Visa 2009 Annual Report Download

Download and view the complete annual report

Please find the complete 2009 Visa annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 172

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159
  • 160
  • 161
  • 162
  • 163
  • 164
  • 165
  • 166
  • 167
  • 168
  • 169
  • 170
  • 171
  • 172

Visa Inc. (V)
10-K
Annual report pursuant to section 13 and 15(d)
Filed on 11/20/2009
Filed Period 09/30/2009

Table of contents

  • Page 1
    Visa Inc. (V) 10-K Annual report pursuant to section 13 and 15(d) Filed on 11/20/2009 Filed Period 09/30/2009

  • Page 2
    ... company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ The aggregate market value of the registrant's class A common stock, par value $.0001 per share, held by non-affiliates (using the New York Stock Exchange closing price as of March 31, 2009, the last business day of the registrant...

  • Page 3
    ... Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Item 6 Selected Financial Data Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations Item 7A Quantitative and Qualitative Disclosures About Market Risk...

  • Page 4
    ... take advantage of these opportunities; statements as to future foreign and domestic regulatory changes and their impact on our business; statements as to the impact of litigation and the operation of our retrospective responsibility plan; statements regarding the put option held by Visa Europe; and...

  • Page 5
    ... maintenance and promotion of our brands. Business We derive revenues primarily from fees paid by our customers based on payments volume, transactions that we process and certain other related services that we provide. In fiscal 2009: • we launched our first global advertising campaign, entitled...

  • Page 6
    ..., money orders, government checks, travelers cheques, official checks and other paper-based means of transferring value; card-based payments-credit cards, charge cards, debit cards, deferred debit cards, ATM cards, prepaid cards, private label cards and other types of general-purpose and limited-use...

  • Page 7
    ... that issue Visa cards to cardholders, and acquirers, which are the financial institutions that offer Visa network connectivity and payments acceptance services to merchants. In addition, we offer a range of value-added processing services to support our customers' Visa programs and to promote the...

  • Page 8
    ... be material. Visa Europe authorizes transactions for its members through its own processing system. Other Value-Added Processing Services We offer a range of other value-added services in certain countries, including risk management, debit issuer processing, loyalty services, dispute management and...

  • Page 9
    ...or checks. Our prepaid platform includes gift, travel, youth, payroll, money transfer, corporate incentive, insurance reimbursement and government benefits cards. Cash Access. Our customers can provide global cash access to their cardholders by issuing products accepted at Visa and PLUS branded ATMs...

  • Page 10
    ... advertising, sponsorships, promotions and public relations to create programs that build active preference for products carrying our brand, promote product usage, increase product acceptance and support cardholder acquisition and retention. For merchants, we work to ensure that the Visa brand...

  • Page 11
    ... These rules and standards relate to such matters as the use of our brands and trademarks, the standards, design and features of payment cards and programs, merchant acquiring activities, including acceptance standards applicable to merchants, use of agents, disputes between members, risk management...

  • Page 12
    ... risk scores to authorization messages; and chip and PIN programs that have been demonstrated to reduce the incidence of certain types of fraud at physical point-of-sale locations. We have also implemented rules that require the use of more secure PIN encryption standards for ATMs and point-of-sale...

  • Page 13
    ... discount rate. The merchant discount typically covers the costs that acquirers incur for participation in four-party payments networks, including those relating to interchange, and compensates them for various other services they provide to merchants. Merchant discount rates and other merchant fees...

  • Page 14
    ...-based payments (including credit, charge, debit, ATM, prepaid, private-label and other types of general-purpose and limited-use cards) and other electronic payments (including wire transfers, electronic benefits transfers, automatic clearing house, or ACH, payments and electronic data interchange...

  • Page 15
    ... 2008 operating revenues. Employees At September 30, 2009, we employed approximately 5,700 persons worldwide. We consider our relationships with our employees to be good. Additional Information and SEC Reports Our Internet address is http://www.visa.com. On our investor relations website, accessible...

  • Page 16
    ... jurisdictions, the relationship between interchange reimbursement fees and bank and merchant costs, and the role of interchange in promoting competition in the provision of payment cards. The resulting report was issued by the U.S. Government Accountability Office in November 2009. Individual state...

  • Page 17
    ... Statement of Objections addresses the honor all cards rule, the no-surcharge rule, and Visa Europe's multilateral interchange reimbursement fees for cross-border payment transactions within the European Economic Area. In March 2009, the Central Bank of Brazil issued a joint report which criticized...

  • Page 18
    ... of our initial public offering and potential follow-on offerings of our class A common stock (or deposits of cash to the escrow account in lieu of such follow-on offerings), a loss sharing agreement, a judgment sharing agreement and the indemnification obligation of Visa U.S.A. members pursuant to...

  • Page 19
    ...in Item 8 in this report. In addition, in the United States, private plaintiffs often seek class action certification in cases against us, particularly in cases involving merchants and consumers, due to the size and scope of our business and the large number of parties involved in our payment system...

  • Page 20
    ... Visa operates. U.S. Treasury Office of Foreign Assets Control Regulation. Regulations imposed by the U.S. Treasury Office of Foreign Assets Control, or OFAC, restrict Visa U.S.A. and Visa International from dealing with certain countries, and parties considered to be connected with money laundering...

  • Page 21
    ... settlement risk management requirements on us, including new settlement procedures or other operational rules to address credit and operational risks or new criteria for member participation and merchant access to our payments system. Any of these developments could make it more costly to operate...

  • Page 22
    ... security solutions or more favorable pricing arrangements. Our competitors may also introduce more innovative programs and services than us. Certain of our competitors, including American Express, Discover, private-label card networks and certain alternative payments systems, operate closed-loop...

  • Page 23
    ... from alternative types of payment services, such as online payment services and services that permit direct debit of consumer checking accounts or ACH payments. Our failure to compete effectively against any of these threats, could materially and adversely affect our revenues, operating results...

  • Page 24
    ... and merchants to support our programs and services. We do not issue cards, extend credit to cardholders or determine the interest rates (if applicable) or other fees charged to cardholders using cards that carry our brands. Each issuer determines these and most other competitive card features. In...

  • Page 25
    ...and use our brands and technology within Visa Europe's region and we have only limited control over the operation of the Visa business there. Visa Europe is not required to spend any minimum amount of money promoting or building the Visa brand in its region, and the strength of the Visa global brand...

  • Page 26
    ... credit risk policy, we would have to absorb the cost of such settlement failure, which could materially and adversely affect our cash flow. If our transaction processing systems are disrupted or we cannot process transactions efficiently, the perception of our brands and our revenues or operating...

  • Page 27
    ... the use and acceptance of our cards, or to greater regulation, which could increase our compliance costs. Failure to maintain interoperability between Visa Inc.'s and Visa Europe's authorization and clearing and settlement systems could damage the business and global perception of the Visa brand...

  • Page 28
    ... Risks Related to our Structure and Organization We have a limited ability to control Visa Europe's operations and limited recourse in the event of a breach of its obligations to us. Our relationship with Visa Europe is governed by a Framework Agreement, which gives Visa Europe very broad rights...

  • Page 29
    ... on the amount, if any, of the funds released from the escrow account and the market price of our class A common stock at the time those funds are released. All shares of class A common stock acquired by a Visa member, an affiliate of a Visa member or a similar person will be converted automatically...

  • Page 30
    ... Contents affiliate of a Visa member or a competitor or its affiliate. Upon such transfer, each share of class C common stock will convert into one share of class A common stock. Holders of our class B and class C common stock have voting rights concerning certain significant corporate transactions...

  • Page 31
    ... in 2009 with the data center becoming fully operational in October 2009 following the migration from our former east coast processing center. We also lease a 13,000 square foot processing center in Japan. We believe that these facilities are suitable and adequate to support our business needs. ITEM...

  • Page 32
    ...PART II ITEM 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Price Range of Common Stock Our class A common stock has been listed on the New York Stock Exchange under the symbol "V" since March 19, 2008. The following table sets forth...

  • Page 33
    ... Item 8 of this report. Number of shares of class A Number of shares of class A common stock to be issued upon exercise of outstanding options, warrants and rights (a) common stock Weighted-average exercise price of outstanding options, warrants and rights (b) (1) Plan Category remaining available...

  • Page 34
    ... Visa U.S.A. Inc., the accounting acquirer in the reorganization. Visa U.S.A. Inc. was a non-stock corporation and therefore no comparable metric for net income per share is provided for fiscal 2007, 2006 and 2005. The long term portion of Visa U.S.A. debt was classified as being due within one year...

  • Page 35
    ... Plan (the "Plan"). Under the terms of the Plan, when Visa funds the Escrow Account, the shares of class B common stock retained by our U.S. financial institution customers and their affiliates are subject to dilution through an adjustment to the conversion rate of the shares of class B common stock...

  • Page 36
    ... where electronic payments are growing rapidly, providing multi-currency and multi-language debit, credit and prepaid processing services to financial institutions, processors and payment companies. VPS will also have capabilities to provide ATM, money transfer and private label processing, as...

  • Page 37
    ... the twelve months ended September 30, 2009 and September 30, 2008 were based on payments volume reported by our financial institution customers for the twelve months ended June 30, 2009 and June 30, 2008, respectively. This table sets forth transaction volumes processed by our VisaNet system during...

  • Page 38
    ... other data processing services. Advertising, marketing and promotion includes expenses associated with advertising and marketing campaigns, sponsorships, and other related promotions to promote the Visa brand. Visa International fees represents fees that Visa U.S.A. paid to Visa International prior...

  • Page 39
    ... dividends received from other cost and equity method investments. Other non-operating income primarily relates to the change in fair value of the liability under the Framework Agreement with Visa Europe. This liability was fully discharged in October 2008. Visa Inc. Fiscal 2009 and 2008 and Visa...

  • Page 40
    .... Revenues from processing foreign currency transactions for our customers fluctuate with cross-border travel and the extent to which Visa-branded products are utilized for travel purposes. Our operating revenues are impacted by fluctuations in foreign currency rates. Operating revenues are...

  • Page 41
    ... 2009 and 2008 primarily due to growth in revenues related to the Visa Extras loyalty platform for administrative and rewards fulfillment services performed in support of the platform. The increase in other revenues during fiscal 2008 also reflects license and other service fees from Visa Europe...

  • Page 42
    ... advertising, marketing and promotion spending in connection with the 2008 Beijing Olympics and our Visa Extras reward program were offset by the absence of costs incurred in fiscal 2007 related to certain joint promotional campaigns which did not recur during fiscal 2008. Visa International fees...

  • Page 43
    ... fiscal 2009 from our new east coast data center. We expect our new east coast data center and office building to generate additional depreciation expense of approximately $12 million in fiscal 2010. Administrative and other remained flat in fiscal 2009, primarily due to unrealized foreign exchange...

