CFOs Split On Refund Profit
Companies are building their 2027 budgets from third-quarter results that included one-time tariff refunds. ACCO Brands counted its refund in adjusted profit, Fortive left its refund out, and FedEx is holding $2.7 billion in refunds for its customers.
Third-quarter results look strong. FactSet reported last Friday that S&P 500 earnings are up 30.2% with 60% of companies reported, and its 14.9% blended net margin would be the second highest since 2009. Analysts expect margins to rise from there, and that optimism is the backdrop for 2027 plans.
Some of the money in this season's results comes from the past. The Supreme Court struck down the emergency tariffs in February, about $166 billion had been collected, and Customs had sent $126 billion in refunds to the Treasury for payment by October 2. Caterpillar's third-quarter operating profit, reported last Thursday, included $128 million in recoveries. New duties of 10% or 12.5% on imports from 60 trading partners remain in force.
We do, however, include the benefit in free cash flow as the cash proceeds are real and available for deployment under our disciplined capital allocation framework.
Mark Okerstrom, Chief Financial Officer, Fortive, October 2026
If a refund can count as profit, sit outside profit or belong to a customer, the question is what the 2027 budget should start from.
- Profit: A one-time refund can make a falling quarter read as a rising one.
- Peers: Two companies' adjusted profits may no longer measure the same thing.
- Cash: Part of the cash on a balance sheet may already be owed to customers.
ACCO Brands reported adjusted operating income of $47.8 million, up from $39.2 million a year ago. A $15.1 million tariff refund sits inside it. Without the refund, the quarter comes to $32.7 million.
The office products company reported on October 29. Net sales fell 0.9% to $380.3 million, while adjusted operating margin rose to 12.6% from 10.2%. The company says the refund added 4 points to that margin, which leaves about 8.6% without it. ACCO reports this openly. Chief executive Tom Tedford said adjusted earnings "included net tariff refunds, with underlying operations in line with outlook," and the release states that refunds stay inside its adjusted measures. A reader who stops at the adjusted line still sees a quarter that rose, when the operations underneath it earned less than a year ago.
↗ ACCO Brands — ACCO Brands Reports Third Quarter ResultsFortive booked an $18 million tariff refund last quarter and left it out of adjusted earnings, while counting it in free cash flow. Its finance chief called the cash real and available to deploy.
Mark Okerstrom set out the treatment on the October 28 earnings call and said Fortive expects to keep excluding refunds. Reported earnings per share rose 63% to $0.57, and adjusted earnings per share rose 13% to $0.77. The refund was worth $0.06 a share, which Fortive removes "to facilitate a consistent comparison." Its adjusted figures therefore leave out the same kind of money that ACCO's includes, and both companies disclose their approach. A board comparing adjusted growth across peers may be comparing two different measures without knowing it. The cash raises a separate question, because it sits outside adjusted earnings and still has to be spent on something.
↗ Fortive — Fortive (FTV) Q3 2026 Earnings Call TranscriptFedEx ended September with $8 billion in cash, and about $2.7 billion of it is tariff refunds held for customers. The money sits on its balance sheet, and FedEx has already recorded it as owed.
FedEx disclosed the balance on October 28 and said it returns refunds to customers "as soon as practicable." It records a liability when the cash arrives and clears it when the refund is paid, so the full amount is on its books as money owed. About a third of the reported cash balance therefore corresponds to customer refund obligations already on the balance sheet. The amount can still change. FedEx says the "ultimate amount and timing of refunds remain uncertain," and it lists litigation over tariff refunds among its risks. Consumer lawsuits seeking refunds are also pending against other companies, so the question of what is owed reaches past the companies that have promised to pay.
↗ FedEx — FedEx Reports Strong Third Quarter ResultsSome of this quarter's numbers look stronger than the businesses behind them. Tariff refunds are the reason, and they are arriving just as 2027 budgets are set.
The same kind of money is raising adjusted profit by $15.1 million at ACCO, sitting outside adjusted earnings at $18 million at Fortive, and resting in FedEx's cash at $2.7 billion while it is owed to customers. Each treatment is legitimate, and each paints a different picture of performance.
Budgets start from these results, so a one-time gain in the starting number becomes next year's target, and the shortfall will look like a performance problem when it arrives. Earned, refunded, owed: only the first can come back next year.
The Decision Signal’s posture for the week of November 2, 2026 is Commit.
All five postures are live. Click on any zone to read this week’s signals from there, and what standing in it would cost.
◇ COMMIT: Before the 2027 budget is approved, decide what happens to every refund dollar. Take it out of the starting number, name what the cash funds, set aside what customers may claim, and compare peers on one basis.
The 2027 budget is still open, and third-quarter results are the likely starting point. Refund amounts are known and can be separated from operating results now.
A starting number that includes refunds sets next year's targets too high. The shortfall appears when the refund is gone, tariff costs remain and people are measured against a level the business never reached.
Reported results show when refund money arrived and rarely set out what the plan should do with it. Closing the gap takes one decision each on the starting number, the cash and customer claims. Which dollars in the 2027 starting number did the business earn this year, and which arrived from the past?
Budget season is hard enough when the numbers are clean. After a year of tariffs that kept changing and costs that outran prices, finance teams are now planning from results that include money few of them expected to see.
Planning starts the same way every year, with the latest numbers on the table and a simple question about how much better next year can be. Finance leaders start there because recent results are usually the best evidence of what a business can do. This year, however, some of the money in those numbers came from a court ruling, and no customer, product or team had anything to do with it.
That matters more than it first appears, because a starting number has a long life. Once approved, it becomes the target a sales leader carries, the plan a manager hires against and the comparison everyone is judged by a year from now. People will be asked to beat a quarter the business never delivered, and most will not know why it feels so hard. The cash deserves its own thought as well, since a single payment can fund a one-time project well and a salary poorly, and customers may yet ask for their share.
The kinder path is to take the refund out now, while the budget is still open. Show the number with and without it, decide what the cash will pay for, and set aside what customers may claim. The plan may look a little less impressive in the room, and it will be one that people can meet.
Respectfully,
PJ Bickett
After reading this briefing, what is your immediate posture?