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 ~~March~~December 31, 2017

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 growth 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 ~~April 14, 2017~~January 26, 2018 there were ~~1,846,250,328~~1,802,624,578 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 ~~13,684,312~~12,400,261 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—~~March~~December 31, 2017 and September 30, ~~2016~~2017	3
	Consolidated Statements of Operations—Three ~~and Six~~ Months Ended ~~March~~December 31, 2017 and 2016	4
	Consolidated Statements of Comprehensive Income—Three Months Ended December 31, 2017 and 2016	5
	Consolidated Statements of ~~Comprehensive Income—~~Cash Flows—Three ~~and Six~~ Months Ended ~~March~~December 31, 2017 and 2016	7
	~~Consolidated Statements of Cash Flows—Six Months Ended March 31, 2017 and 2016~~	86
	Notes to Consolidated Financial Statements (unaudited)	107
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2821
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3929
Item 4.	Controls and Procedures	3929

PART II.	Other Information	4030

Item 1.	Legal Proceedings	4030
Item 1A.	Risk Factors	4030
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4030
Item 3.	Defaults Upon Senior Securities	4030
Item 4.	Mine Safety Disclosures	4030
Item 5.	Other Information	4030
Item 6.	Exhibits	4030
	Signatures	4131
	Exhibit Index	4232

PART I. FINANCIAL INFORMATION



ITEM 1.	Financial Statements

VISA INC.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)


	March 31, 2017		September 30, 2016		December 31, 2017			September 30, 2017
	(in millions, except par value data)				(in millions, except par value data)
Assets
Cash and cash equivalents	$	6,427	$	5,619	$	8,138		$	9,874
Restricted cash—U.S. litigation escrow (Note 3)	1,029		1,027
Investment securities (Note 4):
Restricted cash—U.S. litigation escrow (Note 2)					883			1,031
Investment securities (Note 3):
Trading	78		71		106			82
Available-for-sale	1,417		3,248		3,307			3,482
Settlement receivable (Note 7)	3,350		1,467
Settlement receivable					1,618			1,422
Accounts receivable	1,081		1,041		1,281			1,132
Customer collateral (Note 7)	1,043		1,001
Customer collateral (Note 5)					1,155			1,106
Current portion of client incentives	292		284		295			344
Prepaid expenses and other current assets	788		555		504			550
Total current assets	15,505		14,313		17,287			19,023
Investment securities, available-for-sale (Note 4)	2,882		3,931
Investment securities, available-for-sale (Note 3)					2,674			1,926
Client incentives	486		448		557			591
Property, equipment and technology, net	2,133		2,150		2,238			2,253
Other assets	980		893		1,127			1,226
Intangible assets, net (Note 2 and Note 5)	26,416		27,234
Goodwill (Note 2 and Note 5)	14,825		15,066
Intangible assets, net					28,109			27,848
Goodwill					15,162			15,110
Total assets	$	63,227	$	64,035	$	67,154		$	67,977
Liabilities
Accounts payable	$	120	$	203	$	108		$	179
Settlement payable (Note 7)	2,879		2,084
Customer collateral (Note 7)	1,043		1,001
Settlement payable					2,302			2,003
Customer collateral (Note 5)					1,155			1,106
Accrued compensation and benefits	500		673		389			757
Client incentives	1,753		1,976		2,355			2,089
Accrued liabilities	1,167		1,128		1,224			1,129
Current maturities of long-term debt (Note 6)	1,748		—
Accrued litigation (Note 13)	996		981
Current maturities of long-term debt (Note 4)					—			1,749
Accrued litigation (Note 11)					830			982
Total current liabilities	10,206		8,046		8,363			9,994
Long-term debt (Note 6)	14,140		15,882
Long-term debt (Note 4)					16,621			16,618
Deferred tax liabilities	5,731		4,808		5,107			5,980
Deferred purchase consideration	1,180		1,225		1,330			1,304
Other liabilities	1,187		1,162		2,332			1,321
Total liabilities	32,444		31,123		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

VISA INC.

CONSOLIDATED ~~BALANCE SHEETS—(Continued)~~STATEMENTS OF OPERATIONS

~~(UNAUDITED)~~(UNAUDITED)

March 31,
2017 September 30,
2016
(in millions, except par value data)
Equity
Preferred stock, $0.0001 par value, 25 shares authorized and 5 issued and outstanding as follows:
Series A convertible participating preferred stock, none issued (Note 2 and Note 9) $ —
$ —
Series B convertible participating preferred stock, 2 shares issued and outstanding at March 31, 2017 and September 30, 2016 (Note 2 and Note 9) 2,397
2,516
Series C convertible participating preferred stock, 3 shares issued and outstanding at March 31, 2017 and September 30, 2016 (Note 2 and Note 9) 3,200
3,201
Class A common stock, $0.0001 par value, 2,001,622 shares authorized, 1,847 and 1,871 shares issued and outstanding at March 31, 2017 and September 30, 2016, respectively (Note 9) —
—
Class B common stock, $0.0001 par value, 622 shares authorized, 245 shares issued and outstanding at March 31, 2017 and September 30, 2016 (Note 9) —
—
Class C common stock, $0.0001 par value, 1,097 shares authorized, 14 and 17 shares issued and outstanding at March 31, 2017 and September 30, 2016, respectively (Note 9) —
—
Treasury stock (Note 9) —
(170 )
Right to recover for covered losses (Note 3) (77 ) (34 )
Additional paid-in capital 17,103
17,395
Accumulated income 9,140
10,462
Accumulated other comprehensive loss, net:
Investment securities, available-for-sale 45
36
Defined benefit pension and other postretirement plans (216 ) (225 )
Derivative instruments classified as cash flow hedges (6 ) (50 )
Foreign currency translation adjustments (803 ) (219 )
Total accumulated other comprehensive loss, net (980 ) (458 )
Total equity 30,783
32,912
Total liabilities and equity $ 63,227
$ 64,035



	Three Months Ended December 31,
	2017			2016
	(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

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

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

Basic earnings per share (Note 8)
Class A common stock	$	1.07		$	0.86
Class B common stock	$	1.77		$	1.41
Class C common stock	$	4.30		$	3.43

Basic weighted-average shares outstanding (Note 8)
Class A common stock	1,811			1,860
Class B common stock	245			245
Class C common stock	13			17

Diluted earnings per share (Note 8)
Class A common stock	$	1.07		$	0.86
Class B common stock	$	1.77		$	1.41
Class C common stock	$	4.29		$	3.42

Diluted weighted-average shares outstanding (Note 8)
Class A common stock	2,353			2,421
Class B common stock	245			245
Class C common stock	13			17

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

Table of Contents

VISA INC.

CONSOLIDATED STATEMENTS OF ~~OPERATIONS~~COMPREHENSIVE INCOME

(UNAUDITED)

Three Months Ended
March 31, Six Months Ended
March 31,
2017 2016 2017 2016
(in millions, except per share data)
Operating Revenues
Service revenues $ 1,993
$ 1,699
$ 3,911
$ 3,344
Data processing revenues 1,843
1,473
3,735
2,952
International transaction revenues 1,469
1,045
2,958
2,076
Other revenues 203
198
406
396
Client incentives (1,031 ) (789 ) (2,072 ) (1,577 )
Net operating revenues 4,477
3,626
8,938
7,191
Operating Expenses
Personnel 704
528
1,275
1,027
Marketing 193
186
411
380
Network and processing 150
126
295
254
Professional fees 83
66
163
138
Depreciation and amortization 131
121
277
241
General and administrative 406
164
592
320
Litigation provision (Note 13) 2
1
17
1
Total operating expenses 1,669
1,192
3,030
2,361
Operating income 2,808
2,434
5,908
4,830
Non-operating (Expense) Income
Interest expense (135 ) (132 ) (275 ) (161 )
Other 29
139
48
411
Non-operating (expense) income (106 ) 7
(227 ) 250
Income before income taxes 2,702
2,441
5,681
5,080
Income tax provision (Note 12) 2,272
734
3,181
1,432
Net income $ 430
$ 1,707
$ 2,500
$ 3,648



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

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

Table of Contents

VISA INC.

CONSOLIDATED STATEMENTS OF ~~OPERATIONS—(Continued)~~CASH FLOWS

(UNAUDITED)

Three Months Ended
March 31, Six Months Ended
March 31,
2017 2016 2017 2016
(in millions, except per share data)
Basic earnings per share (Note 10)
Class A common stock $ 0.18
$ 0.71
$ 1.04
$ 1.51
Class B common stock $ 0.30
$ 1.17
$ 1.71
$ 2.49
Class C common stock $ 0.72
$ 2.85
$ 4.15
$ 6.05
Basic weighted-average shares outstanding (Note 10)

Class A common stock 1,854
1,909
1,857
1,923
Class B common stock 245
245
245
245
Class C common stock 15
19
16
19
Diluted earnings per share (Note 10)

Class A common stock $ 0.18
$ 0.71
$ 1.04
$ 1.51
Class B common stock $ 0.29
$ 1.17
$ 1.71
$ 2.49
Class C common stock $ 0.72
$ 2.84
$ 4.14
$ 6.04
Diluted weighted-average shares outstanding (Note 10)

Class A common stock 2,406
2,401
2,413
2,416
Class B common stock 245
245
245
245
Class C common stock 15
19
16
19



	Three Months Ended December 31,
	2017			2016
	(in millions)
Operating Activities
Net income	$	2,522		$	2,070
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
Depreciation and amortization of property, equipment, technology and intangible assets	145			146
Deferred income taxes	(919		)	77
Right to recover for covered losses recorded in equity (Note 2)	(3		)	(94		)
Other	(23		)	13
Change in operating assets and liabilities:
Settlement receivable	(180		)	56
Accounts receivable	(146		)	(89		)
Client incentives	(986		)	(1,129		)
Other assets	92			66
Accounts payable	(51		)	(102		)
Settlement payable	275			79
Accrued and other liabilities	794			316
Accrued litigation (Note 11)	(152		)	13
Net cash provided by operating activities	2,762			2,508
Investing Activities
Purchases of property, equipment, technology and intangible assets	(141		)	(171		)
Investment securities, available-for-sale:
Purchases	(1,636		)	(1,032		)
Proceeds from maturities and sales	1,076			788
Purchases of / contributions to other investments	(6		)	(2		)
Net cash used in investing activities	(707		)	(417		)
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			—
Cash proceeds from issuance of common stock under employee equity plans	53			56
Restricted stock and performance-based shares settled in cash for taxes	(88		)	(60		)
Net cash used in financing activities	(3,871		)	(1,730		)
Effect of exchange rate changes on cash and cash equivalents	80			(156		)
(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
Supplemental Disclosure
Income taxes paid, net of refunds	$	183		$	96
Interest payments on debt (Note 4)	$	241		$	244
Accruals related to purchases of property, equipment, technology and intangible assets	$	26		$	69

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
March 31, Six Months Ended
March 31,
2017 2016 2017 2016
(in millions)
Net income $ 430
$ 1,707
$ 2,500
$ 3,648
Other comprehensive income (loss), net of tax:
Investment securities, available-for-sale:
Net unrealized gain 19
26
16
60
Income tax effect (7 ) (7 ) (8 ) (23 )
Reclassification adjustment for net loss (gain) realized in net income 1
(3 ) 1
(3 )
Income tax effect —
1
—
1
Defined benefit pension and other postretirement plans:
Net unrealized actuarial (loss) gain and prior service credit (5 ) 5
(5 ) 61
Income tax effect 2
(2 ) 2
(23 )
Amortization of actuarial loss and prior service credit realized in net income 15
2
21
(5 )
Income tax effect (7 ) —
(9 ) 2
Derivative instruments classified as cash flow hedges:
Net unrealized (loss) gain (49 ) (54 ) 25
(38 )
Income tax effect 11
11
4
6
Reclassification adjustment for net loss (gain) realized in net income 8
(37 ) 20
(85 )
Income tax effect (3 ) 11
(5 ) 25
Foreign currency translation adjustments 404
—
(584 ) —
Other comprehensive income (loss), net of tax 389
(47 ) (522 ) (22 )
Comprehensive income $ 819
$ 1,660
$ 1,978
$ 3,626

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

~~Table of Contents~~

~~VISA INC.~~

~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~(UNAUDITED)~~

Six Months Ended
March 31,
2017 2016
(in millions)
Operating Activities
Net income $ 2,500

$ 3,648
Adjustments to reconcile net income to net cash provided by operating activities:
Client incentives 2,072

1,577
Fair value adjustment for the Visa Europe put option —

(255 )
Share-based compensation (Note 11) 116

97
Excess tax benefit for share-based compensation —

(43 )
Depreciation and amortization of property, equipment, technology and intangible assets 277

241
Deferred income taxes 1,700

(29 )
Right to recover for covered losses recorded in equity (163 )
—
Charitable contribution of Visa Inc. shares (Note 9 and Note 12) 192

—
Other 23

17
Change in operating assets and liabilities:

Settlement receivable (1,946 )
(6 )
Accounts receivable (40 )
(97 )
Client incentives (2,306 )
(1,912 )
Other assets (301 )
(397 )
Accounts payable (83 )
(34 )
Settlement payable 883

(57 )
Accrued and other liabilities (35 )
81
Accrued litigation (Note 13) 15

(12 )
Net cash provided by operating activities 2,904

2,819
Investing Activities
Purchases of property, equipment, technology and intangible assets (317 )
(250 )
Investment securities, available-for-sale:

Purchases (1,083 )
(17,437 )
Proceeds from maturities and sales 3,972

15,860
Acquisition of business, net of cash received (302 )
(14 )
Purchases of / contributions to other investments (2 )
(9 )
Proceeds / distributions from other investments —

4
Net cash provided by (used in) investing activities 2,268

(1,846 )

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

~~Table of Contents~~

~~VISA INC.~~

~~CONSOLIDATED STATEMENTS OF CASH FLOWS—(Continued)~~

~~(UNAUDITED)~~

Six Months Ended
March 31,
2017 2016
(in millions)
Financing Activities
Repurchase of class A common stock (Note 9) $ (3,469 )
$ (3,765 )
Dividends paid (Note 9) (795 )
(676 )
Proceeds from issuance of senior notes (Note 6) —

15,971
Debt issuance costs (Note 6) —

(96 )
Payments from litigation escrow account—U.S. retrospective responsibility plan (Note 3 and Note 13) —

11
Cash proceeds from issuance of common stock under employee equity plans 87

49
Restricted stock and performance-based shares settled in cash for taxes (66 )
(85 )
Excess tax benefit for share-based compensation —

43
Net cash (used in) provided by financing activities (4,243 )
11,452
Effect of exchange rate changes on cash and cash equivalents (121 )
—
Increase in cash and cash equivalents 808

12,425
Cash and cash equivalents at beginning of year 5,619

3,518
Cash and cash equivalents at end of period $ 6,427

$ 15,943
Supplemental Disclosure
Income taxes paid, net of refunds $ 1,611

$ 1,501
Interest payments on debt (Note 6) $ 244

$ —
Net unrealized gain on currency forward contracts $ —

$ 116
Accruals related to purchases of property, equipment, technology and intangible assets $ 37

$ 38

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

~~Table of Contents~~

~~VISA INC.~~

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~March~~December 31, 2017

(UNAUDITED)

Note 1—Summary of Significant Accounting Policies

Organization. Visa Inc. ("Visa" or the "Company") is a global payments technology company that ~~connects consumers, merchants, financial institutions, businesses, strategic partners~~enables fast, secure and ~~governments in~~reliable electronic payments across more than 200 countries and ~~territories to fast, secure and reliable electronic payments.~~territories. Visa and its wholly-owned consolidated subsidiaries, including Visa U.S.A. Inc. ("Visa U.S.A."), Visa International Service Association ("Visa International"), Visa Worldwide Pte. Limited, Visa Europe Limited ("Visa Europe"), Visa Canada Corporation, ~~Inovant~~Visa Technology & Operations LLC and CyberSource Corporation, ~~("CyberSource"),~~ operate one of the world’s largest retail electronic payments networks — VisaNet — which facilitates authorization, clearing and settlement of payment transactions and enables usthe Company to provide ~~our~~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 financial institution clients.

