UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended December 31, ~~2017~~2018

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

Commission file number 001-33977

VISA INC.

(Exact name of Registrant as specified in its charter)



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

P.O. Box 8999 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, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and ~~"emerging~~“emerging growth ~~company"~~company” in Rule 12b-2 of the Exchange Act.



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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 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 ~~26, 2018~~25, 2019 there were ~~1,802,624,578~~1,750,176,642 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 ~~12,400,261~~11,686,801 shares of class C common stock, par value $0.0001 per share, of Visa Inc. outstanding.

VISA INC.

TABLE OF CONTENTS




		Page
PART I.	Financial Information	3

Item 1.	Financial Statements (unaudited)	3
	Consolidated Balance Sheets—December 31, ~~2017~~2018 and September 30, ~~2017~~2018	3
	Consolidated Statements of Operations—Three Months Ended December 31, ~~2017~~2018 and ~~2016~~2017	4
	Consolidated Statements of Comprehensive Income—Three Months Ended December 31, ~~2017~~2018 and ~~2016~~2017	5
	Consolidated Statement of Changes in Equity—Three Months Ended December 31, 2018	6
	Consolidated Statements of Cash Flows—Three Months Ended December 31, ~~2017~~2018 and ~~2016~~2017	67
	Notes to Consolidated Financial Statements (unaudited)	78
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2124
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2932
Item 4.	Controls and Procedures	2932

PART II.	Other Information	3033

Item 1.	Legal Proceedings	3033
Item 1A.	Risk Factors	3033
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3033
Item 3.	Defaults Upon Senior Securities	3033
Item 4.	Mine Safety Disclosures	3033
Item 5.	Other Information	3033
Item 6.	Exhibits	3034
	Signatures	31
	~~Exhibit Index~~	3236

PART I. FINANCIAL INFORMATION



ITEM 1.	Financial Statements

VISA INC.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

December 31,
2017 September 30,
2017
(in millions, except par value data)
Assets
Cash and cash equivalents $ 8,138
$ 9,874
Restricted cash—U.S. litigation escrow (Note 2) 883
1,031
Investment securities (Note 3):
Trading 106
82
Available-for-sale 3,307
3,482
Settlement receivable 1,618
1,422
Accounts receivable 1,281
1,132
Customer collateral (Note 5) 1,155
1,106
Current portion of client incentives 295
344
Prepaid expenses and other current assets 504
550
Total current assets 17,287
19,023
Investment securities, available-for-sale (Note 3) 2,674
1,926
Client incentives 557
591
Property, equipment and technology, net 2,238
2,253
Other assets 1,127
1,226
Intangible assets, net 28,109
27,848
Goodwill 15,162
15,110
Total assets $ 67,154
$ 67,977
Liabilities
Accounts payable $ 108
$ 179
Settlement payable 2,302
2,003
Customer collateral (Note 5) 1,155
1,106
Accrued compensation and benefits 389
757
Client incentives 2,355
2,089
Accrued liabilities 1,224
1,129
Current maturities of long-term debt (Note 4) —
1,749
Accrued litigation (Note 11) 830
982
Total current liabilities 8,363
9,994
Long-term debt (Note 4) 16,621
16,618
Deferred tax liabilities 5,107
5,980
Deferred purchase consideration 1,330
1,304
Other liabilities 2,332
1,321
Total liabilities 33,753
35,217
Equity
Preferred stock, $0.0001 par value, 25 shares authorized and 5 shares issued and outstanding as follows:
Series A convertible participating preferred stock, none issued (Note 7) —
—
Series B convertible participating preferred stock, 2 shares issued and outstanding at December 31, 2017 and September 30, 2017 (the “UK&I preferred stock”) (Note 7) 2,295
2,326
Series C convertible participating preferred stock, 3 shares issued and outstanding at December 31, 2017 and September 30, 2017 (the “Europe preferred stock”) (Note 7) 3,181
3,200
Class A common stock, $0.0001 par value, 2,001,622 shares authorized, 1,805 and 1,818 shares issued and outstanding at December 31, 2017 and September 30, 2017, respectively (Note 7) —
—
Class B common stock, $0.0001 par value, 622 shares authorized, 245 shares issued and outstanding at December 31, 2017 and September 30, 2017 (Note 7) —
—
Class C common stock, $0.0001 par value, 1,097 shares authorized, 12 and 13 shares issued and outstanding at December 31, 2017 and September 30, 2017, respectively (Note 7) —
—
Right to recover for covered losses (Note 2) (5 ) (52 )
Additional paid-in capital 16,761
16,900
Accumulated income 9,966
9,508
Accumulated other comprehensive income (loss), net:
Investment securities, available-for-sale 61
73
Defined benefit pension and other postretirement plans (76 ) (76 )
Derivative instruments classified as cash flow hedges (33 ) (36 )
Foreign currency translation adjustments 1,251
917
Total accumulated other comprehensive income, net 1,203
878
Total equity 33,401
32,760
Total liabilities and equity $ 67,154
$ 67,977

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

~~Table of Contents~~



	December 31, 2018			September 30, 2018
	(in millions, except par value data)
Assets
Cash and cash equivalents	$	8,289		$	8,162
Restricted cash equivalents—U.S. litigation escrow (Note 3 and Note 4)	1,496			1,491
Investment securities (Note 5)	3,461			3,547
Settlement receivable	3,123			1,582
Accounts receivable	1,405			1,208
Customer collateral (Note 3 and Note 7)	1,330			1,324
Current portion of client incentives	547			340
Prepaid expenses and other current assets	456			562
Total current assets	20,107			18,216
Investment securities (Note 5)	4,132			4,082
Client incentives	1,264			538
Property, equipment and technology, net	2,437			2,472
Goodwill	15,149			15,194
Intangible assets, net	27,301			27,558
Other assets	1,265			1,165
Total assets	$	71,655		$	69,225
Liabilities
Accounts payable	$	124		$	183
Settlement payable	3,890			2,168
Customer collateral (Note 7)	1,330			1,325
Accrued compensation and benefits	440			901
Client incentives	3,345			2,834
Accrued liabilities	1,487			1,160
Deferred purchase consideration	1,284			1,300
Accrued litigation (Note 13)	1,489			1,434
Total current liabilities	13,389			11,305
Long-term debt (Note 6)	16,633			16,630
Deferred tax liabilities	4,835			4,618
Other liabilities	2,703			2,666
Total liabilities	37,560			35,219
Equity
Preferred stock, $0.0001 par value, 25 shares authorized and 5 shares issued and outstanding as follows:
Series A convertible participating preferred stock, none issued (the “class A equivalent preferred stock”) (Note 9)	—			—
Series B convertible participating preferred stock, 2 shares issued and outstanding at December 31, 2018 and September 30, 2018 (the “UK&I preferred stock”) (Note 9)	2,286			2,291
Series C convertible participating preferred stock, 3 shares issued and outstanding at December 31, 2018 and September 30, 2018 (the “Europe preferred stock”) (Note 9)	3,178			3,179
Class A common stock, $0.0001 par value, 2,001,622 shares authorized, 1,754 and 1,768 shares issued and outstanding at December 31, 2018 and September 30, 2018, respectively (Note 9)	—			—
Class B common stock, $0.0001 par value, 622 shares authorized, 245 shares issued and outstanding at December 31, 2018 and September 30, 2018 (Note 9)	—			—
Class C common stock, $0.0001 par value, 1,097 shares authorized, 12 shares issued and outstanding at December 31, 2018 and September 30, 2018 (Note 9)	—			—
Right to recover for covered losses (Note 4)	(92		)	(7		)
Additional paid-in capital	16,540			16,678
Accumulated income	11,908			11,318
Accumulated other comprehensive income (loss), net:
Investment securities	(4		)	(17		)
Defined benefit pension and other postretirement plans	(67		)	(61		)
Derivative instruments classified as cash flow hedges	68			60
Foreign currency translation adjustments	278			565
Total accumulated other comprehensive income, net	275			547
Total equity	34,095			34,006
Total liabilities and equity	$	71,655		$	69,225

VISA INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)


	Three Months Ended December 31,						Three Months Ended December 31,
	2017			2016			2018			2017
	(in millions, except per share data)						(in millions, except per share data)
Operating Revenues
Service revenues	$	2,146		$	1,918
Data processing revenues	2,147			1,892
International transaction revenues	1,666			1,489
Other revenues	229			203
Client incentives	(1,326		)	(1,041		)
Net operating revenues	4,862			4,461
Net revenues							$	5,506		$	4,862

Operating Expenses
Personnel	679			571			807			679
Marketing	223			218			276			223
Network and processing	160			145			173			160
Professional fees	92			80			91			92
Depreciation and amortization	145			146			159			145
General and administrative	236			186			276			236
Litigation provision (Note 11)	—			15
Litigation provision (Note 13)							7			—
Total operating expenses	1,535			1,361			1,789			1,535
Operating income	3,327			3,100			3,717			3,327

Non-operating Income (Expense)
Interest expense	(154		)	(140		)	(145		)	(154		)
Other	66			19			58			66
Total non-operating expense	(88		)	(121		)	(87		)	(88		)
Income before income taxes	3,239			2,979			3,630			3,239
Income tax provision (Note 10)	717			909
Income tax provision (Note 12)							653			717
Net income	$	2,522		$	2,070		$	2,977		$	2,522

Basic earnings per share (Note 8)
Basic Earnings Per Share (Note 10)
Class A common stock	$	1.07		$	0.86		$	1.30		$	1.07
Class B common stock	$	1.77		$	1.41		$	2.12		$	1.77
Class C common stock	$	4.30		$	3.43		$	5.20		$	4.30

Basic weighted-average shares outstanding (Note 8)
Basic Weighted-average Shares Outstanding (Note 10)
Class A common stock	1,811			1,860			1,760			1,811
Class B common stock	245			245			245			245
Class C common stock	13			17			12			13

Diluted earnings per share (Note 8)
Diluted Earnings Per Share (Note 10)
Class A common stock	$	1.07		$	0.86		$	1.30		$	1.07
Class B common stock	$	1.77		$	1.41		$	2.12		$	1.77
Class C common stock	$	4.29		$	3.42		$	5.20		$	4.29

Diluted weighted-average shares outstanding (Note 8)
Diluted Weighted-average Shares Outstanding (Note 10)
Class A common stock	2,353			2,421			2,291			2,353
Class B common stock	245			245			245			245
Class C common stock	13			17			12			13

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

~~Table of Contents~~

VISA INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)


	Three Months Ended December 31,						Three Months Ended December 31,
	2017			2016			2018			2017
	(in millions)						(in millions)
Net income	$	2,522		$	2,070		$	2,977		$	2,522
Other comprehensive income (loss), net of tax:
Investment securities, available-for-sale:
Investment securities:
Net unrealized gain (loss)	9			(3		)	8			9
Income tax effect	(3		)	(1		)	(2		)	(3		)
Reclassification adjustment for net gain realized in net income	(28		)	—
Reclassification adjustment for net (gain) loss realized in net income							—			(28		)
Income tax effect	10			—			—			10
Defined benefit pension and other postretirement plans:
Amortization of actuarial loss and prior service credit realized in net income	—			6
Net unrealized actuarial gain (loss) and prior service credit (cost)							(7		)	—
Income tax effect	—			(2		)	1			—
Derivative instruments classified as cash flow hedges:
Net unrealized (loss) gain	(1		)	74
Net unrealized gain (loss)							38			(1		)
Income tax effect	(5		)	(7		)	(10		)	(5		)
Reclassification adjustment for net loss realized in net income	11			12
Reclassification adjustment for net (gain) loss realized in net income							(25		)	11
Income tax effect	(2		)	(2		)	5			(2		)
Foreign currency translation adjustments	334			(988		)	(287		)	334
Other comprehensive income (loss), net of tax	325			(911		)	(279		)	325
Comprehensive income	$	2,847		$	1,159		$	2,698		$	2,847

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

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(UNAUDITED)

~~Table of Contents~~



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


⁽¹⁾	Increase or decrease in conversion of class C common stock is less than one million shares.

