What changed in this filing

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Item 1. Financial Statements

2020-07-31 compared with 2020-05-04 · 291 added, 164 removed, 629 unchanged (42% of the section changed)

16 unchanged sentences

Property, equipment and technology, net 2,746 2,695

Goodwill 15,791 15,656

Intangible assets, net 27,188 26,780

Other assets 3,433 2,232

Total assets $ 77,884 $ 72,574

Accounts payable $ 153 $ 156

13 unchanged sentences

Series A convertible participating preferred stock, none issued (the “class A equivalent preferred stock”) (Note 10)

Series B convertible participating preferred stock, 2 shares issued and outstanding at March 31, 2020 and September 30, 2019 (the “UK&I preferred stock”) (Note 5 and Note 10)

Series C convertible participating preferred stock, 3 shares issued and outstanding at March 31, 2020 and September 30, 2019 (the “Europe preferred stock”) (Note 5 and Note 10)

Class A common stock, $0.0001 par value, 2,001,622 shares authorized, 1,693 and 1,718 shares issued and outstanding at March 31, 2020 and September 30, 2019, respectively (Note 10)

Class B common stock, $0.0001 par value, 622 shares authorized, 245 shares issued and outstanding at March 31, 2020 and September 30, 2019 (Note 10)

Class C common stock, $0.0001 par value, 1,097 shares authorized, 11 shares issued and outstanding at March 31, 2020 and September 30, 2019 (Note 10)

Series B convertible participating preferred stock, 2 shares issued and outstanding at June 30, 2020 and September 30, 2019 (the “UK&I preferred stock”) (Note 5 and Note 10)

Series C convertible participating preferred stock, 3 shares issued and outstanding at June 30, 2020 and September 30, 2019 (the “Europe preferred stock”) (Note 5 and Note 10)

Class A common stock, $ 0.0001 par value, 2,001,622 shares authorized, 1,687 and 1,718 shares issued and outstanding at June 30, 2020 and September 30, 2019, respectively (Note 10)

Class B common stock, $ 0.0001 par value, 622 shares authorized, 245 shares issued and outstanding at June 30, 2020 and September 30, 2019 (Note 10)

Class C common stock, $ 0.0001 par value, 1,097 shares authorized, 11 shares issued and outstanding at June 30, 2020 and September 30, 2019 (Note 10)

Right to recover for covered losses (Note 5) ( 24 ) ( 171 )

7 unchanged sentences

Total accumulated other comprehensive income (loss), net ( 279 ) ( 650 )

Total equity 35,524 34,684

Total liabilities and equity $ 77,884 $ 72,574

2 unchanged sentences

Three Months Ended

Six Months Ended

June 30, Nine Months Ended

2020 2019 2020 2019

(in millions, except per share data)

Net revenues $ 4,837 $ 5,840 $ 16,745 $ 16,840

Operating Expenses

Personnel 941 872 2,863 2,573

Marketing 174 282 683 799

Network and processing 172 184 536 528

11 unchanged sentences

Income tax provision (Note 13) 559 765 2,006 2,118

Net income $ 2,373 $ 3,101 $ 8,729 $ 9,055

Basic Earnings Per Share (Note 11)

17 unchanged sentences

Three Months Ended

Six Months Ended

June 30, Nine Months Ended

2020 2019 2020 2019

(in millions)

Net income $ 2,373 $ 3,101 $ 8,729 $ 9,055

Other comprehensive income (loss), net of tax:

3 unchanged sentences

Reclassification adjustments ( 1 ) 1 ( 3 ) 1

Income tax effect 1 — 1 —

Defined benefit pension and other postretirement plans:

Net unrealized actuarial gain (loss) and prior service credit (cost)

— ( 1 ) 2 ( 8 )

Income tax effect — — ( 1 ) 1

11 unchanged sentences

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Three Months Ended March 31, 2020

Preferred Stock

Right to Recover for Covered Losses

Paid-In Capital

Three Months Ended June 30, 2020

Preferred Stock Common Stock Preferred Stock Right to Recover for Covered Losses Additional

Paid-In Capital Accumulated

Income Accumulated

Comprehensive

Income (Loss), Net

Income (Loss), Net Total

Series B Series C Class A Class B Class C

(in millions, except per share data)

Balance as of December 31, 2019

Balance as of March 31, 2020 2 3 1,693 245 11 $ 5,462 $ ( 184 ) $ 16,385 $ 13,366 $ ( 444 ) $ 34,585

Net income 2,373 2,373

Other comprehensive income (loss), net of tax

1 unchanged sentence

VE territory covered losses incurred (Note 5)

Conversion of class C common stock upon sales into public market

Recovery through conversion rate adjustment (Note 5 and 10)

( 164 ) 169 5

Vesting of restricted stock and performance-based shares

2 unchanged sentences

Cash proceeds from issuance of common stock under employee equity plans

Cash dividends declared and paid, at a quarterly amount of $0.30 per class A share (Note 10)

Cash dividends declared and paid, at a quarterly amount of $ 0.30 per class A common stock (Note 10)

( 663 ) ( 663 )

Repurchase of class A common stock (Note 10)

Balance as of March 31, 2020

( 6 ) ( 65 ) ( 1,004 ) ( 1,069 )

Balance as of June 30, 2020 2 3 1,687 245 11 $ 5,298 $ ( 24 ) $ 16,457 $ 14,072 $ ( 279 ) $ 35,524

