When looking through AAPL's financial statements for its first fiscal quarter of 2016, I noticed something odd when looking at its cash flow statement. Although AAPL generated $337 million more in Net Income, it somehow generated $6.3 billion less in Operating Cash Flow. Last holiday quarter (FQ1-15), AAPL converted 45.2 cents of every revenue dollar booked during the quarter to cash. This quarter (FQ1-16), AAPL only converted 36.2 cents of every revenue dollar booked during the quarter to cash - a year-over-year drop of 20% - I would call that significant:
So when you look at the line item details of the cash flow statement there are a few big items that swing the number in both directions, but ultimately the negatives far outweigh the positives.
- Accounts receivable, net: AAPL generated $3.9B more this holiday quarter compared to last
- Vendor non-trade receivables: AAPL generated $5.3B more this holiday quarter compared to last
- Accounts payable: AAPL used $9.9B more this holiday quarter compared to last
- Other current and non-current liabilities: AAPL used $5.0B more this holiday quarter compared to last
All-in-all, these declines outweighed the gains to the tune of $6.3B. The odd thing is that these big shifts all occurred in accounts that one would consider "normal, ordinary-course, working-capital accounts". The one that baffles me the most is Accounts Payable. To see a $9.9B year-over-year decline in that account alone is pretty remarkable. I'm an accountant - I understand that balance sheets are snapshots-in-time and that there could be extenuating factors that play into an account moving significantly, but this takes "significantly" to a new level. Even if AAPL received a generous offer to pay its A/P early, that just seems like a lot of cash to move. I've charted Operating Cash Flow as a % of Revenue for the last 13-quarters, and of all the holiday quarters, Dec-2015 (FQ1-16) was the lowest out of the past four holiday quarters: