Delaware | 26-0267673 | |
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) | |
P.O. Box 8999 San Francisco, California | 94128-8999 | |
(Address of principal executive offices) | (Zip Code) |
Large accelerated filer R | Accelerated filer o |
Non-accelerated filer o (Do not check if a smaller reporting company.) | Smaller Reporting Company o |
Page | ||
PART I. | ||
Item 1. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
PART II. | ||
Item 1. | ||
Item 1A. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 5. | ||
Item 6. | ||
ITEM 1. | Financial Statements |
June 30, 2013 | September 30, 2012 | ||||||
(in millions, except par value data) | |||||||
Assets | |||||||
Cash and cash equivalents | $ | 1,453 | $ | 2,074 | |||
Restricted cash—litigation escrow (Note 2) | 49 | 4,432 | |||||
Investment securities: | |||||||
Trading | 73 | 66 | |||||
Available-for-sale | 1,822 | 677 | |||||
Income tax receivable | 600 | 179 | |||||
Settlement receivable | 459 | 454 | |||||
Accounts receivable | 779 | 723 | |||||
Customer collateral (Note 6) | 817 | 823 | |||||
Current portion of client incentives | 240 | 209 | |||||
Deferred tax assets | 429 | 2,027 | |||||
Prepaid expenses and other current assets | 220 | 122 | |||||
Total current assets | 6,941 | 11,786 | |||||
Investment securities, available-for-sale | 3,189 | 3,283 | |||||
Client incentives | 85 | 58 | |||||
Property, equipment and technology, net | 1,689 | 1,634 | |||||
Other assets | 332 | 151 | |||||
Intangible assets, net | 11,368 | 11,420 | |||||
Goodwill | 11,681 | 11,681 | |||||
Total assets | $ | 35,285 | $ | 40,013 | |||
Liabilities | |||||||
Accounts payable | $ | 131 | $ | 152 | |||
Settlement payable | 817 | 719 | |||||
Customer collateral (Note 6) | 817 | 823 | |||||
Accrued compensation and benefits | 444 | 460 | |||||
Client incentives | 829 | 830 | |||||
Accrued liabilities | 628 | 584 | |||||
Accrued litigation (Note 11) | 5 | 4,386 | |||||
Total current liabilities | 3,671 | 7,954 | |||||
Deferred tax liabilities | 4,043 | 4,058 | |||||
Other liabilities | 568 | 371 | |||||
Total liabilities | 8,282 | 12,383 |
June 30, 2013 | September 30, 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, 515 and 535 shares issued and outstanding at June 30, 2013, and September 30, 2012, respectively (Note 7) | — | — | |||||
Class B common stock, $0.0001 par value, 622 shares authorized, 245 shares issued and outstanding at June 30, 2013, and September 30, 2012 (Note 7) | — | — | |||||
Class C common stock, $0.0001 par value, 1,097 shares authorized, 27 and 31 shares issued and outstanding at June 30, 2013, and September 30, 2012, respectively (Note 7) | — | — | |||||
Additional paid-in capital | 19,130 | 19,992 | |||||
Accumulated income | 7,989 | 7,809 | |||||
Accumulated other comprehensive income (loss), net: | |||||||
Investment securities, available-for-sale | 26 | 3 | |||||
Defined benefit pension and other postretirement plans | (181 | ) | (186 | ) | |||
Derivative instruments classified as cash flow hedges | 40 | 13 | |||||
Foreign currency translation adjustments | (1 | ) | (1 | ) | |||
Total accumulated other comprehensive loss, net | (116 | ) | (171 | ) | |||
Total equity | 27,003 | 27,630 | |||||
Total liabilities and equity | $ | 35,285 | $ | 40,013 |
Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
(in millions, except per share data) | |||||||||||||||
Operating Revenues | |||||||||||||||
Service revenues | $ | 1,298 | $ | 1,216 | $ | 3,967 | $ | 3,608 | |||||||
Data processing revenues | 1,191 | 1,040 | 3,456 | 2,913 | |||||||||||
International transaction revenues | 854 | 748 | 2,490 | 2,229 | |||||||||||
Other revenues | 179 | 175 | 533 | 532 | |||||||||||
Client incentives | (521 | ) | (614 | ) | (1,641 | ) | (1,592 | ) | |||||||
Total operating revenues | 3,001 | 2,565 | 8,805 | 7,690 | |||||||||||
Operating Expenses | |||||||||||||||
Personnel | 493 | 435 | 1,433 | 1,255 | |||||||||||
Marketing | 252 | 242 | 640 | 602 | |||||||||||
Network and processing | 117 | 102 | 346 | 303 | |||||||||||
Professional fees | 103 | 99 | 282 | 251 | |||||||||||
Depreciation and amortization | 101 | 84 | 291 | 244 | |||||||||||
General and administrative | 108 | 112 | 322 | 320 | |||||||||||
Litigation provision (Note 11) | (1 | ) | 4,098 | 3 | 4,098 | ||||||||||
Total operating expenses | 1,173 | 5,172 | 3,317 | 7,073 | |||||||||||
Operating income (loss) | 1,828 | (2,607 | ) | 5,488 | 617 | ||||||||||
Non-operating income | 5 | — | 3 | 2 | |||||||||||
Income (loss) before income taxes | 1,833 | (2,607 | ) | 5,491 | 619 | ||||||||||
Income tax provision (benefit) | 608 | (768 | ) | 1,703 | 139 | ||||||||||
Net income (loss) including non-controlling interest | 1,225 | (1,839 | ) | 3,788 | 480 | ||||||||||
Loss attributable to non-controlling interest | — | — | — | 2 | |||||||||||
Net income (loss) attributable to Visa Inc. | $ | 1,225 | $ | (1,839 | ) | $ | 3,788 | $ | 482 |
Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
(in millions, except per share data) | |||||||||||||||
Basic earnings (loss) per share (Note 8) | |||||||||||||||
Class A common stock | $ | 1.89 | $ | (2.74 | ) | $ | 5.76 | $ | 0.71 | ||||||
Class B common stock | $ | 0.79 | $ | (1.16 | ) | $ | 2.42 | $ | 0.32 | ||||||
Class C common stock | $ | 1.89 | $ | (2.74 | ) | $ | 5.76 | $ | 0.71 | ||||||
Basic weighted-average shares outstanding (Note 8) | |||||||||||||||
Class A common stock | 515 | 525 | 524 | 523 | |||||||||||
Class B common stock | 245 | 245 | 245 | 245 | |||||||||||
Class C common stock | 28 | 40 | 29 | 43 | |||||||||||
Diluted earnings (loss) per share (Note 8) | |||||||||||||||
Class A common stock | $ | 1.88 | $ | (2.74 | ) | $ | 5.74 | $ | 0.71 | ||||||
Class B common stock | $ | 0.79 | $ | (1.16 | ) | $ | 2.41 | $ | 0.32 | ||||||
Class C common stock | $ | 1.88 | $ | (2.74 | ) | $ | 5.74 | $ | 0.71 | ||||||
Diluted weighted-average shares outstanding (Note 8) | |||||||||||||||
Class A common stock | 651 | 672 | 660 | 681 | |||||||||||
Class B common stock | 245 | 245 | 245 | 245 | |||||||||||
Class C common stock | 28 | 40 | 29 | 43 |
Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
(in millions) | |||||||||||||||
Net income (loss) including non-controlling interest | $ | 1,225 | $ | (1,839 | ) | $ | 3,788 | $ | 480 | ||||||
Other comprehensive (loss) income, net of tax: | |||||||||||||||
Investment securities, available-for-sale: | |||||||||||||||
Net unrealized (loss) gain | (10 | ) | (6 | ) | 40 | 1 | |||||||||
Income tax effect | 1 | 2 | (16 | ) | — | ||||||||||
Reclassification adjustment for net gain realized in net income including non-controlling interest | — | — | (1 | ) | — | ||||||||||
Income tax effect | — | — | — | — | |||||||||||
Defined benefit pension and other postretirement plans | 3 | 9 | 8 | 1 | |||||||||||
Income tax effect | (1 | ) | (3 | ) | (3 | ) | (3 | ) | |||||||
Derivative instruments classified as cash flow hedges: | |||||||||||||||
Net unrealized gain | 40 | 21 | 55 | 9 | |||||||||||
Income tax effect | (9 | ) | (9 | ) | (9 | ) | (3 | ) | |||||||
Reclassification adjustment for net gain realized in net income including non-controlling interest | (9 | ) | (7 | ) | (26 | ) | (3 | ) | |||||||
Income tax effect | 2 | 2 | 7 | 3 | |||||||||||
Foreign currency translation adjustments | — | (8 | ) | — | (4 | ) | |||||||||
Other comprehensive income, net of tax | 17 | 1 | 55 | 1 | |||||||||||
Comprehensive income (loss) including non-controlling interest | 1,242 | (1,838 | ) | 3,843 | 481 | ||||||||||
Comprehensive loss attributable to non-controlling interest | — | — | — | 2 | |||||||||||
Comprehensive income (loss) attributable to Visa Inc. | $ | 1,242 | $ | (1,838 | ) | $ | 3,843 | $ | 483 |
Common Stock | Additional Paid-In Capital | Accumulated Income (Deficit) | Accumulated Other Comprehensive (Loss) Income | Total Equity | ||||||||||||||||||||
Class A | Class B | Class C | ||||||||||||||||||||||
(in millions, except per share data) | ||||||||||||||||||||||||
Balance as of September 30, 2012 | 535 | 245 | 31 | $ | 19,992 | $ | 7,809 | $ | (171 | ) | $ | 27,630 | ||||||||||||
Net income attributable to Visa Inc. | 3,788 | 3,788 | ||||||||||||||||||||||
Other comprehensive income, net of tax | 55 | 55 | ||||||||||||||||||||||
Comprehensive income including non-controlling interest | 3,843 | |||||||||||||||||||||||
Issuance of restricted stock awards | 1 | — | ||||||||||||||||||||||
Conversion of class C common stock upon sale into public market | 4 | (4 | ) | — | ||||||||||||||||||||
Share-based compensation | 139 | 139 | ||||||||||||||||||||||
Excess tax benefit for share-based compensation | 64 | 64 | ||||||||||||||||||||||
Cash proceeds from exercise of stock options | 1 | 98 | 98 | |||||||||||||||||||||
Restricted stock and performance shares settled in cash for taxes(1) | — | (64 | ) | (64 | ) | |||||||||||||||||||
Cash dividends declared and paid, at a quarterly amount of $0.33 per as-converted share (Note 7) | (653 | ) | (653 | ) | ||||||||||||||||||||
Repurchase of class A common stock (Note 7) | (26 | ) | (1,099 | ) | (2,955 | ) | (4,054 | ) | ||||||||||||||||
Balance as of June 30, 2013 | 515 | 245 | 27 | $ | 19,130 | $ | 7,989 | $ | (116 | ) | $ | 27,003 |
(1) | Decrease in class A common stock is less than 1 million shares. |
Nine Months Ended June 30, | |||||||
2013 | 2012 | ||||||
(in millions) | |||||||
Operating Activities | |||||||
Net income including non-controlling interest | $ | 3,788 | $ | 480 | |||
Adjustments to reconcile net income including non-controlling interest to net cash provided by operating activities: | |||||||
