November 2012
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Day November 7, 2012

ReCapEx: The curious case of Apple's 2012 and 2013 Capital Expenditures

The latest yearly report from Apple includes, as it has in the past, the forecast of Capital Expenditures. I’ve been tracking this data as an indicator of both strategic intent and potential forecasting tool for iOS device production.

Before exploring Apple’s own forecast, we should look at how they met expectations for fiscal 2012.

In October 2011 the company forecast was as follows:

The Company anticipates utilizing approximately $8.0 billion for capital expenditures during 2012, including approximately $900 million for retail store facilities and approximately $7.1 billion for product tooling and manufacturing process equipment

In October 2012 it reported:

The Company’s capital expenditures were $10.3 billion during 2012, consisting of $865 million for retail store facilities and $9.5 billion for other capital expenditures, including product tooling and manufacturing process equipment, and other corporate facilities and infrastructure. The Company’s actual cash payments for capital expenditures during 2012 were $8.3 billion.

There are two points that need to be highlighted:

  1. Expenditures overall were $2.3 billion higher than forecast. Nearly all of the over-spending was for “product tooling, manufacturing process equipment and infrastructure”. Retail was planned at $900 million and actual was $865 (an under-spend of $35 million). As no major real estate assets were acquired (change in those assets was $380 million, less than 2011 or 2010) the “deficit” in budgeted expenditures can be attributed entirely to product tooling and manufacturing process equipment.[1] The $2.3 billion spending over expectations amounts to 34% of forecast.
  2. The cash payments for capex were $2 billion lower than expenditures. This is a curious situation which was not highlighted in previous 10 K reports. What this implies is that much of the “over-spend” was not paid for though cash and since no new debt was booked it’s likely to have been paid for through some form of vendor financing. I’ll explore some explanations below.

So it’s important to note that the company spent a great deal more (one third more) than expected and paid for some of the acquisitions through uncharacteristic or unorthodox means.

The historic budgeting for Machinery & Equipment (+Land & Buildings) is shown in the following graph: