UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended December 31, ~~2015~~2016

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

For the transition period from to

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

(650) 432-3200

(Registrant’s telephone number, including area code)

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 þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes þ No o

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



Large accelerated filer þ	Accelerated filer o
Non-accelerated filer o (Do not check if a smaller reporting company.)	Smaller Reporting Company o

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

As of January ~~22, 2016~~27, 2017 there were ~~1,919,130,968~~1,858,020,846 shares of class A common stock, par value $0.0001 per share, 245,513,385 shares of class B common stock, par value $0.0001 per share, and ~~19,411,327~~14,504,893 shares of class C common stock, par value $0.0001 per share, of Visa Inc. outstanding.

Table of Contents

VISA INC.

TABLE OF CONTENTS




		Page
PART I.	Financial Information	3

Item 1.	Financial Statements (unaudited)	3
	Consolidated Balance Sheets—December 31, ~~2015~~2016 and September 30, ~~2015~~2016	3
	Consolidated Statements of Operations—Three Months Ended December 31, ~~2015~~2016 and ~~2014~~2015	5
	Consolidated Statements of Comprehensive Income—Three Months Ended December 31, ~~2015~~2016 and ~~2014~~2015	7
	~~Consolidated Statement of Changes in Equity—Three Months Ended December 31, 2015~~	8
	Consolidated Statements of Cash Flows—Three Months Ended December 31, ~~2015~~2016 and ~~2014~~2015	98
	Notes to Consolidated Financial Statements (unaudited)	1110
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2724
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3631
Item 4.	Controls and Procedures	3631

PART II.	Other Information	3732

Item 1.	Legal Proceedings	3732
Item 1A.	Risk Factors	3732
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3732
Item 3.	Defaults Upon Senior Securities	3732
Item 4.	Mine Safety Disclosures	3732
Item 5.	Other Information	3732
Item 6.	Exhibits	3832
	Signatures	3933
	Exhibit Index	4034

~~Table of Contents~~

PART I. FINANCIAL INFORMATION



ITEM 1.	Financial Statements

VISA INC.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)


	December 31, 2015		September 30, 2015		December 31, 2016		September 30, 2016
	(in millions, except par value data)				(in millions, except par value data)
Assets
Cash and cash equivalents	$	12,837	$	3,518	$	5,824	$	5,619
Restricted cash—litigation escrow (Note 3)	1,061		1,072
Restricted cash—U.S. litigation escrow (Note 3)					1,028		1,027
Investment securities (Note 4):
Trading	80		66		82		71
Available-for-sale	8,428		2,431		3,615		3,248
Settlement receivable	443		408		1,333		1,467
Accounts receivable	922		847		1,120		1,041
Customer collateral (Note 7)	1,041		1,023
Customer collateral (Note 6)					1,006		1,001
Current portion of client incentives	414		303		265		284
Prepaid expenses and other current assets	247		353		416		555
Total current assets	25,473		10,021		14,689		14,313
Investment securities, available-for-sale (Note 4)	3,487		3,384		3,802		3,931
Client incentives	128		110		484		448
Property, equipment and technology, net	1,884		1,888		2,201		2,150
Other assets	832		778		921		893
Intangible assets, net	11,348		11,361
Goodwill	11,825		11,825
Intangible assets, net (Note 2)					26,381		27,234
Goodwill (Note 2)					14,892		15,066
Total assets	$	54,977	$	39,367	$	63,370	$	64,035
Liabilities
Accounts payable	$	118	$	127	$	118	$	203
Settlement payable	744		780		2,059		2,084
Customer collateral (Note 7)	1,041		1,023
Customer collateral (Note 6)					1,006		1,001
Accrued compensation and benefits	317		503		433		673
Client incentives	1,116		1,049		1,872		1,976
Accrued liabilities (Note 8)	1,009		849
Accrued litigation (Note 13)	1,012		1,024
Accrued liabilities					1,546		1,128
Current maturities of long-term debt and short-term debt (Note 5)					2,313		—
Accrued litigation (Note 12)					994		981
Total current liabilities	5,357		5,355		10,341		8,046
Long-term debt (Note 5)	15,877		—		14,138		15,882
Deferred tax liabilities	3,344		3,273		4,822		4,808
Other liabilities (Note 8)	923		897
Deferred purchase consideration					1,164		1,225
Other liabilities					1,179		1,162
Total liabilities	25,501		9,525		31,644		31,123

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

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VISA INC.

CONSOLIDATED BALANCE SHEETS—(Continued)

(UNAUDITED)


	December 31, 2015			September 30, 2015			December 31, 2016			September 30, 2016
	(in millions, except par value data)						(in millions, except par value data)
Equity
Preferred stock, $0.0001 par value, 25 shares authorized and none issued	$	—		$	—
Class A common stock, $0.0001 par value, 2,001,622 shares authorized, 1,926 and 1,950 shares issued and outstanding at December 31, 2015 and September 30, 2015, respectively (Note 9)	—			—
Class B common stock, $0.0001 par value, 622 shares authorized, 245 shares issued and outstanding at December 31, 2015 and September 30, 2015 (Note 9)	—			—
Class C common stock, $0.0001 par value, 1,097 shares authorized, 19 and 20 shares issued and outstanding at December 31, 2015 and September 30, 2015, respectively (Note 9)	—			—
Preferred stock, $0.0001 par value, 25 shares authorized and 5 issued and outstanding as follows:
Series A convertible participating preferred stock, none issued (Note 2 and Note 8)							$	—		$	—
Series B convertible participating preferred stock, 2 shares issued and outstanding at December 31, 2016 and September 30, 2016 (Note 2 and Note 8)							2,516			2,516
Series C convertible participating preferred stock, 3 shares issued and outstanding at December 31, 2016 and September 30, 2016 (Note 2 and Note 8)							3,201			3,201
Class A common stock, $0.0001 par value, 2,001,622 shares authorized, 1,854 and 1,871 shares issued and outstanding at December 31, 2016 and September 30, 2016, respectively (Note 8)							—			—
Class B common stock, $0.0001 par value, 622 shares authorized, 245 shares issued and outstanding at December 31, 2016 and September 30, 2016 (Note 8)							—			—
Class C common stock, $0.0001 par value, 1,097 shares authorized, 16 and 17 shares issued and outstanding at December 31, 2016 and September 30, 2016, respectively (Note 8)							—			—
Treasury stock							(170		)	(170		)
Right to recover for covered losses (Note 3)							(128		)	(34		)
Additional paid-in capital	17,824			18,073			17,184			17,395
Accumulated income	11,701			11,843			10,492			10,462
Accumulated other comprehensive loss, net:
Investment securities, available-for-sale	23			5			32			36
Defined benefit pension and other postretirement plans	(131		)	(161		)	(221		)	(225		)
Derivative instruments classified as cash flow hedges	60			83			27			(50		)
Foreign currency translation adjustments	(1		)	(1		)	(1,207		)	(219		)
Total accumulated other comprehensive loss, net	(49		)	(74		)	(1,369		)	(458		)
Total equity	29,476			29,842			31,726			32,912
Total liabilities and equity	$	54,977		$	39,367		$	63,370		$	64,035

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

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VISA INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)


	Three Months Ended December 31,						Three Months Ended December 31,
	2015			2014			2016			2015
	(in millions, except per share data)						(in millions, except per share data)
Operating Revenues
Service revenues	$	1,645		$	1,538		$	1,918		$	1,645
Data processing revenues	1,479			1,383			1,892			1,479
International transaction revenues	1,031			970			1,489			1,031
Other revenues	198			204			203			198
Client incentives	(788		)	(713		)	(1,041		)	(788		)
Total operating revenues	3,565			3,382
Net operating revenues							4,461			3,565
Operating Expenses
Personnel	499			509			571			499
Marketing	194			205			218			194
Network and processing	128			114			145			128
Professional fees	72			70			80			72
Depreciation and amortization	120			120			146			120
General and administrative	156			126			186			156
Litigation provision (Note 12)							15			—
Total operating expenses	1,169			1,144			1,361			1,169
Operating income	2,396			2,238			3,100			2,396
Non-operating Income
Non-operating (Expense) Income
Interest expense	(29		)	(3		)	(140		)	(29		)
Other	272			27			19			272
Total non-operating income	243			24
Non-operating (expense) income							(121		)	243
Income before income taxes	2,639			2,262			2,979			2,639
Income tax provision (Note 12)	698			693
Income tax provision (Note 11)							909			698
Net income	$	1,941		$	1,569		$	2,070		$	1,941

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

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VISA INC.

CONSOLIDATED STATEMENTS OF OPERATIONS—(Continued)

(UNAUDITED)


	Three Months Ended December 31,				Three Months Ended December 31,
	2015		2014		2016		2015
	(in millions, except per share data)				(in millions, except per share data)
Basic earnings per share (Note 10)
Basic earnings per share (Note 9)
Class A common stock	$	0.80	$	0.63	$	0.86	$	0.80
Class B common stock	$	1.32	$	1.05	$	1.41	$	1.32
Class C common stock	$	3.20	$	2.54	$	3.43	$	3.20
Basic weighted-average shares outstanding (Note 10)
Basic weighted-average shares outstanding (Note 9)
Class A common stock	1,937		1,974		1,860		1,937
Class B common stock	245		245		245		245
Class C common stock	20		22		17		20
Diluted earnings per share (Note 10)
Diluted earnings per share (Note 9)
Class A common stock	$	0.80	$	0.63	$	0.86	$	0.80
Class B common stock	$	1.32	$	1.04	$	1.41	$	1.32
Class C common stock	$	3.20	$	2.53	$	3.42	$	3.20
Diluted weighted-average shares outstanding (Note 10)
Diluted weighted-average shares outstanding (Note 9)
Class A common stock	2,430		2,478		2,421		2,430
Class B common stock	245		245		245		245
Class C common stock	20		22		17		20

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

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VISA INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)


	Three Months Ended December 31,						Three Months Ended December 31,
	2015			2014			2016			2015
	(in millions)						(in millions)
Net income	$	1,941		$	1,569		$	2,070		$	1,941
Other comprehensive income, net of tax:
Other comprehensive (loss) income, net of tax:
Investment securities, available-for-sale:
Net unrealized gain (loss)	34			(10		)
Income tax effect	(16		)	3
Reclassification adjustment for net gain realized in net income	—			(21		)
Net unrealized (loss) gain							(3		)	34
Income tax effect	—			8			(1		)	(16		)
Defined benefit pension and other postretirement plans:
Net unrealized actuarial gain and prior service credit	56			6			—			56
Income tax effect	(21		)	(1		)	—			(21		)
Amortization of actuarial loss and prior service credit realized in net income	(7		)	(1		)	6			(7		)
Income tax effect	2			—			(2		)	2
Derivative instruments classified as cash flow hedges:
Net unrealized gain	16			63			74			16
Income tax effect	(5		)	(17		)	(7		)	(5		)
Reclassification adjustment for net gain realized in net income	(48		)	(6		)
Reclassification adjustment for net loss (gain) realized in net income							12			(48		)
Income tax effect	14			2			(2		)	14
Foreign currency translation adjustments	—			1			(988		)	—
Other comprehensive income, net of tax	25			27
Other comprehensive (loss) income, net of tax							(911		)	25
Comprehensive income	$	1,966		$	1,596		$	1,159		$	1,966

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

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VISA INC.

CONSOLIDATED ~~STATEMENT~~STATEMENTS OF ~~CHANGES IN EQUITY~~CASH FLOWS

(UNAUDITED)

Common Stock Additional Paid-in Capital Accumulated Income Accumulated
Other
Comprehensive
Loss Total
Equity
Class A Class B Class C
(in millions, except per share data)
Balance as of September 30, 2015 1,950
245
20
$ 18,073
$ 11,843
$ (74 ) $ 29,842
Net income 1,941
1,941
Other comprehensive income, net of tax 25
25
Comprehensive income 1,966
Conversion of class C common stock upon sale into public market 1
(1 ) —
Issuance and vesting of restricted stock and performance-based shares 1
—
Share-based compensation, net of forfeitures (Note 11) —
⁽¹⁾
39
39
Restricted stock and performance-based shares settled in cash for taxes (1 ) (81 ) (81 )
Excess tax benefit for share-based compensation 36
36
Cash proceeds from issuance of common stock under employee equity plans 1
29
29
Cash dividends declared and paid, at a quarterly amount of $0.14 per as-converted share (Note 9) (340 ) (340 )
Repurchase of class A common stock (Note 9) (26 ) (272 ) (1,743 ) (2,015 )
Balance as of December 31, 2015 1,926
245
19
$ 17,824
$ 11,701
$ (49 ) $ 29,476



	Three Months Ended December 31,
	2016			2015
	(in millions)
Operating Activities
Net income	$	2,070		$	1,941
Adjustments to reconcile net income to net cash provided by operating activities:
Client incentives	1,041			788
Fair value adjustment for the Visa Europe put option	—			(255		)
Share-based compensation (Note 10)	45			39
Excess tax benefit for share-based compensation	—			(36		)
Depreciation and amortization of property, equipment, technology and intangible assets	146			120
Deferred income taxes	77			45
Right to recover for covered losses recorded in equity	(94		)	—
Other	13			5
Change in operating assets and liabilities:
Settlement receivable	56			(35		)
Accounts receivable	(89		)	(75		)
Client incentives	(1,129		)	(850		)
Other assets	66			23
Accounts payable	(102		)	—
Settlement payable	79			(36		)
Accrued and other liabilities	316			317
Accrued litigation (Note 12)	13			(12		)
Net cash provided by operating activities	2,508			1,979
Investing Activities
Purchases of property, equipment, technology and intangible assets	(171		)	(126		)
Investment securities, available-for-sale:
Purchases	(1,032		)	(6,803		)
Proceeds from maturities and sales	788			739
Purchases of / contributions to other investments	(2		)	(8		)
Proceeds / distributions from other investments	—			4
Net cash used in investing activities	(417		)	(6,194		)


⁽¹⁾	~~Decrease in class A common stock related to forfeitures of restricted stock awards is less than 1 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~~FLOWS—(Continued)

(UNAUDITED)

Three Months Ended
December 31,
2015 2014
(in millions)
Operating Activities
Net income $ 1,941
$ 1,569
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of client incentives 788
713
Fair value adjustment for the Visa Europe put option (255 ) —
Share-based compensation 39
45
Excess tax benefit for share-based compensation (36 ) (58 )
Depreciation and amortization of property, equipment, technology and intangible assets 120
120
Deferred income taxes 45
97
Other 5
(19 )
Change in operating assets and liabilities:
Settlement receivable (35 ) 286
Accounts receivable (75 ) (78 )
Client incentives (850 ) (687 )
Other assets 23
(141 )
Accounts payable —
10
Settlement payable (36 ) (477 )
Accrued and other liabilities 317
484
Accrued litigation (Note 13) (12 ) (103 )
Net cash provided by operating activities 1,979
1,761
Investing Activities
Purchases of property, equipment, technology and intangible assets (126 ) (104 )
Investment securities, available-for-sale:
Purchases (6,803 ) (758 )
Proceeds from maturities and sales 739
226
Purchases of / contributions to other investments (8 ) —
Proceeds / distributions from other investments 4
—
Net cash used in investing activities (6,194 ) (636 )



