FQ1 AAPL Tax Rates

  • Posted: 11 December 2010 11:17 PM

    If there’s one unheralded factor in Apple’s meteoric 67% gain in eps in FY2010 it’s the dramatic reduction in tax rates. FQ4’s 21.1% tax rate propelled eps much higher considering the more than $20 billion in revenue. My eight quarter data tables indicate an FY2010 average tax rate (averaging the tax rate reported for the four quarters) of 24.5% and an 8-quarter average of 28.1%. In the year-ago quarter the tax rate was 29%. Apple’s guidance for the quarter is 25.5%.

    I’m currently at 24% tax rate for the quarter.

    What say the members of the AFB?

         
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    Posted: 12 December 2010 12:42 AM #1

    Aggressive, but still in the ballpark.

         
  • Posted: 12 December 2010 12:58 AM #2

    Tetrachloride - 12 December 2010 04:42 AM

    Aggressive, but still in the ballpark.

    Tetra, why do you think 24% is aggressive?

         
  • Posted: 12 December 2010 01:00 AM #3

    USA has the highest corporate tax rates in the world.  Apple’s international sales are exploding, which are significantly lower.  I’m projecting 23% for FQ1 2011.

         
  • Posted: 12 December 2010 01:22 AM #4

    Mercel - 12 December 2010 05:00 AM

    USA has the highest corporate tax rates in the world.  Apple’s international sales are exploding, which are significantly lower.  I’m projecting 23% for FQ1 2011.

    *Sigh* Google ?Double Irish? ?Dutch Sandwich? “Carried Interest” and then try making that claim again. Most multi national Corporations, don’t pay anywhere close to these purported high US corporate tax rates. The small non public businesses are the ones who shoulder the Tax Burden in the US.

         
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    Posted: 12 December 2010 01:42 AM #5

    irieblue - 12 December 2010 05:22 AM
    Mercel - 12 December 2010 05:00 AM

    USA has the highest corporate tax rates in the world.  Apple’s international sales are exploding, which are significantly lower.  I’m projecting 23% for FQ1 2011.

    *Sigh* Google ?Double Irish? ?Dutch Sandwich? “Carried Interest” and then try making that claim again. Most multi national Corporations, don’t pay anywhere close to these purported high US corporate tax rates. The small non public businesses are the ones who shoulder the Tax Burden in the US.

    Nice reasoning, Google uses Irish and Dutch tax shelters, and that’s an argument that the US tax system isn’t F’d up?

    This is an AAPL finance board, not a generic multi-national corporation board. Apple still does most of its biz in the US, and pays taxes twice, once for corporate, and a second time for shareholders’ cap gains taxes. And AAPL would pay a third time if it wanted to repatriate half of that $50B in case they have sitting around in other countries and pay a dividend.

    Our tax system is farked and encourages capital to avoid the US.

    And BTW, no, privately-held corps are mostly S corps and have pass-through taxation, no evil double-taxation like C corps.

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  • Posted: 12 December 2010 02:05 AM #6

    irieblue - 12 December 2010 05:22 AM
    Mercel - 12 December 2010 05:00 AM

    USA has the highest corporate tax rates in the world.  Apple’s international sales are exploding, which are significantly lower.  I’m projecting 23% for FQ1 2011.

    *Sigh* Google ?Double Irish? ?Dutch Sandwich? “Carried Interest” and then try making that claim again. Most multi national Corporations, don’t pay anywhere close to these purported high US corporate tax rates. The small non public businesses are the ones who shoulder the Tax Burden in the US.

    Apple doesn’t pay close to the top 35% rate because they have international sales that are taxed at lower rates.  The small, non-public businesses are LLCs and S Corps, and as pass-through entities, the income is taxed at the marginal rate of the individual.  Tax loopholes for corporations and individuals are wildly overstated.  I can guarantee you that US corporations are paying higher rates than they do on international sales.

         
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    Posted: 12 December 2010 02:08 AM #7

    I’m just being cautious by tending toward the average.  Better to have upside surprise.

