Visa 2011 Annual Report Download - page 57

Table of Contents
estimated. The following table calculates our total obligation assuming, for illustrative purposes only, a range of P/E ratios for Visa Inc. and assuming that
Visa Europe demonstrates $100 million of adjusted sustainable income at the date of exercise. The $100 million of assumed adjusted sustainable income
provided below is for illustrative purposes only. This does not represent an estimate of the amount of adjusted sustainable income Visa Europe would have
been able to demonstrate at September 30, 2011, or will be able to demonstrate at any point in time in the future. Should Visa Europe elect to exercise its
option, we believe it is likely that it will implement changes in its business operations to move to a for-profit model in order to maximize adjusted sustainable
income and, as a result, to increase the purchase price. The table also provides the amount of increase or decrease in the payout, assuming the same range of
estimated P/E ratios, for each $25 million of adjusted sustainable income above or below the assumed $100 million demonstrated at the time of exercise. At
September 30, 2011, our estimated long-term P/E ratio was 16.9x and the long-term P/E differential, the difference between this ratio and the estimated ratio
applicable to Visa Europe, was 1.9x. At September 30, 2011, the spot P/E ratio was 14.9x and the spot P/E differential, the difference between this ratio and
the estimated spot ratio applicable to Visa Europe, was 1.1x. These ratios are for reference purposes only and are not necessarily indicative of the ratio or
differential that could be applicable if the put option were exercised at any point in the future.
Visa Inc's Forward
Price-to-Earnings Ratio
Payout Assuming
Adjusted Sustainable
Income of $100 million(1)
Increase/Decrease in Payout
for Each $25 million of
Adjusted Sustainable Income
Above/Below $100 million
(in millions) (in millions)
25 $2,500 $625
20 $2,000 $500
15 $1,500 $375
(1) Given the large range of different economic environments and circumstances under which Visa Europe could decide to exercise its option, the ultimate
purchase price could be several billion dollars or more.
Pension and other postretirement benefits. We sponsor various qualified and nonqualified defined benefit pension plans that generally provide benefits
based on years of service, age and eligible compensation. Employees hired before January 1, 2008, earn benefits based on their pay during their last five years
of employment. Employees hired or rehired on or after January 1, 2008 earn benefits based on a cash balance formula. Effective January 1, 2011, all
employees accrued benefits under the cash balance formula and ceased to accrue benefits under any other formula. We also sponsor a postretirement benefit
plan that provides postretirement medical benefits for retirees and dependents upon meeting minimum age and service requirements. Our policy with respect
to our qualified pension plan is to contribute annually not less than the minimum required under the Employee Retirement Income Security Act, or ERISA.
Our nonqualified pension and other postretirement benefit plans are funded on a current basis. We typically fund our qualified pension plan in September of
each year. Funding does not impact current period pension expense but has the positive impact of reducing future period expense for the plan. In fiscal 2011,
2010 and 2009, we made contributions to our pension and other postretirement plans of $74 million, $66 million, and $170 million, respectively. In fiscal
2012, we anticipate funding our defined benefit pension plans and postretirement plan by approximately $54 million. The actual contribution amount will vary
depending upon the funded status of the pension plan, movements in the discount rate, performance of the plan assets, and related tax consequences.
Capital expenditures. Our capital expenditures increased during fiscal 2011 due to investment in technology, infrastructure and growth initiatives. We
expect capital expenditures to be in the $350 million to $400 million range in fiscal 2012, as we continue to make ongoing investments in technology and our
payments system infrastructure.
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