Visa 2010 Annual Report Download - page 55

Table of Contents
Uses of Liquidity
Payments settlement. Payments settlement due from and due to issuing and acquiring clients represents our most consistent liquidity requirement,
arising primarily from settlement currencies other than the U.S. dollar. U.S. dollar settlements are settled within the same day and do not result in a net
receivable or payable balance. These settlement receivables and payables generally remain outstanding for one to two business days, consistent with standard
market conventions for domestic transactions and foreign currency transactions. We maintain a liquidity position sufficient to enable uninterrupted daily net
settlement. Typically, the highest seasonal liquidity demand is experienced in December and early January during the holiday shopping season.
Covered litigation. We are parties to legal and regulatory proceedings with respect to a variety of matters, including certain litigation that we refer to as
covered litigation. As noted above, settlements of, or judgments in, covered litigation are paid from the escrow account. See Note 4—Retrospective
Responsibility Plan and Note 22—Legal Matters to our consolidated financial statements, as well as Sources of Liquidity. In fiscal 2010, 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. 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 to prepay our remaining payment obligations under the original Retailers' litigation settlement agreement. We
made a payment of $682 million to fully satisfy the remaining $800 million obligation in October 2009.
Share repurchase plan. During fiscal 2010, we used $1.0 billion to repurchase approximately 12.9 million shares of our class A common stock under
the share repurchase plan authorized in October 2009. In October 2010, after the end of our 2010 fiscal year, our board of directors authorized a second $1.0
billion share repurchase plan to be in place through September 30, 2011, subject to extension or expansion at the determination of our board of directors.
Repurchased shares have been retired and constitute authorized but unissued shares.
Dividends. During fiscal 2010, we paid $368 million in dividends. On October 20, 2010, our board of directors declared a quarterly dividend in the
aggregate amount of $0.15 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 $107 million in connection with this dividend in December 2010. See Note 16—Stockholders' Equity to our consolidated
financial statements. We anticipate continuing to pay 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. 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.
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