Visa 2014 Annual Report Download - page 68

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 $500 million of adjusted
sustainable income at the date of exercise. The $500 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,
2014, 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 $100 million of adjusted sustainable
income above or below the assumed $500 million demonstrated at the time of exercise. At
September 30, 2014, 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, 2014, the spot P/E ratio was 20.6x and the spot P/E differential, the difference between
this ratio and the estimated spot ratio applicable to Visa Europe, was 2.0x. 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 $500 million(1)
Increase/
Decrease in Payout
for Each $100 million of
Adjusted Sustainable
Income Above/
Below $500 million
(in millions) (in millions)
25 $12,500 $2,500
20 $10,000 $2,000
15 $7,500 $1,500
(1) Given current economic conditions, the purchase price under the terms of the put option would likely
be in excess of $10 billion.
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. 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. In fiscal 2014, 2013 and 2012, we made contributions to our pension and
other postretirement plans of $14 million, $4 million, and $88 million, respectively. The lower
contributions in fiscal 2014 and 2013, as compared to fiscal 2012, were driven by a higher-than-
expected rate of return on our plan assets and an increase in the discount rate. In fiscal 2015, given
current projections and assumptions, we anticipate funding our defined benefit pension plans and other
postretirement plan by approximately $10 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. See Note 10—Pension, Postretirement and Other Benefits to
our consolidated financial statements.
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