February 18, 2004: Apple CEO Steve Jobs sends an internal message to employees revealing that the company is completely debt-free for the first time in years.
“Today is a historic, fateful day for our society,” he writes. It’s a big turnaround from the bad old days of the 1990s, when Apple was carrying more than $1 billion in debt — and facing bankruptcy.
Apple becomes debt free in 2004
Achieving debt-free status was in some ways a formality for Apple. By this time, the company had enough money in the bank to easily wipe out the remaining debt. In 2004, Apple released the first iMac, the similarly colored iBook laptop and the groundbreaking iPod music player. Cupertino also launched the iTunes Store, which was on its way to transforming the music industry.
Apple has clearly changed course and gone in the right direction.
However, using $300 million in cash to pay off the company’s latest debt proved a symbolic triumph. Apple CFO Fred Anderson, on the brink of retirement, confirmed the news.
The end of Apple’s debt…for now
Apple revealed its plans to repay the debt, originally borrowed in 1994, in an SEC filing dated February 10, 2004:
“The Company currently has outstanding debt in the form of $300 million of the aggregate principal amount of 6.5% unsecured notes originally issued in 1994. The notes, which pay interest semiannually, were sold at 99.925% of par, with an effective yield to maturity of 6.51%. The notes, along with approximately $1.5 million, of deferred with interest due in February, are entered into with no interest swaps due. 2004 and were therefore classified as short-term debt as of December 27, 2003. The Company currently anticipates that it will use its existing cash balances to pay these notes as they mature.”
Steve Jobs’ email to Apple employees also mentioned that the company had $4.8 billion in the bank in February 2004. These days, Apple maintains a much larger pile of cash reserves (although its finances are structured so that the company also carries a large amount of debt).
Apple is becoming profitable again
In 2004, Apple had been profitable for about six years. The change came in early 1998, when Jobs shocked attendees at the Macworld Expo in San Francisco by revealing that Apple was making money again. The company’s fortunes fell and rose several times before a major recovery began. But Cupertino was once again headed for the top of the tech world.
The repayment of Apple’s remaining debt in February 2004 put a stop to this point.
