Apple Announces Plans to Initiate Dividend and Share Repurchase Program

[marksman]

Wirelessly posted (Mozilla/5.0 (iPhone; CPU iPhone OS 5_0 like Mac OS X) AppleWebKit/534.46 (KHTML, like Gecko) Version/5.1 Mobile/9A334 Safari/7534.48.3)

If I had 100 billion I would spend it on hookers and blow

 

[TheBronx]

Wirelessly posted (Mozilla/5.0 (iPhone; CPU iPhone OS 5_0 like Mac OS X) AppleWebKit/534.46 (KHTML, like Gecko) Version/5.1 Mobile/9A334 Safari/7534.48.3)

If I had 100 billion I would spend it on hookers and blow

Seems wasteful.

 

[SteveJobsUK]

US Cash currently is at around $34 Billion, so that suggests around a 1/3 of their cash is generated in the US, so surely they are using up all their US cash over the next 3 years? Assuming they generate $45B, $15B stays in the US. Tax efficient?

 

[Rocketman]

Zero discussion of uses of offshore cash. Interesting.

I am guessing supplier prepayments, retail expansion, freight fees, and under the radar small acquisitions.

 

[iDisk]

I wouldn't say sad - just his own touch on Apple. Consider the way The Loop framed Tim Cook's first 208 days as CEO:

The products released now, aren't a product of Tim's involvement. Steve Jobs gave Apple a vision and Apple should stick to it. The Philanthropy is great but the dividends aren't the Apple/Steve Way of things.

In reality its just a poor move. This doesn't help Apple at All. Steve was all about Apple not shark share-holders

 

[CJM]

I still don't understand how it's lawful for a company to keep its cash overseas as a tax dodge. The CFO even stated it was for tax reasons.

 

[Flitzy]

How do people get "Apple is moving away from creating products for customers" from this?

Seriously, some of the responses are just chicken little-ish.

 

[ad2435]

also remember that >60% of apples cash is held overseas so that is not available to be given out to shareholders since apple doesn't want to pay usa taxes on that money.

 

[WhoDaKat]

And the rich get richer.

 

[Small White Car]

Someone with $10,000 worth of AAPL shares would have quarterly income of $45. Not great is it. Just don't see the point if they're trying to give long term investors income! Will just make the price go up higher but no real gains from that.

Another way of saying it: Anyone with 100 shares gets a free Mac Mini every year!

Kind of sounds better when you put it that way. For people who bought stock expecting NO dividend, that's not a bad gift.

 

[deconstruct60]

The $2.65 is a quarterly dividend, so you'd get that much per share every 3 months.

They paying $10.60 annually per share.

so $10.60/$585 ==> a whopping 1.8% (subtract out the inflation rate and you have what??? )

Apple is earning about 30% on revenues. It isn't exactly going to hurt them to drop this; especially when they already are up to their eyeball in excess cash anyway. This is really a "Floodwater diversion" program. The money is coming in so fast there is no prudent place to put it.

 

[tevans333]

I still don't understand how it's lawful for a company to keep it's cash overseas as a tax dodge. The CFO even stated it was for tax reasons.

The cash was generated in those countires, so they have already paid taxes on it in there. They would be getting taxed a 2nd time to simply move it.

 

[Asclepio]

Steve Jobs would have not approved it.

 

[TheBronx]

How do people get "Apple is moving away from creating products for customers" from this?

Seriously, some of the responses are just chicken little-ish.

Because whenever Apple does anything whatsoever, the first response is always "this is the beginning of the end" hehe.

When Apple proves them wrong, like they always do, they wait for the next major announcement to rehash it again!

 

[SteveJobsUK]

.

How? $10,000 would mean you had 17 shares, 17 shares would entitle you to $45 income per quarter ($2.65 x 17).

Your maths is wrong.

 

[tevans333]

so $10.60/$585 ==> a whopping 1.8% (subtract out the inflation rate and you have what??? )

Apple is earning about 30% on revenues. It isn't exactly going to hurt them to drop this; especially when they already are up to their eyeball in excess cash anyway. This is really a "Floodwater diversion" program. The money is coming in so fast there is no prudent place to put it.

If they want to maintain $100B in cash, then they can only spend what they generate. So look at it in terms of a percentage of current cash generations. Lets assume there our 1 billion share and they will generate $40 in cash this year. That $10B paid in dividends and $15B used for buyback. That leaves them $15B to play with and still maintain $100B to sit on. In effect they are paying out quick a bit fo their projected cash generation.

