Perhaps the one chart that is most praised following every Apple's quarterly earnings report is the one showing the company's gargantuan cash trove, and sure enough, this quarter was no exception for good reason: AAPL's total cash and equivalents, including its short and long-term investments just rose to a record $164.5 billion, as shown below.
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There is one problem with this chart: it includes the contribution of AAPL's debt, because while pundits are quick to praise AAPL's cash, they forget that starting in Q3 2013 AAPL also started loading up on debt, first $17 billion, and as of this quarter, the debt has now grown to $29 billion.
Why? For the simple reason that the bulk of AAPL's cash hoard has been held offshore since 2009, and only $18.4 billion, or the least since September 2010, was on the domestic books as of the March 31 quarter (the June 30 update won't be available until the 10-Q is filed).
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Clearly, AAPL doesn't want to pay cash taxes on its repatriated cash, so for the past year it has been issuing debt instead to fund dividends and buybacks. Which also means that one has to net out the debt when looking at the firm's net cash level.
It is this - Apple's cash net of its debt - which is shown on the chart below. Contrary to the chart at the top, it shows that Apple's cash has actually not increased at all in the past 7 quarters, and at June 30 was $135 billion, below the $137 billion AAPL had in December 2012 when it launched its aggressive "shareholder friendly" strategy in the form of massive dividends and stock buybacks.
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The good news is that for now, courtesy of its massive cash cushion, any incremental debt is merely a blip, but what was $0 less than two years ago has promptly grown to $29 billion, a far faster pace of growth than AAPL's own organice cash creation. At this rate, in a year or two, even S&P may start asking if AAPL's AA+ rated debt is truly worth the same rating as the US itself.
