is not subject to tax.
NM (61)%
NM
Revaluation of Visa Europe put
$
payments volume
$ 2,851 $ 2,594
Cash volume
520
491
Visa Europe (5)
10% $ 2,800
6% 1,774
175
$ 2,288
22% $ 5,651
$ 4,882
16 %
2,015
(12)%
NM
Total nominal
2,294
175
(8)%
NM
Total nominal
volume (6)
$ 3,370 $ 3,086
9% $ 4,749 $ 4,303
10 % $ 8,119 $ 7,388
10%
Nominal payments
volume
United States
12 months
ended June 30,(1)
2015
2014
%
Change
2,506
NM
479
NM
2016
2015
%
Change
(in billions, except percentages)
volume
Consumer credit
$ 1,080
Consumer debit(3)
1,320
$ 980
1,202
10% $ 1,720 $ 1,676 3% $2,799 $ 2,656
5%
10%
454
462
(2)%
1,774
479
(8) $ (424) $ 5
35
622 (101)
6%
562
598
(2)%
International
150
9%
412
450
Commercial(4)
7 %
1,663
147
Visa Inc.
12 months
ended June 30,(1)
12 months ended
June 30,
2015 vs 2014(1)
Nominal Constant(7)
12 months ended
June 30,
2016 vs 2015(1)
Nominal Constant(7)
12 months ended
June 30,
2016 vs 2015(1)
Nominal
Total payments volume
growth (5)
Total volume growth (5)
12 months ended
June 30,
2015 vs 2014(1)
Nominal Constant(7)
22%
10%
37% 4%
27% ―%
13%
10%
16%
10%
22%
7%
11%
19%
(7)
(6)
(5)
(4)
Includes consumer prepaid volume and interlink volume.
(3)
Constant(7)
Figures in the tables may not recalculate exactly due to rounding. Percentage changes are calculated based on unrounded
numbers.
(2)
40
40
(1) Service revenues in a given quarter are assessed based on nominal payments volume in the prior quarter. Therefore,
service revenues reported for the twelve months ended September 30, 2016, 2015 and 2014, were based on nominal
10%
3%
payments volume reported by our financial institution clients for the twelve months ended June 30, 2016, 2015 and 2014,
respectively.
%
Change
Visa Inc.
The following table presents nominal and constant payments volume growth. (2)
12 months
ended June 30,(1)
2015
2014
%
Change
2015
2014
%
Change
(in billions, except percentages)
Consumer credit
Consumer debit(3)
Commercial(4)
$ 980 $ 872
1,202 1,127
412
370
12% $ 1,676 $ 1,599
7% 462
11%
150
453
145
5% $ 2,656 $ 2,470
2% 1,663 1,580
4 % 562
8%
5 %
514
3 %
- % $ 7,388 $ 7,157
9% $ 4,303 $ 4,319
$ 3,086 $ 2,838
Total nominal
volume(6)
(3)%
International
7%
10% $ 2,288 $ 2,196
5% 2,015 2,122
469
$ 2,594 $ 2,369
491
Cash volume
Total nominal
payments volume
9%
4% $ 4,882 $ 4,565
(5)% 2,506 2,591
Includes large, middle and small business credit and debit, as well as commercial prepaid volume.
2015
12 months
ended June 30,(1)
0.49
Net gains on currency forward
contracts
―%
(74)
(27)
(47)
(0.02)
Foreign exchange gain on euro
deposits.
―%
(145)
(54)
(91)
1,184
(0.04)
―%
(255)
-
(255)
(0.11)
As adjusted
$ 5,060
66% $
(345) $ 2,815 $ 6,862 $
2.84
Diluted weighted-average shares
outstanding, as reported.
2,414
Fiscal 2015
(in millions, except percentages and per
share data)
option
693
12%
(1,877)
Adjusted operating expenses, operating margin, non-operating income, income taxes, net income
and diluted earnings per share are non-GAAP financial measures and should not be relied upon as
substitutes for measures calculated in accordance with U.S. GAAP. The following tables reconcile our
as-reported financial measures calculated in accordance with U.S. GAAP to the respective non-GAAP
adjusted financial measures for fiscal 2016, 2015 and 2014:
(in millions, except percentages and per
share data)
Fiscal 2016
Non-
operating
Operating Operating Income
Expenses Margin (1),(2) (Expense)
Income
Taxes
Diluted
Earnings
Net Income Per Share(2)
As reported
$ 7,199
52% $
129 $
Severance cost
(110)
1%
2,021 $
38
5,991 $
Visa Europe Framework Agreement
loss
0.04
96
1%
(152)
Acquisition-related costs
Non-
operating
Operating Operating Income
Expenses Margin (1),(2) (Expense)
(0.04)
―%
liability
Remeasurement of deferred tax
0.03
72
2.48
(88)
Income
Taxes
Diluted
Earnings Per
Net Income Share (2),(3)
As reported
-
167
283
0.11
As adjusted
$ 4,555
64% $
27 $2,453 $ 5,721 $
2.27
Diluted weighted-average shares
outstanding, as reported
2,523
(1) Operating margin is calculated as operating income divided by net operating revenues.
38
(2)
(3)
Figures in the table may not recalculate exactly due to rounding. Operating margin and diluted earnings per share figures
are calculated based on unrounded numbers.
12 months
ended June 30,(1)
Visa Inc.
%
Change
2015
2016
Nominal payments
-
International
United States
The following tables present nominal payments volume. (2)
39
Nominal payments volume and transaction counts. Payments volume is the primary driver for our
service revenues, and the number of processed transactions is the primary driver for our data
processing revenues. Nominal payments volume over the prior year posted strong growth in the U.S.,
driven mainly by consumer debit and credit. Nominal international payments volume was negatively
impacted by the overall strengthening of the U.S. dollar. On a constant-dollar basis, which excludes the
impact of exchange rate movements, our international payments volume growth rate for the 12 months
ended June 30, 2016(1) and 2015 was 37% and 13%, respectively. Processed transactions sustained
healthy growth reflecting the ongoing worldwide shift to electronic currency.
Common stock repurchases. During fiscal 2016, we repurchased 91 million shares of our class A
common stock in the open market using $7.0 billion of cash on hand. As of September 30, 2016, we
had remaining authorized funds of $5.8 billion. All share repurchase programs authorized prior to
October 2015 have been completed. See Note 14-Stockholders' Equity to our consolidated financial
statements.
The per share amounts for the prior periods presented have been retroactively adjusted to reflect the four-for-one stock split
effected in the fiscal second quarter of 2015.
12 months
ended June 30,(1)
2016
2.16
$
$
4,816
65% $
(69)$ 2,667 $
6,328 $
2.58
Revaluation of Visa Europe put
option
-
―%
110
110
0.04
As adjusted
Diluted weighted-average shares
outstanding, as reported . .
$ 4,816
65% $
41 $ 2,667 $ 6,438 $
61%
4%
(450)
Litigation provision
$ 5,005
As reported
Taxes Net Income Share (2),(3)
27 $ 2,286 $ 5,438 $
Diluted
Earnings Per
Operating Operating Income
Expenses Margin (1),(2) (Expense)
(in millions, except percentages and per
share data)
Non-
operating
Fiscal 2014
2,457
2.62
Income
Our nominal payments volume, total payments volume growth and total volume growth for the twelve months ended June
30, 2016 reflect the related nominal payments volume of Visa Europe for the three months ended June 30, 2016, which
impacts our service revenues for the fourth quarter of fiscal 2016.
Visa Europe (5)
Growth on a constant-dollar basis excludes the impact of foreign currency fluctuations against the U.S. dollar.
$ 2,226 $ 2,079 $ 1,875 $ 147 $ 204
7%
11 %
Marketing.
869
872
900
(3)
(28)
-
- %
(3)%
Network and processing
538
474
507
64
(33)
13 %
(7)%
Professional fees
389
336
328
53
8
16 %
2%
Depreciation and amortization
(in millions, except percentages)
Personnel
VS.
2014
VS.
2015
19%
10%
$15,082 $13,880 $12,702
$1,202
$1,178
9%
9%
(1)
(2)
Figures in the table may not recalculate exactly due to rounding. Percentage changes are calculated based on unrounded
numbers.
Our operating revenues for fiscal 2016 do not reflect revenues earned by Visa Europe from the acquisition date, June 21, 2016,
through June 30, 2016 as the impact was immaterial.
Service revenues, which includes revenues earned by Visa Europe in the fiscal fourth quarter,
increased in fiscal 2016 and 2015 primarily due to 16% and 7% growth in nominal payments
volume, respectively. The growth in fiscal 2016 service revenues was slower than the growth in
payments volume reflecting the inclusion of Visa Europe revenue for the fiscal fourth quarter and
the resulting impact on our service revenue yield. Fiscal 2016 growth also reflects select pricing
modifications which became effective in the third quarter of fiscal 2015.
Data processing revenues increased in fiscal 2016 and 2015 due to overall growth in processed
transactions of 17% and 9%, respectively, which includes data processing revenues earned by
Visa Europe in the fiscal fourth quarter and the resulting impact on our data processing revenue
yield.
International transaction revenues increased in fiscal 2016 primarily due to nominal cross-border
volume growth of 37%, including revenues earned by Visa Europe in the fiscal fourth quarter. In
addition to the inclusion of Visa Europe revenue and the resulting impact on our international
transaction revenue yield, fiscal 2016 growth also reflects select pricing modifications that became
effective in the third quarter of fiscal 2015. The increase in fiscal 2015 was primarily driven by
higher volatility in a broad range of currencies, combined with select pricing modifications that
became effective in the third quarter of fiscal 2015.
502
Client incentives increased in fiscal 2016 and 2015, reflecting overall growth in global payments
volume, incentives incurred on long-term client contracts that were initiated or renewed during
fiscal 2016 and 2015 and Visa Europe's incentives for the fourth quarter of fiscal 2016. The
amount of client incentives we record in future periods will vary based on changes in performance
expectations, actual client performance, amendments to existing contracts or the execution of
new contracts.
Operating Expenses
The following table sets forth the components of our total operating expenses.
Fiscal Year Ended
September 30,
2016(2)
2015
2014
$ Change
2016
VS.
2015
% Change(1)
2015
2016
2015
VS.
2014
44
(269)
494
59
Personnel expenses increased in fiscal 2016 primarily due to a severance charge related to
personnel reductions including planned reductions at Visa Europe, combined with an
increase from the inclusion of Visa Europe fiscal fourth quarter expenses. This increase was
partially offset by a decrease in contractor costs, an increase in personnel costs that were
invested in and capitalized as part of technology development projects and lower incentive
compensation. The increase in fiscal 2015 was primarily due to an increase in headcount
reflecting our strategy to invest for future growth, combined with higher incentive
compensation.
Marketing expenses in fiscal 2016 reflect efficiencies in production and agency costs which
were redeployed for other marketing uses, and Visa Europe expenses for the fiscal fourth
quarter. The decrease in marketing during fiscal 2015 compared to fiscal 2014 was mainly
due to the overall strengthening of the U.S. dollar as marketing spend in local currencies
was converted to U.S. dollars, combined with the absence of the 2014 Sochi Winter
Olympics and 2014 FIFA World Cup spend that was incurred in fiscal 2014. The decrease
was partially offset by increases in promotional campaigns that support our growth strategies
and product initiatives.
Network and processing expenses increased in fiscal 2016 primarily due to the inclusion of
Visa Europe expenses beginning in the fourth quarter of fiscal 2016 and fees associated
with the processing of Russian domestic transactions that transitioned to the Russian
National Payment Card system during the third quarter of fiscal 2015. The decrease in fiscal
2015 was a result of initiatives to optimize the use of our technology resources. See Note
2-Acquisition of Visa Europe to our consolidated financial statements.
45
•
•
Professional fees increased in fiscal 2016 primarily reflecting transaction costs incurred in
connection with our acquisition of Visa Europe. See Note 2-Acquisition of Visa Europe to
our consolidated financial statements.
Depreciation and amortization expenses in fiscal 2016 were flat compared to fiscal 2015.
The increase in fiscal 2015 was primarily due to additional depreciation from our ongoing
investments in technology assets and infrastructure to support our digital solutions and core
business initiatives.
General and administrative expenses increased in fiscal 2016 mainly due to costs incurred
related to our acquisition of Visa Europe and the inclusion of Visa Europe expenses
beginning in the fourth quarter of fiscal 2016. See Note 2-Acquisition of Visa Europe to our
consolidated financial statements. The increase was also attributable to net foreign
exchange losses incurred as a result of changes in the U.S. dollar exchange rate against
other currencies in which we transact. The increase in fiscal 2015 was mainly due to an
increase in travel activities, product enhancements and facilities costs in support of our
business growth, combined with losses incurred from the sale of assets held by an
international subsidiary. These increases were partially offset by unrealized foreign
exchange gains and the absence of the fiscal 2014 disposal of obsolete technology assets.
Litigation provision decreased in fiscal 2016 primarily due to the absence of a loss incurred
in fiscal 2015 upon the settlement of uncovered litigation. The decrease in fiscal 2015
reflects the absence of a $450 million accrual related to the U.S. covered litigation incurred
in fiscal 2014. See Note 20—Legal Matters and Note 3-U.S. and Europe Retrospective
Responsibility Plans to our consolidated financial statements.
Visa Europe Framework Agreement loss resulted from the effective settlement of the
Framework Agreement between Visa and Visa Europe upon consummation of the
transaction. See Note 2— Acquisition of Visa Europe to our consolidated financial
statements.
Non-operating Income (Expense)
The following table sets forth the components of our non-operating income (expense).
Fiscal Year Ended
September 30,
% Change(1)
2016
2016(2)
2015
2014
$ Change
2016
VS.
2015
2015
2015
VS.
2014
VS.
2015
VS.
2014
(in millions, except percentages)
Interest expense
Other
$ (427) $
556
(3)
(66)
Total nominal volume is the sum of total nominal payments volume and cash volume. Total nominal payments volume is the
total monetary value of transactions for goods and services that are purchased on cards carrying the Visa, Visa Electron,
Interlink and V PAY brands. Cash volume generally consists of cash access transactions, balance access transactions,
balance transfers and convenience checks. Total nominal volume is provided by our financial institution clients, subject to
review by Visa. On occasion, previously presented volume information may be updated. Prior period updates are not
material.
•
Operating expenses for fiscal 2016 and 2014 include significant items that we do not believe are indicative of our operating
performance as they are related to the Visa Europe acquisition, or are covered by the U.S. retrospective responsibility plan.
See Overview within this Item 7-Management's Discussion and Analysis of Financial Condition and Results of Operations.
Our operating expenses for fiscal 2016 do not reflect the expenses incurred by Visa Europe from the acquisition date,
June 21, 2016, through June 30, 2016 as the impact was immaterial. Operating expenses incurred by Visa Europe for the
three months ended September 30, 2016 are reflected in fiscal 2016 total operating expenses.
2%
14 %
General and administrative
796
547
507
249
40
46 %
Litigation provision
2
14
453
(12)
435
(439) (86)%
1,877
1,877
NM
8%
(97)%
-
%
49 %
(4)%
Agreement loss ..
Total operating expenses (3)
(1)
(2)
(3)
Figures in the table may not recalculate exactly due to rounding. Percentage changes are calculated based on unrounded
numbers.
Visa Europe Framework
(548)
•
(2,861)
Operating Revenues
The following table sets forth our operating revenues earned the U.S., internationally and in
accordance with the Framework Agreement prior to the Visa Europe acquisition on June 21, 2016.
Visa Europe revenue earned for the three months ended September 30, 2016 is included in
International.
Fiscal Year Ended
September 30,
$ Change
2016
2015
% Change (1)
2016
2015
VS.
2015
VS.
VS.
2014
2015
VS.
2014
United States
International.
Revenues earned under the
Framework Agreement (3)
Net operating revenues
2016(2)
2015
2014
(in millions, except percentages)
$ 7,851 $ 7,406 $ 6,847 $
445 $ 559
6%
8%
7,040
6,219
5,629
821
Visa Inc. Fiscal 2016, 2015 and 2014
42
Non-operating income (expense) primarily includes interest expense, changes in the fair value of
the Visa Europe put option and income, gains and losses earned on investments and derivative
instruments not associated with our core operations.
Non-operating Income (Expense)
(2,592)
The following table provides the number of transactions processed by our VisaNet system,
including transactions involving Visa, Visa Electron, Interlink, V PAY and PLUS cards processed on
Visa's networks during the fiscal periods presented.(1)
Visa processed transactions
2016(2),(3)
83,159
2016 vs. 2015
2015(2)
2014 % Change(3)
(in millions, except percentages)
70,968 64,993
2015 vs. 2014
% Change
17%
9%
(1) Figures in the table may not recalculate exactly due to rounding. Percentage changes are calculated based on unrounded
numbers. On occasion, previously presented information may be updated. Prior period updates are not material. Our
operating revenues and related processed transactions for fiscal 2016 do not reflect the financial results or related
processed transactions of Visa Europe from the acquisition date, June 21, 2016, through June 30, 2016 as the impact is
immaterial. See Note 2-Acquisition of Visa Europe to our consolidated financial statements.
(2)
(3)
As a result of changes in Russian National Payment System law, we transitioned the processing of Russian domestic
transactions to the Russian National Payment Card System during the third quarter of fiscal 2015. The number of
transactions processed by our VisaNet system does not reflect Russian domestic transactions processed after the transition.
Visa processed transactions in fiscal 2016 include transactions processed by Visa Europe during the fiscal fourth quarter.
Results of Operations
590
Operating Revenues
The following sets forth the components of our operating revenues:
Service revenues consist mainly of revenues earned for services provided in support of client
usage of Visa products. Current quarter service revenues are primarily assessed using a calculation of
current pricing applied to the prior quarter's payments volume. Service revenues also include
assessments designed to support ongoing acceptance and volume growth initiatives, which are
recognized in the same period the related volume is transacted.
41
Data processing revenues are earned for authorization, clearing, settlement, network access and
other maintenance and support services that facilitate transaction and information processing among
our clients globally. Data processing revenues are recognized in the same period the related
transactions occur or services are rendered.
International transaction revenues are earned for cross-border transaction processing and
currency conversion activities. Cross-border transactions arise when the country of origin of the issuer
is different from that of the merchant. International transaction revenues are primarily generated by
cross-border payments and cash volume.
Client incentives consist of long-term contracts with financial institution clients, merchants and
strategic partners for various programs designed to build payments volume, increase Visa product
acceptance, win merchant routing transactions over our network and drive innovation. These
incentives are primarily accounted for as reductions to operating revenues.
Operating Expenses
Personnel expenses include salaries, employee benefits, incentive compensation, share-based
compensation, severance charges and contractor expense.
Marketing expenses include expenses associated with advertising and marketing campaigns,
sponsorships and other related promotions of the Visa brand.
Network and processing expenses mainly represent expenses for the operation of our processing
network, including maintenance, equipment rental and fees for other data processing services.
Professional fees mainly consist of fees for consulting, legal and other professional services.
Depreciation and amortization expenses include depreciation expense for property and
equipment, as well as amortization of purchased and internally developed software. Also included in
this amount is amortization of finite-lived intangible assets primarily obtained through acquisitions.
General and administrative expenses mainly consist of transaction costs related to the Visa
Europe acquisition, product enhancements, facilities costs, travel activities, foreign exchange gains
and losses and other corporate expenses incurred in support of our business.
Litigation provision is an estimate of litigation expense and is based on management's
understanding of our litigation profile, the specifics of the cases, advice of counsel to the extent
appropriate and management's best estimate of incurred loss as of the balance sheet date.
Visa Europe Framework Agreement loss is a one-time loss incurred upon consummation of the
Visa Europe acquisition on June 21, 2016, resulting from the effective settlement of the Framework
Agreement between us and Visa Europe.
Our operating revenues are primarily generated from payments volume on Visa products for
purchased goods and services, as well as the number of transactions processed on our network. We
do not earn revenues from, or bear credit risk with respect to, interest or fees paid by account holders
on Visa products. Our issuing clients have the responsibility for issuing cards and other payment
products, and determining the interest rates and fees paid by account holders. We generally do not
earn revenues from the fees that merchants are charged for acceptance by the acquirers, including the
merchant discount rate. Our acquiring clients are generally responsible for soliciting merchants, and
establishing and earning these fees.
13 %
Other revenues consist mainly of license fees for use of the Visa brand, revenues earned from
Visa Europe in accordance with the Visa Europe Framework Agreement prior to the completion of the
Visa Europe acquisition, fees for account holder services, certification and licensing, and other
activities related to our acquired entities. Other revenues also include optional service or product
enhancements, such as extended account holder protection and concierge services.
191
385
720
5,167
5,552
6,272
Data processing revenues
9%
7%
(in millions, except percentages)
$ 5,797 $ 445 $ 505
$ 6,747 $ 6,302
Service revenues.
2014
2015
2014
VS.
13%
7%
International transaction revenues
4,064
(3,409)
10%
Net operating revenues
Client incentives
7%
―%
53
VS.
770
823
Other revenues
14%
14%
504
585
3,560
823
VS.
4,649
2014
43
Our operating revenues, primarily service revenues, international transaction revenues, and client
incentives, are impacted by the overall strengthening or weakening of the U.S. dollar as payments
volume and related revenues denominated in local currencies are converted to U.S. dollars. The effect
of exchange rate movements in fiscal 2016, as partially mitigated by our hedging program, resulted in a
negative three percentage point impact to our net operating revenue growth.
The increase in operating revenues primarily reflects continued growth in processed transactions
and nominal payments volume, as well as the fiscal fourth quarter operating revenues of Visa Europe.
These benefits were partially offset by increases in client incentives. Overall revenue growth also
reflects the positive impact of select pricing modifications effected in the third quarter of fiscal 2015.
Our operating revenues for fiscal 2016 do not reflect revenues earned by Visa Europe from the acquisition date, June 21,
2016, through June 30, 2016 as the impact was immaterial.
(3)
(2)
(1) Figures in the table may not recalculate exactly due to rounding. Percentage changes are calculated based on unrounded
numbers.
9% 9%
13%
(25)%
29
(64)
1,202 $ 1,178
$ 15,082 $ 13,880 $ 12,702 $
VS.
2015
226
The following table sets forth the components of our net operating revenues, including operating
revenues earned by Visa Europe for the three months ended September 30, 2016. Other revenues also
includes revenue earned from Visa Europe in accordance with the Framework Agreement prior to its
acquisition on June 21, 2016.
Fiscal Year Ended
September 30,
Reflects revenues earned from Visa Europe prior to the acquisition, in accordance with the Framework Agreement that
provided for trademark and technology licenses and bilateral services. The Framework Agreement was effectively settled
upon the closing of the acquisition. See Note 2-Acquisition of Visa Europe to our consolidated financial statements.
2015
2015
% Change(1)
2016
2015
2016(2)
$ Change
2016
255
payments of $426 million made from the U.S. litigation escrow account and a related
decrease of approximately $157 million of income taxes paid during fiscal 2015; and
the return of $1.1 billion in takedown payments in fiscal 2014 and related increase of $368
million in income taxes paid.
The cash inflows and outflows related to the U.S. litigation escrow account are also reflected as
offsetting cash flows within financing activities for their respective years as they are covered by the
U.S. retrospective responsibility plan. See Note 3-U.S. and Europe Retrospective Responsibility
Plans and Note 20—Legal Matters to our consolidated financial statements.
•
Financing activities. Cash provided by financing activities in fiscal 2016 reflects $15.9 billion net
aggregate proceeds received from our debt issuance completed in December 2015, $7.0 billion used
to repurchase class A common stock in the open market, and $1.4 billion of dividend payments. Cash
used in financing activities in fiscal 2015 and 2014 reflect significant cash flows in connection with the
interchange multidistrict litigation that offset the impacts discussed above within operating activities as
they are covered by the U.S. retrospective responsibility plan, as follows:
•
•
payments of $426 million made from the U.S. litigation escrow account in fiscal 2015;
$1.1 billion in takedown payments returned to the U.S. litigation escrow account in fiscal
2014; and
Investing activities. Cash used in investing activities was higher in fiscal 2016 compared to the
prior year primarily due to the up-front cash consideration paid in the Visa Europe acquisition, offset by
$2.8 billion of cash held by Visa Europe at the closing of the transaction. Cash used in investing
activities was higher in fiscal 2015 compared to fiscal 2014, primarily reflecting a decrease in the
proceeds received from maturities and sales of available-for-sale securities, and an increase in
purchases of available-for-sale securities. See Note 2-Acquisition of Visa Europe and Note 4-Fair
Value Measurements and Investments to our consolidated financial statements.
$1.9 billion of the consideration paid in the Visa Europe acquisition related to the effective
settlement of the Framework Agreement between us and Visa Europe, and payment of $244
million of interest on the senior notes during fiscal 2016 (see Note 2-Acquisition of Visa
Europe and Note 9-Debt);
7,477
(1,435)
(3,603)
(941)
(6,478)
(34)
(1)
2,101 $
1,547 $
(215)
$450 million deposited into the U.S. litigation escrow account in fiscal 2014.
Operating activities. Cash provided by operating activities in fiscal 2016, 2015 and 2014 was
significantly impacted by cash flows related to the Visa Europe acquisition and the U.S. interchange
multidistrict litigation, including:
•
•
•
49
Universal shelf registration statement. In July 2015, we filed a registration statement with the SEC
using a shelf registration process. As permitted by the registration statement, we may, from time to
time, sell shares of debt or equity securities in one or more transactions. This registration statement
expires in July 2018.
Sources of Liquidity
Short-term unsecured debt
Long-term unsecured debt.
Standard and Poor's
Rating Outlook
Moody's
Rating
Outlook
A-1
Stable
A+
Stable
P-1
A1
Stable
Debt type
(10,916)
At September 30, 2016, our credit ratings by Standard and Poor's and Moody's were as follows:
Credit Ratings
U.S. Litigation escrow account. Pursuant to the terms of the U.S. retrospective responsibility plan,
we maintain a U.S. litigation escrow account from which monetary liabilities from settlements of, or
judgments in, the U.S. covered litigation will be payable. When we fund the U.S. litigation escrow
account, the shares of class B common stock held by our stockholders are subject to dilution through
an adjustment to the conversion rate of the shares of class B common stock to shares of class A
common stock. See Note 3-U.S. and Europe Retrospective Responsibility Plans and Note 20-Legal
Matters to our consolidated financial statements. The balance in this account at September 30, 2016,
was $1.0 billion and is reflected as restricted cash in our consolidated balance sheet. As these funds
are restricted for the sole purpose of making payments related to the U.S. covered litigation matters, as
described below under Uses of Liquidity, we do not rely on them for other operational needs.
Long-term debt and change in capital structure. In conjunction with the Visa Europe acquisition,
we have evolved our long-term capital structure. In December 2015, we issued fixed-rate senior notes
in an aggregate principal amount of $16.0 billion, with maturities ranging between 2 and 30 years. Our
first principal payment of $1.8 billion is due on December 14, 2017. Interest on the Notes, at a rate
ranging between 1.20% and 4.30%, is payable semi-annually on June 14 and December 14 of each
year. An interest payment of $244 million was made on June 14, 2016. The Notes may be redeemed
as a whole or in part, at our option at any time prior to maturity, at a specified redemption price. The
net aggregate proceeds of $15.9 billion, after deducting underwriting discounts and debt issuance
costs of $127 million, were used to fund a portion of the purchase price for the acquisition of Visa
Europe and for general corporate purposes, including share repurchases. We are not subject to any
financial covenants and did not experience any changes to our investment credit ratings as a result of
this debt issuance. See Note 9-Debt to our consolidated financial statements. We expect to issue
additional debt of about $2.0 billion by the end of the first quarter of fiscal 2017, market conditions
permitting.
60
50
Credit facility. On January 27, 2016, we entered into an unsecured $4.0 billion revolving credit
facility. The credit facility, which expires on January 27, 2021, replaced our previous $3.0 billion credit
facility, which expired on January 27, 2016. The new credit facility contains covenants and events of
default customary for facilities of this type. There were no borrowings under either facility and we were
in compliance with all related covenants during the year ended September 30, 2016. See Note 9—
Debt to our consolidated financial statements.
Commercial paper program. We maintain a commercial paper program to support our working
capital requirements and for other general corporate purposes. Under the program, we are authorized
to issue up to $3.0 billion in outstanding notes, with maturities up to 397 days from the date of
issuance. We had no outstanding obligations under the program at September 30, 2016. See Note 9—
Debt to our consolidated financial statements.
Factors that may impact the liquidity of our investment portfolio include, but are not limited to,
changes to credit ratings of the securities, uncertainty related to regulatory developments, actions by
central banks and other monetary authorities, and the ongoing strength and quality of credit markets.
We will continue to review our portfolio in light of evolving market and economic conditions. However, if
current market conditions deteriorate, the liquidity of our investment portfolio may be impacted and we
could determine that some of our investments are impaired, which could adversely impact our financial
results. We have policies that limit the amount of credit exposure to any one financial institution or type
of investment.
Available-for-sale investment securities. Our investment portfolio is designed to invest excess
cash in securities which enables us to meet our working capital and liquidity needs. Our investment
portfolio primarily consists of debt securities issued by the U.S. Treasury or U.S. government-
sponsored agencies. The majority of these investments, $3.9 billion, are classified as non-current as
they have stated maturities of more than one year from the balance sheet date. However, these
investments are generally available to meet short-term liquidity needs.
Cash and cash equivalents and short-term and long-term available-for-sale investment securities
held by our foreign subsidiaries totaled $8.7 billion at September 30, 2016. If it were necessary to
repatriate these funds for use in the U.S., we would be required to pay U.S. income taxes on the
amount of undistributed earnings in those subsidiaries. It is our intent to indefinitely reinvest the
majority of these funds outside of the U.S. As such, we have not accrued any U.S. income tax
provision in our financial results related to approximately $8.3 billion of undistributed earnings included
in these funds. The amount of income taxes that would have resulted had these funds been repatriated
is not practicably determinable.
Our primary sources of liquidity are cash on hand, cash flow from our operations, our investment
portfolio and access to various equity and borrowing arrangements. Funds from operations are
maintained in cash and cash equivalents and short-term or long-term available-for-sale investment
securities based upon our funding requirements, access to liquidity from these holdings, and the return
that these holdings provide. We believe that cash flow generated from operations, in conjunction with
access to our other sources of liquidity, will be more than sufficient to meet our ongoing operational
needs.
The remainder of the change in fiscal 2015 compared to 2014 was primarily due to decreases in
common stock repurchases. See Note 3-U.S. and Europe Retrospective Responsibility Plans, Note
9-Debt, Note 14- Stockholders' Equity and Note 20—Legal Matters to our consolidated financial
statements.
7,205
$
$
(54)
(145)
(27)
(74)
693
1,877
56
152
88
38
110
(255)
25.2%
8,012 $ 2,021
$
Visa Europe Framework Agreement loss
Net gains on currency forward contracts
Foreign exchange gain on euro deposits
Revaluation of Visa Europe put option
As adjusted
Remeasurement of deferred tax liability
Acquisition-related costs
Severance cost
As reported
Effective
Income Tax
Rate(1)
Income Tax
Provision
Income Taxes
Before
Income
Stable
9,677 $ 2,815
29.1%
(1) Figures in the table may not recalculate exactly due to rounding. Effective income tax rate changes are calculated based on
unrounded numbers.
2014
2015
(in millions)
2016
Increase (decrease) in cash and cash equivalents
Effect of exchange rate changes on cash and cash
equivalents
Financing activities
Investing activities
Operating activities
Total cash provided by (used in):
The following table summarizes our cash flow activity for the fiscal years presented:
Cash Flow Data
48
48
Based on our current cash flow budgets and forecasts of our short-term and long-term liquidity
needs, we believe that our projected sources of liquidity will be sufficient to meet our projected liquidity
needs for more than the next 12 months. We will continue to assess our liquidity position and potential
sources of supplemental liquidity in view of our operating performance, current economic and capital
market conditions, and other relevant circumstances.
pay dividends and repurchase our shares at the discretion of our board of directors; and
invest excess cash in securities that enable us to first meet our working capital and
liquidity needs, and earn additional income.
make planned capital investments in our business;
ensure payments on required litigation settlements;
ensure timely completion of payments settlement activities;
provide adequate liquidity to cover operating expenditures and liquidity contingency
scenarios;
•
•
The objectives of our treasury policies are to:
We regularly evaluate cash requirements for current operations, commitments, development
activities and capital expenditures, and we may elect to raise additional funds for these purposes in the
future through the issuance of either debt or equity. Our treasury policies provide management with the
guidelines and authority to manage liquidity risk in a manner consistent with our corporate objectives.
Management of Our Liquidity
Liquidity and Capital Resources
5,574 $ 6,584 $
Various factors affect our credit ratings, including changes in our operating performance, the
economic environment, conditions in the electronic payment industry, our financial position and
changes in our business strategy. We do not currently foresee any reasonable circumstances under
which our credit ratings would be significantly downgraded. If a downgrade were to occur, it could
adversely impact, among other things, our future borrowing costs and access to capital markets.
148
Payments settlement. Payments settlement due from and to our financial institution clients can
represent a substantial daily liquidity requirement. Most U.S. dollar settlements are settled within the
same day and do not result in a net receivable or payable balance, while settlements in currencies
other than the U.S. dollar generally remain outstanding for one to two business days, which is
962
164
49
1,175
Leases(3)
126
185
118
190
619
Client incentives(4)
Purchase orders (2)
5,544
4,721
4,791
21,801
Marketing and sponsorship (5)
126
248
33
555
Dividends(6)
400
400
6,745
$ 23,589
$ 3,903 $ 16,501
$ 489 $ 2,696
clearer understanding of our operating performance in fiscal 2016. See Overview - Adjusted financial
results within this Management's Discussion and Analysis of Financial Condition and Results of
Operations for descriptions of the adjustments in the table below.
40
57
We are further exposed to foreign currency exchange rate risk as the functional currency of Visa
Europe is the euro. Translation from the euro to the U.S. dollar is performed for balance sheet
accounts using exchange rates in effect at the balance sheet date and for revenue and expense
accounts using an average exchange rate for the period. Resulting translation adjustments are
reported as a component of accumulated other comprehensive income or loss on the consolidated
balance sheets. A hypothetical 10% change in the euro against the U.S. dollar compared to the
exchange rate at September 30, 2016, could result in a foreign currency translation adjustment of $1.9
billion. In the third quarter, we designated our euro-denominated deferred consideration liability as a
net investment hedge against a portion of our net investment in Visa Europe. Changes in the value of
the deferred cash consideration liability, attributable to a change in exchange rates at the end of each
reporting period, partially offset the foreign currency translation of the Company's net investment
recorded in accumulated other comprehensive income in the Company's consolidated balance sheet.
See Note 1-Summary of Significant Accounting Policies and Note 12-Derivative and Non-derivative
Financial Instruments to our consolidated financial statements.
On June 21, 2016, we acquired 100% of the share capital of Visa Europe. On the third
anniversary of the Closing, we will pay additional purchase consideration of €1 billion, plus 4.0%
compound annual interest. See Note 2-Acquisition of Visa Europe to our consolidated financial
statements. As such, we are exposed to foreign currency exchange rate risk with respect to
fluctuations of the U.S. dollar against the euro. A hypothetical 10% decline in the U.S. dollar against
the euro, compared to the exchange rate at September 30, 2016, would increase the deferred
purchase consideration liability by $123 million, including interest.
The aggregate notional amounts of our foreign currency forward contracts outstanding in our
exchange rate risk management program, including contracts not designated for cash flow hedge
accounting, were $2.7 billion and $1.2 billion at September 30, 2016 and 2015, respectively. The
aggregate notional amount outstanding at September 30, 2016 is fully consistent with our strategy and
treasury policy aimed at reducing foreign exchange risk below a predetermined and approved
threshold. However, actual results could materially differ from our forecast. The effect of a hypothetical
10% increase or decrease in the value of the functional currencies is estimated to create an additional
fair value gain of approximately $160 million or loss of approximately $190 million, respectively, on our
foreign currency forward contracts outstanding at September 30, 2016. See Note 1-Summary of
Significant Accounting Policies and Note 12-Derivative and Non-derivative Financial Instruments to
our consolidated financial statements.
We are exposed to adverse fluctuations in foreign currency exchange rates. Risks from foreign
currency exchange rate fluctuations are primarily related to adverse changes in the functional currency
value of revenues generated from foreign currency-denominated transactions and adverse changes in
the functional currency value of payments in foreign currencies. We manage these risks by entering
into foreign currency forward contracts that hedge exposures of the variability in the functional currency
equivalent of anticipated non-functional currency denominated cash flows. Our foreign currency
exchange rate risk management program reduces, but does not entirely eliminate, the impact of foreign
currency exchange rate movements.
Foreign Currency Exchange Rate Risk
Market risk is the potential economic loss arising from adverse changes in market factors. Our
exposure to financial market risks results primarily from fluctuations in foreign currency exchange
rates, interest rates and equity prices. Aggregate risk exposures are monitored on an ongoing basis.
ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk
99
We indemnify our financial institution clients for settlement losses suffered due to the failure of
any other client to fund its settlement obligations in accordance with our rules. The amount of the
indemnification is limited to the amount of unsettled Visa payment transactions at any point in time. We
maintain global credit settlement risk policies and procedures to manage settlement risk, which may
require clients to post collateral if certain credit standards are not met. See Note 1-Summary of
Significant Accounting Policies and Note 11-Settlement Guarantee Management to our consolidated
financial statements.
In the ordinary course of business, we enter into contractual arrangements with financial
institutions and other clients and partners under which we may agree to indemnify the client for certain
53
types of losses incurred relating to the services we provide or otherwise relating to our performance
under the applicable agreement.
Contractual Obligations
Our contractual commitments will have an impact on our future liquidity. The contractual
obligations identified in the table below include both on- and off-balance sheet transactions that
represent a material, expected or contractually committed future obligation as of September 30, 2016.
We believe that we will be able to fund these obligations through cash generated from our operations
and available credit facilities.
Payments Due by Period
3-5
Years
Less than
1 Year
1-3
Years
More than 5
Years
Total
(in millions)
Long-term debt(1)
Deferred purchase consideration(7)
1,266
1,266
Total(8,9)
Assumptions and judgment. We evaluate the likelihood of a potential loss from legal or regulatory
proceedings to which we are a party. We record a liability for such claims when a loss is deemed
probable and the amount can be reasonably estimated. Significant judgment may be required in the
determination of both probability and whether an exposure is reasonably estimable. Our judgments are
subjective based on the status of the legal or regulatory proceedings, the merits of our defenses and
consultation with in-house and outside legal counsel. As additional information becomes available, we
reassess the potential liability related to pending claims and may revise our estimates.
Our U.S. retrospective responsibility plan only addresses monetary liabilities from settlements of,
or final judgments in, the U.S. covered litigation. The plan's mechanisms include the use of the U.S.
litigation escrow account. The accrual related to the U.S. covered litigation could be either higher or
lower than the U.S. litigation escrow account balance. We did not record an accrual for the U.S.
covered litigation during fiscal 2016. Our Europe retrospective responsibility plan only covers Visa
Europe territory covered litigation (and resultant liabilities and losses) relating to the covered period,
subject to certain limitations. See Note 3-U.S. and Europe Retrospective Responsibility Plans and
Note 20 Legal Matters to our consolidated financial statements.
Impact if actual results differ from assumptions. Due to the inherent uncertainties of the legal and
regulatory processes in the multiple jurisdictions in which we operate, our judgments may be materially
different than the actual outcomes, which could have material adverse effects on our business,
financial conditions and results of operations. See Note 20—Legal Matters to our consolidated financial
statements.
Income Taxes
Critical estimates. In calculating our effective income tax rate, we make judgments regarding
certain tax positions, including the timing and amount of deductions and allocations of income among
various tax jurisdictions.
Assumptions and judgment. We have various tax filing positions with regard to the timing and
amount of deductions and credits, the establishment of liabilities for uncertain tax positions and the
allocation of income among various tax jurisdictions. We are also required to inventory, evaluate and
measure all uncertain tax positions taken or to be taken on tax returns and to record liabilities for the
amount of such positions that may not be sustained, or may only be partially sustained, upon
examination by the relevant taxing authorities.
Impact if actual results differ from assumptions. Although we believe that our estimates and
judgments are reasonable, actual results may differ from these estimates. Some or all of these
judgments are subject to review by the taxing authorities. If one or more of the taxing authorities were
to successfully challenge our right to realize some or all of the tax benefit we have recorded, and we
were unable to realize this benefit, it could have a material adverse effect on our financial results and
cash flows.
56
Indemnifications
Our off-balance sheet arrangements are primarily comprised of guarantees and indemnifications.
Visa has no off-balance sheet debt, other than lease and purchase order commitments, as discussed
below and reflected in our contractual obligations table.
Off-Balance Sheet Arrangements
The assessment of fair value of our financial instruments is based on a fair value hierarchy that
requires an entity to maximize the use of observable inputs and minimize the use of unobservable
inputs when measuring fair value. Observable inputs are obtained from independent sources and can
be validated by a third party, whereas unobservable inputs reflect assumptions regarding what a third
party would use in pricing an asset or liability. As of September 30, 2016, our financial instruments
measured at fair value on a recurring basis included approximately $12.0 billion of assets and $136
million of liabilities. None of these instruments were valued using significant unobservable inputs. See
Note 4-Fair Value Measurements and Investments to our consolidated financial statements.
Fair Value Measurements-Financial Instruments
Capital expenditures. Our capital expenditures increased during fiscal 2016, due to investments
in technology, infrastructure and growth initiatives. We expect to continue investing in technology
assets and payments system infrastructure to support our digital solutions and core business
initiatives.
benefits for substantially all employees residing in the U.S. As a result of the acquisition of Visa
Europe, we assumed the obligations related to Visa Europe's defined benefit plan, primarily consisting
of the U.K. pension plans. Our policy with respect to our U.S. qualified pension plan is to contribute
annually in September of each year, an amount not less than the minimum required under the
Employee Retirement Income Security Act. Our U.S. non-qualified pension and other postretirement
benefit plans are funded on a current basis. In relation to the Visa Europe U.K. pension plans, our
funding policy is to contribute in accordance with the appropriate funding requirements agreed with the
trustees of our U.K. pension plans. Additional amounts may be agreed with the U.K. pension plan
trustees. In fiscal 2016, 2015 and 2014, we made contributions to our U.S. pension and other
postretirement plans of $4 million, $19 million, and $14 million, respectively. For Visa Europe's U.K.
pension plans, we made contributions of $102 million subsequent to the acquisition date as agreed
upon with the trustees to improve the funding level of the plans. In fiscal 2017, given current
projections and assumptions, we anticipate funding our U.S. and Visa Europe's U.K. defined benefit
pension plans by approximately $12 million and $6 million, respectively. The actual contribution
amount will vary depending upon the funded status of the pension plan, movements in the discount
rate, performance of the plan assets and related tax consequences. See Note 10-Pension,
Postretirement and Other Benefits to our consolidated financial statements.
52
529
Pension and other postretirement benefits. We sponsor various qualified and non-qualified
defined benefit pension and other postretirement benefit plans that provide for retirement and medical
Dividends. During fiscal 2016, we declared and paid $1.4 billion in dividends. In October 2016,
our board of directors declared a quarterly dividend in the aggregate amount of $0.165 per share of
class A common stock (determined in the case of class B and class C common stock and U.K.&I and
Europe preferred stock on an as-converted basis). We expect to pay approximately $400 million in
connection with this dividend on December 6, 2016. See Note 14-Stockholders' Equity to our
consolidated financial statements. We expect to continue paying quarterly dividends in cash, subject to
approval by the board of directors. All preferred and class B and C common stock will share ratably on
an as-converted basis in such future dividends.
Common stock repurchases. During fiscal 2016, we repurchased 91 million shares of our class A
common stock in the open market using $7.0 billion of cash on hand. As of September 30, 2016, we
had remaining authorized funds of $5.8 billion. In October 2015 and July 2016, our board of directors
authorized share repurchase programs for $5.0 billion each. These authorizations have no expiration
date. All share repurchase programs authorized prior to October 2015 have been completed. See Note
14-Stockholders' Equity to our consolidated financial statements.
Other litigation. Judgments in and settlements of litigation, other than the U.S. covered litigation,
could give rise to future liquidity needs.
U.S. covered litigation. We are parties to legal and regulatory proceedings with respect to a
variety of matters, including certain litigation that we refer to as the U.S. covered litigation. As noted
above, monetary liabilities from settlements of, or judgments in, the U.S. covered litigation are payable
from the U.S. litigation escrow account. During fiscal 2016, we made $45 million in covered litigation
payments that were funded from the U.S. litigation escrow account, reflecting settlements with
individual opt-out merchants in the interchange multidistrict litigation proceedings. At September 30,
2016, the U.S. litigation escrow account had an available balance of $1.0 billion. In June 2016, the
approval of the 2012 Settlement Agreement was reversed by the U.S. Court of Appeals for the Second
Circuit. Until the appeals process is complete, it is uncertain whether the Company will be able to
resolve the class plaintiffs' claims as contemplated by the Settlement Agreement. If the Settlement
Agreement is terminated and no further agreement is reached regarding funds previously paid from the
litigation account into settlement funds pursuant to the Settlement Agreement, we will have the right to
approximately $3.0 billion, which would be returned to the U.S. litigation escrow account. This will
increase our taxable income, thereby increasing our taxes to be paid by approximately $1.1 billion. See
Note 3-U.S. and Europe Retrospective Responsibility Plans and Note 20—Legal Matters to our
consolidated financial statements.
Visa Europe acquisition. On June 21, 2016, we acquired 100% of the share capital of Visa
Europe, a payments technology business. The acquisition positions us to create additional value
through increased scale, efficiencies realized by the integration of both businesses, and benefits
related to Visa Europe's transition from an association to a for-profit enterprise. We paid up-front cash
consideration of €12.2 billion ($13.9 billion) and issued preferred stock convertible upon certain
conditions into approximately 79 million shares of class A common stock, equivalent to a value of €5.3
billion ($6.1 billion) at the closing stock price of $77.33 on June 21, 2016. Also, in connection with the
purchase, we will pay an additional €1.0 billion, plus 4% compound annual interest, on the third
anniversary of the Closing. See Note 2-Acquisition of Visa Europe to our consolidated financial
statements.
consistent with industry practice for such transactions. In general, during fiscal 2016, we were not
required to fund settlement-related working capital. Our average daily net settlement position was a net
payable of $242 million.
51
Critical estimates. We are currently involved in various legal proceedings, the outcomes of which
are not within our complete control or may not be known for prolonged periods of time. Management is
required to assess the probability of loss and amount of such loss, if any, in preparing our financial
statements.
Uses of Liquidity
Legal and Regulatory Matters
Impact if actual results differ from assumptions. If actual performance or recoverable cash flows
are not consistent with our estimates, client incentives may be materially different than initially
recorded. Increases in incentive payments are generally driven by increased payments and transaction
volume, which drive our net revenues. As a result, in the event incentive payments exceed estimates,
such payments are not expected to have a material effect on our financial condition, results of
operations or cash flows. The cumulative impact of a revision in estimates is recorded in the period
such revisions become probable and estimable. For the year ended September 30, 2016, client
incentives represented 18% of gross operating revenues.
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
$7,647 $ 11,304 $ 8,939 $ 21,515 $ 49,405
In December 2015, we issued $16.0 billion of fixed-rate senior notes in conjunction with the acquisition of Visa Europe with
maturities ranging between 2 and 30 years. Interest on the Notes, at a rate ranging between 1.20% and 4.30%, is payable
semi-annually on June 14 and December 14 of each year. Amounts presented include payments for both interest and
principal. Also see Note 9-Debt to our consolidated financial statements.
Represents agreements to purchase goods and services that specify significant terms, including: fixed or minimum
quantities to be purchased, minimum or variable price provisions, and the approximate timing of the transaction.
Includes operating leases for premises, equipment and software licenses, which range in terms from less than one year to
nineteen years.
Represents future cash payments for long-term contracts with financial institution clients and other business partners for
various programs designed to build payments volume, increase Visa product acceptance and win merchant routing
transactions over our network. These agreements, which range in terms from one to sixteen years, can provide card
issuance and/or conversion support, volume/growth targets and marketing and program support based on specific
performance requirements. Payments under these agreements will generally be offset by revenues earned from higher
corresponding payments and transaction volumes. These payment amounts are estimates and will change based on client
performance, amendments to existing contracts or execution of new contracts. Related amounts disclosed in Note 17-
Commitments and Contingencies to our consolidated financial statements represent the associated expected reduction of
revenue related to these agreements that we estimate we will record.
Visa is a party to contractual sponsorship agreements ranging from approximately three to sixteen years. These contracts
are designed to increase Visa brand recognition, drive Visa product usage, and differentiate Visa against competition. Over
the life of these contracts, Visa is required to make payments in exchange for certain advertising and promotional rights. In
connection with these contractual commitments, Visa has an obligation to spend certain minimum amounts for advertising
and marketing promotion over the life of the contract. For obligations where the individual years of spend are not specified in
the contract, we have estimated the timing of when these amounts will be spent.
Includes expected dividend amount of $400 million as dividends were declared in October 2016 and will be paid on
December 6, 2016 to all holders of record of Visa's common stock as of November 18, 2016.
On June 21, 2016, we acquired 100% of the share capital of Visa Europe. In connection with the purchase, we will pay an
additional €1.0 billion, plus 4% compound annual interest, on the third anniversary of the Closing. See Note 2-Acquisition
of Visa Europe to our consolidated financial statements.
We have liabilities for uncertain tax positions of $911 million. At September 30, 2016, we had also accrued $61 million of
interest and $17 million of penalties associated with our uncertain tax positions. We cannot determine the range of cash
payments that will be made and the timing of the cash settlements, if any, associated with our uncertain tax positions.
Therefore, no amounts related to these obligations have been included in the table.
54
(9)
We evaluate the need to make contributions to our pension plan after considering the funded status of the pension plan,
movements in the discount rate, performance of the plan assets and related tax consequences. Expected contributions to
our pension plan have not been included in the table as such amounts are dependent upon the considerations discussed
above, and may result in a wide range of amounts. See Note 10-Pension, Postretirement and Other Benefits to our
consolidated financial statements and the Liquidity and Capital Resources section of this Management's Discussion and
Analysis of Financial Condition and Results of Operations.
Critical Accounting Estimates
Our consolidated financial statements are prepared in accordance with accounting principles
generally accepted in the United States of America which require us to make judgments, assumptions
and estimates that affect the amounts reported. See Note 1—Summary of Significant Accounting
Policies to our consolidated financial statements. We have established policies and control procedures
which seek to ensure that estimates and assumptions are appropriately governed and applied
consistently from period to period. However, actual results could differ from our assumptions and
estimates, and such differences could be material.
We believe that the following accounting estimates are the most critical to fully understand and
evaluate our reported financial results, as they require our most subjective or complex management
judgments, resulting from the need to make estimates about the effect of matters that are inherently
uncertain and unpredictable.
Revenue Recognition-Client Incentives
Critical estimates. We enter into incentive agreements with financial institution clients, merchants
and other business partners for various programs designed to build payments volume, increase Visa
product acceptance and win merchant routing transactions over our network. These incentives are
primarily accounted for as reductions to operating revenues; however, if a separate identifiable benefit
at fair value can be established, they are accounted for as operating expenses. We generally capitalize
advance incentive payments under these agreements if select criteria are met. The capitalization
criteria include the existence of future economic benefits to Visa, the existence of legally enforceable
recoverability language (e.g., early termination clauses), management's ability and intent to enforce the
recoverability language and the ability to generate future earnings from the agreement in excess of
amounts deferred. Capitalized amounts are amortized over the shorter of the period of contractual
recoverability or the corresponding period of economic benefit. Incentives not yet paid are accrued
systematically and rationally based on management's estimate of each client's performance. These
accruals are regularly reviewed and estimates of performance are adjusted as appropriate, based on
changes in performance expectations, actual client performance, amendments to existing contracts or
the execution of new contracts.
Assumptions and judgment. Estimation of client incentives relies on forecasts of payments
volume, card issuance and card conversion. Performance is estimated using customer-reported
information, transactional information accumulated from our systems, historical information and
discussions with our clients, merchants and business partners.
55
Fiscal 2016
Income tax effect . . .
(1) Decrease in Class A common stock related to forfeitures of restricted stock awards.
(in millions, except par value data)
$ - $ -
2,516
3,201
--
(170)
Right to recover for covered losses (Note 3)
(34)
Additional paid-in capital
17,395
18,073
Accumulated income..
Treasury stock (Note 2 and Note 14).
10,462
Accumulated other comprehensive loss, net:
Investment securities, available-for-sale
36
5
Defined benefit pension and other postretirement plans
(225)
(161)
Derivative instruments classified as cash flow hedges
Foreign currency translation adjustments
(50)
83
(219)
(1)
11,843
Class C common stock, $0.0001 par value, 1,097 shares authorized,
17 and 20 shares issued and outstanding at September 30, 2016
and 2015, respectively (Note 14)
Series B convertible participating preferred stock, 2 shares issued
and outstanding at September 30, 2016 (Note 2 and Note 14)
Series C convertible participating preferred stock, 3 shares issued
and outstanding at September 30, 2016 (Note 2 and Note 14) ..
Class A common stock, $0.0001 par value, 2,001,622 shares
authorized, 1,871 and 1,950 shares issued and outstanding at
September 30, 2016 and 2015, respectively (Note 14) ....
Class B common stock, $0.0001 par value, 622 shares authorized, 245
shares issued and outstanding at September 30, 2016 and 2015
(Note 14)
Series A convertible participating preferred stock, none issued
(Note 2 and Note 14)
981
1,024
Total current liabilities
8,046
5,355
Long-term debt (Note 9)
15,882
Deferred tax liabilities (Note 19).
4,808
3,273
Deferred purchase consideration (Note 2)
1,225
Other liabilities (Note 8)
1,162
897
Total liabilities.
31,123
9,525
See accompanying notes, which are an integral part of these consolidated financial statements.
62
62
VISA INC.
CONSOLIDATED BALANCE SHEETS-(Continued)
September 30,
2016
September 30,
2015
Equity
Preferred stock, $0.0001 par value, 25 shares authorized and 5 issued
and outstanding as follows:
Total accumulated other comprehensive loss, net
Accrued litigation (Note 20)
(458)
Total equity...
770
(3,409)
(2,861)
(2,592)
15,082
13,880
12,702
Personnel
2,226
2,079
1,875
Marketing
823
Network and processing
872
900
538
474
507
Professional fees
389
336
328
Depreciation and amortization
502
494
869
823
3,560
4,064
32,912
29,842
Total liabilities and equity
$ 64,035
$ 39,367
See accompanying notes, which are an integral part of these consolidated financial statements.
63
33
VISA INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
2016 (1)
For the Years Ended
September 30,
2015
2014
Operating Revenues
Service revenues
Data processing revenues
International transaction revenues
Other revenues.
Client incentives
Net operating revenues
Operating Expenses
(in millions, except per share data)
$ 6,747 $ 6,302 $ 5,797
6,272
5,552
5,167
4,649
(74)
849
1,128
Accrued liabilities (Note 8)
The Board of Directors and Stockholders
Visa Inc.:
We have audited the accompanying consolidated balance sheets of Visa Inc. and subsidiaries as
of September 30, 2016 and 2015, and the related consolidated statements of operations,
comprehensive income, changes in equity, and cash flows for each of the years in the three-year
period ended September 30, 2016. We also have audited Visa Inc.'s internal control over financial
reporting as of September 30, 2016, based on criteria established in Internal Control - Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO). Visa Inc.'s management is responsible for these consolidated financial statements, for
maintaining effective internal control over financial reporting, and for its assessment of the
effectiveness of internal control over financial reporting, included in the accompanying Management's
Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on
these consolidated financial statements and an opinion on the Company's internal control over
financial reporting based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material misstatement and
whether effective internal control over financial reporting was maintained in all material respects. Our
audits of the consolidated financial statements included examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial statement presentation.
Our audit of internal control over financial reporting included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, and testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk. Our
audits also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audits provide a reasonable basis for our opinions.
A company's internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles. A company's internal
control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject
to the risk that controls may become inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
In our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the financial position of Visa Inc. and subsidiaries as of September 30, 2016 and 2015, and the
results of their operations and their cash flows for each of the years in the three-year period ended
September 30, 2016, in conformity with U.S. generally accepted accounting principles. Also in our
opinion, Visa Inc. maintained, in all material respects, effective internal control over financial reporting as
of September 30, 2016, based on criteria established in Internal Control - Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission.
60
60
Visa Inc. acquired Visa Europe during 2016, and management excluded from its assessment of
the effectiveness of Visa Inc.'s internal control over financial reporting as of September 30, 2016, Visa
Europe's internal control over financial reporting associated with 7% of total assets and 4% of net
operating revenue included in the consolidated financial statements of Visa Inc. and subsidiaries as of
and for the year ended September 30, 2016. Our audit of internal control over financial reporting of
Visa Inc. also excluded an evaluation of the internal control over financial reporting of Visa Europe.
/s/ KPMG LLP
Santa Clara, California
November 15, 2016
Report of Independent Registered Public Accounting Firm
61
CONSOLIDATED BALANCE SHEETS
September 30,
2016
September 30,
2015
(in millions, except par value data)
Assets
Cash and cash equivalents
Investment securities (Note 4):
Trading
Available-for-sale
Settlement receivable
$
Restricted cash-U.S. litigation escrow (Note 3)
VISA INC.
59
59
73
We are also subject to foreign currency exchange risk in daily settlement activities. This risk
arises from the timing of rate setting for settlement with clients relative to the timing of market trades
for balancing currency positions. Risk in settlement activities is limited through daily operating
procedures, including the utilization of Visa settlement systems and our interaction with foreign
exchange trading counterparties.
Interest Rate Risk
Our investment portfolio assets are held in both fixed-rate and adjustable-rate securities. These
assets are included in cash equivalents and short-term or long-term available-for-sale investments.
Investments in fixed-rate instruments carry a degree of interest rate risk. The fair value of fixed-rate
securities may be adversely impacted due to a rise in interest rates. Additionally, a falling-rate
environment creates reinvestment risk because as securities mature, the proceeds are reinvested at a
lower rate, generating less interest income. Historically, we have been able to hold investments until
maturity. Neither our operating results or cash flows have been, nor are they expected to be, materially
impacted by a sudden change in market interest rates.
The fair value balances of our fixed-rate investment securities at September 30, 2016 and 2015
were $5.1 billion and $4.4 billion, respectively. A hypothetical 100 basis point increase or decrease in
interest rates would create an estimated change in fair value of approximately $49 million on our fixed-
rate investment securities at September 30, 2016. The fair value balances of our adjustable-rate debt
securities were $2.2 billion and $1.7 billion at September 30, 2016 and 2015, respectively.
Pension Plan Risk
At September 30, 2016 and 2015, our U.S. defined benefit pension plan assets were $1.1 billion and
$1.0 billion, respectively, and projected benefit obligations were $1.1 billion and $1.0 billion, respectively. A
material adverse decline in the value of pension plan assets and/or the discount rate for benefit obligations
would result in a decrease in the funded status of the pension plan, an increase in pension cost and an
increase in required funding. A hypothetical 10% decrease in the value of pension plan assets and a 1%
decrease in the discount rate would result in an aggregate decrease of approximately $254 million in the
funded status and an increase of approximately $40 million in pension cost.
At September 30, 2016, our non-U.S. defined benefit pension plan assets were $415 million and
projected benefit obligations were $474 million. A material adverse decline in the value of pension plan
assets and/or the discount rate for benefit obligations would result in a decrease in the funded status of
the pension plan, an increase in pension cost and an increase in required funding. A hypothetical 10%
decrease in the value of pension plan assets and a 1% decrease in the discount rate would result in an
aggregate decrease of approximately $127 million in the funded status and an increase of
approximately $9 million in pension cost.
We will continue to monitor the performance of pension plan assets and market conditions as we
evaluate the amount of our contribution to the pension plan for fiscal 2017, if any, which would be
made in September 2017.
58
59
VISA INC.
ITEM 8. Financial Statements and Supplementary Data
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
As of September 30, 2016 and 2015 and for the years ended September 30, 2016, 2015 and
2014
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Income
Consolidated Statements of Changes in Equity
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements
61
63
65
67
68
71
5,619 $
1,027
3,518
1,072
71
778
Intangible assets, net (Note 7)
27,234
11,361
Goodwill.
15,066
11,825
Total assets
$ 64,035
$ 39,367
Liabilities
Accounts payable
203
$
127
Settlement payable
2,084
780
Customer collateral (Note 11)
1,001
1,023
Accrued compensation and benefits
673
503
Client incentives
1,976
1,049
893
435
Other assets (Note 5)
2,150
66
3,248
2,431
1,467
408
Accounts receivable
1,041
847
Customer collateral (Note 11)
1,001
1,023
Current portion of client incentives.
284
303
Prepaid expenses and other current assets (Note 5)
555
353
Total current assets
14,313
10,021
Investment securities, available-for-sale (Note 4)
3,931
3,384
Client incentives
448
110
Property, equipment and technology, net (Note 6)
1,888
General and administrative
Commitments and contingencies (Note 17)
547
Foreign currency translation adjustments
Other comprehensive loss, net of tax
Comprehensive income.
(218)
1
(1)
(384)
(57)
(38)
•¢ €°
10
(1)
9
(8)
3
$ 5,607 $ 6,271 $ 5,400
See accompanying notes, which are an integral part of these consolidated financial statements.
66
67
VISA INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Common Stock
Class A
Class B
Class C
Additional
Paid-In Capital
- N
26
35
Income tax effect.
|
3-
Income tax effect.
Defined benefit pension and other postretirement plans:
Net unrealized actuarial gain (loss) and prior service
credit
(106)
(122)
(27)
Income tax effect. .
36
45
8
Amortization of actuarial loss (gain) and prior service
credit realized in net income ..
Income tax effect. .
Net unrealized (loss) gain..
See accompanying notes, which are an integral part of these consolidated financial statements.
Derivative instruments classified as cash flow hedges:
(4)
(74)
172
65
(51)
(13)
Reclassification adjustment for net gain realized in net
income
(103)
(102)
(46)
Accumulated
Income
Accumulated
Other
Comprehensive
Income (Loss)
Balance as of September 30, 2014
172
(86)
90
91
(38)
(38)
5,400
796
172
(86)
90
91
(79)
(843)
(1,006)
(3,275)
(1,006)
(4,118)
1,978
245
22
$
18,299
$
9,131
$
(17) $ 27,413
Repurchase of class A common stock.
8
$0.10 per as-converted share
5
Total
Equity
(in
millions, except per share data)
2,031
245
27
$
18,875 $
7,974
$
21 $ 26,870
5,438
5,438
Balance as of September 30, 2013
Net income
Other comprehensive loss, net of tax
Comprehensive income
Conversion of class C common stock upon sale into public
market
19
(5)
Issuance and vesting of restricted stock and performance-based
shares
4
Share-based compensation, net of forfeitures (Note 16)
Restricted stock and performance-based shares settled in cash
for taxes
(1)(1)
(1)
Excess tax benefit for share-based compensation
Cash proceeds from issuance of common stock under employee
equity plans
Cash dividends declared and paid, at a quarterly amount of
(1)
IN
(3)
8,995
7,724
2,021
$ 5,991
2,667
2,286
$ 6,328 $ 5,438
(1) The Company did not include Visa Europe's financial results in the Company's consolidated statements of operations from
the acquisition date, June 21, 2016, through June 30, 2016 as the impact was immaterial. The Company's consolidated
statement of operations for the year ended September 30, 2016 includes Visa Europe's financial results for the three months
ended September 30, 2016. See Note 2-Acquisition of Visa Europe.
See accompanying notes, which are an integral part of these consolidated financial statements.
64
VISA INC.
CONSOLIDATED STATEMENTS OF OPERATIONS―(Continued)
2016 (1)
For the Years Ended
September 30,
2015
2014
(in millions, except per share data)
Basic earnings per share (Note 15)
Class A common stock
Class B common stock
Class C common stock
Basic weighted-average shares outstanding (Note 15)
Class A common stock
Class B common stock
Class C common stock
Diluted earnings per share (Note 15)
$ 2.49 $ 2.58
$ 2.16
$ 4.10
8,012
$ 4.26
Net income
Income before income taxes
(21)
507
Litigation provision (Note 20)
14
453
Visa Europe Framework Agreement loss (Note 2)
1,877
Total operating expenses
7,199
4,816
Operating income
7,883
9,064
7,697
Non-operating Income (Expense)
Interest expense
Other (Note 4 and Note 12).
Non-operating income (expense)
(427)
(3)
(8)
556
(66)
35
129
(69)
27
Income tax provision (Note 19)
$ 3.63
5,005
$ 10.33
245
22
26
(1)
The Company did not include Visa Europe's financial results in the Company's consolidated statements of operations from
the acquisition date, June 21, 2016, through June 30, 2016 as the impact was immaterial. The Company's consolidated
statement of operations for the year ended September 30, 2016 includes Visa Europe's financial results for the three months
ended September 30, 2016. See Note 2-Acquisition of Visa Europe.
See accompanying notes, which are an integral part of these consolidated financial statements.
65
59
Net income
VISA INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Other comprehensive (loss) income, net of tax:
245
Investment securities, available-for-sale:
Income tax effect . . .
Reclassification adjustment for net gain realized in net
income
2016
For the Years Ended
September 30,
2015
(in millions)
2014
$ 5,991 $ 6,328 $ 5,438
(21)
(44)
(18)
8
$ 9.94
17
Net unrealized gain (loss) ...
245
19
51
2,457
2,523
$ 8.65
1,954
1,993
245
1,906
245
19
22
26
Class A common stock
$ 2.48
$ 2.58
$ 2.16
245
$ 4.09
Class B common stock
Class C common stock
Class B common stock
Diluted weighted-average shares outstanding (Note 15)
$ 8.62
$ 10.30
Class A common stock
Class C common stock
$ 3.62
$ 4.25
$ 9.93
2,414
95
63
Balance as of September 30,
(92)
(34)
(170)
| | &
(92)
63
95
(91)
(1)
(2)
(1,350)
(1,350)
(965)
(6,022)
(6,987)
2
245
3 1,871
2016
221
Cash proceeds from issuance of
common stock under employee
equity plans
(2)
2
3
17 $ 5,717 $ (170) $
5,717
VE territory covered losses incurred
(Note 3)
Class C common stock held by Visa
Europe, a wholly-owned subsidiary
of Visa Inc. (Note 2 and
Note 14)
Conversion of class C common stock
upon sale into public market
Issuance and vesting of restricted
stock and performance-based
shares
Share-based compensation, net of
forfeitures (Note 16)
Restricted stock and performance-
based shares settled in cash for
taxes
Excess tax benefit for share-based
compensation
Cash dividends declared and paid, at
a quarterly amount of $0.14 per
as-converted share (Note 14)
Repurchase of class A common
stock (Note 14)
8
00
2
_ (2)
(1)
3
(1)
(170)
(34)
(34) $ 17,395 $
221
(458) $ 32,912
172
(63)
(84)
(90)
502
494
435
(764)
195
(580)
187
(9)
4
14
453
64
24
37
Settlement receivable.
Accounts receivable
Issuance of preferred stock (Note 2
and Note 14)
Client incentives
-
10,462 $
110
2,592
Series B and C preferred stock are alternatively referred to as U.K.&I and Europe preferred stock, respectively.
Decrease in Class A common stock related to forfeitures of restricted stock awards is less than 1 million shares.
See accompanying notes, which are an integral part of these consolidated financial statements.
VISA INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended
September 30,
2014
Operating Activities
Net income
Adjustments to reconcile net income to net cash provided by
operating activities:
Client incentives
(255)
Fair value adjustment for the Visa Europe put option
Share-based compensation ...
Deferred income taxes.
Right to recover for covered losses recorded in equity
Litigation provision (Note 20)
Other
Change in operating assets and liabilities:
2016
2015
(in millions)
$ 5,991 $ 6,328 $ 5,438
-
3,409
2,861
Excess tax benefit for share-based compensation
Depreciation and amortization of property, equipment,
technology and intangible assets
Comprehensive income
Cash proceeds from issuance of common stock under employee
equity plans
5,607
(57)
6,271
Conversion of class C common stock upon sale into public
market
11
(2)
Issuance and vesting of restricted stock and performance-based
shares
4
Share-based compensation, net of forfeitures (Note 16)
Restricted stock and performance-based shares settled in cash
for taxes
(1) (1)
(1)
(57)
187
187
(108)
Excess tax benefit for share-based compensation
84
84
3
82
82
Cash dividends declared and paid, at a quarterly amount of
$0.12 per as-converted share..
Repurchase of class A common stock (Note 14)
(108)
(44)
6,328
(17) $ 27,413
Other assets
VISA INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY-(Continued)
Balance as of September 30, 2014
Net income
Other comprehensive loss, net of tax
Comprehensive income
Common Stock
Class A
Class B
6,328
Class C
Accumulated
Income
Accumulated
Other
Comprehensive
Loss
Total
Equity
1,978
245
22
(in millions, except per share data)
$
18,299 $
9,131
$
Additional
Paid-In Capital
(471)
(1,177)
(2,439)
(1,177)
Right to
Series Series Class
B
C
A
B
Class Class Preferred Treasury
C Stock
Stock
Recover for Additional
Covered Paid-In Accumulated Comprehensive
Losses Capital Income
Loss
(in millions, except per share data)
Accumulated
Other
Total
Equity
Common Stock
1,950
20 $
$
$
$ 18,073 $
11,843 $
(74) $ 29,842
5,991
5,991
(384)
(384)
245
Preferred Stock(1)
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY-(Continued)
VISA INC.
(2,910)
Balance as of September 30, 2015
1,950
245
20
$
18,073
$
11,843
$
(74)
$
29,842
(1)
Decrease in Class A common stock related to forfeitures of restricted stock awards.
68
See accompanying notes, which are an integral part of these consolidated financial statements.
Balance as of September 30,
2015
Net income
Other comprehensive loss, net of
tax
69
5,717
Accounts payable
244 $
Accrued and other liabilities
62
Right to recover for covered losses related to Visa Europe acquisition
(Note 2)
34 $ - $ -
See accompanying notes, which are an integral part of these consolidated financial statements.
71
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2016
Note 1―Summary of Significant Accounting Policies
Organization. In a series of transactions from October 1 to October 3, 2007, Visa Inc. (Visa or the
Company) undertook a reorganization in which Visa U.S.A. Inc. (Visa U.S.A.), Visa International
Service Association (Visa International), Visa Canada Corporation (Visa Canada) and Inovant LLC
(Inovant) became direct or indirect subsidiaries of Visa and established the U.S. retrospective
responsibility plan (the October 2007 reorganization or reorganization). See Note 3-U.S. and Europe
Retrospective Responsibility Plans. The reorganization was reflected as a single transaction on
October 1, 2007 using the purchase method of accounting with Visa U.S.A. as the accounting acquirer.
Visa Europe Limited (Visa Europe) did not become a subsidiary of Visa Inc., but rather remained
owned and governed by its European member financial institutions. On June 21, 2016, the Company
acquired 100% of the share capital of Visa Europe. The Company's consolidated statements of
operations do not reflect the financial results of Visa Europe for the 10 days from the acquisition date
through June 30, 2016 as the impact was immaterial. See Note 2-Acquisition of Visa Europe.
_
62
Visa is a global payments technology company that connects consumers, merchants, financial
institutions, businesses, strategic partners and governments in more than 200 countries and territories
to fast, secure and reliable electronic payments. Visa and its wholly-owned consolidated subsidiaries,
including Visa U.S.A., Visa International, Visa Worldwide Pte. Limited (VWPL), Visa Europe Limited
(Visa Europe), Visa Canada, Inovant and CyberSource Corporation (CyberSource), operate one of the
world's largest retail electronic payments network — VisaNet - which facilitates authorization, clearing
and settlement of payment transactions and enables us to provide our financial institution and
merchant clients a wide range of products, platforms and value-added services. VisaNet also offers
fraud protection for account holders and assured payment for merchants. Visa is not a bank and does
not issue cards, extend credit or set rates and fees for account holders on Visa products. In most
cases, account holder and merchant relationships belong to, and are managed by, Visa's financial
institution clients.
On March 18, 2015, the Company completed a four-for-one split of its class A common stock
effected in the form of a stock dividend. All per share amounts and number of shares outstanding in the
consolidated financial statements and accompanying notes are presented on a post-split basis. See
Note 14-Stockholders' Equity.
The Company's activities are interrelated, and each activity is dependent upon and supportive of
the other. All significant operating decisions are based on analysis of Visa as a single global business.
Accordingly, the Company has one reportable segment, Payment Services.
Use of estimates. The preparation of consolidated financial statements in conformity with U.S.
GAAP requires management to make estimates and assumptions about future events. These
72
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
September 30, 2016
estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the consolidated financial statements and reported
amounts of revenues and expenses during the reporting period. Future actual results could differ
materially from these estimates. The use of estimates in specific accounting policies is described
further below as appropriate.
Cash and cash equivalents. Cash and cash equivalents include cash and certain highly liquid
investments with original maturities of 90 days or less from the date of purchase. Cash equivalents are
primarily recorded at cost, which approximates fair value due to their generally short maturities.
Restricted cash-U.S. litigation escrow. The Company maintains an escrow account from which
monetary liabilities from settlements of, or judgments in, the U.S. covered litigation are paid. See
Note 3-U.S. and Europe Retrospective Responsibility Plans and Note 20—Legal Matters for a
discussion of the U.S. covered litigation. The escrow funds are held in money market investments,
together with the interest earned, less applicable taxes payable, and classified as restricted cash on
the consolidated balance sheets. Interest earned on escrow funds is included in non-operating income
on the consolidated statements of operations.
Consolidation and basis of presentation. The consolidated financial statements include the
accounts of Visa and its consolidated entities and are presented in accordance with accounting
principles generally accepted in the United States of America ("U.S. GAAP"). The Company
consolidates its majority-owned and controlled entities, including variable interest entities ("VIES") for
which the Company is the primary beneficiary. The Company's investments in VIEs have not been
material to its consolidated financial statements as of and for the periods presented. All significant
intercompany accounts and transactions are eliminated in consolidation.
Investments and fair value. The Company measures certain assets and liabilities at fair value.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. Fair value measurements are
reported under a three-level valuation hierarchy. See Note 4-Fair Value Measurements and
Investments. The classification of the Company's financial assets and liabilities within the hierarchy is
as follows:
81 $
$
7,477
(3,603) (6,478)
(34)
1
(1)
(215)
2,101 1,547
3,518 1,971 2,186
$ 5,619 $ 3,518 $ 1,971
Cash and cash equivalents at end of year
Supplemental Disclosure
42 $
Series B and C convertible participating preferred stock issued in Visa
Europe acquisition (Note 2)
Deferred purchase consideration recorded for Visa Europe acquisition
(Note 2)
$ 1,236 $
-
$
Income taxes paid, net of refunds
$ 2,842 $2,486 $ 2,656
Interest payments on debt
$
$
Accruals related to purchases of property, equipment, technology and
intangible assets
$ 5,717 $
90
Level 1-Inputs to the valuation methodology are unadjusted quoted prices in active markets for
identical assets or liabilities. The Company's Level 1 assets include money market funds, publicly-
traded equity securities and U.S. Treasury securities.
Level 3-Inputs to the valuation methodology are unobservable and cannot be corroborated by
observable market data. The Company's Level 3 assets and liabilities included auction rate securities
and the Visa Europe put option at September 30, 2015.
September 30, 2016
circumstances indicate that their carrying amounts may not be recoverable. These intangibles have
useful lives ranging from 3 to 15 years. No events or changes in circumstances indicate that
impairment existed as of September 30, 2016. See Note 7-Intangible Assets and Goodwill.
Indefinite-lived intangible assets consist of trade name, customer relationships and reacquired
rights. Intangible assets with indefinite useful lives are not amortized but are evaluated for impairment
annually or more frequently if events or changes in circumstances indicate that impairment may exist.
The Company first assesses qualitative factors to determine whether it is necessary to perform a
quantitative impairment test for indefinite-lived intangible assets. The Company assesses each
category of indefinite-lived intangible assets for impairment on an aggregate basis, which may require
the allocation of cash flows and/or an estimate of fair value to the assets or asset group. Impairment
exists if the fair value of the indefinite-lived intangible asset is less than the carrying value. The
Company relies on a number of factors when completing impairment assessments, including a review
of discounted net future cash flows, business plans and the use of present value techniques.
The Company completed its annual impairment review of indefinite-lived intangible assets as of
February 1, 2016, and concluded there was no impairment as of that date. No recent events or
changes in circumstances indicate that impairment of the Company's indefinite-lived intangible assets
existed as of September 30, 2016.
Goodwill. Goodwill represents the excess of the purchase price over the fair value of the net
assets acquired in a business combination. Goodwill is not amortized but is evaluated for impairment at
the reporting unit level annually as of February 1, or more frequently if events or changes in
circumstances indicate that impairment may exist.
The Company evaluated its goodwill for impairment on February 1, 2016, and concluded there
was no impairment as of that date. No recent events or changes in circumstances indicate that
impairment existed as of September 30, 2016.
Accrued litigation. The Company evaluates the likelihood of an unfavorable outcome in legal or
regulatory proceedings to which it is a party and records a loss contingency when it is probable that a
liability has been incurred and the amount of the loss can be reasonably estimated. These judgments
are subjective, based on the status of such legal or regulatory proceedings, the merits of the
Company's defenses and consultation with corporate and external legal counsel. Actual outcomes of
these legal and regulatory proceedings may differ materially from the Company's estimates. The
Company expenses legal costs as incurred in professional fees in the consolidated statements of
operations. See Note 20—Legal Matters.
Revenue recognition. The Company's operating revenues are comprised principally of service
revenues, data processing revenues, international transaction revenues and other revenues, reduced
by costs incurred under client incentives arrangements. The Company recognizes revenue, net of
sales and other similar taxes, when the price is fixed or determinable, persuasive evidence of an
arrangement exists, the service is performed and collectability of the resulting receivable is reasonably
assured.
Service revenues consist of revenues earned for services provided in support of client usage of
Visa products. Current quarter service revenues are primarily assessed using a calculation of current
76
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
VISA INC.
September 30, 2016
pricing applied to the prior quarter's payments volume. The Company also earns revenues from
assessments designed to support ongoing acceptance and volume growth initiatives, which are
recognized in the same period the related volume is transacted.
Data processing revenues consist of revenues earned for authorization, clearing, settlement,
network access and other maintenance and support services that facilitate transaction and information
processing among the Company's clients globally. Data processing revenues are recognized in the
same period the related transactions occur or services are rendered.
International transaction revenues are earned for cross-border transaction processing and
currency conversion activities. Cross-border transactions arise when the country of origin of the issuer
is different from that of the merchant. International transaction revenues are primarily generated by
cross-border payments and cash volume.
Other revenues consist mainly of license fees for use of the Visa brand, revenues earned from
Visa Europe in connection with the Visa Europe Framework Agreement (see Note 2-Acquisition of
Visa Europe) prior to the acquisition of Visa Europe, fees for account holder services, licensing and
certification and other activities related to the Company's acquired entities. Other revenues also
include optional service or product enhancements, such as extended account holder protection and
concierge services. Other revenues are recognized in the same period the related transactions occur
or services are rendered.
Client incentives. The Company enters into long-term contracts with financial institution clients,
merchants and strategic partners for various programs designed to build payments volume, increase
Visa product acceptance, win merchant routing transactions over Visa's network and drive innovation.
These incentives are primarily accounted for as reductions to operating revenues or as operating
expenses if a separate identifiable benefit at fair value can be established. The Company generally
capitalizes advance incentive payments under these agreements if select criteria are met. The
capitalization criteria include the existence of future economic benefits to Visa, the existence of legally
enforceable recoverability language (e.g., early termination clauses), management's ability and intent
to enforce the recoverability language and the ability to generate future earnings from the agreement in
excess of amounts deferred. Capitalized amounts are amortized over the shorter of the period of
contractual recoverability or the corresponding period of economic benefit. Incentives not yet paid are
accrued systematically and rationally based on management's estimate of each client's performance.
These accruals are regularly reviewed and estimates of performance are adjusted, as appropriate,
based on changes in performance expectations, actual client performance, amendments to existing
contracts or the execution of new contracts. See Note 17—Commitments and Contingencies.
Marketing. The Company expenses costs for the production of advertising as incurred. The cost
of media advertising is expensed when the advertising takes place. Sponsorship costs are recognized
over the period in which the Company benefits from the sponsorship rights. Promotional items are
expensed as incurred, when the related services are received, or when the related event occurs.
Income taxes. The Company's income tax expense consists of two components: current and
deferred. Current income tax expense represents taxes paid or payable for the current period. Deferred
tax assets and liabilities are recognized to reflect the future tax consequences attributable to temporary
differences between the financial statement carrying amounts and the respective tax basis of existing
77
Settlement payable.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
Level 2-Inputs to the valuation methodology can include: (1) quoted prices in active markets for
similar (not identical) assets or liabilities; (2) quoted prices for identical or similar assets in non-active
markets; (3) inputs other than quoted prices that are observable for the asset or liability; or (4) inputs
that are derived principally from or corroborated by observable market data. The Company's Level 2
assets and liabilities include commercial paper, U.S. government-sponsored debt securities, corporate
debt securities and foreign exchange derivative instruments.
VISA INC.
Finite-lived intangible assets primarily consist of customer relationships, reacquired rights,
reseller relationships and trade names obtained through acquisitions. Finite-lived intangible assets are
amortized on a straight-line basis and are tested for recoverability if events or changes in
Trading investment securities include mutual fund equity security investments related to various
employee compensation and benefit plans. Trading activity in these investments is at the direction of
the Company's employees. These investments are held in a trust and are not available for the
Company's operational or liquidity needs. Interest and dividend income and changes in fair value are
recorded in non-operating income, and offset in personnel expense on the consolidated statements of
operations.
Available-for-sale investment securities include investments in debt and equity securities. These
securities are recorded at cost at the time of purchase and are carried at fair value. The Company
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
September 30, 2016
considers these securities to be available-for-sale to meet working capital and liquidity needs.
Investments with original maturities of greater than 90 days and stated maturities of less than one year
from the balance sheet date, or investments that the Company intends to sell within one year, are
classified as current assets, while all other securities are classified as non-current assets. These
investments are generally available to meet short-term liquidity needs. Unrealized gains and losses are
reported in accumulated other comprehensive income or loss on the consolidated balance sheets until
realized. The specific identification method is used to calculate realized gain or loss on the sale of
marketable securities, which is recorded in non-operating income on the consolidated statements of
operations. Dividend and interest income are recognized when earned and are included in non-
operating income on the consolidated statements of operations.
The Company evaluates its debt and equity securities for other-than-temporary impairment, or
OTTI, on an ongoing basis. When there has been a decline in fair value of a debt or equity security
below the amortized cost basis, the Company recognizes OTTI if: (1) it has the intent to sell the
security; (2) it is more likely than not that it will be required to sell the security before recovery of the
amortized cost basis; or (3) it does not expect to recover the entire amortized cost basis of the security.
The Company applies the equity method of accounting for investments in other entities when it
holds between 20% and 50% ownership in the entity or when it exercises significant influence. Under
the equity method, the Company's share of each entity's profit or loss is reflected in non-operating
income on the consolidated statements of operations. The equity method of accounting is also used for
flow-through entities such as limited partnerships and limited liability companies when the investment
ownership percentage is equal to or greater than 5% of outstanding ownership interests, regardless of
whether the Company has significant influence over the investees.
The Company applies the cost method of accounting for investments in other entities when it
holds less than 20% ownership in the entity and does not exercise significant influence, or for flow-
through entities when the investment ownership is less than 5% and the Company does not exercise
significant influence. These investments consist of equity holdings in non-public companies and are
recorded in other assets on the consolidated balance sheets.
The Company regularly reviews investments accounted for under the cost and equity methods for
possible impairment, which generally involves an analysis of the facts and changes in circumstances
influencing the investment, expectations of the entity's cash flows and capital needs, and the viability of
its business model.
75
Financial instruments. The Company considers the following to be financial instruments: cash and
cash equivalents, restricted cash-U.S. litigation escrow, trading and available-for-sale investment
securities, settlement receivable and payable, customer collateral, non-marketable equity investments,
settlement risk guarantee, and derivative instruments. See Note 4-Fair Value Measurements and
Investments.
74
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
September 30, 2016
Customer collateral. The Company holds cash deposits and other non-cash assets from certain
clients in order to ensure their performance of settlement obligations arising from Visa payment
products are processed in accordance with the Company's rules. The cash collateral assets are
restricted and fully offset by corresponding liabilities and both balances are presented on the
consolidated balance sheets, excluding cash collateral held by Visa Europe as its clients retain
beneficial ownership and the cash is only accessible to the Company in the event of default by the
client on its settled obligations. Non-cash collateral assets are held on behalf of the Company by a third
party and are not recorded on the consolidated balance sheets. See Note 11-Settlement Guarantee
Management.
Property, equipment and technology, net. Property, equipment and technology are recorded at
historical cost less accumulated depreciation and amortization, which are computed on a straight-line
basis over the asset's estimated useful life. Depreciation and amortization of technology, furniture,
fixtures and equipment are computed over estimated useful lives ranging from 2 to 10 years. Capital
leases are amortized over the lease term and leasehold improvements are amortized over the shorter
of the useful life of the asset or lease term. Building improvements are depreciated between 3 and 40
years, and buildings are depreciated over 40 years. Improvements that increase functionality of the
asset are capitalized and depreciated over the asset's remaining useful life. Land and construction-in-
progress are not depreciated. Fully depreciated assets are retained in property, equipment and
technology, net, until removed from service.
Technology includes purchased and internally developed software, including technology assets
obtained through acquisitions. Internally developed software represents software primarily used by the
VisaNet electronic payments network. Internal and external costs incurred during the preliminary
project stage are expensed as incurred. Qualifying costs incurred during the application development
stage are capitalized. Once the project is substantially complete and ready for its intended use these
costs are amortized on a straight-line basis over the technology's estimated useful life. Acquired
technology assets are initially recorded at fair value and amortized on a straight-line basis over the
estimated useful life.
The Company evaluates the recoverability of long-lived assets for impairment annually or more
frequently if events or changes in circumstances indicate that the carrying amount of an asset or asset
group may not be recoverable. If the sum of expected undiscounted net future cash flows is less than
the carrying amount of an asset or asset group, an impairment loss is recognized to the extent that the
carrying amount of the asset or asset group exceeds its fair value. See Note 6—Property, Equipment
and Technology, Net.
Leases. The Company enters into operating and capital leases for the use of premises, software
and equipment. Rent expense related to operating lease agreements, which may or may not contain
lease incentives, is primarily recorded on a straight-line basis over the lease term.
Intangible assets, net. The Company records identifiable intangible assets at fair value on the
date of acquisition and evaluates the useful life of each asset.
Settlement receivable and payable. The Company operates systems for authorizing, clearing and
settling payment transactions worldwide. Most U.S. dollar settlements with the Company's financial
institution clients are settled within the same day and do not result in a receivable or payable balance,
while settlements in currencies other than the U.S. dollar generally remain outstanding for one to two
business days, resulting in amounts due from and to clients. These amounts are presented as
settlement receivable and settlement payable on the consolidated balance sheets.
84
73
(108)
5,574
6,584
7,205
Purchases of property, equipment, technology and intangible
assets
Proceeds from sales of property, equipment and technology
(523)
(414)
(553)
-
10
998
Investment securities, available-for-sale:
(28,004)
(2,850)
(2,572)
Proceeds from maturities and sales
26,697
1,925
2,342
Acquisitions, net of $2.8 billion cash received from Visa Europe
(Note 2)
(9,082)
Purchases
(446)
513
118
Accrued litigation (Note 20)
(86)
Net cash provided by operating activities
Investing Activities
391
378
13
(65)
(19)
(53)
(3,508)
(2,970)
(2,395)
(315)
(41)
(379)
43
(13)
(56)
(302)
(552)
107
277
(93)
(149)
(47)
(10)
Cash and cash equivalents at beginning of year
2016
For the Years Ended
September 30,
2015
(in millions)
2014
$ (6,987) $ (2,910) $(4,118)
(170)
(1,350) (1,177) (1,006)
15,971
Increase (decrease) in cash and cash equivalents
(98)
(999)
445
95
95
426
88
82
Purchases of / contributions to other investments
91
(92)
63
- - (450)
Effect of exchange rate changes on cash and cash equivalents
-
See accompanying notes, which are an integral part of these consolidated financial statements.
(9)
Proceeds/distributions from other investments
Net cash provided by (used in) financing activities
12
Net cash used in investing activities
(10,916)
(1,435)
(941)
70
VISA INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS-(Continued)
Financing Activities
(25)
Repurchase of class A common stock (Note 14)
Treasury stock-class C common stock (Note 2)
Dividends paid (Note 14)
Proceeds from issuance of senior notes (Note 9)
Debt issuance costs (Note 9).
Deposit into U.S. litigation escrow account-U.S. retrospective
responsibility plan (Note 3 and Note 20).
Payments from (return to) U.S. litigation escrow account―U.S.
retrospective responsibility plan (Note 3 and Note 20). .
Excess tax benefit for share-based compensation.
Cash proceeds from issuance of common stock under employee equity
plans
Restricted stock and performance-based shares settled in cash for
taxes
$6,862
$8,335
$10,729
$2.84
12 months ended September 30 (except where noted)
$4.61
2017
2016
$8.1 trillion
$10.3 trillion
$13,749
$3.48
$4.42
FY 2017
$10,022
$6,860
$6,022
$5,060
$20,609
$18,358
$15,082
FY 2018
FY 2016
$2.80
$5.7 trillion
In millions (except for per share data)
$12,336
$7.3 trillion
100
83.2 billion
227
$2.48
326
177
148
113
Visa Inc.
$100
9/30/13 9/30/14 9/30/15 9/30/16 9/30/17 9/30/18
Company/Index
(Fiscal Year Ended)
period
2018
$11.2 trillion
$8.2 trillion
$150
Base
$200
$250
$300
$350
The accompanying graph and chart compares the cumulative total return on
Visa's common stock with the cumulative total return on Standard & Poor's 500
Index and the Standard & Poor's 500 Data Processing Index from September 30,
2013 through September 30, 2018. The comparison assumes $100 was invested
on September 30, 2013, and that dividends were reinvested. Visa Inc.'s class B
and C common stock are not publicly traded or listed on any exchange or dealer
quotation system.
Our sponsorships enable us to grow brand
awareness, showcase innovations and
activate promotions that deepen client and
consumer relationships. For example, at the
Olympic Winter Games in PyeongChang,
we piloted a Visa multi-sensory experience
-new sound, animation and haptic
(vibration) cues to help signify quick and
secure transactions in digital and physical
retail environments. While still early stage,
it shows Visa's commitment to ensuring
our brand remains relevant and trusted in
an age of connected payment devices. In
both PyeongChang and at the FIFA World
Cup in Russia, we debuted a range of
innovative, contactless payment devices so
athletes and fans could spend less time in
line and more time focused on the games.
Stock Performance
124.3 billion
3.3 billion
3.2 billion
2.5 billion
111.2 billion
Indexed Returns
$34,006
Annual
Report
$32,912
In millions (except for per share data)
Financial Highlights (GAAP)
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FY 2017
FY 2018
Net operating revenues
Operating expenses
$10,301
$6,699
$5,991
$12,954
$12,144
$7,883
$7,655
$6,214
$7,199
$20,609
$18,358
$15,082
$32,760
FY 2016
Total volume, including payments and cash volume³
Payments volume³
Operational Highlights'
Diluted class A common stock earnings per share
Net income
Operating income
Operating expenses
Net operating revenues
Financial Highlights (ADJUSTED)1.2
Diluted class A common stock earnings per share
Stockholders' equity
Net income
Operating income
Transactions processed on Visa's networks
Cards
100
ALS 09/21 15:32 18:09/21.1
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119
VISA
Beyond investments, Visa launched the
fintech fast-track program this fiscal year
that helps European start-ups and early
growth-stage companies connect to Visa
in as little as four weeks. The accelerated
onboarding program, which we are
expanding globally, involves simplified
contracts and pricing.
Visa has already made a series of fintech
investments globally, including Klarna,
Solaris Bank and Payworks in prior years.
This year we established or expanded our
relationships with Behalf, Paidy, Paystack
and Conductor.
commerce arenas.
across the world that we believe are
in line with our vision and strategic
objectives, support deeper engagement
with key partners, and expand access
to payment solutions worldwide. A few
months ago,
Visa launched a $100 million
investment program to support start-up
businesses in the digital payments and
Visa is also investing in fintech companies
By providing access to Visa capabilities
through an open network of APIs, the
Visa Developer Center allows partners
around the globe to create new digital
commerce experiences. One way in which
we encouraged the use of VisaNet APIs
is through the Visa Everywhere Initiative.
The program is active in more than 80
countries and rewards start-ups that are
solving complex challenges in order to
advance secure digital commerce.
The substantial growth of fintechs across
the world is an important source of
innovation and growth that we believe
will help accelerate the adoption of
digital payments. In 2018, we further
expanded our partnerships to enable rapid
innovation among fintechs and our clients.
Enabling Innovation through Fintechs
and Other Partnerships
In 2018, we made progress in extending
our reach through new and expanded
client relationships and fintech
partnerships.
Growing our Footprint
corporate payment customers to use a Visa
virtual card to make global B2B payments.
We also formed a strategic partnership
with WEX, a leading provider of corporate
payment solutions, in July 2018. The
partnership allows WEX and their
In March, we acquired Fraedom, a
software-as-a-service company that
provides products and services such as
expense management and accounts
payable to financial institutions and
their corporate customers. Fraedom has
been a valued partner of ours for almost
10 years, and underlies Visa's IntelliLink
Spend Management, a core platform
for Visa's commercial and small business
clients. The acquisition enables financial
institutions to deliver an enhanced and
differentiated corporate card experience to
business clients-allowing them to better
track corporate expenses and eliminate
traditionally manual processes.
For the twelve months ended September
30, 2018, our business-to-business (B2B)
payments volume grew to $950 billion,
or more than 11 percent of our total
payments volume. While Visa leads this
segment today in terms of card solutions,
we continue to invest in growing our
share of the significant B2B payment
opportunity.
Expanding into New Business
Segments
In fiscal year 2018, we expanded our Visa
Token Service (VTS) to 11 new countries.
We now offer the service to issuers in
40 countries, representing more than 75
percent of Visa's global payment volume.
We are particularly encouraged by the
number of transactions that use tokens,
which has grown three-fold over the
past year.
Tokens are an important enabler of digital
commerce across many form factors for
mobile and ecommerce payments. A token
replaces a consumer's card number with a
unique, one-time code that cannot be re-
used if stolen-significantly reducing the
potential for fraud.
The Visa Direct platform could deliver
transactions to more than 2 billion Visa
debit and prepaid cards globally, has cross-
border capabilities and has already sent
transactions to more than 150 countries
this year. It is clear from our experience
in the last 12 months and from our
conversations with clients and partners
that we are only beginning to scratch the
surface of the opportunity to improve
how funds are disbursed and exchanged
around the world.
Visa Direct is one of the most important
ways we are capturing new types of
payments that were previously made by
cash or check. Visa Direct changes the
typical payment flow, whereby account
holders pay using their Visa credit, debit or
prepaid card for purchases at a business.
Instead, Visa Direct pushes funds to the
account holder, opening up our network
to new types of payments, such as peer-
to-peer (P2P), business-to-consumer
disbursements and bill payment. Today,
Visa Direct enables ride-share drivers
to receive their wages daily, insurance
payouts to be disbursed, and a delivery
service representative to be paid securely
and in real-time. We continue to see strong
growth. In the fourth quarter of fiscal year
2018, the year-over-year growth rate of Visa
Direct was more than 100 percent.
