Visa Inc. Posts Strong Fiscal Fourth Quarter and Full-Year 2012 Adjusted Earnings Results and Announces New $1.5 billion Share Repurchase Program

FOSTER CITY, Calif., Oct. 31, 2012 /PRNewswire/ --

  • Adjusted quarterly net income of $1 billion or $1.54 per diluted class A common share, excluding special item
  • Adjusted full-year 2012 net income of $4.2 billion or $6.20 per diluted class A common share, excluding special items
  • GAAP quarterly net income of $1.7 billion or $2.47 per diluted class A common share, including special item
  • Full-year 2012 GAAP net income, including special items, was $2.1 billion or $3.16 per diluted class A common share
  • The Company authorizes a new $1.5 billion repurchase program and increases quarterly dividend payment by 50%

Visa Inc. (NYSE: V) today announced financial results for the Company's fiscal fourth quarter and full-year 2012. Adjusted quarterly and full-year net income per class A common share outstanding are non-GAAP financial measures that are reconciled to their most directly comparable GAAP measures in the accompanying financial tables. On an adjusted basis, the Company's financial results reflect the impact of special items that are either non-recurring, have no cash impact or are related to amounts covered by the retrospective responsibility plan.

GAAP net income in the fiscal fourth quarter of 2012 was $1.7 billion or diluted class A common stock earnings per share of $2.47. Adjusted net income in the fiscal fourth quarter was $1.0 billion or diluted class A common stock earnings per share of $1.54, excluding a special item related to the reversal of  previously recorded tax reserves which increased net income by $627 million. The weighted-average number of diluted class A common shares outstanding in the fiscal fourth quarter was 672 million. 

GAAP net income for the full-year 2012 was $2.1 billion, which included several special items: a one-time non-cash deferred tax adjustment of $208 million during the fiscal second quarter; a covered litigation provision of $4.1 billion and related tax benefits during the fiscal third quarter; and the reversal of previously recorded tax reserves which totaled $627 million during the fiscal fourth quarter. Diluted class A common stock earnings per share was $3.16. On an adjusted basis, excluding the aforementioned special items, net income for the full-year 2012 was $4.2 billion, an increase of 19% over the prior year. Adjusted diluted class A common stock earnings per share was $6.20, an increase of 24% over the prior year. The weighted-average number of diluted class A common shares outstanding for the full year was 678 million.

GAAP net operating revenue in the fiscal fourth quarter of 2012 was $2.7 billion, an increase of 15% over the prior year. Currency fluctuations contributed a negative 1 percentage point of growth towards quarterly net operating revenues.

GAAP net operating revenue for the full-year of 2012 was $10.4 billion, an increase of 13% over the prior year and driven by double-digit revenue growth contributions from service, data processing and international transaction revenues. There was no significant impact on full-year results related to the strengthening or weakening of the U.S. dollar over the prior year.

"Visa delivered strong financial performance for the fourth quarter and full year, a result of our focus on growing our core business, accelerating expansion of our business outside the U.S and investing in next-generation technologies that will define the future of payments," said Joseph Saunders, Chairman and Chief Executive Officer of Visa Inc.

"With our solid record of growth and sound strategy, Visa has a strong foundation for continued long-term growth as technology-enabled change continues to shape our global market.  We will continue to invest in new technologies that will help our financial institution clients expand their businesses, add incremental value to the merchant community, and forge new revenue opportunities for both Visa and our partners. We see extraordinary opportunity for growth in the payments industry."

Fiscal Fourth Quarter 2012 Financial Highlights:

Payments volume growth, on a constant dollar basis, for the three months ended June 30, 2012, on which fiscal fourth quarter service revenue is recognized, was a positive 6% over the prior year at $978 billion.

Payments volume growth, on a constant dollar basis, for the three months ended September 30, 2012, was a positive 6% over the prior year at $1 trillion.

Cross-border volume growth, on a constant dollar basis, was a positive 10% for the three months ended September 30, 2012.

