If all you financial analysts feel like you’re doing more work this year, there may be good reason for that: for the first time in years, the total number of 10-Q filings submitted to the Securities and Exchange Commission is going up.

It’s true! Calcbench recently decided to tally the total number of 10-Q filings by year for the last decade, and found that after a long decline throughout the 2010s, the total number of filings spiked back upward in 2021 — largely due to SPACs, special purpose acquisition companies.

Figure 1, below, tells the tale. The SEC received more than 21,000 10-Q filings in 2012. Then the annual total drifted downward starting in 2013 to a low of 16,963 filings in 2020, a drop of 24.6 percent.

That decline throughout the 2010s is no surprise. The number of publicly traded firms on U.S. markets has dwindled steadily for 20 years, mostly due to one publicly traded firm acquiring another or private equity groups taking a publicly traded firm off the market.

This year, however, the trend reversed course. The total number of 10-Q filings for 2021 is already at 18,679 — a 10.1 percent increase over all of 2020, with a few more weeks of the year still to come.

OK, but where are all those new 10-Q filings coming from? Calcbench investigated that too. We looked at the change in filers year over year by SIC code, to give us a sense of which industries are seeing lots of publicly traded firms coming or going in any given year.

Figure 2, below, shows the 10 SIC codes with the largest increases from 2020 to 2021.

As you can see, the number of SPACs filing 10-Qs soared this year, far ahead of any other type of business. (The SIC codes with the biggest declines included oil & gas, down 13 firms; electric power generation and distribution, down 11; and industrial inorganic chemicals, also down 11.)

Here’s where it gets really interesting. If you do the math, those additional 438 SPACs translate into an additional 1,752 10-Q filings per year — which is more than the entire increase we’ve seen in 2021 filings, and then some.

In other words, that long-running decline in filings to the SEC has reversed, and SPACs are driving it all.

Calcbench has written quite a bit about SPACs this year, including an in-depth series looking at how many SPACs exist, how much money they have at their disposal for acquisitions, and numerous reporting issues unique to this breed of holding company.

Considering all the action in this sector, clearly it will be one to keep watching closely in 2022 and beyond.

Monday, November 22, 2021

Good news for financial analysts who missed our webinar last week on supply chain disruptions: we have now posted the entire discussion to the Calcbench YouTube channel, so that you can watch it at your leisure.

The webinar is one hour long and features the entire Calcbench gang, both taking a macro-economic look at supply chain pressures and offering specific examples of how you can find such data yourself in various pockets of the Calcbench data archive.

The complete agenda is as follows:

  • CEO Pranav Ghai starts with general observations on supply chain disruption & its effects on operating margins, cost of goods sold, and similar key financial disclosures.
  • Chief product development officer Ariel Markelevich then talks about where one can find information on supply chain issues in the earnings statement; and the important role that narrative disclosures in the footnotes can play to help an analyst find and understand the important details.
  • Chief technology officer Alex Rapp walks through a real-life example of which firms can benefit from these disruptions — and how to study the data to determine how real those benefits are, or are not.
  • And senior analyst Andrew Kittredge wraps up with an example of how to model supply chain issues and operating margins in Python using the Calcbench API, for all the advanced data aficionados out there.

We also include a short video at the end celebrating the 10-year anniversary of Calcbench, which just happened a few weeks ago — but really, we’re all about the data.

Anyway, the webinar is on our YouTube channel, or you can watch in the player below. Enjoy!

Wednesday, November 17, 2021

Today we continue our look at supply chain disruptions (one might say we have a steady supply of posts on the subject…) by examining the disclosures of trucking company J.B. Hunt Transport Services ($JBHT). After all, shouldn’t a company in the business of moving stuff around be making a killing these days?

At first glance of the income statement, that hypothesis would seem correct. Revenue in third-quarter 2021 was up 27.2 percent from the year-ago period, including “fuel surcharge revenues” that soared from $176.5 million last year to $330.9 million today.

Figure 1, below, shows that 10-Q comparison. Yes, operating expenses rose by 25 percent — but operating income, pre-tax earnings, and net income rose by even larger numbers. So in that world, do higher prices really matter that much?

Upon closer inspection of Hunt’s disclosures, maybe they do. We also peeked at the company’s balance sheet, and found that net accounts receivables have risen 28.6 percent over the last 12 months; from $1.121 billion in Q3 2020, to $1.442 billion today. See Figure 2, below.

A growing accounts receivable line can indicate that customers are taking longer to pay their bills, or that some customers aren’t likely to pay them at all. So we used our handy Trace feature to see what Hunt disclosed in the footnotes about its growing A/R line:

The adequacy of our allowance is reviewed quarterly. Balances are charged against the allowance when it is determined the receivable will not be recovered. The allowance for uncollectible accounts for our trade accounts receivable was $17.0 million at September 30, 2021 and $18.4 million at December 31, 2020. During the three and nine months ended September 30, 2021, the allowance for uncollectible accounts increased by $1.1 million and $2.5 million, respectively, and was reduced $0.3 million and $3.9 million, respectively, by write-offs.

Also keep an eye on prepaid expenses, which have been falling quarter after quarter for all of 2021 so far. Companies sometimes cut back on prepaid expenses to conserve cash. We don’t know whether that’s the case here, but the question is worth asking next time you’re on a J.B. Hunt earnings call.