Capturing a larger share of transactions on
digital channels remains a priority for Visa.
In 2018, Visa made significant progress in
enabling secure digital payments beyond
the point of sale.
Growing Digital
Visa Direct enables ride-share drivers to receive
their wages, insurance payouts to be disbursed
and a delivery service representative to be paid
securely and in real-time.
Our vision is for consumers to access
their payment credentials through a
simple, password-less process, creating
a consistent, fast and convenient digital
shopping experience across merchants,
browsers and devices.
SRC is designed to allow merchants
to standardize the online checkout
experience, regardless of whether the
consumer is shopping on a phone, tablet,
PC or voice-activated assistant. In support
of this standard, we recently announced
the Visa Digital Commerce Program
(DCP) built on top of the SRC framework.
With DCP, shoppers will be recognized
when they log into a merchant site using
biometrics or passcodes, rather than
having to authenticate themselves every
time they pay.
4000 12345678 9010
VISA
Enhancing Trust
We are living in an increasingly
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The last 12 months were historic for the
Visa brand as we were center stage for
three of our most significant brand-
building properties-the Olympic Winter
Games PyeongChang 2018, the 2018 FIFA
World Cup and Super Bowl LII. Today, we
are the only brand in the world that is a
major sponsor of all three of these events,
and we recently announced the extension
of our global Olympic Sponsorship
through 2032.
The Visa brand is one of our most
important and valuable assets. Visa
consistently receives recognition as one
of the top brands in the world and is
routinely recognized for innovation, brand
value and ethics/corporate responsibility.
For consumers and businesses, our brand
continues to symbolize access, confidence
and convenience.
Building our World-Class Brand
USA
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Secure Remote Commerce (SRC):
Ecommerce and mobile commerce
are growing rapidly, but the payment
experience is inconsistent and complicated
for most consumers and merchants. To
help address these challenges, EMVCO, an
industry specifications body operated by
the world's leading payment networks,
published a draft of its Secure Remote
Commerce (SRC) technical specification.
USA
AdviceQueue Monitor Alerts
VISA
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We continue to invest in artificial
intelligence to help detect and prevent
fraud. Advances in these fields have helped
us improve our risk tools and solutions
and prevent fraud threats for the entire
payments ecosystem. For example, Visa
Advanced Authorization (VAA), which is
a risk management tool offered to our
clients, uses neural networks and machine
learning models to assess transaction risks
and provide risk scores in real time. VAA
identifies unusual events and spending
behaviors within each account, as well
as anomalies across multiple accounts,
issuers, merchants, locations, regions, and
the wider payment system.
I've already discussed the progress we
made in developing the Visa Digital
Commerce Program and adopting
tokenization. In 2018, we also launched
our second Cyber Fusion Center in London
designed to help Visa, financial institutions
and merchants prevent, detect, respond
and recover from cyberattacks. The first
center opened in the United States two
years ago, and we have plans to develop a
third center in Asia Pacific in 2019.
Visa has always placed a premium on
preserving and enhancing trust in our
products, network and brand. Through
an evolving and multi-layered approach,
we work to stay ahead of the curve and
enable secure, frictionless digital payment
experiences.
This connectivity offers tremendous
benefits, but also creates challenges in
terms of greater threats of cybercrime
and security breaches that expose
consumer data.
interconnected and digital world. At the
close of fiscal year 2018, the Visa network
had more than 3.3 billion card credentials
that were available to be used at nearly
54 million merchant locations. As large as
our network is, we only expect it to grow
over time as more people come into the
financial mainstream and as the Internet of
Things enables cars, homes and offices to
connect to the world of commerce.
09/21 18:18
Our scan-to-pay service has emerged
as one of our most successful low-cost
acceptance solutions for merchants,
enabling the growth of digital payments
in developing economies and remote
locations. In some countries, the
infrastructure for traditional payments
technology simply may not exist. With
scan-to-pay, a business needs only
to display a QR code to accept digital
payments, saving the cost, time and
complexity of installing a terminal and
telecommunications wiring. Scan-to-
pay allows payments to be sent from
a Visa prepaid, debit or credit card by
simply scanning a QR code displayed by
the merchant. In the last year, we saw
acceptance grow steadily to more than
700,000 scan-to-pay acceptance points
in India, one of the largest countries
adopting this technology.
The U.S. market is poised for significant
contactless growth over the coming
year as a result of expanding merchant
adoption and the acceleration of
contactless issuance by a number of our
largest U.S. clients. Already more than 70 of
the top 100 U.S. merchants by transactions
are contactless-enabled. On the issuing
side, several of our largest clients will begin
issuing contactless cards over the next
few quarters. We are excited about the
prospects of tap-to-pay taking off in the
United States.
Contactless, or tap-to-pay, adoption
continues to grow rapidly as a faster and
more convenient way to pay compared to
a dip, swipe or scan. Contactless payments
reduce transaction times-making it
the ideal way to pay for lower ticket
transactions in cash-heavy environments.
Excluding the United States, domestic
contactless penetration of transactions
processed over VisaNet is above 40
percent, up more than 12 percentage
points in the past year. More than 20
countries have increased their domestic
contactless penetration by more than 20
points since last year, led by Russia, which is
up 38 points to over 50 percent.
Visa's results reflect the continued strength
of our network business model and were
due to three primary factors:
2018 Performance
In this year's letter, I highlight Visa's
performance with a focus on how
strengthening our core assets-network,
brand, and security-drove our success.
I also outline the actions we are taking
to further accelerate access to digital
payments globally for the benefit of
our clients, account holders, partners,
shareholders and communities around
the world.
The impact and influence of digital
payments expanded rapidly in 2018,
fueled by the proliferation of smart
connected devices, adoption of
technology that enables payments
in new environments, and growth in
under penetrated payment segments
like business-to-business. Visa's ability to
navigate the accelerating pace of change,
and maintain our position at the heart of
digital payments innovation, is remarkable
for a company of our scale and reach.
2018 was a historic year for Visa during which we celebrated our
60th anniversary and 10 years as a publicly-traded company. These
milestones also capped another successful 12 months for Visa. We
recorded strong financial and operating performance in almost every
area of our global business, strengthening our position as the leader in
secure digital payments.
Dear Shareholders,
A letter from Al Kelly
4 These figures represent data at June 30, 2018, June 30, 2017 and June 30, 2016.
3 Total volume is the sum of payments volume and cash volume. Payments volume is the total monetary value of transactions for goods and services that are purchased on Visa-branded cards and payment products. Cash volume generally consists
of cash access transactions, balance access transactions, balance transfers and convenience checks. For further discussion, see Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Overview - Nominal
payments volume and transaction counts in this Annual Report.
2 For further discussion of fiscal years 2018, 2017 and 2016 non-GAAP adjusted operating expenses, operating income, net income and diluted earnings per share, see Item 7 - Management's Discussion and Analysis of Financial Condition and Results
of Operations - Overview - Adjusted financial results in this Annual Report.
S&P 500 Data Processing Index
S&P 500 Index
1. Total spending on Visa branded
payment products to pay for goods and
services (payments volume);
Visa Inc.
1 Includes Europe results beginning in fiscal fourth quarter 2016.
Processing Index
294
207
158
136
114
100
S&P 500 Data
192
163
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120
2. Cross-border spending, a subset of
payment volume, which is captured
when an account holder in one country
uses his/her payment credentials to
make a purchase in another country
(cross border); and
In fiscal year 2018, Visa's payment
credentials, which include traditional cards,
card numbers stored on file at online
businesses, and card numbers stored on
mobile devices, were used 182 billion
times-almost a half billion transactions
for every day last year. This record usage
resulted in double digit growth in all three
primary drivers I've noted below.
Visa is constantly focused on improving
the speed, security and accessibility of
digital transactions in face-to-face and
online environments. During the year, we
took important steps to make it faster,
safer and easier for consumers to pay and
businesses to receive payment by investing
in contactless, scan-to-pay and Secure
Remote Commerce (SRC).
Driving Adoption of Payment
Acceptance Technologies
In 2018, we completed the migration of
Visa Europe's clients from the Visa Europe
legacy network to our global VisaNet
system. This was a massive undertaking
that will benefit clients in terms of the
scale, resilience and redundancy of
our network operations. Additionally,
clients in Europe now have access to the
full suite of Visa's global products and
services, including risk management and
information services.
VisaNet, which is designed to be our
secure, scalable and reliable processing
system, is the backbone of Visa and
continues to enable our growth across
the world. We are continually investing
in VisaNet to ensure we have ample
capacity to handle the growing volume of
digital payments. Each summer, VisaNet
engineers run the annual stress test, a
simulation that pushes VisaNet to its limits
to prepare for the busiest time of the
year-the holiday shopping season. This
year's stress test showed that VisaNet could
process more than 65,000 transaction
messages per second-more than four
times our peak velocity during the 2017
holiday season.
Enhancing VisaNet
Growing our footprint.
Expanding into new business segments;
and
Growing usage across our digital
platforms;
acceptance technologies;
Driving adoption of payment
•
• Enhancing VisaNet;
3. The subset of total transactions that are
fully processed on our network, VisaNet
―from authorization to clearing and
settlement (processed transactions).
At the heart of Visa's success for the last 60
years has been the strength and breadth of
our global network. In 2018, we focused on
growing and strengthening our network
with an emphasis on five priorities:
+12%
+10%
+11%
Processed
transactions
Cross-border
volume
Payments
volume
$
2018 Key Business Drivers
GAAP operating expenses were $7.7 billion
for fiscal year 2018, a 23 percent increase
over the prior year's results, including
special items. Excluding these special
items, adjusted operating expenses grew
14 percent over the prior year, primarily
driven by investments in personnel.
Payments volume for the 12 months ended
September 30, 2018 reached $8.2 trillion,
an 11 percent increase over last year, on a
constant dollar basis. Cross-border volume
growth, on a constant dollar basis, was
more than 10 percent for the 12 months
ended September 30, 2018.
Net operating revenue grew 12 percent to
$20.6 billion for fiscal year 2018, driven by
continued growth in payments volume,
cross-border volume and processed
transactions.
We reported GAAP earnings per share
growth of 58 percent to $4.42 and adjusted
earnings per share growth of 32 percent to
$4.61. Fiscal full-year 2018 results included
special items related to U.S. tax reform,
a litigation provision associated with
the interchange multi-district litigation
case and a donation of available-for-
sale investment securities to the Visa
Foundation, while prior year's results
included special items related to the legal
entity reorganization of Visa Europe and
certain other Visa subsidiaries.
Enhancing and Expanding our Network
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5,526
The following financial instruments are not measured at fair value on the Company's consolidated
balance sheet at September 30, 2018, but require disclosure of their fair values: time deposits
recorded in prepaid expenses and other current assets, settlement receivable and payable and
customer collateral. The estimated fair value of such instruments at September 30, 2018 approximates
their carrying value due to their generally short maturities. If measured at fair value in the financial
statements, these financial instruments would be classified as Level 2 in the fair value hierarchy.
On August 26, 2014, Visa entered into an amendment to the omnibus agreement. The omnibus
amendment makes applicable to certain settlements in opt-out cases in the interchange multidistrict
litigation the settlement-sharing provisions of the omnibus agreement, pursuant to which the monetary
portion of any settlement of the interchange multidistrict litigation covered by the omnibus agreement
would be divided into a MasterCard portion at 33.3333% and a Visa portion at 66.6667%. The omnibus
amendment also provides that in the event of termination of the class settlement agreement, Visa and
MasterCard would make mutually acceptable arrangements so that Visa shall have received two-thirds
and MasterCard shall have received one-third of the total of (i) the sums paid to defendants as a result
of the termination of the settlement agreement and (ii) the takedown payments previously made to
defendants.
monetary portion of any settlement of the interchange multidistrict litigation covered by the omnibus
agreement would be divided into a MasterCard portion at 33.3333% and a Visa portion at 66.6667%. In
addition, the monetary portion of any judgment assigned to Visa-related claims in accordance with the
omnibus agreement would be treated as a Visa portion. Visa would have no liability for the monetary
portion of any judgment assigned to MasterCard-related claims in accordance with the omnibus
agreement, and if a judgment is not assigned to Visa-related claims or MasterCard-related claims in
accordance with the omnibus agreement, then any monetary liability would be divided into a
MasterCard portion at 33.3333% and a Visa portion at 66.6667%. The Visa portion of a settlement or
judgment covered by the omnibus agreement would be allocated in accordance with specified
provisions of the Company's U.S. retrospective responsibility plan. The litigation provision on the
consolidated statements of operations was not impacted by the execution of the omnibus agreement.
September 30, 2018
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
VISA INC.
83
Omnibus agreement. Visa entered into an omnibus agreement with MasterCard and certain Visa
U.S.A. members that confirmed and memorialized the signatories' intentions with respect to the loss
sharing agreement, the interchange judgment sharing agreement and other agreements relating to the
interchange multidistrict litigation, see Note 17-Legal Matters. Under the omnibus agreement, the
On October 22, 2015, Visa entered into an amendment to the loss sharing agreement. The
amendment includes within the scope of U.S. covered litigation any action brought after the
amendment by an opt out from the Rule 23(b)(3) Settlement Class in MDL 1720 that arises out of facts
or circumstances substantially similar to those alleged in MDL 1720 and that is not transferred to or
otherwise included in MDL 1720. On the same date, Visa entered into amendments to the interchange
judgment sharing agreement and omnibus agreement that include any such action within the scope of
those agreements as well.
Loss sharing agreement. Visa has entered into a loss sharing agreement with Visa U.S.A., Visa
International and certain Visa U.S.A. members. The loss sharing agreement provides for the
indemnification of Visa U.S.A., Visa International and, in certain circumstances, Visa with respect to:
(i) the amount of a final judgment paid by Visa U.S.A. or Visa International in the U.S. covered litigation
after the operation of the interchange judgment sharing agreement, plus any amounts reimbursable to
the interchange judgment sharing agreement signatories; or (ii) the damages portion of a settlement of
a U.S. covered litigation that is approved as required under Visa U.S.A.'s certificate of incorporation by
the vote of Visa U.S.A.'s specified voting members. The several obligation of each bank that is a party
to the loss sharing agreement will equal the amount of any final judgment enforceable against Visa
U.S.A., Visa International or any other signatory to the interchange judgment sharing agreement, or the
amount of any approved settlement of a U.S. covered litigation, multiplied by such bank's then-current
membership proportion as calculated in accordance with Visa U.S.A.'s certificate of incorporation.
Interchange judgment sharing agreement. Visa U.S.A. and Visa International have entered into an
interchange judgment sharing agreement with certain Visa U.S.A. members that have been named as
defendants in the interchange multidistrict litigation, which is described in Note 17-Legal Matters.
Under this judgment sharing agreement, Visa U.S.A. members that are signatories will pay their
membership proportion of the amount of a final judgment not allocated to the conduct of MasterCard.
Indemnification obligations. To the extent that amounts available under the U.S. litigation escrow
arrangement and other agreements in the plan are insufficient to fully resolve the U.S. covered
litigation, the Company will use commercially reasonable efforts to enforce the indemnification
obligations of Visa U.S.A.'s members for such excess amount, including but not limited to enforcing
indemnification obligations pursuant to Visa U.S.A.'s certificate of incorporation and bylaws and in
accordance with their membership agreements.
Europe Retrospective Responsibility Plan
Conversion feature. Under the terms of the plan, when the Company funds the U.S. litigation escrow
account, the shares of class B common stock are subject to dilution through an adjustment to the
conversion rate of the shares of class B common stock to shares of class A common stock. This has the
same economic effect on diluted class A common stock earnings per share as repurchasing the
Company's class A common stock, because it reduces the class B conversion rate and consequently the
as-converted class A common stock share count. See Note 11-Stockholders' Equity.
September 30, 2018
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
VISA INC.
82
(1) These payments are associated with the interchange multidistrict litigation. See Note 17-Legal Matters.
1,031
1,491 $
$
Balance at end of period.
4
(140)
The accrual related to the U.S. covered litigation could be either higher or lower than the U.S.
litigation escrow account balance. The Company recorded an additional accrual of $600 million for the
U.S. covered litigation during fiscal 2018. No additional accrual was recorded for the U.S. covered
litigation during fiscal 2017. See Note 17-Legal Matters.
funds (1) .......
UK loss sharing agreement. The Company has entered into a loss sharing agreement with Visa
Europe and certain of Visa Europe's member financial institutions located in the United Kingdom (the
"UK LSA members"). Each of the UK LSA members has agreed, on a several and not joint basis, to
compensate the Company for certain losses which may be incurred by the Company, Visa Europe or
their affiliates as a result of certain existing and potential litigation relating to the setting and
implementation of domestic multilateral interchange fee rates in the United Kingdom prior to the closing
of the Visa Europe acquisition (the “Closing"), subject to the terms and conditions set forth therein and,
with respect to each UK LSA member, up to a maximum amount of the up-front cash consideration
received by such UK LSA member. The UK LSA members' obligations under the UK loss sharing
agreement are conditional upon, among other things, either (a) losses valued in excess of the sterling
equivalent on June 21, 2016 of €1.0 billion having arisen in UK covered claims (and such losses having
reduced the conversion rate of the UK&I preferred stock accordingly), or (b) the conversion rate of the
UK&I preferred stock having been reduced to zero pursuant to losses arising in claims relating to
multilateral interchange fee rate setting in the Visa Europe territory.
84
(52)
3,200 $
2,326 $
Europe
(in millions)
UK&I
Preferred Stock
Right to Recover for
Covered Losses
Balance as of September 30, 2018.
adjustment ..
Balance as of September 30, 2017
VE territory covered losses incurred
Recovery through conversion rate
The following table sets forth the activities related to VE territory covered losses in preferred stock
and "right to recover for covered losses” within equity during the year ended September 30, 2018. VE
territory covered losses incurred reflect settlements with merchants and additional legal costs.
See Note 17-Legal Matters.
Litigation management deed. The Company has entered into a litigation management deed with
Visa Europe which sets forth the agreed upon procedures for the management of the VE territory
covered litigation, the allocation of losses resulting from this litigation (the "VE territory covered losses")
between the UK&I and Europe preferred stock, and any accelerated conversion or reduction in the
conversion rate of the shares of UK&I and Europe preferred stock. The litigation management deed
applies only to VE territory covered litigation (and resultant losses and liabilities). The litigation
management deed provides that the Company will generally control the conduct of the VE territory
covered litigation, subject to certain obligations to report and consult with the litigation management
September 30, 2018
VISA INC.
85
During the year ended September 30, 2018, the Company recovered $56 million of VE territory
covered losses through adjustments to the class A common stock conversion rates applicable to the
UK&I and Europe preferred stock. The conversion rates applicable to the UK&I and Europe preferred
stock were reduced from 13.077 and 13.948, respectively, as of September 30, 2017
to 12.955 and 13.888, respectively, as of September 30, 2018.
VE territory covered losses may be recorded before the corresponding adjustment to the
applicable conversion rate is effected. Adjustments to the conversion rate may be executed once in
any six-month period unless a single, individual loss greater than €20 million is incurred, in which case,
the six-month limitation does not apply. When the adjustment to the conversion rate is made, the
amount previously recorded in "right to recover for covered losses" as contra-equity will then be
recorded against the book value of the preferred stock within stockholders' equity.
Visa Inc. net income will not be impacted by VE territory covered losses as long as the
as-converted value of the preferred stock is greater than the covered loss. VE territory covered losses
will be recorded when the loss is deemed to be probable and reasonably estimable, or in the case of
attorney's fees, when incurred. Concurrently, the Company will record a reduction to stockholders'
equity, which represents the Company's right to recover such losses through adjustments to the
conversion rate applicable to the preferred stock. The reduction to stockholders' equity is recorded in a
contra-equity account referred to as "right to recover for covered losses."
Unlike the U.S. retrospective responsibility plan, the Europe retrospective responsibility plan does
not have an escrow account that is used to fund settlements or judgments. The Company is entitled to
recover VE territory covered losses through a periodic adjustment to the class A common stock
conversion rates applicable to the UK&I and Europe preferred stock. The total amount of protection
available through the preferred stock component of the Europe retrospective responsibility plan is
equivalent to the as-converted value of the preferred stock, which can be calculated at any point in
time as the product of: (a) the outstanding number of shares of preferred stock; (b) the current
conversion rate applicable to each class of preferred stock; and (c) Visa's class A common stock price.
This amount differs from the value of the preferred stock recorded within stockholders' equity on the
Company's consolidated balance sheets. The book value of the preferred stock reflects its historical
value recorded at the Closing less VE territory covered losses recovered through a reduction of the
applicable conversion rate. The book value does not reflect changes in the underlying class A common
stock price subsequent to the Closing.
The Company obtained certain protections for VE territory covered losses through the UK&I and
Europe preferred stock, the UK loss sharing agreement, and the litigation management deed, referred
to as the "Europe retrospective responsibility plan." The plan covers VE territory covered litigation (and
resultant liabilities and losses) relating to the covered period, which generally refers to the period
before the Closing. Visa's protection from the plan is further limited to 70% of any liabilities where the
claim relates to inter-regional multilateral interchange fee rates where the issuer is located outside the
Visa Europe territory, and the merchant is located within the Visa Europe territory. The plan does not
protect the Company in Europe against all types of litigation or remedies or fines imposed in
competition law enforcement proceedings, only the interchange litigation specifically covered by the
plan's terms.
committees for VE territory covered litigation (the “VE territory litigation management committees”).
The VE territory litigation management committees, which are composed of representatives of certain
Visa Europe members, have also been granted consent rights to approve certain material decisions in
relation to the VE territory covered litigation.
September 30, 2018
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Payments to opt-out merchants and interest earned on escrow
600
Deposits into the litigation escrow account.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
60
80
In October 2016, the FASB issued ASU 2016-16, which requires that entities recognize the
income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer
occurs. The Company will adopt the standard effective October 1, 2018. The Adoption is not expected
to have a material impact on the consolidated financial statements.
In March 2016, the FASB issued ASU 2016-07, which eliminates the requirement that an entity
retroactively adopt the equity method of accounting if an investment qualifies for use of the equity
method as a result of an increase in the level of ownership or degree of influence. The equity method
investor is required to add the cost of acquiring the additional interest in the investee to the current
basis of the investor's previously held interest and adopt the equity method of accounting as of the
date the investment becomes qualified for equity method accounting. The Company adopted the
standard effective October 1, 2017. The adoption did not have a material impact on the consolidated
financial statements.
In March 2016, the FASB issued ASU 2016-06, which clarifies the requirements for assessing
whether contingent call/put options that can accelerate the payment of principal on debt instruments
are clearly and closely related to their debt hosts. An entity performing the assessment is required to
assess the embedded call/put options solely in accordance with a four-step decision sequence. The
Company adopted the standard effective October 1, 2017. The adoption did not have a material impact
on the consolidated financial statements.
In March 2016, the FASB issued ASU 2016-05, which clarifies that a change in the counterparty
to a derivative instrument that has been designated as the hedging instrument under Topic 815,
Derivatives and Hedging, does not, in and of itself, require dedesignation of that hedging relationship
provided that all other hedge accounting criteria continue to be met. The Company adopted the
standard effective October 1, 2017. The adoption did not have a material impact on the consolidated
financial statements.
In February 2016, the FASB issued ASU 2016-02, which requires the recognition of lease assets
and lease liabilities arising from operating leases in the statement of financial position. The Company
I will adopt the standard effective October 1, 2019 and does not anticipate that this new accounting
guidance will have a material impact on its consolidated statement of operations. The Company
estimates the value of leased assets and liabilities that may be recognized could be in the hundreds of
millions of dollars. The actual impact will depend on the Company's lease portfolio at the time of
adoption. In July 2018, the FASB issued ASU 2018-11, which provides entities with an additional
transition method to adopt the new leases standard. Under this new transition method, an entity initially
applies the new leases standard at the adoption date and recognizes a cumulative-effect adjustment to
the opening balance of retained earnings in the period of adoption. Consequently, an entity's reporting
for the comparative periods presented in the financial statements will continue to be in accordance with
the current leases standard. The optional transition method does not change the existing disclosure
requirements. The Company is evaluating the effect that ASU 2018-11 will have on its consolidated
financial statements.
In January 2016, the FASB issued ASU 2016-01, which amends certain aspects of recognition,
measurement, presentation and disclosure of financial instruments, including the requirement to
measure certain equity investments at fair value with changes in fair value recognized in net income.
The Company will adopt the standard effective October 1, 2018. The adoption is not expected to have
a material impact on the consolidated financial statements.
September 30, 2018
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
September 30, 2018
VISA INC.
The Company has completed an assessment of its existing customer contracts through
September 30, 2018. Based on this assessment, application of the new standard to the consolidated
financial statements for fiscal 2018 would not have resulted in a material impact. The impact of the new
standard to future financial results is unknowable as it is not possible to estimate the impact of the
standard to new customer contracts which may be executed in future periods. However, the new
standard is not expected to have a material impact to the fiscal 2019 consolidated financial statements.
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards
Update (ASU) No. 2014-09, which requires an entity to recognize the amount of revenue to which it
expects to be entitled for the transfer of goods or services to customers. The ASU will replace existing
revenue recognition guidance in U.S. GAAP when it becomes effective. Subsequently, the FASB also
issued a series of amendments to the new revenue standard. The Company will adopt the standard
effective October 1, 2018 using the modified retrospective transition method. The new standard will
primarily impact the timing of recognition and classification of certain client incentives, including certain
services provided as an incentive, and certain marketing-related funds paid to customers.
Recently Issued Accounting Pronouncements
Earnings per share. The Company calculates earnings per share using the two-class method to
reflect the different rights of each class and series of outstanding common stock. The dilutive effect of
incremental common stock equivalents is reflected in diluted earnings per share by application of the
treasury stock method. See Note 12-Earnings Per Share.
Share-based compensation. The Company recognizes share-based compensation cost using the
fair value method of accounting. The Company recognizes compensation cost for awards with only
service conditions on a straight-line basis over the requisite service period, which is generally the
vesting period. Compensation cost for performance and market-condition-based awards is recognized
on a graded-vesting basis. The amount is initially estimated based on target performance and is
adjusted as appropriate based on management's best estimate throughout the performance period.
See Note 13-Share-based Compensation.
Non-derivative financial instrument designated as a net investment hedge. The Company
designated the euro-denominated deferred cash consideration liability, a non-derivative financial
instrument, as a hedge against a portion of the Company's euro-denominated net investment in Visa
Europe. Changes in the value of the deferred cash consideration liability, attributable to the change in
exchange rates at the end of each reporting period, partially offset the foreign currency translation
adjustments resulting from the euro-denominated net investment, are reported as a component of
accumulated other comprehensive income or loss on the Company's consolidated balance sheets. See
Note 9-Derivative and Non-derivative Financial Instruments.
Derivatives are carried at fair value on a gross basis in either prepaid and other current assets,
non-current other assets, accrued liabilities or non-current other liabilities on the consolidated balance
sheets. At September 30, 2018, derivatives outstanding mature within 12 months or less. Gains and losses
resulting from changes in fair value of designated derivative instruments are accounted for either in
accumulated other comprehensive income or loss on the consolidated balance sheets, or in the
consolidated statements of operations in the corresponding account where revenue or expense is hedged,
or to general and administrative for hedge amounts determined to be ineffective. Gains and losses resulting
from changes in fair value of derivative instruments not designated for hedge accounting are recorded in
general and administrative for hedges of operating activity, or non-operating income (expense) for hedges
of non-operating activity. See Note 9-Derivative and Non-derivative Financial Instruments.
September 30, 2018
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
VISA INC.
88
79
In November 2016, the FASB issued ASU 2016-18, which requires that a statement of cash flows
includes the total of cash, cash equivalents, and amounts generally described as restricted cash or
restricted cash equivalents when reconciling the beginning-of-period and end-of-period total amounts.
The Company will adopt the standard effective October 1, 2018. The adoption will impact the
presentation of transactions related to the U.S. litigation escrow account on the consolidated
statements of cash flows.
In March 2017, the FASB issued ASU 2017-07, which requires that the service cost component of
net periodic pension and postretirement benefit cost be presented in the same line item as other
employee compensation costs, while the other components be presented separately as non-operating
income (expense). Currently, all net periodic pension and postretirement benefit costs are presented in
personnel expense on the Company's consolidated statement of operations. The Company will adopt
the standard effective October 1, 2018. The adoption is not expected to have a material impact on the
consolidated financial statements.
In May 2017, the FASB issued ASU 2017-09, which amends the scope of modification accounting
for share-based payment arrangements. Specifically, an entity would not apply modification accounting
if the fair value, vesting conditions, and classification of the awards are the same immediately before
and after the modification. The Company will adopt the standard effective October 1, 2018. The
adoption is not expected to have a material impact on the consolidated financial statements.
(in millions)
1,031 $ 1,027
2017
2018
$
Balance at beginning of period
The following table sets forth the changes in the restricted cash-U.S. litigation escrow account
by fiscal year:
U.S. litigation escrow agreement. In accordance with the U.S. litigation escrow agreement, the
Company maintains an escrow account, from which settlements of, or judgments in, the U.S. covered
litigation are paid. The amount of the escrow is determined by the board of directors and the
Company's litigation committee, all members of which are affiliated with, or act for, certain Visa U.S.A.
members. The escrow funds are held in money market investments along with the interest earned, less
applicable taxes and are classified as restricted cash on the consolidated balance sheets.
any case brought after October 22, 2015 by a merchant that opted out of the Rule 23(b)(3)
settlement class pursuant to the 2012 Settlement Agreement in MDL 1720 that arises out of
facts or circumstances substantially similar to those alleged in MDL 1720 and that is not
transferred to or otherwise included in MDL 1720. See Note 17-Legal Matters.
any claim that challenges the reorganization or the consummation thereof; provided that such
claim is transferred for coordinated or consolidated pre-trial proceedings at any time to MDL
1720 by the Judicial Panel on Multidistrict Litigation or otherwise included at any time in MDL
1720 by order of any court of competent jurisdiction; and
the Interchange Multidistrict Litigation. In re Payment Card Interchange Fee and Merchant
Discount Antitrust Litigation, 1:05-md-01720-JG-JO (E.D.N.Y.) or MDL 1720, including all
cases currently included in MDL 1720, any other case that includes claims for damages
relating to the period prior to the Company's IPO that has been or is transferred for
coordinated or consolidated pre-trial proceedings at any time to MDL 1720 by the Judicial
Panel on Multidistrict Litigation or otherwise included at any time in MDL 1720 by order of any
court of competent jurisdiction;
•
•
•
U.S. covered litigation consists of a number of matters that have been settled or otherwise fully or
substantially resolved, as well as the following:
The Company has established several related mechanisms designed to address potential liability
under certain litigation referred to as the "U.S. covered litigation." These mechanisms are included in
and referred to as the U.S. retrospective responsibility plan and consist of a U.S. litigation escrow
agreement, the conversion feature of the Company's shares of class B common stock, the
indemnification obligations of the Visa U.S.A. members, an interchange judgment sharing agreement,
a loss sharing agreement and an omnibus agreement, as amended.
U.S. Retrospective Responsibility Plan
Note 2-U.S. and Europe Retrospective Responsibility Plans
September 30, 2018
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
VISA INC.
4
81
In August 2018, the FASB issued ASU 2018-15, which requires implementation costs incurred by
customers in cloud computing arrangements to be deferred and recognized over the term of the
arrangement, if those costs would be capitalized by the customer in a software licensing arrangement
under the internal-use software guidance. The standard will be effective for the Company on
October 1, 2020. However, the Company is evaluating the effect that ASU 2018-15 will have on its
consolidated financial statements and is considering early adoption of the standard.
In March 2018, the FASB issued ASU 2018-05 to insert the SEC's interpretive guidance from
Staff Accounting Bulletin No. 118 into the income tax accounting codification under U.S. GAAP. The
ASU permits companies to use provisional amounts for certain income tax effects of the Tax Act during
a one-year measurement period. The provisional accounting impacts for the Company may change in
future reporting periods until the accounting analysis is finalized, which will occur no later than the first
quarter of fiscal 2019.
In February 2018, the FASB issued ASU 2018-02, which allows a reclassification from
accumulated other comprehensive income to retained earnings for adjustments to tax effects that were
originally recorded in other comprehensive income due to changes in the U.S. federal corporate
income tax rate resulting from the enactment of the U.S. tax reform legislation, commonly referred to
as the Tax Cuts and Jobs Act (the "Tax Act"). The Company will adopt the standard effective
October 1, 2019. The adoption is not expected to have a material impact on the consolidated financial
statements.
(11)
$
VISA INC.
(21)
18
78
Foreign exchange derivative instruments
Other assets:
Prepaid and other current assets:
1,621
124
2,508
15
Equity securities
U.S. Treasury securities
3,663
5,008
U.S. government-sponsored debt securities ..
Total
Investment securities, available-for-sale:
98
Equity securities
Investment securities, trading:
1,048 $ 2,870
$
U.S. government-sponsored debt securities
5,935
6,252 $
$
Cash equivalents and restricted cash:
Money market funds ..
(in millions)
82
2017
$
7,762 $
Other Financial Instruments not Measured at Fair Value
(35)
2,291 $
Long-term debt. Debt instruments are measured at amortized cost on the Company's
consolidated balance sheets at September 30, 2018 and 2017. The fair value of these notes, as
provided by third-party pricing vendors, is based on quoted prices in active markets for similar, not
identical, assets. The pricing data obtained from outside sources is reviewed internally for
reasonableness, compared against benchmark quotes from independent pricing sources, then
confirmed or revised accordingly. If measured at fair value in the financial statements, these
instruments would be classified as Level 2 in the fair value hierarchy. The carrying value and estimated
fair value of long-term debt were both $16.6 billion as of September 30, 2018. The carrying value and
estimated fair value of long-term debt was $18.4 billion and $19.2 billion, respectively, as of
September 30, 2017.
Other Fair Value Disclosures
If the Company were required to perform a quantitative assessment for impairment testing of
goodwill and indefinite-lived intangible assets, the fair values would generally be estimated using an
income approach. As the assumptions employed to measure these assets on a non-recurring basis are
based on management's judgment using internal and external data, these fair value determinations are
classified as Level 3 in the fair value hierarchy. The Company completed its annual impairment review
of its indefinite-lived intangible assets and goodwill as of February 1, 2018, and concluded that there
was no impairment. No recent events or changes in circumstances indicate that impairment existed at
September 30, 2018. See Note 1-Summary of Significant Accounting Policies.
Non-financial assets and liabilities. Long-lived assets such as goodwill, indefinite-lived intangible
assets, finite-lived intangible assets and property, equipment and technology are considered
non-financial assets. The Company does not have any non-financial liabilities measured at fair value
on a non-recurring basis. Finite-lived intangible assets primarily consist of customer relationships, trade
names and reseller relationships, all of which were obtained through acquisitions. See Note 5-
Intangible Assets and Goodwill.
Non-marketable equity investments and investments accounted for under the equity method.
These investments are classified as Level 3 due to the absence of quoted market prices, the inherent
lack of liquidity and the fact that inputs used to measure fair value are unobservable and require
management's judgment. When certain events or circumstances indicate that impairment may exist,
the Company revalues the investments using various assumptions, including the financial metrics and
ratios of comparable public companies. There were no significant impairment charges incurred during
fiscal 2018, 2017 and 2016. At September 30, 2018 and 2017, these investments totaled $137 million
and $94 million, respectively. These assets are classified in other assets on the consolidated balance
sheets.
Assets Measured at Fair Value on a Non-recurring Basis
September 30, 2018
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
VISA INC.
8,873 $
87
There were no transfers between Level 1 and Level 2 assets during fiscal 2018.
98
22 $
22 $ 98
$ - $ - $
Total
$
Foreign exchange derivative instruments
Accrued liabilities:
Liabilities
6,551
6,134 $
Level 2 assets and liabilities measured at fair value on a recurring basis. The fair value of U.S.
government-sponsored debt securities, as provided by third-party pricing vendors, is based on quoted
prices in active markets for similar, not identical, assets. The pricing data obtained from outside
sources is reviewed internally for reasonableness, compared against benchmark quotes from
independent pricing sources, then confirmed or revised accordingly. Foreign exchange derivative
instruments are valued using inputs that are observable in the market or can be derived principally
from or corroborated by observable market data. There were no substantive changes to the valuation
techniques and related inputs used to measure fair value during fiscal 2018.
2018
Level 1 assets measured at fair value on a recurring basis. Money market funds, publicly-traded
equity securities and U.S. Treasury securities are classified as Level 1 within the fair value hierarchy,
as fair value is based on quoted prices in active markets.
2018
11,403
Total
3,200
4,634
3,179
3,414 $ 2,326
2,291 $
4,823 $
6,580
Europe preferred stock
$
UK&I preferred stock
5,470
(in millions)
Book Value of
Preferred Stock
Stock(2)
Preferred
September 30, 2017
As-Converted
Value of
September 30, 2018
The following table sets forth the as-converted value of the preferred stock available to recover
VE territory covered losses compared to the book value of preferred shares recorded in stockholders'
equity within the Company's consolidated balance sheets as of September 30, 2018 and 2017.(1)
(7)
56
2017
3,179 $
Book Value of
Preferred Stock
8,048
As-Converted
Value of
Preferred
Stock(3)
(7)
Level 1
Fair Value Measurements at September 30
Using Inputs Considered as
Less: right to recover for covered losses
Level 2
Assets
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The Company measures certain assets and liabilities at fair value. See Note 1-Summary of
Significant Accounting Policies.
Note 3-Fair Value Measurements and Investments
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
September 30, 2018
VISA INC.
906
86
(3) The as-converted value of preferred stock is calculated as the product of: (a) 2 million and 3 million shares of the UK&I and
Europe preferred stock outstanding, respectively, as of September 30, 2017; (b) 13.077 and 13.948, the class A common
stock conversion rate applicable to the UK&I and Europe preferred stock outstanding, respectively, as of September 30,
2017; and (c) $105.24, Visa's class A common stock closing stock price as of September 30, 2017. Earnings per share is
calculated based on unrounded numbers.
Fair Value Measurements
(2) The as-converted value of preferred stock is calculated as the product of: (a) 2 million and 3 million shares of the UK&l and
Europe preferred stock outstanding, respectively, as of September 30, 2018; (b) 12.955 and 13.888, the class A common
stock conversion rate applicable to the UK&I and Europe preferred stock outstanding, respectively, as of September 30,
2018; and (c) $150.09, Visa's class A common stock closing stock price as of September 30, 2018. Earnings per share is
calculated based on unrounded numbers.
(52)
(52)
Total recovery for covered losses
$
(7)
available
5,463 $
7,996 $
5,474
(1) Figures in the table may not recalculate exactly due to rounding. As-converted and book values of preferred stock are based
on unrounded numbers.
11,396 $
2.80% Senior Notes due December 2022 (the "December
2022 Notes")
2.30%
2.30%
1,000
1,000
2.15% Senior Notes due September 2022 (the "September
2022 Notes")
3,000
1,750
3,000
2.20% Senior Notes due 2020 (the "2020 Notes")
1.37%
September 30, 2018 September 30, 2017
$
1.20% Senior Notes due 2017 (the “2017 Notes")
Principal Amount Principal Amount Interest Rate
(in millions, except percentages)
2,250
Effective
The Company had outstanding debt as follows:
2,250
1,500
3.15% Senior Notes due 2025 (the "2025 Notes")
2.75% Senior Notes due 2027 (the "2027 Notes")
4.15% Senior Notes due 2035 (the "2035 Notes")
4.30% Senior Notes due 2045 (the "2045 Notes")
3.65% Senior Notes due 2047 (the "2047 Notes")
Total debt ..
(120)
18,500
Note 6-Debt
16,750 $
3.73%
750
750
4.37%
3,500
3,500
4.23%
1,500
2.91%
750
750
3.26%
4,000
4,000
Unamortized discounts and debt issuance costs
Less: current portion of long-term debt
2.89%
The decrease in total net intangible assets and goodwill during fiscal 2018 was primarily related
to foreign currency translation, which is recorded as a component of accumulated other comprehensive
income in the consolidated balance sheets.
Total indefinite-lived intangible
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
4,084
Visa trade name . . .
23,184
reacquired rights.
Customer relationships and
assets:
Indefinite-lived intangible
327
assets
(418)
290
(473)
763
assets
Total finite-lived intangible
8
(133)
(9)
745
27,268
23,184
23,437
VISA INC.
91
In February 2017, the Company acquired a business for a total purchase consideration net of
cash received of approximately $302 million, paid primarily with cash on hand. Total purchase
consideration has been allocated to the tangible and identifiable intangible assets acquired, and to
liabilities assumed based on their respective fair values on the acquisition date. Related finite-lived
intangible assets recorded totaled $104 million with a weighted-average useful life of eight years.
Goodwill of $181 million was recorded to reflect the excess purchase consideration over net assets
acquired. The consolidated financial statements include the operating results of the acquired business
from the date of acquisition. Pro forma information related to the acquisition has not been presented as
the impact is not material to the Company's financial results.
There was no impairment related to the Company's indefinite-lived or finite-lived intangible assets
during fiscal 2018, 2017 or 2016.
$ 56 $ 56 $ 56 $ 50 $ 28 $ 44 $ 290
2019 2020 2021 2022 2023 Thereafter Total
(in millions)
Estimated future amortization expense
Fiscal year ending September 30,
Amortization expense related to finite-lived intangible assets was $55 million, $56 million and
$50 million for fiscal 2018, 2017 and 2016, respectively. At September 30, 2018, estimated future
amortization expense on finite-lived intangible assets is as follows:
$ 28,031 $ (473) $ 27,558 $ 28,266 $
(418) $ 27,848
27,521
4,084
23,437
Total intangible assets
27,521
27,268
4,084
4,084
September 30, 2018
(1,749)
4
16,630 $
Benefit payments
(52)
24
(58)
(38)
Actuarial loss (gain)
11
12
(63)
36
Interest cost
6
Service cost
433 $ 474
1,072 $
913 $
$
Benefit obligation-beginning of fiscal year
32
(137)
(9)
(14)
17
year
Fair value of plan assets-beginning of fiscal
Change in Plan Assets:
433
452 $
913 $
844 $
$
Accumulated benefit obligation . . .
433
452 $
913 $
844 $
$
Benefit obligation-end of fiscal year
8
(12)
Foreign currency exchange rate changes
Change in Pension Benefit Obligation:
2017
2018
2017
(in millions)
Future principal payments
2023 Thereafter Total
2022
(in millions)
2021
2020
2019
Fiscal year ending September 30,
At September 30, 2018, future principal payments on the Company's outstanding debt are as
follows:
The Company recognized related interest expense of $550 million and $505 million in fiscal 2018
and fiscal 2017, respectively, as non-operating expense.
September 30, 2018
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
VISA INC.
92
The indenture governing the Company's outstanding senior notes, or collectively, the "Notes",
contains customary event of default provisions. The Notes are senior unsecured obligations of the
Company, ranking equally and ratably among themselves and with the Company's existing and future
unsecured and unsubordinated debt. The Notes are not secured by any assets of the Company and
are not guaranteed by any of the Company's subsidiaries. The Company was in compliance with all
related covenants as of September 30, 2018. Each series of Notes may be redeemed as a whole or in
part at the Company's option at any time at specified redemption prices.
Use of Proceeds from Notes issued in 2017. On September 11, 2017, the Company called for
redemption of all of the $1.75 billion principal amount outstanding of the 2017 Notes in accordance with
the optional redemption provisions set forth in the governing indenture. Subsequent to fiscal 2017, on
October 11, 2017, the redemption date, the Company redeemed all of the $1.75 billion principal
amount. The redemption was funded with the proceeds from the Notes issued in 2017.
In September 2017, the Company issued fixed-rate senior notes (the September 2022 Notes,
2027 Notes and 2047 Notes, or collectively, the “Notes issued in 2017") in an aggregate principal
amount of $2.5 billion, with maturities ranging between 5 and 30 years. Interest on the Notes issued in
2017 is payable semi-annually on March 15 and September 15 of each year, commencing March 15,
2018. The net aggregate proceeds from the Notes issued in 2017, after deducting discounts and debt
issuance costs, were approximately $2.5 billion.
Senior Notes
Total long-term debt
16,618
$
$
$
Commercial Paper Program
2018
September 30,
Non-U.S. Plans
U.S. Plans
September 30,
Reconciliation of pension benefit obligations, plan assets, funded status and amounts
recognized in the Company's consolidated balance sheets:
Summary of Plan Activities
Under the Visa Europe UK pension plans, presented below under "non-U.S. plans”, retirement
benefits are provided based on the participants' final pensionable pay and are currently closed to new
entrants. However, future benefits continue to accrue for active participants. The funding policy is to
contribute in accordance with the appropriate funding requirements agreed with the trustees of the UK
pension plans. Additional amounts may be agreed with the UK pension plan trustees.
The funding policy for the U.S. pension benefits is to contribute annually no less than the
minimum required contribution under ERISA.
September 30, 2018
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
VISA INC.
93
Defined benefit pension plans. The U.S. pension benefits under the defined benefit pension plan
were earned based on a cash balance formula. An employee's cash balance account was credited with
an amount equal to 6% of eligible compensation plus interest based on 30-year Treasury securities. In
October 2015, the Company's board of directors approved an amendment of the U.S. qualified defined
benefit pension plan such that the Company discontinued employer provided credits after
December 31, 2015. Plan participants continue to earn interest credits on existing balances at the time
of the freeze. As a result, a curtailment gain totaling $8 million was recognized in fiscal 2016 as part of
the Company's net periodic benefit cost.
Disclosures presented below include the U.S. pension plans and the non-U.S. plans, comprising
only the Visa Europe plans. Disclosures relating to other U.S. postretirement benefit plans and other
non-U.S. pension benefit plans are not included as they are immaterial, individually and in aggregate.
The Company uses a September 30 measurement date for its pension and other postretirement
benefit plans.
The Company sponsors various qualified and non-qualified defined benefit pension and other
postretirement benefit plans that provide for retirement and medical benefits for all eligible employees
residing in the United States. The Company also sponsors other pension benefit plans that provide
benefits for internationally-based employees at certain non-U.S. locations.
Note 7-Pension, Postretirement and Other Benefits
The Company is a party to a credit agreement for a 5-year, unsecured $4.0 billion revolving credit
facility (the "Credit Facility") which expires on January 27, 2022. Borrowings under the Credit Facility
are available for general corporate purposes. Interest on borrowings under the Credit Facility would be
charged at the London Interbank Offered Rate (LIBOR) or an alternative base rate, in each case plus
applicable margins that fluctuate based on the applicable rating of senior unsecured long-term
securities of the Company. The Company has agreed to pay a commitment fee which will fluctuate
based on such applicable rating of the Company. The Company had no amounts outstanding under
the Credit Facility as of September 30, 2018 and 2017.
Credit Facility
Visa maintains a commercial paper program to support its working capital requirements and for
other general corporate purposes. Under the program, the Company is authorized to issue up to
$3.0 billion in outstanding notes, with maturities up to 397 days from the date of issuance. The
Company had no outstanding obligations under the program as of September 30, 2018 and 2017.
- $ 3,000 $ 1,000 $2,250 $ 10,500 $ 16,750
6
2018
17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
VISA INC.
7,516
7,532 $
$
4,082
3,434
3,443 $
4,089
September 30, 2018
$
Fair Value
Amortized Cost
89
Total
Due after 10 years
Due after 5 years through 10 years
Due after 1 year through 5 years
Due within one year
(in millions)
Investment Income
Investment income is recorded as non-operating income in the Company's consolidated
statements of operations and consisted of the following:
For the Years Ended
September 30,
Unrealized gains, net
Investment securities, trading:
Gain on other investments
Interest and dividend income on cash and investments
3
3 |
155
62
4
6
75
92 $
198
-
173 $
(in millions)
2016
2017
1,074 $
September 30, 2018:
Available-for-sale investment securities primarily include U.S. Treasury securities and U.S.
government-sponsored debt securities. Available-for-sale debt securities are presented below in
accordance with their stated maturities. A portion of these investments, $4.1 billion, are classified as
non-current, as they have stated maturities of more than one year from the balance sheet date.
However, these investments are generally available to meet short-term liquidity needs.
$ 1,926
$ 4,082
-
$ 5,016
2,516
4
Equity securities
debt securities . . .
U.S. Treasury securities
U.S. government-sponsored
(in millions)
September 30, 2017
Gross Unrealized
Fair
Gains Losses Value
Amortized
Cost
Fair
Value
Gains Losses
Amortized
Cost
Gross Unrealized
September 30, 2018
The amortized cost, unrealized gains and losses and fair value of available-for-sale investment
securities are as follows:
Available-for-sale Investment Securities
Trading investment securities include mutual fund equity security investments related to various
employee compensation and benefit plans. Trading activity in these investments is at the direction of
the Company's employees. These investments are held in trust and are not available for the
Company's operational or liquidity needs. Interest and dividend income and changes in fair value are
recorded in non-operating income, and offset in personnel expense on the consolidated statements of
operations. As of September 30, 2018 and 2017, trading investment securities totaled $98 million and
$82 million, respectively.
Trading Investment Securities
Investments
September 30, 2018
-
Realized gains, net
$ (8) $
(8)
1
investment securities
available-for-sale
Long-term
$ (3,482)
$ (3,449)
investment securities ..
available-for-sale
Less: current portion of
$ (4) $ 5,408
$ (16) $ 7,531 $ 5,292 $ 120
$ 7,536 $ 11
Total
$ (2) $ 3,663
(2) 1,621
124
-
5 119
15
-
11
1,623
5,008 $ 3,664 $
2,508
(11)
Investment securities, available-for-sale:
Realized gains from donation
(in millions)
Net
Accumulated
Amortization
Gross
Net
September 30, 2017
Accumulated
Amortization
September 30, 2018
Finite-lived intangible
assets:
Gross
Note 5-Intangible Assets and Goodwill
Depreciation and amortization expense related to property, equipment and technology was
$558 million, $500 million and $452 million for fiscal 2018, 2017 and 2016, respectively. Included in
those amounts was amortization expense on technology of $312 million, $285 million and $259 million
for fiscal 2018, 2017 and 2016, respectively.
September 30, 2018
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
VISA INC.
90
32 $ 990
$
Indefinite-lived and finite-lived intangible assets consisted of the following:
Customer relationships
452 $
(274) $
Other ....
16
(79)
95
13
(82)
95
Reseller relationships
102
(93)
195
93
(106)
199
Trade names
201
(237) $
438 $
178 $
$ 309 $ 257 $ 195 $ 128 $ 69
Estimated future amortization expense
Total
2022 2023 Thereafter
(in millions)
2017
September 30, September 30,
2018
82
470 $ 105 $
$
(4)
(1)
98
193
Property, equipment and technology, net
Accumulated depreciation and amortization
Total property, equipment and technology
Technology
Furniture, equipment and leasehold improvements
Construction-in-progress
Buildings and building improvements
Land
Property, equipment and technology, net, consisted of the following:
Note 4 Property, Equipment and Technology, Net
Investment income
Other-than-temporary impairment on investments
(in millions)
Realized gains (losses), net from sales
69 $
898
2021
2020
2019
At September 30, 2018, estimated future amortization expense on technology was as follows:
Fiscal year ending September 30,
Technology consists of both purchased and internally developed software. Internally developed
software primarily represents software utilized by the VisaNet electronic payments network. At
September 30, 2018 and 2017, accumulated amortization for technology was $1.9 billion and
$1.7 billion, respectively.
2,253
2,472 $
$
(2,890)
(3,225)
5,143
5,697
2,533
2,916
139
153
1,534
1,661
865
72
1,077 $
Non-U.S. Plans(1)
415
571
$ 65 $ 31
$ 65 $ 31
debt securities
Corporate debt securities
Cash equivalents.
Collective investment
funds
(in millions)
540
2017
2017
2018
2017
2018
2017
2018
Total
Level 3
2018
571
540
187
39
34
39
34
75
62
75
47
30
30
29
62
U.S. Treasury securities
Asset-backed securities
47
30
U.S. government-sponsored
197
187
197
Fair Value Measurements at September 30 Using Inputs Considered as
Level 1
Equity securities
Level 2
The following tables set forth by level, within the fair value hierarchy, the pension plan's
investments at fair value as of September 30, 2018 and 2017, including the impact of transactions that
were not settled at the end of September:
2018
For the Years Ended September 30,
2017 2016
2017
Non-U.S. Plans
U.S. Plans
2018
Weighted-Average Actuarial Assumptions:
66
(52) $
2016
26 $
(147) $
(85) $
$
Total recognized in net periodic benefit cost
and other comprehensive income
66
(55) $
30 $
$
14 $
Discount rate (1) for benefit obligation:
Pension
4.23% 3.84% 3.62% 2.90% 2.70% 2.40%
Discount rate for net periodic benefit cost:
Pension
For non-U.S. pension plan assets, the Company's investment strategy is to invest in the following:
equity securities of 15%, interest and inflation hedging assets of 40% and other of 45%, consisting of
cash, certain multi-asset funds and property. At September 30, 2018, non-U.S. pension plan asset
allocations for these categories were 16%, 38% and 46%, respectively, which were generally aligned
with the target allocations.
invest in the following: equity securities of 50% to 80%, fixed income securities of 25% to 35% and
other, primarily consisting of cash equivalents to meet near term expected benefit payments and
expenses, of up to 7%. At September 30, 2018, U.S. pension plan asset allocations for these
categories were 65%, 29% and 6%, respectively, which were within target allocation ranges.
September 30, 2018
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
VISA INC.
96
Pension plan assets are broadly diversified to maintain a prudent level of risk and to provide
adequate liquidity for benefit payments. The Company generally evaluates and rebalances the pension
plan assets, as appropriate, to ensure that allocations are consistent with its investment strategy and
within target allocation ranges. For U.S. pension plan assets, the Company's investment strategy is to
Pension plan assets are managed with a long-term perspective to ensure that there is an
adequate level of assets to support benefit payments to participants over the life of the pension plan.
Pension plan assets are managed by external investment managers. Investment manager
performance is measured against benchmarks for each asset class on a quarterly basis. An
independent consultant assists management with investment manager selections and performance
evaluations.
Pension Plan Assets
(3) This assumption is not applicable for the U.S. plans due to the amendment of the U.S. qualified defined benefit pension plan
in October 2015, which discontinued the employer provided credits effective after December 31, 2015.
(2) Primarily based on the targeted allocation, and evaluated for reasonableness by considering such factors as: (i) actual return
on plan assets; (ii) historical rates of return on various asset classes in the portfolio; (iii) projections of returns on various
asset classes; and (iv) current and prospective capital market conditions and economic forecasts.
(1) Represents a single weighted-average discount rate derived based on a cash flow matching analysis, with the projected
benefit payments matching spot rates from a yield curve developed from high-quality corporate bonds.
ΝΑ NA 3.20% 3.20% 3.20%
ΝΑ NA 3.20% 3.20% 3.00%
NA
ΝΑ
Net periodic benefit cost
Rate of increase (3) in compensation levels for:
Benefit obligation
7.00% 7.00% 7.00% 4.25% 4.50% 3.92%
Expected long-term rate of return on plan
assets (2)
3.84% 3.62% 4.33% 2.70% 2.40% 3.10%
U.S. Plans
141
145
141
Non-U.S. Plans
U.S. Plans
2023
2022
2021
2020
2019.
Expected benefit payments
(in millions)
Expected employer contributions
2019 ..
Actual employer contributions
2018.
Cash Flows
There were no transfers between Level 1 and Level 2 assets during fiscal 2018 or 2017. A roll-
forward of Level 3 plan assets measured at fair value is not presented because activities during fiscal
2018 and 2017 were immaterial.
Level 3 assets. Asset-backed securities are bonds that are backed by various types of assets and
primarily consist of mortgage-backed securities. Asset-backed securities are classified as Level 3 due
to a lack of observable inputs in measuring fair value.
Level 2 assets. Collective investment funds are unregistered investment vehicles that generally
commingle the assets of multiple fiduciary clients, such as pension and other employee benefit plans,
to invest in portfolio of stocks, bonds or other securities. Although the collective investment funds held
by the plan are ultimately invested in publicly traded equity securities, their own unit values are not
directly observable, and therefore they are classified as Level 2. The fair values of corporate debt,
multi-asset, derivatives and U.S. government-sponsored securities are based on quoted prices in
active markets for similar assets as provided by third-party pricing vendors. This pricing data is
reviewed internally for reasonableness through comparisons with benchmark quotes from independent
third-party sources. Based on this review, the valuation is confirmed or revised accordingly.
September 30, 2018
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
VISA INC.
2017.
1
$
11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
98
The Company indemnifies its clients for settlement losses suffered due to failure of any other
client to fund its settlement obligations in accordance with the Visa operating rules. This
indemnification creates settlement risk for the Company due to the difference in timing between the
date of a payment transaction and the date of subsequent settlement.
Note 8-Settlement Guarantee Management
The Company sponsors a defined contribution plan, or 401(k) plan, that covers substantially all of
its employees residing in the United States. Personnel costs included $93 million, $58 million, and
$55 million in fiscal 2018, 2017 and 2016, respectively, for expenses attributable to the Company's
employees under the 401(k) plan. The Company's contributions to this 401(k) plan are funded on a
current basis, and the related expenses are recognized in the period that the payroll expenses are
incurred.
Other Benefits
2024-2028
555558
10
73
១១៨៨មិ
284
64
67
150
10
1
15
9
97
Level 1 assets. Cash equivalents (money market funds and time deposits), U.S. and UK Treasury
securities and equity securities are classified as Level 1 within the fair value hierarchy, as fair value is
based on quoted prices in active markets.
(1) Multi-asset securities represent pension plan assets that are invested in funds comprised of broad ranges of assets.
$ 74 $ 285 $ 329 $ 116 $ 33 $ 32 $ 436 $ 433
(in millions)
2017
2018
2018
2017
2018
2017
2018
Total
Level 3
Level 2
Level 1
Multi-asset securities (1)
Total
Cash equivalents . .
Corporate debt securities
UK Treasury securities
Asset-backed securities
Equity securities. .
Fair Value Measurements at September 30 Using Inputs Considered as
Non-U.S. Plans
$ 268 $ 251 $ 788 $ 784 $ 34 $ 39 $1,090 $1,074
Total.
145
EA
19
6 $
$ 6 $
77
329
77
329
134
68
134
32
33
32
32
98
68
33
150
150
-
39
39
1
(50) $ (143) $
$
comprehensive income
47 $
2017
2018
2017
2018
Non-U.S. Plans
September 30,
U.S. Plans
September 30,
Net actuarial loss.
(in millions)
97 $
Amounts recognized in accumulated other comprehensive income before tax:
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
VISA INC.
94
(16) $
161 $
246 $
$
Funded status at end of fiscal year
September 30, 2018
39 $
9
Benefit obligations in excess of plan assets related to the Company's U.S. non-qualified
plan and the non-U.S. pension plans(¹) :
436 $
- $
- $
$
Fair value of plan assets-end of year.
(452) $ (5)
(7) $
(6) $
$
Accumulated benefit obligation-end of year.
Accumulated benefit obligation in excess of plan assets
(in millions)
2017
September 30,
Non-U.S. Plans
2018
2017
2018
U.S. Plans
September 30,
(6)
(6)
(5)
Non-current liability
Fair value of plan assets-end of fiscal year
10
(12)
Foreign currency exchange rate changes
(14)
(9)
(137)
(63)
Benefit payments
5
11
9
1
Company contribution
17
13
125
78
Actual return on plan assets
$
|
1,090 $
436 $
(10)
(1)
(1)
Current liability
5
$
SA
-
168 $
252 $
$
Non-current asset
Recognized in Consolidated Balance Sheets:
(16) $
161 $
246 $
$
Funded status at end of fiscal year
433
1,074 $
433 $
Projected benefit obligation in excess of plan assets
$
September 30, 2018
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
VISA INC.
95
95
(1) For fiscal 2016, the amounts represent the Visa Europe plans' net pension benefit cost recognized from the Closing through
September 30, 2016.
3 $
(4) $
Other changes in plan assets and benefit obligations recognized in other comprehensive
income:
(5) $
(35) $
$
13
15
3
(8)
2
15
(4) $
Current year actuarial loss (gain).
Amortization of actuarial (loss) gain
U.S. Plans
Non-U.S. Plans
Total recognized in other
Amortization of prior service credit
9
(2)
-
(20)
66
(53) $
30 $ 30 $
(113) $
(30)
(47) $
(3)
(in millions)
2016
2017
2018
2016
2017
2018
For the Years Ended September 30,
(1)
(4)
(16)
(20)
For the Years Ended September 30,
U.S. Plans
Total net periodic benefit cost
Settlement loss.
Curtailment gain
Amortization of actuarial loss
Amortization of prior service credit
Expected return on assets
Interest cost
Service cost
Net periodic pension cost:
436 $
$
$
Fair value of plan assets-end of year
(5)
(452) $
(7) $
(6) $
2018
Benefit obligation-end of year ..
2017
2018
(69)
(70)
(70)
11
12
40
36
32
1
6 $
4 $
13 $
$
-
$
-
(in millions)
2016
2017
2016
VISA INC.
2017
(in millions, except per share data)
600
(1) Effective price per share is calculated using the volume-weighted average price of the Company's class A common stock
over a pricing period in accordance with the Company's current certificate of incorporation.
Under the terms of the Europe retrospective responsibility plan, the Company is entitled to
recover VE territory covered losses through periodic adjustments to the class A common stock
conversion rates applicable to the UK&I and Europe preferred stock. See Note 2-U.S. and Europe
Retrospective Responsibility Plans.
The following table presents as-converted UK&I and Europe preferred stock, after the Company
recovered VE territory covered losses through conversion rate adjustments, for fiscal 2018 and 2017.
There were no comparable adjustments recorded for UK&I and Europe preferred stock during fiscal
2016.
Reduction in equivalent number of as-converted
shares of class A common stock
UK&I Preferred Stock
2018
Europe Preferred Stock
For the Years Ended September 30,
2017
2018
2017
132.32
(in millions, except per share and conversion rate data)
(1)
-
(1)
$ 112.92 $ 85.01
-
Effective price per share (2)
$
113.05
(1)
$
-
2
5
$
Shares repurchased in the open market(2)
Average repurchase price per share(3)
Total cost
2017
2016
(in millions, except per share data)
58
77
91
$ 89.98 $ 77.05
$ 7,192 $ 6,891 $ 6,987
$ 123.76
(1) Shares repurchased in the open market reflect repurchases settled during fiscal 2018, 2017 and 2016. These amounts
include repurchases traded but not yet settled on or before September 30, 2017, September 30, 2016 and September 30,
2015 for fiscal 2018, 2017 and 2016, respectively. Also, these exclude repurchases traded but not yet settled on or before
September 30, 2018, September 30, 2017 and September 30, 2016 for fiscal 2018, 2017 and 2016, respectively.
(2) All shares repurchased in the open market have been retired and constitute authorized but unissued shares.
(3) Figures in the table may not recalculate exactly due to rounding. Average repurchase price per share is calculated based on
unrounded numbers.
In January 2018, the Company's board of directors authorized an additional $7.5 billion share
repurchase program. This authorization has no expiration date. As of September 30, 2018, the Company's
January 2018 share repurchase program had remaining authorized funds of $4.2 billion for share
repurchase. All share repurchase programs authorized prior to January 2018 have been completed.
$
102
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
September 30, 2018
Under the terms of the U.S. retrospective responsibility plan, when the Company makes a deposit
into the litigation escrow account, the shares of class B common stock are subject to dilution through a
reduction to the conversion rate of the shares of class B common stock to shares of class A common
stock.
The following table presents as-converted class B common stock after deposits into the litigation
escrow account for fiscal 2018. There were no comparable adjustments recorded for as-converted
class B common stock during fiscal 2017 and 2016.
For the Year Ended
September 30, 2018
Effective price per share(1)
Deposits under the U.S. retrospective responsibility plan
ᎾᎯ ᎾᎯ
(in millions, except per share data)
VISA INC.
The following table presents share repurchases in the open market for the following fiscal years(1):
For the Years Ended September 30,
2018
88.70
35
Diluted earnings per share is computed by dividing net income available by the weighted-average
number of shares of common stock outstanding, participating securities and, if dilutive, potential class
A common stock equivalent shares outstanding during the period. Dilutive class A common stock
equivalents may consist of: (1) shares of class A common stock issuable upon the conversion of UK&I
and Europe preferred stock and class B and C common stock based on the conversion rates in effect
through the period, and (2) incremental shares of class A common stock calculated by applying the
treasury stock method to the assumed exercise of employee stock options, the assumed purchase of
stock under the Employee Stock Purchase Plan and the assumed vesting of unearned performance
shares.
The following table presents earnings per share for fiscal 2018.(1)
Class A common stock.
Class B common stock.
Class C common stock
Participating securities (4)
Net income
Basic Earnings Per Share
Diluted Earnings Per Share
(in millions, except per share data)
Weighted-
Income
Allocation
(A) (2)
$ 7,937
Basic earnings per share is computed by dividing net income available to each class by the
weighted-average number of shares of common stock outstanding and participating securities during
the period. Net income is allocated to each class of common stock and participating securities based
on its proportional ownership on an as-converted basis. The weighted-average number of shares of
each class of common stock outstanding reflects changes in ownership over the periods presented.
See Note 11-Stockholders' Equity.
Average
Outstanding (B)
Earnings per
Share =
(A)/(B)
1,792 $
4.43
Income
Allocation
(A) (2)
$10,301
Weighted-
Average
Shares
Earnings per
Share=
Outstanding (B)
Shares
Recovery through conversion rate adjustment . . $
Note 12-Earnings Per Share
stockholders are entitled to cast a number of votes equal to the number of shares of class B or C
common stock held multiplied by the applicable conversion rate in effect on the record date. Holders of
the Company's common stock have no right to vote on any amendment to the current certificate of
incorporation that relates solely to any series of preferred stock.
$
190 $
21
$
1
(1) The reduction in equivalent number of shares of class A common stock was less than one million shares.
(2) Effective price per share for each adjustment made during the year is calculated using the volume-weighted average price of
the Company's class A common stock over a pricing period in accordance with the Company's current certificates of
designations for its series B and C convertible participating preferred stock. Effective price per share for each fiscal year is
calculated using the weighted-average effective prices of the respective adjustments made during the year.
Class B common stock. The class B common stock is not convertible or transferable until the date
on which all of the U.S. covered litigation has been finally resolved. This transfer restriction is subject to
limited exceptions, including transfers to other holders of class B common stock. After termination of
the restrictions, the class B common stock will be convertible into class A common stock if transferred
to a person that was not a Visa Member (as defined in the current certificate of incorporation) or similar
person or an affiliate of a Visa Member or similar person. Upon such transfer, each share of class B
common stock will automatically convert into a number of shares of class A common stock based upon
the applicable conversion rate in effect at the time of such transfer.
103
VISA INC.
Dividends declared. The Company declared and paid $1.9 billion in dividends in fiscal 2018 at a
quarterly rate of $0.195 per share in the first fiscal quarter and $0.21 per share in the remaining
quarters of the fiscal year. On October 16, 2018, the Company's board of directors declared a quarterly
cash dividend of $0.25 per share of class A common stock (determined in the case of class B and C
common stock and UK&I and Europe preferred stock on an as-converted basis), which will be paid on
December 4, 2018, to all holders of record of the Company's common and preferred stock as of
November 16, 2018.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Adjustment of the conversion rate occurs upon: (i) the completion of any follow-on offering of
class A common stock completed to increase the size of the U.S. litigation escrow account (or any
cash deposit by the Company in lieu thereof) resulting in a further corresponding decrease in the
conversion rate; or (ii) the final resolution of the U.S. covered litigation and the release of funds
remaining on deposit in the U.S. litigation escrow account to the Company resulting in a corresponding
increase in the conversion rate. See Note 2-U.S. and Europe Retrospective Responsibility Plans.
Class C common stock. As of September 30, 2018, all of the shares of class C common stock
have been released from transfer restrictions. A total of 140 million shares have been converted from
class C to class A common stock upon their sale into the public market.
Preferred stock. Preferred stock may be issued as redeemable or non-redeemable, and has
preference over any class of common stock with respect to the payment of dividends and distribution of
the Company's assets in the event of a liquidation or dissolution. The Company had 5 million shares of
UK&I and Europe preferred stock outstanding at the end of fiscal 2018 and 2017. The shares of UK&I
and Europe preferred stock are subject to restrictions on transfer and may become convertible in
stages based on developments in the VE territory covered litigation. The shares of UK&I and Europe
preferred stock will become fully convertible on the 12th anniversary of the Closing, subject only to a
holdback to cover any then-pending claims. Upon any such conversion of the UK&I or Europe
preferred stock (whether by such 12th anniversary, or thereafter with respect to claims pending on
such anniversary), the holder would receive either class A common stock or class A equivalent
preferred stock (for those who are not eligible to hold class A common stock pursuant to the
Company's charter). The class A equivalent preferred stock will be freely transferable and each share
of class A equivalent preferred stock will automatically convert into 100 shares of class A common
stock upon a transfer to any holder that is eligible to hold class A common stock under the charter. See
Note 2-U.S. and Europe Retrospective Responsibility Plans.
Voting rights. The holders of the UK&I and Europe preferred stock have no right to vote on any
matters, except for certain defined matters, including, in specified circumstances, any consolidation,
merger, combination or similar transaction of the Company in which the preferred stockholders would
either (i) receive shares of common stock or other equity securities of the Company with preferences,
rights and privileges that are not substantially identical to the preferences, rights and privileges of the
applicable series of preferred stock or (ii) receive securities, cash or other property that is different from
what the Company's class A common stockholders would receive. With respect to these limited
matters on which the holders of preferred stock may vote, approval by the preferred stockholders
requires the affirmative vote of the outstanding voting power of each such series of preferred stock,
each such series voting as a single class. In either case, the UK&I and Europe preferred stockholders
are entitled to cast a number of votes equal to the number of shares held by each such holder. Holders
of the class A equivalent preferred stock, upon issuance at conversion, will have similar voting rights to
the rights of the holders of the UK&I and Europe preferred stock.
Class A common stockholders have the right to vote on all matters on which stockholders
generally are entitled to vote. Class B and C common stockholders have no right to vote on any
matters, except for certain defined matters, including (i) any decision to exit the core payments
business, in which case the class B and C common stockholders will vote together with the class A
common stockholders in a single class, and (ii) in specified circumstances, any consolidation, merger,
combination or similar transaction of the Company, in which case the class B and C common
stockholders will vote together as a single class. In either case, the class B and C common
104
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
September 30, 2018
September 30, 2018
(A)/(B)
Reduction in as-converted shares. During fiscal 2018, total as-converted class A common stock
was reduced by 63 million shares at an average price of $124.29 per share. Of the 63 million shares,
58 million were repurchased in the open market using $7.2 billion of operating cash on hand.
Additionally, in June 2018, the Company deposited $600 million of operating cash into the litigation
escrow account previously established under the U.S. retrospective responsibility plan. Also, the
Company recovered $56 million of VE territory covered losses in accordance with the Europe
retrospective responsibility plan during fiscal 2018. The deposit and recovery have the same economic
effect on earnings per share as repurchasing the Company's class A common stock, because they
reduce the class B common stock conversion rate and the UK&I and Europe preferred stock
conversion rates and consequently, reduce the as-converted class A common stock share count. See
Note 2-U.S. and Europe Retrospective Responsibility Plans.
(2) Class A common stock shares outstanding reflect repurchases settled on or before September 30, 2018.
Note 9-Derivative and Non-derivative Financial Instruments
Derivative Financial Instruments
Designated derivative financial instrument hedges. The aggregate notional amount of the
Company's derivative contracts outstanding in its hedge program was $2.5 billion at September 30,
2018 and $1.8 billion at September 30, 2017. As of September 30, 2018, the Company's cash flow
hedges in an asset position totaled $78 million and were classified in prepaid expenses and other
current assets on the consolidated balance sheets, while cash flow hedges in a liability position totaled
$20 million and were classified in accrued liabilities on the consolidated balance sheets. These
amounts are subject to master netting agreements, which provide the Company with a legal right to net
settle multiple payable and receivable positions with the same counterparty, in a single currency
through a single payment. However, the Company presents fair values on a gross basis on the
consolidated balance sheets. See Note 1-Summary of Significant Accounting Policies.
99
99
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
September 30, 2018
The Company uses regression analysis to assess hedge effectiveness prospectively and
retrospectively. The effectiveness tests are performed on foreign exchange forward contracts based on
changes in the spot rate of the derivative instrument compared to changes in the spot rate of the
forecasted hedged transaction. Forward points are excluded from effectiveness testing and
measurement purposes. Excluded forward points are reported in earnings. For fiscal 2018, 2017 and
2016, the amounts by which earnings were reduced relating to excluded forward points were
$9 million, $18 million and $30 million, respectively.
Cash equivalent collateral reflected in customer collateral on the consolidated balance sheets is
held by a custodian in an account under the Company's name and ownership. At September 30, 2018
and 2017, $384 million of cash equivalent collateral is excluded from the consolidated balance sheets
as clients retain beneficial ownership of it and it is only accessible to the Company in the event of
default by the client on its settlement obligations. All other collateral is excluded from the consolidated
balance sheets. See Note 1-Summary of Significant Accounting Policies.
The effective portion of changes in the fair value of derivative contracts is recorded as a
component of accumulated other comprehensive income or loss on the consolidated balance sheets.
When the forecasted transaction occurs and is recognized in earnings, the amount in accumulated
other comprehensive income or loss related to that hedge is reclassified to operating revenue or
expense. The Company expects to reclassify $71 million of pre-tax gains to earnings during fiscal
2019.
The Company utilizes foreign exchange derivative contracts to hedge against foreign currency
exchange rate fluctuations related to certain monetary assets and liabilities denominated in foreign
currency held by Visa Europe. As of September 30, 2018 and 2017, the aggregate notional amount of
these balance sheet hedges was $1.2 billion and $1.0 billion, respectively.
Credit and market risks. The Company's derivative financial instruments are subject to both credit
and market risk. The Company monitors the credit-worthiness of the financial institutions that are
counterparties to its derivative financial instruments and does not consider the risks of counterparty
nonperformance to be significant. The Company mitigates this risk by entering into master netting
agreements, and such agreements require each party to post collateral against its net liability position
with the respective counterparty. As of September 30, 2018, the Company has received collateral of
$56 million, from counterparties, which is included in accrued liabilities in the consolidated balance
sheets, and posted collateral of $2 million, which is included in prepaid expenses and other current
assets in the consolidated balance sheets. Notwithstanding the Company's efforts to manage foreign
exchange risk, there can be no absolute assurance that its hedging activities will adequately protect
against the risks associated with foreign currency fluctuations. Credit and market risks related to
derivative instruments were not considered significant as of September 30, 2018.
Non-derivative Financial Instrument Designated as a Net Investment Hedge
As of September 30, 2018, the Company had designated $1.1 billion of its euro-denominated
deferred cash consideration liability, a non-derivative financial instrument, as a hedge against a portion
of the foreign currency exchange rate exposure of the Company's euro-denominated net investment of
$18.8 billion in Visa Europe. During fiscal 2018, changes in the euro exchange rate against the U.S.
dollar resulted in net foreign currency translation adjustments of $0.4 billion.
100
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
September 30, 2018
Note 10-Enterprise-wide Disclosures and Concentration of Business
The Company's long-lived net property, equipment and technology assets are classified by major
geographic areas as follows:
Non-designated derivative financial instrument hedges. Subsequent to the acquisition of Visa
Europe, the Company entered into currency forward contracts to offset Visa Europe hedges
outstanding at the date of the acquisition that did not qualify for cash flow hedge accounting treatment
in accordance with U.S. GAAP or the Company's accounting policy.
United States
International
860
4,142 $ 3,914
1,316
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
September 30, 2018
Historically, the Company has experienced minimal losses as a result of its settlement risk
guarantee. However, the Company's future obligations, which could be material under its guarantees,
are not determinable as they are dependent upon future events.
The Company's settlement exposure is limited to the amount of unsettled Visa payment
transactions at any point in time, which vary significantly day to day. The Company's maximum
settlement exposure was $91.7 billion and the average daily settlement exposure was $56.7 billion
during the year ended September 30, 2018.
The Company maintains and regularly reviews global settlement risk policies and procedures to
manage settlement exposure, which may require clients to post collateral if certain credit standards are
not met. At September 30, 2018 and 2017, the Company held the following collateral to manage
settlement exposure:
September 30, September 30,
2018
(in millions)
941
2017
Pledged securities at market value
Letters of credit.
Guarantees
Total
$
1,708 $ 1,490
192
167
1,382
Cash equivalents
(3) The class B to class A common stock conversion rate is presented on a rounded basis. Conversion calculations for dividend
payments are based on a conversion rate rounded to the tenth decimal.
Total
2018
Into Class A
Common Stock
As-converted
Class A Common
Stock (1)
(in millions, except conversion rate)
2
12.9550
32
3
13.8880
44
Shares
Outstanding
1,768
245
1.6298
(3)
400
12
4.0000
47
2,291
(1) Figures in the table may not recalculate exactly due to rounding. As-converted class A common stock is calculated based on
unrounded numbers.
1,768
September 30, September 30,
Total
Class B common stock.
2017
(in millions)
$
2,152 $ 2,003
320
250
$
2,472 $ 2,253
Revenue by geographic market is primarily based on the location of the issuing financial
institution. Revenues earned in the United States were approximately 45% of net operating revenues in
fiscal 2018, 47% in fiscal 2017 and 52% in fiscal 2016. No individual country, other than the United
States, generated more than 10% of net operating revenues in these years.
Class C common stock
A significant portion of Visa's operating revenues is concentrated among its largest clients. Loss
of business from any of these clients could have an adverse effect on the Company. The Company did
not have any customer that generated greater than 10% of its net operating revenues in fiscal 2018,
2017 and 2016.
Visa Europe acquisition. In connection with the Visa Europe acquisition, three new series of
preferred stock of the Company were created. Upon issuance, all of the preferred stock participate on
an as-converted basis in regular quarterly cash dividends declared on the Company's class A common
stock. Additionally, Visa Europe held shares of Visa Inc.'s class C common stock, which were treated
as treasury stock in purchase accounting. During fiscal 2017, the newly-formed Visa Foundation
received all Visa Inc. shares that were previously recorded as treasury stock. See Note 16—Income
Taxes
As-converted class A common stock. The UK&I and Europe preferred stock, issued in the Visa
Europe acquisition, is convertible upon certain conditions into shares of class A common stock or class
A equivalent preferred stock, at an initial conversion rate of 13.952 shares of class A common stock for
each share of UK&I and Europe preferred stock. The conversion rates may be reduced from time to
time to offset certain liabilities. See Note 2-U.S. and Europe Retrospective Responsibility Plans.
101
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
September 30, 2018
The number of shares of each series and class, and the number of shares of class A common
stock on an as-converted basis at September 30, 2018, are as follows:
Conversion Rate
UK&I preferred stock
Europe preferred stock
Class A common stock (2)
Note 11-Stockholders' Equity
2,329 (3) $
Reduction in equivalent number of as-converted shares of class A
common stock
1,787
Fair value per option granted
2018
4
2.0%
18.3%
0.7%
18.24 $
4.23
1.6%
20.2%
Expected dividend yield(4)
0.8%
13.90 $
4.35
1.5%
21.7%
0.7%
15.01
(1) Until March 2018, this assumption was based on the Company's historical option exercises and those of a set of peer
companies that management believed to be generally comparable to Visa. The Company's data was weighted based on the
number of years between the measurement date and Visa's IPO date as a percentage of the options' contractual term. The
relative weighting placed on Visa's data and peer data for stock options granted until March 2018 in fiscal 2018 was
approximately 97% and 3%, respectively, 87% and 13% in fiscal 2017, respectively, and 77% and 23% in fiscal 2016,
respectively. The assumptions for stock options granted after March 2018 was based on Visa's historical exercise experience
as the passage of time since the Company's IPO has exceeded 10 years.
(2) Based upon the zero coupon U.S. treasury bond rate over the expected term of the awards.
(3) Based on the Company's implied and historical volatility. The expected volatility was approximately 18% in fiscal 2018 and
20% in fiscal 2017 and ranged from 20% to 23% in fiscal 2016.
(4) Based on the Company's annual dividend rate on the date of grant.
2016
107
Expected volatility(3)
Expected term (in years) (1)
62 Not presented Not presented $
61 Not presented
Not presented
Net income
$ 5,991
(1) Figures in the table may not recalculate exactly due to rounding. Earnings per share is calculated based on unrounded
numbers.
(2) Net income is allocated based on proportional ownership on an as-converted basis. The weighted-average number of shares
of as-converted class B common stock used in the income allocation was 403 million for fiscal 2018, and 405 million for fiscal
2017 and 2016. The weighted-average number of shares of as-converted class C common stock used in the income
allocation was 49 million, 58 million and 75 million for fiscal 2018, 2017 and 2016, respectively. The weighted-average
number of shares of preferred stock included within participating securities was 32 million and 33 million of as-converted
UK&I preferred stock for fiscal 2018 and 2017, respectively, and 44 million of as-converted Europe preferred stock for fiscal
2018 and 2017.
(3) Weighted-average diluted shares outstanding are calculated on an as-converted basis, and include incremental common
stock equivalents, as calculated under the treasury stock method. The computation includes 3 million common stock
equivalents for fiscal 2018, and 5 million common stock equivalents for fiscal 2017 and 2016, because their effect would have
been dilutive. The computation excludes 1 million of common stock equivalents for fiscal 2018, and 2 million of common
stock equivalents for fiscal 2017 and 2016, because their effect would have been anti-dilutive.
(4) Participating securities include preferred stock outstanding and unvested share-based payment awards that contain
non-forfeitable rights to dividends or dividend equivalents, such as the Company's UK&I and Europe preferred stock,
restricted stock awards, restricted stock units and earned performance-based shares. Participating securities' income is
allocated based on the weighted-average number of shares of as-converted stock. See Note 11-Stockholders' Equity.
Risk-free rate of return(2)
106
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
Note 13-Share-based Compensation
September 30, 2018
2007 Equity Incentive Compensation Plan
The Company's 2007 Equity Incentive Compensation Plan, or the EIP, authorizes the
compensation committee of the board of directors to grant non-qualified stock options ("options"),
restricted stock awards ("RSAS"), restricted stock units ("RSUs") and performance-based shares to its
employees and non-employee directors, for up to 236 million shares of class A common stock. Shares
available for award may be either authorized and unissued or previously issued shares subsequently
acquired by the Company. The EIP will continue to be in effect until all of the common stock available
under the EIP is delivered and all restrictions on those shares have lapsed, unless the EIP is
terminated earlier by the Company's board of directors. Awards may be granted under the plan until
January 31, 2022.
Share-based compensation cost is recorded net of estimated forfeitures on a straight-line basis
for awards with service conditions only, and on a graded-vesting basis for awards with service,
performance and market conditions. For fiscal 2018, 2017 and 2016, the Company recorded share-
based compensation cost related to the EIP of $312 million, $224 million and $211 million,
respectively, in personnel expense on its consolidated statements of operations. The related tax
benefits were $53 million, $67 million and $62 million for fiscal 2018, 2017 and 2016, respectively. The
amount of capitalized share-based compensation cost was immaterial during fiscal 2018, 2017 and
2016.
Options
Options issued under the EIP expire 10 years from the date of grant and primarily vest ratably
over 3 years from the date of grant, subject to earlier vesting in full under certain conditions.
During fiscal 2018, 2017 and 2016, the fair value of each stock option was estimated on the date
of grant using a Black-Scholes option pricing model with the following weighted-average assumptions:
For the Years Ended September 30,
2017
VISA INC.
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
September 30, 2018
The following table summarizes the Company's option activity for fiscal 2018:
6.94
433
Options exercisable at September 30, 2018 ...
Options exercisable and expected to vest at
September 30, 2018(2)
4.42
55.28
5.42
$
285
5,567,702 $
75.30
74.23
422
(1) Calculated using the closing stock price on the last trading day of fiscal 2018 of $150.09, less the option exercise price,
multiplied by the number of instruments.
(2) Applies a forfeiture rate to unvested options outstanding at September 30, 2018 to estimate the options expected to vest in
the future.
For the options exercised during fiscal 2018, 2017 and 2016, the total intrinsic value was
$249 million, $178 million and $103 million, respectively, and the tax benefit realized was $55 million,
$62 million and $35 million, respectively. As of September 30, 2018, there was $22 million of total
unrecognized compensation cost related to unvested options, which is expected to be recognized over
a weighted-average period of approximately 0.6 years.
Restricted Stock Awards and Restricted Stock Units
RSAS and RSUs issued under the EIP primarily vest ratably over 3 years from the date of grant,
subject to earlier vesting in full under certain conditions.
Upon vesting, the RSAs are settled in class A common stock on a one-for-one basis. During the
vesting period, RSA award recipients are eligible to receive dividends and participate in the same
voting rights as those granted to the holders of the underlying class A common stock. Upon vesting,
RSUS can be settled in class A common stock on a one-for-one basis or in cash, or a combination
thereof, at the Company's option. The Company does not currently intend to settle any RSUs in cash.
During the vesting period, RSU award recipients are eligible to receive dividend equivalents, but do not
participate in the voting rights granted to the holders of the underlying class A common stock. The
company discontinued granting RSAs in fiscal 2016 but will continue to grant RSUs under the EIP.
The fair value and compensation cost before estimated forfeitures for RSAs and RSUs is
calculated using the closing price of class A common stock on the date of grant. No RSAs were
granted during fiscal 2018, 2017 and 2016. The weighted-average grant-date fair value of RSUs
granted during fiscal 2018, 2017 and 2016 was $111.11, $81.67 and $79.77, respectively. The total
grant-date fair value of RSAS and RSUs vested during fiscal 2018, 2017 and 2016 was $183 million,
$163 million and $142 million, respectively.
108
6.86 $
5,788,840 $
Outstanding at September 30, 2018
28.37
Weighted-
Average
Exercise Price
Per Share
Weighted-
Average
Remaining
Contractual
Term
Options
(in years)
Aggregate
Intrinsic
Value (1)
(in millions)
Outstanding at September 30, 2017
7,115,876 $
50.17
Granted
Forfeited
Expired
1,646,060 $
110.26
(281,952)
93.19
(1,128) $
11.00
Exercised
(2,690,016) $
securities(4)
9.93
3,000,704 $
19
Earnings per
Shares
Share=
Outstanding (B)
(A)/(B)
Income
Allocation
(A) (2)
Average
Earnings per
Shares
Average
Share=
(A)/(B)
$ 5,170
1,845 $
2.80
$6,699
2,395 (3) $
2.80
1,134
245 $
Outstanding (B)
4.62
Income
Allocation
(A) (2)
Weighted-
$
245 $
12 $
218
359 Not presented Not presented $
7.28 $1,785
17.72 $
245 $
7.27
217
12
358 Not presented
Weighted-
17.69
105
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
September 30, 2018
The following table presents earnings per share for fiscal 2017.(1)
Class A common stock
Class B common stock
Class C common stock
Participating securities (4)
Net income
Basic Earnings Per Share
Diluted Earnings Per Share
$ 10,301
$1,132
$
Not presented
$
Weighted-
Average
Earnings per
Shares
Share=
Outstanding (B)
(A)/(B)
Class A common stock
$ 4,738
1,906 $
Income
Allocation
(A) (2)
Class B common stock
Class C common stock
Participating
245 $
19 $
2.49 $
4.10 $
5,991
2.48
9.94 $
1,004
185
245 $
245
4.09
1,006
185
(A)/(B)
2,414 (3) $
Share =
Outstanding (B)
4.61
14 $
11.21 $
163
14
$
11.19
232 Not presented Not presented $
6,699
232 Not presented
162
The following table presents earnings per share for fiscal 2016.(1)
Not presented
Earnings per
Average
Weighted-
Income
Allocation
(A) (2)
(in millions, except per share data)
Diluted Earnings Per Share
Basic Earnings Per Share
Shares
U.S.
Non-U.S.
$
Total income before taxes
110
Visa considers an entity to be a related party for purposes of this disclosure if that entity owns
more than 10% of Visa's total voting common stock at the end of the fiscal year, or if an officer or
employee of that entity also serves on the Company's board of directors. The Company considers an
investee to be a related party if the Company's: (i) ownership interest in the investee is greater than or
equal to 10% or (ii) if the investment is accounted for under the equity method of accounting. At
September 30, 2018 and 2017, no entity owned more than 10% of the Company's total voting common
stock. There were no significant transactions with related parties during fiscal 2018, 2017 and 2016.
Note 16 Income Taxes
2018
The Company's income before taxes by fiscal year consisted of the following:
5,839
2016
8,440 $
3,254
2,173
VISA INC.
11,694 $
8,012
2017
(in millions)
8,088 $
4,718
12,806 $
Deferred purchase consideration. On June 21, 2016, the Company acquired 100% of the share
capital of Visa Europe. In connection with the purchase, the Company will pay an additional
€1.0 billion, plus 4% compound annual interest, on the third anniversary of the Closing.
Note 15-Related Parties
2020
Total
September 30, 2018
simulation model. The grant-date fair value of performance-based shares granted in fiscal 2018, 2017
and 2016 was $120.11, $86.37 and $92.71 per share, respectively. Earned performance shares
granted in fiscal 2018, 2017 and 2016 vest approximately three years from the initial grant date. All
performance awards are subject to earlier vesting in full under certain conditions.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
Compensation cost for performance-based shares is initially estimated based on target
performance. It is recorded net of estimated forfeitures and adjusted as appropriate throughout the
performance period. At September 30, 2018, there was $54 million of total unrecognized compensation
cost related to unvested performance-based shares, which is expected to be recognized over a
weighted-average period of approximately 0.94 years.
Employee Stock Purchase Plan
The Visa Inc. Employee Stock Purchase Plan (the "ESPP”) permits eligible employees to
purchase the Company's class A common stock at a 15% discount of the stock price on the purchase
date, subject to certain restrictions. A total of 20 million shares of class A common stock have been
reserved for issuance under the ESPP. ESPP did not have a material impact on the consolidated
financial statements in fiscal 2018, 2017 or 2016.
Note 14-Commitments and Contingencies
Commitments. The Company leases certain premises and equipment throughout the world with
varying expiration dates. The Company incurred total rent expense of $224 million, $159 million and
$134 million in fiscal 2018, 2017 and 2016, respectively. Future minimum payments on leases at
September 30, 2018 are as follows:
Operating leases
2019
2021
$
180 $ 123 $
2022
(in millions)
2023
Thereafter
102 $ 89 $ 75 $ 178 $ 747
September 30, 2018
629
Current:
3,792
3,297
2,799
(1,214)
1,607
(508)
(96)
368
66
23
25
(207)
(1,287)
1,698
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
(778)
(63)
U.S. income before taxes included $2.7 billion, $2.9 billion and $2.5 billion of the Company's U.S.
entities' income from operations outside of the U.S. for fiscal 2018, 2017 and 2016, respectively.
Income tax provision by fiscal year consisted of the following:
754
291
U.S. federal
State and local
Non-U.S.
Total current taxes
Deferred:
U.S. federal
State and local
181
Non-U.S.
Total income tax provision
2018
2017
(in millions)
2016
2,819 $ 2,377 $
2,250
219
Total deferred taxes
VISA INC.
Forfeited.
For the Company's performance-based shares, in addition to service conditions, the ultimate
number of shares to be earned depends on the achievement of both performance and market
conditions. The performance condition is based on the Company's earnings per share target. The
market condition is based on the Company's total shareholder return ranked against that of other
companies that are included in the Standard & Poor's 500 Index. The fair value of the performance-
based shares, incorporating the market condition, is estimated on the grant date using a Monte Carlo
RSA
RSU
RSA RSU
RSA
RSU
-
4,673,701 $ 63.37 $ 80.37
2,832,984 $
$ 111.11
(451,297) (1,937,132) $ 63.39 $ 79.76
(14,710) (365,099) $ 72.25 $ 92.31
Units
Outstanding at
466,007
Granted
Vested
Outstanding at
September 30, 2018
5,204,454 $
-
September 30, 2017
$ 96.50 0.0
Awards
(in years)
$
a $71 million one-time tax benefit related to the Visa Foundation's receipt of Visa Inc.
shares, previously recorded by Visa Europe as treasury stock.
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
September 30, 2018
The following table summarizes the Company's RSA and RSU activity for fiscal 2018:
Weighted-
(in millions)
Weighted-
Average
Remaining
Aggregate
Average
Intrinsic
Restricted Stock
Grant Date
Fair Value
Term
Value (1)
Contractual
109
0.88 $
$ 781
108.05
Outstanding at September 30, 2018
999,416 $
102.07
Weighted-
Average
Remaining
Contractual
(175,214) $
Term
Aggregate
Intrinsic
Value (1)
(in millions)
0.94
$
150
(1) Calculated by multiplying the closing stock price on the last trading day of fiscal 2018 of $150.09 by the number of
instruments.
(2) Represents the maximum number of performance-based shares which could be earned.
(in years)
-
Forfeited
(48,980) $
(1) Calculated by multiplying the closing stock price on the last trading day of fiscal 2018 of $150.09 by the number of
instruments.
At September 30, 2018, there was $284 million of total unrecognized compensation cost related
to unvested RSUs, which is expected to be recognized over a weighted-average period of
approximately 0.88 years for RSUs.
Performance-based Shares
The following table summarizes the maximum number of performance-based shares which could
be earned and related activity for fiscal 2018:
Shares
Weighted-
Average
Grant Date
Fair Value
Outstanding at September 30, 2017
76.07
937,675 $
Granted(2).
641,498 $
120.11
Vested and earned
(355,563) $
88.05
Unearned.
84.20
2,505 $ 4,995 $
The effective income tax rate was 43% in fiscal 2017 and 25% in fiscal 2016. The effective tax
rate in fiscal 2017 differs from the effective tax rate in fiscal 2016 primarily due to:
The tax effect of temporary differences that give rise to significant portions of deferred tax assets
and liabilities at September 30, 2018 and 2017, are presented below:
Balance at end of period
Payments for VE territory covered litigation
Accrual for VE territory covered litigation
Balance at beginning of period
The following table summarizes the accrual activity related to VE territory covered litigation by
fiscal year:
Visa Inc., Visa International and Visa Europe are parties to certain legal proceedings that are
covered by the Europe retrospective responsibility plan. Unlike the U.S. retrospective responsibility
plan, the Europe retrospective responsibility plan does not have an escrow account that is used to fund
settlements or judgments. The Company is entitled to recover VE territory covered losses through a
periodic adjustment to the conversion rates applicable to the UK&I preferred stock and Europe
preferred stock. An accrual for the VE territory covered losses and a reduction to stockholders' equity
will be recorded when the loss is deemed to be probable and reasonably estimable. See further
discussion below under VE Territory Covered Litigation and Note 2-U.S. and Europe Retrospective
Responsibility Plans.
Accrual Summary-VE Territory Covered Litigation
During the second quarter of fiscal 2014, pursuant to the 2012 Settlement Agreement approved
by the MDL 1720 court on January 14, 2014, the Company recorded a $1.1 billion accrual to address
"opt-out" claims for merchants who opted out of the original class settlement agreement. An additional
accrual of $450 million associated with these opt-out claims was recorded in the fourth quarter of fiscal
2014. During the third quarter of fiscal 2018, pursuant to an amended settlement agreement that
superseded the 2012 Settlement Agreement, the Company recorded an additional accrual and
deposited $600 million into the U.S. litigation escrow account. See further discussion below under
Interchange Multidistrict Litigation (MDL) - Individual Merchant Actions and Note 2-U.S. and Europe
Retrospective Responsibility Plans.
978
Balance at end of period ...
978
1,428
$
(150)
Interchange Multidistrict Litigation (MDL) – Putative Class Actions
600
2017
2018
Provision for interchange multidistrict litigation
Payments for U.S. covered litigation .