Total processed transactions, which represent transactions processed by VisaNet, for the three months ended September 30, 2012, were 14 billion, a positive 2% increase over the prior year.

For the fiscal fourth quarter 2012, service revenues were $1.3 billion, an increase of 14% versus the prior year, and are recognized based on payments volume in the prior quarter. All other revenue categories are recognized based on current quarter activity. Data processing revenues rose 15% over the prior year to $1.1 billion. International transaction revenues, which are driven by cross-border volume, grew 5% over the prior year to $796 million. Other revenues, which include the Visa Europe licensing fee, were $172 million, flat compared to the prior year. Client incentives, which are a contra revenue item, were $563 million and represent 17% of gross revenues.

Total operating expenses on a GAAP basis were $1.2 billion for the quarter, an 18% increase over the prior year.

Cash, cash equivalents, restricted cash, and available-for-sale investment securities were $10.5 billion at September 30, 2012.

Fiscal Full-Year 2012 Financial Highlights:

For the fiscal full-year 2012, service revenues were $4.9 billion, an increase of 14% over the prior year. Data processing revenues rose 14% over the prior year to $4.0 billion. International transaction revenues, which are driven by cross-border volume, grew 13% over the prior year to $3.0 billion. Other revenues, which include the Visa Europe licensing fee, were $704 million, a 7% increase over the prior year.  Client incentives, which are a contra revenue item, were $2.2 billion and represent 17% of gross revenues.

Total processed transactions, which represent transactions processed by VisaNet for the 12 months ended September 30, 2012, totaled 53 billion, a 5% increase over the prior year.

Excluding the litigation provision recorded in the fiscal third quarter of 2012, total adjusted operating expenses increased 12% over the prior year to $4.2 billion.

Excluding special items, the Company's adjusted tax rate was 32.9% for the twelve months ended September 30, 2012.

Notable Events:

Total as-converted class A common stock was reduced by 2.5 million shares during the three months ended September 30, 2012, which was funded from $324 million of our operating cash on hand. Of the $324 million, $174 million was used to repurchase class A common stock in the open market. In addition, we deposited $150 million from our operating cash into the litigation escrow account previously established under the retrospective responsibility plan. This deposit has the same economic effect on earnings per share as repurchasing the Company's class A common stock as it reduces the as-converted class B common stock share count.  

As announced on October 24, 2012, the Board of Directors declared a quarterly dividend in the aggregate amount of $0.33 per share of class A common stock (determined in the case of class B and class C common stock on an as-converted basis) payable on December 4, 2012, to all holders of record of the Company's class A, class B and class C common stock as of November 16, 2012.

The Board of Directors has authorized a new $1.5 billion class A share repurchase program. The authorization will be in place through October 2013, and is subject to further change at the discretion of the Board.

Financial Outlook:

Visa Inc. provides its financial outlook for the following metrics for fiscal 2013:

  • Annual net revenue growth in the low double digits;
  • Client incentives as a percent of gross revenues: 18% to 18.5% range;
  • Marketing expenses: Under $1 billion
  • Adjusted annual operating margin of about 60%;
  • Tax rate: 30% to 32% range;
  • Adjusted annual diluted class A common stock earnings per share growth: High teens;
  • Capital expenditures: $425 million to $475 million range; and
  • Annual free cash flow about $5 billion.

Fiscal Fourth Quarter and Full-Year 2012 Earnings Results Conference Call Details:

Visa's executive management team will host a live audio webcast beginning at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) today to discuss the financial results and business highlights.

All interested parties are invited to listen to the live webcast at http://investor.visa.com. A replay of the webcast will be available on the Visa Investor Relations website for 30 days.

Investor information, including supplemental financial information, is available on Visa Inc.'s Investor Relations website at http://investor.visa.com.