  • Page 44
    ...-operating income in fiscal 2008 reflected the adjustments to the fair market value of our liability under the Framework Agreement with Visa Europe. This liability was settled during the first fiscal quarter of 2009. Effective Income Tax Rate The effective tax rate increased to 41% in fiscal 2009...

  • Page 45
    ... of investment securities and $1.0 billion from the sale of our 10% ownership in VisaNet do Brasil, all of which were reinvested in money market funds. We also purchased $306 million of property, equipment and technology primarily related to construction of our east coast data center. Cash provided...

  • Page 46
    ... of Contents term available-for-sale investment securities based upon our funding requirements, access to liquidity from these holdings, and return that these holdings provide. Investment Portfolio. Our investment portfolio primarily comprises of securities which enable us to meet a desired level...

  • Page 47
    ... our shareholders 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 4-Retrospective Responsibility Plan to our consolidated financial statements. The balance in this account at September 30, 2009 was...

  • Page 48
    ... dividends. Visa Europe Put Option. We have granted Visa Europe a perpetual put option which, if exercised, will require us to purchase all of the outstanding shares of capital stock of Visa Europe from its members. Visa Europe may exercise the put option at any time. The purchase price of the Visa...

  • Page 49
    ... provide benefits based on years of service, age and employees' final three to five years of earnings, as well as a postretirement benefit plan which provides postretirement medical benefits for retirees and dependents upon meeting minimum age and service requirements. Our policy with respect...

  • Page 50
    ... customer to honor Visa cards, traveler's cheques, or other instruments processed in accordance with our operating regulations. The amount of the indemnification is unlimited. We maintain global credit settlement risk policies and procedures to manage settlement risk which may require customers to...

  • Page 51
    ... merchants for various programs designed to build sales volume and increase payment product acceptance. These agreements, which range in term from one to thirteen years, provide card issuance, marketing and program support based on specific performance requirements. Payments under these agreements...

  • Page 52
    ...year ended September 30, 2009, performance adjustments to volume and support agreements were less than 1% of our total operating revenues. Fair Value-Visa Europe Put Option Critical Estimates. We have granted Visa Europe a perpetual put option under which we are required to purchase all of the share...

  • Page 53
    ... not limited to, changes in the regulatory environment, client portfolio, long-term growth rates or new product innovation. A consistent methodology is applied to a group of comparable public companies used to estimate the forward price-to-earnings multiple applicable to Visa Europe. These estimates...

  • Page 54
    ... a for-profit business model in advance of exercising the put option. The foreign exchange rate used to translate Visa Europe's results from euros to U.S. dollars reflects our estimate of long-term exchange rates and is determined based on forward foreign exchange rates available in the marketplace...

  • Page 55
    ... on a number of factors when completing impairment assessment including a review of discounted future cash flows, business plans and use of present value techniques. No impairment of our intangible assets or goodwill exists as of our July 1, 2009 annual assessment, and no events or circumstances...

  • Page 56
    ... of rate setting for settlement with customers 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...

  • Page 57
    ...point increase or decrease in rates would have impacted the fair value of these notes by approximately $2 million at September 30, 2009. Visa Europe Put Option We have a liability related to the put option with Visa Europe which is recorded at fair market value at September 30, 2009. We are required...

  • Page 58
    Table of Contents ITEM 8. Financial Statements and Supplementary Data VISA INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page As of September 30, 2009 and 2008 and for the years ended September 30, 2009, 2008 and 2007 Report of Independent Registered Public Accounting Firm Consolidated Balance ...

  • Page 59
    ... 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...

  • Page 60
    ... statements of operations, changes in stockholders' equity, comprehensive income, and cash flows for the year ended September 30, 2007 are those of Visa U.S.A. Inc. and subsidiaries, the accounting acquirer in the reorganization. /s/ KPMG LLP San Francisco, California November 19, 2009 59

  • Page 61
    ...Note 12) Accrued compensation and benefits Volume and support incentives Accrued liabilities (Note 9) Current portion of long-term debt (Note 10) Current portion of accrued litigation (Note 21) Redeemable class C (series III) common stock, no shares and 35 shares issued and outstanding, respectively...

  • Page 62
    ...series IV) common stock, $0.0001 par value, 1 shares authorized, 1 issued and outstanding at September 30, 2008 (Note 15) Additional paid-in capital Class C treasury stock (Note 15) Accumulated income Accumulated other comprehensive loss, net Investment securities, available-for-sale Defined benefit...

  • Page 63
    ...) 2007 (1) Operating Revenues Service revenues Data processing revenues International transaction revenues Other revenues Volume and support incentives Total operating revenues Operating Expenses Personnel Network, EDP and communications Advertising, marketing and promotion Visa International fees...

  • Page 64
    ...VISA INC. CONSOLIDATED STATEMENTS OF OPERATIONS-(Continued) For the Years Ended September 30, 2009 2008 2007 (1) Basic weighted average shares outstanding (Note 16) Class A common stock Class B common stock Class C common stock Class C (series I) common stock Class C (series II) common stock Class...

  • Page 65
    ... stock Accretion of class C (series II) common stock (Note 15) Share-based compensation (Note 17) Cash dividends declared, at a quarterly amount of $0.105 per asconverted share Impact of cash dividend declaration on class C (series II) common stock (Note 15) Special IPO dividends received from cost...

  • Page 66
    ...Conversion of class C (series III) and class C (series IV) into class C (series I) common stock (Note 15) Conversion of class C common stock upon sale into public market (Note 15) Share-based compensation (Note 17) Tax benefit for share-based compensation Cash proceeds from exercise of stock options...