Balance at beginning of period
The following table summarizes the accrual activity related to U.S. covered litigation by fiscal
September 30, 2018
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
VISA INC.
year:
116
Visa Inc., Visa U.S.A. and Visa International are parties to certain legal proceedings that are
covered by the U.S. retrospective responsibility plan, which the Company refers to as the U.S. covered
litigation. See Note 2-U.S. and Europe Retrospective Responsibility Plans. An accrual for the U.S.
covered litigation and a charge to the litigation provision are recorded when a loss is deemed to be
probable and reasonably estimable. In making this determination, the Company evaluates available
information, including but not limited to actions taken by the litigation committee. The total accrual
related to the U.S. covered litigation could be either higher or lower than the escrow account balance.
982
$
1,434
(in millions)
978 $
$
2018
(in millions)
$ 4,995
43%
$ 2,021
25%
113
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
September 30, 2018
The effective income tax rate was 20% in fiscal 2018 and 43% in fiscal 2017. The effective tax
rate in fiscal 2018 differs from the effective tax rate in fiscal 2017 primarily due to:
•
•
•
the effects of the Tax Act, which include the decrease in the fiscal 2018 federal statutory rate,
the transition tax, and the remeasurement of deferred taxes, as discussed above;
$161 million of tax benefits due to various non-recurring audit settlements in fiscal 2018; and
2017
the absence of the following items related to the Visa Europe reorganization recorded in fiscal
2017:
On September 17, 2018, Visa, MasterCard, and certain U.S. financial institutions reached an
agreement with plaintiffs purporting to act on behalf of the putative Damages Class to resolve all
Damages Class claims (the "Amended Settlement Agreement"), subject to court approval. The Amended
Settlement Agreement supersedes the 2012 Settlement Agreement and includes, among other terms, a
release from participating class members for liability arising out of conduct alleged by the Damages
Class in the litigation, including claims that accrue no later than five years after the Amended Settlement
Agreement becomes final. Participating class members will not release injunctive relief claims as a
named representative or non-representative class member in the putative Injunctive Relief Class. The
Amended Settlement Agreement also requires an additional settlement payment from all defendants
totaling $900 million, with the Company's share of $600 million to be paid from the Company's litigation
escrow account established pursuant to the Company's retrospective responsibility plan. See Note 2—
U.S. and Europe Retrospective Responsibility Plans. The additional settlement payment will be added to
the approximately $5.3 billion previously deposited into settlement accounts by the defendants pursuant
to the 2012 Settlement Agreement. If more than 15% of class members (by payment volume) opt out of
the class, up to $700 million may be returned to defendants (with up to $467 million to the Company)
based on the total merchant opt-out percentage. Defendants may terminate the Amended Settlement
Agreement if more than 25% of class members (by payment volume) opt out of the class.
On remand, the district court entered an order appointing interim counsel for two putative classes
of plaintiffs, a "Damages Class" and an "Injunctive Relief Class." Thereafter, a new group of purported
class plaintiffs, acting on behalf of the putative Injunctive Relief Class, filed a class action complaint
seeking declaratory and injunctive relief, as well as attorneys' fees. That complaint seeks, among other
things, an injunction against: the setting of default interchange rates; certain Visa operating rules
relating to merchants, including the honor-all-cards rule; and various transaction fees, including the
fixed acquirer network fee. The complaint names as defendants Visa Inc., MasterCard Incorporated
and MasterCard International Incorporated, and certain U.S. financial institutions. In addition, the
plaintiffs purporting to act on behalf of the putative Damages Class filed a Third Consolidated
Amended Class Action Complaint, seeking money damages and attorneys' fees, among other relief.
Subsequently, Visa received from the Court and deposited into the Company's U.S. litigation
escrow account "takedown payments" of approximately $1.1 billion. On June 30, 2016, the U.S. Court
of Appeals for the Second Circuit vacated the lower court's certification of the merchant class and
reversed the approval of the settlement. The Second Circuit determined that the class plaintiffs were
inadequately represented, and remanded the case to the lower court for further proceedings.
Visa Inc., Visa U.S.A., Visa International, MasterCard Incorporated, MasterCard International
Incorporated, various U.S. financial institution defendants, and the class plaintiffs signed a settlement
agreement (the "2012 Settlement Agreement") to resolve the class plaintiffs' claims. Pursuant to the
2012 Settlement Agreement, the Company deposited approximately $4.0 billion from the U.S. litigation
escrow account and approximately $500 million attributable to interchange reductions for an eight-
month period into settlement accounts established under the 2012 Settlement Agreement.
New York for coordination of pre-trial proceedings in MDL 1720. A group of purported class plaintiffs
subsequently filed amended and supplemental class complaints. The individual and class complaints
generally challenged, among other things, Visa's and MasterCard's purported setting of interchange
reimbursement fees, their "no surcharge" and honor-all-cards rules, alleged tying and bundling of
transaction fees, and Visa's reorganization and IPO, under the federal antitrust laws and, in some
cases, certain state unfair competition laws. The complaints sought money damages, declaratory and
injunctive relief, attorneys' fees and, in one instance, an order that the IPO be unwound.
September 30, 2018
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
VISA INC.
117
Beginning in May 2005, a series of complaints (the majority of which were styled as class actions)
were filed in U.S. federal district courts by merchants against Visa U.S.A., Visa International and/or
MasterCard, and in some cases, certain U.S. financial institutions. The Judicial Panel on Multidistrict
Litigation issued an order transferring the cases to the U.S. District Court for the Eastern District of
(187)
186
2
1 $
1
a $1.5 billion non-recurring, non-cash income tax provision primarily related to the
elimination of deferred tax balances originally recognized upon the acquisition of Visa
Europe; and
20%
(204)
186
(59)
197
172
56
$ 1,160
(in millions)
1,353
367
(233)
Increases of unrecognized tax benefits related to prior years
Decreases of unrecognized tax benefits related to prior years
Increases of unrecognized tax benefits related to current year
Reductions related to lapsing statute of limitations.
$
Balance at beginning of period
2017
2018
A reconciliation of beginning and ending unrecognized tax benefits by fiscal year is as follows:
At September 30, 2018 and 2017, the Company's total gross unrecognized tax benefits were
$1.7 billion and $1.4 billion, respectively, exclusive of interest and penalties described below. Included
in the $1.7 billion and $1.4 billion are $1.2 billion and $1.1 billion of unrecognized tax benefits,
respectively, that if recognized, would reduce the effective tax rate in a future period.
In accordance with Accounting Standards Codification 740-Income Taxes, the Company is
required to inventory, evaluate and measure all uncertain tax positions taken or to be taken on tax
returns, and to record liabilities for the amount of such positions that may not be sustained, or may only
partially be sustained, upon examination by the relevant taxing authorities.
September 30, 2018
(1)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
114
The Company's operating hub in the Asia Pacific region is located in Singapore. It is subject to a
tax incentive which is effective through September 30, 2023, and is conditional upon meeting certain
business operations and employment thresholds in Singapore. The tax incentive decreased Singapore
tax by $295 million, $252 million and $235 million, and the benefit of the tax incentive on diluted
earnings per share was $0.13, $0.11 and $0.10 in fiscal 2018, 2017 and 2016, respectively.
Current income taxes receivable were $82 million and $148 million at September 30, 2018 and
2017, respectively. Non-current income taxes receivable of $689 million and $755 million at
September 30, 2018 and 2017, respectively, were included in other assets. Income taxes payable of
$257 million and $243 million at September 30, 2018 and 2017, respectively, were included in accrued
liabilities. Accrued income taxes of $2.4 billion and $1.1 billion at September 30, 2018 and 2017,
respectively, were included in other liabilities.
the non-taxable $255 million revaluation of the Visa Europe put option recorded in fiscal
2016.
an $88 million one-time tax benefit due to the remeasurement of deferred tax liabilities
as a result of the reduction in the UK tax rate enacted in fiscal 2016; and
the effect of one-time items related to the Visa Europe acquisition recorded during fiscal
2016, the most significant of which was the $1.9 billion U.S. loss related to the effective
settlement of the Framework Agreement between Visa and Visa Europe. These one-time
items impacted the geographic mix of global income, resulting in a reduced effective tax
rate in fiscal 2016;
the absence of:
$70 million of excess tax benefits related to share-based payments recorded in fiscal 2017, as
a result of the early adoption of ASU 2016-09; and
the items listed above related to the Visa Europe reorganization recorded in fiscal 2017;
•
•
118
•
2,021
VISA INC.
(156)
(1)
$
601
19
7
981
$
(in millions)
982
2017
2018
Accrual Summary-U.S. Covered Litigation
Balance at end of period
Payments for legal matters
Provision for covered legal matters
Provision for uncovered legal matters
Balance at beginning of period
Balance at end of period
The following table summarizes the activity related to accrued litigation by fiscal year:
The Company is party to various legal and regulatory proceedings. Some of these proceedings
involve complex claims that are subject to substantial uncertainties and unascertainable damages.
Accordingly, except as disclosed, the Company has not established reserves or ranges of possible loss
related to these proceedings, as at this time in the proceedings, the matters do not relate to a probable
loss and/or the amount or range of losses are not reasonably estimable. Although the Company
believes that it has strong defenses for the litigation and regulatory proceedings described below, it
could, in the future, incur judgments or fines or enter into settlements of claims that could have a
material adverse effect on the Company's financial position, results of operations or cash flows. From
time to time, the Company may engage in settlement discussions or mediations with respect to one or
more of its outstanding litigation matters, either on its own behalf or collectively with other parties.
Note 17—Legal Matters
The Company is also subject to examinations by various state and foreign tax authorities. All
material state and foreign tax matters have been concluded for years through fiscal 2002. The timing
and outcome of the final resolutions of the federal, state and foreign tax examinations and refund
claims are uncertain. As such, it is not reasonably possible to estimate the impact that the final
outcomes could have on the Company's unrecognized tax benefits in the next 12 months.
The Office of the Assistant Commissioner of Income Tax in India completed the examination of
the Company's income tax returns for the taxable years falling within the period from fiscal 2010 to
2015, and proposed certain assessments. The Company objected to these proposed assessments and
filed appeals to the appellate authorities. While the timing and outcome of the final resolution of these
appeals are uncertain, the Company believes that its income tax provision adequately reflects its
income tax obligations in India.
September 30, 2018
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
VISA INC.
115
During fiscal 2013, the Canada Revenue Agency (CRA) completed its examination of the
Company's fiscal 2003 through 2009 Canadian tax returns and proposed certain assessments. Based
on the findings of its examination, the CRA also proposed certain assessments to the Company's fiscal
2010 through 2017 Canadian tax returns. The Company filed notices of objection against these
assessments and, in fiscal 2015, completed the appeals process without reaching a settlement with the
CRA. In April 2016, the Company petitioned the Tax Court of Canada to overturn the CRA's
assessments. Legal proceedings continue to be in progress. The Company continues to believe that its
income tax provision adequately reflects its obligations to the CRA.
The Company's fiscal 2012 through 2015 U.S. federal income tax return is currently under
Internal Revenue Service (IRS) examination. The Company has filed federal refund claims for fiscal
years 2008 through 2011, which are also currently under IRS examination. Except for the refund
claims, the federal statutes of limitations have expired for fiscal years prior to 2012. The Company's
fiscal years 2006 through 2011 California tax returns are currently under examination. The California
statutes of limitations have expired for fiscal years prior to 2006.
It is the Company's policy to account for interest expense and penalties related to uncertain tax
positions in non-operating expense in its consolidated statements of operations. The Company
recognized $15 million, $23 million and $15 million of interest expense in fiscal 2018, 2017 and 2016,
respectively, related to uncertain tax positions. The Company accrued no penalties in fiscal 2018, and
accrued $1 million and $3 million of penalties in fiscal 2017 and 2016, respectively, related to uncertain
tax positions. At September 30, 2018 and 2017, the Company had accrued interest of $99 million and
$84 million, respectively, and accrued penalties of $34 million related to uncertain tax positions in its
other long-term liabilities.
1,353
$
1,658
The litigation accrual is an estimate and is based on management's understanding of its litigation
profile, the specifics of each case, advice of counsel to the extent appropriate and management's best
estimate of incurred loss as of the balance sheet date.
$ 2,505
U.S. Covered Litigation
(188)
(35)
941
1,307
(286)
(391)
(5,153)
(6,756)
(106)
(59)
(5,545)
(7,206)
(4,604) $
(5,899)
The Tax Act, enacted on December 22, 2017, transitions the U.S. tax system to a new territorial
system and lowers the statutory federal corporate income tax rate from 35% to 21%. The reduction of
the statutory federal corporate tax rate to 21% became effective on January 1, 2018. In fiscal 2018, the
Company's statutory federal corporate rate is a blended rate of 24.5%, which will be reduced to 21% in
fiscal 2019 and thereafter.
(34)
111
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
September 30, 2018
As a result of the reduction in the federal corporate tax rate, the Company provisionally
remeasured its net deferred tax liabilities as of the enactment date of the Tax Act. The deferred tax
remeasurement is now complete and resulted in a one-time, non-cash tax benefit of $1.1 billion,
recorded in fiscal 2018.
In transitioning to the new territorial tax system, the Tax Act requires the Company to include
certain untaxed foreign earnings of non-U.S. subsidiaries in its fiscal 2018 taxable income. Such
foreign earnings are subject to a one-time tax at 15.5% on the amount held in cash or cash
equivalents, and at 8% on the remaining non-cash amount. The 15.5% and 8% tax, collectively
referred to as the "transition tax", was estimated to be $1.1 billion, and was recorded in fiscal 2018.
The transition tax will be paid over a period of eight years as permitted by the Tax Act.
The above-mentioned accounting impact of the transition tax is provisional, based on currently
available information and technical guidance on the interpretations of the new law. The Company
continues to obtain and analyze additional information and guidance as they become available to
complete the accounting for the tax impact of the Tax Act. Additional information currently unavailable
that is needed to complete the analysis includes, but is not limited to, foreign tax returns and foreign
tax documentation for the computation of foreign tax credits, and the final determination of the untaxed
foreign earnings subject to the transition tax. The provisional accounting impact may change until the
accounting analysis is finalized, which will occur no later than the first quarter of fiscal 2019, as
permitted by ASU 2018-05.
The Tax Act also introduces several tax provisions, including:
•
•
•
•
Tax on global intangible low-tax income, which, in general, is determined annually based on
the Company's aggregate foreign subsidiaries' income in excess of certain qualified business
asset investment return. This provision is effective for the Company on October 1, 2018. The
Company needs additional information to complete its analysis on whether to adopt an
accounting policy to account for the tax effects of global intangible low-tax income in the period
that it is subject to such tax, or to provide deferred taxes for book and tax basis differences
that, upon reversal, may be subject to such tax. Hence, the Company has not recorded any tax
on global intangible low-tax income in fiscal 2018. The Company will make an accounting
policy election no later than the first quarter of fiscal 2019.
Base erosion and anti-abuse tax, which, in general, functions like a minimum tax that partially
disallows deductions for certain related party transactions. This new minimum tax is
determined on a year-by-year basis, and this provision is effective for the Company on
October 1, 2018. Hence, no base erosion anti-abuse tax has been recorded in fiscal 2018.
Deduction for foreign-derived intangible income, which, in general, allows a deduction of
certain intangible income derived from serving foreign markets. This provision is effective for
the Company on October 1, 2018. Hence, the Company has not recorded the impact of this
provision in fiscal 2018.
Other new tax provisions, which disallow certain deductions related to entertainment
expenses, fringe benefits provided to employees, executive compensation, and fines or
penalties or similar payments to governments. The Company has recorded provisional
amounts for the tax effects of these new provisions in fiscal 2018, based on information
currently available. The provisional amounts may change no later than the first quarter of fiscal
2019, if additional information is obtained and analyzed.
112
VISA INC.
193
127
236
Deferred Tax Assets:
Accrued compensation and benefits
Accrued litigation obligation
Client incentives
Net operating loss carryforwards
Comprehensive loss
Federal benefit of state taxes
Other
Valuation allowance
Deferred tax assets
Deferred Tax Liabilities:
Property, equipment and technology, net
Intangible assets
Foreign taxes
Deferred tax liabilities
Net deferred tax liabilities
2018
(3)%
29
17
45
34
272
VISA INC.
213
329
194
$
135
(in millions)
2017
373
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
120
At September 30, 2018 and 2017, net deferred tax assets of $14 million and $81 million,
respectively, are reflected in other assets on the consolidated balance sheets.
(553)
(7)%
1,147
9%
―%
―%
balances
Revaluation of Visa Europe put
option. .
other legal entities
Other, net
Income tax provision
(1,133)
(9)%
(5)%
(88)
―%
―%
(89)
(1)%
Reorganization of Visa Europe and
―%
1,515
13%
―%
(386)
(3)%
(172)
(2)%
September 30, 2018
(1)%
(641)
-%
Transition tax on foreign earnings.
Remeasurement of deferred tax
(in millions, except percentages)
Percent
Dollars
Percent
Dollars
Dollars
U.S. federal income tax at statutory
rate
2016
2018
For the Years Ended September 30,
The income tax provision differs from the amount of income tax determined by applying the
applicable U.S. federal statutory rate of 24.5% to pretax income, as a result of the following:
As of September 30, 2018, the Company had $17 million federal, $21 million state and
$137 million foreign net operating loss carryforwards. The federal and state net operating loss
carryforwards will expire in fiscal 2028 through 2037. The foreign net operating loss may be carried
forward indefinitely. The Company expects to fully utilize the federal and state net operating loss
carryforwards in future years.
(465) (4)%
In assessing the realizability of deferred tax assets, management considers whether it is more
likely than not that all or some portion of the deferred tax assets will not be realized. The ultimate
realization of the deferred tax assets is dependent upon the generation of future taxable income during
the periods in which those temporary differences are deductible. The fiscal 2018 and 2017 valuation
allowances relate primarily to foreign net operating losses from subsidiaries acquired in recent years.
2017
$ 3,141
Percent
25%
benefit
Non-U.S. tax effect, net of federal
2%
135
200
2%
2%
State income taxes, net of federal
benefit
35%
$ 2,804
35%
$ 4,093
201
On June 27, 2016, The Kroger Co. ("Kroger”) filed a lawsuit against Visa Inc. in the U.S. District
Court for the Southern District of Ohio. After granting a motion to dismiss filed by Visa, Kroger filed an
amended complaint seeking a declaratory judgment that certain of its actions or policies with respect to
its acceptance of Visa debit cards did not violate a commercial agreement between Kroger and Visa,
and seeking monetary damages under state law. On November 13, 2017, Visa filed a motion to
dismiss the amended complaint, and Kroger subsequently sought leave to file a second amended
complaint. The parties have stipulated that the litigation, including consideration of that motion, be
stayed until December 4, 2018.
EMV Chip Liability Shift
Kroger
Plaintiffs filed a renewed motion for class certification on July 16, 2018, following an earlier denial
of the motion without prejudice.
EMVCO and the financial institution defendants were dismissed, and the matter was subsequently
transferred to the U.S. District Court for the Eastern District of New York, which has clarified that this
case is not part of MDL 1720.
Following their initial complaint filed on March 8, 2016, B&R Supermarket, Inc., d/b/a Milam's
Market, and Grove Liquors LLC filed an amended class action complaint on July 15, 2016, against Visa
Inc., Visa U.S.A., MasterCard, Discover, American Express, EMVCO and certain financial institutions in
the U.S. District Court for the Northern District of California. The amended complaint asserts that
defendants, through EMVCo, conspired to shift liability for fraudulent, faulty or otherwise rejected
payment card transactions from defendants to the purported class of merchants, defined as those
merchants throughout the United States who have been subjected to the “Liability Shift” since October
2015. Plaintiffs claim that the so-called "Liability Shift" violates Sections 1 and 3 of the Sherman Act
and certain state laws, and seek treble damages, injunctive relief and attorneys' fees.
On November 25, 2014, Pulse Network LLC filed suit against Visa Inc. in federal district court in
Texas. Pulse alleges that Visa has, among other things, monopolized and attempted to monopolize
debit card network services markets. Pulse seeks unspecified treble damages, attorneys' fees and
injunctive relief, including to enjoin the fixed acquirer network fee structure, Visa's conduct regarding
PIN-Authenticated Visa Debit and Visa agreements with merchants and acquirers relating to debit
acceptance. On August 31, 2018, the court granted Visa's motion for summary judgment, finding that
Pulse did not have standing to pursue its claims. On September 28, 2018, Pulse filed a notice of
appeal seeking review of the district court's summary judgment decision by the U.S. Court of Appeals
for the Fifth Circuit.
Consumer Class Actions. In October 2011, a purported consumer class action was filed against
Visa and MasterCard in the same federal court challenging the same ATM access fee rules. Two other
purported consumer class actions challenging the rules, later combined, were also filed in October
2011 in the same federal court naming Visa, MasterCard and three financial institutions as defendants.
Plaintiffs seek treble damages, restitution, injunctive relief, and attorneys' fees where available under
federal and state law, including under Section 1 of the Sherman Act and consumer protection statutes.
These cases are proceeding in the district court.
On March 13, 2012, the Antitrust Division of the United States Department of Justice (the
"Division") issued a Civil Investigative Demand, or "CID," to Visa Inc. seeking documents and
information regarding a potential violation of Section 1 or 2 of the Sherman Act, 15 U.S.C. §§ 1, 2. The
CID focuses on PIN-Authenticated Visa Debit and Visa's competitive responses to the Dodd-Frank Act,
including Visa's fixed acquirer network fee. Visa is cooperating with the Division in connection with the
CID.
U.S. Department of Justice Civil Investigative Demand
September 30, 2018
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
121
VISA INC.
122
Pulse Network
VISA INC.
Visa Inc.
Nuts for Candy
June 30,
2018(1)
National ATM Council Class Action. In October 2011, the National ATM Council and thirteen
non-bank ATM operators filed a purported class action lawsuit against Visa (Visa Inc., Visa
International, Visa U.S.A. and Plus System, Inc.) and MasterCard in the U.S. District Court for the
District of Columbia. The complaint challenges Visa's rule (and a similar MasterCard rule) that if an
ATM operator chooses to charge consumers an access fee for a Visa or Plus transaction, that fee
cannot be greater than the access fee charged for transactions on other networks. Plaintiffs claim that
the rule violates Section 1 of the Sherman Act, and seek treble damages, injunctive relief, and
attorneys' fees.
September 30,
2018(1)
Quarter Ended (unaudited)
The following tables show selected quarterly operating results for each quarter and full year of
fiscal 2018 and 2017 for the Company:
Selected Quarterly Financial Data (Unaudited)
123
On October 15, 2018, the Brazilian Administrative Council for Economic Defense ("CADE")
initiated an investigation against Visa, Mastercard, American Express and Elo seeking information
regarding potential competition law violations with respect to network rules that require acquirers to
receive certain information from payment facilitators. Visa is cooperating with CADE.
Brazilian Administrative Council for Economic Defense
On January 19, 2017, the State of Ohio Office of the Attorney General issued an investigative
demand to Visa seeking documents and information focusing on Visa's rules related to the acceptance
of Visa debit cards, as well as cardholder verification methods and the routing of Visa debit
transactions. Visa is cooperating with the Attorney General.
Ohio Attorney General Civil Investigative Demand
Following complaints lodged by certain financial institutions in Korea, in November 2016, the
Korea Fair Trade Commission (KFTC) initiated an investigation into certain pricing changes applicable
to Visa financial institutions in Korea. In August 2018, the KFTC notified Visa that the KFTC
determined that the pricing changes did not violate Korean law and the investigation was closed.
Korea Fair Trade Commission
On April 5, 2017, plaintiff Nuts for Candy, on behalf of itself and a putative class of California
merchants that have accepted Visa-branded cards since January 1, 2004, filed a lawsuit against Visa
Inc., Visa International and Visa U.S.A. in California state court. Nuts for Candy pursues claims under
California state antitrust and unfair business statutes, seeking damages, costs and other remedies.
Subject to the court's approval, Visa and Nuts for Candy have reached an agreement to resolve Nuts
for Candy's claims in connection with the settlement of the putative Damages Class claims discussed
above in Interchange Multidistrict Litigation (MDL) - Putative Class Actions.
September 30, 2018
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
U.S. ATM Access Fee Litigation
The information required by this item concerning director independence pursuant to Item 407(a)
of Regulation S-K is incorporated herein by reference to the section entitled "Independence of
Directors" in our Proxy Statement.
Canadian Merchant Litigation
119
The Company believes it has substantial defenses to the claims asserted in the putative class
actions and individual merchant actions, but the final outcome of individual legal claims is inherently
unpredictable. The Company could incur judgments, enter into settlements or revise its expectations
regarding the outcome of merchants' claims, and such developments could have a material adverse
effect on the Company's financial results in the period in which the effect becomes probable and
reasonably estimable. While the U.S. retrospective responsibility plan is designed to address monetary
liability in these matters, see Note 2-U.S. and Europe Retrospective Responsibility Plans, judgments
or settlements that require the Company to change its business practices, rules, or contractual
commitments could adversely affect the Company's financial results.
The individual merchant actions described in this section have been either assigned to the judge
presiding over MDL 1720, or have been transferred or are being considered for transfer by the Judicial
Panel on Multidistrict Litigation for inclusion in MDL 1720. The court has entered an order confirming
that In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation,
1:05-md-01720-JG-JO (E.D.N.Y.), includes (1) all current and future actions transferred to MDL 1720
by the Judicial Panel on Multidistrict Litigation or other order of any court for inclusion in coordinated or
pretrial proceedings, and (2) all actions filed in the Eastern District of New York that arise out of
operative facts as alleged in the cases subject to the transfer orders of the Judicial Panel on
Multidistrict Litigation. These individual merchant actions are U.S. covered litigation for purposes of the
U.S. retrospective responsibility plan. See Note 2-U.S. and Europe Retrospective Responsibility
Plans.
A number of the individual merchant actions have been settled, and remain settled. Those settled
merchants are not members of the putative Damages Class for purposes of the Amended Settlement
Agreement.
In addition to the cases filed by individual merchants, Visa, MasterCard, and certain U.S. financial
institution defendants in MDL 1720 filed complaints against certain merchants in the Eastern District of
New York seeking, in part, a declaration that Visa's conduct did not violate federal or state antitrust
laws.
Beginning in May 2013, more than 50 cases have been filed in or removed to various federal
district courts by hundreds of merchants generally pursuing damages claims on allegations similar to
those raised in MDL 1720. A number of the cases also include allegations that Visa has monopolized,
attempted to monopolize, and/or conspired to monopolize debit card-related market segments. In
addition, some of the cases seek an injunction against the setting of default interchange rates; certain
Visa operating rules relating to merchants, including the honor-all-cards rule; and various transaction
fees, including the fixed acquirer network fee. One merchant's complaint also asserts that Visa,
MasterCard and their member banks conspired to prevent the adoption of chip-and-PIN authentication
in the U.S. or otherwise circumvent competition in the debit market. The cases name as defendants
Visa Inc., Visa U.S.A., Visa International, MasterCard Incorporated and MasterCard International
Incorporated, although some also include certain U.S. financial institutions as defendants. On
October 27, 2017, certain individual merchants filed amended complaints that, among other things,
added claims for injunctive relief and updated claims for damages.
Interchange Multidistrict Litigation (MDL) - Individual Merchant Actions
Settlement discussions with plaintiffs purporting to act on behalf of the putative Injunctive Relief
Class are ongoing.
September 30, 2018
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
VISA INC.
ITEM 14. Principal Accountant Fees and Services
The information required by this Item is incorporated herein by reference to the section entitled
"Independent Registered Public Accounting Firm Fees” in our Proxy Statement.
128
March 31,
2018
VISA INC.
Beginning in December 2010, a number of class action lawsuits were filed in Quebec, British
Columbia, Ontario, Saskatchewan and Alberta against Visa Canada, MasterCard and ten financial
institutions on behalf of merchants that accept payment by Visa and/or MasterCard credit cards. The
actions allege a violation of Canada's price-fixing law and various common law claims based on
separate Visa and MasterCard conspiracies in respect of default interchange and certain of the
networks' rules. In 2015 and 2016, four financial institutions settled with the plaintiffs. In June 2017,
Visa, MasterCard and a fifth financial institution also reached settlements with the plaintiffs. Settlement
approval hearings were held in 2018 and courts in each of the five provinces approved the settlements.
Wal-Mart Canada and/or Home Depot of Canada Inc. have filed notices of appeal of the British
Columbia, Ontario, Saskatchewan and Alberta decisions approving the settlements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
UK Merchant Litigation
DCC Investigation. In 2013, the EC opened an investigation against Visa Europe, based on a
complaint alleging that Visa Europe's pricing of and rules relating to Dynamic Currency Conversion
(DCC) transactions infringe EU competition rules. This investigation is pending.
All issues relating to intra-regional or domestic consumer debit and credit card transactions
acquired in the EEA were settled by commitments offered by Visa Europe Limited in 2010 and 2014
respectively, and endorsed by the EC. Those commitments have now expired, but the European Union
rates on which those commitments were applied remain subject to limits imposed by the European
Interchange Fee Regulation.
The EC continues to claim that inter-regional interchange fees violate EEA competition law and
may impose fines in the event that it adopts an infringement decision. The potential amount of any fine
cannot be estimated at this time. The EC may also require Visa to reduce the default inter-regional
interchange rates the Company sets, revise the Visa operating rules or the way in which the Company
enforces its rules, or otherwise modify the way the Company does business. Visa responded in writing
to the revised SSO in November 2017 and an oral hearing was held in February 2018. Visa continues
to cooperate with the EC in its investigation.
September 30, 2018
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
VISA INC.
120
Inter-regional Interchange Investigation. Following the issuance of a Statement of Objections in
2009 concerning, among other things, the alleged default application of Visa Inc.'s inter-regional
interchange fees to intra-regional and domestic consumer debit and credit card transactions in the
European Economic Area (EEA), the European Commission (EC) served a Supplementary Statement
of Objections (SSO) on Visa Inc. and Visa International in 2013 and a revised SSO in August 2017.
The revised SSO concerns only the application of Visa Inc.'s inter-regional interchange fees to
transactions involving Visa consumer debit and credit cards issued outside of the Visa Europe region
and used at merchants located within the EEA.
European Commission Proceedings
Other Litigation
The full scope of damages is not yet known because not all Merchant claims have been served
and Visa has substantial defenses. However, the total damages sought in the outstanding claims that
have been issued, served and/or preserved likely amount to approximately $2 billion.
In addition, over 30 additional Merchants have threatened to commence similar proceedings.
Standstill agreements have been entered into with respect to some of those Merchants' claims. While
the amount of interchange being challenged could be substantial, these claims have not yet been filed
and their full scope is not yet known. The Company has learned that several additional European
entities have indicated that they may also bring similar claims and the Company anticipates additional
claims in the future.
A trial took place from November 2016 to March 2017, relating to claims asserted by only one
Merchant. In judgments published in November 2017 and February 2018, the court found as to that
Merchant that Visa's UK domestic interchange did not restrict competition, but that if it had been found
to be restrictive it would not be exemptible under applicable law. In April 2018, the Court of Appeal
heard the Merchant's appeal of the decision alongside two separate MasterCard cases also involving
interchange claims. On July 4, 2018, the Court of Appeal overturned the lower court's rulings, finding
that Visa's UK domestic interchange restricted competition and the question of whether Visa's UK
domestic interchange was exempt from the finding of restriction under applicable law had been
incorrectly decided. The Court of Appeal remitted the claim to the lower court to reconsider the
exemption issue and the assessment of damages. On July 31, 2018, both Visa and the Merchant
applied for permission to appeal aspects of the Court of Appeal's judgment to the Supreme Court of
the United Kingdom.
Since July 2013, in excess of 400 Merchants (the capitalized term “Merchant,” when used in this
section, means a merchant together with subsidiary/affiliate companies that are party to the same
claim) have commenced proceedings against Visa Europe, Visa Inc. and Visa International primarily
relating to interchange rates in Europe. They seek damages for alleged anti-competitive conduct in
relation to one or more of the following types of interchange fees for credit and debit card transactions:
UK domestic, Irish domestic, other European domestic, intra-European Economic Area and/or other
inter-regional. As of the filing date, Visa Europe, Visa Inc. and Visa International have settled the
claims asserted by over 75 Merchants, leaving more than 300 Merchants with outstanding claims.
September 30, 2018
VE Territory Covered Litigation
Fiscal Year
Quarter Ended (unaudited)
2018 Total
3.46 $
0.72
SASASA
$
0.86 $
2.80
$
1.41 $
4.62
3.62 $
$
11.21
Diluted earnings per share
Class A common stock
Class B common stock
Class C common stock
SSS
0.90 $
0.86 $
0.18
3.43 $
1.49 $
$
1.43 $
2,059 $
430
SS
$
3,100 $
12,144
$
2,070 $
6,699
0.30
Basic earnings per share
Class B common stock
Class C common stock
SSS
$
0.91 $
0.87 $
0.18
$
1.49 $
Class A common stock
2,140 $
1.42 $
3.61 $
The effectiveness of our internal control over financial reporting as of September 30, 2018, has
been audited by KPMG LLP, an independent registered public accounting firm and is included in Item 8
of this report.
125
Changes in Internal Control over Financial Reporting
In preparation for management's report on internal control over financial reporting, we
documented and tested the design and operating effectiveness of our internal control over financial
reporting. During fiscal 2018, there were no significant changes in our internal controls over financial
reporting that occurred during the year ended September 30, 2018, that have materially affected, or
are reasonably likely to materially affect, the Company's internal control over financial reporting.
ITEM 9B. Other Information
Not applicable.
126
PART III
Certain information required by Part III is omitted from this Report and the Company will file a
definitive proxy statement pursuant to Regulation 14A under the Exchange Act (the “Proxy Statement")
not later than 120 days after the end of the fiscal year ended September 30, 2018, and certain
information included therein is incorporated herein by reference. Only those sections of the Proxy
Statement that specifically address the items set forth herein are incorporated by reference. Such
incorporation does not include the report of the Audit and Risk Committee included in the Proxy
Statement.
Our internal control over financial reporting is designed to provide reasonable, but not absolute,
assurance regarding the reliability of financial reporting and the preparation of financial statements in
accordance with U.S. generally accepted accounting principles. There are inherent limitations to the
effectiveness of any system of internal control over financial reporting. These limitations include the
possibility of human error, the circumvention or overriding of the system and reasonable resource
constraints. Because of its inherent limitations, our internal control over financial reporting may not
prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are
subject to the risks discussed in Item 1A-Risk Factors of this report.
ITEM 10. Directors, Executive Officers and Corporate Governance
The information required by this item regarding compliance with Section 16(a) of the Exchange
Act pursuant to Item 405 of Regulation S-K is incorporated herein by reference to the section entitled
"Section 16(a) Beneficial Ownership Reporting Compliance" in our Proxy Statement.
Our Code of Business Conduct and Ethics that is applicable to our directors, executive officers,
senior financial officers, as well as our employees and contractors and our Corporate Governance
Guidelines are available on the Investor Relations page of our website at http://investor.visa.com,
under "Corporate Governance." Printed copies of these documents are also available to stockholders
without charge upon written request directed to Corporate Secretary, Visa Inc., P.O. Box 193243, San
Francisco, California 94119.
ITEM 11. Executive Compensation
The information required by this item concerning director and executive compensation is
incorporated herein by reference to the sections entitled "Compensation of Non-Employee Directors"
and "Executive Compensation" in our Proxy Statement.
The information required by this item pursuant to Item 407(e)(4) of Regulation S-K is incorporated
herein by reference to the section entitled "Compensation Committee Interlocks and Insider
Participation" in our Proxy Statement.
The information required by this item pursuant to Item 407(e)(5) of Regulation S-K is incorporated
herein by reference to the section entitled "Compensation Committee Report" in our Proxy Statement.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
The information required by this item pursuant to Item 403 of Regulation S-K is incorporated
herein by reference to the section entitled "Beneficial Ownership of Equity Securities" in our Proxy
Statement.
For the information required by item 201(d) of Regulation S-K, refer to Item 5 in this report.
ITEM 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this item concerning the Company's directors, executive officers, the
Code of Business Conduct and Ethics and corporate governance matters is incorporated herein by
reference to the sections entitled "Director Nominee Biographies,” “Executive Officers" and "Corporate
Governance" in our Proxy Statement.
0.29
The Company's management is responsible for establishing and maintaining adequate internal
control over financial reporting for the Company. Management assessed the effectiveness of the
Company's internal control over financial reporting as of September 30, 2018. Based on
management's assessment, management has concluded that the Company's internal control over
financial reporting was effective as of September 30, 2018 using the criteria set forth in Internal
Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (2013 framework).
There are inherent limitations to the effectiveness of any system of disclosure controls and
procedures. These limitations include the possibility of human error, the circumvention or overriding of
the controls and procedures and reasonable resource constraints. In addition, because we have
designed our system of controls based on certain assumptions, which we believe are reasonable,
about the likelihood of future events, our system of controls may not achieve its desired purpose under
all possible future conditions. Accordingly, our disclosure controls and procedures provide reasonable
assurance, but not absolute assurance, of achieving their objectives.
3.45 $
0.72
SASSA
$
0.86 $
2.80
$
1.41 $
4.61
Management's Report on Internal Control over Financial Reporting
$
11.19
(1) The Company's unaudited consolidated statement of operations include the impact of several significant one-time items. See
Overview within Item 7-Management's Discussion and Analysis of Financial Condition and Results of Operations of this
report.
124
ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosures
Not applicable.
ITEM 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain a system of disclosure controls and procedures (as defined in the Rules 13a-15(e)
and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) that is
designed to ensure that information required to be disclosed in our Exchange Act reports is recorded,
processed, summarized and reported within the time periods specified in the SEC's rules and forms,
and that such information is accumulated and communicated to our management, including our Chief
Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding
required disclosures.
Under the supervision and with the participation of our management, including our Chief
Executive Officer and Chief Financial Officer, we conducted an evaluation of our disclosure controls
and procedures. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer
concluded that, as of September 30, 2018, our disclosure controls and procedures were effective at the
reasonable assurance level.
3.42 $
2,808
3,024 $
3,212 $
2,522 $
10,301
Basic earnings per share
Class A common stock
Class B common stock
Class C common stock
SSS
$
1.24 $
$
1.00 $
$
2.01 $
1.66 $
1.84
4.94 $
4.02 $
4.46 $
SASSA
$
1.12
1.07 $
12,954
$
(in millions, except per share data)
Operating revenues
Operating income
Net income
S55
5,434 $
5,240 $
5,073
$
3,327 $
3,406 $
3,336
$
2,845 $
2,329 $
2,605
Ꭿ ᏌᏊ Ꭿ
$
4,862 $
20,609
2,885 $
4.43
$
1.77 $
4.29 $
17.69
September 30,
2017
June 30,
2017
March 31,
2017 (1)
Fiscal Year
December 31,
2016
2017 Total
Visa Inc.
$
Operating revenues
Operating income
Net income
SSS
$
4,855 $
4,565 $ 4,477 $
4,461 $
18,358
$
(in millions, except per share data)
7.27
1.77 $
$
7.28
4.30 $
17.72
Diluted earnings per share
Class A common stock
Class B common stock
Class C common stock
SSS
1.23 $
1.00 $
1.11 $
$
2.01 $
1.65 $
1.84
4.93 $
4.01 $
4.46
SASS
1.07 $
4.42
December 31,
2017(1)
The information required by this item concerning related party transactions pursuant to Item 404
of Regulation S-K is incorporated herein by reference to the section entitled "Certain Relationships and
Related Person Transactions" in our Proxy Statement.
127
Form of Visa Inc. 2007 Equity Incentive
Compensation Plan Performance Share
Award Agreement for awards granted after
November 1, 2015
Annex B
DEF 14A 001-33977
Visa Inc. Incentive Plan, as amended and
restated as of February 3, 2016
10.23*
Annex A 1/12/2016
DEFA 14A 001-33977
Visa Inc. 2007 Equity Incentive
Compensation Plan, as amended and
restated as of February 3, 2016
10.22*
10.17 11/21/2014
10-K 001-33977
Visa Directors Deferred Compensation
Plan, as amended and restated as of
July 22, 2014
10.21*
001-33977 10.21 11/20/2015
10-K
Visa 2005 Deferred Compensation Plan,
effective as of August 12, 2015
10.20*
6/21/2016
10.1
8-K 001-33977
Litigation Management Deed, dated as of
June 21, 2016, by and among the VE
Member Representative, Visa Inc., the
LMC Appointing Members, the UK&I DCC
Appointing Members, the Europe DCC
Appointing Members and the UK&I DCC
Interested Members
10.19
11/2/2015
10.1
001-33977
8-K
9/18/2018
10.1
12/11/2015
001-33977
10.24*
10-K 001-33977
10-Q
Form of Alternate Visa Inc. 2007 Equity
10.30*
1/30/2014
10.1
001-33977
10-Q
November 16, 2018
10.29*
DEF 14A 001-33977 Appendix B 12/12/2014
Visa Inc. 2015 Employee Stock Purchase
Plan
10.28*
11/9/2010
10.1
8-K 001-33977
Visa Inc. Executive Severance Plan,
effective as of November 3, 2010
10.27*
001-33977 10.34 11/18/2011
10-K
First Amendment, effective January 1,
2011, of the Visa Excess Retirement
Benefit Plan, as amended and restated as
of January 1, 2008
10.26*
11/21/2008
001-33977 10.32
10-K
Visa Excess Retirement Benefit Plan, as
amended and restated as of January 1,
2008
10.25*
10.31 11/21/2008
Visa Excess Thrift Plan, as amended and
restated as of January 1, 2008
8-K
132
8-K
Form of Loss Sharing Agreement by and
among Visa U.S.A. Inc., Visa International
Service Association, Visa Inc. and various
financial institutions
10.9
001-33977 10.10 11/20/2015
10-K
Amendment of Interchange Judgment
Sharing Agreement
10.8
2/8/2011
10.2
8-K 001-33977
Interchange Judgment Sharing Agreement
Schedule
10.7
International Service Association and Visa
U.S.A. Inc., and the other parties thereto +
Agreement by and among Visa
7/24/2007
333-143966 10.13
S-4/A
Form of Interchange Judgment Sharing
10.6
syndication agent, and the lenders
referred to therein #
America, N.A., as administrative agent,
JPMorgan Chase Bank N.A., as
4/21/2017
10.1
001-33977
10-Q
Five Year Revolving Credit Agreement,
amended and restated as of January 27,
2017, by and among Visa Inc., Visa
International Service Association, Visa
U.S.A. Inc., as borrowers, Bank of
10.5
Form of Framework Agreement by and
among Visa Inc., Visa Europe Limited,
Inovant LLC, Visa International Services
Association and Visa U.S.A. Inc. +
S-4/A
333-143966 10.14 7/24/2007
10.10
10.11
Loss Sharing Agreement, dated as of
November 2, 2015, among the UK
Members listed on Schedule 1 thereto,
Visa Inc. and Visa Europe Limited
Superseding and Amended Settlement
Agreement, dated September 17, 2018, by
and among Visa Inc., Visa U.S.A. Inc.,
Visa International Service Association,
MasterCard Incorporated, MasterCard
International Incorporated, various U.S.
financial institution defendants, and the
damages class plaintiffs to resolve the
damages class plaintiffs' claims in the
matter styled In re Payment Card
Interchange Fee and Merchant Discount
Antitrust Litigation, No. 05-MD-1720
Settlement Agreement, dated October 19,
2012, by and among Visa Inc., Visa U.S.A.
Inc., Visa International Service
Association, MasterCard Incorporated,
MasterCard International Incorporated,
various U.S. financial institution
defendants, and the class plaintiffs to
resolve the class plaintiffs' claims in the
matter styled In re Payment Card
Interchange Fee and Merchant Discount
Antitrust Litigation, No. 05-MD-1720
Second Amendment, dated October 22,
2015, to Omnibus Agreement regarding
Interchange Litigation Judgment Sharing
and Settlement Sharing
Amendment, dated August 26, 2014, to
the Omnibus Agreement regarding
Interchange Litigation Judgment Sharing
and Settlement Sharing by and among
Visa Inc., Visa U.S.A. Inc., Visa
International Service Association,
MasterCard Incorporated, MasterCard
International Incorporated and the parties
thereto
Omnibus Agreement, dated February 7,
2011, regarding Interchange Litigation
Judgment Sharing and Settlement Sharing
by and among Visa Inc., Visa U.S.A. Inc.,
Visa International Service Association,
MasterCard Incorporated, MasterCard
International Incorporated and the parties
thereto
10.18
10.17
10.16
10.15
10.14
10.13
2/6/2013
001-33977
10.3
001-33977 10.17 11/20/2015
10-K
10.14 11/21/2014
001-33977
10-K
7/16/2012
10.2
001-33977
131
10.1
10.13
8-K 001-33977
2/8/2011
10-K 001-33977
11/20/2015
S-4/A 333-143966 10.18 8/22/2007
Loss Sharing Agreement Schedule
Amendment of Loss Sharing Agreement
Form of Litigation Management
Agreement by and among Visa Inc., Visa
International Service Association, Visa
U.S.A. Inc. and the other parties thereto
10.12
10-Q 001-33977
333-143966 10.17 7/24/2007
10.5
Incentive Compensation Plan Stock
001-33977
10.1
4/27/2018
21.1+
23.1+
31.1+
List of Significant Subsidiaries of Visa Inc.
Consent of KPMG LLP, Independent
Registered Public Accounting Firm
Certification of the Chief Executive Officer
pursuant to Exchange Act Rules 13a-14(a)
and 15d-14(a), as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of
2002
134
31.2+
32.1+
32.2+
101.INS
Certification of the Chief Financial Officer
pursuant to Exchange Act Rules 13a-14(a)
and 15d-14(a), as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of
2002
Certification of the Chief Executive Officer
pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
Certification of the Chief Financial Officer
pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
XBRL Instance Document
101.SCH XBRL Taxonomy Extension Schema
Document
101.CAL XBRL Taxonomy Extension Calculation
Linkbase Document
101.DEF XBRL Taxonomy Extension Definition
Linkbase Document
101.LAB XBRL Taxonomy Extension Label
Linkbase Document
101.PRE XBRL Taxonomy Extension Presentation
Linkbase Document
+ Confidential treatment has been requested for portions of this agreement. A completed copy of the
agreement, including the redacted portions, has been filed separately with the SEC.
*
10-Q
+
Amendment No.1 to the Aircraft Time
Sharing Agreement, dated November 9,
2016, between Visa Inc. and Alfred F.
Kelly, Jr.
001-33977 10.59 11/15/2016
1/28/2016
10.36*
Form of Visa Inc. 2007 Equity Incentive
Compensation Plan Restricted Stock Unit
Award Agreement for the CEO, for the
10-K
001-33977 10.52 11/15/2016
Make-Whole Award.
10.37*
Form of Letter Agreement relating to Visa
Inc. Executive Severance Plan
8-K
001-33977
10.2
11/9/2010
10.38*
Form of Visa Inc. 2007 Equity Incentive
Compensation Plan Director Restricted
Stock Unit Award Agreement for awards
granted after November 1, 2017
10-Q
001-33977
10.1
2/1/2018
10.39*
Offer Letter, dated October 17, 2016,
between Visa Inc. and Alfred F. Kelly, Jr.
8-K
001-33977
99.1
10/21/2016
10.40*
Aircraft Time Sharing Agreement, dated
November 9, 2016, between Visa Inc. and
Alfred F. Kelly, Jr.
10-K
10.41*
#
Management contract, compensatory plan or arrangement.
Filed or furnished herewith.
Director
Lloyd A. Carney
/s/ Mary B. Cranston
Director
Mary B. Cranston
/s/Francisco Javier Fernández-Carbajal
November 16, 2018
November 16, 2018
Director
November 16, 2018
Francisco Javier Fernández-Carbajal
/s/ John F. Lundgren
Director
November 16, 2018
John F. Lundgren
/s/ Denise A. Morrison
Director
November 16, 2018
Denise A. Morrison
/s/ Suzanne Nora Johnson
Director
001-33977 10.40 11/21/2014
10-K
Form of Visa Inc. 2007 Equity Incentive
Compensation Plan Director Restricted
Stock Unit Award Agreement for awards
granted after November 1, 2014
10.30*
granted after November 18, 2013
Option Award Agreement for awards
/s/ Lloyd A. Carney
Robert W. Matschullat
November 16, 2018
Independent Chair
Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any omitted
schedule will be furnished supplementally to the SEC upon request; provided, however, that the
parties may request confidential treatment pursuant to Rule 24b-2 of the Exchange Act for any
document so furnished.
135
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf
by the undersigned, thereunto duly authorized.
VISA INC.
By:
Name:
Title:
Date:
/s/ Alfred F. Kelly, Jr.
Alfred F. Kelly, Jr.
Chief Executive Officer
November 16, 2018
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report
has been signed below by the following persons on behalf of the registrant in the capacities and on the
dates indicated:
Signature
1/30/2014
Title
/s/ Alfred F. Kelly, Jr.
Alfred F. Kelly, Jr.
/s/ Vasant M. Prabhu
Vasant M. Prabhu
/s/ James H. Hoffmeister
James H. Hoffmeister
/s/ Robert W. Matschullat
Chief Executive Officer and Director November 16, 2018
November 16, 2018
(Principal Executive Officer)
Chief Financial Officer
(Principal Financial Officer)
Global Corporate Controller and
November 16, 2018
Chief Accounting Officer
(Principal Accounting Officer)
Date
S-4/A
10.4
333-143966 10.15 6/22/2007
/s/ Maynard G. Webb, Jr.
Director
November 16, 2018
Maynard G. Webb, Jr.
136
Board of Directors
Robert W. Matschullat
Independent Chair
Lloyd A. Carney
Director
Mary B. Cranston
Director, Chair of Audit and Risk Committee
Francisco Javier Fernández-Carbajal
Director
Alfred F. Kelly, Jr.
Chief Executive Officer
John F. Lundgren
Director
Denise M. Morrison
Director
Suzanne Nora Johnson
Director, Chair of Compensation Committee
John A. C. Swainson
Director, Chair of Nominating and
Corporate Governance Committee
Maynard G. Webb, Jr.
Director
Executive Committee
Alfred F. Kelly, Jr.
Chief Executive Officer
John A. C. Swainson
Lynne Biggar
November 16, 2018
/s/ John A. C. Swainson
Agreement, dated as of May 10, 2016,
between Visa Inc. and Visa Europe
5/10/2016
2.1
001-33977
8-K
Amended and Restated Transaction
2.1
Date
Filing
Exhibit
Number
File
Number
Form
Number Description
Exhibit Exhibit
Incorporated by Reference
EXHIBIT INDEX
129
Refer to the Exhibit Index herein.
3. The following exhibits are filed as part of this report or, where indicated, were previously filed
and are hereby incorporated by reference:
None.
2. Consolidated Financial Statement Schedules
See Index to Consolidated Financial Statements in Item 8-Financial Statements and
Supplementary Data of this report.
1. Consolidated Financial Statements
The following documents are filed as part of this report:
ITEM 15. Exhibits and Financial Statement Schedules
10-Q
Suzanne Nora Johnson
Director
Executive Vice President and Chief
Marketing and Communications Officer
Chris Clark
Corporate Secretary
Visa Inc.
PO Box 193243
San Francisco CA, 94119 USA
corporatesecretary@visa.com
Independent Registered
Public Accounting Firm
KPMG LLP
Investor Relations
Visa Inc.
ir@visa.com
+1 650 432 7644
investor.visa.com
Transfer Agent
EQ Shareowner Services
P.O. Box 64854
St. Paul, MN 55164-0854 USA
+1 651 306 4433 or +1 866 456 9417
+1 651 554 3863 Fax
https://www.shareowneronline.com
√
FSC
www.fsc.org
MIX
Paper from
responsible sources
FSC® C132107
Printed in the USA
Please recycle
© 2018 Visa. All rights reserved.
globalmedia@visa.com
visa.com/newsroom
Visa Inc.
Media Relations
+1 650 432 3200
Executive Vice President and Group
Executive, Asia Pacific
Jennifer Grant
Executive Vice President, Human Resources
and Chief Human Resources Officer
Charlotte Hogg
Executive Vice President and Chief
Executive Officer, Europe
Oliver Jenkyn
Executive Vice President and Group
Executive, North America
Ryan McInerney
President
Vasant M. Prabhu
Executive Vice President and Chief
Financial Officer
Ellen Richey
Vice Chairman and Chief Risk Officer
Limited #
William M. Sheedy
Rajat Taneja
Executive Vice President, Technology and
Operations
Kelly Mahon Tullier
Executive Vice President, General Counsel
and Corporate Secretary
Corporate Headquarters
Visa Inc.
One Market Plaza
San Francisco, CA 94105 USA
visa.com
Mailing Address
Visa Inc.
P.O. Box 8999
San Francisco, CA 94128-8999 USA
Executive Vice President, Strategy, M&A,
Government Relations and Social Impact
3.1
Sixth Amended and Restated Certificate of
8-K
9/11/2017
4.3
001-33977
8-K
Form of 3.650% Senior Note due 2047
4.13
12/14/2015
4.7
001-33977
8-K
Form of 4.300% Senior Note due 2045
4.12
12/14/2015
4.6
001-33977
8-K
Form of 4.150% Senior Note due 2035
4.11
9/11/2017
4.2
001-33977
8-K
Form of 2.750% Senior Note due 2027
4.1
12/14/2015
4.5
001-33977
4.14
Certificate of Designations of Series A
Convertible Participating Preferred Stock
of Visa Inc.
8-K
001-33977
S-4
Form of Escrow Agreement by and among
Visa Inc., Visa U.S.A. Inc. and the escrow
agent
10.3
333-143966 Annex A 9/13/2007
S-4/A
Amended and Restated Global
Restructuring Agreement, dated
August 24, 2007, by and among Visa Inc.,
Visa International Service Association,
Visa U.S.A. Inc., Visa Europe Limited,
Visa Canada Association, Inovant LLC,
Inovant, Inc., Visa Europe Services, Inc.,
Visa International Transition LLC, VI
Merger Sub, Inc., Visa USA Merger Sub
Inc. and 1734313 Ontario Inc.
10.2
130
10/25/2012
10.1
001-33977
8-K
Form of Indemnity Agreement
8-K
10.1
3.3
001-33977
8-K
Certificate of Designations of Series C
Convertible Participating Preferred Stock
of Visa Inc.
4.16
6/21/2016
3.2
001-33977
8-K
Certificate of Designations of Series B
Convertible Participating Preferred Stock
of Visa Inc.
4.15
6/21/2016
3.1
6/21/2016
10.3
Form of 3.150% Senior Note due 2025
12/14/2015
4.1
000-53572
8-A
Form of specimen certificate for class B
common stock of Visa Inc.
4.2
9/13/2007
4.1
333-143966
S-4/A
Form of stock certificate of Visa Inc.
4.1
11/20/2015
3.3
001-33977
10-K
Amended and Restated Bylaws of Visa
Inc.
3.3
2/27/2015
3.1
001-33977
8-K
Certificate of Correction of the Certificate
of Incorporation of Visa Inc.
3.2
Incorporation of Visa Inc.
1/29/2015
3.2
001-33977
1/28/2009
4.3
Form of specimen certificate for class C
8-A
4.4
001-33977
8-K
Form of 2.800% Senior Note due 2022
4.8
9/11/2017
4.1
001-33977
8-K
Form of 2.150% Senior Note due 2022
4.7
12/14/2015
4.3
4.9
001-33977
Form of 2.200% Senior Note due 2020
4.6
between Visa Inc. and U.S. Bank National
Association
12/14/2015
4.1
001-33977
8-K
Indenture dated December 14, 2015
4.5
common stock of Visa Inc.
1/28/2009
4.2
000-53572
8-K
001-33977
PART IV
Form of Visa Inc. 2007 Equity Incentive
Compensation Plan Stock Option Award
Agreement for awards granted after
November 18, 2013
10.34*
1/28/2016
10.1
001-33977
10-Q
Form of Visa Inc. 2007 Equity Incentive
Compensation Plan Stock Option Award
Agreement for awards granted after
November 1, 2015
10.33*
001-33977 10.45 11/21/2014
10-K
Form of Visa Inc. 2007 Equity Incentive
Compensation Plan Restricted Stock Unit
Award Agreement for awards granted after
Form of Alternate Visa Inc. 2007 Equity
Incentive Compensation Plan Stock
Option Award Agreement for awards
granted after November 1, 2014
10-K
Form of Visa Inc. 2007 Equity Incentive
Compensation Plan Restricted Stock Unit
Award Agreement for awards granted after
November 1, 2014
10.31*
133
Form of Visa Inc. 2007 Equity Incentive
Compensation Plan Stock Option Award
Agreement for awards granted after
November 1, 2014
10.41 11/21/2014
001-33977
10-K
10.31*
10.32*
10-Q
001-33977 10.43 11/21/2014
10.2
1/28/2016
November 1, 2015
10.35*
001-33977
Champion Security
Champion payment system security
for the industry.
Leverage
World-Class Brand
Bring Visa's vision, mission and
strategy to life through compelling
brand expressions that drive
measurable outcomes for Visa and our
partners.
Transform Technology
Visa is a technology company. In recent years, we have shifted our proprietary technology
architecture to a more open architecture across our software, hardware and networking platforms. The
Visa Developer Platform provides application developers with access to certain of Visa's products,
services and technology via APIs, in an effort to enable business partners to create new commerce
experiences and increase the speed and depth of payment innovations that leverage Visa's products,
services and technology.
Champion Security
We have focused many of our investments, partnerships, and expertise to enhance the security
of our network, and to enable consumers and businesses to pay and be paid with confidence. As
payment methods evolve, we are focused on the following four areas:
•
•
Protecting payment data with a payments architecture that complies with industry standards
Rendering sensitive payment data useless by deploying technologies such as EMVⓇ chip,
EMV tokenization, and encryption
Using predictive analytics, artificial intelligence, and insights in an effort to identify and prevent
fraud before it happens
•
Empowering consumers to actively protect their own financial information and transactions
7
Protect Data
Safeguard payment data
Security standards
development
Compliance with
•
drive efficiency and enable innovation.
Be the employer of choice for
top talent.
Develop Best Talent
Expand Access
Evolve our client interactions to true
partnerships with financial institutions,
merchants and new industry partners.
Deepen Partnerships
Achieve success as a leading partner
for digital payments comparable to
what we have achieved in the physical
world.
Drive Digital
Foundational
Growth
Visa's vision to be the best way to pay and be paid, for everyone, everywhere - guides our
purpose. Our mission
to connect the world through the most innovative, reliable, and secure
payments network, enabling individuals, businesses, and economies to thrive is underpinned by
seven strategic pillars:
-
Transform Technology
Transform Visa's technology assets to
industry standards
Strategic Focus
6
CO
Visa is not a financial institution. We do not issue cards, extend credit, or set rates and fees for
account holders of Visa products. We do not earn revenues from, or bear credit risk with respect to,
interest or fees paid by account holders on Visa products. Interchange reimbursement fees represent a
transfer of value between the financial institutions participating in our open-loop payments network. We
administer the collection and remittance of interchange reimbursement fees through the settlement
process, but we generally do not receive any revenue related to interchange reimbursement fees. In
addition, we do not receive as revenue the fees that merchants are charged directly for acceptance by
their acquirers.
Account holder and merchant relationships are managed primarily by our financial institution clients
and merchant acquirers, including processors and independent service organizations.
programs
and others who
accept electronic
payments as a
method of payment
for their goods or
services
Retailers, billers
Expand access to Visa products and
services globally.
-
Devalue Data
Render data useless
EMV chip
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be
submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit such files). Yes ☑ No ☐
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer,
smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer" "accelerated filer,"
"smaller reporting company," and "emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ☑
Non-accelerated filer ☐
Accelerated filer ☐
Emerging growth company ☐
Smaller reporting company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition
period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange
Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes ☐ No ☑
The aggregate market value of the registrant's class A common stock, par value $0.0001 per share, held by non-affiliates
(using the New York Stock Exchange closing price as of March 29, 2018, the last business day of the registrant's most recently
completed second fiscal quarter) was approximately $214.1 billion. There is currently no established public trading market for the
registrant's class B common stock, par value $0.0001 per share, or the registrant's class C common stock, par value $0.0001 per
share.
As of November 9, 2018, there were 1,759,797,999 shares outstanding of the registrant's class A common stock, par value
$0.0001 per share, 245,513,385 shares outstanding of the registrant's class B common stock, par value $0.0001 per share, and
11,706,272 shares outstanding of the registrant's class C common stock, par value $0.0001 per share.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement for the 2019 Annual Meeting of Stockholders are incorporated herein by
reference in Part III of this Annual Report on Form 10-K to the extent stated herein. Such Proxy Statement will be filed with the
Securities and Exchange Commission within 120 days of the Registrant's fiscal year ended September 30, 2018.
TABLE OF CONTENTS
Page
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the
Act. Yes ☐ No ☑
PARTI
Item 1
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes ☑ No ☐
New York Stock Exchange
(Name of each exchange on which registered)
Commission file number 001-33977
VISA
VISA INC.
(Exact name of Registrant as specified in its charter)
(State or other jurisdiction
of incorporation or organization)
P.O. Box 8999
San Francisco, California
(Address of principal executive offices)
(650) 432-3200
26-0267673
(IRS Employer
Identification No.)
94128-8999
(Zip Code)
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Class A common stock, par value $0.0001 per share
(Title of each Class)
Securities registered pursuant to Section 12(g) of the Act:
Class B common stock, par value $0.0001 per share
Class C common stock, par value $0.0001 per share
(Title of each Class)
Item 1A
Risk Factors
Item 1B
Analytics
■
Detection
Stop fraud before it occurs
Harness Data
11000
10100001
00101117
011000100
00110
Data
***
Encryption
■
Tokenization
■
■
Authentication
Empower Consumers
Engage consumers in
♫ payment security
Business
Unresolved Staff Comments
Item 2
8
In parallel, Visa is supporting and enabling our clients and partners to harness digital commerce
opportunities through Visa Digital Solutions. Visa Digital Solutions is a growing portfolio of Visa
payment services and authentication technologies that enable tokenization, online commerce and push
payment services to be securely embedded in new products. Our growing portfolio of Visa payment
services and authentication technologies enable tokenization and online commerce as well as facilitate
secure, cost-effective P2P, B2C, B2B and G2C payment services.
Visa transactions today take place across a variety of devices and transaction types. Visa has
developed various products, partnerships and platforms in an effort to enable fast and secure
commerce on cards, phones, laptops and other form factors. Visa offers a token service, which can be
used to replace payment card account numbers with a unique one-time use code, or token, in an effort
to make transactions more secure. In doing so, we aim to increase consumer confidence in the
security of devices and other solutions that are used to initiate and make payments.
Drive Digital
Merchants
Visa's employees are one of our most important assets. Visa's approximately 17,000 employees
in 119 locations across the world embody our vision and drive our growth. As a truly global enterprise
with the integration of Visa Europe, we are adding new talent and expertise to Visa. At the same time,
Visa is building a culture of empowered leadership. This focus is intended to provide functional and
market leaders greater autonomy and authority to respond quickly and decisively to the needs of our
clients and innovate to capture new digital commerce opportunities.
The Visa brand is one of the world's most recognized, trusted, and valuable brands. Anchored on
the notion that Visa is "everywhere you want to be," we believe the brand stands for acceptance,
security, convenience, speed, and reliability. In recognition of its strength among clients and
consumers, the Visa brand is ranked highly in a number of brand studies, including BrandZ Top 100
Most Valuable Global Brands Study, Forbes World's Most Valuable Brands, Interbrand's Best Global
Brands, and YouGov Brand Index. Our brand strength helps us to deliver added value to financial
institutions, merchants, clients and partners through compelling brand expressions, a wide-range of
products and services, and innovative marketing efforts.
Leverage our World-class Brand
Consumer Controls
Geolocation
Alerts
'
■
■
Develop the Best Talent
to
•
merchants
PART I
3
This Annual Report on Form 10-K contains forward-looking statements within the meaning of the
U.S. Private Securities Litigation Reform Act of 1995 that relate to, among other things, our future
operations, prospects, developments, strategies and growth of our business; anticipated expansion of
our products in certain countries; industry developments; expectations regarding litigation matters,
investigations and proceedings; timing and amount of stock repurchases; sufficiency of sources of
liquidity and funding; effectiveness of our risk management programs; and expectations regarding the
impact of recent accounting pronouncements on our consolidated financial statements. Forward-
looking statements generally are identified by words such as "believes,” “estimates,” “expects,"
"intends," "may," "projects,” “could,” “should,” “will,” “continue” and other similar expressions. All
statements other than statements of historical fact could be forward-looking statements, which speak
only as of the date they are made, are not guarantees of future performance and are subject to certain
risks, uncertainties and other factors, many of which are beyond our control and are difficult to predict.
We describe risks and uncertainties that could cause actual results to differ materially from those
expressed in, or implied by, any of these forward-looking statements in Item 1—Business, Item 1A-
Risk Factors, Item 7-Management's Discussion and Analysis of Financial Condition and Results of
Operations and elsewhere in this report. Except as required by law, we do not intend to update or
revise any forward-looking statements as a result of new information, future events or otherwise.
Forward-Looking Statements:
2
"Visa" and our other trademarks referenced in this report are Visa's property. This report may
contain additional trade names and trademarks of other companies. The use or display of other
companies' trade names or trademarks does not imply our endorsement or sponsorship of, or a
relationship with these companies.
Unless the context indicates otherwise, reference to "Visa," "Company,” “we,” “us” or “our” refers
to Visa Inc. and its subsidiaries.
129
Exhibits, Financial Statement Schedules.
PART IV
Item 15
128
127
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
Item 13
Item 14
127
ITEM 1. Business
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters . . .
OVERVIEW
Though Visa has evolved and grown over the course of the last six decades, our fundamental
business model has remained the same:
MERCHANT
4
We have accelerated the pace of change in digital payments by making application
programming interfaces (APIs) available in an effort to increase access to our network,
products and services, offering innovation opportunities at our ten global innovation network
locations, and building partnerships with new players, such as financial technology companies,
commonly known as fintechs.
We have adopted new digital payment and security technologies, such as contactless and
tokenization.
•
•
In recent years, we have evolved our organization to accelerate the migration of digital payments
across new channels including ecommerce, mobile and wearables.
We manage and promote our brands to the benefit of our clients and partners through
advertising, promotional and sponsorship initiatives with the Olympic Games, FIFA and the
National Football League, among others. We also use these sponsorship assets to showcase
our payment innovations.
We provide other value-added services to our clients, including fraud and risk management,
debit issuer processing, loyalty services, dispute management, digital services like
tokenization, as well as consulting and analytics.
We offer a wide range of Visa-branded payment products, which our financial institution clients
use to develop and offer core business solutions, credit, debit, prepaid and cash access
programs for account holders (individuals, businesses and government entities). Our scale and
reach are made possible by a network of 15,900 financial institution clients that issue Visa-
branded products. During fiscal 2018, Visa's total payments and cash volume grew to $11.2
trillion and more than 3.3 billion cards were available worldwide to be used at nearly 54 million
business and merchant locations.
We provide transaction processing services (primarily authorization, clearing and settlement)
to our financial institution and merchant clients through VisaNet, our global processing
platform. During fiscal 2018, we saw 182 billion payments and cash transactions with Visa's
brand, equating to an average of 500 million transactions a day. Of the 182 billion total
transactions, 124.3 billion were processed by Visa.
•
•
•
.
Sixty years ago, in September 1958, the first BankAmericard credit card was issued in Fresno,
California. BankAmericard became Visa in 1976 and expanded globally. Ten years ago, in March
2008, Visa Inc. completed the largest initial public offering at that time on the New York Stock
Exchange. These milestones have helped establish Visa as one of the world's leading payments
technology companies.
VISA
Item 12
Executive Compensation
Item 7A
37
Management's Discussion and Analysis of Financial Condition and Results of
Operations
36
Selected Financial Data
Item 6
Item 7
34
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
Item 5
PART II
20
+23333
Mine Safety Disclosures
Item 4
Properties ....
Quantitative and Qualitative Disclosures About Market Risk
127
59
Financial Statements and Supplementary Data
127
Directors, Executive Officers and Corporate Governance
Item 10
Item 11
PART III
62
2222
126
Other Information.
Item 9B
125
Controls and Procedures
Item 9A
125
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure...
Item 9
Item 8
3.3B = ~160+L
Visa Cards(2)
Currencies(3)
■
manages global
Offer rewards
service for account
holders
■ Provide customer
account holders
and interest
charges from
Builds and
■
Set and collect fees
management
Provides risk
■
Develops products
systems
■
operational
Acquirers
institutions or
opportunities
service for
market
Provide customer
.
Develops new
■
brand
merchants
statements for
reports and
Generate recurring
products
merchants to
accept Visa
companies that
contract with
Financial
processing and
■
Provides
payments.
Two years ago, our industry reached a milestone when digital payments surpassed cash
payments worldwide for the first time. Despite this growth, we have a significant opportunity to displace
cash payments. In 2018, approximately $17 trillion of payments were conducted using cash and
checks. There is additional opportunity among new payment flows, including person-to-person (P2P),
business-to-business (B2B), business-to-consumer (B2C) and government-to-consumer (G2C)
(3) As of September 30, 2018
(2) As of June 30, 2018
(1) Transacted on our payment products for the 12 months ended June 30, 2018
Transaction messages per
second (capacity) (3)
65,000+
Countries and Territories(3)
Financial Institution Clients(3)
200+
15,900
Merchant Locations (2)
53.9M
Total payments and cash
volume (1)
$11.2 trillion
Visa's Network
Our four-party model seeks to facilitate secure, reliable and convenient transactions between
financial institutions, merchants and account holders through our advanced transaction processing
network, VisaNet. VisaNet authorizes, clears and settles a diverse range of payment transactions, and
allows us to provide our financial institution and merchant clients with a wide range of products,
platforms, and value-added services.
In recent years, we have broadened our network model to incorporate fintechs in an effort to
deliver additional value to clients and consumers. As digital payments evolve, we are increasingly
engaging new partners, including messaging platforms, technology providers, and device
manufacturers to capture new payment flows.
We believe our network is core to the growth of our business and the expansion of digital
commerce globally.
•
Visa Network
companies that
issue Visa products
to account holders
Assume account
holders' credit risk
institutions or
Financial
Issuers
transactions to pay
for goods and
services
(acceptance)
conduct
Individuals and
•
Account Holders
MERCHANT
VISA
5
LO
businesses that
Delaware
Legal Proceedings
OR
Visa is incredibly fortunate to be able to
evolve from a position of strength and
opportunity:
I had the privilege of spending a day
with Dee Hock, the founder and first
CEO of Visa, at his home in Washington
last summer. What I took away from our
conversation is that Visa is a story of
change. Since our founding, Visa has been
a disruptor of payments and commerce,
and has set the pace of change in our
industry. To continue to lead, Visa needs to
continue to be a driver of disruption.
A Bold Vision for the Next Decade
63340
In 2018, we also made progress to meet
and exceed the environmental, social
and governance (ESG) expectations of
our shareholders. We are committed to
reducing our environmental footprint,
with approximately 70% of our global
square footage now environmentally-
certified, combined with our new pledge
to transition to 100% renewable electricity
across our operations by the end of 2019.
We continued to focus on building a
leadership culture based on inclusiveness
and diversity, which includes our reported
pay equity numbers. We are proud of our
commitment, and the recognition we have
received on the Dow Jones Sustainability
Index, FTSE4Good Index and Best
Corporate Citizens list.
Small and micro-businesses are an
important driver of economic activity,
particularly in developing economies, and
our social impact platform is focused on
enabling them to thrive through access,
growth and resilience. Last December,
we announced an inaugural grant from
the Visa Foundation to Women's World
Banking to support the growth of female-
owned businesses. While we have a lot of
work left to do to bring small enterprises
into the financial mainstream, we believe
we can make a meaningful difference
through our Foundation investments,
partnerships, and access to Visa's expertise,
resources and experience.
Sixty years after the launch of
BankAmericard, we are closer than ever
to realizing our vision of being the best
way to pay and be paid for everyone,
everywhere. While a future powered by
secure digital payments is within reach,
we still have a long way to go. According
to the latest estimates, there are 1.7 billion
people who remain excluded from formal
financial services. As a global leader, it is
imperative that we constantly explore
ways to improve people's lives and drive
economic and societal progress, in parallel
to increasing shareholder value.
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
Social Impact
.
Item 3
Cash and checks still account for
approximately $17 trillion in consumer
spending worldwide, and there is a
sizable market for P2P, B2B and B2C
payments. These position Visa for
growth for many years ahead.
We have a suite of world-class assets-
our network, products, brand, security,
partnerships and people.
We have a track record of disruption
within and outside our organization.
In the year ahead and beyond, we are
challenging ourselves to think and act
with even greater agility, speed and
flexibility. This includes expanding
our partnerships with fintechs, better
anticipating the needs of our clients and
enabling greater innovation through
assets such as our Visa Developer Center.
I want to conclude by welcoming our
newest board member, Denise Morrison.
Denise brings valuable experience
from her time in senior leadership roles,
including her time as Chief Executive
Officer of Campbell Soup. Additionally,
I want to acknowledge and welcome
Debbie Hewitt, who joined as Chair of
the Visa Europe Limited board and will
bring her experience as Group Managing
Director at RAC. Denise and Debbie
complement an impressive group of
directors who have provided invaluable
guidance as the company has navigated
unprecedented change in the industry.
I have been given the great honor and
privilege to lead this wonderful company.
It's a responsibility I take incredibly
seriously, and one I share with my
colleagues across the world. I am so very
fortunate to be able to count on our almost
17,000 colleagues in 119 offices worldwide
who, every day, look for ways to make Visa
better in every sense—a better place to
work, a better steward of our brand and
network assets, a better contributor to
the world, and a better company for our
shareholders. Their commitment is what
makes Visa an exceptional company with
a great future. Together, we are poised to
make continued progress in service of our
vision to be the best way to pay and be
paid for everyone, everywhere.
Ae Kelly
Alfred F. Kelly, Jr.
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 2018
We are also advancing the adoption of biometric authentication as a more secure alternative to
passwords, which can be guessed or stolen. To help financial institutions and merchants more quickly
adopt emerging biometric authentication solutions, we launched Visa ID Intelligence, a platform that
provides a curated selection of leading third-party authentication technologies. Our clients can create,
test and adopt new authentication solutions with simple integrations using Visa APIs and software
developer's kits.
In addition to our new initiatives, we continue to improve existing products and services such as
Visa Risk Manager, Visa Advanced Authorization, Visa Mobile Location Confirmation, Visa Consumer
Controls and Visa Transaction Advisor, which provide data driven tools to issuers, acquirers and
merchants to detect and prevent fraud and improve account holder and transaction authentication, as
well as providing account holders the ability to track and manage their payment activity on enrolled
accounts.
Beyond our risk products and solutions, we continue to work with the Payment Card Industry
Security Standards Council, EMVCO, and other industry standards organizations to develop and
support standards for payment data security, EMV Chip payment technology, EMV Payment
Tokenization, EMV SRC and EMV 3-D Secure. We also partner with financial institutions, merchants,
governments, and law enforcement agencies to help identify fraud and share information about
security best practices, threat intelligence, and legal and regulatory developments.
Financial data security breaches continue to drive financial institution and merchant losses and
can undermine consumer confidence in digital payments. We are investing in more proactive malware
and threat identification to help stop fraud and data loss before it occurs. Through our eCommerce
Threat Disruption (eTD) capability, we can trace malicious servers and identify compromised merchant
websites where skimmer code may have been injected. We have already successfully disrupted
criminal servers driving ecommerce merchant compromises. We also conduct testing to identify
possible future threats in the context of known vulnerabilities and provide clients with actionable threat
intelligence.
We are also providing more robust data-driven insights that help our clients improve their fraud
and authorization performance. Visa's data analytics capabilities and interactive delivery platforms
enable our clients to assess their performance relative to peers and test alternate fraud procedures to
model possible improvements.
+
Our gross revenues consist of service revenues, data processing revenues, international
transaction revenues, and other revenues. Net operating revenues are gross revenues reduced by
costs incurred under client incentive arrangements. We have one reportable segment, Payment
Services.
14
Revenue Details
$8.9B
We continue to develop our suite of risk products and solutions to help financial institution and
merchant clients minimize risk and enable secure commerce. 3-D Secure technology is a fraud
detection protocol which provides a data connection between digital merchants, payment networks
and financial institutions to be able to analyze and share more intelligence information about
transactions to boost security and improve the checkout and user experience. The 3-D Secure
standard has been updated and will modernize online security, fully embracing the benefit of always-on
connectivity across multiple devices. The new standard will enable ten times more data to be
exchanged between financial institutions and merchants, allowing our clients to have greater accuracy
in identifying both legitimate and fraudulent transactions.
$9.0B
+
$7.2B
+
$900M
Service
Revenues
Data
Processing
Revenues
International
Transaction
Revenues
Other
Revenues
NET OPERATING REVENUES
Risk Products & Payment Security Initiatives
Additionally, contactless payments could provide new payment opportunities in areas such as
transit. Transport for London has now seen over 1.7 billion contactless journeys and Translink in
Vancouver and Milan Metro launched in the summer of 2018. Additionally, many other transit agencies
globally have announced plans to launch contactless payments (e.g. New York Metropolitan
Transportation Authority, Singapore Land Transport Authority and Metro Rio). In 2018, we focused on
growing contactless card issuance and enabling contactless acceptance in under-penetrated markets,
such as the United States.
The CyberSource platform enables merchants to accept payments online, in-app or on the mobile
web, and in-person. CyberSource's small business solutions are represented by the Authorize. Net
brand in North America. CyberSource provides modular, digital capabilities far beyond the traditional
gateway function of connecting merchants to payment processing. Using CyberSource services,
merchants of all sizes can improve the way their consumers engage and transact, mitigate fraud and
security risk, lower operational costs and adapt to changing business requirements. CyberSource's
global footprint lets merchants accept payments in over 200 countries and territories across the world
and includes a broad choice of acquirer and processor partners, payment types and hardware
components. Merchants connect to CyberSource directly through APIs or via pre-built integrations to
various ecommerce and point-of-sale platforms. Similarly, CyberSource offers the same technology
platform to support acquirers as well as comprehensive payment management solutions and support to
attract, retain, and grow their merchant base.
Credit: Credit cards are issued by financial institutions to allow consumers and businesses to
access credit to pay for goods and services. Visa does not extend credit; however, we provide
combinations of card benefits, including technology, authorization, fraud tools, and brand support that
financial institutions use to enable their credit products. We also partner with our clients on product
design, consumer segmentation, and consumer experience design to help financial institutions better
deliver products and services that match their consumers' needs.
-
Debit: Debit cards are issued by financial institutions to allow consumers and small businesses to
purchase goods and services using funds held in their demand deposit accounts. Debit cards enable
cardholders to transact in person, online, or via mobile without needing cash or checks and
without accessing a line of credit. Visa provides a strong brand; the network infrastructure and
processing; acceptance; product features and support; risk tools and services; and industry expertise
to help issuers optimize their debit offerings.
Prepaid: Prepaid products draw from a designated balance funded by individuals, corporations,
or governments. Prepaid cards address many consumer-use cases and needs including, general
purpose reloadable, payroll, government and corporate disbursements, healthcare, gift, and
travel. Prepaid cards also play an important part in financial inclusion, bringing payment solutions to
those with limited or no access to traditional banking products.
Global ATM: The Visa/PLUS Global ATM network provides account holders with convenient cash
access in more than 200 countries and territories worldwide through issuing and acquiring partnerships
with both financial institutions and independent ATM operators.
Processing Infrastructure
VisaNet is designed to be one of the world's most secure, reliable and interoperable global
payments networks. VisaNet is built on a high-performance architecture that allows us to analyze each
authorization we process in real time and provide value-added processing services such as risk
scoring and tokenization. It provides the infrastructure for delivering innovation and other payment
system enhancements for domestic payments and cross-border international transactions globally.
VisaNet consists of five main areas:
Software: Sitting at the center of Visa's technology platform is a set of commercial software
applications powering authorization, clearing, and settlement, as well as value-added services for our
clients.
Hardware: Our software runs on powerful servers, mainframes and data storage systems that are
capable of processing more than 65,000 transaction messages per second.
Processing Centers: Our hardware resides in four global processing centers, which are located
on three continents. Our global processing centers are designed to synchronize in real time, so that if
one system encounters an issue, transactions are rerouted almost instantly and automatically to
another.
Telecommunications: We connect our clients and partners to VisaNet through a global, private
telecommunications network that is designed for redundancies and to provide security and availability
of our products and services.
11
Security: Finally, we have multiple layers of advanced security tools to protect our technology
footprint at the enterprise, network, operating system, and application levels. To strengthen our
security and cyber defenses, we continue to deploy new tools and measures to help safeguard our
network and the wider ecosystem from hackers and cyber-attacks.
13
Together, these systems are designed to deliver security, convenience and service that our
account holders, clients and partners expect of the Visa brand.
Visa Direct: Visa Direct is our push payment platform that facilitates fund transfers by our
financial institution clients which allows businesses, governments, and consumers to utilize VisaNet
processing capabilities to transfer funds from an originating account to another account via card
credentials. The transfer is made with the same level of security protection, network reliability and
ease-of-use that Visa uses for other types of transactions. Push payments represent one of our biggest
incremental payment flow opportunities. This global platform enables faster payments solutions for a
range of new use cases, including P2P, B2B and B2C disbursements, cross-border remittances and
bill pay.
Visa Direct is currently operating in more than 150 countries. Over seventy of those countries are
enabled for fast funds acceptance through Visa Direct, with funds typically posted in seconds and no
longer than 30 minutes. Global growth for Visa Direct means enabling acquirers, processors, and
merchants to leverage their existing network connections to build new services, capabilities, and
solutions with global scale and reach.
In certain emerging markets, push payments allow consumers to use their enabled mobile
applications to "push" money to a business account conveniently using an alias (e.g. QR code), for
payment of goods and services. Visa's QR code scan-to-pay functionality enables low-cost, quick to
market alternatives for promoting digital payment acceptance at small and medium size merchants.
Visa Token Service: The Visa Token Service (VTS) replaces sensitive account information, such
as the 16-digit account number, with a unique digital identifier called a token. The token enables
payments to be initiated and communicated to Visa without the account holder or acquirer being
required to expose personal account numbers (PANs) that could be compromised.
In fiscal 2018, we expanded VTS presence in ten new markets for a total of 40 markets. We also
enabled more than 20 new global and regional token requestors in fiscal 2018. Because of the added
security measures, token transactions tend to have lower rates of fraud and higher rates of
authorization than PANs, a key value proposition for clients to implement and use tokens. This year,
we also signed several significant merchants and gateways to use or otherwise participate in our token
service. By expanding access to the Visa Token Service to new partners, we expect Visa issuers and
other partners to offer or enable secure digital payments across an increasing range of solutions and
circumstances.
Visa Checkout: Visa Checkout offers consumers an expedited and secure payment experience
for online and mobile transactions. This is particularly important as digital commerce continues to shift
from desktop devices to mobile devices, where shoppers have higher abandonment rates of their items
in their shopping carts. At the end of fiscal 2018, Visa Checkout has over 40 million consumer
accounts in 26 countries, driven by growth in Europe and the United States. We also launched Visa
Checkout Open Platform (VCOP) in fiscal 2017. VCOP allows digital wallet partners to integrate with
Visa Checkout, thereby providing consumers with improved online and in-application payment
services. In doing so, consumers have additional options for paying online. We plan to start migrating
our Visa Checkout users in select markets to Secure Remote Commerce in mid- to late-2019.
12
Secure Remote Commerce: In 2018, we announced our support of the EMV Secure Remote
Commerce (SRC) specifications and the creation of the Visa Digital Commerce Program (Visa DCP).
Our Visa DCP platform is an implementation of the EMV Secure Remote Commerce technical
framework and specifications that enables a merchant to provide a consistent, streamlined digital
checkout experience to consumers, including a common acceptance mark, and to obtain secure
customer payment information and enhance the security for digital transactions and stored credentials.
Visa DCP includes Visa's SRC and Visa Token Service platforms. Visa DCP is planned for launch in
the middle of 2019.
Contactless
Contactless payments allow consumers to tap-to-pay with a card or near field communication
(NFC) enabled device at a terminal enabled with NFC technology. Contactless technology offers
consumers an additional checkout option while providing the same security as an EMV chip card and
helps merchants move customers through their check-out lines faster. At the end of fiscal 2018, nearly
one in four of all face-to-face Visa domestic transactions running over our global network were
contactless, up from 15% at the end of fiscal 2017. In many parts of the globe, including most of
Europe, Canada, and parts of Asia, contactless is mature and accounts for more than half of all
face-to-face transactions.
Earned for services provided in support of client
usage of Visa products.
Merchant Products
We have a suite of products and services to help merchants reduce their payment fraud and
improve customer loyalty. Visa Commerce Network, and CyberSource's product offerings are
examples of Visa's continued investment to deliver industry-leading products and capabilities to our
merchant partners.
Visa Commerce Network uses our global payments network to enable merchants to promote
relevant offers to acquire new customers, drive loyalty, and increase sales. For example, Uber and
Visa Commerce Network have partnered to introduce Visa Local Offers, a card-linked offer program
that rewards enrolled U.S. Visa account holders for shopping at thousands of featured merchants in
the United States. Uber credits are awarded to the riders' Uber accounts on qualifying purchases -
eliminating the need for coupons or promo codes.
Digital Product
Earned for authorization, clearing, settlement,
network access and other maintenance and
support services that facilitate transaction and
information processing among our clients globally.
$5.5B
Includes license fees for use of the Visa brand, fees
for account holder services, certification, licensing
and other activities related to our acquired
entities.
3,243
1,825
113
114
58
(1) UnionPay, which operates primarily within the Chinese domestic market, is not included in this table as Visa currently does
not compete in that market under local law. Although we are uncertain how UnionPay reports certain volumes, reportedly its
numbers could approach or exceed some of those listed in this chart.
(2) The data presented are provided by our financial institution clients. Previously submitted information may be updated and all
data are subject to review by Visa.
(3) MasterCard, American Express, JCB and Discover/Diners Club data sourced from The Nilson Report issue 1130 (April
2018). Includes all consumer and commercial credit, debit and prepaid cards. Some figures are estimates and currency
figures are in U.S. dollars. MasterCard excludes Maestro and Cirrus figures. American Express includes figures for third-
party issuers. Discover figures consist of U.S. data only and include third-party issuers. JCB figures include third-party
issuers and other payment-related products.
Local and regional networks, that operate in many countries, often with the support of government
influence or mandate. In some cases, they are owned by financial institutions. These networks typically
focus on debit payment products and may have strong local acceptance, and recognizable brands.
Examples include STAR, NYCE, and Pulse in the United States, Interac in Canada, EFTPOS in
Australia and Mir in Russia.
Alternate Payment Providers, which often have a primary focus of enabling payments through
ecommerce and mobile channels, but are expanding or may expand their offerings to the physical point
of sale. These companies may process payments using in-house account transfers between parties,
electronic funds transfer networks like the Automated Clearing House (ACH), global or local networks
like Visa, or some combination of the foregoing. In some cases, these entities are both a partner and a
competitor to Visa. Examples of alternate payment providers include PayPal, Alipay, and WeChat.
Alipay and WeChat Pay are among the fastest growing mobile payment providers in the world and
pose a competitive challenge to Visa and other international networks outside of China.
16
Other Electronic Payments Networks like the ACH in the United States are often regulated by
local governments. Historically focused on interbank transfers, many are adding capabilities that may
make them more competitive for retail payments. MasterCard acquired VocaLink Holdings Limited in
2016, which provides faster payments and alternative payments technology that competes with our
Visa Direct offering, among other things. We also compete with closed-loop payment systems,
emerging payments networks, wire transfers, and electronic benefit transfers.
Payment Processors, which we compete with for the processing of Visa transactions or which
may benefit from mandates requiring them to handle processing under local regulation. For example,
as a result of regulation in Europe under the Interchange Fee Regulation (IFR), we may face
competition from other networks, processors, and other third-parties who could process Visa
transactions directly with issuers and acquirers.
We believe our fundamental value proposition of acceptance, security, convenience, speed, and
reliability offers us a key competitive advantage. We succeed in part because we understand the
needs of the individual markets in which we operate and partner with local financial institutions,
merchants, governments, non-governmental organizations, and business organizations to provide
tailored solutions. We believe Visa is well-positioned competitively, due to our global brand, our broad
set of Visa-branded payment products, and our proven track record of processing payment
transactions securely and reliably through VisaNet.
Cards (M)
SEASONALITY
WORKING CAPITAL
Payments settlement due to and from our financial institution clients can represent a substantial
daily working capital requirement. Most U.S. dollar settlements are settled within the same day and do
not result in a receivable or payable balance, while settlement in currencies other than the U.S. dollar
generally remain outstanding for one to two business days, which is consistent with industry practice
for such transactions.
GOVERNMENT REGULATION
As a global payments technology company, we are subject to complex and evolving global
regulations in the various jurisdictions in which our products and services are used. The most
significant government regulations that impact our business are discussed below. For further
discussion of how global regulations may impact our business, see Item 1A-Risk Factors—
Regulatory Risks.
Anti-corruption, Anti-money Laundering, Anti-terrorism, and Sanctions. We are subject to
anti-corruption laws and regulations, including the U.S. Foreign Corrupt Practices Act (FCPA), the UK
Bribery Act, and other laws that generally prohibit the making or offering of improper payments to
foreign government officials and political figures for the purpose of obtaining or retaining business or to
gain an unfair business advantage. We are also subject to anti-money laundering and anti-terrorist
financing laws and regulations, including the U.S. Bank Secrecy Act. In addition, we are subject to
economic and trade sanctions programs administered by the Office of Foreign Assets Control (OFAC)
in the United States. Therefore, we do not permit financial institutions or other entities that are
domiciled in countries or territories subject to comprehensive OFAC trade sanctions (currently, Cuba,
Iran, North Korea, Syria, and Crimea), or that are included on OFAC's list of Specially Designated
Nationals and Blocked Persons, to issue or acquire Visa cards or engage in transactions using our
services.
17
Government-imposed Market Participation and Restrictions. Certain governments, including
China, India, Indonesia, Russia, Thailand and Vietnam, have taken actions to advantage domestic
payments systems and/or certain issuers, payments networks, or processors, including by imposing
regulations that favor domestic providers, impose local ownership requirements on processors, require
data localization, or mandate domestic processing be done in that country.
Interchange Rates and Fees. An increasing number of jurisdictions around the world regulate or
influence debit and credit interchange reimbursement rates in their regions. For example, the Dodd-
Frank Wall Street Reform and Consumer Act (Dodd-Frank Act) in the United States limits interchange
reimbursement rates for certain debit card transactions, the European Union's (EU) IFR limits
interchange rates in Europe (as discussed below) and the Reserve Bank of Australia and the Central
Bank of Brazil regulate average permissible levels of interchange.
Internet Transactions. Many jurisdictions have adopted regulations that require payments
system participants to monitor, identify, filter, restrict, or take other actions with regard to certain types
of payment transactions on the Internet, such as gambling and the purchase of cigarettes or alcohol.
Network Exclusivity and Routing. In the United States, the Dodd-Frank Act limits network
exclusivity and preferred routing arrangements for the debit and prepaid market segments. Other
jurisdictions impose similar limitations, such as the IFR's prohibition on restrictions that prevent multiple
payment brands or functionality on the same card.
No-surcharge Rules. We have historically enforced rules that prohibit merchants from charging
higher prices to consumers who pay using Visa products instead of other means. However, merchants'
ability to surcharge varies by geographic market as well as Visa product type, and continues to be
impacted by litigation, regulation, and legislation.
Privacy and Data Protection. Aspects of our operations or business are subject to privacy, data
use and data security regulations, which impact the way we use and handle data, operate our products
and services, and even impact our ability to offer a product or service. In addition, regulators are
proposing new laws or regulations which could require Visa to adopt certain cybersecurity and data
handling practices. In many jurisdictions consumers must be notified in the event of a data security
breach, and such notification requirements continue to increase in scope and cost. The changing
privacy laws in the United States (e.g. California Consumer Privacy Act), Europe, Brazil and
elsewhere, including the adoption by the European Union of the General Data Protection Regulation
(GDPR) effective in May 2018, create new individual privacy rights and impose increased obligations
on companies handling personal data.
Supervisory Oversight of the Payments Industry. Visa is subject to financial sector oversight
and regulation in substantially all of the jurisdictions in which we operate. In the United States, for
example, the Federal Financial Institutions Examination Council (FFIEC) has supervisory oversight
over Visa under applicable federal banking laws and policies as a technology service provider to U.S.
financial institutions. The federal banking agencies comprising the FFIEC are the Federal Reserve
Board, the Comptroller of the Currency, the Federal Deposit Insurance Corporation and the National
Credit Union Administration. Visa also may be separately examined by the Bureau of Consumer
Financial Protection as a service provider to the banks that issue Visa-branded consumer credit and
debit card products. Central banks in other countries, including Russia, Ukraine, and the United
Kingdom (as discussed below), have recognized or designated Visa as a retail payment system under
various types of financial stability regulations. Visa is also subject to oversight by banking and financial
sector authorities in other jurisdictions, such as Brazil and Hong Kong.
18
We generally do not experience any pronounced seasonality in our business. No individual
quarter of fiscal 2018 or fiscal 2017 accounted for more than 30% of our operating revenues in those
years.
2.6
3.4
7.7
$26.1B
Gross
Revenues
Business Solutions: We offer a portfolio of business payment solutions including small business,
corporate (travel) cards, purchasing cards, virtual accounts, and disbursement accounts covering most
major industry segments around the world. Business solutions are designed to bring efficiency,
controls, and automation to small businesses, commercial and government payment processes,
ranging from employee travel to fully integrated, invoice-based payables.
Client
Incentives
Paid to financial institutions, merchants and
strategic partners to build payments volume,
increase Visa product acceptance, win merchant
routing transactions over our network and drive
innovation.
$20.6B
NET
OPERATING
REVENUE
COMPETITION
The global payments industry continues to undergo dynamic change. Existing and emerging
competitors compete with Visa's network and payment solutions for consumers and for participation by
financial institutions and merchants. Technology and innovation are shifting consumer habits and
driving growth opportunities in ecommerce, mobile payments, blockchain technology and digital
currencies. These advances are enabling new entrants, many of which depart from traditional network
payment models. In certain countries, the evolving regulatory landscape is changing how we compete,
creating local networks, or enabling additional processing competition.
15
We compete against all forms of payment. This includes paper-based payments, primarily cash and
checks, and all forms of electronic payments. Our electronic payment competitors principally include:
Global or Multi-Regional Networks, which typically offer a range of branded, general purpose card
payment products that can be used at millions of merchant locations around the world. Examples
include MasterCard, American Express, Discover, JCB, and UnionPay. These competitors may be
more concentrated in specific geographic regions, such as JCB in Japan and Discover in the United
States, or have a leading position in certain countries. For example, UnionPay operates the sole
domestic acceptance mark in China and is expanding into other global markets. See Item 1A-Risk
Factors-Regulatory Risks-Government-imposed restrictions on international payment systems may
prevent us from competing against providers in certain countries, including significant markets such as
China, India and Russia. Based on available data, Visa is one of the largest retail electronic funds
transfer networks used throughout the world. The following chart compares our network with these
network competitors for calendar year 2017(1):
American
Visa(2)
MasterCard (3) Express(3) JCB(3)
Discover |
Diners Club(3)
Payments Volume ($B)
87.46
170
Total Transactions (B)
$173
$260
$1,085
Earned for cross-border transaction processing
and currency conversion activities.