Consolidation and basis of presentation. The accompanying unaudited consolidated financial statements include the accounts of Visa and its consolidated entities and are presented in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). The Company consolidates its majority-owned and controlled entities, including variable interest entities ("VIEs") for which the Company is the primary beneficiary. The Company’s investments in VIEs have not been material to its consolidated financial statements as of and for the periods presented. All significant intercompany accounts and transactions are eliminated in consolidation.

The accompanying unaudited consolidated financial statements are presented in accordance with the U.S. Securities and Exchange Commission ~~("SEC")~~(SEC) requirements for Quarterly Reports on Form 10-Q and, consequently, do not include all of the annual disclosures required by U.S. GAAP. Reference should be made to the Visa Annual Report on Form 10-K for the year ended September 30, ~~2016~~2017 for additional disclosures, including a summary of the Company’s significant accounting policies.

In the opinion of management, the accompanying unaudited consolidated financial statements include all normal recurring adjustments necessary for a fair presentation of the Company's financial position, results of operations and cash flows for the interim periods presented.

Recently Issued and Adopted Accounting Pronouncements.

In May 2014, the Financial Accounting Standards Board ~~("FASB")~~(FASB) issued Accounting Standards Update ~~("ASU")~~(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 existing revenue recognition guidance in U.S. GAAP when it becomes effective. Subsequently, the FASB also issued a series of amendments to the new revenue standard. The Company will adopt the standard effective October 1, 2018, and expects to adopt the standard using the modified retrospective transition method. The Company expects that the new standard will primarily impact recognition timing for certain fixed incentives and price discounts provided to clients, and the classification of certain client incentives between contra revenues and operating expenses. The Company is still in the process of quantifying the full effect that ASU 2014-09 and all of its related subsequent updates will have on its consolidated financial statements and related disclosures. The impact of the new standard to future financial results is unknowable 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 ~~2016-09,~~2016-05, which ~~simplifies several aspects~~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 ~~the~~itself, require dedesignation of that hedging relationship provided that all other hedge accounting for share-based payments, including the accounting for excess tax benefits and deficiencies, forfeitures, and statutory tax withholding requirements, as well as classification on the statement of cash flows relatedcriteria continue to ~~excess tax benefits and employee taxes paid when an employer withholds shares for tax-withholding purposes.~~be met. The Company ~~elected to early adopt this guidance~~adopted the standard effective October 1, ~~2016.~~2017. The adoption ~~had the following~~did not have a material impact on the consolidated financial ~~statements:~~statements.

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VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

~~The Company recorded excess tax benefits of $46 million in our provision for income taxes rather than as an increase to additional paid-in capital for the six months ended~~In March ~~31, 2017 on a prospective basis. Therefore, the prior period presented has not been adjusted.~~

The Company excluded the excess tax benefits from the assumed proceeds available to repurchase shares in the computation of diluted earnings per share, which did not have a material impact on our diluted earnings per share for the six months ended March 31, 2017.

The Company elected to apply the presentation requirement for cash flows related to excess tax benefits prospectively, and thus, the prior period presented has not been adjusted. This adoption resulted in an increase to both net cash provided by operating activities and net cash used in financing of $46 million for the six months ended March 31, 2017.

~~In October~~ 2016, the FASB issued ASU ~~2016-16,~~2016-06, which ~~requires~~clarifies the requirements for assessing whether contingent call/put options that ~~entities recognize~~can accelerate the ~~income tax consequences~~payment of ~~an intra-entity transfer of an asset, other than inventory, when~~principal on debt instruments are clearly and closely related to their debt hosts. An entity performing the ~~transfer occurs.~~assessment is required to assess the embedded call/put options solely in accordance with a four-step decision sequence. The ~~standard will be effective for Visa on October 1, 2018. However, the~~ Company ~~is considering early adoption of~~adopted the standard oneffective October 1, 2017. The adoption isdid not ~~expected to 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 will adopt the standard effective October 1, 2018. The adoption will impact the presentation of transactions related to the U.S. litigation escrow account on the consolidated statements of cash flows.

In January 2017, the FASB issued ASU 2017-04, which simplifies the test for goodwill impairment by eliminating a previously required step. The Company will adopt the standard effective October 1, 2020. The adoption is not expected to have a material impact on the consolidated financial statements.

In March ~~2017,~~2016, the FASB issued ASU ~~2017-07,~~2016-07, which ~~requires~~eliminates the requirement that an entity retroactively adopt the ~~service cost component~~equity method of ~~net periodic pension and postretirement benefit cost be presented~~accounting if an investment qualifies for use of the equity method as a result of an increase in the ~~same line item~~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 ~~other employee compensation costs, while~~of the ~~other components be presented separately as non-operating income (expense). Currently, all net periodic pension and postretirement benefit costs are presented in Personnel on~~date the ~~Company's consolidated statement of operations.~~investment becomes qualified for equity method accounting. The Company ~~will adopt~~adopted the standard effective October 1, ~~2018.~~2017. The adoption isdid not ~~expected to~~ have a material impact on the consolidated financial statements.

Note 2—~~Visa Europe~~

On June 21, 2016, the Company acquired 100% of the share capital of Visa Europe, a payments technology business. The acquisition positions Visa to create additional value through increased scale, efficiencies realized by the integration of both businesses, and benefits related to Visa Europe's transition from an association to a for-profit enterprise. At the closing of the transaction (the "Closing"), the Company:

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

issued preferred stock of the Company convertible upon certain conditions into approximately 79 million shares of class A common stock of the Company, as described below, equivalent to a value of €5.3 billion ($6.1 billion) at the closing stock price of $77.33 on June 21, 2016; and

~~agreed to pay an additional €1.0 billion, plus 4% compound annual interest, on the third anniversary of the Closing.~~

~~Preferred stock. In connection with the transaction, three new series of preferred stock of the Company were created:~~

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

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

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

The Company issued 2,480,466 shares of U.K.&I preferred stock to Visa Europe’s member financial institutions in the United Kingdom and Ireland entitled to receive preferred stock at the Closing, and 3,156,823 shares of Europe preferred stock to Visa Europe’s other member financial institutions entitled to receive preferred stock at the Closing.

~~Table of Contents~~

~~VISA INC.~~

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

Under certain conditions described below, the U.K.&I and Europe preferred stock is convertible into shares of class A common stock or class A equivalent preferred stock, at an initial conversion rate of 13.952 shares of class A common stock for each share of U.K.&I preferred stock and Europe preferred stock. The conversion rates may be reduced from time to time to offset certain liabilities, which may be incurred by the Company, Visa Europe or their affiliates as a result of certain existing and potential litigation relating to the setting of multilateral interchange fee rates in the Visa Europe territory, where, generally, the relevant claims (and resultant liabilities and losses) relate to the period before the Closing. See ~~Note 3—U.S. and Europe Retrospective Responsibility Plans.~~

~~Updated purchase price allocation.~~

Upon the Closing, total purchase consideration of $18.8 billion was allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on a preliminary valuation. During the second quarter of fiscal year 2017, based on additional information that became available, which impacted certain of the assumptions used, the Company updated the purchase price allocation.

~~The following table summarizes the updated purchase price allocation:~~

Preliminary Purchase Price Allocation Measurement Period Adjustments
Updated
Purchase Price Allocation
(in millions)
Current assets⁽¹⁾
$ 4,457
$ —
$ 4,457
Non-current assets⁽²⁾
258
(46 ) 212
Current liabilities⁽³⁾
(2,731 ) (39 ) (2,770 )
Non-current liabilities⁽²⁾
(2,605 ) 618
(1,987 )
Tangible assets and liabilities $ (621 ) $ 533
$ (88 )
Intangible assets — customer relationships and reacquired rights⁽²⁾
16,137
(232 ) 15,905
Goodwill⁽⁴⁾
3,268
(301 ) 2,967
Fair value of net assets acquired $ 18,784
$ —
$ 18,784


⁽¹⁾	~~Current assets are largely comprised of cash and cash equivalents and settlement receivable.~~

⁽²⁾

Intangible assets consist of customer relationships and reacquired rights, which have been valued as a single composite intangible asset as they are inextricably linked. These intangibles are considered indefinite-lived assets as the associated customer relationships have historically not experienced significant attrition, and the reacquired rights are based on the Framework Agreement, which has a perpetual term. Non-current assets and liabilities include deferred tax assets and liabilities that result in net deferred tax liabilities of $1.7 billion based on the updated valuation. In February 2017, the Company completed a legal entity reorganization, resulting in the elimination of most of these deferred tax assets and liabilities. See ~~Note 12—Income Taxes~~.


⁽³⁾	~~Current liabilities assumed mainly include settlement payable, client incentives liabilities and accrued liabilities.~~


⁽⁴⁾	The excess of purchase consideration over net assets acquired was recorded as goodwill, which represents the value that is expected from increased scale and synergies as a result of the integration of both businesses.

~~Table of Contents~~

~~VISA INC.~~

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

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

The following table presents unaudited supplemental pro forma information for the three and six months ended March 31, 2016, as if the acquisition and related issuance of senior notes had occurred on October 1, 2014. The pro forma financial information is not necessarily indicative of the Company's consolidated results of operations that would have been realized had the acquisition been completed on October 1, 2014, nor does it purport to project the future results of operations of the combined company or reflect any reorganizations, or cost or other operating synergies that may occur subsequent to the Closing. The actual results of operations of the combined company may differ significantly from the pro forma results presented here due to many factors.

Consolidated Actual Results Unaudited Pro Forma Consolidated Results Consolidated Actual Results Unaudited Pro Forma Consolidated Results
Three Months Ended March 31, Six Months Ended March 31,
2017 2016 2017 2016
(in millions, except per share data)
Net operating revenues $ 4,477
$ 3,935
$ 8,938
$ 7,899
Net income $ 430
$ 1,679
$ 2,500
$ 3,456
Diluted earnings per share $ 0.18
$ 0.68
$ 1.04
$ 1.39

~~The unaudited pro forma financial information for the three and six months ended March 31, 2016 reflects the following material pro forma adjustments:~~

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

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

an increase in non-operating expense for the six months ended March 31, 2016 for additional interest expense and amortization of debt issuance costs resulting from the issuance of the $16.0 billion senior notes;


•	~~exclusion of a $255 million gain related to the revaluation of the Visa Europe put option from the six months ended March 31, 2016~~⁽¹⁾~~; and~~

~~elimination of acquisition-related costs incurred by Visa Europe.~~


⁽¹⁾	For purposes of preparing this pro forma financial information, the fair value of the Visa Europe put option is presumed to have been reduced to zero prior to October 1, 2014. Therefore, the Company did not include any gains associated with a write-down in the fair value of the Visa Europe put option liability in the unaudited pro forma net income for the six months ended March 31, 2016.

The pro forma results also reflect the applicable tax impact of the pro forma adjustments. The taxes associated with the adjustments reflect the statutory tax rate in effect during the respective periods.

~~Note 3—~~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 on the consolidated balance sheets. The balance of the escrow account was $0.9 billion at December 31, 2017 and $1.0 billion at ~~March 31, 2017 and~~ September 30, ~~2016.~~2017. The Company ~~did not make any payments to opt-out merchants~~paid $150 million from the litigation escrow account during the ~~six~~three months ended ~~March~~December 31, 2017. See Note ~~13—~~11—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 ~~six~~three months ended ~~March~~December 31, 2017. See Note ~~13—~~11—Legal Matters.

~~Table of Contents~~

~~VISA INC.~~

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

Europe Retrospective Responsibility Plan

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

During the ~~six~~three months ended ~~March~~December 31, 2017, the Company recovered ~~$120~~$50 million of VE territory covered losses through adjustments to the class A common stock conversion rates applicable to the ~~U.K.~~UK&I and Europe preferred stock, from ~~13.952 at September 30, 2016 to 13.388~~13.077 and 13.948, respectively, at ~~March~~September 30, 2017 to 12.966 and 13.893, respectively, at December 31, 2017.