 

[SteveJobsUK]

Another way of saying it: Anyone with 100 shares gets a free Mac Mini every year!

Kind of sounds better when you put it that way. For people who bought stock expecting NO dividend, that's not a bad gift.

Very true but someone with $58,500 invested in Apple probably wouldn't need a Mac Mini!

 

[xinu]

Someone could call Guinness World Records

We have here the stingiest company in the world.

100.000 USD shares pay you 450usd dividends... What is the point?

 

[Small White Car]

Very true but someone with $58,500 invested in Apple probably wouldn't need a Mac Mini!

Everyone needs a Mac Mini!

 

[deconstruct60]

also remember that >60% of apples cash is held overseas so that is not available to be given out to shareholders since apple doesn't want to pay usa taxes on that money.

The gross, jingoistic fallacy here is that none of Apple's shareholders are not also overseas.

Apple can easily pay UK folks with a UK check. Germans with a German check. Japanese with a Japanese check. etc. Where do you think Apple's non US money is sitting. Under a matteress in an Apple store? Those foreign banks can cut checks too. Only need the correct name and address to send it to (or bank routing number.). Buckets of Apple dividends are going to drop into nameless Swiss bank accounts by tax shelters held by more than a few.


Foreigners who own indirectly through funds that only have a US presence may be limited but Apple isn't.

 

[TheBronx]

Someone could call Guinness World Records

We have here the stingiest company in the world.

100.000 USD shares pay you 450usd dividends... What is the point?

I know, they should give away all their profits, right?!

 

[Vtwo]

Rofl, $45 B is nothing for Apple. They made $14B in the last QUARTER. Even assuming zero growth, with this plan, APPL will still have $200B by the end of 2014.

As for the tax dodge, they aren't dodging. They already paid the taxes at the different countries where the profits were made. But the US government wants to tax them AGAIN for bring it to the US. Maybe big multinational companies have this issue, not just APple.

 

[SteveJobsUK]

The gross, jingoistic fallacy here is that none of Apple's shareholders are not also overseas.

Apple can easily pay UK folks with a UK check. Germans with a German check. Japanese with a Japanese check. etc. Where do you think Apple's non US money is sitting. Under a matteress in an Apple store? Those foreign banks can cut checks too. Only need the correct name and address to send it to (or bank routing number.). Buckets of Apple dividends are going to drop into nameless Swiss bank accounts by tax shelters held by more than a few.


Foreigners who own indirectly through funds that only have a US presence may be limited but Apple isn't.

Missing one crucial point, AAPL shares are only traded on the US stock market.

 

[xyion1]

Someone could call Guinness World Records

We have here the stingiest company in the world.

100.000 USD shares pay you 450usd dividends... What is the point?

Uh what? $100,000/$600per = 167 shares * 10.60 = $1770.20/year in dividends.

100,000 shares * 10.60 = $1,060,000 dividends/year.

100 shares = $1,060

(I wasn't sure what 100.000 USD shares meant).

 

[Cybbe]

Preliminary transcript:

Apple, Inc. (AAPL)
Cash Update
March 19, 2012


...joined to the conference.

((Nancy Paxton, Investor Relations, Apple, Inc.))

Without limitation those regarding anticipated dividends and share repurchase activity and the expected performance of Apple’s business. Actual execution of these activities and results of business operations could differ materially from our forecast. For more information, please refer to the risk factors discussed in Apple’s Form 10-K for 2011 and the Form 10-Q for the quarter ended December 31, 2011. Apple assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates.

With that I’d like to turn the call over to Tim Cook.

((Timothy D. Cook, Director, Chief Executive & Operating Officer))

Thank you, Nancy. Good morning to everyone and thanks for joining us. I’d like to start by discussing how confident we feel about Apple’s future. We are participating in some very large and growing markets and we see significant opportunities ahead of us.

Starting with iPhone, in our most recently recorded quarter we saw 37 million iPhones. That’s a very large number, but it represented less than 9% of handsets sold during the quarter. The handset market is expected to grow dramatically in the years ahead from 1.6 billion in 2011 to over 2 billion by 2015 and it’s our belief that eventually all handsets will be smartphones to the potential for iPhone is enormous.