Amortization of client incentives | 1,641 | 1,592 | |||||
Share-based compensation | 139 | 112 | |||||
Excess tax benefit for share-based compensation | (64 | ) | (42 | ) | |||
Depreciation and amortization of property, equipment, technology and intangible assets | 291 | 244 | |||||
Deferred income taxes | 1,562 | (1,427 | ) | ||||
Litigation provision and accretion (Note 11) | 3 | 4,099 | |||||
Other | 39 | (34 | ) | ||||
Change in operating assets and liabilities: | |||||||
Income tax receivable | (421 | ) | (41 | ) | |||
Settlement receivable | (5 | ) | (31 | ) | |||
Accounts receivable | (56 | ) | (231 | ) | |||
Client incentives | (1,700 | ) | (1,315 | ) | |||
Other assets | (310 | ) | — | ||||
Accounts payable | 5 | (58 | ) | ||||
Settlement payable | 98 | 298 | |||||
Accrued and other liabilities | 351 | 134 | |||||
Accrued litigation (Note 11) | (4,384 | ) | (140 | ) | |||
Net cash provided by operating activities | 977 | 3,640 | |||||
Investing Activities | |||||||
Purchases of property, equipment, technology and intangible assets | (333 | ) | (270 | ) | |||
Proceeds from disposal of property, equipment and technology | — | 2 | |||||
Investment securities, available-for-sale: | |||||||
Purchases | (2,789 | ) | (3,326 | ) | |||
Proceeds from sales and maturities | 1,767 | 1,640 | |||||
Net distributions from other investments | 1 | 14 | |||||
Acquisitions, net of cash received | — | (3 | ) | ||||
Net cash used in investing activities | (1,354 | ) | (1,943 | ) |
Nine Months Ended June 30, | |||||||
2013 | 2012 | ||||||
(in millions) | |||||||
Financing Activities | |||||||
Repurchase of class A common stock (Note 7) | $ | (4,054 | ) | $ | (536 | ) | |
Dividends paid (Note 7) | (653 | ) | (448 | ) | |||
Deposits into litigation escrow account—retrospective responsibility plan | — | (1,565 | ) | ||||
Payments from litigation escrow account—retrospective responsibility plan (Note 2) | 4,383 | 140 | |||||
Cash proceeds from exercise of stock options | 98 | 111 | |||||
Restricted stock and performance shares settled in cash for taxes | (64 | ) | — | ||||
Excess tax benefit for share-based compensation | 64 | 42 | |||||
Payment for earn-out related to PlaySpan acquisition | (12 | ) | — | ||||
Principal payments on capital lease obligations | (6 | ) | (6 | ) | |||
Net cash used in financing activities | (244 | ) | (2,262 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | — | (4 | ) | ||||
Decrease in cash and cash equivalents | (621 | ) | (569 | ) | |||
Cash and cash equivalents at beginning of year | 2,074 | 2,127 | |||||
Cash and cash equivalents at end of period | $ | 1,453 | $ | 1,558 | |||
Supplemental Disclosure of Cash Flow Information | |||||||
Income taxes paid, net of refunds | $ | 478 | $ | 1,575 | |||
Amounts included in accounts payable and accrued and other liabilities related to purchases of property, equipment, technology and intangible assets | $ | 27 | $ | 85 |
(in millions) | |||
Balance at October 1, 2012 | $ | 4,432 | |
Payments to settlement funds(1): | |||
Class plaintiffs | (4,033 | ) | |
Individual plaintiffs | (350 | ) | |
Balance at June 30, 2013 | $ | 49 |
(1) | These payments are associated with the Multidistrict Litigation Proceedings. The settlement with the class plaintiffs in these proceedings is subject to final court approval, which the Company cannot assure will be received, and to the adjudication of any appeals. See Note 11—Legal Matters. |
Fair Value Measurements Using Inputs Considered as | |||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | |||||||||||||||||||||
June 30, 2013 | September 30, 2012 | June 30, 2013 | September 30, 2012 | June 30, 2013 | September 30, 2012 | ||||||||||||||||||
(in millions) | |||||||||||||||||||||||
Assets | |||||||||||||||||||||||
Cash equivalents and restricted cash: | |||||||||||||||||||||||
Money market funds | $ | 620 | $ | 5,676 | |||||||||||||||||||
Commercial paper | $ | 52 | $ | 93 | |||||||||||||||||||
Investment securities, trading: | |||||||||||||||||||||||
Equity securities | 73 | 66 | |||||||||||||||||||||
Investment securities, available-for-sale: | |||||||||||||||||||||||
U.S. government-sponsored debt securities | 2,880 | 2,821 | |||||||||||||||||||||
U.S. Treasury securities | 1,574 | 1,066 | |||||||||||||||||||||
Equity securities | 60 | 2 | |||||||||||||||||||||
Corporate debt securities | 491 | 63 | |||||||||||||||||||||
Auction rate securities | $ | 7 | $ | 7 | |||||||||||||||||||
Prepaid and other current assets: | |||||||||||||||||||||||
Foreign exchange derivative instruments | 44 | 13 | |||||||||||||||||||||
Total | $ | 2,327 | $ | 6,810 | $ | 3,467 | $ | 2,990 | $ | 7 | $ | 7 | |||||||||||
Liabilities | |||||||||||||||||||||||
Accrued liabilities: | |||||||||||||||||||||||
Visa Europe put option | $ | 145 | $ | 145 | |||||||||||||||||||
Earn-out related to PlaySpan acquisition | — | 12 | |||||||||||||||||||||
Foreign exchange derivative instruments | $ | 6 | $ | 11 | |||||||||||||||||||
Total | $ | — | $ | — | $ | 6 | $ | 11 | $ | 145 | $ | 157 |
Pension Benefits | Other Postretirement Benefits | ||||||||||||||||||||||||||||||
Three Months Ended June 30, | Nine Months Ended June 30, | Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||||||||||||||||
2013 | 2012 | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | ||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||||
Service cost | $ | 10 | $ | 10 | $ | 32 | $ | 29 | $ | — | $ | — | $ | — | $ | — | |||||||||||||||
Interest cost | 9 | 10 | 27 | 30 | — | — | — | 1 | |||||||||||||||||||||||
Expected return on assets | (16 | ) | (14 | ) | (47 | ) | (41 | ) | — | — | — | — | |||||||||||||||||||
Amortization of: | |||||||||||||||||||||||||||||||
Prior service credit | (2 | ) | (2 | ) | (7 | ) | (7 | ) | (1 | ) | — | (2 | ) | (2 | ) | ||||||||||||||||
Actuarial loss | 8 | 8 | 22 | 24 | — | — | — | — | |||||||||||||||||||||||
Settlement loss | — | 3 | — | 3 | — | — | — | — | |||||||||||||||||||||||
Total net periodic benefit cost | $ | 9 | $ | 15 | $ | 27 | $ | 38 | $ | (1 | ) | $ | — | $ | (2 | ) | $ | (1 | ) |
June 30, 2013 | September 30, 2012 | ||||||
(in millions) | |||||||
Cash equivalents | $ | 817 | $ | 823 | |||
Pledged securities at market value | 264 | 307 | |||||
Letters of credit | 1,157 | 1,084 | |||||
Guarantees | 2,088 | 2,022 | |||||
Total | $ | 4,326 | $ | 4,236 |
(in millions, except conversion rate) | Shares Outstanding | Conversion Rate Into Class A Common Stock | As-converted Class A Common Stock(1) | |||||
Class A common stock | 515 | — | 515 | |||||
Class B common stock | 245 | 0.4206 | 103 | |||||
Class C common stock | 27 | 1.0000 | 27 | |||||
Total | 645 |
(1) | Figures in the table may not recalculate exactly due to rounding. As-converted class A common stock is calculated based on whole numbers, not the rounded numbers presented. |
(in millions, except per share data) | Three Months Ended June 30, 2013 | Nine Months Ended June 30, 2013 | |||||
Shares repurchased in the open market (1) | 6 | 26 | |||||
Weighted-average repurchase price per share | $ | 176.75 | $ | 157.48 | |||
Total cost | $ | 981 | $ | 4,054 |
(1) | All shares repurchased in the open market have been retired and constitute authorized but unissued shares. |
Basic Earnings Per Share | Diluted Earnings Per Share | |||||||||||||||||||||
(in millions, except per share data) | ||||||||||||||||||||||
Income Allocation (A)(2) | Weighted- Average Shares Outstanding (B) | Earnings per Share = (A)/(B) | Income Allocation (A)(2) | Weighted- Average Shares Outstanding (B) | Earnings per Share = (A)/(B) | |||||||||||||||||
Class A common stock | $ | 973 | 515 | $ | 1.89 | $ | 1,225 | 651 | (3) | $ | 1.88 | |||||||||||
Class B common stock | 194 | 245 | 0.79 | 194 | 245 | 0.79 | ||||||||||||||||
Class C common stock | 53 | 28 | 1.89 | 53 | 28 | 1.88 | ||||||||||||||||
Participating securities(4) | 5 | Not presented | Not presented | 5 | Not presented | Not presented | ||||||||||||||||
Net income attributable to Visa Inc. | $ | 1,225 |
Basic Earnings Per Share | Diluted Earnings Per Share | |||||||||||||||||||||
(in millions, except per share data) | ||||||||||||||||||||||
Income Allocation (A)(2) | Weighted- Average Shares Outstanding (B) | Earnings per Share = (A)/(B) | Income Allocation (A)(2) | Weighted- Average Shares Outstanding (B) | Earnings per Share = (A)/(B) | |||||||||||||||||
Class A common stock | $ | 3,014 | 524 | $ | 5.76 | $ | 3,788 | 660 | (3) | $ | 5.74 | |||||||||||
Class B common stock | 594 | 245 | 2.42 | 592 | 245 | 2.41 | ||||||||||||||||
Class C common stock | 166 | 29 | 5.76 | 165 | 29 | 5.74 | ||||||||||||||||
Participating securities(4) | 14 | Not presented | Not presented | 14 | Not presented | Not presented | ||||||||||||||||
Net income attributable to Visa Inc. | $ | 3,788 |
Basic Earnings (Loss) Per Share | Diluted Earnings (Loss) Per Share | |||||||||||||||||||||
(in millions, except per share data) | ||||||||||||||||||||||
Loss Allocation (A)(2) | Weighted- Average Shares Outstanding (B) | Earnings (Loss) per Share = (A)/(B) | Loss Allocation (A)(2) | Weighted- Average Shares Outstanding (B) | Earnings (Loss) per Share = (A)/(B) | |||||||||||||||||
Class A common stock | $ | (1,437 | ) | 525 | $ | (2.74 | ) | $ | (1,839 | ) | 672 | (3) | $ | (2.74 | ) | |||||||
Class B common stock | (286 | ) | 245 | (1.16 | ) | (286 | ) | 245 | (1.16 | ) | ||||||||||||
Class C common stock | (109 | ) | 40 | (2.74 | ) | (109 | ) | 40 | (2.74 | ) | ||||||||||||
Participating securities(4) | (7 | ) | Not presented | Not presented | (7 | ) | Not presented | Not presented | ||||||||||||||
