Visa 2008 Annual Report Download - page 64

Table of Contents
Operating Expenses
Operating expenses decreased 20% for fiscal 2008, compared to the prior year comparable period. The change primarily reflects decreases in the
litigation provision and professional and consulting fees.
The following table sets forth the components of our actual and pro forma operating expenses.
Fiscal Year ended September 30,
Visa Inc.
2008
Pro
Forma
2007
$
Change
%
Change
(in millions, except percentages)
Personnel $ 1,199 $ 1,159 $ 40 3%
Network, EDP and communications 339 308 31 10%
Advertising, marketing and promotion 1,016 1,075 (59) (5)%
Professional and consulting fees 438 552 (114) (21)%
Depreciation and amortization 237 228 9 4%
Administrative and other 332 334 (2) (1)%
Litigation provision 1,470 2,653 (1,183) (45)%
Total Operating Expenses $ 5,031 $ 6,309 $ (1,278) (20)%
Personnel
The increase in personnel expense for fiscal 2008 reflects the offsetting impacts of charges incurred with the reorganization and IPO and reduction of
certain pension and incentive expenses.
Personnel expense increased due to the combined impacts of: (i) severance and other charges incurred during the period associated with workforce
consolidation and elimination of overlapping functions; (ii) compensation expenses related to stock-based awards granted to employees in connection with our
IPO and (iii) a pension settlement charge of $27 million related to early recognition of actuarial losses related to employee attrition during fiscal 2008. During
fiscal 2008, we incurred $93 million in severance and other charges related to workforce consolidation, an increase of $80 million over similar charges
recorded in the fourth quarter of the prior fiscal year. In connection with our IPO in March 2008, employees were granted stock-based awards and as a result,
we recognized $74 million in compensation expense during fiscal 2008.
Charges incurred related to workforce consolidation and equity awards were offset by reductions in pension expense of $34 million due to conversion
of our defined benefit pension plan to a cash-balance plan in fiscal 2008 and due to the absence of a special $53 million IPO incentive granted to employees in
the fourth quarter of the prior fiscal year.
Due to the deterioration in market conditions and the resulting impact on the fair value of our pension plan assets upon remeasurement at September 30,
2008, we expect that our pension plan expense will increase in fiscal 2009. Also, we continue to evaluate various alternatives for achieving synergies in the
global organization and expect to incur additional severance charges, which may be significant, in fiscal 2009.
Network, EDP and communications
The increase in network, EDP and communications expense during fiscal 2008 reflects a 6% increase in maintenance, equipment rental and other costs
related to outsourcing certain development activities to remote locations compared to the prior year. Maintenance and equipment rental costs may
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