Visa 2012 Annual Report Download - page 49

Table of Contents
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 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, 2012 , 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 its 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, 2012 , our estimated long-term P/E ratio was 16.9 x and the long-term P/E differential, the difference
between this ratio and the estimated ratio applicable to Visa Europe, was 1.9 x. At September 30, 2012 , the spot P/E ratio was
18.8 x and the spot P/E differential, the difference between this ratio and the estimated spot ratio applicable to Visa Europe, was
1.8 x. 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.
Pension and other postretirement benefits. We sponsor various qualified and non-qualified defined benefit pension plans that
generally provide benefits based on years of service, age and eligible compensation. 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 non-qualified 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 2012, 2011 and 2010, we
made contributions to our pension and other postretirement plans of $88 million , $74 million , and $66 million , respectively. In
fiscal 2013 , we anticipate funding our defined benefit pension plans and postretirement plan by approximately $52 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 2012
due to investment in technology, infrastructure and
growth initiatives. We expect capital expenditures to be in the $425 million to $475 million range in fiscal 2013 , as we continue to
make ongoing investments in technology assets and payments system infrastructure to support our core business as well as our
eCommerce and mobile initiatives.
Acquisitions. There were no material acquisitions during fiscal 2012 , compared to fiscal 2011 , when we acquired PlaySpan
and Fundamo for a total of $268 million, net of $22 million in cash received. See Note 5—Acquisitions to our consolidated financial
statements. We will continue to pursue our growth initiatives and to expand our product offerings through acquisitions and strategic
partnerships in the future.
Fair Value Measurements—Financial Instruments
The assessment of fair value of our financial instruments is based on a fair value hierarchy that requires an entity to maximize
the use of observable inputs and minimize the use of unobservable inputs when measuring fair
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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.