Visa 2015 Annual Report Download

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Annual Report 2015

Table of contents

  • Page 1
    Annual Report 2015

  • Page 2
    ... split effected in the second quarter of fiscal 2015. Total volume is the sum of payments volume and cash volume. Payments volume is the total monetary value of transactions for goods and services that are purchased on Visa-branded cards and payment products. Cash volume generally consists of cash...

  • Page 3
    ... the same time I am conscious of the fact that our industry is more competitive than ever, and we need to be careful about being too specific if we think it could hurt our competitive position. 2015 Performance 2015 was another strong year for Visa. We reported adjusted earnings per share growth of...

  • Page 4
    ... zero liability in many markets around the world meant that consumers could carry and use their cards without the risk of theft, as is still the case with cash. Visa's products were, and still are, also extremely cost effective compared to cash and checks for merchants. Today's innovations hold the...

  • Page 5
    ... Visa Commerce Network, a new way for merchants to grow their business through relevant consumer offers • Piloting Rewards Redemption, a new product which allows consumers to use their participating issuer or loyalty program rewards points toward purchases at participating everyday spend merchants...

  • Page 6
    .... global clients. Our clients will benefit as we work every day to earn their business, bringing them  At the initial conversion rate, the shares of Visa Inc. preferred stock issued in the transaction will be convertible into an aggregate of 78,654,400 shares of class A common stock, valued at...

  • Page 7
    ... the share of personal consumption expenditure using our products. Cash and check in Europe represent 37% of personal consumption expenditure, a 3.3 trillion dollar growth opportunity. Europe will be a very important region for the combined company, representing approximately 17% of cards in...

  • Page 8
    ...competition. We compete vigorously every day, doing our best to earn our clients' business and preserve our share. In summary, we are delighted to be reuniting the Visa family. We believe that we have structured this in a way that creates value for both Visa Europe members, our shareholders and our...

  • Page 9
    ... software and allowing trusted partners to gain access to our capabilities to power their experiences is critical to our long-term success. We have a great team at Visa today, but we will continue to add resources here. In support of this goal, we opened a new Technology Center in Bangalore, India...

  • Page 10
    ...-wide roadmap for payments system security. In 2015, we also launched a number of new fraud prevention and risk management capabilities, including Mobile Location Confirmation, Decision Manager Replay for merchants, and an enhanced Alerts capability available through APIs. We announced a partnership...

  • Page 11
    ... company relative to our free cash flow, but we do carefully allocate it. Our assets are our people, our ideas, and our technology. Historically the biggest driver of capital usage was our hardware-i.e. the data centers which processed seamlessly the 71 billion transactions per year in a safe...

  • Page 12
    ... the total available to $7.8 billion as of September 30, 2015. Capital Structure Prior to the Visa Europe transaction, we were limited in our ability to use our debt capacity. Visa Europe held a put option and we would have potentially needed to finance an unknown purchase price within 285 days. We...

  • Page 13
    Thank you to my 11,300 partners at Visa who work every day to deliver on the great promise that this company has. Our Future Our future is incredibly exciting and bright. The new payments map is being defined now and we are working to ensure we preserve and grow our business. There is competition ...

  • Page 14
    ... 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 31, 2015, the last business day of the registrant's most recently completed second fiscal quarter) was approximately...

  • Page 15
    ... 33 33 33 33 Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities ...Selected Financial Data ...Management's Discussion and Analysis of Financial Condition and Results of Operations ...Quantitative and Qualitative Disclosures About Market Risk...

  • Page 16
    ...support of national payments networks outside the United States; and increased regulation of consumer privacy, data use and security; • • • • developments in litigation and government enforcement, including those affecting interchange reimbursement fees, antitrust and tax; • new lawsuits...

  • Page 17
    ... to integrate acquisitions successfully or to 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...

  • Page 18
    ... advanced processing networks - VisaNet - which facilitates authorization, clearing and settlement of payment transactions worldwide. It also offers fraud protection for account holders and rapid payment for merchants. Visa is not a bank and does not issue cards, extend credit or set rates and fees...

  • Page 19
    ... New Zealand, Peru, Singapore, South Africa, United Arab Emirates, and the U.S. c. Visa payWave: With Visa payWave technology, consumers are able to pay for products and services via smart phone or other devices, and by using their contactless cards at physical retailers. d. Visa Direct: Visa Direct...

  • Page 20
    ... network, VisaNet, through which Visa connects and manages the exchange of information and value between: (i) issuers - financial institutions that issue Visa-branded cards or payment products to account holders, and (ii) acquirers - financial institutions that contract with merchants to accept Visa...

  • Page 21
    ...purchased goods and services. Data processing revenues consist of revenues earned for authorization, clearing, settlement, network access and other maintenance and support services that facilitate transaction and information processing among our clients globally and with Visa Europe. Data processing...

  • Page 22
    ... each authorization transaction we process in real 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...

  • Page 23
    ... Visa. Visa Europe data are not included. MasterCard, American Express, JCB, and Discover/Diners Club data sourced from The Nilson Report issue 1060 (March 2015). Includes all consumer and commercial credit, debit and prepaid cards. Some figures are estimates and currency figures are in U.S. dollars...

  • Page 24
    ... consumer protection issues, including those pertaining to us to some extent. The CFPB's future actions may make payment card or product transactions generally less attractive to issuers, acquirers, consumers and merchants by further regulating disclosures, payment card practices, fees, routing and...

  • Page 25
    No-surcharge rules. We have historically implemented rules that prohibit merchants from charging higher prices to consumers who pay using their Visa-branded card or payment product instead of other means. As part of the settlement reached in the interchange multidistrict litigation, however, Visa ...

  • Page 26
    ...' 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 27
    .... We refer to these various practices as 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, the Visa Rules require that all authorization...

  • Page 28
    ...matters like interchange reimbursement rates, preferred routing, domestic processing requirements, currency conversion, point of sale transaction rules and practices, privacy, and data use or protection. As a result, the Visa Rules may differ from country to country or by product offering. If widely...

  • Page 29
    ... are subject to similar requirements under privacy laws and bank regulatory regimes. For example, as of September 1, 2015, Russia amended its personal data law to require personal "data operators" to store personal information of Russian citizens in databases located in Russia. In addition, many...

  • Page 30
    ... we process. Moreover, such regulations can limit the types of products and services that we offer, the countries in which Visabranded cards are used and the types of account holders and merchants who can obtain or accept Visa-branded cards, thereby harming our overall business. Litigation Risks Our...

  • Page 31
    ... in Item 8 of this report. Beginning in 2005, a series of complaints (the majority of which were styled as class actions) were filed on behalf of merchants against us, MasterCard and/or other defendants, including certain Visa member financial institutions. We refer to this as the interchange...

  • Page 32
    ...the setting of multilateral interchange fee rates in the Visa Europe territory. As part of the acquisition terms, the Company has obtained certain protection in respect of losses resulting from such existing and potential litigation through the preferred stock and the U.K. loss sharing agreement. If...

  • Page 33
    ... incentives, marketing and other support payments. We have continued to increase the use of incentives such as up-front cash payments and fee discounts in many countries, including the U.S. In addition, we offer incentives to certain merchants or acquirers to win routing preference in...

  • Page 34
    ...technology or have greater financial resources. They 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...

  • Page 35
    ... in the payments value chain is key to our business. Some of our competitors, including American Express, Discover, private-label card networks, virtual currencies and certain alternate payments systems, operate closed-loop payments systems, with direct connections to both merchants and consumers...

  • Page 36
    ... their relationships with account holders and merchants to support and to compete effectively for our programs and services. We do not issue cards, extend credit to account holders or determine the interest rates or other fees charged to account holders using cards that carry our brands. Each issuer...

  • Page 37
    ... of service and promotion of our brands in Europe could affect our brands and reputation globally. While Visa Europe has very broad latitude to use our brands and technology within its region, Visa Europe is not required to spend any minimum amount of money conducting research on brand performance...

  • Page 38
    ... Our clients may decrease spending for optional or enhanced services, which could reduce account holders' desire to use these products. Our clients may increase account holder fees as a cost-recovery initiative, or as a result of regulatory action, decreasing their value proposition to consumers and...

  • Page 39
    ... near-term investments 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 in the securities markets...

  • Page 40
    ...absorb the cost of such settlement failure, which could impact our liquidity. The use of our products and our revenues could decline if we cannot keep pace with rapid technological developments to provide new and innovative payment programs and services or comply with new laws and regulations. Rapid...

  • Page 41
    ... card or other data processed, stored or transmitted by third parties or by us. We, our clients, merchants, and other service providers process, store or transmit account holder and other information in connection with Visa-branded cards and payment products. In addition, our clients may use...

  • Page 42
    ... the number of class A common stock outstanding, which could adversely affect the market price and dilute the voting power of our existing class A common stock. Likewise, if we complete the proposed acquisition of Visa Europe and issue the preferred shares, similar impacts on market price and...

  • Page 43
    ..., if a dividend is declared or paid, an equivalent amount must be paid on each class or series of our common stock (and on the preferred shares we are obligated to issue if we complete our proposed acquisition of Visa Europe). Acquisitions, strategic investments and entries into new businesses could...