You can also glean more insight about Hunt’s operations from its earnings statement, which contains quite a bit of other, non-GAAP information. We pulled up the earnings statement on our Interactive Disclosure page, and scrolled down to the list of “Operating Statistics by Segment.” There, Hunt shared numerous details about the size of its trucking fleet, number of hauls, and revenue per haul. Take a look:

We can see that the number of “intermodal” loads is down 6 percent, but revenue per load is up a whopping 24 percent. Why? If you read the narrative disclosures, you get even more detail:

Overall intermodal volumes declined 6% versus the same period in 2020. Eastern network loads declined 2%, while transcontinental loads declined 9% compared to the third quarter 2020. Demand for intermodal capacity remains strong, however, volumes in the quarter were negatively impacted by a continuation of rail restrictions across the network and elevated detention of trailing equipment at customer facilities. We believe labor shortages across the industry in both rail and truck networks and at customer warehouses are at the core of the supply-chain fluidity challenges limiting our asset utilization and capacity.

In other words, labor shortages and infrastructure glitches are gumming up Hunt’s ability to move stuff around, but the company is making up that difference through higher rates to customers and fuel surcharges.

So even at a business that should be doing great in this time of supply chain stress, there’s plenty to ask about and consider. Thankfully the one raw material that is in abundant supply right now is data.

Tuesday, November 9, 2021

Supply chain constraints, inflation, and the cost of materials have all been on the minds of many firms and financial analysts lately. Calcbench is no exception, so during some spare time today we decided to map out the cost of revenue for large firms since the pandemic began at the start of last year.

We examined cost of revenue (also commonly known as cost of goods sold, or “COGS”) for more than 340 companies in the S&P 500 that have reported COGS for the last seven quarters — that is, from the start of 2020 through Q3 2021.

Figure 1, below, shows the change in COGS for all 341 firms as a group. The total jumped 17.2 percent in the last seven quarters, from $1.07 trillion at the start of 2020 to $1.25 trillion today. Second quarter 2020 does show a dip to $944.2 billion, which makes sense considering a large portion of the world was in lockdown at that time. (The second decline in Q1 2021 might also be due to a spike in covid cases in the United States that period, too.)

Of course, collective numbers can mask the effect of certain outliers, so we also calculated the median change in COGS over the same seven quarters. Median COGS rose even more: 20.2 percent, from $1.07 billion to $1.28 billion. That’s in Figure 2, below; and again we see the same dip during lockdown.

And since we’re always nosy here at Calcbench, we also calculated the change in COGS for each firm in our sample, and then ranked them from biggest increase to smallest. Table 1, below, shows the 10 firms with the largest increase in cost of revenue for the last seven quarters.

Some of the increases make sense. AbbVie ($ABBV), for example, manufactures rapid covid testing kits, so its increased costs presumably are driven by high demand for those kits. On the other hand, we also have the likes of toy manufacturer Hasbro ($HAS). As much as we’d like to speculate on that situation, first we have to run to the store and get our kids’ holiday presents before you all beat us to it.

You can conduct your own research on cost of goods sold using our Multi-Company page and entering “cost of revenue” or “cost of goods” in the standardized search metrics field on the left side of the screen. When you find something interesting, you can then bounce over to our Interactive Disclosure page to see what the company might be saying about the issue in its footnotes, Management Discussion & Analysis, or other disclosures.

And if you’d like to learn more about supply chain issues and how Calcbench can help you research them, join us at 4 PM ET on Tuesday, Nov. 16 for a free webinar exploring what firms are reporting about the issue and how to study the data.

Friday, November 5, 2021

We’re coming up to our 10-year anniversary at Calcbench, so we wanted to take a look at corporate M&A activity over the last decade. Although Calcbench has the data for all corporate acquisitions, we decided to focus on the S&P 500, since these firms typically dominate the corporate acquisition market.

We start by examining the number of acquisitions as well as the total price paid for those targets. As you can see from Figure 1, below, the number of acquisitions has been tapering downward since 2016. On the other hand, we see a jump in the amount paid for those acquisitions starting in 2015 (orange line, with right-side vertical axis measured in billions). Those numbers have somewhat declined in recent years, but not nearly as much as the drop in number of deals. Purchase prices in 2020, for example, were still higher than the pop that happened five years earlier.

Well, if the number of acquisitions goes down, but the total amount paid for these acquisitions stays high, that must mean that the average price has gone up. So we examined that.

Figure 2, below, shows the mean and median purchase price. As you can see, both the mean and median purchase price have increased. The median price actually doubled from 2014 to 2021! The implication: although S&P 500 companies are buying fewer companies, on average they are paying more for each one.

We were also interested to see what portion of the purchase price is assigned to goodwill. The chart above shows that about 60 percent of the purchase price is typically allocated to goodwill. This level seems to be relatively constant over the last decade.  

Want more? Calcbench has all corporate acquisition activity, as well as purchase price allocation data, in our business combination portal (available for Professional level users). Want to know more about goodwill? Our latest webinar and blog are great sources of information.

