VISA INC., 10-Q filed on 7/24/2013
Quarterly Report
Document and Entity Information
9 Months Ended
Jun. 30, 2013
Jul. 19, 2013
Class A
Jul. 19, 2013
Class B
Jul. 19, 2013
Class C
Entity Registrant Name
VISA INC. 
 
 
 
Entity Central Index Key
0001403161 
 
 
 
Current Fiscal Year End Date
--09-30 
 
 
 
Entity Filer Category
Large Accelerated Filer 
 
 
 
Document Type
10-Q 
 
 
 
Document Period End Date
Jun. 30, 2013 
 
 
 
Document Fiscal Year Focus
2013 
 
 
 
Document Fiscal Period Focus
Q3 
 
 
 
Amendment Flag
false 
 
 
 
Entity Common Stock, Shares Outstanding
 
514,589,442 
245,513,385 
27,393,264 
CONSOLIDATED BALANCE SHEETS (USD $)
In Millions, unless otherwise specified
Jun. 30, 2013
Sep. 30, 2012
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 
Equity
 
 
Preferred stock, $0.0001 par value, 25 shares authorized and none issued
   
   
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 
Class A common stock
 
 
Equity
 
 
Common stock
   
   
Class B common stock
 
 
Equity
 
 
Common stock
   
   
Class C common stock
 
 
Equity
 
 
Common stock
   
   
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
In Millions, except Per Share data, unless otherwise specified
Jun. 30, 2013
Sep. 30, 2012
Preferred Stock
 
 
Preferred stock, par value
$ 0.0001 
$ 0.0001 
Preferred stock, shares authorized
25 
25 
Preferred stock, shares issued
0 
0 
Class A common stock
 
 
Common stock, par value
$ 0.0001 
$ 0.0001 
Common stock, shares authorized
2,001,622 
2,001,622 
Common stock, shares issued
515 
535 
Common stock, shares outstanding
515 
535 
Class B common stock
 
 
Common stock, par value
$ 0.0001 
$ 0.0001 
Common stock, shares authorized
622 
622 
Common stock, shares issued
245 
245 
Common stock, shares outstanding
245 
245 
Class C common stock
 
 
Common stock, par value
$ 0.0001 
$ 0.0001 
Common stock, shares authorized
1,097 
1,097 
Common stock, shares issued
27 
31 
Common stock, shares outstanding
27 
31 
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)
In Millions, except Per Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Jun. 30, 2013
Jun. 30, 2012
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
 
 
 
 
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
 
 
 
 
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
 
 
 
 
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
[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.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Jun. 30, 2013
Jun. 30, 2012
Net income (loss) including non-controlling interest
$ 1,225 
$ (1,839)
$ 3,788 
$ 480 
Investment securities, available-for-sale:
 
 
 
 
Net unrealized (loss) gain
(10)
(6)
40 
1 
Income tax effect
1 
2 
(16)
0 
Reclassification adjustment for net gain realized in net income including non-controlling interest
0 
   
(1)
0 
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
   
   
0 
2 
Comprehensive income (loss) attributable to Visa Inc.
$ 1,242 
$ (1,838)
$ 3,843 
$ 483 
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 ($)
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 
 
 
 
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Parenthetical) (USD $)
In Millions, except Per Share data, unless otherwise specified
9 Months Ended
Jun. 30, 2013
Class A common stock
Maximum
Restricted stock instruments settled in cash for taxes shares (in shares)
1 
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Millions, unless otherwise specified
9 Months Ended
Jun. 30, 2013
Jun. 30, 2012
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)
0 
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 
Proceeds from Sale and Maturity of Other Investments
1 
14 
Payments to Acquire Businesses, Net of Cash Acquired
0 
(3)
Net cash used in investing activities
(1,354)
(1,943)
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 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 
Summary of Significant Accounting Policies
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.
Retrospective Responsibility Plan
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.
 
(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.
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.
Fair Value Measurements and Investments
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.
 
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


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.
Debt
Debt
Note 4—Debt
Commercial paper program. Visa maintains a commercial paper program to support its working capital requirements and for other general corporate purposes. On February 7, 2013, the Company replaced the existing $500 million program with a new commercial paper program. Under the new program, the Company is authorized to issue up to $3.0 billion in outstanding notes, with maturities up to 397 days from the date of issuance. The Company had no outstanding obligations under the new program at June 30, 2013.
Credit facility. On January 31, 2013, the Company entered into an unsecured $3.0 billion revolving credit facility. This credit facility, which expires on January 30, 2014, replaced the Company's existing $3.0 billion credit facility, which would have expired on February 15, 2013. The new credit facility contains covenants and events of default customary for facilities of this type. The participating lenders in the new credit facility include affiliates of certain holders of the Company's class B and class C common stock and some of the Company's clients or affiliates of its clients. The new credit facility is maintained to provide liquidity in the 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 ("LIBOR") or an alternative base rate, in each case plus applicable margins that fluctuate based on the applicable credit rating of the Company's senior unsecured long-term debt. Visa also agreed to pay a commitment fee that fluctuates based on the credit rating of the Company's senior unsecured long-term debt. Currently, the applicable margin is 0.00% to 0.75% depending on the type of the loan, and the commitment fee is 0.05%. There were no borrowings under this facility and the Company was in compliance with all related covenants at June 30, 2013 .
Pension and Other Postretirement Benefits
Pension and Other Postretirement Benefits
Note 5—Pension and Other Postretirement Benefits
The Company sponsors various qualified and non-qualified defined benefit pension and other postretirement benefit plans that provide for retirement and medical benefits for substantially all employees residing in the United States.
The components of net periodic benefit cost are as follows:
 