  • Page 67
    ... STATEMENTS OF COMPREHENSIVE INCOME For the Years Ended September 30, 2009 2008 (in millions) 2007 (1) Net income (loss) Other comprehensive income (loss), net of tax: Investment securities, available-for-sale Net unrealized gain (loss) Income tax effect Reclassification adjustment for net (gain...

  • Page 68
    ... and support incentives Other assets Accounts payable Settlement payable Accrued compensation and benefits Accrued and other liabilities Accrued litigation Member deposits Net cash provided by operating activities Investing Activities Investment securities, available-for-sale: Purchases Proceeds...

  • Page 69
    ...Years Ended September 30, 2009 2008 (in millions) 2007 (1) Financing Activities Proceeds from short-term borrowing Payments on short-term borrowing Proceeds from sale of common stock, net of issuance costs of $550 Tax benefit for share-based compensation Cash proceeds from exercise of stock options...

  • Page 70
    ... the accounting acquirer in the reorganization. During the first quarter of fiscal 2009, the Company formed Visa Processing Services, Ltd. ("VPS") and issued a 30% minority interest to and executed a joint venture agreement with Yalamanchili International Pte. Ltd., a payments processor and software...

  • Page 71
    ... investments with original maturities of 90 days or less from the date of purchase. Cash equivalents are recorded at cost, which approximates fair value. Restricted cash-Litigation escrow-The Company deposited funds from the IPO and its own funds into an Escrow Account from which settlements of, or...

  • Page 72
    ... of purchase and are carried at fair value. The Company classifies its debt and marketable equity securities as available-for-sale to meet its operational needs. Investments with original maturities greater than 90 days and stated maturities less than one year from the balance sheet date are current...

  • Page 73
    ..., trading and available-for sale investments, the Reserve Primary Fund (see Note 6-Prepaid Expenses and Other Assets), accounts receivable, non-marketable equity investments, customer collateral, accounts payable, debt, settlement guarantees, derivative instruments, the Visa Europe put option, and...

  • Page 74
    ...number of factors when completing impairment assessment including a review of discounted future cash flows, business plans and use of present value techniques. The Company evaluated its goodwill for impairment as of July 1, 2009 and concluded there was no impairment as of that date. No recent events...

  • Page 75
    .... 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 volume and support incentives. The Company recognizes revenue when the price is fixed...

  • Page 76
    ...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...

  • Page 77
    ... claims arising out of the provision of services brought against Visa Europe by Visa Inc.'s customer financial institutions, as described in Note 18-Commitments and Contingencies. Share-based compensation-The Company recognizes share-based compensation cost using the fair value method of accounting...

  • Page 78
    ...of operations upon adoption. The Company will adopt this standard in fiscal 2010. In May 2009, FASB ASC 855 was issued and established standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued...

  • Page 79
    ..., or the date on which all parties entered into the global restructuring agreement. Additional purchase consideration of $1.2 billion, consisting of 26,138,056 incremental shares of class C common stock valued at $44 per share were issued to the acquired regions shortly before the IPO in connection...

  • Page 80
    ... stock valued at $3.1 billion based on the value of the class C (series I) common stock issued to the acquired regions. Visa Europe also received 27,904,464 shares of class C (series II) common stock valued at $1.104 billion determined by discounting the redemption price of these shares using a risk...

  • Page 81
    ... of the outstanding shares of capital stock of Visa Europe from its members. The put option became exercisable during fiscal 2009. The Company is required to purchase the shares of Visa Europe no later than 285 days after exercise of the put option. The purchase price of the Visa Europe shares under...

  • Page 82
    ...of Visa Europe. The Company may exercise the call option, in the event of certain triggering events. These triggering events involve the performance of Visa Europe measured as an unremediated decline in the number of merchants or ATM's in the Visa Europe region that accept Visa-branded products. The...

  • Page 83
    ...will also guarantee the obligations of their respective customers and members to settle transactions, manage certain relationships with sponsors, customers and merchants, and comply with rules relating to the operation of the Visa enterprise. The Company will indemnify Visa Europe for claims arising...

  • Page 84
    ... Plan (the "Plan") and consist of an escrow agreement, a loss sharing agreement, an interchange judgment sharing agreement, the conversion feature of the Company's shares of class B common stock and the indemnification obligations of the Visa U.S.A. members pursuant to Visa U.S.A.'s certificate...

  • Page 85
    ... litigation, multiplied by such bank's then-current membership proportion as calculated in accordance with Visa U.S.A.'s certificate of incorporation. Visa U.S.A. and Visa International also entered into an interchange judgment sharing agreement with certain Visa U.S.A. members that have been named...

  • Page 86
    ... Other asset backed securities Auction rate securities Derivative financial instruments Foreign exchange derivative instruments Liabilities Other liabilities Visa Europe put option Foreign exchange derivative instruments Level 3 Assets and Liabilities that are Measured at Fair Value on a Recurring...

  • Page 87
    ...30, 2009 (in millions, except as noted) Visa Europe put option agreement. The Company granted Visa Europe a perpetual put option which is carried at fair value in accrued liabilities on the consolidated balance sheet with changes in the fair value recorded in the consolidated statement of operations...

  • Page 88
    ... quarter of fiscal 2010 and are not expected to have a significant impact on our consolidated financial statements. See Note 1-Summary of Significant Accounting Policies. Available-for-sale investments Available-for-sale investment securities, which are recorded at fair value, consist of the types...

