CORRECT: 2nd UPDATE: Corporate Charges Mount For Health Bill
26 3월 2010 - 6:21AM
Dow Jones News
The corporate cost of the landmark U.S. health-care overhaul
continued to mount Thursday as companies announced special charges
that will put a dent in profit expectations.
Caterpillar Inc. (CAT) and Deere & Co. (DE) announced a
combined $250 million in charges against earnings in the current
quarter ending March 30. Other companies with large ranks of
retirees and generous pension plans are expected to follow
suit.
U.S. companies from a broad swathe of industry sectors had
warned in the run-up to last weekend's health vote in the Congress
they faced exposure to new taxes in the legislation targeted at
federal subsidies that companies receive for providing prescription
drug benefits for retirees.
An estimated 1,400 for-profit companies would be affected by the
new tax, according to an estimate from Towers Watson, an employee
benefits consulting firm. Overall, more than 3,500 U.S. companies,
nonprofit organization and government agencies provide drug
coverage to 6.3 million retirees and their spouses.
Since the Medicare Part D program was enacted in 2003, the
federal government has been providing the tax-free subsidies to
employers as an incentive to maintain their drug benefit
programs.
"We were disappointed to learn that the tax was included in the
bill," said John Calagna, a spokesman for insurance company MetLife
Inc. (MET). "We're concerned about it." He said the company is
still evaluating its expenses from the legislation.
The negative reactions of companies drew a rebuke from U.S.
Commerce Secretary Gary Locke. "The rules... and a lot of the
regulations on how this will affect large businesses haven't even
been published yet," he said in an interview on CNBC. "So for them
to come out, I think, is premature and irresponsible."
The issues yet to be resolved include when the actual tax would
be start.
In the U.S. Senate bill signed by President Barack Obama
Tuesday, the tax would go into effect Jan. 1, 2011. But the
so-called fix-it bill accompanying the legislation and approved by
the Senate Thursday would delay the start of the tax until
2013.
The subsidy covers about 28% of employers' costs for drug
benefits, or an average of $665 a year for each person covered,
according to Towers Watson's calculations. At an anticipated 35%
combined state and federal tax rate, companies would pay about $233
in taxes per person covered.
Caterpillar expects to receive $20 million in drug subsidies
this year, while Deere anticipates $17 million, according to
regulatory filings from the companies.
Caterpillar, the world's largest construction machinery
manufacturer by sales, was one of the most vocal opponents of the
legislation. It announced late Wednesday that it will take a $100
million charge to earnings this quarter to reflect the new tax.
Farm equipment maker Deere followed suit Thursday with a $150
million charge that, like Caterpillar's, was not included in its
existing guidance. Steel maker AK Steel (AKS) said Tuesday it will
record a $31 million charge against first-quarter earnings. About
40,000 Caterpillar retirees receive company-sponsored drug
benefits, which are more generous than the Medicare drug plan,
which requires recipients to pay some out-of-pocket expenses.
The charge is expected to be a one-time cost, but Caterpillar
argues that higher taxes and other potential cost increases related
to insurance mandates in the legislation will hinder the company's
recovery this year after a 75% profit plunge in 2009.
"From our point of view, a tax increase like this cannot come at
a worse time," said Jim Dugan, a Caterpillar spokesman.
Companies are required to recognize the full impact of the tax
in the period in which the law was signed. Industry analysts
project the impact of Caterpillar's charge against earnings at
about 16 cents a share, while Deere's charge is projected at about
35 cents a share.
Analysts surveyed by Thomson Reuters expect Caterpillar to earn
40 cents in the first quarter, excluding one-time costs, while
Deere's fiscal second-quarter income is estimated at $1.04.
-By Bob Tita, Dow Jones Newswires; 312-750-4129;
robert.tita@dowjones.com
(Doug Cameron and Mark Taylor contributed to this article.)
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