About Visa

Visa is a global payments technology company that connects consumers, businesses, financial institutions and governments in more than 200 countries and territories to fast, secure and reliable electronic payments. We operate one of the world's most advanced processing networks—VisaNet—that is capable of handling more than 24,000 transaction messages a second, with fraud protection for consumers and guaranteed payment for merchants. Visa is not a bank and does not issue cards, extend credit or set rates and fees for consumers. Visa's innovations, however, enable its financial institution customers to offer consumers more choices: pay now with debit, ahead of time with prepaid or later with credit products. For more information, visit www.corporate.visa.com.

Forward Looking Statements:

This press release contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These statements can be identified by the terms "continue," "expect," "will," "see," and similar references to the future. Examples of such forward-looking statements include, but are not limited to, statements we make about our revenue opportunities and about our revenue, earnings per share, incentive payments, expenses, operating margin, tax rate, capital expenditures and free cash flow and the growth of those items.

By their nature, forward-looking statements: (i) speak only as of the date they are made, (ii) are neither statements of historical fact nor guarantees of future performance and (iii) are subject to risks, uncertainties, assumptions and changes in circumstances that are difficult to predict or quantify. Therefore, actual results could differ materially and adversely from those forward-looking statements because of a variety of factors, including the following:

  • the impact of laws, regulations and marketplace barriers, including:
    • rules capping debit interchange reimbursement fees promulgated under the U.S. Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act;
    • rules under the Dodd-Frank Act expanding issuers' and merchants' choice among debit payment networks;
    • increased regulation outside the United States and in other product categories;
    • increased government support of national payment networks outside the United States; and
    • rules about consumer privacy and data use and security;
  • developments in current or future litigation and government enforcement, including those affecting interchange reimbursement fees, antitrust and tax disputes;
  • economic factors, such as:
    • an increase or spread of the current European crisis involving sovereign debt and the euro;
    • the so-called "fiscal cliff" in the United States: the combination of expiring tax cuts and mandatory reductions in federal spending at the end of 2012;
    • other global economic, political and health conditions;
    • cross-border activity and currency exchange rates; and
    • material changes in our clients' performance compared to our estimates;
  • industry developments, such as competitive pressure, rapid technological developments, and disintermediation from the payments value stream;
  • system developments, such as:
    • disruption of our transaction processing systems or the inability to process transactions efficiently;
    • account data breaches or increased fraudulent or other illegal activities involving our cards; and
    • issues arising at Visa Europe, including failure to maintain interoperability between our systems;
  • costs arising if Visa Europe were to exercise its right to require us to acquire all of its outstanding stock;
  • loss of organizational effectiveness or key employees;
  • failure to integrate acquisitions successfully or to effectively launch new products and businesses;
  • changes in accounting principles or treatments; and

the other factors discussed under the heading "Risk Factors" in our most recent Annual Report on Form 10−K on file with the U.S. Securities and Exchange Commission. You should not place undue reliance on such statements. Unless required to do so by law, we do not intend to update or revise any forward−looking statement, because of new information or future developments or otherwise.

Contacts:

Investor Relations: Jack Carsky or Victoria Hyde-Dunn, 650-432-7644, ir@visa.com  
Media Relations: Will Valentine, 650-432-2990, globalmedia@visa.com  

 

VISA INC.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)






September 30,
2012


September 30,
2011


(in millions, except par value data)

Assets




Cash and cash equivalents

$                2,074


$                2,127

Restricted cash—litigation escrow

4,432


2,857

Investment securities




    Trading

66


57

    Available-for-sale 

677


1,214

Settlement receivable

454


412

Accounts receivable

723


560

Customer collateral

823


931

Current portion of client incentives

209


278

Deferred tax assets

2,027


489

Prepaid expenses and other current assets 

301


265





Total current assets

11,786


9,190





Investment securities, available-for-sale 

3,283


711

Client incentives

58


85

Property, equipment and technology, net 

1,634


1,541

Other assets 

151


129

Intangible assets, net

11,420


11,436

Goodwill

11,681


11,668





Total assets

$              40,013


$              34,760









Liabilities




Accounts payable

$                   152


$                   169

Settlement payable

719


449

Customer collateral 

823


931

Accrued compensation and benefits

460


387

Client incentives

830


528

Accrued liabilities 

584


562

Accrued litigation 

4,386


425





Total current liabilities

7,954


3,451





Deferred tax liabilities

4,058


4,205

Other liabilities

371


667





Total liabilities

12,383


8,323









Equity




Preferred stock, $0.0001 par value, 25 shares authorized and none issued

$                       -


$                       -

Class A common stock, $0.0001 par value, 2,001,622 shares authorized, 535 and 520 shares issued and outstanding at September 30, 2012, and September 30,2011, respectively

-


-

Class B common stock, $0.0001 par value, 622 shares authorized, 245 shares issued and outstanding at September 30, 2012 and September 30, 2011 

-


-

Class C common stock, $0.0001 par value, 1,097 shares authorized, 31 and 47 shares issued and outstanding at September 30, 2012 and September 30, 2011, respectively

-


-

Additional paid-in capital

19,992


19,907

Accumulated income

7,809


6,706

Accumulated other comprehensive income (loss), net




    Investment securities, available-for-sale

3


-

    Defined benefit pension and other postretirement plans

(186)


(186)

    Derivative instruments classified as cash flow hedges

13


18

    Foreign currency translation adjustments

(1)


(8)

Total accumulated other comprehensive loss, net

(171)


(176)





Total equity

27,630


26,437





Total liabilities and equity

$              40,013


$              34,760

 

VISA INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)


Three Months Ended
September 30,


Twelve Months Ended
September 30,


2012


2011


2012


2011


(in millions, except per share data)

Operating Revenues








Service revenues

$                1,264


$                1,105


$                4,872


$                4,261

Data processing revenues

1,062


925


3,975


3,478

International transaction revenues

796


758


3,025


2,674

Other revenues

172


171


704


655

Client incentives

(563)


(576)


(2,155)


(1,880)

Total operating revenues

2,731


2,383


10,421


9,188









Operating Expenses








Personnel

471


388


1,726


1,459

Network and processing

111


106


414


357

Marketing

271


239


873


870

Professional fees

134


115


385


337

Depreciation and amortization

89


77


333


288

General and administrative

131


95


451


414

Litigation provision

2


1


4,100


7

Total operating expenses

1,209


1,021


8,282


3,732

Operating income

1,522


1,362


2,139


5,456









Other Income (Expense)








Interest income (expense)

57


(13)


29


(32)

Investment income

5


1


36


108

Other

4


4


3


124

Total other income (expense)

66


(8)


68


200









Income before income taxes

1,588


1,354


2,207


5,656

Income tax (benefit) provision 

(74)


476


65


2,010

Net income including non-controlling interest

1,662


878


2,142


3,646

Loss attributable to non-controlling interest

-


2


2


4

Net income attributable to Visa Inc.

$                1,662


$                   880


$                2,144


$                3,650









Basic earnings per share








    Class A common stock

$                  2.48


$                  1.28


$                  3.17


$                  5.18

    Class B common stock

$                  1.05


$                  0.62


$                  1.40


$                  2.59

    Class C common stock

$                  2.48


$                  1.28


$                  3.17


$                  5.18









Basic weighted-average shares outstanding








    Class A common stock

528


518


524


509

    Class B common stock

245


245


245


245

    Class C common stock

35


49


41


70









Diluted earnings per share








    Class A common stock

$                  2.47


$                  1.27


$                  3.16


$                  5.16

    Class B common stock

$                  1.04


$                  0.62


$                  1.39


$                  2.58

    Class C common stock

$                  2.47


$                  1.27


$                  3.16


$                  5.16









Diluted weighted-average shares outstanding








    Class A common stock

672


692


678


707

    Class B common stock

245


245


245


245

    Class C common stock

35


49


41


70

 

