VISA INC. (Form: 10-Q, Received: 01/31/2020 16:07:28)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q



☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2019



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 001-33977

VISA INC.

(Exact name of Registrant as specified in its charter)



Delaware		26-0267673
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

P.O. Box 8999		94128-8999
San Francisco,	California
(Address of principal executive offices)		(Zip Code)

(650) 432-3200

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol	Name of each exchange on which registered
Class A Common Stock, par value $0.0001 per share	V	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	☑	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of January 24, 2020, there were 1,706,024,403 shares outstanding of the registrant’s class A common stock, par value $0.0001 per share, 245,513,385 shares outstanding of the registrant’s class B common stock, par value $0.0001 per share, and 10,969,172 shares outstanding of the registrant’s class C common stock, par value $0.0001 per share.

Table of Contents

VISA INC.

TABLE OF CONTENTS




		Page
PART I.	Financial Information	4

Item 1.	Financial Statements (unaudited)	4
	Consolidated Balance Sheets—December 31, 2019 and September 30, 2019	4
	Consolidated Statements of Operations—Three Months Ended December 31, 2019 and 2018	5
	Consolidated Statements of Comprehensive Income—Three Months Ended December 31, 2019 and 2018	6
	Consolidated Statements of Changes in Equity—Three Months Ended December 31, 2019 and 2018	7
	Consolidated Statements of Cash Flows—Three Months Ended December 31, 2019 and 2018	9
	Notes to Consolidated Financial Statements (unaudited)	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4.	Controls and Procedures	31

PART II.	Other Information	32

Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	32
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	32
Item 3.	Defaults Upon Senior Securities	32
Item 4.	Mine Safety Disclosures	32
Item 5.	Other Information	32
Item 6.	Exhibits	33
	Signatures	34

Table of Contents

PART I. FINANCIAL INFORMATION



ITEM 1.	Financial Statements

VISA INC.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)



	December 31, 2019			September 30, 2019
	(in millions, except par value data)
Assets
Cash and cash equivalents	$	8,768		$	7,838
Restricted cash equivalents—U.S. litigation escrow (Note 3 and Note 4)	1,634			1,205
Investment securities (Note 5)	3,902			4,236
Settlement receivable	3,273			3,048
Accounts receivable	1,661			1,542
Customer collateral (Note 3 and Note 8)	1,698			1,648
Current portion of client incentives	803			741
Prepaid expenses and other current assets	580			712
Total current assets	22,319			20,970
Investment securities (Note 5)	1,719			2,157
Client incentives	2,481			2,084
Property, equipment and technology, net	2,739			2,695
Goodwill	15,767			15,656
Intangible assets, net	27,137			26,780
Other assets	2,619			2,232
Total assets	$	74,781		$	72,574
Liabilities
Accounts payable	$	133		$	156
Settlement payable	4,277			3,990
Customer collateral (Note 3 and Note 8)	1,698			1,648
Accrued compensation and benefits	527			796
Client incentives	4,270			3,997
Accrued liabilities	2,045			1,625
Current maturities of long-term debt (Note 7)	3,000			—
Accrued litigation (Note 13)	1,629			1,203
Total current liabilities	17,579			13,415
Long-term debt (Note 7)	13,688			16,729
Deferred tax liabilities	4,810			4,807
Other liabilities	3,434			2,939
Total liabilities	39,511			37,890
Equity
Preferred stock, $0.0001 par value, 25 shares authorized and 5 shares issued and outstanding as follows:
Series A convertible participating preferred stock, none issued (the “class A equivalent preferred stock”) (Note 9)	—			—
Series B convertible participating preferred stock, 2 shares issued and outstanding at December 31, 2019 and September 30, 2019 (the “UK&I preferred stock”) (Note 4 and Note 9)	2,285			2,285
Series C convertible participating preferred stock, 3 shares issued and outstanding at December 31, 2019 and September 30, 2019 (the “Europe preferred stock”) (Note 4 and Note 9)	3,177			3,177
Class A common stock, $0.0001 par value, 2,001,622 shares authorized, 1,709 and 1,718 shares issued and outstanding at December 31, 2019 and September 30, 2019, respectively (Note 9)	—			—
Class B common stock, $0.0001 par value, 622 shares authorized, 245 shares issued and outstanding at December 31, 2019 and September 30, 2019 (Note 9)	—			—
Class C common stock, $0.0001 par value, 1,097 shares authorized, 11 shares issued and outstanding at December 31, 2019 and September 30, 2019 (Note 9)	—			—
Right to recover for covered losses (Note 4)	(175		)	(171		)
Additional paid-in capital	16,424			16,541
Accumulated income	13,899			13,502
Accumulated other comprehensive income (loss), net:
Investment securities	4			6
Defined benefit pension and other postretirement plans	(203		)	(192		)
Derivative instruments	49			199
Foreign currency translation adjustments	(190		)	(663		)
Total accumulated other comprehensive income (loss), net	(340		)	(650		)
Total equity	35,270			34,684
Total liabilities and equity	$	74,781		$	72,574

See accompanying notes, which are an integral part of these unaudited consolidated financial statements.

Table of Contents

VISA INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)



	Three Months Ended December 31,
	2019			2018
	(in millions, except per share data)
Net revenues	$	6,054		$	5,506

Operating Expenses
Personnel	982			807
Marketing	274			276
Network and processing	181			173
Professional fees	106			91
Depreciation and amortization	182			159
General and administrative	313			276
Litigation provision (Note 13)	—			7
Total operating expenses	2,038			1,789
Operating income	4,016			3,717

Non-operating Income (Expense)
Interest expense, net	(111		)	(145		)
Investment income and other	69			58
Total non-operating income (expense)	(42		)	(87		)
Income before income taxes	3,974			3,630
Income tax provision (Note 12)	702			653
Net income	$	3,272		$	2,977

Basic Earnings Per Share (Note 10)
Class A common stock	$	1.46		$	1.30
Class B common stock	$	2.37		$	2.12
Class C common stock	$	5.85		$	5.20

Basic Weighted-average Shares Outstanding (Note 10)
Class A common stock	1,713			1,760
Class B common stock	245			245
Class C common stock	11			12

Diluted Earnings Per Share (Note 10)
Class A common stock	$	1.46		$	1.30
Class B common stock	$	2.37		$	2.12
Class C common stock	$	5.84		$	5.20

Diluted Weighted-average Shares Outstanding (Note 10)
Class A common stock	2,240			2,291
Class B common stock	245			245
Class C common stock	11			12

See accompanying notes, which are an integral part of these unaudited consolidated financial statements.

Table of Contents

VISA INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)



	Three Months Ended December 31,
	2019			2018
	(in millions)
Net income	$	3,272		$	2,977
Other comprehensive income (loss), net of tax:
Investment securities:
Net unrealized gain (loss)	—			8
Income tax effect	—			(2		)
Defined benefit pension and other postretirement plans:
Net unrealized actuarial gain (loss) and prior service credit (cost)	(1		)	(7		)
Income tax effect	—			1
Reclassification adjustments	4			—
Income tax effect	(1		)	—
Derivative instruments:
Net unrealized gain (loss)	(188		)	38
Income tax effect	39			(10		)
Reclassification adjustments	(2		)	(25		)
Income tax effect	1			5
Foreign currency translation adjustments	483			(287		)
Other comprehensive income (loss), net of tax	335			(279		)
Comprehensive income	$	3,607		$	2,698

See accompanying notes, which are an integral part of these unaudited consolidated financial statements.

Table of Contents

VISA INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(UNAUDITED)



	Three Months Ended December 31, 2019
	Preferred Stock		Common Stock					Preferred Stock		Right to Recover for Covered Losses			Additional Paid-In Capital			Accumulated Income			Accumulated Other Comprehensive Income (Loss), Net			Total Equity
	Series B	Series C	Class A		Class B	Class C
	(in millions, except per share data)
Balance as of September 30, 2019	2	3	1,718		245	11		$	5,462	$	(171	)	$	16,541		$	13,502		$	(650	)	$	34,684
Net income																3,272						3,272
Other comprehensive income (loss), net of tax																			335			335
Comprehensive income																						3,607
Adoption of new accounting standards (Note 1)																25			(25		)	—
VE territory covered losses incurred (Note 4)										(4		)										(4		)
Conversion of class C common stock upon sales into public market			1			—	⁽¹⁾															—
Vesting of restricted stock and performance-based shares			3																			—
Share-based compensation, net of forfeitures (Note 11)													116									116
Restricted stock and performance-based shares settled in cash for taxes			(1	)									(147		)							(147		)
Cash proceeds from issuance of common stock under employee equity plans			1										55									55
Cash dividends declared and paid, at a quarterly amount of $0.30 per as-converted share (Note 9)																(671		)				(671		)
Repurchase of class A common stock (Note 9)			(13	)									(141		)	(2,229		)				(2,370		)
Balance as of December 31, 2019	2	3	1,709		245	11		$	5,462	$	(175	)	$	16,424		$	13,899		$	(340	)	$	35,270


⁽¹⁾	Increase or decrease is less than one million shares.

See accompanying notes, which are an integral part of these unaudited consolidated financial statements.

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VISA INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY—(Continued)

(UNAUDITED)



	Three Months Ended December 31, 2018
	Preferred Stock		Common Stock						Preferred Stock			Right to Recover for Covered Losses			Additional Paid-In Capital			Accumulated Income			Accumulated Other Comprehensive Income (Loss), Net			Total Equity
	Series B	Series C	Class A			Class B	Class C
	(in millions, except per share data)
Balance as of September 30, 2018	2	3	1,768			245	12		$	5,470		$	(7	)	$	16,678		$	11,318		$	547		$	34,006
Net income																		2,977						2,977
Other comprehensive income (loss), net of tax																					(279		)	(279		)
Comprehensive income																								2,698
Adoption of new accounting standards																		393			7			400
VE territory covered losses incurred (Note 4)												(91		)										(91		)
Recovery through conversion rate adjustment (Note 4 and Note 9)									(6		)	6												—
Conversion of class C common stock upon sales into public market			—		⁽¹⁾		—	⁽¹⁾																—
Vesting of restricted stock and performance-based shares			3																					—
Share-based compensation, net of forfeitures (Note 11)															100									100
Restricted stock and performance-based shares settled in cash for taxes			(1	)											(101		)							(101		)
Cash proceeds from issuance of common stock under employee equity plans			1												48									48
Cash dividends declared and paid, at a quarterly amount of $0.25 per as-converted share (Note 9)																		(572		)				(572		)
Repurchase of class A common stock (Note 9)			(17	)											(185		)	(2,208		)				(2,393		)
Balance as of December 31, 2018	2	3	1,754			245	12		$	5,464		$	(92	)	$	16,540		$	11,908		$	275		$	34,095


⁽¹⁾	Increase or decrease is less than one million shares.

See accompanying notes, which are an integral part of these unaudited consolidated financial statements.

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VISA INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)



	Three Months Ended December 31,
	2019			2018
	(in millions)
Operating Activities
Net income	$	3,272		$	2,977
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Client incentives (Note 2)	1,748			1,456
Share-based compensation (Note 11)	116			100
Depreciation and amortization of property, equipment, technology and intangible assets	182			159
Deferred income taxes	(47		)	139
VE territory covered losses incurred (Note 4)	(4		)	(91		)
Other	(50		)	9
Change in operating assets and liabilities:
Settlement receivable	(183		)	(1,551		)
Accounts receivable	(107		)	(200		)
Client incentives	(1,943		)	(1,361		)
Other assets	123			(37		)
Accounts payable	(12		)	(46		)
Settlement payable	218			1,739
Accrued and other liabilities	136			(54		)
Accrued litigation (Note 13)	426			55
Net cash provided by (used in) operating activities	3,875			3,294
Investing Activities
Purchases of property, equipment and technology	(191		)	(157		)
Investment securities:
Purchases	(400		)	(1,124		)
Proceeds from maturities and sales	1,202			1,233
Acquisitions, net of cash acquired	(77		)	—
Purchases of / contributions to other investments	(9		)	(22		)
Proceeds / distributions from other investments	1			—
Other investing activities	36			—
Net cash provided by (used in) investing activities	562			(70		)
Financing Activities
Repurchase of class A common stock (Note 9)	(2,370		)	(2,393		)
Dividends paid (Note 9)	(671		)	(572		)
Cash proceeds from issuance of common stock under employee equity plans	55			48
Restricted stock and performance-based shares settled in cash for taxes	(147		)	(101		)
Net cash provided by (used in) financing activities	(3,133		)	(3,018		)
Effect of exchange rate changes on cash and cash equivalents	127			(68		)
Increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents	1,431			138
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period (Note 3)	10,832			10,977
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period (Note 3)	$	12,263		$	11,115
Supplemental Disclosure
Income taxes paid, net of refunds	$	345		$	168
Interest payments on debt	$	234		$	234
Accruals related to purchases of property, equipment and technology	$	66		$	34

See accompanying notes, which are an integral part of these unaudited consolidated financial statements.