  • Page 44
    ... integrating the acquired business and systems into our existing operations, successfully managing new risks associated with the acquired business and achieving expected synergies, any of which we may be unable to achieve on a timely basis or at all. Until our acquisition of Visa Europe is completed...

  • Page 45
    ... 2, 2016, or if legal restraints that prohibit the closing have become final and non-appealable. If we fail to complete the acquisition, Visa Europe would continue to have the right to require us to purchase all outstanding capital stock from Visa Europe's members under the terms of the put option...

  • Page 46
    ... we currently expect the Visa Europe acquisition to be mildly accretive to adjusted earnings per share in fiscal year 2017 (before one-time integration costs), if the expenses associated with integrating Visa Europe into our operations and financing the acquisition are higher than we currently...

  • Page 47
    ...four-for-one stock split that was effected in the second quarter of fiscal 2015. See Note 14-Stockholders' Equity in Item 8-Financial Statements and Supplementary Data of this report. Price Range of Common Stock Our class A common stock has been listed on the New York Stock Exchange under the symbol...

  • Page 48
    ... the Company during the quarter ended September 30, 2015. Approximate Dollar Value Of Shares That May Yet Be Purchased Under The Plans Or Programs (2),(3) Period Total Number Of Average Price Paid Shares Purchased (1) Per Share Total Number Of Shares Purchased As Part Of Publicly Announced Plans...

  • Page 49
    ...which permit Visa to issue options in connection with certain acquisition transactions. In January 2015, the Company's class A stockholders approved the ESPP which permits eligible employees to purchase shares of Class A common stock at a 15% discount of the stock price on the purchase date, subject...

  • Page 50
    ...30, 2014 (1) 2013 (1) 2012 (3) (in millions, except per share data) 2011 Operating revenues ...Operating expenses ...Operating income ...Net income attributable to Visa Inc...Basic earnings per share-class A common stock(4) ...Diluted earnings per share-class A common stock(4) ...Balance Sheet Data...

  • Page 51
    ... clients with a global payments infrastructure and support services for the delivery of Visa-branded payment products, including credit, debit and prepaid. We facilitate global commerce through the transfer of value and information among financial institutions, merchants, consumers, businesses...

  • Page 52
    ... due to rounding. Percentage changes are calculated based on unrounded numbers. Adjusted net income and diluted earnings per share in fiscal 2015 and 2014 exclude the impact of certain significant items that we believe are not indicative of our operating performance, as they either have no cash...

  • Page 53
    ... earnings per share figures are calculated based on unrounded numbers. The per share amounts for the prior periods presented have been retroactively adjusted to reflect the four-for-one stock split effected in the fiscal second quarter of 2015. Class A common stock split. In January 2015, Visa...

  • Page 54
    ... 2015, we repurchased 44 million shares of our class A common stock in the open market using $2.9 billion of cash on hand. As of September 30, 2015, we had remaining authorized funds of $2.8 billion. All share repurchase programs authorized prior to October 2014 have been completed. In October 2015...

  • Page 55
    ... 30, 2014 vs 2013(1) Nominal Constant(6) Visa Inc. 12 months ended June 30, 2015 vs 2014(1) Nominal Constant(6) 12 months ended June 30, 2014 vs 2013(1) Nominal Constant(6) Payments volume growth Consumer credit ...Consumer debit(3) ...Commercial(4) ...Total payments volume growth ...Cash volume...

  • Page 56
    ...Visa-branded cards and payment products for purchased goods and services, as well as the number of transactions processed on our network. We do not earn revenues from, or bear credit risk with respect to, interest or fees paid by account holders on Visa-branded cards or payment products. Our issuing...

  • Page 57
    Data processing revenues are earned for authorization, clearing, settlement, network access and other maintenance and support services that facilitate transaction and information processing among our clients globally and with Visa Europe. Data processing revenues are recognized in the same period ...

  • Page 58
    ... in local currencies are converted to U.S. dollars. The effect of exchange rate movements in fiscal 2015, as partially mitigated by our hedging program, resulted in an overall decline of about two-and-a-half percentage points in total operating revenue growth. The following table sets forth...

  • Page 59
    ... one-time share-based compensation expenses previously recognized in fiscal 2013, partially offset by an increase in headcount. Marketing decreased in fiscal 2015 mainly due to the overall strengthening of the U.S. dollar as marketing spend in local currencies was converted to U.S. dollars, combined...

  • Page 60
    ...fiscal 2013 was also attributable to elevated spend supporting the two sporting campaigns. • Network and processing in fiscal 2015 decreased as a result of initiatives to optimize the use of our technology resources. The increase in fiscal 2014 was mainly due to continued technology and processing...

