Visa 2014 Annual Report Download - page 54

(2) 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, not the rounded numbers
presented.
(3) During fiscal 2014 and 2012, we recorded litigation provisions of $450 million and $4.1 billion,
respectively, and related tax benefits, associated with the 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 covered litigation will be paid from the
litigation escrow account. See Note 3—Retrospective Responsibility Plan and Note 20—Legal
Matters to our consolidated financial statements.
(4) During fiscal 2012, we reversed all previously recorded tax reserves and accrued interest associated
with uncertainties related to the deductibility of covered litigation expense recorded in fiscal 2007
through fiscal 2011. This resulted in a non-recurring increase in net income for fiscal 2012 by $326
million. Additionally, our reported financial results benefited from a non-recurring, non-cash
adjustment of $208 million related to the remeasurement of our net deferred tax liabilities attributable
to changes in the California state apportionment rules. See Note 19—Income Taxes to our
consolidated financial statements.
Interchange multidistrict litigation. On October 19, 2012, Visa, MasterCard, various U.S. financial
institution defendants and the class plaintiffs signed a settlement agreement to resolve the class
plaintiffs’ claims in the interchange multidistrict litigation. On December 10, 2012, Visa paid
approximately $4.0 billion from the litigation escrow account into a settlement fund established
pursuant to the definitive class settlement agreement. On January 14, 2014, the court entered the final
judgment order approving the settlement with the class plaintiffs, which is subject to the adjudication of
any appeals. Certain merchants in the proposed settlement classes, however, have objected to the
settlement and a number of merchants have filed opt-out claims. Takedown payments of approximately
$1.1 billion related to the opt-out merchants were received on January 27, 2014, and deposited into the
litigation escrow account. The deposit into the litigation escrow account and a related increase in
accrued litigation to address opt-out claims were recorded in the second quarter of fiscal 2014. In the
fourth quarter of fiscal 2014, we deposited $450 million of operating cash into the litigation escrow
account and recorded an additional accrual of $450 million associated with the opt-out claims, resulting
in an accrued litigation balance related to covered litigation of $1.4 billion at September 30, 2014. See
Note 3—Retrospective Responsibility Plan and Note 20—Legal Matters to our consolidated financial
statements.
Reduction in as-converted shares. During fiscal 2014, total as-converted class A common stock
was reduced by 22 million shares, at an average price of $209.15 per share, using $4.6 billion of
operating cash on hand. Of the $4.6 billion, $4.1 billion was used to repurchase class A common stock
in the open market. In addition, we deposited $450 million of operating cash into the litigation escrow
account previously established under the 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 3—Retrospective Responsibility Plan and Note 14—Stockholders’ Equity to our consolidated
financial statements.
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