  • Page 89
    ... of mutual fund investments related to various employee compensation plans. Employees bear the risk of market fluctuations over the term of their participation in these compensation plans. See Note 1-Summary of Significant Accounting Policies. As of September 30, 2009, trading assets totaled $59...

  • Page 90
    ... Investment income, net, consisted of the following: For the Years Ended September 30, 2009 2008 (in millions) 2007 Interest and dividend income on cash and investments Gain on sale of other investments Investment securities-available-for-sale: Gross realized gains Gross realized losses Investment...

  • Page 91
    ...reflects costs related to the construction of the Company's east coast data center, which commenced operations in fiscal 2009. Technology consists of both purchased and internally developed software. Internally developed software represents software utilized by the VisaNet electronic payment network...

  • Page 92
    ... and the acquired regions of Visa International. Visa Europe's franchise right represents the value of the right to franchise the use of the Visa brand, use of Visa technology and access to the overall Visa network in the Visa Europe region. There was no amortization or impairment related to these...

  • Page 93
    ... of two data centers and an office building, in addition to processing assets and developed software. 7.53% Medium-Term Notes Visa International established a medium-term note program in 1992 to offer up to $250 million of unsecured private placement notes. At September 30, 2009, the Company had no...

  • Page 94
    ...2010 2011 2012 2013 2014 Thereafter Total (in millions) U.S. Commercial Paper Program $ 12 12 13 8 7 5 $ 57 Visa International maintains a U.S. commercial paper program to support its working capital requirements and for general corporate purposes. This program allows the Company to issue...

  • Page 95
    ... benefits plan provides medical benefits for retirees and dependents who meet minimum age and service requirements. Benefits are provided from retirement date until age sixty-five. Retirees must contribute on a monthly basis for the same coverage that is generally available to active employees and...

  • Page 96
    ... fiscal year Service cost Interest cost Plan amendments Actuarial (gain)/loss Settlements Benefit payments Benefit obligation-end of fiscal year Accumulated benefit obligation Change in Plan Assets: Fair value of plan assets-beginning of fiscal year Actual return on plan assets Company contribution...

  • Page 97
    ... value of plan assets, end of year Net periodic pension and other postretirement plan cost $ 21 $ - 739 $ 703 18 - 667 $ 624 NA - 43 - $ NA - 50 - $ Pension Benefits Fiscal 2009 2008 2007 2009 (in millions) Other Postretirement Benefits 2008 2007 Service cost Interest cost Expected return...

  • Page 98
    ... in net periodic pension cost over the average remaining service period of employees expected to receive benefits under the plan, which is currently eight years. For the benefit obligation measured at fiscal 2009 year-end, rate of increase in compensation is 0% for fiscal 2010 and 5.5% for fiscal...

  • Page 99
    ...customer to honor Visa cards, travelers cheques, deposit access products, point-of-sale check service drivers and other instruments processed in accordance with the operating regulations. This indemnification creates settlement risk for the Company due to the difference in timing between the date of...

  • Page 100
    ... global credit settlement risk policies and procedures to manage settlement risk which may require customers to post collateral if certain credit standards are not met. During the first quarter of fiscal 2009, the Company updated its settlement risk policy and raised the safety margin from two days...

  • Page 101
    ... and expenses being denominated in or based on currencies other than USD. In fiscal 2009 the Company implemented a rolling hedge strategy program. Under this strategy, the Company seeks to reduce the exchange rate risk from forecasted net exposure of revenues derived from and payments made in...

  • Page 102
    ...080 Revenue by geographic market is primarily based on the location of the issuing bank. Certain revenues, primarily international service revenues, are shared by geographic locations based upon the location of the merchant involved in the transaction. Visa does not maintain revenues by individual...

  • Page 103
    ... 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. Funding of the Litigation Escrow Account...

  • Page 104
    ... the Fifth Amended and Restated Certificate of Incorporation of Visa Inc. After giving effect to the fiscal 2009 escrow fundings and the corresponding reduction in the conversion rate applicable to class B common stock outstanding, the number of class A shares outstanding on an as-converted basis...

  • Page 105
    ...special cash and stock dividends are recorded as an increase in additional paid-in capital, net of tax, and are not recorded as income in the consolidated statements of operations as they represent the same redemption proceeds and shares issued by the Company as part of the reorganization. Any value...

  • Page 106
    ...B and class C common stock based on the conversion rate in effect through the period, exercise of employee stock options, vesting of restricted share awards, restricted share units and performance shares to certain employees and directors. For fiscal 2007, Visa U.S.A. was a non-stock corporation and...

  • Page 107
    ... a gradedvesting basis for awards with both service and performance conditions. The Company's estimated forfeiture rate is based on actual and trended forfeiture data and employee attrition rates. For fiscal 2009 and 2008, the Company recorded share-based compensation expense of $115 million and $74...

  • Page 108
    ...certain conditions. During fiscal 2009 and 2008, the fair value of each stock option was estimated on the date of grant using a Black-Scholes option pricing model with the following assumptions: Expected term (in years) (2) Risk-free rate of return (3) Expected volatility (4) Expected dividend yield...

  • Page 109
    ... to receive dividend equivalents but do not participate in the voting rights granted to the holders of the underlying class A common stock. 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...

  • Page 110
    ... compensation cost related to non-vested performance-based shares. The following table summarizes the Company's performance-based shares activity for fiscal 2009: WeightedAverage Remaining Contractual Term (in years) Shares WeightedAverage Grant Date Fair Value Aggregate Intrinsic (1) Value...