  • Page 61
    .... Cash Flow Data The following table summarizes our cash flow activity for the fiscal years presented: 2015 2014 (in millions) 2013 Total cash provided by (used in): Operating activities ...Investing activities ...Financing activities ...Effect of exchange rate changes on cash and cash equivalents...

  • Page 62
    ... to the interchange multidistrict litigation, cash used in financing activities was $4.0 billion, $5.0 billion and $6.1 billion in fiscal 2015, 2014 and 2013, respectively. The changes in fiscal years 2015 and 2014 are primarily due to the repurchase of class A common stock in the open market. See...

  • Page 63
    .... 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. Under the program, we are authorized to issue up to $3.0 billion in outstanding notes...

  • Page 64
    ...dollar generally remain outstanding for one to two business days, which is consistent with industry practice for such transactions. During fiscal 2015, we were not required to fund settlementrelated working capital. Our average daily net settlement position was a payable of $272 million. Visa Europe...

  • Page 65
    ... 30, 2015, or will be able to demonstrate at any point in time in the future. Should Visa Europe elect to exercise its put option in its unamended form, 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...

  • Page 66
    ... 2015, we repurchased 44 million shares of our class A common stock in the open market using $2.9 billion of cash on hand. As of September 30, 2015, we had remaining authorized funds of $2.8 billion. All share repurchase programs authorized prior to October 2014 have been completed. In October 2015...

  • Page 67
    ... obligations in accordance with our rules. 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 collateral...

  • Page 68
    ...-branded card and product acceptance and win merchant routing transactions over our network. These agreements, which range in terms from one to thirteen years, can provide card issuance and/or conversion support, volume/growth targets and marketing and program support based on specific performance...

  • Page 69
    ... 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 identifiable benefit at fair value...

  • Page 70
    ...will be required to purchase all of the outstanding shares of capital stock of Visa Europe from its members. The unamended put option provides a formula for determining the purchase price of the Visa Europe shares, which, subject to certain adjustments, applies our forward price-to-earnings multiple...

  • Page 71
    ...-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 72
    ... will seek to maximize the purchase price by adopting a forprofit business model in advance of exercising the unamended put option. The foreign exchange rate used to translate Visa Europe's results from euros to U.S. dollars reflects a blend of forward exchange rates observed in the marketplace. The...

  • Page 73
    ...foreign currency exchange risk in daily settlement activities. This risk arises from 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...

  • Page 74
    ... both fixed-rate and adjustable-rate securities. These assets are included in cash equivalents and short-term or long-term available-for-sale investments. Investments in fixed-rate instruments carry a degree of interest rate risk. The fair value of fixed-rate securities may be adversely impacted due...

  • Page 75
    ITEM 8. Financial Statements and Supplementary Data VISA INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page As of September 30, 2015 and 2014 and for the years ended September 30, 2015, 2014 and 2013 Report of Independent Registered Public Accounting Firm ...Consolidated Balance Sheets ......

  • Page 76
    ... with U.S. generally accepted accounting principles. Also in our opinion, Visa Inc. maintained, in all material respects, effective internal control over financial reporting as of September 30, 2015, based on criteria established in Internal Control - Integrated Framework (2013) issued by the...

  • Page 77
    VISA INC. CONSOLIDATED BALANCE SHEETS September 30, September 30, 2015 2014 (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 ...Settlement receivable ...Accounts ...

  • Page 78
    VISA INC. CONSOLIDATED BALANCE SHEETS-(Continued) September 30, September 30, 2015 2014 (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, 1,950 and 1,978 ...

  • Page 79
    ... 30, 2015 2014 2013 (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 80
    VISA INC. CONSOLIDATED STATEMENTS OF OPERATIONS-(Continued) For the Years Ended September 30, 2015 2014 2013 (in millions, except per share data) Basic earnings per share (Note 15) Class A common stock ...$ Class B common stock ...$ 2.58 4.26 $ $ $ 2.16 3.63 8.65 1,993 245 26 $ $ $ 1.90 3.20 ...

  • Page 81
    ...INCOME For the Years Ended September 30, 2015 2014 2013 (in millions) Net income ...$ 6,328 Other comprehensive (loss) income, net of tax: Investment securities, available-for-sale: Net unrealized (loss) gain ...(21) Income tax effect ...8 Reclassification adjustment for net (gain) loss realized in...

  • Page 82
    ...tax benefit for share-based compensation ... Cash proceeds from issuance of common stock under employee equity plans ... Cash dividends declared and paid, at a quarterly amount of $0.0825 per as-converted share ... Repurchase of class A common stock ... Balance as of September 30, 2013 ... $ 18,875...