$5,242
Total Volume ($B)
$159
$253
$1,071
$3,814
$7,565
$10,516
Core Products
Interchange Multidistrict Litigation
For decades, our growth has been driven by the strength of our core business solutions, credit,
debit, and prepaid products, as well as our global ATM network. The ability to access available funds, a
line of credit, or a prepaid account has provided consumers and businesses flexibility and
convenience.
Payments Volume(2)
$8.1
Up 29% over prior year's
adjusted results
Net Income
(Adj.)(1)
$10.7B
Up 54% over prior year
$10.3B
GAAP Net
Income
Up 12% over prior year
Net
Operating
Revenues
Up 13% over prior year
Fiscal 2018 Key Statistics
Despite the best efforts of governments and the private sector, an estimated 1.7 billion people
worldwide lack access to safe and reliable financial services. Mobile connectivity, new acceptance
devices untethered to landline infrastructure and new partnerships are enabling digital payments in
remote and challenging environments.
The core of Visa's mission to connect the world is based on the belief that everyone,
everywhere should have access to the speed, convenience and reliability of digital payments.
―
_
Expand Access
Visa's business has been built on a foundation of long-standing and mutually-beneficial
partnerships. We seek to differentiate our relationships with our clients by offering access to our global
network, payment products, value-added services and payment expertise. We have also expanded our
partnerships to include technology leaders, governments, non-governmental organizations and
fintechs.
Deepen Partnerships
10
In 2018, we made a strategic decision to focus much of our social impact efforts on enabling
micro and small enterprises to succeed. Visa and the Visa Foundation are committed to help
low-income, financially underserved micro and small enterprises around the world. This initiative is
good for small enterprises and the global economy. Sixty-five percent of all new private sector jobs in
the U.S. and 60 percent of new jobs in developing economies are in the small and micro-business
sector.
Processed Transactions
$20.6B +11
Up 12% over prior year
PRODUCTS & SERVICES
124.3B
Separately, Visa also launched an investment program to invest up to $100 million to support the
fintech ecosystem with the focus on supporting start-up businesses that are innovating in open banking
and those using emerging technologies that have the potential to create new commerce experiences.
We also make investments in companies around the world that we believe may further our vision
and strategic objectives, support deeper engagement with key partners, or expand access to payment
solutions worldwide. In 2018, we made several investments in the fintech industry and unveiled a new
program in Europe, which we are implementing around the world, called fintech fast-track. The fintech
fast-track program provides an accelerated and simplified onboarding process for startup and early
growth-stage companies to become Visa issuers. In addition, through the Visa Ready certification
program, we provide the structure that allows partners to introduce devices, software, and solutions
that can securely initiate or accept Visa payments.
Our global innovation network with ten locations in key markets such as Dubai, London, Miami,
San Francisco, and Singapore fosters collaboration with our financial institution and merchant clients,
partners, and developers to help spur the creation of innovative payment and commerce applications
and solutions. By providing access to Visa capabilities through APIs, the Visa Developer Platform is
designed to enable global partners to transform ideas into new digital commerce, payment, or related
experiences or solutions. For example, the Visa Everywhere Initiative is a global innovation program
active in more than 80 countries since 2015 that tasks start-ups to solve commerce challenges, further
enhance their own product propositions and provide new solutions for our network of partners.
Global Innovation Network, Visa Developer Platform,
How We Work with Partners
Certifications, and Startups
In fiscal 2018, we completed the final stages of the Visa Europe technology migration, which was
a multi-year process that brought our European clients onto VisaNet. The unified global platform aims
to increase the speed-to-market, resilience and availability of innovative solutions to our European
clients. As a result, clients will see expanded services including greater support of Visa Direct
transactions, real-time risk management, tokenization and global dispute capabilities. In addition, we
migrated the fraud scoring and case management service in Europe to our global platform. Clients will
benefit from a unified security architecture built on multiple redundant layers of cyber defense designed
to protect them from data security breaches and service disruptions.
Visa Europe Integration
We reached a damages class settlement in the U.S. interchange multidistrict litigation (MDL) in
September 2018. The settlement has been submitted to the district court for preliminary approval, and
following such approval, merchant class members will be given the opportunity to opt out of or object to
the settlement. The district court will then determine whether to finally approve the settlement. This
damages class settlement does not resolve the injunctive relief class claims seeking modifications to
network rules. See Note 17-Legal Matters to our consolidated financial statements included in
Item 8-Financial Statements and Supplementary Data of this report for a discussion of the MDL.
9
Dividends &
Share Buybacks
KEY INITIATIVES
Up 7% over prior year
~17,000
$9.1B >
(1) Please see Item 7-Management's Discussion and Analysis of Financial Condition and Results of Operations for a
reconciliation of our adjusted financial results.
(2) For the 12 months ended June 30, 2018, upon which fiscal 2018 service revenues are based.
Employees in 119 office and data
center locations around the world
•
We expect the competitive landscape to continue to shift and evolve. For example:
•
•
.
•
•
25
We may be adversely affected by the outcome of litigation or investigations, despite certain
protections that are in place.
Our competitors may develop substantially better technology, have more widely adopted delivery
channels or have greater financial resources. They may offer more effective, innovative or a wider
range of programs, products, and services. They may use more effective advertising and marketing
strategies that result in broader brand recognition, and greater issuance and merchant acceptance.
They may also develop better security solutions or more favorable pricing arrangements. Moreover,
even if we successfully adapt to technological change and the proliferation of alternative types of
payment services by developing and offering our own services in these areas, such services may
provide less favorable financial terms for us than we currently receive from VisaNet transactions, which
could hurt our financial results and prospects.
The global payments space is intensely competitive. As technology evolves, new competitors or
methods of payment emerge, and existing clients and competitors assume different roles. Our products
compete with cash, checks, electronic funds, virtual currency payments, global or multi-regional
networks, other domestic and closed-loop payments systems, and alternate payment providers
primarily focused on enabling payments through ecommerce and mobile channels. As the global
payments space becomes more complex, we face increasing competition from our clients, emerging
payment providers, and other digital and technology companies that have developed payments
systems enabled through online activity in ecommerce and mobile channels.
We face intense competition in our industry.
Business Risks
For certain actions like those that are U.S. covered litigation or VE territory covered litigation, as
described in Note 2-U.S. and Europe Retrospective Responsibility Plans and Note 17-Legal Matters
to our consolidated financial statements included in Item 8-Financial Statements and Supplementary
Data of this report, we have certain financial protections pursuant to the respective retrospective
responsibility plans. The two retrospective responsibility plans are different in the protections they
provide and the mechanisms by which we are protected. The failure of one or both of the retrospective
responsibility plans to adequately insulate us from the impact of such settlements, judgments, losses,
or liabilities could materially harm our financial condition or cash flows, or even cause us to become
insolvent.
24
We are involved in numerous litigation matters, investigations, and proceedings asserted by civil
litigants, governments, and enforcement bodies alleging, among other things, violations of competition
and antitrust law, consumer protection law, and intellectual property law (these are referred to as
"actions" in this section). Details of the most significant actions we face are described more fully in
Note 17-Legal Matters to our consolidated financial statements included in Item 8-Financial
Statements and Supplementary Data of this report. These actions are inherently uncertain, expensive,
and disruptive to our operations. In the event we are found liable in any material action, particularly in a
large class action lawsuit, such as one involving an antitrust claim entitling the plaintiff to treble
damages, or we incur liability arising from a government investigation, we may be required to pay
significant awards, settlements, or fines. In addition, settlement terms, judgments, or pressures
resulting from actions may harm our business by requiring us to modify, among other things, the
default interchange reimbursement rates we set, the Visa operating rules or the way in which we
enforce those rules, our fees or pricing, or the way we do business. The outcome of these actions may
also influence regulators, investigators, governments, or civil litigants in the same or other jurisdictions,
which may lead to additional actions against Visa. Finally, we are required by some of our commercial
agreements to indemnify other entities for litigation brought against them, even if Visa is not a
defendant.
competitors, clients and others are developing alternate payment networks or products, such
as mobile payment services, ecommerce payment services, P2P payment services, faster
payment initiatives and payment services that permit ACH or direct debits from consumer
checking accounts, that could reduce our role or otherwise disintermediate us from the
transaction processing or the value-added services we provide to support such processing.
Examples include initiatives from The Clearing House, an association comprised of large
financial institutions that is developing its own faster payments system, and Early Warning
Services, which operates Zelle, a bank-offered alternative network that provides another
platform for faster funds or real-time payments across a variety of payment types, including
P2P, corporate and government disbursement, bill pay and deposit check transactions;
Certain of our competitors operate with different business models, have different cost structures,
or participate in different market segments. Those business models may ultimately prove more
successful or more adaptable to regulatory, technological, and other developments. In some cases,
these competitors have the support of government mandates that prohibit, limit, or otherwise hinder our
ability to compete for transactions within certain countries and regions. Some of our competitors,
including American Express, Discover, private-label card networks, virtual currency providers,
technology companies that enable the exchange of digital assets, and certain alternate payments
systems like Alipay and WeChat Pay, operate closed-loop payments systems, with direct connections
to both merchants and consumers. Government actions or initiatives such as the Dodd-Frank Act or
the U.S. Federal Reserve's Faster Payments initiatives may provide them with increased opportunities
to derive competitive advantages from these business models. Similarly, regulation in Europe under
PSD2 and the IFR may require us to open up access to, and allow participation in, our network to
additional participants, and reduce the infrastructure investment and regulatory burden on potential
competitors. We also run the risk of disintermediation due to factors such as emerging technologies,
including mobile payments, alternate payment credentials, other ledger technologies or payment forms,
and by virtue of increasing bilateral agreements between entities that prefer not to use our payments
network for processing transactions. For example, merchants could process transactions directly with
issuers, or processors could process transactions directly with issuers and acquirers.
similarly, multiple countries are developing or promoting real-time payment systems or
mandating local networks with clients that also present a risk of disintermediation to our
business and some regions, such as Southeast Asia, under the auspices of the Association of
Southeast Asian Nations (ASEAN), are looking into cross-border connectivity of such systems;
parties that process our transactions may try to minimize or eliminate our position in the
payments value chain;
28
participants in the payments industry may merge, form joint ventures or enable or enter into
other business combinations that strengthen their existing business propositions or create
new, competing payment services; and
Litigation Risks
Our revenues are dependent on the volume and number of payment transactions made by
consumers, governments, and businesses whose spending patterns may be affected by prevailing
economic conditions. In addition, more than half of our operating revenues are earned outside the
United States. International cross-border transaction revenues represent a significant part of our
revenue and are an important part of our growth strategy. Therefore, adverse macroeconomic
conditions, including recessions, inflation, high unemployment, currency fluctuations, actual or
anticipated large-scale defaults or failures, or slowdown of global trade could decrease consumer and
corporate confidence and reduce consumer, government, and corporate spending which have a direct
impact on our revenues. In addition, outbreaks of illnesses, pandemics, or other local or global health
issues, political uncertainties, international hostilities, armed conflict, or unrest, and natural disasters
could impact our operations, our clients, our activities in a particular location, and cross-border travel
and spend. Geopolitical trends towards nationalism, protectionism, and restrictive visa requirements,
as well as continued activity and uncertainty around economic sanctions could limit the expansion of
our business in those regions. The current trade environment reduces the likelihood of having our Bank
Card Clearing Institution application in China approved. In addition, any decline in cross-border travel
and spend could impact the number of cross-border transactions we process and our currency
exchange activities, which in turn would reduce our international transaction revenues.
Our brand is globally recognized and is a key asset of our business. We believe that our clients
and account holders associate our brand with acceptance, security, convenience, speed, and
reliability. Our success depends in large part on our ability to maintain the value of our brand and
reputation of our products and services in the payments ecosystem, elevate the brand through new
and existing products, services and partnerships, and uphold our corporate reputation. The popularity
of products that we have developed in partnership with technology companies and financial institutions
may have the potential to cause consumer confusion or brand disintermediation at the point-of-sale
and decrease the value of our brand. Our brand reputation may be negatively impacted by a number of
factors, including clearing and settlement service disruptions; data security breaches; compliance
failures by Visa, including our employees, agents, clients, partners or suppliers; negative perception of
our industry, the industries of our clients or Visa-accepting merchants; ill-perceived actions by clients or
other third parties, such as sponsorship or co-brand partners; and fraudulent, risky, controversial or
illegal activities using our payment products. If we are unable to maintain our reputation, the value of
our brand may be impaired, which could harm our relationships with clients, account holders, and the
public, as well as impact our business.
Our business could be harmed if we are not able to maintain and enhance our brand, if events
occur that have the potential to damage our brand or reputation, or if we experience brand
disintermediation.
preference and acceptance growth. We also engage in many payment card co-branding efforts with
merchants, who receive incentives from us. As these and other relationships become more prevalent
and take on a greater importance to our business, our success will increasingly depend on our ability to
sustain and grow these relationships. In addition, we depend on our clients and third parties, including
vendors and suppliers, to process transactions properly, provide various services associated with our
payments network on our behalf, and otherwise adhere to our operating rules. To the extent that such
parties fail to perform or deliver adequate services, may result in negative experiences for account
holders or others when using their Visa-branded payment products, which could harm our business
and reputation.
27
As noted above, our relationships with industry participants are complex and require us to
balance the interests of multiple third parties. For instance, we depend significantly on relationships
with our financial institution clients and on their relationships with account holders and merchants to
support our programs and services, and thereby compete effectively in the marketplace. We engage in
discussions with merchants, acquirers, and processors to provide incentives to promote routing
We depend on relationships with financial institutions, acquirers, processors, merchants, and
other third parties.
parties that access our payment credentials, tokens and technologies, including clients,
technology solution providers or others might be able to migrate account holders and other
clients to alternate payment methods or use our payment credentials, tokens and technologies
to establish or help bolster alternate payment methods and platforms;
We rely in part on merchants and their relationships with our clients to maintain and expand the
acceptance of Visa products. Certain large retail merchants have been exercising their influence in the
global payments system in certain jurisdictions, such as the United States, Canada and Europe, to
attempt to lower their acceptance costs by lobbying for new legislation, seeking regulatory
enforcement, filing lawsuits and in some cases, refusing to accept Visa products. If they are successful
in their efforts, we may face increased compliance and litigation expenses and issuers may decrease
their issuance of our products. For example, in the United States, certain stakeholders have raised
concerns regarding how payment security standards and rules may impact the cost of payment card
acceptance. In addition to ongoing litigation related to the U.S. migration to EMV-capable cards and
point-of-sale terminals, U.S. merchant-affiliated groups and processors have expressed concerns
regarding the EMV certification process and some policymakers have concerns about the roles of
industry bodies such as EMVCo and the Payment Card Industry Security Standards Council in the
development of payment card standards. Additionally, some merchants and processors have
advocated for changes to industry practices and Visa acceptance requirements at the point of sale,
including the ability for merchants to accept only certain types of Visa products, to mandate only PIN
authenticated transactions, to differentiate or steer among Visa product types issued by different
financial institutions, and to impose surcharges on customers presenting Visa products as their form of
payment. If successful, these efforts could adversely impact consumers' usage of our products, lead to
regulatory enforcement and/or litigation, increase our compliance and litigation expenses, and harm
our business.
In addition, it may be difficult or costly for us to acquire or conduct business with financial
institutions or merchants that have longstanding exclusive, or nearly exclusive, relationships with our
competitors. These financial institutions or merchants may be more successful and may grow more
quickly than our existing clients or merchants. In addition, if there is a consolidation or acquisition of
one or more of our largest clients or co-brand partners by a financial institution client or merchant with
a strong relationship with one of our competitors, it could result in our business shifting to a competitor,
which could put us at a competitive disadvantage and harm our business.
In addition, we face intense competitive pressure on the prices we charge our financial institution
clients. In order to stay competitive, we may need to adjust our pricing or offer incentives to our clients
to increase payments volume, enter new market segments, adapt to regulatory changes, and expand
their use and acceptance of Visa products and services. These include up-front cash payments, fee
discounts, rebates, credits, performance-based incentives, marketing, and other support payments that
impact our revenues and profitability. In addition, we offer incentives to certain merchants or acquirers
to win routing preference in situations where other network functionality is enabled on our products and
there is a choice of network routing options. Market pressures on pricing, incentives, fee discounts, and
rebates could moderate our growth. If we are not able to implement cost containment and productivity
initiatives in other areas of our business or increase our volumes in other ways to offset or absorb the
financial impact of these incentives, fee discounts, and rebates, it may harm our net revenues and
profits.
26
26
Our financial institution clients and merchants can reassess their commitments to us at any time or
develop their own competitive services. While we have certain contractual protections, our clients,
including some of our largest clients, generally have flexibility to issue non-Visa products. Further, in
certain circumstances, our financial institution clients may decide to terminate our contractual relationship
on relatively short notice without paying significant early termination fees. Because a significant portion of
our operating revenues is concentrated among our largest clients, the loss of business from any one of
these larger clients could harm our business, results of operations, and financial condition.
Our revenues and profits are dependent on our client and merchant base, which may be costly
to win, retain, and maintain.
As the competitive landscape is quickly evolving, we may not be able to foresee or respond
sufficiently to emerging risks associated with new businesses, products, services and practices. We
may be asked to adjust our local rules and practices, develop or customize certain aspects of our
payment services, or agree to business arrangements that may be less protective of Visa's proprietary
technology and interests in order to compete and we may face increasing operational costs and risk of
litigation concerning intellectual property. Our failure to compete effectively in light of any such
developments could harm our business and prospects for future growth.
new or revised industry standards related to the EMV Secure Remote Commerce, cloud-based
payments, tokenization or other payments-related technologies set by organizations such as
the International Organization for Standardization, American National Standards Institute,
World Wide Web Consortium, European Card Standards Group and EMVCO may result in
additional costs and expenses for Visa and its clients, or otherwise negatively impact the
functionality and competitiveness of our products and services.
Merchants' and processors' continued push to lower acceptance costs and challenge industry
practices could harm our business.
We exercise significant judgment in calculating our worldwide provision for income taxes and
other tax liabilities. Although we believe our tax estimates are reasonable, many factors may limit their
accuracy. We are currently under examination by, or in disputes with, the U.S. Internal Revenue
Service, the UK's HM Revenue & Customs as well as tax authorities in other jurisdictions, and we may
be subject to additional examinations or disputes in the future. Relevant tax authorities may disagree
with our tax treatment of certain material items and thereby increase our tax liability. Failure to sustain
our position in these matters could harm our cash flow and financial position. In addition, changes in
existing laws, such as future regulatory guidance on the U.S. Tax Cuts and Jobs Act, tax law changes
in the United States or foreign jurisdictions, or those resulting from the Base Erosion and Profit Shifting
project being conducted by the Organization for Economic Cooperation and Development, may also
materially affect our effective tax rate. A substantial increase in our tax payments could have a
material, adverse effect on our financial results. See also Note 16-Income Taxes to our consolidated
financial statements included in Item 8-Financial Statements and Supplementary Data of this report.
21
in India. Such data localization requirements have cost implications for us, impact our ability to utilize
the efficiencies and value of our global network, and could affect our strategy. Furthermore,
enforcement actions and investigations by regulatory authorities related to data security incidents and
privacy violations continue to increase. The enactment of more restrictive laws, rules, regulations, or
future enforcement actions or investigations could impact us through increased costs or restrictions on
our business, and noncompliance could result in regulatory penalties and significant legal liability.
Increased regulation of the global payments industry, including with respect to interchange
reimbursement fees, operating rules, risk management protocols and other related practices,
could harm our business.
20
20
If widely varying regulations come into existence worldwide, we may have difficulty rapidly
adjusting our product offerings, services, fees, and other important aspects of our business in the
various regions where we operate. Our compliance programs and policies are designed to support our
compliance with a wide array of regulations and laws, such as anti-money laundering, anti-corruption,
competition, privacy and sanctions, and we continually enhance our compliance programs as
regulations evolve. However, we cannot guarantee that our practices will be deemed compliant by all
applicable regulatory authorities. In the event our controls should fail or we are found to be out of
compliance for other reasons, we could be subject to monetary damages, civil and criminal penalties,
litigation, investigations and proceedings, and damage to our global brands and reputation.
Furthermore, the evolving and increased regulatory focus on the payments industry could negatively
impact or reduce the number of Visa products our clients issue, the volume of payments we process,
our revenues, our brands, our competitive positioning, our ability to use our intellectual property to
differentiate our products and services, the quality and types of products and services we offer, the
countries in which our products are used, and the types of consumers and merchants who can obtain
or accept our products, all of which could harm our business.
As a global payments technology company, we are subject to complex and evolving regulations
that govern our operations. See Item 1-Business-Government Regulation for more information on
the most significant areas of regulation that affect our business. The impact of these regulations on us,
our clients, and other third parties could limit our ability to enforce our payments system rules; require
us to adopt new rules or change existing rules; affect our existing contractual arrangements; increase
our compliance costs; require us to make our technology or intellectual property available to third
parties, including competitors, in an undesirable manner; and reduce our revenue opportunities. As
discussed in more detail below, we may face differing rules and regulations in matters like interchange
reimbursement rates, preferred routing, domestic processing requirements, currency conversion,
point-of-sale transaction rules and practices, privacy, data use or protection, and associated product
technology. As a result, the Visa operating rules and our other contractual commitments may differ
from country to country or by product offering. Complying with these and other regulations increases
our costs and could reduce our revenue opportunities.
We are subject to complex and evolving global regulations that could harm our business and
financial results.
Regulatory Risks
ITEM 1A. Risk Factors
We may be subject to tax examinations or disputes, or changes in tax laws.
http://www.sec.gov. Our corporate website is accessible at http://corporate.visa.com. We make
available, free of charge, on our investor relations website at http://investor.visa.com our annual reports
on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K and any
amendments to those reports as soon as reasonably practicable after they are electronically filed with,
or furnished to, the SEC. We also may include supplemental financial information on our investor
relations website at http://investor.visa.com and may use this website as a means of disclosing
material, non-public information and for complying with our disclosure obligations under Regulation FD.
Accordingly, investors should monitor such portions of our investor relations website, in addition to
following SEC filings and publicly available conference calls. The information contained on, or
accessible through, our corporate website, including the information contained on our investor relations
website, is not incorporated by reference into this report or any other report filed with, or furnished to,
the SEC.
We are subject to the reporting requirements of the Securities Exchange Act of 1934, as
amended (Exchange Act) and its rules and regulations. The Exchange Act requires us to file periodic
reports, proxy statements and other information with the U.S. Securities and Exchange Commission
(SEC). Copies of these reports, proxy statements and other information can be viewed at
AVAILABLE INFORMATION
Visa Inc. was incorporated in Delaware in May 2007 and we completed our initial public offering in
March 2008. Prior to 2007 when Visa was reorganized, Visa served its member financial institutions
through Visa International and regional member-owned associations (e.g., Visa U.S.A. Inc., Visa
Canada Corporation). As part of the 2007 reorganization, these associations became a part of Visa
Inc. in October 2007, with the exception of Visa Europe Limited, which continued to operate as an
association until our acquisition in June 2016.
ADDITIONAL INFORMATION
Additional Regulatory Developments. Various regulatory agencies also continue to examine a
wide variety of other issues, including mobile payment transactions, tokenization, access rights for
non-financial institutions, money transfer, identity theft, account management guidelines, disclosure
rules, security, and marketing that could affect our financial institution clients and us. Furthermore,
following the passage of PSD2 in Europe, several countries, including Australia, Canada, Hong Kong
and Mexico are contemplating granting various types of access rights to third party processors,
including access to consumer account data maintained by our financial institution clients, which could
have implications for our business as well.
As discussed in Item 1A-Risk Factors-Business Risks—The United Kingdom's withdrawal from
the European Union could harm our business and financial results, Brexit could lead to further legal
and regulatory complexity in Europe.
There are other regulations in the European Union that impact our business, as discussed above,
including, privacy and data protection, anti-bribery, anti-money laundering, anti-terrorism and
sanctions. Other recent regulatory changes in Europe such as the second Payment Services Directive
(PSD2) require, among other things, that our financial institution clients provide certain customer
account access rights to emerging non-financial institution players. PSD2 also includes strong
customer authentication requirements for certain transactions that could impose both operational
complexity on Visa and negatively impact consumer payment experiences.
European Regulations and Supervisory Oversight. Visa Europe continues to be subject to
complex and evolving regulation in the European Economic Area. Visa Europe has been designated as
a Recognized Payment System in the United Kingdom, bringing it within the scope of the Bank of
England's supervisory powers and subject to various requirements, including on issues such as
governance and risk management designed to maintain the stability of the United Kingdom's financial
system. Visa Europe is also subject to the European Central Bank's oversight, whose main focus is on
the functioning of card payments, as well as the security, operational reliability, and business continuity
of the schemes and their payment instruments. Furthermore, Visa Europe is regulated by the United
Kingdom's Payment Systems Regulator (PSR), which has wide ranging powers and authority to review
our business practices, systems, rules and fees with respect to promoting competition and innovation
in the United Kingdom, and ensuring payments meet account holder needs. The PSR is also the
regulator responsible for monitoring Visa Europe's compliance with the IFR in the United Kingdom. The
IFR regulates interchange rates within Europe, requires Visa Europe to separate its payment card
scheme activities from processing activities for accounting, organization, and decision-making
purposes within the European Union and imposes limitations on network exclusivity and routing.
National competent authorities in the EU are responsible for monitoring and enforcing the IFR in their
markets.
19
Interchange reimbursement fees, certain operating rules and related practices continue to be
subject to increased government regulation globally, and regulatory authorities and central banks in a
number of jurisdictions have reviewed or are reviewing these fees, rules, and practices. For example,
regulations adopted by the U.S. Federal Reserve cap the maximum U.S. debit interchange
reimbursement rate received by large financial institutions at 21 cents plus 5 basis points per transaction,
plus a possible fraud adjustment of 1 cent. The Dodd-Frank Act also limits issuers' and our ability to
adopt network exclusivity and preferred routing in the debit and prepaid area, which also impacts our
business. The EU's IFR places an effective cap on consumer credit and consumer debit interchange fees
for both domestic and cross-border transactions within Europe (30 basis points and 20 basis points,
respectively). EU member states have the ability to further reduce these interchange levels within their
territories. More recently, countries in Latin America have also adopted interchange caps. For example, in
March 2017, Argentina's central bank passed regulations that cap interchange fees on credit and debit
transactions. In March 2018, Brazil adopted interchange caps on debit transactions.
Regulators around the world have been establishing or increasing their authority to regulate
certain aspects of the payments industry. See Item 1. Business -Government Regulation for more
information. In the United States and many other jurisdictions, we have historically set default
interchange reimbursement fees. Even though we generally do not receive any revenue related to
interchange reimbursement fees in a payment transaction (in the context of credit and debit
transactions, those fees are paid by the acquirers to the issuers; the reverse is true for certain
transactions like ATM), interchange reimbursement fees are a factor on which we compete with other
payments providers and are therefore an important determinant of the volume of transactions we
process. Consequently, changes to these fees, whether voluntarily or by mandate, can substantially
affect our overall payments volumes and revenues.
our revenues.
23
Our business relies on the processing of data in many jurisdictions and the movement of data
across national borders. Legal requirements relating to the collection, storage, handling, use,
disclosure, transfer, and security of personal data continue to evolve, and regulatory scrutiny in this
area is increasing around the world. Significant uncertainty exists as privacy and data protection laws
may be interpreted and applied differently from country to country and may create inconsistent or
conflicting requirements. For example, the GDPR extends the scope of the EU data protection law to
all companies processing data of EU residents, regardless of the company's location. The law requires
companies to meet new requirements regarding the handling of personal data. Although we have an
extensive data privacy program that addresses the GDPR requirements, our ongoing efforts to comply
with GDPR and other privacy and data protection laws (such as the new California Consumer Privacy
Act effective as of January 2020 and the Brazilian General Data Protection Law effective as of
February 2020) may entail substantial expenses, may divert resources from other initiatives and
projects, and could limit the services we are able to offer. In addition, earlier this year, India adopted a
data localization law that requires all payment system operators to store domestic transaction data only
Laws and regulations regarding the handling of personal data and information may impede our
services or result in increased costs, legal claims, or fines against us.
In general, national laws that protect domestic providers or processing may increase our costs;
decrease our payments volumes and impact the revenue we generate in those countries; decrease the
number of Visa products issued or processed; impede us from utilizing our global processing
capabilities and controlling the quality of the services supporting our brands; restrict our activities; limit
our growth and the ability to introduce new products, services and innovations; force us to leave
countries or prevent us from entering new markets; and create new competitors, all of which could
harm our business.
Mir and UnionPay have grown rapidly in Russia and China, respectively, and are actively
pursuing international expansion plans, which could potentially lead to regulatory pressures on our
international routing rule (which requires that international transactions on Visa cards be routed over
VisaNet). Furthermore, although regulatory barriers shield Mir and UnionPay from competition in
Russia and China, respectively, alternate payment providers such as Alipay and WeChat Pay have
rapidly expanded into ecommerce, offline, and cross-border payments, which could make it difficult for
us to compete even if our license is approved in China. Last year, with strong backing from China's
government, a new digital transaction routing system known as Netlink was established. The PBOC
allowed Alipay and other digital payment providers to invest in Netlink. It and other such systems could
have a competitive advantage in comparison with other international payments networks.
Co-badging and co-residency regulations may pose additional challenges in markets where Visa
competes with national networks for issuance and routing. For example, in China, certain banks have
issued dual-branded cards for which domestic transactions in China are processed by UnionPay and
transactions outside of China are processed by us or other international payments networks. The
PBOC is contemplating that dual-branded cards could be phased out over time as new licenses are
issued to international companies to participate in China's domestic payments market. Accordingly, we
have been working with Chinese issuers to issue Visa-only branded cards for international travel, and
later for domestic transactions after we obtain a BCCI license. However, notwithstanding such efforts,
the phase out of dual-branded cards may decrease our payment volumes and impact the revenue we
generate in China.
Due to our inability to manage the end-to-end processing of transactions for cards in certain
countries (e.g., Russia and Thailand), we depend on our close working relationships with our clients or
third-party processors to ensure transactions involving our products are processed effectively. Our
ability to do so may be adversely affected by regulatory requirements and policies pertaining to
transaction routing or on-shore processing.
When we cannot set default interchange reimbursement rates at optimal levels, issuers and
acquirers may find our payments system less attractive. This may increase the attractiveness of other
payments systems, such as our competitors' closed-loop payments systems with direct connections to
both merchants and consumers. We believe some issuers may react to such regulations by charging
new or higher fees, or reducing certain benefits to consumers, which make our products less appealing
to consumers. Some acquirers may elect to charge higher merchant discount rates regardless of the
Visa interchange reimbursement rate, causing merchants not to accept our products or to steer
customers to alternate payments systems or forms of payment. In addition, in an effort to reduce the
expense of their payment programs, some issuers and acquirers have obtained, and may continue to
obtain, incentives from us, including reductions in the fees that we charge, which may directly impact
22
22
Recent regulatory initiatives in India also suggest growing nationalistic priorities, including a
recent data localization mandate passed by the government, which has cost implications for us and
could affect our ability to effectively compete with domestic payment providers. Furthermore, regional
groups of countries, such as the Gulf Cooperation Countries in the Middle East and a number of
countries in Southeast Asia, are considering, or may consider, efforts to restrict our participation in the
processing of regional transactions. The African Development Bank has also indicated an interest in
supporting national payment systems in its efforts to expand financial inclusion and strengthen regional
financial stability. Geopolitical events, including sanctions, trade tensions or other types of activities
could potentially intensify this activity, which could adversely affect our business.
In Russia, legislation effectively prevents us from processing domestic transactions. The central
bank controlled national payment card system (NSPK) is the only entity allowed to process
domestically. In China, UnionPay remains the sole processor of domestic payment card transactions
and operates the sole domestic acceptance mark. Although we have filed an application with the
People's Bank of China (PBOC) to operate a Bank Card Clearing Institution (BCCI) in China, the timing
and the procedural steps remain uncertain. The approval process might require several years, and
there is no guarantee that the license to operate a BCCI will be approved or, if we obtain such license,
that we will be able to successfully compete with domestic payments networks.
Governments in a number of jurisdictions shield domestic payment card networks, brands, and
processors from international competition by imposing market access barriers and preferential
domestic regulations. To varying degrees, these policies and regulations affect the terms of
competition in the marketplace and undermine the competitiveness of international payments
networks. In the future, public authorities may impose regulatory requirements that favor domestic
providers or mandate that domestic payments processing be performed entirely within that country,
which would prevent us from managing the end-to-end processing of certain transactions.
Government-imposed restrictions on international payment systems may prevent us from
competing against providers in certain countries, including significant markets such as China,
India and Russia.
Finally, regulators around the world increasingly take note of each other's approaches to
regulating the payments industry. Consequently, a development in one jurisdiction may influence
regulatory approaches in another. The risks created by a new law or regulation in one jurisdiction have
the potential to be replicated and to negatively affect our business in another jurisdiction or in other
product offerings. Similarly, new regulations involving one product offering may prompt regulators to
extend the regulations to other product offerings. For example, credit payments could become subject
to similar regulation as debit payments. The Reserve Bank of Australia initially capped credit
interchange, but subsequently capped debit interchange as well.
As we develop new product and service offerings to support our clients, the potential scope of
regulatory obligations and scrutiny could also increase. For instance, new products and capabilities,
including tokenization, and mobile and push payments, could bring increased licensing or authorization
requirements in the countries where the product or capability is offered.
We are also subject to central bank oversight in some markets, including, Brazil, Russia, the United
Kingdom and within the European Union. This oversight could result in new governance, reporting,
licensing, cybersecurity, processing infrastructure, capital, or credit risk management requirements. We
could also be required to adopt policies and practices designed to mitigate settlement and liquidity risks,
including increased requirements to maintain sufficient levels of capital and financial resources locally, as
well as localized risk management or governance. Increased central bank oversight could also lead to
new or different criteria for participation in and access to our payments system, including allowing
non-traditional financial technology companies to act as issuers or acquirers. Additionally, regulators in
other jurisdictions are considering or adopting approaches based on similar regulatory principles.
In addition to the regulation of interchange reimbursement fees, a number of regulators impose
restrictions on other aspects of our payments business. For example, governments such as in India
may use regulation to further drive down merchant discount rates, which could negatively affect the
economics of our transactions. Similarly, the Payment System Regulator's review of the acquiring
market in the United Kingdom could lead to additional regulatory pressure on our business. With
increased merchant lobbying, we could also begin to see regulatory interest in network fees.
Government regulations or pressure may also require us to allow other payments networks to support
Visa products or services, or to have the other network's functionality or brand marks on our products.
As innovations in payment technology have enabled us to expand into new products and services, they
have also expanded the potential scope of regulatory influence. In addition, the European Union's
requirement to separate scheme and processing adds costs and impacts the execution of our
commercial, innovation and product strategies.
Global economic, political, market, and social events or conditions may harm our business.
Elimination of deferred tax balances. During fiscal 2017, in connection with our legal entity
reorganization, we eliminated deferred tax balances originally recognized upon the acquisition
of Visa Europe, resulting in the recognition of a non-recurring, non-cash income tax provision
of $1.5 billion.
38
Total Number Of
Shares Purchased
As Part Of Publicly
Announced Plans Or
Programs (2),(3)
2,767,789 $
4,898,688 $
(1) Our results of operations and the financial position beginning with the last quarter of fiscal 2016 include Visa Europe's
financial results.
2.58
$
2.16
2017(1)
At September 30,
2016(1)
2014
Balance Sheet Data:
2018(1)
2015
Total assets
$ 69,225 $
Accrued litigation
Long-term debt
Total equity
$
$ 1,434 (6) $
$ 16,630 $
34,006 $
982
16,618 (7) $
32,760 $
(in millions, except per share data)
67,977 $
$
$ 39,367
64,035
981 $
15,882 (7) $
32,912 $ 29,842 $ 27,413
$ 37,543
1,024
$
1,456 (6)
-
$
Dividend declared and paid
per common share(5)
$ 0.825
$ 2.48 $
$ 0.660
2.80
$
Operating revenues
$ 20,609
$
Operating expenses
$ 7,655
$
Operating income
Net income
$
$ 12,954 $
10,301 (3) $
Basic earnings per share―
class A common
stock (5)
Diluted earnings per
share class A common
stock(5)
Fiscal Year Ended September 30,
2016(1)
2017(1)
2015
(in millions, except per share data)
18,358 $ 15,082 $ 13,880
6,214 $
12,144 $
6,699 (4) $
2014
$ 12,702
7,199 (2) $ 4,816 $ 5,005
7,883 $ 9,064 $ 7,697
5,991 $ 6,328 $
S5
5,438
SSS
4.43 $
2.80 $
2.49 $ 2.58 $
2.16
4.42
$ 0.560
$ 0.480 $ 0.400
(2) During fiscal 2016, upon consummation of the Visa Europe acquisition, we recorded a non-recurring loss of $1.9 billion,
before tax, in operating expense resulting from the effective settlement of the Framework Agreement between us and Visa
Europe.
$ 10,729
$ 8,335
$ 6,862
29%
Transition tax on foreign earnings. During fiscal 2018, in connection with the Tax Act's
requirement that we include certain untaxed foreign earnings of non-U.S. subsidiaries in our
fiscal 2018 taxable income, we recorded a one-time transition tax estimated to be
approximately $1.1 billion.
21%
Diluted earnings per share, as adjusted (2)
$ 4.61
$ 3.48
$ 2.84
Remeasurement of deferred tax balances. During fiscal 2018, in connection with the Tax Act's
reduction of the corporate income tax rate, we remeasured our net deferred tax liabilities as of
the enactment date, resulting in the recognition of a non-recurring, non-cash income tax
benefit of $1.1 billion.
32%
22%
(1) Figures in the table may not recalculate exactly due to rounding. Percentage changes are calculated based on unrounded
numbers.
(2) Adjusted net income and adjusted diluted earnings per share in fiscal 2018, 2017 and 2016 exclude the impact of certain
significant items that we believe are not indicative of our operating performance, as they were either non-recurring or had no
cash impact. For a full reconciliation of our adjusted financial results, see tables in Adjusted financial results below.
37
32
Highlights for fiscal 2018. Our business is affected by overall economic conditions and consumer
spending. Our business performance during fiscal 2018 reflects solid global consumer spending
growth, supported by favorable U.S. economic conditions and tempered by volatility in some emerging
markets. We recorded net operating revenues of $20.6 billion for fiscal 2018, an increase of 12% over
the prior year, primarily reflecting continued growth in processed transactions, nominal payments
volume and nominal cross-border volume. The effect of exchange rate movements, as partially
mitigated by our hedging program, resulted in an approximately one percentage point positive impact
to our net operating revenue growth.
Total operating expenses for fiscal 2018 were $7.7 billion, compared to $6.2 billion in fiscal 2017.
The increase over the prior year was primarily driven by a higher litigation provision and continued
investments to support our business growth.
Adjusted financial results. Our financial results for fiscal 2018, 2017 and 2016 reflect the impact of
certain significant items that we do not believe are indicative of our ongoing operating performance in
the prior or future years, as they were either non-recurring or had no cash impact. As such, we believe
the presentation of adjusted financial results excluding the following items provides a clearer
understanding of our operating performance for the periods presented.
•
•
•
•
•
Charitable contributions
During fiscal 2018, we donated available-for-sale investment securities to the Visa
Foundation and recognized a non-cash general and administrative expense of
$195 million, before tax, and recorded $193 million of realized gain on the donation of
these investments as non-operating income. Net of the related cash tax benefit of
$51 million, determined by applying applicable tax rates, adjusted net income decreased
by $49 million.
During fiscal 2017, associated with our legal entity reorganization, we recognized a
non-cash general and administrative expense of $192 million, before tax, related to the
charitable donation of Visa Inc. shares that were acquired as part of the Visa Europe
acquisition and held as treasury stock. Net of the related cash tax benefit of $71 million,
determined by applying applicable tax rates, adjusted net income increased by
$121 million.
Litigation provision. During fiscal 2018, we recorded a litigation provision of $600 million and
related tax benefits of $137 million associated with the interchange multidistrict litigation. The
tax impact is determined by applying applicable federal and state tax rates to the litigation
provision. Under the U.S. retrospective responsibility plan, we recover the monetary liabilities
related to the U.S. covered litigation through a reduction to the conversion rate of our class B
common stock to shares of class A common stock.
Net income, as adjusted (2)
13%
58%
$ 2.48
(3) During fiscal 2018, as a result of the U.S. tax reform legislation, our net income reflected a lower statutory tax rate, a
non-recurring, non-cash income tax benefit of approximately $1.1 billion from the remeasurement of our deferred tax
liabilities, and a one-time transition tax of approximately $1.1 billion.
(4) During fiscal 2017, in connection with our legal entity reorganization, we eliminated deferred tax balances originally
recognized upon the acquisition of Visa Europe, resulting in the recognition of a non-recurring, non-cash income tax
provision of $1.5 billion.
(5) The per share amounts for the prior periods presented have been retroactively adjusted to reflect the four-for-one stock split
effected in the second quarter of fiscal 2015.
(6) During fiscal 2014, the court entered the final judgment order approving the settlement with the class plaintiffs in the
interchange multidistrict litigation proceedings. Certain merchants in the settlement classes objected to the settlement and
filed opt-out claims. Takedown payments of approximately $1.1 billion related to the opt-out merchants were received and
deposited into the U.S. litigation escrow account, and a related increase in accrued litigation to address the opt-out claims
were recorded in the second quarter of fiscal 2014. During fiscal 2018, pursuant to an amended settlement agreement that
superseded the 2012 Settlement Agreement, we recorded an additional accrual of $600 million. See Note 2-U.S. and
Europe Retrospective Responsibility Plans and Note 17-Legal Matters to our consolidated financial statements included in
Item 8-Financial Statements and Supplementary Data of this report.
(7) During fiscal 2017 and fiscal 2016, we issued fixed-rate senior notes in an aggregate principal amount of $2.5 billion and
$16.0 billion, respectively. See Note 6-Debt to our consolidated financial statements included in Item 8-Financial
Statements and Supplementary Data of this report.
36
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations
This management's discussion and analysis provides a review of the results of operations,
financial condition and liquidity and capital resources of Visa Inc. and its subsidiaries ("Visa,” “we,” “us,”
"our" and the "Company") on a historical basis and outlines the factors that have affected recent
earnings, as well as those factors that may affect future earnings. The following discussion and
analysis should be read in conjunction with the consolidated financial statements and related notes
included in Item 8 of this report.
Overview
Visa is a global payments technology company that enables fast, secure and reliable electronic
payments across more than 200 countries and territories. We facilitate global commerce through the
transfer of value and information among a global network of consumers, merchants, financial
institutions, businesses, strategic partners and government entities. Our advanced transaction
processing network, VisaNet, enables authorization, clearing and settlement of payment transactions
and allows us to provide our financial institution and merchant clients a wide range of products,
platforms and value-added services.
U.S. Tax Reform Legislation. On December 22, 2017, the U.S. government enacted
comprehensive tax reform legislation commonly referred to as the Tax Cuts and Jobs Act (the "Tax
Act"). The Tax Act transitions the U.S. tax system to a new territorial system and lowers the statutory
federal corporate income tax rate. As a result of the reduction in the federal corporate income tax rate,
we remeasured our net deferred tax liabilities as of the enactment date and the remeasurement
resulted in a one-time, non-cash tax benefit of $1.1 billion and was recorded in the year ended
September 30, 2018. In transitioning to the new territorial system, the Tax Act requires us to include
certain untaxed foreign earnings of non-U.S. subsidiaries in our fiscal 2018 taxable income. This tax,
referred to as the "transition tax”, was estimated to be $1.1 billion and was recorded in the year ended
September 30, 2018. See Note 16-Income Taxes to our consolidated financial statements included in
Item 8-Financial Statements and Supplementary Data.
Financial overview. Our financial results for fiscal 2018, 2017 and 2016 include the impact of
several significant one-time items. Our as-reported U.S. GAAP and adjusted non-GAAP net income
and diluted earnings per share are shown in the table below.
For the Years Ended
September 30,
% Change(1)
2018
2018(1)
2017
VS.
2018
2017
2016
2017
2016
Net income, as reported.
$ 10,301
(in millions, except percentages)
$ 6,699 $ 5,991
54%
12%
Diluted earnings per share, as reported
$ 4.42
$ 2.80
VS.
Statement of Operations Data:
$
The following tables present selected Visa Inc. financial data for the past five fiscal years. The
data below should be read in conjunction with Item 7-Management's Discussion and Analysis of
Financial Condition and Results of Operations and Item 8-Financial Statements and Supplementary
Data of this report.
•
Provisions contained in our certificate of incorporation and bylaws and our capital structure could
delay or prevent a merger, takeover attempt, or change in control that our stockholders may consider
favorable. For example, except for limited exceptions:
Delaware law, provisions in our certificate of incorporation and bylaws, and our capital
structure could make a merger, takeover attempt, or change in control difficult.
Although their voting rights are limited, holders of our class B and C common stock and, in certain
specified circumstances, holders of our series and series C preferred stock, can vote on certain
significant transactions. With respect to our class B and C common stock, these transactions include a
proposed consolidation or merger, a decision to exit our core payments business and any other vote
required under Delaware law. With respect to our series B and series C preferred stock, voting rights
are limited to proposed consolidations or mergers in which holders of the series B and series C
preferred stock would either (i) receive shares of stock or other equity securities with preferences,
rights and privileges that are not substantially identical to the preferences, rights and privileges of the
applicable series of preferred stock or (ii) receive securities, cash or other property that is different from
what our class A common stockholders would receive. Because the holders of classes of capital stock
other than class A common stock are our current and former financial institution clients, they may have
interests that diverge from our class A common stockholders. As a result, the holders of these classes
of capital stock may not have the same incentive to approve a corporate action that may be favorable
to the holders of class A common stock, and their interests may otherwise conflict with interests of our
class A common stockholders.
Holders of our class B and C common stock and series B and series C preferred stock may
have different interests than our class A common stockholders concerning certain significant
transactions.
Approximate
Dollar Value
Of Shares That
May Yet Be
Purchased
The market price of our class A common stock could fall as a result of many factors. Under our
U.S. retrospective responsibility plan, upon final resolution of our U.S. covered litigation, all class B
common stock will become convertible into class A common stock. Our series B and series C preferred
stock will become convertible into class A common stock in stages based on developments in current
and potential litigation and will become fully convertible no later than 2028 (subject to a holdback to
cover any pending claims). Conversion of our class B and class C common stock into class A common
stock, or our series B and series C preferred stock into class A common stock, would increase the
amount of class A common stock outstanding, which could adversely affect the market price of our
existing class A common stock and would dilute the voting power of existing class A common
stockholders.
The conversions of our class B and class C common stock or series B and series C preferred
stock into shares of class A common stock would result in voting dilution to, and could impact
the market price of, our existing class A common stock.
offer employment terms that are competitive with the rest of the labor market. Ongoing changes in laws
and policies regarding immigration and work authorizations have made it more difficult for employees
to work in, or transfer among, jurisdictions in which we have operations and could continue to impair
our ability to attract and retain qualified employees. Failure to attract, hire, develop, motivate, and
retain highly qualified and diverse employee talent, to develop and implement an adequate succession
plan for the management team, or to maintain a corporate culture that fosters integrity, innovation, and
collaboration could disrupt our operations and adversely affect our business and our future success.
31
The talents and efforts of our employees, particularly our key management, are vital to our
success. Our management team has significant industry experience and would be difficult to replace.
We may be unable to retain them or to attract other highly qualified employees, particularly if we do not
We may be unable to attract, hire, and retain a highly qualified and diverse workforce, including
key management.
anticipated benefits, synergies, or value of the investment or acquisition not materializing
negative impact on our financial position and/or statement of operations
dilutive issuance of equity securities, if new securities are issued
.
•
the incurrence of debt
•
•
failure to mitigate the liabilities of the acquired business
•
discovery of unidentified issues after the acquisition or investment was made
in the case of foreign acquisitions, risks related to the integration of operations across different
cultures and languages, and the economic, political, and regulatory risks associated with
operating in new regions or countries. For more information on regulatory risks, please see
Item 1-Business-Government Regulations and Item 1A-Risk Factors-Regulatory Risks
above
failure to retain employees, clients, or partners of the acquired business
challenges of integrating new employees, business cultures, business systems, and
technologies
difficulty, expense or failure of implementing controls, procedures, and policies at the acquired
company
.
•
Selected Financial Data
32
33
33
Average Price Paid
Per Share
Total Number Of
Shares Purchased (1)
Total
July 1-31, 2018 ..
August 1-31, 2018
September 1-30,
2018
Period
The table below sets forth our purchases of common stock during the quarter ended
September 30, 2018.
Issuer Purchases of Equity Securities
Subject to legally available funds, we expect to continue paying quarterly cash dividends on our
outstanding common and preferred stock in the future. However, the declaration and payment of future
dividends is at the sole discretion of our board of directors after taking into account various factors,
including our financial condition, settlement indemnifications, operating results, available cash and
current and anticipated cash needs.
On October 16, 2018, our board of directors declared a quarterly cash dividend of $0.25 per share
of class A common stock (determined in the case of class B and C common stock and series B and C
preferred stock on an as-converted basis) payable on December 4, 2018, to holders of record as of
November 16, 2018 of our common and preferred stock.
Our class A common stock has been listed on the New York Stock Exchange under the symbol
"V" since March 19, 2008. At November 9, 2018, we had 362 stockholders of record of our class A
common stock. The number of beneficial owners is substantially greater than the number of record
holders, because a large portion of our class A common stock is held in "street name” by banks and
brokers. There is currently no established public trading market for our class B or C common stock.
There were 1,537 and 559 holders of record of our class B and C common stock, respectively, as of
November 9, 2018.
ITEM 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
PART II
Not applicable.
ITEM 4. Mine Safety Disclosures
•
Refer to Note 17-Legal Matters to our consolidated financial statements included in
Item 8-Financial Statements and Supplementary Data of this report.
We believe that these facilities are suitable and adequate to support our ongoing business needs.
In addition, we owned or leased a total of four global processing centers located in the United
States, Singapore and the United Kingdom.
At September 30, 2018, we owned or leased 115 offices in 72 countries around the world. Our
corporate headquarters are located in owned and leased premises in the San Francisco Bay Area.
ITEM 2. Properties
Not applicable.
ITEM 1B. Unresolved Staff Comments
only the board of directors, Chairman, or CEO may call a special meeting of stockholders
our stockholders may only take action during a stockholders' meeting and may not act by
written consent
the affirmative votes of the class B and C common stock and series B and series C preferred
stock are required for certain types of consolidations or mergers
no competitor or an affiliate of a competitor may hold more than 5% of our total outstanding
common stock on an as-converted basis
•
•
•
•
ITEM 3. Legal Proceedings
•
no person may beneficially own more than 15% of our class A common stock (or 15% of our
total outstanding common stock on an as-converted basis), unless our board of directors
approves the acquisition of such shares in advance
Weighted-Average
Exercise Price Of
Outstanding Options
142.84
3,869,153 $ 4,142,815,994
11,530,384
(1) Includes 5,246 shares of class A common stock withheld at an average price of $140.71 per share (per the terms of grants
under our 2007 Equity Incentive Compensation Plan) to offset tax withholding obligations that occur upon vesting and
release of restricted shares.
(2) The figures in the table reflect transactions according to the trade dates. For purposes of our consolidated financial
statements included in this Form 10-K, the impact of these repurchases is recorded according to the settlement dates.
34
=4
EQUITY COMPENSATION PLAN INFORMATION
The table below presents information as of September 30, 2018, for the Visa 2007 Equity
Incentive Compensation Plan (the "EIP") and the Visa Inc. Employee Stock Purchase Plan (the
"ESPP"), which were approved by our stockholders. We do not have any equity compensation plans
that have not been approved by our stockholders. For a description of the awards issued under the EIP
and the ESPP, see Note 13-Share-based Compensation to our consolidated financial statements
included in Item 8-Financial Statements and Supplementary Data of this report.
(a)
Number Of Shares
Of Class A
Common Stock Issuable
Upon Exercise Of
Outstanding Options And
Rights
Number Of Shares Of
Class A
Common Stock
Remaining Available For
Future Issuance Under
Equity Compensation
Plans (Excluding
Shares
Reflected In Column (a))
Plan Category
Equity compensation
plans approved by
stockholders
12,401,143
(1) $
75.30 (2)
162,313,945 (3)
(1) The maximum number of shares issuable as of September 30, 2018 consisted of 5,788,840 outstanding options, 5,204,454
outstanding restricted stock units and 999,416 outstanding performance shares under the EIP and 408,433 purchase rights
outstanding under the ESPP.
(2) The weighted-average exercise price is calculated based solely on the exercise prices of the outstanding stock options and
does not reflect the shares that will be issued upon the vesting of outstanding restricted stock units and performance shares,
which have no exercise price. Additionally, it excludes the weighted-average exercise price of the outstanding purchase
rights under the ESPP, as the exercise price is based on the future stock price, net of discount, at the end of each monthly
purchase over the offering period.
(3) As of September 30, 2018, 145 million shares and 17 million shares remain available for issuance under the EIP and the
ESPP, respectively.
35
55
ITEM 6. Selected Financial Data
•
11,535,630 $
147.30
(3) Our board of directors from time to time authorizes the repurchase of shares of our common stock up to a certain monetary
limit. In January 2018, our board of directors authorized a share repurchase program for $7.5 billion. This authorization has
no expiration date. All share repurchase programs authorized prior to January 2018 have been completed.
30
failure to develop the acquired business adequately
•
greater than expected investment of resources or operating expenses
disruption to our ongoing business, including diversion of resources and management's
attention from our existing business
•
As part of our overall business strategy, we may make acquisitions and strategic investments. We
may not achieve the anticipated benefits of our current and future acquisitions and strategic
investments and they may involve significant risks and uncertainties, including:
We may not achieve the anticipated benefits of our acquisitions or strategic investments, and
may face risks and uncertainties as a result.
Structural and Organizational Risks
These events could significantly disrupt our operations; impact our clients and consumers;
damage our reputation and brand; result in litigation, violations of applicable privacy and other laws,
and regulatory scrutiny, investigations, actions, fines or penalties; result in damages or changes to our
business practices; decrease the overall use and acceptance of our products; decrease our volume,
revenues and future growth prospects; and be costly, time consuming and difficult to remedy. In the
event of damage or disruption to our business due to these occurrences, we may not be able to
successfully and quickly recover all of our critical business functions, assets, and data through our
business continuity program. Furthermore, while we maintain insurance, our coverage may not
sufficiently cover all types of losses or claims that may arise.
some cases, the mitigation efforts may be dependent on third parties who may not deliver to the
required contractual standards or whose hardware, software or network services may be subject to
error, defect, delay, or outage. Although we devote significant resources to our cybersecurity and
supplier risk management programs and have implemented security measures to protect our systems
and data, and to prevent, detect and respond to data security incidents, there can be no assurance that
our efforts will prevent these threats.
3,869,153 $
Numerous and evolving cybersecurity threats, including advanced and persistent cyber-attacks,
phishing and social engineering schemes, particularly on our internet applications, could compromise
the confidentiality, availability, and integrity of data in our systems. Because the techniques used to
obtain unauthorized access, or to disable or degrade systems change frequently, have become
increasingly more complex and sophisticated, and may be difficult to detect for periods of time, we may
not anticipate these acts or respond adequately or timely. The security measures and procedures we,
our financial institution and merchant clients, other merchants and third-party service providers in the
payments ecosystem have in place to protect sensitive consumer data and other information may not
be successful or sufficient to counter all data security breaches, cyber-attacks, or system failures. In
Furthermore, our visibility and role in the global payments industry may also put our company at a
greater risk of being targeted by hackers. In the normal course of our business, we have been the
target of malicious cyber-attack attempts. We may also be impacted by attacks and data security
breaches of financial institutions, merchants, or third-party processors. We are aware of instances
where nation states have sponsored attacks against some of our financial institution clients, and other
instances where merchants have encountered substantial data security breaches affecting their
customers, some of whom were Visa account holders. Although these attacks and breaches have not
had a direct, material impact on us, we believe these incidents are likely to continue and we are unable
to predict the direct or indirect impact of future attacks or breaches to our business.
Our cybersecurity and processing systems, as well as those of financial institutions, merchants,
and third-party service providers, may experience errors, interruptions, delays or damage from a
number of causes, including power outages, hardware, software and network failures, computer
viruses, malware or other destructive software, internal design, manual or usage errors, cyber-attacks,
terrorism, workplace violence or wrongdoing, catastrophic events, natural disasters and severe
weather conditions. For instance, on June 1, 2018, our European authorization systems suffered a
partial service disruption that prevented many cardholders from using Visa's European systems for
payments for several hours that day. Although that service disruption was caused by a switch
malfunction, rather than a cyber-attack, and was limited to the European authorization system, which
has since been decommissioned with the processing migration to our global platform, the fact remains
that our systems are highly technical and complex and are not immune from errors and vulnerabilities.
The global payments industry is undergoing significant and rapid technological change, including
mobile and other proximity payment technologies, ecommerce, tokenization, cryptocurrencies, and
new authentication technologies such as biometrics, distributed ledger and blockchain technologies. As
a result, we expect new services and technologies to continue to emerge and evolve. In addition to our
own initiatives and innovations, we work closely with third parties, including potential competitors, for
the development of and access to new technologies. It is difficult, however, to predict which
technological developments or innovations will become widely adopted and how those technologies
may be regulated. Moreover, some of the new technologies could be subject to intellectual property-
related lawsuits or claims, potentially impacting our development efforts and/or requiring us to obtain
licenses. If we or our partners fail to adapt and keep pace with new technologies in the payments
space in a timely manner, it could harm our ability to compete, decrease the value of our products and
services to our clients, impact our intellectual property or licensing rights, harm our business and
impact our future growth.
A disruption, failure or breach of our networks or systems, including as a result of cyber-
attacks, could harm our business.
Our indemnification obligation to fund settlement losses of our clients exposes us to
significant risk of loss and may reduce our liquidity.
Technology and Cybersecurity Risks
29
29
Brexit could lead to legal uncertainty and potentially divergent national laws and regulations in the
United Kingdom and European Union. We, as well as our clients who have significant operations in the
United Kingdom, may incur additional costs and expenses as we adapt to potentially divergent
regulatory frameworks from the rest of the European Union and as a result, our Visa operating rules
and contractual commitments in the United Kingdom and the rest of the European Union may be
impacted. In addition, we may need to apply for regulatory authorization and permission in separate
EU member states following Brexit. These factors may impact our ability to operate and process data
in the European Union and United Kingdom seamlessly. This and other Brexit-related issues may
require changes to our legal entity structure in the United Kingdom and the European Union. Any of
these effects of Brexit, among others, could harm our business and financial results.
In June 2016, voters in the United Kingdom approved the withdrawal of the United Kingdom from
the European Union (commonly referred to as “Brexit”). In March 2017, the UK government initiated
the exit process under Article 50 of the Treaty of the European Union, commencing a period of up to
two years for the United Kingdom and the other EU member states to negotiate the terms of the
withdrawal. Uncertainty over the terms of the United Kingdom's departure from the European Union
could cause political and economic uncertainty in the United Kingdom and the rest of Europe, which
could harm our business and financial results.
The United Kingdom's withdrawal from the European Union could harm our business and
financial results.
We indemnify issuers and acquirers for settlement losses they may suffer due to the failure of
another issuer or acquirer to honor its settlement obligations in accordance with the Visa operating
rules. In certain instances, we may indemnify issuers or acquirers even in situations in which a
transaction is not processed by our system. This indemnification creates settlement risk for us due to
the timing difference between the date of a payment transaction and the date of subsequent
settlement. Our indemnification exposure is generally limited to the amount of unsettled Visa payment
transactions at any point in time and any subsequent amounts that may fall due relating to adjustments
for previously processed transactions. Concurrent settlement failures involving more than one of our
largest clients, several of our smaller clients, or systemic operational failures could negatively impact
our financial position. Even if we have sufficient liquidity to cover a settlement failure, we may be
unable to recover the amount of such payment. This could expose us to significant losses and harm
our business. See Note 8-Settlement Guarantee Management to our consolidated financial
statements included in Item 8-Financial Statements and Supplementary Data of this report.
Failure to anticipate, adapt to or keep pace with new technologies in the payments industry
could harm our business and impact future growth.
Any events or conditions that impair the functioning of the financial markets, tighten the credit
market, or lead to a downgrade of our current credit rating could increase our future borrowing costs
and impair our ability to access the capital and credit markets on favorable terms, which could affect
our liquidity and capital resources, or significantly increase our cost of capital. If clients default on their
settlement obligations, it may also impact our liquidity. Any of these events could adversely affect the
growth of our volumes and revenue.
A decline in economic conditions could impact our clients as well, and their decisions could
reduce the number of cards, accounts, and credit lines of their account holders, which ultimately impact
our revenues. They may also implement cost-reduction initiatives that reduce or eliminate marketing
budgets, and decrease spending on optional or enhanced, value-added services from us.
Under The Plans Or
Programs (2),(3)
2,762,543 $ 5,406,314,588
4,898,688 $ 4,712,814,749
138.90
141.55
2016
2017
2016(2)
(in millions, except percentages)
VS.
2017
2017
2017
VS.
2016
9,027
International transaction
revenues
$ 8,918 $ 7,975 $ 6,747 $ 943 $ 1,228
12% 18%
Data processing revenues
2018
Service revenues
VS.
(2) Our operating revenues for fiscal 2016 do not reflect revenues earned by Visa Europe from the acquisition date, June 21,
2016, through June 30, 2016 as the impact was immaterial.
2017
(100)%
7,786
12%
22%
$ 20,609 $18,358 $15,082 $ 2,251 $ 3,276
(1) Figures in the table may not recalculate exactly due to rounding. Percentage changes are calculated based on unrounded
numbers.
% Change(1)
2018
(2) Our operating revenues for fiscal 2016 do not reflect revenues earned by Visa Europe from the acquisition date, June 21,
2016, through June 30, 2016 as the impact was immaterial.
The increase in operating revenues in fiscal 2018 and 2017 reflects the continued growth in
nominal payments volume, nominal cross-border volume, and processed transactions. The increase in
operating revenues in fiscal 2017 also reflects the inclusion of operating revenues from Visa Europe for
the full year compared to one quarter in fiscal 2016. These benefits were partially offset by increases in
client incentives in both fiscal 2018 and 2017.
Our operating revenues, primarily service revenues, international transaction revenues, and client
incentives, are impacted by the overall strengthening or weakening of the U.S. dollar as payments
volume and related revenues denominated in local currencies are converted to U.S. dollars. The effect
of exchange rate movements in fiscal 2018, as partially mitigated by our hedging program, resulted in
an approximately one percentage point positive impact to our net operating revenue growth.
445
The following table sets forth the components of our net operating revenues, including operating
revenues earned by Visa Europe for fiscal 2018, 2017 and the fourth quarter of fiscal 2016. Other
revenues in fiscal 2016 included revenue earned from Visa Europe in accordance with the Framework
Agreement prior to its acquisition on June 21, 2016.
For the Years Ended
September 30,
$ Change
2018
VS.
(3) Reflects revenues earned from Visa Europe prior to the acquisition, in accordance with the Framework Agreement that
provided for trademark and technology licenses and bilateral services. The Framework Agreement was effectively settled
upon the closing of the acquisition.
6,272
(1) Figures in the table may not recalculate exactly due to rounding. Percentage changes are calculated based on unrounded
numbers.
1,514
NM
22%
12%
$15,082 $2,251 $3,276
$18,358
$ 20,609
Net operating revenues ...
34%
20%
(1,156)
(926)
(3,409)
(4,565)
2%
1,241
12%
103
823
841
36%
14%
1,672
890
4,649
6,321
7,211
944
(5,491)
Client incentives
Other revenues
24%
16%
18
(191)
(1) Service revenues in a given quarter are assessed based on nominal payments volume in the prior quarter. Therefore, service
revenues reported for the 12 months ended September 30, 2018, 2017 and 2016, were based on nominal payments volume
reported by our financial institution clients for the 12 months ended June 30, 2018, 2017 and 2016, respectively.
Net operating revenues
Network and processing expenses mainly represent expenses for the operation of our processing
network, including maintenance, equipment rental and fees for other data processing services.
Marketing expenses include expenses associated with advertising and marketing campaigns,
sponsorships and other related promotions of the Visa brand.
Personnel expenses include salaries, employee benefits, incentive compensation, share-based
compensation, severance charges and contractor expense.
Operating Expenses
Client incentives consist of long-term contracts with financial institution clients, merchants and
strategic partners for various programs designed to build payments volume, increase Visa product
acceptance, win merchant routing transactions over our network and drive innovation. These
incentives are primarily accounted for as reductions to operating revenues.
Other revenues consist mainly of license fees for use of the Visa brand, fees for account holder
services, certification and licensing, and other activities related to our acquired entities. With respect to
fiscal 2016, other revenues also consists of revenues earned from Visa Europe in accordance with the
Visa Europe Framework Agreement prior to the completion of the Visa Europe acquisition. Other
revenues also include optional service or product enhancements, such as extended account holder
protection and concierge services.
International transaction revenues are earned for cross-border transaction processing and
currency conversion activities. Cross-border transactions arise when the country of origin of the issuer
is different from that of the merchant. International transaction revenues are primarily generated by
cross-border payments and cash volume.
43
Data processing revenues are earned for authorization, clearing, settlement, network access and
other maintenance and support services that facilitate transaction and information processing among
our clients globally. Data processing revenues are recognized in the same period the related
transactions occur or services are rendered.
Service revenues consist mainly of revenues earned for services provided in support of client
usage of Visa products. Current quarter service revenues are primarily assessed using a calculation of
current pricing applied to the prior quarter's payments volume. Service revenues also include
assessments designed to support ongoing acceptance and volume growth initiatives, which are
recognized in the same period the related volume is transacted.
The following sets forth the components of our operating revenues:
Our operating revenues are primarily generated from payments volume on Visa products for
purchased goods and services, as well as the number of transactions processed on our network. We
do not earn revenues from, or bear credit risk with respect to, interest or fees paid by account holders
on Visa products. Our issuing clients have the responsibility for issuing cards and other payment
products, and determining the interest rates and fees paid by account holders. We generally do not
earn revenues from the fees that merchants are charged for acceptance by acquirers, including the
merchant discount rate. Our acquiring clients are generally responsible for soliciting merchants, and
establishing and earning these fees.
Operating Revenues
Financial Information Presentation
(1) Figures in the table may not recalculate exactly due to rounding. Percentage changes are calculated based on unrounded
numbers. On occasion, previously presented information may be updated. Prior period updates are not material. Our
operating revenues and related processed transactions for fiscal 2016 do not reflect the financial results or related processed
transactions of Visa Europe from the acquisition date, June 21, 2016, through June 30, 2016 as the impact was immaterial.
(2) Visa processed transactions in fiscal 2018, 2017 and the fourth quarter of fiscal 2016 include transactions processed by Visa
Europe.
34%
12%
•
(4) Includes large, middle and small business credit and debit, as well as commercial prepaid volume.
(5) Our nominal payments volume, total payments volume growth and total volume growth for the 12 months ended June 30,
2016 does not reflect the related nominal payments volume of $477 billion and cash volume of $177 billion for Visa Europe
for the three months ended June 30, 2016, which impacts our service revenues for the fourth quarter of fiscal 2016.
(6) Total nominal volume is the sum of total nominal payments volume and cash volume. Total nominal payments volume is the
total monetary value of transactions for goods and services that are purchased on cards carrying the Visa, Visa Electron,
Interlink and V PAY brands. Cash volume generally consists of cash access transactions, balance access transactions,
balance transfers and convenience checks. Total nominal volume is provided by our financial institution clients, subject to
review by Visa. On occasion, previously presented volume information may be updated. Prior period updates are not
material.
(7) As a result of European Union Interchange Fee regulation changes, effective with the quarter ended December 31, 2016,
Europe co-badged payments volume is no longer included in reported volume. For comparative purposes, prior year figures
were adjusted to exclude co-badged volume. The associated growth rates for the 12 months ended June 30, 2018 and 2017
were calculated using these adjusted amounts.
(8) Growth on a constant-dollar basis excludes the impact of foreign currency fluctuations against the U.S. dollar.
The following table(1), (2) provides the number of transactions involving Visa, Visa Electron,
Interlink, VPAY and PLUS cards processed on Visa's networks during the fiscal periods presented:
Professional fees mainly consist of fees for consulting, legal and other professional services.
Depreciation and amortization expenses include depreciation expense for property and
equipment, as well as amortization of purchased and internally developed software. Also included in
this amount is amortization of finite-lived intangible assets primarily obtained through acquisitions.
2018
2016
2018 vs. 2017
% Change
2017 vs. 2016
% Change
Visa processed transactions
124,320
(in millions, except percentages)
111,215 83,159
2017
191
General and administrative expenses mainly consist of product enhancements, facilities costs,
travel activities, foreign exchange gains and losses and other corporate expenses incurred in support
of our business, and with respect to fiscal 2016, transaction costs related to the Visa Europe
acquisition.
Visa Europe Framework Agreement loss is a one-time loss incurred upon consummation of the
Visa Europe acquisition on June 21, 2016, resulting from the effective settlement of the Framework
Agreement between us and Visa Europe.
Framework
Agreement(3)
Revenues earned under the
International
37 %
17%
2,614
11 %
7%
(in millions, except percentages)
$ 7,851 $ 628 $ 853
7,040 1,623
9,654
$ 9,332 $ 8,704
11,277
VS.
2016
2017
2016
VS.
VS.
2017
Non-operating Income (Expense)
Non-operating income (expense) primarily includes interest expense, gains and losses earned on
investments and derivative instruments not associated with our core operations, and with respect to
fiscal 2016, changes in the fair value of the Visa Europe put option and income.
44
Results of Operations
Operating Revenues
The following table sets forth our operating revenues earned in the United States, internationally
and in accordance with the Framework Agreement prior to the Visa Europe acquisition on June 21,
2016. Visa Europe revenue earned for fiscal 2018, 2017 and the fourth quarter of fiscal 2016 is
included in International.
Litigation provision is an estimate of litigation expense and is based on management's
understanding of our litigation profile, the specifics of the cases, advice of counsel to the extent
appropriate and management's best estimate of incurred loss as of the balance sheet date.
United States
2018
2017
2016(2)
$ Change
2018
VS.
2017
2017
% Change(1)
2018
For the Years Ended
September 30,
•
a non-cash adjustment of $255 million in fiscal 2016 to decrease the fair value of the
Visa Europe put option, which is not subject to tax, reducing the fair value of the liability
•
2017
2017
$ Change
2018
Interest expense
Other
% Change(1)
2018
September 30,
For the Years Ended
The following table sets forth the components of our non-operating income (expense).
Non-operating Income (Expense)
47
Marketing expenses increased in fiscal 2018 primarily due to higher spending in support of a
number of campaigns, including the Olympic Winter Games PyeongChang 2018 and 2018
FIFA World Cup™.
Personnel expenses increased in fiscal 2018 and 2017 driven by continued increase in
headcount and higher incentive compensation, reflecting our strategy to invest for future
growth.
.
•
VS.
Total operating expenses increased in fiscal 2018 primarily due to the $600 million accrual related
to the U.S. covered litigation and our ongoing investments to support our business growth. See
Note 2-U.S. and Europe Retrospective Responsibility Plans and Note 17-Legal Matters to our
consolidated financial statements included in Item 8-Financial Statements and Supplementary Data
of this report for more information on the U.S. covered litigation accrual. Total operating expenses
decreased in fiscal 2017 primarily due to the $1.9 billion loss related to the effective settlement of the
Framework Agreement between Visa and Visa Europe recorded during fiscal 2016. The remaining
components of total operating expenses increased in fiscal 2017 primarily due to the inclusion of Visa
Europe expenses. Additional factors impacting our operating expenses are discussed below.
(2) Our operating expenses for fiscal 2016 do not reflect the expenses incurred by Visa Europe from the acquisition date,
June 21, 2016, through June 30, 2016 as the impact was immaterial.
(1) Figures in the table may not recalculate exactly due to rounding. Percentage changes are calculated based on unrounded
numbers.
$ 7,655 $ 6,214 $ 7,199 $ 1,441 $ (985) 23% (14)%
NM (100)%
(1,877)
1,877
NM
NM
17
588
2
19
607
33%
(3) Operating expenses for fiscal 2018, 2017 and 2016 include significant items that we do not believe are indicative of our
operating performance as they are related to the charitable donation or the Visa Europe acquisition. See Overview within this
Item 7-Management's Discussion and Analysis of Financial Condition and Results of Operations.
VS.
VS.
2016(2)
48
48
See Note 3-Fair Value Measurements and Investments and Note 9-Derivative and
Non-derivative Financial Instruments to our consolidated financial statements included in Item 8-
Financial Statements and Supplementary Data of this report.
to zero.
(3) Includes consumer prepaid volume and interlink volume.
a foreign exchange gain of $145 million in fiscal 2016 on euro deposits as a result of
holding euro-denominated bank balances for a short period in advance of the closing of
the Visa Europe acquisition; and
net gains of $74 million in fiscal 2016 related to currency forward contracts entered into
to mitigate a portion of our foreign currency exchange rate risk associated with the
upfront cash consideration paid in the Visa Europe acquisition;
■
Other non-operating income (expense) increased in fiscal 2018 primarily due to gains of
$292 million from the donation of securities to the Visa Foundation and sales of investments.
Other non-operating income (expense) decreased in fiscal 2017 primarily due to the absence
of the following:
Interest expense increased during fiscal 2018 and 2017 primarily due to the issuance of fixed-
rate senior notes in fiscal 2017 and 2016. See Note 6-Debt to our consolidated financial
statements included in Item 8-Financial Statements and Supplementary Data of this report.
•
(2) Fiscal 2016 non-operating income (expense) includes financial results of Visa Europe for the fourth quarter of fiscal 2016, but
does not reflect the financial results of Visa Europe from the acquisition date, June 21, 2016, through June 30, 2016 as the
impact was immaterial.
(1) Figures in the table may not recalculate exactly due to rounding. Percentage changes are calculated based on unrounded
numbers.
$ (148) $ (450) $ 129 $ 302 $ (579)
Total non-operating income
(expense)
NM
(67)%
2018
2017
2017
2016
(in millions, except percentages)
$ (612) $ (563) $ (427) $ (49) $ (136)
2017
VS.
2016
8%
9%
464
113
556
351 (443)
311%
(80)%
32%
•
264
796
2016
2017
2016
2017
2016(2)
2017
2018
VS.
VS.
VS.
2017
2017
$ Change
2018
VS.
Total operating expenses(3)
(in millions, except percentages)
General and administrative .
Litigation provision . . .
Visa Europe Framework
Agreement loss
Network and processing
Professional fees.
Marketing
Personnel
% Change(1)
2018
September 30,
For the Years Ended
The following table sets forth the components of our total operating expenses:
Operating Expenses
46
46
Client incentives increased in fiscal 2018 and 2017, reflecting overall growth in global
payments volume, incentives recognized on long-term client contracts that were initiated or
renewed during fiscal 2018 and 2017 and the inclusion of Visa Europe's incentives for fiscal
2018, 2017 and the fourth quarter of fiscal 2016. The amount of client incentives we record in
future periods will vary based on changes in performance expectations, actual client
performance, amendments to existing contracts or the execution of new contracts.
International transaction revenues increased in fiscal 2018 and 2017 primarily due to nominal
cross-border volume growth of 14% and 79%, respectively, and select pricing modifications.
International transaction revenue growth in fiscal 2017 also reflects the inclusion of revenues
earned by Visa Europe and the resulting impact on our corresponding yield, which was partially
offset by lower volatility in a broad range of currencies.
Data processing revenues increased in fiscal 2018 and 2017 due to overall growth in
processed transactions of 12% and 34%, respectively. Fiscal 2018 growth also reflected select
pricing modifications. The growth in data processing revenues was slower than the growth in
processed transactions during fiscal 2017, reflecting the inclusion of data processing revenues
earned by Visa Europe and the resulting impact on our data processing revenue yield.
Service revenues increased in fiscal 2018 and 2017 primarily due to 13% and 39% growth in
nominal payments volume, respectively. The growth in service revenues was slower than the
growth in payments volume during fiscal 2017, reflecting the inclusion of Visa Europe revenue
and the resulting impact on our service revenue yield.
Depreciation and amortization
$ 3,170 $ 2,628
$ 2,226 $ 542 $ 402
21%
1,060
1,145
11%
10%
54
57
502
556
613
5%
9%
20
37
389
409
446
15%
18%
988
922
869
66
53
85
7%
686
620
538
66
82
11%
6%
42
•
3%
56
96
0.04
Visa Europe Framework Agreement
loss ..
(1,877)
1%
12%
1,184
0.49
contracts
Net gains on currency forward
Foreign exchange gain on euro
deposits
693
(152)
(0.04)
(88)
(in millions, except percentages and per
share data)
As reported
$ 7,199
Severance cost
(110)
Operating operating
Operating Margin İncome
Earnings
Expenses
(1),(2)
(Expense) Provision Income Per Share(2)
52% $ 129 $ 2,021 $ 5,991 $ 2.48
1%
Income
Tax
Diluted
Net
38
72
0.03
Remeasurement of deferred tax
liability
Acquisition-related costs
88
Revaluation of Visa Europe put
Year ended September 30, 2016
Non-
option
(74)
Reduction in as-converted shares. During fiscal 2018, total as-converted class A common stock
was reduced by 63 million shares at an average price of $124.29 per share. Of the 63 million shares,
58 million were repurchased in the open market using $7.2 billion of operating cash on hand.
Additionally, in June 2018, we deposited $600 million of operating cash into the litigation escrow
account previously established under the U.S. retrospective responsibility plan. Also, we recovered
$56 million of VE territory covered losses in accordance with the Europe retrospective responsibility
plan during fiscal 2018. The deposit and recovery have the same economic effect on earnings per
share as repurchasing our class A common stock, because they reduce the class B common stock
conversion rate and the UK&I and Europe preferred stock conversion rates and consequently, reduce
the as-converted class A common stock share count. See Note 2-U.S. and Europe Retrospective
Responsibility Plans and Note 11-Stockholders' Equity to our consolidated financial statements
included in Item 8-Financial Statements and Supplementary Data.
In January 2018, our board of directors authorized an additional $7.5 billion share repurchase
program. As of September 30, 2018, the program had remaining authorized funds of $4.2 billion for
share repurchase. All share repurchase programs authorized prior to January 2018 have been
completed. See Note 11-Stockholders' Equity to our consolidated financial statements included in
Item 8-Financial Statements and Supplementary Data.
Nominal payments volume and transaction counts. Payments volume is the primary driver for our
service revenues, and the number of processed transactions is the primary driver for our data
processing revenues. Nominal payments volume over the prior year posted low double-digit growth in
the United States, driven mainly by consumer credit and debit. Nominal international payments volume
growth was positively impacted by the strengthening of the U.S. dollar and the ongoing worldwide shift
to electronic payments. On a constant-dollar basis, which excludes the impact of exchange rate
movements, our international payments volume growth rate was 11% for the 12 months ended
June 30, 2018. Growth on a constant-dollar basis was not significantly different from the nominal-dollar
basis growth rate for the 12 months ended June 30, 2017(1). Growth in processed transactions for fiscal
2017 reflects the inclusion of Visa Europe's processed transactions for the full year compared to three
months in fiscal 2016.
41
The following tables(2) present nominal payments and cash volume:
2018
Interchange multidistrict litigation. During fiscal 2018, we recorded an additional accrual of $600
million to address claims associated with the interchange multidistrict litigation, resulting in an accrued
litigation balance related to U.S. covered litigation of $1.4 billion at September 30, 2018. We also
deposited $600 million of operating cash into the U.S. litigation escrow account. See Note 2-U.S. and
Europe Retrospective Responsibility Plans and Note 17-Legal Matters to our consolidated financial
statements included in Item 8-Financial Statements and Supplementary Data.
United States
2017
%
Change
2018
International(7)
Visa Inc.(7)
12 months
ended June 30,(1)
12 months
ended June 30, (1)
40
(2) Figures in the table may not recalculate exactly due to rounding. Operating margin, diluted earnings per share and their
respective totals are calculated based on unrounded numbers.
(1) Operating margin is calculated as operating income divided by net operating revenues.
(27)
(47)
(0.02)
―%
(145)
(54)
(91)
(0.04)
-%
(255)
(255)
(0.11)
As adjusted
$ 5,060
66% $ (345) $ 2,815 $ 6,862 $ 2.84
―%
(1) Operating margin is calculated as operating income divided by net operating revenues.
(2) Figures in the table may not recalculate exactly due to rounding. Operating margin, diluted earnings per share and their
respective totals are calculated based on unrounded numbers.
3.48
8,335 $
$ 7,655
Diluted
Earnings
Per Share(2)
63% $ (148) $ 2,505 $ 10,301 $ 4.42
Net
Income
Charitable contribution
(195)
As reported
1% (193)
(600)
(2) Figures in the tables may not recalculate exactly due to rounding. Percentage changes are calculated based on unrounded
numbers.
Remeasurement of deferred tax
balances
-%
Transition tax on foreign earnings
Litigation provision ...
Income
Tax
Operating operating
Operating Margin Income
Expenses
(1),(2) (Expense) Provision
share data)
•
•
•
•
•
•
Severance cost. During fiscal 2016, we recorded a $110 million charge for severance costs
related to personnel reductions, including planned reductions at Visa Europe. Although we
routinely record severance expenses, these charges are larger than any past quarterly accrual
due to the acquisition and integration of Visa Europe. Net of related tax benefit of $38 million,
determined by applying applicable tax rates, the adjustment to net income was an increase of
$72 million.
Remeasurement of deferred tax liability. During fiscal 2016, we recorded a non-cash,
non-recurring $88 million gain upon the remeasurement of a deferred tax liability, recorded
upon the acquisition of Visa Europe, to reflect a tax rate change in the United Kingdom.
Acquisition-related costs. During fiscal 2016, we incurred $152 million of non-recurring
acquisition costs in operating expense as a result of the Visa Europe transaction. This amount
is comprised of $60 million of transaction expenses recorded in professional fees, and
$92 million of UK stamp duty recorded in general and administrative expenses. Net of related
tax benefit of $56 million, determined by applying applicable federal and state tax rates, the
adjustment to net income was an increase of $96 million.
Visa Europe Framework Agreement loss. During fiscal 2016, upon consummation of the Visa
Europe transaction, we recorded a non-recurring loss of $1.9 billion, before tax, in operating
expense resulting from the effective settlement of the Framework Agreement between us and
Visa Europe. Net of related tax benefit of $693 million, determined by applying applicable
federal and state tax rates, the adjustment to net income was an increase of $1.2 billion.
Net gains on currency forward contracts. During fiscal 2016, we entered into currency forward
contracts to mitigate a portion of our foreign currency exchange rate risk associated with the
upfront cash consideration paid in the Visa Europe acquisition. As a result, we recorded
non-recurring, net gains of $74 million, before tax, in other non-operating income. Net of
related tax expense of $27 million, determined by applying applicable federal and state tax
rates, the adjustment to net income was a decrease of $47 million.
Foreign exchange gain on euro deposits. During fiscal 2016, we recorded a non-recurring
foreign exchange gain of $145 million, before tax, in other non-operating income as a result of
holding euro-denominated bank balances for a short period in advance of the closing of the
Visa Europe acquisition. Net of related tax expense of $54 million, determined by applying
applicable federal and state tax rates, the impact to net income was a decrease of $91 million.
Revaluation of Visa Europe put option. During fiscal 2016, we recorded a decrease of
$255 million in the fair value of the Visa Europe put option, resulting in the recognition of
non-cash income in other non-operating income. This amount is not subject to income tax and
therefore has no impact on our reported income tax provision.
39
Adjusted operating expenses, operating margin, non-operating income (expense), income tax
provision, net income and diluted earnings per share are non-GAAP financial measures and should not
be relied upon as substitutes for measures calculated in accordance with U.S. GAAP. The following
tables reconcile our as-reported financial measures calculated in accordance with U.S. GAAP to the
respective non-GAAP adjusted financial measures for fiscal 2018, 2017 and 2016:
Year ended September 30, 2018
Non-
(in millions, except percentages and per
-%
As adjusted
$ 6,860
67% $ (341) $ 2,679 $ 10,729 $
Diluted
Earnings
Per Share(2)
2.80
Charitable contribution
(192)
Elimination of deferred tax balances
1%
-%
71
(1,515)
121
0.05
1,515
0.63
As adjusted
$ 6,022
67% $
(450) $ 3,551 $
Net
12 months
ended June 30,(1)
Income
Tax
$ 6,214
51
137
(49)
(0.02)
463
0.20
1,133
(1,133)
(0.49)
(1,147)
1,147
0.49
4.61
(in millions, except percentages and per
share data)
As reported
Year ended September 30, 2017
Non-
Operating operating
Operating Margin Income
Expenses
(1),(2) (Expense) Provision Income
66% $ (450) $ 4,995 $ 6,699 $
2017
―%
2018
27%
27%
11%
10%
25%
25%
9%
Consumer debit(3)
12%
229%
241%
14%
11%
61%
18%
12%
Consumer credit
Payments volume growth
11% $ 6,322 $ 4,096
54% $ 10,054 $ 7,465
35%
volume(5),(6)
The following table presents nominal and constant payments and cash volume growth.(2)
International(7)
12 months ended
June 30,
Visa Inc.(7)
2018 vs 2017(1)
Nominal Constant(8)
12 months ended
June 30,
2017 vs 2016(1)
Nominal Constant(8)
12 months ended
June 30,
2018 vs 2017(1)
Nominal Constant(8)
12 months ended
June 30,
2017 vs 2016(1)
Nominal Constant(8)
65%
Commercial(4)
19%
15%
%
Change
33%
4%
2%
26%
27%
Total volume growth (5).
11%
7%
54%
57%
10%
8%
35%
36%
2%
$ 3,732 $ 3,369
4%
40%
107%
105%
14%
12%
36%
36%
Total payments volume
growth (5)
15%
11%
71%
74%
13%
10%
39%
Cash volume growth
Total nominal
32%
2,294
14%
812
14%
$ 3,499 $ 3,188
562
544
10% $ 4,562 $ 3,974
3% 2,435 2,348
15% $ 8,063 $ 7,162
4% 2,997
13%
2,892 4%
$ 4,061 $3,732
9% $ 6,998 $ 6,322
11% $ 11,060 $ 10,054
10%
2017
United States
12 months
ended June 30,(1)
3,253 2,864
925
2016
19%
11%
26%
2017
%
Change
Nominal payments
volume
Consumer credit
Consumer debit(3)
Commercial(4)
Total nominal payments
volume
Cash volume
(in billions, except percentages)
$ 1,441 $ 1,309
1,496
562
1,373
506
10% $ 2,443 $ 2,177
9% 1,757 1,491
11% 363
306
12% $
3,885 $ 3,486
18%
%
Change
Total nominal
volume (6)
Visa Inc.(7)
454
148
107%
2,864
812
27% $ 3,486 $ 2,799
229%
25%
1,774 61%
598
36%
21% $ 2,177 $ 1,720
4% 1,491
12%
306
Total nominal payments
$ 3,188 $ 2,850
544
12% $ 3,974 $ 2,321
5% 2,348 1,775
2,892
71% $ 7,162 $ 5,171
32%
International (7)
39%
Cash volume
1,320
450
520
volume(5)
$ 1,309 $ 1,079
1,373
506
12 months
12 months
ended June 30,(1)
2017
%
Change
2017
2016
2016
ended June 30,(1)
(in billions, except percentages)
Nominal payments
volume
Consumer credit
Consumer debit(3)
%
Change
Commercial(4)
54
94
Reduction in as-converted shares. During fiscal 2018, share repurchases and escrow deposits
reduced as-converted class A common stock by 63 million at an average price of $124.38 per share.
Of the 63 million shares, 58 million were repurchased in the open market using $7.2 billion of cash on
hand. Additionally, we deposited $600 million of operating cash into the U.S. litigation escrow account
previously established under the U.S. retrospective responsibility plan. The deposit has the same
economic effect on earnings per share as repurchasing our Class A common stock because it reduces
the class B conversion rate and consequently the as-converted class A common stock share count.
See Note 2-U.S. and Europe Retrospective Responsibility Plans and Note 11-Stockholders' Equity
to our consolidated financial statements included in Item 8-Financial Statements and Supplementary
Data of this report.
Other litigation. Judgments in and settlements of litigation, other than the U.S. covered litigation,
including VE territory covered litigation or other fines imposed in investigations and proceeding, could
give rise to future liquidity needs.
Short-term unsecured debt
Long-term unsecured debt
Payments settlement. Payments settlement due to and from our financial institution clients can
represent a substantial daily liquidity requirement. Most U.S. dollar settlements are settled within the
same day and do not result in a net receivable or payable balance, while settlements in currencies
other than the U.S. dollar generally remain outstanding for one to two business days, which is
consistent with industry practice for such transactions. In general, during fiscal 2018, we were not
required to fund settlement-related working capital. Our average daily net settlement position was a net
payable of $931 million. We hold approximately $7.6 billion of available liquidity globally as of
September 30, 2018, in the form of cash, cash equivalents and available-for-sale investment securities,
to fund daily settlement in the event one or more of our financial institution clients are unable to settle.
Uses of Liquidity
Stable
In January 2018, our board of directors authorized a share repurchase program for $7.5 billion.
This authorization has no expiration date. As of September 30, 2018, we had remaining authorized
funds of $4.2 billion. All share repurchase programs authorized prior to January 2018 have been
completed. See Note 11-Stockholders' Equity to our consolidated financial statements included in
Item 8-Financial Statements and Supplementary Data of this report.
Various factors affect our credit ratings, including changes in our operating performance, the
economic environment, conditions in the electronic payment industry, our financial position and
changes in our business strategy. We do not currently foresee any reasonable circumstances under
which our credit ratings would be significantly downgraded. If a downgrade were to occur, it could
adversely impact, among other things, our future borrowing costs and access to capital markets.
U.S. covered litigation. We are parties to legal and regulatory proceedings with respect to a
variety of matters, including certain litigation that we refer to as the U.S. covered litigation. As noted
above, monetary liabilities from settlements of, or judgments in, the U.S. covered litigation are payable
from the U.S. litigation escrow account. During fiscal 2018, we deposited $600 million into the U.S.
litigation escrow account to address claims associated with the interchange multidistrict litigation, and
made $150 million covered litigation payments that were funded from the U.S. litigation escrow
account. At September 30, 2018, the U.S. litigation escrow account had an available balance of
$1.5 billion. In September 2018, Visa and other defendants entered into a new settlement agreement
with plaintiffs in the interchange multidistrict litigation purporting to represent a class of plaintiffs
seeking monetary damages, which superseded and amended the 2012 Settlement Agreement. The
proposed settlement amount is approximately $6.2 billion. Our share represents approximately
$4.1 billion, the majority of which will be satisfied through funds previously deposited with the court plus
the $600 million we deposited into its litigation escrow account in June 2018. No additional funds are
required for this class settlement. Our share is covered under the U.S. retrospective responsibility plan,
which was created to insulate Visa and our class A common shareholders from financial liability for
certain litigation cases. Until the court approves the 2018 Settlement Agreement, it is uncertain
whether the Company will be able to resolve the damages class plaintiffs' claims as contemplated by
that agreement. If the 2018 Settlement Agreement is terminated and no further agreement is reached
regarding funds previously paid from the litigation escrow account into court-supervised settlement
funds, we will have the right to the majority of these funds, which would be returned to the U.S.
litigation escrow account. This will increase our taxable income, thereby increasing our taxes to be
paid. See Note 2-U.S. and Europe Retrospective Responsibility Plans and Note 17-Legal Matters to
our consolidated financial statements included in Item 8—Financial Statements and Supplementary
Data of this report.
53
56
Pension and other postretirement benefits. We sponsor various qualified and non-qualified
defined benefit pension and other postretirement benefit plans that provide for retirement and medical
benefits for substantially all employees residing in the United States. As a result of the acquisition of
Visa Europe, we assumed the obligations related to Visa Europe's defined benefit plan, primarily
consisting of the UK pension plans. Our policy with respect to our U.S. qualified pension plan is to
contribute annually in September of each year, an amount not less than the minimum required under
the Employee Retirement Income Security Act. Our U.S. non-qualified pension and other
postretirement benefit plans are funded on a current basis. In relation to the Visa Europe UK pension
plans, our funding policy is to contribute in accordance with the appropriate funding requirements
agreed with the trustees of our UK pension plans. Additional amounts may be agreed with the UK
pension plan trustees. In fiscal 2018, 2017 and 2016, we made contributions to our U.S. pension and
other postretirement benefit plans of $3 million, $12 million and $4 million, respectively. For Visa
Europe's UK pension plans, we made contributions of $11 million, $5 million and $102 million in fiscal
2018, 2017 and 2016, respectively, subsequent to the acquisition date as agreed upon with the
trustees to improve the funding level of the plans. In fiscal 2019, given current projections and
assumptions, we anticipate funding our U.S. pension and other postretirement benefit plans and Visa
Europe's UK defined benefit pension plans by approximately $3 million and $10 million, respectively.
The actual contribution amount will vary depending upon the funded status of the pension plan,
movements in the discount rate, performance of the plan assets and related tax consequences. See
Note 7-Pension, Postretirement and Other Benefits to our consolidated financial statements included
in Item 8-Financial Statements and Supplementary Data of this report.
Capital expenditures. Our capital expenditures increased during fiscal 2018, due to investments in
technology, infrastructure and growth initiatives. We expect to continue investing in technology assets
and payments system infrastructure to support our digital solutions and core business initiatives.
Acquisitions. In February 2017, we acquired a business using $302 million of cash on hand,
primarily reflecting total purchase price less cash received. The acquisition will help Visa's clients and
merchant partners accelerate digital commerce. On June 21, 2016, we acquired 100% of the share
capital of Visa Europe. In connection with the purchase, we will pay an additional €1.0 billion, plus 4%
compound annual interest, on the third anniversary of the closing of the Visa Europe acquisition. See
Note 5-Intangible Assets and Goodwill to our consolidated financial statements included in Item 8—
Financial Statements and Supplementary Data of this report.
55
55
99
Fair Value Measurements—Financial Instruments
The assessment of fair value of our financial instruments is based on a fair value hierarchy that
requires an entity to maximize the use of observable inputs and minimize the use of unobservable
inputs when measuring fair value. Observable inputs are obtained from independent sources and can
be validated by a third party, whereas unobservable inputs reflect assumptions regarding what a third
party would use in pricing an asset or liability. As of September 30, 2018, our financial instruments
measured at fair value on a recurring basis included approximately $15.0 billion of assets and
$22 million of liabilities. None of these instruments were valued using significant unobservable inputs.
See Note 3-Fair Value Measurements and Investments to our consolidated financial statements
included in Item 8—Financial Statements and Supplementary Data of this report.
Off-Balance Sheet Arrangements
Our off-balance sheet arrangements are primarily comprised of guarantees and indemnifications.
Visa has no off-balance sheet debt, other than lease and purchase order commitments, as discussed
and reflected in our contractual obligations table below.
Stable
Indemnifications
We indemnify our financial institution clients for settlement losses suffered due to the failure of
any other client to fund its settlement obligations in accordance with our rules. The amount of the
indemnification is limited to the amount of unsettled Visa payment transactions at any point in time. We
maintain global credit settlement risk policies and procedures to manage settlement risk, which may
require clients to post collateral if certain credit standards are not met. See Note 1-Summary of
Significant Accounting Policies and Note 8-Settlement Guarantee Management to our consolidated
financial statements included in Item 8-Financial Statements and Supplementary Data of this report.