	Three Months Ended December 31,
	2016			2015
	(in millions)
Financing Activities
Repurchase of class A common stock (Note 8)	$	(1,893	)	$	(2,015	)
Dividends paid (Note 8)	(399		)	(340		)
Proceeds from issuance of senior notes (Note 5)	—			15,971
Debt issuance costs (Note 5)	—			(77		)
Proceeds from issuance of commercial paper (Note 5)	566			—
Payments from litigation escrow account—U.S. retrospective responsibility plan (Note 3 and Note 12)	—			11
Cash proceeds from issuance of common stock under employee equity plans	56			29
Restricted stock and performance-based shares settled in cash for taxes	(60		)	(81		)
Excess tax benefit for share-based compensation	—			36
Net cash (used in) provided by financing activities	(1,730		)	13,534
Effect of exchange rate changes on cash and cash equivalents	(156		)	—
Increase in cash and cash equivalents	205			9,319
Cash and cash equivalents at beginning of year	5,619			3,518
Cash and cash equivalents at end of period	$	5,824		$	12,837
Supplemental Disclosure
Income taxes paid, net of refunds	$	96		$	79
Interest payments on debt (Note 5)	$	244		$	—
Accruals related to purchases of property, equipment, technology and intangible assets	$	69		$	40

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—(Continued)~~

~~(UNAUDITED)~~

Three Months Ended
December 31,
2015 2014
(in millions)
Financing Activities
Repurchase of class A common stock (Note 9) $ (2,015 ) $ (803 )
Dividends paid (Note 9) (340 ) (297 )
Proceeds from issuance of senior notes (Note 5) 15,971
—
Debt issuance costs (Note 5) (77 ) —
Payments from litigation escrow account—U.S. retrospective responsibility plan (Note 3 and Note 13) 11
100
Cash proceeds from issuance of common stock under employee equity plans 29
30
Restricted stock and performance-based shares settled in cash for taxes (81 ) (100 )
Excess tax benefit for share-based compensation 36
58
Net cash provided by (used in) financing activities 13,534
(1,012 )
Effect of exchange rate changes on cash and cash equivalents —
1
Increase in cash and cash equivalents 9,319
114
Cash and cash equivalents at beginning of year 3,518
1,971
Cash and cash equivalents at end of period $ 12,837
$ 2,085
Supplemental Disclosure
Income taxes paid, net of refunds $ 79
$ 57
Accruals related to purchases of property, equipment, technology and intangible assets $ 40
$ 21

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

~~Table of Contents~~

VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, ~~2015~~2016

(UNAUDITED)

Note 1—Summary of Significant Accounting Policies

Organization. Visa Inc. ~~(“Visa”~~("Visa" or the ~~“Company”~~"Company") is a global payments technology company that connects consumers, ~~businesses,~~merchants, financial institutions, businesses, strategic partners and governments in more than 200 countries and territories to fast, secure and reliable electronic payments. Visa and its wholly-owned consolidated subsidiaries, including Visa U.S.A. Inc. (“("Visa U.S.A.”"), Visa International Service Association (“("Visa ~~International”~~International"), Visa Worldwide Pte. Limited, Visa Europe Limited ("Visa Europe"), Visa Canada Corporation, Inovant LLC and CyberSource Corporation ~~(“CyberSource”~~("CyberSource"), operate one of the world’s ~~most advanced processing~~largest retail electronic payments networks — VisaNet — which facilitates authorization, clearing and settlement of payment transactions ~~worldwide.~~and enables us to provide our financial institution and merchant clients a wide range of products, platforms and value-added services. VisaNet also offers fraud protection for account holders and assured payment for merchants. Visa is not a bank and does not issue cards, extend credit or set rates and fees for account holders on ~~Visa-branded cards and payment~~Visa products. In most cases, account holder and merchant relationships belong to, and are managed by, Visa's financial institution clients. Visa provides a wide variety of payment solutions that support payment products that issuers can offer to their account holders: pay now with debit, pay ahead with prepaid or pay later with credit products. Visa also offers a growing suite of innovative digital, eCommerce and mobile products and services. These services facilitate transactions on Visa's network among account holders, merchants, financial institutions and governments in mature and emerging markets globally.

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”~~GAAP"). The Company consolidates its majority-owned and controlled entities, including variable interest entities ~~(“VIEs”~~("VIEs") for which the Company is the primary beneficiary. The Company’s investments in VIEs have not been material to its consolidated financial statements as of and for the periods presented. All significant intercompany accounts and transactions are eliminated in consolidation.

The accompanying unaudited consolidated financial statements are presented in accordance with the U.S. Securities and Exchange Commission ~~(“SEC”~~("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, ~~2015~~2016 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 ~~April 2015,~~May 2014, the Financial Accounting Standards Board ~~(“FASB”~~("FASB") issued Accounting Standards Update ~~(“ASU”~~("ASU") ~~2015-03,~~2014-09, which ~~simplifies~~requires an entity to recognize the ~~presentation of debt issuance costs by requiring that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying~~ amount of ~~debt liability, consistent with debt discounts~~revenue to which it expects to be entitled for the transfer of goods or ~~premiums.~~services to customers. The ~~standard impacts presentation only.~~ASU will replace existing revenue recognition guidance in U.S. GAAP when it becomes effective. Subsequently, the FASB also issued a series of amendments to the new revenue standard. The Company ~~elected to early~~will adopt the standard effective October 1, ~~2015~~2018. The standard permits the use of either the retrospective or cumulative effect transition method. The Company has not yet selected a transition method and is evaluating the ~~carrying amount~~full effect that ASU 2014-09 and all of ~~the Company's debt liability is presented net of issuance costs~~its related subsequent updates will have on ~~the~~its consolidated financial ~~statements. Also see~~ ~~Note 5—Debt.~~statements and related disclosures.

In ~~September 2015,~~March 2016, the FASB issued ASU ~~No. 2015-16,~~2016-09, which simplifies several aspects of the accounting for ~~post-acquisition adjustments by eliminating~~share-based payments, including the ~~requirement~~accounting for excess tax benefits and deficiencies, forfeitures, and statutory tax withholding requirements, as well as classification on the statement of cash flows related to ~~retrospectively account~~excess tax benefits and employee taxes paid when an employer withholds shares for ~~the adjustments made to provisional amounts recognized in a business combination.~~tax-withholding purposes. The Company elected to early adopt this guidance ~~on a prospective basis~~ effective October 1, ~~2015.~~2016. The adoption ~~did not have a material~~had the following impact on the consolidated financial ~~statements.~~statements:

In November 2015, the FASB issued ASU 2015-17, which simplifies the presentation of deferred income taxes by requiring that deferred tax assets and liabilities be presented as non-current. The standard impacts presentation only. The Company elected to early adopt the standard on a retrospective basis effective October 1, 2015 and all deferred tax assets and liabilities are classified as non-current. Previously, current deferred tax assets had been presented separately and current deferred tax liabilities had been included in accrued liabilities on the consolidated

1110

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VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

~~balance sheets. All~~The Company recorded excess tax benefits of $26 million in our provision for income taxes rather than as an increase to additional paid-in capital for the three months ended December 31, 2016 on a prospective basis. Therefore, the prior period ~~amounts within~~presented has not been adjusted.

The Company excluded the ~~consolidated financial statements have been reclassed~~excess tax benefits from the assumed proceeds available to ~~conform to current period presentation. The reclass~~repurchase shares in the computation of diluted earnings per share for the quarter ended December 31, 2016, which increased diluted weighted average common shares outstanding by 1 million, which did not ~~affect~~have a material impact on our diluted earnings per share.

The Company elected to apply the ~~Company's total equity, operating revenues, net income, comprehensive income or~~presentation requirement for cash flows asrelated to excess tax benefits prospectively, and thus, the prior period presented has not been adjusted. This adoption resulted in an increase to both net cash provided by operating activities and net cash used in financing of ~~and~~$26 million for the ~~periods presented.~~three months ended December 31, 2016.

In ~~January~~October 2016, the FASB issued ASU ~~2016-01,~~2016-16, which ~~amends certain aspects~~requires that entities recognize the income tax consequences of ~~recognition, measurement, presentation~~an intra-entity transfer of an asset, other than inventory, when the transfer occurs. The Company is evaluating the effect that ASU 2016-16 will have on its consolidated financial statements and ~~disclosure~~is considering early adoption of the standard.

In November 2016, the FASB issued ASU 2016-18, which requires that a statement of cash flows should include the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents when reconciling the beginning-of-period and end-of-period total amounts. The Company is evaluating the effect that ASU 2016-18 will have on its consolidated financial ~~instruments, including~~statements and is considering early adoption of the ~~requirement to measure certain equity investments at~~standard.

In January 2017, the FASB issued ASU 2017-04, which eliminates Step 2 from the goodwill impairment test. Instead, an entity should perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with ~~changes in~~its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value, ~~recognized in net income.~~not to exceed the total amount of goodwill allocated to the reporting unit. The Company will adopt the standard effective October 1, ~~2018.~~2020. The adoption is not expected to have a material impact on the consolidated financial statements.

Note 2—Visa Europe

~~Acquisition of Visa Europe~~

On ~~November 2, 2015,~~June 21, 2016, the Company ~~and Visa Europe entered into a transaction agreement (the "Transaction Agreement"), pursuant to which the Company and Visa Europe agreed on the terms and conditions of the Company’s acquisition of~~acquired 100% of the share capital of Visa Europe, ~~for~~ a ~~total purchase price~~payments technology business. The acquisition positions Visa to create additional value through increased scale, efficiencies realized by the integration of upboth businesses, and benefits related to ~~€21.2 billion. The purchase price consists of: (a) at~~Visa Europe's transition from an association to a for-profit enterprise. At the closing of the transaction (the "Closing"), the Company:

paid up-front cash consideration of ~~€11.5~~€12.2 billion ~~and~~($13.9 billion);

issued preferred stock of the Company convertible upon certain conditions into approximately 79 million shares of class A common ~~stock or class A equivalent preferred~~ stock of the Company, as described below, ~~valued~~equivalent to a value of €5.3 billion ($6.1 billion) at ~~approximately €5.0 billion,~~the closing stock price of $77.33 on June 21, 2016; and ~~(b) following the end of sixteen fiscal quarters post-closing, contingent cash consideration of up~~

agreed to ~~€4.0 billion (plus up to~~pay an additional ~~€0.7~~€1.0 billion, ~~in interest), determined based~~plus 4% compound annual interest, on the ~~achievement of specified net revenue levels during such post-closing period. Closing is subject to regulatory approvals and other customary conditions, and is currently expected to occur in the fiscal~~ third ~~quarter of 2016.~~

~~Transaction agreement and option amendment. The Transaction Agreement provides for the acquisition to be effected pursuant to the exercise~~anniversary of the amended Visa Europe put option (the "Amended Put Option"), as described further below. In connection with the execution of the Transaction Agreement, the Company and Visa Europe entered into an amendment (the "Put Option Amendment") to the Visa Europe put option (the "Put") to align certain terms of the Put with the terms of the Transaction Agreement. Under the terms and conditions of the Transaction Agreement, the Visa Europe board of directors is required to exercise the Amended Put Option on the closing date of the transaction to effect Visa’s purchase of all of Visa Europe’s share capital. If the Transaction Agreement is terminated for any reason prior to the completion of the transaction, the Put Option Amendment will also terminate and the Put will revert to its original, unamended form. The Transaction Agreement may be terminated by the Company or Visa Europe, subject to specified exceptions, if the transaction is not consummated by August 2, 2016, or if legal restraints that prohibit the closing have become final and non-appealable.Closing.

Preferred stock. In connection with the transaction, ~~the board of directors of the Company has authorized the creation of~~ three new series of preferred stock of the ~~Company:~~Company were created:

series A convertible participating preferred stock, par value $0.0001 per share, which is generally designed to be economically equivalent to the Company’s class A common stock (the “class A equivalent preferred stock”);

series B convertible participating preferred stock, par value $0.0001 per share (the “U.K.&I preferred stock”); and

series C convertible participating preferred stock, par value $0.0001 per share (the “Europe preferred stock”).

The ~~Transaction Agreement provides that, subject to the terms and conditions thereof, at closing, the~~ Company ~~will issue 2,480,500~~issued 2,480,466 shares of U.K.&I preferred stock to ~~those of~~ Visa Europe’s member financial institutions in the United Kingdom and Ireland ~~that are~~ entitled to receive preferred stock at ~~closing,~~the Closing, and ~~3,157,000~~3,156,823 shares of Europe preferred stock to ~~those of~~ Visa Europe’s other member financial institutions ~~that are~~ entitled to receive preferred stock at ~~closing. Subject to~~ the ~~reduction in conversion rates~~Closing. Under certain conditions described below, the U.K.&I preferred stock will be convertible into a number of shares of class A common stock or class A equivalent preferred stock valued at approximately €2.2 billion and the Europe preferred stock will be convertible into a number of shares of class A common stock or class A equivalent preferred stock valued at approximately €2.8 billion. These approximate values of the UK&I and Europe preferred stock ~~to be issued at closing are based on the average price of the class A common stock of $71.68 per share, and the euro-dollar exchange rate of 1.12750 for the 30 trading days ended October 19, 2015.~~

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~~VISA INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~The UK&I and Europe preferred stock will be~~is convertible into shares of class A common stock or class A equivalent preferred stock, at an initial conversion rate of 13.952 shares of class A common stock for each share of U.K.&I preferred stock and Europe preferred stock. The conversion rates may be reduced from time to time to offset certain liabilities, ~~if any,~~ which may be incurred by the Company, Visa Europe or their affiliates as a result

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VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

of certain existing and potential litigation relating to the setting of multilateral interchange fee rates in the Visa Europe ~~territory. A reduction in~~territory, where, generally, the ~~conversion rates of~~relevant claims (and resultant liabilities and losses) relate to the ~~U.K.&I preferred stock and~~period before the Europe preferred stock have the same economic effect on earnings per share as repurchasing the Company's class A common stock because it reduces the as-converted class A common stock share count. Additionally, the shares of U.K.&I and Europe preferred stock will be subject to restrictions on transfer and may become convertible in stages based on developments in the existing and potential litigation. The shares of U.K.&I and Europe preferred stock will become fully convertible on the 12th anniversary of closing, subject only to a holdback to cover any then-pending claims.Closing. See Note 3—U.S. and Europe Retrospective Responsibility ~~Plan~~Plans.

Actual and ~~Potential~~pro forma impact of acquisition.

The following table presents unaudited supplemental pro forma information for the three months ended December 31, 2015, as if the acquisition and related issuance of senior notes had occurred on October 1, 2014. The pro forma financial information is not necessarily indicative of the Company's consolidated results of operations that would have been realized had the acquisition been completed on October 1, 2014, nor does it purport to project the future results of operations of the combined company or reflect any reorganizations, or cost or other operating synergies that may occur subsequent to the Closing. The actual results of operations of the combined company may differ significantly from the pro forma results presented here due to many factors.



	Consolidated Actual Results		Unaudited Pro Forma Consolidated Results
	Three Months Ended December 31,
	2016		2015
	(in millions, except per share data)
Net operating revenues	$	4,461	$	3,964
Net income	$	2,070	$	1,776
Diluted earnings per share	$	0.86	$	0.71

The unaudited pro forma financial information for the three months ended December 31, 2015 reflects the following material pro forma adjustments:

conversion of Visa Europe's historical results of operations from euro to U.S. dollar, and from International Financial Reporting Standards to U.S. GAAP;

elimination of transactions between Visa and Visa Europe ~~Liabilities.~~upon consolidation, primarily related to annual license and various other fees paid by Visa Europe to Visa in accordance with the Framework Agreement;

~~Upon~~an increase in non-operating expense for the three months ended December 31, 2015 for additional interest expense and amortization of debt issuance costs resulting from the issuance of the ~~preferred stock at closing,~~$16.0 billion senior notes;


•	exclusion of a $255 million gain related to the revaluation of the Visa Europe put option⁽¹⁾; and

elimination of acquisition-related costs incurred by Visa Europe.


⁽¹⁾	For purposes of preparing this pro forma financial information, the fair value of the Visa Europe put option is presumed to have been reduced to zero prior to October 1, 2014. Therefore, the Company did not include any gains associated with a write-down in the fair value of the Visa Europe put option liability in the unaudited pro forma net income for the three months ended December 31, 2015.