We are off to an amazing start with iPad selling 55 million from the launch of the first iPad in the spring of 2010 through the end of our recent quarter and with the launch of the new iPad it just keeps getting better. Gardner estimates that the tablet market will be 325 million units by 2015 and as I said many times before we believe that the tablet market will eventually surpass the PC market in size. It’s just a question of when. And with the MacIntosh as the bad quarter we had outperformed the PC market for 23 consecutive quarters yet we have less than 6% of market share of this $350 million units per year market. We are innovating at an incredible pace, building a tremendous ecosystem with apps and content, providing great services such as iCloud which has already eclipsed over a 100 million users within just a few months of its launch and we’re delivering incredible developments like Siri, a profound new way to interface with the iPhone.

We are also investing in distribution around the world. We continue to open our own stores including 40 this fiscal year alone. We are expanding our footprint with new carrier partners and other third party resellers and we are investing in our direct enterprise sales force. Simply stated, we don’t see sealing store opportunities. All of this innovation and success have led to generation of substantial amount of cash, both domestically and abroad. We have used some of our cash to make great investments in our business to increase research and development, acquisitions, new retail store openings, strategic prepayments and capital expenditures in our supply chain, and building out of our infrastructure, and you will see more of all of these in the future.

Even with these investments we can maintain a war chest for strategic opportunities and have plenty of cash to run our business. So, we are going to initiate a dividend and share repurchase program. We have thought very deeply and very carefully about our cash balance. We will continue to invest in the business and we will maintain our disciplined and focused approach in the future.

Innovation is the most important objective at Apple and we will not lose side of that. These decisions will not close any doors for us. Subject to a board declaration we plan to initiate a quarterly dividend of $2.65 per share beginning in the September quarter. A quarterly dividend will provide recurrent income to our shareholders and we also believe it will broaden Apple’s investor base by attracting new investors who don’t currently own Apple stock. Additionally, in the December quarter, we plan to commence the share repurchase program. The board has authorized the repurchase of $10 billion of stock over the next three fiscal years with the primary objective of neutralizing dilutions from future grants through Apple’s employee equity programs.

We will continually asses the opportunities to invest further in our business, and in consultation with our – we will review our dividend and share purchases plans periodically. We will continue to do what we believe is in the best interest of Apple, and our long term shareholders. I would now like to turn over the call to Peter who will provide more details on our programs.

((Peter Oppenheimer, Chief Financial Officer & Senior Vice President))

Thank you, Tim. Apple’s cash has increased substantially for all the right reasons, our business is performing extremely well and we have been very disciplined with our stewardship of the cash making great investments. In fiscal year `11 our cash increased by $31 billion dollars with $24 billion of that growth coming from abroad. During the first quarter of fiscal year `12 we generated another $16 billion that left us with about $98 million of cash at the end of the December quarter, of which about $64 billion was outside United States.

As Tim said that’s plenty of cash to run the business. So we’re are announcing today a dividend and share repurchase program. And thinking about our cash, we want to achieve several objectives. First, we want to maintain the flexibility to take advantage of investment opportunities that prevent themselves. Second, we want to provide some current income for our long-term shareholders. Third, we want to increase the attractiveness of Apple to a wider investor base. And finally, we want to limit future delusion from our employee equity programs.

The program that we’re announcing today will have two elements. A dividend and a share repurchase. Subject to board declaration we plan to initiate a quarterly dividend of $2.55 per share beginning in our September quarter. We plan to acquire the dividend concurrent with our quarterly earnings release in July and to establish the record and payment days at that time. Our Board has concluded to amend existing RSU agreements so that unvested RSUs can participate in dividends acquired. This would apply to both historical brands that are unvested as of the dividend record dates as well as future brands. Dividend equivalent on unvested RSUs will be deferred and paid with unlying RSUs best. At Sam’s request, none of his unvested RSUs will participate in dividends. Based on anticipated shares and RSUs outstanding. we would except the first years annual dividend payments to be over $10 billion.

With respect to share repurchase our Board has authorized a $10 billion program beginning in our fiscal year ‘13 to be executed over three years with the primary purpose of neutralizing the impact of delusion from future employee equity grants and employee stock purchase programs. Commencing in fiscal year ‘12, which begins on September 30, 2012. We will begin to repurchase shares primarily to offset the amount of shares we expect will ultimately be issued from the current year employee equity grants. We intend to execute these repurchases over the course of each fiscal year. We expect cash used to repurchase shares through the share repurchase program and to net-share-settle vesting RSUs to consume approximately $4 billion in the first fiscal year.

Combining dividends, share repurchases and cash used to net-share-settle vesting RSUs, we anticipate utilizing approximately $45 billion of domestic cash in the first three years of our program. In closing, we remain very confident in the future of our business, are extremely enthusiastic about the opportunities that lie ahead and look forward to executing our plans to initiate a dividend and share repurchase program.