Net loss attributable to Visa Inc. | $ | (1,839 | ) |
Basic Earnings Per Share | Diluted Earnings Per Share | |||||||||||||||||||||
(in millions, except per share data) | ||||||||||||||||||||||
Income Allocation (A)(2) | Weighted- Average Shares Outstanding (B) | Earnings per Share = (A)/(B) | Income Allocation (A)(2) | Weighted- Average Shares Outstanding (B) | Earnings per Share = (A)/(B) | |||||||||||||||||
Class A common stock | $ | 372 | 523 | $ | 0.71 | $ | 482 | 681 | (3) | $ | 0.71 | |||||||||||
Class B common stock | 78 | 245 | 0.32 | 78 | 245 | 0.32 | ||||||||||||||||
Class C common stock | 30 | 43 | 0.71 | 30 | 43 | 0.71 | ||||||||||||||||
Participating securities(4) | 2 | Not presented | Not presented | 2 | Not presented | Not presented | ||||||||||||||||
Net income attributable to Visa Inc. | $ | 482 |
(1) | Figures in the table may not recalculate exactly due to rounding. Earnings (loss) per share is calculated based on whole numbers, not the rounded numbers presented. |
(2) | Net income (loss) attributable to Visa Inc. is allocated based on proportional ownership on an as-converted basis. The weighted-average numbers of shares of as-converted class B common stock used in the income (loss) allocation were 103 million for the three and nine months ended June 30, 2013, and 104 million and 110 million for the three and nine months ended June 30, 2012, respectively. |
(3) | Weighted-average diluted shares outstanding are calculated on an as-converted basis, and include incremental common stock equivalents, as calculated under the treasury stock method. The computation includes 2 million common stock equivalents for the three and nine months ended June 30, 2013, and 3 million for the nine months ended June 30, 2012, because their effect would have been dilutive. The computation excludes less than 1 million common stock equivalents for the three and nine months ended June 30, 2013 and the nine months ended June 30, 2012, because their effect would have been anti-dilutive. The computation also excludes 7 million outstanding stock awards for the three months ended June 30, 2012, because their effect would have been anti-dilutive as the Company had a net loss. |
(4) | Participating securities are unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents, such as the Company's restricted stock awards, restricted stock units and earned performance-based shares. |
Granted | Weighted-Average Grant Date Fair Value | Weighted-Average Exercise Price | ||||||||
Non-qualified stock options | 579,318 | $ | 39.03 | $ | 147.37 | |||||
Restricted stock awards ("RSAs") | 891,360 | 146.96 | ||||||||
Restricted stock units ("RSUs") | 326,746 | 145.83 | ||||||||
Performance-based shares(1) | 230,518 | 164.14 |
(1) | Represents the maximum number of performance-based shares which could be earned. |
• | certain foreign tax credit benefits related to prior years recognized in the second quarter of fiscal 2013; |
• | a $76 million tax benefit recognized in the first quarter of fiscal 2013, as a result of new guidance issued by the state of California regarding apportionment rules for years prior to fiscal 2012; and |
• | the absence of: |
• | the tax benefit and the offsetting tax reserve associated with the covered litigation provision recorded in the third quarter of fiscal 2012; |
• | a one-time foreign tax credit carryover benefit recognized in the third quarter of fiscal 2012; and |
• | a one-time, non-cash benefit of $208 million from the remeasurement of existing net deferred tax liabilities in the second quarter of fiscal 2012, as a result of the California state apportionment rule changes adopted in that quarter. |
Fiscal 2013 | Fiscal 2012 | ||||||
(in millions) | |||||||
Balance at October 1 | $ | 4,386 | $ | 425 | |||
Provision for unsettled matters | 3 | 4,098 | |||||
Interest accretion on settled matters | — | 1 | |||||
Payment on unsettled matters(1) | (4,033 | ) | — | ||||
Payment on settled matters | (351 | ) | (140 | ) | |||
Balance at June 30 | $ | 5 | $ | 4,384 |
(1) | On December 10, 2012, the Company paid approximately $4.0 billion from the litigation escrow account into a settlement fund established pursuant to the definitive class settlement agreement in the Multidistrict Litigation Proceedings. The settlement with the class plaintiffs is subject to final court approval, which the Company cannot assure will be received, and to the adjudication of any appeals. See further discussion below. |
ITEM 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
• | the impact of new laws, regulations and marketplace barriers, including: |
• | rules capping debit interchange reimbursement fees promulgated under the Dodd-Frank Act; |
• | rules under the Dodd-Frank Act expanding issuers' and merchants' choice among debit payment networks; |
• | increased regulation outside the United States and in other product categories; |
• | increased government support of national payment networks outside the United States; and |
• | rules about consumer privacy and data use and security; |
• | developments in current or future litigation or government enforcement, including: |
• | those affecting interchange reimbursement fees, antitrust and tax disputes; and |
• | our failure to satisfy the conditions necessary to make the multidistrict litigation settlement effective; |
• | economic factors, such as: |
• | an increase or spread of the current European crisis involving sovereign debt and the euro; |
• | a failure to resolve the current sequestration in the United States; |
• | cross-border activity and currency exchange rates; |
• | material changes in our clients' performance compared to our estimates; and |
• | other global economic, political and health conditions; |
• | industry developments, such as competitive pressure, rapid technological developments and disintermediation from the payments value stream; |
• | system developments, such as: |
• | disruption of our transaction processing systems or the inability to process transactions efficiently; |
• | account data compromises or increased fraudulent or other illegal activities involving our cards; and |
• | issues arising at Visa Europe, including failure to maintain interoperability between our systems; |
• | costs and liquidity needs arising if Visa Europe were to exercise its right to require us to acquire all of its outstanding stock; |
• | loss of organizational effectiveness or key employees; |
• | failure to integrate recent acquisitions successfully or to effectively launch new products and businesses; and |
• | Litigation provision. During the third quarter of fiscal 2012, we recorded a litigation provision of $4.1 billion and related tax benefits associated with the interchange MDL, which is covered by the retrospective responsibility plan. Monetary liabilities from settlements of, or judgments in, the covered litigation are paid from the litigation escrow account. See Note 2—Retrospective Responsibility Plan and Note 11—Legal Matters to our unaudited consolidated financial statements. |
• | Deferred tax adjustment. During the second quarter of 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. |
Three Months Ended June 30, 2013 | Three Months Ended June 30, 2012 | ||||||||||||||||||||||||||||||
(in millions, except margin ratio and per share data) | |||||||||||||||||||||||||||||||
Operating expenses | Operating margin (1) | Net income attributable to Visa Inc. | Diluted earnings per share (2) | Operating expenses | Operating margin (1) | Net (loss) income attributable to Visa Inc. | Diluted (loss) earnings per share (2) | ||||||||||||||||||||||||
As reported | $ | 1,173 | 61 | % | $ | 1,225 | $ | 1.88 | $ | 5,172 | (102 | )% | $ | (1,839 | ) | $ | (2.74 | ) | |||||||||||||
Litigation provision | — | — | — | — | (4,098 | ) | NM | 2,894 | (3 | ) | 4.30 | ||||||||||||||||||||
Adjusted | $ | 1,173 | 61 | % | $ | 1,225 | $ | 1.88 | $ | 1,074 | 58 | % | $ | 1,055 | $ | 1.56 | |||||||||||||||
Weighted-average number of diluted shares outstanding (4) | 651 | 675 |
Nine Months Ended June 30, 2013 | Nine Months Ended June 30, 2012 | ||||||||||||||||||||||||||||||
(in millions, except margin ratio and per share data) | |||||||||||||||||||||||||||||||
Operating expenses | Operating margin (1) | Net income attributable to Visa Inc. | Diluted earnings per share (2) | Operating expenses | Operating margin (1) | Net income attributable to Visa Inc. | Diluted earnings per share (2) | ||||||||||||||||||||||||
As reported | $ | 3,317 | 62 | % | $ | 3,788 | $ | 5.74 | $ | 7,073 | 8 | % | $ | 482 | $ | 0.71 | |||||||||||||||
Litigation provision | — | — | — | — | (4,098 | ) | 53 | % | 2,894 | (3 | ) | 4.25 | |||||||||||||||||||
Impact of deferred tax adjustment | — | — | — | — | — | — | % | (208 | ) | (0.30 | ) | ||||||||||||||||||||
Adjusted | $ | 3,317 | 62 | % | $ | 3,788 | $ | 5.74 | $ | 2,975 | 61 | % | $ | 3,168 | $ | 4.66 | |||||||||||||||
Weighted-average number of diluted shares outstanding (as reported) | 660 | 681 |
(1) | Operating margin is calculated as operating income (loss) divided by total operating revenues. |
(2) | Figures in the table may not recalculate exactly due to rounding. Diluted earnings (loss) per share is calculated based on whole numbers, not the rounded numbers presented. |
(3) | The litigation provision adjustment to net (loss) income attributable to Visa Inc. is shown net of tax. The tax impact is determined by applying applicable federal and state tax rates to the litigation provision and applying related reserves for uncertain tax positions. |
(4) | For the three months ended June 30, 2012, the computation of adjusted diluted earnings per share included the effect of 3 million incremental dilutive shares, which were excluded from the computation of reported diluted loss per share as they were considered anti-dilutive when applied to a net loss. |
U.S. | Rest of World | Visa Inc. | ||||||||||||||||||||||||||||||
3 Months Ended March 31, 2013 (2) | 3 Months Ended March 31, 2012 (2) | % Change | 3 Months Ended March 31, 2013 (2) | 3 Months Ended March 31, 2012 (2) | % Change | 3 Months Ended March 31, 2013 (2) | 3 Months Ended March 31, 2012 (2) | % Change | ||||||||||||||||||||||||
(in billions, except percentages) | ||||||||||||||||||||||||||||||||
Nominal Payments Volume | ||||||||||||||||||||||||||||||||
Consumer credit | $ | 186 | $ | 168 | 10 | % | $ | 363 | $ | 337 | 8 | % | $ | 549 | $ | 505 | 9 | % | ||||||||||||||
Consumer debit(3) | 264 | 264 | — | % | 99 | 83 | 19 | % | 362 | 346 | 5 | % | ||||||||||||||||||||
Commercial and other(3) | 80 | 76 | 6 | % | 33 | 31 | 8 | % | 113 | 106 | 7 | % | ||||||||||||||||||||
Total Nominal Payments Volume | $ | 530 | $ | 508 | 4 | % | $ | 495 | $ | 450 | 10 | % | $ | 1,025 | $ | 958 | 7 | % | ||||||||||||||
Cash volume | 108 | 108 | — | % | 514 | 476 | 8 | % | 621 | 584 | 6 | % | ||||||||||||||||||||
Total Nominal Volume(4) | $ | 637 | $ | 615 | 4 | % | $ | 1,009 | $ | 926 | 9 | % | $ | 1,646 | $ | 1,541 | 7 | % |
U.S. | Rest of World | Visa Inc. | ||||||||||||||||||||||||||||||
9 Months Ended March 31, 2013 (2) | 9 Months Ended March 31, 2012 (2) | % Change | 9 Months Ended March 31, 2013 (2) | 9 Months Ended March 31, 2012 (2) | % Change | 9 Months Ended March 31, 2013 (2) | 9 Months Ended March 31, 2012 (2) | % Change | ||||||||||||||||||||||||
(in billions, except percentages) | ||||||||||||||||||||||||||||||||
Nominal Payments Volume | ||||||||||||||||||||||||||||||||
Consumer credit | $ | 580 | $ | 523 | 11 | % | $ | 1,116 | $ | 1,024 | 9 | % | $ | 1,696 | $ | 1,547 | 10 | % | ||||||||||||||
Consumer debit(3) | 771 | 801 | (4 | )% | 291 | 248 | 17 | % | 1,062 | 1,049 | 1 | % | ||||||||||||||||||||
Commercial and other(3) | 244 | 229 | 7 | % | 104 | 96 | 8 | % | 349 | 325 | 7 | % | ||||||||||||||||||||
Total Nominal Payments Volume | $ | 1,595 | $ | 1,554 | 3 | % | $ | 1,511 | $ | 1,368 | 10 | % | $ | 3,106 | $ | 2,922 | 6 | % | ||||||||||||||
Cash volume | 327 | 323 | 1 | % | 1,548 | 1,435 | 8 | % | 1,876 | 1,759 | 7 | % | ||||||||||||||||||||
Total Nominal Volume(4) | $ | 1,923 | $ | 1,877 | 2 | % | $ | 3,059 | $ | 2,803 | 9 | % | $ | 4,982 | $ | 4,680 | 6 | % |
(1) | Figures in the table may not recalculate exactly due to rounding. Percentage changes are calculated based on whole numbers, not the rounded numbers presented. |
(2) | Service revenues in a given quarter are assessed based on payments volume in the prior quarter. Therefore, service revenues reported for the three and nine months ended June 30, 2013 and 2012, were based on payments volume reported by our financial institution clients for the three and nine months ended March 31, 2013 and 2012, respectively. |
(3) | Includes prepaid volume. |
(4) | Total nominal volume is the sum of total nominal payments volume and cash volume. Total nominal payments volume is the total monetary value of transactions for goods and services that are purchased. Cash volume generally consists of cash access transactions, balance access transactions, balance transfers and convenience checks. Total nominal volume is provided by our financial institution clients, subject to review by Visa. From time to time, previously presented volume information may be updated. Prior year volume information presented in these tables has not been updated, as subsequent adjustments were not material. |
Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||||
2013 | 2012 | % Change | 2013 | 2012 | % Change | ||||||||||||
(in millions, except percentages) | |||||||||||||||||
Visa processed transactions(2) | 14,972 | 13,113 | 14 | % | 42,981 | 39,751 | 8 | % | |||||||||
CyberSource billable transactions(3) | 1,648 | 1,303 | 27 | % | 4,836 | 3,819 | 27 | % |
(1) | Figures in the table may not recalculate exactly due to rounding. Percentage changes are calculated based on whole numbers, not the rounded numbers presented. |
(2) | Represents transactions involving Visa, Visa Electron, Interlink and PLUS cards processed on Visa's networks. |
(3) | Transactions include, but are not limited to, authorization, settlement payment network connectivity, fraud management, payment security management, tax services and delivery address verification. |
Three Months Ended June 30, | 2013 vs. 2012 | Nine Months Ended June 30, | 2013 vs. 2012 | ||||||||||||||||||||||||||
2013 | 2012 | $ Change | % Change(1) | 2013 | 2012 | $ Change | % Change(1) | ||||||||||||||||||||||
(in millions, except percentages) | |||||||||||||||||||||||||||||
U.S. | $ | 1,632 | $ | 1,449 | $ | 183 | 13 | % | $ | 4,756 | $ | 4,199 | $ | 557 | 13 | % | |||||||||||||
Rest of world | 1,314 | 1,058 | 256 | 24 | % | 3,883 | 3,323 | 560 | 17 | % | |||||||||||||||||||
Visa Europe | 55 | 58 | (3 | ) | (5 | )% | 166 | 168 | (2 | ) | (2 | )% | |||||||||||||||||
Total operating revenues | $ | 3,001 | $ | 2,565 | $ | 436 | 17 | % | $ | 8,805 | $ | 7,690 | $ | 1,115 | 14 | % |
(1) | Figures in the table may not recalculate exactly due to rounding. Percentage changes are calculated based on whole numbers, not the rounded numbers presented. |
Three Months Ended June 30, | 2013 vs. 2012 | Nine Months Ended June 30, | 2013 vs. 2012 | ||||||||||||||||||||||||||
2013 | 2012 | $ Change | % Change(1) | 2013 | 2012 | $ Change | % Change(1) | ||||||||||||||||||||||
(in millions, except percentages) | |||||||||||||||||||||||||||||
Service revenues | $ | 1,298 | $ | 1,216 | $ | 82 | 7 | % | $ | 3,967 | $ | 3,608 | $ | 359 | 10 | % | |||||||||||||
Data processing revenues | 1,191 | 1,040 | 151 | 15 | % | 3,456 | 2,913 | 543 | 19 | % | |||||||||||||||||||
International transaction revenues | 854 | 748 | 106 | 14 | % | 2,490 | 2,229 | 261 | 12 | % | |||||||||||||||||||
Other revenues | 179 | 175 | 4 | 1 | % | 533 | 532 | 1 | — | % | |||||||||||||||||||
Client incentives | (521 | ) | (614 | ) | 93 | (15 | )% | (1,641 | ) | (1,592 | ) | (49 | ) | 3 | % | ||||||||||||||
Total operating revenues | $ | 3,001 | $ | 2,565 | $ | 436 | 17 | % | $ | 8,805 | $ | 7,690 | $ | 1,115 | 14 | % |
(1) | Figures in the table may not recalculate exactly due to rounding. Percentage changes are calculated based on whole numbers, not the rounded numbers presented. |
• | Service revenues increased during the three- and nine-month comparable periods primarily due to 7% and 6% growth in nominal payments volume, respectively; however, the growth in service revenues was greater than the growth in nominal payments volume for the nine-month comparable period. This reflects a shift in the mix of our payments volume, most notably a significant decline in volume related to Interlink, which is a debit product that does not generate any service revenues. |
• | Data processing revenues increased due to overall growth in processed transactions of 14% and 8% during the three- and nine-month comparable periods, respectively, and solid growth in CyberSource billable transactions. Growth in the number of processed transactions reflected growth in Visa transactions processed outside of the United States, U.S. credit transactions and U.S. debit transactions, excluding Interlink. Processed transaction growth from Interlink increased 25% during the three-month comparable period and decreased 24% during the nine-month comparable period. The decrease reflects an anticipated decline in U.S. debit processed transactions as a result of certain provisions of the Dodd-Frank Act, which became effective in the third quarter of fiscal 2012. |
• | International transaction revenues increased during the three- and nine-month comparable periods, primarily due to 11% and 10% growth in nominal cross-border payments volume, respectively. |
• | Client incentives decreased during the three-month comparable period mainly due to the absence of significant one-time incentives incurred in the prior year, combined with the impact of recently executed issuer contracts, offset by an increase due to overall growth in global payments volume. Additionally, the overall increase during the nine-month comparable period reflects incentives incurred on long-term client contracts that were initiated or renewed after the third quarter of fiscal 2012. These included a number of |
Three Months Ended June 30, | 2013 vs. 2012 | Nine Months Ended June 30, | 2013 vs. 2012 | ||||||||||||||||||||||||||
2013 | 2012 | $ Change | % Change(1) | 2013 | 2012 | $ Change | % Change(1) | ||||||||||||||||||||||
(in millions, except percentages) | |||||||||||||||||||||||||||||
Personnel | 493 | $ | 435 | $ | 58 | 13 | % | 1,433 | $ | 1,255 | $ | 178 | 14 | % | |||||||||||||||
Marketing | 252 | 242 | 10 | 4 | % | 640 | 602 | 38 | 6 | % | |||||||||||||||||||
Network and processing | 117 | 102 | 15 | 14 | % | 346 | 303 | 43 | 14 | % | |||||||||||||||||||
Professional fees | 103 | 99 | 4 | 5 | % | 282 | 251 | 31 | 12 | % | |||||||||||||||||||
Depreciation and amortization | 101 | 84 | 17 | 22 | % | 291 | 244 | 47 | 20 | % | |||||||||||||||||||
General and administrative | 108 | 112 | (4 | ) | (3 | )% | 322 | 320 | 2 | 1 | % | ||||||||||||||||||
Litigation provision | (1 | ) | 4,098 | (4,099 | ) | NM | 3 | 4,098 | (4,095 | ) | NM | ||||||||||||||||||