VISA INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	Three Months Ended December 31,						Three Months Ended December 31,
	2017			2016			2018			2017
	(in millions)						(in millions)
Operating Activities
Net income	$	2,522		$	2,070		$	2,977		$	2,522
Adjustments to reconcile net income to net cash provided by operating activities:
Client incentives	1,326			1,041
Share-based compensation (Note 9)	68			45
Client incentives (Note 2)							1,456			1,326
Share-based compensation (Note 11)							100			68
Depreciation and amortization of property, equipment, technology and intangible assets	145			146			159			145
Deferred income taxes	(919		)	77			139			(919		)
Right to recover for covered losses recorded in equity (Note 2)	(3		)	(94		)
Right to recover for covered losses recorded in equity (Note 4)							(91		)	(3		)
Other	(23		)	13			9			(21		)
Change in operating assets and liabilities:
Settlement receivable	(180		)	56			(1,551		)	(180		)
Accounts receivable	(146		)	(89		)	(200		)	(146		)
Client incentives	(986		)	(1,129		)	(1,361		)	(986		)
Other assets	92			66			(37		)	141
Accounts payable	(51		)	(102		)	(46		)	(51		)
Settlement payable	275			79			1,739			275
Accrued and other liabilities	794			316			(54		)	794
Accrued litigation (Note 11)	(152		)	13
Accrued litigation (Note 13)							55			(152		)
Net cash provided by operating activities	2,762			2,508			3,294			2,813
Investing Activities
Purchases of property, equipment, technology and intangible assets	(141		)	(171		)
Investment securities, available-for-sale:
Purchases of property, equipment and technology							(157		)	(141		)
Investment securities:
Purchases	(1,636		)	(1,032		)	(1,124		)	(1,636		)
Proceeds from maturities and sales	1,076			788			1,233			1,076
Purchases of / contributions to other investments	(6		)	(2		)	(22		)	(6		)
Net cash used in investing activities	(707		)	(417		)	(70		)	(707		)
Financing Activities
Repurchase of class A common stock (Note 7)	(1,778		)	(1,893		)
Repayments of long-term debt (Note 4)	(1,750		)	—
Dividends paid (Note 7)	(458		)	(399		)
Proceeds from issuance of commercial paper	—			566
Payments from litigation escrow account—U.S. retrospective responsibility plan (Note 2 and Note 11)	150			—
Repurchase of class A common stock (Note 9)							(2,393		)	(1,778		)
Repayments of long-term debt							—			(1,750		)
Dividends paid (Note 9)							(572		)	(458		)
Cash proceeds from issuance of common stock under employee equity plans	53			56			48			53
Restricted stock and performance-based shares settled in cash for taxes	(88		)	(60		)	(101		)	(88		)
Net cash used in financing activities	(3,871		)	(1,730		)	(3,018		)	(4,021		)
Effect of exchange rate changes on cash and cash equivalents	80			(156		)	(68		)	80
(Decrease) increase in cash and cash equivalents	(1,736		)	205
Cash and cash equivalents at beginning of period	9,874			5,619
Cash and cash equivalents at end of period	$	8,138		$	5,824
Increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents							138			(1,835		)
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period (Note 3)							10,977			12,011
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period (Note 3)							$	11,115		$	10,176
Supplemental Disclosure
Income taxes paid, net of refunds	$	183		$	96		$	168		$	183
Interest payments on debt (Note 4)	$	241		$	244
Accruals related to purchases of property, equipment, technology and intangible assets	$	26		$	69
Interest payments on debt (Note 6)							$	234		$	241
Accruals related to purchases of property, equipment and technology							$	34		$	26

~~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, ~~2017~~2018

(UNAUDITED)

Note 1—Summary of Significant Accounting Policies

Organization. Visa Inc. ~~("Visa"~~(“Visa” or the ~~"Company"~~“Company”) is a global payments technology company that enables fast, secure and reliable electronic payments across more than 200 countries and territories. Visa and its wholly-owned consolidated subsidiaries, including Visa U.S.A. Inc. ("(“Visa U.S.A."”), Visa International Service Association ("(“Visa ~~International"~~International”), Visa Worldwide Pte. Limited, Visa Europe Limited ("(“Visa ~~Europe"~~Europe”), Visa Canada Corporation (“Visa Canada”), Visa Technology & Operations LLC and CyberSource Corporation, operate one of the world’s largest retail electronic payments networks — VisaNet — which facilitates authorization, clearing and settlement of payment transactions and enables the Company to provide its financial institution and merchant clients a wide range of products, platforms and value-added services. 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 products. In most cases, account holder and merchant relationships belong to, and are managed by, ~~Visa's~~Visa’s financial institution clients.

Consolidation and basis of presentation. The accompanying unaudited consolidated financial statements include the accounts of Visa and its consolidated entities and are presented in accordance with accounting principles generally accepted in the United States of America ("(“U.S. ~~GAAP"~~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) 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, ~~2017~~2018 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~~Company’s financial position, results of operations and cash flows for the interim periods presented.

Recently Issued and Adopted Accounting Pronouncements.

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of goods or services to customers. ~~The ASU will replace~~This new revenue standard replaces all existing revenue recognition guidance in U.S. ~~GAAP when it becomes effective.~~GAAP. Subsequently, the FASB also issued a series of amendments to the new revenue standard. The ~~Company will adopt~~new revenue standard changes the ~~standard effective October 1, 2018,~~classification and ~~expects to adopt the standard using the modified retrospective transition method. The Company expects that the new standard will primarily impact~~timing of recognition ~~timing for certain fixed incentives and price discounts provided to clients, and the classification~~ of certain client incentives ~~between contra~~and marketing-related funds paid to customers, as well as revenues and ~~operating expenses. The Company is still in the process of quantifying the full effect that ASU 2014-09~~expenses for market development funds and ~~all of its related subsequent updates will have on its consolidated financial statements and related disclosures. The impact of the new standard~~services provided to ~~future financial results is unknowable~~customers as ~~it is not possible to estimate the impact to the recognition of new customer contracts which may be executed in future periods. The Company has completed~~ an assessment of its existing customer contracts through December 31, 2017. Application of the new standard to consolidated financial statements for the first quarter of fiscal 2018 would not have resulted in a material impact. The Company will continue to assess the impact of the new standard as new customer contracts are executed going forward.

~~In March 2016, the FASB issued ASU 2016-05, which clarifies that a change in the counterparty to a derivative instrument that has been designated as the hedging instrument under Topic 815,~~ ~~Derivatives and Hedging, does not, in and of itself, require dedesignation of that hedging relationship provided that all other hedge accounting criteria continue to be met.~~incentive. The Company adopted the standard effective October 1, ~~2017.~~2018 using the modified retrospective transition method applied to the aggregate of all modifications for contracts not completed as of October 1, 2018. Results for reporting periods beginning after October 1, 2018 are presented under the new revenue standard. The ~~adoption did not have a material impact~~comparative prior period amounts appearing on the financial statements have not been restated and continue to be reported under the prior revenue standard. See Note 2—Revenues for the impact of the new revenue standard on the accompanying unaudited consolidated financial ~~statements.~~statements as of and for the three months ended December 31, 2018.

Table of Contents

VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table summarizes the cumulative transition adjustments for the adoption of the new revenue standard recorded on the October 1, 2018 consolidated balance sheet to reflect the aggregate impact to all contracts not completed as of October 1, 2018:



	Fiscal Year 2018 Closing Balance Sheet		Cumulative Transition Adjustment for New Revenue Standard		Fiscal Year 2019 Opening Balance Sheet
	(in millions)
Assets
Current portion of client incentives	$	340	$	199	$	539
Client incentives	538		614		1,152
Liabilities
Client incentives	2,834		241		3,075
Accrued liabilities	1,160		6		1,166
Deferred tax liabilities	4,618		108		4,726
Other liabilities	2,666		58		2,724
Equity
Accumulated income	11,318		400		11,718

In ~~March~~January 2016, the FASB issued ASU ~~2016-06,~~2016-01, which ~~clarifies~~amends certain aspects of recognition, measurement, presentation and disclosure of financial instruments, including the ~~requirements for assessing whether contingent call/put options that can accelerate the payment of principal on debt instruments are clearly and closely related~~requirement to ~~their debt hosts. An entity performing the assessment is required to assess the embedded call/put options solely~~measure certain equity investments at fair value with changes in ~~accordance with a four-step decision sequence.~~fair value recognized in net income. The Company adopted the standard effective October 1, ~~2017.~~2018, using the modified retrospective transition method for marketable equity securities and the prospective method for non-marketable equity securities. The Company has elected to use the measurement alternative for non-marketable equity securities, defined as cost adjusted for changes from observable transactions for identical or similar investments of the same issuer, less impairment. The adoption did not have a material impact on the consolidated financial statements.

In ~~March~~February 2016, the FASB issued ASU ~~2016-07,~~2016-02, which ~~eliminates~~requires the ~~requirement~~recognition of lease assets and lease liabilities arising from operating leases on the balance sheet. Subsequently, the FASB also issued a series of amendments to this new lease standard that ~~an entity retroactively~~address the transition methods available and clarify the guidance for lessor costs. The Company will adopt the ~~equity~~standard effective October 1, 2019 and expects to adopt using the modified retrospective transition method ~~of accounting if an investment qualifies for use of~~without restating comparative periods. The adoption is not expected to have a material impact on the ~~equity method as a result~~consolidated financial statements.

In October 2016, the FASB issued ASU 2016-16, which requires that entities recognize the income tax consequences of an ~~increase in~~intra-entity transfer of an asset, other than inventory, when the level of ownership or degree of influence. The equity method investor is required to add the cost of acquiring the additional interest in the investee to the current basis of the investor's previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting.transfer occurs. The Company adopted the standard effective October 1, ~~2017.~~2018. The adoption did not have a material impact on the consolidated financial statements.

In November 2016, the FASB issued ASU 2016-18, which requires that a statement of cash flows includes 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 adopted the standard effective October 1, 2018. The adoption impacted the presentation of transactions related to the U.S. litigation escrow account and customer collateral on the consolidated statements of cash flows. The prior period statement of cash flows have been retrospectively adjusted to reflect the impact of this ASU, which had no impact on the Company’s balance sheets, statements of operations or statements of comprehensive income for any period.

In March 2017, the FASB issued ASU 2017-07, which requires that the service cost component of net periodic pension and postretirement benefit cost be presented in the same line item as other employee compensation costs, while the other components be presented separately as non-operating income (expense). In addition, only the service cost component is eligible for capitalization, when applicable. Retrospective application is required for the change in income statement presentation while the change in capitalized benefit cost is required to be applied prospectively. The Company adopted the standard effective October 1, 2018, which did not have a material impact on the consolidated financial statements. The service cost component of net periodic pension and postretirement benefit cost is presented in personnel expenses while the other components are presented in other non-operating expense on the Company’s

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VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

consolidated statement of operations. The Company did not apply the standard retrospectively for the change in income statement presentation as the impact would have been immaterial.

In May 2017, the FASB issued ASU 2017-09, which amends the scope of modification accounting for share-based payment arrangements. Specifically, an entity would not apply modification accounting if the fair value, vesting conditions, and classification of the awards are the same immediately before and after the modification. The Company adopted the standard effective October 1, 2018. The adoption did not have a material impact on the consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The Company adopted the standard effective October 1, 2018. The adoption did not have a material impact on the consolidated financial statements.

Note 2—Revenues

Impact of the New Revenue Standard

The following tables summarize the impact of the new revenue standard on the Company’s consolidated statement of operations for the three months ended December 31, 2018 and the consolidated balance sheet as of December 31, 2018:



	For the Three Months Ended December 31, 2018
	As Reported		Impact of the New Revenue Standard			Results Under Prior Revenue Standard
	(in millions)
Net revenues	$	5,506	$	(52	)	$	5,454

Operating Expenses
Marketing	276		(30		)	246
Professional fees	91		(3		)	88
General and administrative	276		(3		)	273
Total operating expenses	1,789		(36		)	1,753
Operating income	3,717		(16		)	3,701

Income before income taxes	3,630		(16		)	3,614
Income tax provision	653		(1		)	652
Net income	2,977		(15		)	2,962



	December 31, 2018
	As Reported		Impact of the New Revenue Standard			Results Under Prior Revenue Standard
	(in millions)
Assets
Current portion of client incentives	$	547	$	(198	)	$	349
Client incentives	1,264		(661		)	603
Liabilities
Accounts payable	124		(23		)	101
Client incentives	3,345		(260		)	3,085
Accrued liabilities	1,487		(7		)	1,480
Deferred tax liabilities	4,835		(109		)	4,726
Other liabilities	2,703		(45		)	2,658
Equity
Accumulated income	11,908		(415		)	11,493

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VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Disaggregation of Revenues

The nature, amount, timing and uncertainty of the Company’s revenues and cash flows and how they are affected by economic factors are most appropriately depicted through the Company’s revenue categories and geographical markets. The following tables disaggregate the Company’s net revenues by revenue category and by geography for the three months ended December 31, 2018 and 2017:



	Three Months Ended December 31,
	2018			2017
	(in millions)
Service revenues	$	2,342		$	2,146
Data processing revenues	2,470			2,147
International transaction revenues	1,851			1,666
Other revenues	299			229
Client incentives	(1,456		)	(1,326		)
Net revenues	$	5,506		$	4,862



	Three Months Ended December 31,
	2018			2017
	(in millions)
U.S.	$	2,508		$	2,265
International	2,998		2,597
Net revenues	$	5,506		$	4,862

Revenue recognition. The Company's net revenues are comprised principally of the following categories: service revenues, data processing revenues, international transaction revenues, and other revenues, reduced by costs incurred under client incentives arrangements. As a payment network service provider, the Company’s obligation to the customer is to stand ready to provide continuous access to our payment network over the contractual term. Consideration is variable based primarily upon the amount and type of transactions and payments volume on Visa’s products. The Company recognizes revenues, net of sales and other similar taxes, as the payment network services are performed. Fixed fees for payment network services are generally recognized ratably over the related service period. The Company has elected the optional exemption to not disclose the remaining performance obligations related to payment network services.

Service revenues consist of revenues earned for services provided in support of client usage of Visa products. Current quarter service revenues are primarily assessed using a calculation of current pricing applied to the prior quarter's payments volume. The Company also earns revenues from assessments designed to support ongoing acceptance and volume growth initiatives, which are recognized in the same period the related volume is transacted.

Data processing revenues consist of revenues earned for authorization, clearing, settlement, network access and other maintenance and support services that facilitate transaction and information processing among the Company's clients globally. Data processing revenues are recognized in the same period the related transactions occur or services are performed.

International transaction revenues are earned for cross-border transaction processing and currency conversion activities. Cross-border transactions arise when the country of origin of the issuer is different from that of the merchant. International transaction revenues are primarily generated by cross-border payments and cash volume.

Other revenues consist mainly of license fees for use of the Visa brand, fees for account holder services, licensing and certification and other activities related to the Company's acquired entities. Other revenues also include optional services or product enhancements, such as extended account holder protection and concierge services. Other revenues are recognized in the same period the related transactions occur or services are performed.