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

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY—(Continued)

Six Months Ended March 31, 2020

Preferred Stock

Right to Recover for Covered Losses

Paid-In Capital

Nine Months Ended June 30, 2020

Preferred Stock Common Stock Preferred Stock Right to Recover for Covered Losses Additional

Paid-In Capital Accumulated

Income Accumulated

Comprehensive

Income (Loss), Net

Income (Loss), Net Total

Series B Series C Class A Class B Class C

(in millions, except per share data)

Balance as of September 30, 2019 2 3 1,718 245 11 $ 5,462 $ ( 171 ) $ 16,541 $ 13,502 $ ( 650 ) $ 34,684

Net income 8,729 8,729

Other comprehensive income (loss), net of tax

2 unchanged sentences

VE territory covered losses incurred (Note 5)

( 22 ) ( 22 )

Recovery through conversion rate adjustment (Note 5 and 10)

( 164 ) 169 5

Conversion of class C common stock upon sales into public market

2 unchanged sentences

Restricted stock and performance-based shares settled in cash for taxes

( 1 ) ( 158 ) ( 158 )

Cash proceeds from issuance of common stock under employee equity plans

Cash dividends declared and paid, at a quarterly amount of $0.30 per class A share (Note 10)

Cash dividends declared and paid, at a quarterly amount of $ 0.30 per class A common stock (Note 10)

( 2,002 ) ( 2,002 )

Repurchase of class A common stock (Note 10)

Balance as of March 31, 2020

( 37 ) ( 390 ) ( 6,182 ) ( 6,572 )

Balance as of June 30, 2020 2 3 1,687 245 11 $ 5,298 $ ( 24 ) $ 16,457 $ 14,072 $ ( 279 ) $ 35,524

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

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY—(Continued)

Three Months Ended March 31, 2019

Preferred Stock

Right to Recover for Covered Losses

Paid-In Capital

Three Months Ended June 30, 2019

Preferred Stock Common Stock Preferred Stock Right to Recover for Covered Losses Additional

Paid-In Capital Accumulated

Income Accumulated

Comprehensive

Income (Loss), Net

Income (Loss), Net Total

Series B Series C Class A Class B Class C

(in millions, except per share data)

Balance as of December 31, 2018

Balance as of March 31, 2019 2 3 1,741 245 12 $ 5,464 $ ( 163 ) $ 16,547 $ 12,513 $ ( 86 ) $ 34,275

Net income 3,101 3,101

Other comprehensive income (loss), net of tax

Comprehensive income 3,297

Adoption of new accounting standards (Note 1)

VE territory covered losses incurred (Note 5)

Recovery through conversion rate adjustment (Note 5 and 10)

Conversion of class C common stock upon sales into public market

3 unchanged sentences

Cash proceeds from issuance of common stock under employee equity plans

Cash dividends declared and paid, at a quarterly amount of $0.25 per class A share (Note 10)

Cash dividends declared and paid, at a quarterly amount of $ 0.25 per class A common stock (Note 10)

( 565 ) ( 565 )

Repurchase of class A common stock (Note 10)

Balance as of March 31, 2019

( 13 ) ( 140 ) ( 2,009 ) ( 2,149 )

Balance as of June 30, 2019 2 3 1,729 245 12 $ 5,462 $ ( 169 ) $ 16,552 $ 13,040 $ 110 $ 34,995

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

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY—(Continued)

Six Months Ended March 31, 2019

Preferred Stock

Right to Recover for Covered Losses

Paid-In Capital

Nine Months Ended June 30, 2019

Preferred Stock Common Stock Preferred Stock Right to Recover for Covered Losses Additional

Paid-In Capital Accumulated

Income Accumulated

Comprehensive

Income (Loss), Net

Income (Loss), Net Total

Series B Series C Class A Class B Class C

(in millions, except per share data)

Balance as of September 30, 2018 2 3 1,768 245 12 $ 5,470 $ ( 7 ) $ 16,678 $ 11,318 $ 547 $ 34,006

Net income 9,055 9,055

Other comprehensive income (loss), net of tax

( 444 ) ( 444 )

Comprehensive income 8,611

1 unchanged sentence

VE territory covered losses incurred (Note 5)

Recovery through conversion rate adjustment (Note 5 and Note 10)

( 170 ) ( 170 )

Recovery through conversion rate adjustment (Note 5 and 10)

Conversion of class C common stock upon sales into public market

2 unchanged sentences

Restricted stock and performance-based shares settled in cash for taxes

( 1 ) ( 106 ) ( 106 )

Cash proceeds from issuance of common stock under employee equity plans

Cash dividends declared and paid, at a quarterly amount of $0.25 per class A share (Note 10)

Cash dividends declared and paid, at a quarterly amount of $ 0.25 per class A common stock (Note 10)

( 1,706 ) ( 1,706 )

Repurchase of class A common stock (Note 10)

Balance as of March 31, 2019

( 44 ) ( 468 ) ( 6,012 ) ( 6,480 )

Balance as of June 30, 2019 2 3 1,729 245 12 $ 5,462 $ ( 169 ) $ 16,552 $ 13,040 $ 110 $ 34,995

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

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended

Nine Months Ended

(in millions)

Operating Activities

Net income $ 8,729 $ 9,055

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

4 unchanged sentences

VE territory covered losses incurred (Note 5) ( 22 ) ( 170 )

Other ( 149 ) ( 204 )