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VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2019

(UNAUDITED)

Note 1—Summary of Significant Accounting Policies

Organization. Visa Inc. (“Visa” or the “Company”) is a global payments technology company that enables fast, secure and reliable electronic payments across more than 200 countries and territories. 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 Europe Limited (“Visa Europe”), Visa Canada Corporation (“Visa Canada”), Visa Technology & Operations LLC and CyberSource Corporation, operate one of the world’s largest electronic payments networks — VisaNet — which facilitates authorization, clearing and settlement of payment transactions and enables the Company to provide its financial institution and merchant clients a wide range of products, platforms and value-added services. Visa is not a financial institution and does not issue cards, extend credit or set rates and fees for account holders on Visa products. In most cases, account holder and merchant relationships belong to, and are managed by, Visa’s financial institution clients.

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 unaudited consolidated financial statements as of and for the periods presented. All significant intercompany accounts and transactions are eliminated in consolidation.

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, 2019 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 operations and cash flows for the interim periods presented.

Recently Issued and Adopted Accounting Pronouncements.

In February 2016, the FASB issued ASU 2016-02, which requires the recognition of lease assets and lease liabilities arising from operating leases on the balance sheet. Subsequently, the FASB also issued a series of amendments to this new leases standard that address the transition methods available and clarify the guidance for lessor costs and other aspects of the new leases standard. The Company adopted the standard effective October 1, 2019 using the modified retrospective transition method with comparative periods continuing to be reported using the prior leases standard. The Company elected to apply the package of practical expedients permitted under the transition guidance, allowing the Company to carry forward the historical assessment of whether a contract was or contains a lease, lease classification and capitalization of initial direct costs. The adoption did not have a material impact on the consolidated financial statements.

In accordance with ASU 2016-02, the Company determines if an arrangement is a lease at its inception. Right-of-use (“ROU”) assets, and corresponding lease liabilities, are recognized at the commencement date based on the present value of remaining lease payments over the lease term. For this purpose, the Company considers only payments that are fixed and determinable at the time of commencement. As a majority of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The ROU asset also includes any lease payments made prior to commencement and is recorded net of any lease incentives received. The lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options. The Company does not record a ROU asset and corresponding liability for leases with terms of 12 months or less.

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VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The Company does not include renewals in the determination of the lease term unless the renewals are deemed to be reasonably assured at lease commencement. Lease agreements generally contain lease and non-lease components. Non-lease components primarily include payments for maintenance and utilities. The Company does not combine lease payments with non-lease components for any of its leases. Operating leases are recorded as ROU assets, which are included in other assets. The current portion of lease liabilities are included in accrued liabilities and the long-term portion is included in other liabilities on the consolidated balance sheet. The Company’s lease cost consists of amounts recognized under lease agreements in the results of operations adjusted for impairment and sublease income.

In February 2018, the FASB issued ASU 2018-02, which allows a reclassification from accumulated other comprehensive income to retained earnings for adjustments to tax effects that were originally recorded in other comprehensive income due to changes in the U.S. federal corporate income tax rate resulting from the enactment of the U.S. tax reform legislation, commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Company adopted the ASU effective October 1, 2019. The adoption did not have a material impact on the consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, which simplifies the accounting for income taxes by removing certain exceptions to the general principles in the existing guidance for income taxes and making other minor improvements. The amendments in the ASU are effective for the Company on October 1, 2021. The Company does not plan to early adopt the ASU at this time. The adoption is not expected to have a material impact on the consolidated financial statements.

In January 2020, the FASB issued ASU 2020-01, which clarifies that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting for the purposes of applying the fair value measurement alternative. The amendments in the ASU are effective for the Company on October 1, 2021. The adoption is not expected to have a material impact on the consolidated financial statements.

Note 2—Revenues

The nature, amount, timing and uncertainty of the Company’s revenues and cash flows and how they are affected by economic factors are most appropriately depicted through the Company’s revenue categories and geographical markets. The following tables disaggregate the Company’s net revenues by revenue category and by geography for the three months ended December 31, 2019 and 2018:



	Three Months Ended December 31,
	2019			2018
	(in millions)
Service revenues	$	2,555		$	2,342
Data processing revenues	2,864			2,470
International transaction revenues	2,018			1,851
Other revenues	365			299
Client incentives	(1,748		)	(1,456		)
Net revenues	$	6,054		$	5,506



	Three Months Ended December 31,
	2019		2018
	(in millions)
U.S.	$	2,717	$	2,508
International	3,337		2,998
Net revenues	$	6,054	$	5,506

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VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 3—Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents

The Company’s cash and cash equivalents include cash and certain highly liquid investments with original maturities of 90 days or less from the date of purchase. Cash equivalents are primarily recorded at cost, which approximates fair value due to their generally short maturities. The Company defines restricted cash and restricted cash equivalents as cash and cash equivalents that cannot be withdrawn or used for general operating activities.

The Company reconciles cash, cash equivalents, restricted cash and restricted cash equivalents reported in the consolidated balance sheets that aggregate to the beginning and ending balances shown in the consolidated statements of cash flows as follows:



	December 31, 2019		September 30, 2019
	(in millions)
Cash and cash equivalents	$	8,768	$	7,838
Restricted cash and restricted cash equivalents:
U.S. litigation escrow	1,634		1,205
Customer collateral	1,698		1,648
Prepaid expenses and other current assets	163		141
Cash, cash equivalents, restricted cash and restricted cash equivalents	$	12,263	$	10,832

Note 4—U.S. and Europe Retrospective Responsibility Plans

U.S. Retrospective Responsibility Plan

Under the terms of the U.S. retrospective responsibility plan, the Company maintains an escrow account from which settlements of, or judgments in, certain litigation referred to as the “U.S. covered litigation” are paid. The escrow funds are held in money market investments along with interest income earned, less applicable taxes, and are classified as restricted cash equivalents on the consolidated balance sheets.

On December 13, 2019, the district court entered the final judgment order approving the Amended Settlement Agreement with the Damages Class plaintiffs in the Interchange Multidistrict Litigation proceedings. A takedown payment of approximately $467 million was received on December 27, 2019, and deposited into the Company’s litigation escrow account. The deposit into the litigation escrow account and reestablishment of a prior accrual to address opt-out claims was recorded during the three months ended December 31, 2019. The accrual related to the U.S. covered litigation could be either higher or lower than the litigation escrow account balance. See Note 13—Legal Matters.

The following table sets forth the changes in the restricted cash equivalents—U.S. litigation escrow account:



	Three Months Ended December 31,
	2019			2018
	(in millions)
Balance at beginning of period	$	1,205		$	1,491
Return of takedown payment to the litigation escrow account	467			—
Payments to opt-out merchants⁽¹⁾ and interest earned on escrow funds	(38		)	5
Balance at end of period	$	1,634		$	1,496


⁽¹⁾	These payments are associated with the Interchange Multidistrict Litigation. See Note 13—Legal Matters.

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VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Europe Retrospective Responsibility Plan

Visa Inc., Visa International and Visa Europe are parties to certain existing and potential litigation relating to the setting of multilateral interchange fee rates in the Visa Europe territory (the “VE territory covered litigation”). Under the terms of the Europe retrospective responsibility plan, the Company is entitled to recover certain losses resulting from VE territory covered litigation (the “VE territory covered losses”) through a periodic adjustment to the class A common stock conversion rates applicable to the UK&I and Europe preferred stock. VE territory covered losses are recorded in “right to recover for covered losses” within equity before the corresponding adjustment to the applicable conversion rate is effected. Adjustments to the conversion rate may be executed once in any six-month period unless a single, individual loss greater than €20 million is incurred, in which case, the six-month limitation does not apply. When the adjustment to the conversion rate is made, the amount previously recorded in “right to recover for covered losses” as contra-equity is then recorded against the book value of the preferred stock within stockholders’ equity. See Note 13—Legal Matters. There were no adjustments to the conversion rates during the three months ended December 31, 2019.

The following table sets forth the as-converted value of the preferred stock available to recover VE territory covered losses compared to the book value of preferred shares recorded in stockholders’ equity within the Company’s consolidated balance sheets as of December 31, 2019 and September 30, 2019:



	December 31, 2019						September 30, 2019
	As-Converted Value of Preferred Stock^(1),(2)			Book Value of Preferred Stock⁽¹⁾			As-Converted Value of Preferred Stock^(1),(3)			Book Value of Preferred Stock⁽¹⁾
	(in millions)
UK&I preferred stock	$	6,029		$	2,285		$	5,519		$	2,285
Europe preferred stock	8,236			3,177			7,539			3,177
Total	14,265			5,462			13,058			5,462
Less: right to recover for covered losses	(175		)	(175		)	(171		)	(171		)
Total recovery for covered losses available	$	14,090		$	5,287		$	12,887		$	5,291


⁽¹⁾	Figures in the table may not recalculate exactly due to rounding. As-converted and book values are based on unrounded numbers.

⁽²⁾

The as-converted value of preferred stock is calculated as the product of: (a) 2 million and 3 million shares of the UK&I and Europe preferred stock outstanding, respectively, as of December 31, 2019; (b) 12.936 and 13.884, the class A common stock conversion rate applicable to the UK&I and Europe preferred stock as of December 31, 2019, respectively; and (c) $187.90, Visa’s class A common stock closing stock price as of December 31, 2019.

⁽³⁾

The as-converted value of preferred stock is calculated as the product of: (a) 2 million and 3 million shares of the UK&I and Europe preferred stock outstanding, respectively, as of September 30, 2019; (b) 12.936 and 13.884, the class A common stock conversion rate applicable to the UK&I and Europe preferred stock as of September 30, 2019, respectively; and (c) $172.01, Visa’s class A common stock closing stock price as of September 30, 2019.

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VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 5—Fair Value Measurements and Investments

Assets and Liabilities Measured at Fair Value on a Recurring Basis



	Fair Value Measurements Using Inputs Considered as
	Level 1				Level 2
	December 31, 2019		September 30, 2019		December 31, 2019		September 30, 2019
	(in millions)
Assets
Cash equivalents and restricted cash equivalents:
Money market funds	$	7,539	$	6,494
U.S. government-sponsored debt securities					$	350	$	150
Investment securities:
Marketable equity securities	154		126
U.S. government-sponsored debt securities					4,565		5,592
U.S. Treasury securities	902		675
Other current and non-current assets:
Derivative instruments					274		437
Total	$	8,595	$	7,295	$	5,189	$	6,179
Liabilities
Accrued compensation and benefits:
Deferred compensation liability	$	141	$	113
Accrued and other liabilities:
Derivative instruments					$	99	$	52
Total	$	141	$	113	$	99	$	52

There were no transfers between Level 1 and Level 2 assets during the three months ended December 31, 2019.

Level 1 assets. Money market funds, marketable 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 Company’s deferred compensation liability is measured at fair value based on marketable equity securities held under the deferred compensation plan.

Level 2 assets and liabilities. The fair value of U.S. government-sponsored 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. 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 three months ended December 31, 2019.

U.S. government-sponsored debt securities and U.S. Treasury securities. The Company considers U.S. government-sponsored debt securities and U.S. Treasury securities to be available-for-sale and held $5.5 billion and $6.3 billion of these investment securities as of December 31, 2019 and September 30, 2019, respectively. All of the Company’s long-term available-for-sale investment securities are due within one to five years.

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VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Assets Measured at Fair Value on a Non-recurring Basis

Non-marketable equity securities. The Company’s non-marketable equity securities are investments in privately held companies without readily determinable market values. 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.

During the three months ended December 31, 2019, $9 million of upward adjustments and no downward adjustments were included in the carrying value of non-marketable equity securities. During the three months ended December 31, 2019 and 2018, there were no significant impairments. The following table summarizes the total carrying value of the Company’s non-marketable equity securities held as of December 31, 2019 including cumulative unrealized gains and losses:



	December 31, 2019
	(in millions)
Initial cost basis	$	595
Upward adjustments	119
Downward adjustments (including impairment)	(4		)
Carrying amount, end of period	$	710

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 and trade names, 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, 2019, and concluded that there was no impairment. No recent events or changes in circumstances indicate that impairment existed at December 31, 2019.

