Visa 2011 Annual Report Download - page 56

Table of Contents
of, or judgments in, covered litigation are paid from the escrow account. See Note 3—Retrospective Responsibility Plan and Note 21—Legal Matters to our
consolidated financial statements, as well as Sources of Liquidity. During fiscal 2011, we made $280 million in covered litigation payments that were funded
from the escrow account.
Other litigation. Judgments in and settlements of litigation, other than covered litigation, could give rise to future liquidity needs.
Share repurchase. During fiscal 2011, we used $3.2 billion to effectively repurchase 43.0 million class A common shares on an as-converted basis,
including $2.0 billion in open market repurchases and $1.2 billion in deposits into the litigation escrow account. Repurchased shares have been retired and
constitute authorized but unissued shares. We have completed the share repurchase programs previously authorized by the board of directors in April 2011
and October 2010. In July 2011, our board of directors authorized a new $1.0 billion share repurchase program to be in effect through July 20, 2012. At
September 30, 2011, the July share repurchase program had remaining authorized funds of $577 million. On October 26, 2011, we announced that our board
of directors authorized a $1.0 billion increase to the existing share repurchase program, subject to the same terms of the July authorization. See Note 15—
Stockholders' Equity to our consolidated financial statements.
Dividends. During fiscal 2011, we paid $423 million in dividends. On October 18, 2011, our board of directors declared a quarterly dividend in the
aggregate amount of $0.22 per share of class A common stock (determined in the case of class B and class C common stock on an as-converted basis). We
expect to pay approximately $151 million in connection with this dividend in December 2011. See Note 15—Stockholders' Equity to our consolidated
financial statements. We expect to continue paying quarterly dividends in cash, subject to approval by our board of directors. Class B and class C common
stock will share ratably on an as-converted basis in such future dividends.
Visa Europe put option. We have granted Visa Europe a perpetual put option which, if exercised, will require us to purchase all of the outstanding
shares of capital stock of Visa Europe from its members. Visa Europe may exercise the put option at any time. The put option provides a formula for
determining the purchase price of the Visa Europe shares, which subject to certain adjustments, applies Visa Inc.'s forward price-to-earnings multiple, or the
"P/E ratio" (as defined in the option agreement) at the time the option is exercised to Visa Europe's adjusted sustainable income for the forward 12-month
period, or the "adjusted sustainable income" (as defined in the option agreement). The calculation of Visa Europe's adjusted sustainable income under the
terms of the put option agreement includes potentially material adjustments for cost synergies and other negotiated items. Upon exercise, the key inputs to this
formula, including Visa Europe's adjusted sustainable income, will be the result of negotiation between us and Visa Europe. The put option provides an
arbitration mechanism in the event that the two parties are unable to agree on the ultimate purchase price.
At September 30, 2011, we determined the fair value of the put option liability to be approximately $145 million. While this amount represents the fair
value of the put option at September 30, 2011, it does not represent the actual purchase price that we may be required to pay if the option is exercised. The
purchase price we could be obligated to pay 285 days after exercise will represent a substantial financial obligation, which could be several billion dollars or
more. We may need to obtain third-party financing, either by borrowing funds or undertaking a subsequent equity offering in order to fund this payment. The
amount of that potential obligation could vary dramatically based on, among other things, Visa Europe's adjusted sustainable income and our P/E ratio, in
each case, as negotiated at the time the put option is exercised.
Given the perpetual nature of the put option and the various economic conditions which could be present at the time of exercise, our ultimate obligation
in the event of exercise cannot be reliably
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