Change in operating assets and liabilities:

2 unchanged sentences

Client incentives ( 6,261 ) ( 4,778 )

Other assets ( 464 ) ( 172 )

Accounts payable 7 ( 22 )

6 unchanged sentences

Investment securities:

Purchases ( 549 ) ( 2,321 )

Proceeds from maturities and sales 3,675 3,870

7 unchanged sentences

Dividends paid (Note 10) ( 2,002 ) ( 1,706 )

Proceeds from issuance of commercial paper (Note 8)

Proceeds from issuance of senior notes (Note 8) 3,985 —

Payment of deferred purchase consideration related to Visa Europe acquisition — ( 1,236 )

Cash proceeds from issuance of common stock under employee equity plans 142 127

Restricted stock and performance-based shares settled in cash for taxes ( 158 ) ( 106 )

Other financing activities ( 118 ) —

Net cash provided by (used in) financing activities ( 4,723 ) ( 9,401 )

Effect of exchange rate changes on cash and cash equivalents

Effect of exchange rate changes on cash, cash equivalents, restricted cash and restricted cash equivalents

Increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents

6,102 ( 308 )

Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period (Note 4)

10,832 10,977

Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period (Note 4)

$ 16,934 $ 10,669

Supplemental Disclosure

Income taxes paid, net of refunds

Cash paid for income taxes, net $ 1,793 $ 1,992

Interest payments on debt $ 503 $ 503

26 unchanged sentences

The worldwide spread of coronavirus (“COVID-19”) has created significant uncertainty in the global economy.

There have been no comparable recent events that provide guidance as to the effect the spread of COVID-19 as a global pandemic may have, and, as a result, the ultimate impact of COVID-19 and the extent to which COVID-19 impacts the Company’s business, results of operations and financial condition will depend on future developments, which are highly uncertain and difficult to predict.

There have been no comparable recent events that provide guidance as to the effect the spread of COVID-19 as a global pandemic may have, and, as a result, the ultimate impact of COVID-19 and the extent to which COVID-19 continues to impact the Company’s business, results of operations and financial condition will depend on future developments, which are highly uncertain and difficult to predict.

Recently Issued and Adopted Accounting Pronouncements.

2 unchanged sentences

The Company adopted the standard effective October 1, 2019 using the modified retrospective transition method with comparative periods continuing to be reported using the prior leases standard.

The Company elected to apply the package of practical expedients permitted under the transition guidance, allowing the Company to carry forward the historical assessment of whether a contract was or contains a lease, lease classification and capitalization of initial direct costs.

The Company elected to apply the package of practical expedients permitted under the transition guidance, allowing the Company to carry forward the historical assessment of whether a contract was or

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

contains a lease, lease classification and capitalization of initial direct costs.

The adoption did not have a material impact on the consolidated financial statements.

In accordance with ASU 2016-02, the Company determines if an arrangement is a lease at its inception.

Right-of-use (“ROU”) assets, and corresponding lease liabilities, are recognized at the commencement date based on the

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

present value of remaining lease payments over the lease term.

Right-of-use (“ROU”) assets, and corresponding lease liabilities, are recognized at the commencement date based on the present value of remaining lease payments over the lease term.

For this purpose, the Company considers only payments that are fixed and determinable at the time of commencement.

35 unchanged sentences

The nature, amount, timing and uncertainty of the Company’s revenues and cash flows and how they are affected by economic factors are most appropriately depicted through the Company’s revenue categories and geographical markets.

The following tables disaggregate the Company’s net revenues by revenue category and by geography for the three and six months ended March 31, 2020 and 2019 :

The following tables disaggregate the Company’s net revenues by revenue category and by geography for the three and nine months ended June 30, 2020 and 2019:

Three Months Ended

Six Months Ended

June 30, Nine Months Ended

2020 2019 2020 2019

(in millions)

4 unchanged sentences

Client incentives ( 1,513 ) ( 1,546 ) ( 4,966 ) ( 4,480 )

Net revenues $ 4,837 $ 5,840 $ 16,745 $ 16,840

Three Months Ended

Six Months Ended

June 30, Nine Months Ended

2020 2019 2020 2019

(in millions)

$ 2,380 $ 2,587 $ 7,747 $ 7,573

International 2,457 3,253 8,998 9,267

Net revenues $ 4,837 $ 5,840 $ 16,745 $ 16,840

Note 4—Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents

11 unchanged sentences

Cash, cash equivalents, restricted cash and restricted cash equivalents

$ 16,934 $ 10,832

and Europe Retrospective Responsibility Plans

7 unchanged sentences

A takedown payment of approximately $ 467 million was received on December 27, 2019, and deposited into the Company’s litigation escrow account.

The deposit into the litigation escrow account and reestablishment of a prior accrual to address opt-out claims was recorded during the six months ended March 31, 2020 .

The deposit into the litigation escrow account and reestablishment of a prior accrual to address opt-out claims was recorded during the nine months ended June 30, 2020.

The accrual related to the U.S.

3 unchanged sentences

litigation escrow account:

Six Months Ended

Nine Months Ended

(in millions)

12 unchanged sentences

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 three and nine months ended June 30, 2020, the Company recovered $ 164 million of VE territory covered losses through adjustments to the class A common stock conversion rates applicable to the UK&I and Europe preferred stock.

The conversion rates applicable to the UK&I and Europe preferred stock were reduced from 12.936 and 13.884 , respectively, as of September 30, 2019 to 12.775 and 13.722 , respectively, as of June 30, 2020.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(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 nine months ended June 30, 2020.

