Mav
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Post by Mav on Jul 26, 2013 16:47:39 GMT -8
Heck, might as well give a separate topic a try.
People more familiar with ASR programs or whatever, could Apple realistically buyback 100M shares, since ASR programs apparently have some costs associated with them? I have a hard time seeing how Apple could either contract with investment banks to buy AAPL at over $500 since April, or contract to buy AAPL now over $500 when it can easily buy over the open market at $440. Are those $500+ per share numbers flying around just wrong? Something I'm missing? Like Apple having the right to buy extra AAPL shares if the actual share price is way below the contract buy price?
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Post by artman1033 on Jul 26, 2013 18:29:09 GMT -8
At HORACE'S site, the poster named CHAKA10 seems to know what he is talking aboutChaka10 • a day ago There seems to be some confusion on how an ASR works and the share count. I offer a summary below: Under an ASR contract, the Company purchases a stated amount of shares (call it 23.5 mm) for a stated price (call it $12 bb) from an intermediary bank. The 23.5 mm shares are delivered and $12 bb price is paid up front. The Company recognizes this right away as a repurchase on its accounts. The bank now has $12 bb with which it can cover its 23.5 mm short position through open market purchases during the ASR period. Obviously the actual cost of open market purchases of 23.5 mm shares may be higher or lower than $12 bb, in which case the difference is trued-up at the end of the ASR (so called “settlement”). Thus the bank has no real market risk (unless specifically negotiated and built into the contract), and is really paid a fee for facilitating the repurchase program. This part of the deal is effectively a “forward contract”, and is accounted for as such (but we don’t need to get into that to understand the ASR). The settlement mentioned above can be made in cash or shares, i.e., if the bank is able to buy the 23.5 mm shares it has delivered to Apple for less than $12 bb -- which is the same as saying that the bank could purchase more than 23.5 mm shares with the $12 bb --, then Apple can request delivery of the difference in additional shares. That’s what happened with the first ASR -- Apple paid $1.95 bb and received 2.6 mm shares ($750 a share), which was completed and accounted for in F1Q13. Obviously it didn’t cost the bank $750 a share on open market repurchases, and thus, when the repurchase period for that ASR ended in April 2013 (i.e., the June quarter), Apple received an additional 1.5 mm shares, i.e., total 4.1 mm shares and average repurchase price of $478 (as disclosed in Apple’s 10-Q). As you can see from the summary, the basic features of an ASR (as opposed to OMR) are (a) the Company gets to complete and retire shares right away based on an estimated price and (b) the actual repurchases can continue over months through open market repurchases, with a true-up on the cost at the end. (Thus it is a bit of “cake and eat it too” financial engineering.) To summarize, as disclosed in the 10Q, Apple’s share repurchase program totals $60 bb, of which $18 bb has been used as of end of the June quarter. The $18 bb consists of $1.9 bb in the first ASR, $12 bb under the second and $4 bb of open market purchases. The $1.99 bb was accounted for in F1Q13, thus the $12 and the $4 adds up to the $16 bb mentioned by Oppenheimer for the June quarter. Total shares retired in the June quarter is 34 mm (not 36 mm), i.e., 1.5 from settlement of the first ASR, 23.5 delivery under the second ASR and 9 mm in OMR. The benefit of the 34 mm reduction is mitigated by any employee issuances of course, and "diluted shares" for EPS purposes is calculated on a time-weighted average basis, i.e., the full impact of will be felt in the September quarter "before any further buybacks or any issuance to employees" (I assume this is the 11 mm share benefit to which Oppenheimer was referring).
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Mav
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Post by Mav on Jul 28, 2013 9:18:28 GMT -8
Anyone think Apple will expand the buyback program again within 1-3 years? Anyone actually think it _won't_?
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Post by Red Shirted Ensign on Jul 28, 2013 9:55:27 GMT -8
Anyone think Apple will expand the buyback program again within 1-3 years? Anyone actually think it _won't_? I think it will. Or, another way to look at it, Apple will continue to return cash to shareholders through divvy bumps, share retirements and maybe, gasp, a special dividend. ( not high on this last but assume for a moment they could repatriate the foreign cash at a tax advantage....hmmm). Even after everything they did this last four months....and in a sales "lull" while expenses and inventories built...cash grew. Aaple has 740 million dollar unrealized loss on the books from the recent rise in interest rates ( yawn) but higher rates mean eventually the cash pile produces MORE income....thus more to spend or return... Not a bad place to be...
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Mav
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Post by Mav on Jul 28, 2013 10:53:21 GMT -8
Of course, higher interest rates could pressure Apple to increase the dividend.
To sidestep that, I'd prefer Apple to eventually settle into a consistent dividend growth rate of 3-5% per year, that should be sustainable.
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Post by Red Shirted Ensign on Jul 28, 2013 11:02:55 GMT -8
Of course, higher interest rates could pressure Apple to increase the dividend. To sidestep that, I'd prefer Apple to eventually settle into a consistent dividend growth rate of 3-5% per year, that should be sustainable. I think 5% is a minimum unless things really cool off on the underlying business....but then the share price drops and the yield increases....so new value investors can still see reasons to buy. The cash machine will continue to print money. If apple does as it has in "returning" a share, many will find the stock alluring at numerous price points, good ties or bad. Actually paying the dividend for a year, and raising it, allow the stock to hit more screens...
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Post by Deleted on Jul 28, 2013 13:02:44 GMT -8
Anyone think Apple will expand the buyback program again within 1-3 years? Anyone actually think it _won't_? I think it will. Or, another way to look at it, Apple will continue to return cash to shareholders through divvy bumps, share retirements and maybe, gasp, a special dividend. ( not high on this last but assume for a moment they could repatriate the foreign cash at a tax advantage....hmmm). Even after everything they did this last four months....and in a sales "lull" while expenses and inventories built...cash grew. Aaple has 740 million dollar unrealized loss on the books from the recent rise in interest rates ( yawn) but higher rates mean eventually the cash pile produces MORE income....thus more to spend or return... Not a bad place to be... In the current circumstances with Apples growth slowing in the near term, with temporary EPS shrinkage, I would rather they continued with share buybacks rather than a special dividend. What's the deal with possibly going back to the debt market this quarter? I presume Apple is running quite low on its US cash reserves, so expecting another quarter of huge share buybacks is unlikely unless they repatriate some cash or go back to the debt market for another offering?
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Mav
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Post by Mav on Jul 28, 2013 13:04:49 GMT -8
Depends on what you mean by "low": It's looking like $40B in domestic cash to me (against $17B in presumably domestic bond debt).
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Post by Deleted on Jul 28, 2013 17:01:31 GMT -8
Really? Do you have a link to a report on that? I did not know that.
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Mav
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Post by Mav on Jul 28, 2013 17:41:34 GMT -8
Don't need one. TOTAL Cash: 10-Q or Oppenheimer's comments: $146.6B in cash (cash + all marketable securities) "Offshore" cash (reported by Oppenheimer at the CC): $106B I mean, what else do you call cash that isn't offshore?
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Post by thomson on Oct 11, 2013 9:19:16 GMT -8
What this term exactly means and how it is defined? And if report is necessary then better results may be seen in such case.
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