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
)
Settlement Guarantee Management
Settlement Guarantee Management
Note 6—Settlement Guarantee Management
The indemnification for settlement losses that Visa provides to its clients creates settlement risk for the Company due to the difference in timing between the date of a payment transaction and the date of subsequent settlement. The exposure to settlement losses through our settlement indemnification is accounted for as a settlement risk guarantee. The Company’s settlement exposure is limited to the amount of unsettled Visa payment transactions at any point in time. The Company requires certain clients that do not meet its credit standards to post collateral to offset potential loss from their estimated unsettled transactions. The Company’s estimated maximum settlement exposure was $52.1 billion at June 30, 2013, compared to $49.3 billion at September 30, 2012. Of these settlement exposure amounts, $3.6 billion at June 30, 2013 and $3.5 billion at September 30, 2012, were covered by collateral.
The Company maintained collateral as follows:
 
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


The total available collateral balances presented in the table above were greater than the settlement exposure covered by customer collateral held due to instances in which the available collateral exceeded the total settlement exposure for certain financial institutions at each date presented.
The fair value of the settlement risk guarantee is estimated based on a proprietary probability-weighted model and was approximately $1 million at June 30, 2013 and September 30, 2012. These amounts are reflected in accrued liabilities on the consolidated balance sheets.
Stockholders' Equity
Stockholders' Equity
Note 7—Stockholders' Equity
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:
(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.
Reduction in as-converted class A common stock
The following table presents share repurchases in the open market.
(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.
At June 30, 2013, the Company had $61 million of remaining funds available for share repurchases under the current program authorized by the board of directors. In July 2013, the Company's board of directors authorized a new $1.5 billion share repurchase program to be in effect through July 2014.
Dividends. On July 16, 2013, the Company’s board of directors declared a dividend in the amount of $0.33 per share of class A common stock (determined in the case of class B and class C common stock on an as-converted basis), which will be paid on September 4, 2013, to all holders of record of the Company's class A, class B and class C common stock as of August 16, 2013. The Company paid $653 million in dividends during the nine months ended June 30, 2013.
Earnings Per Share
Earnings Per Share
Note 8—Earnings Per Share
The following table presents earnings per share for the three months ended June 30, 2013.(1)     
 
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

 
 
 
 
 
 
 
 
 
 
 
The following table presents earnings per share for the nine months ended June 30, 2013.(1)     
 
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

 
 
 
 
 
 
 
 
 
 
 
The following table presents loss per share for the three months ended June 30, 2012.(1)
 
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
)
 
 
 
 
 
 
 
 
 
 
 
The following table presents earnings per share for the nine months ended June 30, 2012. (1)     
 
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.
Share-based Compensation
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:
 
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.
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.
Income Taxes
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:
•
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.
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.
Legal Matters
Legal Matters
Note 11—Legal Matters
The Company is party to various legal and regulatory proceedings. Some of these proceedings involve complex claims that are subject to substantial uncertainties and unascertainable damages. Accordingly, except as disclosed, the Company has not established reserves or ranges of possible loss related to these proceedings, as at this time in the proceedings, the matters do not relate to a probable loss and/or the amount or range of losses are not reasonably estimable. Although the Company believes that it has strong defenses for the litigation and regulatory proceedings described below, it could, in the future, incur judgments or fines or enter into settlements of claims that could have a material adverse effect on the Company's financial position, results of operations or cash flows. From time to time, the Company may engage in settlement discussions or mediations with respect to one or more of its outstanding litigation matters, either on its own behalf or collectively with other parties.
The litigation accrual is an estimate and is based on management’s understanding of its litigation profile, the specifics of each case, advice of counsel to the extent appropriate and management’s best estimate of incurred loss as of the balance sheet date.
The following table summarizes activity related to accrued litigation.
 
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.
Covered Litigation
Visa Inc., Visa U.S.A. and Visa International are parties to certain legal proceedings that are covered by the retrospective responsibility plan, which the Company refers to as the covered litigation. See Note 2—Retrospective Responsibility Plan. An accrual for the covered litigation and a charge to the litigation provision are recorded when loss is deemed to be probable and reasonably estimable. In making this determination, the Company evaluates available information, including but not limited to actions taken by the litigation committee.
The Attridge Litigation. The parties in the Credit/Debit Card Tying Cases subsequently agreed upon a revised written settlement agreement, which was submitted to the court for preliminary approval on August 20, 2012 and executed as of September 6, 2012. The court entered an order preliminarily approving the settlement on November 20, 2012. On April 11, 2013, the settlement in the Credit/Debit Tying Cases was granted final approval, and objectors have filed notices of appeal in those cases and the Attridge case. On April 25, 2013, in light of the proceedings in the Credit/Debit Card Tying Cases, the Attridge case was stayed until September 20, 2013.
The Interchange Litigation
Multidistrict Litigation Proceedings (MDL). The district court entered the preliminary approval order on November 27, 2012. On November 27, 2012, certain objectors filed a notice of appeal from the preliminary approval order in the U.S. Court of Appeals for the Second Circuit. Objectors also moved to stay the preliminary approval order in the district court and moved for expedited briefing in the court of appeals. On December 10, 2012, the court of appeals entered an order deferring briefing for the appeal until after the district court enters an order of final approval and final judgment with respect to the settlement, or otherwise concludes the matters by entry of a final judgment. On December 17, 2012, certain objectors filed a motion asking the court of appeals to reconsider its decision, which was denied on January 31, 2013. On January 15, 2013, the district court denied as moot objectors' request to stay the preliminary approval order.
On December 10, 2012, Visa paid approximately $4.0 billion from the litigation escrow account into a settlement fund established pursuant to the definitive class settlement agreement.
Certain retailers in the proposed settlement classes thereafter objected to the settlement, opted out of the damages portion of the class settlement, and/or are seeking to opt out of the rules portion of the class settlement. Details of retailers who have filed an opt-out claim may be found below (see "Interchange Opt-out Litigation" below).
Certain competitors and other interested parties have also objected to the class settlement, including Discover, which filed a motion to intervene on May 28, 2013. Discover seeks, among other things, to object to the settlement agreement and to file a proposed complaint challenging certain aspects of the settlement agreement as a restraint of trade in violation of Section 1 of the Sherman Act. On June 13, 2013, the district court ordered defendants to respond to Discover's objections by August 16, 2013.
On July 1, 2013, the class administrator filed an amended report stating that the administrator had received 7,953 requests to opt out of the settlement. Under the Settlement Agreement, if class members opt out of the damages portion of the class settlement, the defendants are entitled to receive payments of no more than 25% of the original cash payments made into the settlement fund, based on the percentage of payment card sales volume for a defined period attributable to merchants who opted out (the “takedown payments”). By no later than August 16, 2013, the parties will submit to the court any disputes about the takedown payments.
Interchange Opt-out Litigation
On May 24, 2013, CVS Pharmacy, Inc. filed suit in the Eastern District of New York against Visa Inc., Visa U.S.A., Visa International, MasterCard Incorporated, and MasterCard International Incorporated. The CVS case has been included as part of MDL 1720. On May 28 and 29, 2013, Buc-ee's Ltd. and Shop Rite Inc. (and two other plaintiffs), respectively, filed suit in the Southern District of New York against Visa Inc., Visa U.S.A., Visa International, MasterCard Incorporated, and MasterCard International Incorporated. The Buc-ee's complaint also includes certain U.S. financial institution defendants in MDL 1720. On June 14, 2013, the Clerk of the Judicial Panel on Multidistrict Litigation transferred the Shop Rite and Buc-ee's cases to the Eastern District of New York for inclusion in MDL 1720. Plaintiffs in the CVS, Shop Rite, and Buc-ee's cases are pursuing damages claims based upon allegations similar to those raised in MDL 1720. As part of MDL 1720, these cases are covered litigation for purposes of the retrospective responsibility plan. See Note 2—Retrospective Responsibility Plan.
On May 24, 2013, Visa, MasterCard, and certain U.S. financial institution defendants in MDL 1720 filed a complaint in the Eastern District of New York against certain named class representative plaintiffs who had opted out or stated their intention to opt out of the damages portion of the MDL class settlement. On June 10, 2013, Visa filed a similar complaint in the Eastern District of New York against Wal-Mart Stores Inc. Both 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 MDL class settlement, Visa's conduct in, among other things, continuing to set default interchange rates, maintaining its “honor all cards” rule, enforcing certain rules relating to merchants, and restructuring itself, did not violate federal or state antitrust laws. Both cases have been assigned to the same district court judge presiding over MDL 1720.