Preferred Stock Right to Recover for Covered Losses

(in millions)

Balance as of September 30, 2019 $ 2,285 $ 3,177 $ ( 171 )

VE territory covered losses incurred (1)

Recovery through conversion rate adjustment (2)

( 72 ) ( 92 ) 169

Balance as of June 30, 2020 $ 2,213 $ 3,085 $ ( 24 )

(1) VE territory covered losses incurred reflect settlements with merchants and additional legal costs.

See Note 14—Legal Matters .

There were no adjustments to the conversion rates during the six months ended March 31, 2020 .

The following table sets forth the as-converted value of the preferred stock available to recover VE territory covered losses compared to the book value of preferred shares recorded in stockholders’ equity within the Company’s consolidated balance sheets as of March 31, 2020 and September 30, 2019 :

March 31, 2020

September 30, 2019

(2) Adjustment to right to recover for covered losses for the conversion rate adjustment differs from the actual recovered amount due to differences in foreign exchange rates between the time the losses were incurred and the subsequent recovery through the conversion rate adjustment.

June 30, 2020 September 30, 2019

As-Converted Value of Preferred Stock (1),(2)

5 unchanged sentences

Europe preferred stock 8,368 3,085 7,539 3,177

Total 14,489 5,298 13,058 5,462

right to recover for covered losses ( 24 ) ( 24 ) ( 171 ) ( 171 )

3 unchanged sentences

(2) The as-converted value of preferred stock is calculated as the product of:

(a) 2 million and 3 million shares of the UK&I and Europe preferred stock outstanding, respectively, as of March 31, 2020 ;

(b) 12.936 and 13.884 , the class A common stock conversion rate applicable to the UK&I and Europe preferred stock as of March 31, 2020 , respectively;

and (c) $ 161.12 , Visa’s class A common stock closing stock price as of March 31, 2020 .

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

(a) 2 million and 3 million shares of the UK&I and Europe preferred stock outstanding, respectively, as of June 30, 2020;

(b) 12.775 and 13.722 , the class A common stock conversion rate applicable to the UK&I and Europe preferred stock as of June 30, 2020, respectively;

and (c) $ 193.17 , Visa’s class A common stock closing stock price as of June 30, 2020.

(3) The as-converted value of preferred stock is calculated as the product of:

2 unchanged sentences

and (c) $ 172.01 , Visa’s class A common stock closing stock price as of September 30, 2019.

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

Note 6—Fair Value Measurements and Investments

2 unchanged sentences

Using Inputs Considered as

Level 1 Level 2

2020 September 30,

2019 June 30,

2020 September 30,

2 unchanged sentences

Money market funds

$ 12,739 $ 6,494

government-sponsored debt securities

5 unchanged sentences

Derivative instruments

Total $ 13,133 $ 7,295 $ 3,564 $ 6,179

Accrued compensation and benefits:

2 unchanged sentences

Derivative instruments

There were no transfers between Level 1 and Level 2 assets during the six months ended March 31, 2020 .

Total $ 128 $ 113 $ 247 $ 52

There were no transfers between Level 1 and Level 2 assets during the nine months ended June 30, 2020.

Level 1 assets.

7 unchanged sentences

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 months ended March 31, 2020 .

There were no substantive changes to the valuation techniques and related inputs used to measure fair value during the nine months ended June 30, 2020.

government-sponsored debt securities and U.S.

2 unchanged sentences

government-sponsored debt securities and U.S.

Treasury securities to be available-for-sale and held $ 3.4 billion and $ 6.3 billion of these investment securities as of March 31, 2020 and September 30, 2019 , respectively.

Treasury securities to be available-for-sale and held $ 3.1 billion and $ 6.3 billion of these investment securities as of June 30, 2020 and September 30, 2019, respectively.

All of the Company’s long-term available-for-sale investment securities are due within one to five years .

4 unchanged sentences

These investments are classified as Level 3 due to the absence of quoted market prices, the inherent lack of liquidity and the fact that inputs used to measure fair value are unobservable and require management’s judgment.

During the three months ended March 31, 2020 , the Company recorded no material upward or downward adjustments.

During the six months ended March 31, 2020 , $ 9 million of upward adjustments and no material downward adjustments were included in the carrying value of non-marketable equity securities.

During the three and six months ended March 31, 2020 and 2019 , there were no impairments.

The following table summarizes the total carrying value of the Company’s non-marketable equity securities held as of March 31, 2020 including cumulative unrealized gains and losses:

March 31, 2020

During the three and nine months ended June 30, 2020, $ 56 million and $ 65 million, respectively, of upward adjustments were included in the carrying value of non-marketable equity securities.

No material downward adjustments were included during the same periods.

During the three and nine months ended June 30, 2020, $ 6 million in impairment was recognized.

There was no impairment recognized during the same prior-year comparable periods.

The following table summarizes the total carrying value of the Company’s non-marketable equity securities held as of June 30, 2020 including cumulative unrealized gains and losses:

June 30, 2020

(in millions)

10 unchanged sentences

The Company completed its annual impairment review of its indefinite-lived intangible assets and goodwill as of February 1, 2020, and concluded that there was no impairment.

No recent events or changes in circumstances indicate that impairment existed at March 31, 2020 .

No recent events or changes in circumstances indicate that impairment existed at June 30, 2020.