The pro forma results also reflect the ~~holders~~applicable tax impact of the ~~U.K.&I~~pro forma adjustments. The taxes associated with the adjustments reflect the statutory tax rate in effect during the respective periods.

Goodwill and ~~Europe preferred stock will have no right to vote on any matters, except for certain defined matters, including, in specified circumstances, any consolidation, merger or combination of~~intangible assets.

Upon the Company. Holders of the class A equivalent preferred stock, upon issuance at conversion, will have similar voting rights to the rights of the holders of the U.K.&I and Europe preferred stock. With respect to those limited matters on which the holders of preferred stock may vote, approval by the holders of the preferred stock requires the affirmative vote of the outstanding voting power of each such series of preferred stock, each such series voting as a single class. Once issued, all three series of preferred stock will participate on an as-converted basis in regular quarterly cash dividends declared on the Company's class A common stock.

~~U.K. loss sharing agreement and litigation management deed. On November 2, 2015,~~Closing, the Company ~~Visa Europe~~recorded goodwill and certain of Visa Europe’s member financial institutions located in the United Kingdom (the “U.K. LSA members”) entered into a loss sharing agreement (the “U.K. loss sharing agreement”), pursuant to which each of the U.K. LSA members has agreed, on a several and not joint basis, to compensate the Company for certain losses which may be incurred by the Company, Visa Europe or their affiliatesindefinite-lived intangible assets as a result of ~~certain existing~~the acquisition. The decrease in goodwill and ~~potential litigation relating~~intangible assets at December 31, 2016 from September 30, 2016 is primarily due to ~~the setting and implementation~~foreign currency translation, which is recorded as a component of ~~domestic multilateral interchange fee rates~~accumulated other comprehensive loss in the United Kingdom, subject to the terms and conditions set forth therein and, with respect to each U.K. LSA member, up to a maximum amount of the up-front cash consideration to be received by such U.K. LSA member. The U.K. LSA members’ obligations under the U.K. loss sharing agreement are conditional upon, among other things, the acquisition closing, and additionally upon either (a) losses valued at in excess of the sterling equivalent at closing of €1.0 billion having arisen in claims relating to the U.K. domestic multilateral interchange fees (with such losses being recoverable through reductions in the conversion rate of the U.K.&I preferred stock), or (b) the conversion rate of the UK&I preferred stock having been reduced to zero pursuant to losses arising in claims relating to multilateral interchange fee rate setting in the Visa Europe territory, as described above. See ~~Note 3—U.S. Retrospective Responsibility Plan and Potential Visa Europe Liabilities.~~consolidated balance sheet.

Prior to closing, the Company and the other parties thereto will enter into a litigation management deed, which will set forth the agreed upon procedures for the management of the existing and potential litigation, as described above, relating to the setting and implementation of multilateral interchange fee rates in the Visa Europe territory (the "Europe covered claims"), the allocation of losses resulting from the Europe covered claims, and any accelerated conversion or reduction in the conversion rate of the shares of U.K.&I and Europe preferred stock. Subject to the terms and conditions set forth therein, the litigation management deed provides that the Company will generally control the conduct of the Europe covered claims, subject to certain obligations to report and consult with newly established Europe litigation management committees. The Europe litigation management committees, which will be composed of representatives of certain Visa Europe members, will also be granted consent rights to approve certain material decisions in relation to the Europe covered claims.

~~Table of Contents~~

~~VISA INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

Note 3—U.S. and Europe Retrospective Responsibility ~~Plan and Potential Visa Europe Liabilities~~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, 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 on the consolidated balance sheets. The balance of the escrow account was ~~$1.1~~$1.0 billion at December 31, ~~2015~~2016 and September 30, ~~2015.~~2016. The Company ~~paid $11 million~~did not make any payments to opt-out merchants from the litigation escrow account during the three months ended December 31, ~~2015~~ ~~to settle their claims associated with the interchange multidistrict litigation.~~2016. See Note ~~13—~~12—Legal Matters.

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VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The accrual related to the covered litigation could be either higher or lower than the litigation escrow account balance. The Company did not record an additional accrual for the covered litigation during the three months ended December 31, ~~2015~~.2016. See Note ~~13—~~12—Legal Matters.

~~Potential Visa~~ Europe ~~Liabilities~~Retrospective Responsibility Plan

~~On November 2, 2015,~~Under the terms of the Europe retrospective responsibility plan, the Company is entitled to recover VE territory covered losses through a periodic adjustment to the class A common stock conversion rates applicable to the U.K.&I. and ~~Visa~~ Europe ~~entered into~~preferred stock. VE territory covered losses may be recorded in "right to recover for covered losses" within equity before the ~~Transaction Agreement pursuant~~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 will then be recorded against the book value of the preferred stock within stockholders' equity. As of December 31, 2016, the Company ~~agreed to acquire Visa Europe. Closing of the acquisition is subject to various conditions including regulatory approvals, and is expected to occur~~had recorded $128 million in the ~~fiscal third quarter~~"right to recover for covered losses" related to VE territory covered losses compared to $34 million at September 30, 2016 as a result of ~~2016. Visa Inc., Visa Europe or their affiliates are, or may become, a party to certain existing~~additional losses incurred, including settlements with several merchants and ~~potential litigation relating~~additional legal costs. See Note 12—Legal Matters. There were no adjustments to the ~~setting of multilateral interchange fee~~conversion rates in the ~~Visa Europe territory.~~ three months ended December 31, 2016.

The ~~Company has obtained certain protection in respect~~following table sets forth the as-converted value of ~~losses resulting from existing and potential litigation through~~ the preferred stock ~~and~~available to recover VE territory covered losses compared to the ~~U.K. loss sharing agreement, and has agreed to certain terms regarding~~book value of preferred shares recorded in stockholders' equity within the ~~conduct~~Company's unaudited consolidated balance sheet as of ~~such litigation, all of which is conditioned on the closing of the acquisition of Visa Europe by the Company. See~~ December 31, 2016.~~Note 2—Visa Europe.~~⁽¹⁾



	December 31, 2016
	As-Converted Value of Preferred Stock⁽²⁾			Book Value of Preferred Stock
	(in millions)
U.K.&I preferred stock	$	2,700		$	2,516
Europe preferred stock	3,436			3,201
Total	$	6,136		$	5,717
Less: Right to recover for covered losses	(128		)	(128		)
Total recovery for covered losses available	$	6,008		$	5,589


⁽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 U.K.&I and Europe preferred stock outstanding, respectively, as of December 31, 2016; (b) the 13.952 class A common stock conversion rate applicable to both the U.K.&I and Europe preferred stock as of December 31, 2016; and (c) $78.02, Visa's class A common stock closing stock price as of December 31, 2016.

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VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 4—Fair Value Measurements and Investments

Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Recurring Basis


	Fair Value Measurements Using Inputs Considered as												Fair Value Measurements Using Inputs Considered as
	Level 1				Level 2				Level 3				Level 1				Level 2
	December 31, 2015		September 30, 2015		December 31, 2015		September 30, 2015		December 31, 2015		September 30, 2015		December 31, 2016		September 30, 2016		December 31, 2016		September 30, 2016
	(in millions)												(in millions)
Assets
Cash equivalents and restricted cash:
Money market funds	$	3,517	$	3,051									$	4,819	$	4,537
U.S. Treasury securities	5,999		—
U.S. government-sponsored debt securities					3,198		280										$	—	$	196
Investment securities, trading:
Equity securities	80		66										82		71
Investment securities, available-for-sale:
U.S. government-sponsored debt securities																	4,671		4,699
U.S. Treasury securities	3,871		2,656										2,554		2,178
U.S. government-sponsored debt securities					7,535		2,615
Equity securities	59		4										62		53
Corporate debt securities					443		533										130		249
Auction rate securities									$	7	$	7
Prepaid and other current assets:
Foreign exchange derivative instruments																	88		50
Other assets:
Foreign exchange derivative instruments					50		76										2		6
Total	$	13,526	$	5,777	$	11,226	$	3,504	$	7	$	7	$	7,517	$	6,839	$	4,891	$	5,200
Liabilities
Accrued liabilities:
Visa Europe put option									$	—	$	255
Foreign exchange derivative instruments																	$	76	$	116
Other liabilities:
Foreign exchange derivative instruments					$	10	$	13									8		20
Total	$	—	$	—	$	10	$	13	$	—	$	255	$	—	$	—	$	84	$	136

There were no transfers between Level 1 and Level 2 assets during the three months ended December 31, ~~2015~~ ~~and 2014.~~2016.

Level 1 assets measured at fair value on a recurring basis. Money market funds, publicly-traded equity securities and U.S. Treasury securities are classified as Level 1 within the fair value hierarchy, as fair value is based on quoted prices in active markets.

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~~VISA INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

Level 2 assets and liabilities measured at fair value on a recurring basis. The fair value of U.S. government-sponsored debt securities and corporate debt securities, as provided by third-party pricing vendors, is based on quoted prices in active markets for similar, not identical, assets. The pricing data obtained from outside sources is reviewed internally for reasonableness, compared against benchmark quotes from independent pricing sources, then confirmed or revised accordingly. Foreign exchange derivative instruments are valued using inputs that are observable in the market or can be derived principally from or corroborated by observable market data. There were no substantive changes to the valuation techniques and related inputs used to measure fair value during the three months ended December 31, ~~2015~~2016..

~~Level 3 assets and liabilities measured at fair value on a recurring basis.~~ Auction rate securities are classified as Level 3 due to a lack of trading in active markets and a lack of observable inputs in measuring fair value. There were no substantive changes to the valuation techniques and related inputs used to measure fair value during the ~~three months ended December 31, 2015~~.

~~Visa Europe put option agreement.~~ On November 2, 2015, the Company and Visa Europe entered into the Put Option Amendment to align certain terms of the Put with the terms of the Visa Europe Transaction Agreement. Under the terms and conditions of the Transaction Agreement, the Visa Europe board of directors is required to exercise the Amended Put Option on the closing date of the transaction to effect Visa’s purchase of all of Visa Europe’s share capital. If the Transaction Agreement is terminated for any reason prior to the completion of the transaction, the Put Option Amendment will also terminate and the Put will revert to its original, unamended form.

Exercise of the Amended Put Option by the Visa Europe board of directors is mandatory, subject to the satisfaction of the terms and conditions of the Transaction Agreement. As such, for accounting purposes, it is not treated as a written put option and is not required to be recorded at fair value. At December 31, 2015, Visa expected to complete the transaction in accordance with the Transaction Agreement. Therefore, management concluded that it does not expect the Put to revert to its original, unamended form or to be unilaterally exercised by Visa Europe in the future. As a result, the value of the Put was reduced to zero at December 31, 2015.

~~Changes in the fair value of the Put are recorded as non-cash, non-operating income in the Company's consolidated statements of operations.~~

Assets Measured at Fair Value on a Non-recurring Basis

Non-marketable equity investments and investments accounted for under the equity method. These investments are classified as Level 3 due to the absence of quoted market prices, the inherent lack of liquidity, and the fact that inputs used to measure fair value are unobservable and require management's judgment. When certain events or

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VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

circumstances indicate that impairment may exist, the Company revalues the investments using various assumptions, including the financial metrics and ratios of comparable public companies. There were no

~~events or circumstances that indicated these investments became impaired~~ significant impairments during the three months ended December 31, ~~2015~~2016 or ~~2014. At~~ 2015. These investments totaled $48 million and $46 million at December 31, ~~2015~~2016 and September 30, ~~2015, these investments totaled~~ ~~$47 million~~2016, respectively, and~~$45 million, respectively. These assets~~ are classified in other assets on the consolidated balance sheets.

Due to the completion of an initial public offering by one of the Company's investees during the quarter ended December 31, 2015, the Company reclassified equity securities previously accounted for as a cost method investment, with a carrying value of $4 million, to short-term available-for-sale investment securities. The fair value of this investment at December 31, 2015 was $55 million, resulting in the recognition of a pre-tax unrealized gain of $51 million in other comprehensive income.

Non-financial assets and liabilities. Long-lived assets such as goodwill, indefinite-lived intangible assets, finite-lived intangible assets, and property, equipment and technology are considered non-financial assets. The Company does not have any non-financial liabilities measured at fair value on a non-recurring basis. Finite-lived intangible assets primarily consist of customer relationships, trade names and reseller relationships, 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. There were no events or changes in circumstances that indicate impairment at December 31, ~~2015~~.2016.

~~Table of Contents~~

~~VISA INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

Other Fair Value Disclosures

Long-term debt. ~~In December 2015, the Company issued fixed-rate senior notes in an aggregate principal amount of $16.0 billion, with maturities ranging between 2 and 30 years. See~~ ~~Note 5—Debt.~~ ~~These debt~~Debt instruments are measured at amortized cost on the Company's unaudited consolidated balance sheet at December 31, ~~2015.~~2016. The fair value of ~~these notes,~~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 following table presents the carrying amount and estimated fair value of the Company’s debt in order of ~~maturity:~~maturity.


					December 31, 2016				September 30, 2016
	December 31, 2015				Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
	Carrying Amount		Estimated Fair Value		(in millions)
1.20% Senior Notes due December 2017	$	1,745	$	1,748	$	1,747	$	1,750	$	1,746	$	1,754
2.20% Senior Notes due December 2020	2,986		2,995		2,988		3,009		2,988		3,077
2.80% Senior Notes due December 2022	2,237		2,259		2,239		2,263		2,238		2,359
3.15% Senior Notes due December 2025	3,962		4,005		3,965		4,018		3,964		4,225
4.15% Senior Notes due December 2035	1,485		1,514		1,485		1,570		1,485		1,698
4.30% Senior Notes due December 2045	3,462		3,551		3,461		3,694		3,461		4,045
	$	15,877	$	16,072
Total					$	15,885	$	16,304	$	15,882	$	17,158

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, ~~2015~~,2016, but ~~require~~ disclosure of their fair ~~values:~~values is required: time deposits recorded in prepaid expenses and other current assets, settlement receivable and payable, commercial paper, and customer collateral. The estimated fair value of such instruments at December 31, ~~2015~~2016 approximates their carrying value due to their generally short maturities. If measured at fair value in the financial statements, these financial instruments would be classified as Level 2 in the fair value hierarchy.

Investments

Available-for-sale investment securities. The Company had ~~$55~~$59 million in gross unrealized gains and ~~$14~~$7 million in gross unrealized losses at December 31, ~~2015. The unrealized gains were primarily related to the Company's reclassified equity investment discussed above.~~2016. There were $7$55 million gross unrealized gains and no gross unrealized losses at September 30, ~~2015.~~2016. A majority of the Company's available-for-sale investment securities with stated maturities are due within one to two years.

1715

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VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 5—Debt

The Company had outstanding debt as follows:


	December 31, 2015									December 31, 2016							September 30, 2016
	Principal Amount		Unamortized Discounts and Debt Issuance Costs			Carrying Amount		Effective Interest Rate		Principal Amount		Unamortized Discounts and Debt Issuance Costs			Carrying Amount		Principal Amount		Unamortized Discounts and Debt Issuance Costs			Carrying Amount		Effective Interest Rate
										(in millions, except percentages)
Commercial Paper										$	567	$	(1	)	$	566	$	—	$	—		$	—	0.79	%	⁽¹⁾
1.20% Senior Notes due December 2017 (the "2017 Notes")										1,750		(3		)	1,747		—		—			—		1.37	%
Total current maturities of long-term debt and short-term debt										2,317		(4		)	2,313		—		—			—
	(in millions, except percentages)
1.20% Senior Notes due December 2017 (the "2017 Notes")	$	1,750	$	(5	)	$	1,745	1.36	%	—		—			—		1,750		(4		)	1,746		1.37	%
2.20% Senior Notes due December 2020 (the "2020 Notes")	3,000		(14		)	2,986		2.30	%	3,000		(12		)	2,988		3,000		(12		)	2,988		2.30	%
2.80% Senior Notes due December 2022 (the "2022 Notes")	2,250		(13		)	2,237		2.89	%	2,250		(11		)	2,239		2,250		(12		)	2,238		2.89	%
3.15% Senior Notes due December 2025 (the "2025 Notes")	4,000		(38		)	3,962		3.26	%	4,000		(35		)	3,965		4,000		(36		)	3,964		3.26	%
4.15% Senior Notes due December 2035 (the "2035 Notes")	1,500		(15		)	1,485		4.23	%	1,500		(15		)	1,485		1,500		(15		)	1,485		4.23	%
4.30% Senior Notes due December 2045 (the "2045 Notes")	3,500		(38		)	3,462		4.37	%	3,500		(39		)	3,461		3,500		(39		)	3,461		4.37	%
Total long-term debt	$	16,000	$	(123	)	$	15,877			14,250		(112		)	14,138		16,000		(118		)	15,882

Total debt										$	16,567	$	(116	)	$	16,451	$	16,000	$	(118	)	$	15,882


⁽¹⁾	Represents the weighted-average interest rate for the commercial paper outstanding at December 31, 2016.

Senior Notes

In December 2015, the Company issued fixed-rate senior notes (the 2017 Notes, 2020 Notes, 2022 Notes, 2025 Notes, 2035 Notes and 2045 Notes, or collectively, the "Notes") in conjunction with the anticipated acquisition of Visa Europe, in an aggregate principal amount of $16.0 billion, with maturities ranging between 2 and 30 years. Interest on the Notes, at a rate ranging between 1.20% and 4.30%, is payable semi-annually on June 14 and December 14 of each year, commencing June 14, 2016. The Company recognized interest expense for the senior notes, which were issued in December 2015, of $125 million and $24 million for the ~~quarter~~three months ended December 31, 2016 and 2015, respectively, as non-operating expense. The ~~net aggregate proceeds~~Company paid $244 million in interest on the senior notes during the three months ended December 31, 2016.

Commercial Paper Program

The Company maintains a commercial paper program to support its working capital requirements and for other general corporate purposes. The carrying amount outstanding at December 31, 2016 was $566 million, with a weighted-average interest rate of 0.79% and remaining maturities ranging from ~~the issuance~~37 days to 66 days. As of the Notes, after deducting discounts and debt issuance costs, were $15.9 billion. The discounts and debt issuance costs will be amortized over the respective term of each note using the effective interest method. The indenture governing the Notes contains customary event of default provisions. The Notes are senior unsecured obligations ofSeptember 30, 2016, the Company ranking equally and ratably among themselves and with the Company's existing and future unsecured and unsubordinated debt. The Notes are not secured by any assets of the Company and are not guaranteed by any of the Company's subsidiaries. The Company was in compliance with all related covenants as of December 31, 2015.

Each series of the Notes may be redeemed as a whole or in part, at the Company’s option at any time, prior to, with respect to the 2017 Notes, their maturity date, and with respect to the 2020 Notes, the 2022 Notes, the 2025 Notes, the 2035 Notes and the 2045 Notes, the applicable par call date (as set forth in the table below), at a price equal to the greater of:

~~100% of the principal amount of such Notes; and~~

~~the sum of the present value of the remaining scheduled payments of principal and interest through the maturity or par call date for each of the Notes below at the treasury rate defined~~had no outstanding obligations under the ~~terms of the Notes, plus the applicable spread for such Notes (as set forth in the table below),~~program.

~~plus, in each case, accrued and unpaid interest to, but excluding, the date of redemption.~~

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VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)



~~Series~~	~~Maturity/Par Call Date~~	~~Spread~~
~~2017 Notes~~	~~December 14, 2017~~	~~5 bps~~
~~2020 Notes~~	~~November 14, 2020~~	~~10 bps~~
~~2022 Notes~~	~~October 14, 2022~~	~~12.5 bps~~
~~2025 Notes~~	~~September 14, 2025~~	~~15 bps~~
~~2035 Notes~~	~~June 14, 2035~~	~~20 bps~~
~~2045 Notes~~	~~June 14, 2045~~	~~20 bps~~

On or after the applicable par call date, the Notes, except the 2017 Notes, may be redeemed as a whole or in part, at the Company’s option at any time, at a redemption price equal to 100% of the principal amount of the Notes being redeemed plus accrued interest.

In the event that the Visa Europe acquisition has not been consummated on or prior to February 2, 2017 (which date may be extended in accordance with the terms of the Notes), the Company will be required to redeem all outstanding 2017 Notes, 2020 Notes, 2022 Notes and 2025 Notes on the special mandatory redemption date, as defined in the terms of the Notes, at a redemption price equal to 101% of the aggregate principal amount of such Notes plus accrued and unpaid interest. The 2035 Notes and 2045 Notes are not subject to the special mandatory redemption provision.

~~Future principal payments on the Company's outstanding debt are as follows:~~

Fiscal Year 2016 2017 2018 2019 2020 Thereafter Total
(in millions) $ —
$ —
$ 1,750
$ —
$ —
$ 14,250
$ 16,000

Credit Facility ~~Renewal.~~ Extension

On January 27, ~~2016,~~2017, the Company ~~Visa International Service Association and Visa U.S.A. Inc. (collectively,~~extended the ~~"Borrowers") entered into a 5-year, unsecured~~term of the $4.0 billion revolving credit facility (the "Credit Facility") with Bank of America, N.A., as administrative agent and the lenders party thereto. JP Morgan Chase Bank, N.A., acted as syndication agent in connection with the Credit Facility; Bank of China, Los Angeles Branch, Barclays Bank PLC, Citibank, N.A., HSBC Bank USA, N.A., Royal Bank of Canada, Standard Chartered Bank, The Bank of Tokyo-Mitsubishi UFJ, Ltd., U.S. Bank National Association, Wells Fargo Bank, National Association, Deutsche Bank Securities Inc. and Toronto Dominion (New York) LLC, acted as Documentation Agents; and J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Bank of China, Los Angeles Branch, Barclays Bank PLC, Citigroup Global Markets, Inc., HSBC Bank USA, N.A., RBC Capital Markets, Standard Chartered Bank, The Bank of Tokyo-Mitsubishi UFJ, Ltd., U.S. Bank National Association, Wells Fargo Securities, LLC, Deutsche Bank Securities Inc. and TD Securities (USA) LLC, acted as joint lead arrangers and joint book runners. The Credit Facility, which expires on January 27, 2021, replaced the Company's prior $3.0 billion credit facility ~~which expired~~that was entered into on January 27, 2016.

The ~~Credit Facility provides the Borrowers with a borrowing capacity of up to $4.0 billion. Borrowings under the Credit Facility are available for general corporate purposes. Interest~~credit facility will now expire on the borrowings under the Credit Facility would be charged at the London Interbank Offered Rate (LIBOR) or an alternative base rate, in each case plus applicable margins that fluctuate based on the applicable rating of senior unsecured long-term debt securitiesJanuary 27, 2022. No other terms were materially changed. A brief description of the ~~Company. The Borrowers have agreed to pay a commitment fee which will fluctuate based on such applicable rating~~material terms and conditions of the ~~Company.~~

~~Table of Contents~~

~~VISA INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~Other material terms are:~~

~~a financial covenant which requires the Company to maintain a Consolidated Indebtedness to Consolidated EBITDA Ratio (as defined~~credit facility are described in the ~~Credit Facility) of not greater than 3.75 to 1.00;~~

~~customary restrictive covenants, which limit~~Company's Form 10-K, as filed with the Borrowers' ability to, among other things, create certain liens, effect fundamental changes to their business, or merge or dispose of substantially all of their assets, subject in each case to customary exceptions and amounts;

customary events of default, upon the occurrence of which, after any applicable grace period, the requisite lenders will have the ability to accelerate all outstanding loans thereunder and terminate the commitments; and

~~other customary and standard terms and conditions.~~

~~The Borrowers currently have no borrowings under the Credit Facility. The participating lenders in the Credit Facility include certain holders~~SEC on November 15, 2016. A copy of the credit facility is filed as Exhibit 10.1 to the Company's ~~class B~~Form 10-Q, as filed with the SEC on April 30, 2016 and ~~class C common stock, certain of the Borrowers' customers and their affiliates.~~is hereby incorporated by reference.

Note 6—~~Pension and Other Postretirement Benefits~~

The Company sponsors various qualified and non-qualified defined benefit pension and other postretirement benefit plans that provide for retirement and medical benefits for substantially all employees residing in the United States. The Company also sponsors other pension benefit plans that provide benefits for internationally-based employees at certain non-U.S. locations, which are not presented below as they are not material.

In October 2015, the Company's board of directors approved an amendment of the qualified defined benefit pension plan such that the Company discontinued employer provided credits after December 31, 2015. Plan participants continue to earn interest credits on existing balances at the time of the freeze. As a result, a curtailment gain totaling $8 million was recognized as part of the Company's net periodic benefit cost. The Company also recorded a net unrealized actuarial gain of $56 million from the remeasurement of its pension plan in the first quarter of fiscal 2016 within other comprehensive income.

~~The components of net periodic benefit cost are as follows:~~

Pension Benefits Other Postretirement Benefits
Three Months Ended
December 31, Three Months Ended
December 31,
2015
2014 2015 2014
(in millions)
Service cost $ 13
$ 12
$ —
$ —
Interest cost 11
10
—
—
Expected return on assets (17 ) (18 ) —
—
Amortization of:
Prior service credit (1 ) (2 ) (1 ) (1 )
Actuarial loss 2
—
—
—
Curtailment gain (8 ) —
—
—
Settlement loss —
2
—
—
Total net periodic benefit cost $ —
$ 4
$ (1 ) $ (1 )

~~Note 7—~~Settlement Guarantee Management

The Company indemnifies its ~~financial institution~~ clients for settlement losses suffered due to failure of any other clients to fund its settlement obligations in accordance with the Visa 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. The exposure to settlement losses through Visa's settlement indemnification is accounted for as a settlement risk guarantee. The Company’s settlement exposure is limited to the amount of unsettled Visa payment transactions at any point in time. The Company requires certain ~~financial institution~~ clients that do not meet its credit standards to post collateral to offset potential loss from their estimated unsettled

~~Table of Contents~~

~~VISA INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

transactions. The Company’s estimated maximum settlement exposure was ~~$42.5~~$68.7 billion for the quarter ended December 31, ~~2015~~,2016, compared to ~~$43.5~~$67.8 billion for the quarter ended September 30, ~~2015~~.2016. Of these amounts, ~~$2.2~~$3.0 billion and $2.9 billion were covered by collateral at December 31, ~~2015~~2016 and September 30, ~~2015~~.2016, respectively.

The Company maintained collateral as follows:


	December 31, 2015		September 30, 2015		December 31, 2016		September 30, 2016
	(in millions)				(in millions)
Cash equivalents(1)	$	1,041	$	1,023	$	1,283	$	1,295
Pledged securities at market value	151		154		166		170
Letters of credit	1,131		1,178		1,328		1,311
Guarantees	935		971		1,443		1,418
Total	$	3,258	$	3,326	$	4,220	$	4,194


⁽¹⁾	Cash collateral held by Visa Europe is not included on the Company's consolidated balance sheets as its clients retain beneficial ownership and the cash is only accessible to the Company in the event of default by the client on its settlement obligations.

The total available collateral balances presented in the table above were greater than the settlement exposure covered by customer collateral held due to instances in which the available collateral exceeded the total settlement exposure for certain financial institutions at each date presented.

The fair value of the settlement risk guarantee is estimated based on a proprietary probability-weighted model and was approximately $1$2 million at December 31, ~~2015~~2016 and September 30, ~~2015~~.2016. These amounts are reflected in accrued liabilities on the Company's consolidated balance sheets.

Note ~~8—Accrued~~7—Pension and Other ~~Liabilities~~Postretirement Benefits

~~Accrued liabilities consisted~~The Company sponsors various qualified and non-qualified defined benefit pension and other postretirement benefit plans that provide for retirement and medical benefits for substantially all employees residing in the U.S. The Company also sponsors other pension benefit plans that provide benefits for internationally-based employees at certain non-U.S. locations. The components of net periodic benefit cost presented below include the U.S. pension plans and the non-U.S. plans, which represent Visa Europe funded and unfunded pension plans. Disclosures relating to other non-U.S. pension benefit plans are not included as they are immaterial, individually and in aggregate.

In October 2015, the U.S. qualified defined benefit pension plan was amended such that the Company discontinued employer provided credits after December 31, 2015, and that plan participants continue to earn interest credits on existing balances at the time of the ~~following:~~

freeze. The Visa Europe pension plans had been closed to new entrants prior to the Visa Europe acquisition.

December 31,
2015 September 30,
2015
(in millions)
Accrued operating expenses $ 220
$ 257
Visa Europe put option ⁽¹⁾
—
255
Deferred revenue 80
81
Accrued interest expenses ⁽²⁾
23
—
Accrued income taxes ⁽³⁾
522
75
Other ⁽⁴⁾
164
181
Total $ 1,009
$ 849

~~Other non-current liabilities consisted of the following:~~

December 31,
2015 September 30,
2015
(in millions)
Accrued income taxes $ 771
$ 752
Employee benefits 82
77
Other 70
68
Total $ 923
$ 897

⁽¹⁾

On November 2, 2015, the Company and Visa Europe entered into the Put Option Amendment to align certain terms of the Put with the terms of the Visa Europe Transaction Agreement. Exercise of the Amended Put Option by the Visa Europe board of directors is mandatory, subject to the satisfaction of the terms and conditions of the Transaction Agreement. As such, for accounting purposes, it is not treated as a written put option and is not required to be recorded at fair value. At December 31, 2015, Visa expected to complete the transaction in accordance with the Transaction Agreement. Therefore, management concluded that it does not expect the Put to revert to its original, unamended form or to be unilaterally exercised by Visa Europe in the future. As a result,

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

~~the value of the Put was reduced to zero at December 31, 2015. See~~ ~~Note 2—Visa Europe~~ ~~and~~ ~~Note 4—Fair Value Measurements and Investments~~.



	U.S. Plans												Non-U.S. Plans
	Pension Benefits						Other Postretirement Benefits						Pension Benefits
	Three Months Ended December 31,						Three Months Ended December 31,						Three Months Ended December 31,
	2016			2015			2016			2015			2016
	(in millions)
Service cost	$	—		$	13		$	—		$	—		$	2
Interest cost	9			11			—			—			3
Expected return on assets	(18		)	(17		)	—			—			(4		)
Amortization of:
Prior service credit	—			(1		)	(1		)	(1		)	—
Actuarial loss	4			2			—			—			—
Curtailment gain	—			(8		)	—			—			—
Settlement loss	2			—			—			—			—
Total net periodic benefit cost	$	(3	)	$	—		$	(1	)	$	(1	)	$	1

⁽²⁾

~~The balance at December 31, 2015 is due to the issuance of long-term debt in conjunction with the anticipated acquisition of Visa Europe. See~~ ~~Note 2—Visa Europe~~ ~~and~~ ~~Note 5—Debt.~~


⁽³⁾	~~The increase in accrued income taxes is primarily related to current income taxes accrued in the first quarter of fiscal 2016, but payable in the second quarter of fiscal 2016.~~


⁽⁴⁾	~~Prior period current deferred tax liabilities have been retroactively reclassed to non-current deferred tax liabilities on the consolidated balance sheets upon adoption of FASB issued ASU 2015-17. See~~ ~~Note 1—Summary of Significant Accounting Policiesand~~ ~~Note 12—Income Taxes.~~

Note 9—8—Stockholders' Equity

~~Class A common stock split.~~ In January 2015, Visa’s board of directors declared a four-for-one split of its class A common stock. Each class A common stockholder of record at the close of business on February 13, 2015 ("Record Date"), received a dividend of three additional shares on March 18, 2015 for every share held as of the Record Date. Trading began on a split-adjusted basis on March 19, 2015. Holders of class B and C common stock did not receive a stock dividend. Instead, the conversion rate for class B common stock increased to 1.6483 shares of class A common stock per share of class B common stock, and the conversion rate for class C common stock increased to 4.0 shares of class A common stock per share of class C common stock. Immediately following the split, the class A, B and C stockholders retained the same relative ownership percentages that they had prior to the stock split. All per share amounts and number of shares outstanding in these unaudited consolidated financial statements and accompanying notes are presented on a post-split basis. As a result of the stock split, all historical per share data and number of shares outstanding presented have been retroactively adjusted.