Dividends. During fiscal 2018, we declared and paid $1.9 billion in dividends. On October 16,
2018, our board of directors declared a quarterly dividend in the aggregate amount of $0.25 per share
of class A common stock (determined in the case of class B and C common stock and series B and C
preferred stock on an as-converted basis). We expect to pay approximately $574 million in connection
with this dividend on December 4, 2018. See Note 11-Stockholders' Equity to our consolidated
financial statements included in Item 8-Financial Statements and Supplementary Data of this report.
We expect to continue paying quarterly dividends in cash, subject to approval by the board of directors.
All preferred and class B and C common stock will share ratably on an as-converted basis in such
future dividends.
P-1
A1
52
Rating
the effective settlement of the Framework Agreement between us and Visa Europe; and
In the ordinary course of business, we enter into contractual arrangements with financial
institutions and other clients and partners under which we may agree to indemnify the client for certain
types of losses incurred relating to the services we provide or otherwise relating to our performance
under the applicable agreement.
payments of $545 million, $489 million and $244 million of interest on the outstanding senior
notes during fiscal 2018, 2017 and 2016 respectively.
The cash inflows and outflows related to the U.S. litigation escrow account are also reflected as
offsetting cash flows within financing activities for their respective years as they are covered by the
U.S. retrospective responsibility plan. See Note 2-U.S. and Europe Retrospective Responsibility
Plans and Note 17-Legal Matters to our consolidated financial statements included in Item 8-
Financial Statements and Supplementary Data of this report.
51
Investing activities. Cash used in investing activities in fiscal 2018 was higher than the prior-year
comparable period as purchases of available-for-sale investment securities reflected additional
investment of net proceeds received from new fixed-rate senior notes issued in September 2017. Cash
provided by investing activities in fiscal 2017 reflected net proceeds from maturities and sales of
available-for-sale investment securities. Cash used in investing activities in fiscal 2016 primarily
reflected the up-front cash consideration paid in the Visa Europe acquisition, offset by $2.8 billion of
cash held by Visa Europe at the closing of the transaction in fiscal 2016.
Financing activities. Cash used in financing activities in fiscal 2018 primarily reflected the
$7.2 billion used to repurchase class A common stock, $1.9 billion of dividend payments, the
redemption of $1.75 billion principal amount outstanding of the 2017 Notes and $600 million deposited
into the U.S. litigation escrow account, partially offset by payments of $150 million from our litigation
escrow account. Cash used in financing activities in fiscal 2017 primarily reflected $6.9 billion used to
repurchase class A common stock in the open market and $1.6 billion of dividend payments, partially
offset by $2.5 billion net aggregate proceeds received from our debt issuance completed in September
2017. Cash provided by financing activities in fiscal 2016 primarily reflected $15.9 billion net aggregate
proceeds received from our debt issuance completed in December 2015, partially offset by $7.0 billion
used to repurchase class A common stock in the open market and $1.4 billion of dividend payments.
See Note 2-U.S. and Europe Retrospective Responsibility Plans, Note 6-Debt, Note 11-
Stockholders' Equity and Note 17-Legal Matters to our consolidated financial statements included in
Item 8-Financial Statements and Supplementary Data of this report.
Sources of Liquidity
Our primary sources of liquidity are cash on hand, cash flow from our operations, our investment
portfolio and access to various equity and borrowing arrangements. Funds from operations are
maintained in cash and cash equivalents and short-term or long-term available-for-sale investment
securities based upon our funding requirements, access to liquidity from these holdings, and the return
that these holdings provide. We believe that cash flow generated from operations, in conjunction with
access to our other sources of liquidity, will be more than sufficient to meet our ongoing operational
needs.
Foreign Earnings. Pursuant to the Tax Act, we are required to pay U.S. tax on most of the
undistributed and untaxed foreign earnings of non-U.S. subsidiaries accumulated as of December 31,
2017. The transition tax will be paid over a period of eight years as permitted by the Tax Act. As a
result of the Tax Act, we are no longer subject to incremental U.S. federal tax on foreign earnings of
non-U.S. subsidiaries in the event that we repatriate these earnings back to the United States.
Available-for-sale investment securities. Our investment portfolio is designed to invest excess
cash in securities which enables us to meet our working capital and liquidity needs. Our investment
portfolio primarily consists of debt securities issued by the U.S. Treasury or U.S. government-
sponsored agencies. The majority of these investments, $3.4 billion, are classified as current and are
available to meet short-term liquidity needs. The remaining non-current investments have stated
maturities of more than one year from the balance sheet date; however, they are also generally
available to meet short-term liquidity needs.
Factors that may impact the liquidity of our investment portfolio include, but are not limited to,
changes to credit ratings of the securities, uncertainty related to regulatory developments, actions by
central banks and other monetary authorities, and the ongoing strength and quality of credit markets.
We will continue to review our portfolio in light of evolving market and economic conditions. However, if
current market conditions deteriorate, the liquidity of our investment portfolio may be impacted and we
could determine that some of our investments are impaired, which could adversely impact our financial
results. We have policies that limit the amount of credit exposure to any one financial institution or type
of investment.
Outlook
52
Credit facility. We have an unsecured $4.0 billion revolving credit facility (the "Credit Facility")
which expires on January 27, 2022. There were no borrowings under the credit facility as of
September 30, 2018 and we were in compliance with all related covenants as of and during the year
ended September 30, 2018. See Note 6-Debt to our consolidated financial statements included in
Item 8-Financial Statements and Supplementary Data of this report.
Universal shelf registration statement. In July 2018, we filed a registration statement with the SEC
using a shelf registration process. As permitted by the registration statement, we may, from time to
time, sell shares of debt or equity securities in one or more transactions. This registration statement
expires in July 2021.
U.S. Litigation escrow account. Pursuant to the terms of the U.S. retrospective responsibility plan,
we maintain a U.S. litigation escrow account from which monetary liabilities from settlements of, or
judgments in, the U.S. covered litigation will be payable. When we fund the U.S. litigation escrow
account, the shares of class B common stock held by our stockholders are subject to dilution through
an adjustment to the conversion rate of the shares of class B common stock to shares of class A
common stock. In June 2018, we deposited $600 million into the U.S. litigation escrow account to
address claims associated with the interchange multidistrict litigation. See Note 2-U.S. and Europe
Retrospective Responsibility Plans and Note 17-Legal Matters to our consolidated financial
statements included in Item 8-Financial Statements and Supplementary Data of this report. The
balance in this account at September 30, 2018, was $1.5 billion and is reflected as restricted cash in
our consolidated balance sheets. As these funds are restricted for the sole purpose of making
payments related to the U.S. covered litigation matters, as described below under Uses of Liquidity, we
do not rely on them for other operational needs.
Long-term debt. In September 2017, we issued fixed-rate senior notes in an aggregate principal
amount of $2.5 billion, with maturities ranging between 5 and 30 years. In October 2017, we redeemed
all of the $1.75 billion principal amount outstanding of the 2017 Notes. The redemption was funded
with the net proceeds from the new fixed-rate senior notes issued in September 2017. We are not
subject to any financial covenants and did not experience any changes to our investment credit ratings
as a result of this debt issuance. See Note 6-Debt to our consolidated financial statements included in
Item 8-Financial Statements and Supplementary Data of this report.
Credit Ratings
At September 30, 2018, our credit ratings by Standard and Poor's and Moody's were as follows:
Standard and Poor's
Moody's
Debt type
Rating
A-1
A+
Outlook
Positive
Positive
Commercial paper program. We maintain a commercial paper program to support our working
capital requirements and for other general corporate purposes. Under the program, we are authorized
to issue up to $3.0 billion in outstanding notes, with maturities up to 397 days from the date of
issuance. We had no outstanding obligations under the program at September 30, 2018. See Note 6—
Debt to our consolidated financial statements included in Item 8-Financial Statements and
Supplementary Data of this report.
Contractual Obligations
Deferred purchase
Payments Due by Period
Dividends(5)
574
574
consideration (6)
Total(7),(8),(9)
1,317
$ 4,071
1,317
$ 4,853 $ 4,679
$ 17,102
$ 30,705
(1) Amounts presented include payments for both interest and principal. Also see Note 6-Debt to our consolidated financial
statements included in Item 8-Financial Statements and Supplementary Data of this report.
(2) Represents agreements to purchase goods and services that specify significant terms, including: fixed or minimum quantities
to be purchased, minimum or variable price provisions, and the approximate timing of the transaction. For obligations where
the individual years of spend are not specified in the contract, we have estimated the timing of when these amounts will be
spent.
1,105
(3) Includes operating leases for premises, equipment and software licenses, which range in terms from less than one year to
twenty years.
(5) Includes expected dividend amount of $574 million as dividends were declared on October 16, 2018 and will be paid on
December 4, 2018 to all holders of record of Visa's common stock as of November 16, 2018.
(6) On June 21, 2016, we acquired 100% of the share capital of Visa Europe. In connection with the purchase, we will pay an
additional €1.0 billion, plus 4% compound annual interest, on the third anniversary of the closing of the Visa Europe
acquisition. Amount presented was converted to U.S. dollar at the September 30, 2018 exchange rate.
(7) We have liabilities for uncertain tax positions of $1.4 billion as of September 30, 2018. At September 30, 2018, we had also
accrued $99 million of interest and $34 million of penalties associated with our uncertain tax positions. We cannot determine
the range of cash payments that will be made and the timing of the cash settlements, if any, associated with our uncertain tax
positions. Therefore, no amounts related to these obligations have been included in the table.
(8) We evaluate the need to make contributions to our pension plan after considering the funded status of the pension plan,
movements in the discount rate, performance of the plan assets and related tax consequences. Expected contributions to our
pension plan have not been included in the table as such amounts are dependent upon the considerations discussed above,
and may result in a wide range of amounts. See Note 7-Pension, Postretirement and Other Benefits to our consolidated
financial statements included in Item 8-Financial Statements and Supplementary Data of this report and the Liquidity and
Capital Resources section of this Management's Discussion and Analysis of Financial Condition and Results of Operations.
(9) Future cash payments for long-term contracts with financial institution clients and other business partners are not included in
the table as the amounts are unknowable due to the inherent unpredictability of payment and transaction volume. These
agreements, which range in terms from one to eleven years, can provide card issuance and/or conversion support, volume/
growth targets and marketing and program support based on specific performance requirements. As of September 30, 2018,
we have $2.8 billion of client incentives liability recorded on the consolidated balance sheet related to these arrangements.
57
44
Critical Accounting Estimates
Our consolidated financial statements are prepared in accordance with accounting principles
generally accepted in the United States of America which require us to make judgments, assumptions
and estimates that affect the amounts reported. See Note 1-Summary of Significant Accounting
Policies to our consolidated financial statements included in Item 8-Financial Statements and
Supplementary Data of this report. We have established policies and control procedures which seek to
ensure that estimates and assumptions are appropriately governed and applied consistently from
period to period. However, actual results could differ from our assumptions and estimates, and such
differences could be material.
We believe that the following accounting estimates are the most critical to fully understand and
evaluate our reported financial results, as they require our most subjective or complex management
judgments, resulting from the need to make estimates about the effect of matters that are inherently
uncertain and unpredictable.
Revenue Recognition-Client Incentives
Critical estimates. We enter into incentive agreements with financial institution clients, merchants
and other business partners for various programs designed to increase revenue by growing payments
volume, increasing Visa product acceptance, winning merchant routing transactions over to our
network and driving innovation. These incentives are primarily accounted for as reductions to operating
revenues; however, if a separate identifiable benefit at fair value can be established, they are
accounted for as operating expenses. We generally capitalize advance incentive payments under
these agreements if select criteria are met. The capitalization criteria include the existence of future
economic benefits to Visa, the existence of legally enforceable recoverability language (e.g., early
termination clauses), management's ability and intent to enforce the recoverability language and the
ability to generate future earnings from the agreement in excess of amounts deferred. Capitalized
amounts are amortized over the shorter of the period of contractual recoverability or the corresponding
period of economic benefit. Incentives not yet paid are accrued systematically and rationally based on
management's estimate of each client's performance. These accruals are regularly reviewed and
estimates of performance are adjusted as appropriate, based on changes in performance expectations,
actual client performance, amendments to existing contracts or the execution of new contracts.
$1.9 billion of the consideration paid in the Visa Europe acquisition during fiscal 2016 related to
(4) Amounts presented relate to the estimated transition tax, net of foreign tax credit carryovers, on certain foreign earnings of
non-U.S. subsidiaries. See Note 16-Income Taxes to our consolidated financial statements included in Item 8-Financial
Statements and Supplementary Data of this report.
663
177
177
Less than
1 Year
1-3
Years
3-5
Years
More than
5 Years
Total
(in millions)
Long-term debt(1)
$ 537
$ 4,041
$ 4,140
$ 15,719
$ 24,437
Purchase obligations(2)
1,375
410
198
542
2,525
Leases(3)
180
225
164
178
747
Transition tax(4)
88
Our contractual commitments will have an impact on our future liquidity. The contractual
obligations identified in the table below include both on- and off-balance sheet transactions that
represent a material, expected or contractually committed future obligation as of September 30, 2018.
We believe that we will be able to fund these obligations through cash generated from our operations
and available credit facilities.
.
Impact if actual results differ from assumptions. If actual performance or recoverable cash flows
are not consistent with our estimates, client incentives may be materially different than initially
recorded. Increases in incentive payments are generally driven by increased payments and transaction
volume, which drive our net revenues. As a result, in the event incentive payments exceed estimates,
such payments are not expected to have a material effect on our financial condition, results of
operations or cash flows. The cumulative impact of a revision in estimates is recorded in the period
such revisions become probable and estimable. For the year ended September 30, 2018, client
incentives represented 21% of gross operating revenues.
net deposits made into the U.S. litigation escrow account of $450 million in fiscal 2018;
Year ended September 30, 2018
As reported
Charitable contribution
Litigation provision
Remeasurement of deferred tax balances
Transition tax on foreign earnings.
As adjusted
As reported
Charitable contribution
Elimination of deferred tax balances
As adjusted
Income
Adjusted effective income tax rate. Our financial results for fiscal 2018 and 2017 reflect the impact
of certain significant items that we do not believe are indicative of our ongoing operating performance
in prior or future years, as they are either non-recurring or have no cash impact. As such, we have
presented our adjusted effective income tax rates in the tables below, which we believe provides a
clearer understanding of our operating performance in fiscal 2018 and 2017. See Overview-Adjusted
financial results within this Management's Discussion and Analysis of Financial Condition and Results
of Operations for descriptions of the adjustments in the table below.
Before
Taxes
Income
Tax
Provision
2
600
(in millions, except percentages)
$ 12,806 $ 2,505
51
137
Effective
Income Tax
Rate(1)
19.6%
1,133
(1,147)
$ 13,408
$ 2,679
Income
The above-mentioned accounting impact of the transition tax is provisional, based on currently
available information and technical guidance on the interpretations of the new law. We continue to
obtain and analyze additional information and guidance as they become available to complete the
accounting for the tax impact of the Tax Act. Additional information currently unavailable that is needed
to complete the analysis includes, but is not limited to, foreign tax returns and foreign tax
documentation for the computation of foreign tax credits, and the final determination of the untaxed
foreign earnings subject to the transition tax. The provisional accounting impact may change until the
accounting analysis is finalized, which will occur no later than the first quarter of fiscal 2019, as
permitted by ASU 2018-05.
49
In transitioning to the new territorial tax system, the Tax Act requires that we include certain
untaxed foreign earnings of non-U.S. subsidiaries in our fiscal 2018 taxable income. Such foreign
earnings are subject to a one-time tax at 15.5% on the amount held in cash or cash equivalents, and at
8% on the remaining non-cash amount. The 15.5% and 8% tax, collectively referred to as the
"transition tax", was estimated to be $1.1 billion, and was recorded in fiscal 2018. The transition tax will
be paid over a period of eight years as permitted by the Tax Act.
58
Critical estimates. We are currently involved in various legal proceedings, the outcomes of which
are not within our complete control or may not be known for prolonged periods of time. Management is
required to assess the probability of loss and amount of such loss, if any, in preparing our financial
statements.
Legal and Regulatory Matters
Effective Income Tax Rate
The effective income tax rate was 20% in fiscal 2018 and 43% in fiscal 2017. The effective tax
rate in fiscal 2018 differs from the effective tax rate in fiscal 2017 primarily due to:
•
the effects of the Tax Act, enacted on December 22, 2017, as discussed below;
•
•
$161 million of tax benefits due to various non-recurring audit settlements in fiscal 2018; and
the absence of the following items related to the Visa Europe reorganization recorded in fiscal
2017:
■
a $1.5 billion non-recurring, non-cash income tax provision primarily related to the
elimination of deferred tax balances originally recognized upon the acquisition of Visa
Europe; and
a $71 million one-time tax benefit related to the Visa Foundation's receipt of Visa Inc.
shares, previously recorded by Visa Europe as treasury stock.
The effective income tax rate was 43% in fiscal 2017 and 25% in fiscal 2016. The effective tax
rate in fiscal 2017 differs from the effective tax rate in fiscal 2016 primarily due to:
•
•
•
the items listed above related to the Visa Europe reorganization recorded in fiscal 2017;
$70 million of excess tax benefits related to share-based payments recorded in fiscal 2017, as
a result of the early adoption of Accounting Standards Update 2016-09; and
the absence of:
■
the effect of one-time items related to the Visa Europe acquisition recorded during fiscal
2016, the most significant of which was the $1.9 billion U.S. loss related to the effective
settlement of the Framework Agreement between Visa and Visa Europe. These one-time
items impacted the geographic mix of our global income, resulting in a reduced effective
tax rate in fiscal 2016;
an $88 million one-time tax benefit due to the remeasurement of deferred tax liabilities
as a result of the reduction in the UK tax rate enacted in fiscal 2016; and
the non-taxable $255 million revaluation of the Visa Europe put option recorded in fiscal
2016.
The Tax Act, enacted on December 22, 2017, transitions the U.S. tax system to a new territorial
system and lowers the statutory federal corporate income tax rate from 35% to 21%. The reduction of
the statutory federal corporate tax rate to 21% became effective on January 1, 2018. In fiscal 2018, our
statutory federal corporate rate is a blended rate of 24.5%, which will be reduced to 21% in fiscal 2019
and thereafter.
As a result of the reduction in the federal corporate tax rate, we provisionally remeasured our net
deferred tax liabilities as of the enactment date of the Tax Act. The deferred tax remeasurement is now
complete and resulted in a one-time, non-cash tax benefit of $1.1 billion, recorded in fiscal 2018.
20.0%
•
Year ended September 30, 2017
Before
invest excess cash in securities that enable us to first meet our working capital and liquidity
needs, and earn additional income.
Based on our current cash flow budgets and forecasts of our short-term and long-term liquidity
needs, we believe that our projected sources of liquidity will be sufficient to meet our projected liquidity
needs for more than the next 12 months. We will continue to assess our liquidity position and potential
sources of supplemental liquidity in view of our operating performance, current economic and capital
market conditions, and other relevant circumstances.
Cash Flow Data
The following table summarizes our cash flow activity for the fiscal years presented:
Total cash provided by (used in):
2018
For the Years Ended
September 30,
2017
(in millions)
2016
Operating activities
Investing activities
Financing activities
Effect of exchange rate changes on cash and cash
equivalents
•
(Decrease) increase in cash and cash equivalents
(3,084)
(11,240)
735
(5,924)
(101)
236
$ 5,574
(10,916)
$ (1,712) $ 4,255 $
7,477
(34)
2,101
Operating activities. Cash provided by operating activities in fiscal 2018 and 2017 was impacted
by continued growth in our underlying business. Fiscal 2017 was impacted by the inclusion of Visa
Europe in our results for the full year, while fiscal 2016 had one quarter of results that included Visa
Europe. Other factors impacting cash provided by operating activities include:
•
$ 12,713 $ 9,208
• pay dividends and repurchase our shares at the discretion of our board of directors; and
make planned capital investments in our business;
ensure payments on required litigation settlements;
Income
Taxes
Income
Tax
Provision
Effective
Income Tax
Rate(1)
42.7%
(in millions, except percentages)
$ 11,694 $ 4,995
192
71
(1,515)
$ 11,886
$ 3,551
29.9%
(1) Figures in the table may not recalculate exactly due to rounding. Effective income tax rate changes are calculated based on
unrounded numbers.
Liquidity and Capital Resources
Management of Our Liquidity
We regularly evaluate cash requirements for current operations, commitments, development
activities and capital expenditures, and we may elect to raise additional funds for these purposes in the
future through the issuance of either debt or equity. Our treasury policies provide management with the
guidelines and authority to manage liquidity risk in a manner consistent with our corporate objectives.
50
50
•
•
•
.
The objectives of our treasury policies are to:
provide adequate liquidity to cover operating expenditures and liquidity contingency scenarios;
ensure timely completion of payments settlement activities;
Income
Assumptions and judgment. Estimation of client incentives relies on forecasts of payments and
transaction volume, card issuance and card conversion. Performance is estimated using client-
reported information, transactional information accumulated from our systems, historical information
and discussions with our clients, merchants and business partners.
(22)
(2)
5,980
1,304
2,666
1,321
35,219
35,217
Preferred stock, $0.0001 par value, 25 shares authorized and 5 shares issued and
outstanding as follows:
Series A convertible participating preferred stock, none issued (the "class A
equivalent preferred stock") (Note 11)
Series B convertible participating preferred stock, 2 shares issued and outstanding
at September 30, 2018 and 2017 (the "UK&I preferred stock") (Note 11)
Series Ċ convertible participating preferred stock, 3 shares issued and outstanding
at September 30, 2018 and 2017 (the "Europe preferred stock") (Note 11)
Class A common stock, $0.0001 par value, 2,001,622 shares authorized, 1,768 and 1,818
shares issued and outstanding at September 30, 2018 and 2017, respectively
(Note 11)
Class B common stock, $0.0001 par value, 622 shares authorized, 245 shares issued
and outstanding at September 30, 2018 and 2017, respectively (Note 11)
Class C common stock, $0.0001 par value, 1,097 shares authorized, 12 and 13 shares
issued and outstanding at September 30, 2018 and 2017, respectively (Note 11)
Right to recover for covered losses (Note 2)
Accumulated income
Investment securities, available-for-sale
Additional paid-in capital
Accumulated other comprehensive income (loss), net:
Defined benefit pension and other postretirement plans
Derivative instruments classified as cash flow hedges
Foreign currency translation adjustments
Total accumulated other comprehensive income (loss), net
Total equity
Total liabilities and equity
2,291
2,326
3,179
3,200
(7)
16,678
(52)
16,900
11,318
9,508
4,618
(17)
16,618
9,994
2,472
2,253
15,194
15,110
27,558
27,848
1,165
1,226
$
69,225
$
67,977
$
183 $
179
2,168
2,003
1,325
1,106
901
757
2,834
2,089
1,160
1,129
1,300
1,749
1,434
982
16,630
73
(61)
(76)
6,321
4,649
944
841
823
(5,491)
(4,565)
(3,409)
20,609
18,358
15,082
Net operating revenues
Operating Expenses
Personnel
Marketing
Network and processing
Professional fees
3,170
2,628
2,226
988
922
869
686
620
538
446
409
389
Depreciation and amortization
7,211
6,272
7,786
9,027
60
(36)
565
917
547
878
34,006
32,760
$
69,225 $
67,977
See accompanying notes, which are an integral part of these consolidated financial statements.
59
65
591
VISA INC.
2018
For the Years Ended
September 30,
2017
2016 (1)
(in millions, except per share data)
Operating Revenues
Service revenues
Data processing revenues
International transaction revenues
Other revenues
Client incentives
$
8,918 $
7,975 $
6,747
CONSOLIDATED STATEMENTS OF OPERATIONS
538
1,926
4,082
Consolidated Statements of Operations.
Consolidated Statements of Comprehensive Income
Consolidated Statements of Changes in Equity.
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements
N1228
63
65
66
67
68
71
72
62
62
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
Visa Inc.:
Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting
We have audited the accompanying consolidated balance sheets of Visa Inc. and subsidiaries (Visa
Inc. or the Company) as of September 30, 2018 and 2017, the related consolidated statements of
operations, comprehensive income, changes in equity, and cash flows for each of the years in the
three-year period ended September 30, 2018 and the related notes. We also have audited Visa Inc.'s
internal control over financial reporting as of September 30, 2018, based on Internal Control
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the financial position of Visa Inc. and subsidiaries as of September 30, 2018 and 2017, and
the results of their operations and their cash flows for each of the years in the three-year period ended
September 30, 2018, in conformity with U.S. generally accepted accounting principles. Also in our
opinion, Visa Inc. maintained, in all material respects, effective internal control over financial reporting
as of September 30, 2018, based on Internal Control - Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission.
Basis for Opinions
Visa Inc.'s management is responsible for these consolidated financial statements, for maintaining
effective internal control over financial reporting, and for their assessment of the effectiveness of
internal control over financial reporting, included in the accompanying Management's Report on
Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company's
consolidated financial statements and an opinion on the Company's internal control over financial
reporting based on our audits. We are a public accounting firm registered with the Public Company
Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect
to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require
that we plan and perform the audits to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement, whether due to error or fraud, and whether
effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks
of material misstatement of the consolidated financial statements, whether due to error or fraud, and
performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our
audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements.
Our audit of internal control over financial reporting included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, and testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk. Our
audits also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audits provide a reasonable basis for our opinions.
63
Report of Independent Registered Public Accounting Firm―(Continued)
Definition and Limitations of Internal Control Over Financial Reporting
A company's internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles. A company's internal
control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the
risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
Consolidated Balance Sheets
Report of Independent Registered Public Accounting Firm
As of September 30, 2018 and 2017 and for the years ended September 30, 2018, 2017 and 2016
Page
See accompanying notes, which are an integral part of these consolidated financial statements.
Assumptions and judgment. We evaluate the likelihood of a potential loss from legal or regulatory
proceedings to which we are a party. We record a liability for such claims when a loss is deemed
probable and the amount can be reasonably estimated. Significant judgment may be required in the
determination of both probability and whether a potential loss is reasonably estimable. Our judgments
are subjective based on the status of the legal or regulatory proceedings, the merits of our defenses
and consultation with in-house and outside legal counsel. As additional information becomes available,
we reassess the potential liability related to pending claims and may revise our estimates.
Our U.S. retrospective responsibility plan only addresses monetary liabilities from settlements of,
or final judgments in, the U.S. covered litigation. The plan's mechanisms include the use of the U.S.
litigation escrow account. The accrual related to the U.S. covered litigation could be either higher or
lower than the U.S. litigation escrow account balance. We recorded an additional accrual of
$600 million for U.S. covered litigation during fiscal 2018. Our Europe retrospective responsibility plan
only covers Visa Europe territory covered litigation (and resultant liabilities and losses) relating to the
covered period, subject to certain limitations, and does not cover any fines or penalties incurred in the
European Commission proceedings or any other matter. See Note 2-U.S. and Europe Retrospective
Responsibility Plans and Note 17-Legal Matters to our consolidated financial statements included in
Item 8-Financial Statements and Supplementary Data of this report.
Impact if actual results differ from assumptions. Due to the inherent uncertainties of the legal and
regulatory processes in the multiple jurisdictions in which we operate, our judgments may be materially
different than the actual outcomes, which could have material adverse effects on our business,
financial conditions and results of operations. See Note 17—Legal Matters to our consolidated financial
statements included in Item 8—Financial Statements and Supplementary Data of this report.
Income Taxes
Critical estimates. In calculating our effective income tax rate, we make judgments regarding
certain tax positions, including the timing and amount of deductions and allocations of income among
various tax jurisdictions.
Assumptions and judgment. We have various tax filing positions with regard to the timing and
amount of deductions and credits, the establishment of liabilities for uncertain tax positions and the
allocation of income among various tax jurisdictions. We are also required to inventory, evaluate and
measure all uncertain tax positions taken or to be taken on tax returns and to record liabilities for the
amount of such positions that may not be sustained, or may only be partially sustained, upon
examination by the relevant taxing authorities.
Impact if actual results differ from assumptions. Although we believe that our estimates and
judgments are reasonable, actual results may differ from these estimates. Some or all of these
judgments are subject to review by the taxing authorities. If one or more of the taxing authorities were
to successfully challenge our right to realize some or all of the tax benefit we have recorded, and we
were unable to realize this benefit, it could have a material adverse effect on our financial results and
cash flows.
ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk
Market risk is the potential economic loss arising from adverse changes in market factors. Our
exposure to financial market risks results primarily from fluctuations in foreign currency exchange
rates, interest rates and equity prices. Aggregate risk exposures are monitored on an ongoing basis.
59
59
Foreign Currency Exchange Rate Risk
We are exposed to risks from foreign currency exchange rate fluctuations that are primarily
related to changes in the functional currency value of revenues generated from foreign currency-
denominated transactions and changes in the functional currency value of payments in foreign
currencies. We manage these risks by entering into foreign currency forward contracts that hedge
exposures of the variability in the functional currency equivalent of anticipated non-functional currency
denominated cash flows. Our foreign currency exchange rate risk management program reduces, but
does not entirely eliminate, the impact of foreign currency exchange rate movements.
/s/ KPMG LLP
The aggregate notional amounts of our foreign currency forward contracts outstanding in our
exchange rate risk management program, including contracts not designated for cash flow hedge
accounting, were $3.7 billion and $3.1 billion at September 30, 2018 and 2017, respectively. The
aggregate notional amount outstanding at September 30, 2018 is fully consistent with our strategy and
treasury policy aimed at reducing foreign exchange risk below a predetermined and approved
threshold. However, actual results could materially differ from our forecast. The effect of a hypothetical
10% increase or decrease in the value of the functional currencies is estimated to create an additional
fair value gain of approximately $280 million or loss of approximately $350 million, respectively, on our
foreign currency forward contracts outstanding at September 30, 2018. See Note 1-Summary of
Significant Accounting Policies and Note 9-Derivative and Non-derivative Financial Instruments to our
consolidated financial statements included in Item 8-Financial Statements and Supplementary Data
of this report.
We are further exposed to foreign currency exchange rate risk as the functional currency of Visa
Europe is the euro. Translation from the euro to the U.S. dollar is performed for balance sheet
accounts using exchange rates in effect at the balance sheet date and for revenue and expense
accounts using an average exchange rate for the period. Resulting translation adjustments are
reported as a component of accumulated other comprehensive income or loss on the consolidated
balance sheets. A hypothetical 10% change in the euro against the U.S. dollar compared to the
exchange rate at September 30, 2018, would result in a foreign currency translation adjustment of
$2.0 billion. We designate a portion of our euro-denominated deferred consideration liability as a net
investment hedge against a portion of the foreign exchange rate exposure of our net investment of
$18.8 billion in Visa Europe as of September 30, 2018. Changes in the value of the deferred cash
consideration liability, attributable to a change in exchange rates at the end of each reporting period,
partially offset the foreign currency translation of the Company's net investment recorded in
accumulated other comprehensive income in the Company's consolidated balance sheets. See
Note 1-Summary of Significant Accounting Policies and Note 9-Derivative and Non-derivative
Financial Instruments to our consolidated financial statements included in Item 8-Financial
Statements and Supplementary Data of this report.
We are also subject to foreign currency exchange risk in daily settlement activities. This risk
arises from the timing of rate setting for settlement with clients relative to the timing of market trades
for balancing currency positions. Risk in settlement activities is limited through daily operating
procedures, including the utilization of Visa settlement systems and our interaction with foreign
exchange trading counterparties.
60
Interest Rate Risk
Our investment portfolio assets are held in both fixed-rate and adjustable-rate securities. These
assets are included in cash equivalents and short-term or long-term available-for-sale investments.
Investments in fixed-rate instruments carry a degree of interest rate risk. The fair value of fixed-rate
securities may be adversely impacted due to a rise in interest rates. Additionally, a falling-rate
environment creates reinvestment risk because as securities mature, the proceeds are reinvested at a
lower rate, generating less interest income. Historically, we have been able to hold investments until
maturity. Neither our operating results or cash flows have been, nor are they expected to be, materially
impacted by a sudden change in market interest rates.
The fair value balances of our fixed-rate investment securities at September 30, 2018 and 2017
were $5.1 billion and $6.4 billion, respectively. A hypothetical 100 basis point increase or decrease in
interest rates would create an estimated change in fair value of approximately $31 million on our
investment securities at September 30, 2018. The fair value balances of our adjustable-rate debt
securities were $3.5 billion and $1.8 billion at September 30, 2018 and 2017, respectively.
Pension Plan Risk
At September 30, 2018 and 2017, our U.S. defined benefit pension plan assets were $1.1 billion
at each year end, and projected benefit obligations were $0.8 billion and $0.9 billion, respectively. A
material adverse decline in the value of pension plan assets and/or in the discount rate for benefit
obligations would result in a decrease in the funded status of the pension plan, an increase in pension
cost and an increase in required funding. A hypothetical 10% decrease in the value of pension plan
assets and a 1% decrease in the discount rate would result in an aggregate decrease of approximately
$206 million in the funded status and an increase of approximately $35 million in pension cost.
At September 30, 2018 and 2017, our non-U.S. defined benefit pension plan assets were
$0.4 billion at each year end, and projected benefit obligations were $0.5 billion and $0.4 billion,
respectively. A material adverse decline in the value of pension plan assets and/or in the discount rate
for benefit obligations would result in a decrease in the funded status of the pension plan, an increase
in pension cost and an increase in required funding. A hypothetical 10% decrease in the value of
pension plan assets and a 1% decrease in the discount rate would result in an aggregate decrease of
approximately $148 million in the funded status and an increase of approximately $13 million in
pension cost.
We will continue to monitor the performance of pension plan assets and market conditions as we
evaluate the amount of our contribution to the pension plan for fiscal 2019, if any, which would be
made in September 2019.
61
ITEM 8. Financial Statements and Supplementary Data
VISA INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
On June 21, 2016, we acquired 100% of the share capital of Visa Europe. On the third
anniversary of the closing of the Visa Europe transaction, we will pay an additional purchase
consideration of €1.0 billion, plus 4.0% compounded annual interest. As such, we are exposed to
foreign currency exchange rate risk with respect to fluctuations of the U.S. dollar against the euro. A
hypothetical 10% decline in the U.S. dollar against the euro, compared to the exchange rate at
September 30, 2018, would increase the deferred purchase consideration liability by $130 million,
including interest.
613
We have served as the Company's auditor since 2007.
November 16, 2018
Deferred tax liabilities (Note 16)
Deferred purchase consideration
Other liabilities
Total liabilities
Commitments and contingencies (Note 14)
Equity
September 30,
2018
September 30,
2017
(in millions, except par value data)
$
8,162 $
1,491
9,874
1,031
98
82
3,449
3,482
1,582
1,422
1,208
1,132
1,324
1,106
340
344
562
550
18,216
19,023
Long-term debt (Note 6).
Total current liabilities
Accrued litigation (Note 17).
Current maturities of long-term debt (Note 6)
64
VISA INC.
CONSOLIDATED BALANCE SHEETS
Assets
Cash and cash equivalents
Restricted cash-U.S. litigation escrow (Note 2)
Investment securities (Note 3):
Trading
Available-for-sale
Settlement receivable
Accounts receivable
Customer collateral (Note 8)
Current portion of client incentives
Prepaid expenses and other current assets
Santa Clara, California
Total current assets
Client incentives
Property, equipment and technology, net (Note 4)
Goodwill (Note 5)
Intangible assets, net (Note 5)
Other assets
Total assets
Liabilities
Accounts payable
Settlement payable
Customer collateral (Note 8)
Client incentives
Accrued compensation and benefits
Accrued liabilities
Deferred purchase consideration
Investment securities, available-for-sale (Note 3)
556
11,305
General and administrative
35
(352)
1,136
(218)
(331)
1,336
(384)
Comprehensive income ...
$
9,970 $ 8,035 $
5,607
See accompanying notes, which are an integral part of these consolidated financial statements.
67
VISA INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Balance as of September 30,
2015
Net income
Other comprehensive income,
net of tax
Comprehensive income
Issuance of preferred stock
(Note 11)
Right to
Preferred Stock(1)
Common Stock
Recover for Additional
B
Series Series
C
Class
(12)
A
(2)
33
Derivative instruments classified as cash flow hedges:
Net unrealized gain (loss)
Income tax effect
Reclassification adjustment for net loss (gain) realized in net income
Income tax effect
Foreign currency translation adjustments
Other comprehensive income (loss), net of tax
16
(5)
5
(1)
8ཙུ། སྨྱ$88 སླེ
༄Êཕྲུ༤ 8
60
(24)
51
(18)
1
1
183
(106)
(54)
32
36
10
(12)
(4)
(74)
(24)
15
9
32
(103)
B
1,950
245 20 $
(1)
settled in cash for taxes
(2)
221
(92)
Excess tax benefit for share-
based compensation
Cash proceeds from issuance of
common stock under
employee equity plans
Cash dividends declared and
paid, at a quarterly amount of
$0.14 per as-converted share
(Note 11)
Repurchase of class A common
stock (Note 11)
3
⌘ $
(1,350)
(91)
(965)
(6,022)
Balance as of September 30,
2016
2
3 1,871
245
17 $ 5,717 $ (170) $
(34) $ 17,395 $
10,462 $
(458) $ 32,912
ཟུང་ ༔ ཚོ ་སྦྱིན་གྱི།། མཱུ  ིི ཋ ཝ ཕྱི ནྤྱི ནྟི
(74) $ 29,842
68
(1) Series B and C preferred stock are alternatively referred to as UK&I and Europe preferred stock, respectively.
Decrease in Class A common stock related to forfeitures of restricted stock awards is less than one million shares.
performance-based shares
502
of forfeitures (Note 13)
Share-based compensation, net
Class Class Preferred Treasury
C
Stock Stock
(in millions, except per share data)
$
Covered
Losses
Accumulated
Other
Paid-In Accumulated Comprehensive
Capital Income
Loss
$
-
$ 18,073 $ 11,843 $
5,991
(384)
2
5,717
VE territory covered losses
incurred (Note 2)
Reclassification adjustment for net loss realized in net income
Income tax effect
(34)
subsidiary of Visa Inc.
(Note 11)
Conversion of class C common
stock upon sales into public
8
00
(1)
(2)
(170)
market
Issuance and vesting of
restricted stock and
2
performance-based shares
Class C common stock held by
Visa Europe, a wholly-owned
Income tax effect
Restricted stock and
Defined benefit pension and other postretirement plans:
(148)
(450)
129
12,806
11,694
8,012
2,505
4,995
2,021
$
10,301 $
6,699 $
5,991
$
4.43 $
2.80
$
2.49
$
7.28
$
4.62 $
4.10
$
17.72
$ 11.21
$
9.94
Class A common stock
556
113
464
(427)
1,145
Net unrealized actuarial gain (loss) and prior service credit
1,060
796
Litigation provision (Note 17)
607
19
2
Visa Europe Framework Agreement loss
1,877
Total operating expenses
7,655
6,214
7,199
Class B common stock
Operating income
12,144
Non-operating Income (Expense)
Interest expense
Other
Total non-operating income (expense)
Income before income taxes
Income tax provision (Note 16)
Net income
Basic earnings per share (Note 12)
Class A common stock
Class B common stock
Class C common stock
Basic weighted-average shares outstanding (Note 12)
(612)
(563)
12,954
Class C common stock
7,883
1,845
2,414
245
245
14
19
(1) The Company did not include Visa Europe's financial results in the Company's consolidated statements of operations from
the acquisition date, June 21, 2016, through June 30, 2016 as the impact was immaterial. The Company's consolidated
statement of operations for the year ended September 30, 2016 includes Visa Europe's financial results for the three months
ended September 30, 2016.
See accompanying notes, which are an integral part of these consolidated financial statements.
66
VISA INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Net income
Other comprehensive income (loss), net of tax:
Investment securities, available-for-sale:
For the Years Ended
September 30,
2018
2017
2016
(in millions)
.$
6,699 $
5,991
Net unrealized gain
94
Income tax effect
(19)
Reclassification adjustment for net (gain) loss realized in net income
Income tax effect
1,792
(215)
50
2,395
2,329
245
12
10,301 $
Class B common stock
$
2.80
$
4.42
$
Class A common stock.
2.48
19
12
245
1,906
245
Class C common stock
245
14
Class B common stock
Diluted earnings per share (Note 12)
7.27 $
4.61
$
4.09
Class C common stock
$
17.69
$ 11.19
Class A common stock
$
Diluted weighted-average shares outstanding (Note 12)
9.93
$
Deposit into U.S. litigation escrow account-U.S. retrospective responsibility plan (Note 2 and
Note 17)
4
(10)
(7,192) (6,891) (6,987)
(1,750)
(3,084)
735 (10,916)
Proceeds from issuance of senior notes (Note 6)
(170)
6
2
5,012 9,119
(302) (9,082)
(50)
(196)
3,636
(3,238) (10,426)
(5,772)
Debt issuance costs (Note 6) .
(1,918) (1,579)
Payments from U.S. litigation escrow account-U.S. retrospective responsibility plan (Note 2 and
Note 17)..
(46)
(1,350)
(76)
15,971
(34)
236
(101)
Treasury stock-class C common stock (Note 11)
7,477
(5,924)
(11,240)
(Decrease) increase in cash and cash equivalents
Effect of exchange rate changes on cash and cash equivalents
Net cash (used in) provided by financing activities
63
(92)
(94)
95
149
164
Cash proceeds from issuance of common stock under employee equity plans
Restricted stock and performance-based shares settled in cash for taxes
Excess tax benefit for share-based compensation
45
150
1
(600)
(98)
(15)
2,488
Dividends paid (Note 11)
(30)
Net cash (used in) provided by investing activities
Financing Activities
43
3
(315)
(252)
(160)
(3,508)
(4,628)
(4,682)
(65)
(54)
262
(70)
94
(223)
64
50
(74)
192
(9)
(1,712) 4,255
(11)
(209)
391
Repurchase of class A common stock (Note 11)
Repayments of long-term debt (Note 6)
(176)
1,761
Purchases of / contributions to other investments
Proceeds/distributions from other investments
Acquisitions, net of cash received
Proceeds from maturities and sales
Investment securities, available-for-sale:
Purchases
12
14
Proceeds from sales of property, equipment and technology
(523)
(707)
(302)
(718)
Investing Activities
5,574
9,208
12,713
Net cash provided by operating activities
(43)
1
452
277
465
Purchases of property, equipment, technology and intangible assets
2,101
Property, equipment and technology, net. Property, equipment and technology are recorded at
historical cost less accumulated depreciation and amortization, which are computed on a straight-line
basis over the asset's estimated useful life. Depreciation and amortization of technology, furniture,
fixtures and equipment are computed over estimated useful lives ranging from 2 to 10 years. Capital
leases are amortized over the lease term and leasehold improvements are amortized over the shorter
of the useful life of the asset or lease term. Building improvements are depreciated between 3 and 40
years, and buildings are depreciated over 40 years. Improvements that increase functionality of the
asset are capitalized and depreciated over the asset's remaining useful life. Land and
construction-in-progress are not depreciated. Fully depreciated assets are retained in property,
equipment and technology, net, until removed from service.
9,874
Goodwill. Goodwill represents the excess of the purchase price over the fair value of the net
assets acquired in a business combination. Goodwill is not amortized but is evaluated for impairment at
the reporting unit level annually as of February 1, or more frequently if events or changes in
circumstances indicate that impairment may exist.
The Company completed its annual impairment review of indefinite-lived intangible assets as of
February 1, 2018, and concluded there was no impairment as of that date. No recent events or
changes in circumstances indicate that impairment of the Company's indefinite-lived intangible assets
existed as of September 30, 2018.
Company relies on a number of factors when completing impairment assessments, including a review
of discounted net future cash flows, business plans and the use of present value techniques.
September 30, 2018
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
VISA INC.
75
Indefinite-lived intangible assets consist of trade name, customer relationships and reacquired
rights. Intangible assets with indefinite useful lives are not amortized but are evaluated for impairment
annually or more frequently if events or changes in circumstances indicate that impairment may exist.
The Company first assesses qualitative factors to determine whether it is necessary to perform a
quantitative impairment test for indefinite-lived intangible assets. The Company assesses each
category of indefinite-lived intangible assets for impairment on an aggregate basis, which may require
the allocation of cash flows and/or an estimate of fair value to the assets or asset group. Impairment
exists if the fair value of the indefinite-lived intangible asset is less than the carrying value. The
Finite-lived intangible assets primarily consist of customer relationships, reacquired rights, reseller
relationships and trade names obtained through acquisitions. Finite-lived intangible assets are
amortized on a straight-line basis and are tested for recoverability if events or changes in
circumstances indicate that their carrying amounts may not be recoverable. These intangibles have
useful lives ranging from 3 to 15 years. No events or changes in circumstances indicate that
impairment existed as of September 30, 2018. See Note 5-Intangible Assets and Goodwill.
Intangible assets, net. The Company records identifiable intangible assets at fair value on the
date of acquisition and evaluates the useful life of each asset.
The Company evaluated its goodwill for impairment as of February 1, 2018, and concluded there
was no impairment as of that date. No recent events or changes in circumstances indicate that
impairment existed as of September 30, 2018.
Leases. The Company enters into operating and capital leases for the use of premises, software
and equipment. Rent expense related to operating lease agreements, which may or may not contain
lease incentives, is primarily recorded on a straight-line basis over the lease term.
Technology includes purchased and internally developed software, including technology assets
obtained through acquisitions. Internally developed software represents software primarily used by the
VisaNet electronic payments network. Internal and external costs incurred during the preliminary
project stage are expensed as incurred. Qualifying costs incurred during the application development
stage are capitalized. Once the project is substantially complete and ready for its intended use these
costs are amortized on a straight-line basis over the technology's estimated useful life. Acquired
technology assets are initially recorded at fair value and amortized on a straight-line basis over the
estimated useful life.
September 30, 2018
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
VISA INC.
74
Guarantees and indemnifications. The Company recognizes an obligation at inception for
guarantees and indemnifications that qualify for recognition, regardless of the probability of occurrence.
The Company indemnifies its financial institution clients for settlement losses suffered due to the failure
of any other client to fund its settlement obligations in accordance with the Visa operating rules. The
estimated fair value of the liability for settlement indemnification is included in accrued liabilities on the
consolidated balance sheets.
Customer collateral. The Company holds cash deposits and other non-cash assets from certain
clients in order to ensure their performance of settlement obligations arising from Visa payment
products are processed in accordance with the Company's rules. The cash collateral assets are
restricted and fully offset by corresponding liabilities and both balances are presented on the
consolidated balance sheets, excluding certain cash collateral for which clients retain beneficial
ownership and the cash is only accessible to the Company in the event of default by the client on its
settled obligations. All other collateral is excluded from the consolidated balance sheets. Pledged
securities are held by a custodian in an account under the Company's name and ownership; however,
the Company does not have the right to repledge these securities, but may sell these securities in the
event of default by the client on its settlement obligations. Letters of credit are provided primarily by
client financial institutions to serve as irrevocable guarantees of payment. Guarantees are provided
primarily by parent financial institutions to secure the obligations of their subsidiaries. The Company
routinely evaluates the financial viability of institutions providing the letters of credit and guarantees.
See Note 8-Settlement Guarantee Management.
Settlement receivable and payable. The Company operates systems for authorizing, clearing and
settling payment transactions worldwide. Most U.S. dollar settlements with the Company's financial
institution clients are settled within the same day and do not result in a receivable or payable balance,
while settlements in currencies other than the U.S. dollar generally remain outstanding for one to two
business days, resulting in amounts due from and to clients. These amounts are presented as
settlement receivable and settlement payable on the consolidated balance sheets.
Financial instruments. The Company considers the following to be financial instruments: cash and
cash equivalents, restricted cash-U.S. litigation escrow, trading and available-for-sale investment
securities, settlement receivable and payable, customer collateral, non-marketable equity investments,
settlement risk guarantee, and derivative instruments. See Note 3-Fair Value Measurements and
Investments.
The Company regularly reviews investments accounted for under the cost and equity methods for
possible impairment, which generally involves an analysis of the facts and changes in circumstances
influencing the investment, expectations of the entity's cash flows and capital needs, and the viability of
its business model.
The Company evaluates the recoverability of long-lived assets for impairment annually or more
frequently if events or changes in circumstances indicate that the carrying amount of an asset or asset
group may not be recoverable. If the sum of expected undiscounted net future cash flows is less than
the carrying amount of an asset or asset group, an impairment loss is recognized to the extent that the
carrying amount of the asset or asset group exceeds its fair value. See Note 4-Property, Equipment
and Technology, Net.
The Company applies the cost method of accounting for investments in other entities when it
holds less than 20% ownership in the entity and does not exercise significant influence, or for flow-
through entities when the investment ownership is less than 5% and the Company does not exercise
significant influence. These investments consist of equity holdings in non-public companies and are
recorded in other assets on the consolidated balance sheets.
Accrued litigation. The Company evaluates the likelihood of an unfavorable outcome in legal or
regulatory proceedings to which it is a party and records a loss contingency when it is probable that a
liability has been incurred and the amount of the loss can be reasonably estimated. These judgments
are subjective, based on the status of such legal or regulatory proceedings, the merits of the
Company's defenses and consultation with corporate and external legal counsel. Actual outcomes of
these legal and regulatory proceedings may differ materially from the Company's estimates. The
Company expenses legal costs as incurred in professional fees in the consolidated statements of
operations. See Note 17-Legal Matters.
Service revenues consist of revenues earned for services provided in support of client usage of
Visa products. Current quarter service revenues are primarily assessed using a calculation of current
pricing applied to the prior quarter's payments volume. The Company also earns revenues from
assessments designed to support ongoing acceptance and volume growth initiatives, which are
recognized in the same period the related volume is transacted.
78
(764)
Derivative financial instruments. The Company uses foreign exchange forward derivative
contracts to reduce its exposure to foreign currency rate changes on forecasted non-functional
currency denominated operational cash flows. To qualify for cash flow hedge accounting treatment, the
Company formally documents, at inception of the hedge, all relationships between the hedging
transactions and the hedged items, as well as the Company's risk management objective and strategy
for undertaking various hedging transactions. The Company also formally assesses whether the
derivatives that are used in hedging transactions are highly effective in offsetting changes in the cash
flows of the hedged items and whether those derivatives may be expected to remain highly effective in
future periods.
Where a non-U.S. currency is the functional currency, translation from that functional currency to
the U.S. dollar is performed for balance sheet accounts using exchange rates in effect at the balance
sheet date and for revenue and expense accounts using an average exchange rate for the period.
Resulting translation adjustments are reported as a component of accumulated other comprehensive
income or loss on the consolidated balance sheets.
Foreign currency remeasurement and translation. The Company's functional currency is the U.S.
dollar for the majority of its foreign operations except for Visa Europe whose functional currency is the
euro. Transactions denominated in currencies other than the applicable functional currency are
converted to the functional currency at the exchange rate on the transaction date. At period end,
monetary assets and liabilities are remeasured to the functional currency using exchange rates in
effect at the balance sheet date. Non-monetary assets and liabilities are remeasured at historical
exchange rates. Resulting foreign currency transaction gains and losses related to conversion and
remeasurement are recorded in general and administrative expense in the consolidated statements of
operations and were not material for fiscal 2018, 2017 and 2016.
The Company recognizes the funded status of its benefit plans in its consolidated balance sheets
as other assets, accrued liabilities and other liabilities. The Company recognizes settlement losses
when it settles pension benefit obligations, including making lump-sum cash payments to plan
participants in exchange for their rights to receive specified pension benefits, when certain thresholds
are met. See Note 7-Pension, Postretirement and Other Benefits.
Pension and other postretirement benefit plans. The Company's defined benefit pension and
other postretirement benefit plans are actuarially evaluated, incorporating various critical assumptions
including the discount rate and the expected rate of return on plan assets (for qualified pension plans).
The discount rate is based on a cash flow matching analysis, with the projected benefit payments
matching spot rates from a yield curve developed from high-quality corporate bonds. The expected rate
of return on pension plan assets considers the current and expected asset allocation, as well as
historical and expected returns on each plan asset class. Any difference between actual and expected
plan experience, including asset return experience, in excess of a 10% corridor is recognized in net
periodic pension cost over the expected average employee future service period, which is
approximately 9 years for the U.S. plans and 11 years for the Visa Europe UK pension plan. Other
assumptions involve demographic factors such as retirement age, mortality, attrition and the rate of
compensation increases. The Company evaluates assumptions annually and modifies them as
appropriate.
September 30, 2018
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
VISA INC.
Revenue recognition. The Company's operating revenues consist of service revenues, data
processing revenues, international transaction revenues and other revenues, reduced by costs
incurred under client incentives arrangements. The Company recognizes revenue, net of sales and
other similar taxes, when the price is fixed or determinable, persuasive evidence of an arrangement
exists, the service is performed and collectability of the resulting receivable is reasonably assured.
77
Income taxes. The Company's income tax expense consists of two components: current and
deferred. Current income tax expense represents taxes paid or payable for the current period. Deferred
tax assets and liabilities are recognized to reflect the future tax consequences attributable to temporary
differences between the financial statement carrying amounts and the respective tax basis of existing
assets and liabilities, and operating loss and credit 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. In assessing whether deferred tax
assets are realizable, management considers whether it is more likely than not that some portion or all
of the deferred tax assets will not be realized. A valuation allowance is recorded for the portions that
are not expected to be realized based on the level of historical taxable income, projections of future
taxable income over the periods in which the temporary differences are deductible, and qualifying tax
planning strategies.
Marketing. The Company expenses costs for the production of advertising as incurred. The cost
of media advertising is expensed when the advertising takes place. Sponsorship costs are recognized
over the period in which the Company benefits from the sponsorship rights. Promotional items are
expensed as incurred, when the related services are received, or when the related event occurs.
Client incentives. The Company enters into long-term contracts with financial institution clients,
merchants and strategic partners for various programs designed to increase revenue by growing
payments volume, increasing Visa product acceptance, winning merchant routing transactions over to
Visa's network and driving innovation. These incentives are primarily accounted for as reductions to
operating revenues or as operating expenses if a separate identifiable benefit at fair value can be
established. The Company generally capitalizes advance incentive payments under these agreements
if select criteria are met. The capitalization criteria include the existence of future economic benefits to
Visa, the existence of legally enforceable recoverability language (e.g., early termination clauses),
management's ability and intent to enforce the recoverability language and the ability to generate
future earnings from the agreement in excess of amounts deferred. Capitalized amounts are amortized
over the shorter of the period of contractual recoverability or the corresponding period of economic
benefit. Incentives not yet paid are accrued systematically and rationally based on management's
estimate of each client's performance. These accruals are regularly reviewed and estimates of
performance are adjusted, as appropriate, based on changes in performance expectations, actual
client performance, amendments to existing contracts or the execution of new contracts.
Other revenues consist mainly of license fees for use of the Visa brand, fees for account holder
services, licensing and certification and other activities related to the Company's acquired entities.
Other revenues also include optional service or product enhancements, such as extended account
holder protection and concierge services. Other revenues are recognized in the same period the
related transactions occur or services are rendered. Prior to the acquisition of Visa Europe, other
revenues also included revenues earned from Visa Europe in connection with the Visa Europe
Framework Agreement.
September 30, 2018
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
VISA INC.
76
International transaction revenues are earned for cross-border transaction processing and
currency conversion activities. Cross-border transactions arise when the country of origin of the issuer
is different from that of the merchant. International transaction revenues are primarily generated by
cross-border payments and cash volume.
Data processing revenues consist of revenues earned for authorization, clearing, settlement,
network access and other maintenance and support services that facilitate transaction and information
processing among the Company's clients globally. Data processing revenues are recognized in the
same period the related transactions occur or services are rendered.
Where interpretation of the tax law may be uncertain, the Company recognizes, measures and
discloses income tax uncertainties. The Company accounts for interest expense and penalties related
to uncertain tax positions as non-operating expense in the consolidated statements of operations. The
Company files a consolidated federal income tax return and, in certain states, combined state tax
returns. The Company elects to claim foreign tax credits in any given year if such election is beneficial
to the Company. See Note 16-Income Taxes.
income on the consolidated statements of operations. The equity method of accounting is also used for
flow-through entities such as limited partnerships and limited liability companies when the investment
ownership percentage is equal to or greater than 5% of outstanding ownership interests, regardless of
whether the Company has significant influence over the investees.
September 30, 2018
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
$
Accruals related to purchases of property, equipment, technology and intangible assets
$
195 $
$
Charitable contribution of available-for-sale investment securities to Visa Foundation
545 $ 489 $ 244
$
Interest payments on debt
$ 2,842
77 $ 50 $ 42
$ 2,285 $ 3,038
$
$ 5,717
$
Series B and C convertible participating preferred stock issued in Visa Europe acquisition (Note 2)
Deferred purchase consideration recorded for Visa Europe acquisition (Note 14).
Income taxes paid, net of refunds
Supplemental Disclosure
$ 5,619
$ 8,162 $ 9,874
Cash and cash equivalents at end of year
3,518
5,619
$ 1,236
See accompanying notes, which are an integral part of these consolidated financial statements.
71
VISA INC.
VISA INC.
73
The Company applies the equity method of accounting for investments in other entities when it
holds between 20% and 50% ownership in the entity or when it exercises significant influence. Under
the equity method, the Company's share of each entity's profit or loss is reflected in non-operating
The Company evaluates its debt and equity securities for other-than-temporary impairment, or
OTTI, on an ongoing basis. When there has been a decline in fair value of a debt or equity security
below the amortized cost basis, the Company recognizes OTTI if: (1) it has the intent to sell the
security; (2) it is more likely than not that it will be required to sell the security before recovery of the
amortized cost basis; or (3) it does not expect to recover the entire amortized cost basis of the security.
Available-for-sale investment securities include investments in debt and equity securities. These
securities are recorded at cost at the time of purchase and are carried at fair value. The Company
considers these securities to be available-for-sale to meet working capital and liquidity needs.
Investments with original maturities of greater than 90 days and stated maturities of less than one year
from the balance sheet date, or investments that the Company intends to sell within one year, are
classified as current assets, while all other securities are classified as non-current assets. These
investments are generally available to meet short-term liquidity needs. Unrealized gains and losses are
reported in accumulated other comprehensive income or loss on the consolidated balance sheets until
realized. The specific identification method is used to calculate realized gain or loss on the sale of
marketable securities, which is recorded in non-operating income on the consolidated statements of
operations. Dividend and interest income are recognized when earned and are included in
non-operating income on the consolidated statements of operations.
Trading investment securities include mutual fund equity security investments related to various
employee compensation and benefit plans. Trading activity in these investments is at the direction of
the Company's employees. These investments are held in a trust and are not available for the
Company's operational or liquidity needs. Interest and dividend income and changes in fair value are
recorded in non-operating income, and offset in personnel expense on the consolidated statements of
operations.
Level 3-Inputs to the valuation methodology are unobservable and cannot be corroborated by
observable market data. The Company's Level 3 assets include non-marketable equity investments
and investments accounted for under the equity method.
Level 2-Inputs to the valuation methodology can include: (1) quoted prices in active markets for
similar (not identical) assets or liabilities; (2) quoted prices for identical or similar assets in non-active
markets; (3) inputs other than quoted prices that are observable for the asset or liability; or (4) inputs
that are derived principally from or corroborated by observable market data. The Company's Level 2
assets and liabilities include commercial paper, U.S. government-sponsored debt securities, corporate
debt securities and foreign exchange derivative instruments.
Level 1-Inputs to the valuation methodology are unadjusted quoted prices in active markets for
identical assets or liabilities. The Company's Level 1 assets include money market funds, publicly-
traded equity securities and U.S. Treasury securities.
Investments and fair value. The Company measures certain assets and liabilities at fair value. Fair
value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. Fair value measurements are
reported under a three-level valuation hierarchy. See Note 3-Fair Value Measurements and
Investments. The classification of the Company's financial assets and liabilities within the hierarchy is
as follows:
September 30, 2018
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
VISA INC.
22
72
Restricted cash-U.S. litigation escrow. The Company maintains an escrow account from which
monetary liabilities from settlements of, or judgments in, the U.S. covered litigation are paid. See Note
2-U.S. and Europe Retrospective Responsibility Plans and Note 17-Legal Matters for a discussion
of the U.S. covered litigation. The escrow funds are held in money market investments, together with
the interest earned, less applicable taxes payable, and classified as restricted cash on the consolidated
balance sheets. Interest earned on escrow funds is included in non-operating income on the
consolidated statements of operations.
Cash and cash equivalents. Cash and cash equivalents include cash and certain highly liquid
investments with original maturities of 90 days or less from the date of purchase. Cash equivalents are
primarily recorded at cost, which approximates fair value due to their generally short maturities.
Use of estimates. The preparation of consolidated financial statements in conformity with U.S.
GAAP requires management to make estimates and assumptions about future events. These
estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the consolidated financial statements and reported
amounts of revenues and expenses during the reporting period. Future actual results could differ
materially from these estimates. The use of estimates in specific accounting policies is described
further below as appropriate.
The Company's activities are interrelated, and each activity is dependent upon and supportive of
the other. All significant operating decisions are based on analysis of Visa as a single global business.
Accordingly, the Company has one reportable segment, Payment Services.
Consolidation and basis of presentation. The consolidated financial statements include the
accounts of Visa and its consolidated entities and are presented in accordance with accounting
principles generally accepted in the United States of America ("U.S. GAAP"). The Company
consolidates its majority-owned and controlled entities, including variable interest entities ("VIES") for
which the Company is the primary beneficiary. The Company's investments in VIES have not been
material to its consolidated financial statements as of and for the periods presented. All significant
intercompany accounts and transactions are eliminated in consolidation.
Organization. Visa Inc. (“Visa” or the “Company”) is a global payments technology company that
enables fast, secure and reliable electronic payments across more than 200 countries and territories.
Visa and its wholly-owned consolidated subsidiaries, including Visa U.S.A. Inc. ("Visa U.S.A.”), Visa
International Service Association ("Visa International"), Visa Worldwide Pte. Limited, Visa Europe
Limited ("Visa Europe"), Visa Canada Corporation (“Visa Canada”), Visa Technology & Operations LLC
and CyberSource Corporation, operate one of the world's largest retail electronic payments network
VisaNet - which facilitates authorization, clearing and settlement of payment transactions and enables
the Company to provide its financial institution and merchant clients a wide range of products,
platforms and value-added services. VisaNet also offers fraud protection for account holders and
assured payment for merchants. Visa is not a bank and does not issue cards, extend credit or set rates
and fees for account holders on Visa products. In most cases, account holder and merchant
relationships belong to, and are managed by, Visa's financial institution clients.
Note 1―Summary of Significant Accounting Policies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2018
Cash and cash equivalents at beginning of year
1,700
Repurchase of class A common stock
502
3 1,818
2
(6,074)
(817)
(77)
(1,579)
ཟུཙྩེ ཙྪཱ ཀཽརྨཱ ཀཽ༞ 1: ༄ ༄ 1: ། ༀ ཛི ༄ སྠཽ རྞྞཟླ
1,336
149
(76)
235
14
191
(209)
170
(191)
2017
Balance as of September 30,
4
(1)
- (2)
245
13 $
5,526 $
$
Paid-In Accumulated Comprehensive
Accumulated
Other
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY-(Continued)
VISA INC.
Cash proceeds from issuance of
Share-based compensation, net of
forfeitures (Note 13)
Restricted stock and performance-
based shares settled in cash for
taxes ..
Recovery through conversion rate
adjustment (Note 2 and Note 11)
Conversion of class C common stock
upon sales into public market
Issuance and vesting of restricted
stock and performance-based
shares
(Note 2)
VE territory covered losses incurred
Comprehensive income
......
tax
Net income
2017
Balance as of September 30,
70
70
See accompanying notes, which are an integral part of these consolidated financial statements.
(1) Series B and C preferred stock are alternatively referred to as UK&I and Europe preferred stock, respectively.
(2) Decrease in Class A common stock related to forfeitures of restricted stock awards is less than one million shares.
878 $ 32,760
9,508 $
(52) $ 16,900 $
Other comprehensive income, net of
stock (Note 11)
Repurchase of class A common
Cash dividends declared and
paid, at a quarterly amount of
$0.165 per as-converted share
(Note 11)
A
C
B
Series Series Class
Recover for Additional
Right to
Common Stock
Preferred Stock(1)
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY-(Continued)
VISA INC.
2
rate adjustment (Note 2 and
Note 11)
...
VE territory covered losses
incurred (Note 2)
Comprehensive income
net of tax
Other comprehensive income,
Net income
2016
Balance as of September 30,
69
(1,277)
Recovery through conversion
Preferred Stock(1)
3
245
performance-based shares
settled in cash for taxes
Cash proceeds from issuance of
common stock under employee
equity plans
Restricted stock and
Share-based compensation, net
of forfeitures (Note 13)
2
Issuance and vesting of restricted
stock and performance-based
shares
market
(4)
17
stock upon sales into public
Conversion of class C common
1,871
Treasury stock appreciation, net
of tax
Inc. shares (Note 11 and
Note 16)
Charitable contribution of Visa
(458) $ 32,912
10,462 $
(34) $ 17,395 $
Accumulated
Other
Paid-In Accumulated Comprehensive
Capital Income Income (Loss)
Losses
Covered
Class Class Preferred Treasury
B
C
Stock Stock
(in millions, except per share data)
5,717 $ (170) $
17 $
2
Common Stock
6,699
Series Series Class
Adjustments to reconcile net income to net cash provided by operating activities:
Net income
Operating Activities
$ 10,301 $ 6,699 $ 5,991
2016
2017
(in millions)
2018
For the Years Ended
September 30,
VISA INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
See accompanying notes, which are an integral part of these consolidated financial statements.
Client incentives
(2)
547
11,318
16,678
(7)
(6,573)
(619)
ཟུང་ཀཽཎྜི་ཏྲྰཾའི།།།་སེ་ཚི་རྡོ་གྱི་སྤྱིན་
(331)
(1,918)
5,470
(1) Series B and C preferred stock are alternatively referred to as UK&I and Europe preferred stock, respectively.
Decrease in Class A common stock related to forfeitures of restricted stock awards is less than one million shares.
12
Fair value adjustment for the Visa Europe put option
Excess tax benefit for share-based compensation
556
Right to
613
(63)
221
235
327
(255)
3,409
4,565
Share-based compensation (Note 13)
5,491
Accrued and other liabilities
Settlement payable
Accounts payable
Other assets
Client incentives
Accounts receivable
Settlement receivable
Charitable contribution of Visa Inc. shares (Note 11 and Note 16)
Other
Right to recover for covered losses recorded in equity (Note 2).
Depreciation and amortization of property, equipment, technology and intangible assets
Deferred income taxes
Accrued litigation (Note 17)
245
Change in operating assets and liabilities:
3
878
9,508 $
(52) $ 16,900 $
Income
Income
5,526 $
$
13
245
1,818
10,301
3
Capital
Losses
Recover for Additional
Covered
Class Class Preferred
Stock
C
B
A
1,768
C
B
(in millions, except per share data)
(11)
2
56
(58)
2018
(56)
Balance as of September 30,
(Note 11)
share for the rest of the fiscal year
(Note 11)
as-converted share in the first
Cash dividends declared and paid, at a
quarterly amount of $0.195 per
equity plans
164
quarter and $0.210 per as-converted
common stock under employee
4
(94)
327
(1)
- (2)
(1)
2
3
2
$115
$135
$151
$121
$159
$104
$100
$120
$160
$100
$132
$156
S&P 500 Index
Visa Inc.
Base period
9/30/22
2 These figures represent data at June 30, 2021, June 30, 2022 and June 30, 2023.
3 For further discussion and a reconciliation of our GAAP to non-GAAP financial measures presented, see Item 7 - Management's Discussion and Analysis of Financial Condition
and Results of Operations - Overview - Non-GAAP financial results in this Annual Report.
1 Total volume is the sum of payments volume and cash volume. Payments volume represents the aggregate dollar amount of purchases made with cards and other form
factors carrying the Visa, Visa Electron, V PAY and Interlink brands and excludes Europe co-badged volume. Cash volume generally consists of cash access transactions,
balance access transactions, balance transfers and convenience checks. For further discussion, see Item 7 - Management's Discussion and Analysis of Financial Condition and
Results of Operations - Overview - Payments volume and processed transactions in this Annual Report.
S&P 500 Data
2
VISA
9/30/23
Stock Performance
Indexed Returns (Fiscal Year Ended)
Company/Index
9/30/18
9/30/19
9/30/20
9/30/21
The accompanying graph and chart compare the cumulative total return on Visa's class A common stock with the cumulative
total return on Standard & Poor's 500 Index and Standard & Poor's 500 Data Processing Index from September 30, 2018 through
September 30, 2023. The comparison assumes $100 was invested on September 30, 2018, and that dividends were reinvested.
There is currently no established public trading market for Visa Inc.'s class B and class C common stock.
$100
9/30/22
$143
Looking back on FY23
Fiscal year 2023 was a year of enormous
change. We saw continued economic
growth coming out of the COVID-19
pandemic and the pace of technological
development accelerate, including
generative artificial intelligence (AI),
which has emerged as a once-in-a-
generation innovation that will transform
how we live and work, and most certainly
how we shop, buy and pay.
$8.77
Behind each of these numbers are real-
world needs being met - value being
delivered to consumers, businesses and
governments. Visa helps consumers who
need secure and convenient ways to pay
and be paid; creators and businesses
of all sizes who need modern payment
acceptance solutions; and issuers
and acquirers who need innovative
offerings for their customers. We help
governments send payments to people
quickly when they need them most. We
partner with fintechs, neobanks, digital
wallets and enablers to bring them into
the payments ecosystem and help them
achieve scale and growth.
from our fiscal year 2023 (FY23). Today, Visa's network spans
more than 200 countries and territories, approximately
14,500 financial institutions, more than 130 million merchant
locations and 4.3 billion payment credentials. All told, during
our FY23, the Visa network enabled $15 trillion in total volume
and 276 billion transactions.
We have built one of the most innovative,
convenient, reliable and secure payment
networks in the world, and we are putting
it to work to deliver our purpose: to uplift
everyone, everywhere by being the best
way to pay and be paid. It's an exciting
time to be a leader in payments, and I am
pleased to share some of our highlights
Dear Fellow Shareholders,
CEO LETTER
3
ANNUAL REPORT 2023
9/30/23
9/30/21
9/30/20
9/30/19
9/30/18
$100
$110
$161
$116
$170
Processing Index
Visa Inc.
S&P 500 Index
$117
S&P 500 Data Processing Index
$170
$160
$150
$140
$130
$120
$180
$7.50
2021
Diluted class A common stock earnings per share
212.6B
192.5B
164.7B
$12.3T
$11.6T
$10.4T
$14.8T
$14.1T
$13.0T
2023
2022
12 months ended September 30 (except where noted)
Financial Highlights (Non-GAAP)³
Diluted class A common stock earnings per share
Net income
Operating expenses
Net revenues
Annual Report 2023
Throughout all this, Visa played a vital
role in payments around the world, while
consistently delivering for our clients,
partners and shareholders.
VISA
Our purpose
is to uplift
everyone,
everywhere
by being
the best way
to pay and
be paid.
3.7B
View the interactive report
and additional content at
annualreport.visa.com
Operational Highlights
Total volume¹
Payments volume¹
Transactions processed on Visa's networks
Cards²
Financial Highlights (GAAP)
YEAR-END FINANCIAL HIGHLIGHTS
$5.91
4.OB
In millions (except per share data)
$18,280
$16,034
$12,933
Net income
$10,481
$9,387
$8,077
Operating expenses
$32,653
$29,310
$24,105
Net revenues
FY 2023
FY 2022
FY 2021
In millions (except per share data)
$8.28
FY 2021
FY 2022
FY 2023
$24,105
$29,310
$32,653
4.3B
$8,301
$11,653
$12,311
$14,957
$17,273
$5.63
$7.00
$10,497
FY23 performance
our product roadmap and integrating
capabilities like generative Al to bring
solutions that address the needs of not
only today, but well into the future. This
includes investing in our data and risk
solutions, processing capabilities and
consulting and analytics expertise to
serve the next generation of users and
help our clients build and grow their
business.
4
Security
Technology
Platforms
of becoming a network of networks, our technology platforms, security, brand and talent.
We are fortifying the key foundations of our business model, which consist
FOUNDATIONS
and to all form factors, using all available networks and being a single connection point
for our partners; and providing our value added services on all transactions, no matter the network.
Our network of networks strategy means moving money to all endpoints
NETWORK OF NETWORKS
Visa Cross-Border
Solutions
Visa Commercial
Solutions
Tokenization
T
ENABLERS
Click to Pay
Brand
Tap to Pay
CORE PRODUCTS
Open
Banking
We remain focused on moving trillions of
dollars of consumer spending in cash and checks to
cards and digital accounts on Visa's network of networks.
CONSUMER
PAYMENTS
Visa Direct
Issuing
Solutions
Risk & Identity
Solutions
Visa's network of networks approach
creates opportunities to capture new sources of
money movement through card and non-card flows
for consumers, businesses and governments around the
world by facilitating P2P, B2C, B2B and G2C payments.
NEW FLOWS
Acceptance
Solutions
our revenue with products and solutions that differentiate our network,
deepen our client relationships and deliver innovative solutions across other networks.
Value added services represent an opportunity for us to diversify
VALUE ADDED SERVICES
OUR STRATEGY
Credit • Debit
Prepaid
Advisory
Services
Executive Committee
(pictured below, seated, left to right)
FY23 marked another year of strong
financial performance amid much
uncertainty in the macroeconomic
environment. We drove broad-based
growth in payments volume, processed
transactions and cross-border volume,
all of which enabled us to deliver $33
billion in net revenues and GAAP earnings
per share of $8.28, up 11 percent and 18
percent from the prior year, respectively.
Consumer spending remained resilient
around the world, while the ongoing
recovery in travel continued to be a
tailwind for cross-border volume growth.
9
ANNUAL REPORT 2023
Group President, Global Markets
Oliver Jenkyn
Global Head of Value Added Services
Antony Cahill
Chief Financial Officer
Chris Suh
Vice Chair, Chief People and Corporate
Affairs Officer
Kelly Mahon Tullier
Chief Marketing Officer
Frank Cooper III
Chief Executive Officer
Ryan McInerney
President, Technology
Rajat Taneja
Jack Forestell
Chief Product and Strategy Officer
Charlotte Hogg
Chief Executive Officer, Europe
Michelle Gethers
Chief Diversity Officer and Head of
7
Corporate Responsibility
Chief Risk Officer
(pictured below, standing, left to right)
Julie B. Rottenberg
General Counsel
Christopher T. Newkirk
Global Head of New Flows - Commercial
& Money Movement Solutions
Paul D. Fabara
ANNUAL REPORT 2023
Talent
Ryan McInerney
At Visa, we do well by doing good, and
our purpose guides our long-term
aspirations. As we leverage our incredible
partnerships to grow credentials and
expand the reach of our network, we are
bringing more individuals and businesses
Foster City
Cyber Fusion Center
VISA
23:20
Singapore
rded
15:20
GMT
Our products and solutions are some of
the most sophisticated in the world and
we're on a journey to build the future
of payments and money movement.
We are committed to expanding upon
The payments industry is evolving faster
than ever and we are evolving with it.
By developing the next generation of
products and solutions, delivering on
our purpose and investing in our people,
we will create the next phase of growth
for the company and lead Visa into the
future.
Positioning Visa for the future
Our third growth engine is value added
services - services that help our
clients and partners optimize their
performance, differentiate their offerings
and create better experiences for their
customers. In FY23, we delivered more
than 2,000 consulting engagements that
we estimate created more than $3 billion
of additional client revenue, thanks to our
support. Our growth strategy in value
added services is threefold: deepening
client penetration of existing products,
expanding geographically and building
and launching new solutions. We've
made significant progress across each of
these areas over the past year. Our top
265 largest clients now use on average 22
Visa services - double that of our overall
client base.
engagements
In FY23, we
delivered more than
2,000 consulting
+
CEO LETTER
VISA
Chief Executive Officer
Our business priorities
In FY23, we delivered against our key
growth levers - consumer payments,
new flows and value added services.
We executed with a relentless focus on
supporting our go-to-market teams,
delivering for our clients, enabling
innovative products and solutions and
selling our solutions more effectively to
accelerate our growth, now and in the
future.
Consumer payments
Our consumer payments business
aims to grow digital commerce by
connecting buyers and sellers globally
with safe, simple and innovative digital
payments solutions. We are continuing
to grow our credentials, increase our
acceptance and deepen our engagement
with cardholders, issuers, merchants
and fintechs across the ecosystem.
Over the past year, credentials
grew 7 percent to 4.3 billion and we
surpassed 7.5 billion network tokens.
Total transactions, including cash and
payments transactions, were 276 billion,
meaning that Visa credentials were used
on average 757 million times a day in the
fiscal year. Merchant locations were up 17
percent to more than 130 million, helped
by strong growth in Latin America, Central
Europe, Middle East and Africa. We signed
more than 500 commercial partnerships
with fintechs globally, from early-stage
companies to growing and mature
players. Finally, tap-to-pay transactions,
which continue to be a powerful driver of
engagement, grew another 9 percentage
points to 63 percent of total face-to-face
transactions globally (76 percent of total
face-to-face transactions excluding the
United States).
Ashburn
Visa credentials were
used on average 757
million times a day in
the fiscal year
New flows
We see significant opportunities in new
flows to accelerate our growth and
enable more payments use cases for our
clients and partners. Business-to-business
(B2B) remains the largest component
of new flows today, with small business
and corporate card issuance comprising
the majority of the $1.57 trillion in
commercial payments volume in the
past year. To help address large-ticket
cross-border B2B flows, our Visa B2B
Connect network enables businesses
to make payments to other businesses,
while removing friction, attaching rich
data to the payment and enabling the
tracking of payments in progress. In FY23,
we increased the number of banks that
have signed onto Visa B2B Connect by
more than 70 percent, while the number
of transacting banks more than doubled
as clients activated the service.
Visa Direct, our push payment platform
that allows funds to be sent and received
in near real-time, from person-to-person
(P2P), B2B, business-to-consumer and
government-to-consumer, is a key
enabler of our new flows growth strategy.
Through Visa Direct, we continue to
scale our reach, add new capabilities
and drive adoption across markets and
segments. Visa Direct has the potential
to reach more than 8.5 billion cards,
deposit accounts and digital wallets
around the world. In FY23, we saw more
than 7.5 billion Visa Direct transactions
across more than 65 use cases and over
2,800 programs, helped by more than
500 enablers. For example, one use
case that is a significant opportunity is
cross-border remittances. Cross-border
P2P transactions grew 65 percent this
year enabling us to reach a new record
for Visa Direct payments volume in the
fourth quarter. We are excited about
the momentum across Visa Direct and
will continue to execute our strategy of
growing existing use cases, extending
into new geographies, expanding
into new areas and deepening our
engagement with our partners.
ANNUAL REPORT 2023
5
P2P payments can be sent and received in near real-time with Visa Direct, our push
payment platform.
GMT
Value added services
Visa is in a strong position. We have a
clear strategy and roadmap, significant
opportunities for growth and a leadership
team dedicated to driving continued
growth and success. At the end of
the day, Visa is not just a leader in the
payments industry, we are helping to
create its future.
Malware EOR-Anomalous process detected
Web Application-WAF-SQL attempt detected
Network IDS-Explot attempt observed CVE-2022-34706
IOC Detected-Proxy traffic to known malicious domain detected
Visa Behaviour Analytics-Brute force attempt detected
6
VISA
DS-Proxy Network Trojan containing malware ce detected
Employees at Visa's Cyber Fusion Center in Virginia build and use Al to detect and secure
cyber threats.
All of this comes to life thanks to the Visa
team, our talented employees who bring
a variety of experience and background,
like the many communities we serve. We
strive to foster a culture of inclusion and
innovation and are committed to our
employees' continued growth through
development opportunities to expand
their capabilities and skills, and ultimately
help them better serve our clients and
partners.
In Mexico, Visa employees participated in a reforestation volunteering activity, planting a
total of 1,000 trees.
Looking ahead, to FY24 and beyond
In February of this year, I stepped into
the role of Chief Executive Officer after
having been Visa's President for almost
10 years. There has been a great sense
of continuity across the company
throughout our leadership transition,
and I would like to thank our shareholders
for their commitment and support. To
all of the approximately 28,800 Visa
employees, thank you for all of your
hard work, leadership and commitment.
And to our clients and partners, you
are the foundation of our business and
everything we do. As an organization, we
are focused on and committed to your
continued success.
VSIRT Alert Monitoring
Дри
Reper 
Was Skewney
into the financial ecosystem. One
example of how we're bringing this to life
is through Visa Direct, where we allow
families to receive remittances more
quickly, and facilitate faster access to
wages and government disbursements.
Finally, we amplify our business impact
through our social impact work, which
provides the tools and resources to
digitally enable individuals, businesses
and communities who have historically
been underserved by traditional financial
services.
Description
Abnormal user activity-Mutiple user failed logon-CM36wwes8 x 125
Adocument with known explat code detected
DODA
London
08:20 11:20 15:20
Medum
Threat Level: Guarded
Bengaluru Singapore
16:20 20:50 23:20
ISA
187,340
COUNT &.
Aby Eve
Event ID
106230
Severity
186240
2 High
46,139,758
3.6290
September 30, 2023
12
3.6450
11
3
16
7
2.9710
7
2.9370
2
Class A common stock
Series C preferred stock
1,594
2,047
1,594
(2) 100.0000
Total
39
394
1.6059 (3)
4.0000
10
-
1,635
390
38
1.5875 (3)
4.0000
10
Class C common stock
245
Class B common stock
1,635
245
7
the consolidated balance sheets, and posted collateral of $47 million, which is included in prepaid expenses and
other current assets on the consolidated balance sheets. Notwithstanding the Company's efforts to manage
foreign exchange risk, there can be no absolute assurance that its hedging activities will adequately protect
against the risks associated with foreign currency fluctuations. As of September 30, 2023, credit and market risks
related to derivative instruments were not considered significant.
Series A preferred stock
Series B preferred stock
2,103
Note 14-Enterprise-wide Disclosures and Concentration of Business
The Company's long-lived net property and equipment and ROU assets are classified by major geographic
areas as follows:
U.S.
International
Total
September 30,
2023
2022
(in millions)
1,286 $
544
1,312
531
$
1,830 $
1,843
Revenues by geographic market is primarily based on the location of the issuing financial institution. Net
revenues earned in the U.S. were approximately 43%, 44% and 46% of total net revenues in fiscal 2023, 2022,
and 2021, respectively. No individual country, other than the U.S., generated 10% or more of total net revenues in
these years.
In fiscal 2023, 2022 and 2021, the Company had one client that accounted for 11%, 10% and 11% of its total
net revenues, respectively.
Note 15-Stockholders' Equity
Common
Stock(1)
Class A
As-converted
Conversion
Rate Into
Class A
Common
Stock
(in millions, except conversion rate)
Common
Shares
Stock(1) Outstanding
(2) 100.0000
Stock
Class A
Common
Shares
Outstanding
2022
2023
Conversion
Rate Into
September 30,
As-converted class A common stock. The number of shares of each series and class, and the number of
shares of class A common stock on an as-converted basis were as follows:
As-converted
Class A
(1) Figures in the table may not recalculate exactly due to rounding. As-converted class A common stock is calculated based on unrounded
numbers.
Preferred stock. In connection with the Visa Europe acquisition, three series of preferred stock of the
Company were created. Upon issuance, all of the preferred stock participate on an as-converted basis in regular
quarterly cash dividends declared on the Company's class A common stock. Preferred stock may be issued as
(3) The class B to class A common stock conversion rate is presented on a rounded basis. Conversion calculations for dividend payments are
based on a conversion rate rounded to the tenth decimal.
$
$
$215.28
19 $ 11
- $ -
$197.93 $197.50 $220.84
$ 135 $ 6 $
$ 1,510 $1,982 $
35
-
_ (1)
$220.71
$ 20
$
(1) The reduction in equivalent number of shares of class A common stock was less than one million shares.
(2) Effective price per share for the period represents the weighted-average price calculated using the effective price per share of the
respective adjustments made during the period. Effective price per share for each adjustment is calculated using the volume-weighted
average price of the Company's class A common stock over a pricing period in accordance with the Company's current certificates of
designations for its series B and C preferred stock.
88
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
September 30, 2023
Common stock repurchases. The following table presents share repurchases in the open market:
For the Years Ended September 30,
2023
2021
2022
(in millions, except per share data)
Shares repurchased in the open market(1)
89
Class C common stock. There are no existing transfer restrictions on class C common stock.
In September 2023, the Company announced that it was engaging with its common stockholders on the
subject of potential amendments to the certificate of incorporation that, if proposed, approved and implemented,
would authorize Visa to conduct an exchange offer program that would have the effect of releasing transfer
restrictions on portions of Visa's Class B common stock prior to the final resolution of the U.S. covered litigation.
Adjustment of the conversion rate occurs upon: (i) the completion of any follow-on offering of class A
common stock completed to increase the size of the U.S. litigation escrow account (or any cash deposit by the
Company in lieu thereof) resulting in a further corresponding decrease in the conversion rate; or (ii) the final
resolution of the U.S. covered litigation and the release of funds remaining on deposit in the U.S. litigation escrow
account to the Company resulting in a corresponding increase in the conversion rate. See Note 5-U.S. and
Europe Retrospective Responsibility Plans.
Class B common stock. Under the current certificate of incorporation, the class B common stock is not
convertible or transferable until the date on which all of the U.S. covered litigation has been finally resolved. This
transfer restriction is subject to limited exceptions, including transfers to other holders of class B common stock.
After termination of the restrictions, the class B common stock will be convertible into class A common stock if
transferred to a person that was not a Visa Member (as defined in the current certificate of incorporation) or
similar person or an affiliate of a Visa Member or similar person. Upon such transfer, each share of class B
common stock will automatically convert into a number of shares of class A common stock based upon the
applicable conversion rate in effect at the time of such transfer.
Dividends. In fiscal 2023, 2022 and 2021, the Company declared and paid dividends of $3.8 billion,
$3.2 billion and $2.8 billion, respectively. On October 24, 2023, the Company's board of directors declared a
quarterly cash dividend of $0.52 per share of class A common stock (determined in the case of class B and C
common stock and series A, B and C preferred stock on an as-converted basis), payable on December 1, 2023,
to all holders of record as of November 9, 2023.
Recovery through conversion rate adjustment
Sixth Anniversary Release
In December 2021, the Company's board of directors authorized a $12.0 billion share repurchase program
and in October 2022, authorized an additional $12.0 billion share repurchase program (October 2022 Program).
As of September 30, 2023, the Company's October 2022 Program had remaining authorized funds of $5.0 billion.
All share repurchase programs authorized prior to the October 2022 Program have been completed. In October
2023, the Company's board of directors authorized a new $25.0 billion share repurchase program, providing
multi-year flexibility. These authorizations have no expiration date.
(1) Shares repurchased in the open market reflect repurchases that settled during fiscal 2023, 2022 and 2021. All shares repurchased in the
open market have been retired and constitute authorized but unissued shares.
55
56
40
222.27 $ 206.47 $ 219.03
12,182 $ 11,589 $ 8,676
$
$
Total cost(2)
Average repurchase cost per share(2)
(2) Figures in the table may not recalculate exactly due to rounding. Average repurchase cost per share and total cost are calculated based on
unrounded numbers and include applicable taxes.
(2) The number of shares outstanding was less than one million.
$219.12
(1)
80
87
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
September 30, 2023
Series A preferred stock issuance. In July 2022, the Company issued 176,655 shares of series A preferred
stock in connection with the Sixth Anniversary Release. See Note 5-U.S. and Europe Retrospective
Responsibility Plans.
Reduction in as-converted shares. Under the terms of the U.S. retrospective responsibility plan, when the
Company funds the U.S. litigation escrow account, the value of the Company's class B common stock is subject
to dilution through a downward adjustment to the rate at which shares of class B common stock ultimately convert
into shares of class A common stock. See Note 5-U.S. and Europe Retrospective Responsibility Plans.
The following table presents the reduction in the number of as-converted class B common stock after
deposits into the U.S. litigation escrow account under the U.S. retrospective responsibility plan for fiscal 2023 and
2022. There was no comparable adjustment recorded for class B common stock for fiscal 2021.
Reduction in equivalent number of class A common stock
Effective price per share(1)
Deposits into the U.S. litigation escrow account
For the Years Ended September 30,
2022
2023
(in millions, except per share data)
5
4
$ 221.33 $
1,000 $
205.06
850
(1) Effective price per share for the period represents the weighted-average price calculated using the effective prices per share of the
respective adjustments made during the period. Effective price per share for each adjustment is calculated using the volume-weighted
average price of the Company's class A common stock over a pricing period in accordance with the Company's current certificate of
incorporation.
Under the terms of the Europe retrospective responsibility plan, the Company is entitled to recover VE
territory covered losses through periodic adjustments to the class A common stock conversion rates applicable to
the series B and C preferred stock, and is required to undertake periodic release assessments following the
anniversary of the Visa Europe acquisition to determine if value should be released from the series B and C
preferred stock. The recovery and any releases of value have the same economic effect on earnings per share as
repurchasing the Company's class A common stock because it reduces the series B and C preferred stock
conversion rates and consequently, reduces the as-converted class A common stock share count. See Note 5—
U.S. and Europe Retrospective Responsibility Plans.
10
8
(1)
(1)
common stock
Series C
Effective price per share(2)
Series B Series C Series B
(in millions, except per share data)
Series B
2021
For the Years Ended September 30,
2022
2023
Reduction in equivalent number of class A
The following table presents the reduction in the number of as-converted series B and C preferred stock after
the Company recovered VE territory covered losses through conversion rate adjustments and completed its Sixth
Anniversary Release:
Series C
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
September 30, 2023
98
4,084
25,824
24,706
20,622
4,084
24,706
assets
Total intangible assets
$ 26,959 $ (855) $ 26,104 $ 25,848 $ (783) $ 25,065
For fiscal 2023, 2022 and 2021, amortization expense related to finite-lived intangible assets was
$76 million, $90 million and $83 million, respectively.
As of September 30, 2023, estimated future amortization expense on finite-lived intangible assets was as
follows:
Estimated future amortization expense
2024
2025
For the Years Ending September 30,
2026
2027
2028 Thereafter
Total
$ 73 $ 57 $ 42 (in millions) $ 23 $ 45 $ 280
81
4,084
20,622
21,740
25,824
(95)
95
(95)
Other...
16
(16)
16
(16)
Total finite-lived intangible assets
1,135
4
(855)
1,142
(783)
359
Indefinite-lived intangible assets:
Customer relationships and reacquired
rights
21,740
Visa trade name.
4,084
Total indefinite-lived intangible
280
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
September 30, 2023
The changes in goodwill were as follows:
Thereafter
Total undiscounted lease payments
Less: imputed interest . .
Present value of lease liabilities.
Operating Leases
(in millions)
$
123
111
98
76
2028
60
568
(50)
$
518
During fiscal 2023, 2022 and 2021, ROU assets obtained in exchange for lease liabilities was $82 million,
$74 million and $96 million, respectively.
As of September 30, 2023, the Company had additional operating leases that had not yet commenced with
lease obligations of $433 million. These operating leases will commence in fiscal 2024 with non-cancellable lease
terms of 1 to 14 years.
82
32
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
September 30, 2023
100
95
2027
2025
Balance as of beginning of period
Goodwill from acquisitions, net of adjustments
Foreign currency translation
Balance as of end of period
For the Years Ended
September 30,
2023
2022
(in millions)
17,787
15,958
2026
2,320
(491)
17,997 $
17,787
Note 9-Leases
The Company entered into various operating lease agreements primarily for real estate. The Company's
leases have original lease periods expiring between fiscal 2024 and 2035. For certain leases the Company has
options to extend the lease term for up to five years. Payments under the Company's lease arrangements are
generally fixed.
As of September 30, 2023 and 2022, ROU assets included in other assets on the consolidated balance
sheets was $488 million and $480 million, respectively. As of September 30, 2023 and 2022, the current portion
of lease liabilities included in accrued liabilities on the consolidated balance sheets was $106 million and
$98 million, respectively, and the long-term portion included in other liabilities was $412 million and $422 million,
respectively.
During fiscal 2023, 2022 and 2021, total operating lease cost was $129 million, $117 million and $111 million
respectively. As of September 30, 2023 and 2022, the weighted-average remaining lease term for operating
leases was approximately six years and the weighted-average discount rate for operating leases was 2.43% and
2.15%, respectively.
As of September 30, 2023, the present value of future minimum lease payments was as follows:
Fiscal:
2024
210
Reseller relationships
36
(159)
$
(227) $
731
Other Fair Value Disclosures
Debt. Debt instruments are measured at amortized cost on the Company's consolidated balance sheets. The
fair value of the debt instruments, as provided by third-party pricing vendors, is based on quoted prices in active
markets for similar, not identical, assets. If measured at fair value in the financial statements, these instruments
would be classified as Level 2 in the fair value hierarchy. As of September 30, 2023, the carrying value and
estimated fair value of debt was $20.5 billion and $17.7 billion, respectively. As of September 30, 2022, the
carrying value and estimated fair value of debt was $22.5 billion and $19.9 billion, respectively.
Other financial instruments not measured at fair value. As of September 30, 2023, the carrying values of
settlement receivable and payable and customer collateral are an approximate fair value due to their generally
short maturities. If measured at fair value in the financial statements, these financial instruments would be
classified as Level 2 in the fair value hierarchy.
Note 7-Property, Equipment and Technology, Net
Property, equipment and technology, net, consisted of the following:
Land
Buildings and building improvements
663
Furniture, equipment and leasehold improvements
Technology.
Total property, equipment and technology
Accumulated depreciation and amortization
September 30,
2023
2022
(in millions)
71 $
72
1,022
Construction-in-progress
1,003
$
68
VISA INC.
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
September 30, 2023
Investment Income (Expense)
Investment income (expense) consisted of the following:
Interest and dividend income on cash and investments
Equity securities:
Unrealized gains (losses), net
Realized gains (losses), net
Investment income (expense)
26
For the Years Ended
September 30,
2022
2021
(in millions)
745
$
69 $
(16)
(84)
2
(364)
721
2023
Note 10-Debt
2,146
344
Note 8-Intangible Assets and Goodwill
Indefinite-lived and finite-lived intangible assets consisted of the following:
September 30,
Gross
2023
Accumulated
Amortization
Net
Gross
2022
Accumulated
Amortization
Net
(in millions)
$ 605 $ 505
$ 1,757
For fiscal 2023, 2022 and 2021, depreciation and amortization expense related to property, equipment and
technology was $867 million, $771 million and $721 million, respectively.
Finite-lived intangible assets:
829 $
(572) $
Trade names
195
(172)
257 $
23
836 $
(513) $
323
195
Customer relationships
2,230
Total
$ 341 $ 197 $ 84 $
285
5,197
5,291
8,780
8,881
(5,355)
(5,658)
Property, equipment and technology, net
$ 3,425 $ 3,223
As of September 30, 2023 and 2022, accumulated amortization for technology was $3.4 billion and
$3.7 billion, respectively.
25
80
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
As of September 30, 2023, estimated future amortization expense on technology was as follows:
2024
2025
For the Years Ending September 30,
2028 Thereafter
Estimated future amortization expense
2026
2027
(in millions)
60
The Company had outstanding debt as follows:
September 30, 2023
2023
The Company's settlement exposure is limited to the amount of unsettled Visa payment transactions at any
point in time, which vary significantly day to day. For fiscal 2023, the Company's maximum daily settlement
exposure was $126.9 billion and the average daily settlement exposure was $77.1 billion.
The Company maintains and regularly reviews global settlement risk policies and procedures to manage
settlement exposure, which may require clients to post collateral if certain credit standards are not met. The
Company held the following collateral to manage settlement exposure:
Restricted cash
Pledged securities
Letters of credit
Guarantees
Total
Note 13-Derivative and Hedging Instruments
September 30,
2023
2022
(in millions)
3,005 $
2,342
411
213
1,738
1,582
1,047
950
$
6,201 $
5,087
Historically, the Company has experienced minimal losses as a result of its settlement risk guarantee.
However, the Company's future obligations, which could be material under its guarantees, are not determinable
as they are dependent upon future events.
The Company indemnifies its clients for settlement losses suffered due to failure of any other client to fund
its settlement obligations in accordance with the Visa operating rules. This indemnification creates settlement risk
for the Company due to the difference in timing between the date of a payment transaction and the date of
subsequent settlement.
Note 12-Settlement Guarantee Management
The Company sponsors a defined contribution plan, or 401(k) plan, that covers its employees residing in the
U.S. In fiscal 2023, 2022 and 2021, personnel expenses included $192 million, $161 million, and $141 million,
respectively, attributable to the Company's employees under the 401(k) plan. The Company's contributions to this
401(k) plan are funded on a current basis, and the related expenses are recognized in the period that the payroll
expenses are incurred.
-
$ 5,434
2027
(in millions)
$ 2,750 $
2028 Thereafter
Total
-
$ 12,752 $ 20,936
Visa maintains a commercial paper program to support its working capital requirements and for other general
corporate purposes. Under the program, the Company is authorized to issue up to $3.0 billion in outstanding
notes, with maturities up to 397 days from the date of issuance. As of September 30, 2023 and 2022, the
Company had no outstanding obligations under the program.
Credit Facility
In May 2023, the Company entered into an amended and restated credit agreement for a five-year,
unsecured $7.0 billion revolving credit facility, which will expire in May 2028. Interest on borrowings will be
charged at the applicable reference rate or an alternative base rate as defined in the credit agreement based on
the currency and type of the borrowing, plus an applicable margin based on the applicable credit rating of the
Company's senior unsecured long-term debt. The Company has agreed to pay a commitment fee which will
fluctuate based on such applicable rating of the Company. As of September 30, 2023, the Company was in
compliance with all related covenants. This credit facility is maintained to ensure the integrity of the payment card
settlement process and for general corporate purposes. As of September 30, 2023 and 2022, the Company had
no amounts outstanding under the credit facility.
As of September 30, 2023 and 2022, the aggregate notional amount of the Company's derivative contracts
outstanding in its hedge program was $11.0 billion and $11.9 billion, respectively. As of September 30, 2023 and
2022, the aggregate notional amount of the derivative contracts not designated as hedging instruments was
$0.8 billion and $1.5 billion, respectively.
Note 11—Pension and Other Postretirement Benefits
The Company sponsors qualified and non-qualified defined benefit pension and other postretirement benefit
plans that provide for retirement and medical benefits for all eligible employees residing in the U.S. The Company
also sponsors other pension benefit plans that provide benefits for internationally-based employees at certain
non-U.S. locations. The Company's defined benefit pension and other postretirement benefit plans are actuarially
evaluated, incorporating various assumptions such as the discount rate and the expected rate of return on plan
assets. Disclosures below include U.S. pension plans and certain non-U.S. pension plans. The Company uses a
September 30 measurement date for its pension and other postretirement benefit plans.
The U.S. pension plans are closed to new entrants and frozen. However, existing plan participants continue
to earn interest credits on existing balances at the time of the freeze. Additionally, the Visa Europe plans are
closed to new entrants. However, future benefits continue to accrue for active participants.
The funded status of the Company's defined benefit pension plans is substantially recorded in other assets
on the consolidated balance sheets and is measured as the difference between the fair value of plan assets and
the accumulated benefit obligation. As of September 30, 2023 and 2022, for U.S. pension plans, the fair value of
plan assets was $1.0 billion and $960 million, respectively, accumulated benefit obligation was $640 million and
$663 million, respectively, and the funded status was $374 million and $297 million, respectively. As of
September 30, 2023 and 2022, for non-U.S. pension plans, the fair value of plan assets was $317 million and
84
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
September 30, 2023
$327 million, respectively, accumulated benefit obligation was $287 million and $278 million, respectively, and
funded status was $30 million and $49 million, respectively.
As of September 30, 2023 and 2022, the amount recognized in accumulated other comprehensive income
(loss) before tax for U.S. pension plans was ($82) million and ($150) million, respectively. As of September 30,
2023 and 2022, the amount recognized in accumulated other comprehensive income (loss) before tax for
non-U.S. pension plans was ($87) million and ($35) million, respectively.
Defined Contribution Plan
Defined Benefit and Other Postretirement Plans
85
55
Assets
100 $ 718
178 $ 378
Prepaid expenses and other current assets
$
15 $
35
Accrued liabilities
Other liabilities
Accrued liabilities
(1) The fiscal 2022 amounts have been revised to conform to the fiscal 2023 presentation.
EA SA
Foreign exchange forward
contracts
66 $
314 $ 322
29
16 $
47
For fiscal 2023, 2022 and 2021, the Company recognized an increase (decrease) in earnings related to
excluded forward points from forward contracts designated as net investment hedges and interest differentials
from swap agreements of ($25) million, $151 million and $156 million, respectively.
Cash flow hedges. For fiscal 2023 and 2022, the Company recognized pre-tax net gains (losses) from cash
flow hedges in other comprehensive income (loss) of ($126) million and $190 million, respectively. The amount
recognized in other comprehensive income (loss) was not material for fiscal 2021.
The Company estimates that $46 million of pre-tax net gains related to cash flow hedges recorded in
accumulated other comprehensive income (loss) as of September 30, 2023 will be reclassified into the
consolidated statements of operations within the next 12 months.
Net investment hedges. For fiscal 2023, 2022 and 2021, the Company recognized pre-tax net gains (losses)
in other comprehensive income (loss) related to net investment hedges of ($445) million, $845 million and
$20 million, respectively. As of September 30, 2023 and 2022, the Company designated €3.0 billion and
€1.2 billion, respectively, of Euro notes, a non-derivative financial instrument, as a hedge against a portion of the
Company's Euro-denominated net investment in Visa Europe.
Credit and market risks. The Company's derivative financial instruments are subject to both credit and
market risk. The Company monitors the credit-worthiness of the financial institutions that are counterparties to its
derivative financial instruments and does not consider the risks of counterparty nonperformance to be significant.
The Company mitigates this risk by entering into master netting agreements, and such agreements require each
party to post collateral against its net liability position with the respective counterparty. As of September 30, 2023,
the Company has received collateral of $91 million from counterparties, which is included in accrued liabilities on
September 30,
49
$
Instrument:
Interest rate swaps
VISA INC.
The following table shows the Company's derivative instruments at gross fair value:
Balance Sheet Location
September 30,
2023
2022(1)
(in millions)
Foreign exchange forward
Designated as Hedging Instrument:
Prepaid expenses and other current assets
Other assets
Not Designated as Hedging
$
contracts
Cross-currency swaps
Not Designated as Hedging
Instrument:
Foreign exchange forward
contracts
Liabilities
Designated as Hedging Instrument:
Foreign exchange forward
contracts
SASA
2026
86
2024
1,500
2.13%
1.10% Senior Notes due February 2031
1,000
1,000
1.20 %
4.15% Senior Notes due December 2035
1,500
1,500
4.23 %
1,500
2.70% Senior Notes due April 2040 ..
4.30% Senior Notes due December 2045
1,000
2.80 %
3,500
3,500
4.37 %
3.65% Senior Notes due September 2047
750
750
3.73 %
2.00% Senior Notes due August 2050.
1,000
1,750
2.05% Senior Notes due April 2030.
750
2025
2022
Effective
Interest Rate (1)
(in millions, except percentages)
U.S. dollar notes
2.80% Senior Notes due December 2022
-
$
2,250
2.89 %
2.91 %
3.15% Senior Notes due December 2025
4,000
3.26%
1.90% Senior Notes due April 2027.
0.75% Senior Notes due August 2027
1,500
1,500
2.02 %
500
0.84 %
2.75% Senior Notes due September 2027
750
4,000
1,750
500
Euro notes
Total carrying value of debt
$
2,250
20,463
20,200
$
20,463 $
22,450
(1) Effective interest rates disclosed do not reflect hedge accounting adjustments.
(2) Represents the fair value of interest rate swap agreements entered into on a portion of the outstanding senior notes. See Note 1-
Summary of Significant Accounting Policies and Note 13-Derivative and Hedging Instruments.
Long-term debt
Senior Notes
80
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
September 30, 2023
During fiscal 2023, the Company repaid $2.25 billion of principal upon maturity of its senior notes due
December 2022.
As of September 30, 2023, future principal payments on the Company's outstanding debt were as follows:
For the Years Ending September 30,
2.09%
Commercial Paper Program
Future principal payments
83
Current maturities of debt
The Company's outstanding senior notes are senior unsecured obligations of the Company, ranking equally
and ratably among themselves and with the Company's existing and future unsecured and unsubordinated debt.
The senior notes are not secured by any assets of the Company and are not guaranteed by any of the Company's
subsidiaries. As of September 30, 2023, the Company was in compliance with all related covenants. Each series
of senior notes may be redeemed as a whole or in part at the Company's option at any time at specified
redemption prices. In addition, each series of the Euro notes may be redeemed as a whole at specified
redemption prices upon the occurrence of certain U.S. tax events.
22,450
1,434
1,325
Reported as:
1.50% Senior Notes due June 2026
1.71 %
2.00% Senior Notes due June 2029
1,062
982
2.375% Senior Notes due June 2034
690
638
2.53 %
2.13 %
20,936
20,463 $
22,945
Unamortized discounts and debt issuance costs
Hedge accounting fair value adjustments(2) .
(159)
(173)
(314)
Total carrying value of debt
Total debt
(322)
Term
205.35
(32,358) $
211.09
798,017 $
(in years)
6,168,624 $
(in millions)
Value(1)
Contractual
(2,716) $
Intrinsic
145.92
191.77
5,884,022 $
98.54
Outstanding as of September 30, 2022
Granted.
Aggregate
400
$
5.94
(1,006,212) $
162.07
$
5.01
4,241,861 $ 144.75
401
5.96
5,925,355 $ 162.40
362
Remaining
2021
Weighted-
4.07
0.3 %
4.11
1.1 %
4.17
4.0 %
2022
Expected dividend yield(4)
Expected volatility(3)
28.6 %
Risk-free rate of return(2)
For the Years Ended September 30,
2023
The fair value of each stock option was estimated on the date of grant using a Black-Scholes option pricing
model with the following weighted-average assumptions:
Options issued under the EIP expire 10 years from the date of grant and primarily vest ratably over three
years from the date of grant, subject to earlier vesting in full under certain conditions.
Options
Forfeited
For fiscal 2023, 2022 and 2021, the Company recorded share-based compensation cost related to the EIP of
$734 million, $571 million and $518 million, respectively, in personnel expense on its consolidated statements of
operations. The related tax benefits for fiscal 2023, 2022 and 2021 were $112 million, $82 million and $73 million,
respectively.
Expected term (in years)(1)
Average
27.1 %
0.8 %
Weighted-
Average
Exercise Price
Per Share
The following table summarizes the Company's option activity:
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
September 30, 2023
VISA INC.
92
92
25.1 %
(4) Based on the Company's annual dividend rate on the date of grant.
Fair value per option granted
(2) Based on the zero-coupon U.S. Treasury constant maturity yield curve, continuously compounded over the expected term of the awards.
(3) Based on the Company's implied and historical volatilities.
39.51
0.6%
0.7 %
43.16 $
57.31 $
(1) Based on Visa's historical exercise experience.
Expired
2021
Outstanding as of September 30, 2023
(1) Calculated by multiplying the closing stock price on the last trading day of fiscal 2023 of $230.01 by the number of instruments.
As of September 30, 2023, there was $745 million of total unrecognized compensation cost related to
unvested RSUs, which is expected to be recognized over a weighted-average period of approximately 0.96 year.
Performance-based Shares
For the Company's performance-based shares, in addition to service conditions, the ultimate number of
shares to be earned depends on the achievement of both performance and market conditions. The performance
condition is based on the Company's earnings per share target. The market condition is based on the Company's
total shareholder return ranked against that of other companies that are included in the Standard & Poor's 500
Index.
The fair value of each performance-based shares incorporating the market condition was estimated on the
date of grant using a Monte Carlo simulation model with the following weighted-average assumptions:
For the Years Ended September 30,
2022
Expected term (in years)
Risk-free rate of return(1)
Expected volatility(2)
Expected dividend yield(3)
Fair value per performance-based share granted
2023
2.15
4.4%
The Company's 2007 Amended and Restated Equity Incentive Compensation Plan (EIP) authorizes the
compensation committee of the board of directors to grant non-qualified stock options (options), RSUs,
performance-based shares and restricted stock awards to its employees and non-employee directors, for up to
198 million shares of class A common stock. Shares available for grant may be either authorized and unissued or
previously issued shares subsequently acquired by the Company. Under the EIP, shares withheld for taxes, or
shares used to pay the exercise or purchase price of an award, shall not again be available for future grant. The
EIP will continue to be in effect until all of the common stock available under the EIP is delivered and all
restrictions on those shares have lapsed, unless the EIP is terminated earlier by the Company's board of
directors.
28.9 %
2.05
0.5 %
28.3 %
2.00
0.2%
27.2 %
$
0.8%
221.32 $
0.8%
186.50 $
Shares
Average
Weighted-
The following table summarizes the maximum number of performance-based shares which could be earned
and related activity:
September 30, 2023
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1,476
VISA INC.
4
Performance-based shares vest over three years and are subject to earlier vesting in full under certain
conditions. During fiscal 2023, 2022 and 2021, the total grant date fair value of performance-based shares vested
and earned was $44 million, $49 million and $47 million, respectively. Compensation cost for performance-based
shares is initially estimated based on target performance. It is recorded net of estimated forfeitures and adjusted
as appropriate throughout the performance period.
(3) Based on the Company's annual dividend rate on the date of grant.
(1) Based on the zero-coupon U.S. treasury constant maturity yield curve, continuously compounded over the expected term of the awards.
(2) Based on the Company's implied and historical volatilities.
229.81
0.6%
94
$
0.96
6,417,397 $ 209.19
Granted
Outstanding as of September 30, 2022
The following table summarizes the Company's RSU activity:
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
September 30, 2023
VISA INC.
33
Vested
93
RSUs issued under the EIP primarily vest ratably over three years from the date of grant, subject to earlier
vesting in full under certain conditions. Upon vesting, RSUs can be settled in class A common stock on a
one-for-one basis or in cash, or a combination thereof, at the Company's option. The Company does not currently
intend to settle any RSUs in cash. During the vesting period, RSU award recipients are eligible to receive dividend
equivalents, but do not participate in the voting rights granted to the holders of the underlying class A common
stock.
During fiscal 2023, 2022 and 2021, the total intrinsic value of options exercised was $134 million, $56 million
and $124 million, respectively, and the tax benefit realized was $28 million, $11 million and $23 million,
respectively. As of September 30, 2023, there was $25 million of total unrecognized compensation cost related to
unvested options, which is expected to be recognized over a weighted-average period of approximately 0.38 year.
Restricted Stock Units
(2) Applied a forfeiture rate to unvested options outstanding as of September 30, 2023 to estimate the options expected to vest in the future.
(1) Calculated using the closing stock price on the last trading day of fiscal 2023 of $230.01, less the option exercise price, multiplied by the
number of instruments.
Options exercisable as of September 30, 2023.
Options exercisable and expected to vest as of
September 30, 2023(2)
Options
The fair value and compensation cost before estimated forfeitures is calculated using the closing price of
class A common stock on the date of grant. During fiscal 2023, 2022 and 2021, the weighted-average grant date
fair value of RSUs granted was $212.94, $204.73 and $209.00, respectively. During fiscal 2023, 2022 and 2021,
the total grant date fair value of RSUs vested was $486 million, $380 million and $331 million, respectively.
Exercised
Forfeited
Units
207.97
(321,726) $
200.33
(2,428,334) $
212.94
3,373,137 $
Outstanding as of September 30, 2023
203.23
(in millions)
Aggregate
Intrinsic
Value(1)
Term
(in years)
Average
Remaining
Contractual
Weighted-
Weighted-
Average
Grant Date
Fair Value
5,794,320 $
Equity Incentive Compensation Plan
The following table presents earnings per share for fiscal 2021:
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
September 30, 2023
1,618 $
245 $
10 $
8.29 $
13.26 $
17,273
3,251
2,085 (3) $
245
8.28
$
13.24
33.17 $
Not presented $
319
10
33.13
284 Not presented
Not presented
$ 17,273
Net income
The following table presents earnings per share for fiscal 2022:
Earnings per
Average
Income
Allocation
(A)(1)
(A)/(B)(2)
Outstanding (B)
(A)(1)
3,254
320
284 Not presented
Share =
Earnings per
Weighted-
Weighted-
Average
Income
Allocation
Diluted Earnings Per Share
Basic Earnings Per Share
Shares
Shares
Class B common stock
Class C common stock
Participating securities
Class A common stock
Weighted-
Average
Grant Date
Fair Value
September 30, 2023
redeemable or non-redeemable, and has preference over any class of common stock with respect to the payment
of dividends and distribution of the Company's assets in the event of a liquidation or dissolution.
The series B and C preferred stock is convertible upon certain conditions into shares of class A common
stock or series A preferred stock. The shares of series B and C preferred stock are subject to restrictions on
transfer and may become convertible in stages based on developments in the VE territory covered litigation. The
shares of series B and C preferred stock will become fully convertible on the 12th anniversary of the closing of the
Visa Europe acquisition, subject only to a holdback to cover any then-pending claims. Upon any such conversion
of the series B and C preferred stock (whether by such 12th anniversary, or thereafter with respect to claims
pending on such anniversary), the conversion rate would be adjusted downward and the holder would receive
either class A common stock or series A preferred stock (for those who are not eligible to hold class A common
stock pursuant to the Company's certificate of incorporation). The conversion rates may also be reduced from
time to time to offset certain liabilities.
The series A preferred stock, generally designed to be economically equivalent to the Company's class A
common stock, is freely transferable and each share of series A preferred stock will automatically convert into 100
shares of class A common stock upon a transfer to any holder that is eligible to hold class A common stock under
the charter. See Note 5-U.S. and Europe Retrospective Responsibility Plans.
Voting rights. The holders of the series B and C preferred stock have no right to vote on any matters, except
for certain defined matters, including, in specified circumstances, any consolidation, merger, combination or
similar transaction of the Company in which the preferred stockholders would either (i) receive shares of common
stock or other equity securities of the Company with preferences, rights and privileges that are not substantially
identical to the preferences, rights and privileges of the applicable series of preferred stock or (ii) receive
securities, cash or other property that is different from what the Company's class A common stockholders would
receive. With respect to these limited matters on which the holders of preferred stock may vote, approval by the
preferred stockholders requires the affirmative vote of the outstanding voting power of each such series of
preferred stock, each such series voting as a single class. In either case, the series B and C preferred
stockholders are entitled to cast a number of votes equal to the number of shares held by each such holder.
Holders of the series A preferred stock, upon issuance at conversion, will have similar voting rights to the rights of
the holders of the series B and C preferred stock.
Class A common stockholders have the right to vote on all matters on which stockholders generally are
entitled to vote. Class B and C common stockholders have no right to vote on any matters, except for certain
defined matters, including (i) any decision to exit the core payments business, in which case the class B and C
common stockholders will vote together with the class A common stockholders in a single class, (ii) in specified
circumstances, any consolidation, merger, combination or similar transaction of the Company, in which case the
class B and C common stockholders will vote together as a single class, and (iii) the approval of certain
amendments to the Company's certificate of incorporation, in which case class A, B and C common stockholders
will vote as a separate class, including if such amendments affect the terms of class B or C common stock. In
these cases, the class B and C common stockholders are entitled to cast a number of votes equal to the number
of shares of class B or C common stock held multiplied by the applicable conversion rate in effect on the record
date. Holders of the Company's common stock have no right to vote on any amendment to the current certificate
of incorporation that relates solely to any series of preferred stock.
90
90
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Note 16-Earnings Per Share
September 30, 2023
The following table presents earnings per share for fiscal 2023:
Basic Earnings Per Share
Diluted Earnings Per Share
Weighted-
(in millions, except per share data)
Share =
(A)/(B)(2)
Outstanding (B)
Shares
Earnings per
Average
$ 13,415
Weighted-
(A)/(B)(2)
Outstanding (B)
Earnings per
Share =
Shares
Average
Income
Allocation
(A)(1)
Income
Allocation
(A)(1)
Share=
Outstanding (B)
(A)/(B)(2)
9,527
2,244
237
(in millions, except per share data)
1,691 $
245 $
10 $
303 Not presented Not presented
Average
Earnings per
Shares
Share =
Outstanding (B)
(A)/(B)(2)
5.63 $
9.14 $
22.53 $
12,311
2,188 (3) $
5.63
2,242
245
VISA INC.
91
(3) Weighted-average diluted shares outstanding are calculated on an as-converted basis, and include incremental common stock
equivalents, as calculated under the treasury stock method. The common stock equivalents are not material for each of fiscal 2023, 2022
and 2021.
(2) Figures in the table may not recalculate exactly due to rounding. Basic and diluted earnings per share are calculated based on unrounded
numbers.
(1) The weighted-average number of shares of as-converted class B common stock used in the income allocation was 392 million, 397 million
and 398 million for fiscal 2023, 2022 and 2021, respectively. The weighted-average number of shares of as-converted class C common
stock used in the income allocation was 39 million, 40 million and 42 million for fiscal 2023, 2022 and 2021, respectively. The weighted-
average number of shares of preferred stock included within participating securities was 10 million, 8 million and 12 million of as-converted
series A preferred stock for fiscal 2023, 2022 and 2021, respectively, 7 million, 14 million and 16 million of as-converted series B preferred
stock for fiscal 2023, 2022 and 2021, respectively, and 11 million, 20 million and 22 million of as-converted series C preferred stock for
fiscal 2023, 2022 and 2021, respectively.
$ 12,311
(A)(1)
Net income
22.51
10
236
303 Not presented
$
9.13
$
Not presented
(A)/(B)(2)
Outstanding (B)
Income
Allocation
10
280
11.31
$
7.00
2,136 (3) $
245
28.00
2,778
7.01 $
11.33 $
28.03
1,651 $
245 $
280
10 $
327 Not presented Not presented $
(in millions, except per share data)
2,781
$ 11,569
Class A common stock
Class B common stock
Class C common stock
Participating securities
14,957
Note 17-Share-based Compensation
326 Not presented
Net income
Share =
Shares
Earnings per
Average
Income
Allocation
(A)(1)
Weighted-
Not presented
Weighted-
Basic Earnings Per Share
Participating securities
Class C common stock
Class B common stock
Class A common stock
14,957
Diluted Earnings Per Share
Remaining
•
Term
(758)
(3%)
(588)
(3%)
(505) (3%)
1,007
(142)
(1%)
(255) (2%)
(176)
(1%)
(82)
(90)
$ 3,764
18% $ 3,179
18%
$ 3,752
during fiscal 2021, $255 million of tax benefits recognized as a result of the conclusion of audits by taxing
authorities.
during fiscal 2021, a $1.0 billion non-recurring, non-cash tax expense related to the remeasurement of UK
deferred tax liabilities as a result of the increase in UK tax rate from 19% to 25%, effective April 1, 2023;
and
during fiscal 2022, a $176 million tax benefit related to prior years due to a decrease in the state
apportionment ratio as a result of a tax position taken related to a ruling;
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
•
.
245
In fiscal 2022 and fiscal 2021, the effective income tax rates were 18% and 23%, respectively. The effective
income tax rate in fiscal 2022 differs from the effective income tax rate in fiscal 2021 primarily due to the following:
during fiscal 2023, a $142 million tax benefit related to prior years due to the reassessment of an
uncertain tax position as a result of new information obtained during an ongoing tax examination; and
•
•
In fiscal 2023 and fiscal 2022, the effective income tax rates were 18% including the following:
THE
23%
during fiscal 2022, a $176 million tax benefit related to prior years due to a decrease in the state
apportionment ratio as a result of a tax position taken related to a ruling.
As of September 30, 2023 and 2022, current income taxes receivable of $206 million and $190 million,
respectively, were included in prepaid expenses and other current assets; non-current income taxes receivable of
$961 million and $1.0 billion, respectively, were included in other assets; income taxes payable of $1.5 billion and
$365 million, respectively, were included in accrued liabilities; and accrued income taxes of $1.9 billion and
$2.3 billion, respectively, were included in other liabilities on the consolidated balance sheets.
21%
$ 4,418
(124)
(25)
(50)
(6,541)
(6,412)
$
(4,988) $
(5,245)
As of September 30, 2023 and 2022, net deferred tax assets of $126 million and $87 million, respectively,
were reflected in other assets on the consolidated balance sheets.
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not
that all or some portion of the deferred tax assets will not be realized. The ultimate realization of the deferred tax
assets is dependent upon the generation of future taxable income during the periods in which those temporary
96
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
September 30, 2023
differences are deductible. The fiscal 2023 and 2022 valuation allowances relate primarily to foreign net operating
losses from subsidiaries acquired in recent years.
As of September 30, 2023, the Company had $1.0 billion of foreign net operating loss carryforwards, which
may be carried forward indefinitely.
The following table presents a reconciliation of the income tax provision to the amount of income tax
determined by applying the U.S. federal statutory income tax rate to income before income taxes:
2023
2021
222
$ 3,373
216
$ 3,809
21 %
21 %
2022
For the Years Ended September 30,
Income tax provision
Other, net
State tax apportionment position.
U.S. federal income tax at statutory rate
State income taxes, net of federal benefit
Non-U.S. tax effect, net of federal benefit
Remeasurement of deferred tax balances
Reassessment of an uncertain tax position
Conclusion of audits . . . .
(in millions, except percentages)
The Company's operating hub in the Asia Pacific region is located in Singapore. It was subject to a tax
incentive, effective October 1, 2008 through September 30, 2023, conditional upon meeting certain business
97
VISA INC.
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
September 30, 2023
The Company is also subject to examinations by various state and foreign tax authorities. All material state
and foreign tax matters have been concluded for years through fiscal 2007. The timing and outcome of the final
resolutions of the federal, state and foreign tax examinations and refund claims are uncertain. However, it is
reasonably possible that the Company's net unrecognized tax benefits could decrease by approximately
$400 million in the next 12 months.
Note 20―Legal Matters
The Company is party to various legal and regulatory proceedings. Some of these proceedings involve
complex claims that are subject to substantial uncertainties and unascertainable damages. For those proceedings
where a loss is determined to be only reasonably possible or probable but not estimable, the Company has
disclosed the nature of the claim. Additionally, unless otherwise disclosed below with respect to these
proceedings, the Company cannot provide an estimate of the possible loss or range of loss. Although the
Company believes that it has strong defenses for the litigation and regulatory proceedings described below, it
could, in the future, incur judgments or fines or enter into settlements of claims that could have a material adverse
effect on the Company's financial position, results of operations or cash flows. From time to time, the Company
may engage in settlement discussions or mediations with respect to one or more of its outstanding litigation
matters, either on its own behalf or collectively with other parties.
The litigation accrual is an estimate and is based on management's understanding of its litigation profile, the
specifics of each case, advice of counsel to the extent appropriate and management's best estimate of incurred
loss as of the balance sheet date.
The following table summarizes the activity related to accrued litigation:
For the Years Ended
September 30,
Balance as of beginning of period
Provision for uncovered legal matters
Provision for covered legal matters
Payments for legal matters. .
Balance as of end of period
Accrual Summary-U.S. Covered Litigation
2023
2022
99
99
Visa Inc., Visa U.S.A. and Visa International are parties to certain legal proceedings that are covered by the
U.S. retrospective responsibility plan, which the Company refers to as the U.S. covered litigation. An accrual for
the U.S. covered litigation and a charge to the litigation provision are recorded when a loss is deemed to be
probable and reasonably estimable. In making this determination, the Company evaluates available information,
including but not limited to actions taken by the Company's litigation committee. The total accrual related to the
U.S. covered litigation could be either higher or lower than the escrow account balance. See further discussion
below under U.S. Covered Litigation and Note 5-U.S. and Europe Retrospective Responsibility Plans.
1,456
1,751 $
$
98
(418)
885
6
21
1,024
983
1,456 $
(in millions)
(750)
The India tax authorities completed the assessment of the Company's income tax returns for the taxable
years falling within the period from fiscal 2010 to 2021 and made certain adjustments. The Company objected to
these adjustments and filed appeals to the appellate authorities.
The Company's California income tax returns for fiscal 2012 through 2015 are currently under examination
and refund claims filed for fiscal 2006 through 2011 are currently under administrative appeal. Except for the
refund claims, the California statute of limitations has expired for fiscal years prior to 2012.
The Company's U.S. federal income tax returns for fiscal 2016 through 2018 are currently under
examination. For fiscal 2008 through 2015, one unresolved issue related to an income tax deduction remains.
During fiscal 2022, the Company completed the administrative appeals process for this issue without reaching a
settlement with the Internal Revenue Service. The Company is evaluating its next steps. Except for the
unresolved issue, the federal statute of limitations has expired for fiscal years prior to 2016.
2,579
(in millions)
2,683 $ 2,488 $
Increase in unrecognized tax benefits related to prior years
Decrease in unrecognized tax benefits related to prior years
Increase in unrecognized tax benefits related to current year
Decrease related to settlements with taxing authorities
Reduction related to lapsing statute of limitations.
Balance as of end of period
Balance as of beginning of period
2021
2022
515
2023
year:
As of September 30, 2023, 2022 and 2021, the Company's total gross unrecognized tax benefits were
$3.5 billion, $2.7 billion and $2.5 billion, respectively, exclusive of interest and penalties described below. Included
in the $3.5 billion, $2.7 billion and $2.5 billion are $1.6 billion, $1.3 billion and $1.3 billion of unrecognized tax
benefits, respectively, that if recognized, would reduce the effective tax rate in a future period.
The Company is required to inventory, evaluate and measure all uncertain tax positions taken or to be taken
on tax returns, and to record liabilities for the amount of such positions that may not be sustained, or may only
partially be sustained, upon examination by the relevant taxing authorities.
operations and employment thresholds in Singapore. In fiscal 2023, 2022 and 2021, the tax incentive decreased
Singapore tax by $468 million, $362 million and $273 million, and the gross benefit of the tax incentive on diluted
earnings per share was $0.22, $0.17 and $0.12, respectively.
September 30, 2023
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
The following table presents a reconciliation of beginning and ending unrecognized tax benefits by fiscal
(103)
10
(190)
In fiscal 2023, 2022 and 2021, the Company recognized $34 million, $15 million and $1 million of net interest
expense, respectively, related to uncertain tax positions. In fiscal 2023 and 2021, the Company accrued no
significant penalties and in fiscal 2022, the Company reversed accrued penalties of $31 million related to
uncertain tax positions. As of September 30, 2023 and 2022, the Company had accrued interest of $271 million
and $238 million, respectively, and no significant accrued penalties related to uncertain tax positions.
The increases in unrecognized tax benefits include refund claims filed during the year, an increase in gross
timing differences, and various tax positions across several jurisdictions. The decrease in unrecognized tax
benefits primarily includes the reassessment of an uncertain tax position as a result of new information obtained
during an ongoing tax examination, as mentioned above.
3,497 $ 2,683 $ 2,488
(2)
(3)
(4)
34
(63)
(17)
326
350
510
(386)
(143)
(19)
Contractual
(5,788)
(450)
For the Years Ended September 30,
2023
2022
2021
U.S.
Non-U.S.
Total income before income taxes
$
13,339 $
7,698
(in millions)
11,051 $
7,085
11,002
5,061
$
21,037 $
18,136 $ 16,063
For fiscal 2023, 2022 and 2021, U.S. income before income taxes included $4.2 billion, $3.6 billion, and
$3.1 billion, respectively, of the Company's U.S. entities' income from operations outside of the U.S.
95
55
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
September 30, 2023
Non-U.S.....
State and local
U.S. federal
Deferred:
Total current taxes
Non-U.S..
The Company's income before income taxes by fiscal year consisted of the following:
State and local
(in millions)
2021
2022
For the Years Ended September 30,
2023
Current:
Income tax provision by fiscal year consisted of the following:
U.S. federal
2,630 $ 2,166 $
Note 19-Income Taxes
$ 85 $ 33 $ 5 $ - $ - $ - $ 12
Aggregate
Intrinsic
Value(1)
(in years)
(in millions)
Outstanding as of September 30, 2022
Granted(2)
834,196 $
199.92
551,818 $
221.32
Vested and earned
(219,523) $
201.70
Unearned
(167,989) $
194.42
Outstanding as of September 30, 2023
123
Total
Thereafter
For the Years Ending September 30,
2026
2027
2028
(in millions)
2025
2024
Software licenses
The Company has software licenses throughout the world with varying expiration dates. As of September 30,
2023, future minimum payments on software licenses were as follows:
As of September 30, 2023, there was $81 million of total unrecognized compensation cost related to
unvested performance-based shares, which is expected to be recognized over a weighted-average period of
approximately one year.
(1) Calculated by multiplying the closing stock price on the last trading day of fiscal 2023 of $230.01 by the number of instruments.
(2) Represents the maximum number of performance-based shares which could be earned.
230
$
1.00
998,502 $ 212.28
Note 18-Commitments
1,943
293
104
Deferred Tax Liabilities:
Property, equipment and technology, net
Intangible assets
Unrealized gains on equity securities
Foreign taxes
Deferred tax liabilities
Net deferred tax liabilities
September 30,
2023
2022
(in millions)
212
SA
$
172
365
630
(350)
1,167
1,553
(120)
(149)
71
Deferred tax assets
66
125
21
72
117
232
331
442
133
Valuation allowance
Other
Federal benefit of state taxes
(143)
(28)
(77)
(1)
(57)
(231)
(28)
(339)
3,515
4,247
869
1,245
1,324
69
2,881
(6,063)
956
(483)
Comprehensive loss
Net operating loss carryforwards
Client incentives
Accrued litigation obligation
Accrued compensation and benefits
Deferred Tax Assets:
Total deferred taxes
The following table presents the components of deferred tax assets and liabilities:
3,179 $
3,764 $
$
Total income tax provision
871
(336)
3,752
VISA INC.
$
ITEM 14. Principal Accountant Fees and Services
Certain merchants in the proposed settlement class objected to the settlement and/or submitted requests to
opt out of the settlement class. On December 13, 2019, the district court granted final approval of the Amended
Settlement Agreement, which was subsequently appealed. Based on the percentage of class members (by
payment volume) that opted out of the class, $700 million was returned to defendants. Visa's portion of the
takedown payment, approximately $467 million, was deposited into the U.S. litigation escrow account. On
March 15, 2023, the U.S. Court of Appeals for the Second Circuit affirmed the final approval of the Amended
Settlement Agreement by the district court. On August 3, 2023, the district court entered an order appointing a
special master to resolve matters arising out of or relating to the Amended Settlement Agreement's plan of
administration.
September 30, 2023
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
VISA INC.
101
On September 17, 2018, Visa, Mastercard, and certain U.S. financial institutions reached an agreement with
plaintiffs purporting to act on behalf of the putative Damages Class to resolve all Damages Class claims (Amended
Settlement Agreement). The Amended Settlement Agreement supersedes the 2012 Settlement Agreement and
includes, among other terms, a release from participating class members for liability arising out of conduct alleged by
the Damages Class in the litigation, including claims that accrue no later than five years after the Amended
Settlement Agreement becomes final. Participating class members will not release injunctive relief claims as a
named representative or non-representative class member in the putative Injunctive Relief Class. The Amended
Settlement Agreement also required an additional settlement payment from all defendants totaling $900 million, with
the Company's share of $600 million paid from the Company's litigation escrow account established pursuant to the
Company's retrospective responsibility plan. See Note 5-U.S. and Europe Retrospective Responsibility Plans. The
additional settlement payment was added to the approximately $5.3 billion previously deposited into settlement
accounts by the defendants pursuant to the 2012 Settlement Agreement.
On remand, the district court entered an order appointing interim counsel for two putative classes of
plaintiffs, a "Damages Class" and an “Injunctive Relief Class." The plaintiffs purporting to act on behalf of the
putative Damages Class subsequently filed a Third Consolidated Amended Class Action Complaint, seeking
money damages and attorneys' fees, among other relief. A new group of purported class plaintiffs, acting on
behalf of the putative Injunctive Relief Class, filed a class action complaint against Visa, Mastercard, and certain
bank defendants seeking, among other things, an injunction against the setting of default interchange rates;
against certain Visa operating rules relating to merchants, including the honor-all-cards rule; and against various
transaction fees, including the fixed acquirer network fee, as well as attorneys' fees.
On June 30, 2016, the U.S. Court of Appeals for the Second Circuit vacated the lower court's certification of
the merchant class, reversed the approval of the settlement, and remanded the case to the lower court for further
proceedings.
Visa Inc., Visa U.S.A., Visa International, Mastercard Incorporated, Mastercard International Incorporated,
various U.S. financial institution defendants, and the class plaintiffs signed a settlement agreement (2012
Settlement Agreement) to resolve the class plaintiffs' claims. Pursuant to the 2012 Settlement Agreement, the
Company deposited approximately $4.0 billion from the U.S. litigation escrow account and approximately
$500 million attributable to interchange reductions for an eight-month period into court-authorized settlement
accounts. Visa subsequently received from the Court and deposited into the Company's U.S. litigation escrow
account "takedown payments" of approximately $1.1 billion.
Beginning in May 2005, a series of complaints (the majority of which were styled as class actions) were filed
in U.S. federal district courts by merchants against Visa U.S.A., Visa International and/or Mastercard, and in some
cases, certain U.S. financial institutions. The Judicial Panel on Multidistrict Litigation issued an order transferring
the cases to the U.S. District Court for the Eastern District of New York (Court) for coordination of pre-trial
proceedings in MDL 1720. A group of purported class plaintiffs subsequently filed amended and supplemental
class complaints. The individual and class complaints generally challenged, among other things, Visa's and
Mastercard's purported setting of interchange reimbursement fees, their "no surcharge" and honor-all-cards rules,
alleged tying and bundling of transaction fees, and Visa's reorganization and IPO, under the federal antitrust laws
and, in some cases, certain state unfair competition laws. The complaints sought money damages, declaratory
and injunctive relief, attorneys' fees and, in one instance, an order that the IPO be unwound.
Interchange Multidistrict Litigation (MDL) – Class Actions
U.S. Covered Litigation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
September 30, 2023
VISA INC.
100
On May 29, 2020, a complaint was filed by Old Jericho Enterprise, Inc. against Visa and Mastercard on
behalf of a purported class of gasoline retailers operating in 24 states and the District of Columbia. On April 28,
2021, a complaint was filed by Hayley Lanning and others, and on June 16, 2021, a complaint was filed by Camp
Grounds Coffee and others, each against Visa and Mastercard on behalf of a purported class of merchants
located in 25 states and the District of Columbia who have taken payment using the Square card acceptance
service. Each of these complaints alleges violations of the antitrust laws of those jurisdictions and seeks recovery
for plaintiffs as indirect purchasers. To the extent these plaintiffs' claims are not released by the Amended
Settlement Agreement, Visa believes they are covered by the U.S. Retrospective Responsibility Plan.
11
On June 1, 2020, Visa, jointly with other defendants, served a motion for summary judgment regarding the
claims in the Injunctive Relief Class complaint. The putative Injunctive Relief Class plaintiffs served a motion for
partial summary judgment. On September 27, 2021, the district court certified without opt out rights an Injunctive
Relief Class consisting of all merchants that accept Visa or Mastercard credit or debit cards in the United States
at any time between December 18, 2020 and entry of final judgment.
Since May 2013, more than 50 cases have been filed in or removed to various federal district courts by
hundreds of merchants generally pursuing damages claims on allegations similar to those raised in MDL 1720.
The cases name as defendants Visa Inc., Visa U.S.A., Visa International, Mastercard Incorporated and
Mastercard International Incorporated, although some also include certain U.S. financial institutions as
defendants. A number of the cases include allegations that Visa has monopolized, attempted to monopolize, and/
or conspired to monopolize debit card-related market segments. Some of the cases seek an injunction against the
setting of default interchange rates; certain Visa operating rules relating to merchants, including the
honor-all-cards rule; and various transaction fees, including the fixed acquirer network fee. In addition, some
cases assert that Visa, Mastercard and/or their member banks conspired to prevent the adoption of chip-and-PIN
authentication in the U.S. or otherwise circumvent competition in the debit market. Certain individual merchants
have filed amended complaints to, among other things, add claims for injunctive relief and update claims for
damages.
103
Since July 2013, proceedings have been commenced by more than 1,150 Merchants (the capitalized term
"Merchant", when used in this section, means a Merchant together with subsidiary/affiliate companies that are
party to the same claim) against Visa Europe, Visa Inc. and other Visa subsidiaries in the UK and other countries,
primarily relating to interchange rates in Europe and, in some cases, relating to fees charged by Visa and certain
Visa rules. They seek damages for alleged anti-competitive conduct in relation to one or more of the following
types of interchange fees for credit and debit card transactions: UK domestic, Irish domestic, other European
domestic, intra-European Economic Area and/or other inter-regional. As of the filing date, Visa has settled the
claims asserted by over 175 Merchants, and there are approximately 900 Merchants with outstanding claims. In
addition, over 30 Merchants have threatened to commence similar proceedings. Standstill agreements have been
entered into with respect to some of those threatened Merchant claims, several of which have been settled. While
the amount of interchange being challenged could be substantial, these claims have not yet been filed and their
full scope is not yet known. The Company has learned that several additional European entities have indicated
they may also bring similar claims, and the Company anticipates additional claims in the future.
Europe Merchant Litigation
VE Territory Covered Litigation
On December 30, 2022, a putative class action was filed in California state court against Visa, Mastercard,
and certain financial institutions on behalf of all Visa and Mastercard cardholders in California who made a
purchase using a Visa-branded or Mastercard-branded payment card in California from January 1, 2004. Plaintiffs
primarily allege a conspiracy to fix interchange fees and seek injunctive relief, attorneys' fees and damages as
direct and indirect purchasers based on alleged violations of California law. On January 11, 2023, plaintiffs filed
an amended complaint asserting the same claims as asserted in the prior complaint. On January 30, 2023, Visa
removed the action to federal court, and the Judicial Panel on Multidistrict Litigation subsequently issued an order
transferring the case to MDL 1720. On June 15, 2023, plaintiffs' motion to remand the case to California state
court was denied, and plaintiffs appealed. On July 28, 2023, defendants filed a motion to dismiss that appeal,
which was granted on November 14, 2023.
Consumer Interchange Litigation
The Company believes it has substantial defenses to the claims asserted in the putative class actions and
individual merchant actions, but the final outcome of individual legal claims is inherently unpredictable. The
Company could incur judgments, enter into settlements or revise its expectations regarding the outcome of
merchants' claims, and such developments could have a material adverse effect on the Company's financial
results in the period in which the effect becomes probable and reasonably estimable. While the U.S. retrospective
responsibility plan is designed to address monetary liability in these matters, see Note 5-U.S. and Europe
Retrospective Responsibility Plans, judgments or settlements that require the Company to change its business
practices, rules, or contractual commitments could adversely affect the Company's financial results.
On June 1, 2020 and July 14, 2023, Visa, jointly with other defendants, served motions for summary
judgment regarding the claims in certain of the individual merchant actions, as well as certain declaratory
judgment claims brought by Visa, Mastercard, and some U.S. financial institutions. Plaintiffs in certain of the
individual merchant actions served motions for partial summary judgment. On October 9, 2022, defendants'
motion for summary judgment regarding damages for EMV-related chargebacks was denied.
Visa has reached settlements with a number of merchants representing approximately 72% of the Visa-
branded payment card sales volume of merchants who opted out of the Amended Settlement Agreement with the
Damages Class plaintiffs.
September 30, 2023
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
VISA INC.
102
The individual merchant actions described in this section have been either assigned to the judge presiding
over MDL 1720, have been transferred, or are being considered for transfer by the Judicial Panel on Multidistrict
Litigation for inclusion in MDL 1720. These individual merchant actions are U.S. covered litigation for purposes of
the U.S. retrospective responsibility plan. See Note 5-U.S. and Europe Retrospective Responsibility Plans.
In addition to the cases filed by individual merchants, Visa, Mastercard, and/or certain U.S. financial
institution defendants in MDL 1720 filed complaints against certain merchants in the Eastern District of New York
seeking, in part, a declaration that Visa's conduct did not violate federal or state antitrust laws.
Interchange Multidistrict Litigation (MDL) - Individual Merchant Actions
VISA INC.
$
$
(301)
(726)
861
906
881
1,441 $
(in millions)
2022
2023
Provision for interchange multidistrict litigation
Payments for U.S. covered litigation
Balance as of beginning of period
For the Years Ended
September 30,
The following table summarizes the accrual activity related to U.S. covered litigation:
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
September 30, 2023
VISA INC.
$
110
1,621 $
During fiscal 2023, the Company recorded additional accruals of $906 million and deposited $1.0 billion into
the U.S. litigation escrow account to address claims of certain merchants who opted out of the Amended
Settlement Agreement (as described herein). The accrual balance is consistent with the Company's best estimate
of its share of a probable and reasonably estimable loss with respect to the U.S. covered litigation. While this
estimate is consistent with the Company's view of the current status of the litigation, the probable and reasonably
estimable loss or range of such loss could materially vary based on developments in the litigation. The Company
will continue to consider and reevaluate this estimate in light of the substantial uncertainties with respect to the
litigation. The Company is unable to estimate a potential loss or range of loss, if any, at trial if negotiated
resolutions cannot be reached.
Balance as of end of period.
24
(115)
(19)
118
Provision for VE territory covered litigation
Payments for VE territory covered litigation
102
11 $
Balance as of beginning of period
2022
(in millions)
2023
For the Years Ended
September 30,
The following table summarizes the accrual activity related to VE territory covered litigation:
Visa Inc., Visa International and Visa Europe are parties to certain legal proceedings that are covered by the
Europe retrospective responsibility plan. Unlike the U.S. retrospective responsibility plan, the Europe retrospective
responsibility plan does not have an escrow account that is used to fund settlements or judgments. The Company
is entitled to recover VE territory covered losses through periodic adjustments to the conversion rates applicable
to the series B and C preferred stock. An accrual for the VE territory covered losses and a reduction to
stockholders' equity will be recorded when the loss is deemed to be probable and reasonably estimable. See
further discussion below under VE Territory Covered Litigation and Note 5-U.S. and Europe Retrospective
Responsibility Plans.
Accrual Summary-VE Territory Covered Litigation
Balance as of end of period. .
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
1,441
A trial took place from November 2016 to March 2017, relating to claims asserted by one Merchant. In
judgments published in November 2017 and February 2018, the court found as to that Merchant that Visa's UK
domestic interchange did not restrict competition, but that if it had been found to restrict competition, it would not
be exemptible under applicable law. On July 4, 2018, the Court of Appeal overturned the lower court's rulings,
finding that Visa's UK domestic interchange restricted competition and the question of whether Visa's UK
domestic interchange was exempt from the finding of restriction under applicable law had been incorrectly
decided. Following an appeal to the Supreme Court of the United Kingdom, on June 17, 2020, the Supreme Court
found that Visa's UK domestic interchange restricted competition under applicable competition law. On
September 30, 2021, Visa reached a confidential settlement agreement resolving one Merchant's claims.
ITEM 9B. Other Information
107
In preparation for management's report on internal control over financial reporting, we documented and
tested the design and operating effectiveness of our internal control over financial reporting. There have been no
changes in our internal controls over financial reporting that occurred during our fourth quarter of fiscal 2023 that
have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls and Procedures and Internal Control over Financial Reporting
Our internal control over financial reporting is designed to provide reasonable, but not absolute, assurance
regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S.
generally accepted accounting principles. There are inherent limitations to the effectiveness of any system of
internal control over financial reporting. These limitations include the possibility of human error, the circumvention
or overriding of the system and reasonable resource constraints. Because of its inherent limitations, our internal
control over financial reporting may not prevent or detect misstatements and instances of fraud. In addition,
because we have designed our system of controls based on certain assumptions, which we believe are
reasonable, about the likelihood of future events, our system of controls may not achieve its desired purpose
under all possible future conditions. Accordingly, our disclosure controls and procedures provide reasonable
assurance, but not absolute assurance, of achieving their objectives. Projections of any evaluation of
effectiveness to future periods are subject to the risks discussed in Part I, Item 1A-Risk Factors of this report.
Changes in Internal Control over Financial Reporting
The effectiveness of our internal control over financial reporting as of September 30, 2023, has been audited
by KPMG LLP, an independent registered public accounting firm, as stated in their report which is included in
Item 8 of this report.
Our management is responsible for establishing and maintaining adequate internal control over our financial
reporting. Management assessed the effectiveness of our internal control over financial reporting as of
September 30, 2023 using the criteria set forth in Internal Control-Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on
management's assessment, management has concluded that our internal control over financial reporting was
effective as of September 30, 2023.
(b) Trading Plans.
Management's Report on Internal Control over Financial Reporting
We maintain a system of disclosure controls and procedures (as defined in the Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934, as amended (Exchange Act)) that is designed to ensure
that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and
reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated
and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow timely decisions regarding required disclosures.
Evaluation of Disclosure Controls and Procedures
ITEM 9A. Controls and Procedures
Not applicable.
ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
106
Under the supervision and with the participation of our management, including our Chief Executive Officer
and Chief Financial Officer, we conducted an evaluation of our disclosure controls and procedures. Based on this
evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that, as of September 30, 2023,
our disclosure controls and procedures were effective at the reasonable assurance level.
None
ITEM 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
September 30, 2023
109
The information required by this Item will be included in our Proxy Statement and is incorporated herein by
reference.
The information required by this item will be included in our Proxy Statement and is incorporated herein by
reference.
ITEM 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this item will be included in our Proxy Statement and is incorporated herein by
reference.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
The information required by this item will be included in our Proxy Statement and is incorporated herein by
reference.
or
corporatesecretary@visa.com.
Our Code of Business Conduct and Ethics that is applicable to our directors, executive officers, senior
financial officers, as well as our employees and contractors and our Corporate Governance Guidelines are
available on the Investor Relations page of our website at investor.visa.com, under "Corporate Governance."
Printed copies of these documents are also available to stockholders without charge upon written request directed
to Corporate Secretary, Visa Inc., P.O. Box 193243, San Francisco, California 94119
We will file a definitive proxy statement pursuant to Regulation 14A under the Exchange Act (Proxy
Statement) no later than 120 days after the end of the fiscal year ended September 30, 2023. The information
required by this item will be included in our Proxy Statement and is incorporated herein by reference.
ITEM 10. Directors, Executive Officers and Corporate Governance
PART III
108
On December 2, 2022, the EC informed Visa that it had opened a preliminary investigation into Visa's
incentive agreements with clients. Visa is cooperating with the EC in connection with the investigation.
European Commission Client Incentive Agreements Investigation
ITEM 11. Executive Compensation
Foreign Currency Exchange Rate Litigation
On March 13, 2012, the Antitrust Division of the United States Department of Justice (Division) issued a Civil
Investigative Demand (CID), to Visa Inc. seeking documents and information regarding a potential violation of
Section 1 or 2 of the Sherman Act, 15 U.S.C. §§ 1, 2. The CID focused on PIN-Authenticated Visa Debit and
Visa's competitive responses to the Dodd-Frank Act, including Visa's fixed acquirer network fee. Visa has
cooperated with the Division in connection with the CID.
U.S. Department of Justice Civil Investigative Demand (2012)
Consumer Class Actions. In October 2011, a purported consumer class action was filed against Visa and
Mastercard in the same federal court challenging the same ATM access fee rules. Two other purported consumer
class actions challenging the rules, later combined, were also filed in October 2011 in the same federal court
naming Visa, Mastercard and three financial institutions as defendants. Plaintiffs seek treble damages, restitution,
injunctive relief, and attorneys' fees where available under federal and state law, including under Section 1 of the
Sherman Act and consumer protection statutes. On August 4, 2021, the district court granted plaintiffs' motion for
class certification in each case. On August 8, 2022, in the case in which the three financial institutions were
named, the district court granted plaintiffs' motion for final approval of a class action settlement with those
institutions and entered final judgments of dismissal as to those institutions. On July 25, 2023, the U.S. Court of
Appeals for the District of Columbia affirmed the district court's class certification decision, and on September 27,
2023, defendants' petition for rehearing en banc was denied.
September 30, 2023
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
VISA INC.
104
National ATM Council Class Action. In October 2011, the National ATM Council and thirteen non-bank ATM
operators filed a purported class action lawsuit against Visa (Visa Inc., Visa International, Visa U.S.A. and Plus
System, Inc.) and Mastercard in the U.S. District Court for the District of Columbia. The complaint challenges
Visa's rule (and a similar Mastercard rule) that if an ATM operator chooses to charge consumers an access fee
for a Visa or Plus transaction, that fee cannot be greater than the access fee charged for transactions on other
networks. Plaintiffs claim that the rule violates Section 1 of the Sherman Act and seek treble damages, injunctive
relief, and attorneys' fees. On August 4, 2021, the district court granted plaintiffs' motion for class certification. On
July 25, 2023, the U.S. Court of Appeals for the District of Columbia affirmed the district court's class certification
decision, and on September 27, 2023, defendants' petition for rehearing en banc was denied.
U.S. ATM Access Fee Litigation
On November 14, 2021, a motion to certify a class action was filed against Visa and Mastercard in the Israel
Central District Court. The motion asserts that interchange fees on cross-border transactions in Israel and the
Honor All Cards rule are anti-competitive and seeks damages and injunctive relief.
Other Litigation
The full scope of potential damages is not yet known because not all Merchant claims have been served and
Visa has substantial defenses. However, the claims that have been issued, served and/or preserved, seek
several billion dollars in damages.
On June 1, 2022, two class action claims were filed against Visa with the CAT on behalf of UK businesses
that accepted Visa-branded payment cards at any time since June 1, 2016, alleging that UK domestic, intra-
European Economic Area, and inter-regional interchange fees on commercial credit cards, and inter-regional
interchange fees on consumer cards, are anti-competitive. The Europe retrospective responsibility plan covers
liabilities and losses relating to the covered period, which generally refers to the period before the closing of the
Visa Europe acquisition. On June 8, 2023, the UK Competition Appeal Tribunal denied class certification in the
two class action claims.
Following an initial class action complaint filed on July 9, 2021, an amended class action complaint was filed
on December 6, 2021 against Visa in the U.S. District Court for the Northern District of California by several
individuals on behalf of a purported nationwide class, and/or purported California, Washington, Massachusetts or
New Jersey subclasses, of cardholders who conducted a transaction in a foreign currency. The amended
complaint asserted claims for unjust enrichment and restitution as well as violations of the California Unfair
Competition Law, the Washington Consumer Protection Act, the Massachusetts Consumer Protection Act, and
the New Jersey Consumer Fraud Act. On December 21, 2022, plaintiffs filed a third amended complaint asserting
the same claims. On August 30, 2023, the court granted Visa's motion to dismiss with prejudice and directed the
clerk to close the case.
On November 26, 2021, with respect to certain pending Merchant claims, the UK Competition Appeal
Tribunal (CAT) found that UK and certain other domestic and intra-European Economic Area consumer
interchange fees before the introduction of the Interchange Fee Regulation (IFR) were a restriction of competition,
but that the question of whether those fees, along with inter-European Economic Area fees, are a restriction of
competition after the introduction of the IFR would need to be resolved at trial. Whether any interchange fees are
exempt from the finding of restriction under applicable law and the assessment of damages, if any, will also need
to be considered at trial. On October 4, 2022, the UK Court of Appeal affirmed the CAT's ruling.
Pulse Network
On November 25, 2014, Pulse Network LLC filed suit against Visa Inc. in federal district court in Texas,
alleging that Visa has, among other things, monopolized and attempted to monopolize debit card network
services markets. On August 29, 2022, Pulse filed an amended complaint, which makes similar allegations and
seeks unspecified treble damages, attorneys' fees and injunctive relief, including to enjoin the fixed acquirer
network fee structure, and Visa's agreements relating to debit with issuers, acquirers and merchants.
Other Litigation
On June 26, 2020, the European Commission (EC) informed Visa that it opened a preliminary investigation
into Visa's rules regarding staged digital wallets. On February 16, 2023, the EC notified Visa that the investigation
has been closed.
On March 26, 2021, June 11, 2021, January 4, 2023, and May 2, 2023, the Antitrust Division of the U.S.
Department of Justice (the Division) issued CIDs to Visa, seeking documents and information regarding a
potential violation of Section 1 or 2 of the Sherman Act, 15 U.S.C. §§ 1, 2. The CIDS focus on U.S. debit and
competition with other payment methods and networks. Visa is cooperating with the Division in connection with
the investigation.
Beginning in December 2021, Visa was served with claims in Germany brought by German banks against
Visa Europe and Visa Inc. The banks claim that Visa's ATM rules prohibiting the charging of access fees on
domestic cash withdrawals are anti-competitive, and the majority seek damages. Visa has filed challenges to the
jurisdiction of the German courts to hear these claims, one of which was denied and one of which was granted as
to Visa Europe.
German ATM Litigation
U.S. Department of Justice Civil Investigative Demand (2021)
On December 13, 2019, Euronet 360 Finance Limited, Euronet Polska Spolka z.o.o. and Euronet Services
spol. s.r.o. (Euronet) served a claim in the UK alleging that certain rules affecting ATM access fees in Poland, the
Czech Republic and Greece by Visa Inc. and Mastercard Incorporated, and certain of their subsidiaries, breach
various competition laws. Euronet sought damages, costs, and injunctive relief to prevent the defendants from
enforcing these rules. Visa reached a settlement with Euronet, and the claim against Visa has been dismissed.
European Commission Staged Digital Wallets Investigation
Euronet Litigation
September 30, 2023
of the Durbin Amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act. On June 9, 2020,
the Federal Trade Commission (FTC) issued a CID to Visa requesting additional documents and information. Visa
has cooperated with the FTC in connection with the CID.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
VISA INC.
105
On November 4, 2019, the Bureau of Competition of the United States Federal Trade Commission (Bureau)
requested that Visa provide, on a voluntary basis, documents and information relating to an investigation as to
whether Visa's actions inhibited merchant choice in the selection of debit payments networks in potential violation
Federal Trade Commission Civil Investigative Demand
EMVCO and the financial institution defendants were dismissed, and the matter was subsequently
transferred to the U.S. District Court for the Eastern District of New York, which has clarified that this case is not
part of MDL 1720. On August 28, 2020, the district court granted plaintiffs' motion for class certification. On
November 30, 2022, Visa, jointly with other defendants, served a motion for summary judgment regarding the
claims in the amended complaint and a motion to decertify the class.
Following their initial complaint filed on March 8, 2016, B&R Supermarket, Inc., d/b/a Milam's Market, and
Grove Liquors LLC filed an amended class action complaint on July 15, 2016, against Visa Inc., Visa U.S.A.,
Mastercard, Discover, American Express, EMVCo and certain financial institutions in the U.S. District Court for
the Northern District of California. The amended complaint asserts that defendants, through EMVCo, conspired to
shift liability for fraudulent, faulty, or otherwise rejected payment card transactions from defendants to the
purported class of merchants, defined as those merchants throughout the U.S. who have been subjected to the
"Liability Shift" since October 2015. Plaintiffs claim that the “Liability Shift" violates Sections 1 and 3 of the
Sherman Act and certain state laws, and seek treble damages, injunctive relief and attorneys' fees.
EMV Chip Liability Shift
November 15, 2023
(Principal Accounting Officer)
/s/ Alfred F. Kelly, Jr.
Alfred F. Kelly, Jr.
Executive Chairman
Accounting Officer
Signature
Lead Independent Director
November 15, 2023
/s/ Lloyd A. Carney
Lloyd A. Carney
Director
/s/ John F. Lundgren
John F. Lundgren
November 15, 2023
Ryan McInerney
/s/ Peter M. Andreski
Peter M. Andreski
(Principal Financial Officer)
November 15, 2023
Chief Financial Officer
(Principal Executive Officer)
/s/ Chris Suh
Chris Suh
/s/ Ryan McInerney
November 15, 2023
Chief Executive Officer and Director
Title
November 15, 2023
Date
Global Corporate Controller, Chief
/s/Kermit R. Crawford
November 15, 2023
November 15, 2023
Director
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been
signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated:
/s/ Maynard G. Webb, Jr.
Maynard G. Webb, Jr.
Linda J. Rendle
/s/ Linda J. Rendle
Signature
118
Pamela Murphy
November 15, 2023
Director
/s/ Pamela Murphy
Denise M. Morrison
Director
Director
Teri L. List
November 15, 2023
Director
/s/ Teri L. List
Ramon Laguarta
November 15, 2023
Director
/s/ Ramon Laguarta
Francisco Javier Fernández-Carbajal
November 15, 2023
/s/ Francisco Javier Fernández-Carbajal Director
Kermit R. Crawford
/s/ Denise M. Morrison
Chief Executive Officer
November 15, 2023
4/27/2023
/s/ Ryan McInerney
31.1+
Consent of KPMG LLP, Independent
Registered Public Accounting Firm
List of Significant Subsidiaries of Visa Inc.
21.1+
23.1+
10.6
001-33977
10-Q
Aircraft Time Sharing Agreement, effective
January 30, 2023, between Visa and Ryan
McInerney
10.56*
4/27/2023
10.5
001-33977
Rule 13a-14(a)/15d-14(a) Certification of
Principal Executive Officer
10-Q
10.55*
between Visa Inc. and Alfred F. Kelly, Jr.
Agreement, effective November 1, 2019,
11/13/2019
10.48
001-33977
10-K
Amended and Restated Aircraft Time Sharing
10.54*
Agreement, dated June 13, 2023, between
Visa Inc. and Chris Suh
06/20/2023
Director
First Amendment to Amended and Restated
Aircraft Time Sharing Agreement, dated
January 30, 2023, between Visa and Alfred F.
Kelly, Jr.
Ryan McInerney
31.2+
32.1+
Title:
Date:
Name:
By:
VISA INC.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended,
the registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned,
thereunto duly authorized.
SIGNATURES
117
Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule
will be furnished supplementally to the SEC upon request; provided, however, that the parties may request
confidential treatment pursuant to Rule 24b-2 of the Exchange Act for any document so furnished.
Filed or furnished herewith.
Management contract, compensatory plan or arrangement.
#
+
Rule 13a-14(a)/15d-14(a) Certification of
Principal Financial Officer
t Confidential treatment has been requested for portions of this agreement. A completed copy of the
agreement, including the redacted portions, has been filed separately with the SEC.
*
Cover Page Interactive Data File (formatted as
104+
101.PRE+ Inline XBRL Taxonomy Extension Presentation
Linkbase Document
101.LAB+ Inline XBRL Taxonomy Extension Label
Linkbase Document
101.DEF+ Inline XBRL Taxonomy Extension Definition
Linkbase Document
101.CAL+ Inline XBRL Taxonomy Extension Calculation
Linkbase Document
Document
101.SCH+ Inline XBRL Taxonomy Extension Schema
116
101.INS+ Inline XBRL Instance Document - the instance
document does not appear in the Interactive
Data File because its XBRL tags are
embedded within the Inline XBRL document.
Section 1350 Certification of Principal
Executive and Financial Officer
Inline XBRL and contained in Exhibit 101)
119
4.1
Date
between Visa Inc. and Visa Europe Limited #
3.1
Seventh Restated Certificate of Incorporation
of Visa Inc.
8-K
001-33977
3.1
1/27/2021
3.2
Amended and Restated Bylaws of Visa Inc.
8-K
001-33977
3.2
Agreement, dated as of May 10, 2016,
8/5/2022
Form of stock certificate of Visa Inc.
S-4/A
333-143966
4.1
9/13/2007
4.2
Form of specimen certificate for class B
common stock of Visa Inc.
8-A
000-53572
4.1
1/28/2009
4.3
99.2
Form of specimen certificate for class C
common stock of Visa Inc.
5/10/2016
001-33977
001-33977
PART IV
ITEM 15. Exhibits and Financial Statement Schedules
The following documents are filed as part of this report:
1. Consolidated Financial Statements
See Index to Consolidated Financial Statements in Item 8 of this report.
2. Consolidated Financial Statement Schedules
None.
3. The following exhibits are filed as part of this report or, where indicated, were previously filed and are
hereby incorporated by reference:
Refer to the Exhibit Index herein.
ITEM 16. Form 10-K Summary
None.
2.1
110
Incorporated by Reference
Exhibit Exhibit
Number Description
Form
File
Number
Exhibit
Filing
Number
Date
2.1
Amended and Restated Transaction
8-K
EXHIBIT INDEX
Title
8-A
4.2
001-33977
4.5
12/14/2015
4.9
Form of 1.500% Senior Note due 2026
8-K
001-33977
4.1
6/1/2022
4.10
Form of 0.750% Senior Note due 2027
8-K
8-K
001-33977
8/17/2020
4.11
Form of 1.900% Senior Note due 2027
8-K
001-33977
4.1
4/2/2020
4.12
Form of 2.750% Senior Note due 2027
8-K
November 15, 2023
November 15, 2023
4.1
000-53572
Form of 3.150% Senior Note due 2025
12/14/2015
1/28/2009
4.4
Certificate of Designations of Series A
Convertible Participating Preferred Stock of
Visa Inc.
8-K
001-33977
3.1
6/21/2016
4.5
Certificate of Designations of Series B
8-K
001-33977
3.2
4.8
6/21/2016
4.6
Certificate of Designations of Series C
8-K
001-33977
3.3
6/21/2016
Convertible Participating Preferred Stock of
Visa Inc.
4.7
Indenture dated December 14, 2015 between
Visa Inc. and U.S. Bank National Association
8-K
001-33977
4.1
Convertible Participating Preferred Stock of
Visa Inc.
001-33977
4.2
Offer Letter and One-Time Cash Award
11/21/2014
10.32*
Form of Visa Inc. 2007 Equity Incentive
10-Q
001-33977
10.1
1/28/2016
Compensation Plan Stock Option Award
Agreement for awards granted after
November 1, 2015
10.33*
Form of Alternate Visa Inc. 2007 Equity
10-K
001-33977
10.34
11/18/2021
Incentive Compensation Plan Stock Option
Award Agreement for awards granted after
November 1, 2015
10.34*
Form of Visa Inc. 2007 Equity Incentive
Compensation Plan Director Restricted Stock
Unit Award Agreement for awards granted
after November 1, 2017
10-Q
001-33977
10.1
2/1/2018
10.35*
Form of Visa Inc. 2007 Equity Incentive
Compensation Plan Director Restricted Stock
Unit Award Agreement for awards granted
after November 1, 2018
10-Q
001-33977
Form of Escrow Agreement by and among
Visa Inc., Visa U.S.A. Inc. and the escrow
agent
10.3
10.40
Annex A 9/13/2007
Appendix B 12/12/2014
10-K
10-K
001-33977
10.31
11/21/2008
10.25*
Visa Excess Retirement Benefit Plan, as
amended and restated as of January 1, 2008
10-K
001-33977
10.32
11/21/2008
10.26*
First Amendment, effective January 1, 2011, of
the Visa Excess Retirement Benefit Plan, as
amended and restated as of January 1, 2008
10-K
001-33977
10.34
11/18/2011
10.27*
Visa Inc. Executive Severance Plan, effective
as of January 1, 2022
10-Q
001-33977
10.8
1/28/2022
10.28+*
Visa Executive Officer Cash Severance Policy,
effective as of November 6, 2023
10.29+*
Visa Inc. Clawback Policy, as amended and
restated November 1, 2023
10.30*
10.31*
Visa Inc. 2015 Employee Stock Purchase Plan
Form of Visa Inc. 2007 Equity Incentive
Compensation Plan Director Restricted Stock
Unit Award Agreement for awards granted
after November 1, 2014
DEF 14A
001-33977
001-33977
Visa Excess Thrift Plan, as amended and
restated as of January 1, 2008
333-143966
1/31/2020
12/14/2015
4.6
001-33977
8-K
Form of 4.150% Senior Note due 2035
4.17
6/1/2022
4.3
001-33977
8-K
8/17/2020
4.2
001-33977
8-K
Form of 1.100% Senior Note due 2031
Form of 2.375% Senior Note due 2034
4.16
4.15
4/2/2020
4.2
001-33977
8-K
Form of 2.050% Senior Note due 2030
4.14
6/1/2022
4.2
001-33977
8-K
Form of 2.000% Senior Note due 2029
4.13
4.18
S-4/A
Form of 2.700% Senior Note due 2040
001-33977
10.1
001-33977
10-Q
Amended and Restated Global Restructuring
Agreement, dated August 24, 2007, by and
among Visa Inc., Visa International Service
Association, Visa U.S.A. Inc., Visa Europe
Limited, Visa Canada Association, Inovant
LLC, Inovant, Inc., Visa Europe Services, Inc.,
Visa International Transition LLC, VI Merger
Sub, Inc., Visa USA Merger Sub Inc. and
1734313 Ontario Inc.
Form of Indemnity Agreement
10.2
10.1
111
8/17/2020
4.3
001-33977
8-K
Form of 2.000% Senior Note due 2050
Description of Securities
4.22+
4.21
9/11/2017
4.3
001-33977
8-K
Form of 3.650% Senior Note due 2047
4.20
12/14/2015
4.7
001-33977
8-K
Form of 4.300% Senior Note due 2045
4.19
4/2/2020
4.3
8-K
9/11/2017
10.24*
10.1
Form of Litigation Management Agreement by
and among Visa Inc., Visa International
Service Association, Visa U.S.A. Inc. and the
other parties thereto
10.12
10-K
Amendment of Loss Sharing Agreement
10.11
8-K
Loss Sharing Agreement Schedule
10.10
7/24/2007
10.14
333-143966
S-4/A
Form of Loss Sharing Agreement by and
among Visa U.S.A. Inc., Visa International
Service Association, Visa Inc. and various
financial institutions
10.9
11/20/2015
10.10
001-33977
10-K
Amendment of Interchange Judgment Sharing
Agreement
10.8
2/8/2011
10.2
001-33977
8-K
Interchange Judgment Sharing Agreement
Schedule
10.7
7/24/2007
10.13
S-4/A 333-143966
S-4/A
07/26/2023
001-33977
001-33977
333-143966
2/8/2011
11/20/2015
8/22/2007
Interchange Fee and Merchant Discount
plaintiffs to resolve the class plaintiffs' claims in
the matter styled In re Payment Card
financial institution defendants, and the class
2/6/2013
10.3
001-33977
10-Q
10.17
Settlement Agreement, dated October 19,
2012, by and among Visa Inc., Visa U.S.A.
Inc., Visa International Service Association,
Mastercard Incorporated, Mastercard
International Incorporated, various U.S.
10.16
11/20/2015
10.17
001-33977
10-K
Second Amendment, dated October 22, 2015,
to Omnibus Agreement regarding Interchange
Litigation Judgment Sharing and Settlement
Sharing
11/21/2014
10.14
001-33977
10-K
7/16/2012
10.2
001-33977
8-K
10.15
Amendment, dated August 26, 2014, to the
Omnibus Agreement regarding Interchange
Litigation Judgment Sharing and Settlement
Sharing by and among Visa Inc., Visa U.S.A.
Inc., Visa International Service Association,
Mastercard Incorporated, Mastercard
International Incorporated and the parties
thereto
Omnibus Agreement, dated February 7, 2011,
regarding Interchange Litigation Judgment
Sharing and Settlement Sharing by and among
Visa Inc., Visa U.S.A. Inc., Visa International
Service Association, Mastercard Incorporated,
Mastercard International Incorporated and the
parties thereto
10.14
10.13
112
10.1
10.13
10.18
7/28/2022
10.1
10-Q
11/2/2015
November 2, 2015, among the UK Members
listed on Schedule 1 thereto, Visa Inc. and Visa
Europe Limited
10.19
8-K
001-33977
10.1
6/21/2016
Litigation Management Deed, dated as of
June 21, 2016, by and among the VE Member
Representative, Visa Inc., the LMC Appointing
Members, the UK&I DCC Appointing Members,
the Europe DCC Appointing Members and the
UK&I DCC Interested Members
113
10.20*
Visa 2005 Deferred Compensation Plan,
effective as of August 12, 2015
10-K
001-33977
10.21
11/20/2015
10.21*
10.22*
Visa Directors Deferred Compensation Plan,
as amended and restated as of July 22, 2014
Visa Inc. 2007 Equity Incentive Compensation
Plan, amended and restated as of January 26,
2021
10-K
001-33977
10.17
11/21/2014
8-K
001-33977
10.22
1/27/2021
10.23*
Visa Inc. Incentive Plan, as amended and
restated as of July 18, 2022
001-33977
10.1
001-33977
001-33977
Loss Sharing Agreement, dated as of
Form of Interchange Judgment Sharing
Agreement by and among Visa International
Service Association and Visa U.S.A. Inc., and
the other parties thereto +
Amended and Restated Five Year Revolving
Credit Agreement, dated as of May 31, 2023,
by and among Visa Inc., Visa International
Service Association, Visa U.S.A. Inc. and Visa
Europe Limited, as borrowers, Bank of
America, N.A., as administrative agent,
JPMorgan Chase Bank N.A., as syndication
agent, and the lenders referred to therein #
10.6
10.5
7/24/2007
10.17
333-143966
S-4/A
Form of Framework Agreement by and among
Visa Inc., Visa Europe Limited, Inovant LLC,
Visa International Services Association and
Visa U.S.A. Inc. +
10.4
6/22/2007
10.15
333-143966
S-4
Antitrust Litigation, No. 05-MD-1720
Superseding and Amended Settlement
8-K
001-33977
10.1
9/18/2018
Agreement, dated September 17, 2018, by and
among Visa Inc., Visa U.S.A. Inc., Visa
International Service Association, Mastercard
Incorporated, Mastercard International
Incorporated, various U.S. financial institution
defendants, and the damages class plaintiffs to
resolve the damages class plaintiffs' claims in
the matter styled In re Payment Card
Interchange Fee and Merchant Discount
Antitrust Litigation, No. 05-MD-1720
10.18
8-K
8-K
10-Q
10-Q
10-Q
001-33977
10.7
1/31/2019
Agreement for awards granted after
November 1, 2018
10.42*
Form of Visa Inc. 2007 Equity Incentive
10-K
001-33977
10.44
11/18/2021
Form of Visa Inc. 2007 Equity Incentive
Compensation Plan Performance Share Award
Compensation Plan Director Restricted Stock
10.43*
Form of Visa Inc. 2007 Equity Incentive
Compensation Plan Restricted Stock Unit
Award Agreement for the CEO for awards
granted after November 1, 2021
10-Q
001-33977
10.2
1/28/2022
10.44*
Form of Visa Inc. 2007 Equity Incentive
Compensation Plan Stock Option Award
Agreement for the CEO for awards granted
after November 1, 2021
10-Q
001-33977
10.3
1/28/2022
Unit Award Agreement for awards granted
after January 1, 2021
10.41*
1/31/2019
10.6
114
10.36*
10.37*
Form of Visa Inc. 2007 Equity Incentive
Compensation Plan Restricted Stock Unit
Award Agreement for the CEO for awards
granted after November 1, 2018
Form of Visa Inc. 2007 Equity Incentive
Compensation Plan Stock Option Award
Agreement for the CEO for awards granted
after November 1, 2018
10-Q
001-33977
10.2
1/31/2019
10-Q
001-33977
10.3
1/31/2019
10.38*
Form of Visa Inc. 2007 Equity Incentive
Compensation Plan Performance Share Award
Agreement for the CEO for awards granted
after November 1, 2018
001-33977
10.4
1/31/2019
10.39*
Form of Visa Inc. 2007 Equity Incentive
Compensation Plan Restricted Stock Unit
Award Agreement for awards granted after
November 1, 2018
10-Q
001-33977
10.5
1/31/2019
10.40*
Form of Visa Inc. 2007 Equity Incentive
Compensation Plan Stock Option Award
Agreement for awards granted after
November 1, 2018
10-Q
001-33977
10.45*
Form of Visa Inc. 2007 Equity Incentive
Compensation Plan Performance Share Award
Agreement for the CEO for awards granted
after November 1, 2021
10-Q
001-33977
Compensation Plan Stock Option Award
Agreement for awards granted after
January 23, 2023
10.50*
Form of Visa Inc. 2007 Equity Incentive
10-Q
001-33977
10.2
4/27/2023
Compensation Plan Performance Share Award
Agreement for awards granted after
January 23, 2023
4/27/2023
10.51*
10-Q
001-33977
10.3
4/27/2023
Incentive Compensation Plan Performance
Share Award Agreement for awards granted
after January 23, 2023
10.52*
Form of Amendment Notification to Stock
Option and Performance Share Award Holders
10-Q
001-33977
10.4
4/27/2023
10.53*
Form of Alternate Visa Inc. 2007 Equity
1/31/2019
10.1
10-Q
10.4
1/28/2022
10.46*
Form of Visa Inc. 2007 Equity Incentive
10-Q
001-33977
10.5
1/28/2022
Compensation Plan Restricted Stock Unit
Award Agreement for awards granted after
November 1, 2021
10.47*
Form of Visa Inc. 2007 Equity Incentive
Compensation Plan Stock Option Award
Agreement for awards granted after
November 1, 2021
001-33977
10-Q
10.6
1/28/2022
115
10.48*
Form of Visa Inc. 2007 Equity Incentive
Compensation Plan Performance Share Award
10-Q
001-33977
10.7
1/28/2022
Agreement for awards granted after
November 1, 2021
10.49*
Form of Visa Inc. 2007 Equity Incentive
001-33977
10.1
Media relations
https://www.shareowneronline.com
Corporate secretary
San Francisco, CA 94128-8999 USA
Investor relations
Visa Inc.
Investor Relations@visa.com
+1650 432 7644
investor.visa.com
Visa Inc.
P.O. Box 193243
P.O. Box 8999
San Francisco CA, 94119-3243 USA
Corporate Secretary@visa.com
public accounting firm
KPMG LLP
Transfer agent
EQ Shareowner Services
P.O. Box 64874
St. Paul, MN 55164-0874 USA
+1651 306 4433 or +1866 456 9417
+1866 720 7686 Fax
Independent registered
Visa Inc.
+1650 432 3200
visa.com
©2023 Visa. All rights reserved
FSC® C132107
Paper from
responsible sources
Mailing address
www.fsc.org
FSC
visa.com/newsroom
Press@visa.com
MIX
Visa Inc.
[THIS PAGE INTENTIONALLY LEFT BLANK]
Corporate headquarters
Visa Inc.
One Market Plaza
San Francisco, CA 94105 USA
Visa is one of the world's leaders in digital payments. Our purpose is to uplift everyone, everywhere by being
the best way to pay and be paid. We facilitate global commerce and money movement across more than 200
countries and territories among a global set of consumers, merchants, financial institutions and government
entities through innovative technologies.
"Visa" and our other trademarks referenced in this report are Visa's property. This report may contain
additional trade names and trademarks of other companies. The use or display of other companies' trade names
or trademarks does not imply our endorsement or sponsorship of, or a relationship with these companies.
2
Forward-Looking Statements
ITEM 1. Business
OVERVIEW
3
PART I
Unless the context indicates otherwise, reference to “Visa,” “we,” “us,” “our” or “the Company" refers to Visa
Inc. and its subsidiaries.
This Annual Report on Form 10-K contains forward-looking statements within the meaning of the U.S.
Private Securities Litigation Reform Act of 1995 that relate to, among other things, the impact on our future
financial position, results of operations and cash flows; the approval and implementation of the potential certificate
of incorporation amendments and the potential exchange offers; prospects, developments, strategies and growth
of our business; anticipated expansion of our products in certain countries; industry developments; anticipated
timing and benefits of our acquisitions; expectations regarding litigation matters, investigations and proceedings;
timing and amount of stock repurchases; sufficiency of sources of liquidity and funding; effectiveness of our risk
management programs; and expectations regarding the impact of recent accounting pronouncements on our
consolidated financial statements. Forward-looking statements generally are identified by words such as
"anticipates," "believes," "estimates,” “expects,” “intends,” “may,” “projects,” “could,” “should,” “will,” “continue” and
other similar expressions. All statements other than statements of historical fact could be forward-looking
statements, which speak only as of the date they are made, are not guarantees of future performance and are
subject to certain risks, uncertainties and other factors, many of which are beyond our control and are difficult to
predict. We describe risks and uncertainties that could cause actual results to differ materially from those
expressed in, or implied by, any of these forward-looking statements in Item 1, Item 1A, Item 7 and elsewhere in
this report. Except as required by law, we do not intend to update or revise any forward-looking statements as a
result of new information, future events or otherwise.
Item 16
Item 3
110
Exhibits, Financial Statement Schedules.
Form 10-K Summary
Item 15
PART IV
109
Since Visa's early days in 1958, we have been in the business of facilitating payments between consumers
and businesses. We are focused on extending, enhancing and investing in our proprietary advanced transaction
processing network, VisaNet, to offer a single connection point for facilitating payment transactions to multiple
endpoints through various form factors. As a network of networks enabling global movement of money through all
available networks, we are working to provide payment solutions and services for everyone, everywhere. Through
our network, we offer products, solutions and services that facilitate secure, reliable and efficient money
movement for participants in the ecosystem.
(pictured below, seated, left to right)
Ramon Laguarta
Director
Francisco Javier Fernández-Carbajal
Director
110
•
•
•
up 9% from prior year
EMPLOYEES
~28,800
located in more than
80 countries and territories
around the world
(1) Please see Item 7 of this report for a reconciliation of our GAAP to non-GAAP financial results.
OUR CORE BUSINESS
CONSUMER
ISSUER
VISANET
ACQUIRER
MERCHANT
Auth.
$16.1B
Auth.
Response
Response
Response
Collect money from
cardholder
Settlement:
Collect money from issuer
Settlement:
Deliver money to acquirer
Deliver money to
merchant
$
FLOW OF MONEY
$
In a typical Visa C2B payment transaction, the consumer purchases goods or services from a merchant
using a Visa card or payment product. The merchant presents the transaction data to an acquirer, usually a bank
or third-party processing firm that supports acceptance of Visa cards or payment products, for verification and
processing. Through VisaNet, the acquirer presents the transaction data to Visa, which in turn sends the
transaction data to the issuer to check the account holder's account balance or credit line for authorization. After
the transaction is authorized, the issuer posts the transaction to the consumer's account and effectively pays the
acquirer an amount equal to the value of the transaction, minus the interchange reimbursement fee. The acquirer
pays the amount of the purchase, minus the merchant discount rate (MDR), to the merchant.
Visa earns revenue by facilitating money movement across more than 200 countries and territories among a
global set of consumers, merchants, financial institutions and government entities through innovative
technologies.
5
Auth.
Lloyd A. Carney
DIVIDENDS &
SHARE REPURCHASES
up 10% from prior year
We facilitate secure, reliable and efficient money movement among consumers, issuing and
acquiring financial institutions and merchants. We have traditionally referred to this structure as the
"four-party" model. Please see Our Core Business discussion below. As the payments ecosystem
continues to evolve, we have broadened this model to include digital banks, digital wallets and a range of
financial technology companies (fintechs), governments and non-governmental organizations (NGOs).
We provide transaction processing services (primarily authorization, clearing and settlement) to our
financial institution and merchant clients through VisaNet. During fiscal year 2023, 276 billion payments
and cash transactions with Visa's brand were processed by Visa or other networks, equating to an
average of 757 million transactions per day. Of the 276 billion total transactions, 213 billion were
processed by Visa.
We offer a wide range of Visa-branded payment products that our clients, including 14,500 financial
institutions, use to develop and offer payment solutions or services, including credit, debit, prepaid and
cash access programs for individual, business and government account holders. During fiscal year 2023,
Visa's total payments and cash volume was $15 trillion, and 4.3 billion payment credentials, which are
issued Visa card accounts that were available worldwide to be used at more than 130 million merchant
locations.(1)
We take an open partnership approach and seek to provide value by enabling access to our global
network, including offering our technology capabilities through application programming interfaces (APIs).
We partner with both traditional and emerging players to innovate and expand the payments ecosystem,
allowing them to use the resources of our platform to scale and grow their businesses more quickly and
effectively.
We are accelerating the migration to digital payments through our network of networks strategy. We
aim to provide a single connection point so that Visa clients can enable money movement for businesses,
governments and consumers, regardless of which network is used to start or complete the transaction.
This model ultimately helps to unify a complex payments ecosystem. Visa's network of networks
approach creates opportunities by facilitating person-to-person (P2P), business-to-consumer (B2C),
business-to-business (B2B) and government-to-consumer (G2C) payments, in addition to consumer to
business (C2B) payments.
(1) The number includes an estimated 30 million locations through payment facilitators, which are technology providers that provide payment
acceptance services to merchants on behalf of acquirers. Data provided to Visa by acquiring institutions and other third parties as of
June 30, 2023.
4
•
We provide value added services to our clients, including issuing solutions, acceptance solutions, risk
and identity solutions, open banking and advisory services.
We invest in and promote our brand to the benefit of our clients and partners through advertising,
promotional and sponsorship initiatives with the International Olympic Committee, the International
Paralympic Committee and the National Football League (NFL), among others. We also use these
sponsorship assets to showcase our payment innovations.
FISCAL YEAR 2023 KEY STATISTICS
NET REVENUES
$32.7B
up 11% from prior year
$
GAAP NET INCOME
up 15% from prior year
CURRENCIES
~160
in transaction processing
PAYMENTS
VOLUME
$12.3T
up 6% from prior year
NON-GAAP NET INCOME¹
$18.3B
up 14% from prior year
PROCESSED
TRANSACTIONS
212.6B
$17.3B
Director, Chair of Audit and Risk
Committee
(pictured below, standing, left to right)
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
108
PART III
Item 10
Directors, Executive Officers and Corporate Governance
109
Item 11
Executive Compensation
109
Item 12
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
109
Item 13
108
Item 14
109
Item 2
Unresolved Staff Comments
Item 1B
Risk Factors
Item 1A
Item 1
Business . 4
PART I
Page
TABLE OF CONTENTS
Portions of the Registrant's Proxy Statement for the 2024 Annual Meeting of Stockholders are incorporated herein by reference in Part III
of this Annual Report on Form 10-K to the extent stated herein. Such Proxy Statement will be filed with the Securities and Exchange
Commission within 120 days of the Registrant's fiscal year ended September 30, 2023.
DOCUMENTS INCORPORATED BY REFERENCE
Certain Relationships and Related Transactions, and Director Independence.
Principal Accounting Fees and Services
As of November 8, 2023, there were 1,580,679,900 shares outstanding of the registrant's class A common stock, 245,513,385 shares
outstanding of the registrant's class B common stock, and 9,453,068 shares outstanding of the registrant's class C common stock.
Other Information.
107
Legal Proceedings.
Item 4
Mine Safety Disclosures
18
35
35
35
00 10 10 10 1
35
Item 6
Item 7
Item 7A
PART II
Item 5
Item 9B
Item 9C
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Management's Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
37
49
A w w w
36
36
Item 8
Financial Statements and Supplementary Data
51
Item 9
Item 9A
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . .
Controls and Procedures
.. 107
[Reserved]
Properties ...
The aggregate market value of the registrant's class A common stock, held by non-affiliates (using the New York Stock Exchange closing
price as of March 31, 2023, the last business day of the registrant's most recently completed second fiscal quarter) was approximately
$364.9 billion. There is currently no established public trading market for the registrant's class B common stock, or the registrant's class Ć
common stock.
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements.
VISA
Commission file number 001-33977
to
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
OR
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 2023
FORM 10-K
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
VISA
10
Executive Chairman
Alfred F. Kelly, Jr.
Director, Chair of Compensation
Committee
VISA INC.
Denise M. Morrison
Director and Chief Executive Officer
Ryan McInerney
Director
Teri L. List
Chair of Nominating and Corporate
Governance Committee
Lead Independent Director,
John F. Lundgren
Director
Kermit R. Crawford
Director
Pamela Murphy
Director, Chair of Finance Committee
Maynard G. Webb, Jr.
Linda J. Rendle
Director
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based
compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☑
(Exact name of Registrant as specified in its charter)
(State or other jurisdiction
Our net revenues in fiscal year 2023 consisted of the following:
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public
accounting firm that prepared or issued its audit report. ☑
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Accelerated filer
Smaller reporting company
Emerging growth company
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and
"emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant
to Rule 405 of Regulation S-T ($232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
required to submit such files). Yes ☑ No ☐
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☑
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes
No
Yes ☑ No
Securities registered pursuant to Section 12(g) of the Act:
Class B common stock, par value $0.0001 per share
Class C common stock, par value $0.0001 per share
(Title of each class)
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
Name of each exchange on which registered
New York Stock Exchange
(Zip Code)
Delaware
94128-8999
V29
V26
V
Class A Common Stock, par value $0.0001 per share
1.500% Senior Notes due 2026
2.000% Senior Notes due 2029
2.375% Senior Notes due 2034
Title of each class
Trading
Symbol
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
(IRS Employer
Identification No.)
26-0267673
(650) 432-3200
San Francisco, California
(Address of principal executive offices)
P.O. Box 8999
of incorporation or organization)
V34
SERVICE
Visa Direct utilizes more than 70 domestic payment schemes, 10 real-time payments schemes, 15 card-
based networks and five payment gateways, with the potential to reach more than 8.5 billion cards, deposit
accounts and digital wallets. In fiscal year 2023, Visa Direct processed more than 7.5 billion transactions across
more than 2,800 global programs. Visa Direct solutions supported more than 500 partners across more than 65
use cases. We also announced in fiscal year 2023 Visa's partnership with DailyPay, i2C, PayPal, TabaPay,
Venmo and Western Union to pilot Visa+, an innovative service that aims to help individuals send money quickly
and securely between different participating P2P digital payment apps.
CLIENT INCENTIVES
We enable consumer payments and help our clients grow as digital commerce, new technologies and new
participants continue to transform the payments ecosystem. Some examples include:
Enablers
Prepaid: Prepaid cards and digital credentials draw from a designated balance funded by individuals,
businesses or governments. Prepaid cards address many use cases and needs, including general purpose
reloadable, payroll, government and corporate disbursements, healthcare, gift and travel. Visa-branded
prepaid cards also play an important part in financial inclusion, bringing payment solutions to those with
limited or no access to traditional banking products.
Debit: Debit cards and digital credentials allow consumers and small businesses to purchase goods and
services using funds held in their deposit accounts. Debit cards enable account holders to transact in person,
online or via mobile without needing cash or checks and without accessing a line of credit. The Visa/PLUS
Global ATM network also provides debit, credit and prepaid account holders with cash access, and other
banking capabilities, in more than 200 countries and territories worldwide through issuing and acquiring
partnerships with both financial institutions and independent ATM operators.
Credit: Credit cards and digital credentials allow consumers and businesses to access credit to pay for
goods and services. Credit cards are affiliated with programs operated by financial institution clients,
co-brand partners, fintechs and affinity partners.
Visa's growth has been driven by the strength of our core products — credit, debit and prepaid.
Core Products
7
Click to Pay
Tokenization
Tap to Pay
Credit Debit • Prepaid
T
ENABLERS
CORE PRODUCTS
We remain focused on moving trillions of dollars of consumer spending in cash and checks to cards and
digital accounts on Visa's network of networks.
Consumer Payments
Tap to Pay
As we seek to improve the user experience in the face-to-face environment, contactless payments or tap to
pay, which is the process of tapping a contactless card or mobile device on a terminal to make a payment, has
emerged as a preferred way to pay among consumers in many countries around the world. Tap to pay adoption is
growing and many consumers have come to expect touchless payment experiences.
Globally, we have 50 countries and territories with more than 90 percent contactless penetration and more
than 100 countries and territories where tap to pay is more than 50 percent of face-to-face transactions. Excluding
the United States, 76 percent of face-to-face transactions globally were contactless in fiscal year 2023. In the
U.S., Visa has surpassed 40 percent contactless penetration and more than 520 million tap-to-pay-enabled Visa
cards. We have activated more than 750 contactless public transport projects worldwide. In addition, we
processed more than 1.6 billion contactless transactions on global transit systems in fiscal year 2023, an increase
of more than 30 percent year over year.
T
$14.8B
Board of Directors
9
We are also expanding our network with B2B payments. Our three strategic areas of focus include investing
in and growing card-based payments, accelerating our efforts in non-card, cross-border payments and digitizing
domestic accounts payable and accounts receivable processes. We offer a portfolio of commercial payment
solutions, including small business, corporate (travel) cards, purchasing cards, virtual cards and digital
credentials, non-card cross-border B2B payment options and disbursement accounts, covering most major
industry segments around the world. These solutions are designed to bring efficiency, controls and automation to
small businesses, commercial and government payment processes, ranging from employee travel to fully
integrated, invoice-based payables.
Visa Commercial Solutions
We continue to build on our network of networks strategy by investing in our own capabilities with Visa+ and
Visa Alias Directory Service, which offers capabilities to our clients to link aliases, such as mobile numbers or
email addresses, to payment credentials, as well as strategically collaborating with digital and mobile payment
providers to expand the reach of Visa Direct and deliver even stronger domestic and cross-border payment and
connection capabilities to our clients.
Visa Direct is part of Visa's strategy beyond C2B payments and helps facilitate the delivery of funds to
eligible cards, deposit accounts and digital wallets across more than 190 countries and territories. Visa Direct
supports multiple use cases, such as P2P payments and account-to-account transfers, business and government
payouts to individuals or small businesses, merchant settlements and refunds.
Visa Direct
Value Added Services
VISA CROSS-BORDER
SOLUTIONS
New flows focus on facilitating commercial and global money movement across Visa's network of networks.
This approach creates opportunities to capture new sources of money movement through card and non-card
flows for consumers, businesses and governments around the world by facilitating P2P, B2C, B2B and G2C
payments.
New Flows
Click to Pay provides a simplified and more consistent cardholder checkout experience online by removing
time-consuming key entry of personal information and enabling consumer and transaction data to be passed
securely between payments network participants. Based on the EMVⓇ Secure Remote Commerce industry
standard, Click to Pay brings a standardized and streamlined approach to online checkout and meets the needs
of consumers shopping across a growing number of connected devices. The goal of Click to Pay is to make digital
payments as secure, reliable and interoperable as the checkout experience in person.
Click to Pay
8
The provisioning of network tokens continues to accelerate. As of the end of fiscal year 2023, Visa
provisioned more than 7.5 billion network tokens, surpassing the number of physical cards in circulation. The
milestone reinforces Visa's commitment to secure, reliable and efficient money movement, in person and online.
Visa Token Service (VTS) brings trust to digital commerce innovation. As consumers increasingly rely on
digital transactions, VTS is designed to enhance the digital ecosystem through improved authorization, reduced
fraud and improved consumer experience. VTS helps protect digital transactions by replacing 16-digit Visa
account numbers with a token that includes a surrogate account number, cryptographic information and other
data to protect the underlying account information. This security technology can work for a variety of payment
transactions, both in person or online.
Tokenization
VISA COMMERCIAL
SOLUTIONS
New Flows
VISA DIRECT
consumer payments, new flows and value
Consist mainly of value added services related to advisory,
marketing and certain card benefits; license fees for use of the
Visa brand or technology; and fees for account holder
services, certification and licensing
OTHER REVENUES
(1) Figure may not recalculate exactly due to rounding.