Gains and Losses on Marketable and Non-marketable Equity Securities

1 unchanged sentence

Three Months Ended

Six Months Ended

June 30, Nine Months Ended

2020 2019 2020 2019

(in millions)

2 unchanged sentences

Total gain (loss) recognized in non-operating income (expense), net

$ 68 $ 11 $ 64 $ 85

Other Fair Value Disclosures

4 unchanged sentences

If measured at fair value in the financial statements, these instruments would be classified as Level 2 in the fair value hierarchy.

The carrying value and estimated fair value of long-term debt was $ 16.9 billion and $ 18.6 billion ,

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

respectively, as of March 31, 2020 .

The carrying value and estimated fair value of long-term debt was $ 20.9 billion and $ 23.4 billion, respectively, as of June 30, 2020.

The carrying value and estimated fair value of long-term debt was $ 16.7 billion and $ 18.4 billion, respectively, as of September 30, 2019.

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

Other financial instruments not measured at fair value.

The following financial instruments are not measured at fair value on the Company’s unaudited consolidated balance sheet at March 31, 2020 , but disclosure of their fair values is required:

settlement receivable and payable, accounts receivable, commercial paper and customer collateral.

The estimated fair value of such instruments at March 31, 2020 approximates their carrying value due to their generally short maturities.

The following financial instruments are not measured at fair value on the Company’s unaudited consolidated balance sheet at June 30, 2020, but disclosure of their fair values is required:

settlement receivable and payable, accounts receivable and customer collateral.

The estimated fair value of such instruments at June 30, 2020 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.

5 unchanged sentences

Payments under the Company’s lease arrangements are generally fixed.

At March 31, 2020 , the Company had no finance leases.

During the three and six months ended March 31, 2020 , total operating lease cost was $ 29 million and $ 55 million , respectively.

At March 31, 2020 , the weighted average remaining lease term for operating leases was approximately 7 years and the weighted average discount rate for operating leases was 2.28 % .

At March 31, 2020 , the present value of future minimum lease payments was as follows:

March 31, 2020

At June 30, 2020, the Company had no finance leases.

During the three and nine months ended June 30, 2020, total operating lease cost was $ 29 million and $ 84 million, respectively.

At June 30, 2020, the weighted average remaining lease term for operating leases was approximately 7 years and the weighted average discount rate for operating leases was 2.28 %.

At June 30, 2020, the present value of future minimum lease payments was as follows:

June 30, 2020

(in millions)

Remainder of 2020 $ 29

Thereafter 226

Total undiscounted lease payments 635

1 unchanged sentence

Present value of lease liabilities $ 583

At March 31, 2020 , the Company had additional operating leases that had not yet commenced with lease obligations of $ 465 million .

At June 30, 2020, the Company had additional operating leases that had not yet commenced with lease obligations of $ 465 million.

These operating leases will commence between fiscal 2020 and 2023 with non-cancellable lease terms of 1 to 15 years.

4 unchanged sentences

(in millions, except percentages)

Commercial paper

2.20 % Senior Notes due December 2020

$ 3,000 $ 3,000 2.30 %

2.15 % Senior Notes due September 2022

1,000 1,000 2.30 %

2.80 % Senior Notes due December 2022

2,250 2,250 2.89 %

3.15 % Senior Notes due December 2025

4,000 4,000 3.26 %

1.90 % Senior Notes due April 2027

1,500 — 2.02 %

2.75 % Senior Notes due September 2027

750 750 2.91 %

2.05 % Senior Notes due April 2030

1,500 — 2.13 %

4.15 % Senior Notes due December 2035

1,500 1,500 4.23 %

2.70 % Senior Notes due April 2040

1,000 — 2.80 %

4.30 % Senior Notes due December 2045

3,500 3,500 4.37 %

3.65 % Senior Notes due September 2047

750 750 3.73 %

20,750 16,750

Unamortized discounts and debt issuance costs

( 134 ) ( 108 )

Hedge accounting fair value adjustments (2)

Total carrying value of debt

$ 20,879 $ 16,729

Current maturities of debt

Long-term debt

17,880 16,729

Total carrying value of debt

$ 20,879 $ 16,729

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

3 unchanged sentences

Under the program, the Company is authorized to issue up to $ 3.0 billion in outstanding notes, with maturities up to 397 days from the date of issuance.

At March 31, 2020 , the commercial paper outstanding had remaining maturities of less than 12 months.

In April 2020, the Company issued fixed-rate senior notes in a public offering in an aggregate principal amount of $ 4.0 billion , with maturities ranging between 7 and 20 years.

During the three months ended June 30, 2020, the Company repaid $ 1.0 billion of commercial paper that was issued during the three months ended March 31, 2020.

The Company had no outstanding obligations under the program at June 30, 2020 and September 30, 2019.

In April 2020, the Company issued fixed-rate senior notes in a public offering for an aggregate principal amount of $ 4.0 billion, with maturities ranging between 7 and 20 years.

The April 2027 Notes, 2030 Notes and 2040 Notes, or collectively, the "2020 Notes", have interest rates of 1.90 %, 2.05 % and 2.70 %, respectively.

2 unchanged sentences

The Company plans to use the net proceeds for general corporate purposes.

The 2020 Notes are senior unsecured obligations of the Company, ranking equally with the Company's other senior unsecured indebtedness.

The Company may redeem the 2020 Notes as a whole or in part at any time and from time to time at specified redemption prices.