Gains and Losses on Marketable and Non-marketable Equity Securities

Gains and losses on the Company’s equity securities are summarized below.



	Three Months Ended December 31,
	2019		2018
	(in millions)
Net gain (loss) on equity securities sold during the period	$	4	$	—
Unrealized gain (loss) on equity securities held as of the end of the period	14		(20		)
Total gain (loss) recognized in non-operating income (expense), net	$	18	$	(20	)

Other Fair Value Disclosures

Long-term debt. Debt instruments are measured at amortized cost on the Company’s consolidated balance sheets. The fair value of the debt instruments, 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. If measured at fair value in the financial statements, these instruments would be classified as Level 2 in the fair value hierarchy. The carrying value and estimated fair value of long-term debt was $16.7 billion and $18.3 billion, respectively, as of December 31, 2019. The carrying value and estimated fair value of long-term debt was $16.7 billion and $18.4 billion, respectively, as of September 30, 2019.

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VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Other financial instruments not measured at fair value. The following financial instruments are not measured at fair value on the Company’s unaudited consolidated balance sheet at December 31, 2019, but disclosure of their fair values is required: settlement receivable and payable, accounts receivable and customer collateral. The estimated fair value of such instruments at December 31, 2019 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.

Note 6—Leases

The Company entered into various operating lease agreements primarily for real estate. The Company's leases have original lease periods expiring between fiscal 2020 and 2030. Many leases include one or more options to renew. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants. Payments under the Company’s lease arrangements are generally fixed. At December 31, 2019, the Company had no finance leases.

During the three months ended December 31, 2019, total operating lease cost was $26 million. At December 31, 2019, the weighted average remaining lease term for operating leases was approximately 7 years and the weighted average discount rate for operating leases was 2.31%.

At December 31, 2019, the present value of future minimum lease payments was as follows:



	December 31, 2019
	(in millions)
Remainder of 2020	$	82
2021	108
2022	93
2023	86
2024	73
Thereafter	186
Total undiscounted lease payments	628
Less: imputed interest	(54		)
Present value of lease liabilities	$	574

At December 31, 2019, the Company had additional operating leases that had not yet commenced with lease obligations of $507 million. These operating leases will commence between fiscal 2020 and 2023 with non-cancellable lease terms of 5 to 15 years.

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VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 7—Debt

The Company had outstanding debt as follows:



	December 31, 2019			September 30, 2019			Effective Interest Rate⁽¹⁾
	(in millions, except percentages)
2.20% Senior Notes due December 2020	$	3,000		$	3,000		2.30	%
2.15% Senior Notes due September 2022	1,000			1,000			2.30	%
2.80% Senior Notes due December 2022	2,250			2,250			2.89	%
3.15% Senior Notes due December 2025	4,000			4,000			3.26	%
2.75% Senior Notes due September 2027	750			750			2.91	%
4.15% Senior Notes due December 2035	1,500			1,500			4.23	%
4.30% Senior Notes due December 2045	3,500			3,500			4.37	%
3.65% Senior Notes due September 2047	750			750			3.73	%
Total senior notes	16,750			16,750
Unamortized discounts and debt issuance costs	(105		)	(108		)
Hedge accounting fair value adjustments⁽²⁾	43			87
Less: current maturities of long-term debt	(3,000		)	—
Total long-term debt	$	13,688		$	16,729


⁽¹⁾	Effective interest rates disclosed do not reflect hedge accounting adjustments.


⁽²⁾	Represents the change in fair value of interest rate swap agreements entered into on a portion of the outstanding Senior Notes.

Note 8—Settlement Guarantee Management

The Company indemnifies its clients for settlement losses suffered due to failure of any other client to fund its settlement obligations in accordance with the Visa operating rules. This indemnification creates settlement risk for the Company due to the difference in timing between the date of a payment transaction and the date of subsequent settlement.

Historically, the Company has experienced minimal losses as a result of its settlement risk guarantee. However, the Company’s future obligations, which could be material under its guarantees, are not determinable as they are dependent upon future events.

The Company’s settlement exposure is limited to the amount of unsettled Visa payment transactions at any point in time, which vary significantly day to day. The Company’s maximum daily settlement exposure was $97.3 billion and the average daily settlement exposure was $59.2 billion during the three months ended December 31, 2019.

The Company maintains and regularly reviews global settlement risk policies and procedures to manage settlement exposure, which may require clients to post collateral if certain credit standards are not met. At December 31, 2019 and September 30, 2019, the Company held collateral as follows:



	December 31, 2019		September 30, 2019
	(in millions)
Restricted cash and restricted cash equivalents	$	1,698	$	1,648
Pledged securities at market value	241		259
Letters of credit	1,325		1,293
Guarantees	506		477
Total	$	3,770	$	3,677

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VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 9—Stockholders’ Equity

As-converted class A common stock. The following table presents the number of shares of each series and class of stock and the number of shares of class A common stock on an as-converted basis:



	December 31, 2019				September 30, 2019
	Shares Outstanding	Conversion Rate Into Class A Common Stock		As-converted Class A Common Stock⁽¹⁾	Shares Outstanding	Conversion Rate Into Class A Common Stock		As-converted Class A Common Stock⁽¹⁾
	(in millions, except conversion rates)
UK&I preferred stock	2	12.9360		32	2	12.9360		32
Europe preferred stock	3	13.8840		44	3	13.8840		44
Class A common stock⁽²⁾	1,709	—		1,709	1,718	—		1,718
Class B common stock	245	1.6228	⁽³⁾	398	245	1.6228	⁽³⁾	398
Class C common stock	11	4.0000		44	11	4.0000		45
Total				2,227				2,237


⁽¹⁾	Figures in the table may not recalculate exactly due to rounding. As-converted class A common stock is calculated based on unrounded numbers.


⁽²⁾	Class A common stock shares outstanding reflect repurchases that settled on or before December 31, 2019 and September 30, 2019.


⁽³⁾	The class B to class A common stock conversion rate is presented on a rounded basis. Conversion calculations for dividend payments are based on a conversion rate rounded to the tenth decimal.

Reduction in as-converted shares. Under the terms of the Europe retrospective responsibility plan, the Company is entitled to recover VE territory covered losses through periodic adjustments to the class A common stock conversion rates applicable to the UK&I and Europe preferred stock. The recovery has the same economic effect on earnings per share as repurchasing the Company’s class A common stock, because it reduces the UK&I and Europe preferred stock conversion rates and consequently, reduces the as-converted class A common stock share count. There were no conversion rate adjustments in the three months ended December 31, 2019. See Note 4—U.S. and Europe Retrospective Responsibility Plans.

Common stock repurchases. The following table presents share repurchases in the open market for the following periods:



	Three Months Ended December 31,
	2019		2018
	(in millions, except per share data)
Shares repurchased in the open market⁽¹⁾	13		17
Average repurchase price per share⁽²⁾	$	179.27	$	138.11
Total cost⁽²⁾	$	2,370	$	2,393


⁽¹⁾	Shares repurchased in the open market reflect repurchases that settled during the three months ended December 31, 2019 and 2018. All shares repurchased in the open market have been retired and constitute authorized but unissued shares.


⁽²⁾	Figures in the table may not recalculate exactly due to rounding. Average repurchase price per share and total cost is calculated based on unrounded numbers.

In January 2019, the Company’s board of directors authorized an $8.5 billion share purchase program. As of December 31, 2019, the Company’s January 2019 share repurchase program had remaining authorized funds of $1.7 billion for share repurchase. In January 2020, the Company’s board of directors authorized an additional $9.5 billion share repurchase program. These authorizations have no expiration date.

Dividends. On January 28, 2020, the Company’s board of directors declared a quarterly cash dividend of $0.30 per share of class A common stock (determined in the case of class B and C common stock and UK&I and Europe preferred stock on an as-converted basis). The cash dividend will be paid on March 3, 2020, to all holders of record as of February 14, 2020. The Company declared and paid $671 million and $572 million during the three months ended December 31, 2019 and 2018, respectively, in dividends to holders of the Company’s common and preferred stocks.

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VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 10—Earnings Per Share

Basic earnings per share is computed by dividing net income available to each class of shares by the weighted-average number of shares of common stock outstanding and participating securities during the period. Net income is allocated to each class of common stock and participating securities based on its proportional ownership on an as-converted basis. The weighted-average number of shares outstanding of each class of common stock reflects changes in ownership over the periods presented. See Note 9—Stockholders’ Equity.

Diluted earnings per share is computed by dividing net income available by the weighted-average number of shares of common stock outstanding, participating securities and, if dilutive, potential class A common stock equivalent shares outstanding during the period. Dilutive class A common stock equivalents may consist of: (1) shares of class A common stock issuable upon the conversion of UK&I and Europe preferred stock and class B and C common stock based on the conversion rates in effect through the period, and (2) incremental shares of class A common stock calculated by applying the treasury stock method to the assumed exercise of employee stock options, the assumed purchase of stock under the Company’s Employee Stock Purchase Plan and the assumed vesting of unearned performance shares.

The following table presents earnings per share for the three months ended December 31, 2019:



	Basic Earnings Per Share					Diluted Earnings Per Share
	(in millions, except per share data)
	Income Allocation (A)⁽¹⁾		Weighted- Average Shares Outstanding (B)	Earnings per Share = (A)/(B)⁽²⁾		Income Allocation (A)⁽¹⁾		Weighted- Average Shares Outstanding (B)		Earnings per Share = (A)/(B)⁽²⁾
Class A common stock	$	2,506	1,713	$	1.46	$	3,272	2,240	⁽³⁾	$	1.46
Class B common stock	583		245	$	2.37	582		245		$	2.37
Class C common stock	65		11	$	5.85	65		11		$	5.84
Participating securities⁽⁴⁾	118		Not presented	Not presented		117		Not presented		Not presented
Net income	$	3,272

The following table presents earnings per share for the three months ended December 31, 2018:



	Basic Earnings Per Share					Diluted Earnings Per Share
	(in millions, except per share data)
	Income Allocation (A)⁽¹⁾		Weighted- Average Shares Outstanding (B)	Earnings per Share = (A)/(B)⁽²⁾		Income Allocation (A)⁽¹⁾		Weighted- Average Shares Outstanding (B)		Earnings per Share = (A)/(B)⁽²⁾
Class A common stock	$	2,290	1,760	$	1.30	$	2,977	2,291	⁽³⁾	$	1.30
Class B common stock	521		245	$	2.12	520		245		$	2.12
Class C common stock	61		12	$	5.20	61		12		$	5.20
Participating securities⁽⁴⁾	105		Not presented	Not presented		105		Not presented		Not presented
Net income	$	2,977

⁽¹⁾

Net income is allocated based on proportional ownership on an as-converted basis. The weighted-average number of shares of as-converted class B common stock used in the income allocation was 398 million and 400 million for the three months ended December 31, 2019 and 2018, respectively. The weighted-average number of shares of as-converted class C common stock used in the income allocation was 44 million and 47 million for the three months ended December 31, 2019 and 2018, respectively. The weighted-average number of shares of preferred stock included within participating securities was 32 million of as-converted UK&I preferred stock for the three months ended December 31, 2019 and 2018. The weighted-average number of shares of preferred stock included within participating securities was 44 million of as-converted Europe preferred stock for the three months ended December 31, 2019 and 2018.


⁽²⁾	Figures in the table may not recalculate exactly due to rounding. Earnings per share is calculated based on unrounded numbers.

⁽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 approximately 3 million common stock equivalents for the three months ended December 31, 2019 and 2018, because their effect would have been dilutive. The computation excludes 1 million of common stock equivalents for the three months ended December 31, 2019 and 2018, because their effect would have been anti-dilutive.

⁽⁴⁾

Participating securities include preferred stock outstanding and unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents, such as the Company’s UK&I and Europe preferred stock, restricted stock units and earned performance-based shares. Participating securities’ income is allocated based on the weighted-average number of shares of as-converted stock.

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VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 11—Share-based Compensation

The Company granted the following equity awards to employees and non-employee directors under the 2007 Equity Incentive Compensation Plan, or the EIP, during the three months ended December 31, 2019:



	Granted	Weighted-Average Grant Date Fair Value		Weighted-Average Exercise Price
Non-qualified stock options	1,247,982	$	29.37	$	182.50
Restricted stock units	2,189,944	$	182.62
Performance-based shares⁽¹⁾	470,128	$	211.08


⁽¹⁾	Represents the maximum number of performance-based shares which could be earned.

