Visa 2007 Annual Report Download - page 80

Table of Contents
Operating Expenses
Total operating expenses increased by 127% to $5.0 billion in fiscal 2007 compared to $2.2 billion in fiscal 2006. The increase primarily reflects the
$2.7 billion litigation provision, which represented 94% of that increase. Excluding the litigation provision, operating expenses increased $191 million, or 9%.
Fiscal Year 2007 vs. 2006
2007 2006 $ Change % Change
(in millions, except percentages)
Personnel $ 721 $ 671 $ 50 7%
Network, EDP and communications 366 328 38 12%
Advertising, marketing and promotion 581 474 107 23%
Visa International fees 173 159 14 9%
Professional and consulting fees 334 291 43 15%
Administrative and other 211 272 (61) (22)%
Litigation provision 2,653 23 2,630 NM
Total Operating Expenses $ 5,039 $ 2,218 $ 2,821 127%
Personnel
Personnel expense increased 4% in fiscal 2007 due to a $26 million charge representing the first installment of a one-time special bonus program of $51
million associated with the establishment of Visa Inc. Half of the $51 million special bonus program vested during fiscal 2007. The other half is payable in
stock or cash one year after the completion of an initial public offering if certain vesting requirements are met. The remaining increase of 3% reflects
severance expense for certain executives, annual salary adjustments, which were broadly in line with economic price increases, offset by the impact of lower
average headcount during fiscal 2007.
Network, EDP and Communications
The increase in Network, EDP and Communications expense for fiscal 2007 was primarily due to the following:
• a $29 million in crease in fees paid for debit processing services for charges related to processing transactions through non-Visa networks, and
• a $12 million increase in maintenance and equipment rental costs.
Advertising, Marketing and Promotion
The increase in advertising, marketing and promotion expense in fiscal 2007 was primarily due to the following:
• a $67 million increase in expenditures for certain joint promotional campaigns with financial institution customers; and
• a $23 million increase in expenditures associated with Visa Extras, Visa U.S.A.'s point-based rewards program that enables enrolled cardholders
to earn reward points on qualifying purchases.
The remaining increase is attributable to additional promotional activity related to Visa Signature, Visa Small Business, and Consumer Debit products.
These increases were offset by the absence of initial launch expenditures for Visa U.S.A.'s new brand mark and card design which began in January 2006 and
the "Life Takes Visa" advertising campaign, which began in February 2006.
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