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

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

For the Years Ending September 30,

2020 2021 2022 2023 2024 Thereafter Total

(in millions)

Future principal payments $ — $ 3,000 $ 1,000 $ 2,250 $ — $ 14,500 $ 20,750

Note 9—Settlement Guarantee Management

3 unchanged sentences

However, the Company’s future obligations, which could be material under its guarantees, are not determinable as they are dependent upon future events.

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

The Company’s settlement exposure is limited to the amount of unsettled Visa payment transactions at any point in time, which vary significantly day to day.

The Company’s maximum daily settlement exposure was $ 97.3 billion and the average daily settlement exposure was $ 56.7 billion during the six months ended March 31, 2020 .

The Company’s maximum daily settlement exposure was $ 97.3 billion and the average daily settlement exposure was $ 54.4 billion during the nine months ended June 30, 2020.

The Company maintains and regularly reviews global settlement risk policies and procedures to manage settlement exposure, which may require clients to post collateral if certain credit standards are not met.

At March 31, 2020 and September 30, 2019 , the Company held collateral as follows:

At June 30, 2020 and September 30, 2019, the Company held collateral as follows:

2020 September 30,

3 unchanged sentences

Letters of credit 1,273 1,293

Guarantees 704 477

Total $ 4,017 $ 3,677

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

Note 10—Stockholders’ Equity

1 unchanged sentence

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

March 31, 2020

September 30, 2019

Conversion Rate Into

As-converted Class A

Conversion Rate Into

As-converted Class A

June 30, 2020 September 30, 2019

Outstanding Conversion Rate Into

Common Stock As-converted Class A

Outstanding Conversion Rate Into

Common Stock As-converted Class A

(in millions, except conversion rates)

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Class A common stock (2)

1,687 — 1,687 1,718 — 1,718

Class B common stock 245 1.6228 (3)

398 245 1.6228 (3)

Class C common stock 11 4.0000 43 11 4.0000 45

Total 2,203 2,237

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

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

Class A common stock shares outstanding reflect repurchases that settled on or before March 31, 2020 and September 30, 2019 .

(2) Class A common stock shares outstanding reflect repurchases that settled on or before June 30, 2020 and September 30, 2019.

(3) The class B to class A common stock conversion rate is presented on a rounded basis.

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The recovery has the same economic effect on earnings per share as repurchasing the Company’s class A common stock, because it reduces the UK&I and Europe preferred stock conversion rates and consequently, reduces the as-converted class A common stock share count.

There were no conversion rate adjustments in the six months ended March 31, 2020 .

See Note 5—U.S.

and Europe Retrospective Responsibility Plans .

The following table presents the reduction in equivalent number of as-converted shares of class A common stock, effective price per share and recovery of VE territory covered losses through conversion rate adjustments:

Nine Months Ended

June 30, 2020 Nine Months Ended

June 30, 2019

UK&I Europe UK&I Europe

(in millions, except per share data)

Reduction in equivalent number of as-converted class A common stock

Effective price per share (2)

$ 180.00 $ 180.00 $ 141.32 $ 150.26

Recovery through conversion rate adjustment

$ 72 $ 92 $ 6 $ 2

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

(2) Effective price per share for the quarter 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.

Effective price per share is calculated using the weighted-average effective prices of the respective adjustments made during the year.

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

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Three Months Ended

Six Months Ended

June 30, Nine Months Ended

2020 2019 2020 2019

(in millions, except per share data)

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Average repurchase price per share (2)

$ 177.86 $ 162.97 $ 179.91 $ 147.66

Total cost (2)

Shares repurchased in the open market reflect repurchases that settled during the three and six months ended March 31, 2020 and 2019 .

$ 1,069 $ 2,149 $ 6,572 $ 6,480

(1) Shares repurchased in the open market reflect repurchases that settled during the three and nine months ended June 30, 2020 and 2019.

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

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Average repurchase price per share and total cost is calculated based on unrounded numbers.

In January 2019, the Company’s board of directors authorized an $ 8.5 billion share repurchase program and in January 2020, authorized an additional $ 9.5 billion share purchase program.

In January 2019, the Company’s board of directors authorized an $ 8.5 billion share repurchase program and in January 2020, authorized an additional $ 9.5 billion share purchase program (the “January 2020 Program”).

These authorizations have no expiration date.

As of March 31, 2020 , the Company’s January 2020 share repurchase program had remaining authorized funds of $ 8.1 billion for share repurchase.

All share repurchase programs authorized prior to January 2020 have been completed.

O n April 21, 2020 , the Company’s board of directors declared a quarterly cash dividend of $ 0.30 per share of class A common stock (determined in the case of class B and C common stock and UK&I and Europe preferred stock on an as-converted basis).

The cash dividend will be paid on June 2, 2020 , to all holders of record as of May 14, 2020 .

The Company declared and paid $ 668 million and $ 569 million during the three months ended March 31, 2020 and 2019 , respectively and $ 1.3 billion and $ 1.1 billion during the six months ended March 31, 2020 and 2019 , respectively, in dividends to holders of the Company’s common and preferred stocks.

As of June 30, 2020, the Company’s January 2020 Program had remaining authorized funds of $ 7.0 billion for share repurchase.

All share repurchase programs authorized prior to the January 2020 Program have been completed.

O n July 20, 2020, the Company’s board of directors declared a quarterly cash dividend of $ 0.30 per share of class A common stock (determined in the case of class B and C common stock and UK&I and Europe preferred stock on an as-converted basis).

