So there we were, nosing around the 2016 results of the S&P 500. We happened upon the results of Hess Corp., and noticed something unusual: Hess reported an operating loss last year, but also paid income taxes.
Wait, we said—can that be right? Why would a company pay taxes for a year in which it lost money? And how often does this happen, anyway?
Thankfully, Calcbench databases can answer those questions. Let’s show you how.
First we need to identify how many S&P 500 companies did report losses in 2016, but also paid taxes. That requires some straightforward work on our Multi-Company page. The key is to narrow the field through our Choose Companies feature. Note the dialogue box in Figure 1, below.
We selected the S&P 500 as our first target, a standard peer group available in the middle column. Then we moved to the left-side column to narrow the field. We used the Screen/Filter tab, then chose Standardized Metric. That gave us the option to search standard terms on the Income Statement, and we selected Operating Income. Then we set our parameter for only those companies whose operating income was less than zero—that is, they had a loss last year.
Now peek at the right-side column. You can see our original list of the S&P 500 has been whittled down to 46. Then hit “Done choosing companies.” That brings you back to the Multi-Company page, in Figure 2 below.
Next, we need to find which companies within those 46 also paid taxes last year. That’s easy. Go to the Search Standardized Metrics text box (circled in blue, above), and start typing “Income tax provision.” You’ll see that choice appear, and click on that one. A new column will appear on the results on the right-hand side. Then we can sort results by that column, largest to smallest—which gives us the 19 companies in the S&P 500 that reported both operating losses and income taxes paid last year. See Figure 3, below. Note the results on the right-hand side, now different from Figure 2.
The results we get on the Multi-Company page only give us tabular information. We know which companies fit the profile, and how much they reported in operating losses and provisions for income taxes. So why would they do this?
To find out that answer, we need to use the world-famous Calcbench Trace feature.
Move your mouse over any result in that Income Taxes column. You’ll see the Trace feature activate with a small word that says—wait for it—“trace.” That will bring you to a result like what we see in Figure 4, below.
In this example, we traced the $2.22 billion Hess claimed as an income tax expense. The trace shows us exactly where that number appears on the income statement (high-lighted in blue), and further below (circled in red) you can see a “Read Full Disclosure” option. Click on that, and you will be taken to the exact footnote disclosure that explains why Hess reported the $2.22 billion in taxes. (Figure 5, below.)
Hess’s explanation is rather lengthy. We won’t go into it here. Companies might pay taxes even amid operating losses for a variety of reasons: a foreign subsidiary that requires payment, some complex business strategy, and the like.
Whatever that specific reason may be, you can use the same technique to find the disclosures of the other 19 companies that paid taxes and reported operating losses last year. If we found a company that didn’t have a “Read Full Disclosure” option when we traced the number, we could always dig into the truth by using the Interactive Disclosure database instead, searching for Income Taxes in the “Choose Disclosure Type” menu on the left-hand side.
Calcbench subscribers can use the same principles for all sorts of sophisticated searches. Start by using the Choose Companies box to identify a broad range of companies you want to study, and then work on the Multi-Company page to refine that first group of peers into a smaller, more precise list. You can sort that smaller list however you like, and use the Trace feature or the Interactive Disclosure page to find precise reasons why a company reported the numbers it did.
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