Visa Inc. (V)
Q4 2008 Earnings Call Transcript
October 29, 2008, 5:00 p.m. ET

Executives

Jack Carsky – Head of Global Investor Relations
Joseph W. Saunders – Chairman and Chief Executive Officer
Byron Pollitt – Chief Financial Officer

Analysts

Tien-Tsin Huang – JPMorgan
Adam Frisch – UBS
Charlie Murphy – Morgan Stanley
Craig Maurer – Calyon Securities
Julio Quinteros – Goldman, Sachs & Co.
Andrew Jeffrey – SunTrust Robinson Humphrey
Patrick Burton – Citigroup
Christopher Mammone – Deutsche Bank
Daniel Perlin – Wachovia Securities
Gregory Smith – Merrill Lynch & Co., Inc.
Sanjay Sakhrani – Keefe, Bruyette & Woods
Bruce Harting – Barclays Capital

Presentation

Operator

Welcome to Visa Incorporation’s fiscal fourth quarter and full year 2008 earnings conference call. All participants are in a listen-only mode. Today’s conference is being recorded.

I would like to turn the call to your host Mr. Jack Carsky, Head of Global Investor Relations for Visa. Sir, you may begin.

Jack Carsky

Thank you Jose. Good afternoon everyone and welcome to Visa Inc.’s fourth quarter and full year 2008 earnings conference call.

Speaking today are Joe Saunders, Visa’s Chairman and Chief Executive Officer and Byron Pollitt, Visa’s Chief Financial Officer. This call is currently being webcast live over the Internet. It can be accessed on the Investor Relations section of our website at www.investor.visa.com. A replay of the webcast will also be archived on our site for 30 days. A PowerPoint deck containing highlights of today’s commentary was posted to our website prior to this call.

Let me please remind you that this presentation may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. By their nature forward-looking statements are not guarantees of future performance and as a result of a variety of factors actual results could differ materially from such statements. Additional information concerning those factors is available in the company’s filings with the SEC which can be accessed through the SEC website or the Investor Relations section of the Visa website.

For historical non-GAAP or pro forma related financial information disclosed in this call, the related GAAP measures and other information required by Regulation G of the SEC are available in the financial and statistical summary accompanying our fiscal fourth quarter earnings press release. This release can also be accessed through the Investor Relations section of our website.

With that, I’ll turn the call over to Joe.

Joseph W. Saunders

Thank you Jack, and thanks to all of you for joining us this afternoon. Before I discuss earnings, let me speak to the Discover litigation which as you know, we settled just two days ago. We are obviously very pleased that we were able to put this behind us in a manner quite consistent with our retrospective responsibility plan. An additional component of the Discover settlement is settlement of unasserted claims by MasterCard. And with this settlement, I am delighted to tell you that all disputes between Visa, it’s primary competitors, MasterCard, American Express, First Data and Discover have now been resolved. That’s an important milestone. Although the expense for the Discover settlement did flow through our income statement this quarter, as per the retrospective responsibility plan there is no direct cost to our public Class A shareholders and there is no dilution to their holdings.

With respect to the MasterCard release as previously reported, Visa Inc. had taken a $30 million after-tax reserve in the third quarter since this claim is not covered by the retrospective responsibility plan. As the obligation was connected to the ultimate settlement amount, we recognized an additional $80 million after-tax reserve this quarter.

As a result of the Discover settlement, we will be taking steps this fiscal first quarter to fund our escrow account with an additional $1.1 billion. As per our retrospective responsibility plan, when we fund the escrow, our Class B shareholders will bear this cost via a reduction in their as converted share count.

It is our intention to seek an amendment to our charter to permit us to deposit our own funds into the escrow account and buy down Class B ownership directly. This approach reduces the total number of shares outstanding for EPS calculation purposes, effectively operating as a share repurchase program in the amount of $1.1 billion.