This is unbelievable…..the other day we reported here and here about various companies (AT&T, CAT, 3M) having to re-estimate costs and earnings due to the new mandates and taxes associated with the Healthcare Bill. There is absolutely no evidence whatsoever that these companies were in some way being dishonest – to the contrary, the companies are gravely concerned about their earnings going forward in light of the REALITY of the new Healthcare Bill. As we all should be. Now the Obama administration wants them to shut up? My goodness….I THOUGHT we still had the right to free speech and I THOUGHT private companies had not only a duty to their shareholders but a responsibility for honest estimates of costs and earnings. Guess not. We all must not utter a disparaging word against any of the policies of this Administration apparently. Sig heil, comrades.
Caterpillar Inc. and other large companies are being criticized by the Obama administration for reporting now that they will take millions of dollars in hits to their earnings because of one portion of the new health care legislation.
Caterpillar and Deere were accused of being “premature and irresponsible” by U.S. Secretary of Commerce Gary Locke for saying a change to Medicare Part D laws would hurt their earnings in the present quarter.
Those companies are also being questioned about the amounts they are claiming — amounts that seem to get larger with every company that makes a report to the U.S. Securities and Exchange Commission about taking a one-time charge as a result of the legislation.
Caterpillar started it all by saying it would take a $100 million hit on its first quarter earnings. Deere & Co. followed with a report it would lose $150 million to its fiscal second quarter earnings.
The largest estimated hit yet, $1 billion, was announced Friday by AT&T.
At issue is what kind of hit corporate America will take because it is losing a tax deduction from Medicare Part D. Before, companies were paid subsidies of $1,330 a year, tax-free, for every retiree for whom it provided a prescription drug plan. Then, that amount could be deducted from the company’s taxes.
The new law still provides the subsidy tax free, but companies will no longer be able to deduct it from taxes.
Also on Friday the Wall Street Journal said in a published report that it calculates Caterpillar’s loss would be more like $7 million, based on the fact Caterpillar told the SEC it expected to receive about $20 million annually from the tax deduction and the 35 percent corporate tax rate that would now be applied to that deduction amount.
But Caterpillar on Friday defended itself, reiterating its belief it must, under accepted accounting rules and regulations, record any one-time tax charge in the quarter in which the legislation causing that charge is signed.
The $100 million, said Caterpillar spokesman Jim Dugan, “is our calculation of what that change in Medicare Part D will mean to the company.”
Dugan was pressed for further explanation of how the calculation was made, including whether the $100 million was an estimate of what the change will cost Caterpillar in perpetuity since it can only be charged once.
He said further details will be included in Caterpillar’s first quarter earnings report, which will be released April 26.
On the time of the filing, Dugan said, “We felt it was very appropriate and prudent to file the disclosure with the SEC immediately. We tend to take a conservative approach to SEC filings.”
Dugan declined to comment on the statement of Commerce Secretary Locke, which he made in a live interview Thursday on CNBC.
He also declined to say anything more about a telephone call made Thursday from the White House to Vice Chairman Doug Oberhelman, which Oberhelman revealed while speaking to the Morton Rotary Club later on Thursday.
While he acknowledged the call was regarding the health care legislation, Oberhelman would not say from it it came or what was said. He did describe the call as “productive.”
Paul Gordon can be reached at 686-3288 or [email protected]
We have learned that AT&T has now been ‘requested’ by Congress to appear before the House Energy and Commerce Committee to ‘prove’ their earnings adjustment in response to the Healthcare Bill. Uh….apparently, this is more proof Congress has no idea what was in this thing in its final incarnation.