  • Page 111
    ...30, 2009 (in millions, except as noted) from one to thirteen years, provide card issuance, and/or conversion, volume targets and marketing and program support based on specific performance requirements. These agreements are designed to encourage customer business and to increase overall Visa-branded...

  • Page 112
    ... fees of $139 million in March 2008. Investees. The Company generated total operating revenues of $56 million and $39 million, and received dividend income of $41 million and $65 million from related party investees during fiscal 2009 and 2008, respectively. The Company also received special IPO...

  • Page 113
    ... below: 2009 (in millions) 2008 Deferred Tax Assets Accrued compensation and benefits Comprehensive income Investments in joint ventures Accrued litigation obligation Volume and support incentives Research and development credits Federal benefit of state taxes Federal benefit of foreign taxes Other...

  • Page 114
    ... fiscal 2009 is primarily due to the additional non-U.S. tax in fiscal 2009 on the sale of the investment in VisaNet do Brasil, the litigation tax reserves in fiscal 2008, and a one-time rate reduction in fiscal 2008 from the combined effect of the loss of a California special deduction upon IPO and...

  • Page 115
    ... decreased Singapore tax by $16 million for fiscal 2009. The benefit of the tax incentive agreement on diluted net income per share was $0.02. In accordance with ASC 740, the Company is required to inventory, evaluate, and measure all uncertain tax positions taken or to be taken on tax returns, and...

  • Page 116
    ... October 4, 2004, Discover Financial Services, Inc. filed a complaint against Visa U.S.A., Visa International and MasterCard International Incorporated (MasterCard). The complaint was filed in the U.S. District Court for the Southern District of New York and was designated as a related case to a 115

  • Page 117
    ...'s Competitive Programs Policy (CPP) (which prohibited their respective members from issuing American Express or Discover cards) violated Sections 1 and 2 of the Sherman Act and California's Unfair Competition Law, and sought money damages (subject to trebling) and attorneys' fees and costs. On...

  • Page 118
    .../Debit Card Tying Cases. The Interchange Litigation Kendall. On October 8, 2004, a purported class action lawsuit was filed by a group of merchants in the U.S. District Court for the Northern District of California against Visa U.S.A., MasterCard and several Visa U.S.A. member financial institutions...

  • Page 119
    ... 29, 2009, putative class plaintiffs filed a Second Consolidated Amended Class Action Complaint. Among other things, this complaint: (i) added new claims for damages and injunctive relief against Visa and the bank defendants regarding interchange reimbursement fees for Visa PIN-debit cards; (ii...

  • Page 120
    ... merchant discount fees, passed on some portion those fees to consumers in the form of higher prices on goods and services sold. Visa U.S.A. has been successful in the majority of these cases, as courts in 17 jurisdictions have granted Visa U.S.A.'s motions to dismiss for failure to state a claim...

  • Page 121
    ...1% currency conversion "fee" assessed on member financial institutions by the payment card networks on transactions involving the purchase of goods or services in a foreign currency and the disclosure of that fee (Schwartz). Plaintiffs claimed Visa's currency conversion practices violated California...

  • Page 122
    ... and merchant class action was filed in California state court against Visa U.S.A., Visa International, MasterCard, Merrick Bank and CardSystems Solutions, Inc. The complaint alleged that Visa U.S.A. and Visa International's failure to inform cardholders in a timely manner of a data-security breach...

  • Page 123
    ... District of California on June 4, 2008. The plaintiff alleged that, due to fluctuations in currency conversion rates, a transaction disputed by a cardholder and ultimately charged back to a merchant by its acquiring bank (a "chargeback") may result in a debit to a merchant's account in excess...

  • Page 124
    ...Inc. International" (sic), MasterCard, American Express, Diners Club, Consorcio Credicard, and more than thirty privately held financial institutions. The Competition Authority alleges that, among other things, the defendants' setting of default interchange rates and merchant discount rates violates...

  • Page 125
    ... plaintiff alleged that Visa's practice of imposing fines on acquiring banks for their merchants' failure to abide by certain Visa rules, including fines related to the Cardholder Information Security Program (CISP) and Account Data Compromise Recovery (ADCR) process, violates California state law...

  • Page 126
    ... of Caracas issued a new decision. The decision (i) dismissed Visa International's appeal; (ii) ratified the preliminary injunction; and (iii) found Visa and Todoticket liable for legal fees and costs in connection with the appeal. On July 9, 2009, Visa International filed a further appeal as to...

  • Page 127
    ... Data Transmission System Employing Means for Randomly Altering the Encryption Keys"). On May 22, 2009, Visa answered the complaint and filed a counterclaim for a declaratory judgment that Visa is not infringing the patent and/or that the patent is invalid. Actus, LLC-Prepaid Cards On April 9, 2009...

  • Page 128
    ... that certain Visa products and/or services infringe U.S. Patent No. 7,096,003 ("Transaction Security Apparatus"). On June 23, 2009, plaintiff filed a first amended complaint. On July 10, 2009, Visa filed a motion to dismiss plaintiff's claim. On October 1, 2009, the parties executed an agreement to...

  • Page 129
    ...full year of fiscal 2009 and 2008 for Visa Inc.: Quarter Ended (unaudited) Visa Inc. Dec. 31, 2008 Mar. 31, 2009 June 30, 2009 Sept. 30, 2009 Fiscal Year 2009 Total Operating revenues Operating income Net income Basic net income per share Class A common stock Class B common stock (i) Class C common...

  • Page 130
    ... disclosure controls and procedures. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that, as of September 30, 2009, our disclosure controls and procedures were effective. There are inherent limitations to the effectiveness of any system of disclosure...

