Visa 2012 Annual Report Download

Download and view the complete annual report

Please find the complete 2012 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 136

  • 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

VISA INC.
FORM 10-K
(Annual Report)
Filed 11/16/12 for the Period Ending 09/30/12
Address P.O. BOX 8999
SAN FRANCISCO, CA 94128-8999
Telephone (415) 932-2100
CIK 0001403161
Symbol V
SIC Code 7389 - Business Services, Not Elsewhere Classified
Industry Consumer Financial Services
Sector Financial
Fiscal Year 09/30
http://www.edgar-online.com
© Copyright 2013, EDGAR Online, Inc. All Rights Reserved.
Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use.

Table of contents

  • Page 1
    VISA INC. FORM 10-K (Annual Report) Filed 11/16/12 for the Period Ending 09/30/12 Address Telephone CIK Symbol SIC Code Industry Sector Fiscal Year P.O. BOX 8999 SAN FRANCISCO, CA 94128-8999 (415) 932-2100 0001403161 V 7389 - Business Services, Not Elsewhere Classified Consumer Financial Services ...

  • Page 2
    ...Act: Class B common stock, par value $.0001 per share Class C common stock, par value $.0001 per share Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. No 3 Indicate by check mark if the registrant is not required to file reports...

  • Page 3
    ... 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 30, 2012 , the last business day of the registrant's most recently completed second fiscal quarter) was approximately $62.1 billion . There is currently...

  • Page 4
    ... 113 113 Directors, Executive Officers and Corporate Governance Executive Compensation Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Certain Relationships and Related Transactions, and Director Independence Principal Accountant Fees and Services 114...

  • Page 5
    ... product categories; increased government support of national payment networks outside the United States; and rules about consumer privacy and data use and security; developments in litigation and government enforcement, including those affecting interchange reimbursement fees, antitrust and tax...

  • Page 6
    ...operate an open-loop payments network, a multi-party system in which Visa connects issuing financial institutions, or issuers, that issue cards to cardholders, and acquiring financial institutions, or acquirers, that have the banking relationship with merchants-and manage the exchange of information...

  • Page 7
    ... checks, money orders, government checks, travelers cheques and other paperbased 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 cards...

  • Page 8
    ... MasterCard, American Express, JCB, and Discover/Diners Club. While these brands, including Visa, were historically associated with consumer credit or charge cards in the United States and other major international markets, we and others have, over time, broadened our offerings to include debit, ATM...

  • Page 9
    ... vice versa. Visa Europe authorizes, clears and settles 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, issuer processing, loyalty, dispute management...

  • Page 10
    ... branded cards to offer international cash access as a complement to domestic cash access services. Commercial Our commercial product platforms enable small businesses, medium and large companies, and government organizations to streamline payment processes, manage total spend, access information...

  • Page 11
    ... and sponsorship activities, educating domestic and regulatory banking authorities on our capabilities, increasing acceptance of Visa products around the world and ensuring that the system operates reliably and securely for all of our network participants. Brand Management, Marketing and Corporate...

  • Page 12
    ...information services, and evaluating potential modifications to our operating rules and interchange rates to enhance the value of our payments network compared to other forms of payment. For example, we raised the limit for our "no signature required" program from $25 to $50 for U.S. discount stores...

  • Page 13
    ... network exclusivity and transaction routing. We expect these rules, which include provisions effective in our fiscal 2012 and 2013, to continue to have an adverse impact on our pricing, reduce the number and volume of U.S. debit payments we process and decrease associated revenues. See Item 1A-Risk...

  • Page 14
    ...Bank of Australia has enacted a regulation limiting the costs that can be considered in setting interchange reimbursement fees for both our credit and our debit cards. Interchange reimbursement fees represent a transfer of value among the financial institutions participating in an open-loop payments...

  • Page 15
    ... card providers or payment processing providers. Most notably, none of our financial institution clients in China have received authorization to issue cards carrying only our brands for domestic use in China, limiting our opportunities in that market. Regulators in an increasing number of countries...

  • Page 16
    ... brands compete with Maestro, owned by MasterCard, and various regional and country-specific debit network brands including STAR, NYCE, and PULSE in the United States, EFTPOS in Australia, NETS in Singapore, and Interac in Canada. In addition to our PLUS brand, the primary cash access card brands...