On May 23, 2013, Target Corporation and a number of other plaintiffs filed suit in the Southern District of New York against Visa Inc., Visa U.S.A., Visa International, MasterCard Incorporated, and MasterCard International Incorporated. The plaintiffs are former class members of the damages class in MDL 1720 who opted out of the damages portion of the class settlement and are pursuing damages claims. Plaintiffs in the Target case are pursuing damages claims on allegations similar to those raised in MDL 1720. On June 6, 2013, the Clerk of the Judicial Panel on Multidistrict Litigation filed an order conditionally transferring the Target opt-out case to the Eastern District of New York for inclusion in MDL 1720 (see “Multidistrict Litigation Proceedings,” above). On June 13, 2013, the Target plaintiffs filed a Notice of Opposition to the conditional transfer order, and on June 27, 2013, the Target plaintiffs filed a motion to vacate the conditional transfer order. On June 26, 2013, a group of fifty-five merchants in a case known as 7-Eleven filed suit in the Southern District of New York against Visa Inc., Visa U.S.A., Visa International, MasterCard Incorporated, MasterCard International Incorporated, and certain U.S. financial institution defendants in MDL 1720. The allegations in the 7-Eleven case are similar to those that have been generally raised in MDL 1720, but also include allegations that Visa has monopolized, attempted to monopolize, and conspired to monopolize the debit card network services market in violation of Section 2 of the Sherman Act; and plaintiffs seek an injunction against the Fixed Acquirer Network Fee. On June 28, 2013, the defendants filed a notice of a tag-along action and requested that the Clerk of the Judicial Panel on Multidistrict Litigation transfer the 7-Eleven opt-out case to the Eastern District of New York for inclusion in MDL 1720 (see “Multidistrict Litigation Proceedings,” above). On July 12, 2013, the Clerk of the Judicial Panel on Multidistrict Litigation filed an order conditionally transferring the 7-Eleven opt-out case to the Eastern District of New York for inclusion in MDL 1720. On July 12, 2013, the 7-Eleven plaintiffs filed a Notice of Opposition to the conditional transfer order. The Target and 7-Eleven opt-out cases will be covered litigation for purposes of the retrospective responsibility plan (see Note 2—Retrospective Responsibility Plan) if transferred to or otherwise included in MDL 1720.
Other Litigation
“Indirect Purchaser” Actions. In the Credit/Debit Card Tying Cases, the court entered an order preliminarily approving the settlement on November 20, 2012. On April 11, 2013, the court entered an order finally approving the settlement and entered judgment. Objectors to the settlement have filed notices of appeal.
Vale Canjeable
In June 2013, the Venezuelan Supreme Court ruled in Visa and Todoticket's favor with respect to both appeals. The Supreme Court dismissed the plaintiff's claims of trademark infringement and damages in their entirety. The Supreme Court's decision furthermore invalidated the injunction ordered by the Fifth Municipal court effective immediately.
European Interchange Proceedings
European Commission. On March 8, 2013, Visa Inc. and Visa International received a redacted copy of the supplementary Statement of Objections (“SSO”) that was previously announced by the European Commission (“EC”) on July 31, 2012. On April 24, 2013, Visa Inc. and Visa International received a less redacted version of the SSO from the EC, but to date have not received a complete copy of the SSO without redactions. The SSO alleges a breach of Article 101 of the Treaty on the Functioning of the European Union and Article 53 of the European Economic Area Agreement. Among other things, the SSO asserts claims jointly against Visa Europe, Visa Inc., and Visa International, objecting to: (1) the level of domestic credit interchange, primarily in the following eight European Economic Area member states: Ireland, Luxembourg, Sweden, Italy, Malta, Netherlands, Belgium, and Hungary; (2) the level of cross-border credit interchange for transactions at European merchants with respect to cards issued both in Europe and outside of Europe, and seeking the substantial reduction of both domestic and such cross-border credit interchange; (3) Visa Europe's rule prohibiting cross-border acquiring; and (4) other point-of-sale rules, such as the “Honor All Cards” and “no-surcharge” rules. The SSO also announces the EC's intention to impose fines. The potential amount of any fine resulting from the action could be substantial but cannot be estimated at this time. Visa Europe is obligated to indemnify Visa Inc. and Visa International in connection with this proceeding, in our opinion, including payment of any fines that may be imposed. However, on April 4, 2013, Visa Europe expressed an "initial" view that it is not obligated to indemnify Visa Inc. or Visa International for any claim in the SSO. Visa Inc. continues to firmly believe that Visa Europe is obligated to indemnify for all claims contained in the SSO, and has been in discussions with Visa Europe to resolve this issue. Both parties have initiated a dispute resolution procedure contemplated by the Framework Agreement to resolve their dispute regarding this indemnification issue.
Visa Europe has offered commitments addressing domestic interchange, cross-border interchange within Europe, cross-border acquiring within Europe, and other Visa Europe rules. The EC will consider whether to accept those commitments after a period of public comment.

Threatened Merchant Litigation. On March 22, 2013, Visa Inc. learned that counsel for private merchant plaintiffs have threatened to file litigation against Visa Europe, Visa Inc., and Visa International with respect to interchange rates in Europe. While the amount of interchange being challenged could be substantial, the full scope of the claims is not known at this time. On March 28, 2013, Visa Europe, Visa Inc., Visa International and the plaintiffs entered into (1) a standstill agreement, which tolled any limitation periods that would have been applicable to the claims which had not yet expired; and (2) a costs agreement, which preserved the then-current recoverability rules in the United Kingdom which changed on April 1, 2013. Visa Europe is obligated to indemnify Visa Inc. and Visa International in connection with this proceeding, in our opinion, and Visa Europe has agreed to bear certain costs contemplated by the standstill agreement. However, on April 4, 2013, Visa Europe expressed an "initial" view that they are not obligated to indemnify Visa Inc. or Visa International for claims included within this threatened litigation. Visa Inc. continues to firmly believe that Visa Europe is obligated to indemnify for these claims, and has been in discussions with Visa Europe to resolve this issue. Both parties have initiated a dispute resolution procedure contemplated by the Framework Agreement to resolve their dispute regarding this indemnification issue.
Canadian Competition Proceedings
Competition Bureau. On July 23, 2013, the Competition Tribunal ruled in favor of Visa Canada and MasterCard, dismissing the Commissioner of Competition's challenges to Visa's "no-surcharge" and "honour all cards" policies. The Competition Tribunal found that the Commissioner failed to establish that either policy constituted resale price maintenance under Section 76 of the Competition Act.
Merchant Litigation. In the Watson case, the plaintiff's reply materials in support of class certification were received on November 30, 2012. The class certification hearing commenced on April 22, 2013 and concluded on May 1, 2013.
On December 3, 2012, plaintiff's counsel in the 1023926 Alberta Ltd. action filed an application for certification of a class action. On December 14, 2012, the Watson plaintiff's counsel filed another merchant class action in Alberta (Macaronies Hair Club and Laser Centre Inc.) which effectively mirrors the claims in the Watson case. Following a hearing on defendants' applications to stay the Alberta actions, the court ordered that both Alberta actions be stayed pending the decision in the Watson case and on the condition that the Watson class definition be amended to include Alberta residents.
On January 4, 2013, plaintiff's counsel in the Canada Rent A Heater (2000) Ltd. action (now titled Crown and Hand Pub Ltd.) filed an application for certification of a class action. On January 23, 2013, the Watson plaintiff's counsel filed another action in Saskatchewan (Hello Baby Equipment Inc.) which effectively mirrors the claims in the Watson case.
Dynamic Currency Conversion (“DCC”)
On February 4, 2013, the Australian Competition and Consumer Commission (“ACCC”) commenced proceedings in the Federal Court of Australia against Visa Inc., Visa U.S.A., V.W.P.L., and Visa AP (Australia) Pty Limited alleging that certain Visa policies related to the provision of DCC services violated Australian competition law. Among other things, the ACCC alleges that: (1) from May 2010 to October 2010, Visa prohibited DCC services with respect to transactions on Visa international payment cards conducted at Australian merchant outlets that had not previously been conducting DCC transactions; and (2) from at least May 2007, Visa prohibited DCC services with respect to cash withdrawals at Australian ATMs on Visa international payment cards. The ACCC seeks declaratory relief and a monetary fine. The potential amount of any fine cannot be estimated at this time.
On June 6, 2013, Visa filed its response to the ACCC's allegations.
U.S. ATM Access Fee Litigation
On February 13, 2013, the court granted the motion to dismiss and dismissed the cases without prejudice. On March 12, 2013, plaintiffs in the National ATM Council class action and the consumer class actions moved for an order altering or amending the court's February 13, 2013 order to provide that (1) the complaints (as opposed to the cases) are dismissed without prejudice, and (2) plaintiffs may move to amend their complaints. On April 15, 2013, plaintiffs in the National ATM Council class action and the Stoumbos case moved for leave to file amended complaints. On April 18, 2013, plaintiffs in the Mackmin case moved for leave to file an amended complaint. Defendants filed responses opposing the motions on the grounds that they are not procedurally proper and would be futile in any event. On April 24, 2013, the court ordered the defendants to file further detailed responses, addressing futility in particular. Briefing on the motions is complete.
Consumer Financial Protection Bureau. On February 7, 2013, Visa received a letter from the Consumer Financial Protection Bureau (“CFPB”) seeking documents and information, on a voluntary basis, regarding Visa's practices with respect to the conversion of U.S. cardholder foreign transactions from foreign currency into U.S. dollars. On March 20, 2013, Visa met with the CFPB and provided information and materials in response to the requests. Visa is continuing to cooperate with the CFPB's inquiry.
Summary of Significant Accounting Policies (Policies)
Organization 
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 
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 adopted accounting pronouncements 
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.
Retrospective Responsibility Plan (Tables)
Schedule of Restricted Cash and Cash Equivalents
The following table summarizes activity related to the litigation escrow account.
 
(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 and Investments Fair Value Measurements and Investments (Tables)
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis
Assets and Liabilities Measured at Fair Value on a Recurring Basis.
 
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 and Other Postretirement Benefits (Tables)
Schedule of Defined Benefit Plans Disclosures
The components of net periodic benefit cost are as follows:
 
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
)
Settlement Guarantee Management (Tables)
Schedule of Customer Collateral
The Company maintained collateral as follows:
 
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

Stockholders' Equity (Tables)
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:
(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.
Share Repurchase Program Disclosure 
The following table presents share repurchases in the open market.
(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.
Earnings Per Share (Tables)
Schedule of Earnings Per Share, Basic and Diluted
The following table presents earnings per share for the three months ended June 30, 2013.(1)     
 
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

 
 
 
 
 
 
 
 
 
 
 
The following table presents earnings per share for the nine months ended June 30, 2013.(1)     
 
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

 
 
 
 
 
 
 
 
 
 
 
The following table presents loss per share for the three months ended June 30, 2012.(1)
 
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
)
 
 
 
 
 
 
 
 
 
 
 
The following table presents earnings per share for the nine months ended June 30, 2012. (1)     
 
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.
Share-based Compensation (Tables)
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:
 
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.
Legal Matters (Tables)
Schedule of Loss Contingencies by Contingency
The following table summarizes activity related to accrued litigation.
 
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.
Retrospective Responsibility Plan Changes in the Escrow Account (Details) (USD $)
In Millions, unless otherwise specified
9 Months Ended
Jun. 30, 2013
Sep. 30, 2012
Jun. 30, 2013
Class plaintiffs
Jun. 30, 2013
Individual plaintiffs
Escrow Account [Roll Forward]
 
 
 
 
Balance at October 1, 2012
$ 49 
$ 4,432 
 
 
Payments to settlement funds
 
 
(4,033)1
(350)1
Balance at June 30, 2013
$ 49 
$ 4,432 
 
 
Fair Value Measurements and Investments - Additional Information (Detail) (USD $)
In Millions, unless otherwise specified
9 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Sep. 30, 2012
Fair Value, Measurement Inputs, Disclosure [Line Items]
 
 
 
Payments from litigation escrow account-Retrospective Responsibility Plan
$ 4,383 
$ 140 
 
Probability of exercise by Visa Europe
40.00% 
 
 
P/E differential at the time of exercise
1.9x 
 
 
P/E differential at the time of exercise, ratio
190.00% 
 
 
Spot price to earnings
21.0x 
 
 
Spot price to earnings, ratio
2,100.00% 
 
 
Incremental price to earnings differential compared to estimate
2.4x 
 
 
Incremental price to earnings differential compared to estimate, ratio
240.00% 
 
 
Incremental probability of exercise by Visa Europe
5.00% 
 
 
Incremental Assumed Price to Earnings Differential at Time of Exercise
1.0x 
 
 
Incremental P/E differential at time of exercise, ratio
100.00% 
 
 
Increase in put option value due to increase in price to earnings differential
84 
 
 
Increase in put option value due to increase in probability of exercise
18 
 
 
Other than Temporary Impairment Losses, Investments
15 
 
 
Equity method investments, reclassified as available-for-sale securities, carrying value
12 
 
 
Available-for-sale securities, previously classified as equity method Investments, fair value disclosure
57 
 
 
Available-for-sale securities, previously classified as equity method investments, gross unrealized gains
45 
 
 
Available-for-sale securities, gross unrealized gains
48 
 
4 
Available-for-sale securities, gross unrealized losses
6 
 
1 
Fair Value, Measurements, Recurring
 
 
 
Fair Value, Measurement Inputs, Disclosure [Line Items]
 
 
 
Visa Europe put option
145 
 
145 
Non Marketable Equity Investments
 
 
 
Fair Value, Measurement Inputs, Disclosure [Line Items]
 
 
 
Non-marketable equity investments
$ 54 
 
$ 86 
Fair Value Measurements and Investments Assets and Liabilities Measured at Fair Value on a Recurring Basis (Details) (Fair Value, Measurements, Recurring, USD $)
In Millions, unless otherwise specified
Jun. 30, 2013
Sep. 30, 2012
Accrued liabilities
 
 
Visa Europe put option
$ 145 
$ 145 
Level 1
 
 
Prepaid and other current assets:
 
 
Fair value, total assets
2,327 
6,810 
Accrued liabilities
 
 
Fair value, total liabilities
0 
0 
Level 2
 
 
Prepaid and other current assets:
 
 
Fair value, total assets
3,467 
2,990 
Accrued liabilities
 
 
Fair value, total liabilities
6 
11 
Level 3
 
 
Prepaid and other current assets:
 
 
Fair value, total assets
7 
7 
Accrued liabilities
 
 
Fair value, total liabilities
145 
157 
Visa Europe put option |
Level 3
 
 
Accrued liabilities
 
 
Visa Europe put option
145 
145 
Earn-out related to PlaySpan acquisition |
Level 3
 
 
Accrued liabilities
 
 
Earn-out related to PlaySpan acquisition
0 
12 
Foreign exchange derivative instruments |
Level 2
 
 
Accrued liabilities
 
 
Foreign exchange derivative instruments
6 
11 
Money market funds |
Level 1
 
 
Cash equivalents and restricted cash:
 
 
Cash equivalents and restricted cash:
620 
5,676 
Commercial paper |
Level 2
 
 
Cash equivalents and restricted cash:
 
 
Cash equivalents and restricted cash:
52 
93 
Equity securities |
Level 1
 
 
Investment securities:
 