Total Operating Expenses | $ | 1,173 | $ | 5,172 | $ | (3,999 | ) | (77 | )% | $ | 3,317 | $ | 7,073 | $ | (3,756 | ) | (53 | )% |
(1) | Figures in the table may not recalculate exactly due to rounding. Percentage changes are calculated based on |
• | Personnel increased primarily due to increases in headcount reflecting our strategy to invest for future growth, particularly in key product and geography-specific initiatives. |
• | Marketing increased mainly reflecting strategies to promote our core products and a number of various campaigns including the 2013 FIFA Confederation Cup and the 2014 Winter Olympics. Total marketing spend is expected to be under $1 billion for fiscal 2013. |
• | Network and processing increased mainly due to greater investment in technology projects and costs incurred for the operation of our processing network. |
• | Professional fees increased primarily reflecting greater investment in technology projects. |
• | Depreciation and amortization increased primarily due to additional depreciation from our ongoing investments in technology assets and infrastructure to support our core business as well as our e-commerce and mobile initiatives. |
• | Litigation provision decrease reflects the absence of a $4.1 billion accrual recorded in the prior year related to the covered litigation. See Note 11—Legal Matters to our unaudited consolidated financial statements. |
• | certain foreign tax credit benefits related to prior years recognized in the second quarter of fiscal 2013; |
• | a $76 million tax benefit recognized in the first quarter of fiscal 2013, as a result of new guidance issued by the state of California regarding apportionment rules for years prior to fiscal 2012; and |
• | the absence of: |
• | the tax benefit and the offsetting tax reserve associated with the covered litigation provision recorded in the third quarter of fiscal 2012; |
• | a one-time foreign tax credit carryover benefit recognized in the third quarter of fiscal 2012; and |
• | a one-time, non-cash benefit of $208 million from the remeasurement of existing net deferred tax liabilities in the second quarter of fiscal 2012, as a result of the California state apportionment rule changes adopted in that quarter. |
Nine Months Ended June 30, | |||||||
2013 | 2012 | ||||||
(in millions) | |||||||
Total cash provided by (used in): | |||||||
Operating activities | $ | 977 | $ | 3,640 | |||
Investing activities | (1,354 | ) | (1,943 | ) | |||
Financing activities | (244 | ) | (2,262 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | — | (4 | ) | ||||
Decrease in cash and cash equivalents | $ | (621 | ) | $ | (569 | ) |
ITEM 3. | Quantitative and Qualitative Disclosures about Market Risk |
ITEM 4. | Controls and Procedures |
ITEM 1. | Legal Proceedings. |
ITEM 1A. | Risk Factors. |
ITEM 2. | Unregistered Sales of Equity Securities and Use of Proceeds. |
Period | (a) Total Number of Shares Purchased (1) | (b) Average Price Paid per Share | (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) | (d) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2) | |||||||||
April 1-30, 2013 | 825,429 | $ | 162.71 | 825,429 | $ | 907,840,727 | |||||||
May 1-31, 2013 | 1,767,608 | $ | 179.93 | 1,758,753 | $ | 591,372,019 | |||||||
June 1-30, 2013 | 2,966,303 | $ | 178.77 | 2,966,303 | $ | 61,028,535 | |||||||
Total | 5,559,340 | $ | 176.75 | 5,550,485 |
(1) | Includes 8,855 shares of class A common stock withheld at an average price of $181.73 per share (per the terms of grants under our 2007 Equity Incentive Compensation Plan) to offset tax withholding obligations that occur upon vesting and release of restricted shares. |
(2) | The figures in the table reflect transactions according to trade dates. For purposes of the Company's consolidated financial statements included in this Form 10-Q, the impact of these repurchases is recorded according to settlement dates. In July 2013, the Company's board of directors authorized an additional $1.5 billion share repurchase program to be in effect through July 2014. |
ITEM 3. | Defaults Upon Senior Securities. |
ITEM 4. | Mine Safety Disclosures. |
ITEM 5. | Other Information. |
ITEM 6. | Exhibits. |
VISA INC. | ||||
Date: | July 24, 2013 | By: | /s/ Charles W. Scharf | |
Name: | Charles W. Scharf | |||
Title: | Chief Executive Officer (Principal Executive Officer) | |||
Date: | July 24, 2013 | By: | /s/ Byron H. Pollitt | |
Name: | Byron H. Pollitt | |||
Title: | Chief Financial Officer (Principal Accounting Officer) |
Incorporated by Reference | |||||||||
Exhibit Number | Description of Documents | Schedule/ Form | File Number | Exhibit | Filing Date | ||||
10.1 | Confirmation Letter by John M. Partridge, dated March 29, 2013 | 8-K | 001-33977 | 10.1 | 4/1/2013 | ||||
10.2 | Offer Letter dated May 20, 2013, between Visa Inc. and Ryan McInerney | 8-K | 001-33977 | 99.2 | 5/23/2013 | ||||
31.1* | Certification of Charles W. Scharf, Chief Executive Officer, pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||||||||
31.2* | Certification of Byron H. Pollitt, Chief Financial Officer, pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||||||||
32.1* | Certification of Charles W. Scharf, Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||||||||
32.2* | Certification of Byron H. Pollitt, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||||||||
101.INS* | XBRL Instance Document | ||||||||
101.SCH* | XBRL Taxonomy Extension Schema Document | ||||||||
101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document | ||||||||
101.DEF* | XBRL Taxonomy Extension Definition Linkbase Document | ||||||||
101.LAB* | XBRL Taxonomy Extension Label Linkbase Document | ||||||||
101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document |
* | Filed or furnished herewith. |
1. | I have reviewed this quarterly report on Form 10-Q of Visa Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; |
(d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: | July 24, 2013 | /s/ Charles W. Scharf | |
Charles W. Scharf Chief Executive Officer (Principal Executive Officer) |
1. | I have reviewed this quarterly report on Form 10-Q of Visa Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; |
(d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: | July 24, 2013 | /s/ Byron H. Pollitt | |
Byron H. Pollitt Chief Financial Officer (Principal Financial Officer) |
• | the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
• | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: | July 24, 2013 | /s/ Charles W. Scharf | |
Charles W. Scharf Chief Executive Officer (Principal Executive Officer) |
• | the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
• | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: | July 24, 2013 | /s/ Byron H. Pollitt | |
Byron H. Pollitt Chief Financial Officer (Principal Financial Officer) |
Share-based Compensation
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9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Share-based Compensation [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Compensation | Note 9—Share-based Compensation The Company granted the following equity awards to employees and non-employee directors under the 2007 Equity Incentive Compensation Plan during the nine months ended June 30, 2013:
The Company’s non-qualified stock options, RSAs and RSUs, are equity awards with service-only conditions and are accordingly expensed on a straight-line basis over the vesting period. For equity awards with performance and market conditions, the Company uses the graded-vesting method of expense attribution. Compensation cost is recorded net of estimated forfeitures, which are adjusted as appropriate. |
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)
In Millions, except Per Share data, unless otherwise specified |
3 Months Ended | 9 Months Ended | ||||||||||||
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Jun. 30, 2013
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Jun. 30, 2012
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Jun. 30, 2013
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Jun. 30, 2012
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Operating Revenues | ||||||||||||||
Service revenues | $ 1,298 | $ 1,216 | $ 3,967 | $ 3,608 | ||||||||||
Data processing revenues | 1,191 | 1,040 | 3,456 | 2,913 | ||||||||||
International transaction revenues | 854 | 748 | 2,490 | 2,229 | ||||||||||
Other revenues | 179 | 175 | 533 | 532 | ||||||||||
Client incentives | (521) | (614) | (1,641) | (1,592) | ||||||||||
Total operating revenues | 3,001 | 2,565 | 8,805 | 7,690 | ||||||||||
Operating Expenses | ||||||||||||||
Personnel | 493 | 435 | 1,433 | 1,255 | ||||||||||
Marketing | 252 | 242 | 640 | 602 | ||||||||||
Network and processing | 117 | 102 | 346 | 303 | ||||||||||
Professional fees | 103 | 99 | 282 | 251 | ||||||||||
Depreciation and amortization | 101 | 84 | 291 | 244 | ||||||||||
General and administrative | 108 | 112 | 322 | 320 | ||||||||||
Litigation provision (Note 11) | (1) | 4,098 | 3 | 4,098 | ||||||||||
Total operating expenses | 1,173 | 5,172 | 3,317 | 7,073 | ||||||||||
Operating income (loss) | 1,828 | (2,607) | 5,488 | 617 | ||||||||||
Non-operating income | 5 | 0 | 3 | 2 | ||||||||||
Income (loss) before income taxes | 1,833 | (2,607) | 5,491 | 619 | ||||||||||
Income tax provision (benefit) | 608 | (768) | 1,703 | 139 | ||||||||||
Net income (loss) including non-controlling interest | 1,225 | (1,839) | 3,788 | 480 | ||||||||||
Loss attributable to non-controlling interest | 2 | |||||||||||||
Net income (loss) attributable to Visa Inc. | $ 1,225 | [1],[2] | $ (1,839) | [1],[2] | $ 3,788 | [1],[2] | $ 482 | [1],[2] | ||||||
Class A common stock
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Earnings Per Share | ||||||||||||||
Basic earnings (loss) per share (Note 8) | $ 1.89 | [1] | $ (2.74) | [1] | $ 5.76 | [1] | $ 0.71 | [1] | ||||||
Basic weighted-average shares outstanding (Note 8) | 515 | [1] | 525 | [1] | 524 | [1] | 523 | [1] | ||||||
Diluted earnings (loss) per share (Note 8) | $ 1.88 | [1] | $ (2.74) | [1] | $ 5.74 | [1] | $ 0.71 | [1] | ||||||
Diluted weighted-average shares outstanding (Note 8) | 651 | [1],[3] | 672 | [1],[3] | 660 | [1],[3] | 681 | [1],[3] | ||||||
Class B common stock
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Earnings Per Share | ||||||||||||||
Basic earnings (loss) per share (Note 8) | $ 0.79 | [1] | $ (1.16) | [1] | $ 2.42 | [1] | $ 0.32 | [1] | ||||||
Basic weighted-average shares outstanding (Note 8) | 245 | [1] | 245 | [1] | 245 | [1] | 245 | [1] | ||||||
Diluted earnings (loss) per share (Note 8) | $ 0.79 | [1] | $ (1.16) | [1] | $ 2.41 | [1] | $ 0.32 | [1] | ||||||
Diluted weighted-average shares outstanding (Note 8) | 245 | [1] | 245 | [1] | 245 | [1] | 245 | [1] | ||||||
Class C common stock
|
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Earnings Per Share | ||||||||||||||
Basic earnings (loss) per share (Note 8) | $ 1.89 | [1] | $ (2.74) | [1] | $ 5.76 | [1] | $ 0.71 | [1] | ||||||
Basic weighted-average shares outstanding (Note 8) | 28 | [1] | 40 | [1] | 29 | [1] | 43 | [1] | ||||||
Diluted earnings (loss) per share (Note 8) | $ 1.88 | [1] | $ (2.74) | [1] | $ 5.74 | [1] | $ 0.71 | [1] | ||||||
Diluted weighted-average shares outstanding (Note 8) | 28 | [1] | 40 | [1] | 29 | [1] | 43 | [1] | ||||||
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Retrospective Responsibility Plan
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9 Months Ended | ||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Retrospective Responsibility Plan [Abstract] | |||||||||||||||||||||||||||||||||||||
Retrospective Responsibility Plan | Note 2—Retrospective Responsibility Plan Under the terms of the retrospective responsibility plan, the Company maintains an escrow account from which settlements of, or judgments in, the covered litigation are paid. See Note 11—Legal Matters. The following table summarizes activity related to the litigation escrow account.
The accrual related to the covered litigation could be either higher or lower than the litigation escrow account balance. The Company did not record an additional accrual for the covered litigation during the nine months ended June 30, 2013. |
Settlement Guarantee Management (Tables)
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9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Settlement Guarantee Management [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Customer Collateral | The Company maintained collateral as follows:
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Income Taxes
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9 Months Ended | ||||||||||||||||||||||||
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Jun. 30, 2013
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||
Income Taxes | Note 10—Income Taxes The effective income tax rates were 33% and 31% for the three and nine months ended June 30, 2013, respectively, and 29% and 22% for the three and nine months ended June 30, 2012, respectively. The effective tax rates for the three and nine months ended June 30, 2013 differ from the effective tax rates in the same periods in fiscal 2012 mainly due to:
During the three and nine months ended June 30, 2013, the Company's gross unrecognized tax benefits increased by $10 million and $231 million, respectively, $8 million and $179 million of which, respectively, would favorably impact the effective income tax rate if recognized. The increase in gross unrecognized tax benefits is primarily due to changes in judgments and estimates related to various tax positions across several jurisdictions. During the three and nine months ended June 30, 2013, the Company accrued $4 million and $9 million of interest, respectively, compared to $1 million and $15 million, respectively, in the prior-year comparable periods. During the three and nine months ended June 30, 2013, the Company accrued no penalties and $2 million of penalties, respectively, related to uncertain tax positions. No penalties related to uncertain tax positions were accrued for the same prior-year comparable periods. The Company reclassified $1.6 billion from deferred tax assets to income tax receivable in the first quarter of the current fiscal year to reflect the current tax deduction related to the payments totaling $4.4 billion made in connection with the covered litigation. See Note 2—Retrospective Responsibility Plan and Note 11—Legal Matters. The income tax receivable has been applied and will continue to be applied to reduce income taxes payable throughout fiscal 2013. |
Stockholders' Equity - Additional Information (Detail) (USD $)
|
1 Months Ended | 9 Months Ended | |
---|---|---|---|
Jul. 24, 2013
|
Jun. 30, 2013
|
Jul. 16, 2013
|
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Stockholders' Equity Note [Line Items] | |||
Stock Repurchase Remaining Authorized Amount | $ 61,000,000 | ||
Stock Repurchase Program, Authorized Amount | 1,500,000,000.0 | ||
Dividends Payable, Amount Per Share (in USD per Share) | $ 0.33 | ||
Dividends, Cash | $ 653,000,000 | ||
Subsequent Event
|
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Stockholders' Equity Note [Line Items] | |||
Dividends Payable, Amount Per Share (in USD per Share) | $ 0.33 |
Share-based Compensation (Tables)
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9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Share-based Compensation [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Share-based Compensation Arrangements by Share-based Payment Award | The Company granted the following equity awards to employees and non-employee directors under the 2007 Equity Incentive Compensation Plan during the nine months ended June 30, 2013:
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Earnings Per Share (Tables)
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9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Earnings Per Share, Basic and Diluted | The following table presents earnings per share for the three months ended June 30, 2013.(1)
The following table presents earnings per share for the nine months ended June 30, 2013.(1)
The following table presents loss per share for the three months ended June 30, 2012.(1)
The following table presents earnings per share for the nine months ended June 30, 2012. (1)
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Settlement Guarantee Management - Additional Information (Detail) (USD $)
|
Jun. 30, 2013
|
Sep. 30, 2012
|
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Settlement Guarantee Management [Abstract] | ||
Estimated maximum settlement exposure | $ 52,100,000,000 | $ 49,300,000,000 |
Covered settlement exposure | 3,600,000,000 | 3,500,000,000 |
Estimated probability-weighted value of the guarantee | $ 1,000,000 | $ 1,000,000 |
Basic and Diluted Earnings Per Share (Parenthetical) (Detail)
In Millions, unless otherwise specified |
3 Months Ended | 9 Months Ended | ||
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Jun. 30, 2013
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Jun. 30, 2012
|
Jun. 30, 2013
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Jun. 30, 2012
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Schedule of Earnings Per Share, Basic and Diluted, by Common Class [Line Items] | ||||
Stock options included in the computation of diluted shares outstanding | 2 | 2 | 3 | |
Stock Options
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Schedule of Earnings Per Share, Basic and Diluted, by Common Class [Line Items] | ||||
Stock options excluded from computation of average dilutive shares outstanding | 7 | |||
Stock Options | Maximum
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Schedule of Earnings Per Share, Basic and Diluted, by Common Class [Line Items] | ||||
Stock options excluded from computation of average dilutive shares outstanding | 1 | 1 | 1 | |
Class B common stock
|
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Schedule of Earnings Per Share, Basic and Diluted, by Common Class [Line Items] | ||||
Weighted-average as-converted class B common stock used in income allocation | 103 | 104 | 103 | 110 |
Legal Matters - Additional Information (Detail) (Class plaintiffs, USD $)
In Millions, unless otherwise specified |
9 Months Ended | |||
---|---|---|---|---|
Jun. 30, 2013
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Class plaintiffs
|
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Loss Contingencies [Line Items] | ||||
Payments on litigation matters | $ 4,033 | [1] | ||
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Stockholders' Equity (Tables)
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9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Stockholders' Equity Note [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Stock by Class | The number of shares of each class and the number of shares of class A common stock on an as-converted basis at June 30, 2013, are as follows:
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Share Repurchase Program Disclosure | The following table presents share repurchases in the open market.
