During Apple’s earnings conference call on February 1, 2018, Luca Maestri, the company’s CFO, stated that due to changes in the tax laws, “Tax reform will allow us to pursue a more optimal capital structure for our company. Our current net cash position is $163 billion. And given the increased financial and operational flexibility from the access to our foreign cash, we are targeting to become approximately net cash neutral over time.” 

In just under three years Apple’s net cash position has essentially been halved while it has bought back 9.4 billion split-adjusted shares or 35% of them. Using the estimates below it should take Apple another three years and $250 billion to get to a neutral cash position.

Calculation to neutral cash position

Using the estimates below it will take Apple three years and about $250 billion to get to a neutral cash position. The $250 billion is 12% of the company’s market cap and would increase EPS by approximately 4% per year.

  • Current net cash position, fiscal 2020: $79 billion

  • Estimated free cash flow per year: $70 billion
  • Dividend payments per year: $14 billion
  • Net increase in cash per year: $56 billion
  • Buybacks per year: $80 billion
  • Decrease in net cash per year: $24 billion
  • Decrease over three years: $72 billion
  • Remaining net cash position of $7 billion

Buybacks started in late 2012

Apple started to buy back shares in its December 2012 quarter but began in earnest in the June 2013 quarter. Since than it has spent just over $400 billion to repurchase stock. Adjusting for stock splits Apple has decreased its share count from 26.5 billion to 17.1 billion, a decrease of 35%.

  • Fiscal 2012: $0
  • Fiscal 2013: $22.9 billion
  • Fiscal 2014: $45 billion
  • Fiscal 2015: $35.2 billion
  • Fiscal 2016: $29.7 billion
  • Fiscal 2017: $32.9 billion
  • Fiscal 2018: $73.1 billion
  • Fiscal 2019: $67.1 billion
  • Fiscal 2020: $72.5 billion
  • December 2020: $24 billion

Note: fiscal 2013 to 2017 are based on cash flow statements

Cash is still king

Being cash neutral does not mean having any cash, as every company requires some level to run its business and take advantage of opportunities as they arise. In a situation where excess cash generates a low level of return and the company is fully funding its operations and research and development, it makes sense to use some to buy back shares.

  • Fiscal 2012: $121 billion
  • Fiscal 2013: $147 billion
  • Fiscal 2014: $155 billion
  • Fiscal 2015: $206 billion
  • Fiscal 2016: $238 billion
  • Fiscal 2017: $269 billion (December 2017 $285 billion high-water mark)
  • Fiscal 2018: $237 billion
  • Fiscal 2019: $206 billion
  • Fiscal 2020: $192 billion
  • December 2020: $196 billion

Debt can be good as long as it is not excessive

Apple started to take on debt as it began to buy back shares. Given its ability to borrow at low rates it makes sense to leverage its balance sheet, shrink the number of shares, which increases its EPS, and therefore share price.

  • Fiscal 2012: $0
  • Fiscal 2013: $17 billion
  • Fiscal 2014: $35 billion
  • Fiscal 2015: $64 billion
  • Fiscal 2016: $87 billion
  • Fiscal 2017: $116 billion (December 2017 quarter $122 billion high-water mark)
  • Fiscal 2018: $114 billion
  • Fiscal 2019: $108 billion
  • Fiscal 2020: $112 billion
  • December 2020: $112 billion

Net cash (Cash minus debt)

The high-water mark for Apple’s net cash position was $162.7 billion in its December 2017 quarter. It was on the earnings call for this quarter that the company announced its goal to become cash neutral.

  • Fiscal 2012: $121 billion
  • Fiscal 2013: $130 billion
  • Fiscal 2014: $120 billion
  • Fiscal 2015: $141 billion
  • Fiscal 2016: $151 billion
  • Fiscal 2017: $153 billion (December 2017 quarter $163 billion high-water mark)
  • Fiscal 2018: $123 billion (February 2018 announced cash neutral goal)
  • Fiscal 2019: $98 billion
  • Fiscal 2020: $79 billion
  • December 2020: $84 billion

Free cash flow (Operating cash flow minus capital expenditures)

Apple generated its greatest amount of free cash flow in fiscal 2015 when it launched its larger screen iPhone 6 and 6+ in September 2014. Fiscal 2020 came in a very close second and it would not be surprising to see fiscal 2021 break the record with the iPhone 12. Note that fiscal 2015 had $233.7 billion in revenue and last year the company generated $274.5 billion.

  • Fiscal 2012: $41.5 billion
  • Fiscal 2013: $44.6 billion
  • Fiscal 2014: $49.9 billion
  • Fiscal 2015: $69.8 billion (larger screen iPhone 6 & 6+ full year)
  • Fiscal 2016: $52.7 billion
  • Fiscal 2017: $50.8 billion
  • Fiscal 2018: $64.1 billion
  • Fiscal 2019: $58.9 billion
  • Fiscal 2020: $68.1 billion

Amount spent on dividends

While Apple has been increasing its dividend, it has been buying back stock. This has helped to keep the absolute amount in dollars it spends on dividends in check. While the amount has risen over the years, it was flat between fiscal 2019 and 2020 and may only rise slightly this fiscal year.

  • Fiscal 2011: $0
  • Fiscal 2012: $2.5 billion
  • Fiscal 2013: $10.6 billion
  • Fiscal 2014: $11.1 billion
  • Fiscal 2015: $11.6 billion
  • Fiscal 2016: $12.1 billion
  • Fiscal 2017: $12.8 billion
  • Fiscal 2018: $13.7 billion
  • Fiscal 2019: $14.1 billion
  • Fiscal 2020: $14.1 billion
  • December 2020: $3.6 billion or $14.4 billion annualized

Apple hardly spends any money on acquisitions

Except for $3 billion for Beats in 2014 and $1.5 billion in fiscal 2020, Apple spent less than $721 million in the other seven years. For a company of Apple’s size what it spends on acquisitions doesn’t impact cash flow or its objective of becoming cash flow neutral.

  • Fiscal 2012: $350 million
  • Fiscal 2013: $496 million
  • Fiscal 2014: $3.8 billion ($3 billion for Beats)
  • Fiscal 2015: $343 million
  • Fiscal 2016: $297 million
  • Fiscal 2017: $329 million
  • Fiscal 2018: $721 million
  • Fiscal 2019: $624 million
  • Fiscal 2020: $1.5 billion



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