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VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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


	Preferred Stock						Right to Recover for Covered Losses			Preferred Stock						Right to Recover for Covered Losses
	U.K.&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, 2016	$	2,516		$	3,201		$	(34	)
Balance as of September 30, 2017										$	2,326		$	3,200		$	(52	)
VE territory covered losses incurred	$	—		$	—		$	(163	)	—			—			(3		)
Recovery through conversion rate adjustment	(119		)	(1		)	120			(31		)	(19		)	50
Balance as of March 31, 2017	$	2,397		$	3,200		$	(77	)
Balance as of December 31, 2017										$	2,295		$	3,181		$	(5	)

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


	March 31, 2017						December 31, 2017						September 30, 2017
	As-Converted Value of Preferred Stock⁽²⁾			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)
U.K.&I preferred stock	$	2,951		$	2,397
UK&I preferred stock							$	3,667		$	2,295		$	3,414		$	2,326
Europe preferred stock	3,913			3,200			5,001			3,181			4,634			3,200
Total	$	6,864		$	5,597		8,668			5,476			8,048			5,526
Less: Right to recover for covered losses	(77		)	(77		)
Less: right to recover for covered losses							(5		)	(5		)	(52		)	(52		)
Total recovery for covered losses available	$	6,787		$	5,520		$	8,663		$	5,471		$	7,996		$	5,474


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

⁽²⁾

The as-converted value of preferred stock is calculated as the product of: (a) 2 million and 3 million shares of the ~~U.K.~~UK&I and Europe preferred stock outstanding, respectively, as of ~~March~~December 31, 2017; (b)~~13.388~~12.966 and 13.893, the class A common stock conversion rate applicable to the UK&I and Europe preferred stock as of December 31, 2017, respectively; and (c) $114.02, Visa's class A common stock closing stock price as of December 31, 2017.

⁽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; (b)13.077 and 13.948, the class A common stock conversion rate applicable to the ~~U.K.~~UK&I and Europe preferred stock as of ~~March 31,~~September 30, 2017, respectively; and (c) ~~$88.87,~~$105.24, Visa's class A common stock closing stock price as of ~~March 31,~~September 30, 2017.

149

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VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 4—3—Fair Value Measurements and Investments

Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Recurring Basis


	Fair Value Measurements Using Inputs Considered as								Fair Value Measurements Using Inputs Considered as
	Level 1				Level 2				Level 1				Level 2
	March 31, 2017		September 30, 2016		March 31, 2017		September 30, 2016		December 31, 2017		September 30, 2017		December 31, 2017		September 30, 2017
	(in millions)								(in millions)
Assets
Cash equivalents and restricted cash:
Money market funds	$	4,594	$	4,537					$	5,918	$	5,935
U.S. government-sponsored debt securities					$	132	$	196					$	567	$	2,870
Investment securities, trading:
Equity securities	78		71						106		82
Investment securities, available-for-sale:
U.S. government-sponsored debt securities					3,039		4,699						3,530		3,663
U.S. Treasury securities	1,102		2,178						2,337		1,621
Equity securities	78		53						114		124
Corporate debt securities					80		249
Prepaid and other current assets:
Foreign exchange derivative instruments					52		50
Other assets:
Foreign exchange derivative instruments					—		6						26		18
Total	$	5,852	$	6,839	$	3,303	$	5,200	$	8,475	$	7,762	$	4,123	$	6,551
Liabilities
Accrued liabilities:
Foreign exchange derivative instruments					$	83	$	116					$	65	$	98
Other liabilities:
Foreign exchange derivative instruments					—		20
Total	$	—	$	—	$	83	$	136	$	—	$	—	$	65	$	98

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

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

Level 2 assets and liabilities measured at fair value on a recurring basis. The fair value of U.S. government-sponsored ~~debt securities and corporate~~ debt securities, as provided by third-party pricing vendors, is based on quoted prices in active markets for similar, not identical, assets. The pricing data obtained from outside sources is reviewed internally for reasonableness, compared against benchmark quotes from independent pricing sources, then confirmed or revised accordingly. Foreign exchange derivative instruments are valued using inputs that are observable in the market or can be derived principally from or corroborated by observable market data. There were no substantive changes to the valuation techniques and related inputs used to measure fair value during the ~~six~~three months ended ~~March~~December 31, 2017.

~~Table of Contents~~

~~VISA INC.~~

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

Assets Measured at Fair Value on a Non-recurring Basis

Non-marketable equity investments and investments accounted for under the equity method. These investments are classified as Level 3 due to the absence of quoted market prices, the inherent lack of liquidity, and the fact that inputs used to measure fair value are unobservable and require management's judgment. When certain events or circumstances indicate that impairment may exist, the Company revalues the investments using various assumptions, including the financial metrics and ratios of comparable public companies. There were no significant impairments during the ~~six~~three months ended ~~March~~December 31, 2017 or 2016. These investments totaled ~~$49~~$99 million and ~~$46~~$94 million at ~~March~~December 31, 2017 and September 30, ~~2016,~~2017, respectively, and are classified in other assets on the consolidated balance sheets.

Table of Contents

VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Non-financial assets and liabilities. Long-lived assets such as goodwill, indefinite-lived intangible assets, finite-lived intangible assets, and property, equipment and technology are considered non-financial assets. The Company does not have any non-financial liabilities measured at fair value on a non-recurring basis. Finite-lived intangible assets primarily consist of customer relationships, trade names and reseller relationships, all of which were obtained through acquisitions.

If the Company were required to perform a quantitative assessment for impairment testing of goodwill and indefinite-lived intangible assets, the fair values would generally be estimated using an income approach. As the assumptions employed to measure these assets on a non-recurring basis are based on management's judgment using internal and external data, these fair value determinations are classified as Level 3 in the fair value hierarchy. The Company completed its annual impairment review of its indefinite-lived intangible assets and goodwill as of February 1, 2017, and concluded that there was no impairment. No recent events or changes in circumstances indicate that impairment existed at ~~March~~December 31, 2017.

Other Fair Value Disclosures

Long-term debt. Debt instruments are measured at amortized cost on the Company's unaudited consolidated balance sheet at ~~March~~December 31, 2017. 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 and estimated fair value of the Company’s debt in order of maturity:


	March 31, 2017				September 30, 2016				December 31, 2017				September 30, 2017
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
	(in millions)								(in millions)
1.20% Senior Notes due December 2017	$	1,748	$	1,748	$	1,746	$	1,754	$	—	$	—	$	1,749	$	1,751
2.20% Senior Notes due December 2020	2,989		3,009		2,988		3,077		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	2,239		2,270		2,238		2,359		2,240		2,283		2,240		2,301
3.15% Senior Notes due December 2025	3,966		4,014		3,964		4,225		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	1,485		1,569		1,485		1,698		1,486		1,665		1,485		1,637
4.30% Senior Notes due December 2045	3,461		3,673		3,461		4,045		3,462		3,983		3,463		3,873
3.65% Senior Notes due September 2047									740		770		740		746
Total	$	15,888	$	16,283	$	15,882	$	17,158	$	16,621	$	17,514	$	18,367	$	19,171

Other financial instruments not measured at fair value. The following financial instruments are not measured at fair value on the Company's unaudited consolidated balance sheet at ~~March~~December 31, 2017, 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 ~~March~~December 31, 2017 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.

~~Table of Contents~~

~~VISA INC.~~

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

Investments

Available-for-sale investment securities. The Company had ~~$78~~$110 million in gross unrealized gains and $7$12 million in gross unrealized losses at ~~March~~December 31, 2017. There were ~~$55~~$120 million gross unrealized gains and no$4 million gross unrealized losses at September 30, ~~2016.~~2017. A majority of the Company's available-for-sale investment securities with stated maturities are due within one to two years.

~~Note 5—Intangible Assets and Goodwill~~

Goodwill and intangible assets at March 31, 2017 decreased from September 30, 2016 primarily due to measurement period adjustments as the Company updated the purchase price allocation during the second quarter of fiscal 2017. See ~~Note 2—Visa Europe. Goodwill and intangible assets also decreased due to foreign currency translation, which is recorded as a component of accumulated other comprehensive loss in the consolidated balance sheet.~~

In February 2017, the Company acquired a business for a total purchase consideration net of cash received of approximately $302 million, paid primarily with cash on hand. Total purchase consideration has been allocated to the tangible and identifiable intangible assets acquired, and to liabilities assumed based on their respective fair values on the acquisition date. Related finite-lived intangible assets recorded totaled $104 million with a weighted-average useful life of eight years. Goodwill of $181 million was recorded to reflect the excess purchase consideration over net assets acquired. The consolidated financial statements include the operating results of the acquired business from the date of acquisition. Pro forma information related to the acquisition has not been presented as the impact is not material to the Company's financial results.

~~Note 6—Debt~~

~~The Company had outstanding debt as follows:~~

March 31, 2017 September 30, 2016
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
$ (2 ) $ 1,748
$ —
$ —
$ —
1.37 %
Total current maturities of long-term debt 1,750
(2 ) 1,748
—
—
—

1.20% Senior Notes due December 2017 (the "2017 Notes") —
—
—
1,750
(4 ) 1,746
1.37 %
2.20% Senior Notes due December 2020 (the "2020 Notes") 3,000
(11 ) 2,989
3,000
(12 ) 2,988
2.30 %
2.80% Senior Notes due December 2022 (the "2022 Notes") 2,250
(11 ) 2,239
2,250
(12 ) 2,238
2.89 %
3.15% Senior Notes due December 2025 (the "2025 Notes") 4,000
(34 ) 3,966
4,000
(36 ) 3,964
3.26 %
4.15% Senior Notes due December 2035 (the "2035 Notes") 1,500
(15 ) 1,485
1,500
(15 ) 1,485
4.23 %
4.30% Senior Notes due December 2045 (the "2045 Notes") 3,500
(39 ) 3,461
3,500
(39 ) 3,461
4.37 %
Total long-term debt 14,250
(110 ) 14,140
16,000
(118 ) 15,882

Total debt $ 16,000
$ (112 ) $ 15,888
$ 16,000
$ (118 ) $ 15,882

Table of Contents

VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 4—Debt

The Company had outstanding debt as follows:



	December 31, 2017							September 30, 2017
	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

2.20% Senior Notes due December 2020	3,000		(9		)	2,991		3,000		(10		)	2,990		2.30	%
2.15% Senior Notes due September 2022	1,000		(7		)	993		1,000		(7		)	993		2.30	%
2.80% Senior Notes due December 2022	2,250		(10		)	2,240		2,250		(10		)	2,240		2.89	%
3.15% Senior Notes due December 2025	4,000		(31		)	3,969		4,000		(33		)	3,967		3.26	%
2.75% Senior Notes due September 2027	750		(10		)	740		750		(10		)	740		2.91	%
4.15% Senior Notes due December 2035	1,500		(14		)	1,486		1,500		(15		)	1,485		4.23	%
4.30% Senior Notes due December 2045	3,500		(38		)	3,462		3,500		(37		)	3,463		4.37	%
3.65% Senior Notes due September 2047	750		(10		)	740		750		(10		)	740		3.73	%
Total long-term debt	16,750		(129		)	16,621		16,750		(132		)	16,618

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.

~~Interest~~The Company recognized interest expense for the senior notes ~~was $125~~of $138 million and ~~$250~~$125 million for the three ~~and six~~ months ended ~~March~~December 31, 2017 ~~respectively, as compared to $125 million~~ and ~~$149 million for the same periods in 2016. The Company recognized interest expense~~2016, respectively, as non-operating expense ~~and paid $244 million in interest on the senior notes during the six months ended March 31, 2017~~.

~~Commercial Paper Program~~

The Company maintains a commercial paper program to support its working capital requirements and for other general corporate purposes. During the three months ended March 31, 2017, the Company repaid the $567 million of commercial paper that was issued in December 2016. As of March 31, 2017 and September 30, 2016, the Company had no outstanding obligations under the program.

~~Credit Facility Extension~~

On January 27, 2017, the Company extended the term of the $4.0 billion credit facility that was entered into on January 27, 2016. The credit facility will now expire on January 27, 2022. No other terms were materially changed. A brief description of the material terms and conditions of the credit facility are described in the Company's Form 10-K, as filed with the SEC on November 15, 2016.

Note 7—5—Settlement Guarantee Management

The Company indemnifies its clients for settlement losses suffered due to failure of any other clients to fund its settlement obligations in accordance with the Visa ~~Rules.~~rules. This indemnification creates settlement risk for the Company due to the difference in timing between the date of a payment transaction and the date of subsequent settlement. ~~The exposure to settlement losses through Visa's settlement indemnification is accounted for as a settlement risk guarantee.~~ The Company’s settlement exposure is limited to the amount of unsettled Visa payment transactions at any point in time. The Company requires certain 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 ~~$68.5~~$71.3 billion ~~for~~during the ~~quarter~~three months ended ~~March~~December 31, 2017, compared to ~~$67.8~~$67.7 billion ~~for~~during the ~~quarter~~three months ended September 30, ~~2016.~~2017. Of these amounts, ~~$3.1~~$4.5 billion and ~~$2.9~~$2.8 billion were covered by collateral at ~~March~~December 31, 2017 and September 30, ~~2016,~~2017, respectively. The total available collateral balances presented in the table below were greater than the settlement exposure covered by customer collateral held due to instances in which the available collateral exceeded the total settlement exposure for certain financial institutions at each date presented.

Table of Contents

VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The Company maintained collateral as follows:


	March 31, 2017		September 30, 2016		December 31, 2017		September 30, 2017
	(in millions)				(in millions)
Cash equivalents⁽¹⁾	$	1,324	$	1,295	$	1,569	$	1,490
Pledged securities at market value	154		170		169		167
Letters of credit	1,477		1,311		1,319		1,316
Guarantees	1,369		1,418		617		941
Total	$	4,324	$	4,194	$	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 total available collateral balances presented in the table above were greater than the settlement exposure covered by customer collateral held due to instances in which the available collateral exceeded the total settlement exposure for certain financial institutions at each date presented.

The fair value of the settlement risk guarantee is estimated based on a proprietary probability-weighted model and was approximately $3 million ~~and $2 million~~ at ~~March~~December 31, 2017 and September 30, ~~2016, respectively.~~2017. These amounts are reflected in accrued liabilities on the Company's consolidated balance sheets.

~~Table of Contents~~

~~VISA INC.~~

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

In the last week of March 2017, the Company experienced delays in the processing and settlement of $1.6 billion of volume in Europe. As a result of this delay, this volume was processed and settled in the first few days of April 2017 instead of in March 2017. The settlement receivable and payable amounts recorded on the consolidated balance sheets at March 31, 2017 are elevated because they include this unsettled activity. The balances in these accounts returned to historical levels in early April 2017 following the settlement of this activity.

Note 8—6—Pension and Other Postretirement Benefits

The Company sponsors various qualified and non-qualified defined benefit pension and other postretirement benefit plans that provide for retirement and medical benefits for ~~substantially~~ all eligible employees residing in the ~~U.S.~~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, ~~which represent~~comprising only the Visa Europe ~~funded and unfunded pension~~ plans. Disclosures relating to other non-U.S. pension benefit plans are not included as they are immaterial, individually and in aggregate.