As-Converted Class A Common Stock.The number of shares of each series and class and the number of shares of class A common stock on an as-converted basis at December 31, ~~2015,~~2016, are as follows:


(in millions, except conversion rates)	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⁾
Class A common stock	1,926	—		1,926
U.K.&I preferred stock					2	13.9520		35
Europe preferred stock					3	13.9520		44
Class A common stock ⁽²⁾					1,854	—		1,854
Class B common stock	245	1.6483	⁽²⁾	405	245	1.6483	⁽³⁾	405
Class C common stock	19	4.0000		78	16	4.0000		62
Total				2,409				2,400


⁽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 exclude repurchases traded but not yet settled on or before December 31, 2016.


⁽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 class A common stock.~~Common stock repurchases. The following table presents share repurchases in the open market.⁽¹⁾


(in millions, except per share data)	Three Months Ended December 31, 2015		Three Months Ended December 31, 2016
Shares repurchased in the open market ⁽¹⁾⁽²⁾	26		24
Average repurchase price per share ⁽²⁾⁽³⁾	$	78.52	$	79.94
Total cost	$	2,015	$	1,893


⁽¹⁾	Shares repurchased in the open market reflect repurchases settled during the three months ended December 31, 2016. These amounts include repurchases traded but not yet settled on or before September 30, 2016 and exclude repurchases traded but not yet settled on or before December 31, 2016.


⁽²⁾	All shares repurchased in the open market have been retired and constitute authorized but unissued shares.


⁽²⁾⁽³⁾	Figures in the table may not recalculate exactly due to rounding. Average repurchase price per share is calculated based on unrounded numbers.

~~In October 2015, the Company's board of directors authorized a new $5.0 billion share repurchase program, in addition to the existing October 2014 program.~~ As of December 31, ~~2015,~~2016, the ~~Company~~Company's July 2016 program had remaining authorized funds of ~~$5.8~~$3.9 billion for share repurchase. All share repurchase programs authorized prior to July 2016 have been completed.

Dividends. In January 2017, the Company’s board of directors declared a quarterly cash dividend of $0.165 per share of class A common stock (determined in the case of class B and C common stock and U.K.&I and Europe

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VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

~~Dividends.~~preferred stock on an as-converted basis). The cash dividend will be paid on March 7, 2017, to all holders of record of the Company's common and preferred stock as of February 17, 2017. The Company declared and paid ~~$340~~$399 million in dividends to holders of the Company's common stock during the three months ended December 31, ~~2015~~.2016.

Note ~~10—~~9—Earnings Per Share

Basic earnings per share is computed by dividing net income available to each class ~~and series~~ by the weighted-average number of shares of common stock outstanding and participating securities ~~in the form of unvested restricted stock awards, unvested restricted stock units and unvested earned performance-based shares~~ during the period. Net income is allocated to each class ~~and series~~ of common stock and participating securities based on its proportional ownership on an as-converted basis. The ~~weighted~~weighted-average number of shares of each class ~~and series~~ of common stock outstanding reflects changes in ownership over the periods presented. See Note 9—8—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 ~~in the form of unvested restricted stock awards, unvested restricted stock units and unvested earned performance-based shares~~ 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 U.K.&I and Europe preferred stock and class B and ~~class~~ C common stock based on the conversion rate 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 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, ~~2015~~.2016.⁽¹⁾


	Basic Earnings Per Share					Diluted Earnings Per Share						Basic Earnings Per Share					Diluted Earnings Per Share
	(in millions, except per share data)											(in millions, except per share data)
	Income Allocation (A)⁽²⁾		Weighted- Average Shares Outstanding (B)	Earnings per Share = (A)/(B)		Income Allocation (A)⁽²⁾		Weighted- Average Shares Outstanding (B)		Earnings per Share = (A)/(B)		Income Allocation (A)⁽²⁾		Weighted- Average Shares Outstanding (B)	Earnings per Share = (A)/(B)		Income Allocation (A)⁽²⁾		Weighted- Average Shares Outstanding (B)		Earnings per Share = (A)/(B)
Class A common stock	$	1,550	1,937	$	0.80	$	1,941	2,430	⁽³⁾	$	0.80	$	1,594	1,860	$	0.86	$	2,070	2,421	⁽³⁾	$	0.86
Class B common stock⁽⁴⁾	324		245	$	1.32	$	323	245		$	1.32	347		245	$	1.41	$	346	245		$	1.41
Class C common stock⁽⁴⁾	63		20	$	3.20	$	63	20		$	3.20	57		17	$	3.43	$	57	17		$	3.42
Participating securities⁽⁵⁾⁽⁴⁾	4		Not presented	Not presented		$	4	Not presented		Not presented		72		Not presented	Not presented		$	72	Not presented		Not presented
Net income	$	1,941										$	2,070

The following table presents earnings per share for the three months ended December 31, ~~2014~~2015.⁽¹⁾


	Basic Earnings Per Share					Diluted Earnings Per Share						Basic Earnings Per Share					Diluted Earnings Per Share
	(in millions, except per share data)											(in millions, except per share data)
	Income Allocation (A)⁽²⁾		Weighted- Average Shares Outstanding (B)	Earnings per Share = (A)/(B)		Income Allocation (A)⁽²⁾		Weighted- Average Shares Outstanding (B)		Earnings per Share = (A)/(B)		Income Allocation (A)⁽²⁾		Weighted- Average Shares Outstanding (B)	Earnings per Share = (A)/(B)		Income Allocation (A)⁽²⁾		Weighted- Average Shares Outstanding (B)		Earnings per Share = (A)/(B)
Class A common stock	$	1,253	1,974	$	0.63	$	1,569	2,478	⁽³⁾	$	0.63	$	1,550	1,937	$	0.80	$	1,941	2,430	⁽³⁾	$	0.80
Class B common stock⁽⁴⁾	257		245	$	1.05	$	257	245		$	1.04	324		245	$	1.32	$	323	245		$	1.32
Class C common stock⁽⁴⁾	55		22	$	2.54	$	55	22		$	2.53	63		20	$	3.20	$	63	20		$	3.20
Participating securities⁽⁵⁾⁽⁴⁾	4		Not presented	Not presented		$	4	Not presented		Not presented		4		Not presented	Not presented		$	4	Not presented		Not presented
Net income	$	1,569										$	1,941


⁽¹⁾	Figures in the table may not recalculate exactly due to rounding. Earnings per share is calculated based on unrounded numbers. ~~The number of shares and per share amounts for the prior periods presented have been retroactively adjusted to reflect the four-for-one stock split effected in the fiscal second quarter of 2015. See~~ ~~Note 9—Stockholders' Equity~~.

⁽²⁾

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 405 million for the three months ended December 31, ~~2015~~ 2016 and ~~2014.~~2015. The weighted-average number of shares of as-converted class C common stock used in the income allocation was 67 millionand 78 million for the three months ended December 31, 2016 and 2015, respectively. The weighted-average number of shares of as-converted U.K.&I and Europe preferred stock, included within participating securities, used in the income allocation was 35 million and 44 million, respectively, for the three months ended December 31, 2016.

~~Table of Contents~~

~~VISA INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~common stock used in the income allocation was 78 millionand 88 million for the~~ ~~three~~ ~~months ended~~ ~~December 31,~~ ~~2015 and 2014, respectively.~~

⁽³⁾

Weighted-average diluted shares outstanding are calculated on an as-converted basis, and include incremental common stock equivalents, as calculated under the treasury stock method. The computation includes approximately 5 million common stock equivalents for the three months ended December 31, 2016 and 2015 ~~and 2014,~~ because their effect would be dilutive. The computation excludes 3 million and 1 million ~~and 2 million~~of common stock equivalents for the three months ended December 31, 2016 and 2015, ~~and 2014,~~ respectively, because their effect would have been anti-dilutive.

Table of Contents

VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

⁽⁴⁾

The outstanding number of shares of class B and C common stock were not impacted by the stock split as these stockholders received an adjustment to their respective conversion ratios instead of stock dividends. See ~~Note 9—Stockholders' Equity~~. Weighted-average basic and diluted shares outstanding for class B and C common stock are calculated based on the common shares outstanding of each respective class rather than on an as-converted basis.

⁽⁵⁾

Participating securities ~~are~~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 U.K.&I and Europe preferred stock, restricted stock awards, restricted stock units and ~~unvested~~ earned performance-based shares. Participating securities' income is allocated based on the weighted-average number of shares of as-converted stock.

Note ~~11—~~10—Share-based Compensation

The Company granted the following equity awards to employees and non-employee directors under the 2007 Equity Incentive Compensation Plan during the three months ended December 31, ~~2015~~2016:


	Granted	Weighted-Average Grant Date Fair Value		Weighted-Average Exercise Price		Granted	Weighted-Average Grant Date Fair Value		Weighted-Average Exercise Price
Non-qualified stock options	1,362,840	$	15.09	$	80.15	1,671,344	$	13.90	$	80.82
Restricted stock units ("RSUs")	2,346,825	$	80.15			2,952,720	$	80.82
Performance-based shares⁽¹⁾	604,219	$	92.71			634,651	$	86.37


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

The Company’s non-qualified stock options and RSUs are equity awards with service-only conditions and are accordingly expensed on a straight-line basis over the vesting period. The Company's performance-based shares are equity awards with service, market and performance conditions that are accounted for using the graded-vesting method. ~~Compensation~~The Company recorded share-based compensation cost ~~is recorded~~of $45 million for the three months ended December 31, 2016, net of estimated forfeitures, which are adjusted as appropriate.

Note ~~12—~~11—Income Taxes

The effective income tax rates were ~~26%~~31% and ~~31%~~26% for the three months ended December 31, ~~2015~~2016 and ~~2014,~~2015, respectively. The effective tax rate for the three months ended December 31, ~~2015~~2016 differs from the effective tax rate in the same period in the prior fiscal year primarily due to:

$26 million of excess tax benefits related to share-based payments recorded during the quarter ended December 31, 2016 as a result of early adoption of new Accounting Standards Update 2016-09. See Note 1—Summary of Significant Accounting Policies;

the restrictions on U.S. foreign tax credits that can be claimed on Visa Europe's foreign taxes under the current tax structure;

the absence of the non-taxable $255 million revaluation of the Visa Europe put option recorded in the quarter ended December 31, 2015; and

the absence of foreign tax credit benefits related to prior fiscal years recognized during the quarter ended December 31, ~~2015; and~~2015.

~~the absence of the reversal of previously established state tax reserves in the quarter ended December 31, 2014.~~

During the three months ended December 31, ~~2015,~~2016, the Company's gross unrecognized tax benefits increased by ~~$20~~$33 million, of which $28 million would favorably impact the effective tax rate if recognized. The increase in gross unrecognized tax benefits is primarily related to various tax positions across several jurisdictions. During the three months ended December 31, ~~2015~~2016 and ~~2014,~~2015, respectively, 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

~~Table of Contents~~

~~VISA INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

highly uncertain. It is not reasonably possible to estimate the increase or decrease in unrecognized tax benefits within the next twelve months.

~~In November 2015, the FASB issued Accounting Standards Update 2015-17, which simplifies the presentation~~

Table of deferred income taxes by requiring that deferred tax assets and liabilities be presented as non-current. The standard impacts presentation only. The Company elected to early adopt the standard on a retrospective basis effective October 1, 2015 and all deferred tax assets and liabilities are classified as non-current on the Company's consolidated balance sheets. All prior period amounts have been reclassified to conform with the current period presentation.Contents

VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note ~~13—~~12—Legal Matters

The Company is party to various legal and regulatory proceedings. Some of these proceedings involve complex claims that are subject to substantial uncertainties and unascertainable damages. Accordingly, except as disclosed, the Company has not established reserves or ranges of possible loss related to these proceedings, as at this time in the proceedings, the matters do not relate to a probable loss and/or the amount or range of losses are not reasonably estimable. Although the Company believes that it has strong defenses for the litigation and regulatory proceedings described below, it could, in the future, incur judgments or fines or enter into settlements of claims that could have a material adverse effect on the Company's financial position, results of operations or cash flows. From time to time, the Company may engage in settlement discussions or mediations with respect to one or more of its outstanding litigation matters, either on its own behalf or collectively with other parties.

The litigation accrual is an estimate and is based on management’s understanding of its litigation profile, the specifics of each case, advice of counsel to the extent appropriate and management’s best estimate of incurred loss as of the balance sheet date.

The following table summarizes the activity related to accrued litigation.


	Fiscal 2016			Fiscal 2015			Fiscal 2017			Fiscal 2016
	(in millions)						(in millions)
Balance at October 1	$	1,024		$	1,456		$	981		$	1,024
Provision for uncovered legal matters							15			—
Accrual of VE territory covered litigation							86			—
Payments on legal matters	(12		)	(103		)	(88		)	(12		)
Balance at December 31	$	1,012		$	1,353		$	994		$	1,012

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 Note 3—U.S. and Europe Retrospective Responsibility ~~Plan and Potential Visa Europe Liabilities.~~Plans. An accrual for the U.S. covered litigation and a charge to the litigation provision are recorded when loss is deemed to be probable and reasonably estimable. In making this determination, the Company evaluates available information, including but not limited to actions taken by the litigation committee. The 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 activity related to U.S. covered litigation.


	Fiscal 2016			Fiscal 2015			Fiscal 2017		Fiscal 2016
	(in millions)						(in millions)
Balance at October 1	$	1,023		$	1,449		$	978	$	1,023
Payments on covered litigation	(11		)	(100		)
Payments on U.S. covered litigation							—		(11		)
Balance at December 31	$	1,012		$	1,349		$	978	$	1,012

~~Interchange Opt-out~~Accrual Summary—VE Territory Covered Litigation

~~Beginning in May 2013, more than 50 opt-out cases~~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 ~~been filed by hundreds of merchants in various federal district courts, generally pursuing damages claims on allegations similar~~an escrow account that is used to ~~those raised in MDL 1720. A~~fund settlements or judgments. The Company is entitled to recover VE territory covered losses through a periodic adjustment to the conversion rates applicable to the U.K.&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 3—U.S. and Europe Retrospective Responsibility Plans. The following table summarizes the activity related to VE territory covered litigation.

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VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

~~number~~



	Fiscal 2017
	(in millions)
Balance at October 1	$	2
Accrual for VE territory covered litigation	86
Payments on VE territory covered litigation	(88		)
Balance at December 31	$	—

U.S. Covered Litigation

Interchange Multidistrict Litigation (MDL)

On November 23, 2016, class plaintiffs that signed the 2012 Settlement Agreement filed a petition for writ of certiorari with the U.S. Supreme Court seeking review of the ~~cases also include allegations~~Second Circuit’s decision that ~~Visa has monopolized, attempted to monopolize, and/or conspired to monopolize debit card-related market segments, and one of~~vacated the cases seeks an injunction against the fixed acquirer network fee. The cases name as defendants Visa Inc., Visa U.S.A., Visa International, MasterCard Incorporated, and MasterCard International Incorporated, although some also include certain U.S. financial institutions as defendants. Wal-Mart Stores Inc. and its subsidiaries filed an opt-out complaint that also adds Visa Europe Limited and Visa Europe Services Inc. as defendants.