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VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Client incentives. The Company enters into long-term contracts with financial institution clients, merchants and strategic partners for various programs designed to increase revenues recognized by growing payments volume, increasing Visa product acceptance, winning merchant routing transactions over to Visa's network and driving innovation. These incentives are primarily accounted for as reductions to revenues or as operating expenses if the payment is in exchange for a distinct good or service provided by the customer. The Company generally capitalizes upfront and fixed incentive payments under these agreements and amortizes the amounts as a reduction to revenues ratably over the contractual term. Incentives that are earned by the customer based on performance targets are recorded as reductions to revenues based on management's estimate of each client's future performance. These accruals are regularly reviewed and estimates of performance are adjusted, as appropriate, based on changes in performance expectations, actual client performance, amendments to existing contracts or the execution of new contracts.

Note 2—3—Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents

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

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



	December 31,				September 30,
	2018		2017		2018		2017
	(in millions)
Cash and cash equivalents	$	8,289	$	8,138	$	8,162	$	9,874
Restricted cash and restricted cash equivalents:
U.S. litigation escrow	1,496		883		1,491		1,031
Customer collateral	1,330		1,155		1,324		1,106
Cash, cash equivalents, restricted cash and restricted cash equivalents	$	11,115	$	10,176	$	10,977	$	12,011

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

U.S. Retrospective Responsibility Plan

Under the terms of the U.S. retrospective responsibility plan, the Company maintains an escrow account from which settlements of, or judgments in, certain litigation referred to as the ~~"U.S.~~“U.S. covered ~~litigation"~~litigation” are paid. The escrow funds are held in money market investments along with interest income earned, less applicable taxes and are classified as restricted cash equivalents on the consolidated balance sheets. The balance of the escrow account was ~~$0.9~~$1.5 billion at December 31, ~~2017~~2018 and ~~$1.0 billion at~~ September 30, ~~2017. The Company paid $150 million from the litigation escrow account during the three months ended December 31, 2017.~~2018. See Note ~~11—~~13—Legal Matters.

The accrual related to the U.S. covered litigation could be either higher or lower than the litigation escrow account balance. The Company did not record an additional accrual for the U.S. covered litigation during the three months ended December 31, ~~2017.~~2018. See Note ~~11—~~13—Legal Matters.

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VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Europe Retrospective Responsibility Plan

~~The Company,~~Visa Inc., Visa International and Visa Europe ~~or their affiliates~~ are parties to certain existing and potential litigation relating to the setting of multilateral interchange fee rates in the Visa Europe territory (the ~~"VE~~“VE territory covered ~~litigation"~~litigation”). Under the terms of the Europe retrospective responsibility plan, the Company is entitled to recover certain losses resulting from VE territory covered litigation (the ~~"VE~~“VE territory covered ~~losses"~~losses”) through a periodic adjustment to the class A common stock conversion rates applicable to the UK&I and Europe preferred stock. VE territory covered losses are recorded in ~~"right~~“right to recover for covered ~~losses"~~losses” within equity before the corresponding adjustment to the applicable conversion rate is effected. Adjustments to the conversion rate may be executed once in any six-month period unless a single, individual loss greater than €20 million is incurred, in which case, the six-month limitation does not apply. When the adjustment to the conversion rate is made, the amount previously recorded in ~~"right~~“right to recover for covered ~~losses"~~losses” as contra-equity is then recorded against the book value of the preferred stock within ~~stockholders'~~stockholders’ equity.

During the three months ended December 31, ~~2017,~~2018, the Company recovered ~~$50~~$6 million of VE territory covered losses through adjustments to the class A common stock conversion rates applicable to the UK&I and Europe preferred stock. The conversion rates applicable to the UK&I and Europe preferred stock were reduced from ~~13.077~~12.955 and ~~13.948,~~13.888, respectively, atas of September 30, ~~2017~~2018 to ~~12.966~~12.939 and ~~13.893,~~13.886, respectively, atas of December 31, ~~2017.~~

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~~VISA INC.~~

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

2018.

The following table sets forth the activities related to VE territory covered losses in preferred stock and ~~"right~~“right to recover for covered ~~losses"~~losses” within equity during the three months ended December 31, ~~2017.~~2018. VE territory covered losses incurred reflect settlements with merchants and additional legal costs. See Note ~~11—~~13—Legal ~~Matters.~~Matters.


	Preferred Stock						Right to Recover for Covered Losses			Preferred Stock						Right to Recover for Covered Losses
	UK&I			Europe			Right to Recover for Covered Losses			UK&I			Europe			Right to Recover for Covered Losses
	(in millions)									(in millions)
Balance as of September 30, 2017	$	2,326		$	3,200		$	(52	)
Balance as of September 30, 2018										$	2,291		$	3,179		$	(7	)
VE territory covered losses incurred	—			—			(3		)	—			—			(91		)
Recovery through conversion rate adjustment	(31		)	(19		)	50			(5		)	(1		)	6
Balance as of December 31, 2017	$	2,295		$	3,181		$	(5	)
Balance as of December 31, 2018										$	2,286		$	3,178		$	(92	)

The following table⁽¹⁾ sets forth the as-converted value of the preferred stock available to recover VE territory covered losses compared to the book value of preferred shares recorded in ~~stockholders'~~stockholders’ equity within the ~~Company's unaudited~~Company’s consolidated balance ~~sheet~~sheets as of December 31, ~~2017~~2018 and September 30, ~~2017.~~⁽¹⁾2018:


	December 31, 2017						September 30, 2017						December 31, 2018						September 30, 2018
	As-Converted Value of Preferred Stock⁽²⁾			Book Value of Preferred Stock			As-Converted Value of Preferred Stock⁽³⁾			Book Value of Preferred Stock			As-Converted Value of Preferred Stock⁽²⁾			Book Value of Preferred Stock			As-Converted Value of Preferred Stock⁽³⁾			Book Value of Preferred Stock
	(in millions)												(in millions)
UK&I preferred stock	$	3,667		$	2,295		$	3,414		$	2,326		$	4,235		$	2,286		$	4,823		$	2,291
Europe preferred stock	5,001			3,181			4,634			3,200			5,784			3,178			6,580			3,179
Total	8,668			5,476			8,048			5,526			10,019			5,464			11,403			5,470
Less: right to recover for covered losses	(5		)	(5		)	(52		)	(52		)	(92		)	(92		)	(7		)	(7		)
Total recovery for covered losses available	$	8,663		$	5,471		$	7,996		$	5,474		$	9,927		$	5,372		$	11,396		$	5,463


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

⁽²⁾

The as-converted value of preferred stock is calculated as the product of: (a) 2 million and 3 million shares of the UK&I and Europe preferred stock outstanding, respectively, as of December 31, ~~2017;~~2018; (b)~~12.966~~12.939 and ~~13.893,~~13.886, the class A common stock conversion rate applicable to the UK&I and Europe preferred stock as of December 31, ~~2017,~~2018, respectively; and (c) ~~$114.02, Visa's~~$131.94, Visa’s class A common stock closing stock price as of December 31, ~~2017.~~2018.

⁽³⁾

The as-converted value of preferred stock is calculated as the product of: (a) 2 million and 3 million shares of the UK&I and Europe preferred stock outstanding, respectively, as of September 30, ~~2017;~~2018; (b)~~13.077~~12.955 and ~~13.948,~~13.888, the class A common stock conversion rate applicable to the UK&I and Europe preferred stock as of September 30, ~~2017,~~2018, respectively; and (c) ~~$105.24, Visa's~~$150.09, Visa’s class A common stock closing stock price as of September 30, ~~2017.~~2018.

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VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 3—5—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 1				Level 2
	December 31, 2017		September 30, 2017		December 31, 2017		September 30, 2017		December 31, 2018		September 30, 2018		December 31, 2018		September 30, 2018
	(in millions)								(in millions)
Assets
Cash equivalents and restricted cash:
Money market funds	$	5,918	$	5,935					$	7,063	$	6,252
U.S. government-sponsored debt securities					$	567	$	2,870					$	98	$	1,048
Investment securities, trading:
Equity securities	106		82
Investment securities, available-for-sale:
Investment securities:
Marketable equity securities									123		113
U.S. government-sponsored debt securities					3,530		3,663						5,234		5,008
U.S. Treasury securities	2,337		1,621						2,236		2,508
Equity securities	114		124
Prepaid and other current assets:
Other current and non-current assets:
Foreign exchange derivative instruments					26		18						113		78
Total	$	8,475	$	7,762	$	4,123	$	6,551	$	9,422	$	8,873	$	5,445	$	6,134
Liabilities
Accrued liabilities:
Foreign exchange derivative instruments					$	65	$	98					$	28	$	22
Total	$	—	$	—	$	65	$	98	$	—	$	—	$	28	$	22

There were no transfers between Level 1 and Level 2 assets during the three months ended December 31, ~~2017.~~2018.

Level 1 ~~assets measured at fair value on a recurring basis.~~assets. 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.

Level 2 assets and ~~liabilities measured at fair value on a recurring basis.~~liabilities. The fair value of U.S. government-sponsored debt securities, as provided by third-party pricing vendors, is based on quoted prices in active markets for similar, not identical, assets. The pricing data obtained from outside sources is reviewed internally for reasonableness, compared against benchmark quotes from independent pricing sources, then confirmed or revised accordingly. 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, ~~2017.~~2018.

Marketable equity securities. Marketable equity securities are publicly traded and measured at fair value within Level 1 of the fair value hierarchy, as fair value is based on quoted prices in active markets. On October 1, 2018, the Company adopted ASU 2016-01 which changed the Company’s accounting for marketable equity securities. Beginning on October 1, 2018, unrealized gains and losses from changes in fair value of marketable equity securities are recognized in non-operating income (expense).

U.S. government-sponsored debt securities and U.S. Treasury securities. The Company considers U.S. government-sponsored debt securities and U.S. Treasury securities to be available-for-sale and held $7.5 billion of these investment securities as of December 31, 2018 and September 30, 2018. A majority of the Company’s long-term available-for-sale investment securities are due within one to five years.

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VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Assets Measured at Fair Value on a Non-recurring Basis

Non-marketable equity securities. The Company’s non-marketable equity securities are investments ~~and investments accounted for under the equity method~~.in privately held companies without readily determinable market values. These investments are classified as Level 3 due to the absence of quoted market prices, the inherent lack of liquidity and the fact that inputs used to measure fair value are unobservable and require ~~management's~~management’s judgment. ~~When certain events or circumstances indicate that impairment may exist,~~On October 1, 2018, the Company ~~revalues~~adopted ASU 2016-01 which changed the Company’s accounting for non-marketable equity securities. Beginning on October 1, 2018, the Company’s policy is to adjust the carrying value of its non-marketable equity securities to fair value when transactions for identical or similar investments ~~using various assumptions, including~~of the ~~financial metrics~~same issuer are observable in the market. All gains and ~~ratios of comparable public companies. There were no significant impairments during the three months ended December 31, 2017 or 2016. These investments~~losses on non-marketable equity securities, realized and unrealized, are recognized in non-operating income (expense).

Non-marketable equity securities totaled ~~$99~~$159 million and ~~$94~~$137 million at December 31, ~~2017~~2018 and September 30, ~~2017,~~2018, respectively, and are classified in other assets on the consolidated balance sheets.

~~Table~~ During the three months ended December 31, 2018, there were no upward or downward adjustments made to the carrying value of ~~Contents~~

~~VISA INC.~~

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

non-marketable equity securities. During the three months ended December 31, 2018 and 2017, there were no significant impairments of non-marketable equity securities.

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~~management’s judgment using internal and external data, these fair value determinations are classified as Level 3 in the fair value hierarchy. The Company completed its annual impairment review of its indefinite-lived intangible assets and goodwill as of February 1, ~~2017,~~2018, and concluded that there was no impairment. No recent events or changes in circumstances indicate that impairment existed at December 31, ~~2017.~~2018.

Gains and Losses on Marketable and Non-marketable Equity Securities

The Company recognized a net unrealized loss of $20 million, and no net realized gains or losses on its marketable and non-marketable equity securities for the three months ended December 31, 2018.

Other Fair Value Disclosures

Long-term debt. Debt instruments are measured at amortized cost on the ~~Company's unaudited~~Company’s consolidated balance ~~sheet at December 31, 2017.~~sheets. The fair value of the debt instruments, as provided by third-party pricing vendors, is based on quoted prices in active markets for similar, not identical, assets. The pricing data obtained from outside sources is reviewed internally for reasonableness, compared against benchmark quotes from independent pricing sources, then confirmed or revised accordingly. If measured at fair value in the financial statements, these instruments would be classified as Level 2 in the fair value hierarchy.

The ~~following table presents the~~ carrying ~~amount~~value and estimated fair value of ~~the Company’s~~long-term debt ~~in order~~was $16.6 billion and $16.7 billion, respectively, as of ~~maturity:~~

December 31, 2017 September 30, 2017
Carrying Amount Estimated Fair Value Carrying Amount Estimated Fair Value
(in millions)
1.20% Senior Notes due December 2017 $ —
$ —
$ 1,749
$ 1,751
2.20% Senior Notes due December 2020 2,991
2,998
2,990
3,031
2.15% Senior Notes due September 2022 993
986
993
997
2.80% Senior Notes due December 2022 2,240
2,283
2,240
2,301
3.15% Senior Notes due December 2025 3,969
4,089
3,967
4,098
2.75% Senior Notes due September 2027 740
740
740
737
4.15% Senior Notes due December 2035 1,486
1,665
1,485
1,637
4.30% Senior Notes due December 2045 3,462
3,983
3,463
3,873
3.65% Senior Notes due September 2047 740
770
740
746
Total $ 16,621
$ 17,514
$ 18,367
$ 19,171
December 31, 2018. The carrying value and estimated fair value of long-term debt were both $16.6 billion as of September 30, 2018.

Other financial instruments not measured at fair value. The following financial instruments are not measured at fair value on the ~~Company's~~Company’s unaudited consolidated balance sheet at December 31, ~~2017,~~2018, but disclosure of their fair 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, ~~2017~~2018 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 $110 million in gross unrealized gains and $12 million in gross unrealized losses at December 31, 2017. There were $120 million gross unrealized gains and $4 million gross unrealized losses at September 30, 2017. A majority of the Company's available-for-sale investment securities with stated maturities are due within one to two years.

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VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 4—6—Debt

The Company had outstanding debt as follows:


	December 31, 2017							September 30, 2017									December 31, 2018			September 30, 2018			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)
1.20% Senior Notes due December 2017 (the "2017 Notes")	$	—	$	—		$	—	$	1,750	$	(1	)	$	1,749	1.37	%
Total current maturities of long-term debt	—		—			—		1,750		(1		)	1,749
																	(in millions, except percentages)
2.20% Senior Notes due December 2020	3,000		(9		)	2,991		3,000		(10		)	2,990		2.30	%	$	3,000		$	3,000		2.30	%
2.15% Senior Notes due September 2022	1,000		(7		)	993		1,000		(7		)	993		2.30	%	1,000			1,000			2.30	%
2.80% Senior Notes due December 2022	2,250		(10		)	2,240		2,250		(10		)	2,240		2.89	%	2,250			2,250			2.89	%
3.15% Senior Notes due December 2025	4,000		(31		)	3,969		4,000		(33		)	3,967		3.26	%	4,000			4,000			3.26	%
2.75% Senior Notes due September 2027	750		(10		)	740		750		(10		)	740		2.91	%	750			750			2.91	%
4.15% Senior Notes due December 2035	1,500		(14		)	1,486		1,500		(15		)	1,485		4.23	%	1,500			1,500			4.23	%
4.30% Senior Notes due December 2045	3,500		(38		)	3,462		3,500		(37		)	3,463		4.37	%	3,500			3,500			4.37	%
3.65% Senior Notes due September 2047	750		(10		)	740		750		(10		)	740		3.73	%	750			750			3.73	%
Total debt																	16,750			16,750
Unamortized discounts and debt issuance costs																	(117		)	(120		)
Total long-term debt	16,750		(129		)	16,621		16,750		(132		)	16,618				$	16,633		$	16,630

Total debt	$	16,750	$	(129	)	$	16,621	$	18,500	$	(133	)	$	18,367

~~Senior Notes~~

On October 11, 2017, the Company redeemed all of the $1.75 billion principal amount outstanding of the 2017 Notes. The redemption was funded with net proceeds from new fixed-rate senior notes issued by the Company in September 2017. As a result of this redemption, we recorded a $1 million loss on extinguishment of debt during the three months ended December 31, 2017.

The Company recognized interest expense for ~~the~~its senior notes of ~~$138~~$137 million and ~~$125~~$138 million for the three months ended December 31, ~~2017~~2018 and ~~2016,~~2017, respectively, as non-operating ~~expense~~.expense.

Note 5—7—Settlement Guarantee Management

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

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

The Company’s settlement exposure is limited to the amount of unsettled Visa payment transactions at any point in ~~time.~~time, which vary significantly day to day. The ~~Company requires certain clients that do not meet its credit standards to post collateral to offset potential loss from their estimated unsettled transactions. The~~ Company’s ~~estimated~~ maximum settlement exposure was ~~$71.3~~$88.2 billion and the average daily settlement exposure was $56.1 billion during the three months ended December 31, ~~2017, compared~~2018.

The Company maintains and regularly reviews global settlement risk policies and procedures to ~~$67.7 billion during the three months ended September 30, 2017. Of these amounts, $4.5 billion and $2.8 billion were covered by~~manage settlement exposure, which may require clients to post collateral atif certain credit standards are not met. At December 31, ~~2017~~2018 and September 30, ~~2017, respectively. The total available~~2018, the Company held collateral ~~balances presented~~as follows:



	December 31, 2018		September 30, 2018
	(in millions)
Cash equivalents	$	1,720	$	1,708
Pledged securities at market value	307		192
Letters of credit	1,346		1,382
Guarantees	952		860
Total	$	4,325	$	4,142

Cash equivalent collateral reflected in customer collateral on the consolidated balance sheets is held by a custodian in an account under the Company’s name and ownership. At December 31, 2018 and September 30, 2018, $390 million and $384 million, respectively, of cash equivalent collateral is excluded from the consolidated balance sheets as clients retain beneficial ownership of it and it is only accessible to the Company in the ~~table below were greater than~~event of default by the client on its settlement ~~exposure covered by customer~~obligations. All other collateral ~~held due to instances in which~~is excluded from the ~~available collateral exceeded the total settlement exposure for certain financial institutions at each date presented.~~consolidated balance sheets.

1216

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VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

~~The Company maintained collateral as follows:~~

December 31,
2017 September 30,
2017
(in millions)
Cash equivalents⁽¹⁾
$ 1,569
$ 1,490
Pledged securities at market value 169
167
Letters of credit 1,319
1,316
Guarantees 617
941
Total $ 3,674
$ 3,914


⁽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 fair value of the settlement risk guarantee is estimated based on a proprietary probability-weighted model and was approximately $3 millionat December 31, 2017 and September 30, 2017. These amounts are reflected in accrued liabilities on the Company's consolidated balance sheets.~~

Note 6—8—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 all eligible 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. The components of net periodic benefit cost presented below include the U.S. pension ~~and other postretirement benefit~~ plans and the non-U.S. pension plans, comprising only the Visa Europe plans. Disclosures relating to other U.S. postretirement benefit plans and other non-U.S. pension benefit plans are not included as they are immaterial, individually and in aggregate.

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,
2017 2016 2017 2016 2017 2016
(in millions)
Service cost $ —
$ —
$ —
$ —
$ 1
$ 2
Interest cost 8
9
—
—
3
3
Expected return on plan assets (17 ) (18 ) —
—
(5 ) (4 )
Amortization of:

Prior service credit —
—
—
(1 ) —
—
Actuarial loss —
4
—
—
—
—
Settlement loss —
2
—
—
—
—
Total net periodic benefit cost $ (9 ) $ (3 ) $ —
$ (1 ) $ (1 ) $ 1



	Pension Benefits
	U.S. Plans						Non-U.S. Plans
	Three Months Ended December 31,						Three Months Ended December 31,
	2018			2017			2018			2017
	(in millions)
Service cost	$	—		$	—		$	1		$	1
Interest cost	8			8			3			3
Expected return on plan assets	(18		)	(17		)	(4		)	(5		)
Total net periodic benefit cost (income)	$	(10	)	$	(9	)	$	—		$	(1	)

~~Table of Contents~~

~~VISA INC.~~

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

Note 9—Stockholders' Equity

~~Note 7—Stockholders' Equity~~

~~As-Converted Class~~As-converted class A ~~Common Stock.~~common stock. The following table⁽¹⁾ presents 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, 2017, are as follows:~~basis:


(in millions, except conversion rates)	Shares Outstanding	Conversion Rate Into Class A Common Stock		As-converted Class A Common Stock⁽¹⁾
					December 31, 2018					September 30, 2018
					Shares Outstanding	Conversion Rate Into Class A Common Stock		As-converted Class A Common Stock⁽²⁾		Shares Outstanding	Conversion Rate Into Class A Common Stock		As-converted Class A Common Stock⁽²⁾
					(in millions, except conversion rates)
UK&I preferred stock	2	12.9660		32	2	12.9390		32	⁽³⁾	2	12.9550		32	⁽³⁾
Europe preferred stock	3	13.8930		44	3	13.8860		44	⁽³⁾	3	13.8880		44	⁽³⁾
Class A common stock⁽²⁾	1,805	—		1,805
Class A common stock⁽⁴⁾					1,754	—		1,754		1,768	—		1,768
Class B common stock	245	1.6483	⁽³⁾	405	245	1.6298	⁽⁵⁾	400		245	1.6298	⁽⁵⁾	400
Class C common stock	12	4.0000		49	12	4.0000		47		12	4.0000		47
Total				2,335				2,277					2,291


⁽¹⁾	Figures in the table may not recalculate exactly due to rounding.


⁽²⁾	As-converted class A common stock is calculated based on unrounded numbers.


⁽²⁾⁽³⁾	The reduction in equivalent number of shares of class A common stock was less than one million shares during the three months ended December 31, 2018.


⁽⁴⁾	Class A common stock shares outstanding ~~exclude~~reflect repurchases ~~traded but not yet~~ settled on or before December 31, ~~2017.~~2018 and September 30, 2018.


⁽³⁾⁽⁵⁾	The class B to class A common stock conversion rate is presented on a rounded basis. Conversion calculations for dividend payments are based on a conversion rate rounded to the tenth decimal.

Reduction in as-converted shares.During the three months ended December 31, 2017, total as-converted class A common stock was reduced by 17 million shares at an average price of $110.27 per share. Of the 17 million shares, 16 million were repurchased in the open market using $1.8 billion of operating cash on hand. Additionally, the Company recovered $50 million of VE territory covered losses in accordance with the Europe retrospective responsibility plan. The recovery has the same economic effect on earnings per share as repurchasing the Company's class A common stock, because it reduces the UK&I and Europe preferred stock conversion rates and consequently the as-converted class A common stock share count. See ~~Note 2—U.S. and Europe Retrospective Responsibility Plans~~.

~~The following table presents share repurchases in the open market.~~⁽¹⁾

(in millions, except per share data) Three Months Ended
December 31, 2017
Shares repurchased in the open market⁽²⁾
16
Average repurchase price per share⁽³⁾
$ 110.24
Total cost $ 1,778


⁽¹⁾	Shares repurchased in the open market reflect repurchases settled during the three months ended December 31, 2017. These amounts include repurchases traded but not yet settled on or before September 30, 2017 and exclude repurchases traded but not yet settled on or before December 31, 2017.


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


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

As of December 31, 2017, the Company's April 2017 share repurchase program had remaining authorized funds of $2.1 billion for share repurchase. All share repurchase programs authorized prior to April 2017 have been completed. In January 2018, the Company's board of directors authorized an additional $7.5 billion share repurchase program.

Under the terms of the Europe retrospective responsibility plan, the Company is entitled to recover VE territory covered losses through periodic adjustments to the class A common stock conversion rates applicable to the UK&I and Europe preferred stock. ~~See~~ ~~Note 2—U.S.~~The recovery has the same economic effect on earnings per share as repurchasing the Company’s class A common stock, because it reduces the UK&I and Europe ~~Retrospective Responsibility Plans~~.preferred stock conversion rates and consequently, reduces the as-converted class A common stock share count.

1417

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VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table presents ~~as-converted UK&I~~effective price per share and ~~Europe preferred stock, after the Company recovered~~recovery of VE territory covered losses through conversion rate ~~adjustments, for the three months ended December 31, 2017.~~adjustments:

Three Months Ended
December 31, 2017
(in millions, except per share data) UK&I Preferred Stock Europe Preferred Stock
Reduction in equivalent number of shares of class A common stock⁽¹⁾
—
—
Effective price per share⁽²⁾
$ 111.32
$ 111.32
Recovery through conversion rate adjustment $ 31
$ 19



	Three Months Ended December 31, 2018				Twelve Months Ended September 30, 2018
	Preferred Stock
	UK&I		Europe		UK&I		Europe
	(in millions, except per share data)
Effective price per share⁽¹⁾	$	137.19	$	137.19	$	113.05	$	112.92
Recovery through conversion rate adjustment	$	5	$	1	$	35	$	21


⁽¹⁾	~~The reduction in equivalent number of shares of class A common stock was less than one million shares for both series of preferred stock.~~

⁽²⁾

Effective price per share for the quarter is calculated using the volume-weighted average price of the ~~Company's~~Company’s class A common stock over a pricing period in accordance with the ~~Company's~~Company’s current certificates of designations for its series B and C convertible participating preferred stock. Effective price per share for the fiscal year is calculated using the weighted-average effective prices of the respective adjustments made during the year.

~~Dividends.~~ Common stock repurchases. The following table⁽¹⁾ presents share repurchases in the open market for the following periods:



	Three Months Ended December 31,
	2018		2017
	(in millions, except per share data)
Shares repurchased in the open market⁽²⁾	17		16
Average repurchase price per share⁽³⁾	$	138.11	$	110.24
Total cost	$	2,393	$	1,778

⁽¹⁾

Figures in the table may not recalculate exactly due to rounding. Shares repurchased in the open market reflect repurchases settled during the three months ended December 31, 2018 and 2017. These amounts include repurchases traded but not yet settled on or before September 30, 2018 and 2017, respectively, and exclude repurchases traded but not yet settled on or before December 31, 2018 and 2017, respectively.


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


⁽³⁾	Average repurchase price per share is calculated based on unrounded numbers.

As of December 31, 2018, the Company’s January 2018 share repurchase program had remaining authorized funds of $1.8 billion for share repurchase. All share repurchase programs authorized prior to January 2018 have been completed. In January ~~2018,~~2019, the Company’s board of directors authorized an additional $8.5 billion share repurchase program.

Dividends. On January 29, 2019, the Company’s board of directors declared a quarterly cash dividend of ~~$0.21~~$0.25 per share of class A common stock (determined in the case of class B and C common stock and UK&I and Europe preferred stock on an as-converted basis). The cash dividend will be paid on March ~~6, 2018,~~5, 2019, to all holders of record ~~of the Company's common and preferred stock~~ as of February ~~16, 2018.~~15, 2019. The Company declared and paid ~~$458~~$572 million in dividends to holders of the ~~Company's~~Company’s common stock during the three months ended December 31, ~~2017.~~2018.