VISA INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


For the Years Ended September 30,


2012


2011


2010


(in millions)

Operating Activities






Net income including non-controlling interest

$                2,142


$                3,646


$                2,964

Adjustments to reconcile net income including non-controlling interest to net cash provided by (used in) operating activities:






Amortization of client incentives

2,155


1,880


1,560

Fair value adjustment for the Visa Europe put option

-


(122)


(79)

Share-based compensation

147


154


131

Excess tax benefit for share-based compensation

(71)


(18)


(14)

Depreciation and amortization of intangible assets and property, equipment and technology

333


288


265

Litigation provision and accretion

4,101


18


(18)

Deferred income taxes

(1,690)


164


249

Other

(8)


(104)


(32)

Change in operating assets and liabilities:






Settlement receivable

(42)


(4)


203

Accounts receivable

(161)


(79)


(7)

Client incentives

(1,757)


(1,857)


(1,386)

Other assets

(26)


2


(42)

Accounts payable

(17)


29


(21)

Settlement payable

270


36


(245)

Accrued and other liabilities

(227)


129


165

Accrued litigation

(140)


(290)


(1,002)

Net cash provided by operating activities

5,009


3,872


2,691







Investing Activities






Purchases of property, equipment, technology and intangible assets

(376)


(353)


(241)

Proceeds from disposal of property, equipment and technology

2


-


3

Investment securities, available-for-sale:






Purchases

(4,140)


(1,910)


(11)

Proceeds from sales and maturities

2,093


129


67

Purchases of / contributions to other investments

(12)


(13)


(17)

Proceeds / distributions from other investments

22


116


11

Acquisitions, net of cash received of $17, $22 and $147, respectively 

(3)


(268)


(1,805)

Distribution from money market investment

-


-


89

Net cash used in investing activities

(2,414)


(2,299)


(1,904)







Financing Activities






Repurchase of class A common stock

(710)


(2,024)


(1,000)

Dividends paid

(595)


(423)


(368)

Deposits into litigation escrow account—retrospective responsibility plan

(1,715)


(1,200)


(500)

Payments from litigation escrow account—retrospective responsibility plan

140


280


280

Cash proceeds from exercise of stock options

174


99


56

Excess tax benefit for share-based compensation

71


18


14

Principal payments on capital lease obligations

(6)


(10)


(12)

Payments for earn-out related to PlaySpan acquisition

(14)


-


-

Principal payments on debt

-


(44)


(12)

Net cash used in financing activities

(2,655)


(3,304)


(1,542)

Effect of exchange rate changes on cash and cash equivalents

7


(9)


5

Decrease in cash and cash equivalents

(53)


(1,740)


(750)

Cash and cash equivalents at beginning of year

2,127


3,867


4,617

Cash and cash equivalents at end of year

$                2,074


$                2,127


$                3,867







Supplemental Disclosure of Cash Flow Information






Income taxes paid, net of refunds

$                2,057


$                1,731


$                1,291

Amounts included in accounts payable and accrued and other liabilities related to purchases of property, equipment, technology and intangible assets

$                     67


$                     36


$                     31

Interest payments on debt

$                       -


$                        3


$                        4

 

VISA INC.

FISCAL 2012 AND 2011 QUARTERLY RESULTS OF OPERATIONS

(UNAUDITED)












Fiscal 2012 Quarter Ended


Fiscal 2011 Quarter Ended


September 30,
2012


June 30,
2012


March 31,
2012


December 31,
2011


September 30,
2011


(in millions)

Operating Revenues










Service revenues

$                1,264


$                1,216


$                1,241


$                1,151


$                1,105

Data processing revenues

1,062


1,040


922


951


925

International transaction revenues

796


748


733


748


758

Other revenues

172


175


179


178


171

Client incentives

(563)


(614)


(497)


(481)


(576)

Total operating revenues

2,731


2,565


2,578


2,547


2,383