These U.S. Companies Have The Most Cash Parked Overseas

While many US companies, especially those in the Russell 2000, have seen their stocks surge in recent days on renewed hopes that Trump tax reform may pass in the coming months (Goldman assigned a 65% probability of Trump tax passing), the reality is that for a vast majority of US corporations a tax cut to 30% or even 25% will have little marginal impact: after all, while US companies may have some the highest statutory tax rate in the world...

... the effective tax rate of the median S&P 500 company is 12% below the statutory rate, or roughly 27%:

Yet one aspect of the upcoming tax law change - if it passes - that would certainly boost US corporate bottom lines, is if the IRS grants an offshore cash repatriation holiday (or even one penalized by a nominal tax). It is here that most companies will promptly take advantage of the new rules to repatriate cash, and use it not to hire more workers or spend on capex, but "invest" in dividends and buybacks.

As Bank of America writes in a recent report, a major boost to S&P 500 EPS would come from the repatriation of the $1.2tn in cash overseas, excluding cash held by Financials and Managed Care companies - which may require a significant portion of their overseas cash for their foreign operations.

The proposal recommends a one-time mandatory tax, not just on cash held overseas, but on all accumulated foreign earnings on which US taxes have not been paid, whether or not this cash has been spent. While the latest tax reform plan did not specify a repatriation tax rate, the prior proposals suggest that the tax rate on overseas cash would fall in the neighborhood of 8.75% (Blueprint) and 10% (Trump). The Blueprint proposal had additionally specified a reduced 3.5% tax rate on non-cash accumulated foreign profits.

And while it is true that a substantial portion of this overseas "cash" is not really but has been invested in securities, many of which are US based, using offshore tax havens, depending on the magnitude of the final tax, Treasurers may just have the incentive to liquidate existing asset holding, in order to shore up their domestic balance sheets, and use the cash at will, instead of being landlocked like Apple which is forced to issue new debt every time it wants to buyback stock.

Next, some math: assuming that companies spend half of the freed up cash to repurchase shares, this would, according to Bank of America, represent $3 of EPS accretion. Given their high overseas cash balances, Tech and Health Care would benefit most from the repatriation tax holiday, and these sectors could buy back 6% and 3% of their shares, respectively.

Indicatively, during the last repatriation holiday in 2004/05, a much higher proportion (~80%) of repatriated cash was used on buybacks. That said, most banks assume a 50% repatriation today, for several reasons including 1) more elevated corporate leverage. 2) higher valuations today, 3) top-line growth finally materializing, and 4) investors increasingly agitating for capex over other forms of cash.

So with that in mind, here is a) the list of companies with the most retained foreign earnings (i.e. overseas cash) ...

... and, more informatively, b) the companies that have the largest proportion of offshore cash as a percentage of market cap (and in this case the foreign cash is at least 5% of market cap): these would be the biggest beneficiaries of the repatriation "holiday", and as expected, tech and healthcare companies are by far the biggest winners.


ejmoosa Thu, 10/05/2017 - 15:59 Permalink

It's there money.  Let them do what they want.But if the government wants those dollars here rather than continuing to print dollars, change the tax laws.

The Alarmist NoDecaf Thu, 10/05/2017 - 16:25 Permalink

Most of this "untaxed" money is post-tax in the nations where it is being held or moved around legally after being taxed elsewhere, and it is held by overseas entities that are not US persons. For the US to reach out and try to grab a share of it would simply send the scoundrels scurrying totally offshore.

Time for the US to man-up and lower the top corporate rate to be more competitive rather than to continue to bluster about doing the right thing to its corporate instruments of mercantilism. Didn't we learn anything from our British forefathers?