Earned for cross-border transaction processing and currency
conversion activities
INTERNATIONAL TRANSACTION REVENUES
Earned for authorization, clearing, settlement; value added
services related to issuing, acceptance, and risk and identity
solutions; network access; and other maintenance and
support services that facilitate transaction and information
processing among our clients globally
DATA PROCESSING REVENUES
Earned for services provided in support of client usage of Visa
payment services
CLIENT INCENTIVES
SERVICE REVENUES
OTHER
$11.6B
$32.7B¹
NET REVENUES
$16.0B
DATA PROCESSING
Consumer Payments
($12.3B)
$2.5B-
Paid to financial institution clients, merchants and other
business partners to grow payments volume; increase Visa
product acceptance; win merchant routing transactions over to
our network; and drive innovation
INTERNATIONAL TRANSACTION
Visa provides payment processing for both non-Visa-branded and Visa-branded card transactions. In the
context of non-Visa-branded card transactions, we facilitate payment processing by providing gateway routing
services to other payment networks. At the client's request, we may provide authorization, clearing or settlement
services on our network before or after we route the transaction to the other payments network. In those
instances, Visa may earn data processing revenues for the specific services provided. In the context of Visa-
branded card transactions on our network, we provide authorization, clearing and settlement services and may
earn service, data processing, international transaction, or other revenues. Depending on applicable regulations,
some payment processors may or may not use our network to process Visa-branded card transactions. If they
use our network, we may earn service revenues and data processing revenues. If they do not use our network,
we earn only service revenues.
Revenue Growth Drivers
Please see Item 7 and Note 1-Summary of Significant Accounting Policies included in Item 8 of this report,
which include disclosures on how we earn and recognize our revenues.
Talent
We seek to accelerate revenue growth in three primary areas
added services.
Brand
Technology
Platforms
Network of
Networks
FORTIFY KEY
FOUNDATIONS
Value Added Services
Security
Consumer Payments
GROWTH DRIVERS
Visa is not a financial institution. We do not issue cards, extend credit or set rates and fees for account
holders of Visa products nor do we earn revenues from, or bear credit risk with respect to, any of these activities.
REVENUE
Visa's strategy is to accelerate our revenue growth in consumer payments, new flows and value added
services, and fortify the key foundations of our business model.
Our Strategy
New Flows
Interchange reimbursement fees reflect the value merchants receive from accepting our products and play a key
role in balancing the costs and benefits that account holders and merchants derive from participating in our
payments networks. Generally, interchange reimbursement fees are paid by acquirers to issuers. We establish
default interchange reimbursement fees that apply absent other established settlement terms. These default
interchange reimbursement fees are set independently from the revenues we receive from issuers and acquirers.
Our acquiring clients are responsible for setting the fees they charge to merchants for the MDR and for soliciting
merchants. Visa sets fees to acquirers independently from any fees that acquirers may charge merchants.
Therefore, the fees we receive from issuers and acquirers are not derived from interchange reimbursement fees
or MDRs.
6
Our network of networks strategy means moving money to all endpoints and to all form factors, using all
available networks and being a single connection point for our partners; and providing our value added services
on all transactions, no matter the network. The key component of our network of networks strategy is
interoperability. We are opening up our network and increasingly using other networks to reach accounts we could
not otherwise reach and enabling new types of money movement. Visa B2B Connect, Visa Direct, and Visa+ are
examples of our strategy.
Given Visa's ambitious growth agenda and efforts to achieve our purpose, we have focused on enhancing
our employees' expertise across our business. This includes an enhanced development program for our senior
leaders and a formal technology apprenticeship program to help us broaden and strengthen our talent channels
and pipelines. We have also committed to providing employees with the tools they need to do their work more
quickly and easily, including an artificial intelligence or Al-driven portal with a searchable knowledge base to
create customized results and bespoke solutions. We enhanced our mental well-being and retirement benefits,
which is reflective of our key priority to take care of our employees.
with 55 percent located outside the U.S. At the end of fiscal year 2023, Visa's global workforce was 58 percent
men and 42 percent women, and women represented 36 percent of Visa's leadership (defined as vice president
level and above). In the U.S., ethnicity of our workforce was 42 percent Asian, 8 percent Black, 13 percent
Hispanic, 3 percent Other and 35 percent White. For our U.S. leadership, the breakdown was 18 percent Asian,
6 percent Black, 13 percent Hispanic, 3 percent Other and 60 percent White.
12
Attracting, developing and advancing the best talent globally is critical to our continued success. This year
we grew our total workforce from approximately 26,500 in fiscal year 2022 to approximately 28,800 employees in
fiscal year 2023, an increase of 9 percent year over year. Voluntary workforce turnover (rolling 12-month attrition)
was 6 percent as of September 30, 2023. Visa employees are located in more than 80 countries and territories,
Talent
Brand
Our in-depth, multi-layer security approach includes a formal program to devalue sensitive and/or personal
data through various cryptographic means; embedded security in the software development lifecycle; identity and
access management controls to protect against unauthorized access; and advanced cyber detection and
response capabilities. We deploy security tools that help keep our clients and consumers safe. We also invest
significantly in our comprehensive approach to cybersecurity. We deploy security technologies to protect data
confidentiality, the integrity of our network and service availability to strengthen our core cybersecurity capabilities
to minimize risk. Our payments fraud disruption team continually monitors threats to the payments ecosystem to
help ensure attacks are detected and prevented efficiently and effectively.
Security
Visa's leading technology platforms comprise software, hardware, data centers and
a large telecommunications infrastructure. Visa's four data centers are a critical part of our global processing
environment and have a high redundancy of network connectivity, power and cooling designed to provide
continuous availability of systems. Together, these systems deliver the secure, convenient and reliable service
that our clients and consumers expect from the Visa brand.
We also are dedicated to ensuring that employees feel valued in their day-to-day work. During our global
employee engagement survey last year, we learned that our employees wanted more opportunities to recognize
and be recognized, in more informal ways. In response, Visa developed a program that better enabled employees
to provide peer-to-peer recognition for each other's contributions. Using UPLIFT, Visa's new recognition platform,
employees can celebrate their peers' achievements, send e-cards to celebrate the employee journey (from
welcoming new hires to recognizing service anniversaries), use an automated internal networking tool that
matches employees based on smart algorithms, and more. Importantly, all our recognition categories are
grounded in behaviors that reflect our employee value proposition or Visa's Leadership Principles further
reinforcing that at Visa, it is not only about what you achieve, but how you do it. Employee engagement in peer
recognition has significantly increased since the launch, with monthly active users reaching 78 percent in
September 2023, compared to 45 percent in September 2022. With this enhanced platform, employees are
encouraged to recognize and uplift each other.
Technology Platforms
Visa's strong brand helps deliver added value to our clients and their customers, financial institutions,
merchants and partners through compelling brand expressions, a wide range of products and services as well as
innovative brand and marketing efforts. In line with our commitment to an expansive and diverse range of
partnerships for the benefit of our stakeholders, Visa is a sponsor of top entertainment and sports events
including the FIFA Women's World Cup 2023™, the Olympic and Paralympic Games, and the Super Bowl.
Visa is committed to pay equity, regardless of gender or race/ethnicity, and conducts pay equity analyses on
an annual basis. We are also committed to transparency - this year, we launched total rewards statements in the
United Kingdom in addition to those already provided in Asia, to drive a deeper understanding and appreciation of
total rewards value to the individual. We plan to introduce statements in the U.S. as well. For additional
information regarding our human capital management, please see the section titled "Talent and Human Capital
Management" in Visa's 2023 Proxy Statement as well as our website at visa.com/esg, which includes enhanced
workforce disclosures that include our 2022 Consolidated EEO-1 Report and our 2022 Environmental, Social and
Governance (ESG) Report. See Available Information below.
In fiscal year 2023, we signed a definitive agreement to acquire Pismo, a cloud-native issuer processing and
core banking platform with operations in Latin America, Asia Pacific and Europe. The transaction is subject to
customary closing conditions, including applicable regulatory reviews and approvals.
-
Fintechs are a vital growth engine for Visa and a key driver in realizing our purpose to uplift everyone,
everywhere by being the best way to pay and be paid. Fintechs are key enablers of new payment experiences
and new flows. Our work with fintechs is one of our greatest opportunities and has opened new points of
acceptance, extended credit at the point of sale, made cross-border money flows more efficient, moved B2B
spend onto Visa's network, expedited payroll and provided digital wallet customers access to our services. Our
portfolio of fintech partners is diverse and continues to grow and scale. We signed more than 500 commercial
partnerships with fintechs globally, from early stage companies to growing and mature players, an increase of
25 percent year over year.
To better serve fintechs, Visa has a suite of streamlined commercial programs and digital onboarding tools.
Fintech Fast Track, our flagship program for fintechs is designed to help launch new financial features quickly,
such as launching a new card program or enabling the movement of money with Visa Direct. We provide
streamlined onboarding and turnkey access to hundreds of ecosystem partners. The program has welcomed
hundreds of fintechs who are actively engaged in the program.
13
Visa Ready, our certification program, helps technology companies build and launch payment solutions that
meet Visa's global standards around security and functionality. Fintech Partner Connect helps build pathways
between Visa's issuing clients and fintech providers. With our startup engagement programs, like the Visa
Everywhere Initiative that launched in 2022, early-stage companies can build payment solutions based on our
capabilities. Visa also manages programs including She's Next, Empowered by Visa, a global women's
entrepreneurship initiative, and Africa Fintech Accelerator Program to uplift underrepresented communities.
MERGERS AND ACQUISITIONS, JOINT VENTURES AND STRATEGIC INVESTMENTS
Visa continually explores opportunities to augment our capabilities and provide meaningful value to our
clients. Mergers and acquisitions, joint ventures and strategic investments complement our internal development
and enhance our partnerships to align with Visa's priorities. Visa applies a rigorous business analysis to our
acquisitions, joint ventures and investments to ensure they will differentiate our network, provide value added
services and accelerate growth.
CORPORATE RESPONSIBILITY AND SUSTAINABILITY
Visa is committed to operating as a responsible, ethical, inclusive and sustainable company. As one of the
global leaders in digital payments, Visa strives to join with clients, partners and other stakeholders to empower
people, businesses and communities to thrive, to be an industry leader in addressing the corporate responsibility
and sustainability (CRS) topics most significant to our role as a payments technology company, and to meet and
exceed our expectations for performance and transparency. Visa's purpose is to uplift everyone, everywhere by
being the best way to pay and be paid. We believe deeply in our purpose, and we are focused on empowering
people and economies; securing commerce and protecting customers; investing in our workforce; protecting the
planet; and operating responsibly. Our 2022 ESG Report, as well as other CRS-related resources are available on
our website at visa.com/esg. See Available Information below.
INTELLECTUAL PROPERTY
We own and manage the Visa brand, which stands for acceptance, security, convenience, speed and
reliability. Our portfolio of Visa-owned trademarks important to our business. Generally, trademark registrations
are valid indefinitely as long as they are in use and/or maintained. We give our clients access to these assets
through agreements with our issuers and acquirers, which authorize the use of our trademarks in connection with
their participation in our payments network. Additionally, we own a number of patents and patent applications
related to our business and continue to pursue patents in emerging technologies that may have applications in
our business. We rely on a combination of patent, trademark, copyright and trade secret laws in the U.S. and
other jurisdictions, as well as confidentiality procedures and contractual provisions, to protect our proprietary
technology.
COMPETITION
The global payments industry continues to undergo dynamic change. Existing and emerging competitors
compete with Visa's network and payment solutions for consumers and for participation by financial institutions
and merchants. Technology and innovation are shifting consumer habits and driving growth opportunities in
ecommerce, mobile payments, blockchain technology and digital currencies. These advances are enabling new
entrants, many of which depart from traditional network payment models. In certain countries, the evolving
regulatory landscape is creating local networks or enabling additional processing competition.
Network of Networks
14
FINTECH AND DIGITAL PARTNERSHIPS
TALENT
We also provide a range of other services and digital solutions to issuers, such as account controls, digital
issuance, and branded consumer experiences. Additionally, Visa provides loyalty and benefits solution to issuers
aimed at creating compelling and differentiated cardholder experiences, as well as Buy Now, Pay Later (BNPL)
capabilities. BNPL or installment payments allow shoppers the flexibility to pay for a purchase in equal payments
over a defined period of time. Visa is investing in installments as a payments strategy. by offering a portfolio of
BNPL solutions for traditional clients, as well as installments providers, who use our cards and services to support
a wide variety of installment options before, during or after checkout, in person and online.
SECURITY
We compete against all forms of payment. This includes paper-based payments, primarily cash and checks,
and all forms of electronic payments. Our electronic payment competitors principally include:
Visa B2B Connect is a multilateral B2B cross-border payments network designed to facilitate transactions
from the bank of origin directly to the beneficiary bank, helping streamline settlement and optimize payments for
financial institutions' corporate clients. The network delivers B2B cross-border payments that are reliable, flexible,
data-rich, secure and cost-effective. Visa B2B Connect continues to scale and is available in more than 100
countries and territories.
Visa Cross-Border Solutions
Formerly Treasury as a Service, Visa Cross-Border Solutions aligns with our global network of networks
strategy, as we are focused on building the infrastructure that enables our clients of all sizes to deliver cross-
border products with visibility, speed and security. This includes a series of solutions for our established cross-
border consumer payments business, as well as use cases enabled by our digitally native Currencycloud
platform, which includes real-time foreign exchange rates, virtual accounts, and enhanced liquidity and settlement
capabilities.
Value Added Services
Value added services represent an opportunity for us to diversify our revenue with products and solutions
that differentiate our network, deepen our client relationships and deliver innovative solutions across other
networks.
ISSUING
SOLUTIONS
Issuing Solutions
ACCEPTANCE
SOLUTIONS
RISK & IDENTITY
SOLUTIONS
OPEN
BANKING
ADVISORY
SERVICES
Visa DPS is one of the largest issuer processors of Visa debit transactions in the world. In addition to multi-
network transaction processing, Visa DPS also provides a wide range of value added services, including fraud
mitigation, dispute management, data analytics, campaign management, a suite of digital solutions and contact
center services. Our capabilities in API-based issuer processing solutions, like DPS Forward, allow our clients to
create new payments use cases and provide them with modular capabilities for digital payments.
Acceptance Solutions
BRAND
―
10
In addition, Visa provides secure, reliable services for merchants and acquirers that reduce friction and drive
acceptance. Examples include Global Urban Mobility, which supports transit operators to accept Visa contactless
payments in addition to closed-loop payment solutions; and Visa Account Updater, which provides updated
account information for merchants to help strengthen customer relationships and retention. Visa also offers
dispute management services, including a network-agnostic solution from Verifi that enables merchants to
prevent and resolve disputes with a single connection.
Risk and Identity Solutions
Visa's risk and identity solutions transform data into insights for near real-time decisions and facilitate
account holder authentication to help clients prevent fraud and protect account holder data. With the increasing
popularity of omnichannel commerce and digital payments among consumers, fraud prevention helps increase
trust in digital payments. Solutions such as Visa Advanced Authorization, Visa Secure, Visa Risk Manager and
Decision Manager, Visa Consumer Authentication Service, and payment-decisioning solutions from
CardinalCommerce empower financial institutions and merchants with tools that help automate and simplify fraud
prevention and enhance payment security.
Aligned to our network of networks strategy, Visa is increasingly bringing our expertise and capabilities to
emerging fraud challenges, working with network operators and financial institutions to help mitigate fraud. These
value-added fraud prevention tools layer on top of a suite of our network programs that protect the safety and
integrity of the payment ecosystem, and along with our investments in intelligence and technology, help to
prevent, detect and mitigate threats. These programs and Visa's fraud prevention expertise are among the core
benefits of being part of the Visa network. Through the combined efforts of security and identity tools and
services, payment and cyber intelligence, insights and learnings from client or partner breach investigations, and
law enforcement engagement, Visa helps protect financial institutions and merchants from fraud and solve
payment security challenges.
Open Banking
In March 2022, Visa acquired Tink AB, an open banking platform, to catalyze fintech innovation and
accelerate the development and adoption of open banking securely and at scale. Visa's open banking capabilities
range from data access use cases, such as account verification, balance check and personal finance
management, to payment initiation capabilities, such as account-to-account transactions and merchant payments.
These capabilities can help our partner businesses deliver valuable services to their customers.
Advisory Services
Visa Consulting and Analytics (VCA) is the payments consulting advisory arm of Visa. The combination of
our deep payments expertise, proprietary analytical models applied to a breadth of data and our economic
intelligence allows us to identify actionable insights, make recommendations and help implement solutions that
can drive better business decisions and measurable outcomes for clients. VCA offers consulting services for
issuers, acquirers, merchants, fintechs and other partners, spanning the entire customer journey from acquisition
to retention. Further, VCA Managed Services, our dedicated execution arm within the consulting division, is being
increasingly utilized by clients to implement our recommendations and wider value added services product
enablement.
11
Fortify Key Foundations
We are fortifying the key foundations of our business model, which consist of becoming a network of
networks, our technology platforms, security, brand and talent.
NETWORK OF
NETWORKS
TECHNOLOGY
PLATFORMS
Visa Acceptance Solutions, which includes Cybersource, provides modular, value added services in addition
to the traditional gateway function of connecting merchants to payment processing. Using the platform, acquirers,
payment service providers, independent software vendors, and merchants of all sizes can improve the way their
consumers engage and transact; help to mitigate fraud and lower operational costs; and adapt to changing
business requirements. They can also connect with other fintechs through a global payment management
platform to use their services. Visa Acceptance Solutions' capabilities provide new and enhanced payment
integrations with ecommerce platforms, enabling sellers and acquirers to provide tailored commerce experiences
with payments seamlessly embedded. Visa Acceptance Solutions enables an omnichannel solution with a cloud-
based architecture to deliver more innovation at the point of sale.
Global or Multi-Regional Networks: These networks typically offer a range of branded, general purpose
card payment products that consumers can use at millions of merchant locations around the world. Examples
include American Express, Discover, JCB, Mastercard and UnionPay. These competitors may be more
concentrated in specific geographic regions, such as Discover in the U.S. and JCB in Japan, or have a leading
position in certain countries, such as UnionPay in China. See Item 1A-Regulatory Risks-Government-imposed
obligations and/or restrictions on international payments systems may prevent us from competing against
providers in certain countries, including significant markets such as China and India. Based on available data,
Visa is one of the largest retail electronic funds transfer networks used throughout the world.
16
Payments Volume ($B)
We believe our fundamental value proposition of security, convenience, speed and reliability as well as the
number of credentials and our acceptance footprint help us to succeed. In addition, we understand the needs of
the individual markets in which we operate and partner with local financial institutions, merchants, fintechs,
governments, NGOs and business organizations to provide tailored and innovative solutions. We will continue to
utilize our network of networks strategy to facilitate the movement of money. We believe Visa is well-positioned
competitively due to our global brand, our broad set of payment products, new flows offerings and value added
services, and our proven track record of processing payment transactions securely and reliably.
GOVERNMENT REGULATION
As a global payments technology company, we are subject to complex and evolving global regulations in the
various jurisdictions in which our products and services are used. The most significant government regulations
that impact our business are discussed below. For further discussion of how global regulations may impact our
business, see Item 1A-Regulatory Risks.
Anti-Corruption, Anti-Money Laundering, Anti-Terrorism and Sanctions: We are subject to anti-
corruption laws and regulations, including the U.S. Foreign Corrupt Practices Act (FCPA), the UK Bribery Act and
other laws that generally prohibit the making or offering of improper payments to foreign government officials and
political figures for the purpose of obtaining or retaining business or to gain an unfair business advantage. We are
also subject to anti-money laundering and anti-terrorist financing laws and regulations, including the U.S. Bank
Secrecy Act. In addition, we are subject to economic and trade sanctions programs administered by the Office of
Foreign Assets Control (OFAC) in the U.S. Therefore, we do not permit financial institutions or other entities that
are domiciled in countries or territories subject to comprehensive OFAC trade sanctions (currently, Cuba, Iran,
North Korea, Syria, Crimea, and the Donetsk People's Republic and Luhansk People's Republic regions of
Ukraine), or that are included on OFAC's list of Specially Designated Nationals and Blocked Persons, to issue or
acquire Visa cards or engage in transactions using our products and services.
Government-Imposed Market Participation Restrictions: Certain governments, including China, India,
Indonesia, Thailand and Vietnam, have taken actions to promote domestic payments systems and/or certain
issuers, payments networks or processors, by imposing regulations that favor domestic providers, impose local
ownership requirements on processors, require data localization or mandate that domestic processing be done in
that country.
Interchange Rates and Fees: An increasing number of jurisdictions around the world regulate or influence
debit and credit interchange reimbursement rates in their regions. For example, the U.S. Dodd-Frank Wall Street
Reform and Consumer Act (Dodd-Frank Act) limits interchange reimbursement rates for certain debit card
transactions in the U.S.; the European Union (EU) IFR limits interchange rates in the European Economic Area
(EEA) (as discussed below); and the Reserve Bank of Australia (RBA) and the Central Bank of Brazil regulate
average permissible levels of interchange.
Internet Transactions: Many jurisdictions have adopted regulations that require payments system
participants to monitor, identify, filter, restrict or take other actions with regard to certain types of payment
transactions on the Internet, such as gambling, digital currencies, the purchase of cigarettes or alcohol and other
controversial transaction types.
Network Exclusivity and Routing: In the U.S., the Dodd-Frank Act limits network exclusivity and
restrictions on merchant routing choice for the debit and prepaid market segments. Other jurisdictions impose
similar limitations, such as the IFR's prohibition in Europe on restrictions that prevent multiple payment brands or
functionality on the same card.
No-surcharge Rules: We have historically enforced rules that prohibit merchants from charging higher
prices to consumers who pay using Visa products instead of other means. However, merchants' ability to
surcharge varies by geographic market as well as Visa product type, and continues to be impacted by litigation,
regulation and legislation.
Privacy and Data Protection: Aspects of our operations or business are subject to privacy, data use and
data security regulations, which impact the way we use and handle data, operate our products and services and
even impact our ability to offer a product or service. In addition, regulators are proposing new laws or regulations
that could require Visa to adopt certain cybersecurity and data-handling practices, create new individual privacy
rights and impose increased obligations on companies handling personal data.
Supervisory Oversight of the Payments Industry: Visa is subject to financial sector oversight and
regulation in substantially all of the jurisdictions in which we operate. In the U.S., for example, the Federal
Banking Agencies (FBA) (formerly known as the Federal Financial Institutions Examination Council) has
supervisory oversight over Visa under applicable federal banking laws and policies as a technology service
provider to U.S. financial institutions. The federal banking agencies comprising the FBA are the Federal Reserve
Board, the Comptroller of the Currency, the Federal Deposit Insurance Corporation and the National Credit Union
Administration. Visa also may be separately examined by the Consumer Financial Protection Bureau as a service
provider to the banks that issue Visa-branded consumer credit and debit card products. Central banks in other
countries/regions, including Canada, Europe, India, Ukraine and the UK (as discussed below), have recognized or
designated Visa as a retail payment system under various types of financial stability regulations. Visa is also
subject to oversight by banking and financial sector authorities in other jurisdictions, such as Brazil and Hong
Kong.
European and United Kingdom Regulations and Supervisory Oversight: Visa in Europe continues to be
subject to complex and evolving regulation in the EEA and the UK.
There are a number of EU regulations that impact our business. As discussed above, the IFR regulates
interchange rates within the EEA, requires Visa Europe to separate its payment card scheme activities from
processing activities for accounting, organization and decision-making purposes within the EEA, and imposes
limitations on network exclusivity and routing. National competent authorities in the EEA are responsible for
monitoring and enforcing the IFR in their markets. We are also subject to regulations governing areas such as
privacy and data protection, anti-bribery, anti-money laundering, anti-terrorism and sanctions. Other regulations in
Europe, such as the second Payment Services Directive (PSD2), require, among other things, that our financial
institution clients provide certain customer account access rights to emerging non-financial institution players.
PSD2 also includes strong customer authentication requirements for certain transactions that could impose both
operational complexity on Visa and impact consumer payment experiences. Visa Europe is also subject to
supervisory oversight by the European Central Bank and certain competent authorities in Europe.
Value Added Service Providers: We face competition from companies that provide alternatives to our
value added services. This includes a wide range of players, such as technology companies, information services
and consulting firms, governments and merchant services companies. The integration of technology like
generative Al can create new and better offerings that compete with our value added services, such as
strengthened risk monitorization and managing digital identification. Regulatory initiatives could also lead to
increased competition in these areas.
17
Corporate Responsibility and Sustainability: Certain governments around the world are adopting laws
and regulations pertaining to corporate responsibility and sustainability performance, transparency and reporting.
Regulations may include mandated corporate reporting (e.g., Corporate Sustainability Reporting Directive) or in
individual areas, such as mandated reporting on climate-related financial disclosures.
Additional Regulatory Developments: Various regulatory agencies across the world also continue to
examine a wide variety of other issues, including mobile payment transactions, tokenization, access rights for
non-financial institutions, money transfer services, identity theft, account management guidelines, disclosure
rules, security and marketing that could affect our financial institution clients and our business. Furthermore,
following the passage of PSD2 in Europe, several countries, including Australia, Brazil, Canada, Hong Kong and
Mexico, are contemplating granting or have already granted various types of access rights to third-party
processors, including access to consumer account data maintained by our financial institution clients. These
changes could have negative implications for our business depending on how the regulations are framed and
implemented.
AVAILABLE INFORMATION
Our corporate website is visa.com/ourbusiness. Our annual reports on Form 10-K, our quarterly reports on
Form 10-Q, our current reports on Form 8-K, proxy statements and any amendments to those reports filed or
furnished pursuant to the U.S. Securities Exchange Act of 1934, as amended, can be viewed at sec.gov and our
investor relations website at investor.visa.com as soon as reasonably practicable after these materials are
electronically filed with or furnished to the U.S. Securities and Exchange Commission (SEC). In addition, we
routinely post financial and other information, which could be deemed to be material to investors, on our investor
relations website. Information regarding our corporate responsibility and sustainability initiatives is also available
on our website at visa.com/esg. The content of any of our websites referred to in this report is not incorporated by
reference into this report or any other filings with the SEC.
ITEM 1A. Risk Factors
Regulatory Risks
We are subject to complex and evolving global regulations that could harm our business and financial
results.
As a global payments technology company, we are subject to complex and evolving regulations that govern
our operations. See Item 1-Government Regulation for more information on the most significant areas of
regulation that affect our business. The impact of these regulations on us, our clients, and other third parties could
limit our ability to enforce our payments system rules; require us to adopt new rules or change existing rules;
affect our existing contractual arrangements; increase our compliance costs; and require us to make our
technology or intellectual property available to third parties, including competitors, in an undesirable manner. As
discussed in more detail below, we may face differing rules and regulations in matters like interchange
reimbursement rates, preferred routing, domestic processing and localization requirements, currency conversion,
point-of-sale transaction rules and practices, privacy, data use or protection, licensing requirements, and
associated product technology. As a result, the Visa operating rules and our other contractual commitments may
18
differ from country to country or by product offering. Complying with these and other regulations increases our
costs and reduces our revenue opportunities.
If widely varying regulations come into existence worldwide, we may have difficulty rapidly adjusting our
product offerings, services, fees and other important aspects of our business to comply with the regulations. Our
compliance programs and policies are designed to support our compliance with a wide array of regulations and
laws, such as regulations regarding anti-money laundering, anti-corruption, competition, money transfer services,
privacy and sanctions, and we continually adjust our compliance programs as regulations evolve. However, we
cannot guarantee that our practices will be deemed compliant by all applicable regulatory authorities. In the event
our controls should fail or we are found to be out of compliance for other reasons, we could be subject to
monetary damages, civil and criminal penalties, litigation, investigations and proceedings, and damage to our
global brands and reputation. Furthermore, the evolving and increased regulatory focus on the payments industry
could negatively impact or reduce the number of Visa products our clients issue, the volume of payments we
process, our revenues, our brands, our competitive positioning, our ability to use our intellectual property to
differentiate our products and services, the quality and types of products and services we offer, the countries in
which our products are used, and the types of consumers and merchants who can obtain or accept our products,
all of which could harm our business and financial results.
Increased scrutiny and regulation of the global payments industry, including with respect to interchange
reimbursement fees, merchant discount rates, operating rules, risk management protocols and other
related practices, could harm our business.
Regulators around the world have been establishing or increasing their authority to regulate various aspects
of the payments industry. See Item 1-Government Regulation for more information. In the U.S. and many other
jurisdictions, we have historically set default interchange reimbursement fees. Even though we generally do not
receive any revenue related to interchange reimbursement fees in a payment transaction (in the context of credit
and debit transactions, those fees are paid by the acquirers to the issuers; the reverse is true for certain
transactions like ATM), interchange reimbursement fees are a factor on which we compete with other payments
providers and are therefore an important determinant of the volume of transactions we process. Consequently,
changes to these fees, whether voluntarily or by mandate, can substantially affect our overall payments volumes
and revenues.
Interchange reimbursement fees, certain operating rules and related practices continue to be subject to
increased government regulation globally, and regulatory authorities and central banks in a number of jurisdictions
have reviewed or are reviewing these fees, rules and practices. For example:
In the UK, Visa Europe is designated as a Recognized Payment System, bringing it within the scope of the
Bank of England's supervisory powers and subjecting it to various requirements, including on issues such as
governance and risk management designed to maintain the stability of the UK's financial system. Visa Europe is
also regulated by the UK's Payment Systems Regulator (PSR), which has wide-ranging powers and authority to
review our business practices, systems, rules and fees with respect to promoting competition and innovation in
the UK, and ensuring payment systems take care of, and promote, the interests of service-users. Post-Brexit, the
UK has adopted various European regulations, including regulations that impact the payments ecosystem, such
as the IFR and PSD2. The PSR is responsible for monitoring Visa Europe's compliance with the IFR as adopted
in the UK.
The following chart compares our network with these network competitors for calendar year 2022(1):
New Flows Providers: We compete with alternative solutions to our new flows (e.g., Visa Direct and Visa
B2B Connect) such as ACH, RTP and wires. We compete with other global and local card networks for
commercial card portfolios. Additionally, we may face competition from financial institution clients who are
experimenting with B2B blockchain payments.
15
Total Volume ($B)(2)
Total Transactions (B)
Cards (M)
Visa
American Express
Diners Club /
Discover
JCB
Mastercard
11,668
14,108
1,540
243
312
6,568
1,553
Payment Processors: Payment processors may perform processing services on third-party payments
networks on behalf of issuers or acquirers. We compete with payment processors for the processing of Visa
transactions. These processors may benefit from mandates requiring them to handle processing under local
regulation. For example, as a result of regulation in Europe under the Interchange Fee Regulation (IFR), we may
face competition from other networks, processors and other third parties who could process Visa transactions
directly with issuers and acquirers.
258
8,177
260
4,160
10
133
6
150
80
153
2,713
(1) American Express, Diners Club / Discover, JCB and Mastercard data sourced from The Nilson Report issue 1241 (May 2023). Includes all
consumer, small business and commercial credit, debit and prepaid cards. American Express, Diners Club / Discover, and JCB include
business from third-party issuers. JCB figures include other payment-related products and some figures are estimates. Mastercard
excludes Maestro and Cirrus figures.
(2) Total volume is the sum of payments volume and cash volume. Cash volume generally consists of cash access transactions, balance
access transactions, balance transfers and convenience checks.
Local and Regional Networks: Operated in many countries, these networks often have the support of
government influence or mandate. In some cases, they are owned by financial institutions or payment processors.
These networks typically focus on debit payment products, and may have strong local acceptance, and
recognizable brands. Examples include NYCE, Pulse and STAR in the U.S., Interac in Canada and eftpos in
Australia.
Alternative Payments Providers: These providers, such as closed commerce ecosystems, BNPL solutions
and cryptocurrency platforms, often have a primary focus of enabling payments through ecommerce and mobile
channels; however, they are expanding or may expand their offerings to the physical point of sale. These
companies may process payments using in-house account transfers between parties, electronic funds transfer
networks like the ACH, global or local networks like Visa, or some combination of the foregoing. In some cases,
these entities can be both a partner and a competitor to Visa.
Real-time Payment (RTP) Networks: RTP networks have launched in multiple markets and continue to be
driven by strong government sponsorship and regulatory initiatives to enable and drive adoption (e.g., FedNow in
the U.S., PIX in Brazil and United Payments Interface (UPI) in India), increasing their position as an alternative to
payment card schemes. These networks primarily focus on domestic transactions, with adoption varying by use
cases and geographies. However, with linkages such as PayNow in Singapore and UPI in India, cross-border
RTP networks are advancing and will compete with our cross-border business. RTP networks can compete with
Visa on consumer payments and other payment flows (e.g., B2B and P2P) but can also be customers for value
added services, such as risk management.
Digital Wallet Providers: They continue to expand payment capabilities in person and online for consumers
and merchants and provide consumers with additional ways to pay. While digital wallets can help drive Visa
volumes, they can also be funded by non-card payment options. Digital wallet providers who utilize RTP networks
provide additional competition.
320
Regulations adopted by the U.S. Federal Reserve cap the maximum U.S. debit interchange
reimbursement rate received by large financial institutions at 21 cents plus 5 basis points per transaction,
plus a possible fraud adjustment of 1 cent. Additionally, the Dodd-Frank Act limits issuers' and our ability
to adopt network exclusivity and preferred routing in the debit and prepaid area, which also impacts our
business. In response to merchant requests, the Federal Reserve has recently taken actions to revisit its
regulations that implement these aspects of the Dodd-Frank Act. For example, in October 2022, the
Federal Reserve published a final rule effectively requiring issuers to ensure that at least two unaffiliated
networks are available for routing card not present debit transactions by July 1, 2023. In October 2023,
the Federal Reserve issued a proposal for comment which would further lower debit interchange rates,
with a mechanism for automatic adjustment every two years. Separately, there continues to be interest in
regulation of credit interchange fees and routing practices by members of Congress and state legislators
in the U.S. In June 2023, legislation was reintroduced in the U.S. House of Representatives and Senate,
which among other things, would require large issuing banks to offer a choice of at least two unaffiliated
networks over which electronic credit transactions may be processed. Similar legislation was introduced
in the previous Congress in 2022 but failed to advance and become law. The current legislation has
additional bipartisan support, and while the ultimate outcome of the legislation remains unclear, its
sponsors continue to strongly advocate for its passage.
19
In addition, outbreaks of illnesses, pandemics like COVID-19, or other local or global health issues, political
uncertainties, international hostilities, armed conflicts, wars, civil unrest, climate-related events, including the
increasing frequency of extreme weather events, impacts to the power grid, and natural disasters have to varying
degrees negatively impacted our operations, clients, third-party suppliers, activities, and cross-border travel and
spend. Although the World Health Organization and the federal government declared an end to COVID-19 as a
global and national health emergency, respectively, risks related to COVID-19 have adversely affected and may
continue to adversely affect our business, results of operations, cash flows and financial condition. The ongoing
effects of the COVID-19 pandemic remain difficult to predict due to numerous uncertainties, including the
resumption of international travel, and the indirect impact of the pandemic on global economic activity. In addition,
a number of countries took steps during the pandemic to temporarily cap interchange or other fees on electronic
payments as part of their COVID-19 economic relief measures. While most have been rescinded or have expired,
it is possible that proponents of interchange and/or MDR regulation may try to position government intervention as
necessary to support potential future economic relief initiatives.
When we cannot set default interchange reimbursement rates at optimal levels, issuers and acquirers may
find our payments system less attractive. This may increase the attractiveness of other payments systems, such
as our competitors' closed-loop payments systems with direct connections to both merchants and consumers. We
believe some issuers may react to such regulations by charging new or higher fees, or reducing certain benefits to
consumers, which make our products less appealing to consumers. Some acquirers may elect to charge higher
MDR regardless of the Visa interchange reimbursement rate, causing merchants not to accept our products or to
steer customers to alternative payments systems or forms of payment. In addition, in an effort to reduce the
expense of their payment programs, some issuers and acquirers have obtained, and may continue to obtain,
incentives from us, including reductions in the fees that we charge, which directly impacts our revenues.
In addition, we are also subject to central bank oversight in a growing number of countries, including Brazil,
India, the UK and within the EU. Some countries with existing oversight frameworks are looking to further
enhance their regulatory powers while regulators in other jurisdictions are considering or adopting approaches
based on these regulatory principles. This oversight could result in new governance, reporting, licensing,
cybersecurity, processing infrastructure, capital, or credit risk management requirements. We could also be
required to adopt policies and practices designed to mitigate settlement and liquidity risks, including increased
requirements to maintain sufficient levels of capital and financial resources locally, as well as localized risk
management or governance. Increased oversight could also include new criteria for member participation and
merchant access to our payments system.
Finally, policymakers and regulatory bodies in the U.S., Europe, and other parts of the world are exploring
ways to reform existing competition laws to meet the needs of the digital economy, including restricting large
technology companies from engaging in mergers and acquisitions, requiring them to interoperate with potential
competitors, and prohibiting certain kinds of self-preferencing behaviors. While the focus of these efforts remains
primarily on increasing regulation of large technology, e-commerce and social media companies, they could also
have implications for other types of companies including payments networks, which could constrain our ability to
effectively manage our business or potentially limit how we make our products and services available.
Government-imposed obligations and/or restrictions on international payments systems may prevent us
from competing against providers in certain countries, including significant markets such as China and
India.
Governments in a number of jurisdictions shield domestic payments providers, including card networks,
brands, and processors, from international competition by imposing market access barriers and preferential
domestic regulations. To varying degrees, these policies and regulations affect the terms of competition in the
marketplace and impair the ability of international payments networks to compete. Public authorities may also
impose regulatory requirements that favor domestic providers or mandate that domestic payments or data
processing be performed entirely within that country, which could prevent us from managing the end-to-end
processing of certain transactions.
In China, UnionPay remains the predominant processor of domestic payment card transactions and operates
the predominant domestic acceptance mark. Although we filed an application with the People's Bank of China
(PBOC) in May 2020 to operate a Bank Card Clearing Institution (BCCI) in China, the timing and the procedural
steps for approval remain uncertain. There is no guarantee that the license to operate a BCCI will be approved or,
if we obtain such license, that we will be able to successfully compete with domestic payments networks.
Co-badging and co-residency regulations also pose additional challenges in markets where Visa competes with
national networks for issuance and routing. Certain banks have issued dual-branded cards for which domestic
transactions in China are processed by UnionPay and transactions outside of China are processed by Visa or
other international payments networks. The PBOC is contemplating that dual-branded cards be phased out over
time as new licenses are issued to international companies to participate in China's domestic payments market.
Accordingly, we have been working with Chinese issuers to issue Visa-only branded cards for international travel,
and later for domestic transactions should we obtain a BCCI license. However, notwithstanding such efforts, the
phase out of dual-branded cards have decreased our payment volumes and impacted the revenue we generate in
China.
21
UnionPay has grown rapidly in China and is actively pursuing international expansion plans, which could
potentially lead to regulatory pressures on our international routing rule (which requires that international
transactions on Visa cards be routed over VisaNet). Furthermore, although regulatory barriers shield UnionPay
from competition in China, alternative payments providers such as Alipay and WeChat Pay have rapidly expanded
into ecommerce, offline, and cross-border payments, which could make it difficult for us to compete even if our
license is approved in China. NetsUnion Clearing Corp, a Chinese digital transaction routing system, and other
such systems could have a competitive advantage in comparison with international payments networks.
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Regulatory initiatives in India, including a data localization mandate passed by the government that suggest
growing nationalistic priorities, has cost implications for us and could affect our ability to effectively compete with
domestic payments providers. Furthermore, any inability to meet the requirements of the data localization
mandate could impact our ability to do business in India. In Europe, with the support of the European Central
Bank, a group of European banks have announced their intent to launch a pan-European payment system, the
European Payments Initiative (EPI). While EPI subsequently announced a focus on account-to-account instant
payments across a range of use cases, it is noteworthy that the purported motivation behind EPI is to reduce the
risks of disintermediation of European providers by international technology companies and continued reliance on
international payments networks for intra-Europe card transactions. Furthermore, regional groups of countries,
such as the Gulf Cooperation Council (GCC) and a number of countries in Southeast Asia (e.g., Malaysia), have
adopted or may consider, efforts to restrict our participation in the processing of regional transactions. The African
Development Bank has also indicated an interest in supporting national payment systems in its efforts to expand
financial inclusion and strengthen regional financial stability. Finally, some countries such as South Africa are
mandating on-shore processing of domestic transactions. Geopolitical events, including sanctions, trade tensions
or other types of activities have intensified any or all of these activities, which could adversely affect our business.
For example, in the aftermath of U.S. and European sanctions against Russia and the decision by U.S. payments
networks, including Visa to suspend operations in the country, some countries have expressed concerns about
their reliance on U.S. financial services companies, including payments networks, and have taken steps to bolster
the development of domestic solutions. Separately, Russia has called for the BRICS countries (a five-country bloc
made up of Brazil, Russia, India, China and South Africa, and which recently extended invitations to Argentina,
Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates), to lessen dependence on Western payments
systems by, among other things, integrating payments systems and cards across member countries.
Due to our inability to manage the end-to-end processing of transactions for cards in certain countries (e.g.,
Thailand), we depend on our close working relationships with our clients or third-party service providers to ensure
transactions involving our products are processed effectively. Our ability to do so may be adversely affected by
regulatory requirements and policies pertaining to transaction routing or on-shore processing. In general, national
laws that protect or otherwise support domestic providers or processing may increase our costs; decrease our
payments volumes and impact the revenue we generate in those countries; decrease the number of Visa
products issued or processed; impede us from utilizing our global processing capabilities and controlling the
quality of the services supporting our brands; restrict our activities; limit our growth and the ability to introduce
new products, services and innovations; force us to leave countries or prevent us from entering new markets; and
create new competitors, all of which could harm our business.
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Laws and regulations regarding the handling of personal data and information may impede our services
or result in increased costs, legal claims, or fines against us.
Our business relies on the movement of data across national borders. Legal requirements relating to the
collection, storage, handling, use, disclosure, transfer and security of personal data continue to evolve, and we
are subject to an increasing number of privacy and data protection requirements around the world. For example,
our ongoing efforts to comply with complex U.S. state privacy and data protection regulations, and emerging
international privacy and data protection laws, may increase the complexity of our compliance operations, entail
substantial expenses, divert resources from other initiatives and projects, and limit the services we are able to
offer. Additionally, privacy laws in other regions, such as China's Personal Information Protection Law and India's
Personal Data Protection Act, have extraterritorial application and include restrictions on processing sensitive
data, extensive notification requirements, and substantial compliance and audit obligations. The global
proliferation of new privacy and data protection laws may lead to inconsistent and conflicting requirements, which
create an uncertain regulatory environment. Noncompliance could also result in regulatory penalties and
significant legal liability. Enforcement actions and investigations by regulatory authorities into companies related
to data security incidents and privacy violations are generally increasing. In Europe, data protection authorities
continue to apply and enforce the General Data Protection (GDPR), imposing record setting fines.
We are also subject to a variety of laws and regulations governing the development, use, and deployment of
Al technologies. These laws and regulations are still evolving, and there is no single global regulatory framework
for Al. The market is still assessing how regulators may apply existing consumer protection and other laws in the
context of Al. There is thus uncertainty on what new laws will look like and how existing laws will apply to our
development, use, and deployment of Al. In the midst of this uncertainty, we may face challenges due to the
complexity and rapidly changing nature of Al technology and applicable laws. Our use of Al and machine learning
is subject to various risks at each stage of use. In the context of Al development, risks relate to intellectual
property considerations, the use of personal information, and flaws in algorithms or datasets used for training. In
the context of use and deployment, risks include ethical considerations regarding the outputs, and our ability to
safely deploy Al throughout the organization. Our development and implementation of governance frameworks for
our Al and machine learning systems may not be successful in mitigating all of these emerging risks.
We may be subject to tax examinations or disputes, or changes in tax laws.
We exercise significant judgment and make estimates in calculating our worldwide provision for income
taxes and other tax liabilities. Although we believe our tax estimates are reasonable, many factors may limit their
accuracy. We are currently under examination by, or in disputes with, the U.S. Internal Revenue Service, the UK's
HM Revenue and Customs as well as tax authorities in other jurisdictions, and we may be subject to additional
examinations or disputes in the future. Relevant tax authorities may disagree with our tax treatment of certain
material items and thereby increase our tax liability. Failure to sustain our position in these matters could harm
our cash flow and financial position. In addition, changes in existing laws in the U.S. or foreign jurisdictions,
including unilateral actions of foreign jurisdictions to introduce digital services taxes, or changes resulting from the
Organization for Economic Cooperation and Development's Program of Work, related to the revision of profit
allocation and nexus rules and design of a system to ensure multinational enterprises pay a minimum level of tax
to the countries where we earn revenue, may also materially affect our effective tax rate. A substantial increase in
our tax payments could have a material, adverse effect on our financial results. See also Note 19-Income Taxes
to our consolidated financial statements included in Item 8 of this report.
Central banks in a number of countries, including those in Argentina, Australia, Canada, Brazil, Europe and
Mexico, are in the process of developing or expanding national RTP networks and instant payment solutions with
the goal of driving a greater number of domestic transactions onto these systems. In July 2023, the U.S. Federal
Reserve launched its FedNow Service with core clearing and settlement functionality, and expects to add more
features and enhancements over time. Some countries are also exploring cross-border connectivity of their
respective RTP systems. Finally, an increasing number of jurisdictions are exploring the concept of building
central bank digital currencies for retail payments. If successfully deployed, these national payment platforms and
digital currencies could have significant implications for Visa's domestic and cross-border payments, including
potential disintermediation.
Litigation Risks
Regulators around the world increasingly take note of each other's approaches to regulating the payments
industry. Consequently, a development in one jurisdiction may influence regulatory approaches in another. The
risks created by a new law, regulation or regulatory outcome in one jurisdiction have the potential to be replicated
and to negatively affect our business in another jurisdiction or in other product offerings. For example, our
settlement with the European Commission on cross-border interchange rates has drawn preliminary attention
from some regulators in other parts of the world. Similarly, new regulations involving one product offering may
prompt regulators to extend the regulations to other product offerings. For example, credit payments could
become subject to similar regulation as debit payments (or vice versa). The RBA initially capped credit
interchange, but subsequently capped debit interchange as well.
While the focus of interchange and MDR regulation has primarily been on domestic rates historically,
there is increasing focus on cross-border rates in recent years. For example, in 2019, we settled certain
cross-border interchange rates with the European Commission. In 2020, Costa Rica became the first
country to formally regulate cross-border interchange rates by direct regulation. Cross-border MDR is also
regulated in Costa Rica and Turkey. Finally, in June 2022, the UK's PSR initiated two market reviews:
one focusing on post-Brexit increases in interchange rates for transactions between the UK and Europe,
and another focusing on increases in the UK in what are referred to as scheme and processing fees.
Geopolitical trends towards nationalism, protectionism, and restrictive visa requirements, as well as
continued activity and uncertainty around economic sanctions, tariffs or trade restrictions also limit the expansion
of our business in certain regions and have resulted in us suspending our operations in other regions. During
fiscal 2022, economic sanctions were imposed on Russia by the U.S., European Union, United Kingdom and
other jurisdictions and authorities, impacting Visa and its clients. In March 2022, we suspended our operations in
Russia and as a result, are no longer generating revenue from domestic and cross-border activities related to
Russia. For fiscal 2022 and 2021, total net revenues from Russia, including revenues driven by domestic as well
as cross-border activities, were approximately 2% and 4% of our consolidated net revenues, respectively. The
war in Ukraine and any further actions by, or in response to such actions by, Russia or its allies could have lasting
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impacts on Ukraine as well as other regional and global economies, any or all of which could adversely affect our
business.
A decline in economic, political, market, health and social conditions could impact our clients as well, and
their decisions could reduce the number of cards, accounts, and credit lines of their account holders, and impact
overall consumption by consumers and businesses, which would ultimately impact our revenues. Our clients may
implement cost-reduction initiatives that reduce or eliminate marketing budgets, and decrease spending on
optional or enhanced value added services from us. Any events or conditions that impair the functioning of the
financial markets, tighten the credit market, or lead to a downgrade of our current credit rating could increase our
future borrowing costs and impair our ability to access the capital and credit markets on favorable terms, which
could affect our liquidity and capital resources, or significantly increase our cost of capital.
Finally, as governments, investors and other stakeholders face additional pressures to accelerate actions to
address climate change and other environmental, governance and social topics, governments are implementing
regulations and investors and other stakeholders are imposing new expectations or focusing investments in ways
that may cause significant shifts in disclosure, commerce and consumption behaviors that may have negative
impacts on our business. As a result of any of these factors, any decline in cross-border travel and spend would
impact our cross-border volumes, the number of cross-border transactions we process and our currency
exchange activities, which in turn would reduce our international transaction revenues.
Our aspirations to address corporate responsibility and sustainability (CRS) matters and considerations
could adversely affect our business and financial results or negatively impact our reputation.
We are subject to laws, regulations and other measures that govern a wide range of topics, including those
that are related to matters beyond our core products and services, such as matters that touch upon sustainability,
climate change, human capital, inclusion and diversity, and human rights. A wide range of stakeholders, including
governments, customers, employees, and investors are increasingly focused on and are developing expectations
regarding these corporate responsibility matters. We have established CRS-related initiatives, adopted reporting
frameworks, and announced several related goals. These goals may change from time to time, implementation of
these goals may require considerable investments, and ultimately, we cannot guarantee that we will achieve
them.
As referenced above, with increased lobbying by merchants and other industry participants, we are also
beginning to see regulatory interest in network fees in the UK, Europe and Chile. In addition, industry
participants in some countries like Argentina, Chile, Colombia, Dominican Republic, Paraguay, Peru and
South Africa have sought intervention from competition regulators or filed claims relating to certain
network rules, including Visa's restrictions on cross-border acquiring. Other countries, like New Zealand,
are adopting regulations that require us to seek government pre-approval of our network rules, which
could also impact the way we operate in certain markets.
Our ability to achieve any CRS objectives is subject to numerous risks, many of which are outside of our
control, including the evolving legal environment and regulatory requirements for the tracking and reporting of
CRS standards or disclosures and the actions of suppliers, partners, and other third parties. Certain of our
regulators have proposed or adopted, or may propose or adopt, rules or standards related to these matters that
I would apply to our business. Prevailing CRS standards and expectations may also reflect conflicting values or
objectives, which can result in our practices being judged by standards that are continually evolving and are not
always clear. From time to time, the methodologies for reporting our CRS data may be updated and previously
reported data may be adjusted to reflect an improvement in the availability and quality of data, changing
assumptions, changes in the nature and scope of our operations, and other changes in circumstances. This may
result in a lack of consistent or meaningful comparative data from period to period or between us and other
companies in the same industry. Further, where new laws or regulations are more stringent than current legal or
regulatory requirements, we may experience increased compliance burdens and costs to meet such obligations.
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More than half of our net revenues are earned outside the U.S. International cross-border transaction
revenues represent a significant part of our revenue and are an important part of our growth strategy. Our
revenues are dependent on the volume and number of payment transactions made by consumers, governments,
and businesses whose spending patterns may be affected by economic, political, market, health and social
events or conditions. Adverse macroeconomic conditions within the U.S. or internationally, including but not
limited to recessions, inflation, rising interest rates, high unemployment, currency fluctuations, actual or
anticipated large-scale defaults or failures, rising energy prices, or a slowdown of global trade, and reduced
consumer, small business, government, and corporate spending, have a direct impact on our volumes,
transactions and revenues. Furthermore, in efforts to deal with adverse macroeconomic conditions, governments
may introduce new or additional initiatives or requests to reduce or eliminate payment fees or other costs. In an
overall soft global economy, such pricing measures could result in additional financial pressures on our business.
•
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In Europe, the EU's IFR places an effective cap on consumer credit and consumer debit interchange fees
for both domestic and cross-border transactions within the EEA (30 basis points and 20 basis points,
respectively). EU member states have the ability to further reduce these interchange levels within their
territories. The European Commission has announced its intention to conduct another impact assessment
of the IFR, which could result in even lower caps on interchange rates and the expansion of regulation to
other types of products, services and fees.
Several countries in Latin America continue to explore regulatory measures against payments networks
and have either adopted or are exploring interchange caps, including Argentina, Brazil, Chile and Costa
Rica. In Asia Pacific, the Reserve Bank of Australia (RBA) completed its review of the country's payment
system regulations and adopted a series of measures, which include lower interchange rates for debit
transactions. The RBA also continues to assess the potential merits of mandating co-badging and
merchant routing choice on dual network debit cards. In addition, the New Zealand Parliament passed
legislation capping domestic interchange rates for debit and credit products. Finally, many governments,
including but not limited to governments in India, Costa Rica, and Turkey, are using regulation to further
drive down MDR, which could negatively affect the economics of our transactions.
Our stakeholders often hold differing views on our CRS-related goals and initiatives, which may result in
negative attention in traditional and social media or a negative perception of our response to concerns regarding
these matters. In addition, we also face potentially conflicting supervisory directives as certain U.S. regulatory and
non-U.S. authorities have prioritized CRS-related issues while Congress and certain U.S. state governments have
signaled pursuing potentially conflicting priorities. These circumstances, among others, may result in pressure
from investors, unfavorable reputational impacts, including inaccurate perceptions or a misrepresentation of our
actual CRS practices, diversion of management's attention and resources, and proxy fights, among other material
adverse impacts on our businesses. Any failure, or perceived failure, by us to adhere to our public statements,
We may be adversely affected by the outcome of litigation or investigations.
Government regulations or pressure may also impact our rules and practices and require us to allow
other payments networks to support Visa products or services, to have the other network's functionality or
brand marks on our products, or to share our intellectual property with other networks. As innovations in
payment technology have enabled us to expand into new products and services, they have also
expanded the potential scope of regulatory influence. For instance, new products and capabilities,
including tokenization, push payments, and new flows (e.g., Visa B2B Connect) could bring increased
licensing or authorization requirements in the countries where the product or capability is offered.
Furthermore, certain of our businesses are regulated as payment institutions or as money transmitters,
subjecting us to various licensing, supervisory, and other requirements. In addition, the EU's requirement
to separate scheme and processing adds costs and impacts the execution of our commercial, innovation
and product strategies.
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New or revised industry standards related to online checkout and web payments, cloud-based payments,
tokenization or other payments-related technologies set by individual countries, regions or organizations
such as the International Organization for Standardization, American National Standards Institute, World
Wide Web Consortium, European Card Standards Group, PCI Co, Nexo and EMVCO may result in
additional costs and expenses for Visa and its clients, or otherwise negatively impact the functionality and
competitiveness of our products and services.
As the competitive landscape is quickly evolving, we may not be able to foresee or respond sufficiently to
emerging risks associated with new businesses, products, services and practices. We may be asked to adjust our
local rules and practices, develop or customize certain aspects of our payment services, or agree to business
arrangements that may be less protective of Visa's proprietary technology and interests in order to compete and
we may face increasing operational costs and risk of litigation concerning intellectual property. Our failure to
compete effectively in light of any such developments could harm our business and prospects for future growth.
Our revenues and profits are dependent on our client and merchant base, which may be costly to win,
retain and develop.
Our financial institution clients and merchants can reassess their commitments to us at any time or develop
their own competitive services. While we have certain contractual protections, our clients, including some of our
largest clients, generally have flexibility to issue non-Visa products. Further, in certain circumstances, our financial
institution clients may decide to terminate our contractual relationship on relatively short notice without paying
significant early termination fees. Because a significant portion of our net revenues is concentrated among our
largest clients, the loss of business from any one of these larger clients could harm our business, results of
operations and financial condition. For more information, please see Note 14-Enterprise-wide Disclosures and
Concentration of Business to our consolidated financial statements included in Item 8 of this report.
In addition, it may be difficult or costly for us to acquire or conduct business with financial institutions or
merchants that have longstanding exclusive, or nearly exclusive, relationships with our competitors. These
financial institutions or merchants may be more successful and may grow more quickly than our existing clients or
merchants. In addition, if there is a consolidation or acquisition of one or more of our largest clients or co-brand
partners by a financial institution client or merchant with a strong relationship with one of our competitors, it could
result in our business shifting to a competitor, which could put us at a competitive disadvantage and harm our
business.
Global economic, political, market, health and social events or conditions may harm our business.
We are involved in numerous litigation matters, investigations, and proceedings asserted by civil litigants,
governments, and enforcement bodies investigating or alleging, among other things, violations of competition and
antitrust law, consumer protection law, privacy law and intellectual property law (these are referred to as "actions"
in this section). Details of the most significant actions we face are described more fully in Note 20—Legal Matters
disruptions; data security breaches; compliance failures by Visa, including by our employees, agents, clients,
partners or suppliers; failure to meet expectations of our clients, consumers, or other stakeholders; negative
perception of our industry, the industries of our clients, Visa-accepting merchants, or our clients' customers and
agents, including third-party payments providers; ill-perceived actions or affiliations by clients, partners or other
third parties, such as sponsorship or co-brand partners; and fraudulent, or illegal activities using our payment
products or services, and which we may not always be in a position to detect and/or prevent from occurring over
our network. Our brand could also be negatively impacted when our products are used to facilitate payment for
legal, but controversial, products and services, including, but not limited to, adult content, cryptocurrencies,
firearms and gambling activities. Additionally, these risks could be exacerbated if our financial institution partners
and/or merchants fail to maintain necessary controls to ensure the legality of these transactions, if any legal
liability associated with such goods or services is extended to ancillary participants in the value chain like
payments networks, or if our network and industry become entangled in political or social debates concerning
such legal, but controversial, commerce. If we are unable to maintain our reputation, the value of our brand may
be impaired, which could harm our relationships with clients, account holders, employees, prospective employees,
governments and the public, as well as impact our business.
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Our brand is globally recognized and is a key asset of our business. We believe that our clients and their
account holders associate our brand with acceptance, security, convenience, speed, and reliability. Our success
depends in large part on our ability to maintain the value of our brand and reputation of our products and services
in the payments ecosystem, elevate the brand through new and existing products, services and partnerships, and
uphold our corporate reputation. The popularity of products that we have developed in partnership with
technology companies and financial institutions as well as government actions that mandate other networks to
process Visa-branded card transactions may have the potential to cause brand disintermediation at the point of
sale, in ecommerce and mobile channels, and decrease the presence of our brand. Our brand reputation may
also be negatively impacted by a number of factors, including authorization, clearing and settlement service
Our business could be harmed if we are not able to maintain and enhance our brand, if events occur that
have the potential to damage our brand or reputation, or if we experience brand disintermediation.
As noted above, our relationships with industry participants are complex and require us to balance the
interests of multiple third parties. For instance, we depend significantly on relationships with our financial
institution clients and on their relationships with account holders and merchants to support our programs and
services, and thereby compete effectively in the marketplace. We provide incentives to merchants, acquirers,
ecommerce platforms and processors to promote routing preference and acceptance growth. We also engage in
many payment card co-branding efforts with merchants, who receive incentives from us. As emerging participants
such as fintechs enter the payments industry, we engage in discussions to address the role they may play in the
ecosystem, whether as, for example, an issuer, merchant, ecommerce platform or digital wallet provider. As these
and other relationships become more prevalent and take on a greater importance to our business, our success
will increasingly depend on our ability to sustain and grow these relationships. In addition, we depend on our
clients and third parties, including network partners, vendors and suppliers, to submit, facilitate and process
transactions properly, provide various services associated with our payments network on our behalf, and
otherwise adhere to our operating rules and applicable laws. To the extent that such parties fail to perform or
deliver adequate services, it may result in negative experiences for account holders or others when using their
Visa-branded payment products, which could harm our business and reputation.
We depend on relationships with financial institutions, acquirers, processors, merchants, payment
facilitators, ecommerce platforms, fintechs and other third parties.
services, by lobbying for new legislation, seeking regulatory intervention, filing lawsuits and in some cases,
surcharging or refusing to accept Visa products. If they are successful in their efforts, we may face increased
compliance and litigation expenses, issuers may decrease their issuance of our products, and consumer usage of
our products could be adversely impacted. For example, in the U.S., certain stakeholders have raised concerns
regarding how payment security standards and rules may impact debit routing choice and the cost of payment
card acceptance. In addition to ongoing litigation related to the U.S. migration to EMV-capable cards and
point-of-sale terminals, U.S. merchant-affiliated groups and processors have expressed concerns regarding the
EMV certification process and some policymakers have expressed concerns about the roles of industry bodies
such as EMVCo and the Payment Card Industry Security Standards Council in the development of payment card
standards. Additionally, many merchants have advocated for lower acceptance costs in the form of reduced
interchange rates, which could result in some issuers eliminating or reducing their promotion or use of Visa's
products and services, eliminating or reducing cardholder benefits such as rewards programs, or charging
account holders increased or new fees for using Visa-branded products, all of which could negatively impact
Visa's transaction volumes and related revenues. Finally, some merchants and processors have advocated for
changes to industry practices and Visa acceptance requirements at the point of sale, including the ability for
merchants to accept only certain types of Visa products, to mandate only PIN authenticated transactions, to
differentiate or steer among Visa product types issued by different financial institutions, and to impose surcharges
on customers presenting Visa products as their form of payment. If successful, these efforts could adversely
impact consumers' usage of our products and decrease our overall transaction volumes and fee revenues, lead to
regulatory enforcement and/or litigation that increases our compliance and litigation expenses, and ultimately
harm our business.
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We rely in part on merchants and their relationships with our clients or their agents to maintain and expand
the use and acceptance of Visa products. Certain merchants and merchant-affiliated groups have been exerting
their influence in the global payments system in certain jurisdictions, such as the U.S., Canada and Europe, to
attempt to lower acceptance costs paid by merchants to acquirers or their agents to accept payment products or
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In addition, we face intense competitive pressure on the prices we charge our financial institution clients. In
certain regions, we are increasingly facing competition from RTP networks and other payment facilitators offering
lower pricing, as well as initiatives to lower costs, such as the G20 Roadmap for Enhancing Cross-border
Payments. In order to stay competitive, we may need to adjust our pricing or offer incentives to our clients to
increase payments volume, enter new market segments, adapt to regulatory changes, and expand their use and
acceptance of Visa products and services. These include up-front cash payments, fee discounts, rebates, credits,
performance-based incentives, marketing and other support payments that impact our revenues and profitability.
In addition, we offer incentives to certain merchants and acquirers to win routing preference in relation to other
network options or forms of payment. Market pressures on pricing, incentives, fee discounts and rebates could
moderate our growth. If we are not able to implement cost containment and productivity initiatives in other areas
of our business or increase our volumes in other ways to offset or absorb the financial impact of these incentives,
fee discounts and rebates, it may harm our net revenues and profits.
Merchants' and processors' continued push to lower acceptance costs and challenge industry practices
could harm our business.
We expect the competitive landscape to continue to shift and evolve. For example:
Participants in the payments industry may merge, form joint ventures or enable or enter into other
business combinations that strengthen their existing business propositions or create new, competing
payment services.
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Certain of our competitors operate with different business models, have different cost structures or
participate in different market segments. Those business models may ultimately prove more successful or more
adaptable to regulatory, technological and other developments. In some cases, these competitors have the
support of government mandates that prohibit, limit or otherwise hinder our ability to compete for transactions
within certain countries and regions. Some of our competitors, including American Express, Discover, private-
label card networks, virtual currency providers, technology companies that enable the exchange of digital assets,
and certain alternative payments systems like Alipay and WeChat Pay, operate closed-loop payments systems,
Our competitors may acquire, develop, or make better use of substantially better technology, have more
widely adopted delivery channels, or have greater financial resources. They may offer more effective, innovative
or a wider range of programs, products and services. They may use more effective advertising and marketing
strategies that result in broader brand recognition, and greater use, including with respect to issuance and
merchant acceptance. They may also develop better security solutions or more favorable pricing arrangements.
Moreover, even if we successfully adapt to technological change and the proliferation of alternative types of
payment services by developing and offering our own services in these areas, such services may provide less
favorable financial terms for us than we currently receive from VisaNet transactions, which could hurt our financial
results and prospects.
The global payments space is intensely competitive. As technology evolves and consumer expectations
change, new competitors or methods of payment emerge, and existing clients and competitors assume different
roles. Our products compete with cash, checks, electronic payments, virtual currency payments, global or multi-
regional networks, other domestic and closed-loop payments systems, digital wallets and alternative payments
providers primarily focused on enabling payments through ecommerce and mobile channels. As the global
payments space becomes more complex, we face increasing competition from our clients, other emerging
payment providers such as fintechs, other digital payments, technology companies that have developed
payments systems enabled through online activity in ecommerce, social media, and mobile channels, as well as
governments in a number of jurisdictions (e.g., Brazil and India) as discussed above, that are developing,
supporting and/or operating national schemes, RTP networks and other payment platforms.
We face intense competition in our industry.
Business Risks
For certain actions like those that are U.S. covered litigation or VE territory covered litigation, as described in
Note 5-U.S. and Europe Retrospective Responsibility Plans and Note 20-Legal Matters to our consolidated
financial statements included in Item 8 of this report, we have certain financial protections pursuant to the
respective retrospective responsibility plans. The two retrospective responsibility plans are different in the
protections they provide and the mechanisms by which we are protected. The failure of one or both of the
retrospective responsibility plans to adequately insulate us from the impact of such settlements, judgments,
losses, or liabilities could materially harm our financial condition or cash flows, or even cause us to become
insolvent.
to our consolidated financial statements included in Item 8 of this report. These actions are inherently uncertain,
expensive and disruptive to our operations. In the event we are found liable or reach a settlement in any action,
particularly in a large class action lawsuit, such as one involving an antitrust claim entitling the plaintiff to treble
damages in the U.S., or we incur liability arising from a government investigation, we may be required to pay
significant awards, settlements or fines. In addition, settlement terms, judgments, orders or pressures resulting
from actions may harm our business by influencing or requiring us to modify, among other things, the default
interchange reimbursement rates we set, the Visa operating rules or the way in which we enforce those rules, our
fees or pricing, or the way we do business. These actions or their outcomes may also influence regulators,
investigators, governments or civil litigants in the same or other jurisdictions, which may lead to additional actions
against Visa. Finally, we are required by some of our commercial agreements to indemnify other entities for
litigation brought against them, even if Visa is not a defendant.
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We, along with our competitors, clients, network participants, and others are developing or participating in
alternative payments systems or products, such as mobile payment services, ecommerce payment
services, P2P payment services, real-time and faster payment initiatives, and payment services that
permit ACH or direct debits from or to consumer checking accounts, that could either reduce our role or
otherwise disintermediate us from the transaction processing or the value added services we provide to
support such processing. Examples include initiatives from The Clearing House, an association consisting
of large financial institutions that has developed its own faster payments system; Early Warning Services,
which operates Zelle, a bank-offered alternative network that provides another platform for faster funds or
real-time payments across a variety of payment types, including P2P, corporate and government
disbursement, bill pay and deposit check transactions; and cryptocurrency or stablecoin-based payments
initiatives.
Many countries or regions are developing or promoting domestic networks, switches and RTP systems
(e.g., U.S., Brazil, India and Europe) and in some countries the government itself owns and operates
these RTP systems (e.g., Brazil). To the extent these governments mandate local banks and merchants
to use and accept these systems for domestic or other transactions, prohibit international payments
networks, like Visa, from participating on those systems, and/or impose restrictions or prohibitions, on
international payments networks from offering payment services on such transactions, we could face the
risk of our business being disintermediated in those countries. For example, in some regions (Latin
America, Southeast Asia and the Middle East), including through intergovernmental organizations such as
the Association of Southeast Asian Nations and the GCC, some countries are looking into cross-border
connectivity of such domestic systems. Similarly, India has expressed interest in expanding its digital
public infrastructure, which includes its RTP system, UPI, outside the country and for cross-border
payments. Currently, international payment networks like Visa are unable to participate in UPI.
Parties that process our transactions may try to minimize or eliminate our position in the payments value
chain.
Parties that access our payment credentials, tokens and technologies, including clients, technology
solution providers or others might be able to migrate or steer account holders and other clients to
alternative payment methods or use our payment credentials, tokens and technologies to establish or
help bolster alternate payment methods and platforms.
with direct connections to both merchants and consumers. Government actions or initiatives such as the Dodd-
Frank Act, the IFR in Europe, or RTP initiatives by governments such as the U.S. Federal Reserve's Fed Now or
the Central Bank of Brazil's Pix system may provide competitors with increased opportunities to derive
competitive advantages from these business models, and may create new competitors, including in some cases
the government itself. Similarly, regulation in Europe under PSD2 and the IFR may require us to open up access
to, and allow participation in, our network to additional participants, and reduce the infrastructure investment and
regulatory burden on competitors. In addition to the open banking provisions under PSD2, efforts to implement or
facilitate open banking and open finance requirements are underway across a number of countries, including
Australia, Brazil, Canada and the U.S., which could impose additional requirements on financial institutions or
others regarding access to and use of financial data. We also run the risk of disintermediation due to factors such
as emerging technologies and platforms, including mobile payments, alternative payment credentials, other ledger
technologies or payment forms, and by virtue of increasing bilateral agreements between entities that prefer not to
use our payments network for processing transactions. For example, merchants could process transactions
directly with issuers, or processors could process transactions directly with issuers and acquirers.
39
0.34
Non-GAAP
assets
Amortization of acquired intangible
net . .
(Gains) losses on equity investments,
As reported.
8.77
18.1 % $ 18,280 $
$ 10,481 $ 141 $ 4,033
16%
99
Acquisition-related costs
Non-GAAP net income(2)
98
705
(in millions, except percentages and per share data)
$ 32,653 $ 29,310 $ 24,105
$ 11,653 $ 10,497 $ 8,301
VS.
2021
2022
VS.
2022
2023
% Change(1)
2021
2022
For the Years Ended
September 30,
36
2023
Non-GAAP operating expenses(2)
Diluted earnings per share
Net income
Operating expenses
Net revenues
Financial overview. A summary of our as-reported U.S. GAAP and non-GAAP operating results is as follows:
Visa is a global payments technology company that facilitates global commerce and money movement
across more than 200 countries and territories among a global set of consumers, merchants, financial institutions
and government entities through innovative technologies. We provide transaction processing services (primarily
authorization, clearing and settlement) to our financial institution and merchant clients through VisaNet, our
proprietary advanced transaction processing network. We offer products, solutions and services that facilitate
secure, reliable, and efficient money movement for all participants in the ecosystem.
Overview
This section of the report generally discusses fiscal 2023 compared to fiscal 2022. Discussions of fiscal 2022
compared to 2021 that are not included in this report can be found in “Management's Discussion and Analysis of
Financial Condition and Results of Operations” in Part II, Item 7 in our Annual Report on Form 10-K for the year
ended September 30, 2022, filed with the United States Securities and Exchange Commission.
This management's discussion and analysis provides a review of the results of operations, financial condition
and liquidity and capital resources of Visa Inc. and its subsidiaries (Visa, we, us, our or the Company) on a
historical basis and outlines the factors that have affected recent earnings, as well as those factors that may affect
future earnings. The following discussion and analysis should be read in conjunction with the consolidated
financial statements and related notes included in Item 8 of this report.
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Non-GAAP diluted earnings per share(2)
201
Amortization of acquired intangible assets. Amortization of acquired intangible assets consists of
amortization of intangible assets such as developed technology, customer relationships and brands
acquired in connection with business combinations executed beginning in fiscal 2019. Amortization
charges for our acquired intangible assets are non-cash and are significantly affected by the timing,
frequency and size of our acquisitions, rather than our core operations. As such, we have excluded this
amount to facilitate an evaluation of our current operating performance and comparison to our past
operating performance.
83
88
38
11 %
Gains and losses on equity investments. Gains and losses on equity investments include periodic
non-cash fair value adjustments and gains and losses upon sale of an investment. These long-term
investments are strategic in nature and are primarily private company investments. Gains and losses
associated with these investments are tied to the performance of the companies that we invest in and
therefore do not correlate to the underlying performance of our business.
•
•
Non-GAAP financial results. We use non-GAAP financial measures of our performance which exclude
certain items which we believe are not representative of our continuing operations, as they may be non-recurring
or have no cash impact, and may distort our longer-term operating trends. We consider non-GAAP measures
useful to investors because they provide greater transparency into management's view and assessment of our
ongoing operating performance.
Common stock repurchases. In October 2022, our board of directors authorized a $12.0 billion share
repurchase program. During fiscal 2023, we repurchased 55 million shares of our class A common stock in the
open market for $12.2 billion. As of September 30, 2023, our share repurchase program had remaining
authorized funds of $5.0 billion. In October 2023, our board of directors authorized a new $25.0 billion share
repurchase program, providing multi-year flexibility. See Note 15-Stockholders' Equity to our consolidated
financial statements included in Item 8 of this report.
Potential exchange offer program. In September 2023, we announced that we are engaging with our
common stockholders on the subject of potential amendments to our certificate of incorporation that would
authorize Visa to conduct an exchange offer program that would have the effect of releasing transfer restrictions
on portions of our class B common stock prior to the final resolution of the U.S. covered litigation. See our current
report on Form 8-K filed with the SEC on September 13, 2023.
Interchange multidistrict litigation. During fiscal 2023, we recorded additional accruals of $906 million to
address claims associated with the interchange multidistrict litigation. We also made deposits of $1.0 billion into
the U.S. litigation escrow account. See Note 5-U.S. and Europe Retrospective Responsibility Plans and
Note 20 Legal Matters to our consolidated financial statements included in Item 8 of this report.
Pending acquisition. In June 2023, we entered into a definitive agreement to acquire Pismo Holdings
(Pismo), a cloud-native issuer processing and core banking platform with operations in Latin America, Asia Pacific
and Europe, for $1.0 billion in cash. This acquisition is subject to customary closing conditions, including
applicable regulatory reviews and approvals.
GAAP operating expenses increased 11% over the prior year, primarily driven by higher expenses related to
personnel. See Results of Operations-Operating Expenses below for further discussion. Non-GAAP operating
expenses increased 12% over the prior year, primarily driven by higher expenses related to personnel.
Highlights for fiscal 2023. Net revenues increased 11% over the prior year, primarily due to the year-over-
year growth in nominal cross-border volume, processed transactions and nominal payments volume, partially
offset by higher client incentives. Exchange rate movements lowered our net revenues growth by approximately
one-and-a-half percentage points.
The continuing effects of the liquidity issues at certain financial institutions and the war in Ukraine are difficult
to predict due to numerous uncertainties identified in Part I, Item 1A of this report. We will continue to evaluate the
nature and extent of the impact to our business.
37
Russia & Ukraine. During fiscal 2022, economic sanctions were imposed on Russia by the U.S., European
Union, United Kingdom and other jurisdictions and authorities, impacting Visa and its clients. In March 2022, we
suspended our operations in Russia and as a result, are no longer generating revenue from domestic and cross-
border activities related to Russia. For fiscal 2022 and 2021, total net revenues from Russia, including revenues
driven by domestic as well as cross-border activities, were approximately 2% and 4% of our consolidated net
revenues, respectively.
Disruption in the Banking Sector. During fiscal 2023, certain U.S. banks failed, which caused volatility in the
global financial markets. These events did not have an impact on our operating results. We continuously monitor
and manage balance sheet and operational risks from clients in our portfolio, including their settlement
obligations.
(1) Figures in the table may not recalculate exactly due to rounding. Percentage changes are calculated based on unrounded numbers.
(2) For a full reconciliation of our GAAP to non-GAAP financial results, see tables in Non-GAAP financial results below.
27 %
17%
24 %
14 %
$ 12,933
$ 5.91
•
•
•
•
7
0.07
138
38
(176)
(90)
(906)
0.04
81
23
104
8.28
Diluted
Earnings
Per Share(2)
0.04
Rate(2) Net Income
(in millions, except percentages and per share data)
$ 37 $ 3,764 17.9% $ 17,273 $
Income Income Tax Income Tax
(Expense) Provision(1)
Operating
Expenses
Effective
Non-
operating
For the Year Ended
September 30, 2023
Non-GAAP operating expenses, non-operating income (expense), income tax provision, effective income tax
rate, net income and diluted earnings per share should not be relied upon as substitutes for, or considered in
isolation from, measures calculated in accordance with U.S. GAAP. The following tables reconcile our as-reported
financial measures, calculated in accordance with U.S. GAAP, to our respective non-GAAP financial measures:
Indirect taxes. We recognized a one-time charge within general and administrative expense to record our
estimate of probable additional indirect taxes, related to prior periods, for which we could be liable as a
result of certain changes in applicable law. This one-time charge is not representative of our ongoing
operations.
Remeasurement of deferred tax balances. In connection with the UK enacted legislation on June 10,
2021 that increased the tax rate from 19% to 25%, effective April 1, 2023, we remeasured our UK
deferred tax liabilities, resulting in the recognition of a non-recurring, non-cash income tax expense.
Russia-Ukraine charges. We recorded a loss within general and administrative expense from the
deconsolidation of our Russian subsidiary and also incurred charges in personnel expense as a result of
steps taken to support our employees in Russia and Ukraine. We have excluded these amounts as they
are one-time charges and do not reflect the underlying performance of our business.
Litigation provision. We recorded additional accruals to address claims associated with the interchange
multidistrict litigation. Under the U.S. retrospective responsibility plan, we recover the monetary liabilities
related to the U.S. covered litigation through a downward adjustment to the rate at which shares of our
class B common stock ultimately convert into shares of class A common stock. For fiscal 2023 and 2022,
basic earnings per class A common stock was unchanged and increased $0.01, respectively, as a result
of the downward adjustments of the class B common stock conversion rate during the fiscal years. For
fiscal 2023 and 2022, diluted earnings per class A common stock remained unchanged. See Note 5-
U.S. and Europe Retrospective Responsibility Plans and Note 20—Legal Matters to our consolidated
financial statements included in Item 8 of this report.
Acquisition-related costs. Acquisition-related costs consist primarily of one-time transaction and
integration costs associated with our business combinations. These costs include professional fees,
technology integration fees, restructuring activities and other direct costs related to the purchase and
integration of acquired entities. These costs also include retention equity and deferred equity
compensation when they are agreed upon as part of the purchase price of the transaction but are
required to be recognized as expense post-combination. We have excluded these amounts as the
expenses are recognized for a limited duration and do not reflect the underlying performance of our
business.
$ 11,653
22%
Litigation provision
26%
55
ITEM 1B. Unresolved Staff Comments
Not applicable.
ITEM 2. Properties
As of September 30, 2023, we owned or leased 144 office locations in 82 countries around the world,
including four data centers located in the U.S., the United Kingdom and Singapore. Our corporate headquarters
are located in owned and leased premises in the San Francisco Bay Area.
We believe that these facilities are suitable and adequate to support our ongoing business needs.
35
ITEM 3. Legal Proceedings
ITEM 4. Mine Safety Disclosures
Not applicable.
PART II
ITEM 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
On October 24, 2023, our board of directors declared a quarterly cash dividend of $0.52 per share of class A
common stock (determined in the case of class B and C common stock and series A, B and C convertible
participating preferred stock on an as-converted basis) payable on December 1, 2023, to holders of record as of
November 9, 2023.
Subject to legally available funds, we expect to continue paying quarterly cash dividends on our outstanding
common and preferred stock in the future. However, the declaration and payment of future dividends is at the sole
discretion of our board of directors after taking into account various factors, including our financial condition,
settlement indemnifications, operating results, available cash and current and anticipated cash needs.
Refer to Note 20—Legal Matters to our consolidated financial statements included in Item 8 of this report.
Issuer Purchases of Equity Securities
=4
only our board of directors, Chairperson, or CEO or any stockholders who have owned continuously for at
least one year not less than 15 percent of the voting power of all shares of class A common stock
outstanding may call a special meeting of stockholders.
33
33
our class A common stockholders would receive. Because the holders of classes of capital stock other than class
A common stock are our current and former financial institution clients, they may have interests that diverge from
our class A common stockholders. As a result, the holders of these classes of capital stock may not have the
same incentive to approve a corporate action that may be favorable to the holders of class A common stock, and
their interests may otherwise conflict with interests of our class A common stockholders.
Delaware law, provisions in our certificate of incorporation and bylaws, and our capital structure could
make a merger, takeover attempt or change in control difficult.
Provisions contained in our certificate of incorporation and bylaws and our capital structure could delay or
prevent a merger, takeover attempt or change in control that our stockholders may consider favorable. For
example, except for limited exceptions:
•
34
•
•
•
no person may beneficially own more than 15 percent of our class A common stock (or 15 percent of our
total outstanding common stock on an as-converted basis), unless our board of directors approves the
acquisition of such shares in advance;
no competitor or an affiliate of a competitor may hold more than 5 percent of our total outstanding
common stock on an as-converted basis;
the affirmative votes of the class B and C common stock and series A, B and C preferred stock are
required for certain types of consolidations or mergers;
our stockholders may only take action during a stockholders' meeting and may not act by written consent;
and
.
The table below presents our purchases of common stock during the quarter ended September 30, 2023:
Period
July 1-31, 2023.
6,473
7 $
238.94
7 $
4,733
17
7 $
EA
17
(1) Includes applicable taxes.
(2) The figures in the table reflect transactions according to the trade dates. For purposes of our consolidated financial statements included in
this report, the impact of these repurchases is recorded according to the settlement dates.
See Note 15-Stockholders' Equity to our consolidated financial statements included in Item 8 of this report
for further discussion on our share repurchase programs.
ITEM 6. [Reserved]
11 %
241.03
243.29
7 $
8,215
August 1-31, 2023
September 1-30, 2023
Total
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans or
Approximate
Dollar Value
of Shares that
May Yet Be
Purchased
Under the Plans or
Programs(1),(2)
Average Purchase
Total Number of
Shares Purchased
Price
per Share(1)
Programs(2)
(in millions, except per share data)
3
$
240.62
3 $
Although their voting rights are limited, holders of our class B and C common stock and, in certain specified
circumstances, holders of our series A, B and C preferred stock, can vote on certain significant transactions. With
respect to our class B and C common stock, these transactions include a proposed consolidation or merger, a
decision to exit our core payments business and any other vote required under Delaware law, such as the
proposed certificate of incorporation amendments. Please see Item 7 of this report for more information regarding
the potential exchange offer program. With respect to our series A, B and C preferred stock, voting rights are
limited to proposed consolidations or mergers in which holders of the series A, B and C preferred stock would
receive shares of stock or other equity securities with preferences, rights and privileges that are not substantially
identical to the preferences, rights and privileges of the applicable series of preferred stock; or, in the case of
series B and C preferred stock, holders would receive securities, cash or other property that is different from what
Holders of our class B and C common stock and series A, B and C preferred stock may have different
interests than our class A common stockholders concerning certain significant transactions.
Our class A common stock has been listed on the New York Stock Exchange under the symbol “V”. As of
November 8, 2023, we had 316 stockholders of record of our class A common stock. The number of beneficial
owners is substantially greater than the number of record holders, because a large portion of our class A common
stock is held in "street name" by brokers and other financial institutions on behalf of our stockholders. There
currently no established public trading market for our class B or C common stock. As of November 8, 2023, there
were 1,106 and 381 holders of record of our class B and C common stock, respectively.
The conversions of our class B and class C common stock or series A, B and C preferred stock into
shares of class A common stock would result in voting dilution to, and could adversely impact the market
price of, our existing class A common stock.
30
and infrastructure required to operate our data centers and support employee productivity could be impacted by
supply chain disruptions, such as manufacturing, shipping delays, and service disruption due to cyber-attacks. An
extended supply chain or service disruption could also impact processing or delivery of technology services.
Furthermore, our visibility and role in the global payments industry also puts our company at a greater risk of
being targeted by hackers. In the normal course of our business, we have been the target of malicious cyber-
attack attempts. We have been, and may continue to be, impacted by attacks and data security breaches of
financial institutions, merchants, and third-party service providers. We are also aware of instances where nation
states have sponsored attacks against some of our financial institution clients, and other instances where
merchants and issuers have encountered substantial data security breaches affecting their customers, some of
whom were Visa account holders. Given the increase in online banking, ecommerce and other online activity, as
well as more employees working remotely as a result of the COVID-19 pandemic, we continue to see increased
cyber and payment fraud activity, as cybercriminals attempt DDoS related attacks, phishing and social
engineering scams and other disruptive actions. Overall, such attacks and breaches have resulted, and may
continue to result in, fraudulent activity and ultimately, financial losses to Visa's clients.
Numerous and evolving cybersecurity threats, including advanced and persistent cyber-attacks, targeted
attacks against our employees and trusted partners (i.e., insider threats), synthetic media threats such as
phishing, deepfake or social engineering schemes, particularly on our internet-facing applications, could
compromise the confidentiality, availability and integrity of data in our systems or the systems of our third-party
service providers. Because the tactics, techniques and procedures used to obtain unauthorized access, or to
disable or degrade systems change frequently, have become increasingly more complex and sophisticated, and
may be difficult to detect for periods of time, we may not anticipate these acts or respond adequately or timely.
For example, cybercriminals have increasingly demonstrated advanced capabilities, such as use of zero-day
vulnerabilities, and rapid integration of new technology such as generative Al. The security measures and
procedures we, our financial institution and merchant clients, other merchants and third-party service providers in
the payments ecosystem have in place to protect sensitive consumer data and other information may not be
successful or sufficient to counter all data security breaches, cyber-attacks or system failures. In some cases, the
mitigation efforts may be dependent on third parties who may not deliver to the required contractual standards,
who may not be able to timely patch vulnerabilities or fix security defects, or whose hardware, software or network
services may be subject to error, defect, delay, outage or lack appropriate malware prevention to prevent
breaches or data exfiltration incidents. Despite our security measures and programs to protect our systems and
data, and prevent, detect and respond to data security incidents, there can be no assurance that our efforts will
prevent these threats.
In addition, as a global financial services company, Visa is increasingly subject to complex and varied
cybersecurity regulations and cyber incident reporting requirements across numerous jurisdictions. With the often
short timeframes required for cyber incident reporting, there is a risk that Visa or its suppliers will fail to meet the
reporting deadlines for any given incident. In the event we are found to be out of compliance, we could be subject
to monetary damages, civil and criminal penalties, litigation, investigations and proceedings, and damage to our
reputation and brand.
Any of these events could significantly disrupt our operations; impact our clients and consumers; damage
our reputation and brand; result in litigation or claims, violations of applicable privacy and other laws, and
increased regulatory review or scrutiny, investigations, actions, fines or penalties; result in damages or changes to
our business practices; decrease the overall use and acceptance of our products; decrease our volume, revenues
and future growth prospects; and be costly, time consuming and difficult to remedy. In the event of damage or
disruption to our business due to these occurrences, we may not be able to successfully and quickly recover all of
our critical business functions, assets, and data through our business continuity program. Furthermore, while we
maintain insurance, our coverage may not sufficiently cover all types of losses or claims that may arise.
30
31
We may not achieve the anticipated benefits of our acquisitions, joint ventures or strategic investments,
and may face risks and uncertainties as a result.
As part of our overall business strategy, we make acquisitions and strategic investments, and enter into joint
ventures. We may not achieve the anticipated benefits of our current and future acquisitions, joint ventures or
strategic investments and they may involve significant risks and uncertainties, including:
disruption to our ongoing business, including diversion of resources and management's attention from our
existing business;
• greater than expected investment of resources or operating expenses;
•
failure to adequately develop or integrate our acquired entities or joint ventures;
Structural and Organizational Risks
Our cybersecurity and processing systems, as well as those of financial institutions, merchants and third-
party service providers, have experienced and may continue to experience errors, interruptions, delays or
damage from a number of causes, including power outages, hardware, software and network failures, computer
viruses, ransomware, malware or other destructive software, internal design, manual or user errors, cyber-
attacks, terrorism, workplace violence or wrongdoing, catastrophic events, natural disasters, severe weather
conditions and other effects from climate change. In addition, there is risk that third party suppliers of hardware
A disruption, failure or breach of our networks or systems, including as a result of cyber-attacks, could
harm our business.
The global payments industry is undergoing significant and rapid technological change, including increased
proliferation of mobile and other proximity and in-app payment technologies, ecommerce, tokenization,
cryptocurrencies, distributed ledger and blockchain technologies, cloud-based encryption and authorization, and
new authentication technologies such as biometrics, FIDO 2.0, 3D Secure 2.0 and dynamic cardholder verification
values or dCVV2. As a result, we expect new services and technologies to continue to emerge and evolve,
including those developed by Visa such as our new flows offerings. For example, in the past year generative Al
solutions have emerged as an opportunity for Visa, its clients, suppliers, merchants, and partners to innovate
more quickly and better serve consumers. Rapid adoption and novel uses of generative Al across the
marketplace may also introduce unique and unpredictable security risks to our systems, information, and the
payments ecosystem. In addition to our own initiatives and innovations, we work closely with third parties,
including potential competitors, for the development of, and access to, new technologies. It is difficult, however, to
predict which technological developments or innovations will become widely adopted and how those technologies
may be regulated. Moreover, some of the new technologies could be subject to intellectual property-related
lawsuits or claims, potentially impacting our development efforts and/or requiring us to obtain licenses, implement
design changes or discontinue our use. If we or our partners fail to adapt and keep pace with new technologies in
the payments space in a timely manner, it could harm our ability to compete, decrease the value of our products
and services to our clients, impact our intellectual property or licensing rights, harm our business and impact our
future growth.
$ 17,273 $ 14,957
$ 8.28 $ 7.00
$ 12,311
15%
The market price of our class A common stock could fall as a result of many factors. The value of our class B
and C common stock and series A, B and C preferred stock is tied to the value of the class A common stock.
Under our U.S. retrospective responsibility plan, upon final resolution of our U.S. covered litigation, all class
common stock will become convertible into class A common stock. Under our Europe retrospective responsibility
plan, Visa will continue to release value from the series B and series C preferred stock in stages based on
developments in current and potential litigation. The series B and series C preferred stock will become fully
convertible to series A preferred stock or class A common stock no later than 2028 (subject to a holdback to cover
any pending claims). Conversion of our class B and class C common stock into class A common stock, or our
series A, B and C preferred stock into class A common stock, would increase the amount of class A common
stock outstanding, which would dilute the voting power of existing class A common stockholders. In addition, the
sale of significant portions of converted class A common stock could adversely impact the market price of our
existing class A common stock.
$ 5.63
18 %
24 %
$ 10,481 $ 9,387
$ 18,280 $ 16,034
$ 8.77 $ 7.50
$ 8,077
12%
comply fully with developing interpretations of CRS laws and regulations, or meet evolving and varied stakeholder
expectations and standards could negatively impact our business, reputation, financial condition, and operating
results.
Our indemnification obligation to fund settlement losses of our clients exposes us to significant risk of
loss and may reduce our liquidity.
We indemnify issuers and acquirers for settlement losses they may suffer due to the failure of another issuer
or acquirer to honor its settlement obligations in accordance with the Visa operating rules. In certain instances, we
may indemnify issuers or acquirers in situations in which a transaction is not processed by our system. This
indemnification creates settlement risk for us due to the timing difference between the date of a payment
transaction and the date of subsequent settlement. Our indemnification exposure is generally limited to the
amount of unsettled Visa card payment transactions at any point in time and any subsequent amounts that may
fall due relating to adjustments for previously processed transactions. Changes in the credit standing of our clients
or concurrent settlement failures or insolvencies involving more than one of our largest clients, several of our
smaller clients, significant sponsor banks through which non-financial institutions participate in the Visa network,
or systemic operational failures could expose us to liquidity risk, and negatively impact our financial position. Even
if we have sufficient liquidity to cover a settlement failure or insolvency, we may be unable to recover the amount
of such payment. This could expose us to significant losses and harm our business. See Note 12-Settlement
Guarantee Management to our consolidated financial statements included in Item 8 of this report.
Technology and Cybersecurity Risks
Failure to anticipate, adapt to, or keep pace with, new technologies in the payments industry could harm
our business and impact future growth.
•
•
21 %
the data security, cybersecurity and operational resilience posture of our acquired entities, joint ventures
failure to mitigate the deficiencies and liabilities of our acquired entities or joint ventures;
•
dilutive issuance of equity securities, if new securities are issued;
•
the incurrence of debt;
.
•
negative impact on our financial position and/or statement of operations; and
anticipated benefits, synergies or value of our acquisitions, joint ventures or investments not materializing
or taking longer than expected to materialize.
32
32
In addition, we may pursue additional strategic objectives, such as the potential exchange offer program,
which can divert resources and management's attention from our existing business and, if unsuccessful, may
harm our business and reputation.
The talents and efforts of our employees, particularly our key management, are vital to our success. The
market for highly skilled workers and leaders in our industry, especially in fintech, technology, cybersecurity and
other specialized areas, is extremely competitive. Our management team has significant industry experience and
would be difficult to replace. We may be unable to retain them or to attract, hire or retain other highly qualified
employees, particularly if we do not offer employment terms that are competitive with the rest of the labor market.
Ongoing changes in laws and policies regarding immigration, travel and work authorizations have made it more
difficult for employees to work in, or transfer among, jurisdictions in which we have operations and could continue
to impair our ability to attract, hire and retain qualified employees. Failure to attract, hire, develop, motivate and
retain highly qualified and diverse employee talent, especially in light of changing worker expectations and talent
marketplace variability regarding flexible work models; to meet our goals related to fostering an inclusive and
diverse culture or to adequately address potential increased scrutiny of our inclusion and diversity-related
programs and initiatives; to develop and implement an adequate succession plan for the management team; to
maintain our strong corporate culture of fostering innovation, collaboration and inclusion in our current hybrid
model; or to design and successfully implement flexible work models that meet the expectations of employees
and prospective employees could impact our workforce development goals, impact our ability to achieve our
business objectives, and adversely affect our business and our future success.
•
.
discovery of unidentified issues and related liabilities after our acquisitions, joint ventures or investments
were made;
We may be unable to attract, hire and retain a highly qualified and diverse workforce, including key
management.
failure to obtain the necessary government or other approvals at all, on a timely basis or without the
imposition of burdensome conditions or restrictions;
difficulty, expense or failure of implementing controls, procedures and policies at our acquired entities or
joint ventures;
or companies we invest in or partner with, may not be adequate and may be more susceptible to cyber
incidents;
challenges of integrating new employees, business cultures, business systems and technologies;
•
the economic, political, regulatory and compliance risks associated with our acquisitions, joint ventures or
strategic investments, including when entering into a new business or operating in new regions or
countries. For more information on regulatory risks, please see Item 1-Government Regulations and
Item 1A-Regulatory Risks above;
•
•
failure to retain employees, clients or partners of our acquired entities or joint ventures;
•
•
•
in the case of foreign acquisitions, risks related to the integration of operations across different cultures
and languages;
disruptions, costs, liabilities, judgments, settlements or business pressures resulting from litigation
matters, investigations or legal proceedings involving our acquisitions, joint ventures or strategic
investments;
the inability to pursue aspects of our acquisitions or joint ventures due to outcomes in litigation matters,
investigations or legal proceedings;
•
4,830
11 %
23 %
Investing activities
1,104
$ 5,922
Total nominal payments
volume(2)
$ 5,548
$ 4,725
17 %
$ 5,248
25 %
5,346
27%
17 %
$ 4,039
12% $ 4,742
$ 2,695 $ 2,398
2,443
407
2,728
500
10%
25 %
$ 1,641
2,388
696
2,619
882
Commercial(4)
Consumer debit(3)
$ 2,047
Cash volume (5)
Consumer credit
12%
631
9% $14,030
(1%)
(in billions, except percentages)
Dividends. During fiscal 2023, we declared and paid $3.8 billion in dividends to holders of our common and
preferred stock. On October 24, 2023, our board of directors declared a quarterly cash dividend of $0.52 per
share of class A common stock (determined in the case of class B and C common stock and series A, B and C
convertible participating preferred stock on an as-converted basis). We expect to pay approximately $1.1 billion in
connection with this dividend on December 1, 2023. We expect to continue paying quarterly dividends in cash,
subject to approval by the board of directors. All preferred and class B and C common stock will share ratably on
an as-converted basis in such future dividends.
authorized funds of $5.0 billion. In October 2023, our board of directors authorized a new $25.0 billion share
repurchase program, providing multi-year flexibility. Share repurchases will be executed at prices we deem
appropriate subject to various factors, including market conditions and our financial performance, and may be
effected through accelerated share repurchase programs, open market purchases or privately negotiated
transactions, including through Rule 10b5-1 plans. See Note 15-Stockholders' Equity to our consolidated
financial statements included in Item 8 of this report.