  • Page 17
    ...operating revenues and other financial information, see Item 8-Financial Statements and Supplementary Data - Note 14-Enterprise-wide Disclosures and Concentration of Business included elsewhere in this report. Working Capital Requirements Payments settlement due from and due to issuing and acquiring...

  • Page 18
    ... the number of debit cards they issue and investments they make in marketing and rewards programs. Some imposed new or higher fees on debit cards or demand deposit account relationships. Some elected to issue fewer cards enabled with Visa-affiliated networks. Many merchants have used the routing...

  • Page 19
    ...to effect change in these countries may not succeed. This could adversely affect our ability to maintain or increase our revenues and extend our global brands. Regulation in the areas of consumer privacy and data use and security could decrease the number of payment cards issued, our payments volume...

  • Page 20
    ... increases our costs and can reduce our revenue opportunities. Similarly, the impact of such regulations on our clients may reduce the volume of payments we process. Moreover, such regulations can limit the types of products and services that we offer, the countries in which our cards are used...

  • Page 21
    ... acquire Visa-branded payment transactions in the U.S. We refer to this as the interchange litigation. Among other antitrust allegations, the plaintiffs have alleged that Visa's setting of default interchange rates violated federal and state antitrust laws. The lawsuits were transferred to a multi...

  • Page 22
    ...-front cash payments, fee discounts, credits, performance-based incentives, marketing support payments and other support. Over the past several years, we have increased the use of incentives such as up-front cash payments and fee discounts in many countries, including the United States. In order to...

  • Page 23
    ... position in the payments value chain underpins our business. Certain of our competitors, including American Express, Discover, private-label card networks and certain alternative payments systems, operate closed-loop payments systems, with direct connections to both merchants and consumers and no...

  • Page 24
    ... and on their relationships with cardholders and merchants to support our programs and services. We do not issue cards, extend credit to cardholders or determine the interest rates, if any, or other fees charged to cardholders using cards that carry our brands. Each issuer determines these and most...

  • Page 25
    ...only limited control over the operation of the Visa business. Visa Europe is not required to spend any minimum amount of money promoting or building the Visa brands in its region, and the strength of the Visa global brands depends in part on the efforts of Visa Europe to maintain product and service...

  • Page 26
    ... exchange rates could negatively affect the dollar value of our revenues and payments in foreign currencies. The current economic environment could lead some clients to curtail or postpone near-term investments in growing their card portfolios, limit credit lines, modify fee and loyalty programs...

  • Page 27
    ... is the total balance for outstanding traveler's cheques. Additionally, from time to time, we review and revise our risk management methodology and inputs as necessary. See Note 12-Settlement Guarantee Management to our consolidated financial statements included in Item 8 of this report. Some of our...

  • Page 28
    ...the use and acceptance of our cards or lead to greater regulation, increasing our compliance costs. Failure to maintain interoperability between our and Visa Europe's authorization and clearing and settlement systems could damage the business and global perception of the Visa brands. Visa Europe and...

  • Page 29
    ... using cards in Visa Europe's region. If Visa Europe makes us acquire all of its outstanding stock, we will incur substantial costs and may suffer a material and adverse effect on our operations and net income. We have granted Visa Europe a put option requiring us to purchase all outstanding...

  • Page 30
    ... plan, funds still in the escrow account after the resolution of all covered litigation will be released back to us. At that time, each share of class B common stock will become convertible into an increased number of shares of class A common stock, benefiting the holders of class B common stock...

  • Page 31
    ... dividend is contemporaneously declared and paid on each other class of common stock. ITEM 1B. Unresolved Staff Comments Not Applicable. ITEM 2. Properties At September 30, 2012, we owned and leased approximately 2.6 million square feet of office and processing center space in 38 countries...

  • Page 32
    ...2012 , our board of directors declared a quarterly cash dividend of $0.33 per share of class A common stock (determined in the case of class B and C common stock, on an as-converted basis) payable on December 4, 2012 , to holders of record as of November 16, 2012 of our class A, B and C common stock...