The Company recorded share-based compensation cost related to the EIP of $111 million and $95 million for the three months ended December 31, 2019 and 2018, respectively, net of estimated forfeitures, which are adjusted as appropriate.

Note 12—Income Taxes

The effective income tax rates were 18% for both the three months ended December 31, 2019 and 2018.

During the three months ended December 31, 2019, the Company’s gross unrecognized tax benefits increased by $63 million, of which $13 million would favorably impact the effective tax rate, if recognized. The change in unrecognized tax benefits is primarily related to various tax positions across several jurisdictions. During the three months ended December 31, 2019 and 2018, there were no significant changes in interest and penalties related to uncertain tax positions.

The Company’s tax filings are subject to examination by the U.S. federal, state and foreign taxing authorities. The timing and outcome of the final resolutions of the various ongoing income tax examinations are highly uncertain. It is not reasonably possible to estimate the increase or decrease in unrecognized tax benefits within the next twelve months.

Note 13—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.

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VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table summarizes the activity related to accrued litigation:



	Three Months Ended December 31,
	2019			2018
	(in millions)
Balance at beginning of period	$	1,203		$	1,434
Provision for uncovered legal matters	—			7
Provision for covered legal matters	1			90
Reestablishment of prior accrual related to interchange multidistrict litigation	467			—
Payments for legal matters	(42		)	(42		)
Balance at end of period	$	1,629		$	1,489

Accrual Summary—U.S. Covered Litigation

Visa Inc., Visa U.S.A. and Visa International are parties to certain legal proceedings that are covered by the U.S. retrospective responsibility plan, which the Company refers to as the U.S. covered litigation. See further discussion below under U.S. Covered Litigation and Note 4—U.S. and Europe Retrospective Responsibility Plans. An accrual for the U.S. covered litigation and a charge to the litigation provision are recorded when a 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 total accrual related to the U.S. covered litigation could be either higher or lower than the escrow account balance.

The following table summarizes the accrual activity related to U.S. covered litigation:



	Three Months Ended December 31,
	2019			2018
	(in millions)
Balance at beginning of period	$	1,198		$	1,428
Reestablishment of prior accrual related to interchange multidistrict litigation	467			—
Payments for U.S. covered litigation	(41		)	—
Balance at end of period	$	1,624		$	1,428

In fiscal 2019, the Company paid $600 million from its litigation escrow account into a settlement fund established pursuant to the Amended Settlement Agreement with the Damages Class plaintiffs in the Interchange Multidistrict Litigation. Under the Amended Settlement Agreement, if class members opt out of the Damages Class, the defendants are entitled to receive takedown payments of up to $700 million (up to $467 million for Visa), based on the percentage of payment card sales volume attributable to merchants who have chosen to opt out. On December 13, 2019, the district court entered a final judgment order approving the Amended Settlement Agreement with the Damages Class plaintiffs. A takedown payment of approximately $467 million was received on December 27, 2019, and deposited into the Company’s litigation escrow account. The deposit into the litigation escrow account and reestablishment of a prior accrual to address opt-out claims was recorded during the three months ended December 31, 2019. See further discussion below under U.S. Covered Litigation.

Accrual Summary—VE Territory Covered Litigation

Visa Inc., Visa International and Visa Europe are parties to certain legal proceedings that are covered by the Europe retrospective responsibility plan. Unlike the U.S. retrospective responsibility plan, the Europe retrospective responsibility plan does not have an escrow account that is used to fund settlements or judgments. The Company is entitled to recover VE territory covered losses through periodic adjustments to the conversion rates applicable to the UK&I preferred stock and Europe preferred stock. An accrual for the VE territory covered losses and a reduction to stockholders’ equity will be recorded when the loss is deemed to be probable and reasonably estimable. See further discussion below under VE Territory Covered Litigation and Note 4—U.S. and Europe Retrospective Responsibility Plans.

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VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table summarizes the accrual activity related to VE territory covered litigation:



	Three Months Ended December 31,
	2019			2018
	(in millions)
Balance at beginning of period	$	5		$	—
Provision for VE territory covered litigation	1			90
Payments for VE territory covered litigation	(1		)	(35		)
Balance at end of period	$	5		$	55

U.S. Covered Litigation

Interchange Multidistrict Litigation (MDL) – Putative Class Actions

On November 20, 2019, the district court denied the bank defendants’ motion to dismiss the claims brought against them by the putative Injunctive Relief Class.

On December 13, 2019, the district court granted final approval of the 2018 Amended Settlement Agreement relating to claims by the Damages Class, which was subsequently appealed.

VE Territory Covered Litigation

Europe Merchant Litigation

Since July 2013, in excess of 500 Merchants (the capitalized term “Merchant,” when used in this section, means a merchant together with subsidiary/affiliate companies that are party to the same claim) have commenced proceedings against Visa Europe, Visa Inc. and other Visa subsidiaries in the UK, Germany and Belgium primarily relating to interchange rates in Europe and in some cases relating to fees charged by Visa and certain Visa rules. As of the filing date, Visa Europe, Visa Inc. and other Visa subsidiaries have settled the claims asserted by over 100 Merchants, leaving more than 400 Merchants with outstanding claims. In addition, over 30 additional Merchants have threatened to commence similar proceedings. Standstill agreements have been entered into with respect to some of those threatened Merchant claims, several of which have been settled.

Other Litigation

Canadian Merchant Litigation

Between August 2019 and January 2020, the Courts of Appeal in British Columbia, Quebec, Ontario and Saskatchewan rejected the appeals filed by Wal-Mart Canada and Home Depot of Canada Inc. In January 2020, Wal-Mart Canada and Home Depot of Canada Inc. filed applications to appeal the decisions of the British Columbia, Quebec and Ontario courts to the Supreme Court of Canada. An appeal to the Alberta Court of Appeal remains pending.

Nuts for Candy

On December 31, 2019, plaintiff filed a motion to dismiss and for attorneys’ fees and costs based on the settlement reached between the parties and the grant of final approval of the 2018 Amended Settlement Agreement as discussed above in Interchange Multidistrict Litigation (MDL) - Putative Class Actions.

Euronet Litigation

On December 13, 2019, Euronet 360 Finance Limited, Euronet Polska Spolka z.o.o. and Euronet Services spol. s.r.o. (“Euronet”) served a claim in the UK alleging that certain rules affecting ATM access fees in Poland, the Czech Republic and Greece by Visa Inc. and Mastercard Incorporated, and certain of their subsidiaries, breach various competition laws. Euronet seeks damages, costs, and injunctive relief to prevent the defendants from enforcing the aforementioned rules.

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VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 14—Subsequent Events

On January 13, 2020, the Company entered into a definitive agreement to acquire Plaid, Inc. for $5.3 billion. The Company will pay approximately $4.9 billion of cash and $0.4 billion of retention equity and deferred equity consideration. This acquisition is subject to customary closing conditions, including certain regulatory approvals, and is expected to close in the next three to six months.

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ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

This management’s discussion and analysis provides a review of the results of operations, financial condition and the liquidity and capital resources of Visa Inc. and its subsidiaries (“Visa,” “we,” “us,” “our” or the “Company”) on a historical basis and outlines the factors that have affected recent earnings, as well as those factors that may affect future earnings. The following discussion and analysis should be read in conjunction with our unaudited consolidated financial statements and related notes included elsewhere in this report.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 that relate to, among other things, our future operations, prospects, developments, strategies and growth of our business; anticipated expansion of our products in certain countries; industry developments; anticipated benefits of our acquisitions; expectations regarding litigation matters, investigations and proceedings; timing and amount of stock repurchases; sufficiency of sources of liquidity and funding; effectiveness of our risk management programs; and expectations regarding the impact of recent accounting pronouncements on our consolidated financial statements. Forward-looking statements generally are identified by words such as “believes,” “estimates,” “expects,” “intends,” “may,” “projects,” “could,” “should,” “will,” “continue” and other similar expressions. All statements other than statements of historical fact could be forward-looking statements, which speak only as of the date they are made, are not guarantees of future performance and are subject to certain risks, uncertainties and other factors, many of which are beyond our control and are difficult to predict. We describe risks and uncertainties that could cause actual results to differ materially from those expressed in, or implied by, any of these forward-looking statements in our SEC filings, including our Annual Report on Form 10-K, for the year ended September 30, 2019 and our subsequent reports on Forms 10-Q and 8-K. Except as required by law, we do not intend to update or revise any forward-looking statements as a result of new information, future events or otherwise.

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Overview

Visa is a global payments technology company that enables fast, secure and reliable electronic payments across more than 200 countries and territories. We facilitate global commerce through the transfer of value and information among a global network of consumers, merchants, financial institutions, businesses, strategic partners and government entities. Our advanced transaction processing network, VisaNet, enables authorization, clearing and settlement of payment transactions and allows us to provide our financial institution and merchant clients a wide range of products, platforms and value-added services.

Financial overview. Our as-reported U.S. GAAP and non-GAAP net income and diluted earnings per share are as follows:



	Three Months Ended December 31,				2019 vs 2018
	2019		2018		% Change⁽¹⁾
	(in millions, except percentages and per share data)
Net income, as reported	$	3,272	$	2,977	10	%
Diluted earnings per share, as reported	$	1.46	$	1.30	12	%
Non-GAAP net income⁽²⁾	$	3,272	$	2,980	10	%
Non-GAAP diluted earnings per share⁽²⁾	$	1.46	$	1.30	12	%


⁽¹⁾	Figures in the table may not recalculate exactly due to rounding. Percentage changes are calculated based on unrounded numbers.


⁽²⁾	For a full reconciliation of our non-GAAP financial results, see tables in Non-GAAP financial results below.

Highlights for the first quarter of fiscal 2020. Our business is affected by overall economic conditions and consumer spending. Our business performance during the three months ended December 31, 2019 reflects continued global consumer spending growth amidst uneven global economic conditions. We recorded net revenues of $6.1 billion for the three months ended December 31, 2019, an increase of 10% over the prior-year comparable period, reflecting continued growth in nominal payments volume, nominal cross-border volume and processed transactions. Exchange rate movements in the three months ended December 31, 2019, as partially mitigated by our hedging program, negatively impacted our net revenues growth by approximately one percentage point.

Total operating expenses were $2.0 billion for the three months ended December 31, 2019, an increase of 14% on a GAAP and an increase of 13% on a non-GAAP basis, respectively, over the prior-year comparable period. The increase was primarily due to higher personnel, professional fees, depreciation and amortization and general and administrative expenses, as we continue to invest in our business growth.

Non-GAAP financial results. We use non-GAAP financial measures of our performance which exclude certain items which we believe are not representative of our continuing operations and may distort our longer-term operating trends. We consider non-GAAP measures useful to investors because they provide greater transparency into management’s view and assessment of our ongoing operating performance. Starting in fiscal 2020, we revised our non-GAAP methodology to exclude the impact of gains and losses on our equity investments, amortization of acquired intangible assets and acquisition-related costs for acquisitions that closed in fiscal 2019 and subsequent periods. Prior year amounts have been restated to conform to our current presentation.

•

Gains and losses on equity investments. Gains and losses on equity investments include periodic non-cash fair value adjustments and gains and losses upon sale of an investment. These long-term investments are strategic in nature and are primarily private company investments. Gains and losses and the related tax impacts associated with these investments are tied to the performance of the companies that we invest in and therefore do not correlate to the underlying performance of our business. During the three months ended December 31, 2019 and 2018, we recorded net realized and unrealized gains of $13 million and losses of $4 million, respectively, and related tax expense of $3 million and tax benefit of $1 million, respectively.

•

Amortization of acquired intangible assets. Amortization of acquired intangible assets consists of amortization of intangible assets such as developed technology, customer relationships and brands acquired in connection with business combinations executed beginning in fiscal 2019. Amortization charges for our acquired intangible assets are non-cash and are significantly affected by the timing, frequency and size of our acquisitions, rather than our core operations. As such, we have excluded this amount and the related tax impact to facilitate an evaluation of our current operating performance and comparison to our past operating performance. During the three months ended December 31, 2019, we recorded amortization of acquired intangible assets of $11

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million and related tax benefit of $3 million. There were no comparable amounts during the three months ended December 31, 2018 since we are only adjusting for transactions that closed in fiscal 2019 and subsequent periods.