Wednesday, November 3, 2021

Calcbench has been paying extra attention lately to supply chain disruptions among large corporate filers, and perhaps there is no better example of the challenge these days than what Apple ($AAPL) had to say about supply chain risks in its annual report from last week.

You might have seen news that on its earnings call, Apple executives admitted that “supply chain constraints” cost the company about $6 billion in revenue for its Q4 2021. Those constraints included microchip shortages plaguing, well, everyone; and operational disruptions at manufacturing facilities in Southeast Asia, where countries have been battling the Delta variant.

Perhaps even more alarming: CFO Luca Maestri said he expects supply chain constraints to be even larger in this quarter, even as revenue continues to hit all-time highs. (Revenue in the September quarter was $83.4 billion, up 29 percent year over year.)

So where would an analyst start with Calcbench to sift through Apple’s disclosures?

We began by cracking open our Interactive Disclosure viewer to see what Apple had to say about supply chain issues. The company said a lot. Take this example from the Risk Factors disclosure:

During the course of the pandemic, certain of the company’s component suppliers and manufacturing and logistical service providers have experienced disruptions, resulting in supply shortages that affected sales worldwide, and similar disruptions could occur in the future … The company’s global supply chain is large and complex and a majority of the company’s supplier facilities, including manufacturing and assembly sites, are located outside the U.S. As a result, the company’s operations and performance depend significantly on global and regional economic conditions.

You can use our “Compare Text” feature to see what new narrative disclosures have been added compared to the previous period’s disclosures. We did that, and found a lot of green text — meaning, new material that Apple had added since the 2020 annual report. See Figure 1, below.

All the green copy in the center column is new material, and it all addresses supply chain risks.

Before we get carried away, however: if one scrolls further down that center column, you’d also find plenty of red text, which indicates material removed from the prior period’s report. In reality, Apple simply reorganized most of its supply chain disclosures to give risks related to Covid-19 and to macro-economic trends more prominence.

Looking at Q4 Numbers

We also examined Apple’s Q4 numbers, which Calcbench automatically calculates in our Company-in-Detail page. Revenue rose from $64.7 billion in the year-ago period to $83.4 billion this year, an increase of 29 percent. Cost of revenue, meanwhile, only rose 20.4 percent: from $40 billion one year ago, to $48.2 billion now. Figure 2, below, shows the comparison for the whole income statement.

Overall those line items look decent, although we’re comparing Q4 2021 figures to the pandemic-battered year of 2020. Perhaps the question for analysts is more about the even better numbers Apple might have achieved, absent supply chain disruptions.

One might also conduct further research to understand are these supply chain constraints more about raw materials and components that Apple doesn’t have; or workforce disruptions due to delta variant outbreaks keeping facilities closed? Calcbench can’t answer those questions for you, but we do have the data to help you understand which questions are the most useful to ask, and get answered.

An interview with Andy Schmidt, Associate Professor of Accounting at North Carolina State University. NCSU recently upgraded to a Professional subscription. 

What intrigued you about Calcbench? 

I was interested in ways to democratize financial information - to give access to hard to find information to students and professors. I thought products built on top of XBRL could do that.

XBRL was very inaccessible at first. It required coding and managing taxonomies that were a heavy lift for most accountants and accounting students. Calcbench not only makes XBRL accessible for teaching and research, but they also use XBRL to make accounting data more accessible to users. 

How do you use Calcbench in the classroom?

I teach a senior-level capstone course on business valuation - students build spreadsheets and apply different valuation and analysis models. In the past, they would have to go to many sources to access the information needed - from Yahoo! Finance to a companies’ investor relations page to get profile information and financials. Calcbench is a one-stop shop for accounting-based valuation and analysis. You can quickly download entire financial statements or footnotes in formatted spreadsheets or use the XBRL functions to build your own analysis templates in Excel  (e.g. DuPont analysis, Piotroski F-scores, and Altman Z-scores). Once you have a template built, you just type in a ticker symbol and date and Boom! - there is the data, ready for analysis. 

What Calcbench features do you use in your research?

I am a self-proclaimed nerd and like to read accounting footnotes. I like to sort out boilerplate language from the disclosures that really say something about a company’s performance. For me, simple tools like comparing disclosures across time are valuable. I haven’t seen this type of functionality in other XBRL applications.

The ability to dig deep into footnotes is important to my research. I have recently been working on a project related to the deferred tax asset valuation allowance. This data is in the tax footnote and is time-consuming to collect by hand.

How much time do you save with Calcbench? 

I have a disability from a spinal cord injury that has affected the use of my arms and hands. That means it takes me even longer to hunt and peck for information that is not collected by other financial data providers (e.g., financial statement footnote data). In the past it could take me weeks to months to hand-collect data for research. Calcbench reduces this time significantly, to say the least. 

What skills do accounting students need to learn these days? 

Well, I think accounting students still need to learn accounting - the structure and taxonomy of accounting data. Most accounting classes teach students a taxonomy as defined by GAAP. For example, students learn the definition of an account, how accountants typically value the account, potential different ways to arrive at the account value, and how to report the account value in the financial statements or footnotes. In addition to preparing accounting data, we are now asking students to become better users of accounting data - to analyze the data to make decisions. From an analysis standpoint, students should have an advanced understanding of spreadsheet programs like Excel and a semester or two of statistics, covering topics like hypothesis testing, correlation and regression analysis, and forecasting. 