  • Page 131
    ... on internal control over financial reporting, we documented and tested the design and operating effectiveness of our internal control over financial reporting. During fiscal 2009, there were no significant changes in our internal controls over financial reporting that occurred during the year ended...

  • Page 132
    ... relations page of our website at www.investor.visa.com. Printed copies of these documents are also available to stockholders without charge upon written request directed to Corporate Secretary, P.O. Box 8999, San Francisco, California 94128. ITEM 11. Executive Compensation The information required...

  • Page 133
    ... 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. ITEM 14. Principal Accountant Fees and Services The information required by this Item...

  • Page 134
    ... 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. 133 (a) The following documents are filed...

  • Page 135
    ...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/ JOSEPH W. SAUNDERS Joseph W. Saunders Chief Executive Officer November 19, 2009 Pursuant to the requirements of the Securities Exchange Act of 1934...

  • Page 136
    ... Title Date /S/ FRANCISCO JAVIER FERNANDEZ-CARBAJAL Francisco Javier Fernandez-Carbajal /S/ PETER HAWKINS Director Director Director Director Director Director Director Director Director Director Director November 13, 2009 November 19, 2009 November 19, 2009 November 19, 2009 November 19, 2009...

  • Page 137
    ... specimen certificate for class C common stock of Visa Inc. (incorporated by reference to Exhibit 4.2 to the Registration Statement on Form 8-A, filed January 28, 2009) Settlement Agreement, dated June 4, 2003, by and among Visa U.S.A. Inc. and Wal-Mart, Limited Brands, Sears, Safeway, Circuit City...

  • Page 138
    ... Global Restructuring Agreement, by and among Visa Inc., Visa International Service Association, Visa U.S.A. Inc., Visa Europe Limited, Visa Canada Association, Visa Asia Pacific, Visa Latin America (incorporated by reference to Annex A to Amendment No. 5 to the June 2007 S-4) Inovant Long Term...

  • Page 139
    ...the Form 8-K filed by Visa Inc. on August 31, 2009) Form of Visa Inc. 2007 Equity Incentive Compensation Plan Performance Share Award Agreement for members of the Executive Leadership Team ("ELT") Form of Visa Inc. 2007 Equity Incentive Compensation Plan Performance Share Award Agreement for members...

  • Page 140
    ... Section 302 Certification of the Chief Executive Officer pursuant to Section 906 Certification of the Chief Financial Officer pursuant to Section 906 The following materials from the Visa Inc. Annual Report on Form 10-K for the year ended September 30, 2009, filed on November 20, 2009 formatted in...

  • Page 141
    ... Share Award Agreement This PERFORMANCE SHARE AWARD AGREEMENT (this "Agreement"), dated November 5, 2009 (the "Grant Date"), is by and between VISA INC. (the "Company") and (the "Participant"), pursuant to the Visa Inc. 2007 Equity Incentive Compensation Plan (the "Plan"). Capitalized terms...

  • Page 142
    ... items. "TSR Rank" means the aggregate total shareholder return on Shares over the approximately two year period beginning October 28, 2009 and ending on the day the Company's earnings are announced following the close of the Company's 2011 fiscal year, ranked against the total shareholder return...

  • Page 143
    ... for the TSR Rank shall never exceed 125%. The product of the Base Percentage Performance Shares Earned and the Adjustment Multiplier shall be limited to a maximum of 200% and is then multiplied by the grant amount to determine the number of Performance Shares earned. (iv) Notification. As soon as...

  • Page 144
    ... in that number of Performance Shares subject to this Award that would have been earned under Section 3(a)(iii), as of the end of the Performance Cycle, based on the deemed achievement of the Target Performance Level (within the meaning of Section 3(a)(iii)). (ii) Separation from Service by Reason...

  • Page 145
    ...in accordance with the terms of the Plan and this Agreement. 9. Taxes and Withholding. The Company shall have the right to deduct from all amounts otherwise payable to the Participant in cash in respect of Performance Shares covered by this Award any amount of taxes of any kind required by law to be...

  • Page 146
    ... by the Company. 10. No Right to Continued Employment. Neither the Performance Shares covered by this Award nor any terms contained in this Agreement shall confer upon the Participant any rights or claims except in accordance with the express provisions of the Plan and this Agreement, and shall...

  • Page 147
    ... foregoing definition, "Cause" shall at that time have such meaning as may be specified in such employment agreement. (b) "Disability" shall have the meaning set forth for such term in the Company's or its Affiliate's long-term disability plan under which the Participant is covered from time to time...

  • Page 148
    ...) a specific exemption from the registration requirements of the Securities Act, but in claiming such exemption the Participant shall, prior to any offer for sale of such Shares, obtain a prior favorable written opinion, in form and substance satisfactory to the Company, from counsel for or approved...

  • Page 149
    ... Share Award Agreement This PERFORMANCE SHARE AWARD AGREEMENT (this "Agreement"), dated November 5, 2009 (the "Grant Date"), is by and between VISA INC. (the "Company") and (the "Participant"), pursuant to the Visa Inc. 2007 Equity Incentive Compensation Plan (the "Plan"). Capitalized terms...

  • Page 150
    ... items. "TSR Rank" means the aggregate total shareholder return on Shares over the approximately two year period beginning October 28, 2009 and ending on the day the Company's earnings are announced following the close of the Company's 2011 fiscal year, ranked against the total shareholder return...