•

Acquisition-related costs. Acquisition-related costs consist primarily of one-time transaction and integration costs associated with our business combinations. These costs include professional fees, technology integration fees, restructuring activities and other direct costs related to the purchase and integration of acquired entities. It also includes retention equity and deferred equity compensation when they are agreed upon as part of the purchase price of the transaction but are required to be recognized as expense post-combination. We have excluded these amounts and the related tax impacts as the expenses are recognized for a limited duration and do not reflect the underlying performance of our business. During the three months ended December 31, 2019, we recorded acquisition-related costs of $2 million. There were no comparable amounts during the three months ended December 31, 2018 since we are only adjusting for transactions that closed in fiscal 2019 and subsequent periods.

Non-GAAP operating expense, non-operating income (expense), income tax provision, effective income tax rate, net income and diluted earnings per share should not be relied upon as substitutes for, or considered in isolation from, measures calculated in accordance with U.S. GAAP. The following tables reconcile our as-reported financial measures, calculated in accordance with U.S. GAAP, to our respective non-GAAP financial measures for the three months ended December 31, 2019 and 2018.



	Three Months Ended December 31, 2019
	Operating Expenses			Non-operating Income (Expense)			Income Tax Provision			Effective Income Tax Rate⁽¹⁾		Net Income			Diluted Earnings Per Share⁽¹⁾
	(in millions, except percentages and per share data)
As reported	$	2,038		$	(42	)	$	702		17.7	%	$	3,272		$	1.46
(Gains) Losses on equity investments, net	—			(13		)	(3		)			(10		)	—
Amortization of acquired intangible assets	(11		)	—			3					8			—
Acquisition-related costs	(2		)	—			—					2			—
Non-GAAP	$	2,025		$	(55	)	$	702		17.7	%	$	3,272		$	1.46



	Three Months Ended December 31, 2018
	Operating Expenses		Non-operating Income (Expense)			Income Tax Provision		Effective Income Tax Rate⁽¹⁾		Net Income		Diluted Earnings Per Share⁽¹⁾
	(in millions, except percentages and per share data)
As reported	$	1,789	$	(87	)	$	653	18.0	%	$	2,977	$	1.30
(Gains) Losses on equity investments, net	—		4			1				3		—
Non-GAAP	$	1,789	$	(83	)	$	654	18.0	%	$	2,980	$	1.30


⁽¹⁾	Figures in the table may not recalculate exactly due to rounding. Effective income tax rate, diluted earnings per share and their respective totals are calculated based on unrounded numbers.

Common stock repurchases. During the three months ended December 31, 2019, we repurchased 13 million shares of our class A common stock in the open market using $2.4 billion of cash on hand. As of December 31, 2019, we had remaining authorized funds of $1.7 billion for share repurchase. In January 2020, our board of directors authorized an additional $9.5 billion share repurchase program. See Note 9—Stockholders’ Equity to our unaudited consolidated financial statements.

Acquisition. On January 13, 2020, we entered into a definitive agreement to acquire Plaid, Inc. for $5.3 billion. We will pay approximately $4.9 billion of cash and $0.4 billion of retention equity and deferred equity consideration. This acquisition is subject to customary closing conditions, including certain regulatory approvals, and is expected to close in the next three to six months.

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Payments volume and transaction counts. Payments volume is the primary driver for our service revenues, and the number of processed transactions is the primary driver for our data processing revenues. Nominal payments volume in the United States posted high single-digit growth for the three months ended September 30, 2019⁽¹⁾, driven mainly by consumer debit and commercial. Nominal international payments volume growth was negatively impacted by movements in U.S. dollar exchange rates. On a constant-dollar basis, which excludes the impact of exchange rate movements, our international payments volume growth rate for the three months ended September 30, 2019 was 10%. Growth in processed transactions reflects the ongoing worldwide shift to electronic payments.

The following table presents nominal payments and cash volume:



	United States						International						Visa Inc.
	Three Months Ended September 30,⁽¹⁾						Three Months Ended September 30,⁽¹⁾						Three Months Ended September 30,⁽¹⁾
	2019		2018		% Change⁽²⁾		2019		2018		% Change⁽²⁾		2019		2018		% Change⁽²⁾
	(in billions, except percentages)
Nominal payments volume
Consumer credit	$	404	$	382	6	%	$	646	$	616	5	%	$	1,050	$	997	5	%
Consumer debit⁽³⁾	448		408		10	%	500		458		9	%	948		867		9	%
Commercial⁽⁴⁾	170		155		10	%	101		93		9	%	271		248		10	%
Total nominal payments volume⁽²⁾	$	1,023	$	945	8	%	$	1,247	$	1,167	7	%	$	2,270	$	2,112	7	%
Cash volume	148		145		2	%	565		578		(2	)%	712		723		(1	)%
Total nominal volume^(2),(5)	$	1,170	$	1,090	7	%	$	1,812	$	1,745	4	%	$	2,982	$	2,834	5	%

The following table presents nominal and constant payments and cash volume growth:



	International				Visa Inc.
	Three Months Ended September 30, 2019 vs. 2018⁽¹⁾				Three Months Ended September 30, 2019 vs. 2018⁽¹⁾
	Nominal⁽²⁾		Constant^(2),(6)		Nominal		Constant^(2),(6)
Payments volume growth
Consumer credit growth	5	%	7	%	5	%	7	%
Consumer debit growth⁽³⁾	9	%	13	%	9	%	11	%
Commercial growth⁽⁴⁾	9	%	12	%	10	%	11	%
Total payments volume growth⁽²⁾	7	%	10	%	7	%	9	%
Cash volume growth	(2	)%	(1	)%	(1	)%	—	%
Total volume growth⁽²⁾	4	%	6	%	5	%	7	%


⁽¹⁾	Service revenues in a given quarter are assessed based on nominal payments volume in the prior quarter. Therefore, service revenues reported for the three months ended December 31, 2019 and 2018 were based on nominal payments volume reported by our financial institution clients for the three months ended September 30, 2019 and 2018, respectively.


⁽²⁾	Figures in the table may not recalculate exactly due to rounding. Percentage changes and totals are calculated based on unrounded numbers.


⁽³⁾	Includes consumer prepaid volume and Interlink volume.


⁽⁴⁾	Includes large, medium and small business credit and debit, as well as commercial prepaid volume.

⁽⁵⁾

Total nominal volume is the sum of total nominal payments volume and cash volume. Total nominal payments volume is the total monetary value of transactions for goods and services that are purchased on cards and other form factors carrying the Visa, Visa Electron, Interlink and V PAY brands. Cash volume generally consists of cash access transactions, balance access transactions, balance transfers and convenience checks. Total nominal volume is provided by our financial institution clients, subject to review by Visa. On occasion, previously presented volume information may be updated. Prior-period updates, other than the change to the payments volume definition, are not material.


⁽⁶⁾	Growth on a constant-dollar basis excludes the impact of foreign currency fluctuations against the U.S. dollar.

The following table provides the number of transactions involving cards and other form factors carrying the Visa, Visa Electron, Interlink, V PAY and PLUS cards processed on Visa’s networks during the periods presented:



	Three Months Ended December 31,
	2019	2018	% Change⁽¹⁾
	(in millions, except percentages)
Visa processed transactions	37,775	33,931	11	%


⁽¹⁾	Figures in the table may not recalculate exactly due to rounding. Percentage change is calculated based on unrounded numbers.

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Results of Operations

Net Revenues

The following table sets forth our net revenues earned in the U.S. and internationally:



	Three Months Ended December 31,				2019 vs. 2018
	2019		2018		$ Change		% Change⁽¹⁾
	(in millions, except percentages)
U.S.	$	2,717	$	2,508	$	209	8	%
International	3,337		2,998		339		11	%
Net revenues	$	6,054	$	5,506	$	548	10	%


⁽¹⁾	Figures in the table may not recalculate exactly due to rounding. Percentage changes are calculated based on unrounded numbers.

The increase in net revenues reflects the continued growth in nominal payments volume, nominal cross-border volume and processed transactions. The increase in revenues was partially offset by the increase in client incentives.

Our net revenues are impacted by the overall strengthening or weakening of the U.S. dollar as payments volume and related revenues denominated in local currencies are converted to U.S. dollars. Exchange rate movements in the three months ended December 31, 2019, as partially mitigated by our hedging program, negatively impacted our net revenues growth by approximately one percentage point.

The following table sets forth the components of our net revenues:



	Three Months Ended December 31,						2019 vs. 2018
	2019			2018			$ Change			% Change⁽¹⁾
	(in millions, except percentages)
Service revenues	$	2,555		$	2,342		$	213		9	%
Data processing revenues	2,864			2,470			394			16	%
International transaction revenues	2,018			1,851			167			9	%
Other revenues	365			299			66			22	%
Client incentives	(1,748		)	(1,456		)	(292		)	20	%
Net revenues	$	6,054		$	5,506		$	548		10	%


⁽¹⁾	Figures in the table may not recalculate exactly due to rounding. Percentage changes are calculated based on unrounded numbers.


•	Service revenues increased primarily due to 7% growth in nominal payments volume as well as select pricing modifications effective in 2019.


•	Data processing revenues increased mainly due to overall growth in processed transactions of 11%, select pricing modifications effective in 2019, as well as faster growth of our value-added services, favorable business mix and acquisition-related revenue.


•	International transaction revenues increased due to a 7% growth in nominal cross-border volumes and select pricing modifications effective in 2019. These increases were partially offset by lower volatility in a broad range of currencies.


•	Other revenues increased primarily due to higher revenues from value-added services.


•	Client incentives increased mainly due to incentives recognized on long-term customer contracts that were initiated or renewed in 2019 and overall growth in global payments volume. The amount of client incentives we record in future periods will vary based on changes in performance expectations, actual client performance, amendments to existing contracts or execution of new contracts.

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Operating Expenses

The following table sets forth components of our total operating expenses:



	Three Months Ended December 31,				2019 vs. 2018
	2019		2018		$ Change			% Change⁽¹⁾
	(in millions, except percentages)
Personnel	$	982	$	807	$	175		22	%
Marketing	274		276		(2		)	(1	)%
Network and processing	181		173		8			5	%
Professional fees	106		91		15			16	%
Depreciation and amortization	182		159		23			15	%
General and administrative	313		276		37			13	%
Litigation provision	—		7		(7		)	(94	)%
Total operating expenses	$	2,038	$	1,789	$	249		14	%


⁽¹⁾	Figures in the table may not recalculate exactly due to rounding. Percentage changes are calculated based on unrounded numbers.


•	Personnel expenses increased primarily due to continued increase in headcount and higher incentive compensation, reflecting our strategy to invest in future growth.


•	Professional fees expenses increased mainly due to costs incurred in connection with our merger and acquisition activities.


•	Depreciation and amortization expenses increased primarily due to additional depreciation from our on-going investments, including acquisitions.


•	General and administrative expenses increased mainly due to higher product enhancements costs in support of our business growth and higher indirect taxes.

Non-operating Income (Expense)

The following table sets forth the components of our non-operating income (expense):



	Three Months Ended December 31,						2019 vs. 2018
	2019			2018			$ Change		% Change⁽¹⁾
	(in millions, except percentages)
Interest expense, net	$	(111	)	$	(145	)	$	34	(23	)%
Investment income and other	69			58			11		19	%
Total non-operating income (expense)	$	(42	)	$	(87	)	$	45	(52	)%


⁽¹⁾	Figures in the table may not recalculate exactly due to rounding. Percentage changes are calculated based on unrounded numbers.


•	Interest expense, net decreased primarily as a result of entering into derivative instruments in 2019 that lowered the cost of borrowing on a portion of our outstanding debt.


•	Investment income and other increased primarily due to gains on our equity investments.

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Liquidity and Capital Resources

Cash Flow Data

The following table summarizes our cash flow activity for the periods presented:



	Three Months Ended December 31,
	2019			2018
	(in millions)
Total cash provided by (used in):
Operating activities	$	3,875		$	3,294
Investing activities	562			(70		)
Financing activities	(3,133		)	(3,018		)
Effect of exchange rate changes on cash and cash equivalents	127			(68		)
Increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents	$	1,431		$	138

Operating activities. Cash provided by operating activities for the three months ended December 31, 2019 was higher than the prior-year comparable period due to continued growth in our underlying business and receipt of the $467 million takedown payment associated with the Interchange Multidistrict Litigation. See Note 13—Legal Matters to our unaudited consolidated financial statements.

Investing activities. Cash provided by investing activities for the three months ended December 31, 2019 increased primarily due to fewer purchases of investment securities as compared to the prior-year period.

