Visa 2009 Annual Report Download - page 108

Table of Contents
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2009
(in millions, except as noted)
Options
Options issued under the EIP expire 10 years from the date of grant and vest ratably over three years from the date of grant, subject to earlier vesting in
full under certain conditions.
During fiscal 2009 and 2008, the fair value of each stock option was estimated on the date of grant using a Black-Scholes option pricing model with the
following assumptions:
2009 2008
Expected term (in years)(1) 5.69 5.79
Risk-free rate of return(2) 2.7% 2.6%
Expected volatility(3) 44.2% 36.1%
Expected dividend yield(4) 0.7% 1.0%
Weighted-average fair value per option granted $ 23.54 $ 15.34
(1) Based on a set of peer companies who issued awards with similar terms.
(2) Based upon the zero coupon U.S. treasury bond rate over the expected term of the awards.
(3) Based on the average of the Company's implied and historical volatility. As the Company did not have publicly traded stock historically, historical
volatility relies in part on the historical volatility of a group of peer companies that management believes is generally comparable to Visa. The expected
volatilities ranged from 38% to 46%.
(4) Based on the Company's expected annual dividend rate on the date of grant.
The following table summarizes the Company's option activity for fiscal 2009:
Options
Weighted-
Average
Exercise Price
Per Share
Weighted
Average
Remaining
Contractual
Term (in
years)
Aggregate
Intrinsic
Value(5)
(in millions)
Outstanding at October 1, 2008 8,921,380 $ 44.11
Granted 1,290,433 $ 56.51
Forfeited/expired (412,526) $ 45.57
Exercised (709,011) $ 44.00
Outstanding at September 30, 2009 9,090,276 $ 45.81 8.6 $ 212
Options exercisable at September 30, 2009 2,320,503 $ 44.09 8.5 $ 58
Options exercisable and expected to be vested at September 30, 2009(6) 8,480,996 $ 45.77 8.6 $ 198
(5) Calculated using the stock price at September 30, 2009 of $69.11 less the option exercise price, multiplied by the number of instruments.
(6) Adjusted for estimated forfeitures.
For the options exercised during fiscal 2009, the total intrinsic value and the tax benefit realized were $16 million and $5 million, respectively. There
were no options exercised during fiscal 2008.
As of September 30, 2009, there was $72 million of total unrecognized compensation cost related to non-vested options, which is expected to be
recognized over a weighted average period of approximately 1.5 years.
107