  • Page 83
    ...stock and performance-based shares settled in cash for taxes ...Excess tax benefit for share-based compensation ...Cash proceeds from issuance of common stock under employee equity plans ...Cash dividends declared and paid, at a quarterly amount of $0.10 per as-converted share ...Repurchase of class...

  • Page 84
    ...performance-based shares settled in cash for taxes ...Excess tax benefit for share-based compensation ...Cash proceeds from issuance of common stock under employee equity plans ...Cash dividends declared and paid, at a quarterly amount of $0.12 per as-converted share (Note 14) ...Repurchase of class...

  • Page 85
    ... 30, 2015 2014 2013 (in millions) Operating Activities Net income ...$ 6,328 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of client incentives ...2,861 Fair value adjustment for the Visa Europe put option ...110 Share-based compensation ...187...

  • Page 86
    ...Restricted stock and performance-based shares settled in cash for taxes ...Excess tax benefit for share-based compensation ...Payments for earn-out related to PlaySpan acquisition ...Principal payments on capital lease obligations ...Net cash used in financing activities ...Effect of exchange rate...

  • Page 87
    ... processing 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...

  • Page 88
    ... liquid investments with original maturities of 90 days or less from the date of purchase. Cash equivalents are primarily recorded at cost, which approximates fair value due to their generally short maturities. Restricted cash-litigation escrow. The Company maintains an escrow account from which...

  • Page 89
    ... and equity securities. These securities are recorded at cost at the time of purchase and are carried at fair value. The Company considers these securities to be available-for-sale to meet working capital and liquidity needs. Investments with original maturities of greater than 90 days and stated...

  • Page 90
    ... securities, settlement receivable and payable, customer collateral, non-marketable equity investments, settlement risk guarantee, derivative instruments, and the Visa Europe put option. See Note 4-Fair Value Measurements and Investments. Settlement receivable and payable. The Company operates...

  • Page 91
    ... 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. The Company completed its annual impairment review of indefinite-lived intangible assets as of February 1, 2015, and...

  • Page 92
    ... revenues consist 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 clients globally and with Visa Europe. Data processing revenues are recognized in...

  • Page 93
    ... 30, 2015 Marketing. The Company expenses costs for the production of advertising as incurred. The cost of media advertising is expensed when the advertising takes place. Sponsorship costs are recognized over the period in which the Company benefits from the sponsorship rights. Promotional items are...

  • Page 94
    ..., 2014 and 2013. For certain 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...

  • Page 95
    ..., 2015 Earnings per share. The Company calculates earnings per share using the two-class method to reflect the different rights of each class and series of outstanding common stock. The dilutive effect of incremental common stock equivalents is reflected in diluted earnings per share by application...

  • Page 96
    ... to which the Company and Visa Europe agreed on the terms and conditions of the Company's acquisition of 100% of the share capital of Visa Europe for a total purchase price of up to â,¬21.2 billion. The purchase price consists of: (a) at the closing of the transaction, up-front cash consideration of...

  • Page 97
    ... approximate values of the UK&I and Europe preferred stock to be issued at closing are based on the average price of the class A common stock of $71.68 per share, and the euro-dollar exchange rate of 1.12750 for the 30 trading days ended October 19, 2015. The UK&I and Europe preferred stock will...

  • Page 98
    ... 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 after exercise of the unamended put option. The unamended put option agreement provides a formula for determining the purchase price of 85

  • Page 99
    ... ratio applicable to Visa Europe on a standalone basis at the time of exercise, which the Company refers to as the "P/E differential." Exercise of the unamended put option is at the sole discretion of Visa Europe (on behalf of the Visa Europe shareholders pursuant to authority granted to Visa Europe...

  • Page 100
    ...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 accepts Visa-branded products. The...

  • Page 101
    ... in and referred to as the U.S. retrospective responsibility plan, or the plan, and consist of a litigation escrow agreement, the conversion feature of the Company's shares of class B common stock, the indemnification obligations of the Visa U.S.A. members, an interchange judgment sharing agreement...

  • Page 102
    ... the 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 economic effect on earnings...

  • Page 103
    ... of operations is not impacted by the execution of the omnibus agreement. On August 26, 2014, Visa entered into an amendment to the omnibus agreement. The omnibus amendment makes applicable to certain settlements in opt-out cases in the interchange multidistrict litigation the settlement-sharing...

  • Page 104
    ...of the termination of the Settlement Agreement and (ii) the takedown payments previously made to defendants. Potential Visa Europe Liabilities On November 2, 2015, the Company and Visa Europe entered into a transaction agreement pursuant to which the Company agreed to acquire Visa Europe. Closing of...

  • Page 105
    ... Significant Accounting Policies. Assets and Liabilities Measured at Fair Value on a Recurring Basis Fair Value Measurements at September 30 Using Inputs Considered as Level 1 Level 2 Level 3 2015 2014 2015 2014 2015 2014 (in millions) Assets Cash equivalents and restricted cash: Money market funds...

  • Page 106
    ...Auction rate securities are classified as Level 3 due to a lack of trading in active markets and a lack of observable inputs in measuring fair value. There were no substantive changes to the valuation techniques and related inputs used to measure fair value during fiscal 2015. Visa Europe put option...

  • Page 107
    ..., but require disclosure of their fair values: time deposits recorded in prepaid expenses and other current assets, settlement receivable and payable, and customer collateral. The estimated fair value of such instruments at September 30, 2015, approximates their carrying value due to their generally...

  • Page 108
    ... the balance sheet date. However, these investments are generally available to meet short-term liquidity needs. Amortized Cost Fair Value (in millions) September 30, 2015: Due within one year ...Due after 1 year through 5 years ...Due after 5 years through 10 years ...Due after 10 years ...Total...

  • Page 109
    ... as non-operating income in the Company's consolidated statements of operations and consisted of the following: For the Years Ended September 30, 2014 (in millions) 2015 2013 Interest and dividend income on cash and investments ...Gain on other investments ...Investment securities, trading...

  • Page 110
    ... Union. Trade names 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...

  • Page 111
    ..., in April 2015, the Company acquired 100% of the outstanding shares of the strategic partner. The total purchase consideration was approximately $116 million, excluding the Company's previously held minority interest, paid primarily with cash on hand. Total purchase consideration was allocated...

  • Page 112
    ...9-Debt Commercial paper program. Visa maintains a commercial paper program to support its working capital requirements and for other general corporate purposes. Under the program, the Company is authorized to issue up to $3.0 billion in outstanding notes, with maturities up to 397 days from the date...

  • Page 113
    ... event of settlement failures by the Company's clients, to back up the commercial paper program and for general corporate purposes. Interest on borrowings under the Credit Facility would be charged at the London Interbank Offered Rate or an alternative base rate, in each case plus applicable margins...

  • Page 114
    ... year ...Service cost ...Interest cost ...Actuarial loss (gain) ...Benefit payments ...Plan amendment ...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...

  • Page 115
    ......Fair value of plan assets-end of year ...Net periodic pension and other postretirement plan cost: Pension Benefits 2015 2014 $ $ $ $ (19) - (19) - $ $ $ $ (30) - (30) - Other Postretirement Benefits Fiscal 2013 2015 (in millions) 2014 2013 Service cost ...Interest cost ...Expected return on...

  • Page 116
    ... 18 (4) (3) 11 $ 22 $ 35 $ - 2 - 3 5 1 $ (2) 1 - 3 2 (1) $ $ $ $ 2015 Fiscal 2014 2013 Discount rate for benefit 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...

  • Page 117
    ... 2. The Company now presents U.S. Treasury securities separately for disclosure purposes. There were no changes to the valuation techniques or related inputs used to measure fair value. Prior period amounts reflect the change in presentation. Level 1 assets. Cash equivalents (money market funds...

  • Page 118
    ...the Company due to the difference in timing between the date of a payment transaction and the date of subsequent settlement. Settlement at risk, or exposure, is estimated based on the sum of the following inputs: (1) average daily volumes during the quarter multiplied by the estimated number of days...

  • Page 119
    ... global settlement risk policies and procedures to manage settlement exposure, which may require clients to post collateral if certain credit standards are not met. The Company's settlement exposure is limited to the amount of unsettled Visa payment transactions at any point in time. The Company...

  • Page 120
    ... 1-Summary of Significant Accounting Policies. To qualify for cash flow hedge accounting treatment, the Company formally documents, at inception of the hedge, all relationships between the hedging transactions and the hedged items, as well as the Company's risk management objective and strategy for...

  • Page 121
    ...Date. Trading began on a split-adjusted basis on March 19, 2015. Holders of class B and C common stock did not receive a stock dividend. Instead, the conversion rate for class B common stock increased to 1.6483 shares of class A common stock per share of class B common stock, and the conversion rate...

  • Page 122
    ... account in fiscal 2015. (in millions, except per share and conversion rate data) Fiscal 2014 Deposits under the U.S. retrospective responsibility plan ...$ Effective price per share(1) ...$ Reduction in equivalent number of shares of class A common stock ...Conversion rate of class B common stock...

  • Page 123
    ...to the number of shares of class B or C common stock held multiplied by the applicable conversion rate in effect on the record date. Dividends declared. The Company declared and paid $1.2 billion in dividends in fiscal 2015 at a quarterly rate of $0.12 per share. In October 2015, the Company's board...

  • Page 124
    ...not recalculate exactly due to rounding. Earnings per share is calculated based on unrounded numbers. The number of shares and per share amounts for the prior periods presented have been retroactively adjusted to reflect the four-for-one stock split effected in the fiscal second quarter of 2015. See...

  • Page 125
    ...share-based compensation cost was immaterial during fiscal 2015, 2014 and 2013. All per share amounts and number of shares outstanding presented below reflect the four-for-one stock split that was effected in the second quarter of fiscal 2015. See Note 14-Stockholders' Equity. Options Options issued...

  • Page 126
    ... 30, 2015 During fiscal 2015, 2014 and 2013, the fair value of each stock option was estimated on the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions: 2015 2014 2013 Expected term (in years)(1) ...Risk-free rate of return(2) ...Expected...

  • Page 127
    ... 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 2015, 2014 and 2013 was...

  • Page 128
    ... $88 Calculated by multiplying the closing stock price on the last trading day of fiscal 2015 of $69.66 by the number of instruments. (2) Represents the maximum number of performance-based shares which could be earned. For the Company's performance-based shares, in addition to service conditions...

  • Page 129
    ... Visa-branded card and product acceptance and win merchant routing transactions. These agreements, with terms ranging from one to thirteen years, can provide card issuance and/or conversion support, volume/ growth targets and marketing and program support based on specific performance requirements...

  • Page 130
    ...expected to have a material effect on the Company's financial condition, results of operations or cash flows. Note 18-Related Parties Visa considers an entity to be a related party for purposes of this disclosure if that entity owns more than 10% of Visa's total voting common stock at the end of the...

  • Page 131
    ...-(Continued) September 30, 2015 The tax effect of temporary differences that give rise to significant portions of deferred tax assets and liabilities at September 30, 2015 and 2014, are presented below: 2015 (in millions) 2014 Deferred Tax Assets: Accrued compensation and benefits ...Comprehensive...

  • Page 132
    ...to a deduction for U.S. domestic production activities, of which $191 million was a one-time tax benefit related to prior fiscal years. • The effective income tax rate of 30% in fiscal 2014 differs from the effective income tax rate of 31% in fiscal 2013 mainly due to: • • the aforementioned...

  • Page 133
    ... 30, 2015. The amount of income taxes that would have resulted had such earnings been repatriated is not practicably determinable. The Company's largest operating hub outside the United States is located in Singapore. It operates under a tax incentive agreement which is effective through September...

  • Page 134
    ... to the Company's fiscal 2010 through 2014 Canadian tax returns. The Company filed notices of objection against these assessments and, in fiscal 2015, completed the appeals process without reaching a settlement with the CRA. The Company intends to petition the Tax Court of Canada to overturn...

  • Page 135
    ... Plan and Potential Visa Europe Liabilities. Interchange Multidistrict Litigation (MDL) Beginning in May 2005, a series of complaints (the majority of which were styled as class actions) were filed in U.S. federal district courts by merchants against Visa U.S.A., Visa International and/or MasterCard...

  • Page 136
    ...On January 14, 2015, following a court-approved process to give class members who previously opted out of the damages portion of the class settlement an option to rejoin it, the class administrator reported that it had received 1,179 requests by merchants to rejoin the cash settlement class, some of...

  • Page 137
    ... complaints seek a declaration that, from January 1, 2004 to November 27, 2012, the time period for which opt-outs may seek damages under the Settlement Agreement, Visa's conduct in, among other things, continuing to set default interchange rates, maintaining its "honor all cards" rule, enforcing...

  • Page 138
    ... the date of filing, Visa has reached settlement agreements with a number of merchants representing approximately 48% of the Visabranded payment card sales volume of merchants who opted out. On December 23, 2014, a similar case was filed in New Mexico state court by New Mexico's attorney general on...

  • Page 139
    .... The complaints alleged, among other things, that Visa's "honor all cards" rule and a similar MasterCard rule violated state antitrust and consumer protection laws, and common law. The claims in these class actions asserted that merchants, faced with excessive merchant discount fees, passed on some...

  • Page 140
    ... objector's motion for attorneys' fees and costs. Canadian Competition Proceedings Merchant Litigation. Beginning in December 2010, a number of putative class action lawsuits were filed in Quebec, British Columbia, Ontario, Saskatchewan, and Alberta against Visa Canada, MasterCard, and ten financial...