  • Page 33
    ... forth the information with respect to purchases of the Company's common stock made by or on behalf of the Company during the quarter ended September 30, 2012 . (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) (d) Approximate Dollar Value of Shares that May...

  • Page 34
    ..., Statement of Operations Data: 2012 (1) 2011 2010 2009 2008 (in millions, except per share data) Operating revenues Operating expenses Operating income Net income attributable to Visa Inc. Basic earnings per share-class A common stock Diluted earnings per share-class A common stock $ 10,421...

  • Page 35
    ... of Contents At September 30, Balance Sheet Data: 2012 (1) 2011 2010 2009 2008 (in millions, except per share data) Total assets Current portion of long-term debt Current portion of accrued litigation Long-term debt Long-term accrued litigation Total equity Dividend declared and paid per common...

  • Page 36
    ... in marketing and rewards programs. Some have imposed new or higher fees on debit cards or demanddeposit account relationships. Some have elected to issue fewer cards enabled with Visa-affiliated networks. Additionally, the routing regulations have allowed merchants to redirect transactions or steer...

  • Page 37
    ..., our reported financial results benefited from a onetime, 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. Revaluation of Visa Europe put option. During fiscal 2011, we recorded...

  • Page 38
    ...on earnings per share as repurchasing our class A common stock, because they reduce the class B conversion rate and consequently the as-converted class A common stock share count. In July 2012 , our board of directors authorized a $1 billion share repurchase program to be in effect through July 2013...

  • Page 39
    ... consists of cash access transactions, balance access transactions, balance transfers and convenience checks. Total nominal volume is provided by our financial institution clients, subject to verification by Visa. From time to time, previously submitted volume information may be updated. Prior year...

  • Page 40
    ... and PLUS cards processed on Visa's networks. Transactions include, but are not limited to, authorization, settlement payment network connectivity, fraud management, payment security management, tax services and delivery address verification. Since its July 2010 acquisition, CyberSource activity...

  • Page 41
    ...non-operating income primarily relates to gains and losses earned on equity method investments and the change in the fair value of the Visa Europe put option. Visa Inc. Fiscal 2012, 2011 and 2010 Operating Revenues The following table sets forth our operating revenues earned in the United States, in...

  • Page 42
    ... of the Fixed Acquirer Network Fee, which was partially offset by reductions in certain variable fees. While data processing fees benefited from the price restructuring that became effective in the third quarter of fiscal 2012 , increased merchant and acquirer incentives executed as part...

  • Page 43
    ... marketing expense in fiscal 2013, including incremental investment to support our key country growth strategies and new product initiatives. The decrease in fiscal 2011 primarily reflects a change to present revenues and offsetting expenses related to the Visa Extras rewards program on a net basis...

  • Page 44
    ... and liabilities held by foreign subsidiaries into their functional currencies. The increase in fiscal 2011 is primarily due to increased travel and the inclusion of CyberSource activity, combined with reserves for a potential government assessment in one of our international geographies in fiscal...

  • Page 45
    ... foreign tax credits; the effect of applying the foregoing adjustments to a pre-tax income that was reduced by a $4.1 billion covered litigation provision; and the absence of nontaxable revaluations of the Visa Europe put option. â-ª â-ª â-ª We expect our fiscal 2013 effective tax rate to increase...

  • Page 46
    ... activities during fiscal 2012, 2011 and 2010 reflects our continued commitment to return excess cash to shareholders through reduction in the as-converted class A share count, either through purchases in the open market or deposits made into the litigation escrow, and increased dividends. See Note...

  • Page 47
    ... covenants related to this program. Universal shelf registration statement. In July 2012, we filed a registration statement with the U.S. Securities and Exchange Commission using a shelf registration process. As permitted by the registration statement, we may, from time to time, sell shares of...

  • Page 48
    ... effect on earnings per share as repurchasing the Company's class A common stock, because they reduce the class B conversion rate and consequently the as-converted class A common stock share count. In July 2012, our board of directors authorized a $1 billion share repurchase program to be in effect...

  • Page 49
    ...any point in time in the future. Should Visa Europe elect to exercise its option, we believe it is likely that it will implement changes in its business operations to move to a for-profit model in order to maximize its adjusted sustainable income and, as a result, to increase the purchase price. The...