In October 2015, the Company amended the U.S. qualified defined benefit pension plan and discontinued employer provided credits after December 31, 2015. Plan participants will continue to earn interest credits on existing balances at December 31, 2015. The Visa Europe pension plans had been closed to new entrants prior to the Visa Europe acquisition.


	U.S. Plans											Non-U.S. Plans			U.S. Plans											Non-U.S. Plans
	Pension Benefits						Other Postretirement Benefits					Pension Benefits			Pension Benefits						Other Postretirement Benefits					Pension Benefits
	Three Months Ended March 31,						Three Months Ended March 31,					Three Months Ended March 31,			Three Months Ended December 31,						Three Months Ended December 31,					Three Months Ended December 31,
	2017			2016			2017		2016			2017			2017			2016			2017		2016			2017			2016
	(in millions)														(in millions)
Service cost	$	—		$	—		$	—	$	—		$	1		$	—		$	—		$	—	$	—		$	1		$	2
Interest cost	9			10			—		—			2			8			9			—		—			3			3
Expected return on assets	(17		)	(18		)	—		—			(4		)
Expected return on plan assets															(17		)	(18		)	—		—			(5		)	(4		)
Amortization of:
Prior service credit	—			—			—		(1		)	—			—			—			—		(1		)	—			—
Actuarial loss	4			2			—		—			1			—			4			—		—			—			—
Curtailment gain	—			—			—		—			—
Settlement loss	11			—			—		—			—			—			2			—		—			—			—
Total net periodic benefit cost	$	7		$	(6	)	$	—	$	(1	)	$	—		$	(9	)	$	(3	)	$	—	$	(1	)	$	(1	)	$	1

U.S. Plans Non-U.S. Plans
Pension Benefits Other Postretirement Benefits Pension Benefits
Six Months Ended
March 31, Six Months Ended
March 31, Six Months Ended
March 31,
2017 2016 2017 2016 2017
(in millions)
Service cost $ —
$ 13
$ —
$ —
$ 3
Interest cost 18
21
—
—
5
Expected return on assets (35 ) (35 ) —
—
(8 )
Amortization of:

Prior service credit —
(1 ) (1 ) (2 ) —
Actuarial loss 8
4
—
—
1
Curtailment gain —
(8 ) —
—
—
Settlement loss 13
—
—
—
—
Total net periodic benefit cost $ 4
$ (6 ) $ (1 ) $ (2 ) $ 1

1913

Table of Contents

VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 9—7—Stockholders' Equity

As-Converted Class A Common Stock. The number of shares of each series and class and the number of shares of class A common stock on an as-converted basis at ~~March~~December 31, 2017, are as follows:


(in millions, except conversion rates)	Shares Outstanding	Conversion Rate Into Class A Common Stock		As-converted Class A Common Stock⁽¹⁾	Shares Outstanding	Conversion Rate Into Class A Common Stock		As-converted Class A Common Stock⁽¹⁾
U.K.&I preferred stock	2	13.3880		33
UK&I preferred stock					2	12.9660		32
Europe preferred stock	3	13.9480		44	3	13.8930		44
Class A common stock ⁽²⁾	1,847	—		1,847	1,805	—		1,805
Class B common stock	245	1.6483	⁽³⁾	405	245	1.6483	⁽³⁾	405
Class C common stock	14	4.0000		55	12	4.0000		49
Total				2,384				2,335


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


⁽²⁾	Class A common stock shares outstanding exclude repurchases traded but not yet settled on or before ~~March~~December 31, 2017.


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

~~During the three months ended March 31, 2017, the newly-formed Visa Foundation received all Visa Inc. shares that were previously recorded as treasury stock. See~~ ~~Note 12—Income Taxes~~.

Reduction in as-converted shares. During the ~~six~~three months ended ~~March~~December 31, 2017, total as-converted class A common stock was reduced by 4317 million shares at an average price of ~~$83.64~~$110.27 per share. Of the 4317 million shares, 4116 million were repurchased in the open market using ~~$3.5~~$1.8 billion of operating cash on hand. Additionally, the Company recovered ~~$120~~$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 ~~U.K.&I.~~UK&I and Europe preferred stock conversion rates and consequently the as-converted class A common stock share count. See Note 3—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 March 31, 2017		Six Months Ended March 31, 2017		Three Months Ended December 31, 2017
Shares repurchased in the open market ⁽²⁾	18		41		16
Average repurchase price per share ⁽³⁾	$	88.45	$	83.59	$	110.24
Total cost	$	1,576	$	3,469	$	1,778


⁽¹⁾	Shares repurchased in the open market reflect repurchases settled during the three ~~and six~~ months ended ~~March~~December 31, 2017. These amounts include repurchases traded but not yet settled on or before September 30, ~~2016 for the six months, or December 31, 2016 for the three months,~~2017 and exclude repurchases traded but not yet settled on or before ~~March~~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 ~~March~~December 31, 2017, the Company's ~~July 2016~~April 2017 share repurchase program had remaining authorized funds of ~~$2.3~~$2.1 billion for share repurchase. All share repurchase programs authorized prior to ~~July 2016~~April 2017 have been completed. In ~~April 2017,~~January 2018, the Company's board of directors authorized an additional ~~$5.0~~$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 a periodic ~~adjustment~~adjustments to the class A common stock conversion rates applicable to the ~~U.K.&I.~~UK&I and Europe preferred stock. See Note 3—2—U.S. and Europe Retrospective Responsibility Plans.

2014

Table of Contents

VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table presents as-converted ~~U.K.&I.~~UK&I and Europe preferred stock, after the Company recovered VE territory covered losses through a conversion rate ~~adjustment,~~adjustments, for the three ~~and six~~ months ended ~~March~~December 31, 2017.

Three and Six Months Ended March 31, 2017
(in millions, except per share and conversion rate data) U.K.&I. Preferred Stock Europe Preferred Stock
Reduction in equivalent number of shares of class A common stock 1
—
⁽¹⁾
Effective price per share ⁽²⁾
$ 85.01
$ 85.01

Recovery through conversion rate adjustment $ 119
$ 1

Conversion rate of preferred stock to class A common stock after adjustment 13.388
13.948

As-converted preferred stock after recovery 33
44



	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


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


⁽²⁾	Effective price per share is calculated using the volume-weighted average price of the Company's class A common stock over a pricing period in accordance with the Company's current certificates of designations for its series B and C convertible participating preferred stock.

Dividends. In ~~April 2017,~~January 2018, the Company’s board of directors declared a quarterly cash dividend of ~~$0.165~~$0.21 per share of class A common stock (determined in the case of class B and C common stock and ~~U.K.~~UK&I and Europe preferred stock on an as-converted basis). The cash dividend will be paid on ~~June~~March 6, ~~2017,~~2018, to all holders of record of the Company's common and preferred stock as of ~~May 19, 2017.~~February 16, 2018. The Company declared and paid ~~$396 millionand$795~~$458 million in dividends to holders of the Company's common stock during the three ~~and six~~ months ended ~~March~~December 31, 2017.

Note ~~10—~~8—Earnings Per Share

Basic earnings per share is computed by dividing net income available to each class 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 of each class of common stock outstanding reflects changes in ownership over the periods presented. See Note 9—7—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 ~~U.K.~~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 Employee Stock Purchase Plan and the assumed vesting of unearned performance shares.

The following table presents earnings per share for the three months ended ~~March~~December 31, 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	$	332	1,854	$	0.18	$	430	2,406	⁽³⁾	$	0.18	$	1,945	1,811	$	1.07	$	2,522	2,353	⁽³⁾	$	1.07
Class B common stock	73		245	$	0.30	$	72	245		$	0.29	435		245	$	1.77	$	434	245		$	1.77
Class C common stock	10		15	$	0.72	$	10	15		$	0.72	54		13	$	4.30	$	54	13		$	4.29
Participating securities⁽⁴⁾	15		Not presented	Not presented		$	15	Not presented		Not presented		88		Not presented	Not presented		$	87	Not presented		Not presented
Net income	$	430										$	2,522

2115

Table of Contents

VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table presents earnings per share for the ~~six months ended March 31, 2017.~~⁽¹⁾

Basic Earnings Per Share Diluted Earnings Per Share
(in millions, except per share data)

Income
Allocation
(A)⁽²⁾

Weighted-
Average
Shares
Outstanding (B)

Earnings per
Share =
(A)/(B)

Income
Allocation
(A)⁽²⁾

Weighted-
Average
Shares
Outstanding (B)

Earnings per
Share =
(A)/(B)
Class A common stock $ 1,928
1,857
$ 1.04
$ 2,500
2,413
⁽³⁾
$ 1.04
Class B common stock 420
245
$ 1.71
$ 419
245
$ 1.71
Class C common stock 65
16
$ 4.15
$ 65
16
$ 4.14
Participating securities⁽⁴⁾
87
Not presented
Not presented
$ 87
Not presented
Not presented
Net income $ 2,500

~~The following table presents earnings per share for the~~ three months ended ~~March~~December 31, 2016.⁽¹⁾

Basic Earnings Per Share Diluted Earnings Per Share
(in millions, except per share data)

Income
Allocation
(A)⁽²⁾

Weighted-
Average
Shares
Outstanding (B)

Earnings per
Share =
(A)/(B)

Income
Allocation
(A)⁽²⁾

Weighted-
Average
Shares
Outstanding (B)

Earnings per
Share =
(A)/(B)
Class A common stock $ 1,360
1,909
$ 0.71
$ 1,707
2,401
⁽³⁾
$ 0.71
Class B common stock 288
245
$ 1.17
$ 288
245
$ 1.17
Class C common stock 55
19
$ 2.85
$ 55
19
$ 2.84
Participating securities⁽⁴⁾
4
Not presented
Not presented
$ 4
Not presented
Not presented
Net income $ 1,707

~~The following table presents earnings per share for the six months ended March 31, 2016~~.⁽¹⁾


	Basic Earnings Per Share					Diluted Earnings Per Share						Basic Earnings Per Share					Diluted Earnings Per Share
	(in millions, except per share data)											(in millions, except per share data)
	Income Allocation (A)⁽²⁾		Weighted- Average Shares Outstanding (B)	Earnings per Share = (A)/(B)		Income Allocation (A)⁽²⁾		Weighted- Average Shares Outstanding (B)		Earnings per Share = (A)/(B)		Income Allocation (A)⁽²⁾		Weighted- Average Shares Outstanding (B)	Earnings per Share = (A)/(B)		Income Allocation (A)⁽²⁾		Weighted- Average Shares Outstanding (B)		Earnings per Share = (A)/(B)
Class A common stock	$	2,910	1,923	$	1.51	$	3,648	2,416	⁽³⁾	$	1.51	$	1,594	1,860	$	0.86	$	2,070	2,421	⁽³⁾	$	0.86
Class B common stock	612		245	$	2.49	$	611	245		$	2.49	347		245	$	1.41	$	346	245		$	1.41
Class C common stock	118		19	$	6.05	$	117	19		$	6.04	57		17	$	3.43	$	57	17		$	3.42
Participating securities⁽⁴⁾	8		Not presented	Not presented		$	8	Not presented		Not presented		72		Not presented	Not presented		$	72	Not presented		Not presented
Net income	$	3,648										$	2,070


⁽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 405 million for the three ~~and six~~ months ended ~~March~~December 31, 2017 and 2016. The weighted-average number of shares of as-converted class C common stock used in the income allocation was 5851 millionand 6367 million for the three ~~and six~~ months ended ~~March~~December 31, 2017 ~~respectively~~ and ~~77 millionand 78 million for the three and six months ended March 31,~~ 2016, respectively. The weighted-average number of shares of preferred stock, included within participating securities, was 3432 million and 35 million of as-converted ~~U.K.~~UK&I preferred stock for the three months ended December 31, 2017 and 2016, respectively, and 44 million of as-converted Europe preferred stock for the three ~~and six~~ months ended ~~March~~December 31, ~~2017.~~

2017 and 2016.

⁽³⁾

Weighted-average diluted shares outstanding are calculated on an as-converted basis, and include incremental common stock equivalents, as calculated under the treasury stock method. The computation includes approximately 5 million common stock equivalents for the three ~~and six~~ months ended ~~March~~December 31, 2017 and 2016, because their effect would be dilutive. The computation excludes 2 million and 3 million of common stock equivalents for the three ~~and six~~ months ended ~~March~~December 31, 2017 and ~~1 million of common stock equivalents for the three and six months ended March 31,~~ 2016, 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 ~~U.K.~~UK&I and Europe preferred stock, restricted stock awards, restricted stock units and earned performance-based shares. Participating securities' income is allocated based on the weighted-average number of shares of as-converted stock.

~~Table of Contents~~

~~VISA INC.~~

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

Note ~~11—~~9—Share-based Compensation

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


	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	1,671,344	$	13.90	$	80.82	1,622,760	$	17.88	$	109.82
Restricted stock units ("RSUs")	3,122,624	$	80.96			2,626,011	$	109.82
Performance-based shares⁽¹⁾	634,651	$	86.37			641,498	$	120.11


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

The Company’s non-qualified stock options and RSUs are equity awards with service-only conditions and are accordingly expensed on a straight-line basis over the vesting period. The Company's performance-based shares are equity awards with service, market and performance conditions that are accounted for using the graded-vesting method. The Company recorded share-based compensation cost of ~~$116~~$68 million for the ~~six~~three months ended ~~March~~December 31, 2017, net of estimated forfeitures, which are adjusted as appropriate.

Table of Contents

VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note ~~12—~~10—Income Taxes

In February 2017, the Company completed a reorganization of Visa Europe and certain other legal entities ("legal entity reorganization" or "reorganization") to align the Company's corporate structure to the geographic jurisdictions in which it conducts business operations. As a result of the reorganization, during the three months ended March 31, 2017, the Company recorded a non-recurring, non-cash income tax provision of $1.5 billion primarily related to the elimination of deferred tax balances originally recognized upon the acquisition of Visa Europe. Associated with this reorganization, the newly-formed Visa Foundation received all Visa Inc. shares held by Visa Europe, which were previously recorded as treasury stock.