Note 8—10—Earnings Per Share

Basic earnings per share is computed by dividing net income available to each class of shares by the weighted-average number of shares of common stock outstanding and participating securities during the period. Net income is allocated to each class of common stock and participating securities based on its proportional ownership on an as-converted basis. The weighted-average number of shares outstanding of each class of common stock ~~outstanding~~ reflects changes in ownership over the periods presented. See Note 7—9—Stockholders' Equity.

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

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VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table⁽¹⁾ presents earnings per share for the three months ended December 31, ~~2017.~~2018:⁽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	$	1,945	1,811	$	1.07	$	2,522	2,353	⁽³⁾	$	1.07	$	2,290	1,760	$	1.30	$	2,977	2,291	⁽³⁾	$	1.30
Class B common stock	435		245	$	1.77	$	434	245		$	1.77	521		245	$	2.12	$	520	245		$	2.12
Class C common stock	54		13	$	4.30	$	54	13		$	4.29	61		12	$	5.20	$	61	12		$	5.20
Participating securities⁽⁴⁾	88		Not presented	Not presented		$	87	Not presented		Not presented		105		Not presented	Not presented		$	105	Not presented		Not presented
Net income	$	2,522										$	2,977

~~Table of Contents~~

~~VISA INC.~~

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

The following table⁽¹⁾ presents earnings per share for the three months ended December 31, ~~2016~~2017.⁽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	$	1,594	1,860	$	0.86	$	2,070	2,421	⁽³⁾	$	0.86	$	1,945	1,811	$	1.07	$	2,522	2,353	⁽³⁾	$	1.07
Class B common stock	347		245	$	1.41	$	346	245		$	1.41	435		245	$	1.77	$	434	245		$	1.77
Class C common stock	57		17	$	3.43	$	57	17		$	3.42	54		13	$	4.30	$	54	13		$	4.29
Participating securities⁽⁴⁾	72		Not presented	Not presented		$	72	Not presented		Not presented		88		Not presented	Not presented		$	87	Not presented		Not presented
Net income	$	2,070										$	2,522


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

⁽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 400 million and 405 million for the three months ended December 31, 2018 and 2017, ~~and 2016.~~respectively. The weighted-average number of shares of as-converted class C common stock used in the income allocation was 5147 million and 6751 million for the three months ended December 31, ~~2017~~2018 and ~~2016,~~2017, respectively. The weighted-average number of shares of preferred stock included within participating securities was 32 million ~~and 35 million~~ of as-converted UK&I preferred stock for the three months ended December 31, ~~2017~~2018 and ~~2016, respectively,~~2017, and 44 million of as-converted Europe preferred stock for the three months ended December 31, ~~2017~~2018 and ~~2016.~~2017.

⁽³⁾

Weighted-average diluted shares outstanding are calculated on an as-converted basis and include incremental common stock equivalents, as calculated under the treasury stock method. The computation includes approximately 3 million and 5 million common stock equivalents for the three months ended December 31, 2018 and 2017, ~~and 2016,~~respectively, because their effect would be dilutive. The computation excludes 21 million and 32 million of common stock equivalents for the three months ended December 31, ~~2017~~2018, and ~~2016,~~2017 respectively, because their effect would have been anti-dilutive.

⁽⁴⁾

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

Note 9—11—Share-based Compensation

The Company granted the following equity awards to employees and non-employee directors under the 2007 Equity Incentive Compensation Plan, or the EIP, during the three months ended December 31, ~~2017~~2018:


	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	1,622,760	$	17.88	$	109.82	1,109,645	$	25.89	$	134.76
Restricted stock units ("RSUs")	2,626,011	$	109.82
Restricted stock units (“RSUs”)						2,503,888	$	134.76
Performance-based shares⁽¹⁾	641,498	$	120.11			540,538	$	153.42


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

Table of Contents

VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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~~Company’s performance-based shares are equity awards with service, market and performance conditions that are accounted for using the graded-vesting method. The Company recorded share-based compensation cost related to the EIP of ~~$68~~$95 million and $64 million for the three months ended December 31, 2018 and 2017, respectively, net of estimated forfeitures, which are adjusted as appropriate.

~~Table of Contents~~

~~VISA INC.~~

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

Note ~~10—~~12—Income Taxes

The effective income tax rates were ~~22%~~18% and ~~31%~~22% for the three months ended December 31, ~~2017~~2018 and ~~2016,~~2017, respectively. The effective tax rate for the three months ended December 31, ~~2017~~2018 differs from the effective tax rate in the same prior-year period primarily due to the effects of U.S. tax reform legislation commonly referred to as the Tax Cuts and Jobs Act (the ~~"Tax~~“Tax Act”), enacted on December 22, ~~2017.~~ 2017, as discussed below:

The Tax Act ~~transitions the U.S. tax system to a new territorial system and lowers~~reduced the statutory federal corporate income tax rate from 35% to 21%.

~~The reduction of the statutory federal corporate tax rate to 21% became~~ effective on January 1, 2018. In fiscal 2018, the Company’s statutory federal corporate rate iswas a blended rate of 24.5%~~, which will be reduced~~. Federal tax expense for the three months ended December 31, 2018 was determined at a 21% tax rate compared to ~~21% in fiscal 2019 and thereafter.~~

~~As a result of~~ the ~~reduction~~24.5% tax rate in the ~~federal corporate~~prior-year period;

The Tax Act enacted a new deduction for foreign-derived intangible income (“FDII”) and a new tax ~~rate,~~on global intangible low-tax income (“GILTI”). Both FDII and GILTI became effective for the Company ~~remeasured its net~~on October 1, 2018; and

The absence of:


▪	a $1.1 billion non-recurring, non-cash benefit from the remeasurement of deferred tax balances recorded in the three months ended December 31, 2017, in connection with the reduction in U.S. federal tax rate enacted by the Tax Act; and


▪	a $1.1 billion one-time transition tax expense on certain untaxed foreign earnings recorded in the three months ended December 31, 2017, in connection with the requirement enacted by the Tax Act.

The Company previously recorded provisional amounts for the transition tax ~~liabilities as~~and the tax effects of ~~the enactment date of~~various other tax provisions enacted by the Tax Act. ~~The deferred~~As permitted by ASU 2018-05, the Company completed the determination of the accounting impacts of the transition tax ~~remeasurement resulted in a one-time, non-cash~~and the tax ~~benefit estimated to be approximately $1.1 billion, recorded~~effects of these various tax provisions in the three months ended December 31, ~~2017.~~

~~In transitioning~~2018. The adjustments to the ~~new territorial tax system, the Tax Act requires~~provisional amounts were not material. In addition, the Company to include certain untaxed foreign earnings of non-U.S. subsidiaries in its fiscal 2018 taxable income. Such foreign earnings are subject to a one-time tax at 15.5% on the amount held in cash or cash equivalents, and at 8% on the remaining non-cash amount. The 15.5% and 8% tax, collectively referred to as the “transition tax”, was estimated to be $1.1 billion, and was recorded in the three months ended December 31, 2017. The Company intends to elect to pay the transition tax over a period of eight years as permitted by the Tax Act.

The above-mentioned accounting impacts of the deferred tax remeasurement and transition tax are provisional, based on currently available information and technical guidance on the interpretations of the new law. The Company continues to obtain and analyze additional information and guidance as they become available to completehas adopted the accounting policy of accounting for the tax impacts of the Tax Act. Additional information currently unavailable that is needed to complete the analysis includes, but is not limited to, foreign tax returns and foreign tax documentation for the computation of foreign tax credits, the final determination of the untaxed foreign earnings subject to the transition tax, and the final determination of the net deferred tax liabilities subject to remeasurement. The provisional accounting impacts may change in future reporting periods until the accounting analysis is finalized, which will occur no later than the first quarter of fiscal 2019, as permitted by Staff Accounting Bulletin 118.

~~The Tax Act also introduces several tax provisions, including:~~

~~Tax~~taxes on global intangible low-tax income, which, in general, is determined annually based on the Company’s aggregate foreign subsidiaries’ income in excess of certain qualified business asset investment return. This provision is effective for the Company on October 1, 2018. The Company needs additional information to complete its analysis on whether to adopt an accounting policy to account for the tax effects of global intangible low-tax incomeGILTI in the period that it is subject to such ~~tax, or to provide deferred taxes for book and tax basis differences that, upon reversal, may be subject to such~~ tax. Hence, the Company has not recorded any tax on global intangible low-tax income in the three months ended December 31, 2017. The Company will make an accounting policy election no later than the first quarter of fiscal 2019.

Base erosion and anti-abuse tax, which, in general, functions like a minimum tax that partially disallows deductions for certain related party transactions. This new minimum tax is determined on a year-by-year basis, and this provision is effective for the Company on October 1, 2018. Hence, no base erosion anti-abuse tax was recorded in the three months ended December 31, 2017.

Deduction for foreign-derived intangible income, which, in general, allows a deduction of certain intangible income derived from serving foreign markets. This provision is effective for the Company on October 1, 2018. Hence, the Company has not recorded the impact of this provision in the three months ended December 31, 2017.

~~Table of Contents~~

~~VISA INC.~~

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

Other new tax provisions, which disallow certain deductions related to entertainment expenses, fringe benefits provided to employees, executive compensation, and fines or penalties or similar payments to governments. The Company has recorded provisional amounts for the tax effects of these new provisions in the three months ended December 31, 2017, based on information currently available. The provisional amounts may change in future reporting periods when additional information is obtained and analyzed, which will occur no later than the first quarter of fiscal 2019.

During the three months ended December 31, ~~2017,~~2018, the ~~Company's~~Company’s gross unrecognized tax benefits increased by ~~$44 million. The Company's net unrecognized tax benefits that, if recognized,~~$38 million, all of which would favorably impact the effective tax rate ~~increased by $38 million.~~if recognized. The ~~increase~~change in unrecognized tax benefits is primarily related to various tax positions across several jurisdictions. During the three months ended December 31, ~~2017~~2018 and ~~2016,~~2017, there were no significant changes in interest and penalties related to uncertain tax positions.

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

Note ~~11—~~13—Legal Matters

The Company is party to various legal and regulatory proceedings. Some of these proceedings involve complex claims that are subject to substantial uncertainties and unascertainable damages. Accordingly, except as disclosed, the Company has not established reserves or ranges of possible loss related to these proceedings, as at this time in the proceedings, the matters do not relate to a probable loss and/or the amount or range of losses are not reasonably estimable. Although the Company believes that it has strong defenses for the litigation and regulatory proceedings described below, it could, in the future, incur judgments or fines or enter into settlements of claims that could have a material adverse effect on the ~~Company's~~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.

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VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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:


	Three Months Ended						Three Months Ended December 31,
	December 31, 2017			December 31, 2016			2018			2017
	(in millions)						(in millions)
Balance at beginning of period	$	982		$	981		$	1,434		$	982
Provision for uncovered legal matters	—			15			7			—
Accrual of VE territory covered litigation	—			86
Payments on legal matters	(152		)	(88		)
Provision for covered legal matters							90			—
Payments for legal matters							(42		)	(152		)
Balance at end of period	$	830		$	994		$	1,489		$	830

Accrual Summary—U.S. Covered Litigation

Visa Inc., Visa U.S.A. and Visa International are parties to certain legal proceedings that are covered by the U.S. retrospective responsibility plan, which the Company refers to as the U.S. covered litigation. See further discussion below under U.S. Covered Litigation and Note 2—4—U.S. and Europe Retrospective Responsibility Plans. An accrual for the U.S. covered litigation and a charge to the litigation provision are recorded when a loss is deemed to be probable and reasonably estimable. In making this determination, the Company evaluates available information, including but not limited to actions taken by the litigation committee. The total accrual related to the U.S. covered litigation could be either higher or lower than the escrow account balance.

~~Table of Contents~~

~~VISA INC.~~

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

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


	Three Months Ended					Three Months Ended December 31,
	December 31, 2017			December 31, 2016		2018		2017
	(in millions)					(in millions)
Balance at beginning of period	$	978		$	978	$	1,428	$	978
Payments on U.S. covered litigation	(150		)	—
Payments for U.S. covered litigation						—		(150		)
Balance at end of period	$	828		$	978	$	1,428	$	828

Accrual Summary—VE Territory Covered Litigation

Visa Inc., Visa International and Visa Europe are parties to certain legal proceedings that are covered by the Europe retrospective responsibility plan. Unlike the U.S. retrospective responsibility plan, the Europe retrospective responsibility plan does not have an escrow account that is used to fund settlements or judgments. The Company is entitled to recover VE territory covered losses through periodic adjustments to the conversion rates applicable to the UK&I preferred stock and Europe preferred stock. An accrual for the VE territory covered losses and a reduction to ~~stockholders'~~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 2—4—U.S. and Europe Retrospective Responsibility Plans.

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VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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


	Three Months Ended						Three Months Ended December 31,
	December 31, 2017			December 31, 2016			2018			2017
	(in millions)						(in millions)
Balance at beginning of period	$	1		$	2		$	—		$	1
Accrual for VE territory covered litigation	—			86			90			—
Payments on VE territory covered litigation	(1		)	(88		)
Payments for VE territory covered litigation							(35		)	(1		)
Balance at end of period	$	—		$	—		$	55		$	—

U.S. Covered Litigation

Interchange Multidistrict Litigation (MDL) – ~~Individual Merchant~~Putative Class Actions

~~A number of individual merchant actions previously filed have been settled, and remain settled. In addition, following~~On December 6, 2018, the ~~automatic termination~~district court held a hearing on the Damages Class plaintiffs’ motion for preliminary approval of the ~~settlement agreement~~Amended Settlement Agreement, and on January 24, 2019, the district court granted preliminary approval.