  • Page 50
    ... in accordance with our operating regulations. The amount of the indemnification is limited to the amount of unsettled Visa payment transactions at any point in time. We maintain global credit settlement risk policies and procedures to manage settlement risk which may require clients to post...

  • Page 51
    ... timing of the cash settlements, if any, associated with our uncertain tax positions. Therefore, no amounts related to these obligations have been included in the table. Visa granted a perpetual put option to Visa Europe, which if exercised, will require us to purchase all of the outstanding shares...

  • Page 52
    ... 30, 2012 , client incentives represented 17% of gross operating revenues. Fair Value - Visa Europe Put Option Critical Estimates. 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...

  • Page 53
    ...future earnings and those of the comparable companies. Other estimates of lesser significance include growth rates and foreign currency exchange rates applied in the calculation of Visa Europe's adjusted sustainable income. The valuation model assumes a large range of annual growth rates, reflecting...

  • Page 54
    ... on our foreign currency forward contracts outstanding at September 30, 2012 . See Note 13-Derivative Financial Instruments to our consolidated financial statements. We are also subject to foreign currency exchange risk in daily settlement activities. This risk arises from the timing of rate setting...

  • Page 55
    ...activities is limited through daily operating procedures, including the utilization of Visa settlement systems and our interaction with foreign exchange trading counterparties. Interest Rate Risk Our investment portfolio assets are held in both fixed-rate and adjustable-rate securities. These assets...

  • Page 56
    ... Data VISA INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page As of September 30, 2012 and 2011 and for the years ended September 30, 2012, 2011 and 2010 Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets Consolidated Statements of Operations Consolidated...

  • Page 57
    ... of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was...

  • Page 58
    ... (Note 8) Goodwill Total assets Liabilities Accounts payable Settlement payable Customer collateral (Note 12) Accrued compensation and benefits Client incentives Accrued liabilities (Note 9) Accrued litigation (Note 21) Total current liabilities Deferred tax liabilities (Note 20) Other liabilities...

  • Page 59
    ... value data) Equity Preferred stock, $0.0001 par value, 25 shares authorized and none issued $ Class A common stock, $0.0001 par value, 2,001,622 shares authorized, 535 and 520 shares issued and outstanding at September 30, 2012, and September 30, 2011, respectively (Note 15) Class B common stock...

  • Page 60
    ... 2012 2011 2010 (in millions, except per share data) Operating Revenues Service revenues Data processing revenues International transaction revenues Other revenues Client incentives Total operating revenues Operating Expenses Personnel Network and processing Marketing Professional fees Depreciation...

  • Page 61
    ... VISA INC. CONSOLIDATED STATEMENTS OF OPERATIONS-(Continued) For the Years Ended September 30, 2012 2011 2010 (in millions, except per share data) Basic earnings per share (Note 16) Class A common stock Class B common stock Class C common stock Basic weighted-average shares outstanding (Note...

  • Page 62
    See accompanying notes, which are an integral part of these consolidated financial statements. 59

  • Page 63
    ... plans Income tax effect Derivative instruments classified as cash flow hedges Net unrealized gain (loss) Income tax effect Reclassification adjustment for net (gain) loss realized in net income including non-controlling interest Income tax effect Foreign currency translation adjustments...

  • Page 64
    ...benefit for share-based compensation Cash proceeds from exercise of stock options Restricted stock instruments settled in cash for taxes (1) Cash dividends declared and paid, at a quarterly amount of $0.125 per asconverted share Retirement of treasury stock Repurchase of class A common stock Special...

  • Page 65
    ... stock units and performance shares Conversion of class C common stock upon sale into public market Share-based compensation (Note 17) Excess tax benefit for share-based compensation Cash proceeds from exercise of stock options Restricted stock instruments settled in cash for taxes Cash dividends...

  • Page 66
    ... of stock options Restricted stock instruments settled in cash for taxes (1) Cash dividends declared and paid, at a quarterly amount of $0.22 per asconverted share (Note 15) Repurchase of class A common stock (Note 15) Purchase of non-controlling interest Balance as of September 30, 2012 1 16...

