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Annual Report 2013

Table of contents

  • Page 1
    Annual Report 2013

  • Page 2
    ... for per share data) FY 2011 $9,188 $3,732 $5,456 $3,528 $4.99 FY 2012 $10,421 $4,184 $6,237 $4,203 $6.20 FY 2013 $11,778 $4,539 $7,239 $4,980 $7.59 diluted class A common stock earnings per share Financial Highlights (GAAP) Operating revenues Operating expenses Operating income Net income...

  • Page 3
    ... a broader, more open network. They began to license the program to banks across the world in the late Fresno, California, where it did business with about 45 percent of the families living there. At the same time, the bank met with 1960s, allowing them to use different brand names locally. local...

  • Page 4
    ... by giving people access to a line of credit, bank account, or prepaid balance instantly at the point of sale, and Visa transactions are safer for consumers and merchants of all sizes. We run one of the world's only real-time global networks - VisaNet - which processes almost 12,000 transaction...

  • Page 5
    ... interoperable mobile money solution from Visa that uses VisaNet and makes use of the Fundamo technology acquired by Visa in 2011. With more than half of all Rwandan banks now supporting mVisa or committed to join the ecosystem, the solution is a great example of how Visa assets can help address an...

  • Page 6
    ..., the program provides mobile point-of-sale providers with certification of mobile acceptance device hardware and software used for processing Visa transactions. We Are the Best Way to Pay and Be Paid for Everyone, Everywhere Early in Visa's history, we articulated a clear and simple goal: to...

  • Page 7
    ... integrity and data security are also an opportunity and a challenge. Networks earn trusted status in the eyes of merchants and consumers by providing robust protection against fraud. We have earned this right, but we need to continue to earn it every day. Capital Management Since going public, we...

  • Page 8
    ... co-brands in North America issue Visa, and we work with more than 3,000 government programs in more than 30 countries. Our business is global and it's becoming more global. More than 45 percent of our revenues are generated outside of the United States and growing at a much faster rate. To support...

  • Page 9
    ... company (as defined in Rule 12b-2 of the Exchange Act). Yes ' No Í The aggregate market value of the registrant's class A common stock, par value $0.0001 per share, held by non-affiliates (using the New York Stock Exchange closing price as of March 29, 2013, the last business day of the registrant...

  • Page 10
    ... 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...

  • Page 11
    ...economic fragility in the Eurozone and the United States; general economic, political and social conditions in mature and emerging markets globally; material changes in cross-border activity, foreign exchange controls and fluctuations in currency exchange rates; and material changes in our financial...

  • Page 12
    ...effectively develop new products and businesses; natural disasters, terrorist attacks, military or political conflicts, and public health emergencies; and various other factors discussed throughout this report, including but not limited to, Item 1-Business, Item1A-Risk Factors and Item 7-Management...

  • Page 13
    ... and money transfers. In mature markets, Visa continues to expand in digital channels. V.me, Visa's digital wallet service and acceptance mark, is now commercially available in the United States where it is featured on more than fifty merchant sites, and has also launched in Australia and Canada. We...

  • Page 14
    ... mobile operators to offer mobile financial services to their consumers. Visa's new managed service solution already enables mobile money programs in India and Rwanda. • Client contracts. In 2013, we partnered with one of our largest financial institution clients to customize a processing solution...

  • Page 15
    ... on Visa-branded cards and payment products for purchased goods and services. Data processing revenues. Data processing revenues consist of revenues earned for authorization, clearing, settlement, network access and other maintenance and support services that facilitate transaction and information...

  • Page 16
    ... time and to provide value-added services, including information products, such as risk scoring and loyalty applications, while the transaction data is being routed through our network. Visa's processing services continue to expand to address the needs of all participants in the evolving payments...

  • Page 17
    ... system. Intelligent access points around the world complete the VisaNet global processing infrastructure and enable merchants and financial institutions worldwide to access our core processing and value-added services. Visa also owns and manages additional data centers in the United States...

  • Page 18
    ... 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 19
    ... Item 8-Financial Statements and Supplementary Data-Note 20-Legal Matters included elsewhere in this report. Network exclusivity and routing. We have historically had agreements under which issuers received incentives if they agreed to issue Visa-branded cards or payment products that are processed...

  • Page 20
    ... periodically reviews certain of our operations in the United States to examine our compliance with data integrity, security and operational requirements and standards, as well as other requirements applicable to us because of our role as a service provider to financial institutions. Anti-money...

  • Page 21
    ...' ability to offer existing products and services, extend credit via payment cards and products, and offer new types of payment programs, which could decrease our transaction volumes and revenues. Available Information We are subject to the reporting requirements of the Securities Exchange Act of...

  • Page 22
    ... network exclusivity. In addition, certain network or issuer rules or practices may be viewed as limiting the routing options of merchants when multiple debit networks co-reside on Visa debit cards. For example, Visa's rules require that an acquirer must process authorizations for all international...

  • Page 23
    ... and investments they made 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 regulations to redirect transactions or...

  • Page 24
    ... our global brands. Regulation in the areas of consumer privacy and data use and security could decrease the number of Visa-branded cards issued, our payments volume and our revenues. Privacy, data use and security continue to receive heightened legislative and regulatory focus in the United States...

  • Page 25
    ... the volume of payments we process. Moreover, such regulations can limit the types of products and services that we offer, the countries in which Visa-branded cards are used and the types of account holders and merchants who can obtain or accept Visa-branded cards. Any of these occurrences could...

  • Page 26
    ... of which were styled as class actions, have been filed on behalf of merchants against us, MasterCard and/or other defendants, including certain financial institutions that issue Visa-branded payment cards and acquire Visa-branded payment transactions in the United States. We refer to this as the...

  • Page 27
    ...could force us to limit the rates we charge, revise our rules about rates charged to consumers who use Visa-branded payment products, or make other modifications to our business. These modifications could materially and adversely affect our payments volume, revenues, operating results, prospects for...

  • Page 28
    ... cash payments and fee discounts in many countries, including the United States. In addition, we offer incentives to certain merchants or acquirers to win routing in situations where our products are co-resident with other networks and merchants have a choice of network routing options. The economic...

  • Page 29
    ... may offer a wider range of programs, products and services than we do, including more innovative ones. They may use advertising and marketing strategies that are more effective than ours, achieving broader brand recognition and merchant acceptance. They may also develop better security solutions or...

  • Page 30
    ... pricing and business practices as operators of multi-party payments systems such as ours. We also run the risk of disintermediation by virtue of increasing bilateral agreements between entities that would rather not use a payment network for processing payments. For example, merchants could process...

  • Page 31
    ...using both traditional and new technology platforms. Examples include closedloop payment systems that are specific to a single merchant or multi-merchant solutions like the Merchant Customer Exchange, which is designed for a mobile platform and has many merchant participants. Such programs may offer...

  • Page 32
    ... quality of service, corporate responsibility, use and protection of account holder data, regulatory compliance, financial condition and other factors. Negative perception or publicity, particularly in light of the rapid, widespread use of social media channels, could cause damage to our brands and...

  • Page 33
    ...in growing their card portfolios, limit credit lines, modify fees and loyalty programs, or take other actions that adversely affect the growth of our volume and revenue streams from these clients. Declines in stock prices or significant instability could cause consumer spending to decline materially...

  • Page 34
    ..., and our clients pay us fees in connection with them. Some of those fees differ when conversion from the merchant's currency to the issuer's billing currency is required. Thus, revenue from processing cross-border transactions for our clients fluctuates with cross-border activity and the need for...

  • Page 35
    ...intellectual property rights. Our success will depend in part on our ability to develop new technologies and adapt to technological changes and evolving industry standards. If our transaction processing systems are disrupted or compromised, the perception of our brands, and our revenues or operating...

  • Page 36
    ...business due to increasing costs and difficulty in maintaining the interoperability of our respective systems. Any inconsistency in the payment processing services and products between Visa Europe and us could negatively affect account holders from Visa Europe using payment products in the countries...

  • Page 37
    ... granted Visa Europe a put option, which Visa Europe can exercise at any time and which would require us to purchase all outstanding capital stock from Visa Europe's members within 285 days. We are likely to incur a financial obligation of several billion dollars or more and may need to obtain third...

  • Page 38
    ... the number of such shares outstanding. The market price of our class A common stock may also suffer from the perception that such an increase could occur, such as upon the issuance or conversion of certain securities to shares of our class A common stock under the retrospective responsibility plan...