In reply to by NoDecaf

All Risk No Reward The Alarmist Thu, 10/05/2017 - 17:14 Permalink

People don't understand debt-based monetary systems.Net cash parked overseases IS INEXTINGUISHABLE DEBT in the country.Debt-money receipts (you think of them as money; can be electronic or physical) and debt-money debt obligations are created BALANCE SHEET style... The debt-owed to create the money always equals the money generated.  If the money generated is off limits (eg, overseas), then the debt owed is greater than the money available, thereby mathematically guanteering debt defaults, banksruptcy, and Gullible Muppet asset stripping.And it is worse because a few people collect interest (their assets go up, your debt goes up) ON ALMOST ALL OF THE WORLD'S MONEY SUPPLY.BTW, those countries that are always under attack - they aren't part of this debt-money system.YET.-----------------------------------Resources:"The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks."~Lord Acton“When a government is dependent upon bankers for money, they and not the leaders of the government control the situation, since the hand that gives is above the hand that takes. Money has no motherland; financiers are without patriotism and without decency; their sole object is gain.”~Napoleon Bonaparte "Let the American people go into their debt-funding schemes and banking systems, and from that hour their boasted independence will be a mere phantom." ~William Pitt, (referring to the inauguration of the first National Bank in the United States under Alexander Hamilton).How To Be a Crook - Debt Is Not a Choice 2.0 The Rise of [Debt-Money Monopolist] Financial Empire Money (and each MIT economist professor - THEY KNOW AND THEY OCCULT!) is a Goebbelsian propagandist as he covers the crimes of wolves with his fake sheep suit and lisp.Krugman to Lietaer: "Never touch the money system!"

In reply to by The Alarmist

ParkAveFlasher Thu, 10/05/2017 - 16:12 Permalink

Microsoft and the great trans-pacific human conveyor.  Kinda like Willy Wonka and the Chocolate Factory, and all the oompa loompahs work in IT doing OS version retrofits in perpetual confusion.

affirmed_78 Thu, 10/05/2017 - 16:16 Permalink

Good.  Hope GILD buys back all their stock in the next few years. BTW people on both sides of the aisle say bringing back cash to buy back stock is a total waste with no benefits.  Why?  It benefits shareholders, who can cash out and invest in other businesses, etc.  Nothing wrong with that.

heavens-door Thu, 10/05/2017 - 16:21 Permalink

I'm getting older and my eyes aren't what they used to be, cant really read that chart on my phone, is Haliburton in there?  You remember Haliburton don't you?  The one Cheney is part of?  The one that all the Super Patriotic Patriots on FOX and all the Super Patriotic Patriots like Rush and Savage etc told you to support getting no bit contracts in 2001/2002?The same one that, along with Cheney, in 2006 showed it's true face when it turned out it was a Muslim company moving its headquarters to its Muslim home country in the middle east?  That one?

E5 Thu, 10/05/2017 - 16:38 Permalink

For anyone who cares about the politics of this shit.  Bill Gates foundation only gives away an amount of money that is "less than" the tax benefit they receive by having all their money in a charitable trust.  So put him and Google libtards together with their "already foreign friends Soros and company"  and you have what you expect from liberals...HYPOCRISY: the practice of claiming to have moral standards or beliefs to which one's own behavior does not conform; pretense.(Who said liberals claim to have moral standards or beliefs, right?)

falak pema Thu, 10/05/2017 - 16:52 Permalink

the Oil lobby; the financial lobby; the MIIC lobby; the hi-tech lobby; the pharma lobby and the food lobby... win big in tax breaks the world over.Its their Oligarchy led world.The pecking order will change; notice how big Detriot is no longer there! What is good for GM is no longer good for USA !Now the Asian pivot is gonna define part of the new roles! 

DirtySanchez Thu, 10/05/2017 - 17:05 Permalink

USA should quit messing around with the intel agencies offshore accounts, nationalize the firms, and bring the funds rightfully back.

Does anybody out there actually believe exxon,google, apple, facebook, microsoft, etc., are legit public institutions?

Scuba Steve Thu, 10/05/2017 - 19:09 Permalink

Let me get this straight:U.S. based conglomerates lobby to have our young men go to overseas wars, get killed and worse mentally fukked up so those men can protect U.S. corp interests (hold it theres more)so those same corps can then extract tax benefits, cash, subsidies and govt contracts in the U.S. only to park their cash OverSeas without penalty?Tell me why DC isnt burnt to the ground and about 535 carcasses hanging from Lampposts outside the Congressional building by tomorrow morning?