Apple's Accelerated Repurchase Lowers Its Domestic Cash Holdings To September 2010 Levels

Tyler Durden's picture

Today, one of the more prominent news releases was that as the WSJ reported overnight, AAPL had repurchased on an accelerated basis some $14 billion of its shares in the past two weeks, following the constant Tweeted proddings of Carl Icahn, and the market responded by rewarding the stock and pushing it 1.4% higher. There is, however, a flip side to this artificial boost in the company's EPS calculation: a plunge in the company's domestic cash.

As everyone knows, AAPL is still a cash cow, and in the last quarter following the release of its latest iPhone and iPad, it generated a bumper $12 billion in cash. The only problem is that this is global cash, and as the company's 10-Q indicates, $13.1 billion of this cash was generated and held offshore, which means that AAPL's domestic cash declined by $1.1 billion. In fact, as the chart below shows, this was the 4th consecutive quarter in which AAPL's domestic cash has declined offset by a massive cash build offshore. And a reminder, "Amounts held by foreign subsidiaries are generally subject to U.S. income taxation on repatriation to the U.S." This also means that unless AAPL repatriates some of its offshore cash, and unless it issues even more debt, its stock buybacks and dividends are limited to the declining cash amounts held in the US.

So if one were to extrapolate AAPL's Q1 domestic cash simply by subtracting the reported $14 billion used in the stock buyback from its December 31 US cash holdings, as of today, all else equal, AAPL now has "only" $20.4 billion in cash held domestically - an amount that matches its domestic cash holdings last seen in September 2010.

Which suggests that after having yielded to Icahn and successfully defended the $500 level by aggressively buying back its own stock in the last two weeks, AAPL's dry powder for future buybacks is now running dangerously low.

The implication is two-fold: going forward, AAPL's discretionary stock buybacks will be far, far less active as the company will seek to preserve a cash buffer, especially if it wishes to engage in domestic M&A and to preserve liquidity for future dividends. Alternatively, it is becoming increasingly likely that just like in 2013, AAPL will once again be forced to access the debt markets in order to raise its domestic cash level to a point where it will once again have a comfortable cash balance with which to repurchase its stock.

So if indeed Icahn has gotten deep under the skin of Tim Cook, look for AAPL announcing a bond issue in the not to distant future, as it continues to lever itself up merely to placate some of its more vocal activist shareholders (or, improbably enough, repatriating some of its offshore cash at a huge tax hit to the company - something it did not do last time it issued debt, and something it almost certainly won't do this time around).

Alternatively, if there is no debt issue, expect that any aggressive future stock buybacks by Cook's management team will trickle to next to nothing, at which point it will be just the market's buyers negotiating with the market's sellers, without the benefit of tens of billions in additional stock purchases by the company itself.

Whether this means that the stock, which got its euphoric boost today on the buyback news, will now drift lower as the price is set purely by the market will likely be seen in the coming week, although should the Fed also fold and once again taper the taper, thus lifting all boats in confirmation that even the most modest pullback in the S&P is enough to get it back into activist mode, then all bets are off.

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Jumbotron's picture

Margin compression is a bitch.

max2205's picture

But still buy aapl and short any of these ffor 2 years and retire...nflx amzn goog biib pcln cmg 

666's picture

"Amounts held by foreign subsidiaries are generally subject to U.S. income taxation on repatriation to the U.S."

Sounds like nothing that a little lobbying can't fix...

ThroxxOfVron's picture

You've got it all backwards.

Apple is connected.

Apple can't be forced to pay a domestic tax on foreign held cash if there is NO cash held in the US.

.GOV cannot confiscate foreign held funds; so the domestic hoead is being disposed of -and FAST.

Apple doesn't seem to have time to even do due dilligence and buy up other assets...

GetZeeGold's picture



Apple's Accelerated Repurchase - buying time for management to get out.

I am a Man I am Forty's picture

Only $20B in the US, oooooooohhhhhh scary (eyes rolling).

Tyler Durden's picture

Your comments from October 2012, when it had just hit its all time highs:

I am a Man I am...

I am a Man I am Forty's picture

Tyler, please please please explain how Apple is not trading on
fundamentals!  How much cash and growth do they need to have in order to
earn a trailing 15 and forward 12 PE ratio?  Please define bubble for
all of us.  Why don't you tell us what the correct price is for Apple on
fundamentals, and then why don't you put yourself out there and make an
investment/short/trading call so we can track just how good you are.

Compare Apple to T, VZ, NFLX, GOOG, EQIX, AMZN and Apple is cheaper than all of them.  It has the same trailing PE as Microsoft!


and of course:

I am a Man I am...

I am a Man I am Forty's picture

it was an iBubble back in february at $535, you can lose a lot of money on ZH's apple predictions


* * *

(eyes rolling)

Frank -THE COIN -'s picture

CheckMate Bitchez ! Be careful what you ask for.

Freddie's picture

So does the N*A.  That is not NRA.  Try another consonant that comes between R  and  T.

Inthemix96's picture



Smile son, you've just been framed...


maskone909's picture

eyes rolling reminiscient of a teenage girl

i got a new back-slap that will park you like a cadillac

Jumbotron's picture

<Pssstttt.....>  Hey.....I am Man I am.    Here's a hint.

THE INTERNET IS FOREEEEeeeeevahhhh  !!!!

Johnny Cocknballs's picture

Cute, and while I too get a tingle up my thigh when TD Himself posts, I've long wondered about the penchant for Apple-bashing here at ZH. 


Lots of corps have been engaging in buy backs.  Few are sitting on the cash Apple is.  Few are also better situated than Apple - unlike twitter and farcebook, they make stuff.

Where they overvalued?  Obviously yes, but were they overvalued more than most?

For the record, I'm not an Applebot, I'm rocking a samsung galaxy 3 and will upgrade in that universe - better screen for porn and youtube videos, but Android apps sure crash more and there are sure more needless processes running at all times, spying on you and burning through your battery.  Who's doing better? 

Anyone shorting China Mobile Ltd?


So then, what's with all the hatin' on Apple? Just wondering...


Frank -THE COIN -'s picture

Perhaps its because it stands out the most of all the overvalued stocks. If a human competitor wants to be Short OverValued Stocks and Markets it may be human nature to compete against the best. If you wanted to become the Worlds Fastest Human and Olympic Gold Medalist, even though there are many World Class Sprinters, you would want to Beat Usain Bolt. Its just a guess.


Johnny Cocknballs's picture

eeehhh...   no, I mean it stands out, but it's not the most overvalued.  Look, the product matters, not the most recent news cycle, or the fact some stock market guys who don't understand anything about the competition in the product space, let alone the software or hardware, are let down because expectations were high.

I'm sure Apple is solid mid and long term but I'm not looking for converts.  I was just curious - almost seems vendetta like.


It'll retreat from this, obviously, and when it climbs again for a couple weeks....


Agent P's picture

Tyler, for the first time ever, you reminded me of my wife. 

Rainman's picture

I-Con twattered a command and so it is. Sickening.

Lesson of the day : There's more than one way to tap the cash register.

Al Capowned's picture

And they banned bitcoin wallets, Apple are trying there hardest to be assholes,

Slave labour
Offshored assets
Anti competition
Offshored jobs

Johnny Cocknballs's picture

Yeah, making good products at profit. 


Funny how selective the criticism on Libertarian sites are. 


Then I'm the asshole for suggesting that Ayn Rand was the philosophical equivalent of Vanilla Ice and a lack of concern for the poor isn't noble.


Good grief.

debtor of last resort's picture

Update your Foxcon myra app now.

ThroxxOfVron's picture

"Update your Foxcon myra app now."

What a big fat pile of cash You have sitting there -and not in nice safe Treauries! 

iMyRA sounds about right...

max2205's picture

Fed money will also hold it up...

Whoa Dammit's picture

It sure must be nice to get CEO pay merely for being a one trick stock buying pony.