~~Visa reached a settlement agreement with Wal-Mart Stores Inc. and its subsidiaries, which will terminate if, following all appeals, the MDL class settlement is reversed or vacated with respect to~~district court’s certification of the ~~Rule 23(b)(2) settlement~~merchant class orand reversed the ~~consideration provided to or release provided by that class. Including this settlement with Wal-Mart, as~~approval of the ~~date~~settlement. On November 30, 2016, the district court entered an order appointing interim counsel for the putative classes of ~~filing, Visa has reached settlement agreements with a number of merchants representing approximately 49% of~~plaintiffs.

Consumer Interchange Litigation

On December 9, 2016, the ~~Visa-branded payment card sales volume of merchants who opted out.~~Second Circuit denied plaintiffs’ petition for rehearing.

~~European Competition Proceedings~~VE Territory Covered Litigation

U.K. Merchant Litigation~~. A total~~

Since July 2013, in excess of ~~approximately 50 merchants (together~~100 Merchants (the capitalized term "Merchant," when used in this section, means a merchant together with subsidiary/affiliate ~~companies)~~companies who have ~~now~~issued claims jointly) have commenced proceedings against Visa Europe, Visa Inc. and Visa International relating to interchange rates in ~~Europe.~~Europe, and seek damages for alleged anti-competitive conduct primarily in relation to U.K. domestic and/or Irish domestic and/or intra-EEA interchange fees for credit and debit cards. As of the filing date, Visa Europe, Visa Inc. and Visa International have settled the claims asserted by four Merchants.

The trial in relation to claims filed by a number of Merchants in 2013 commenced in November 2016 and is expected to continue until February 2017.

In addition, over 30 additional Merchants have threatened to commence similar proceedings. Standstill agreements have been entered into with respect to some of those Merchants' claims.

Other Litigation

"Indirect Purchaser" Actions

On ~~December 1, 2015,~~January 12, 2017, the ~~objector's appeal from~~appeals court affirmed the trial court's order ~~regarding~~denying the ~~distribution~~objector's motion for attorneys' fees and costs.

Data Pass Litigation

On December 20, 2016, the U.S. Court of Appeals for the Second Circuit affirmed the dismissal as to certain ~~settlement funds was dismissed~~.

~~Canadian Competition Proceedings~~

~~Merchant Litigation.~~ ~~The~~claims against Gamestop Corporation, Webloyalty.com, Inc. and Visa, vacated the dismissal as to certain claims against Webloyalty and Gamestop, and remanded the case to the district court ~~approved~~for further proceedings on the ~~settlement agreements entered into by the three named financial institutions, which are not significant Canadian issuers. A settlement with another financial institution is pending court approval.~~remaining claims.

U.S. ATM Access Fee Litigation

On ~~January 27,~~November 17, 2016, ~~defendants filed petitions for writ of certiorari with~~ the U.S. Supreme Court ~~seeking review~~ordered that the writs of certiorari be dismissed as improvidently granted.

Federal Trade Commission

Notice Regarding EMV Chip Debit Cards. On November 22, 2016, the ~~decisions~~FTC's Bureau of Competition informed Visa that the ~~U.S. Court of Appeals for the District of Columbia Circuit.~~

~~Pulse Network~~

~~On December 17, 2015, the court denied Visa's motion to dismiss the complaint.~~Bureau had closed its investigation.

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VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Korea Fair Trade Commission

Following complaints lodged by certain financial institutions in Korea, in November 2016, the Korea Fair Trade Commission (KFTC) initiated an investigation into certain pricing changes applicable to Visa financial institutions in Korea. Visa is cooperating with the KFTC.



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,” “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.~~1995 that relate to, among other things, our future operations, prospects, developments, strategies, growth of our business, expectations regarding client incentives, anticipated expansion of our products in certain countries, industry developments, expectations regarding litigation, 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," ~~"projected,~~"projects," ~~"could,~~“could," "should," "will," ~~"will continue"~~"continue" and other similar expressions. ~~Examples~~All statements other than statements of historical fact could be forward-looking statements, ~~include, but are not limited to, statements we make about our revenue, client incentives, operating margin, tax rate, earnings per share, free cash flow, and the growth of those items.~~

~~By their nature, forward-looking statements: (i)~~which speak only as of the date they are ~~made; (ii)~~made, are not ~~statements of historical fact or~~ guarantees of future ~~performance;~~performance and ~~(iii)~~ are subject to certain risks, uncertainties ~~assumptions or changes in circumstances that~~and other factors, many of which are beyond our control and are difficult to ~~predict or quantify. Therefore,~~predict. We describe risks and uncertainties that could cause actual results ~~could~~to differ materially ~~and adversely~~ from ~~our~~those expressed in, or implied by, any of these forward-looking statements ~~due to a variety of factors, including the following:~~

~~the impact of laws, regulations and marketplace barriers, including:~~

increased regulation of fees, transaction routing, payment card practices or other aspects of the payments industry in the United States, including new or revised regulations issued under the Dodd-Frank Wall Street Reform and Consumer Protection Act;

~~increased regulation in jurisdictions outside of the United States;~~

~~increased government support of national payments networks outside the United States; and~~

~~increased regulation of consumer privacy, data use and security;~~

~~developments in litigation and government enforcement, including those affecting interchange reimbursement fees, antitrust and tax;~~

~~new lawsuits, investigations or proceedings, or changes to our potential exposure in connection with pending lawsuits, investigations or proceedings;~~

~~economic factors, such as:~~

~~economic fragility in the Eurozone, the United States and in other advanced and emerging markets;~~

~~general economic, political and social conditions in mature and emerging markets globally;~~

~~general stock market fluctuations which may impact consumer spending;~~

~~material changes in cross-border activity, foreign exchange controls and fluctuations in currency exchange rates; and~~

~~material changes~~ in our ~~financial institution clients' performance compared to our estimates;~~

~~industry developments, such as competitive pressure, rapid technological developments and disintermediation from our payments network;~~

~~system developments, such as:~~

~~disruption of our transaction processing systems or the inability to process transactions efficiently;~~

~~account data breaches or increased fraudulent or other illegal activities involving Visa-branded cards or payment products; and~~

~~Table of Contents~~

~~failure to maintain systems interoperability with Visa Europe;~~

~~the transaction with Visa Europe may not be consummated on the terms currently contemplated or at all;~~

~~Visa Europe's business may not be successfully integrated with our business or we may not achieve the anticipated benefits of the transaction;~~

~~the costs and risks associated with the transaction with Visa Europe;~~

~~matters arising in connection with Visa Europe's or our efforts to comply with and satisfy applicable regulatory approvals and closing conditions relating to the transaction;~~

~~the loss of organizational effectiveness or key employees;~~

~~the failure to integrate acquisitions successfully or to effectively develop new products and businesses;~~

~~natural disasters, terrorist attacks, military or political conflicts, and public health emergencies; and~~

~~various other factors, including those more fully described in our~~SEC filings, ~~with the SEC,~~ including our Annual Report on Form 10-K for the year ended September 30, ~~2015,~~2016, and our subsequent reports on Forms 10-Q and 8-K.

~~You should not place undue reliance on such statements.~~ Except as required by law, we do not intend to update or revise any forward-looking statements as a result of new information, future ~~developments~~events or otherwise.

~~Table of Contents~~

Overview

Visa is a global payments technology company that connects consumers, ~~businesses,~~merchants, financial institutions, businesses, strategic partners and ~~governments around the world~~government entities in more than 200 countries and territories to fast, secure and reliable electronic payments. We provide our financial institution clients with a global payments infrastructure and support services for the delivery of Visa-branded payment products, including credit, debit, and prepaid. We facilitateenable global commerce through the transfer of value and information among ~~financial institutions, merchants, consumers, businesses~~these participants. Our advanced transaction processing network facilitates authorization, clearing and ~~government entities. Each of these constituencies has played a key role in the ongoing worldwide migration from paper-based to electronic forms~~settlement of payment transactions and ~~we believe that this transformation continues~~enables us to ~~yield significant growth opportunities, particularly outside the United States. We continue to explore additional opportunities to enhance~~provide our ~~competitive position by expanding the scope~~financial institution and merchant clients a wide range of ~~payment solutions we provide.~~products, platforms and value-added services.

Overall economic conditions. Our business is affected by overall economic conditions and consumer spending. Our business performance during the three months ended December 31, ~~2015~~2016 reflects ~~the impacts of~~ continued uneven ~~and tepid~~ economic ~~growth.~~

~~Visa Europe acquisition.~~ ~~On November 2, 2015, we entered into a Transaction Agreement with Visa Europe, pursuant to which we agreed to acquire 100% of~~growth around the share capital of Visa Europe for a total purchase price of up to €21.2 billion. The purchase price consists of: (a) at the closing of the transaction, up-front cash consideration of €11.5 billion and preferred stock convertible upon certain conditions into class A common stock or class A equivalent preferred stock, valued at approximately €5.0 billion, and (b) following the end of sixteen fiscal quarters post-closing, contingent cash consideration of up to €4.0 billion (plus up to an additional €0.7 billion in interest), determined based on the achievement of specified net revenue levels during such post-closing period. In connection with the execution of the Transaction Agreement, the Company and Visa Europe entered into the Put Option Amendment to align certain terms of the Put with the terms of the Visa Europe Transaction Agreement. Under the terms and conditions of the Transaction Agreement, the Visa Europe board of directors is required to exercise the Amended Put Option on the closing date of the transaction to effect Visa's purchase of all of Visa Europe's share capital. The preferred stock conversion rates may be reduced from time to time to offset certain liabilities, if any, which may be incurred by us, Visa Europe or its affiliates as a result of certain existing and potential litigation relating to the setting of multilateral interchange fee rates in the Visa Europe territory. As part of the acquisition, we also entered into the U.K. loss sharing agreement with Visa Europe and certain of Visa Europe’s members located in the United Kingdom to compensate us for certain losses which may be incurred by us or Visa Europe as a result of certain existing and potential litigation relating to the setting and implementation of domestic multilateral interchange fee rates in the United Kingdom. See ~~Note 2—Visa Europe, Note 3—U.S. Retrospective Responsibility Plan and Potential Visa Europe Liabilities~~ ~~and~~ ~~Note 13—Legal Matters~~to our unaudited consolidated financial statements. The closing of our acquisition of Visa Europe is subject to regulatory approvals and other customary conditions, and is currently expected to occur in our fiscal third quarter of 2016.

~~Debt issuance.~~ 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. Interest on these notes, at a rate ranging between 1.20% and 4.30%, is payable semi-annually on June 14 and December 14, commencing June 14, 2016. The net aggregate proceeds of $15.9 billion, after deducting discounts and debt issuance costs, will be used to fund a portion of the purchase price for the anticipated acquisition of Visa Europe, and the remainder will be used for general corporate purposes including share repurchases. See ~~Note 4—Fair Value Measurements and Investmentsand~~ ~~Note 5—Debt~~ ~~to our unaudited consolidated financial statements.~~world.

Financial highlights. During the three months ended December 31, ~~2015,~~2016, we recorded net income of ~~$1.9~~$2.1 billion or diluted class A earnings per share of ~~$0.80, an increase~~$0.86, increases of ~~24% and 26%, respectively,~~7% over the prior year comparable period. Our net income and diluted earnings per share for the three months ended December 31, 2016 compared to our non-GAAP adjusted net income and diluted earnings per share for the three months ended December 31, 2015 ~~and 2014~~ are as follows:


	Three Months Ended December 31,						Three Months Ended December 31,
(in millions, except percentages and per share data)	2015		2014		% Change⁽¹⁾		2016		2015		% Change⁽¹⁾
Net income, as adjusted	$	1,686	$	1,569	7	%	$	2,070	$	1,686	23	%
Diluted earnings per share, as adjusted⁽²⁾	$	0.69	$	0.63	10	%	$	0.86	$	0.69	23	%


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

~~Table of Contents~~


⁽²⁾	~~The per share amount for the prior period presented has been retroactively adjusted to reflect the four-for-one stock split effected in the fiscal second quarter of 2015.~~

Adjusted net income, effective income tax rate and diluted earnings per share are non-GAAP financial measures and should not be relied upon as substitutes for measures calculated in accordance with U.S. GAAP. During the ~~first quarter of fiscal 2016,~~three months ended December 31, 2015, we recorded a decrease of $255 million in the fair value of the ~~Put,~~Visa Europe put option, resulting in the recognition of non-cash, non-operating income that we do not believe is indicative of our operating performance. As such, we believe the presentation of adjusted financial results provides a clearer understanding of our operating performance for the ~~current~~prior period presented. This amount is not subject to income tax and therefore has no impact on our reported income tax provision. ~~See~~ ~~Note 4—Fair Value Measurements and Investments~~ ~~to our unaudited consolidated financial statements.~~ There was no comparable adjustment recorded for the three months ended December 31, 2014. Adjusted net income, effective income tax rate and diluted earnings per share are non-GAAP financial measures and should not be relied upon as substitutes for measures calculated in accordance with U.S. GAAP.2016. The following table reconciles our as-reported net income, effective income tax rate and diluted earnings per share, which are calculated in accordance with U.S. GAAP, to our respective non-GAAP adjusted financial measures for the three months ended December 31, 2015:



	Three Months Ended December 31, 2015
(in millions, except percentages and per share data)	Net Income			Effective Income Tax Rate⁽¹⁾		Diluted Earnings Per Share⁽¹⁾
As reported	$	1,941		26	%	$	0.80
Revaluation of Visa Europe put option	(255		)	3	%	(0.10		)
As adjusted	$	1,686		29	%	$	0.69
Diluted weighted-average shares outstanding, as reported						2,430


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

We recorded ~~total~~net operating revenues of ~~$3.6~~$4.5 billionfor the three months ended December 31, ~~2015,~~2016, an increase of 5%25% over the prior year comparable period, ~~driven by~~reflecting the operating revenues of Visa Europe and continued growth in processed transactions and nominal payments volume. The ~~general strengthening~~effect of exchange rate movements in the ~~U.S. dollar during the quarter~~three months ended December 31, 2016, as partially mitigated by our hedging program, resulted in a negative three percentage point impact to our ~~total~~net operating revenue growth.

Total operating expenses for the three months ended December 31, ~~2015~~2016 were ~~$1.2~~$1.4 billion, a 2%16% increase over ~~the~~ prior year comparable ~~period.~~period, resulting mainly from the inclusion of Visa Europe's operating expenses following the acquisition.

~~Reduction in as-converted class A common stock.~~Common stock repurchases. ~~In October 2015, our board of directors authorized a new $5.0 billion share repurchase program, in addition to the existing October 2014 program.~~ During the three months ended December 31, ~~2015,~~2016, we repurchased 2624 million shares of our class A common stock in the open market using ~~$2.0~~$1.9 billion of cash on hand. As of December 31, ~~2015,~~2016, we had remaining authorized funds of ~~$5.8~~$3.9 billion for share repurchase. See Note 9—8—Stockholders' Equity to our unaudited consolidated financial statements.

Nominal 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 over the prior year posted double-digit growth in the ~~United States,~~U.S., driven mainly by consumer ~~debit and~~ credit. Nominal international payments volume growth was ~~negatively~~positively impacted bydue to the ~~overall strengthening~~inclusion of nominal payments volume related to Visa Europe for the ~~U.S. dollar. On~~three months ended September 30, 2016⁽¹⁾. Growth on a ~~constant dollar~~constant-dollar basis, which excludes the impact of exchange rate movements, ~~our international payments volume~~was not significantly different from growth ~~rate~~on a nominal-dollar basis for the three months ended September 30, ~~2015~~2016⁽¹⁾ ~~was 15%~~. ~~Processed~~Growth in processed transactions ~~sustained healthy growth reflecting~~reflects the ~~ongoing worldwide shift to electronic currency.~~inclusion of Visa Europe's processed transactions for the three months ended December 31, 2016.