Any parting words for our readers? 

I think that students do not spend enough time with actual financial statements, which impairs their ability to (1) better connect how transactions affect the financial statements and (2) assess the implications of the transactions for a variety of outcomes (e.g., performance). To help students make those connections, I think professors in every accounting class could use Calcbench to quickly deploy examples using current and prior financial statements and footnotes.

Monday, November 1, 2021

By Jason Apollo Voss

One way that a company can create the appearance of profitability through aggressive accounting is sleight of hand with how it capitalizes its expenses.

Capitalization of an expense, rightfully booked now, delays recognition until later; that improves net income right now. But wait, there’s more! Capitalization also puts an asset on the balance sheet that shouldn’t be there; making an aggressive firm look more financially sound, too.

So the capitalization of expenses is potentially both an offense against investors and a con. As with many accounting issues, however, judging a business’ capitalization practices can be tricky. It requires just that: judgment.

When should costs be capitalized? Two fundamental ideas.

The key question is when should costs be capitalized and when they shouldn’t. Fortunately, accounting standard-setters globally have provided some clarity with their well known “Matching Principle.” If you’re not familiar with this bedrock accounting concept, here is the definition from Wikipedia:

“[T]he matching principle instructs that an expense should be reported in the same period in which the corresponding revenue is earned, regardless of when the transfer of cash occurs. By recognizing costs in the period they are incurred, a business can see how much money was spent to generate revenue, reducing ‘noise’ from timing mismatch between when costs are incurred and when revenue is realized.”

Within this definition are two fundamental ideas:

  1. Benefits and the costs required to create them should be linked together for an accurate accounting of profitability for a given business activity.
  2. The time horizon used for examining the benefits and costs of a business activity should also be the same.

If you understand these two fundamental ideas, then you have a powerful evaluative mechanism for judging the way a business capitalizes costs — and whether this provides an accurate record of their profitability. Armed with these concepts, it’s also obvious that the problem of mis-capitalization of expenses is almost always a violation of the second fundamental idea: keeping the evaluative time horizon of both benefits and costs is the same.

In short, companies use capitalization to decouple expenses from their matching revenues by creating a separate, longer time horizon for recognizing expenses. Recognizing expenses over a longer time horizon makes each period’s costs look lower. Consequently, in the short-run, profits look higher, as do assets.

Example: Software as a Service (SaaS) Startup

Imagine you are a startup SaaS business struggling to demonstrate profitability to investors. Also imagine that your premium software has a high customer acquisition cost, but you’re confident that in the fullness of time you'll recoup that cost of bringing on board a new loyal customer.

Your belief is strong because you know that your software is unique and is vital for your customers to improve their businesses; and in turn you anticipate this will create customer loyalty. So while costs are high in the short run, you’re likely to have high profitability in the long run.

From an accounting perspective, you recognize revenues as soon as your customers sign their annual contract. Your research shows that your customers (a) have no substitute for your product; and (b) you likely have a three-year technological advantage over competitors. Therefore, you capitalize your customer acquisition costs over three years, confident that until a viable competitor for your product emerges, that you can count on good repeat business. You believe that you have provided the proper accounting for your situation.

Wrong! While it may seem that you are properly matching expenses to revenues by capitalizing your customer acquisition costs, you aren’t. Here’s why.

In a well-known case from the 1990s, America Online (AOL) was conducting its accounting in almost exactly the way I described above. In AOL’s case, the company was mailing nearly every household in the United States a CD-ROM with its software on it, for free. Interested customers would place the CD in their computers and then sign up for AOL. (If you are over 40, you remember exactly what we mean.)

AOL capitalized these customer acquisition costs because its research showed that customers were likely to be loyal and stick around long enough for collected revenues to be matched to the cost of acquiring the customers.

Well, the SEC had a different opinion. It likened these expenses to advertising costs — which are expensed in the same period in which they are incurred.

There is, however, an exception, and — you guessed correctly! — it requires judgment.

The exception is that if revenues are historically predictable, then the expense of customer acquisition may be capitalized over the length of a typical contract.

Unfortunately for AOL, the SEC argued that it was too new a company and that its future revenues were not predictable enough to qualify for the exception. Ruling in this way had a massive effect on AOL’s results and moved it from strongly profitable to a very large loss. Ouch!

For what it’s worth, I think the SEC had the correct assessment of AOL. As a research analyst at the time, anecdotally I knew from my experience (and those of friends and family), that what they really wanted from AOL was access to the Internet. In other words, as soon as a company could provide direct access to the web, and circumvent the AOL platform, customers would follow … and they did.

This underlines a point I’ve made in previous columns. As analysts, we must always understand the underlying real world economics of the businesses in which we invest. Then we must ask ourselves whether the accounting policies and choices of a company fairly represent the underlying economics. Here are some tips for evaluating proper cost capitalization by a business.

