10. United Continental Holdings
> Income tax expense: -$1 million
> Earnings before taxes: -$724 million
> Revenue: $37.2 billion
> 1-yr. share price change: +55.6%
> Industry: Airlines
Several airlines merged in recent years in an attempt to cut costs and capacity. United and Continental Airlines were no different when they merged in 2010, joining a long list of mergers, including Delta and Northwest, Southwest and Airtran, as well as American Airlines and U.S. Airways. However, United Continental has hardly been a model for a successful merger. The new company has struggled to integrate the systems and workers of the two airlines. Additionally, the company finished 2012 with a net loss for the year, while in the most recent quarter passenger revenue per available seat mile — an important industry measure of profitability — fell. In large part because of its lack of profits, losses before taxes totaled $724 million, the company recorded no tax expense in its most recently reported fiscal year.
9. Bunge Limited
> Income tax expense: -$6 million
> Earnings before taxes: $372 million
> Revenue: $61.0 billion
> 1-yr. share price change: +10.5%
> Industry: Agricultural products
Bunge, a global agribusiness company, reported $372 billion in earnings before taxes in fiscal 2012, but the company actually received a tax benefit that year of $6 million. If the company had assessed all of its income based on the federal corporate tax rate of 35%, it would have had $130 million in tax expenses. However, 42% of Bunge’s total pre-tax income comes from operations overseas, on which the company pays cheaper foreign corporate tax rates. Also the company received over $50 million in fiscal incentives for its investments in Brazil. In October, the company indicated it was considering a sale of its sugar operations in the country after reporting a substantial quarterly loss.
8. Rite Aid Corporation
> Income tax expense: -$111 million
> Earnings before taxes: $8 million
> Revenue: $25.4 billion
> 1-yr. share price change: +317.3%
> Industry: Drugstore
Rite Aid, one of the country’s largest pharmacy chains, had more than $25 billion in revenues in its most recent fiscal year but just $8 million in earnings before taxes. Between a decrease in deferred taxes and a number of tax credits received, the company actually reported a total tax benefit of nearly $111 million. Since it filed its annual report, the company has shown some positive signs. Shares are up by more than 300% in the last year. In the most recent reported 12 months, the company reported net income of roughly $300 million. The drugstore chain may owe much more in taxes when it reports this year.
7. Bristol-Myers Squibb Company
> Income tax expense: -$161 million
> Earnings before taxes: $2.3 billion
> Revenue: $17.6 billion
> 1-yr. share price change: +58.7%
> Industry: Pharmaceuticals
Bristol-Myers Squibb is a New York City-based pharmaceutical giant with some 28,000 employees as of fiscal 2012. That year, the company lost patent protection on its blockbuster drug, Plavix, a blood thinner that accounted for roughly a third of its sales the year before. In all, earnings after taxes fell from $3.7 billion in 2011 to just under $2 billion in 2012. However, the drugmaker was able to take advantage of rates abroad to reduce its tax expense dramatically. According to Tax Analysts’ Sullivan, companies that can shift profits abroad and have a great deal of non-physical assets, such as pharmaceutical companies, often save on their taxes. The company also received a tax benefit related to the writeoff of its acquisition of Inhibitex, helping to bring its total tax balance below zero.
6. Morgan Stanley
> Income tax expense: -$239 million
> Earnings before taxes: $515 million
> Revenue: $26.1 billion
> 1-yr. share price change: +60.8%
> Industry: Banking
Global investment bank and brokerage house Morgan Stanley reported revenue in excess of $26 billion and had just over half a billion in pre-tax income in fiscal 2012, it’s most recently reported fiscal year. However, the company recorded no income tax expense at all. In fact, it reported a tax benefit of nearly $240 million that year. The combination of lower foreign tax rates, tax-exempt income, and domestic tax credits all helped Morgan Stanley record this sizable tax benefit.
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