~~Table of Contents~~

The following ~~tables present~~table presents nominal payments volume.⁽²⁾


	United States						International						Visa Inc.						United States						International						Visa Inc.
	3 Months Ended September 30,⁽¹⁾						3 Months Ended September 30,⁽¹⁾						3 Months Ended September 30,⁽¹⁾						3 Months Ended September 30,⁽¹⁾						3 Months Ended September 30,⁽¹⁾						3 Months Ended September 30,⁽¹⁾
	2015		2014		% Change		2015		2014		% Change		2015		2014		% Change		2016		2015		% Change		2016		2015		% Change		2016		2015		% Change
	(in billions, except percentages)																		(in billions, except percentages)
Nominal payments volume
Consumer credit	$	263	$	238	10	%	$	424	$	423	—	%	$	687	$	662	4	%	$	316	$	263	20	%	$	601	$	424	42	%	$	917	$	687	33	%
Consumer debit⁽³⁾	319		291		9	%	111		122		(9	)%	430		413		4	%	327		319		3	%	411		111		271	%	738		429		72	%
Commercial⁽⁴⁾	111		102		9	%	37		39		(6	)%	148		142		5	%	125		111		12	%	79		36		116	%	204		148		38	%
Total nominal payments volume	$	693	$	632	10	%	$	572	$	584	(2	)%	$	1,265	$	1,216	4	%	$	768	$	693	11	%	$	1,091	$	571	91	%	$	1,858	$	1,264	47	%
Cash volume	129		124		4	%	456		543		(16	)%	585		667		(12	)%	135		129		5	%	626		456		37	%	761		585		30	%
Total nominal volume⁽⁵⁾	$	822	$	756	9	%	$	1,027	$	1,127	(9	)%	$	1,850	$	1,883	(2	)%	$	903	$	822	10	%	$	1,716	$	1,027	67	%	$	2,619	$	1,849	42	%

The following table presents nominal and constant payments volume growth.⁽²⁾


	International				Visa Inc.				International				Visa Inc.
	3 Months Ended September 30, 2015 vs. 2014⁽¹⁾				3 Months Ended September 30, 2015 vs. 2014⁽¹⁾				3 Months Ended September 30, 2016 vs. 2015⁽¹⁾				3 Months Ended September 30, 2016 vs. 2015⁽¹⁾
	Nominal		Constant⁽⁶⁾		Nominal		Constant⁽⁶⁾		Nominal		Constant⁽⁶⁾		Nominal		Constant⁽⁶⁾
Payments volume growth
Consumer credit	—	%	16	%	4	%	14	%	42	%	42	%	33	%	33	%
Consumer debit⁽³⁾	(9	)%	12	%	4	%	10	%	271	%	282	%	72	%	73	%
Commercial⁽⁴⁾	(6	)%	14	%	5	%	10	%	116	%	112	%	38	%	37	%
Total payments volume growth	(2	)%	15	%	4	%	12	%	91	%	92	%	47	%	47	%
Cash volume growth	(16	)%	5	%	(12	)%	5	%	37	%	43	%	30	%	34	%
Total volume growth	(9	)%	10	%	(2	)%	10	%	67	%	70	%	42	%	43	%


⁽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, ~~2015~~2016 and ~~2014,~~2015 were based on nominal payments volume reported by our financial institution clients for the three months ended September 30, 2016 and 2015, ~~and 2014,~~ respectively.


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


⁽³⁾	Includes consumer prepaid volume and Interlink volume.


⁽⁴⁾	Includes large, middle 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 carrying the Visa, Visa Electron, Interlink and ~~Interlink~~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 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 processed by our VisaNet system, including transactions involving Visa, Visa Electron, Interlink, V PAY and PLUS cards processed on Visa's networks.⁽¹⁾


	Three Months Ended December 31,				Three Months Ended December 31,
	2015	2014	% Change		2016	2015	% Change⁽²⁾
	(in millions, except percentages)
Visa processed transactions	18,986	17,599	8	%	27,329	18,986	44	%


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


⁽²⁾	Visa processed transactions for the three months ended December 31, 2016 include transactions processed by Visa Europe.

~~Table of Contents~~

Results of Operations

Operating Revenues

The following table sets forth our operating revenues earned in the ~~United States,~~U.S., internationally and ~~from Visa Europe. Revenues earned from~~in accordance with the Framework Agreement prior to the Visa Europe ~~are a result of our contractual arrangement with~~acquisition on June 21, 2016. Visa Europe ~~as governed by~~revenue earned for the ~~framework agreement that provides for trademark and technology licenses and bilateral services.~~three months ended December 31, 2016 is included in International.

Three Months Ended December 31, 2015 vs. 2014
2015 2014
$
Change

%
Change⁽¹⁾
(in millions, except percentages)
United States $ 1,941
$ 1,784
$ 157
9 %
International 1,559
1,544
15
1 %
Visa Europe 65
54
11
20 %
Total operating revenues $ 3,565
$ 3,382
$ 183
5 %



	Three Months Ended December 31,				2016 vs. 2015
	2016		2015		$ Change			% Change⁽¹⁾
	(in millions, except percentages)
U.S.	$	2,121	$	1,941	$	180		9	%
International	2,340		1,559		781			50	%
Revenues earned under the Framework Agreement⁽²⁾	—		65		(65		)	(100	)%
Net operating revenues	$	4,461	$	3,565	$	896		25	%


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


⁽²⁾	Reflects revenues earned from Visa Europe prior to the acquisition, in accordance with the Framework Agreement that provided for trademark and technology licenses and bilateral services. The Framework Agreement was effectively settled upon the closing of the acquisition. See Note 2—Visa Europe to our unaudited consolidated financial statements.

The increase in operating revenues ~~primarily~~ reflects the operating revenues of Visa Europe and continued growth in processed transactions and nominal payments volume. These benefits were partially offset by increases in client incentives.

Our operating revenues, primarily service revenues, international transaction revenues, and client incentives, 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. The effect of exchange rate movements in the three months ended December 31, ~~2015,~~2016, as partially mitigated by our hedging program, resulted in ~~an overall decline of about~~a negative three percentage ~~points in total~~point impact to our net operating revenue growth.

The following table sets forth the components of our ~~total~~net operating ~~revenues.~~revenues, including operating revenues earned by Visa Europe for the three months ended December 31, 2016. Other revenues for the three months ended December 31, 2015 also includes revenue earned from Visa Europe in accordance with the Framework Agreement prior to its acquisition on June 21, 2016.


	Three Months Ended December 31,						2015 vs. 2014					Three Months Ended December 31,						2016 vs. 2015
	2015			2014			$ Change			% Change⁽¹⁾		2016			2015			$ Change			% Change⁽¹⁾
	(in millions, except percentages)											(in millions, except percentages)
Service revenues	$	1,645		$	1,538		$	107		7	%	$	1,918		$	1,645		$	273		17	%
Data processing revenues	1,479			1,383			96			7	%	1,892			1,479			413			28	%
International transaction revenues	1,031			970			61			6	%	1,489			1,031			458			44	%
Other revenues	198			204			(6		)	(3	)%	203			198			5			2	%
Client incentives	(788		)	(713		)	(75		)	10	%	(1,041		)	(788		)	(253		)	32	%
Total operating revenues	$	3,565		$	3,382		$	183		5	%
Net operating revenues												$	4,461		$	3,565		$	896		25	%


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

Service revenues, which include revenues earned by Visa Europe in the three months ended December 31, 2016, increased primarily due to 47% growth in nominal payments volume during the three month comparable ~~period primarily due to 4%~~period. The growth in ~~nominal payments volume. Service revenues also benefited from select pricing modifications which became effective in~~ the ~~third~~first quarter of fiscal ~~2015.~~2017 service revenues was slower than the growth in payments volume reflecting the inclusion of Visa Europe revenue and the resulting impact on our service revenue yield.

Data processing revenues increased mainly due to overall growth in processed transactions of 8%44% during the three month comparable ~~period.~~period, which includes data processing revenues earned by Visa Europe in the first quarter of fiscal 2017, and the resulting impact on our data processing revenue yield.

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International transaction revenues increased in the first quarter of fiscal 2017primarily due to ~~select pricing modifications that became effective in the third quarter of fiscal 2015, partially offset by a 4% decline in~~ nominal cross-border ~~payments~~ volume growth ~~driven~~of 135%, which includes revenues earned by ~~continued strengthening~~Visa Europe during the three months ended December 31, 2016. International transaction revenue growth also reflects the resulting impact of ~~the U.S. dollar.~~Visa Europe revenues on our corresponding yield.

Client incentives increased during the three month comparable period mainly due to Visa Europe's incentives for the three months ended December 31, 2016, overall growth in ~~U.S.~~ payments volume and incentives recognized on long-term customer contracts that were initiated or renewed after the first quarter of fiscal ~~2015.~~2016. 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 the execution of new contracts.

Operating Expenses

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


	Three Months Ended December 31,				2015 vs. 2014					Three Months Ended December 31,				2016 vs. 2015
	2015		2014		$ Change			% Change⁽¹⁾		2016		2015		$ Change		% Change⁽¹⁾
	(in millions, except percentages)									(in millions, except percentages)
Personnel	$	499	$	509	$	(10	)	(2	)%	$	571	$	499	$	72	14	%
Marketing	194		205		(11		)	(5	)%	218		194		24		12	%
Network and processing	128		114		14			12	%	145		128		17		13	%
Professional fees	72		70		2			2	%	80		72		8		12	%
Depreciation and amortization	120		120		—			(1	)%	146		120		26		22	%
General and administrative	156		126		30			24	%	186		156		30		20	%
Litigation provision										15		—		15		NM
Total operating expenses	$	1,169	$	1,144	$	25		2	%	$	1,361	$	1,169	$	192	16	%

NM — not meaningful


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

~~Marketing~~ Our overall operating expenses~~decreased~~ increased primarily due to ~~lower levels~~the inclusion of ~~advertising and promotional campaigns during~~Visa Europe expenses for the first quarter of fiscal ~~2016.~~2017. Additional factors impacting our operating expenses for the three months ended December 31, 2016 are discussed below.

Personnel expenses increased driven by higher employee compensation costs.

~~Network~~Marketing expenses increased to support our growth strategies and ~~processing~~ expenses increased primarily due to fees associated with the processing of Russian domestic transactions that were transitioned to the Russian National Payment Card system during the third quarter of fiscal 2015.new product initiatives.

General and administrativeexpenses reflected an increase in expenses ~~increased mainly due~~ to provide product benefits to our cardholders as a result of business growth, offset by a decrease in net foreign exchange ~~losses~~impacts incurred as a result of changes in the ~~strengthening~~ U.S. dollar ~~combined with an increase~~exchange rate against other currencies in ~~product enhancements and travel activities in support~~which we transact.

Non-operating (Expense) Income

The following table sets forth components of our ~~business growth.~~non-operating (expense) income.



	Three Months Ended December 31,						2016 vs. 2015
	2016			2015			$ Change			% Change⁽¹⁾
	(in millions, except percentages)
Interest expense	$	(140	)	$	(29	)	$	(111	)	NM
Other	19			272			(253		)	(93	)%
Non-operating (expense) income	$	(121	)	$	243		$	(364	)	NM

NM — not meaningful


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

Interest expense increased primarily due to the issuance of $16.0 billion fixed-rate senior notes in December 2015. See Note 5—Debt to our unaudited consolidated financial statements.

~~Non-operating Income~~

Other non-operating income in the first fiscal quarter of 2016 ~~primarily reflects~~reflected a non-cash adjustment to the fair value of the ~~Put~~Visa Europe put option of $255 million, ~~which is not subject~~reducing the fair value of the liability to tax. The change in value primarily reflects our expectation at December 31, 2015 that we will complete the transaction in accordance with the Transaction Agreement and the Put will not revert to its original, unamended form or be unilaterally exercised by Visa Europe in the future.zero. See Note 2—Visa Europe~~andNote 4—Fair Value Measurements and Investments~~ to our unaudited consolidated financial statements.

Effective Income Tax Rate

$26 million of excess tax benefits related to share-based payments recorded during the quarter ended December 31, 2016 as a result of early adoption of new Accounting Standards Update 2016-09;

the restrictions on U.S. foreign tax credits that can be claimed on Visa Europe's foreign taxes under the current tax structure;

the absence of the non-taxable $255 million revaluation of the Visa Europe put option recorded in the quarter ended December 31, 2015; and

the absence of foreign tax credit benefits related to prior fiscal years recognized during the quarter ended December 31, ~~2015; and~~2015.

~~the absence of the reversal of previously established state tax reserves in the quarter ended December 31, 2014.~~

~~Table of Contents~~

Excluding the non-cash, non-taxable $255 million gain recognized as non-operating income upon the revaluation of the Visa Europe put option, the adjusted non-GAAP effective income tax rate was 29% for the three months ended December 31, 2015. We believe the adjusted effective income tax rate provides a clearer understanding of our operating performance for the ~~current period.~~period in the prior fiscal year.

During the three months ended December 31, ~~2015,~~2016, our gross unrecognized tax benefits increased by ~~$20~~$33 million, of which $28 million would favorably impact our effective tax rate if recognized. The increase in gross unrecognized tax benefits is primarily related to various tax positions across several jurisdictions.

Our 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.

Liquidity and Capital Resources

Cash Flow Data

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


	Three Months Ended December 31,						Three Months Ended December 31,
	2015			2014			2016			2015
	(in millions)						(in millions)
Total cash provided by (used in):
Operating activities	$	1,979		$	1,761		$	2,508		$	1,979
Investing activities	(6,194		)	(636		)	(417		)	(6,194		)
Financing activities	13,534			(1,012		)	(1,730		)	13,534
Effect of exchange rate changes on cash and cash equivalents	—			1			(156		)	—
Increase in cash and cash equivalents	$	9,319		$	114		$	205		$	9,319

Operating activities. Cash provided by operating activities for the three months ended December 31, ~~2015~~2016 was higher than prior year comparable period, reflecting continued growth in our underlying ~~business.~~business, including Visa Europe.

Investing activities. Cash used in investing activities was ~~higher~~lower compared to the prior year comparable period as ~~we invested a portion~~purchases of available-for-sale investment securities during the three months ended December 31, 2015 reflected additional investment of proceeds received from the issuance of our ~~debt issuance in available-for-sale securities.~~Senior Notes. See Note 5—DebtandNote 4—Fair Value Measurements and Investments~~and~~ ~~Note 5—Debt~~ to our unaudited consolidated financial statements.

Financing activities. Financing activities for the three months ended December 31, ~~2015~~2016 reflect net aggregate proceeds of $566 million received from our commercial paper program in December 2016 and $1.9 billion used to repurchase class A common stock in the open market. Activity in the prior year comparable period primarily reflected $15.9 billion net aggregate proceeds received from our debt issuance completed onin December ~~14,~~ 2015 and $2.0 billion of cash used to repurchase class A common stock in the open market. See Note 5—Debt and Note 9—8—Stockholders' ~~Equity.~~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. We believe that cash flow generated from operations, in conjunction with access to our other sources of liquidity, will be more than sufficient to meet our ongoing operational needs.

Cash and cash equivalents and short-term and long-term available-for-sale investment securities held by our foreign subsidiaries, primarily attributable to undistributed earnings, totaled ~~$7.4~~$9.0 billion at December 31, ~~2015~~.2016. If it were necessary to repatriate these ~~funds~~undistributed earnings for use in the ~~United States,~~U.S., we would be required to pay U.S. income taxes on most of this amount. The amount of income taxes that would have resulted had these ~~funds~~undistributed earnings been repatriated is not practicably determinable. It is our intent to indefinitely reinvest the majority of these ~~funds~~undistributed earnings outside of the ~~United States.~~U.S. As such, we have not accrued any U.S. income tax provision in our financial results related to the majority of these funds.

