Apple (NASDAQ: AAPL) filed a preliminary prospectus for a bond offering yesterday morning. It wasn't clear at the time how much Apple was raising, but the company has now filed a final pricing sheet with the SEC that details how the offering priced and how much Apple ended up raising.
The company now has nearly $111 billion in term debt on the balance sheet.
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Filling the domestic coffers
Unlike in some prior offerings, there were no floaters this time around; it was all fixed-rate notes. Here's a breakdown of all the tranches:
That adds up to $7 billion in fresh paper that the Mac maker has just issued, which is comparable in size to prior offerings. Apple raised $7 billion across two separate offerings in the September quarter. The company finished the September quarter with $103.7 billion in total term debt, so this offering brings that figure up to approximately $110.7 billion and will help fund another quarter's worth of capital returns.
Apple returned $11 billion to shareholders last quarter, including $7.5 billion in repurchases, $3.3 billion in dividends and equivalents, and $200 million of net share settlements. Domestic operating cash flow should help cover the rest, and we know that the December quarter is likely to be a monster, with sales expected in the range of $84 billion to $87 billion. Most of those sales will occur internationally, but Apple will only need a few more billion dollars in domestic operating cash flow to cover its capital return activities this quarter.
With great debt burden comes great interest expense
That's an awful lot of debt to service, and interest expenses continue to rise in lockstep. Here's the thing: Apple's massive investment portfolio has long covered these costs and continues to do so. For example, interest and dividend income in fiscal 2017 totaled $5.2 billion, more than enough to pay for the $2.3 billion in interest expense.
Apple has never had net negative interest expenses, and won't for the foreseeable future since there's still a meaningful cushion between interest and dividend income and interest expense.
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Evan Niu, CFA owns shares of Apple. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.