Typical Expenses and Their Capitalization Treatment

While it may seem that whether an expense should be capitalized is a bit tricky based on my AOL example, in most cases the analysis is straightforward. In fact, most of the large expenses incurred by businesses have well-documented, generally accepted accounting principles. For example:

  • Inventories: expensed when the revenue for the good in inventory is sold.
  • Advertising: expensed in the time period in which the advertising was run.
  • Commissions: when a salesperson sells goods, any commission paid to the sales executive is expensed when the revenues are recognized.
  • Prepaid expenses: a good case is insurance, which is always paid in advance and is expensed in the period in which the benefit was experienced.
  • Research and development: because of the uncertain nature of R&D expenses they are typically charged now. The exception is expenses directly tied to a revenue-generating activity, such as software development.
  • Depreciation: this is the classic example of accrual accounting, where the useful life of an asset is estimated and then depreciated over that time, rather than in the period in which it is purchased.
  • Patents: the expenses incurred for filing for the patent and adjudicating patent disputes may be capitalized. The R&D expense incurred developing a technology cannot. Acquired patents and exclusive licenses may be capitalized at their purchase price (similar to goodwill).

Guidelines for Expense Capitalization Judgment

Any assessment should begin by reviewing the company’s approach to capitalization as revealed in the Accounting Policies section of its annual report. (Look for Item 8, just past the financial statements.) With these in mind, here are some guidelines for judging whether a company’s expense capitalization is legitimate.

  1. What is the time frame over which revenues for the product or product line are predictable? This time frame establishes the period for which expenses connected to generating the revenues should be matched.
  2. Regarding predictability of revenues: (a) Is this a product that has been sold for years, or a new product? (b) Is there a sales contract that obligates customers to purchase the product over a specific time frame?
  3. Do the expenses incurred now have staying power and benefit a future period or periods, akin to the purchase of property, plant and equipment? If not, they should be expensed now.
  4. Can expenses be directly tied to a specific (rather than general), revenue-generating activity? If not, they should be expensed immediately. An example is the payment of any general corporate expense, such as rent, where the entirety of the business benefits from the expense and is not tied directly to any revenue activity.
  5. Are any asset accounts growing significantly faster than the company’s operating expenses, as revealed by conducting a common-size over revenues analysis? If these assets are ones where management judgment is important (accounts receivable or inventories) then it may be time to dig deeper or ask management about these accounts. Why? Because accounts that are growing much faster than revenues, and where management has discretion, are vulnerable to being used to stash mis-capitalized expenses.
  6. Do the useful lives for assets that are capitalized match reality? For example, software and other technological assets clearly have short useful lives. Is the company reporting a useful life greater than three years? And so on for other assets: are their useful lives matching the underlying economics?


In conclusion, companies have incentives to report higher profits and assets now. One way they can improve both is to capitalize expenses that should not be. This capitalization con can lead to a distorted understanding of business performance and lead investors astray. By understanding the Matching Principle, you can decipher the correct analysis of a company’s expense capitalization, and avoid a burn by management.

This is a monthly column written by Jason Apollo Voss — investment manager, financial analyst, and these days CEO of Deception and Truth Analysis, a financial analytics firm. You can find his previous columns on the Calcbench blog archives, usually running the first week of every month.

Friday, October 22, 2021

What can you do?  Here’s what you can do.  Calculate a Net Income margin in real time.  This morning, Friday October 22, 2021 at 9:25 EDT, we retrieved all S&P500 firms that had reported this period.  There are 103 firms in our sample as of that time.  

Net Income for those firms was 129 Billion.  Revenue was 790 Billion for a margin of 16.3%

Last year for those same firms, the number are 75.8 B Non Net Income and 698B in revenues for a margin of 10.9%.  

Get the Excel Add in  and have a go yourself!


Wednesday, October 20, 2021

Netflix reported its latest quarterly report last night after the market close. As the investing world read the news (and maybe watched Squid Games), here at Calcbench, we fired up our engines. At 4:03pm, we had the data in house! 

A few minutes later, we had modeled this spreadsheet. (Please note that the formulas will only work with an active Calcbench subscription. That said, this data will auto-poulate for next quarter with a quick copy paste that you could do right now!)

Some takeaways. Here are the subscribers by region for the annual periods until 2020 and the subsequent quarters through Q3 2021.

Last three quarters of subscriber growth by region:

Revenues by region are below. In this chart, we combined annual and quarterly.  We did something simple and scaled the quarterly by multiplying by 4 to make the charts look good, but feel free to do your own thing.  

Monday, October 18, 2021

There was no Plan A. There was also no Plan B. Calcbench started out as a necessity enterprise. 

After working as financial analysts for a number of years, co-founders Pranav Ghai and Alex Rapp, former college roommates, found themselves out of a job during the Great Recession. They wanted something meaningful to keep them occupied and employed. With a little time on their hands, Pranav and Alex developed Calcbench. The year was 2011. 

Ten years later, Calcbench’s financial data platform is integrated into the workflow of companies and organizations that rely on corporate filings, from enforcement agencies, to auditing firms, to corporations and asset management shops. Calcbench is used by U.S-based and global companies for financial analysis, and by universities around the world for research and as a teaching aid. Today Calcbench clients can access data from two million filings, from 12,000+ entities, going back to 2009.

For how it all began to the company’s current success, read on. It’s a real-life journey of a startup that has endured and prevailed over a decade and the many people involved. With deep gratitude to all those who have helped us along the way, we share our story. 