Theosebes Goodfellow's picture

So Apple's strategy is to wait out Obama's hike on taxes, thinking that whoever replaces him will be more inclined to soften the tax blow of repatriation. While it is probably a good strategy for Apple, (and many other corporations doing exactly the same), it should once and for all destroy the myth of there being such a creature as an "American corporation". Old Tommy Jeff had it right:

~"Merchants have no country. The mere spot they stand on does not constitute so strong an attachment as that from which they draw their gains."~

I'm fairly certain Mister Jefferson would have said that the same holds true for politicians whom the merchants hold in their vest pockets.

Luckhasit's picture

Spell check Tyler, that's all I'm sayin homie. Hell, I'll be a proof reader for free if you need. 

Smegley Wanxalot's picture

I have no idea whatsoever why AAPL doesn't repatriate the $100,000,000,000 in foreign holdings and pay the $35,000,000,000 in taxes to Uncle Sam so they can have the pleasure of holding all the remaining cash at a nice safe US bank? 

What are they thinking?

ejmoosa's picture

BFD....they can borrow as much as they want near 0% interest from the Fed.


And if they get into outright trouble, the Fed will buy their shares(if they are not already doing so).

ebworthen's picture

Hasn't AOL done a lot of stock buybacks?

MoneyDuck's picture

Is this article saying they are dangerously low on cash and have to borrow more?  Repatriate cash....problem solved.  Buy shares offshore, unless that is illegal....problem solved. 

seek's picture

I'm noticing a pattern recently. As many know, the amount of cash on corporate books is at or near all-time-highs.

Suddenly there's a lot of activity -- buybacks, M&As, etc -- that's clearing that cash out.

Food for thought -- what would change the concensus thinking suddenly to "cash is bad."?

SmittyinLA's picture

If I were Apple I'd keep my cash in my own bank offshore, secured by long term paper gold notes-held offshore, but enforceable in the USA.

ThroxxOfVron's picture

"I'm noticing a pattern recently. As many know, the amount of cash on corporate books is at or near all-time-highs.

Suddenly there's a lot of activity -- buybacks, M&As, etc -- that's clearing that cash out.

Food for thought -- what would change the concensus thinking suddenly to "cash is bad."?" -Seek



...& yee shall find that... Insider Trading has many faces...

-Apple management are politically 'connected'.  ( Hello, -the NSA/MIC, for one...)

They have been informed of upcoming policy initiatives, corporate taxation and/or mandates to hold treauries for major corporate hoards like the heap Apple has amassed..

Apple is using up domestically held cash reserves; -cashing out insider options and proping the stock price.

It will be crystal clear by the time the newly 'populist' Mr. Obama and Co. decide that it might be time to hike the taxes on Corporations to try and pay the freebies that result in voter loyalty that Apple's massive hoard of domestically held cash will be all but depleted and thus Apple will skirt the already planned Corporate tax gougings...

Watch the other big hoarders like MS and Google buy up NSA/MIC properties and their own stock like crazy with cash instead of borrowing at these crazy cheap rates as if the cash is gonna 'expire'....

holdbuysell's picture

From an ROIC perspective, this article presents a strong argument for why the stock will go much lower.


AdvancingTime's picture

It is hard to imagine how much cheap money is distorting the economy, markets, and reality in general. A total disconnect between life on main street and the financial world is occurring and it is putting the economy in a very dangerous place. It is often hard to determine what is true, but a report on Bloomberg that 32 Trillion dollars in funds were held in offshore accounts around the world made me shutter. How safe is this money, and what exactly is it doing? Can you say Cyprus?

Take for instance that in may of 2013 cash rich Apple floated a massive bond. It was reported that Apple Inc. sold the largest corporate-bond deal in history with a $17 billion offering and that investors hungrily gobbled it up. Apple said earlier this month it would borrow cash as part of a plan to return $100 billion to shareholders by the end of 2015. Money has become so cheap to borrow that many people are now arguing that you must take it even if you don't know what to do with it. More on this subject below,

guasilas's picture

Could somebody please explain why the company uses shareholder's cash to guarantee a price to those who do not wish to be shareholders any more?

BearOfNH's picture

Can somebody please explain why AAPL doesn't have their foreign subsidiaries [re-]purchase AAPL stock, instead of spending domestic dollars?