Settlement discussions with ~~Wal-Mart Stores Inc., Visa and Wal-Mart Stores Inc. entered into a new, unconditional settlement agreement~~plaintiffs purporting to act on ~~October 31, 2017. Consequently, as~~behalf of the ~~filing date, Visa has reached settlement agreements with individual merchants representing approximately 51% of~~putative Injunctive Relief Class are ongoing. On January 16, 2019, the ~~Visa-branded payment card sales volume of merchants who opted out of~~bank defendants moved to dismiss the ~~2012 Settlement Agreement.~~claims brought against them by the Injunctive Relief Class, on the grounds that plaintiffs lack standing and fail to state a claim against the bank defendants.

VE Territory Covered Litigation

UK Merchant Litigation

Since July 2013, in excess of ~~300~~450 Merchants (the capitalized term ~~"Merchant,"~~“Merchant,” when used in this section, means a merchant together with subsidiary/affiliate companies that are party to the same claim) have commenced proceedings against Visa Europe, Visa Inc. and Visa International relating to interchange rates in ~~Europe. They seek damages for alleged anti-competitive conduct~~Europe, and in ~~relation~~some cases relating to ~~one or more of the following types of interchange~~ fees ~~for credit~~charged by Visa and ~~debit card transactions: UK domestic, Irish domestic, other European domestic, intra-European Economic Area and/or other inter-regional.~~certain Visa rules. As of the filing date, Visa Europe, Visa Inc. and Visa International have settled the claims asserted by over 75 Merchants, leaving more than ~~200~~350 Merchants with outstanding claims. In addition, over 30 additional Merchants have threatened to commence similar proceedings.

On November 29, 2018, Visa was granted permission to appeal aspects of the Court of Appeal’s judgment to the Supreme Court of the United Kingdom, including the question of whether Visa’s UK interchange restricted competition.

Other Litigation

European Commission Proceedings

Inter-regional Interchange Investigation. On December 4, 2018, the European Commission (EC) announced formal public consultation (known as “market testing”) of commitments proposed by Visa pursuant to Article 9 of Council Regulation (EC) No 1/2003 in order for the EC to conclude its investigation. Subject to market testing, the EC intends to adopt a decision declaring the commitments to be binding on Visa and concluding that there are no longer grounds for action by the EC and without any finding of infringement of the law by Visa. If accepted by the EC, the proposed commitments require Visa to cap its inter-regional multilateral interchange rates at 1.50% credit and 1.15% debit for “Card-Not-Present” transactions and 0.30% credit and 0.20% debit for “Card Present” transactions on consumer debit and credit cards issued outside of the European Economic Area when used at merchants located inside of the European Economic Area. The commitments would last for a period of five years following implementation. No fine will be imposed against Visa, and the commitments are proposed without prejudice to Visa’s position that its conduct did not infringe any law. The EC’s market testing was completed in January 2019, and the EC is expected to decide whether to formally adopt the proposed commitments in the first half of 2019.

EMV Chip Liability Shift

Plaintiffs filed a renewed motion for class certification on July 16, 2018, following an earlier denial of the motion without prejudice. Plaintiffs’ renewed motion was terminated without prejudice to reinstatement on October 17, 2018.

1922

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VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

~~In November 2016, a trial commenced relating to claims filed by a number of Merchants. All of these Merchants except one settled before~~Kroger

The parties have stipulated that the ~~trial concluded in March 2017.~~ litigation be stayed until February 2, 2019.

Nuts for Candy

On ~~November 30, 2017,~~October 18, 2018, the court ~~found entirely in Visa’s favor~~stayed the Nuts for Candy case pending the district court’s decision on preliminary approval of the Amended Settlement Agreement discussed above under Interchange Multidistrict Litigation (MDL) – Putative Class Actions, and ~~entered judgment dismissing~~pending final approval of that agreement if preliminary approval is granted.

Ohio Attorney General Civil Investigative Demand

On January 8, 2019, the ~~remaining claim~~. ~~An appeal~~State of Ohio Office of the Attorney General informed Visa that the investigation has been lodged, and the Court of Appeal listed the matter for hearing in April 2018. A further judgment on exemption issues is expected to be released in early 2018, which will not change the overall finding on liability set out in the November 30, 2017 judgment.terminated.

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. While the amount of interchange being challenged could be substantial, these claims have not yet been filed and their full scope is not yet known. The Company has learned that several additional European entities have indicated that they may also bring similar claims and the Company anticipates additional claims in the future.

~~Other Litigation~~

~~Canadian Competition Proceedings~~

~~Merchant Litigation.~~ ~~The court in Quebec held a class certification hearing in November 2017 and reserved decision.~~

~~Black Card~~

On December 28, 2017, Black Card LLC ("Black Card") filed a lawsuit against Visa Inc., Visa U.S.A. Inc., and certain Visa member financial institutions in the U.S. District Court for the Western District of Wisconsin. The complaint alleges that defendants conspired to impede Black Card's business in violation of Section 1 of the Sherman Act and fraudulently concealed their conduct. Black Card seeks treble damages, post-judgment interest, and attorneys' fees.

This action follows a lawsuit filed by Black Card in the U.S. District Court for the District of Wyoming in February 2015 relating to a contractual dispute. The District Court in Wyoming granted Visa's motions for summary judgment and the matter was dismissed. Black Card appealed this decision to the U.S. Court of Appeals for the Tenth Circuit on May 10, 2017.



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

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

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 that relate to, among other things, our future operations, prospects, developments, strategies and growth of our business; ~~integration of Visa Europe, including the migration of European activity to VisaNet and anticipated benefits for our European clients;~~ anticipated expansion of our products in certain countries; industry developments; expectations regarding litigation matters, investigations and proceedings; timing and amount of stock repurchases; sufficiency of sources of liquidity and funding; effectiveness of our risk management programs; and expectations regarding the impact of recent accounting pronouncements on our consolidated financial statements. Forward-looking statements generally are identified by words such as ~~"believes," "estimates," "expects," "intends," "may," "projects,"~~“believes,” “estimates,” “expects,” “intends,” “may,” “projects,” “could,~~" "should," "will," "continue"~~” “should,” “will,” “continue” and other similar expressions. All statements other than statements of historical fact could be forward-looking statements, which speak only as of the date they are made, are not guarantees of future performance and are subject to certain risks, uncertainties and other factors, many of which are beyond our control and are difficult to predict. We describe risks and uncertainties that could cause actual results to differ materially from those expressed in, or implied by, any of these forward-looking statements in our SEC filings, including our Annual Report on Form 10-K, for the year ended September 30, ~~2017~~2018 and our subsequent reports on Forms 10-Q and 8-K. Except as required by law, we do not intend to update or revise any forward-looking statements as a result of new information, future events or otherwise.

Overview

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

~~Overall economic conditions.~~ Our business is affected by overall economic conditions and consumer spending. Our business performance during the three months ended December 31, 2017 reflects continued uneven economic growth around the world.

~~U.S. Tax Reform Legislation.~~ On December 22, 2017, the U.S. government enacted comprehensive tax reform legislation commonly referred to as the Tax Cuts and Jobs Act (the "Tax Act"). The Tax Act transitions the U.S. tax system to a new territorial system and lowers the statutory federal corporate income tax rate. As a result of the reduction in the federal corporate income tax rate, we remeasured our net deferred tax liabilities as of the enactment date and the remeasurement resulted in a one-time, non-cash tax benefit estimated to be approximately $1.1 billion, recorded in the three months ended December 31, 2017. In transitioning to the new territorial system, the Tax Act requires us to include certain untaxed foreign earnings of non-U.S. subsidiaries in our fiscal 2018 taxable income. This tax, referred to as the "transition tax", was estimated to be $1.1 billion and recorded in the three months ended December 31, 2017. See ~~Note 10—Income Taxes~~ ~~to our unaudited consolidated financial statements~~.

Financial ~~highlights.~~overview. Our financial results for the three months ended December 31, 2017 ~~reflect~~reflected the impact of certain significant items that we believe ~~are~~were not indicative of our operating performance in these or future periods, as they were either non-recurring or had no cash impact. There were no comparable adjustments recorded for the three months ended December 31, ~~2016.~~2018. Our as-reported U.S. GAAP and adjusted non-GAAP net income and diluted earnings per share for these periods ~~are~~were as follows:


	Three Months Ended December 31,						Three Months Ended December 31,
(in millions, except percentages and per share data)	2017		2016		% Change⁽¹⁾		2018		2017		% Change⁽¹⁾
Net income, as reported	$	2,522	$	2,070	22	%	$	2,977	$	2,522	18	%
Diluted earnings per share, as reported	$	1.07	$	0.86	25	%	$	1.30	$	1.07	21	%
Net income, as adjusted⁽²⁾	$	2,536	$	2,070	23	%	$	2,977	$	2,536	17	%
Diluted earnings per share, as adjusted⁽²⁾	$	1.08	$	0.86	26	%	$	1.30	$	1.08	21	%


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


⁽²⁾	For a full reconciliation of our adjusted financial results, see tables in Adjusted financial results below.

Highlights for the first quarter of fiscal 2019. Our business is affected by overall economic conditions and consumer spending. Our business performance during the three months ended December 31, 2018 reflects continued, strong global consumer spending growth amidst uneven global economic conditions. We recorded net ~~operating~~ revenues of ~~$4.9~~$5.5 billion for the three months ended December 31, ~~2017,~~2018, an increase of 9%13% over the prior-year comparable period, reflecting continued growth in nominal payments volume, ~~processed transactions and~~ nominal cross-border ~~volume.~~volume and processed transactions. The effect of exchange rate movements in the three months ended December 31, ~~2017,~~2018, as partially mitigated by our hedging program, resulted in an approximately ~~one~~half a percentage point ~~positive~~negative impact to our net ~~operating revenue~~revenues growth.

Total operating expenses were $1.8 billion for the three months ended December 31, ~~2017 were $1.5 billion,~~2018, an increase of ~~13%,~~17% over the prior-year comparable period. The increase in the period was primarily due to ~~increases in~~higher personnel, ~~expenses,~~marketing and general and administrative expenses, ~~network and processing expenses and professional fees~~ as we continue to invest to support our business growth.

Adjusted financial results. Our financial results for the three months ended December 31, 2017 ~~reflect~~reflected the impact of certain significant items that we dobelieve were not ~~believe are~~ indicative of our ongoing operating performance in ~~this period~~these or future periods, as they were either non-recurring or had no cash impact. As such, we believe the presentation of adjusted financial results excluding the following items provides a clearer understanding of our operating performance for the periods presented. There were no comparable adjustments recorded for the three months ended December 31, ~~2016.~~2018.

Remeasurement of deferred tax balances. During the three months ended December 31, 2017, in connection with the Tax ~~Act's~~Act’s reduction of the corporate income tax rate, we remeasured our net deferred tax liabilities as of the enactment date, resulting in the recognition of a non-recurring, non-cash income tax benefit ~~estimated~~of $1.1 billion. See Note 12—Income Taxes to ~~be approximately $1.1 billion.~~our unaudited consolidated financial statements.

Transition tax on foreign earnings. During the three months ended December 31, 2017, in connection with the Tax ~~Act's~~Act’s requirement that we include certain untaxed foreign earnings of non-U.S. subsidiaries in our fiscal 2018 taxable income, we recorded a one-time transition tax estimated to be approximately $1.1 billion.

See Note ~~10—~~12—Income Taxesto our unaudited consolidated financial ~~statements~~.statements.

Adjusted financial results are non-GAAP financial measures and should not be relied upon as substitutes for measures calculated in accordance with U.S. GAAP. The following table reconciles our as-reported financial measures, calculated in accordance with U.S. GAAP, to our respective non-GAAP adjusted financial measures for the three months ended December 31, ~~2017.~~ 2017. There were no comparable adjustments recorded for the three months ended December 31, ~~2016.~~2018.


	Three Months Ended December 31, 2017									Three Months Ended December 31, 2017
(in millions, except per share data)	Income Tax Provision			Net Income			Diluted Earnings Per Share⁽¹⁾			Income Tax Provision			Net Income			Diluted Earnings Per Share⁽¹⁾
As reported	$	717		$	2,522		$	1.07		$	717		$	2,522		$	1.07
Remeasurement of deferred tax balances	1,133			(1,133		)	(0.48		)	1,133			(1,133		)	(0.48		)
Transition tax on foreign earnings	(1,147		)	1,147			0.49			(1,147		)	1,147			0.49
As adjusted	$	703		$	2,536		$	1.08		$	703		$	2,536		$	1.08


⁽¹⁾	Figures in the table may not recalculate exactly due to rounding. Diluted earnings per share and its respective total are calculated based on unrounded numbers.

Common stock repurchases. During the three months ended December 31, ~~2017,~~2018, we repurchased 1617 million shares of our class A common stock in the open market using ~~$1.8~~$2.4 billion of cash on hand. As of December 31, ~~2017, we~~2018, our January 2018 share repurchase program had remaining authorized funds of ~~$2.1~~$1.8 billion for share repurchase. In January ~~2018,~~2019, our board of directors authorized an additional ~~$7.5~~$8.5 billion share repurchase program. See Note 7—9—Stockholders' Equity to our unaudited consolidated financial statements.

~~Nominal payments~~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. During the three months ended December 31, 2018, we updated our definition of payments volume to now include all disbursement volume related to Visa Direct, in addition to the funding volume previously included. All prior periods presented have been adjusted accordingly. This change resulted in an increase of 0.5% in Visa Inc. total nominal payments volume growth for the three months ended September 30, 2018. Please refer to the Operational Performance Data section of Exhibit 99.1 to our Current Report on Form 8-K filed on January 30, 2019 for more details on the impact from this update in payments volume definition.

Nominal payments volume ~~over the prior year posted high single-digit growth~~ in the United States posted low double-digit growth for the three months ended September 30, 2018⁽¹⁾, driven mainly by consumer ~~credit. Growth on~~credit and debit. Nominal international payments volume growth was negatively impacted by movements in the U.S. dollar exchange rates. On a constant-dollar basis, which excludes the impact of exchange rate movements, on our international payments volume ~~was not significantly different from~~ growth ~~on a nominal-dollar basis~~rate for the three months ended September 30, ~~2017~~⁽¹⁾2018 was 11%. Growth in processed transactions reflects the ongoing worldwide shift to electronic payments.

The following table⁽²⁾ presents nominal payments and cash ~~volume.~~⁽²⁾volume:



	United States						International						Visa Inc.
	Three Months Ended September 30,⁽¹⁾						Three Months Ended September 30,⁽¹⁾						Three Months Ended September 30,⁽¹⁾
	2018		2017		% Change		2018		2017		% Change		2018		2017		% Change
	(in billions, except percentages)
Nominal payments volume
Consumer credit	$	382	$	348	10	%	$	615	$	592	4	%	$	997	$	939	6	%
Consumer debit⁽³⁾	408		358		14	%	459		428		7	%	868		785		11	%
Commercial⁽⁴⁾	155		135		15	%	93		86		8	%	247		221		12	%
Total nominal payments volume	$	945	$	840	12	%	$	1,167	$	1,106	6	%	$	2,112	$	1,946	9	%
Cash volume	145		142		2	%	578		615		(6	)%	723		756		(4	)%
Total nominal volume⁽⁵⁾	$	1,089	$	982	11	%	$	1,745	$	1,720	1	%	$	2,835	$	2,702	5	%

United States
International⁽³⁾

Visa Inc.⁽³⁾

Three Months Ended September 30,⁽¹⁾

Three Months Ended September 30,⁽¹⁾

Three Months Ended September 30,⁽¹⁾
2017 2016 %
Change 2017 2016 %
Change 2017 2016 %
Change
(in billions, except percentages)
Nominal payments volume
Consumer credit $ 348
$ 315
10 % $ 589
$ 551
7 % $ 937
$ 866
8 %
Consumer debit⁽⁴⁾
354
328
8 % 419
359
17 % 773
686
13 %
Commercial⁽⁵⁾
134
125
8 % 86
75
15 % 220
200
10 %
Total nominal payments volume $ 836
$ 768
9 % $ 1,094
$ 985
11 % $ 1,930
$ 1,752
10 %
Cash volume 142
135
5 % 605
595
2 % 747
731
2 %
Total nominal volume⁽⁶⁾
$ 978
$ 903
8 % $ 1,700
$ 1,580
8 % $ 2,677
$ 2,483
8 %

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


	International⁽³⁾				Visa Inc.⁽³⁾				International				Visa Inc.
	Three Months Ended September 30, 2017 vs. 2016⁽¹⁾				Three Months Ended September 30, 2017 vs. 2016⁽¹⁾				Three Months Ended September 30, 2018 vs. 2017⁽¹⁾				Three Months Ended September 30, 2018 vs. 2017⁽¹⁾
	Nominal		Constant⁽⁷⁾		Nominal		Constant⁽⁷⁾		Nominal		Constant⁽⁶⁾		Nominal		Constant⁽⁶⁾
Payments volume growth
Consumer credit growth	7	%	7	%	8	%	8	%	4	%	9	%	6	%	10	%
Consumer debit growth⁽⁵⁾⁽³⁾	17	%	14	%	13	%	11	%	7	%	12	%	11	%	13	%
Commercial growth⁽⁶⁾⁽⁴⁾	15	%	15	%	10	%	10	%	8	%	15	%	12	%	15	%
Total payments volume growth	11	%	10	%	10	%	10	%	6	%	11	%	9	%	12	%
Cash volume growth	2	%	0	%	2	%	1	%	(6	)%	2	%	(4	)%	2	%
Total volume growth	8	%	7	%	8	%	7	%	1	%	8	%	5	%	9	%


⁽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, ~~2017~~2018 and ~~2016~~2017 were based on nominal payments volume reported by our financial institution clients for the three months ended September 30, ~~2017~~2018 and ~~2016,~~2017, respectively.


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

⁽³⁾

As a result of European Union Interchange Fee regulation changes, effective with the quarter ended December 31, 2016, Europe co-badged payments volume is no longer included in reported volume. For comparative purposes, international volume for the three months ended September 30, 2016 was adjusted to exclude co-badged payments volume. The associated growth rates for the three months ended September 30, 2017 were calculated using these adjusted amounts.


⁽⁴⁾	Includes consumer prepaid volume and Interlink volume.


⁽⁵⁾⁽⁴⁾	Includes large, middle and small business credit and debit, as well as commercial prepaid volume.

⁽⁶⁾⁽⁵⁾

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


⁽⁷⁾⁽⁶⁾	Growth on a constant-dollar basis excludes the impact of foreign currency fluctuations against the U.S. dollar.

The following table⁽¹⁾ provides the number of transactions involving cards and other form factors carrying the Visa, Visa Electron, Interlink, V PAY and PLUS cards processed on ~~Visa's~~Visa’s networks during the periods ~~presented.~~⁽¹⁾presented:


	Three Months Ended December 31,				Three Months Ended December 31,
	2017	2016	% Change		2018	2017	% Change
	(in millions, except percentages)
Visa processed transactions	30,508	27,329	12	%	33,931	30,508	11	%


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

Results of Operations

~~Operating~~Net Revenues

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


	Three Months Ended December 31,				2017 vs. 2016				Three Months Ended December 31,				2018 vs. 2017
	2017		2016		$ Change		% Change⁽¹⁾		2018		2017		$ Change		% Change⁽¹⁾
	(in millions, except percentages)								(in millions, except percentages)
U.S.	$	2,265	$	2,121	$	144	7	%	$	2,508	$	2,265	$	243	11	%
International	2,597		2,340		257		11	%	2,998		2,597		401		15	%
Net operating revenues	$	4,862	$	4,461	$	401	9	%
Net revenues									$	5,506	$	4,862	$	644	13	%


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

The increase in ~~operating~~net revenues reflects the continued growth in nominal payments volume, ~~processed transactions and~~ nominal cross-border ~~volume.~~volume and processed transactions.

Our ~~operating~~net 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, ~~2017,~~2018, as partially mitigated by our hedging program, resulted in an approximately ~~one~~half a percentage point ~~positive~~negative impact to our net ~~operating revenue~~revenues growth.

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


	Three Months Ended December 31,						2017 vs. 2016					Three Months Ended December 31,						2018 vs. 2017
	2017			2016			$ Change			% Change⁽¹⁾		2018			2017			$ Change			% Change⁽¹⁾
	(in millions, except percentages)											(in millions, except percentages)
Service revenues	$	2,146		$	1,918		$	228		12	%	$	2,342		$	2,146		$	196		9	%
Data processing revenues	2,147			1,892			255			13	%	2,470			2,147			323			15	%
International transaction revenues	1,666			1,489			177			12	%	1,851			1,666			185			11	%
Other revenues	229			203			26			13	%	299			229			70			30	%
Client incentives	(1,326		)	(1,041		)	(285		)	27	%	(1,456		)	(1,326		)	(130		)	10	%
Net operating revenues	$	4,862		$	4,461		$	401		9	%
Net revenues												$	5,506		$	4,862		$	644		13	%


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

Service revenues increased primarily due to 9% growth in nominal payments volume during the three-month comparable ~~period primarily due to 10% growth in nominal payments volume.~~period.

Data processing revenues increased mainly due to overall growth in processed transactions of ~~12%~~11% during the three-month comparable ~~period.~~period as well as select pricing modifications effective after the first quarter of fiscal 2018.

International transaction revenues increased ~~primarily~~ due to ~~nominal cross-border volume growth of 14% during the three-month comparable period. International transaction revenue growth was partially offset by lower~~higher volatility in a broad range of ~~currencies.~~currencies and 3% growth in nominal cross-border volume during the three-month comparable period. Growth in international transaction revenues also reflected select pricing modifications effective after the first quarter of fiscal 2018.

Other revenues increased primarily due to changes in the classification and timing of recognition of revenue as a result of the adoption of the new revenue standard.

Client incentives increased ~~during the three-month comparable period~~ mainly due to incentives recognized on long-term customer contracts that were initiated or renewed after the first quarter of fiscal ~~2017~~2018 and overall growth in global payments volume. Client incentives also increased due to changes in classification and timing of recognition as a result of the adoption of the new revenue standard. 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.~~expenses:


	Three Months Ended December 31,				2017 vs. 2016					Three Months Ended December 31,				2018 vs. 2017
	2017		2016		$ Change			% Change⁽¹⁾		2018		2017		$ Change			% Change⁽¹⁾
	(in millions, except percentages)									(in millions, except percentages)
Personnel	$	679	$	571	$	108		19	%	$	807	$	679	$	128		19	%
Marketing	223		218		5			3	%	276		223		53			24	%
Network and processing	160		145		15			10	%	173		160		13			8	%
Professional fees	92		80		12			14	%	91		92		(1		)	(1	)%
Depreciation and amortization	145		146		(1		)	(1	)%	159		145		14			9	%
General and administrative	236		186		50			27	%	276		236		40			17	%
Litigation provision	—		15		(15		)	(100	)%	7		—		7			NM
Total operating expenses	$	1,535	$	1,361	$	174		13	%	$	1,789	$	1,535	$	254		17	%


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

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

~~Network and processing~~Marketing expenses~~increased mainly due to continued technology and processing network investments to support growth.~~

~~Professional fees~~ increased primarily due to ~~consulting fees related~~changes in the classification and timing of recognition of certain marketing expenses as a result of the adoption of the new revenue standard as well as higher spending to ~~technology and other corporate projects.~~support a number of campaigns.

General and administrative expenses increased mainly due to ~~increases in~~higher product ~~enhancements and travel activities~~enhancement costs in support of our business ~~growth, as well as higher indirect taxes.~~

~~Non-operating Income (Expense)~~

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

Three Months Ended
December 31, 2017 vs. 2016
2017 2016
$
Change

%
Change⁽¹⁾
(in millions, except percentages)
Interest expense $ (154 ) $ (140 ) $ (14 ) 10 %
Other 66
19
47
NM
Total non-operating expense $ (88 ) $ (121 ) $ 33
(27 )%

~~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 in the three months ended December 31, 2017 primarily due to the issuance of $2.5 billion fixed-rate senior notes in September 2017. See~~ ~~Note 4—Debt~~ ~~to our unaudited consolidated financial statements.~~

~~Other non-operating income~~ ~~increased in the three months ended December 31, 2017 due to a gain on the sale of an investment and higher interest income on our cash and investments.~~growth.

Effective Income Tax Rate

The effective income tax rates were ~~22%~~18% and ~~31%~~22% for the three months ended December 31, ~~2017~~2018 and ~~2016,~~2017, respectively. The effective tax rate for the three months ended December 31, ~~2017~~2018 differs from the effective tax rate in the same prior-year period primarily due to the effects of the Tax ~~Act.~~ Act enacted on December 22, 2017, as discussed below:

The Tax Act ~~transitions the U.S. tax system to a new territorial system and lowers~~reduced the statutory federal corporate income tax rate from 35% to 21%.

~~The reduction of the statutory federal corporate tax rate to 21% became~~ effective on January 1, 2018. In fiscal 2018, our statutory federal corporate rate iswas a blended rate of 24.5%~~, which will be reduced~~. Federal tax expense for the three months ended December 31, 2018 was determined at a 21% tax rate compared to ~~21% in fiscal 2019 and thereafter.~~

~~As a result of~~ the ~~reduction~~24.5% tax rate in the ~~federal corporate~~prior-year period;

The Tax Act enacted a new deduction for foreign-derived intangible income (“FDII”) and a new tax ~~rate, we remeasured our net~~on global intangible low-tax income (“GILTI”). Both FDII and GILTI became effective for us on October 1, 2018; and

The absence of:


▪	a $1.1 billion non-recurring, non-cash benefit from the remeasurement of deferred tax balances recorded in the three months ended December 31, 2017, in connection with the reduction in U.S. federal tax rate enacted by the Tax Act; and


▪	a $1.1 billion one-time transition tax expense on certain untaxed foreign earnings recorded in the three months ended December 31, 2017, in connection with the requirement enacted by the Tax Act.

We previously recorded provisional amounts for the transition tax ~~liabilities as~~and the tax effects of ~~the enactment date of~~various other tax provisions enacted by the Tax Act. ~~The deferred~~As permitted by ASU 2018-05, we completed the determination of the accounting impacts of the transition tax ~~remeasurement resulted in a one-time, non-cash~~and the tax ~~benefit estimated to be approximately $1.1 billion, recorded~~effects of these various tax provisions in the three months ended December 31, ~~2017.~~

~~In transitioning~~2018. The adjustments to the ~~new territorial tax system,~~provisional amounts were not material. In addition, we have adopted the ~~Tax Act requires~~accounting policy of accounting for taxes on GILTI in the period that ~~we include certain untaxed foreign earnings of non-U.S. subsidiaries in our fiscal 2018 taxable income. Such foreign earnings are~~it is subject to a one-time tax at 15.5% on the amount held in cash or cash equivalents, and at 8% on the remaining non-cash amount. The 15.5% and 8% tax, collectively referred to as the “transition tax”, was estimated to be $1.1 billion, and was recorded in the three months ended December 31, 2017. We intend to elect to pay the transition tax over a period of eight years as permitted by the Tax Act.

During the three months ended December 31, 2017, our gross unrecognized tax benefits increased by $44 million. Our net unrecognized tax benefits that, if recognized, would favorably impact the effective tax rate increased by $38 million. The increase in unrecognized tax benefits is primarily related to various tax positions across several jurisdictions. See ~~Note 10—Income Taxes~~ ~~to our unaudited consolidated financial statements~~.such tax.

Adjusted effective income tax rate. Our financial results for the three months ended December 31, 2017 reflect the impact of certain significant items that we believe ~~are~~were not indicative of our operating performance ~~in this~~during the period, ~~or future periods,~~ as they were either non-recurring or had no cash impact. As such, we have presented our adjusted effective income tax rate for ~~this~~the period in the table below, which we believe provides a clearer understanding of our operating performance for the reported period. There were no comparable adjustments recorded for the three months ended December 31, ~~2016.~~2018. See Overview—Adjusted financial results within this ~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations for descriptions of the adjustments in the tables below.


	Three Months Ended December 31, 2017							Three Months Ended December 31, 2017
(in millions, except percentages)	Income Before Income Taxes		Income Tax Provision			Effective Income Tax Rate⁽¹⁾
								Income Before Income Taxes		Income Tax Provision			Effective Income Tax Rate⁽¹⁾
								(in millions, except percentages)
As reported	$	3,239	$	717		22.1	%	$	3,239	$	717		22.1	%
Remeasurement of deferred tax balances	—		1,133					—		1,133
Transition tax on foreign earnings	—		(1,147		)			—		(1,147		)
As adjusted	$	3,239	$	703		21.7	%	$	3,239	$	703		21.7	%


⁽¹⁾	Figures in the table may not recalculate exactly due to rounding. Effective income tax rate is calculated based on unrounded numbers.

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,
	2017			2016			2018			2017
	(in millions)						(in millions)
Total cash provided by (used in):
Operating activities	$	2,762		$	2,508		$	3,294		$	2,813
Investing activities	(707		)	(417		)	(70		)	(707		)
Financing activities	(3,871		)	(1,730		)	(3,018		)	(4,021		)
Effect of exchange rate changes on cash and cash equivalents	80			(156		)	(68		)	80
(Decrease) increase in cash and cash equivalents	$	(1,736	)	$	205
Increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents							$	138		$	(1,835	)

Operating activities. Cash provided by operating activities for the three months ended December 31, ~~2017~~2018 was higher than the prior-year comparable period, reflecting continued growth in our underlying business.

Investing activities. Cash used in investing activities for the three months ended December 31, ~~2017~~2018 was ~~higher~~lower than the prior-year comparable period as prior-year purchases of ~~available-for-sale~~ investment securities reflected additional investment of net proceeds received from ~~new~~ fixed-rate senior notes issued in September 2017.

Financing activities. Cash used in financing activities for the three months ended December 31, ~~2017~~2018 was ~~higher~~lower than the prior-year comparable period primarily due to the repayment of the ~~2017~~Senior Notes ~~and an increase in dividends paid~~due 2017 in the ~~current year, while the~~ prior ~~year included proceeds from issuance of commercial paper.~~year. This ~~increase~~decrease was partially offset by ~~payments from our litigation escrow account and a decrease~~an increase in the repurchases of our class A common ~~stock.~~stock and higher dividends paid in the current year. See Note ~~2—U.S. and Europe Retrospective Responsibility Plans~~, ~~Note 4—Debt~~ ~~and~~ ~~Note 7—~~9—Stockholders' Equity to our unaudited consolidated financial statements.

Sources of Liquidity

Our primary sources of liquidity are cash on hand, cash flow from operations, our investment portfolio and access to various equity and borrowing arrangements. Funds from operations are maintained in cash and cash equivalents and short-term or long-term available-for-sale investment securities based upon our funding requirements, access to liquidity from these holdings, and the returns that these holdings provide. ~~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 $6.3 billion at December 31, 2017. This excludes $1.8 billion of cash and cash equivalents and available-for-sale investment securities we returned during the three months ended December 31, 2017 from our foreign subsidiaries to the United States. This transaction did not constitute a return of undistributed earnings. Pursuant to the Tax Act, we are required to pay U.S. tax on most of the undistributed and untaxed foreign earnings of non-U.S. subsidiaries accumulated as of December 31, 2017. If it were necessary to repatriate the undistributed earnings of our foreign subsidiaries for use in the United States in the future, the repatriated earnings would not be subject to further U.S. tax.

~~Uses of Liquidity~~

~~There has been no significant change to our primary uses of liquidity since September 30, 2017, 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.

Credit Ratings

~~Senior Notes.~~ In October 2017, we redeemed all of the $1.75 billion principal amount outstanding of the 2017 Notes. The redemption was funded with the net proceeds from the new fixed-rate senior notes issued in September 2017. Interest payments of $241 million were made in fiscal 2018. See ~~Note 4—Debt~~ ~~to our unaudited consolidated financial statements.~~

~~Common stock repurchases.~~During the three months ended December 31, ~~2017,~~2018, our credit ratings by Standard and Poor’s were upgraded to the following as compared to September 30, 2018:



	Standard and Poor’s
	December 31, 2018		September 30, 2018
Debt type	Rating	Outlook	Rating	Outlook
Short-term unsecured debt	A-1+	Stable	A-1	Positive
Long-term unsecured debt	AA-	Stable	A+	Positive

Various factors affect our credit ratings, including changes in our operating performance, the economic environment, conditions in the electronic payment industry, our financial position and changes in our business strategy. We do not currently foresee any reasonable circumstances under which our credit ratings would be significantly downgraded. If a significant downgrade were to occur, it could adversely impact, among other things, our future borrowing costs and access to capital markets.

Uses of Liquidity

There has been no significant change to our primary uses of liquidity since September 30, 2018, except as discussed below.

Common stock repurchases. During the three months ended December 31, 2018, we repurchased 1617 million shares of our class A common stock using ~~$1.8~~$2.4 billion of cash on hand. As of December 31, ~~2017,~~2018, we had remaining authorized funds of ~~$2.1~~$1.8 billion for share repurchase. All share repurchase programs authorized prior to ~~April 2017~~January 2018 have been completed. In January ~~2018,~~2019, our board of directors authorized an additional ~~$7.5~~$8.5 billion share repurchase program. See Note 7—9—Stockholders' Equity to our unaudited consolidated financial statements.

Dividends. During the three months ended December 31, ~~2017,~~2018, we declared and paid ~~$458~~$572 million in dividends to holders of our common stock. InOn January ~~2018,~~29, 2019, our board of directors declared a cash dividend in the amount of ~~$0.21~~$0.25 per share of class A common stock (determined in the case of class B and C common stock and UK&I and Europe preferred stock on an as-converted basis), which will be paid on March ~~6, 2018,~~5, 2019, to all holders of record ~~of our common and preferred stock~~ as of February ~~16, 2018.~~15, 2019. See Note 7—9—Stockholders' Equity to our unaudited consolidated financial statements. We expect to continue paying quarterly dividends in cash, subject to approval by the board of directors. All three series of preferred stock and class B and C common stock will share ratably on an as-converted basis in such future dividends.

Deferred purchase consideration.On June 21, 2016, we acquired 100% of the share capital of Visa Europe. In connection with the purchase, we will pay an additional €1.0 billion, plus 4% compound annual interest, on the third anniversary of the closing of Visa Europe acquisition.

Fair Value Measurements—Financial Instruments

As of December 31, ~~2017,~~2018, our financial instruments measured at fair value on a recurring basis included ~~$12.6~~$14.9 billion of assets and ~~$65~~$28 million of liabilities. See Note 3—5—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, ~~2017,~~2018, compared to September 30, ~~2017.~~2018.



ITEM 4.	Controls and Procedures

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

Changes in internal control over financial reporting. During the three-months ended December 31, 2018, the Company implemented a new client incentives accounting system along with enhancements and modifications to existing internal controls and procedures to comply with the new revenue standard. There ~~has~~have been no ~~change~~other changes in the internal control over financial reporting of Visa Inc. that occurred during the fiscal period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION



ITEM 1.	Legal Proceedings.

Refer to Note ~~11—~~13—Legal Matters to the unaudited consolidated financial statements included in this Form 10-Q for a description of the Company’s current material legal proceedings.



ITEM 1A.	Risk Factors.

For a discussion of the Company’s risk factors, see the information under the heading “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended September 30, ~~2017,~~2018, filed with the SEC on November ~~17, 2017.~~

16, 2018.



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

ISSUER PURCHASES OF EQUITY SECURITIES

The table below sets forth ~~the Company’s~~our purchases of common stock during the ~~three months~~quarter ended December 31, ~~2017~~2018.:

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, 2017 2,759,883
$ 107.13
2,759,883
$ 3,498,752,595
November 1-30, 2017 5,414,230
$ 110.99
5,278,751
$ 2,912,592,445
December 1-31, 2017 7,508,416
$ 111.73
7,508,416
$ 2,073,527,997
Total 15,682,529
$ 110.67
15,547,050



Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs^(1),(2)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs^(1),(2)
October 1-31, 2018	7,030,817	$	139.71	7,030,817	$	3,160,382,369
November 1-30, 2018	6,147,499	$	137.93	6,147,499	$	2,312,319,949
December 1-31, 2018	3,742,470	$	134.10	3,742,470	$	1,810,395,549
Total	16,920,786	$	137.82	16,920,786


⁽¹⁾	Includes 135,479 shares of class A common stock withheld at an average price of $109.82 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 the trade dates. For purposes of our unaudited consolidated financial statements included in this Form 10-Q, the impact of these repurchases is recorded according to settlement dates.

⁽³⁾⁽²⁾

Our board of directors from time to time authorizes the repurchase of shares of our common stock up to a certain monetary limit. In ~~April 2017~~January 2019 and January 2018, our board of directors authorized share repurchase programs for ~~$5.0~~$8.5 billion and $7.5 billion, respectively. These authorizations have no expiration date. All share repurchase programs authorized prior to ~~April 2017~~January 2018 have been completed.



ITEM 3.	Defaults Upon Senior Securities.

None.



ITEM 4.	Mine Safety Disclosures.

Not applicable.



ITEM 5.	Other Information.

None.



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.~~

~~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:~~	~~February 1, 2018~~	~~By:~~	~~/s/ Alfred F. Kelly, Jr.~~
		~~Name:~~	~~Alfred F. Kelly, Jr.~~
		~~Title:~~	~~Chief Executive Officer~~ ~~(Principal Executive Officer)~~

~~Date:~~	~~February 1, 2018~~	~~By:~~	~~/s/ Vasant M. Prabhu~~
		~~Name:~~	~~Vasant M. Prabhu~~
		~~Title:~~	~~Chief Financial Officer~~ ~~(Principal Financial Officer)~~

~~Date:~~	~~February 1, 2018~~	~~By:~~	~~/s/ James H. Hoffmeister~~
		~~Name:~~	~~James H. Hoffmeister~~
		~~Title:~~	~~Global Corporate Controller and~~ ~~Chief Accounting Officer~~ ~~(Principal Accounting Officer)~~

EXHIBIT INDEX



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

~~10.1~~10.1+	Form of Visa Inc. 2007 Equity Incentive Compensation Plan Director Restricted Stock Unit Award Agreement for awards granted after November 1, 2018

10.2+	Form of Visa Inc. 2007 Equity Incentive Compensation Plan Restricted Stock Unit Award Agreement for the CEO for awards granted after November 1, ~~2017~~2018

10.3+	Form of Visa Inc. 2007 Equity Incentive Compensation Plan Stock Option Award Agreement for the CEO for awards granted after November 1, 2018

10.4+	Form of Visa Inc. 2007 Equity Incentive Compensation Plan Performance Share Award Agreement for the CEO for awards granted after November 1, 2018

10.5+	Form of Visa Inc. 2007 Equity Incentive Compensation Plan Restricted Stock Unit Award Agreement for awards granted after November 1, 2018

10.6+	Form of Visa Inc. 2007 Equity Incentive Compensation Plan Stock Option Award Agreement for awards granted after November 1, 2018

10.7+	Form of Visa Inc. 2007 Equity Incentive Compensation Plan Performance Share Award Agreement for awards granted after November 1, 2018

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

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

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

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

101.INS+	XBRL Instance Document

101.SCH+	XBRL Taxonomy Extension Schema Document



101.CAL+		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF+		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB+		XBRL Taxonomy Extension Label Linkbase Document

101.PRE+		XBRL Taxonomy Extension Presentation Linkbase Document



+	Filed or furnished herewith.

SIGNATURES

32Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



		VISA INC.

Date:	January 31, 2019	By:	/s/ Alfred F. Kelly, Jr.
		Name:	Alfred F. Kelly, Jr.
		Title:	Chief Executive Officer (Principal Executive Officer)

Date:	January 31, 2019	By:	/s/ Vasant M. Prabhu
		Name:	Vasant M. Prabhu
		Title:	Chief Financial Officer (Principal Financial Officer)

Date:	January 31, 2019	By:	/s/ James H. Hoffmeister
		Name:	James H. Hoffmeister
		Title:	Global Corporate Controller and Chief Accounting Officer (Principal Accounting Officer)



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, 2017	2,759,883	$	107.13	2,759,883	$	3,498,752,595
November 1-30, 2017	5,414,230	$	110.99	5,278,751	$	2,912,592,445
December 1-31, 2017	7,508,416	$	111.73	7,508,416	$	2,073,527,997
Total	15,682,529	$	110.67	15,547,050