The cash dividend will be paid on September 1, 2020, to all holders of record as of August 14, 2020.

The Company declared and paid $ 663 million and $ 565 million during the three months ended June 30, 2020 and 2019, respectively and $ 2.0 billion and $ 1.7 billion during the nine months ended June 30, 2020 and 2019, respectively, in dividends to holders of the Company’s common and preferred stocks.

Note 11—Earnings Per Share

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

The following table presents earnings per share for the three months ended March 31, 2020 :

Basic Earnings Per Share

Diluted Earnings Per Share

The following table presents earnings per share for the three months ended June 30, 2020:

Basic Earnings Per Share Diluted Earnings Per Share

(in millions, except per share data)

Outstanding (B)

Outstanding (B) Earnings per

Class A common stock $ 1,814 1,690 $ 1.07 $ 2,373 2,214 (3)

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Participating securities (4)

Not presented

The following table presents earnings per share for the six months ended March 31, 2020 :

Basic Earnings Per Share

Diluted Earnings Per Share

85 Not presented Not presented $ 85 Not presented Not presented

Net income $ 2,373

The following table presents earnings per share for the nine months ended June 30, 2020:

Basic Earnings Per Share Diluted Earnings Per Share

(in millions, except per share data)

Outstanding (B)

Outstanding (B) Earnings per

Class A common stock $ 6,679 1,702 $ 3.92 $ 8,729 2,227 (3)

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Participating securities (4)

Not presented

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

Basic Earnings Per Share

Diluted Earnings Per Share

314 Not presented Not presented $ 314 Not presented Not presented

Net income $ 8,729

The following table presents earnings per share for the three months ended June 30, 2019:

Basic Earnings Per Share Diluted Earnings Per Share

(in millions, except per share data)

Outstanding (B)

Outstanding (B) Earnings per

Class A common stock $ 2,379 1,735 $ 1.37 $ 3,101 2,265 (3)

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Participating securities (4)

Not presented

The following table presents earnings per share for the six months ended March 31, 2019 :

Basic Earnings Per Share

Diluted Earnings Per Share

110 Not presented Not presented $ 110 Not presented Not presented

Net income $ 3,101

The following table presents earnings per share for the nine months ended June 30, 2019:

Basic Earnings Per Share Diluted Earnings Per Share

(in millions, except per share data)

Outstanding (B)

Outstanding (B) Earnings per

Class A common stock $ 6,956 1,748 $ 3.98 $ 9,055 2,278 (3)

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Participating securities (4)

Not presented

321 Not presented Not presented $ 321 Not presented Not presented

Net income $ 9,055

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

(1) Net income is allocated based on proportional ownership on an as-converted basis.

The weighted-average number of shares of as-converted class B common stock used in the income allocation was 398 million for the three and six months ended March 31, 2020 and 400 million for the three and six months ended March 31, 2019 .

The weighted-average number of shares of as-converted class C common stock used in the income allocation was 44 million for the three and six months ended March 31, 2020 and 47 million for the three and six months ended March 31, 2019 .

The weighted-average number of shares of preferred stock included within participating securities was 32 million of as-converted UK&I preferred stock for the three and six months ended March 31, 2020 and 2019 , and 44 million of as-converted Europe preferred stock for the three and six months ended March 31, 2020 and 2019 .

The weighted-average number of shares of as-converted class B common stock used in the income allocation was 398 million for the three and nine months ended June 30, 2020 and 400 million for the three and nine months ended June 30, 2019.

The weighted-average number of shares of as-converted class C common stock used in the income allocation was 43 million and 44 million for the three and nine months ended June 30, 2020, respectively, and 46 million and 47 million for the three and nine months ended June 30, 2019, respectively.

The weighted-average number of shares of preferred stock included within participating securities was 32 million of as-converted UK&I preferred stock for the three and nine months ended June 30, 2020 and 2019, and 44 million of as-converted Europe preferred stock for the three and nine months ended June 30, 2020 and 2019.

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

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(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 common stock equivalents of 3 million for the three and six months ended March 31, 2020 and 2019 , because their effect would have been dilutive.

The computation excludes common stock equivalents of 1 million and 2 million for the three and six months ended March 31, 2020 , respectively, and 1 million for the three and six months ended March 31, 2019 , because their effect would have been anti-dilutive.

The computation includes common stock equivalents of 3 million for the three and nine months ended June 30, 2020 and 2019, because their effect would have been dilutive.

The computation excludes common stock equivalents of 1 million for the three and nine months ended June 30, 2020, and less than 1 million for the three and nine months ended June 30, 2019, 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 UK&I and Europe preferred stock and restricted stock units.

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Note 12—Share-based Compensation

The Company granted the following equity awards to employees and non-employee directors under the 2007 Equity Incentive Compensation Plan, or the EIP, during the six months ended March 31, 2020 :

Weighted-Average

The Company granted the following equity awards to employees and non-employee directors under the 2007 Equity Incentive Compensation Plan, or the EIP, during the nine months ended June 30, 2020:

Granted Weighted-Average

Grant Date Fair

Weighted-Average

Value Weighted-Average

Exercise Price

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Performance-based shares (1)

470,128 $ 211.08

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

The Company recorded share-based compensation cost related to the EIP of $ 93 million and $ 106 million for the three months ended March 31, 2020 and 2019 , respectively, and $ 204 million and $ 201 million for the six months ended March 31, 2020 and 2019 , respectively, net of estimated forfeitures, which are adjusted as appropriate.

