Visa 2009 Annual Report Download - page 48

Table of Contents
statements. In fiscal 2009 we made $2.0 billion 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. For example, in
connection with our retailers' litigation settlement in fiscal 2003, we were required to make annual settlement payments of $200 million through fiscal 2012.
In fiscal 2009, we entered into an agreement (the "Prepayment Agreement") to modify our remaining payment obligations under the original retailers'
litigation settlement agreement. Pursuant to the Prepayment Agreement, on October 5, 2009 we made a payment of $682 million to fully satisfy the remaining
$800 million obligation.
Redemption of Stock. In fiscal 2008, we redeemed 154,738,487 shares of class B common stock for $6.6 billion and 159,657,751 shares of our class C
(series I) common stock for $6.8 billion. In fiscal 2009 we completed the redemption of 79,748,857 shares of our class C (series II) common stock and
35,263,585 shares of our class C (series III) common stock held by Visa Europe for $2.6 billion, less dividends and certain other adjustments. In October
2009, our board of directors authorized a $1.0 billion share repurchase plan. The authorization will be in place through September 30, 2010 and is subject to
extension or expansion at the determination of our board of directors.
Dividends. During fiscal 2009, we paid $318 million in dividends. On October 20, 2009, our board of directors declared a quarterly dividend in the
aggregate amount of $0.125 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 $93 million in connection with this dividend in December 2009. See Note 15—Stockholders' Equity to our consolidated financial
statements for further information regarding the dividend declarations. We intend to continue paying quarterly dividends in cash, subject to approval by our
board of directors, at an annual rate equal to $0.50 per share of class A common stock. 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 purchase price of the Visa Europe shares
under the put option is based upon a formula that, subject to certain adjustments, applies Visa Inc.'s forward price-to-earnings multiple (the "P/E ratio") at the
time the option is exercised (as defined in the option agreement) to Visa Europe's projected sustainable adjusted net operating income for the forward 12-
month period ("adjusted sustainable income"). Visa Europe's adjusted sustainable income is calculated under the terms of the put option agreement and
includes potentially material adjustments for cost synergies and other negotiated items.
At September 30, 2009, the fair value of the put option liability was $346 million. While this amount represents the fair value of the put option at
September 30, 2009, 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 determined 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 $75 million of adjusted
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