The effective income tax rates were ~~84%~~22% and ~~56%~~31% for the three ~~and six~~ months ended ~~March~~December 31, 2017 ~~respectively,~~ and ~~30% and 28% for the three and six months ended March 31,~~ 2016, respectively. The effective tax rate for the three ~~and six~~ months ended ~~March~~December 31, 2017 differs from the effective tax rate in the same ~~periods~~prior-year period primarily due to U.S. tax reform legislation, commonly referred to as the Tax Cuts and Jobs Act (the "Tax Act”), enacted on December 22, 2017. The Tax Act transitions the U.S. tax system to a new territorial system and lowers 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 is a blended rate of 24.5%, which will be reduced to 21% in fiscal 2019 and thereafter.

As a result of the reduction in the ~~prior fiscal year primarily due to:~~

federal corporate tax rate, the ~~aforementioned $1.5~~Company remeasured its net deferred tax liabilities as of the enactment date of the Tax Act. The deferred tax remeasurement resulted in a one-time, non-cash tax benefit estimated to be approximately $1.1 billion, ~~non-recurring, non-cash income tax provision related to the legal entity reorganization~~ recorded in the ~~quarter~~three months ended ~~March~~December 31, ~~2017;~~2017.

~~$71 million~~In transitioning to the new territorial tax ~~benefit related~~system, the Tax Act requires the Company to ~~Visa Foundation's receipt~~include certain untaxed foreign earnings of ~~Visa Inc. shares mentioned above;~~

~~$20 million~~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 ~~$46 million of excess~~at 8% on the remaining non-cash amount. The 15.5% and 8% tax, ~~benefits related~~collectively referred to ~~share-based payments~~as the “transition tax”, was estimated to be $1.1 billion, and was recorded ~~during~~in the three ~~and six~~ months ended ~~March~~December 31, ~~2017, respectively,~~2017. The Company intends to elect to pay the transition tax over a period of eight years as ~~a result~~permitted by the Tax Act.

The above-mentioned accounting impacts of ~~early adoption~~the deferred tax remeasurement and transition tax are provisional, based on currently available information and technical guidance on the interpretations of ~~Accounting Standards Update 2016-09. See~~ ~~Note 1—Summary~~the new law. The Company continues to obtain and analyze additional information and guidance as they become available to complete the accounting for the tax impacts of ~~Significant Accounting Policies~~;

the ~~restrictions on U.S.~~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, ~~that can be claimed for Visa Europe's~~the final determination of the untaxed foreign ~~taxes prior~~earnings subject to the ~~aforesaid legal entity reorganization;~~transition tax, and

the ~~absence~~final determination of the ~~non-taxable $255 million revaluation~~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 on global intangible low-tax income, which, in general, is determined annually based on the ~~Visa Europe put option~~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 income 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 ~~quarter~~three months ended December 31, ~~2015.~~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.

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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 ~~and six~~ months ended ~~March~~December 31, 2017, the Company's gross unrecognized tax benefits increased by ~~$23 million and $56 million, respectively.~~$44 million. The Company's net unrecognized tax benefits that, if recognized, would favorably impact the effective tax rate ~~if recognized,~~ increased by ~~$69 million and $97 million for the three and six months ended March 31, 2017, respectively.~~$38 million. The increase in unrecognized tax benefits is primarily related to various tax positions across several jurisdictions. During the three ~~and six~~ months ended ~~March~~December 31, 2017 and 2016, 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.

~~Table of Contents~~

~~VISA INC.~~

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

Note ~~13—~~11—Legal Matters

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

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

The following table summarizes the activity related to accrued litigation:


	Fiscal 2017			Fiscal 2016			Three Months Ended
	(in millions)						December 31, 2017			December 31, 2016
Balance at October 1	$	981		$	1,024
							(in millions)
Balance at beginning of period							$	982		$	981
Provision for uncovered legal matters	17			1			—			15
Accrual of VE territory covered litigation	142			—			—			86
Payments on legal matters	(144		)	(12		)	(152		)	(88		)
Balance at March 31	$	996		$	1,013
Balance at end of period							$	830		$	994

Accrual Summary—U.S. Covered Litigation

Visa Inc., Visa U.S.A. and Visa International are parties to certain legal proceedings that are covered by the U.S. retrospective responsibility plan, which the Company refers to as the U.S. covered litigation. See Note 3—2—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:

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



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

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 a periodic ~~adjustment~~adjustments to the conversion rates applicable to the ~~U.K.~~UK&I preferred stock and Europe preferred stock. An accrual for the VE territory covered losses and a reduction to stockholders' equity will be recorded when the loss is deemed to be probable and reasonably estimable. See further discussion below under VE Territory Covered Litigation and Note 3—2—U.S. and Europe Retrospective Responsibility Plans.

~~Table of Contents~~

~~VISA INC.~~

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

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


	Fiscal 2017			Three Months Ended
	(in millions)			December 31, 2017			December 31, 2016
Balance at October 1	$	2
				(in millions)
Balance at beginning of period				$	1		$	2
Accrual for VE territory covered litigation	142			—			86
Payments on VE territory covered litigation	(144		)	(1		)	(88		)
Balance at March 31	$	—
Balance at end of period				$	—		$	—

U.S. Covered Litigation

Interchange Multidistrict Litigation (MDL)

~~Putative Class Actions.~~ On November 23, 2016, class plaintiffs that signed the 2012 Settlement Agreement filed a petition for writ of certiorari with the U.S. Supreme Court seeking review of the Second Circuit’s decision that vacated the district court’s certification of the merchant class and reversed the approval of the settlement. The Supreme Court denied the petition on March 27, 2017.

On November 30, 2016, the district court entered an order appointing interim counsel for two putative classes of plaintiffs, a “Damages Class” and an “Injunctive Relief Class.” Following the district court’s order, on February 8, 2017, plaintiffs purporting to act on behalf of the putative Damages Class sought leave to file an amended complaint and plaintiffs purporting to act on behalf of the putative Injunctive Relief Class filed a new class complaint, as described below.

The plaintiffs that signed the 2012 Settlement Agreement, acting on behalf of the putative Damages Class, filed a motion requesting leave to file a Third Consolidated Amended Class Action Complaint. The complaint seeks money damages alleged to range in the tens of billions of dollars (subject to trebling), as well as attorneys' fees and injunctive relief, and names as defendants Visa Inc., Visa U.S.A., Visa International, MasterCard Incorporated and MasterCard International Incorporated, and certain U.S. financial institutions. The plaintiffs assert that the proposed complaint updates, among other things, claims for damages and accounts for industry developments. Defendants opposed the Damages Class plaintiffs’ motion on March 10, 2017.

A new group of purported class plaintiffs, acting on behalf of the putative Injunctive Relief Class, filed a class action complaint seeking declaratory and injunctive relief, as well as attorneys’ fees. That complaint seeks, among other things, an injunction against: the setting of default interchange rates; certain Visa Rules relating to merchants, including the honor-all-cards rule; and various transaction fees, including the fixed acquirer network fee. The complaint names as defendants Visa Inc., Visa U.S.A., Visa International, MasterCard Incorporated and MasterCard International Incorporated, and certain U.S. financial institutions.

– Individual Merchant ~~Actions.~~ On February 8, 2017, the same day that the putative Damages Class plaintiffs sought leave to file an amended complaint and the putative Injunctive Relief Class plaintiffs filed a new class action complaint, certain other individual merchants filed motions in existing actions in MDL 1720 requesting leave to amend their complaints. Merchants requesting leave to amend assert, among other things, that their proposed complaints add claims for injunctive relief and update claims for damages. Defendants opposed the various merchants’ motions on March 10, 2017. In addition, on February 8, 2017, certain individual merchants filed a new action in federal court which was subsequently included in MDL 1720.Actions

A number of individual merchant actions previously filed have been settled, and remain ~~settled, but~~settled. In addition, following the automatic termination of the settlement agreement with Wal-Mart Stores Inc. ~~automatically terminated upon the exhaustion of appeals concerning the reversal of approval of the 2012 Settlement Agreement. The termination results in~~, Visa and Wal-Mart Stores Inc. entered into a ~~decrease of the “settled” percentage of Visa-branded payment card sales volume of merchants who opted out of the 2012 Settlement Agreement.~~new, unconditional settlement agreement on October 31, 2017. Consequently, as of the filing date, Visa has reached settlement agreements with individual merchants representing approximately ~~34%~~51% of the Visa-branded payment card sales volume of merchants who opted out of the 2012 Settlement Agreement.

VE Territory Covered Litigation

UK Merchant Litigation

Since July 2013, in excess of 300 Merchants (the capitalized term "Merchant," when used in this section, means a merchant together with subsidiary/affiliate companies that are party to the same claim) have commenced proceedings against Visa Europe, Visa Inc. and Visa International relating to interchange rates in Europe. They seek damages for alleged anti-competitive conduct in relation to one or more of the following types of interchange fees for credit and debit card transactions: UK domestic, Irish domestic, other European domestic, intra-European Economic Area and/or other inter-regional. 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 Merchants with outstanding claims.

2519

Table of Contents

VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

~~Unlike the matters above, all of which were filed in federal court or are pending in MDL 1720, one merchant filed~~In November 2016, a ~~case on February 17, 2017, in Texas state court~~. The Texas merchant generally pursues claims on allegations similar to those raised in MDL 1720. Based on currently available information, the Company believes this matter may be covered by the U.S. retrospective responsibility plan.

~~Consumer Interchange Litigation~~

~~On December 9, 2016, the Second Circuit denied plaintiffs’ petition for rehearing. On March 9, 2017, plaintiffs filed a petition for writ of certiorari with the U.S. Supreme Court.~~

~~VE Territory Covered Litigation~~

~~U.K. Merchant Litigation~~

Since July 2013, in excess of 150 Merchants (the capitalized term "Merchant," when used in this section, means a merchant together with subsidiary/affiliate companies who have issued claims jointly) havetrial commenced ~~proceedings against Visa Europe, Visa Inc. and Visa International~~ relating to interchange rates in Europe, and seek damages for alleged anti-competitive conduct primarily in relation to U.K. domestic and/or Irish domestic and/or intra-EEA interchange fees for credit and debit cards. As of the date of this report, Visa Europe, Visa Inc. and Visa International have settled the claims asserted by 15 Merchants, leaving more than 130 Merchants with outstanding claims.

~~The trial in relation to~~ claims filed ~~in 2013~~ by a number of Merchants. All of these Merchants ~~began in November 2016. Of the 15 settling Merchants, three Merchants~~except one settled before the trial ~~commenced and the remaining 12 settled during trial. The trial~~ concluded in March 2017. On November 30, 2017, the court found entirely in Visa’s favor and ~~a decision~~entered judgment dismissing the remaining claim. An appeal has been lodged, and the Court of Appeal listed the matter for hearing in April 2018. A further judgment on exemption issues is ~~pending with respect~~expected to ~~one remaining Merchant~~be released in early 2018, which will not change the overall finding on liability set out in the November 30, 2017 judgment.

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

~~"Indirect Purchaser" Actions~~

~~On January 12, 2017, the appeals court affirmed the trial court's order denying the objector's motion for attorneys' fees and costs. The objector subsequently agreed not to seek any further appeal.~~

Canadian Competition Proceedings

~~On March 8, 2017, Visa entered into an agreement in principle with merchant class plaintiffs to settle, on a national basis, the active class actions filed~~Merchant Litigation. The court in Quebec ~~British Columbia, Ontario, Saskatchewan~~held a class certification hearing in November 2017 and ~~Alberta. The settlement remains subject to execution of a final settlement agreement and court approval.~~reserved decision.

~~Data Pass Litigation~~Black Card

On December ~~20, 2016,~~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 ~~Second~~Tenth Circuit affirmed the dismissal as to certain claims against Gamestop Corporation, Webloyalty.com, Inc. and Visa, vacated the dismissal as to certain claims against Webloyalty and Gamestop, and remanded the case to the district court for further proceedings on ~~the remaining claims.~~

~~U.S. ATM Access Fee Litigation~~

On November 17, 2016, the U.S. Supreme Court ordered that the writs of certiorari be dismissed as improvidently granted. On February 13, 2017, plaintiffs in the National ATM Council action filed a renewed application for a preliminary injunction to prohibit Visa and MasterCard from continuing to enforce non-discrimination ATM access fee rules. The application is pending.

~~Federal Trade Commission~~

~~Notice Regarding EMV Chip Debit Cards.~~ ~~On November 22, 2016, the FTC's Bureau of Competition informed Visa that the Bureau had closed its investigation.~~

~~Table of Contents~~

~~VISA INC.~~

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

~~EMV Chip Liability Shift~~

~~On March~~May 10, 2017, the plaintiffs filed a motion for class certification. On March 20, 2017, Visa and MasterCard filed a motion to transfer the action to the U.S. District Court for the Eastern District of New York, or, in the alternative, to stay the action. The motion is pending.

~~Walmart Acceptance Agreement~~

~~On February 27, 2017, the Court granted Walmart’s motion to dismiss Visa’s counterclaim for fraudulent inducement. Walmart’s claims and Visa’s remaining counterclaims remain pending.~~

~~Broadway Grill~~

On February 21, 2017, Visa filed a motion to stay the litigation pending the outcome of the federal class actions in MDL 1720. On March 20, 2017, the U.S. Court of Appeals for the Ninth Circuit granted Visa permission to appeal the district court’s order remanding the case to California state court.

On April 5, 2017, plaintiff Nuts for Candy, a California merchant represented by the same counsel that represents Broadway Grill, filed a complaint in California state court containing allegations similar to those raised by Broadway Grill.

~~Korea Fair Trade Commission~~

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

~~Ohio Attorney General Civil Investigative Demand~~

On January 19, 2017, the State of Ohio Office of the Attorney General issued an investigative demand to Visa seeking documents and information focusing on Visa's rules related to the acceptance of Visa debit cards, as well as cardholder verification methods and the routing of Visa debit transactions. Visa is cooperating with the Attorney General.2017.