  • Page 67
    ... net income including non-controlling interest to net cash provided by (used in) operating activities: Amortization of client incentives Fair value adjustment for the Visa Europe put option Share-based compensation Excess tax benefit for share-based compensation Depreciation and amortization of...

  • Page 68
    ... plan (Note 3) Cash proceeds from exercise of stock options Excess tax benefit for share-based compensation Principal payments on capital lease obligations Payments for earn-out related to PlaySpan acquisition Principal payments on debt Net cash used in financing activities Effect of exchange rate...

  • Page 69
    ..., debit, prepaid and commercial payments, and facilitates global commerce through the transfer of value and information among financial institutions, merchants, consumers, businesses and government entities. The Company is not a bank and does not issue cards, extend credit or set rates and fees for...

  • Page 70
    ... auction rate securities. Level 3 liabilities include the Visa Europe put option and the earn-out related to the PlaySpan acquisition. See Note 4-Fair Value Measurements and Investments . In May 2011, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") 2011-04...

  • Page 71
    ... Visa Europe put option and the earn-out provision related to the PlaySpan acquisition. See Note 4-Fair Value Measurements and Investments . Settlement receivable and payable . The Company operates systems for authorizing, clearing and settling payment transactions worldwide. U.S. dollar settlements...

  • Page 72
    ..., including a review of discounted future cash flows, business plans and the use of present value techniques. The Company completed its annual impairment review of indefinite-lived intangible assets as of February 1, 2012 , and concluded there was no impairment as of that date. No recent events or...

  • Page 73
    ... assessed using a calculation of pricing applied to the prior quarter's payments volume. The Company also earns revenues from assessments designed to support ongoing acceptance and volume growth initiatives, which are recognized in the same period the related volume is transacted. Data processing...

  • Page 74
    ... foreign operations, the Company's functional currency may be the local currency in which a foreign subsidiary executes its business transactions. Translation from the local currency to the U.S. dollar is performed for balance sheet accounts using exchange rates in effect at the balance sheet date...

  • Page 75
    ... in Note 2-Visa Europe . Share-based compensation . The Company recognizes share-based compensation cost using the fair value method of accounting. The Company recognizes compensation cost for awards with only service conditions on a straight-line basis over the requisite service period, which...

  • Page 76
    ...calculation include material changes in the P/E ratio of Visa and those of a group of comparable companies used to estimate the forward price-to-earnings multiple applicable to Visa Europe. The Company determined the fair value of the put option to be approximately $145 million at September 30, 2012...

  • Page 77
    ... base fee, as adjusted in future periods based on the growth of the gross domestic product of the European Union, approximates fair value. In addition to the licenses, Visa provides Visa Europe with authorization, clearing and settlement services for cross-border transactions involving Visa Europe...

  • Page 78
    ... terms of the plan, when the Company funds the litigation escrow account, the shares of class B common stock 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. This has the same effect on earnings per share as...

  • Page 79
    ... debt securities U.S. Treasury securities Equity securities Corporate debt securities Auction rate securities Prepaid and other current assets Foreign exchange derivative instruments Liabilities Accrued liabilities Visa Europe put option Earn-out related to PlaySpan acquisition Foreign exchange...

  • Page 80
    ... probability that Visa Europe will elect to exercise its option and the estimated P/E differential are among several unobservable inputs used to value the put option. Earn-out related to PlaySpan acquisition. In connection with the PlaySpan acquisition, the Company initially recorded a liability of...

  • Page 81
    ... Losses September 30, 2011 Gross Unrealized Gains Losses Amortized Cost Fair Value Amortized Cost Fair Value (in millions) U.S. Treasury securities U.S. government-sponsored debt securities Corporate debt securities Auction rate and equity securities Total Less: current portion of available...

  • Page 82
    ... for tax purposes. Fundamo Acquisition . On June 9, 2011, the Company acquired Fundamo, a leading platform provider of mobile financial services for mobile network operators and financial institutions in developing economies. The acquisition was made to accelerate the execution of Visa's global...

  • Page 83
    ... of CyberSource Corporation, a leading provider of electronic payment, risk management and payment security solutions to online merchants. The acquisition was executed to accelerate the growth of Visa's eCommerce category and enhance the value of the Company's network, product and service offerings...

  • Page 84
    ... the original grant date of the CyberSource options. See Note 17-Share-based Compensation . The Company also expensed as incurred approximately $13 million of acquisition-related costs during fiscal 2010, which consisted primarily of professional fees related to closing the transaction. There was no...

  • Page 85
    ... 1,541 $ Increases to net property, equipment and technology in fiscal 2012 primarily reflect the Company's investment in payments system infrastructure. Technology consists of both purchased and internally developed software. Internally developed software primarily represents software utilized by...

  • Page 86
    ... 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 European Union. The Company acquired finite-lived intangible assets primarily related to the CyberSource, PlaySpan and Fundamo acquisitions during fiscal 2011 and 2010...

  • Page 87
    ..., 2011 (in millions) Accrued income taxes-(See Note 20-Income Taxes ) Employee benefits Other Total (1) $ $ 171 93 107 371 $ $ 468 106 93 667 The put option is exercisable at any time at the sole discretion of Visa Europe with payment required 285 days thereafter. Classification in current...

  • Page 88
    ... formula. An employee's cash balance account is credited with an amount equal to 6% of eligible compensation plus interest based on 30-year Treasury securities. The funding policy is to contribute annually no less than the minimum required contribution under ERISA. Postretirement Benefits Plan The...

  • Page 89
    ... benefit cost in fiscal 2013 : Other Postretirement Benefits Pension Benefits (in millions) Actuarial loss Prior service credit Total $ $ 28 $ (9) 19 $ - (3) (3) Benefit obligation and fair value of plan assets with obligations in excess of plan assets: Pension Benefits September 30, 2012...

  • Page 90
    ...: Fiscal 2012 2011 2010 Discount rate for benefit obligation Pension Postretirement Discount rate for net periodic benefit cost Pension Postretirement Expected long-term rate of return on plan assets (2) Rate of increase in compensation levels for: Benefit obligation Net periodic benefit cost...

  • Page 91
    ...iii) projections of returns on various asset classes; and (iv) current and prospective capital market conditions and economic forecasts. The assumed annual rate of future increases in health benefits for the other postretirement benefits plan is 7.5% for fiscal 2013 . The rate is assumed to decrease...

  • Page 92
    ... Guarantee Management The Company indemnifies clients for settlement losses suffered due to failure of any other 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...

  • Page 93
    ...Company does not use foreign exchange forward contracts for speculative or trading purposes. Cash Flow Hedges The Company maintains a rolling hedge program with the objective of reducing exchange rate risk from forecasted net exposures of revenues derived from and payments made in foreign currencies...

  • Page 94
    ... forecasted transaction occurs and is recognized in earnings, the amount in accumulated other comprehensive income (loss) related to that hedge is reclassified to operating revenue or expense. The Company expects to reclassify $19 million pre-tax, to earnings during fiscal 2013. In the event there...

  • Page 95
    ... earnings per share as repurchasing the Company's class A common stock, because they reduce the class B conversion rate and consequently the as-converted class A common stock share count. In July 2012 , the Company's board of directors authorized a $1 billion share repurchase program to be in effect...

  • Page 96
    ...the number of shares of class B or class C common stock held multiplied by the applicable conversion rate in effect on the record date. Dividends Declared. On October 24, 2012 , the Company's board of directors declared a quarterly cash dividend of $0.33 per share of class A common stock (determined...

  • Page 97
    ... numbers of shares of as-converted class B common stock used in the income allocation were 108 million , 123 million and 141 million for fiscal 2012 , 2011 and 2010 , respectively. Earnings per share calculated based on whole numbers, not rounded numbers. Weighted-average dilutive shares outstanding...

  • Page 98
    ... VISA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) September 30, 2012 Note 17-Share-based Compensation The Company's 2007 Equity Incentive Compensation Plan, or the EIP, authorizes the compensation committee of the board of directors to grant non-qualified stock options ("options...

  • Page 99
    ... 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 grant. The weighted-average grant-date fair value of RSAs granted during fiscal 2012 , 2011 and 2010 was...