  • Page 141
    ... 12, 2015. 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 purported class action lawsuit against Visa (Visa Inc., Visa International, Visa U.S.A., and Plus System, Inc.) and MasterCard in the...

  • Page 142
    ... Note 2-Visa Europe. In October 2015 , the Company's board of directors authorized a new $5.0 billion share repurchase program. See Note 14-Stockholders' Equity. In October 2015, the Company's board of directors declared a dividend in the aggregate amount of $0.14 per share of class A common stock...

  • Page 143
    ...Company: Quarter Ended (unaudited) Fiscal Year Jun. 30, Mar. 31, Dec. 31, 2015 2015 2014 2015 Total (in millions, except per share data) Visa Inc. Operating revenues ...Operating income ...Net income attributable to Visa Inc...Basic earnings per share(2) Class A common stock ...Class B common stock...

  • Page 144
    ...'s assessment, management has concluded that the Company's internal control over financial reporting was effective as of September 30, 2015 using the criteria set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013...

  • Page 145
    ... 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 over financial reporting. During fiscal 2015, there were no significant changes...

  • Page 146
    ...these documents are also available to stockholders without charge upon written request directed 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...

  • Page 147
    ...the section entitled "Independence of Directors" in our Proxy Statement. ITEM 14. Principal Accountant Fees and Services The information required by this Item is incorporated herein by reference to the section entitled "Independent Registered Public Accounting Firm Fees" in our Proxy Statement. 134

  • Page 148
    ...and Financial Statement Schedules (a) The following documents are filed as part of this report: 1. Consolidated Financial Statements See Index to Consolidated Financial Statements in Item 8-Financial Statements and Supplementary Data of this report. 2. Consolidated Financial Statement Schedules None...

  • Page 149
    ... 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 19, 2015 Pursuant to the requirements of the Securities Exchange Act of 1934...

  • Page 150
    Signature Title Date /s/ William S. Shanahan William S. Shanahan Director November 19, 2015 /s/ John A. C. Swainson John A. C. Swainson Director November 19, 2015 /s/ Maynard G. Webb, Jr. Maynard G. Webb, Jr. Director November 19, 2015 137

  • Page 151
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  • Page 152
    ... stock of Visa Inc. Form of Indemnity Agreement Amended and Restated Global Restructuring Agreement, dated August 24, 2007, by and among Visa Inc., Visa International Service Association, Visa U.S.A. Inc., Visa Europe Limited, Visa Canada Association, Inovant LLC, Inovant, Inc., Visa Europe Services...

  • Page 153
    ... dated February 7, 2011, regarding Interchange Litigation Judgment Sharing and Settlement Sharing by and among Visa Inc., Visa U.S.A. Inc., Visa International Service Association, MasterCard Incorporated, MasterCard International Incorporated and the parties thereto 2 8-K 001-33977 2.2 11/2/2015...

  • Page 154
    ... Fee and Merchant Discount Antitrust Litigation, No. 05-MD-1720 Loss Sharing Agreement, dated as of November 2, 2015, among the UK Members listed on Schedule 1 thereto, Visa Inc. and Visa Europe Limited Form of Litigation Management Deed, among the VE Member Representative, Visa Inc., Visa Europe...

  • Page 155
    ... Plan Restricted Stock Unit Agreement for executive officers, other than the CEO, with limited vesting upon termination for awards granted after November 1, 2012 Form of Visa Inc. 2007 Equity Incentive Compensation Plan Stock Option Award Agreement for awards granted after November 18, 2013...

  • Page 156
    ... Restricted Stock Unit Award Agreement for awards granted after November 18, 2013 Form of Visa Inc. 2007 Equity Incentive Compensation Plan Performance Share Award Agreement for awards granted after November 18, 2013 Form of Alternate Visa Inc. 2007 Equity Incentive Compensation Plan Stock Option...

  • Page 157
    ... Rajat Taneja Offer Letter and One-Time Cash Award Agreement, dated January 27, 2015, between Visa Inc. and Vasant M. Prabhu Statement of Computation of Ratio of Earnings to Fixed Charges List of Significant Subsidiaries of Visa Inc. Consent of KPMG LLP, Independent Registered Public Accounting Firm...

  • Page 158
    ... 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. Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any...

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  • Page 162
    ... and Government Relations Ellen Richey Jim McCarthy Innovation and Strategic Partnerships Vice Chairman Risk and Public Policy Rajat Taneja Technology Regional Management Chris Clark Asia Pacific Oliver Jenkyn North America Kamran Siddiqi Central & Eastern Europe, Middle East & Africa Eduardo...

  • Page 163
    ....com Media Relations Visa Inc. [email protected] 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 Wells Fargo Shareowner Services P.O. Box 64854...