By Philip Elmer-DeWitt
November 7, 2012

FORTUNE — Sharp was in serious trouble last summer.

It had hemorrhaged 103 billion yen ($1.3 billion) in cash in the first half of 2012. It had another 200 billion yen ($2.3 billion) in convertible bonds coming due in 2013. And an emergency infusion of cash from Foxconn had just fallen through.

This was a problem for Apple (AAPL), because it was counting on Sharp to supply touchscreen displays for the new iPhone 5 scheduled to launch in a few weeks. August came and went and the displays from Sharp were AWOL.

Then, in the second week of September, the
Wall Street Journal
 reported that mass production of Sharp’s LCD screens for Apple had finally begun.

What happened?

Asymco‘s Horace Dediu has a theory. In a post published Wednesday he points out that there was  a $2.3 billion discrepancy between what Apple said it planned to spend on capital expenditures in 2012 and what it actually spent — $2 billion of which wasn’t reported as cash flow.

“The question is,” writes Dediu, “what was it spent on and why did it not go through the cash flow statement?”

His answer:

Circumstantial evidence points to the asset being production equipment (or even a plant) previously owned by Sharp. Sharp is a key supplier of screens to Apple but is also in financial distress. Sharp has also been the object of an intended investment by Foxconn. That deal fell through as Sharp’s finances deteriorated. My guess is that these attempts to shore up Sharp are directed by Apple to ensure both continuity of supply and a balanced supplier base (offsetting Samsung, another supplier.) If Sharp were to enter into some form of bankruptcy, the key plant(s) used in producing screens for Apple might be “up for grabs” by creditors and they might be taken off-line, jeopardizing Apple’s production capacity, irrespective of contractual obligations. I believe that Apple’s late and unprecedented expenditure was to secure this asset. I further believe that the financing for this deal was done through a swap of “pre-orders”. Stepping even further into the hypothesis: Apple arranged to move a Sharp screen production line onto its books and “paid” for it through a pre-payment of components. This being a pre-payment it would be in the form of an “off balance sheet” commitment. Apple reported that “As of September 29, 2012, the Company had outstanding off-balance sheet third-party manufacturing commitments and component purchase commitments of $21.1billion” [my emphasis]. This is a significant increase from earlier years and allows for a huge “slush fund” to cover asset swaps.

Dediu’s post is titled “ReCapEx: The curious case of Apple’s 2012 and 2013 Capital Expenditures” and you can read it here.

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