  • Page 100
    ...75 88.56 0.9 $71 Calculated by multiplying the closing stock price on the last trading day of fiscal 2012 of $134.28 by the number of instruments. For the Company's performance-based shares, in addition to service conditions, the ultimate number of shares to be earned depends on the achievement of...

  • Page 101
    ... driven by increased payment and transaction volume, and as a result, in the event incentive payments exceed the above estimates, such payments are not expected to have a material effect on the Company's financial condition, results of operations or cash flows. Note 19-Related Parties Visa considers...

  • Page 102
    ... generated total operating revenues of $19 million , $28 million and $27 million , and received dividend income of $1 million , $1 million and $2 million from related party investees during fiscal 2012 , 2011 and 2010 , respectively. Note 20-Income Taxes The Company's income before taxes by fiscal...

  • Page 103
    ... . The foreign net operating loss may be carried forward indefinitely. Internal Revenue Code Section 382 imposes substantial restrictions on the utilization of net operating losses and tax credits in the event of a corporation's ownership change, as defined in the Internal Revenue Code. Although the...

  • Page 104
    ...-time benefit recognized upon initial recognition of foreign tax credits in fiscal 2012; the effect of applying the foregoing adjustments to a pre-tax income that was reduced by a $4.1 billion covered litigation provision; and the absence of nontaxable revaluations of the Visa Europe put option in...

  • Page 105
    ...Except for certain outstanding refund claims, the federal and California statutes of limitations have expired for fiscal years prior to fiscal 2006. The Company's fiscal 2003 to 2009 Canadian income tax returns are currently under examination by the Canada Revenue Agency. The Company is also subject...

  • Page 106
    ... the Interchange Litigation. The total accrual related to the covered litigation could be either higher or lower than the escrow account balance. The Discover Litigation. On October 4, 2004, Discover Financial Services, Inc. filed a complaint against Visa U.S.A., Visa International and MasterCard...

  • Page 107
    ... at a discounted value of $1.9 billion using a rate of 4.72% over the payment term. The Attridge Litigation. On December 8, 2004, a complaint was filed in California state court on behalf of an alleged class of consumers asserting claims against Visa U.S.A., Visa International and MasterCard under...

  • Page 108
    ... IPO regarding interchange reimbursement fees for Visa's credit, offline debit, and PIN-debit cards; (iii) eliminated claims for damages relating to the so-called "no-surcharge" rule and "anti-steering" rules; (iv) eliminated claims for damages based on the alleged tie of network processing services...

  • Page 109
    ...law claims against Visa U.S.A. and MasterCard (and, in California, Visa International) on behalf of consumers. The claims in these class actions included allegations mirroring those made in the U.S. merchant lawsuit and asserting that merchants, faced with excessive merchant discount fees, passed on...

  • Page 110
    ... adequacy of the settlement in light of the inclusion of the Attridge claims in the release. Attridge filed a motion to disqualify the trial judge in the Credit/Debit Card Tying Cases , which was granted. On June 4, 2012, the court issued an order reassigning the case to the Honorable John E. Munter...

  • Page 111
    ...to the "Honor All Cards" rule, the "no-surcharge" rule, and certain debit interchange fee practices. On August 10, 2009, Visa Inc. and Visa International filed a response to the SO. On April 26, 2010, Visa Europe announced an agreement with the European Commission, subject to public consultation, to...

  • Page 112
    .... U.S. ATM Access Fee Litigation. National ATM Council class action. On October 12, 2011, the National ATM Council and thirteen non-bank ATM operators filed a class action lawsuit against Visa (Visa Inc., Visa International Service Association, Visa U.S.A., and Plus System, Inc.) and MasterCard in...

  • Page 113
    ...." On January 10, 2012, plaintiffs filed an amended class action complaint against the same defendants. Like the original complaint, the amended complaint alleges that the ATM access fee rule prevents non-bank ATM operators from attracting customers to use other networks in violation of Section 1 of...

  • Page 114
    ... in the case of class B and class C common stock on an as-converted basis). See Note 15- Stockholders' Equity . On October 24, 2012, the Company's board of directors authorized an additional $1.5 billion share repurchase program to be in effect through October 2013. See Note 15-Stockholders...