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CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (USD $)
In Millions, unless otherwise specified |
Total
USD ($)
|
Class A common stock
|
Class B common stock
|
Class C common stock
|
Additional Paid-In Capital
USD ($)
|
Accumulated Income (Deficit)
USD ($)
|
Accumulated Other Comprehensive (Loss) Income
USD ($)
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Beginning Balance at Sep. 30, 2012 | $ 27,630 | $ 19,992 | $ 7,809 | $ (171) | ||||||||||||||
Beginning Balance (in shares) at Sep. 30, 2012 | 535 | 245 | 31 | |||||||||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||||||||
Net income attributable to Visa Inc. | 3,788 | [1],[2] | 3,788 | |||||||||||||||
Other comprehensive income, net of tax | 55 | 55 | ||||||||||||||||
Comprehensive income (loss) including non-controlling interest | 3,843 | |||||||||||||||||
Issuance of restricted stock awards (in shares) | 1 | |||||||||||||||||
Conversion of class C common stock upon sale into public market (in shares) | 4 | (4) | ||||||||||||||||
Share-based compensation | 139 | 139 | ||||||||||||||||
Excess tax benefit for share-based compensation | 64 | 64 | ||||||||||||||||
Cash proceeds from exercise of stock options (in shares) | 1 | |||||||||||||||||
Cash proceeds from exercise of stock options | 98 | 98 | ||||||||||||||||
Restricted stock instruments settled in cash for taxes shares (in shares) | [3] | 0 | ||||||||||||||||
Restricted stock and performance shares settled in cash for taxes(1) | [4] | (64) | (64) | |||||||||||||||
Cash dividends declared and paid, at a quarterly amount of $0.33 per as-converted share (Note 7) | (653) | (653) | ||||||||||||||||
Repurchase of class A common stock (Note 7) (in shares) | (26) | [5] | 26 | |||||||||||||||
Repurchase of class A common stock (Note 7) | (4,054) | (1,099) | (2,955) | |||||||||||||||
Ending Balance at Jun. 30, 2013 | $ 27,003 | $ 19,130 | $ 7,989 | $ (116) | ||||||||||||||
Ending Balance (in shares) at Jun. 30, 2013 | 515 | 245 | 27 | |||||||||||||||
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Fair Value Measurements and Investments
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Jun. 30, 2013
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements and Investments | Note 3—Fair Value Measurements and Investments Fair Value Measurements Assets and Liabilities Measured at Fair Value on a Recurring Basis.
There were no significant transfers between Level 1 and Level 2 assets during the nine months ended June 30, 2013 and 2012. Level 1 assets measured at fair value on a recurring basis. Money market funds, publicly-traded equity securities and U.S. Treasury securities are classified as Level 1 within the fair value hierarchy, as fair value is based on quoted prices in active markets. The significant decrease in the Company's Level 1 assets primarily reflects payments from the litigation escrow account totaling $4.4 billion in connection with the covered litigation. See Note 2—Retrospective Responsibility Plan and Note 11—Legal Matters. Level 2 assets and liabilities measured at fair value on a recurring basis. The fair value of U.S. government-sponsored debt securities and corporate debt securities, as provided by third-party pricing vendors, is based on quoted prices in active markets for similar (not identical) assets. The pricing data obtained from outside sources is reviewed internally for reasonableness, compared against benchmark quotes from independent pricing sources, then confirmed or revised accordingly. Commercial paper and foreign exchange derivative instruments are valued using inputs that are observable in the market or can be derived principally from or corroborated by observable market data. There were no substantive changes to the valuation techniques and related inputs used to measure fair value during the nine months ended June 30, 2013. Level 3 assets and liabilities measured at fair value on a recurring basis. 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 the nine months ended June 30, 2013. Visa Europe put option agreement. The Company has granted Visa Europe a perpetual put option (the "put option") which, if exercised, will require Visa Inc. to purchase all of the outstanding shares of capital stock of Visa Europe from its members. The put option provides a formula for determining the purchase price of the Visa Europe shares, which, subject to certain adjustments, applies Visa Inc.’s forward price-to-earnings multiple, or the P/E ratio (as defined in the option agreement), at the time the option is exercised, to Visa Europe’s projected adjusted sustainable income for the forward 12-month period, or the adjusted sustainable income (as defined in the option agreement). The calculation of Visa Europe’s adjusted sustainable income under the terms of the put option agreement includes potentially material adjustments for cost synergies and other negotiated items. Upon exercise, the key inputs to this formula, including Visa Europe’s adjusted sustainable income, will be the result of negotiation between the Company and Visa Europe. The put option provides an arbitration mechanism in the event that the two parties are unable to agree on the ultimate purchase price. The fair value of the put option represents the value of Visa Europe’s option, which under certain conditions could obligate the Company to purchase its member equity interest for an amount above fair value. While the put option is in fact non-transferable, its fair value represents the Company’s estimate of the amount the Company would be required to pay a third-party market participant to transfer the potential obligation in an orderly transaction at the measurement date. The valuation of the put option therefore requires substantial judgment. The most subjective estimates applied in valuing the put option are the assumed probability that Visa Europe will elect to exercise its option and the estimated differential between the P/E ratio and the P/E ratio applicable to Visa Europe on a standalone basis at the time of exercise, which the Company refers to as the “P/E differential.” The liability is classified within Level 3, as the assumed probability that Visa Europe will elect to exercise its option, the estimated P/E differential, and other inputs used to value the put option are unobservable. At June 30, 2013 and September 30, 2012, the Company determined the fair value of the put option to be $145 million. While $145 million represents the fair value of the put option at June 30, 2013, it does not represent the actual purchase price that the Company may be required to pay if the option is exercised, which could be several billion dollars or more. During the nine months ended June 30, 2013, there were no changes to the valuation methodology used to estimate the fair value of the put option. At June 30, 2013, the key unobservable inputs included a 40% probability of exercise by Visa Europe at some point in the future and an estimated P/E differential of 1.9x. At June 30, 2013, the Company's spot P/E was 21.0x, and there was a differential of 2.4x between this ratio and the estimated spot ratio applicable to Visa Europe. These ratios are for reference only and are not necessarily indicative of the ratio or differential that could be applicable if the put option were exercised at any point in the future. The use of an assumed probability of exercise that is 5% higher than the Company's estimate would have resulted in an increase of approximately $18 million in the value of the put option. An increase of 1.0x in the assumed P/E differential would have resulted in an increase of approximately $84 million in the value of the put option. The put option is exercisable at any time at the sole discretion of Visa Europe. As such, the put option liability is included in accrued liabilities on the Company's consolidated balance sheet at June 30, 2013. Classification in current liabilities is not an indication of management’s expectation of exercise and simply reflects the fact that the obligation resulting from the exercise of the instrument could become payable within 12 months. Any non-cash changes in fair value are recorded in non-operating income on the consolidated statements of operations. Earn-out related to PlaySpan acquisition. The fair value of the earn-out liability was reduced to zero, reflecting payments made in full during the quarter ended December 31, 2012, upon achieving certain revenue targets and other milestones. A separate roll-forward of Level 3 assets and liabilities measured at fair value on a recurring basis is not presented as the primary activities during the nine months ended June 30, 2013 and 2012 were already discussed above. Assets and Liabilities Measured at Fair Value on a Non-recurring Basis. Non-marketable equity investments and investments accounted for under the equity method. These investments are classified as Level 3 due to the absence of quoted market prices, the inherent lack of liquidity, and the fact that inputs used to measure fair value are unobservable and require management's judgment. When certain events or circumstances indicate that impairment may exist, the Company revalues the investments using various assumptions, including the financial metrics and ratios of comparable public companies. The Company recognized a $15 million other-than-temporary impairment loss during the nine months ended June 30, 2013. There were no impairment charges recorded during the nine months ended June 30, 2012. At June 30, 2013, and September 30, 2012, these investments totaled $54 million and $86 million, respectively. These assets are classified in other assets on the consolidated balance sheets. Due to a change in the Company's relationship with one of its investees during fiscal 2013, the Company reclassified equity securities previously accounted for as an equity method investment, with a carrying value of $12 million, to long-term available-for-sale investment securities. The fair value of this investment at June 30, 2013 was $57 million, resulting in the recognition of a pre-tax unrealized gain of $45 million in other comprehensive income. Non-financial assets and liabilities. Long-lived assets such as goodwill, indefinite-lived intangible assets, finite-lived intangible assets, and property, equipment and technology are considered non-financial assets. The Company does not have any non-financial liabilities measured at fair value on a non-recurring basis. Finite-lived intangible assets primarily consist of customer relationships, reacquired rights, reseller relationships and tradenames, all of which were obtained through acquisitions. If the Company were required to perform a quantitative assessment for impairment testing of goodwill and indefinite-lived intangible assets, the fair values would generally be estimated using an income approach. As the assumptions employed to measure these assets on a non-recurring basis are based on management's judgment using internal and external data, these fair value determinations are classified as Level 3 in the fair value hierarchy. The Company completed its annual impairment review of its indefinite-lived intangible assets and goodwill as of February 1, 2013, and concluded that there was no impairment. No recent events or changes in circumstances indicate that impairment existed at June 30, 2013. Other Financial Instruments Not Measured at Fair Value The following financial instruments are not measured at fair value on the Company's consolidated balance sheet at June 30, 2013, but require disclosure of their fair values: settlement receivable and payable, and customer collateral. The estimated fair value of such instruments at June 30, 2013, approximates their carrying value due to their generally short maturities. If measured at fair value in the financial statements, these financial instruments would be classified as Level 2 in the fair value hierarchy. Investments Available-for-sale investment securities The Company had $48 million in gross unrealized gains and $6 million in gross unrealized losses at June 30, 2013. The unrealized gains were primarily related to the Company's reclassified equity investment discussed above. There were $4 million gross unrealized gains and $1 million gross unrealized losses at September 30, 2012. A majority of the Company's available-for-sale investment securities with stated maturities are due within one to five years. |