Commercial Paper Program.

~~Table~~ We maintain a commercial paper program to support our working capital requirements and for other general corporate purposes. The carrying amount outstanding at December 31, 2016 was $566 million, with a weighted-average interest rate of ~~Contents~~

~~Long-term debt~~0.79% and ~~change in capital structure.~~ In conjunction with the anticipated Visa Europe acquisition, we have evolved our long-term capital structure. In December 2015, we issued fixed-rate senior notes in an aggregate principal amount of $16.0 billion, withremaining maturities ranging between 2 and 30 years. Our first principal payment of $1.8 billion is due on December 14, 2017. Interest on the Notes, at a rate ranging between 1.20% and 4.30%, is payable semi-annually on June 14 and December 14 of each year, commencing June 14, 2016. The Notes may be redeemed as a whole or in part, at our option at any time priorfrom 37 days to maturity, at a specified redemption price. In the event that the Visa Europe acquisition is not completed on or prior to February 2, 2017 (which date may be extended), we will be required to redeem all Notes except for the 2035 Notes and the 2045 Notes, at a specified redemption price. The net aggregate proceeds of $15.9 billion, after deducting underwriting discounts and debt issuance costs of $123 million, will be used to fund a portion of the purchase price for the anticipated acquisition of Visa Europe, and the remainder will be used for general corporate purposes including share repurchases. We are not subject to any financial covenants and did not experience any changes to our investment credit ratings as a result of this debt issuance.66 days. See Note 5—Debt to our unaudited consolidated financial statements.

Credit ~~Facility.~~Facility Extension. On January 27, ~~2016,~~2017, we ~~entered into an unsecured~~extended the term of the $4.0 ~~billion revolving credit facility. The credit facility, which expires on January 27, 2021, replaced our previous $3.0~~ billion credit facility ~~which expired~~that was entered into on January 27, 2016. The ~~new~~ credit facility ~~contains covenants and events of default customary for facilities of this type.~~will now expire on January 27, 2022. No other material terms were changed. See Note 5—Debt to our unaudited consolidated financial statements.

Uses of Liquidity

There has been no significant change to our primary uses of liquidity since September 30, ~~2015~~,2016, except as discussed below. Based on our current cash flow budgets and forecasts of our short-term and long-term liquidity needs, we believe that our 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.

~~Visa Europe acquisition.~~Senior Notes. ~~On November 2,~~In December 2015, we ~~entered into a transaction agreement~~issued fixed-rate senior notes in an aggregate principal amount of $16.0 billion, with maturities ranging between 2 and 30 years. Our first principal payment of $1.8 billion is due on December 14, 2017. However, we intend to ~~acquire Visa Europe for a total purchase price~~refinance this current portion of updebt prior to ~~€21.2 billion. The purchase price consists of: (a) at the closing~~its maturity, market conditions permitting. An interest payment of the transaction, up-front cash consideration of €11.5 billion and preferred stock convertible upon certain conditions into class A common stock or class A equivalent preferred stock, valued at approximately €5.0 billion, and (b) following the end of sixteen fiscal quarters post-closing, contingent cash consideration of up to €4.0 billion (plus up to an additional €0.7 billion in interest), determined based$244 million was made on the achievement of specified net revenue levels during such post-closing period. Closing is subject to regulatory approvals and other customary conditions, and is currently expected to occur in the fiscal third quarter ofDecember 14, 2016. See Note ~~2—Visa Europe~~ 5—Debtto our unaudited consolidated financial statements.

We also entered into the Put Option Amendment with Visa Europe to align certain terms of the Put with the terms of the Visa Europe Transaction Agreement. Under the terms and conditions of the Transaction Agreement, the Visa Europe board of directors is required to exercise the Amended Put Option on the closing date of the transaction to effect our purchase of all of Visa Europe’s share capital. If the Transaction Agreement is terminated for any reason prior to the completion of the transaction, the Put Option Amendment will also terminate and the Put will revert to its original, unamended form. We expect to complete the transaction in accordance with the Transaction Agreement, and therefore do not expect the Put to revert to its original, unamended form.

~~Reduction in as-converted class A common stock.~~Common stock repurchases. ~~In October 2015, our board of directors authorized a new $5.0 billion share repurchase program, in addition to the existing October 2014 program.~~ During the three months ended December 31, ~~2015~~,2016, we repurchased 2624 million shares of our class A common stock using ~~$2.0~~$1.9 billion of cash on hand. As of December 31, ~~2015, we~~2016, the July 2016 program had remaining authorized funds of ~~$5.8~~$3.9 billion for share repurchase. All share repurchase programs authorized prior to July 2016 have been completed. See Note 9—8—Stockholders' Equity to our unaudited consolidated financial statements.

Dividends. During the three months ended December 31, ~~2015~~,2016, we declared and paid ~~$340~~$399 million in ~~dividends.~~dividends to holders of our common stock. In January 2017, our board of directors declared a cash dividend in the amount of $0.165 per share of class A common stock (determined in the case of class B and C common stock and U.K.&I and Europe preferred stock on an as-converted basis), which will be paid on March 7, 2017, to all holders of record of our common and preferred stock as of February 17, 2017. See Note 9—8—Stockholders' Equity to our unaudited consolidated financial statements. We expect ~~our~~to continue paying quarterly dividends in cash, subject to approval by the board of ~~directors to declare a quarterly cash dividend at the beginning~~directors. All three series of ~~February 2016.~~preferred stock and class B and C common stock will share ratably on an as-converted basis in such future dividends.

Fair Value Measurements—Financial Instruments

As of December 31, ~~2015~~,2016, our financial instruments measured at fair value on a recurring basis included ~~$24.8~~$12.4 billion of assets and ~~$10~~$84 million of liabilities. ~~Of these instruments, fair value of~~ ~~$7 million~~ ~~was based on significant~~

~~Table of Contents~~

~~unobservable inputs.~~ See Note 4—Fair Value Measurements and Investments 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 during the three months ended December 31, ~~2015,~~2016, compared to September 30, ~~2015.~~2016.



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 disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) of Visa Inc. at the end of the period covered by this report. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures of Visa Inc. were effective at the reasonable assurance level as of the end of the period covered by this report.

Changes in internal control over financial reporting. There has been no change 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.

~~Table of Contents~~

PART II. OTHER INFORMATION



ITEM 1.	Legal Proceedings.

Refer to Note ~~13—~~12—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, ~~2015~~,2016, filed with the SEC on November ~~19, 2015~~.15, 2016.



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

ISSUER PURCHASES OF EQUITY SECURITIES

The table below sets forth ~~information with respect to~~the Company’s purchases of ~~the Company’s~~ common stock ~~made by or on behalf of the Company~~ during the quarter ended December 31, ~~2015~~2016.

Period
Total
Number of
Shares
Purchased ⁽¹⁾

Average
Price Paid
per Share

Total
Number of
Shares
Purchased
as Part of
Publicly
Announced
Plans or
Programs ^(2),(3)

Approximate
Dollar Value
of Shares that
May Yet Be Purchased
Under the Plans or
Programs ^(2),(3)
October 1-31, 2015 558
$ 78.51
—
$ 7,772,396,506
November 1-30, 2015 15,706,612
$ 78.88
15,050,125
$ 6,585,825,936
December 1-31, 2015 10,607,954
$ 78.09
10,606,371
$ 5,757,324,650
Total 26,315,124
$ 78.56
25,656,496



Period	Total Number of Shares Purchased ⁽¹⁾	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs ^(2),(3)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs ^(2),(3)
October 1-31, 2016	2,430,349	$	82.27	2,430,349	$	5,465,815,734
November 1-30, 2016	14,388,292	$	80.41	14,063,092	$	4,334,852,579
December 1-31, 2016	5,759,268	$	77.19	5,759,268	$	3,890,166,593
Total	22,577,909	$	79.79	22,252,709


⁽¹⁾	Includes ~~658,628~~325,200 shares of class A common stock withheld at an average price of ~~$80.15~~$80.82 per share (per the terms of grants under our 2007 Equity Incentive Compensation Plan) to offset tax withholding obligations that occur upon vesting and release of restricted shares.


⁽²⁾	The figures in the table reflect transactions according to trade dates. For purposes of our unaudited consolidated financial statements included in this Form 10-Q, the impact of these repurchases is recorded according to settlement dates.

⁽³⁾

Our board of directors from time to time authorizes the repurchase of shares of our common stock up to a certain monetary limit. In October 2015 and July 2016, our board of directors authorized ~~a new~~share repurchase programs for $5.0 billion ~~share repurchase program in addition to the existing $5.0 billion October 2014 program.~~each. These authorizations have no expiration date. All share repurchase programs authorized prior to ~~October 2014~~July 2016 have been completed.



ITEM 3.	Defaults Upon Senior Securities.

None.



ITEM 4.	Mine Safety Disclosures.

Not applicable.



ITEM 5.	Other Information.

None.

~~Table of Contents~~



ITEM 6.	Exhibits.

The list of exhibits required to be filed as exhibits to this report is listed in the “Exhibit Index,” which is incorporated herein by reference.

~~Table of Contents~~

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 28, 2016~~February 2, 2017	By:	/s/ ~~Charles W. Scharf~~Alfred F. Kelly, Jr.
		Name:	~~Charles W. Scharf~~Alfred F. Kelly, Jr.
		Title:	Chief Executive Officer (Principal Executive Officer)

Date:	~~January 28, 2016~~February 2, 2017	By:	/s/ Vasant M. Prabhu
		Name:	Vasant M. Prabhu
		Title:	Chief Financial Officer (Principal Financial Officer)

Date:	February 2, 2017	By:	/s/ James H. Hoffmeister
		Name:	James H. Hoffmeister
		Title:	Global Corporate Controller and Chief Accounting Officer ~~and~~ (Principal Accounting ~~Officer )~~Officer)

~~Table of Contents~~

EXHIBIT INDEX

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

2.1 Transaction Agreement, dated as of November 2, 2015, between Visa Inc. and Visa Europe Limited # 8-K
001-33977

2.1 11/2/2015

3.1 Amended and Restated Bylaws of Visa Inc. 10-K 001-33977 3.3 11/20/2015

4.1 Form of certificate of designations of series A convertible participating preferred stock of Visa Inc. 8-K
001-33977

3.1 11/2/2015

4.2 Form of certificate of designations of series B convertible participating preferred stock of Visa Inc. 8-K
001-33977

3.2 11/2/2015

4.3 Form of certificate of designations of series C convertible participating preferred stock of Visa Inc. 8-K
001-33977

3.3 11/2/2015

4.4 Indenture dated December 14, 2015 between Visa Inc. and U.S. Bank National Association 8-K
001-33977

4.1 12/14/2015

4.5 Form of 1.200% Senior Note due 2017 8-K
001-33977

4.2 12/14/2015

4.6 Form of 2.200% Senior Note due 2020 8-K
001-33977

4.3 12/14/2015

4.7 Form of 2.800% Senior Note due 2022 8-K
001-33977

4.4 12/14/2015

4.8 Form of 3.150% Senior Note due 2025 8-K 001-33977 4.5 12/14/2015

4.9 Form of 4.150% Senior Note due 2035 8-K 001-33977 4.6 12/14/2015

4.10 Form of 4.300% Senior Note due 2045 8-K 001-33977 4.7 12/14/2015

10.1+ Form of Visa Inc. 2007 Equity Incentive Compensation Plan Stock Option Award Agreement for awards granted after November 1, 2015

10.2+ Form of Visa Inc. 2007 Equity Incentive Compensation Plan Restricted Stock Unit Award Agreement for awards granted after November 1, 2015

10.3+ Form of Visa Inc. 2007 Equity Incentive Compensation Plan Performance Share Award Agreement for awards granted after November 1, 2015

10.4 Amendment No. 1 to the Visa Europe Put-Call Option Agreement, dated November 2, 2015, by and between Visa Inc. and Visa Europe Limited 8-K
001-33977

2.2 11/2/2015

10.5 Amendment of Interchange Judgment Sharing Agreement 10-K 001-33977 10.10 11/20/2015

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10.6 Amendment of Loss Sharing Agreement 10-K 001-33977 10.13 11/20/2015

10.7 Second Amendment, dated October 22, 2015, to Omnibus Agreement regarding Interchange Litigation Judgment Sharing and Settlement Sharing by and among Visa Inc., Visa U.S.A. Inc., Visa International Service Association, MasterCard Incorporated, MasterCard International Incorporated and the parties thereto 10-K
001-33977

10.17 11/20/2015

10.8 Loss Sharing Agreement, dated as of November 2, 2015, among the UK Members listed on Schedule 1 thereto, Visa Inc. and Visa Europe Limited 8-K
001-33977

10.1 11/2/2015

10.9 Form of Litigation Management Deed, among the VE Member Representative, Visa Inc., Visa Europe Limited, the LMC Appointing Members to be listed on Schedule 1 thereto, the UK&I DCC Appointing Members to be listed on Schedule 2 thereto and the Europe DCC Appointing Members to be listed on Schedule 3 thereto 8-K
001-33977

10.2 11/2/2015

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



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

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

~~Table of Contents~~



+	Filed or furnished herewith.
#	Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule will be furnished supplementally to the SEC upon request; provided, however, that the parties may request confidential treatment pursuant to Rule 24b-2 of the Exchange Act for any document so furnished.

4234



	Common Stock						Additional Paid-in Capital			Accumulated Income			Accumulated Other Comprehensive Loss			Total Equity
	Class A			Class B	Class C		Additional Paid-in Capital			Accumulated Income			Accumulated Other Comprehensive Loss			Total Equity
	(in millions, except per share data)
Balance as of September 30, 2015	1,950			245	20		$	18,073		$	11,843		$	(74	)	$	29,842
Net income										1,941						1,941
Other comprehensive income, net of tax													25			25
Comprehensive income																1,966
Conversion of class C common stock upon sale into public market	1				(1	)										—
Issuance and vesting of restricted stock and performance-based shares	1															—
Share-based compensation, net of forfeitures (Note 11)	—		⁽¹⁾				39									39
Restricted stock and performance-based shares settled in cash for taxes	(1	)					(81		)							(81		)
Excess tax benefit for share-based compensation							36									36
Cash proceeds from issuance of common stock under employee equity plans	1						29									29
Cash dividends declared and paid, at a quarterly amount of $0.14 per as-converted share (Note 9)										(340		)				(340		)
Repurchase of class A common stock (Note 9)	(26	)					(272		)	(1,743		)				(2,015		)
Balance as of December 31, 2015	1,926			245	19		$	17,824		$	11,701		$	(49	)	$	29,476



Fiscal Year	2016		2017		2018		2019		2020		Thereafter		Total
(in millions)	$	—	$	—	$	1,750	$	—	$	—	$	14,250	$	16,000



10.6	Amendment of Loss Sharing Agreement	10-K	001-33977	10.13	11/20/2015

10.7	Second Amendment, dated October 22, 2015, to Omnibus Agreement regarding Interchange Litigation Judgment Sharing and Settlement Sharing by and among Visa Inc., Visa U.S.A. Inc., Visa International Service Association, MasterCard Incorporated, MasterCard International Incorporated and the parties thereto	10-K	001-33977	10.17	11/20/2015

10.8	Loss Sharing Agreement, dated as of November 2, 2015, among the UK Members listed on Schedule 1 thereto, Visa Inc. and Visa Europe Limited	8-K	001-33977	10.1	11/2/2015

10.9	Form of Litigation Management Deed, among the VE Member Representative, Visa Inc., Visa Europe Limited, the LMC Appointing Members to be listed on Schedule 1 thereto, the UK&I DCC Appointing Members to be listed on Schedule 2 thereto and the Europe DCC Appointing Members to be listed on Schedule 3 thereto	8-K	001-33977	10.2	11/2/2015

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