Financing activities. Cash used in financing activities for the three months ended December 31, 2019 was slightly higher than the prior-year comparable period primarily due to higher dividends paid. See Note 9—Stockholders’ Equity to our unaudited consolidated financial statements.

Sources of Liquidity

Our primary sources of liquidity are cash on hand, cash flow from operations, our investment portfolio and access to various equity and borrowing arrangements. Funds from operations are maintained in cash and cash equivalents and short-term or long-term available-for-sale investment securities based upon our funding requirements, access to liquidity from these holdings and the returns that these holdings provide. Based on our current cash flow forecasts of our short-term and long-term liquidity needs, we believe that our current and projected sources of liquidity will be sufficient to meet our projected liquidity needs for more than the next 12 months. We will continue to assess our liquidity position and potential sources of supplemental liquidity in view of our operating performance, current economic and capital market conditions and other relevant circumstances.

Uses of Liquidity

There has been no significant change to our primary uses of liquidity since September 30, 2019, except as discussed below.

Common stock repurchases. During the three months ended December 31, 2019, we repurchased 13 million shares of our class A common stock using $2.4 billion of cash on hand. As of December 31, 2019, we had remaining authorized funds of $1.7 billion for share repurchase. In January 2020, our board of directors authorized an additional $9.5 billion share repurchase program. See Note 9—Stockholders’ Equity to our unaudited consolidated financial statements.

Dividends. During the three months ended December 31, 2019, we declared and paid $0.7 billion in dividends to holders of our common and preferred stock. On January 28, 2020, our board of directors declared a cash dividend in the amount of $0.30 per share of class A common stock (determined in the case of class B and C common stock and UK&I and Europe preferred stock on an as-converted basis), which will be paid on March 3, 2020, to all holders of record as of February 14, 2020. See Note 9—Stockholders’ Equity to our unaudited consolidated financial statements. We expect to continue paying quarterly dividends in cash, subject to approval by the board of directors. All three series of preferred stock and class B and C common stock will share ratably on an as-converted basis in such future dividends.

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Senior Notes. In December 2015, we issued fixed-rate senior notes in an aggregate principal amount of $16.0 billion, with maturities ranging between 2 and 30 years. A principal payment of $3.0 billion is due on December 14, 2020, for which we have sufficient liquidity. See Note 7—Debt to our unaudited consolidated financial statements.



ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk

There have been no significant changes to our market risks since September 30, 2019.



ITEM 4.	Controls and Procedures

Disclosure controls and procedures. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of the disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) of Visa Inc. at the end of the period covered by this report and, based on such evaluation, have concluded that the disclosure controls and procedures of Visa Inc. were effective at the reasonable assurance level as of such date.

Changes in internal control over financial reporting. There have been no changes in the internal control over financial reporting of Visa Inc. that occurred during the fiscal period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION



ITEM 1.	Legal Proceedings.

Refer to Note 13—Legal Matters to the unaudited consolidated financial statements included in this Form 10-Q for a description of the Company’s current material legal proceedings.



ITEM 1A.	Risk Factors.

For a discussion of the Company’s risk factors, see the information under the heading “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended September 30, 2019, filed with the SEC on November 14, 2019.



ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds.

ISSUER PURCHASES OF EQUITY SECURITIES

The table below sets forth our purchases of common stock during the quarter ended December 31, 2019:



Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs^(1),(2)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs^(1),(2)
	(in millions, except per share data)
October 1-31, 2019	5	$	175.46	5	$	3,090
November 1-30, 2019	4	$	180.21	4	$	2,390
December 1-31, 2019	4	$	184.73	4	$	1,655
Total	13	$	179.71	13


⁽¹⁾	The figures in the table reflect transactions according to the trade dates. For purposes of our unaudited consolidated financial statements included in this Form 10-Q, the impact of these repurchases is recorded according to settlement dates.


⁽²⁾	Our board of directors from time to time authorizes the repurchase of shares of our common stock up to a certain monetary limit. In January 2019 and January 2020, our board of directors authorized share repurchase programs for $8.5 billion and $9.5 billion, respectively. These authorizations have no expiration date.



ITEM 3.	Defaults Upon Senior Securities.

None.



ITEM 4.	Mine Safety Disclosures.

Not applicable.



ITEM 5.	Other Information.

None.

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ITEM 6.	Exhibits.

EXHIBIT INDEX



		Incorporated by Reference
Exhibit Number	Description of Documents	Schedule/ Form	File Number	Exhibit	Filing Date

10.1+	Form of Indemnification Agreement

31.1+	Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2+	Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1+	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2+	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS+	XBRL Instance Document

101.SCH+	XBRL Taxonomy Extension Schema Document

101.CAL+	XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF+	XBRL Taxonomy Extension Definition Linkbase Document

101.LAB+	XBRL Taxonomy Extension Label Linkbase Document

101.PRE+	XBRL Taxonomy Extension Presentation Linkbase Document



+	Filed or furnished herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



		VISA INC.

Date:	January 31, 2020	By:	/s/ Alfred F. Kelly, Jr.
		Name:	Alfred F. Kelly, Jr.
		Title:	Chairman and Chief Executive Officer (Principal Executive Officer)

Date:	January 31, 2020	By:	/s/ Vasant M. Prabhu
		Name:	Vasant M. Prabhu
		Title:	Vice Chairman and Chief Financial Officer (Principal Financial Officer)

Date:	January 31, 2020	By:	/s/ James H. Hoffmeister
		Name:	James H. Hoffmeister
		Title:	Global Corporate Controller and Chief Accounting Officer (Principal Accounting Officer)

EXHIBIT 10.1

INDEMNITY AGREEMENT

This Indemnity Agreement (“Agreement”) is made as of ______, by and between Visa Inc., a Delaware corporation (the “Company”), and [FULL NAME] (“Indemnitee”).

RECITALS

WHEREAS, highly competent persons have become more reluctant to serve as directors, officers or in other capacities unless they are provided with adequate protection through insurance and adequate indemnification against inordinate risks of claims and actions against them arising out of their service to and activities on behalf of the corporation.

WHEREAS, Article VIII of the Amended and Restated Certificate of Incorporation of the company (the “Certificate of Incorporation”) provides for indemnification of the officers and directors of the Company. Officers and directors may also be entitled to indemnification pursuant to applicable provisions of the Delaware General Corporation Law (“DGCL”). The indemnification provisions set forth therein are not exclusive, and contracts may be entered into between the Company and members of the board of directors, officers and other persons with respect to indemnification.

WHEREAS, increased difficulty in attracting and retaining highly competent persons to serve as directors and officers would be detrimental to the best interests of the Company’s members.

WHEREAS, it is reasonable, prudent and necessary for the Company contractually to obligate itself to indemnify, and to advance expenses on behalf of, such persons to the fullest extent permitted by applicable law, as a supplement to and in furtherance of Article VIII of the Certificate of Incorporation of the Company, so that they will serve or continue to serve the Company free from undue concern that they will not be so indemnified.

WHEREAS, Indemnitee is willing to serve, continue to serve and to take on additional service for or on behalf of the Company on the condition that Indemnitee be so indemnified hereunder.

NOW, THEREFORE, in consideration of the promises and the covenants contained herein, the Company and Indemnitee do hereby covenant and agree as follows:

1.Services to the Company. Indemnitee will serve or continue to serve as a director or officer of the Company for so long as Indemnitee is duly elected or appointed or until Indemnitee tenders Indemnitee’s resignation or is no longer serving in such capacity. This Agreement shall not be deemed an employment contract between the Company (or any of its Subsidiaries (as defined below) or any Enterprise (as defined below)) and Indemnitee. Indemnitee specifically acknowledges that Indemnitee’s employment with the Company (or any of its Subsidiaries or any Enterprise), if any, is at will, and the Indemnitee may be discharged at any time for any reason, with or without cause, except as may be otherwise provided in any written employment contract between Indemnitee and the Company (or any of its Subsidiaries or any Enterprise), other applicable formal severance policies duly adopted by the Board, or, with respect to service as a director or officer of the Company, by the Company’s Certificate of Incorporation, the Company’s By-laws, and the DGCL.

2.Definitions. As used in this Agreement:

(a)“Board” means the Board of Directors of the Company.

(b)“Change of Control” shall be deemed to occur upon the earliest to occur after the date of this Agreement of any of the following events:

i.Any Person (as defined below) is or becomes the Beneficial Owner (as defined below), directly or indirectly, of securities of the Company representing fifteen percent (15%) or more of the combined voting power of the Company's then outstanding securities unless the change in relative Beneficial Ownership of the Company's securities by any Person results solely from a reduction in the aggregate number of outstanding shares of securities entitled to vote generally in the election of directors;

ii.During any period of two (2) consecutive years (not including any period prior to the execution of this Agreement), individuals who at the beginning of such period constitute the Board (including for this purpose any new directors whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved) cease for any reason to constitute at least a majority of the members of the Board;

iii.The effective date of a merger or consolidation of the Company with any other entity, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 51% of the combined voting power of the voting securities of the surviving entity outstanding immediately after such merger or consolidation and with the power to elect at least a majority of the board of directors or other governing body of such surviving entity;

EXHIBIT 10.1

iv.The approval by the stockholders of the Company of a complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets; and

v.There occurs any other event of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or a response to any similar item on any similar schedule or form) promulgated under the Exchange Act (as defined below), whether or not the Company is then subject to such reporting requirement.

vi.For purposes of this Section 2(a)(b), (A) "Person" shall have the meaning as set forth in Sections 13(d) and 14(d) of the Exchange Act; provided, however, that Person shall exclude (x) the Company, (y) any trustee or other fiduciary holding securities under an employee benefit plan of the Company, and (z) any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company; and (B) "Beneficial Owner" shall have the meaning given to such term in Rule 13d-3 under the Exchange Act; provided, however, that Beneficial Owner shall exclude any Person otherwise becoming a Beneficial Owner by reason of the stockholders of the Company approving a merger of the Company with another entity.

(c)“Corporate Status” describes the status of a person who is or was a director, officer, trustee, general partner, managing member, fiduciary, employee or agent of the Company or of any other Enterprise, which such person is or was serving at the request of the Company.

(d)“Delaware Court” shall mean the Court of Chancery of the State of Delaware.

(e)“Disinterested Director” shall mean a director of the Company who is not and was not a party to the Proceeding (as defined below) in respect of which indemnification is sought by Indemnitee.

(f)“Enterprise” shall mean the Company and any other corporation, constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger to which the Company (or any of its wholly owned Subsidiaries) is a party, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise of which Indemnitee is or was serving at the request of the Company as a director, officer, trustee, general partner, managing member, fiduciary, employee or agent.

(g)“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended from time to time.

(h)“Expenses” shall include all expenses, including attorneys’ fees and costs, actually and reasonably incurred by Indemnitee in connection with a Proceeding. Expenses, however, shall not include amounts paid in settlement by Indemnitee or the amount of judgments or fines against Indemnitee.

(i)“Independent Counsel” shall mean a law firm or a member of a law firm that is experienced in matters of corporation law and neither presently is, nor in the past five years has been, retained to represent: (i) the Company or Indemnitee in any matter material to either such party (other than with respect to matters concerning the Indemnitee under this Agreement, or of other indemnitees under similar indemnification agreements); or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement.

(j)References to “fines” shall include any excise tax assessed on Indemnitee with respect to any employee benefit plan; references to “serving at the request of the Company” shall include any service as a director, officer, employee, agent or fiduciary of the Company that imposes duties on, or involves services by, such director, officer, employee, agent or fiduciary with respect to an employee benefit plan, its participants or beneficiaries; and if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in the best interests of the participants and beneficiaries of an employee benefit plan, Indemnitee shall be deemed to have acted in a manner “not opposed to the best interests of the Company” as referred to in this Agreement.

(k)The term “Proceeding” shall include any threatened, pending or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether brought in the right of the Company or otherwise and whether of a civil (including intentional or unintentional tort claims), criminal, administrative or investigative nature, in which Indemnitee was, is or will be involved as a party or otherwise by reason of the fact that Indemnitee is or was a director or officer of the Company, by reason of any action (or failure to act) taken by Indemnitee or of any action (or failure to act) on Indemnitee’s part while acting as a director or officer of the Company, or by reason of the fact that Indemnitee is or was serving at the request of the Company as a director, officer, trustee, general partner, managing member, fiduciary, employee or agent of any other Enterprise, in each case whether or not serving in such capacity at the time any liability or Expense is incurred for which indemnification, reimbursement, or advancement of Expenses can be provided under this Agreement.