An Idea Over Coffee

In 2011, in a fortuitous New York City encounter, Calcbench co-founder and CEO Pranav Ghai ran into Campbell Pryde, now CEO and President of XBRL US, at a coffee shop. 

Colleagues from their days at Morgan Stanley, Ghai and Pryde talked about XBRL. Campbell invited Pranav and his friends to try XBRL US data to see how they could commercialize it. A week after that impromptu coffee-shop meeting, Pranav and Alex Rapp, co-founder and CTO,  developed a prototype that could read XBRL-tagged financial data  from corporate filings. Encouraged by this early success and after a couple of iterations of the prototype, Alex and Pranav sat at a bar, drank a beer, and hatched a new company called Calcbench. 

Pictured above: Alex and Pranav at their first board meeting

Developing the prototype whet the duo’s appetite to enter an XBRL contest — which they won, giving them $20,000 to get their business off the ground. In 2012 Calcbench was also a finalist in the Mass Challenge. That same year, Calcbench was invited to speak at the AICPA’s annual conference and given a seat at a Treasury department jam. 

Pictured above: Calcbench’s first logo

Through these early events, Pranav and Alex met some of Calcbench’s first users, including Jack Ciesielski and Paul Chaney (who still use the platform today).

Yep, It’s Real

Though the promise of the data and interest from potential users kept them engaged, during their first couple of years in business, Pranav and Alex were unsure whether they were “all in.” They tried consulting for unrelated companies, but after a couple of engagements, the two co-founders decided to dedicate time to Calcbench in earnest. Fortunately, their wives were supportive and had health insurance. 

Others chipped in to help them stay the course. Friends at the Polaris Ventures incubator gave them free space. Abby Fitchner, a start-up evangelist, gave them free cloud computing through Microsoft’s BizSpark program. Investors gave them the foundational money to keep them afloat and to grow. The year was 2013. Pranav and Alex hired their first Calcbench “employee,” Ariel Markelevich, an accounting professor whom they knew through XBRL US. That same year, Calcbench landed its first clients. 

Once they received capital and had viable clients, it seemed like there was a clear and linear path to success. But “build it and they will come” wasn’t exactly how it worked. 

Some corporate finance professionals, looking to get competitive data, found Calcbench through due diligence. Some university professors, looking to make data wrangling easier, stumbled upon Calcbench at XBRL conferences. Some individual investors looking for a cheaper financial data provider switched to Calcbench. Mostly, however, clients were small and wanted one-off information such as pension and tax data not readily available from some of the larger, cookie-cutter financial data providers. 

Calcbench was not profitable for a few years and there were questions about the feasibility of the business. Can the business sustain? Is the data clean? Will XBRL become mainstream? Can others replicate Calcbench? 

It wasn’t until 2014 when some of the early adopters found homes for the platform that the business really took off. One of those early adopters was Dave Zion. At the time, Dave was looking at corporate procedures and brought Calcbench into Credit Suisse. Another early adopter came from the Public Company Accounting Oversight Board. Our contact had a stack of 10-Ks on his desk and was looking for product warranty information. He thought Calcbench could help him save weeks searching for the information. He was right, but was only able to bring in Calcbench after an RFP win and a budget sequester ended. Other early adopters included Susan Yount, who brought Calcbench into Workiva. 2014 was the same year that Calcbench hired senior software engineer and financial analyst, Andrew Kittredge.

In 2015, Calcbench started to scale. Calcbench was notified that the SEC had an RFP for a financial data provider two weeks before the due date. After round-the-clock work to complete the RFP, Calcbench won the contract, a game changer for the company. 

From then on, Pranav and Alex joined numerous XBRL and data quality committees. They became go-to experts. Calcbench data and insights could be found in the Wall Street Journal, Washington Post, Fortune, Marketwatch and top academic publications. Hundreds of blog posts were created, read by thousands of financial analysts. 

New features and functionality arrived, such as data from the non-XBRL portions of corporate filings, tying numbers to text, normalizing footnote data, and of course, earnings press releases. This opened the door to new customers like the Financial Accounting Standards Board, some of the largest asset management firms in the world, as well as prestigious universities.

The Marathon Continues

A lot of spaghetti has been thrown against the wall over the years. Some ideas worked. Some did not. Regardless, there were a lot of sleepless nights, chaos, and uncertainty. Eventually it all became fun. 

XBRL is messy; if it were clean, more people would build off the data. This past decade, Pranav and Alex have seen numerous companies try to replicate Calcbench’s success, but few have been able to do it. It’s been a long and winding road, but this adventure has been an exciting one for Calcbench, its co-founders, its team, and its clients. We are grateful to all of you who have taken this journey with us and for those who will join us over the next decade. Many thanks.

The Calcbench Team

Thursday, October 14, 2021

Another day, another nifty time-saving feature we are happy to offer Calcbench subscribers. This time around it’s an ability to export earnings release data directly to Excel, almost immediately after said earnings release hits the wires.

Here’s how it works. Start at our always-popular Recent Filings page. This is where Calcbench presents the latest filings from public firms, which we capture and prep typically within a few minutes of those firms filing their disclosures to the Securities and Exchange Commission. See Figure 1, below.

