Monday, May 20, 2013

Since I've Been Comparing Merck To Apple -- On Repatriation -- Here Is (Apple CEO) Tim Cook's Testimony, For Capitol Hill, This Week


UPDATED: 6:05 PM CDT | 05.20.13 -- The New York Times now has released its piece on all of this, online -- and Apple's Time Cook gets excoriated in it -- for some of the hyperbole in his 17 pages, below. In my estimation, it is only a matter of time before the Times catches up to Merck and Pfizer. And possibly Congress will, too. [End, updated portion.]

At some point tomorrow, I'll get around to explaining the ways in which Apple's corporate structure, and use of CFCs, or controlled-foreign-corporations, differs from Merck's approach. [Hint: It primarily involves the transfers of intellectual property, to generate more income in tax haven jurisdictions -- in Merck's case.] But for now, you may safely assume that -- in the main -- they are largely similar. At least similar enough to make it worthwhile to watch what Apple does -- on foreign cash repatriation, as a "canary in the coal-mine" -- for what Merck might do.

And so, here is the advance-copy (that is some 17 pages of PDF goodness!) of Mr. Cook's upcoming testimony before Congress -- on Apple's recent $17 billion debt issuances, its unimaginably large $60 billion stock buyback program. . . . all of which drives his call for reform of the United States corporate tax code (which, he argues, makes most of these complex financial machinations necessary).

Having said all of that, though -- Apple does pay an immense amount of US corporate income tax. Mr. Cook estimates that Apple is responsible for almost $1 of every $40 the US Treasury collects, in corporate income taxes, from all corporate taxpayers -- paying more than $6 billion in federal taxes in 2012 (which, to be fair, of course -- may just mean that companies like Merck and Pfizer aren't paying their fair share). Wow. Apple's effective 30.5 per cent federal income tax rate here in the US is much higher than Merck's (which stood at 27.9 per cent at year end 2012, but was around 11 per cent in 2011) -- and dwarfes Merck's 2012 $2.44 billion in tax payments, on a dollar for dollar basis.

. . . .Apple, a California company, employs tens of thousands of Americans, creates revolutionary products that improve the lives of tens of millions of Americans, and pays billions of dollars annually to the US Treasury in corporate income and payroll taxes. Apple’s shareholders – from individuals and institutions to pension funds and public employee retirement systems – have benefitted from the Company’s success through the appreciation of its stock price and generous dividends. Apple safeguards the capital entrusted to it by its shareholders with prudent management that reflects the Company’s extensive international operations. Apple complies fully with both the laws and spirit of the laws. And Apple pays all its required taxes, both in this country and abroad. . . .

More tomorrow. And by the way, Merck CFO Kellogg did talk about why he did the aggregate of $6.5 billion debt deals last week, and why the $16.5 billion stock buy-back is happening now, at Merck -- but didn't even remotely hint at repatriation, in his UBS talk today, in Manhattan. And he didn't mention the underwriters' conflict of interest -- even though Merck did a much more complete job of disclosing it, under FINRA Rule 5121, than Apple did -- in its similar definitive 424(b) debt prospectus, of early May.

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