  • Page 151
    ... for the TSR Rank shall never exceed 125%. The product of the Base Percentage Performance Shares Earned and the Adjustment Multiplier shall be limited to a maximum of 200% and is then multiplied by the grant amount to determine the number of Performance Shares earned. (iv) Notification. As soon as...

  • Page 152
    ... in that number of Performance Shares subject to this Award that would have been earned under Section 3(a)(iii), as of the end of the Performance Cycle, based on the deemed achievement of the Target Performance Level (within the meaning of Section 3(a)(iii)). (ii) Separation from Service by Reason...

  • Page 153
    ... (30) days following) the time such related dividends are paid to holders of Shares. 8. No Rights as a Shareholder Prior to Issuance of Shares. Neither the Participant nor any other person shall become the beneficial owner of any Shares that may become payable with respect to the Performance Shares...

  • Page 154
    ... by the Company. 10. No Right to Continued Employment. Neither the Performance Shares covered by this Award nor any terms contained in this Agreement shall confer upon the Participant any rights or claims except in accordance with the express provisions of the Plan and this Agreement, and shall...

  • Page 155
    ... foregoing definition, "Cause" shall at that time have such meaning as may be specified in such employment agreement. (b) "Disability" shall have the meaning set forth for such term in the Company's or its Affiliate's long-term disability plan under which the Participant is covered from time to time...

  • Page 156
    ...) a specific exemption from the registration requirements of the Securities Act, but in claiming such exemption the Participant shall, prior to any offer for sale of such Shares, obtain a prior favorable written opinion, in form and substance satisfactory to the Company, from counsel for or approved...

  • Page 157
    ... Share Award Agreement This PERFORMANCE SHARE AWARD AGREEMENT (this "Agreement"), dated November 5, 2009 (the "Grant Date"), is by and between VISA INC. (the "Company") and (the "Participant"), pursuant to the Visa Inc. 2007 Equity Incentive Compensation Plan (the "Plan"). Capitalized terms...

  • Page 158
    ... items. "TSR Rank" means the aggregate total shareholder return on Shares over the approximately two year period beginning October 28, 2009 and ending on the day the Company's earnings are announced following the close of the Company's 2011 fiscal year, ranked against the total shareholder return...

  • Page 159
    ... for the TSR Rank shall never exceed 125%. The product of the Base Percentage Performance Shares Earned and the Adjustment Multiplier shall be limited to a maximum of 200% and is then multiplied by the grant amount to determine the number of Performance Shares earned. (iv) Notification. As soon as...

  • Page 160
    ... in that number of Performance Shares subject to this Award that would have been earned under Section 3(a)(iii), as of the end of the Performance Cycle, based on the deemed achievement of the Target Performance Level (within the meaning of Section 3(a)(iii)). (ii) Separation from Service by Reason...

  • Page 161
    ... (30) days following) the time such related dividends are paid to holders of Shares. 8. No Rights as a Shareholder Prior to Issuance of Shares. Neither the Participant nor any other person shall become the beneficial owner of any Shares that may become payable with respect to the Performance Shares...

  • Page 162
    ... by the Company. 10. No Right to Continued Employment. Neither the Performance Shares covered by this Award nor any terms contained in this Agreement shall confer upon the Participant any rights or claims except in accordance with the express provisions of the Plan and this Agreement, and shall...

  • Page 163
    ... foregoing definition, "Cause" shall at that time have such meaning as may be specified in such employment agreement. (b) "Disability" shall have the meaning set forth for such term in the Company's or its Affiliate's long-term disability plan under which the Participant is covered from time to time...

  • Page 164
    ...) a specific exemption from the registration requirements of the Securities Act, but in claiming such exemption the Participant shall, prior to any offer for sale of such Shares, obtain a prior favorable written opinion, in form and substance satisfactory to the Company, from counsel for or approved...

  • Page 165
    .... You can access this on-line form through your account at eac.Schwab.com. If you do not reject this Award within thirty (30) days after the Grant Date, you will have accepted this Award and agreed to the terms and conditions set forth in this Agreement and the terms and conditions of the Plan. 9

  • Page 166
    ... Support Services (India) Private Limited Visa International Asia Pacific Korea, Ltd. Visa International (Asia-Pacific), LLC Visa International Mexico S. A. de C.V. Visa AP (Australia) Pty Limited Visa Canada Corporation Visa CEMEA (UK) Limited Visa Do Brasil Empreendimentos Ltda. Visa Holdings...

  • Page 167
    ...) Private Limited Visa Processing Service Pte. Limited Visa Resources Visa Risk Limited Visa Sub-Saharan Africa (Proprietary) Limited Visa U.S.A. Inc. Visa Worldwide (Cayman) Co. Visa Worldwide (Japan) Co., Ltd. Visa Worldwide LLC Visa Worldwide Pte. Limited Visa International Venezuela S.A. Visa...

  • Page 168
    ... Registered Public Accounting Firm The Board of Directors Visa Inc.: We consent to the incorporation by reference in the registration statements (No. 333-150426 and No. 333-157191) on Form S-8 and (No. 333-159001) on Form S-3 of Visa Inc. (the Company) of our report dated November 19, 2009...

  • Page 169
    ... financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules...

  • Page 170
    ... financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules...

  • Page 171
    ...In connection with the Annual Report of Visa Inc. (the "Company") on Form 10-K for the period ended September 30, 2009, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Joseph W. Saunders, Chief Executive Officer of the Company do hereby certify, pursuant to...

  • Page 172
    ... EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Visa Inc. (the "Company") on Form 10-K for the period ended September 30, 2009, as filed with the Securities and Exchange Commission...