Notice that column on the right-hand side that says “Export to Excel” in numerous places. Behind the scenes, Calcbench has indexed the data in those filings so that they can be, you guessed it, exported directly to Excel.

When you click on that option, an Excel file will download onto your computer that you can open, read, and start using. For example, we downloaded the Citigroup ($C) third-quarter earnings release filed this morning, and immediately saw this, Figure 2.

The spreadsheet shows the financial results Citi presented in its earnings release: 3Q 2021, plus the prior quarter, plus the year-ago quarter. You can even see quarter-over-quarter and year-over-year change!

Figure 2 is just one example of what you’d see from Citigroup; there’s a lot more in the Excel spreadsheet that we haven’t shown. Our Export to Excel feature can capture just about any table with tagged data that a company includes in its earnings release, from a summary of financial performance, to full income statement or balance sheet, and even reconciliation statements.

The flip side is that if a firm doesn’t file lots of information in its earnings release, the Excel spreadsheet will be smaller. For example, we also have this Q3 summary from Morgan Stanley ($MS), also filed today, in Figure 3, below.

Morgan Stanley only offered 3Q 2021 and 3Q 2020 data in its release, so that’s all we can pull. If you want 2Q 2021 or other periods, you gotta wait for Morgan Stanley to file its full 10-Q report in a few weeks.

We should also add that our new exporting capability works for some earnings releases, but not all. Some firms will structure their releases in quirky ways that leave the data beyond indexing. Tesla ($TSLA), for example, is a party-pooper that files its earnings release as a JPEG image. Humans can read that, but algorithms can’t — so you won’t be able to do this nifty stuff with Tesla. (If you look back to Figure 1, you can see a few other firms where Export to Excel isn’t available either. Most of the S&P 500 will be, but it’s not universal.)

You can, however, still read filings from Tesla or any other errant firm in our usual Interactive Disclosures database, and export the data to Excel from there. It’s one extra step, but you do end up in the same place. For more information on earnings press releases, check out our how-to video. 

Wednesday, October 13, 2021

The Calcbench database of Segments, Rollforwards and Breakouts is quite the nifty tool, able to help analysts find all sorts of specific, segment-level disclosures and insights.

Our case in point for today: top-selling pharmaceutical drugs.

People might not know this, but blockbuster drugs (those grossing $1 billion or more in annual sales) do typically qualify as a separate operating segment for the pharmaceutical firms selling those drugs. Which means you can look up sales by operating segment in the pharmaceutical sector, and find revenue figures for the individual drugs that you might see advertised on television or discuss with your doctor.

So Calcbench did that the other day. Table 1, below, shows the 20 biggest blockbuster drugs based on 2020 sales.

So we can see that even though AbbVie ($ABBV) had the single biggest blockbuster with its Humira drug for Crohn’s disease and related illnesses, Bristol Myers Squibb ($BMY) was actually the biggest performer overall because it has three blockbusters on the list.

Even better, once you know the revenues from specific blockbuster drugs, one can then calculate the percentage of total revenue those blockbusters provide to their respective pharmaceutical manufacturers. Figure 2, below, shows those percentages for various firms in Big Pharma.

Analysts can then use that information in various other ways. For example, if you know when a blockbuster is going to lose patent protection, you can model when the pharma firm might see a significant drop in revenue as generic competitors enter the market, and how that drop might affect the firm’s overall revenues. You could also ask the CFO or CEO on the next earnings call how they plan to replenish the revenue pipeline with other drug candidates still in development.

Bonus for Calcbench subscribers: We even have an Excel template you can use with all the pharma formulas already baked into the spreadsheet, so you can see how revenue from blockbuster drugs has changed over the last few years. (The template tracks many more specific drugs than the Top 20 we showed in Table 1.)

You do need to be a Calcbench subscriber for the template to work. Then, if you want to go down the rabbit hole, well…

Calcbench now has standardized face financial data from earnings press releases minutes after they are published.  This will be useful for quantitative asset managers who want to include fundamental signals in their model.

Calcbench is extracting the metrics from the income statement, balance sheet, and statement of cash flows.  This includes market moving revenue and earnings per share numbers.  Quality is improved by Calcbench’s ten years of experience parsing the XBRL 10-K/Qs.

We listen for the news wires and earnings announcements filed as 8-Ks on the SEC’s Edgar sight.  The Calcbench extraction process is entirely automated so you have numbers minutes after they are published.

For back-testing purposes we have about 10 years of history with time-stamps of when the data was available.  Coverage is almost all US public companies.

A sample for the 30 companies in the DOW is @ https://www.dropbox.com/s/vazfcnlbhhqyh2n/blog_data.csv?dl=0.  An example of a script to get the data is @ https://github.com/calcbench/notebooks/tree/master/filing_listener.  For a larger sample and to discuss integrating the data into your process email


Thursday, October 7, 2021

The other day we were reading the latest from Calcbench columnist Jason Voss, where he was constructing his own statement of cash flows from General Electric’s ($GE) other financial statements.

We saw that Voss’s column included this line: “Note that GE’s numbers are occasionally a tiny bit off, because the firm rounds the numbers it reports.”