46
Common stock repurchases. During fiscal 2023, we repurchased shares of our class A common stock in the
open market for $12.2 billion. As of September 30, 2023, our share repurchase program had remaining
Litigation. Judgments in and settlements of litigation or other fines imposed in investigations and proceedings
could give rise to future liquidity needs. During fiscal 2023, we deposited $1.0 billion into the U.S. litigation escrow
account to address claims associated with the interchange multidistrict litigation. The balance of this account as of
September 30, 2023 was $1.8 billion and is reflected as restricted cash in our consolidated balance sheets. See
Note 5-U.S. and Europe Retrospective Responsibility Plans and Note 20-Legal Matters to our consolidated
financial statements included in Item 8 of this report.
Payments settlement. Payments settlement due to and from our financial institution clients can represent a
substantial daily liquidity requirement. Most U.S. dollar settlements are settled within the same day and do not
result in a receivable or payable balance, while settlements in currencies other than the U.S. dollar generally
remain outstanding for one to two business days, which is consistent with industry practice for such transactions.
In general, during fiscal 2023, we were not required to fund settlement-related working capital. As of
September 30, 2023, we held $10.1 billion of our total available liquidity to fund daily settlement in the event one
or more of our financial institution clients are unable to settle, with the remaining liquidity available to support our
working capital and other liquidity needs. See Note 12-Settlement Guarantee Management to our consolidated
financial statements included in Item 8 of this report.
Uses of Liquidity
U.S. Litigation escrow account. Pursuant to the terms of the U.S. retrospective responsibility plan, which was
created to insulate Visa and our class A common shareholders from financial liability for certain litigation cases,
we maintain a U.S. litigation escrow account from which monetary liabilities from settlements of, or judgments in,
the U.S. covered litigation will be payable. As these funds are restricted for the sole purpose of making payments
related to the U.S. covered litigation matters, we do not rely on them for other operational needs. See Note 5-
U.S. and Europe Retrospective Responsibility Plans and Note 20—Legal Matters to our consolidated financial
statements included in Item 8 of this report.
Credit facility. We have an unsecured $7.0 billion revolving credit facility, which expires in May 2028. As of
September 30, 2023, there were no amounts outstanding under the credit facility. See Note 10-Debt to our
consolidated financial statements included in Item 8 of this report.
Commercial paper program. We maintain a commercial paper program to support our working capital
requirements and for other general corporate purposes. As of September 30, 2023, we had no outstanding
obligations under the program. See Note 10-Debt to our consolidated financial statements included in Item 8 of
this report.
Factors that may impact the liquidity of our investment portfolio include, but are not limited to, changes to
credit ratings of the securities, uncertainty related to regulatory developments, actions by central banks and other
monetary authorities and the ongoing strength and quality of credit markets. We will continue to review our
portfolio in light of evolving market and economic conditions. However, if current market conditions deteriorate,
the liquidity of our investment portfolio may be impacted and we could determine that some of our investments
are impaired, which could adversely impact our financial results. We have policies that limit the amount of credit
exposure to any one financial institution or type of investment.
Cash, cash equivalents and investments. As of September 30, 2023, our cash and cash equivalents balance
were $16.3 billion and our available-for-sale debt securities were $5.4 billion. Our investment portfolio is designed
to invest cash in securities which enables us to meet our working capital and liquidity needs. Our investment
portfolio consists of debt securities issued by the U.S. Treasury and U.S. government-sponsored agencies.
$3.5 billion of the investments are classified as current and are available to meet short-term liquidity needs. The
remaining non-current investments have stated maturities of more than one year from the balance sheet date;
however, they are also generally available to meet short-term liquidity needs.
International
635
The following table presents the change in nominal and constant payments and cash volume:
12%
$ 7,851 $ 7,172
15%
$ 5,360
$ 6,179
Total nominal volume(2), (6)
- %
_
15%
$ 9,973
$11,470
2,560
13%
- %
1,925
1,929
2,559
$12,532
%
Change(2)
2021
2022
Non-
operating
Income Income Tax Income Tax
(Expense) Provision(1)
Operating
Expenses
September 30, 2021
For the Year Ended
7.50
17.8 % $ 16,034 $
3,476
(413) $
$ 9,387 $
Non-GAAP
0.03
56
4
(60)
Russia-Ukraine charges
0.31
670
191
(861)
0.03
60
Effective
(69)
Rate(2)
Diluted
Earnings
Per Share(2)
4
(21)
0.02
39
12
(51)
Acquisition-related costs
assets
(0.25)
(553)
(159)
(712)
5.63
23.4 % $ 12,311 $
(in millions, except percentages and per share data)
$ 259 $
3,752
$ 8,301
Amortization of acquired intangible
(Gains) losses on equity investments,
As reported..
net ...
Net Income
17
0.04
26
September 30, 2022
For the Year Ended
Non-
operating
Financing activities
Financing activities. Cash used in financing activities in fiscal 2023 was higher than the prior fiscal year
primarily due to the absence of proceeds from the issuance of senior notes, higher principal debt payment upon
maturity of our senior notes, higher dividends paid and higher share repurchases.
Investing activities. Cash used in investing activities in fiscal 2023 was lower than the prior fiscal year
primarily due to the absence of cash paid for acquisitions, cash received from the settlement of net investment
hedge derivative instruments in the current year and lower purchases of investment securities, partially offset by
lower sales and maturities of investment securities.
Operating activities. Cash provided by operating activities in fiscal 2023 was higher than the prior fiscal year
primarily due to growth in our underlying business, partially offset by higher incentive payments.
15,227
(152)
(12,696) $ (14,410)
$
SSS
$ (4,288)
18,849 $
$
SSS
20,755
(2,006)
(17,772) $
$
(in millions)
2021
2022
2023
For the Years Ended
September 30,
Income
(Expense)
94
Income Tax Income Tax
Provision(1)
(in millions, except percentages and per share data)
(120)
0.09
197
67
264
7.00
17.5% $ 14,957 $
3,179
(677) $
$ 10,497 $
Litigation provision
Acquisition-related costs
assets
Amortization of acquired intangible
net .
(Gains) losses on equity investments,
As reported..
Net Income
Rate(2)
Effective
Diluted
Earnings
Per Share(2)
Operating
Expenses
2021
0.01
(152)
9%
(4%)
8%
$ 6,179
$ 6,653
Total nominal volume(2), (6)
$ 5,548
631
608
Cash volume(5)
$ 6,045
volume(2)
Total nominal payments
12 %
1,382
3 %
5,346
5,490
1,544
10 %
500
(2%)
2,728
2,668
551
13 %
$ 6,029
1,844
$ 7,873
8%
$ 5,922
1,929
$11,470
%
Change(2)
Ended June 30,(1)
Twelve Months
Ended June 30,(1)
Twelve Months
2022
%
Change(2)
2021
Twelve Months
Ended June 30, (1)
2022
Nominal payments volume
Visa Inc.
International
U.S.
4 %
$14,030
5%
(4%)
2,560
2,453
$14,526
-%
$ 7,851
2% $12,074
(4%)
balances
6%
$ 5,040
International
Twelve Months
Ended June 30,(1)
U.S.
The following tables present nominal payments and cash volume:
40
40
Payments volume represents the aggregate dollar amount of purchases made with cards and other form
factors carrying the Visa, Visa Electron, V PAY and Interlink brands and excludes Europe co-badged volume.
Nominal payments volume is denominated in U.S. dollars and is calculated each quarter by applying an
established U.S. dollar/foreign currency exchange rate for each local currency in which our volumes are reported.
Processed transactions represent transactions using cards and other form factors carrying the Visa, Visa
Electron, V PAY, Interlink and PLUS brands processed on Visa's networks.
Payments volume and processed transactions. Payments volume is the primary driver for our service
revenues, and the number of processed transactions is the primary driver for our data processing revenues.
(2) Figures in the table may not recalculate exactly due to rounding. Effective income tax rate, diluted earnings per share and their respective
totals are calculated based on unrounded numbers.
$ 8,077 $ (453) $ 2,642
(1) Determined by applying applicable tax rates.
Non-GAAP
Indirect taxes
Remeasurement of deferred tax
5.91
45
0.05
112
0.46
1,007
(1,007)
40
2023
$ 4,742
2022
Change(2)
4%
$ 2,810 $ 2,695
9%
$ 2,047
2,619
882
2,822
993
Commercial(4)
Consumer debit(3)
Sources of Liquidity
$ 2,230
Consumer credit
Nominal payments volume
%
Change(2)
2022
Twelve Months
Ended June 30,(1)
Visa Inc.
(in billions, except percentages)
2023
%
Change(2)
2022
Twelve Months
Ended June 30,(1)
2023
%
17.0 % $ 12,933 $
1,382
Twelve Months Ended
(in millions, except percentages)
2021
2022
2023
VS.
2021
2022
% Change(1)
2022
VS.
2023
September 30,
NM - Not meaningful
Total operating expenses(2)
Litigation provision . .
General and administrative
5,831 $
4,990 $
4,240
17%
25 %
8%
403
505
545
2 %
(1%)
Depreciation and amortization
730
736
18 %
-%
1,136
1,336
1,341
18 %
743
Professional fees
Network and processing
Marketing
Client incentives increased primarily due to growth in payments volume during fiscal 2023. The amount of
client incentives we record in future periods will vary based on changes in performance expectations,
actual client performance, amendments to existing contracts or the execution of new contracts.
Other revenues increased primarily due to growth in marketing and consulting services and select pricing
modifications.
International transaction revenues increased primarily due to growth in nominal cross-border volumes of
23%, excluding transactions within Europe, and select pricing modifications, partially offset by business
mix and lower volatility of a broad range of currencies.
Data processing revenues increased primarily due to 10% growth in processed transactions, select
pricing modifications and growth in value added services. Data processing revenues increased over the
prior-year comparable fiscal year despite the impact of our suspension of operations in Russia.
Service revenues increased primarily due to 5% growth in nominal payments volume and due to business
mix. Service revenues increased over the prior-year comparable fiscal year despite the impact of our
suspension of operations in Russia.
•
•
Operating Expenses
•
(1) Figures in the table may not recalculate exactly due to rounding. Percentage changes are calculated based on unrounded numbers.
22%
11 %
24,105
$ 32,653 $ 29,310 $
23 %
19%
42
943
Our operating expenses consist of the following:
•
Personnel
For the Years Ended
The following table presents the components of our total operating expenses:
43
Litigation provision represents litigation expenses and is an estimate based on management's
understanding of our litigation profile, the specifics of each case, advice of counsel to the extent
appropriate and management's best estimate of incurred loss.
General and administrative expenses consist mainly of card benefits such as costs associated with airport
lounge access, extended cardholder protection and concierge services, facilities costs, travel and meeting
costs, indirect taxes, foreign exchange gains and losses and other corporate expenses incurred in
support of our business.
Depreciation and amortization expenses include amortization of internally developed and purchased
software, depreciation expense for property and equipment and amortization of finite-lived intangible
assets primarily obtained through acquisitions.
•
•
Professional fees mainly consist of fees for legal, consulting and other professional services.
•
network, including maintenance, equipment rental and fees for other data processing services.
Network and processing expenses mainly represent expenses for the operation of our processing
Marketing expenses include expenses associated with advertising and marketing campaigns,
sponsorships and other related promotions of the Visa brand and client marketing.
Personnel expenses include salaries, employee benefits, incentive compensation, share-based
compensation and contractor expenses.
•
•
861
804
9%
44
(1) Figures in the table may not recalculate exactly due to rounding. Percentage changes are calculated based on unrounded numbers.
(361 %)
(105 %)
259
(677) $
37 $
•
$
(118 %)
5%
20%
(592 %)
(513)
772
(538) $
(139)
681
Investment income (expense) and other
Total non-operating income (expense)
(644) $
Interest expense increased primarily due to losses from derivative instruments, partially offset by lower
interest related to indirect taxes and lower outstanding debt. See Note 10-Debt and Note 13-Derivative
and Hedging Instruments to our consolidated financial statements included in Item 8 of this report.
The following table presents our effective income tax rates:
The following table summarizes our cash flow activity:
Cash Flow Data
Based on our current cash flow budgets and forecasts of our short-term and long-term liquidity needs, we
believe that our current and projected sources of liquidity will be sufficient to meet our projected liquidity needs for
more than the next 12 months. We will continue to assess our liquidity position and potential sources of
supplemental liquidity in view of our operating performance, current economic and capital market conditions and
other relevant circumstances.
Liquidity and Capital Resources
during fiscal 2022, a $176 million tax benefit related to prior years due to a decrease in the state
apportionment ratio as a result of a tax position taken related to a ruling.
during fiscal 2023, a $142 million tax benefit related to prior years due to the reassessment of an
uncertain tax position as a result of new information obtained during an ongoing tax examination; and
.
Investment income (expense) and other increased primarily due to higher interest income on our cash
and investments and lower losses on our investments. See Note 6-Fair Value Measurements and
Investments to our consolidated financial statements included in Item 8 of this report.
Effective Income Tax Rate
.
23%
18%
18%
Effective income tax rate
2021
For the Years Ended
September 30,
2022
2023
The effective income tax rates in fiscal 2023 and fiscal 2022 were 18% including the following:
(8,367)
Interest expense
VS.
2021
11 %
8,301
10,497 $
11,653 $
$
NM
7%
26 %
3
927
21 %
11 %
985
1,194
1,330
7 %
868
(in millions, except percentages)
(1) Figures in the table may not recalculate exactly due to rounding. Percentage changes are calculated based on unrounded numbers.
(2) Operating expenses include significant items that we do not believe are indicative of our operating performance. See Overview within this
Item 7.
•
VS.
2022
2021
2022
2023
2022
2023
% Change(1)
•
For the Years Ended
September 30,
Non-operating income (expense) primarily includes interest expense related to borrowings, gains and losses
on investments and derivative instruments, interest expense from tax liabilities, as well as the non-service
components of net periodic pension income and expense.
Non-operating Income (Expense)
Litigation provision increased primarily due to higher accruals related to the U.S. covered litigation. See
Note 5-U.S. and Europe Retrospective Responsibility Plans and Note 20—Legal Matters included in
Item 8 of this report.
General and administrative expenses increased due to unfavorable foreign currency fluctuations, higher
usage of travel related card benefits and travel expenses, partially offset by the absence of expenses as a
result of the suspension of our operations in Russia.
Depreciation and amortization expenses increased primarily due to additional depreciation and
amortization from our on-going investments and acquisitions.
Personnel expenses increased primarily due to higher number of employees and compensation, reflecting
our strategy to invest in future growth, including acquisitions.
•
The following table presents the components of our non-operating income (expense):
Senior notes. As of September 30, 2023, we had an outstanding aggregate principal amount relating to our
senior notes of $20.9 billion. During fiscal 2023, we repaid $2.25 billion of principal upon maturity of our December
2022 senior notes. Since the issuance of the $500 million green bond as part of our commitment to environmental
sustainability and a sustainable payments ecosystem, we have allocated $391 million to eligible green projects.
See Note 10-Debt to our consolidated financial statements included in Item 8 of this report.
(10,295)
19%
4 %
%
17 %
15 %
9%
5%
16 %
13 %
9%
1 %
7 %
(4%)
%
Total volume growth
Cash volume growth (5)
2%
growth
Total payments volume
(4%)
%
%
3 %
For the Years Ended
September 30,
The following table presents the number of processed transactions:
41
(7) Growth on a constant-dollar basis excludes the impact of foreign currency fluctuations against the U.S. dollar.
(6) Total nominal volume is the sum of total nominal payments volume and cash volume. Total nominal volume is provided by our financial
institution clients, subject to review by Visa.
(5) Cash volume generally consists of cash access transactions, balance access transactions, balance transfers and convenience checks.
(4) Includes large, medium and small business credit and debit, as well as commercial prepaid volume.
27 %
(3) Includes consumer prepaid volume and Interlink volume.
(1) Service revenues in a given quarter are primarily assessed based on nominal payments volume in the prior quarter. Therefore, service
revenues reported for the twelve months ended September 30, 2023, 2022 and 2021, were based on nominal payments volume reported
by our financial institution clients for the twelve months ended June 30, 2023, 2022 and 2021, respectively. On occasion, previously
presented volume information may be updated. Prior period updates are not material.
14 %
12 %
7%
4%
13 %
9%
(2) Figures in the table may not recalculate exactly due to rounding. Percentage changes and totals are calculated based on unrounded
numbers.
25 %
15%
12%
4%
Consumer credit growth
Consumer debit growth (3)
Constant(7)
Nominal
June 30,
2022 vs 2021(1),(2)
Twelve Months Ended
Twelve Months Ended
June 30,
2023 vs 2022(1),(2)
Nominal Constant(7)
13 %
Visa Inc.
Nominal
Twelve Months Ended
June 30,
2022 vs 2021(1),(2)
Constant(7)
Nominal
2023 vs 2022(1),(2)
June 30,
Payments volume growth
Constant(7)
Visa processed transactions
12 %
6%
27 %
23 %
20 %
10%
Commercial growth (4)
12 %
11 %
15 %
6%
15 %
12 %
4 %
(2%)
19 %
17 %
11 %
3%
2023
VS.
% Change(1)
2022
2021
2022
2023
VS.
2022
% Change(1)
2023
VS.
2021
For the Years Ended
September 30,
Client incentives
Other revenues
International transaction revenues
Data processing revenues
Service revenues
Our net revenues are impacted by the overall strengthening or weakening of the U.S. dollar as payments
volume and related revenues denominated in local currencies are converted to U.S. dollars. In fiscal 2023,
exchange rate movements lowered our net revenues growth by approximately one-and-a-half percentage points.
The following table presents the components of our net revenues:
(1) Figures in the table may not recalculate exactly due to rounding. Percentage changes are calculated based on unrounded numbers.
Net revenues increased in fiscal 2023 primarily due to the year-over-year growth in nominal cross-border
volume, processed transactions and nominal payments volume, partially offset by higher client incentives.
Net revenues
22%
14,826 $
11,475
24 %
1,675
1,991
2,479
50 %
19%
6,530
(in millions, except percentages)
13,361 $
9,815
13 %
11 %
12,792
14,438
16,007
16%
11 %
11,638
(12,297)
15%
27 %
12%
The following table presents our net revenues earned in the U.S. and internationally:
Our net revenues are primarily generated from payments volume on Visa products for purchased goods and
services, as well as the number of transactions processed on our network. See Note 1-Summary of Significant
Accounting Policies to our consolidated financial statements included in Item 8 of this report for further discussion
on the components of our net revenues.
Net Revenues
Results of Operations
(1) Figures in the table may not recalculate exactly due to rounding. Percentage changes are calculated based on unrounded numbers. On
occasion, previously presented information may be updated. Prior period updates are not material.
17%
2021
For the Years Ended
September 30,
VS.
10%
(in millions, except percentages)
192,530 164,734
212,579
2022
2021
2022
2023
2022
11 %
U.S..
International
2023
10%
24,105
29,310 $
12,945
16,459
(in millions, except percentages)
12,851 $ 11,160
14,138 $
18,515
32,653 $
Net revenues
$
2022
VS.
2022
2023
% Change(1)
2021
2022
VS.
2021
Client incentives. As of September 30, 2023, we had short-term and long-term liabilities recorded on the
consolidated balance sheet related to these agreements of $8.2 billion and $0.2 billion, respectively.
Operating activities.
Purchase obligations. As of September 30, 2023, we had short-term and long-term obligations of $1.7 billion
and $0.9 billion, respectively, related to agreements to purchase goods and services that specify significant terms,
including fixed or minimum quantities to be purchased, minimum or variable price provisions, and the approximate
timing of the transaction. For obligations where the individual years of spend are not specified in the contract, we
have estimated the timing of when these amounts will be spent. For future obligations related to software
licenses, see Note 18-Commitments to our consolidated financial statements included in Item 8 of this report.
proceeding, our history with similar matters, advice of internal and external legal counsel and management's best
estimate of incurred loss. As additional information becomes available, we reassess the potential loss related to
pending claims and may revise our estimates.
We have entered into loss sharing agreements that reduce our potential liability under certain litigation.
However, our U.S. retrospective responsibility plan only addresses monetary liabilities from settlements of, or final
judgments in, the U.S. covered litigation. The plan's mechanisms include the use of the U.S. litigation escrow
account. The accrual related to the U.S. covered litigation could be either higher or lower than the U.S. litigation
escrow account balance. Our Europe retrospective responsibility plan only covers Visa Europe territory covered
litigation (and resultant liabilities and losses) relating to the covered period, subject to certain limitations, and does
not cover any fines or penalties incurred in the European Commission proceedings or any other matter. See
Note 5-U.S. and Europe Retrospective Responsibility Plans and Note 20—Legal Matters to our consolidated
financial statements included in Item 8 of this report.
Impact if actual results differ from assumptions. Due to the inherent uncertainties of the legal and regulatory
processes in the multiple jurisdictions in which we operate, our judgments may be materially different than the
actual outcomes, which could have material adverse effects on our business, financial conditions and results of
operations in the period in which the effect becomes probable and reasonably estimable. See Note 20-Legal
Matters to our consolidated financial statements included in Item 8 of this report.
Income Taxes
Total cash provided by (used in):
Assumptions and judgment. We have various tax filing positions with regard to the timing and amount of
deductions and credits and the allocation of income among various tax jurisdictions, based on our interpretation of
local tax laws. We also inventory, evaluate and measure all uncertain tax positions taken or expected to be taken
on tax returns and record liabilities for the amount of such positions that may not be sustained, or may only be
partially sustained, upon examination by the relevant taxing authorities.
48
Impact if actual results differ from assumptions. Although we believe that our estimates and judgments are
reasonable, actual results may differ from these estimates. Some or all of these judgments are subject to review
by the taxing authorities. If one or more of the taxing authorities were to successfully challenge our right to realize
some or all of the tax benefit we have recorded, and we were unable to realize this benefit, it could have a
material adverse effect on our financial condition, results of operations or cash flows.
Market risk is the potential economic loss arising from adverse changes in market factors. Our exposure to
financial market risks results primarily from fluctuations in foreign currency exchange rates, interest rates and
equity prices. Aggregate risk exposures are monitored on an ongoing basis.
Foreign Currency Exchange Rate Risk
We are exposed to risks from foreign currency exchange rate fluctuations that are primarily related to
changes in the functional currency value of revenues generated from foreign currency-denominated transactions
and changes in the functional currency value of payments in foreign currencies. We manage these risks by
entering into foreign currency forward contracts that hedge exposures of the variability in the functional currency
equivalent of anticipated non-functional currency denominated cash flows. Our foreign currency exchange rate
risk management program reduces, but does not entirely eliminate, the impact of foreign currency exchange rate
movements.
As of September 30, 2023 and 2022, the effect of a hypothetical 10% weakening in the value of the
functional currencies is estimated to create an additional fair value loss of approximately $236 million and
$220 million, respectively, on our outstanding foreign currency forward contracts. The loss from this hypothetical
49
Uncertain tax positions. As of September 30, 2023, we had long-term liabilities for uncertain tax positions of
$1.6 billion. See Note 19-Income Taxes to our consolidated financial statements included in Item 8 of this report.
Pending acquisition. In June 2023, we entered into a definitive agreement to acquire Pismo for $1.0 billion in
cash. This acquisition is subject to customary closing conditions, including applicable regulatory reviews and
approvals.
ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk
Assumptions and judgment. We evaluate the likelihood of a potential loss from legal or regulatory
proceedings to which we are a party. We record a liability for such claims when a loss is deemed probable and
the amount can be reasonably estimated. Significant judgment may be required in the determination of both
probability and whether a loss is reasonably estimable. Our judgments are subjective and based on a number of
factors, including management's understanding of the legal or regulatory profile and the specifics of each
Critical estimates. In calculating our effective income tax rate, we make judgments regarding certain tax
positions, including the timing and amount of deductions and allocations of income among various tax
jurisdictions.
Legal and Regulatory Matters
Leases. As of September 30, 2023, we had short-term and long-term obligations of $12 million and
$421 million, respectively, related to leases that have not yet commenced. For future lease payments related to
leases that have commenced and are recognized in the consolidated balance sheet, see Note 9-Leases to our
consolidated financial statements included in Item 8 of this report.
Critical estimates. We are currently involved in various legal proceedings, the outcomes of which are not
within our complete control and may not be known for prolonged periods of time. Management is required to
assess the probability of loss and estimate the amount of such loss, if any, in preparing our consolidated financial
statements.
Tax Cuts and Jobs Act. As of September 30, 2023, we had short-term and long-term obligations of
$162 million and $431 million, respectively, related to the estimated transition tax, net of foreign tax credit
carryovers, on certain foreign earnings of non-U.S. subsidiaries recognized during fiscal 2018.
Indemnifications
We indemnify our financial institution clients for settlement losses suffered due to the failure of any other client
to fund its settlement obligations in accordance with our operating rules. The amount of the indemnification is limited
to the amount of unsettled Visa payment transactions at any point in time. We maintain and regularly review global
settlement risk policies and procedures to manage settlement risk, which may require clients to post collateral if
certain credit standards are not met. See Note 1-Summary of Significant Accounting Policies and Note 12-
Settlement Guarantee Management to our consolidated financial statements included in Item 8 of this report.
Accounting Pronouncements Not Yet Adopted
The Financial Accounting Standards Board has issued certain accounting updates, which we have either
determined to be not applicable or not expected to have a material impact on our consolidated financial
statements.
47
Our consolidated financial statements are prepared in accordance with accounting principles generally
accepted in the United States of America which require us to make judgments, assumptions and estimates that
affect the amounts reported. See Note 1-Summary of Significant Accounting Policies to our consolidated
financial statements included in Item 8 of this report. We have established policies and control procedures which
seek to ensure that estimates and assumptions are appropriately governed and applied consistently from period
to period. However, actual results could differ from our assumptions and estimates, and such differences could be
material.
We believe that the following accounting estimates are the most critical to fully understand and evaluate our
reported financial results, as they require our most subjective or complex management judgments, resulting from
the need to make estimates about the effect of matters that are inherently uncertain and unpredictable.
Revenue Recognition-Client Incentives
Critical estimates. We enter into long-term incentive agreements with financial institution clients, merchants
and other business partners for various programs that provide cash and other incentives designed to increase
revenue by growing payments volume, increasing Visa product acceptance, winning merchant routing
transactions over to our network and driving innovation. These incentives are primarily accounted for as
reductions to net revenues; however, if a separate identifiable benefit at fair value can be established, they are
accounted for as operating expenses. Incentives are recognized systematically and rationally based on
management's estimate of each client's performance. These estimates are regularly reviewed and adjusted as
appropriate based on changes in performance expectations, actual client performance, amendments to existing
contracts or the execution of new contracts.
Assumptions and judgment. Estimation of client incentives relies on forecasts of payments and transaction
volume, card issuance and card conversion. Performance is estimated using client-reported information,
transactional information accumulated from our systems, historical information, market and economic conditions
and discussions with our clients, merchants and business partners.
Impact if actual results differ from assumptions. If actual performance is not consistent with our estimates,
client incentives may be materially different than initially recorded. Increases in incentive payments are generally
driven by increased payments and transaction volume, which drive our net revenues. As a result, in the event
incentive payments exceed estimates, such payments are not expected to have a material effect on our financial
condition, results of operations or cash flows. The cumulative impact of a revision in estimates is recorded in the
period such revisions become probable and estimable.
Critical Accounting Estimates
(168)
Defined benefit pension and other postretirement plans:
Net unrealized actuarial gain (loss) and prior service credit (cost)
6
178
Income tax effect.
38
(41)
Derivative instruments:
Reclassification adjustments
Income tax effect. .
Net unrealized gain (loss)
Income tax effect. .
(1)
2022
28
(11)
(4)
(133)
53
12,311
$
14,957
$
17,273
$
(in millions)
2021
Reclassification adjustments
1
Income tax effect.
(1)
Translation adjustments
12,152 $
18,325 $
$
82
(2,805)
1,052
98
(95)
(3,255)
975
1
2
(24)
15
(67)
49
2023
Income tax effect. .
Other comprehensive income (loss)
Comprehensive income
10
13
13
Foreign currency translation adjustments:
(2)
(3)
(126)
917
19
24
(177)
(3)
For the Years Ended
September 30,
245
Income tax effect. .
10
10
245
245
245
1,691
1,651
1,618
22.53
$
28.03
33.17 $
$
9.14
10
11.33 $
$
5.63
$
7.01
8.29 $
$
12,311
$
14,957
17,273 $
$
3,752
3,179
3,764
13.26 $
$
8.28 $
7.00 $
Net unrealized gain (loss)
Investment securities:
Other comprehensive income (loss):
Net income
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
VISA INC.
56
See accompanying notes, which are an integral part of these consolidated financial statements.
10
399
10
10
245
12,393
2,188
2,136
245
5.63
$
13.24 $
11.31 $
9.13
$
Reclassification adjustments
33.13
28.00 $
22.51
Class A common stock
Class B common stock
Class C common stock
2,085
$
See accompanying notes, which are an integral part of these consolidated financial statements.
Cash dividends declared and paid, at a quarterly amount of
$0.45 per class A common stock
58
(3)
(43)
(43)
141
(2,805)
(2,805)
14,957
14,957
37,589
$
436
$
$ 3,080(1) 1,932 $ 18,855 $ (133) $ 15,351
5
Equity
Conversion to class A common stock upon sales into public
Total
Accumulated
Right to
Recover for
Covered
Losses
Common Stock
and Additional
Paid-in Capital
Shares Amount
Preferred Stock
Shares Amount
(141)
(3)
―(2)
Issuance of series A preferred stock
Recovery through conversion rate adjustment
VE territory covered losses incurred
Other comprehensive income (loss)
Net income
Balance as of September 30, 2021
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY-(Continued)
VISA INC.
Other
Accumulated Comprehensive
Income Income (Loss)
(in millions, except per share data)
market
-(2)
(612)
See accompanying notes, which are an integral part of these consolidated financial statements.
(2) Increase or decrease is less than one million shares.
(1) As of September 30, 2022 and 2021, the book value of series A preferred stock was $1.0 billion and $486 million, respectively. Refer to Note 5-U.S. and Europe
Retrospective Responsibility Plans for the book value of series B and series C preferred stock.
59
35,581
(2,369) $
16,116 $
$ 2,324(1) 1,890 $ 19,545 $ (35) $
5
Balance as of September 30, 2022
(11,589)
(3,203)
(3,203)
(10,989)
(600)
(56)
Repurchase of class A common stock
$0.375 per class A common stock
10
110
612
Share-based compensation
602
602
See accompanying notes, which are an integral part of these consolidated financial statements.
Stock issued under equity plans
196
196
Restricted stock and performance-based shares settled in cash
for taxes
(120)
(120)
Cash dividends declared and paid, at a quarterly amount of
4
57
(2) Increase or decrease is less than one million shares.
$ 38,733
10
(596) 10
(30)
-(2)
(in millions, except per share data)
$ 19,545 $ (35)
$ 2,324(1) 1,890
5
Accumulated
Income
Losses
Amount
Shares Amount Shares
Right to
Recover for
Covered
Common Stock
and Additional
Paid-in Capital
Preferred Stock
(136)
Balance as of September 30, 2023
16,063
cash for taxes
Restricted stock and performance-based shares settled in
Stock issued under equity plans
Share-based compensation
market
Conversion to class A common stock upon sales into public
Recovery through conversion rate adjustment
VE territory covered losses incurred
Other comprehensive income (loss)
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
VISA INC.
Net income
Balance as of September 30, 2022
Repurchase of class A common stock
31
596
Accumulated
(1,317)
18,040 $
$
$ 1,698(1) 1,849 $ 20,452 $ (140)
5
(3,751)
(12,182)
(3,751)
(11,598)
(584)
(55)
(130)
(130)
(1)
260
260
5
765
765
Other
Comprehensive
Total
Income (Loss)
Equity
$ 16,116
(1) As of September 30, 2023 and 2022, the book value of series A preferred stock was $456 million and $1.0 billion, respectively. Refer to Note 5-U.S. and Europe
Retrospective Responsibility Plans for the book value of series B and series C preferred stock.
$
17,273
17,273
1,052
1,052
(136)
1
(2,369) $ 35,581
18,136
3
259
(in millions, except per share data)
2022
September 30,
2023
Equity
Commitments and contingencies (Note 18 and Note 20)
Total liabilities
Other liabilities
Deferred tax liabilities
Long-term debt
Total current liabilities
Accrued litigation
Current maturities of debt
Client incentives
$
Accrued compensation and benefits
Settlement payable
Accounts payable
Liabilities
Total assets
Other assets
Intangible assets, net
Goodwill
Property, equipment and technology, net
Client incentives
Investment securities
Total current assets
Prepaid expenses and other current assets
Current portion of client incentives
Customer collateral
Customer collateral
16,286
$
15,689
85,501
90,499 $
$
3,737
3,731
25,065
26,104
17,787
17,997
3,223
3,425
3,348
3,789
2,136
1,921
30,205
33,532
1,764
1,449
3,842
2,833
2,183
1,932
Accounts receivable
2,291
3,005
2,342
1,577
1,272
2,584
2,668
2,020
$
Settlement receivable
Restricted cash equivalents-U.S. litigation escrow
Report of Independent Registered Public Accounting Firm
51
62
61
Notes to Consolidated Financial Statements.
Consolidated Statements of Cash Flows ..
58
Consolidated Statements of Changes in Equity
57
Consolidated Statements of Comprehensive Income
56
Consolidated Statements of Operations
55
Consolidated Balance Sheets.
To the Stockholders and the Board of Directors
52
Page
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
VISA INC.
ITEM 8. Financial Statements and Supplementary Data
50
50
Our equity investments are held in both marketable and non-marketable equity securities. The marketable
equity securities are publicly traded stocks and the non-marketable equity securities are investments in privately
held companies. As of September 30, 2023 and 2022, the carrying value of our marketable equity securities was
$163 million and $291 million, respectively, and the carrying value of our non-marketable equity securities was
$1.4 billion and $1.2 billion, respectively. These securities are subject to a wide variety of market-related risks that
could substantially reduce or increase the fair value of our holdings. A decline in financial condition or operating
results of these investments could result in a loss of all or a substantial part of our carrying value in these
companies. We regularly review our non-marketable equity securities for possible impairment, which generally
involves an analysis of the facts and changes in circumstances influencing the investment, expectations of the
entity's cash flows and capital needs, and the viability of its business model.
We have interest rate and cross-currency swap agreements on a portion of our outstanding senior notes that
allow us to manage our interest rate exposure through a combination of fixed and floating rates and reduce our
overall cost of borrowing. Together these swap agreements effectively convert a portion of our U.S. dollar
denominated fixed-rate payments into U.S. dollar and Euro-denominated floating-rate payments. By entering into
interest rate swaps, we have assumed risks associated with market interest rate fluctuations. As of September 30,
2023 and 2022, a hypothetical 100 basis point increase in interest rates would have resulted in an increase of
approximately $40 million in annual interest expense for each fiscal year. See Note 13-Derivative and Hedging
Instruments to our consolidated financial statements included in Item 8 of this report.
Equity Investment Risk
Our investment portfolio assets are held in both fixed-rate and adjustable-rate securities. Investments in
fixed-rate instruments carry a degree of interest rate risk. The fair value of fixed-rate securities may be adversely
impacted due to a rise in interest rates. Additionally, a falling-rate environment creates reinvestment risk because
as securities mature, the proceeds are reinvested at a lower rate, generating less interest income. As of
September 30, 2023 and 2022, a hypothetical 100 basis point increase in interest rates would create an estimated
decrease in the fair value of our investment securities of approximately $43 million and $47 million, respectively.
Any realized losses resulting from such interest rate changes would only occur if we sold the investments prior to
maturity. Historically, we have been able to hold investments until maturity.
Interest Rate Risk
We are also subject to foreign currency exchange risk in daily settlement activities. This risk arises from the
timing of rate setting for settlement with clients relative to the timing of market trades for balancing currency
positions. Risk in settlement activities is limited through daily operating procedures, including the utilization of Visa
settlement systems and our interaction with foreign exchange trading counterparties.
As of September 30, 2023 and 2022, we designated €3.0 billion and €1.2 billion, respectively, of our Euro-
denominated senior notes as a net investment hedge against a portion of the foreign exchange rate exposure
from our net investment in Visa Europe. Foreign currency translation adjustments resulting from the designated
portion of the Euro-denominated senior notes partially offset the foreign currency translation adjustments resulting
from our net investment in Visa Europe. See Note 1-Summary of Significant Accounting Policies and Note 13-
Derivative and Hedging Instruments to our consolidated financial statements included in Item 8 of this report.
We are further exposed to foreign currency exchange rate risk related to translation as the functional
currency of Visa Europe is the Euro. Translation from the Euro to the U.S. dollar is performed for balance sheet
accounts using exchange rates in effect at the balance sheet dates and for revenue and expense accounts using
an average exchange rate for the period. Resulting translation adjustments are reported as a component of
accumulated other comprehensive income (loss) on the consolidated balance sheets. A hypothetical 10% change
in the Euro against the U.S. dollar compared to the exchange rate as of September 30, 2023 and 2022 would
result in a foreign currency translation adjustment of $1.9 billion and $1.8 billion, respectively.
weakening would be largely offset by a corresponding gain on our cash flows from foreign currency-denominated
revenues and payments. See Note 1-Summary of Significant Accounting Policies and Note 13-Derivative and
Hedging Instruments to our consolidated financial statements included in Item 8 of this report.
Report of Independent Registered Public Accounting Firm (KPMG LLP, Santa Clara, CA, Auditor
Firm ID: 185)
Visa Inc.:
Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting
We have audited the accompanying consolidated balance sheets of Visa Inc. and subsidiaries (the Company) as
of September 30, 2023 and 2022, the related consolidated statements of operations, comprehensive income,
changes in equity, and cash flows for each of the years in the three-year period ended September 30, 2023, and
the related notes (collectively, the consolidated financial statements). We also have audited the Company's
internal control over financial reporting as of September 30, 2023, based on criteria established in Internal Control
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission.
Cash and cash equivalents
Assets
CONSOLIDATED BALANCE SHEETS
VISA INC.
54
November 15, 2023
Santa Clara, California
We have served as the Company's auditor since 2007.
/s/ KPMG LLP
analysis over the Company's monetary exposure calculations, and we recalculated the amount of the ending
litigation accrual. We read letters received directly from the Company's external legal counsel and internal
legal counsel that discussed the Company's legal matters, including the MDL - Individual Merchant Actions.
We also considered relevant publicly available information.
Report of Independent Registered Public Accounting Firm―(Continued)
35
53
The following are the primary procedures we performed to address this critical audit matter. We evaluated
the design and tested the operating effectiveness of certain internal controls related to the Company's
litigation accrual process for the MDL - Individual Merchant Actions. We evaluated the Company's ability to
estimate its monetary exposure by comparing historically recorded liabilities to actual monetary amounts
incurred upon resolution of legal matters for merchants that opted out of the previous MDL class settlement.
To assess the estimated monetary exposure in the Company's analysis, we compared such amounts to the
complete population of amounts attributable to the remaining opt-out merchants. We performed a sensitivity
We identified the assessment of the litigation accrual for class members opting out of the Damages
Class settlement in the Interchange Multidistrict Litigation (MDL), also known as the MDL - Individual
Merchant Actions, as a critical audit matter. This proceeding involves claims that are subject to inherent
uncertainties and unascertainable damages. The assessment of the litigation accrual for the MDL -
Individual Merchant Actions required especially challenging auditor judgment due to the assumptions and
estimation associated with the consideration and evaluation of possible outcomes. The Company could incur
judgments, enter into settlements or revise its expectations regarding the outcome of merchants' claims,
which could have a material effect on the estimated amount of the liability in the period in which the effect
becomes probable and reasonably estimable.
As discussed in Notes 5 and 20 to the consolidated financial statements, the Company is party to various
legal proceedings including the Interchange Multidistrict Litigation (MDL) – Individual Merchant Actions, and
has recorded a litigation accrual of $1,621 million as of September 30, 2023. In preparing its consolidated
financial statements, the Company is required to assess the probability of loss associated with each legal
proceeding and estimate the amount of such loss, any. The outcome of legal proceedings to which the
Company is a party is not within the complete control of the Company and may not be known for prolonged
periods of time.
Assessment of the litigation accrual for class members opting out of the Damages Class settlement in the
Interchange Multidistrict Litigation (MDL)
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of the Company as of September 30, 2023 and 2022, and the results of its operations and its
cash flows for each of the years in the three-year period ended September 30, 2023, in conformity with U.S.
generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects,
effective internal control over financial reporting as of September 30, 2023 based on criteria established in
Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective
internal control over financial reporting, and for its assessment of the effectiveness of internal control over
financial reporting, included in the accompanying Management's Report on Internal Control over Financial
Reporting. Our responsibility is to express an opinion on the Company's consolidated financial statements and an
opinion on the Company's internal control over financial reporting based on our audits. We are a public
accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and
are required to be independent with respect to the Company in accordance with the U.S. federal securities laws
and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are
free of material misstatement, whether due to error or fraud, and whether effective internal control over financial
reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the
amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the consolidated financial statements. Our audit of internal control over financial reporting included
obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness
exists, and testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk. Our audits also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control Over Financial Reporting
Investment securities
A company's internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
52
Report of Independent Registered Public Accounting Firm―(Continued)
accordance with generally accepted accounting principles. A company's internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of
the company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated
financial statements that was communicated or required to be communicated to the audit committee and that:
(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved
our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does
not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by
communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the
accounts or disclosures to which it relates.
59
21,037
375 $
3,269
29,310 $
(in millions, except per share data)
32,653 $
2021
For the Years Ended
September 30,
2022
2023
$
Diluted Weighted-average Shares Outstanding
Class C common stock
Class B common stock
Class A common stock
Diluted Earnings Per Share
Class C common stock
Class B common stock
Class A common stock
24,105
Basic Weighted-average Shares Outstanding
Class B common stock
Class A common stock
Basic Earnings Per Share
Net income
Income tax provision
Income before income taxes
Total non-operating income (expense)
Investment income (expense) and other
Interest expense
Non-operating Income (Expense)
Operating income
Total operating expenses
Litigation provision ...
General and administrative.
Class C common stock
5,831
4,990
4,240
(677)
37
772
(139)
681
(513)
(538)
(644)
15,804
18,813
21,000
8,301
10,497
11,653
868
927
985
1,341
1,336
1,136
736
743
730
Depreciation and amortization
545
403
943
861
804
1,330
1,194
505
340
Professional fees
Marketing
Accumulated income
Right to recover for covered losses
19,545
20,452
Class A, Class B and Class C common stock and additional paid-in capital, $0.0001 par value: 2,003,341
shares authorized (Class A 2,001,622, Class B 622, Class C 1,097); 1,849 (Class A 1,594, Class B 245,
Class C 10) and 1,890 (Class A 1,635, Class B 245, Class C 10) shares issued and outstanding as of
September 30, 2023 and 2022, respectively
2,324
1,698
Series A, Series B and Series C convertible participating preferred stock (preferred stock), $0.0001
par value: 25 shares authorized and 5 (Series A less than one, Series B 2, Series C 3) shares
issued and outstanding as of September 30, 2023 and 2022
49,920
51,766
3,535
3,091
5,332
5,114
Accumulated other comprehensive income (loss):
20,200
20,853
23,098
1,456
1,751
2,250
3,726
5,015
6,099
8,177
1,359
1,506
2,342
3,005
3,281
20,463
Investment securities
Defined benefit pension and other postretirement plans
Derivative instruments
Personnel
Operating Expenses
Net revenues
CONSOLIDATED STATEMENTS OF OPERATIONS
VISA INC.
55
55
See accompanying notes, which are an integral part of these consolidated financial statements.
85,501
90,499 $
$
35,581
38,733
Total liabilities and equity
Total equity
(2,369)
(1,317)
Foreign currency translation adjustments..
Total accumulated other comprehensive income (loss)
(140)
(35)
18,040
16,116
Network and processing
(64)
(155)
(169)
(177)
418
(921)
(2,512)
(106)
Accrued liabilities
14
69
(43)
(147)
104
264
(712)
(94)
(109)
(160)
(397)
(468)
(250)
(97)
(343)
(11,014)
(9,351)
(7,510)
(24)
(136)
(666)
873
(483)
2022
(in millions)
2021
$
17,273
$
14,957
$
12,311
12,297
10,295
8,367
765
602
542
943
861
804
(336)
(147)
Accounts payable
34
(705)
Investment securities:
Purchases
(4,363)
(5,997)
(5,111)
Proceeds from maturities and sales
3,160
4,585
5,701
Acquisitions, net of cash and restricted cash acquired
(1,948)
(75)
Purchases of other investments
(121)
(86)
(71)
(970)
(1,059)
Purchases of property, equipment and technology
Investing Activities
67
88
Settlement payable
(194)
1,256
679
Accrued and other liabilities
1,291
2023
1,055
Accrued litigation
295
476
70
Net cash provided by (used in) operating activities
20,755
18,849
15,227
929
For the Years Ended
September 30,
Other assets
Client incentives
$
36,210
12,311
12,311
Other comprehensive income (loss)
Adoption of new accounting standards
VE territory covered losses incurred
Recovery through conversion rate adjustment
Conversion to class A common stock upon sales into public
market
Share-based compensation
Stock issued under equity plans
Restricted stock and performance-based shares settled in cash
for taxes
Cash dividends declared and paid, at a quarterly amount of
$0.32 per class A common stock
82
82
3
354
$
(39) $ 14,088
(in millions, except per share data)
$ 16,721 $
Balance as of September 30, 2020
Net income
VISA INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY-(Continued)
Shares
Preferred Stock
Amount
Common Stock
and Additional
Paid-in Capital
Shares Amount
5
3
$ 5,086
Right to
Recover for
Covered
Accumulated
Other
Accumulated Comprehensive
Total
Losses
Income
Income (Loss)
Equity
1,939
Settlement of derivative instruments
―(1)
(147)
53
(1) Increase or decrease is less than one million shares.
See accompanying notes, which are an integral part of these consolidated financial statements.
VISA INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Operating Activities
Net income
Adjustments to reconcile net income to net cash provided by (used in) operating
activities:
Client incentives
Share-based compensation
Depreciation and amortization
Deferred income taxes
VE territory covered losses incurred
(Gains) losses on equity investments, net
Other
Change in operating assets and liabilities:
Settlement receivable
Accounts receivable
60
37,589
436 $
15,351 $
(147)
(2)
29
25
1,951
542
208
(1)
(55)
(1,951)
(144)
(144)
Repurchase of class A common stock
Balance as of September 30, 2021
(40)
(423)
(2,798)
(8,253)
5 $ 3,080 1,932 $ 18,855 $
(133) $
542
208
402
(2,798)
(8,676)
(25)
Property, equipment and technology, net. Property, equipment and technology are recorded at historical cost
less accumulated depreciation and amortization, which are computed on a straight-line basis over the asset's
estimated useful life. Depreciation and amortization of technology, furniture, fixtures and equipment are computed
over estimated useful lives ranging from 2 to 10 years. Leasehold improvements are amortized over the shorter of
the useful life of the asset or lease term. Building improvements are depreciated between 3 and 40 years, and
buildings are depreciated over 40 years. Improvements that increase functionality of the asset are capitalized and
depreciated over the asset's remaining useful life. Land and construction-in-progress are not depreciated.
Technology includes purchased and internally developed software, including technology assets obtained
through acquisitions. Internally developed software represents software primarily used by the VisaNet electronic
payments network. Internal and external costs incurred during the preliminary project stage are expensed as
incurred. Qualifying costs incurred during the application development stage are capitalized. Once the project is
substantially complete and ready for its intended use these costs are amortized on a straight-line basis over the
64
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
September 30, 2023
technology's estimated useful life. Acquired technology assets are initially recorded at fair value and amortized on
a straight-line basis over the estimated useful life.
The Company evaluates the recoverability of long-lived assets for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. If the sum
of expected undiscounted net future cash flows is less than the carrying amount of an asset or asset group, an
impairment loss is recognized to the extent that the carrying amount of the asset or asset group exceeds its fair
value. See Note 7—Property, Equipment and Technology, Net.
Leases. The Company determines if an arrangement is a lease at its inception. Right-of-use (ROU) assets,
and corresponding lease liabilities, are recognized at the commencement date based on the present value of
remaining lease payments over the lease term. For this purpose, the Company considers only payments that are
fixed and determinable at the time of commencement. As a majority of the Company's leases do not provide an
implicit rate, the Company uses its incremental borrowing rate based on the information available at the
commencement date in determining the present value of lease payments. The ROU asset also includes any lease
payments made prior to commencement and is recorded net of any lease incentives received. The lease terms
may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise
such options. The Company does not record a ROU asset and corresponding liability for leases with terms of 12
months or less.
Lease agreements generally contain lease and non-lease components. Non-lease components primarily
include payments for maintenance and utilities. The Company does not combine lease payments with non-lease
components for any of its leases. Operating leases are recorded as ROU assets, which are included in other
assets on the consolidated balance sheets. The current portion of lease liabilities are included in accrued liabilities
and the long-term portion is included in other liabilities on the consolidated balance sheets. The Company's lease
cost is included in general and administrative expense on the consolidated statements of operations and consists
of amounts recognized under lease agreements, adjusted for impairment and sublease income.
Business combinations. The Company accounts for business combinations using the acquisition method and
accordingly, the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the
acquiree are generally recorded at their acquisition date fair values. The excess of the purchase price over the fair
value of net assets acquired, including identifiable intangible assets, is recorded as goodwill. Acquisition-related
costs are expensed in the periods in which the costs are incurred.
Intangible assets, net and goodwill. The Company records identifiable intangible assets at fair value on the
date of acquisition and evaluates the useful life of each asset.
Finite-lived intangible assets primarily consist of customer relationships and trade names obtained through
acquisitions. Finite-lived intangible assets are amortized on a straight-line basis and are tested for recoverability if
events or changes in circumstances indicate that their carrying amounts may not be recoverable. These
intangibles have useful lives ranging from 3 to 15 years.
Indefinite-lived intangible assets consist of trade name, customer relationships and reacquired rights. Intangible
assets with indefinite useful lives are not amortized but are evaluated for impairment annually or more frequently if
events or changes in circumstances indicate that impairment may exist. The Company first assesses qualitative
factors to determine whether it is necessary to perform a quantitative impairment test for indefinite-lived intangible
assets. The Company assesses each category of indefinite-lived intangible assets for impairment on an aggregate
basis, which may require the allocation of cash flows and/or an estimate of fair value to the assets or asset group.
Impairment exists if the fair value of the indefinite-lived intangible asset is less than the carrying value.
99
65
VISA INC.
Guarantees and indemnifications. The Company recognizes an obligation at inception for guarantees and
indemnifications that qualify for recognition, regardless of the probability of occurrence. The Company indemnifies
its financial institution clients for settlement losses suffered due to the failure of any other client to fund its
settlement obligations in accordance with the Visa operating rules. The Company estimates expected credit
losses and recognizes an allowance for those credit losses related to its settlement indemnification obligations.
The estimated fair value of the liability for settlement indemnification is included in accrued liabilities on the
consolidated balance sheets.
Customer collateral. The Company holds cash deposits and other non-cash assets from certain clients in
order to ensure that their performance of settlement obligations arising from Visa payment services are processed
in accordance with the Company's operating rules. The cash collateral assets are restricted and fully offset by
corresponding liabilities, and both balances are presented on the consolidated balance sheets. Pledged securities
are held by a custodian in accounts under the Company's name and ownership. The Company does not have the
right to repledge these securities, but may sell these securities in the event of default by the client on its
settlement obligations. Letters of credit are provided primarily by a client's financial institutions to serve as
irrevocable guarantees of payment. Guarantees are provided primarily by a client's parent to secure the
obligations of its subsidiaries. The Company routinely evaluates the financial viability of institutions providing the
letters of credit and guarantees. See Note 12-Settlement Guarantee Management.
Settlement receivable and payable. The Company operates systems for authorizing, clearing and settling
payment transactions worldwide. Most U.S. dollar settlements with the Company's financial institution clients are
settled within the same day and do not result in a receivable or payable balance. Settlements in currencies other
than the U.S. dollar generally remain outstanding for one to two business days, resulting in amounts due from and
to clients. These amounts are presented as settlement receivable and settlement payable on the consolidated
balance sheets.
Financial instruments. The Company considers the following to be financial instruments: cash, cash
equivalents, restricted cash, restricted cash equivalents, investment securities, settlement receivable and
payable, accounts receivable, customer collateral, non-marketable equity securities and derivative instruments.
See Note 6-Fair Value Measurements and Investments.
Fair value. The Company measures certain financial assets and liabilities at fair value on a recurring basis.
Certain non-financial assets such as goodwill, intangible assets and property, equipment and technology are
subject to nonrecurring fair value measurements if they are deemed to be impaired. Fair value is the price that
would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
62
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
September 30, 2023
participants at the measurement date. Fair value measurements are reported under a three-level valuation
hierarchy. See Note 6-Fair Value Measurements and Investments.
Marketable equity securities. Marketable equity securities, which are reported in investment securities on the
consolidated balance sheets, include investments in publicly traded companies as well as mutual fund
investments related to various employee compensation and benefit plans. Interest and dividend income as well as
gains and losses, realized and unrealized, from changes in fair value are recognized in investment income
(expense) and other on the consolidated statements of operations.
Trading activity in the mutual fund investments is at the direction of the Company's employees. These
investments are held in a trust and are not considered by the Company to be available for its operational or
liquidity needs. The corresponding liability is reported in accrued liabilities on the consolidated balance sheets,
with changes in the liability recognized in personnel expense on the consolidated statements of operations.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
Available-for-sale debt securities. The Company's investments in debt securities, which are classified as
available-for-sale and reported in investment securities or cash and cash equivalents on the consolidated balance
sheets, include U.S. government-sponsored debt securities and U.S. Treasury securities. These securities are
recorded at cost at the time of purchase and are carried at fair value. The Company considers these securities to
be available-for-sale to meet working capital and liquidity needs. Investments with stated maturities of less than
one year from the balance sheet date, or investments that the Company intends to sell within one year, are
classified as current assets, while all other securities are classified as non-current assets. Unrealized gains and
losses are reported in other comprehensive income (loss). The specific identification method is used to calculate
realized gain or loss on the sale of securities, which is recorded in investment income (expense) and other on the
consolidated statements of operations. Interest income is recognized when earned and is included in investment
income (expense) and other on the consolidated statements of operations.
Non-marketable equity securities. The Company's non-marketable equity securities, which are reported in
other assets on the consolidated balance sheets, include investments in privately held entities without readily
determinable fair values. All gains and losses on non-marketable equity securities are recognized in investment
income (expense) and other on the consolidated statements of operations.
The Company applies the equity method of accounting when it does not have control but has the ability to
exercise significant influence over the entity. Under the equity method, the Company's share of each entity's profit
or loss is recognized in investment income (expense) and other on the consolidated statements of operations.
The Company applies the fair value measurement alternative for equity securities in certain other entities
when it does not have the ability to exercise significant influence over the entity. The Company adjusts the
carrying value of these equity securities to fair value when orderly transactions for identical or similar investments
of the same issuer are observable.
63
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
September 30, 2023
The Company regularly reviews investments accounted for under the equity method and the fair value
measurement alternative for possible impairment, which generally involves an analysis of the facts and changes
in circumstances influencing the investment, expectations of the entity's cash flows and capital needs, and the
viability of its business model.
The Company evaluates its debt securities for impairment on an ongoing basis. When there has been a
decline in fair value of a debt security below the amortized cost basis, the Company recognizes an impairment in
investment income (expense) and other on the consolidated statements of operations if it has the intent to sell the
security or it is more likely than not that the Company will be required to sell the security before recovery of the
amortized cost basis. In addition, if the Company identifies that the decline in fair value has resulted from credit
losses, the credit loss component is recognized as an allowance on the consolidated balance sheets and in
investment income (expense) and other on the consolidated statements of operations. The non-credit loss
component remains in accumulated other comprehensive income (loss) until realized from a sale or subsequent
impairment.
Restricted cash equivalents—U.S. litigation escrow. The Company maintains an escrow account from which
monetary liabilities from settlements of, or judgments in, the U.S. covered litigation are paid. See Note 5-U.S.
and Europe Retrospective Responsibility Plans and Note 20—Legal Matters for a discussion of the U.S. covered
litigation. The escrow funds are held in money market investments, and classified as restricted cash equivalents
on the consolidated balance sheets. Interest earned on escrow funds is recognized in investment income
(expense) and other on the consolidated statements of operations.
September 30, 2023
The Company performed its annual impairment review of indefinite-lived intangible assets and goodwill as of
February 1, 2023, and concluded there was no impairment as of that date. No recent events or changes in
circumstances indicate that impairment existed as of September 30, 2023. See Note 8-Intangible Assets and
Goodwill.
Derivatives are carried at fair value on a gross basis on the consolidated balance sheets. Gains and losses
resulting from changes in the fair value of derivative contracts designated as cash flow hedges are recorded in
other comprehensive income (loss). When the forecasted transaction occurs and is recognized in earnings, the
amount in accumulated other comprehensive income (loss) related to that hedge is reclassified to the
consolidated statements of operations in the corresponding account where revenue or expense is recorded.
Forward points are excluded from effectiveness testing purposes and are reported in earnings. Derivatives
designated as cash flow hedges are subject to master netting agreements, which provide the Company with a
legal right to net settle multiple payable and receivable positions with the same counterparty, in a single currency
through a single payment. However, the Company presents fair values on a gross basis on the consolidated
balance sheets.
The Company holds foreign exchange forward derivative contracts and other non-derivative financial
instruments which were designated as net investment hedges against a portion of the Company's net investment
in Visa Europe. The Company also holds interest rate and cross-currency swap agreements on a portion of the
outstanding senior notes that allows the Company to manage its interest rate exposure through a combination of
fixed and floating rates and reduce the overall cost of borrowing. The Company designated the interest rate
swaps as fair value hedges and the cross-currency swaps as net investment hedges. Gains and losses related to
hedging instruments for fair value hedges are recognized in interest expense along with a corresponding loss or
gain related to the change in the fair value of the underlying hedged item in the same line item on the
consolidated statements of operations. Gains and losses related to hedging instruments for net investment
hedges are recorded in other comprehensive income (loss). Amounts excluded from the effectiveness testing of
net investment hedges are recognized in earnings.
The Company utilizes foreign exchange forward derivative contracts to hedge against foreign currency
exchange rate fluctuations related to certain monetary assets and liabilities denominated in foreign currencies.
Gains and losses resulting from changes in the fair value of these derivative instruments not designated for hedge
accounting are recorded in general and administrative expense on the consolidated statements of operations.
68
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
September 30, 2023
Cash flows associated with a cash flow hedge are classified as an operating activity on the consolidated
statements of cash flows. Cash flows associated with a fair value hedge may be included in operating, investing
or financing activities depending on the classification of the items being hedged. Cash flows associated with a net
investment hedge are classified as an investing activity. See Note 13-Derivative and Hedging Instruments.
Share-based compensation. The Company measures share-based compensation cost at the grant date, net
of estimated forfeitures, based on the estimated fair value of the award. The Company recognizes compensation
cost for awards with only service conditions on a straight-line basis over the requisite service period, which is
generally the vesting period. Compensation cost for performance-based awards is recognized on a graded-
vesting basis. The amount is initially estimated based on target performance and is adjusted as appropriate based
on management's best estimate throughout the performance period. See Note 17-Share-based Compensation.
Earnings per share. The Company calculates earnings per share using the two-class method to reflect the
different rights of each class and series of outstanding common stock.
Basic earnings per share is computed by dividing net income available to each class of shares by the
weighted-average number of shares of common stock and participating securities outstanding during the period.
Participating securities include the Company's series A, B and C preferred stock and restricted stock units (RSUs)
that contain non-forfeitable rights to dividends or dividend equivalents. Net income is allocated to each class of
common stock and participating securities based on its proportional ownership on an as-converted basis. The
weighted-average number of shares outstanding of each class of common stock reflects changes in ownership
over the periods presented. See Note 15-Stockholders' Equity.
Diluted earnings per share is computed by dividing net income available to each class of shares by the
weighted-average number of shares of common stock outstanding, participating securities outstanding and, if
dilutive, potential class A common stock equivalent shares outstanding during the period. Dilutive class A
common stock equivalents may consist of: (1) shares of class A common stock issuable upon the conversion of
series A, B and C preferred stock and class B and C common stock based on the conversion rates in effect
through the period, and (2) incremental shares of class A common stock calculated by applying the treasury stock
method to the assumed exercise of employee stock options, the assumed purchase of stock under the
Company's Employee Stock Purchase Plan and the assumed vesting of unearned performance shares. See Note
16-Earnings Per Share.
Recently Adopted Accounting Pronouncement. In March 2020, the Financial Accounting Standards Board
(FASB) issued Accounting Standards Update (ASU) 2020-04, which provides optional expedients and exceptions
for applying U.S. GAAP to contracts, hedging relationships and other transactions that reference the London
Interbank Offered Rate (LIBOR) or another reference rate expected to be discontinued because of reference rate
reform. Subsequently, the FASB also issued amendments to this standard. The amendments in the ASU are
effective upon issuance through December 31, 2024. During fiscal 2023, the Company adopted certain optional
expedients provided in this ASU in relation to contract modifications and hedge accounting. The adoption did not
have a material impact on the consolidated financial statements.
Note 2-Acquisitions
Pending Acquisition
In June 2023, Visa entered into a definitive agreement to acquire Pismo Holdings, a cloud-native issuer
processing and core banking platform with operations in Latin America, Asia Pacific and Europe, for $1.0 billion in
cash. This acquisition is subject to customary closing conditions, including applicable regulatory reviews and
approvals.
69
Other investing activities.
Derivative and hedging instruments. The Company uses foreign exchange forward derivative contracts to
reduce its exposure to foreign currency rate changes on forecasted non-functional currency denominated
operational cash flows. The terms of these derivative contracts designated as cash flow hedges are generally no
more than 12 months. The Company uses regression analysis to assess hedge effectiveness prospectively and
retrospectively. The effectiveness tests are performed on foreign exchange forward contracts based on changes
in the spot rate of the derivative instrument compared to changes in the spot rate of the forecasted hedged
transaction.
Where a non-U.S. currency is the functional currency, translation from that functional currency to the U.S.
dollar is performed for balance sheet accounts using exchange rates in effect at the balance sheet dates and for
revenue and expense accounts using an average exchange rate for the period. Resulting translation adjustments
are reported as a component of accumulated other comprehensive income (loss) on the consolidated balance
sheets.
the Euro. Transactions denominated in currencies other than the applicable functional currency are converted to
the functional currency at the exchange rate on the transaction date. At period end, monetary assets and liabilities
are remeasured to the functional currency using exchange rates in effect at the balance sheet dates.
Non-monetary assets and liabilities are remeasured at historical exchange rates. Resulting foreign currency
transaction gains and losses related to conversion and remeasurement are recorded in general and
administrative expense on the consolidated statements of operations and were not material for fiscal 2023, 2022
and 2021.
September 30, 2023
Accrued litigation. The Company evaluates the likelihood of an unfavorable outcome in legal or regulatory
proceedings to which it is a party and records a loss contingency when it is probable that a liability has been
incurred and the amount of the loss can be reasonably estimated. These judgments are subjective and based on
a number of factors, including the specifics of such legal or regulatory proceedings, the merits of the Company's
defenses and consultation with internal and external legal counsel. Actual outcomes of these legal and regulatory
proceedings may differ materially from the Company's estimates. The Company expenses legal costs as incurred
in professional fees on the consolidated statements of operations. See Note 20—Legal Matters.
Revenue recognition. The Company's net revenues are comprised principally of the following categories:
service revenues, data processing revenues, international transaction revenues and other revenues, reduced by
client incentives. As a payments network service provider, the Company's obligation to the customer is to stand
ready to provide continuous access to Visa's payments network over the contractual term, facilitate the
processing of payment transactions, including authorization, clearing and settlement, and deliver related products
and services. The Company delivers its payments network services directly to issuers and acquirers, who provide
those services to others within the payments network: the merchants and consumers. The Company considers all
parties in Visa's payments network as customers. The Company earns net revenues primarily from issuers and
acquirers. Consideration is variable based primarily upon the amount and type of transactions and payments
volume on Visa's products. The transaction price for each specific service is reported net of discounts attributable
to individual services or fees. The Company recognizes revenue, net of sales and other similar taxes, as the
payments network services are performed in an amount that reflects the consideration the Company expects to
receive in exchange for those services. The Company has elected the optional exemption to not disclose the
remaining performance obligations related to payments network services and other performance obligations which
are constrained by and dependent upon the future performance of its clients, which are variable in nature. The
Company also recognizes revenues, net of sales and other similar taxes, from other value added services,
including issuing solutions, acceptance solutions, risk and identity solutions, open banking and advisory services,
as these value added services are performed.
Service revenues consist mainly of revenues earned for services provided in support of client usage of Visa
payment services. These revenues include fees related to payments volumes. Visa's obligation is to stand ready
to provide continuous access to Visa's payments network and related services with respect to Visa-branded
payments programs. Current quarter service revenues are primarily assessed using a calculation of current
quarter's pricing applied to the prior quarter's payments volume.
Data processing revenues consist of revenues earned for authorization, clearing, settlement; value added
services related to issuing, acceptance, and risk and identity solutions; network access; and other maintenance
and support services that facilitate transaction and information processing among the Company's clients globally.
Data processing revenues are recognized in the same period the related transactions occur or services are
performed.
International transaction revenues are earned for cross-border transaction processing and currency
conversion activities. Cross-border transactions arise when the country of origin of the issuer or financial
66
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
Goodwill represents the excess of the purchase price over the fair value of the net assets acquired in a
business combination. Goodwill is not amortized but is evaluated for impairment at the reporting unit level
annually or more frequently if events or changes in circumstances indicate that impairment may exist.
institution originating the transaction is different from that of the beneficiary. International transaction revenues are
recognized in the same period the cross-border transactions occur or services are performed.
Client incentives. The Company enters into long-term contracts with financial institution clients, merchants
and other business partners for various programs that provide cash and other incentives designed to increase
revenue by growing payments volume, increasing Visa product acceptance, winning merchant routing
transactions over to Visa's network and driving innovation. Incentives are classified as reductions to net revenues
within client incentives, unless the incentive is a cash payment made in exchange for a distinct good or service
provided by the customer, in which case the payment is classified as operating expense. The Company generally
capitalizes upfront and fixed incentive payments as client incentive assets under these agreements when paid
and amortizes the amounts as a reduction to revenues ratably over the contractual term. Incentives that are
earned by the customer based on performance targets are recorded when earned and disclosed as client
incentive liabilities and as reductions to revenues based on management's estimate of each client's future
performance. These accruals are regularly reviewed and estimates of performance are adjusted, as appropriate,
based on changes in performance expectations, actual client performance, amendments to existing contracts or
the execution of new contracts. Client incentive assets and liabilities are classified on the consolidated balance
sheets as current or long-term based on a 12-month operating cycle.
Marketing. The Company expenses costs for the production of advertising as incurred. The cost of media
advertising is expensed when the advertising takes place. Sponsorship costs are recognized over the period in
which the Company benefits from the sponsorship rights. Promotional costs are expensed as incurred, when the
related services are received, or when the related event occurs.
Income taxes. The Company's income tax expense consists of two components: current and deferred.
Current income tax expense represents taxes paid or payable for the current period. Deferred tax assets and
liabilities are recognized to reflect the future tax consequences attributable to temporary differences between the
financial statement carrying amounts and the respective tax basis of existing assets and liabilities, and operating
loss and credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected
to be applied to taxable income in the years in which those temporary differences are expected to be recovered or
settled. In assessing whether deferred tax assets are realizable, management considers whether it is more likely
than not that some portion or all of the deferred tax assets will not be realized. A valuation allowance is recorded
for the portions that are not expected to be realized based on the level of historical taxable income, projections of
future taxable income over the periods in which the temporary differences are deductible, and qualifying tax
planning strategies.
Where interpretation of the tax law may be uncertain, the Company recognizes, measures and discloses
income tax uncertainties. The Company accounts for interest expense and penalties related to uncertain tax
positions in interest expense and investment income (expense) and other, respectively, on the consolidated
statements of operations. The Company files a consolidated federal income tax return and, in certain states,
combined state tax returns. The Company elects to claim foreign tax credits in any given year if such election is
beneficial to the Company. See Note 19-Income Taxes.
Foreign currency remeasurement and translation. The Company's functional currency is the U.S. dollar for
the majority of its foreign operations except for Visa Europe Limited (Visa Europe) whose functional currency is
67
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
Other revenues consist mainly of value added services related to advisory, marketing and certain card
benefits; license fees for use of the Visa brand or technology; and fees for account holder services, certification
and licensing. Other revenues are recognized in the same period the related transactions occur or services are
performed.
Cash, cash equivalents, restricted cash, and restricted cash equivalents. Cash and cash equivalents include
cash and certain highly liquid investments with original maturities of 90 days or less from the date of purchase.
Cash equivalents are primarily recorded at cost, which approximates fair value due to their generally short
maturities. The Company defines restricted cash and restricted cash equivalents as cash and cash equivalents
that cannot be withdrawn or used for general operating activities. See Note 4-Cash, Cash Equivalents,
Restricted Cash and Restricted Cash Equivalents.
September 30, 2023
The Company's activities are interrelated, and each activity is dependent upon and supportive of the other.
All significant operating decisions are based on analysis of Visa as a single global business. The Company has
one reportable segment, Payment Services.
260
196
208
(130)
(120)
(144)
200
(198)
Net cash provided by (used in) financing activities . . .
(17,772)
(12,696)
(14,410)
Effect of exchange rate changes on cash, cash equivalents, restricted cash and
restricted cash equivalents
636
(1,287)
(37)
Increase (decrease) in cash, cash equivalents, restricted cash and restricted cash
equivalents
Cash proceeds from issuance of class A common stock under equity plans
Restricted stock and performance-based shares settled in cash for taxes
Other financing activities.
3,218
Proceeds from issuance of senior notes
(2,798)
128
Use of estimates. The preparation of consolidated financial statements in conformity with U.S. GAAP
requires management to make estimates and assumptions about future events. These estimates and
assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the consolidated financial statements and reported amounts of revenues and expenses during the
reporting period. These estimates may change as new events occur and additional information is obtained, and
will be recognized in the period in which such changes occur. Future actual results could differ materially from
these estimates. The use of estimates in specific accounting policies is described further below as appropriate.
109
Net cash provided by (used in) investing activities.
(2,006)
(4,288)
(152)
Financing Activities
1,613
Repurchase of class A common stock
(11,589)
(8,676)
Repayments of debt
(2,250)
(1,000)
(3,000)
Dividends paid
(3,203)
(12,101)
578
(3,751)
Cash, cash equivalents, restricted cash and restricted cash equivalents at
beginning of year.
3,741 $
$
607 $
56
$
SSS
3,012
643
SSS
See accompanying notes, which are an integral part of these consolidated financial statements.
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
Note 1-Summary of Significant Accounting Policies
-
-
Organization. Visa Inc. (Visa or the Company), is a global payments technology company that facilitates
global commerce and money movement across more than 200 countries and territories. Visa operates one of the
world's largest electronic payments networks VisaNet which provides transaction processing services
(primarily authorization, clearing and settlement). The Company offers products, solutions and services that
facilitate secure, reliable and efficient money movement for participants in the ecosystem. Visa is not a financial
institution and does not issue cards, extend credit or set rates and fees for account holders of Visa products. In
most cases, account holder and merchant relationships belong to, and are managed by, Visa's financial institution
clients.
628
Consolidation and basis of presentation. The consolidated financial statements include the accounts of Visa
and its consolidated entities and are presented in accordance with accounting principles generally accepted in the
United States of America (U.S. GAAP). The Company consolidates its majority-owned and controlled entities,
including variable interest entities (VIES) for which the Company is the primary beneficiary. The Company's
investments in VIES have not been material to its consolidated financial statements as of and for the periods
presented. Intercompany balances and transactions have been eliminated in consolidation.
61
96 $
41
617
20,377
19,799
$
19,171
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of
year.
$
21,990 $
20,377 $
19,799
Supplemental Disclosure
During fiscal 2022, economic sanctions were imposed on Russia, impacting Visa and its clients. In March
2022, the Company suspended its operations in Russia and deconsolidated its Russian subsidiary.
Cash paid for income taxes, net
$
3,433 $
Interest payments on debt
$
Accruals related to purchases of property, equipment and technology
A A
Interchange judgment sharing agreement. Visa U.S.A. and Visa International Service Association (Visa
International) have entered into an interchange judgment sharing agreement with certain Visa U.S.A. members
that have been named as defendants in the interchange multidistrict litigation, which is described in Note 20—
Legal Matters. Under this judgment sharing agreement, Visa U.S.A. members that are signatories will pay their
membership proportion of the amount of a final judgment not allocated to the conduct of Mastercard.
September 30, 2023
Europe Retrospective Responsibility Plan
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
VISA INC.
Omnibus agreement. Visa entered into an omnibus agreement with Mastercard and certain Visa U.S.A.
members that confirmed and memorialized the signatories' intentions with respect to the loss sharing agreement,
the interchange judgment sharing agreement and other agreements relating to the interchange multidistrict
litigation, see Note 20—Legal Matters. Under the omnibus agreement, the monetary portion of any settlement of
the interchange multidistrict litigation covered by the omnibus agreement would be divided into a Mastercard
portion at 33.3333% and a Visa portion at 66.6667%. In addition, the monetary portion of any judgment assigned
to Visa-related claims in accordance with the omnibus agreement would be treated as a Visa portion. Visa would
have no liability for the monetary portion of any judgment assigned to Mastercard-related claims in accordance
with the omnibus agreement, and if a judgment is not assigned to Visa-related claims or Mastercard-related
claims in accordance with the omnibus agreement, then any monetary liability would be divided into a Mastercard
portion at 33.3333% and a Visa portion at 66.6667%. The Visa portion of a settlement or judgment covered by the
omnibus agreement would be allocated in accordance with specified provisions of the Company's U.S.
retrospective responsibility plan. The litigation provision on the consolidated statements of operations was not
impacted by the execution of the omnibus agreement.
On August 26, 2014, Visa entered into an amendment to the omnibus agreement. The omnibus amendment
makes applicable to certain settlements in opt-out cases in the interchange multidistrict litigation the settlement-
sharing provisions of the omnibus agreement, pursuant to which the monetary portion of any settlement of the
interchange multidistrict litigation covered by the omnibus agreement would be divided into a Mastercard portion
at 33.3333% and a Visa portion at 66.6667%. The omnibus amendment also provides that in the event of
termination of the class settlement agreement, Visa and Mastercard would make mutually acceptable
arrangements so that Visa shall have received two-thirds and Mastercard shall have received one-third of the total
of (i) the sums paid to defendants as a result of the termination of the settlement agreement and (ii) the takedown
payments previously made to defendants.
UK loss sharing agreement. The Company has entered into a loss sharing agreement with Visa Europe and
certain of Visa Europe's member financial institutions located in the United Kingdom (UK LSA members). Each of
the UK LSA members has agreed, on a several and not joint basis, to compensate the Company for certain
losses which may be incurred by the Company, Visa Europe or their affiliates as a result of certain existing and
potential litigation relating to the setting and implementation of domestic multilateral interchange fee rates in the
United Kingdom prior to the closing of the Visa Europe acquisition (Closing), subject to the terms and conditions
set forth therein and, with respect to each UK LSA member, up to a maximum amount of the up-front cash
consideration received by such UK LSA member. The UK LSA members' obligations under the UK loss sharing
agreement are conditional upon, among other things, either (a) losses valued in excess of the sterling equivalent
on June 21, 2016 of €1.0 billion having arisen in UK covered claims (and such losses having reduced the
conversion rate of the series B preferred stock accordingly), or (b) the conversion rate of the series B preferred
stock having been reduced to zero pursuant to losses arising in claims relating to multilateral interchange fee rate
setting in the Visa Europe territory.
On October 22, 2015, Visa entered into an amendment to the loss sharing agreement. The amendment
includes within the scope of U.S. covered litigation any action brought after the amendment by an opt-out from the
Rule 23(b)(3) Settlement Class in MDL 1720 that arises out of facts or circumstances substantially similar to those
alleged in MDL 1720 and that is not transferred to or otherwise included in MDL 1720. On the same date, Visa
entered into amendments to the interchange judgment sharing agreement and omnibus agreement that include
any such action within the scope of those agreements as well.
Loss sharing agreement. Visa has entered into a loss sharing agreement with Visa U.S.A., Visa International
and certain Visa U.S.A. members. The loss sharing agreement provides for the indemnification of Visa U.S.A.,
Visa International and, in certain circumstances, Visa with respect to: (i) the amount of a final judgment paid by
Visa U.S.A. or Visa International in the U.S. covered litigation after the operation of the U.S. litigation escrow
arrangement, conversion feature of the Company's class B common stock and interchange judgment sharing
agreement, plus any amounts reimbursable to the interchange judgment sharing agreement signatories; or (ii) the
damages portion of a settlement of a U.S. covered litigation that is approved as required under Visa U.S.A.'s
certificate of incorporation by the vote of Visa U.S.A.'s specified voting members. The several obligation of each
bank that is a party to the loss sharing agreement will equal the amount of any final judgment enforceable against
Visa U.S.A., Visa International or any other signatory to the interchange judgment sharing agreement, or the
amount of any approved settlement of a U.S. covered litigation, multiplied by such bank's then-current
membership proportion as calculated in accordance with Visa U.S.A.'s certificate of incorporation.
73
Series B
74
The Company obtained certain protections for VE territory covered losses through the series B and C
preferred stock, the UK loss sharing agreement, and the litigation management deed, (collectively Europe
retrospective responsibility plan). The plan covers VE territory covered litigation (and resultant liabilities and
losses) relating to the covered period, which generally refers to the period before the Closing. Visa's protection
from the plan is further limited to 70% of any liabilities where the claim relates to inter-regional multilateral
interchange fee rates where the issuer is located outside the Visa Europe territory, and the merchant is located
within the Visa Europe territory. The plan does not protect the Company in Europe against all types of litigation or
remedies or fines imposed in competition law enforcement proceedings, only the interchange litigation specifically
covered by the plan's terms.
Unlike the U.S. retrospective responsibility plan, the Europe retrospective responsibility plan does not have
an escrow account that is used to fund settlements or judgments. The Company is entitled to recover VE territory
covered losses through periodic adjustments to the class A common stock conversion rates applicable to the
series B and C preferred stock. The total amount of protection available through the preferred stock component of
the Europe retrospective responsibility plan is equivalent to the as-converted value of the preferred stock, which
can be calculated at any point in time as the product of: (a) the outstanding number of shares of preferred stock;
(b) the current conversion rate applicable to each class of preferred stock; and (c) Visa's class A common stock
price. This amount differs from the value of the preferred stock recorded within stockholders' equity on the
Company's consolidated balance sheets. The book value of the preferred stock reflects its historical value
recorded at the Closing less VE territory covered losses recovered through a reduction of the applicable
conversion rate. The book value does not reflect changes in the underlying class A common stock price
subsequent to the Closing.
Series C
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
September 30, 2023
Visa Inc. net income is not impacted by VE territory covered losses as long as the as-converted value of the
preferred stock is greater than the covered loss. VE territory covered losses are recorded when the loss is
deemed to be probable and reasonably estimable, or in the case of attorney's fees, when incurred. Concurrently,
the Company records a reduction to stockholders' equity, which represents the Company's right to recover such
losses through adjustments to the conversion rate applicable to the preferred stock. The reduction to
stockholders' equity is recorded in the contra-equity account right to recover for covered losses.
Preferred Stock
As required by the litigation management deed, on June 21, 2022, the sixth anniversary of the Visa Europe
acquisition, Visa, in consultation with the VE Territory Litigation Management Committee, carried out a release
assessment. After the completion of this assessment, the Company released $3.5 billion of the as-converted
value from its series B and C preferred stock and issued 176,655 shares of series A preferred stock on July 29,
2022 (Sixth Anniversary Release). Each holder of a share of series B and C preferred stock received a number of
series A preferred stock equal to the applicable conversion adjustment divided by 100. The Company paid
$3 million in cash in lieu of issuing fractional shares of series A preferred stock. See Note 15-Stockholders'
Equity.
The following table presents the activities related to VE territory covered losses in preferred stock and right
to recover for covered losses within stockholders' equity:
Litigation management deed. The Company has entered into a litigation management deed with Visa Europe
which sets forth the agreed upon procedures for the management of the VE territory covered litigation, the
allocation of losses resulting from this litigation (VE territory covered losses) between the series B and C preferred
stock, and any accelerated conversion or reduction in the conversion rate of the shares of series B and C
preferred stock. The litigation management deed applies only to VE territory covered litigation (and resultant
losses and liabilities). The litigation management deed provides that the Company will generally control the
conduct of the VE territory covered litigation, subject to certain obligations to report and consult with the litigation
management committee for VE territory covered litigation (VE Territory Litigation Management Committee). The
VE Territory Litigation Management Committee, which is composed of representatives of certain Visa Europe
members, has also been granted consent rights to approve certain material decisions in relation to the VE territory
covered litigation.
VE territory covered losses may be recorded before the corresponding adjustment to the applicable
conversion rate is effected. Adjustments to the conversion rate may be executed once in any six-month period
unless a single, individual loss greater than €20 million is incurred, in which case, the six-month limitation does not
apply. When the adjustment to the conversion rate is made, the amount previously recorded in right to recover for
covered losses is then recorded against the book value of the preferred stock within stockholders' equity.
(1) These payments are associated with the interchange multidistrict litigation. See Note 20-Legal Matters.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
any case brought after October 22, 2015 by a merchant that opted out of the Rule 23(b)(3) settlement
class in MDL 1720 that arises out of facts or circumstances substantially similar to those alleged in MDL
1720 and that is not transferred to or otherwise included in MDL 1720. See Note 20—Legal Matters.
U.S. litigation escrow agreement. In accordance with the U.S. litigation escrow agreement, the Company
maintains an escrow account, from which settlements of, or judgments in, the U.S. covered litigation are paid. The
amount of the escrow is determined by the board of directors and the Company's litigation committee, all
members of which are affiliated with, or act for, certain Visa U.S.A. members. The accrual related to the U.S.
covered litigation could be either higher or lower than the U.S. litigation escrow account balance. See Note 20—
Legal Matters.
any claim that challenges the reorganization or the consummation thereof; provided that such claim is
transferred for coordinated or consolidated pre-trial proceedings at any time to MDL 1720 by the Judicial
Panel on Multidistrict Litigation or otherwise included at any time in MDL 1720 by order of any court of
competent jurisdiction; and
Right to Recover for
Covered Losses
The following table presents the changes in the restricted cash equivalents—U.S. litigation escrow account:
For the Years Ended
September 30,
Balance as of beginning of period
Deposits into the U.S. litigation escrow account
Payments to opt-out merchants(1), net of interest earned on escrow funds
Balance as of end of period. . .
2023
2022
(in millions)
1,449 $
894
1,000
850
(685)
(295)
1,764
$
1,449
Conversion feature. Under the terms of the plan, when the Company funds the U.S. litigation escrow
account, the value of the Company's class B common stock is subject to dilution through a downward adjustment
to the rate at which shares of class B common stock ultimately convert into shares of class A common stock. This
has the same economic effect on earnings per share as repurchasing the Company's class A common stock,
because it reduces the class B conversion rate and consequently the as-converted class A common stock share
count with each deposit amount. See Note 15-Stockholders' Equity.
Indemnification obligations. To the extent that amounts available under the U.S. litigation escrow
arrangement and other agreements in the plan are insufficient to fully resolve the U.S. covered litigation, the
Company will use commercially reasonable efforts to enforce the indemnification obligations of Visa U.S.A.'s
members for such excess amounts, including but not limited to enforcing indemnification obligations pursuant to
Visa U.S.A.'s certificate of incorporation and bylaws and in accordance with their membership agreements.
72
VISA INC.
September 30, 2023
(in millions)
September 30, 2023
460
141
460
$
812 $
(35)
(1) VE territory covered losses incurred reflect settlements with merchants and additional legal costs. See Note 20—Legal Matters.
(2) Adjustment to right to recover for covered losses for the conversion rate adjustment differs from the actual recovered amount due to
differences in foreign exchange rates between the time the losses were incurred and the subsequent recovery through the conversion rate
adjustment.
75
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
The following table presents the as-converted value of the preferred stock available to recover VE territory
covered losses compared to the book value of preferred stock recorded in stockholders' equity within the
Company's consolidated balance sheets:
(6)
(705)
Series B preferred stock
Total
Less: right to recover for covered losses
Total recovery for covered losses available
September 30,
2023
2022
As-converted
Value of
Preferred
Stock(1),(2)
the Interchange Multidistrict Litigation. In re Payment Card Interchange Fee and Merchant Discount
Antitrust Litigation, 1:05-md-01720-JG-JO (E.D.N.Y.) or MDL 1720, including all cases currently included
in MDL 1720, any other case that includes claims for damages relating to the period prior to the
Company's initial public offering (IPO) that has been or is transferred for coordinated or consolidated
pre-trial proceedings at any time to MDL 1720 by the Judicial Panel on Multidistrict Litigation or otherwise
included at any time in MDL 1720 by order of any court of competent jurisdiction;
Book Value of
Preferred
Stock(1)
Series C preferred stock
Balance as of September 30, 2022
VE territory covered losses incurred (1)
Recovery through conversion rate
(476)
(43)
$
812 $
(35)
(136)
adjustment(2)
Balance as of September 30, 2023.
$
(19)
441 $
(11)
801 $
31
(140)
Balance as of September 30, 2021
(135)
$
Recovery through conversion rate adjustment
Sixth Anniversary Release
Balance as of September 30, 2022
$
Preferred Stock
Series B
Series C
(in millions)
Right to Recover for
Covered Losses
1,071 $
1,523 $
(133)
VE territory covered losses incurred (1)
•
2023
U.S. covered litigation consists of a number of matters that have been settled or otherwise fully or
substantially resolved, as well as the following:
70
70
Net revenues
Client incentives
Other revenues
International transaction revenues
Data processing revenues
Service revenues
The nature, amount, timing and uncertainty of the Company's revenues and cash flows and how they are
affected by economic factors are most appropriately depicted through the Company's revenue categories and
geographical markets. The following tables disaggregate the Company's net revenues by revenue category and
by geography:
Note 3-Revenues
Goodwill is primarily attributable to synergies expected to be achieved from the acquisition and the
assembled workforce. The goodwill recognized is not deductible for tax purposes.
For the Years Ended
September 30,
Total...
LO
1,866
$
1,577
25
(71)
46
245
90
$
(in years)
Weighted-
Average Useful
Life
Goodwill..
Purchase Price
Allocation
(in millions)
2022
(in millions)
As-converted
Value of
Preferred
For the Years Ended
September 30,
September 30, 2023
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
VISA INC.
24,105
29,310 $
32,653 $
(8,367)
(10,295)
(12,297)
2021
1,675
2,479
6,530
9,815
11,638
12,792
14,438
16,007
11,475
13,361 $
$
14,826
1,991
Other net assets acquired (liabilities assumed)
Deferred tax liabilities
Customer relationships
Restricted cash and restricted cash equivalents:
U.S. litigation escrow
$
(in millions)
16,286 $
15,689
1,764
1,449
Customer collateral
3,005
2,342
Prepaid expenses and other current assets
Cash and cash equivalents.
935
Cash, cash equivalents, restricted cash and restricted cash equivalents
$
21,990 $ 20,377
Prepaid expenses and other current assets include restricted cash and restricted cash equivalents related to
funds held by the Company on behalf of clients in segregated bank accounts that generally cannot be withdrawn
or used for general operating activities. These amounts are fully offset by corresponding liabilities recorded in
accrued liabilities on the Company's consolidated balance sheets.
Note 5-U.S. and Europe Retrospective Responsibility Plans
U.S. Retrospective Responsibility Plan
The Company has established several related mechanisms designed to address potential liability under
certain litigation (U.S. covered litigation). These mechanisms are included in and referred to as the U.S.
retrospective responsibility plan and consist of a U.S. litigation escrow agreement, the conversion feature of the
Company's shares of class B common stock, the indemnification obligations of the Visa U.S.A. Inc. (Visa U.S.A.)
members, an interchange judgment sharing agreement, a loss sharing agreement and an omnibus agreement, as
amended.
71
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
September 30, 2023
897
2022
2023
September 30,
Technology
The following table summarizes the final purchase price allocation for Tink:
Tink. In March 2022, Visa acquired 100% of the share capital of Tink AB (Tink) for $1.9 billion in cash. Tink is
an open banking platform that enables financial institutions, fintechs and merchants to build financial products and
services and move money. The acquisition is expected to help accelerate the adoption of open banking around
the world by providing a secure, reliable platform for innovation.
Currencycloud. In December 2021, Visa acquired The Currency Cloud Group Limited (Currencycloud), a
global platform that enables financial institutions and fintechs to provide innovative cross-border foreign exchange
solutions, for a total purchase consideration of $893 million (which includes the fair value of Visa's previously held
equity interest in Currencycloud). The Company allocated $150 million of the purchase consideration to
technology, customer relationships, other net assets acquired and deferred tax liabilities and the remaining
$743 million to goodwill.
September 30, 2023
Fiscal 2022 Acquisitions
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
VISA INC.
2021
U.S.
International
Net revenues
(in millions)
14,138 $
18,515
12,851 $
16,459
11,160
12,945
$
32,653 $
29,310 $
24,105
Remaining performance obligations are comprised of deferred revenues and contract revenues that will be
invoiced and recognized as revenues in future periods primarily related to value added services. As of
September 30, 2023, the remaining performance obligations were $2.9 billion. The Company expects
approximately half to be recognized as revenue in the next two years and the remaining thereafter. However, the
amount and timing of revenue recognition is affected by several factors, including contract modifications and
terminations, which could impact the estimate of amounts allocated to remaining performance obligations and
when such revenues could be recognized.
Note 4 Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents
The Company reconciles cash, cash equivalents, restricted cash and restricted cash equivalents reported on
the consolidated balance sheets that aggregate to the beginning and ending balances shown in the consolidated
statements of cash flows as follows:
•
Book Value of
Preferred
September 30, 2022
Stock(1)
$
(134) $
5,261
Debt securities with unrealized losses for less than 12 months and 12 months or greater were as follows:
September 30, 2023
Less Than 12 Months
12 Months or Greater
Fair Value
Gross
Unrealized
Losses
Fair Value
Gross
Unrealized
Losses
4,804
(in millions)
U.S. Treasury securities
412 $
1,360
(2) $
Total
$
1,772 $
(12)
(14) $
50 $
2,128
(68)
2,178 $
(68)
U.S. government-sponsored debt securities
U.S. government-sponsored debt securities
U.S. Treasury securities.
(133)
(1) $
(80)
4,617
Total
$
5,806 $
1 $
(82) $
5,725
September 30, 2022
Gross Unrealized
Amortized
457
Cost
Losses
Fair
Value
(in millions)
U.S. government-sponsored debt securities
U.S. Treasury securities
$
458 $
4,937
Total
$
5,395 $
$
Gains
Total
78
2022
Adjustments:
Upward adjustments
Downward adjustments (including impairment)
Carrying amount
September 30,
2023
(in millions)
$
719
899
(445)
$
Initial cost basis
1,173
Upward adjustments
Downward adjustments (including impairment)
ᏌᏊ Ꮚ
For the Years Ended
September 30,
2023
(in millions)
94 $
(99) $
2022
231
(341)
79
Unrealized gains and losses recognized during fiscal 2023 and 2022 that were included in the carrying
value of the Company's non-marketable equity securities accounted for using the fair value measurement
alternative and still held as of September 30, 2023 and 2022, respectively, were as follows:
The following table summarizes the total carrying value of the Company's non-marketable equity securities
that were accounted for using the fair value measurement alternative and held as of September 30, 2023,
including cumulative unrealized gains and losses:
The Company's non-marketable equity securities include investments in privately held companies without
readily determinable fair values. These investments are measured at fair value on a non-recurring basis and are
classified as Level 3 due to the absence of quoted market prices, the inherent lack of liquidity and the fact that
significant inputs used to measure fair value are unobservable and require management's judgment.
5,725
Less Than 12 Months
Gross
Unrealized
Losses
Fair Value
(in millions)
$
408 $
(1)
3,507
(133)
$
3,915 $
(134)
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
September 30, 2023
The unrealized losses were primarily attributable to changes in interest rates.
The stated maturities of debt securities were as follows:
Due within one year
Due after one year through five years
Total ...
Equity Securities
September 30,
2023
(in millions)
$
3,804
1,921
$
4,697
Stock(1),(3)
1,108
1 $
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
September 30, 2023
Note 6-Fair Value Measurements and Investments
Assets and Liabilities Measured at Fair Value on a Recurring Basis
Assets
Cash equivalents and restricted cash
equivalents:
Money market funds
U.S. Treasury securities
Investment securities:
Marketable equity securities
76
Fair Value Measurements as of September 30
Using Inputs Considered as
Level 2
2023
2022
2023
2022
(in millions)
$
13,504 $
301
339
11,736 $
$ - $
799
Level 1
437
(3) As of September 30, 2022, the as-converted value of preferred stock is calculated as the product of: (a) 2 million and 3 million shares of
the series B and C preferred stock outstanding, respectively; (b) 2.971 and 3.645, the class A common stock conversion rate applicable to
the series B and C preferred stock outstanding, respectively; and (c) $177.65, Visa's class A common stock closing stock price.
1,237
(in millions)
$
1,676 $
441 $
1,309
$
460
2,635
801
2,044
812
(1) Figures in the table may not recalculate exactly due to rounding. As-converted and book values are based on unrounded numbers.
(2) As of September 30, 2023, the as-converted value of preferred stock is calculated as the product of: (a) 2 million and 3 million shares of
the series B and C preferred stock outstanding, respectively; (b) 2.937 and 3.629, the class A common stock conversion rate applicable to
the series B and C preferred stock outstanding, respectively; and (c) $230.01, Visa's class A common stock closing stock price.
4,311
3,353
1,272
(140)
(140)
(35)
(35)
$
4,171 $
1,102
$
3,318 $
1,242
U.S. government-sponsored debt securities
-
U.S. Treasury securities
Total
$
175 $
146 $
396 $
418
Level 1 assets and liabilities. Money market funds, U.S. Treasury securities and marketable equity securities
are classified as Level 1 within the fair value hierarchy, as fair value is based on unadjusted quoted prices in
active markets for identical assets. The Company's deferred compensation liability is measured at fair value
based on marketable equity securities held under the deferred compensation plan.
Level 2 assets and liabilities. The fair value of U.S. government-sponsored debt securities, as provided by
third-party pricing vendors, is based on quoted prices in active markets for similar, not identical, assets. Derivative
instruments are valued using inputs that are observable in the market or can be derived principally from or
corroborated by observable market data.
77
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS―(Continued)
September 30, 2023
418
U.S. Government-sponsored Debt Securities and U.S. Treasury Securities
September 30, 2023
Gross Unrealized
Amortized
Cost
Fair
Gains
Losses
Value
(in millions)
U.S. government-sponsored debt securities
U.S. Treasury securities
$
1,109 $
The amortized cost, unrealized gains and losses and fair value of debt securities were as follows:
396
--
Derivative instruments
Other current and non-current assets:
Money market funds
-
4,316
23
4,005
1,108
457
22
Derivative instruments
-
293
1,131
Total
$
18,483 $ 16,999 $
1,401 $
1,588
Liabilities
Accrued compensation and benefits:
Deferred compensation liability
$
175 $
146 $
Accrued and other liabilities:
(2) $
2023