While borrowing does happen on a case-by-case basis, the capital-spending decline suggests companies haven’t simply turned to that method as an alternate to cash. There can be other reasons to borrow, such as avoiding U.S. tax consequences.
Apple, which holds $102 billion of cash and investments outside the U.S., opted to borrow to help finance a plan unveiled last month to return $100 billion to shareholders. The decision saved the Cupertino, California-based iPhone maker as much as $9.2 billion in taxes, Moody’s Investors Service said.
Cook, in this week’s prepared Senate testimony, said that lowering corporate income taxes and imposing a “reasonable” tax on foreign earnings brought back to the U.S. would “stimulate the creation of American jobs, increase domestic investment and promote economic growth.”
While Apple’s accumulation draws attention, the practice is widespread across multiple industries and company sizes.
Corporate Cash
Cash and marketable securities more than doubled from a year ago to at least $1 billion at 28 companies in the Russell 3000. They include Yahoo! Inc., Dish Network Corp. and Fairfield, Connecticut-based GE, which boosted cash almost threefold to $22.1 billion including proceeds of $16.7 billion from the sale of its remaining interest in NBC Universal to Comcast Corp. in February.
PPG, a producer of specialty chemicals and protective coatings, boosted cash and short-term investments to $2.38 billion in the most recent quarter, an increase of $1 billion from a year earlier, said Jeremy Neuhart, a spokesman.
The sale of the Pittsburgh-based company’s commodity chemicals business generated more than $900 million in cash, he said, adding that PPG is evaluating acquisitions, share buybacks and capital spending in emerging markets.
Caterpillar, the world’s largest maker of construction and mining equipment, more than doubled cash to $3.59 billion in the most recent quarter after reducing inventories by $2.5 billion and curtailing factory operations in the previous six months.
Earnings Results