The Company recorded share-based compensation cost related to the EIP of $ 102 million and $ 106 million for the three months ended June 30, 2020 and 2019, respectively, and $ 306 million and $ 307 million for the nine months ended June 30, 2020 and 2019, respectively, net of estimated forfeitures.

Note 13—Income Taxes

The effective income tax rates were 19 % for the three and six months ended March 31, 2020 and 2019.

During the three and six months ended March 31, 2020 , the Company’s gross unrecognized tax benefits increased by $ 112 million and $ 175 million , respectively.

The effective income tax rates were 19 % for the three and nine months ended June 30, 2020, and 20 % and 19 % for the three and nine months ended June 30, 2019, respectively.

The difference in the effective tax rates between the three-month periods was primarily due to the change in geographic mix of income.

During the three and nine months ended June 30, 2020, the Company’s gross unrecognized tax benefits increased by $ 55 million and $ 230 million, respectively.

The Company’s net unrecognized tax benefits that, if recognized, would favorably impact the effective tax rate, increased by $ 31 million and $ 70 million, respectively.

The change in unrecognized tax benefits is primarily related to various tax positions across several jurisdictions.

During the three and six months ended March 31, 2020 and 2019, there were no significant changes in interest and penalties related to uncertain tax positions.

The Company’s accrued interest related to uncertain tax positions increased by $ 18 million and $ 56 million during the three and nine months ended June 30, 2020, respectively, and $ 19 million and $ 51 million during the three and nine months ended June 30, 2019, respectively.

During the three and nine months ended June 30, 2020 and 2019, there were no significant changes in penalties related to uncertain tax positions.

The Company’s tax filings are subject to examination by the U.S.

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

On July 22, 2020, UK enacted a legislation that repealed the previous tax rate reduction from 19% to 17% that was effective on April 1, 2020.

The repeal of the UK tax rate reduction is not expected to significantly increase the Company’s ongoing effective tax rate, however, it will result in a one-time non-cash tax expense in the fourth quarter of fiscal 2020, due to the re-measurement of deferred taxes which are primarily related to intangibles recorded in purchase accounting upon the acquisition of Visa Europe in fiscal 2016.

Note 14—Legal Matters

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The following table summarizes the activity related to accrued litigation:

Six Months Ended

Nine Months Ended

(in millions)

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covered litigation:

Six Months Ended

Nine Months Ended

(in millions)

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A takedown payment of approximately $ 467 million was received on December 27, 2019, and deposited into the Company’s litigation escrow account.

The deposit into the litigation escrow account and reestablishment of a prior accrual to address opt-out claims was recorded during the six months ended March 31, 2020 .

The deposit into the litigation escrow account and reestablishment of a prior accrual to address opt-out claims was recorded during the nine months ended June 30, 2020.

See further discussion below under U.S.

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

Six Months Ended

Nine Months Ended

(in millions)

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

On May 29, 2020, a complaint was filed by Old Jericho Enterprise, Inc.

against Visa and Mastercard on behalf of a purported class of gasoline retailers operating in 24 states and the District of Columbia.

The complaint alleges violations of the antitrust laws of those jurisdictions and seeks recovery for plaintiffs as indirect purchasers.

Visa believes Plaintiffs’ claims are released by the Amended Settlement Agreement and are, nevertheless, covered by the U.S.

Retrospective Responsibility Plan.

On June 1, 2020, Visa, jointly with other defendants, served a motion for summary judgment regarding the claims in the Injunctive Relief Class complaint.

The putative Injunctive Relief Class plaintiffs served a motion for partial summary judgment.

Interchange Multidistrict Litigation (MDL) - Individual Merchant Actions

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

On June 1, 2020, Visa, jointly with other defendants, served motions for summary judgment regarding the claims in certain of the individual merchant actions, as well as certain declaratory judgment claims brought by Visa, Mastercard, and some U.S.

financial institutions.

Plaintiffs in certain of the individual merchant actions served motions for partial summary judgment.

VE Territory Covered Litigation

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Standstill agreements have been entered into with respect to some of those threatened Merchant claims, several of which have been settled.

On June 17, 2020, the Supreme Court of the United Kingdom found that Visa’s UK domestic interchange restricted competition.

The case will now continue before the UK Competition Appeals Tribunal to determine the lawful level of interchange and the amount the plaintiff may be entitled to recover.

Other Litigation

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The application and an appeal to the Alberta Court of Appeal remain pending.

Pulse Network

On June 5, 2020, the U.S.

Court of Appeals for the Fifth Circuit set the case for re-argument during the week of August 31, 2020.

Nuts for Candy

2 unchanged sentences

The case has been dismissed with prejudice.

Federal Trade Commission Civil Investigative Demand (Formerly Voluntary Access Letter)

On June 9, 2020, the Federal Trade Commission issued a Civil Investigative Demand to Visa requesting additional documents and information.

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

Euronet Litigation

4 unchanged sentences

Euronet seeks damages, costs, and injunctive relief to prevent the defendants from enforcing the aforementioned rules.

European Commission Staged Digital Wallets Investigation

On June 26, 2020, the European Commission (“EC”) informed Visa that it has opened a preliminary investigation into Visa’s rules regarding staged digital wallets and issued a request for information regarding such rules.

Visa is cooperating with the EC.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements