My blog on the 10 minute guide to understanding a Balance Sheet is the most read even though it is also the longest and tries to deal with some complex items in a simple way – http://bit.ly/XMTzfa
I used Apple’s balance sheet for 2012 and since a year or more has passed, let’s see what has changed significantly on their balance sheet in 2013 to enhance the understanding of a balance sheet.
Here’s the extract of the Apple balance sheet as at September 2013 (courtesy of Yahoo Finance):
So what has changed?
1. Current Assets have increased by nearly $16bn, mainly due to a further increase of cash balances and short term investments to $40.5bn. The rest of the current assets increase is in other debtors of over $3bn (this consists of non trade receivables which are from Apple’s manufacturing vendors where Apple has sold them components for us in assembling its products).
2. Long term investments have increased by $14bn to $106.2bn.
So Apple’s total cash and cash equivalent is at $146.7bn!
There have been some Apple shareholders who have been agitating to get back some of this cash. However, a lot of this cash is sitting in overseas subsidiaries and the moment it is brought into the US will be subject to US corporation tax at 35%. Keeping cash overseas and avoiding US taxes is a sore point in the US Congress amongst some politicians. However, Apple are not alone in US tech giants preserving their cash in this way.
So to keep shareholders happy, Apple have done the inevitable and raised some long term debt to buy back some of it’s shares. As interest rates are low, this is cheaper than trying bring back their overseas subsidiaries’ cash in to the US!
3. Apple have raised $17bn in long term debt by way of issuing bonds with interest rates varying from 0.51% to 3.91%. This has resulted in the balance sheet showing $16.9bn under long term liabilities. Apple has such a strong balance sheet with net assets of over $117bn that raising $17bn of debt is insignificant. Although that is the most significant change in the balance sheet.
There is also one item named ‘Other stockholder equity’ that interested me since it was negative at $471m. In reading the full balance sheet, these turned out to be unrealised exchange and translation losses of securities and cash. All overseas currency amounts will have exchange gains or losses when covered at the balance sheet date to consolidate in USD, so in this case the US$ has strengthened against some of the overseas currencies.
So the above are the 3 significant changes showing in Apple’s balance sheet at September 2013. It’s net assets have increased from $112bn to nearly $117bn.
The interesting point will be how Apple deals with it’s cash mountain and how it uses this to balance between shareholders’ needs and it’s future.