(l)The term “Subsidiary,” with respect to any person, shall mean any corporation or other entity of which a majority of the voting power or the voting equity securities or equity interest is owned, directly or indirectly, by that person.

EXHIBIT 10.1

3.Indemnity in Third-Party Proceedings. The Company shall indemnify and hold harmless Indemnitee in accordance with the provisions of this Section 3 if Indemnitee was, is, or is threatened to be made, a party to or a participant (as a witness or otherwise) in any Proceeding, other than a Proceeding by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section 3, Indemnitee shall be indemnified to the fullest extent permitted by applicable law against all Expenses, judgments, liabilities, fines, penalties and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses, judgments, fines, penalties and amounts paid in settlement) actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with such Proceeding or any claim, issue or matter therein, if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company and, in the case of a criminal Proceeding, had no reasonable cause to believe that Indemnitee’s conduct was unlawful.

4.Indemnity in Proceedings by or in the Right of the Company. The Company shall indemnify and hold harmless Indemnitee in accordance with the provisions of this Section 4 if Indemnitee was, is, or is threatened to be made, a party to or a participant (as a witness or otherwise) in any Proceeding by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section 4, Indemnitee shall be indemnified to the fullest extent permitted by applicable law against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with such Proceeding or any claim, issue or matter therein, if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company. If applicable law so provides, no indemnification for Expenses shall be made under this Section 4 in respect of any claim, issue or matter as to which Indemnitee shall have been finally adjudged by a court to be liable to the Company, unless and only to the extent that any court in which the Proceeding was brought or the Delaware Court shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnification.

5.Indemnification for Expenses of a Party Who is Wholly or Partly Successful. Notwithstanding any other provisions of this Agreement, to the fullest extent provided by applicable law and to extent that Indemnitee is a party to (or a participant in) and is successful, on the merits or otherwise, in any Proceeding or in defense of any claim, issue or matter therein, in whole or in part, the Company shall indemnify and hold harmless Indemnitee against all Expenses actually and reasonably incurred by Indemnitee in connection therewith. If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify and hold harmless Indemnitee against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with each successfully resolved claim, issue or matter. If the Indemnitee is not wholly successful in such Proceeding, the Company also shall indemnify and hold harmless Indemnitee against all Expenses reasonably incurred in connection with a claim, issue or matter related to any claim, issue, or matter on which the Indemnitee was successful to the fullest extent permitted by law. For purposes of this Section and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

6.Indemnification For Expenses of a Witness. Notwithstanding any other provision of this Agreement, to the fullest extent permitted by applicable law and to the extent that Indemnitee is, by reason of Indemnitee’s Corporate Status, a witness or otherwise asked to participate in any Proceeding to which Indemnitee is not a party, Indemnitee shall be indemnified and held harmless against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection therewith.

7.Partial Indemnification. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of Expenses, but not, however, for the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee is entitled.

8.Additional Indemnification.

(a)Notwithstanding any limitation in Sections 3, 4, or 5, the Company shall indemnify Indemnitee to the fullest extent permitted by applicable law if Indemnitee is a party to or threatened to be made a party to any Proceeding (including a Proceeding by or in the right of the Company to procure a judgment in its favor) against all Expenses, judgments, fines and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses, judgments, fines and amounts paid in settlement) actually and reasonably incurred by Indemnitee in connection with the Proceeding.

(b)For purposes of Section 8(a), the meaning of the phrase “to the fullest extent permitted by applicable law” shall include, but not be limited to:

i.to the fullest extent permitted by the provision of the DGCL that authorizes or contemplates additional indemnification by agreement, or the corresponding provision of any amendment to or replacement of the DGCL, and

ii.to the fullest extent authorized or permitted by any amendments to or replacements of the DGCL adopted after the date of this Agreement that increase the extent to which a corporation may indemnify its officers and directors.

(c)If a Proceeding for which Indemnitee is entitled to be indemnified hereunder asserts a claim against (i) the lawful spouse or legally recognized domestic partner of Indemnitee or (ii) a property interest of such spouse or domestic partner, then indemnification shall be extended to such spouse or domestic partner or for the protection of the property of such spouse or domestic

EXHIBIT 10.1

partner to the extent that the Proceeding does not arise from any actual or alleged act, error or omission of such spouse or domestic partner.

9.Contribution in the Event of Joint Liability.

(a)To the fullest extent permissible under applicable law, if the indemnification and hold harmless rights provided for in this Agreement are unavailable to Indemnitee in whole or in part for any reason whatsoever, the Company, in lieu of indemnifying and holding harmless Indemnitee, shall pay, in the first instance, the entire amount incurred by Indemnitee, whether for judgments, liabilities, fines, penalties, amounts paid or to be paid in settlement and/or for Expenses, in connection with any Proceeding without requiring Indemnitee to contribute to such payment, and the Company hereby waives and relinquishes any right of contribution it may have at any time against Indemnitee.

(b)The Company shall not enter into any settlement of any Proceeding in which the Company is jointly liable with Indemnitee (or would be if joined in such Proceeding) unless such settlement provides for a full and final release of all claims asserted against Indemnitee.

(c)The Company hereby agrees to fully indemnify and hold harmless Indemnitee from any claims for contribution which may be brought by officers, directors or employees of the Company other than Indemnitee who may be jointly liable with Indemnitee.

10.Exclusions. Notwithstanding any provision in this Agreement, the Company shall not be obligated under this Agreement to make any indemnity in connection with any claim made against Indemnitee:

(a)for which payment has actually been received by or on behalf of Indemnitee under any insurance policy or other indemnity provision, except with respect to any excess beyond the amount actually received under any insurance policy or other indemnity provision;

(b)except as otherwise provided in Section 15(e) hereof, in connection with any Proceeding (or any part of any Proceeding) initiated by Indemnitee (other than any cross claim or counterclaim asserted by the Indemnitee), including any Proceeding (or any part of any Proceeding) initiated by Indemnitee against the Company or its directors, officers, employees or other indemnitees, unless (i) the Board authorized the Proceeding (or any part of any Proceeding) prior to its initiation or (ii) the Company provides the indemnification, in its sole discretion, pursuant to the powers vested in the Company under applicable law; or

(c)in respect of any claim for (i) an accounting of profits made from the purchase and sale (or sale and purchase) by Indemnitee of securities of the Company within the meaning of Section 16(b)16(b) of the Exchange Act, or similar provisions of state statutory law or common law, or (ii) any reimbursement of the Company by the Indemnitee of any bonus or other incentive-based or equity-based compensation or of any profits realized by the Indemnitee from the sale of securities of the Company, as required in each case under the Exchange Act (including any such reimbursements that arise from an accounting restatement of the Company pursuant to Section 304 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) or Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the payment to the Company of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 306 of the Sarbanes-Oxley Act).

11.Advances of Expenses; Defense of Claim.

(a)Notwithstanding any provision of this Agreement to the contrary (other than Section 15(e)), and to the fullest extent not prohibited by applicable law, the Company shall advance the Expenses reasonably incurred by Indemnitee (or reasonably expected by Indemnitee to be incurred by Indemnitee within three months) in connection with any Proceeding (or any part of any Proceeding) not initiated by Indemnitee within ten (10) days after the receipt by the Company of a statement or statements requesting such advances from time to time, whether prior to or after final disposition of any Proceeding. Advances shall be unsecured and interest free. Advances shall be made without regard to Indemnitee’s ability to repay the Expenses and without regard to Indemnitee’s ultimate entitlement to indemnification under the other provisions of this Agreement. Advances shall include any and all reasonable Expenses incurred pursuing a Proceeding to enforce this right of advancement, including Expenses incurred preparing and forwarding statements to the Company to support the advances claimed. The Indemnitee shall qualify for Advances, to the fullest extent permitted by applicable law, solely upon the execution and delivery to the Company of an undertaking providing that the Indemnitee undertakes to repay the advance to the extent that it is ultimately determined that Indemnitee is not entitled to be indemnified by the Company under the provisions of this Agreement, the Certificate of Incorporation, the By-laws of the Company, applicable law or otherwise. This Section 11(a) shall not apply to any claim made by Indemnitee for which indemnity is excluded pursuant to Section 10.

(b)The Company will be entitled to participate in the Proceeding at its own expense.

(c)The Company shall not settle any action, claim or Proceeding (in whole or in part) that would impose any Expense, judgment, fine, penalty or limitation on the Indemnitee without the Indemnitee’s prior written consent.

12.Procedure for Notification and Request for Indemnification.

EXHIBIT 10.1

(a)Indemnitee shall notify the Company in writing of any matter with respect to which Indemnitee intends to seek indemnification or advancement of Expenses hereunder as soon as reasonably practicable following the receipt by Indemnitee of written notice thereof or Indemnitee's becoming aware thereof. The written notification to the Company shall include a description of the nature of the Proceeding and the facts underlying the Proceeding, in each case to the extent known to Indemnitee. The failure of Indemnitee to so notify the Company shall not relieve the Company of any obligation that it may have to the Indemnitee under this Agreement unless the Company’s ability to participate in the defense of such claim was materially and adversely affected by such failure.

(b)To obtain indemnification under this Agreement, Indemnitee shall submit to the Company a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification following the final disposition of such Proceeding. Such request(s) may be delivered from time to time and at such time(s) as Indemnitee deems appropriate in Indemnitee’s sole discretion. Following such a written request for indemnification by Indemnitee, the Indemnitee’s entitlement to indemnification shall be determined according to Section 13(a) of this Agreement.

13.Procedure Upon Request for Indemnification.

(a)Upon written request by Indemnitee for indemnification pursuant to Section 12(b) a determination, if required by applicable law, with respect to Indemnitee's entitlement thereto shall be made in the specific case: (i) if a Change of Control shall have occurred, by Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to Indemnitee; or (ii) if a Change of Control shall not have occurred, (A) by a majority vote of the Disinterested Directors, even if less than a quorum of the Board, (B) by a committee of Disinterested Directors designated by a majority vote of the Disinterested Directors, even if less than a quorum of the Board or (C) if there are no such Disinterested Directors or, if such Disinterested Directors so direct, by Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to Indemnitee. The Company promptly will advise Indemnitee in writing with respect to any determination that Indemnitee is or is not entitled to indemnification, including a description of any reason or basis for which indemnification has been denied. If it is so determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within ten (10) days after such determination. Indemnitee shall reasonably cooperate with the person, persons or entity making such determination with respect to Indemnitee’s entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination. Any costs or Expenses (including attorneys’ fees and disbursements) incurred by or on behalf of Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company (irrespective of the determination as to Indemnitee’s entitlement to indemnification) and the Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom.

(b)In the event the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 13(a) hereof, the Independent Counsel shall be selected as provided in this Section 13(b). If a Change of Control shall not have occurred, the Independent Counsel shall be selected by the Board, and the Company shall give written notice to Indemnitee advising him of the identity of the Independent Counsel so selected. If a Change of Control shall have occurred, the Independent Counsel shall be selected by Indemnitee (unless Indemnitee shall request that such selection be made by the Board, in which event the preceding sentence shall apply), and Indemnitee shall give written notice to the Company advising it of the identity of the Independent Counsel so selected. In either event, Indemnitee or the Company, as the case may be, may, within ten (10) days after such written notice of selection shall have been received, deliver to the Company or to Indemnitee, as the case may be, a written objection to such selection; provided, however, that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of “Independent Counsel” as defined in Section 2 of this Agreement, and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person so selected shall act as Independent Counsel. If such written objection is so made and substantiated, the Independent Counsel so selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court of competent jurisdiction has determined that such objection is without merit. If, within twenty (20) days after submission by Indemnitee of a written request for indemnification pursuant to Section 12(b) hereof, no Independent Counsel shall have been selected and not objected to, either the Company or Indemnitee may petition the Delaware Court for resolution of any objection which shall have been made by the Company or Indemnitee to the other’s selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the Delaware Court or by such other person as such court shall designate, and the person with respect to whom all objections are so resolved or the person so appointed shall act as Independent Counsel under Section 13(a) hereof. Upon the due commencement of any judicial proceeding or arbitration pursuant to Section 15(a) of this Agreement, Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing).

(c)The Company agrees to pay the reasonable fees and expenses of any Independent Counsel serving under this Agreement.

14.Presumptions and Effect of Certain Proceedings.

(a)In making a determination with respect to entitlement to indemnification hereunder, the person, persons or entity making such determination shall, to the fullest extent not prohibited by law, presume that Indemnitee is entitled to indemnification

EXHIBIT 10.1

under this Agreement if Indemnitee has submitted a request for indemnification in accordance with Section 12(b) of this Agreement, and the Company shall, to the fullest extent not prohibited by law, have the burden of proof to overcome that presumption in connection with the making by any person, persons or entity of any determination contrary to that presumption. Neither the failure of the Company (including by its directors or Independent Counsel) to have made a determination prior to the commencement of any action pursuant to this Agreement that indemnification is proper in the circumstances because Indemnitee has met the applicable standard of conduct, nor an actual determination by the Company (including by its directors or Independent Counsel) that Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct.

(b)Subject to Section 15(f) if the person, persons or entity empowered or selected under Section 13 of this Agreement to determine whether Indemnitee is entitled to indemnification shall not have made a determination within thirty (30) days after receipt by the Company of the request therefor, the requisite determination of entitlement to indemnification shall, to the fullest extent not prohibited by law, be deemed to have been made and Indemnitee shall be entitled to such indemnification, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law; provided, however, that such 30-day period may be extended for a reasonable time, not to exceed an additional fifteen (15) days, if the person, persons or entity making the determination with respect to entitlement to indemnification in good faith requires such additional time for the obtaining or evaluating of documentation and/or information relating thereto.

(c)The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which Indemnitee reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that Indemnitee’s conduct was unlawful.

(d)For purposes of any determination of good faith, Indemnitee shall be deemed to have acted in good faith if Indemnitee’s action is based on the records or books of account of the Enterprise, including financial statements, or on information supplied to Indemnitee by the officers of the Enterprise in the course of their duties, or on the advice of legal counsel for the Enterprise or on information or records given or reports made to the Enterprise by an independent certified public accountant or by an appraiser or other expert selected by the Enterprise. The provisions of this Section 14(d) shall not be deemed to be exclusive or to limit in any way the other circumstances in which the Indemnitee may be deemed or found to have met the applicable standard of conduct set forth in this Agreement.

(e)The knowledge and/or actions, or failure to act, of any other director, officer, trustee, partner, managing member, fiduciary, agent or employee of the Enterprise shall not be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement.

15.Remedies of Indemnitee.

(a)Subject to Section (f), in the event that (i) a determination is made pursuant to Section 13 of this Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement of Expenses, to the fullest extent permitted by applicable law, is not timely made pursuant to Section 11 of this Agreement, (iii) no determination of entitlement to indemnification shall have been made pursuant to Section 13(a) of this Agreement within thirty (30) days after receipt by the Company of the request for indemnification, (iv) payment of indemnification is not made pursuant to Section 5, 6, 7 or the last sentence of Section 13(a) of this Agreement within ten (10) days after receipt by the Company of a written request therefor, (v) a contribution payment is not made in a timely manner pursuant to Section 9 of this Agreement, or (vi) payment of indemnification pursuant to Section 3, 4 or 8 of this Agreement is not made within ten (10) days after a determination has been made that Indemnitee is entitled to indemnification, Indemnitee shall be entitled to an adjudication by the Delaware Court to such indemnification, contribution or advancement of Expenses. Alternatively, Indemnitee, at Indemnitee’s option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association. Except as set forth herein, the provisions of Delaware law (without regard to its conflict of laws rules) shall apply to any such arbitration. The Company shall not oppose Indemnitee’s right to seek any such adjudication or award in arbitration.

(b)In the event that a determination shall have been made pursuant to Section 13(a) of this Agreement that Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 15 shall be conducted in all respects as a de novo trial, or arbitration, on the merits and Indemnitee shall not be prejudiced by reason of that adverse determination. In any judicial proceeding or arbitration commenced pursuant to this Section 15, Indemnitee shall be presumed to be entitled to indemnification under this Agreement and the Company shall have the burden of proving Indemnitee is not entitled to indemnification or advancement of Expenses, as the case may be, and the Company may not refer to or introduce into evidence any determination pursuant to Section 13(a) of this Agreement adverse to Indemnitee for any purpose. If Indemnitee commences a judicial proceeding or arbitration pursuant to this Section 15, Indemnitee shall not be required to reimburse the Company for any advances pursuant to Section 11 until a final determination is made with respect to Indemnitee’s entitlement to indemnification (as to which all rights of appeal have been exhausted or lapsed).

(c)If a determination shall have been made pursuant to Section 13(a) of this Agreement that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant

EXHIBIT 10.1

to this Section 15, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law.

(d)The Company shall, to the fullest extent not prohibited by law, be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 15 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court or before any such arbitrator that the Company is bound by all the provisions of this Agreement.

(e)The Company shall indemnify and hold harmless Indemnitee to the fullest extent permitted by law against all Expenses and, if requested by Indemnitee, shall (within ten (10) days after the Company’s receipt of such written request) advance to Indemnitee, to the fullest extent permitted by applicable law, such Expenses that are incurred by Indemnitee in connection with any judicial proceeding or arbitration brought by Indemnitee (i) to enforce Indemnitee’s rights under, or to recover damages for breach of, this Agreement or any other indemnification, advancement or contribution agreement or provision of the Certificate of Incorporation, or the Company’s By-laws now or hereafter in effect; or (ii) for recovery or advances under any insurance policy maintained by the Company for the benefit of Indemnitee, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, advance, contribution or insurance recovery, as the case may be.

(f)Notwithstanding anything in this Agreement to the contrary, no determination as to entitlement to indemnification under this Agreement shall be required to be made prior to the final disposition of the Proceeding.

16.Non-Exclusivity; Survival of Rights; Insurance; Subrogation.

(a)The rights of indemnification and to receive advancement of Expenses as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Certificate of Incorporation, the Company’s By-laws, any agreement, a vote of members or a resolution of directors, or otherwise. No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in Indemnitee’s Corporate Status prior to such amendment, alteration or repeal. To the extent that a change in applicable law, whether by statute or judicial decision, permits greater indemnification or advancement of Expenses than would be afforded currently under Article VIII of the Certificate of Incorporation or this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy.

(b)The DGCL and Article VIII of the Certificate of Incorporation permit the Company to purchase and maintain insurance or furnish similar protection or make other arrangements (“Indemnification Arrangements”) on behalf of Indemnitee against any liability asserted against Indemnitee or incurred by or on behalf of Indemnitee or in such capacity as a director, officer, employee or agent of the Company, or arising out of Indemnitee’s status as such, whether or not the Company would have the power to indemnify Indemnitee against such liability under the provisions of this Agreement or under the DGCL, as it may then be in effect. The purchase, establishment, and maintenance of any such Indemnification Arrangement shall not in any way limit or affect the rights and obligations of the Company or of the Indemnitee under this Agreement except as expressly provided herein, and the execution and delivery of this Agreement by the Company and the Indemnitee shall not in any way limit or affect the rights and obligations of the Company or the other party or parties thereto under any such Indemnification Arrangement.

(c)To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, officers, trustees, partners, managing members, fiduciaries, employees, or agents of the Company or of any other Enterprise which such person serves at the request of the Company, Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any such director, officer, trustee, partner, managing member, fiduciary, employee or agent under such policy or policies. If, at the time the Company receives notice from any source of a Proceeding as to which Indemnitee is a party or a participant (as a witness or otherwise), the Company has director and officer liability insurance in effect, the Company shall give prompt notice of such Proceeding to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such Proceeding in accordance with the terms of such policies.

(d)In the event of any payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.

(e)The Company’s obligation to indemnify or advance Expenses hereunder to Indemnitee who is or was serving at the request of the Company as a director, officer, trustee, partner, managing member, fiduciary, employee or agent of any other Enterprise shall be reduced by any amount Indemnitee has actually received as indemnification or advancement of expenses from such Enterprise.

EXHIBIT 10.1

17.Duration of Agreement. All agreements and obligations of the Company contained herein shall continue during the period Indemnitee serves as a director or officer of the Company or as a director, officer, trustee, partner, managing member, fiduciary, employee or agent of any other corporation, partnership, joint venture, trust, employee benefit plan or other Enterprise which Indemnitee serves at the request of the Company and shall continue thereafter so long as Indemnitee shall be subject to any possible Proceeding (including any rights of appeal thereto and any Proceeding commenced by Indemnitee pursuant to Section 15 of this Agreement) by reason of Indemnitee’s Corporate Status, whether or not Indemnitee is acting in any such capacity at the time any liability or expense is incurred for which indemnification can be provided under this Agreement.

18.Severability. If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including, without limitation, each portion of any Section, paragraph or sentence of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and shall remain enforceable to the fullest extent permitted by law; (b) such provision or provisions shall be deemed reformed to the extent necessary to conform to applicable law and to give the maximum effect to the intent of the parties hereto; and (c) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any Section, paragraph or sentence of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested thereby.

19.Enforcement and Binding Effect.

(a)The Company expressly confirms and agrees that it has entered into this Agreement and assumed the obligations imposed on it hereby in order to induce Indemnitee to serve as a director or officer of the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving as a director or officer of the Company.

(b)Without limiting any of the rights of Indemnitee under the Certificate of Incorporation or By-laws of the Company as they may be amended from time to time, this Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral, written and implied, between the parties hereto with respect to the subject matter hereof.

(c)The indemnification and advancement of Expenses provided by or granted pursuant to this Agreement shall be binding upon and be enforceable by the parties hereto and their respective successors and assigns (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company), shall continue as to an Indemnitee who has ceased to be a director, officer, employee or agent of the Company or of any other Enterprise at the Company’s request, and shall inure to the benefit of Indemnitee and Indemnitee’s spouse, legally recognized domestic partner, assigns, heirs, devisees, executors and administrators and other legal representatives.

(d)The Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all or a substantial part, of the business or assets of the Company, by written agreement in form and substance satisfactory to the Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.

(e)The Company and Indemnitee agree herein that a monetary remedy for breach of this Agreement, at some later date, may be inadequate, impracticable and difficult of proof, and further agree that such breach may cause Indemnitee irreparable harm. Accordingly, the parties hereto agree that Indemnitee may enforce this Agreement by seeking injunctive relief and/or specific performance hereof, without any necessity of showing actual damage or irreparable harm and that by seeking injunctive relief and/or specific performance, Indemnitee shall not be precluded from seeking or obtaining any other relief to which Indemnitee may be entitled. The Company and Indemnitee further agree that Indemnitee shall be entitled to such specific performance and injunctive relief, including temporary restraining orders, preliminary injunctions and permanent injunctions, without the necessity of posting bonds or other undertaking in connection therewith. The Company acknowledges that in the absence of a waiver, a bond or undertaking may be required of Indemnitee by the Court, and the Company hereby waives any such requirement of such a bond or undertaking.

20.Modification and Waiver. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions of this Agreement nor shall any waiver constitute a continuing waiver.

21.Notices. All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given (i) if delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed, or (ii) mailed by certified or registered mail with postage prepaid, on the third (3rd) business day after the date on which it is so mailed:

(a)If to Indemnitee, at the address indicated on the signature page of this Agreement, or such other address as Indemnitee shall provide in writing to the Company.

EXHIBIT 10.1

(b)If to the Company, to:

Visa Inc.

P.O. Box 193243

San Francisco, CA 94119-3243

Attention: General Counsel

or to any other address as may have been furnished to Indemnitee in writing by the Company.

22.Applicable Law and Consent to Jurisdiction. This Agreement and the legal relations between the parties shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to its conflict of laws rules. Except with respect to any arbitration commenced by Indemnitee pursuant to Section 15(a) of this Agreement, the Company and Indemnitee hereby irrevocably and unconditionally: (a) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Delaware Court and not in any other state or federal court in the United States of America or any court in any other country; (b) consent to submit to the exclusive jurisdiction of the Delaware Court for purposes of any action or proceeding arising out of or in connection with this Agreement; (c) appoint irrevocably, to the extent such party is not a resident of the State of Delaware, The Corporation Trust Company, 1209 Orange Street, Wilmington, Delaware 19801 as its agent in the State of Delaware as such party’s agent for acceptance of legal process in connection with any such action or proceeding against such party with the same legal force and validity as if served upon such party personally within the State of Delaware; (d) waive any objection to the laying of venue of any such action or proceeding in the Delaware Court; and (e) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the Delaware Court has been brought in an improper or inconvenient forum, or is subject (in whole or in part) to a jury trial.

23.Identical Counterparts. This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement.

24.Miscellaneous. The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.

IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as of the day and year first above written.



VISA INC.			INDEMNITEE
By:			By:
Name:			Name:
Title:			Title:
			Address:


1.	I have reviewed this quarterly report on Form 10-Q of Visa Inc.;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


(c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;


(d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and


(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and


(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.


•	the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and


•	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.