US Economy
Corporate Tax: US non-financial companies have cash pile of $947bn overseas
By Michael Hennigan, Finfacts founder and editor
Apr 1, 2014 - 8:08 AM

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US non-financial companies rated by Moody's held $1.64tn in cash at year-end 2013, up 12% from the prior record of $1.46tn a year earlier, Moody's Investors Services says in a new report, "Cash Pile Grows 12% to $1.64tn; Overseas Holdings Continue to Expand." The top 50 holders of cash account for $1.04tn of the total, and entry to the top 50 list now requires $5.7bn in cash. Overseas cash is estimated at $947bn, or 58% of current total cash,

"Among sectors, technology continues to hold the most cash and has extended its lead," says Richard Lane, senior vice president. "The technology sector held $638bn, or 39%, of total corporate cash at the end of last year, followed by healthcare/pharmaceuticals, consumer products and energy."

Apple, Microsoft, Google and Verizon are in the top five most cash rich companies, the new report says. Together with pharmaceutical giant Pfizer, they held $404bn, or 25%, of the total non-financial corporate cash balance at year-end 2013, up 24% from $347bn at end-2012.

Apple accounted for $159bn, or 9.7%, of total corporate cash in 2013, up from $137bn, or 9.5%, in 2012, Lane says. "Apple's surging balance has contributed to the concentration of cash among the top cash holders, to 64% of the current total. By itself, Apple now holds more cash than the total for every industry sector except technology and healthcare/pharmaceuticals."

Capital spending and dividends reached seven-year highs in 2013, at $869bn and $365bn, respectively. Share buybacks increased 11% and spending on acquisitions went down 15%. Moody's expects businesses to remain cautious over the next year, with spending on capital investments, dividends, acquisitions and share buybacks going up only slightly, to around $1.7tn.

Cash coverage of five-year debt maturities continues to improve, and exceeded 100% for the third year in a row last year. At the beginning of 2010 the US non-financial corporate sector had $1.05tn in cash and $1.35tn in debt maturities, but higher cash balances and a similar amount of debt maturities brought cash coverage of maturities to 107% last year.

Overseas cash is estimated at $947bn, or 58% of current total cash, up from Moody's estimate of $840bn last year, Lane says. "The high amount reflects the negative tax consequences of permanently repatriating money to the US, and the domestic use of cash for dividends, share buybacks and the majority of acquisitions."

The cash is kept overseas to avoid paying corporate taxes but some of it is held in the United States while most of it is liklely in US dollar accounts in American banks (whether it be in the US or overseas) and some may also be invested in US Treasuries.

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