  • Page 39
    ... amount must be paid on each class or series of our common stock. ITEM 1B. Unresolved Staff Comments Not applicable. ITEM 2. Properties At September 30, 2013, we owned and leased approximately 3.0 million square feet of office and processing center space in 39 countries around the world, of which...

  • Page 40
    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. At September 30, 2013, we had ...

  • Page 41
    ...Company's common stock made by or on behalf of the Company during the quarter ended September 30, 2013. (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) Period (a) Total Number of Shares Purchased (1) (b) Average Price Paid per Share (d) Approximate Dollar...

  • Page 42
    ... Operations Data: 2013 Fiscal Year Ended September 30, 2012(1) 2011 2010 (in millions, except per share data) 2009 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...

  • Page 43
    Balance Sheet Data: 2013 At September 30, 2012(1) 2011 2010 (in millions, except per share data) 2009 Total assets ...Current portion of long-term debt ...Current portion of accrued litigation(2) ...Long-term debt ...Long-term accrued litigation ...Total equity ...Dividend declared and paid per ...

  • Page 44
    .... In October 2013, our board of directors authorized an additional $5.0 billion share repurchase program. Adjusted financial results. Our financial results for fiscal 2012 and 2011 reflect the impact of several significant items that we believe are not indicative of our financial performance in the...

  • Page 45
    ... fiscal 2012, our reported financial results benefited from a one-time, 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...

  • Page 46
    ... 2011 Diluted Net Income Earnings Attributable to Per Visa Inc. Share(2) (in millions, except for percentages and per share data) Operating Expenses Operating Margin(1) As reported ...Revaluation of Visa Europe put option ...Adjusted ...Diluted weighted-average shares outstanding (as reported...

  • Page 47
    ... transactions involving Visa, Visa Electron, Interlink 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. 39

  • Page 48
    ... processing revenues are earned for authorization, clearing, settlement, network access and other maintenance and support services that facilitate transaction and information processing among our financial institution clients globally and with Visa Europe. Data processing revenues are also earned...

  • Page 49
    ... tax positions; income, gains and losses earned on investments; and the change in the fair value of the Visa Europe put option. Visa Inc. Fiscal 2013, 2012 and 2011 Operating Revenues The following table sets forth our operating revenues earned in the United States, internationally and from Visa...

  • Page 50
    ... currencies are converted to U.S. dollars. The effect of exchange rate movements in fiscal 2013, as partially mitigated by our hedging program, resulted in an overall decline of about one percentage point in total operating revenue growth compared to fiscal 2012. While we expect our hedging program...

  • Page 51
    ...Winter Olympics. Marketing in fiscal 2012 mainly reflected sponsorship of the 2012 London Summer Olympics, as well as spend in support of our new product initiatives. • Network and processing in fiscal 2013 and 2012 increased mainly due to costs incurred for the operation of our processing network...

  • Page 52
    ... rate beginning in fiscal 2012 as a result of changes in California apportionment rules adopted in that year; a tax benefit recognized in fiscal 2013 as a result of new guidance issued by the state of California regarding apportionment rules for years prior to fiscal 2012; certain foreign tax credit...

  • Page 53
    ...; • pay dividends and repurchase our shares at the discretion of our board of directors; and • optimize income earned by investing excess cash in securities that enable us to meet our working capital and liquidity needs. Based on our current cash flow budgets and forecasts of our short-term and...

  • Page 54
    ... in available-for-sale securities. Financing activities. Cash used in financing activities during fiscal 2013, 2012 and 2011 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...

  • Page 55
    ... See Item 1A-Risk Factors included elsewhere in this report. Commercial paper program. We maintain a commercial paper program to support our working capital requirements and for other general corporate purposes. On February 7, 2013, we replaced the existing $500 million program with a new commercial...

  • Page 56
    ...million shares of our class A common stock using $5.4 billion of operating cash on hand. At September 30, 2013, we had $251 million of remaining funds available for share repurchases under the current program authorized by the board of directors. In October 2013, our board of directors authorized an...

  • Page 57
    ... future 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 put option provides...

  • Page 58
    ... its option, the ultimate purchase price could be several billion dollars or more. Pension and other postretirement benefits. We sponsor various qualified and non-qualified defined benefit pension plans that generally provide benefits based on years of service, age and eligible compensation. We...

  • Page 59
    ...to honor Visa-branded cards and payment products processed 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...

  • Page 60
    ... to thirteen years, can provide card issuance and/or conversion support, volume/growth targets and marketing and program support based on specific performance requirements. Payments under these agreements will generally be offset by revenues earned from higher corresponding payments and transaction...

  • Page 61
    ... and other business partners for various programs designed to build payments volume, increase Visa-branded card and product acceptance and win merchant routing transactions over our network. These incentives are primarily accounted for as reductions to operating revenues; however, if a separate...

  • Page 62
    ... value of Visa Europe's option was estimated to be approximately $145 million at September 30, 2013. While the put option is in fact non-transferable, this amount, recorded in our financial statements, represents our estimate of the amount we would be required to pay a third-party market participant...

  • Page 63
    ...-term growth rates or new product innovations. 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, therefore, are impacted by changes in stock prices and the financial market...

  • Page 64
    ... currency exchange rate movements. The aggregate notional amounts of our foreign currency forward contracts outstanding in our exchange rate risk management program, including contracts not designated for cash flow hedge accounting, were $1.3 billion and $739 million at September 30, 2013 and 2012...

  • Page 65
    ...the timing of rate setting for settlement with clients 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...

  • Page 66
    ITEM 8. Financial Statements and Supplementary Data VISA INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page As of September 30, 2013 and 2012 and for the years ended September 30, 2013, 2012 and 2011 Report of Independent Registered Public Accounting Firm ...Consolidated Balance Sheets ......

  • Page 67
    ... on the Company's internal control over financial reporting based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance...

  • Page 68
    ... 30, 30, 2013 2012 (in millions, except par value data) Assets Cash and cash equivalents ...Restricted cash-litigation escrow (Note 3) ...Investment securities (Note 4): Trading ...Available-for-sale ...Income tax receivable (Note 19) ...Settlement receivable ...Accounts receivable ...Customer...

  • Page 69
    ... BALANCE SHEETS-(Continued) September 30, September 30, 2013 2012 (in millions, except par 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, 508 and 535 shares issued and outstanding...

  • Page 70
    ... 30, 2013 2012 2011 (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 ...Marketing ...Network and processing...

  • Page 71
    ... OPERATIONS-(Continued) For the Years Ended September 30, 2013 2012 2011 (in millions, except per share data) Basic earnings per share (Note 15) Class A common stock ...Class B common stock ...Class C common stock ...Basic weighted-average shares outstanding (Note 15) Class A common stock ...Class...

  • Page 72
    VISA INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME For the Years Ended September 30, 2012 (in millions) 2013 2011 Net income including non-controlling interest ...Other comprehensive income (loss), net of tax: Investment securities, available-for-sale: Net unrealized gain (loss) ...Income ...

  • Page 73
    ... restricted stock awards ... Vesting of restricted stock units and performance shares ... Conversion of class C common stock upon sale into public market ... Share-based compensation (Note 16) ... Excess tax benefit for share-based compensation ... Cash proceeds from exercise of stock options ... 65...

  • Page 74
    ... non-controlling interest ... Issuance of restricted stock awards ... Conversion of class C common stock upon sale into public market ... Share-based compensation (Note 16) ... Excess tax benefit for share-based compensation ... Cash proceeds from exercise of stock options ... 66 Restricted stock...

  • Page 75
    ... non-controlling interest ... Issuance of restricted stock awards ... Conversion of class C common stock upon sale into public market ... Share-based compensation (Note 16) ... Excess tax benefit for share-based compensation ... Cash proceeds from exercise of stock options ...(1) Restricted stock...

  • Page 76
    ...2013 2012 (in millions) 2011 Operating Activities Net income including non-controlling interest ...Adjustments to reconcile net income including non-controlling interest to net cash provided by operating activities: Amortization of client incentives ...Share-based compensation ...Excess tax benefit...

  • Page 77
    ... ...Payments from litigation escrow account-retrospective responsibility plan (Note 3) ...Cash proceeds from exercise of stock options ...Restricted stock and performance shares settled in cash for taxes ...Excess tax benefit for share-based compensation ...Payments for earn-out related to PlaySpan...