         
  • Posted: 12 December 2010 01:05 PM #8

    Mercel - 12 December 2010 05:00 AM

    USA has the highest corporate tax rates in the world.  Apple’s international sales are exploding, which are significantly lower.  I’m projecting 23% for FQ1 2011.

    Mercel, I like your number.  grin

    I’m a bit higher due to expected domestic sales of the iPad this quarter.

         
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    Posted: 12 December 2010 11:53 PM #9

    24% sounds like a solid number based on the 25.5% quoted by Oppenheimer last quarter.  I might plug in something like 24.7%-25% in my home-game numbers for Q1 to be more conservative.  I don’t know the full impact of the one-time tax benefits that quarter.

    What I’d like to know (and which is probably difficult to precisely pin down) is how much lower Apple’s tax rate can go the more it does business internationally.  Apple did have various one-time “tax breaks” this fiscal year, but I don’t think a percent or two in tax rate makes any material difference in Apple’s results.

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  • Posted: 13 December 2010 01:51 AM #10

    Mav - 13 December 2010 03:53 AM

    but I don’t think a percent or two in tax rate makes any material difference in Apple’s results.

    A 1% shift in Apple’s tax rate (one way or the other) adds or subtracts 8.5? to EPS.  That’s not an amount to sneeze at.

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  • Posted: 13 December 2010 02:05 AM #11

    DawnTreader - 12 December 2010 05:05 PM
    Mercel - 12 December 2010 05:00 AM

    USA has the highest corporate tax rates in the world.  Apple’s international sales are exploding, which are significantly lower.  I’m projecting 23% for FQ1 2011.

    Mercel, I like your number.  grin

    I’m a bit higher due to expected domestic sales of the iPad this quarter.

    After being too high in prior quarter tax rate estimates, I’m obeying “the trend is your friend” maxim and letting the tax rate stay low.  I may use 23.5% before it goes to print.

         
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    Posted: 14 December 2010 02:58 AM #12

    Gregg Thurman - 13 December 2010 05:51 AM
    Mav - 13 December 2010 03:53 AM

    but I don’t think a percent or two in tax rate makes any material difference in Apple’s results.

    A 1% shift in Apple’s tax rate (one way or the other) adds or subtracts 8.5? to EPS.  That’s not an amount to sneeze at.

    I think the effect is slightly lower (5 cents/diluted share per quarter for the entire fiscal year, around 6.5 cents/diluted share for this past fiscal quarter), but you’re right about the significance, now that I did the math.  Good thing for Apple’s famous conservatism, then.

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  • Posted: 14 December 2010 11:09 AM #13

    Roughly, it’s worth (in my calculations) close to $.075 per share. But moving above $26 billion in revenue makes any changes based on ratios of revenue or earnings significant in nominal terms.

         
  • Posted: 14 December 2010 05:06 PM #14

    DawnTreader - 14 December 2010 03:09 PM

    Roughly, it’s worth (in my calculations) close to $.075 per share. But moving above $26 billion in revenue makes any changes based on ratios of revenue or earnings significant in nominal terms.

    Dawn, have you noticed how closely our estimates track each other?

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    Posted: 14 December 2010 07:56 PM #15

    DawnTreader - 14 December 2010 03:09 PM

    Roughly, it’s worth (in my calculations) close to $.075 per share. But moving above $26 billion in revenue makes any changes based on ratios of revenue or earnings significant in nominal terms.

    Hey, I haven’t gotten to my fiscal Q1 calculations yet.  With a revs/earnings base that big, the impact of one percentage point of taxes will be bigger than ever.

    Btw, you guys should check out the 10-K if you haven’t yet.  Maybe it’s because of things like COGS and added-in stuff like VAT, sales tax, levies or whatever, but in income tax terms for the previous fiscal year, Apple seemed to pay next to nothing internationally ($161 mil net foreign income tax) compared to the US ($3.826B combined current/deferred federal income tax, and $540 mil net state income tax).

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    The Summer of AAPL is here.  Enjoy it (responsibly) while it lasts.
    AFB Night Owl Team™
    Thanks, Steve.