Visa 2007 Annual Report Download - page 89

Table of Contents
• finance capital expenditures and future investments;
• service the payments of principal and interest on outstanding indebtedness; and
• pay the costs of litigation, including settlements.
The objectives of Visa U.S.A.'s investment policy are to maintain integrity of principal, to provide adequate liquidity to cover settlement contingency
scenarios and operating expenditures, including payments of principal and interest on its outstanding debt, inclusive of settled litigation, and to optimize
investment income earned within acceptable risk criteria.
Settlement of certain debit transactions due from customers participating in the Debit Processing Service and due to payment networks represents Visa
U.S.A.'s most consistent liquidity requirement. These settlement receivables are generally collected on the business day following the day in which the
transactions were processed, and settlement payables are typically satisfied two days following the processing day. Visa U.S.A. maintains a liquidity position
sufficient to enable uninterrupted daily net debit settlement. During fiscal 2007, Visa U.S.A. funded average daily net settlement payable balances of $62
million, with the highest daily balance being $188 million. During fiscal 2006, Visa U.S.A. funded average daily net settlement payable balances of $62
million, with the highest daily balance being $221 million. Visa International is Visa U.S.A.'s settlement agent for credit and all other debit transactions.
Sources of Liquidity
Visa U.S.A.'s primary sources of liquidity are cash on hand, cash provided by operating activities and a fixed-income investment portfolio. Funds from
operations are maintained in cash and cash equivalents, short-term available-for-sale investment securities, or long-term available-for-sale investment
securities based on Visa U.S.A.'s estimates of when those funds will be needed. At September 30, 2007, September 30, 2006 and September 30, 2005, Visa
U.S.A.'s total liquid assets, consisting of cash and cash equivalents, short-term investment securities, and long-term investment securities, were $1.8 billion,
$1.4 billion and $1.1 billion, respectively, as reflected in the following table:
At September 30,
2007 2006 2005
(in millions)
Cash and cash equivalents $ 275 $ 270 $ 135
Short-term investments securities, available-for-sale 747 660 681
Total current assets 2,507 1,594 1,478
Long-term investments securities, available-for-sale 737 515 319
Total current liabilities 3,282 1,393 1,325
Current portion of long-term debt 41 32 32
Long-term debt — 41 74
Current portion of accrued litigation 2,236 216 197
Long-term portion of accrued litigation 1,446 784 1,010
Total (deficit) equity (501) 583 126
Working capital (775) 201 153
On November 1, 2007, Visa Inc., Visa U.S.A. and Visa International entered into an agreement with American Express to resolve all current litigation
between American Express and Visa U.S.A. and Visa International, and the related litigation between American Express and five co-defendant banks. Under
the settlement agreement, an initial payment of $1.13 billion will be made on or before March 31, 2008, including $945 million from Visa Inc. and $185
million from the five co-defendant banks. Beginning March 31, 2008, Visa Inc. will pay American Express an additional amount of up to $70 million per
quarter for 16 quarters, for a maximum total of $1.12 billion. Total future payments discounted at 4.72% over the payment term, or
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