  • Page 78
    ... networks - VisaNet - which facilitates authorization, clearing and settlement of payment transactions worldwide. VisaNet also offers fraud protection for account holders and assured payment for merchants. Visa is not a bank and does not issue cards, extend credit or set rates and fees for account...

  • Page 79
    ... market data. The Company's Level 3 assets and liabilities include auction rate securities, the Visa Europe put option and the earn-out related to the PlaySpan acquisition. Trading investment securities include mutual fund equity security investments related to various employee compensation...

  • Page 80
    ... cash-litigation escrow, trading and available-for-sale investment securities, settlement receivable and payable, customer collateral, non-marketable equity investments, settlement risk guarantee, derivative instruments, the Visa Europe put option and the earn-out provision related to the PlaySpan...

  • Page 81
    ... Note 11- Settlement Guarantee Management. Client incentives. The Company enters into long-term contracts with financial institution clients and other business partners for various programs designed to build payments volume, increase Visabranded card and product acceptance and win merchant routing...

  • Page 82
    ...Company relies on a number of factors when completing impairment assessments, including a review of discounted net future cash flows, business plans and the use of present value techniques. In July 2012, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") 2012...

  • Page 83
    ... of revenues earned for authorization, clearing, settlement, network access and other maintenance and support services that facilitate transaction and information processing among the Company's financial institution clients globally and with Visa Europe. Data processing revenues are also earned for...

  • Page 84
    ... state tax returns. Foreign taxes paid have historically been deducted to reduce federal income taxes payable. The Company elects to claim foreign tax credits in any given year if such election is beneficial to the Company. See Note 19-Income Taxes. Pension and other postretirement benefit plans...

  • Page 85
    ... 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 86
    ...reflected in diluted earnings per share by application of the treasury stock method. See Note 15 -Earnings Per Share. Recently Issued Accounting Pronouncements In June 2011, the FASB issued ASU 2011-05, which impacts the presentation of comprehensive income. The guidance requires components of other...

  • Page 87
    ... Europe put option agreement. The Company granted Visa Europe a perpetual put option, which if exercised, will require Visa to purchase all of the outstanding shares of capital stock of Visa Europe from its members. The Company is required to purchase the shares of Visa Europe no later than 285 days...

  • Page 88
    ...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, 2013...

  • Page 89
    ... agreed-upon global rules governing the interoperability of Visa's systems with the systems of Visa Europe as well as the use and interoperability of the Visa trademarks. The parties will also guarantee the obligations of their respective clients and members to settle transactions, manage certain...

  • Page 90
    ... earned, less applicable taxes, and are classified as restricted cash on the consolidated balance sheets. The following table sets forth the changes in the litigation escrow account: Fiscal 2012 Fiscal 2013 (in millions) Balance at October 1 ...Payments to settlement funds:(1) Class plaintiffs...

  • Page 91
    ...or Visa International in the covered litigation after the operation of the interchange judgment sharing agreement, plus any amounts reimbursable to the interchange judgment sharing agreement signatories; or (ii) the damages portion of a settlement of a covered litigation that is approved as required...

  • Page 92
    ... 30 Using Inputs Considered as Level 1 Level 2 Level 3 2013 2012 2013 2012 2013 2012 (in millions) Assets Cash equivalents and restricted cash: Money market funds ...$ 1,071 $ 5,676 Commercial paper ...Investment securities, trading: Equity securities ...Investment securities, available-forsale...

  • Page 93
    ... liabilities on the consolidated balance sheets. The fair value of the put option was $145 million at September 30, 2013 and 2012. Changes in fair value are recorded as non-cash, non-operating income in the Company's consolidated statements of operations. See Note 2-Visa Europe. The liability is...

  • Page 94
    ... security investments related to various employee compensation and benefit plans. Trading activity in these investments is at the direction of the Company's employees. These investments are held in trust and are not available for the Company's operational or liquidity needs. Interest and dividend...

  • Page 95
    ...non-current, as they have stated maturities of more than one year from the balance sheet date. However, these investments are generally available to meet short-term liquidity needs. Amortized Cost Fair Value (in millions) September 30, 2013: Due within one year ...$ Due after 1 year through 5 years...

  • Page 96
    ...Years Ended September 30, 2013 2012 2011 (in millions) Interest and dividend income on cash and investments ...$ Gain on other investments ...Investment securities, trading: Unrealized gains (losses), net ...Realized gains (losses), net ...Investment securities, available-for-sale: Realized (losses...

  • Page 97
    ... discount rate at September 30, 2013 compared to September 30, 2012. The decrease in other investments was mainly due to the recognition of an other-than-temporary impairment loss and subsequent sale of an investment, combined with a reclassification of equity securities to long-term available-for...

  • Page 98
    ... represent the value of the Visa brand outside of the United States, excluding the European Union. 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 European Union. Indefinite...

  • Page 99
    ... tax benefits. Note 9-Debt Commercial paper program. Visa maintains a commercial paper program to support its working capital requirements and for other general corporate purposes. On February 7, 2013, the Company replaced the existing $500 million program with a new commercial paper program...

  • Page 100
    ...the United States. The Company uses a September 30 measurement date for its pension and other postretirement benefit plans. Defined benefit pension plans. The defined benefit pension plan benefits are based on years of service, age and eligible compensation. Prior to January 1, 2011, employees hired...

  • Page 101
    ..., September 30, 2013 2012 2013 2012 (in millions) Benefit obligation-beginning of fiscal year ...Service cost ...Interest cost ...Actuarial (gain) loss ...Benefit payments ...Settlements ...Benefit obligation-end of fiscal year ...Accumulated benefit obligation ...Change in Plan Assets: Fair value...

  • Page 102
    ... recognized in accumulated other comprehensive income before tax: Other Pension Benefits Postretirement Benefits September 30, September 30, 2013 2012 2013 2012 (in millions) Net actuarial loss (gain) ...Prior service credit ...Total ... $ 108 (23) $ 328 (33) $ (6) (11) $ (3) (14) $ 85...

  • Page 103
    ... postretirement plan cost: Pension Benefits 2013 2012 Other Postretirement Benefits Fiscal 2011 2013 (in millions) 2012 2011 Service cost ...Interest cost ...Expected return on assets ...Amortization of: Prior service credit ...Actuarial loss (gain) ...Net benefit cost ...Settlement loss ...Total...

  • Page 104
    ... Assumptions: 2013 Fiscal 2012 2011 Discount rate for benefit obligation:(1) 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...

  • Page 105
    ...as pension and other employee benefits plans, to invest in portfolios of stocks, bonds or other securities. A single collective investment fund, previously held by the pension plan, was ultimately invested in common stocks of companies in the S&P 500 index, and as its own unit value was not directly...

  • Page 106
    ...to honor Visa-branded cards and payment products processed in accordance with Visa's operating regulations. This indemnification creates settlement risk for the Company due to the difference in timing between the date of a payment transaction and the date of subsequent settlement. Settlement at risk...

  • Page 107
    ... cash flow hedge program with the objective of reducing exchange rate risk from forecasted net exposures of revenues derived from and payments made in non-functional currencies during the following twelve months. The aggregate notional amounts of the Company's derivative contracts outstanding in its...

  • Page 108
    ..., on the consolidated balance sheet. Notwithstanding the Company's efforts to manage foreign exchange risk, there can be no absolute assurance that its hedging activities will adequately protect against the risks associated with foreign currency fluctuations. Credit and market risks related to...

  • Page 109
    ...net operating revenues in fiscal 2013, 2012 or 2011. Note 14-Stockholders' Equity The number of shares of each class and the number of shares of class A common stock on an asconverted basis at September 30, 2013, are as follows: (in millions except conversion rate) Shares Outstanding Conversion Rate...

  • Page 110
    ... been completed. In October 2013, the Company's board of directors authorized a new $5.0 billion share repurchase program. Under the terms of the retrospective responsibility plan, when the Company makes a deposit into the litigation escrow account, the shares of class B common stock are subject to...

  • Page 111
    ... to the number of shares of classes B or C common stock held multiplied by the applicable conversion rate in effect on the record date. Dividends declared. In October 2013, the Company's board of directors declared a quarterly cash dividend of $0.40 per share of class A common stock (determined in...

  • Page 112
    ... ownership on an asconverted basis. The weighted-average numbers of shares of as-converted class B common stock used in the income allocation were 103 million, 108 million and 123 million for fiscal 2013, 2012 and 2011, respectively. Weighted-average diluted shares outstanding are calculated...

  • Page 113
    ..., restricted stock units and earned performance-based shares. Note 16-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"), restricted stock awards...

  • Page 114
    ...$397 $459 (2) Calculated using the closing stock price on the last trading day of fiscal 2013 of $191.10, less the option exercise price, multiplied by the number of instruments. Applies a forfeiture rate to unvested options outstanding at September 30, 2013 to estimate the number expected to vest...

  • Page 115
    ... the closing stock price on the last trading day of fiscal 2013 of $191.10 by the number of instruments. Represents the maximum number of performance-based shares which could be earned. For the Company's performance-based shares, in addition to service conditions, the ultimate number of shares to...

  • Page 116
    ... to build payments volume, increase Visa-branded card and product acceptance and win merchant routing transactions. These agreements, with original terms ranging from one to thirteen years, can provide card issuance and/or conversion support, volume/growth targets and marketing and program support...

  • Page 117
    ... voting common stock. Except as described below, there were no significant transactions with related parties during fiscal 2013, 2012 and 2011. In fiscal 2011, the Company recognized $172 million in operating revenues from clients that were represented on the Company's board of directors. Due to...

  • Page 118
    VISA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) September 30, 2013 Income tax provision by fiscal year consisted of the following: 2013 2012 (in millions) 2011 Current: U.S. federal ...State and local ...Non-U.S...Total current taxes ...Deferred: U.S. federal ...State and local ......

  • Page 119
    ...) 2012 Deferred Tax Assets: Accrued compensation and benefits ...Comprehensive (income) loss ...Investments in joint ventures ...Accrued litigation obligation ...Client incentives ...Net operating loss carryforward ...Tax credits ...Federal benefit of state taxes ...Federal benefit of foreign taxes...

  • Page 120
    ... benefit ...Reversal of tax reserves related to the deductibility of covered litigation expense ...Remeasurement of deferred taxes due to: California state apportionment rule changes ...Other state apportionment changes ...Revaluation of Visa Europe put option ...Other, net ...Income tax provision...

  • Page 121
    ... rate beginning in fiscal 2012 as a result of changes in California apportionment rules adopted in that year; a tax benefit recognized in fiscal 2013 as a result of new guidance issued by the state of California regarding apportionment rules for years prior to fiscal 2012; certain foreign tax credit...

  • Page 122
    ... outstanding refund claims, the federal and California statutes of limitations have expired for fiscal years prior to fiscal 2006. During fiscal 2013, the Canada Revenue Agency (CRA) completed its examination of the Company's fiscal 2003 to 2011 Canadian tax returns and proposed certain assessments...

  • Page 123
    ...and class plaintiffs in the interchange multidistrict litigation. 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. The claims in this action...

  • Page 124
    ... brought by individual merchants, sought money damages alleged to range in the tens of billions of dollars (subject to trebling), as well as attorneys' fees and injunctive relief. The class plaintiffs also filed a Second Supplemental Class Action Complaint against Visa Inc. and certain member...

  • Page 125
    ... card competitors; and • Agreement that the Company will meet with merchant buying groups that seek to negotiate interchange rates collectively. The district court entered the preliminary approval order of the Settlement Agreement on November 27, 2012. On November 27, 2012, certain objectors filed...

  • Page 126
    ... Responsibility Plan. On May 24, 2013, Visa, MasterCard, and certain U.S. financial institution defendants in MDL 1720 filed a complaint in the Eastern District of New York against certain named class representative plaintiffs who had opted out or stated their intention to opt out of the damages...

  • Page 127
    ... November 27, 2012, the time period for which opt-outs may seek damages under the MDL class settlement, Visa's conduct in, among other things, continuing to set default interchange rates, maintaining its "honor all cards" rule, enforcing certain rules relating to merchants, and restructuring itself...

  • Page 128
    ... anticompetitive effects of interchange fees are reinforced by Visa Europe's "honor all cards" and "no discrimination" rules and rules limiting cross-border issuing and acquiring. On October 16, 2013, Visa Inc. and Visa International were served with a similar claim by a twelfth merchant that is...

