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Visa Expands Balance Sheet on Strong Cash Flows



Strong balance sheet

Visa (V) is a debt-free company with a total balance sheet of $40 billion as of September 30, 2015. This compares to $38.5 billion in 4Q14. The company has generated free cash flows of $6.6 billion in 2015. Fourth quarter cash flows stood at $1.6 billion.

Visa deploys cash flows for dividends, share repurchases, investments in technology, and expansion plans. Visa is also engaged in repurchasing its own shares. However, the company didn’t repurchase its stock in the fourth quarter due to the Visa Europe acquisition.

In 2015, the company repurchased a total of 44.1 million shares at an average price of $66, totaling $2.9 billion or 1.5% of the total market capitalization. Visa is authorized to further repurchase up to $2.8 billion of its stock under the existing plan approved by the board.

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Debt for acquisition

Visa will partially fund its acquisition of Visa Europe through an issuance of debt. The company plans to issue $15–$16 billion in debt. On a pro forma basis, the company will have a debt-to-equity ratio of 35%–40%.

The company had cash and equivalents of $9.3 billion as of September 30, 2015. It spent $138 million during the fourth quarter for organic expansion and technology upgradation. Visa expects significant startup costs for setting up domestic operations in China.

Renewal of partnerships

Visa successfully renewed partnerships with Wells Fargo (WFC). a financial services and bank holding company. The company has partnership agreements in place with five out of its top six customers at least until 2020.

Visa’s debt-to-equity ratio stood at zero in the last fiscal year. Here’s how some of Visa’s peers in the payment processing industry fared with their leverage in the last fiscal year:

  • MasterCard (MA) – 22%
  • American Express (AXP) – 513%
  • Discover Financial (DFS) – 203%

Together, these companies account for 2.3% of the Technology Select Sector SPDR ETF (XLK).


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