 
Trading securities
73 
66 
Available-for-sale securities
60 
2 
U.S. government-sponsored debt securities |
Level 2
 
 
Investment securities:
 
 
Available-for-sale securities
2,880 
2,821 
U.S. Treasury securities |
Level 1
 
 
Investment securities:
 
 
Available-for-sale securities
1,574 
1,066 
Corporate Debt Securities [Member] |
Level 2
 
 
Investment securities:
 
 
Available-for-sale securities
491 
63 
Auction rate securities |
Level 3
 
 
Investment securities:
 
 
Available-for-sale securities
7 
7 
Foreign exchange derivative instruments |
Level 2
 
 
Prepaid and other current assets:
 
 
Prepaid and other current assets:
$ 44 
$ 13 
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. 9, 2014
Commercial paper
Feb. 7, 2013
Commercial paper
Feb. 6, 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% 
 
 
 
 
 
 
 
Components of Net Periodic Benefit Cost (Detail) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Jun. 30, 2013
Jun. 30, 2012
Pension Benefits
 
 
 
 
Defined Benefit Plan Disclosure [Line Items]
 
 
 
 
Service cost
$ 10 
$ 10 
$ 32 
$ 29 
Interest cost
9 
10 
27 
30 
Expected return on assets
(16)
(14)
(47)
(41)
Amortization of:
 
 
 
 
Prior service credit
(2)
(2)
(7)
(7)
Actuarial loss
8 
8 
22 
24 
Settlement loss
0 
3 
0 
3 
Total net periodic benefit cost
9 
15 
27 
38 
Other Postretirement Benefits
 
 
 
 
Defined Benefit Plan Disclosure [Line Items]
 
 
 
 
Service cost
   
   
   
   
Interest cost
   
   
   
1 
Expected return on assets
   
   
   
   
Amortization of:
 
 
 
 
Prior service credit
(1)
   
(2)
(2)
Actuarial loss
   
   
   
   
Settlement loss
0 
0 
0 
0 
Total net periodic benefit cost
$ (1)
    
$ (2)
$ (1)
Settlement Guarantee Management - Additional Information (Detail) (USD $)
Jun. 30, 2013
Sep. 30, 2012
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 
Collateral (Detail) (USD $)
In Millions, unless otherwise specified
Jun. 30, 2013
Sep. 30, 2012
Settlement Guarantee Management [Abstract]
 
 
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 
Number of Shares of Class A Common Shares Outstanding on an As-Converted Basis (Detail)
In Millions, unless otherwise specified
Jun. 30, 2013
Sep. 30, 2012
Schedule of Common Stock as Converted [Line Items]
 
 
As-converted Class A Common Stock
645 1
 
Class A common stock
 
 
Schedule of Common Stock as Converted [Line Items]
 
 
Shares Outstanding
515 
535 
Conversion Rate Into Class A Common Stock
   
 
As-converted Class A Common Stock
515 1
 
Class B common stock
 
 
Schedule of Common Stock as Converted [Line Items]
 
 
Shares Outstanding
245 
245 
Conversion Rate Into Class A Common Stock
0.4206 
 
As-converted Class A Common Stock
103 1
 
Class C common stock
 
 
Schedule of Common Stock as Converted [Line Items]
 
 
Shares Outstanding
27 
31 
Conversion Rate Into Class A Common Stock
1.0000 
 
As-converted Class A Common Stock
27 1
 
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 
Stockholders' Equity - Additional Information (Detail) (USD $)
1 Months Ended 9 Months Ended
Jul. 24, 2013
Jun. 30, 2013
Jul. 16, 2013
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
 
 
 
Stockholders' Equity Note [Line Items]
 
 
 
Dividends Payable, Amount Per Share (in USD per Share)
 
 
$ 0.33 
Basic and Diluted Earnings Per Share (Detail) (USD $)
In Millions, except Per Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Jun. 30, 2013
Jun. 30, 2012
Schedule of Earnings Per Share, Basic and Diluted, by Common Class [Line Items]
 
 
 
 
Net loss attributable to Visa Inc.
$ 1,225 1 2
$ (1,839)1 2
$ 3,788 1 2
$ 482 1 2
Class A common stock
 
 
 
 
Schedule of Earnings Per Share, Basic and Diluted, by Common Class [Line Items]
 
 
 
 
Income Allocation (A)
973 1 2
(1,437)1 2
3,014 1 2
372 1 2
Weighted- Average Shares Outstanding (B)
515 1
525 1
524 1
523 1
Earnings per Share (A)/(B)
$ 1.89 1
$ (2.74)1
$ 5.76 1
$ 0.71 1
Income Allocation (A)
1,225 1 2
(1,839)1 2
3,788 1 2
482 1 2
Weighted- Average Shares Outstanding (B)
651 1 3
672 1 3
660 1 3
681 1 3
Earnings per Share (A)/(B)
$ 1.88 1
$ (2.74)1
$ 5.74 1
$ 0.71 1
Class B common stock
 
 
 
