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repatriating companies—which accounted for 52% of the total repatriated amount—
actually reduced their US workforce and decreased their R&D spending following the
repatriation act. The authors of the NBER study point out that cash is fungible, and
firms were able to bypass the guidelines on how repatriated cash should be used.

Table 7 shows the top 15 repatriating companies following the HIA, and IRS estimates
for the proportion of repatriated cash by industry are in Table 8.

Table 7: Top 15 repatriating companies based on the 2004 HIA
Company Repatriated Amount ($bn)
Pfizer 35.5
Merck 15.9
Hewlett Packard 14.5
Johnson & Johnson 10.7
IBM 9.5
Schering-Plough 9.4
Bristol Myers 9.0
Eli Lilly 8.0
DuPont 7.7
Pepsi Co, Inc. 7.4
Intel 6.2
Coca-Cola 6.1
Altria 6.0
Procter & Gamble 5.8
Oracle 3.1
Source: Data provided by corporations in response to U.S. Senate Permanent Subcommittee on
Investigations survey

Table 8: Corporations Repatriating Dividends Under IRC Section 965,
Selected Items, by Selected Major and Minor Industry of the Parent
Corporation, Tax Years 2004-2006
Industry % of Repatriated Cash Dividends
Pharmaceutical and medicine manufacturing 29%
Computer and electronic equipment manufacturing 19%
Other manufacturing 8%
Food manufacturing 6%
Other chemical manufacturing 5%
Information (including software publishers) 4%
Finance, insurance, real estate, rental and leasing 4%
Transportation equipment manufacturing 3%
Management of companies and enterprises 3%
All other industries 2%
Paper manufacturing 2%
Machinery manufacturing 2%
Electrical equipt, appliance & component manufacturing 2%
Other services 2%
Basic chemical manufacturing 2%
Fabricated metal product manufacturing 1%
Retail trade 1%
Wholesale trade, nondurable goods 1%
Wholesale trade, durable goods 1%
Professional, scientific and technical services 1%
Transportation and warehousing 0%
Plastics and rubber products manufacturing 0%
Primary metal manufacturing 0%
Note: all figures are IRS estimates
Source: IRS (https://www.irs.gov/pub/irs-soi/08codivdeductbul.pdf)

Our data for the S&P 500 similarly suggests that share repurchases saw the biggest
pick-up in terms of cash use from when the HIA was passed in October 2004 through
the end of 2006. Buybacks jumped over 200% over this period, where they went from
12% of operating cash flows to 33% of operating cash flow by the end of 2006.

Chart 5: Capex, dividends, buybacks and M&A for the S&P 500 ex-Financials: increase from
10/31/2004-12/31/2006 and % of Operating Cash Flow during both dates

[Chart showing bar graph with categories: Capex, Dividends, Net Buybacks, Acquisitions. Legend indicates: % of OCF - 10/31/2004 (LHS), % of OCF - 12/31/2006 (LHS), % increase (RHS)]

Source: FactSet, BofA Merrill Lynch US Equity & US Quant Strategy

(https://www.hsgac.senate.gov/subcommittees/investigations/media/new-data-show-corporate-
offshore-funds-not-trapped-abroad-nearly-half-of-so-called-offshore-funds-already-in-the-united-states)

8 Equity Strategy Focus Point | 29 January 2017 Bank of America
Merrill Lynch

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