  • Page 115
    ... of Financial Condition and Results of Operations of this report. During the third quarter of fiscal 2012, we recorded a litigation provision of $4.1 billion and related tax benefits associated with the interchange MDL, which is covered by the retrospective responsibility plan. Settlements of, or...

  • Page 116
    ... an independent registered public accounting firm and is included in Item 8 of this Report. Changes in Internal Control over Financial Reporting In preparation for management's report on internal control over financial reporting, we documented and tested the design and operating effectiveness of our...

  • Page 117
    ... by reference. Such incorporation does not include the report of the Audit and Risk Committee included in the Proxy Statement. ITEM 10. Directors, Executive Officers and Corporate Governance The information required by this item concerning the Company's directors, executive officers, the Code of...

  • Page 118
    Table of Contents ITEM 14. Principal Accountant Fees and Services The information required by this Item is incorporated herein by reference to the section entitled "Independent Auditor Services and Fees" in our Proxy Statement. 115

  • Page 119
    ... Index to Consolidated Financial Statements 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...

  • Page 120
    ...duly 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/ Byron H. Pollitt Byron H. Pollitt Chief Financial Officer November 15, 2012 Pursuant to the requirements of the Securities Exchange Act of 1934...

  • Page 121
    ... Signature Title Date /s/ Charles W. Scharf Charles W. Scharf Chief Executive Officer (principal executive officer) November 15, 2012 /s/ Byron H. Pollitt Byron H. Pollitt Chief Financial Officer (principal financial officer and principal accounting officer) Chairman of the Board November...

  • Page 122
    ... 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, National...

  • Page 123
    10.8 Form of Escrow Agreement among Visa Inc., Visa U.S.A. Inc. and the escrow agent (incorporated by reference to Exhibit 10.15 to the June 2007 S-4) 1

  • Page 124
    ... Incentive Compensation Plan Performance Share Award Agreement for the CEO (incorporated by reference to Exhibit 10.40 to the September 2009 10-K) Settlement Agreement, dated November 7, 2007, by and among Visa Inc., Visa U.S.A., Visa International and American Express (incorporated by reference to...

  • Page 125
    2

  • Page 126
    ... 1, 2008, effective January 1, 2011 (incorporated by reference to Exhibit 10.34 to the Annual Report on Form 10-K for the year ended September 30, 2011 (the "September 2011 10-K")) Form of Visa Inc. 2007 Equity Incentive Compensation Plan Stock Option Award Agreement for executive officers, other...

  • Page 127
    ... Stock Unit Agreement including clawback provision, for awards granted after November 1, 2011 (incorporated by reference to Exhibit to 10.41 to the September 2011 10-K) Memorandum of Understanding (incorporated by reference to Exhibit 10.1 to the Periodic Report on Form 8-K, filed July 16, 2012...

  • Page 128
    ... of Ratio of Earnings to Fixed Charges (incorporated by reference to Exhibit 21.1 to the Automatic Shelf Registration Statement on Form S-3ASR filed by Visa Inc. on July 27, 2012) Preferability letter from KPMG LLP, our Independent Registered Public Accounting Firm (incorporated by reference to...

  • Page 129
    Exhibit 21.1 Subsidiaries of Visa Inc. as of September 30, 2012 Name Visa International Service Association Visa U.S.A. Inc. Visa Worldwide Pte. Limited Jurisdiction Delaware Delaware Singapore

  • Page 130
    ... 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. 333-182908 and No. 333-159001) on Form S-3 of Visa Inc. of our report dated November 15, 2012...

  • Page 131
    ... financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to...

  • Page 132
    Date: November 15, 2012 /s/ Charles W. Scharf Charles W. Scharf Chief Executive Officer (Principal Executive Officer)

  • Page 133
    ... financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to...

  • Page 134
    Date: November 15, 2012 /s/ Byron H. Pollitt Byron H. Pollitt Chief Financial Officer (Principal Financial Officer)

  • Page 135
    ...of the Securities Exchange Act of 1934, as amended; and the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. • Date: November 15, 2012 /s/ Charles W. Scharf Charles W. Scharf Chief Executive Officer...

  • Page 136
    ...with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. • Date: November 15, 2012 Byron H. Pollitt...