 
Schedule of Earnings Per Share, Basic and Diluted, by Common Class [Line Items]
 
 
 
 
Income Allocation (A)
194 1 2
(286)1 2
594 1 2
78 1 2
Weighted- Average Shares Outstanding (B)
245 1
245 1
245 1
245 1
Earnings per Share (A)/(B)
$ 0.79 1
$ (1.16)1
$ 2.42 1
$ 0.32 1
Income Allocation (A)
194 1 2
(286)1 2
592 1 2
78 1 2
Weighted- Average Shares Outstanding (B)
245 1
245 1
245 1
245 1
Earnings per Share (A)/(B)
$ 0.79 1
$ (1.16)1
$ 2.41 1
$ 0.32 1
Class C common stock
 
 
 
 
Schedule of Earnings Per Share, Basic and Diluted, by Common Class [Line Items]
 
 
 
 
Income Allocation (A)
53 1 2
(109)1 2
166 1 2
30 1 2
Weighted- Average Shares Outstanding (B)
28 1
40 1
29 1
43 1
Earnings per Share (A)/(B)
$ 1.89 1
$ (2.74)1
$ 5.76 1
$ 0.71 1
Income Allocation (A)
53 1 2
(109)1 2
165 1 2
30 1 2
Weighted- Average Shares Outstanding (B)
28 1
40 1
29 1
43 1
Earnings per Share (A)/(B)
$ 1.88 1
$ (2.74)1
$ 5.74 1
$ 0.71 1
Participating securities
 
 
 
 
Schedule of Earnings Per Share, Basic and Diluted, by Common Class [Line Items]
 
 
 
 
Income Allocation (A)
5 1 2 4
(7)1 2 4
14 1 2 4
2 1 2 4
Income Allocation (A)
$ 5 1 2 4
$ (7)1 2 4
$ 14 1 2 4
$ 2 1 2 4
Stock Options
 
 
 
 
Schedule of Earnings Per Share, Basic and Diluted, by Common Class [Line Items]
 
 
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount
 
7 
 
 
[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.
Basic and Diluted Earnings Per Share (Parenthetical) (Detail)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Jun. 30, 2013
Jun. 30, 2012
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
 
 
 
 
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
 
 
 
 
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
 
 
 
 
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 
Awards Granted to Company Employees and Non-employee Directors Under the 2007 Equity Incentive Compensation Plan (Detail) (USD $)
9 Months Ended
Jun. 30, 2013
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
Income Taxes - Additional Information (Detail) (USD $)
3 Months Ended 9 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Mar. 31, 2012
Jun. 30, 2013
Jun. 30, 2012
Income Tax Disclosure [Abstract]
 
 
 
 
 
Effective Income Tax Rate, Continuing Operations
33.00% 
29.00% 
 
31.00% 
22.00% 
Tax benefit recognized related to CA apportionment rules
$ 76,000,000 
 
 
 
 
Income Tax Impact From Remeasurement Of Deferred Taxes
 
 
208,000,000 
 
 
Unrecognized Tax Benefits, Period Increase (Decrease)
10,000,000 
 
 
231,000,000 
 
Unrecognized Tax Benefits that Would Impact Effective Tax Rate, Period Increase (Decrease)
8,000,000 
 
 
179,000,000 
 
Unrecognized Tax Benefits, Change in Interest on Income Taxes Accrued
4,000,000 
9,000,000 
 
1,000,000 
15,000,000 
Increase (decrease) In Unrecognized Tax Benefits, Penalties On Income Taxes Accrued
0 
2,000,000 
 
0 
   
Reclassification from deferred tax assets to income tax receivable
 
 
 
1,600,000,000 
 
Payments from litigation escrow account—retrospective responsibility plan (Note 2)
 
 
 
$ 4,383,000,000 
$ 140,000,000 
Legal Matters - Additional Information (Detail) (Class plaintiffs, USD $)
In Millions, unless otherwise specified
9 Months Ended
Jun. 30, 2013
Class plaintiffs
 
Loss Contingencies [Line Items]
 
Payments on litigation matters
$ 4,033 1
Accrued Litigation for Both Covered and Non-Covered Litigation (Detail) (USD $)
In Millions, unless otherwise specified
9 Months Ended
Jun. 30, 2013
Sep. 30, 2012
Jun. 30, 2012
Sep. 30, 2011
Jun. 30, 2013
Settled
Jun. 30, 2012
Settled
Jun. 30, 2013
Unsettled
Jun. 30, 2012
Unsettled
Loss Contingency Accrual [Roll Forward]
 
 
 
 
 
 
 
 
Balance at October 1
$ 5 
$ 4,386 
$ 4,384 
$ 425 
 
 
 
 
Provision for unsettled matters
 
 
 
 
 
 
3 
4,098 
Interest accretion on settled matters
 
 
 
 
   
1 
 
 
Payments to settlement funds
 
 
 
 
(351)
(140)
(4,033)1
   1
Balance at June 30
$ 5 
$ 4,386 
$ 4,384 
$ 425