Summary of Significant Accounting Policies
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9 Months Ended |
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Jun. 30, 2013
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Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Note 1—Summary of Significant Accounting Policies Organization. Visa Inc. (“Visa” or the “Company”) is a global payments technology company that connects consumers, businesses, financial institutions and governments around the world to fast, secure and reliable electronic payments. Visa and its wholly-owned consolidated subsidiaries, including Visa U.S.A. Inc. (“Visa U.S.A.”), Visa International Service Association (“Visa International”), Visa Worldwide Pte. Limited, Visa Canada Corporation, Inovant LLC and CyberSource Corporation (“CyberSource”), operate one of the world’s most advanced processing networks. The Company provides its clients with payment processing platforms that encompass consumer credit, debit, prepaid and commercial payments, and facilitates global commerce through the transfer of value and information among financial institutions, merchants, consumers, businesses and government entities. The Company is not a bank and does not issue cards, extend credit, or collect, assess or set cardholder fees or interest charges. Consolidation and basis of presentation. The accompanying unaudited consolidated financial statements include the accounts of Visa and its consolidated entities and are presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The Company consolidates its majority-owned and controlled entities, including variable interest entities ("VIEs") for which the Company is the primary beneficiary. The Company’s investments in VIEs have not been material to its consolidated financial statements as of and for the periods presented. All significant intercompany accounts and transactions are eliminated in consolidation. Beginning with the first quarter of fiscal 2013, income tax receivable is presented separately on the consolidated balance sheets. Previously, it had been included in the prepaid expenses and other current assets line. The Company also combined the interest income (expense), investment income and other lines on the consolidated statements of operations into one line entitled, "Non-operating income." All prior period information has been reclassified to conform to current period presentation. The accompanying unaudited consolidated financial statements are presented in accordance with the U.S. Securities and Exchange Commission ("SEC") requirements for Quarterly Reports on Form 10-Q and, consequently, do not include all of the annual disclosures required by U.S. GAAP. Reference should be made to the Visa Annual Report on Form 10-K for the year ended September 30, 2012 for additional disclosures, including a summary of the Company’s significant accounting policies. In the opinion of management, the accompanying unaudited consolidated financial statements include all normal recurring adjustments necessary for a fair presentation of the Company's financial position, results of operation and cash flows for the interim periods presented. Recently issued and adopted accounting pronouncements. In June 2011, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") 2011-05, which impacts the presentation of comprehensive income. The guidance requires components of other comprehensive income to be presented with net income to arrive at total comprehensive income. This ASU impacts presentation only and does not impact the underlying components of other comprehensive income or net income. In December 2011, the FASB issued an amendment to ASU 2011-05, which deferred the requirement to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income. All other components of ASU 2011-05 were adopted effective October 1, 2012. The adoption did not have a material impact on the consolidated financial statements. In February 2013, the FASB issued ASU 2013-02, which established the effective date for the requirement to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income. The standard impacts presentation only and does not impact the underlying components of other comprehensive income or net income. The Company will adopt the standard effective October 1, 2013. The adoption is not expected to have a material impact on the consolidated financial statements. In July 2012, the FASB issued ASU 2012-02, which allows an entity to first assess qualitative factors to determine whether it is necessary to perform a quantitative impairment test for indefinite-lived intangible assets. The Company adopted ASU 2012-02 effective October 1, 2012, and applied the new guidance in its annual impairment review of indefinite-lived intangible assets as of February 1, 2013. See Note 3—Fair Value Measurements and Investments. The adoption did not have a material impact on the consolidated financial statements. In January 2013, the FASB issued ASU 2013-01, which clarifies the scope of ASU 2011-11. As amended, ASU 2011-11 requires disclosure of the effect or potential effect of offsetting arrangements on a Company's financial position as well as enhanced disclosure of the rights of offset associated with a Company's recognized derivative instruments, including bifurcated embedded derivatives, repurchase agreements and reverse repurchase agreements, and securities borrowing and lending transactions. The amended standard impacts presentation only and is not expected to have a material impact on the consolidated financial statements. The Company will adopt the standard effective October 1, 2013. In February 2013, the FASB issued ASU 2013-04, which provides guidance for the recognition, measurement and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation is fixed at the reporting date. The Company will adopt the standard effective October 1, 2014. The adoption is not expected to have a material impact on the consolidated financial statements. In March 2013, the FASB issued ASU 2013-05, which clarifies the applicable guidance for the release of the cumulative translation adjustment into net income when a parent either sells a part or all of its investment in a foreign entity, or no longer holds a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business within a foreign entity. The Company will adopt the standard effective October 1, 2014. The adoption is not expected to have a material impact on the consolidated financial statements. In July 2013, the FASB issued ASU 2013-11, which provides guidance for the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. The Company will adopt the standard effective October 1, 2014. The adoption is not expected to have a material impact on the consolidated financial statements. |
Awards Granted to Company Employees and Non-employee Directors Under the 2007 Equity Incentive Compensation Plan (Detail) (USD $)
|
9 Months Ended | |||
---|---|---|---|---|
Jun. 30, 2013
|
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Non-qualified stock options
|
||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Granted | 579,318 | |||
Weighted-Average Grant Date Fair Value | $ 39.03 | |||
Weighted-Average Exercise Price | $ 147.37 | |||
Restricted stock awards (RSAs)
|
||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Granted | 891,360 | |||
Weighted-Average Grant Date Fair Value | $ 146.96 | |||
Restricted stock units (RSUs)
|
||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Granted | 326,746 | |||
Weighted-Average Grant Date Fair Value | $ 145.83 | |||
Performance-based shares
|
||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Granted | 230,518 | [1] | ||
Weighted-Average Grant Date Fair Value | $ 164.14 | [1] | ||
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Legal Matters (Tables)
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9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Legal Matters [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Loss Contingencies by Contingency | The following table summarizes activity related to accrued litigation.
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Debt (Details) (USD $)
|
3 Months Ended | 3 Months Ended | 12 Months Ended | |||||
---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
Revolving Credit Facility
|
Jan. 31, 2013
Revolving Credit Facility
|
Sep. 30, 2012
Revolving Credit Facility
|
Jun. 30, 2013
Revolving Credit Facility
Minimum
|
Jun. 30, 2013
Revolving Credit Facility
Maximum
|
Feb. 09, 2014
Commercial paper
|
Feb. 07, 2013
Commercial paper
|
Feb. 06, 2013
Commercial paper
|
|
Debt Instrument [Line Items] | ||||||||
Commercial Paper Program, Amount | $ 3,000,000,000 | $ 500,000,000 | ||||||
Commercial Paper Program, Maturity Period | 397 days | |||||||
Credit Facility Maximum Borrowing Capacity | $ 3,000,000,000 | $ 3,000,000,000 | ||||||
Credit Facility Interest Rate During Period | 0.00% | 0.75% | ||||||
Credit Facility Commitment Fee Percentage | 0.05% |
Share Repurchases in the Open Market (Detail) (USD $)
In Millions, except Per Share data, unless otherwise specified |
3 Months Ended | 9 Months Ended | ||||
---|---|---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2013
|
|||||
Stockholders' Equity Note [Abstract] | ||||||
Shares repurchased in the open market | 6 | [1] | 26 | [1] | ||
Weighted-average repurchase price per share | $ 176.75 | $ 157.48 | ||||
Total cost | $ 981 | $ 4,054 | ||||
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