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

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

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 that relate to, among other things, our future operations, prospects, developments, strategies and growth of our ~~business, expectations regarding client incentives,~~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,~~countries; industry ~~developments,~~developments; expectations regarding litigation matters, investigations and proceedings; timing and amount of stock ~~repurchases,~~repurchases; sufficiency of sources of liquidity and ~~funding,~~funding; effectiveness of our risk management ~~programs~~programs; and expectations regarding the impact of recent accounting pronouncements on our consolidated financial statements. Forward-looking statements generally are identified by words such as "believes," "estimates," "expects," "intends," "may," "projects," “could," "should," "will," "continue" and other similar expressions. All statements other than statements of historical fact could be forward-looking statements, which speak only as of the date they are made, are not guarantees of future performance and are subject to certain risks, uncertainties and other factors, many of which are beyond our control and are difficult to predict. We describe risks and uncertainties that could cause actual results to differ materially from those expressed in, or implied by, any of these forward-looking statements in our SEC filings, including our Annual Report on Form 10-K, for the year ended September 30, ~~2016,~~2017 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 ~~connects consumers, merchants, financial institutions, businesses, strategic partners~~enables fast, secure and ~~government entities in~~reliable electronic payments across more than 200 countries and ~~territories to fast, secure and reliable electronic payments.~~territories. We ~~enable~~facilitate global commerce through the transfer of value and information among ~~these participants.~~a global network of consumers, merchants, financial institutions, businesses, strategic partners and government entities. Our advanced transaction processing network, ~~facilitates~~VisaNet, enables authorization, clearing and settlement of payment transactions and ~~enables~~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 ~~six~~three months ended ~~March~~December 31, 2017 reflects continued uneven economic growth around the world.

~~Legal entity reorganization.~~U.S. Tax Reform Legislation. ~~In February~~On December 22, 2017, ~~we completed~~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 ~~reorganization of Visa Europe~~new territorial system and ~~certain other legal entities to align our~~lowers the statutory federal corporate ~~structure to the geographic jurisdictions in which we conduct business operations.~~income tax rate. As a result of the ~~reorganization, during~~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 ~~March~~December 31, ~~2017, we recorded a non-recurring, non-cash income tax provision of $1.5 billion primarily related~~2017. In transitioning to the ~~elimination~~new territorial system, the Tax Act requires us to include certain untaxed foreign earnings of ~~deferred~~non-U.S. subsidiaries in our fiscal 2018 taxable income. This tax, ~~balances originally recognized upon~~referred to as the ~~acquisition of Visa Europe. Associated with this reorganization,~~"transition tax", was estimated to be $1.1 billion and recorded in the ~~newly-formed Visa Foundation received all Visa Inc. shares held by Visa Europe, which were previously recorded as treasury stock.~~three months ended December 31, 2017. See Note 10—Income Taxes to our unaudited consolidated financial statements.

Financial highlights. Our financial results for the three ~~and six~~ months ended ~~March~~December 31, 2017 ~~and 2016~~ reflect the impact of certain significant items that we believe are 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. Our as-reported U.S. GAAP and adjusted non-GAAP net income and diluted earnings per share for these periods are as follows:


	Three Months Ended March 31,						Six Months Ended March 31,						Three Months Ended December 31,
(in millions, except percentages and per share data)	2017		2016		% Change⁽¹⁾		2017		2016		% Change⁽¹⁾		2017		2016		% Change⁽¹⁾
Net income, as reported	$	430	$	1,707	(75	)%	$	2,500	$	3,648	(31	)%	$	2,522	$	2,070	22	%
Diluted earnings per share, as reported	$	0.18	$	0.71	(75	)%	$	1.04	$	1.51	(31	)%	$	1.07	$	0.86	25	%
Net income, as adjusted⁽²⁾	$	2,066	$	1,626	27	%	$	4,136	$	3,312	25	%	$	2,536	$	2,070	23	%
Diluted earnings per share, as adjusted⁽²⁾	$	0.86	$	0.68	27	%	$	1.71	$	1.37	25	%	$	1.08	$	0.86	26	%


⁽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.

We recorded net operating revenues of ~~$4.5 billion and $8.9~~$4.9 billion for the three ~~and six~~ months ended ~~March~~December 31, 2017, ~~respectively,~~ an increase of ~~23% and 24%, respectively,~~9% over the ~~prior year~~prior-year comparable ~~periods,~~period, reflecting ~~the operating revenues of Visa Europe and~~ continued growth in nominal payments volume, processed transactions and nominal cross-border ~~volume and processed transactions.~~volume. The effect of exchange rate movements in the three ~~and six~~ months ended ~~March~~December 31, 2017, as partially mitigated by our hedging program, resulted in an approximately ~~negative two-and-a-half and three~~one percentage point ~~impacts~~positive impact to our net operating revenue ~~growth, respectively.~~growth.

Total operating expenses for the three ~~and six~~ months ended ~~March~~December 31, 2017 were ~~$1.7~~$1.5 billion, ~~and $3.0 billion, respectively,~~ an increase of ~~40% and 28%~~13%, ~~respectively,~~ over ~~prior year~~the prior-year comparable periods. Adjusted operating expenses, which excludes the non-recurring, non-cash operating expense related to Visa Inc. shares received by the newly-formed Visa Foundation, were $1.5 billion and $2.8 billion, respectively, an increase of 24% and 20%, respectively, over prior year comparable periods.period. The increase in ~~both periods~~the period was ~~mainly from the inclusion of Visa Europe's operating~~primarily due to increases in personnel expenses, ~~following the acquisition.~~general and administrative expenses, network and processing expenses and professional fees as we continue to invest to support growth.

Adjusted financial results. Our financial results for the three ~~and six~~ months ended ~~March~~December 31, 2017 ~~and 2016~~ reflect the impact of certain significant items that we do not believe are indicative of our ongoing operating performance in ~~these~~this period or future periods, as they ~~are~~were either non-recurring or ~~have~~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.

~~Elimination~~Remeasurement of deferred tax balances. During the ~~second quarter of fiscal~~three months ended December 31, 2017, in connection with the Tax Act's reduction of the corporate income tax rate, we remeasured our ~~legal entity reorganization, we eliminated~~net deferred tax ~~balances originally recognized upon~~liabilities as of the ~~acquisition of Visa Europe,~~enactment date, resulting in the recognition of a non-recurring, non-cash income tax ~~provision of $1.5~~benefit estimated to be approximately $1.1 billion.

~~Charitable contribution.~~Transition tax on foreign earnings. During the ~~second quarter~~three months ended December 31, 2017, in connection with the Tax Act's requirement that we include certain untaxed foreign earnings of non-U.S. subsidiaries in our fiscal 2017, associated with our legal entity reorganization, we recognized a non-recurring, non-cash general and administrative expense of $192 million, before tax, related to the charitable donation of Visa Inc. shares that were acquired as part of the Visa Europe acquisition and held as treasury stock. Net of the related cash tax benefit of $71 million, determined by applying applicable tax rates, adjusted net2018 taxable income, ~~increased by $121 million.~~

~~Revaluation of Visa Europe put option.~~ ~~During the first quarter of fiscal 2016,~~ we recorded a ~~decrease of $255 million in the fair value of the Visa Europe put option, resulting in the recognition of non-cash income in other non-operating income. This amount is not subject~~one-time transition tax estimated to ~~income tax and therefore has no impact on our reported income tax provision.~~be approximately $1.1 billion.

~~Net unrealized gains on currency forward contracts.~~See ~~During the second quarter of fiscal 2016, we entered into currency forward contracts~~ Note 10—Income Taxes to ~~mitigate a portion of~~ our foreign currency exchange rate risk associated with the upfront cash consideration paid in the Visa Europe acquisition. As a result, we recorded non-recurring, net unrealized gains of $116 million, before tax, in non-operating income. Net of related tax expense of $35 million, determined by applying applicable federal and state tax rates, the impact to net income was $81 million.unaudited consolidated financial 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 ~~tables reconcile~~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 ~~and six~~ months ended ~~March~~December 31, ~~2017 and~~2017. There were no comparable adjustments recorded for the three months ended December 31, 2016.

Three Months Ended March 31, 2017
(in millions, except percentages and per share data) Operating Expenses
Operating Margin
_(1),(2)

Non-operating Income (Expense)
Income Tax Provision
Net Income
Diluted Earnings Per Share⁽¹⁾
As reported $ 1,669

63 %
$ (106 )
$ 2,272

$ 430

$ 0.18
Elimination of deferred tax balances —

— %
—

(1,515 )
1,515

0.63
Charitable contribution (192 )
4 %
—

71

121

0.05
As adjusted $ 1,477

67 %
$ (106 )
$ 828

$ 2,066

$ 0.86

Six Months Ended March 31, 2017
(in millions, except percentages and per share data) Operating Expenses
Operating Margin
_(1),(2)
Non-operating Income (Expense) Income Tax Provision Net Income
Diluted Earnings Per Share⁽¹⁾
As reported $ 3,030
66 % $ (227 ) $ 3,181
$ 2,500
$ 1.04
Elimination of deferred tax balances —
— % —
(1,515 ) 1,515
0.63
Charitable contribution (192 ) 2 % —
71
121
0.05
As adjusted $ 2,838
68 % $ (227 ) $ 1,737
$ 4,136
$ 1.71

Three Months Ended March 31, 2016
(in millions, except percentages and per share data) Operating Expenses
Operating Margin
_(1),(2)
Non-operating Income (Expense) Income Tax Provision Net Income
Diluted Earnings Per Share⁽¹⁾
As reported $ 1,192
67 % $ 7
$ 734
$ 1,707
$ 0.71
Net unrealized gains on currency forward contracts —
— % (116 ) (35 ) (81 ) (0.03 )
As adjusted $ 1,192
67 % $ (109 ) $ 699
$ 1,626
$ 0.68

Six Months Ended March 31, 2016
(in millions, except percentages and per share data) Operating Expenses
Operating Margin
_(1),(2)
Non-operating Income (Expense) Income Tax Provision Net Income
Diluted Earnings Per Share⁽¹⁾
As reported $ 2,361
67 % $ 250
$ 1,432
$ 3,648
$ 1.51
Net unrealized gains on currency forward contracts —
— % (116 ) (35 ) (81 ) (0.03 )
Revaluation of Visa Europe put option —
— % (255 ) —
(255 ) (0.11 )
As adjusted $ 2,361
67 % $ (121 ) $ 1,397
$ 3,312
$ 1.37



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


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


⁽²⁾	~~Operating margin is calculated as operating income divided by net operating revenues.~~

Common stock repurchases. During the three months ended ~~March~~December 31, 2017, we repurchased 1816 million shares of our class A common stock in the open market using ~~$1.6~~$1.8 billion of cash on hand. As of ~~March~~December 31, 2017, we had remaining authorized funds of ~~$2.3~~$2.1 billion for share repurchase. In ~~April 2017,~~January 2018, our board of directors authorized an additional ~~$5.0~~$7.5 billion share repurchase program. See Note 9—7—Stockholders' Equity to our unaudited consolidated financial statements.

Nominal payments volume and transaction counts. Payments volume is the primary driver for our service revenues, and the number of processed transactions is the primary driver for our data processing revenues. Nominal payments volume over the prior year posted ~~double-digit~~high single-digit growth in the ~~U.S.,~~United States, driven mainly by consumer credit. ~~Nominal international payments volume growth was positively impacted due to the inclusion of nominal payments volume related to Visa Europe for the three and six months ended December 31, 2016~~⁽¹⁾. Growth 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 for the three ~~and six~~ months ended ~~December 31, 2016~~September 30, 2017⁽¹⁾. Growth in processed transactions reflects the ~~inclusion of Visa Europe's processed transactions for the three and six months ended March 31, 2017.~~ongoing worldwide shift to electronic payments.

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

United States International Visa Inc.

Three Months Ended December 31,⁽¹⁾

Three Months Ended December 31,⁽¹⁾

Three Months Ended December 31,⁽¹⁾
2016 2015 %
Change 2016 2015 %
Change 2016 2015 %
Change
(in billions, except percentages)
Nominal payments volume
Consumer credit $ 336
$ 275
22 % $ 545
$ 438
24 % $ 881
$ 713
23 %
Consumer debit⁽³⁾
343
327
5 % 379
116
226 % 722
444
63 %
Commercial⁽⁴⁾
125
111
12 % 75
37
100 % 200
149
34 %
Total nominal payments volume $ 804
$ 714
13 % $ 999
$ 591
69 % $ 1,802
$ 1,306
38 %
Cash volume 134
128
4 % 588
456
29 % 722
584
24 %
Total nominal volume⁽⁵⁾
$ 937
$ 842
11 % $ 1,587
$ 1,048
51 % $ 2,524
$ 1,890
34 %


	United States						International						Visa Inc.						United States						International⁽³⁾						Visa Inc.⁽³⁾
	Six Months Ended December 31,⁽¹⁾						Six Months Ended December 31,⁽¹⁾						Six Months Ended December 31,⁽¹⁾						Three Months Ended September 30,⁽¹⁾						Three Months Ended September 30,⁽¹⁾						Three Months Ended September 30,⁽¹⁾
	2016		2015		% Change		2016		2015		% Change		2016		2015		% Change		2017		2016		% Change		2017		2016		% Change		2017		2016		% Change
	(in billions, except percentages)																		(in billions, except percentages)
Nominal payments volume
Consumer credit	$	651	$	539	21	%	$	1,146	$	862	33	%	$	1,797	$	1,401	28	%	$	348	$	315	10	%	$	589	$	551	7	%	$	937	$	866	8	%
Consumer debit⁽³⁾⁽⁴⁾	670		646		4	%	790		227		248	%	1,460		873		67	%	354		328		8	%	419		359		17	%	773		686		13	%
Commercial⁽⁴⁾⁽⁵⁾	250		222		12	%	154		74		108	%	404		296		36	%	134		125		8	%	86		75		15	%	220		200		10	%
Total nominal payments volume	$	1,572	$	1,407	12	%	$	2,090	$	1,163	80	%	$	3,661	$	2,570	42	%	$	836	$	768	9	%	$	1,094	$	985	11	%	$	1,930	$	1,752	10	%
Cash volume	269		257		5	%	1,214		912		33	%	1,483		1,169		27	%	142		135		5	%	605		595		2	%	747		731		2	%
Total nominal volume⁽⁵⁾⁽⁶⁾	$	1,840	$	1,664	11	%	$	3,303	$	2,075	59	%	$	5,144	$	3,739	38	%	$	978	$	903	8	%	$	1,700	$	1,580	8	%	$	2,677	$	2,483	8	%

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


	International				Visa Inc.				International				Visa Inc.				International⁽³⁾				Visa Inc.⁽³⁾
	Three Months Ended December 31, 2016 vs. 2015⁽¹⁾				Three Months Ended December 31, 2016 vs. 2015⁽¹⁾				Six Months Ended December 31, 2016 vs. 2015⁽¹⁾				Six Months Ended December 31, 2016 vs. 2015⁽¹⁾				Three Months Ended September 30, 2017 vs. 2016⁽¹⁾				Three Months Ended September 30, 2017 vs. 2016⁽¹⁾
	Nominal		Constant⁽⁶⁾		Nominal		Constant⁽⁶⁾		Nominal		Constant⁽⁶⁾		Nominal		Constant⁽⁶⁾		Nominal		Constant⁽⁷⁾		Nominal		Constant⁽⁷⁾
Payments volume growth
Consumer credit	24	%	26	%	23	%	24	%	33	%	34	%	28	%	29	%
Consumer debit⁽³⁾	226	%	230	%	63	%	63	%	248	%	255	%	67	%	68	%
Commercial⁽⁴⁾	100	%	97	%	34	%	34	%	108	%	104	%	36	%	36	%
Consumer credit growth																	7	%	7	%	8	%	8	%
Consumer debit growth⁽⁵⁾																	17	%	14	%	13	%	11	%
Commercial growth⁽⁶⁾																	15	%	15	%	10	%	10	%
Total payments volume growth	69	%	71	%	38	%	39	%	80	%	81	%	42	%	43	%	11	%	10	%	10	%	10	%
Cash volume growth	29	%	31	%	24	%	25	%	33	%	37	%	27	%	29	%	2	%	0	%	2	%	1	%
Total volume growth	51	%	53	%	34	%	34	%	59	%	62	%	38	%	39	%	8	%	7	%	8	%	7	%

⁽¹⁾

Service revenues in a given quarter are assessed based on nominal payments volume in the prior quarter. Therefore, service revenues reported for the three ~~and six~~ months ended ~~March~~December 31, 2017 and 2016 were based on nominal payments volume reported by our financial institution clients for the three ~~and six~~ months ended ~~December 31,~~September 30, 2017 and 2016, ~~and 2015,~~ respectively.