  • Page 129
    ... supra-competitive default interchange rates and merchant discount fees, and that Visa and MasterCard's respective "no-surcharge" and "honor all cards" policies had the anticompetitive effect of increasing merchant discount fees. The lawsuits seek unspecified monetary damages and injunctive relief...

  • Page 130
    ... be estimated at this time. 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, Visa U.S.A., and Plus System, Inc.) and MasterCard...

  • Page 131
    ... the same ATM access fee rules. Two other purported consumer class actions were also filed in October 2011 in the same federal court, and were later combined into a single amended complaint (Mackmin). The amended complaint challenges the same ATM access fee rules and names Visa, MasterCard and...

  • Page 132
    ... from foreign currency into U.S. dollars. On March 20, 2013, Visa met with the CFPB and provided information and materials in response to the requests. Visa is continuing to cooperate with the CFPB's inquiry. Note 21-Subsequent Events In October 2013, the Company's board of directors authorized an...

  • Page 133
    ... Company: Quarter Ended (unaudited) June 30, Mar. 31, Dec. 31, 2013 2013 2012 (in millions, except per share data) Fiscal Year 2013 Total Visa Inc. Sept. 30, 2013 Operating revenues ...Operating income ...Net income attributable to Visa Inc...Basic earnings per share Class A common stock ...Class...

  • Page 134
    ...that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and...

  • Page 135
    ... 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 internal control...

  • Page 136
    ... to Corporate Secretary, Visa Inc., P.O. Box 8999, San Francisco, California 94128-8999. ITEM 11. Executive Compensation The information required by this item concerning director and executive compensation is incorporated herein by reference to the sections entitled "Compensation of Non-Employee...

  • Page 137
    ... item concerning director independence pursuant to Item 407(a) of Regulation S-K is incorporated herein by reference to the section entitled "Corporate Governance- Independence of Directors" in our Proxy Statement. ITEM 14. Principal Accountant Fees and Services The information required by this Item...

  • Page 138
    ... 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 139
    ...as amended, the registrant has 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/ Charles W. Scharf Charles W. Scharf Chief Executive Officer November 21, 2013 Pursuant to the requirements of the...

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  • Page 141
    ...Visa Europe Limited, Visa Canada Association, Inovant LLC, Inovant, Inc., Visa Europe Services, Inc., Visa International Transition LLC, VI Merger Sub, Inc., Visa USA Merger Sub Inc. and 1734313 Ontario Inc. Form of Visa Europe Put-Call Option Agreement between Visa Inc. and Visa Europe Limited Form...

  • Page 142
    ... International Incorporated, various U.S. financial institution defendants, and the class plaintiffs to resolve the class plaintiffs' claims in the matter styled In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, No. 05-MD-1720 Visa 2005 Deferred Compensation Plan...

  • Page 143
    ... 2011 Form of Visa Inc. 2007 Equity Incentive Compensation Plan Performance Share Award Agreement for executive officers, other than the CEO, for awards granted after November 1, 2011 Form of Visa Inc. 2007 Equity Incentive Compensation Plan Stock Option Award Agreement including clawback provision...

  • Page 144
    ...Incentive Compensation Plan Restricted Stock Unit Agreement for executive officers, other than the CEO, with limited vesting upon termination for awards granted after November 1, 2012 Offer Letter, dated October 23, 2012, between Visa Inc. and Charles W. Scharf Aircraft Time Sharing Agreement, dated...

  • Page 145
    ..., a copy of each instrument. Confidential treatment has been requested for portions of this agreement. A completed copy of the agreement, including the redacted portions, has been filed separately with the SEC. Management contract, compensatory plan or arrangement. Filed or furnished herewith. 5

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  • Page 149
    ...Group Limited William S. Shanahan Former President Colgate-Palmolive Company John A. C. Swainson President, Software Group Dell, Inc. Management Team Charles W. Scharf Chief Executive Officer Elizabeth Buse Global Solutions Joshua Floum General Counsel Antonio Lucio Chief Brand Officer Jim McCarthy...

  • Page 150
    ... 7644 http://investor.visa.com Media Relations Visa Inc. [email protected] +1 650 432 2990 http://corporate.visa.com Corporate Secretary Visa Inc. P.O. Box 8999 San Francisco, CA 94128-8999 USA [email protected] Independent Registered Public Accounting Firm KPMG LLP Transfer Agent...