Summary
Amgen Inc. (AMGN) filed an 8-K on December 22, 2017, to disclose the expected financial impact of the U.S. tax reform legislation enacted in late 2017. The company anticipates having greater access to its accumulated global cash and future global cash flows due to the new tax framework. Importantly, Amgen expects to incur a one-time GAAP net tax expense of approximately $6 billion to $6.5 billion, primarily related to a repatriation tax on accumulated earnings and the revaluation of net deferred tax liabilities. This charge will affect GAAP earnings per share (EPS) and tax rate guidance for fiscal year 2017, but it will not impact the company's previously issued non-GAAP guidance. Amgen expects its future non-GAAP tax rates to remain unchanged by this legislation. The company plans to provide further details on the tax expense and its impact during its fourth quarter/full-year 2017 earnings call, scheduled for around February 1, 2018. While this tax charge is significant and will impact reported GAAP figures, investors should note that the company is finalizing these estimates, and the final impact will be disclosed in the upcoming earnings call. The legislation also sets new corporate tax rates: 21% for U.S. income and a reduced rate for ex-U.S. income, which could positively influence future cash flow management and strategic financial decisions.
Key Highlights
- 1Amgen expects increased access to its accumulated global cash and future global cash flows due to U.S. tax reform.
- 2The company projects a one-time GAAP net tax expense of $6 billion to $6.5 billion related to repatriation and deferred tax liabilities.
- 3This tax expense will impact 2017 GAAP EPS and tax rate guidance.
- 4The tax reform legislation will not affect Amgen's previously provided non-GAAP guidance.
- 5Future non-GAAP tax rates are not expected to increase as a result of the tax reform.
- 6A lower U.S. corporate income tax rate of 21% is expected to apply to future U.S. income.
- 7Further details and final impact will be provided on the Q4 2017 earnings call around February 1, 2018.