⁽²⁾	Figures in the table may not recalculate exactly due to rounding. Percentage changes 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.


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

⁽⁵⁾⁽⁶⁾

Total nominal volume is the sum of total nominal payments volume and cash volume. Total nominal payments volume is the total monetary value of transactions for goods and services that are purchased on cards carrying the Visa, Visa Electron, Interlink and 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~~Prior-period updates are not material.


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

The following table provides the number of transactions ~~processed by our VisaNet system, including transactions~~ involving Visa, Visa Electron, Interlink, V PAY and PLUS cards processed on Visa's ~~networks.~~networks during the periods presented.⁽¹⁾


	Three Months Ended March 31,				Six Months Ended March 31,				Three Months Ended December 31,
	2017	2016	% Change⁽²⁾		2017	2016	% Change⁽²⁾		2017	2016	% Change
	(in millions, except percentages)
Visa processed transactions	26,256	18,475	42	%	53,585	37,461	43	%	30,508	27,329	12	%


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


⁽²⁾	~~Visa processed transactions for the three and six months ended March 31, 2017 include transactions processed by Visa Europe.~~

Results of Operations

Operating Revenues

The following table sets forth our operating revenues earned in the U.S.~~, internationally~~ and in accordance with the Framework Agreement prior to the Visa Europe acquisition on June 21, 2016. Visa Europe revenue earned for the three and six months ended March 31, 2017 is included in International.internationally.


	Three Months Ended March 31,				2017 vs. 2016					Six Months Ended March 31,				2017 vs. 2016					Three Months Ended December 31,				2017 vs. 2016
	2017		2016		$ Change			% Change⁽¹⁾		2017		2016		$ Change			% Change⁽¹⁾		2017		2016		$ Change		% Change⁽¹⁾
	(in millions, except percentages)																		(in millions, except percentages)
U.S.	$	2,156	$	1,924	$	232		12	%	$	4,277	$	3,865	$	412		11	%	$	2,265	$	2,121	$	144	7	%
International	2,321		1,640		681			42	%	4,661		3,199		1,462			46	%	2,597		2,340		257		11	%
Revenues earned under the Framework Agreement⁽²⁾	—		62		(62		)	(100	)%	—		127		(127		)	(100	)%
Net operating revenues	$	4,477	$	3,626	$	851		23	%	$	8,938	$	7,191	$	1,747		24	%	$	4,862	$	4,461	$	401	9	%


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


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

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

Our operating revenues, primarily service revenues, international transaction revenues and client incentives, are impacted by the overall strengthening or weakening of the U.S. dollar as payments volume and related revenues denominated in local currencies are converted to U.S. dollars. The effect of exchange rate movements in the three ~~and six~~ months ended ~~March~~December 31, 2017, as partially mitigated by our hedging program, resulted in an approximately ~~negative two-and-a-half and three~~one percentage point ~~impacts~~positive impact to our net operating revenue ~~growth, respectively.~~

growth.

The following table sets forth the components of our net operating revenues, including operating revenues earned by Visa Europe for the three and six months ended March 31, 2017. Other revenues for the three and six months ended March 31, 2016 also includes revenue earned from Visa Europe in accordance with the Framework Agreement prior to its acquisition on June 21, 2016.revenues.


	Three Months Ended March 31,						2017 vs. 2016					Six Months Ended March 31,						2017 vs. 2016					Three Months Ended December 31,						2017 vs. 2016
	2017			2016			$ Change			% Change⁽¹⁾		2017			2016			$ Change			% Change⁽¹⁾		2017			2016			$ Change			% Change⁽¹⁾
	(in millions, except percentages)																						(in millions, except percentages)
Service revenues	$	1,993		$	1,699		$	294		17	%	$	3,911		$	3,344		$	567		17	%	$	2,146		$	1,918		$	228		12	%
Data processing revenues	1,843			1,473			370			25	%	3,735			2,952			783			27	%	2,147			1,892			255			13	%
International transaction revenues	1,469			1,045			424			41	%	2,958			2,076			882			42	%	1,666			1,489			177			12	%
Other revenues	203			198			5			3	%	406			396			10			2	%	229			203			26			13	%
Client incentives	(1,031		)	(789		)	(242		)	30	%	(2,072		)	(1,577		)	(495		)	31	%	(1,326		)	(1,041		)	(285		)	27	%
Net operating revenues	$	4,477		$	3,626		$	851		23	%	$	8,938		$	7,191		$	1,747		24	%	$	4,862		$	4,461		$	401		9	%


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

Service revenues~~, which include revenues earned by Visa Europe in the three and six months ended March 31, 2017~~, increased during the three-month comparable period primarily due to ~~38% and 42%~~10% growth in nominal payments volume during the three and six month comparable periods, respectively. The growth in service revenues was slower than the growth in payments volume during the three and six months ended March 31, 2017, reflecting the inclusion of Visa Europe revenue and the resulting impact on our service revenue yield.volume.

Data processing revenues increased mainly due to overall growth in processed transactions of ~~42% and43%~~12% during the ~~three and six month~~three-month comparable ~~periods, respectively, which includes data processing revenues earned by Visa Europe in the three and six months ended March 31, 2017, and the resulting impact on our data processing revenue yield.~~period.

International transaction revenues increased primarily due to nominal cross-border volume growth of ~~129% and 132%~~14% during the ~~three and six month~~three-month comparable ~~periods, respectively, which includes revenues earned by Visa Europe during the three and six months ended March 31, 2017.~~period. International transaction revenue growth ~~also reflects the resulting impact~~was partially offset by lower volatility in a broad range of ~~Visa Europe revenues on our corresponding yield.~~currencies.

Client incentives increased during the ~~three and six month~~three-month comparable ~~periods~~period mainly due to incentives recognized on long-term customer contracts that were initiated or renewed after the ~~second~~first quarter of fiscal ~~2016, Visa Europe's incentives for the three and six months ended March 31,~~ 2017 and overall growth in global payments volume. The amount of client incentives we record in future periods will vary based on changes in performance expectations, actual client performance, amendments to existing contracts or the execution of new contracts.

Operating Expenses

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


	Three Months Ended March 31,				2017 vs. 2016				Six Months Ended March 31,				2017 vs. 2016				Three Months Ended December 31,				2017 vs. 2016
	2017		2016		$ Change		% Change⁽¹⁾		2017		2016		$ Change		% Change⁽¹⁾		2017		2016		$ Change			% Change⁽¹⁾
	(in millions, except percentages)																(in millions, except percentages)
Personnel	$	704	$	528	$	176	33	%	$	1,275	$	1,027	$	248	24	%	$	679	$	571	$	108		19	%
Marketing	193		186		7		4	%	411		380		31		8	%	223		218		5			3	%
Network and processing	150		126		24		19	%	295		254		41		16	%	160		145		15			10	%
Professional fees	83		66		17		26	%	163		138		25		18	%	92		80		12			14	%
Depreciation and amortization	131		121		10		8	%	277		241		36		15	%	145		146		(1		)	(1	)%
General and administrative	406		164		242		NM		592		320		272		85	%	236		186		50			27	%
Litigation provision	2		1		1		NM		17		1		16		NM		—		15		(15		)	(100	)%
Total operating expenses	$	1,669	$	1,192	$	477	40	%	$	3,030	$	2,361	$	669	28	%	$	1,535	$	1,361	$	174		13	%

~~NM — not meaningful~~


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

Our overall operating expenses increased primarily due to the inclusion of Visa Europe expenses for the first half of fiscal 2017. Additional factors impacting our operating expenses for the three and six months ended March 31, 2017 are discussed below.

Personnel expenses increased ~~driven by higher incentive compensation, combined with continued~~primarily due to an increase in headcount, reflecting our strategy to invest for future growth.

~~Marketing~~Network and processing expensesincreased mainly due to continued technology and processing network investments to support ~~our growth strategies~~growth.

Professional fees increased primarily due to consulting fees related to technology and ~~new product initiatives.~~other corporate projects.

General and administrative expenses increased ~~primarily~~mainly due to ~~$192 million~~increases in product enhancements and travel activities in support of ~~expense related to the Visa Inc. shares held by Visa Europe that were received by the newly-formed Visa Foundation, and increased expenses to provide product benefits to~~ our ~~account holders~~business growth, as ~~a result of business growth. See~~ ~~Note 12—Income Taxes~~ ~~to our unaudited consolidated financial statements.~~well as higher indirect taxes.

Non-operating Income (Expense) ~~Income~~

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


	Three Months Ended March 31,						2017 vs. 2016					Six Months Ended March 31,						2017 vs. 2016					Three Months Ended December 31,						2017 vs. 2016
	2017			2016			$ Change			% Change⁽¹⁾		2017			2016			$ Change			% Change⁽¹⁾		2017			2016			$ Change			% Change⁽¹⁾
	(in millions, except percentages)																						(in millions, except percentages)
Interest expense	$	(135	)	$	(132	)	$	(3	)	2	%	$	(275	)	$	(161	)	$	(114	)	71	%	$	(154	)	$	(140	)	$	(14	)	10	%
Other	29			139			(110		)	(79	)%	48			411			(363		)	(88	)%	66			19			47			NM
Non-operating (expense) income	$	(106	)	$	7		$	(113	)	NM		$	(227	)	$	250		$	(477	)	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 ~~six~~three months ended ~~March~~December 31, 2017 primarily due to the issuance of ~~$16.0~~$2.5 billion fixed-rate senior notes in ~~December 2015.~~September 2017. See Note 6—4—Debt to our unaudited consolidated financial statements.

Other non-operating income ~~decreased~~increased in the three ~~and six~~ months ended ~~March~~December 31, 2017 due to a gain on the ~~absence~~sale of ~~$116 million of net unrealized gains recognized~~an investment and higher interest income on ~~currency forward contracts entered into during the second quarter of fiscal 2016 to mitigate a portion of~~ our ~~foreign currency exchange rate risk associated with the upfront~~ cash ~~consideration paid in the Visa Europe acquisition. Other non-operating income for the six months ended~~and investments.

~~March 31, 2017 was also lower due to a non-cash reduction of the fair value of the Visa Europe put option of $255 million recorded in the first quarter of fiscal 2016.~~

Effective Income Tax Rate

In February 2017, to align our corporate structure to the geographic jurisdictions in which we conduct business operations, we completed a reorganization of Visa Europe and certain other legal entities. As a result of the reorganization, during the three months ended March 31, 2017, we recorded a non-recurring, non-cash income tax provision of $1.5 billion primarily related to the elimination of deferred tax balances originally recognized upon the acquisition of Visa Europe. Associated with this reorganization, the newly-formed Visa Foundation received all Visa Inc. shares held by Visa Europe, which were previously recorded as treasury stock.

The effective income tax rates were ~~84%~~22% and ~~56%~~31% for the three ~~and six~~ months ended ~~March~~December 31, 2017 ~~respectively,~~ and ~~30% and 28% for the three and six months ended March 31,~~ 2016, respectively. The effective tax rate for the three ~~and six~~ months ended ~~March~~December 31, 2017 differs from the effective tax rate in the same ~~periods~~prior-year period primarily due to 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 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 is a blended rate of 24.5%, which will be reduced to 21% in fiscal 2019 and thereafter.

As a result of the reduction in the ~~prior fiscal year primarily due to:~~

federal corporate tax rate, we remeasured our net deferred tax liabilities as of the ~~aforementioned $1.5~~enactment date of the Tax Act. The deferred tax remeasurement resulted in a one-time, non-cash tax benefit estimated to be approximately $1.1 billion, ~~non-recurring, non-cash income tax provision related to the legal entity reorganization~~ recorded in the ~~quarter ended March 31, 2017;~~

~~$71 million tax benefit related to Visa Foundation's receipt of Visa Inc. shares mentioned above;~~

~~$20 million and $46 million of excess tax benefits related to share-based payments recorded during the~~ three ~~and six~~ months ended ~~March~~December 31, ~~2017, respectively, as a result of early adoption of Accounting Standards Update 2016-09. See~~ ~~Note 1—Summary of Significant Accounting Policies~~;

2017.

~~the restrictions on U.S. foreign tax credits that can be claimed for Visa Europe's foreign taxes prior~~In transitioning to the ~~aforesaid legal entity reorganization;~~new territorial tax system, the Tax Act requires that we include certain untaxed foreign earnings of non-U.S. subsidiaries in our 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 ~~absence of~~remaining non-cash amount. The 15.5% and 8% tax, collectively referred to as the ~~non-taxable $255 million revaluation of the Visa Europe put option~~“transition tax”, was estimated to be $1.1 billion, and was recorded in the ~~quarter~~three months ended December 31, ~~2015.~~2017. We intend 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. We continue to obtain and analyze additional information and guidance as they become available to complete the accounting for the tax impacts of the Tax Act. 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.

During the three ~~and six~~ months ended ~~March~~December 31, 2017, our gross unrecognized tax benefits increased by ~~$23 million and $56 million, respectively.~~$44 million. Our net unrecognized tax benefits that, if recognized, would favorably impact the effective tax rate ~~if recognized,~~ increased by ~~$69 million and $97 million for the three and six months ended March 31, 2017, respectively.~~$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.

Adjusted effective income tax rate. Our financial results for the three ~~and six~~ months ended ~~March~~December 31, 2017 ~~and 2016~~ reflect the impact of certain significant items that we believe are not indicative of our operating performance in ~~these~~this 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 ~~these periods~~this period in the ~~tables~~table below, which we believe provides a clearer understanding of our operating performance for the reported ~~periods.~~period. There were no comparable adjustments recorded for the three months ended December 31, 2016. See Overview—Adjusted financial results within this Management's Discussion and Analysis of Financial Condition and Results of Operations for descriptions of the adjustments in the tables below.

Three Months Ended March 31, 2017 Six Months Ended March 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⁾
As reported $ 2,702
$ 2,272
84.1 % $ 5,681
$ 3,181
56.0 %
Elimination of deferred tax balances —
(1,515 ) —
(1,515 )
Charitable contribution 192
71
192
71

As adjusted $ 2,894
$ 828
28.6 % $ 5,873
$ 1,737
29.6 %


	Three Months Ended March 31, 2016								Six Months Ended March 31, 2016								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⁾		Income Before Income Taxes		Income Tax Provision			Effective Income Tax Rate⁽¹⁾
As reported	$	2,441		$	734		30.1	%	$	5,080		$	1,432		28.2	%	$	3,239	$	717		22.1	%
Net unrealized gains on currency forward contracts	(116		)	(35		)			(116		)	(35		)
Revaluation of Visa Europe put option	—			—					(255		)	—
Remeasurement of deferred tax balances																	—		1,133
Transition tax on foreign earnings																	—		(1,147		)
As adjusted	$	2,325		$	699		30.1	%	$	4,709		$	1,397		29.7	%	$	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:


	Six Months Ended March 31,						Three Months Ended December 31,
	2017			2016			2017			2016
	(in millions)						(in millions)
Total cash provided by (used in):
Operating activities	$	2,904		$	2,819		$	2,762		$	2,508
Investing activities	2,268			(1,846		)	(707		)	(417		)
Financing activities	(4,243		)	11,452			(3,871		)	(1,730		)
Effect of exchange rate changes on cash and cash equivalents	(121		)	—			80			(156		)
Increase in cash and cash equivalents	$	808		$	12,425
(Decrease) increase in cash and cash equivalents							$	(1,736	)	$	205

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

Investing activities. Cash ~~provided by~~used in investing activities ~~increased compared to~~for the ~~prior year~~three months ended December 31, 2017 was higher than the prior-year comparable period as ~~we invested a portion~~purchases of ~~the~~available-for-sale investment securities reflected additional investment of net proceeds received from ~~our debt issuance~~new fixed-rate senior notes issued in ~~available-for-sale securities in the prior year. See~~ ~~Note 6—DebtandNote 4—Fair Value Measurements and Investments~~ ~~to our unaudited consolidated financial statements.~~September 2017.

Financing activities. ~~Financing~~Cash used in financing activities for the ~~six~~three months ended ~~March~~December 31, 2017 ~~reflect $3.5 billion used~~was higher than the prior-year comparable period primarily due to ~~repurchase~~the repayment of the 2017 Notes and an increase in dividends paid in the current year, while the prior year included proceeds from issuance of commercial paper. This increase was partially offset by payments from our litigation escrow account and a decrease in the repurchases of our class A common stock in the open market and $795 million of dividend payments. Activity in the prior year comparable period primarily reflected $15.9 billion net aggregate proceeds received from our debt issuance completed in December 2015, $3.8 billion of cash used to repurchase class A common stock in the open market and $676 million of dividend payments.stock. See Note 6—2—U.S. and Europe Retrospective Responsibility Plans, Note 4—Debt and Note 9—7—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 ~~$8.4~~$6.3 billion at ~~March~~December 31, 2017. ~~In the second quarter of fiscal 2017, following our legal entity reorganization, we returned net $1.3~~This excludes $1.8 billion of cash ~~held by~~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 ~~U.S.~~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 ~~and was not subject to U.S. income taxes.~~of non-U.S. subsidiaries accumulated as of December 31, 2017. If it were necessary to repatriate ~~these~~the undistributed earnings of our foreign subsidiaries for use in the ~~U.S., we~~United States in the future, the repatriated earnings would not be ~~required~~subject to ~~pay~~further U.S. income taxes on most of this amount. The amount of income taxes that would have resulted had these undistributed earnings been repatriated is not practicably determinable. It is our intent to indefinitely reinvest the majority of these undistributed earnings outside of the U.S. As such, we have not accrued any U.S. income tax provision in our financial results related to the majority of these earnings.

~~Credit Facility Extension.~~ On January 27, 2017, we extended the term of the $4.0 billion credit facility that was entered into on January 27, 2016. The credit facility will now expire on January 27, 2022. No other material terms were changed. See ~~Note 6—Debt~~ ~~to our unaudited consolidated financial statements.~~tax.

Uses of Liquidity

There has been no significant change to our primary uses of liquidity since September 30, ~~2016,~~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.

~~Settlement~~. In the last week of March 2017, we experienced delays in the processing and settlement of $1.6 billion of volume in Europe. As a result of this delay, this volume was processed and settled in the first few days of April 2017 instead of in March 2017. The settlement receivable and payable amounts recorded on our consolidated balance sheets at March 31, 2017 are elevated because they include this unsettled activity. The balances in these accounts returned to historical levels in early April 2017 following the settlement of this activity.

Senior Notes. In ~~December 2015,~~October 2017, we ~~issued~~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 ~~an aggregate principal amount~~September 2017. Interest payments of $16.0 billion, with maturities ranging between 2 and 30 years. Our first principal payment of $1.8 billion is due on December 14, 2017. However, we intend to refinance this current portion of debt prior to its maturity, market conditions permitting. An interest payment of $244$241 million ~~was~~were made ~~on December 14, 2016.~~in fiscal 2018. See Note 6—4—Debt to our unaudited consolidated financial statements.

Common stock repurchases. During the ~~six~~three months ended ~~March~~December 31, 2017, we repurchased 4116 million shares of our class A common stock using ~~$3.5~~$1.8 billion of cash on hand. As of ~~March~~December 31, 2017, ~~the July 2016 program~~we had remaining authorized funds of ~~$2.3~~$2.1 billion for share repurchase. All share repurchase programs authorized prior to ~~July 2016~~April 2017 have been completed. In ~~April 2017,~~January 2018, our board of directors authorized an additional ~~$5.0~~$7.5 billion share repurchase program. See Note 9—7—Stockholders' Equity to our unaudited consolidated financial statements.

Dividends. During the ~~six~~three months ended ~~March~~December 31, 2017, we declared and paid ~~$795~~$458 million in dividends to holders of our common stock. In ~~April 2017,~~January 2018, our board of directors declared a cash dividend in the amount of ~~$0.165~~$0.21 per share of class A common stock (determined in the case of class B and C common stock and ~~U.K.~~UK&I and Europe preferred stock on an as-converted basis), which will be paid on ~~June~~March 6, ~~2017,~~2018, to all holders of record of our common and preferred stock as of ~~May 19, 2017.~~February 16, 2018. See Note 9—7—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.

~~Commercial Paper Program.~~ We maintain a commercial paper program to support our working capital requirements and for other general corporate purposes. During the three months ended March 31, 2017, we repaid the $567 million of commercial paper that was issued in December 2016. As of March 31, 2017 and September 30, 2016, we had no outstanding obligations under the program. See ~~Note 6—Debt~~ ~~to our unaudited consolidated financial statements.~~

~~Acquisitions.~~ ~~In February 2017, we acquired a business using~~ ~~$302 million~~ ~~of cash on hand, primarily reflecting total purchase price less cash received. The acquisition will help Visa’s clients and merchant partners accelerate digital commerce. See~~ ~~Note 5—Intangible Assets and Goodwill~~ ~~to our unaudited consolidated financial statements.~~

Fair Value Measurements—Financial Instruments

As of ~~March~~December 31, 2017, our financial instruments measured at fair value on a recurring basis included ~~$9.2~~$12.6 billion of assets and ~~$83~~$65 million of liabilities. See Note 4—3—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 ~~six~~three months ended ~~March~~December 31, 2017, compared to September 30, ~~2016.~~2017.



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 ~~Rule 13a-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f))~~of 1934, as amended) of Visa Inc. at the end of the period covered by this ~~report. Based~~report and, based on such evaluation, ~~our Chief Executive Officer and Chief Financial Officer~~have concluded that the disclosure controls and procedures of Visa Inc. were effective at the reasonable assurance level as of ~~the end of the period covered by this report.~~such date.

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

PART II. OTHER INFORMATION



ITEM 1.	Legal Proceedings.

Refer to Note ~~13—~~11—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, ~~2016,~~2017, filed with the SEC on November ~~15, 2016.~~17, 2017.



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

ISSUER PURCHASES OF EQUITY SECURITIES

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

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)
January 1-31, 2017 995,917
$ 79.60
995,159
$ 3,810,930,933
February 1-28, 2017 3,119,429
$ 87.80
3,067,047
$ 3,541,495,887
March 1-31, 2017 15,067,739
$ 89.24
15,067,739
$ 2,196,602,697
Total 19,183,085
$ 88.50
19,129,945



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


⁽¹⁾	Includes ~~53,140~~135,479 shares of class A common stock withheld at an average price of ~~$85.80~~$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 trade dates. For purposes of our unaudited consolidated financial statements included in this Form 10-Q, the impact of these repurchases is recorded according to settlement dates.

⁽³⁾

Our board of directors from time to time authorizes the repurchase of shares of our common stock up to a certain monetary limit. In ~~July 2016~~April 2017 and ~~April 2017,~~January 2018, our board of directors authorized share repurchase programs for $5.0 billion ~~each.~~and $7.5 billion, respectively. These authorizations have no expiration date. All share repurchase programs authorized prior to ~~July 2016~~April 2017 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:	~~April 21, 2017~~February 1, 2018	By:	/s/ Alfred F. Kelly, Jr.
		Name:	Alfred F. Kelly, Jr.
		Title:	Chief Executive Officer (Principal Executive Officer)

Date:	~~April 21, 2017~~February 1, 2018	By:	/s/ Vasant M. Prabhu
		Name:	Vasant M. Prabhu
		Title:	Chief Financial Officer (Principal Financial Officer)

Date:	~~April 21, 2017~~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	~~Five Year Revolving Credit~~Form of Visa Inc. 2007 Equity Incentive Compensation Plan Restricted Stock Unit Award Agreement ~~amended and restated as of January 27,~~granted after November 1, 2017 by and among Visa Inc., Visa International Service Association, Visa U.S.A. Inc. Visa Europe Limited and Visa Europe Services Inc., as borrowers, Bank of America, N.A., as administrative agent, JPMorgan Chase Bank N.A., as syndication agent, and the lenders referred to therein #

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

4232



	Preliminary Purchase Price Allocation			Measurement Period Adjustments			Updated Purchase Price Allocation
	(in millions)
Current assets⁽¹⁾	$	4,457		$	—		$	4,457
Non-current assets⁽²⁾	258			(46		)	212
Current liabilities⁽³⁾	(2,731		)	(39		)	(2,770		)
Non-current liabilities⁽²⁾	(2,605		)	618			(1,987		)
Tangible assets and liabilities	$	(621	)	$	533		$	(88	)
Intangible assets — customer relationships and reacquired rights⁽²⁾	16,137			(232		)	15,905
Goodwill⁽⁴⁾	3,268			(301		)	2,967
Fair value of net assets acquired	$	18,784		$	—		$	18,784



	Consolidated Actual Results		Unaudited Pro Forma Consolidated Results		Consolidated Actual Results		Unaudited Pro Forma Consolidated Results
	Three Months Ended March 31,				Six Months Ended March 31,
	2017		2016		2017		2016
	(in millions, except per share data)
Net operating revenues	$	4,477	$	3,935	$	8,938	$	7,899
Net income	$	430	$	1,679	$	2,500	$	3,456
Diluted earnings per share	$	0.18	$	0.68	$	1.04	$	1.39



	Three and Six Months Ended March 31, 2017
(in millions, except per share and conversion rate data)	U.K.&I. Preferred Stock		Europe Preferred Stock
Reduction in equivalent number of shares of class A common stock	1		—		⁽¹⁾
Effective price per share ⁽²⁾	$	85.01	$	85.01
Recovery through conversion rate adjustment	$	119	$	1
Conversion rate of preferred stock to class A common stock after adjustment	13.388		13.948
As-converted preferred stock after recovery	33		44



	Three Months Ended March 31, 2017
(in millions, except percentages and per share data)	Operating Expenses			Operating Margin _(1),(2)		Non-operating Income (Expense)			Income Tax Provision			Net Income		Diluted Earnings Per Share⁽¹⁾
As reported	$	1,669		63	%	$	(106	)	$	2,272		$	430	$	0.18
Elimination of deferred tax balances	—			—	%	—			(1,515		)	1,515		0.63
Charitable contribution	(192		)	4	%	—			71			121		0.05
As adjusted	$	1,477		67	%	$	(106	)	$	828		$	2,066	$	0.86



	Six Months Ended March 31, 2017
(in millions, except percentages and per share data)	Operating Expenses			Operating Margin _(1),(2)		Non-operating Income (Expense)			Income Tax Provision			Net Income		Diluted Earnings Per Share⁽¹⁾
As reported	$	3,030		66	%	$	(227	)	$	3,181		$	2,500	$	1.04
Elimination of deferred tax balances	—			—	%	—			(1,515		)	1,515		0.63
Charitable contribution	(192		)	2	%	—			71			121		0.05
As adjusted	$	2,838		68	%	$	(227	)	$	1,737		$	4,136	$	1.71



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)
January 1-31, 2017	995,917	$	79.60	995,159	$	3,810,930,933
February 1-28, 2017	3,119,429	$	87.80	3,067,047	$	3,541,495,887
March 1-31, 2017	15,067,739	$	89.24	15,067,739	$	2,196,602,697
Total	19,183,085	$	88.50	19,129,945