Well that’s intriguing, we thought. The discrepancies due to rounding never add up to anything material, but precision still matters in financial analysis. If nothing else, an analyst might notice those discrepancies in whatever model you’re using, and start poking through Excel formulas to identify where you might have made a mistake — when there was no mistake at all; the firm was just rounding.

For example, GE itself says this in its disclosure of accounting policies:

​​We have reclassified certain prior-year amounts to conform to the current-year’s presentation. Unless otherwise noted, tables are presented in U.S. dollars in millions. Certain columns and rows may not add due to the use of rounded numbers.

So how many other firms out there use rounding to the point that sometimes numbers don’t add up nice and neatly?

To find the answer, a person only needs to enter a clever search string in our Interactive Disclosures database. Just select the firms you want to study, go to the text search field, and enter "rounded add"~10. (Yes, the “rounded add” should be in quotes that go right into the search box.)

That will search for the words “rounded” and “add” within 10 words of each other. See Figure 1, below.

We searched that string for the S&P 500’s 2020 reports, and nearly two dozen companies that mentioned their columns may not always add up due to rounding — businesses ranging from IBM ($IBM) to Baker Hughes ($BKR) to Becton Dickinson ($BDX), and others.

What can an analyst do with this information? First, you can put aside any fears that you’re crazy: the numbers really don’t add up; it’s not a flaw in your Excel formulas.

Second, we also offered this example to show how a Calcbench user can perform more complex text searches in a company’s footnotes. Whenever you want to search for two keywords in proximity to each other, just use that structure we offered earlier: the two words in quotes, followed by the ~ symbol and then whatever number you want to use. (We recommend 10 since that’s enough to capture complex sentence structure, but not so large that you start to get useless results.)

Just another way Calcbench tries to be helpful to our users. Go forth and analyze!

Tuesday, October 5, 2021

Good news for all you Excel enthusiasts out there, which is pretty much everyone in the analyst world: Calcbench has updated our Excel Add-In to embed numerous standard templates right into the software.

You can run templates for income tax analysis, DuPont ratios, impairments, and more. Here’s how it all works.

First, install the Calcbench Excel Add-In. Our most sturdy and versatile version is for Windows; we also have limited versions for Office365 and GoogleSheets, if you’re running those systems.

Second, if you need any refresher course in how to use our Excel Add-In generally, you can watch our YouTube tutorial or read the extensive documentation we have in our Add-In User Guide.

Now the good stuff. Once you install the Add-In, you’ll notice a feature in the menu bar called “Templates.” See Figure 1, below.

Click on that Templates button, and a pull-down menu of various templates will appear. See Figure 2, below.

From there, select the template that you want to use. It will automatically populate in Excel, and then you just need to start entering ticker symbols in the appropriate field. The template will automatically pull data from Calcbench and drop it straight into your model.

Figure 3, below, is an example. It is the valuation template, using data from Johnson & Johnson ($JNJ).

That’s all there is to it! Enjoy, and if you have other ideas for functionality we should offer Calcbench subscribers, drop us a line at us@calcbench.com any time.

By Jason Apollo Voss

Back when you were learning accounting, perhaps your professor, textbook author, or somebody else explained that rather than relying on the cash flow statement reported by a company, you can create your own cash flow statement from information on the firm’s income statement, balance sheet, and footnotes.

If you’ve never done this exercise, give it a try. You’ll be surprised by the insights that you can glean from doing it. Those insights gained include:

  • How the company operates, at a much more granular level.
  • How aggressive or conservative the management team is, as represented by its accounting.
  • How transparent the management team is.
  • What management’s character is.
  • And more.

How to Create Your Own Cash Flow Statement

For those not in the know, let’s walk through how to create your own cash flow statement with disclosures in a company’s income statement, balance sheet, and footnote disclosures. (We’ll use the indirect method, since most companies don’t use the direct method and our comparisons wouldn’t be harmonious. Plus, most companies don’t report the values necessary to compile a direct-method cash flow statement.)

Here are the steps for creating your own cash flow statement. I’ve also added in parentheses where you can usually find the necessary information.

Generally, you can follow the same flow of accounts that the company uses in reporting its own cash flow statement, starting with its calculation of operating cash flow, continuing on to cash flows from investing activities, and concluding with cash flows from financing.

  1. To create an independent operating cash flow estimate, begin with net income as reported (income statement).
  2. Add back any non-cash expenses that were subtracted to derive net income as reported on the income statement (usually on the income statement, sometimes in the footnotes).
  3. Calculate the changes in both current assets and current liabilities for the period, compared to some prior period (balance sheet). Typically you’ll compare year over year, or quarter over quarter.
  4. Using those changes in current assets and current liabilities, add or subtract these changes to the numbers derived in steps 1 and 2 (balance sheet, and sometimes footnotes). Be careful! This can get tricky in which changes get added and which get subtracted, because it can seem counterintuitive. One useful tip is to imagine yourself as the business owner actually writing these checks and receiving these payments. It also helps to know the effect of the various accounts on a business. That is, what is their function? I find this makes tracking accounting flows much easier.
  • As a general guide, if a current asset decreases it means that cash flow increases. If a current liability increases, it means that cash flow increases. For example, if accounts payable increase, it means the company is delaying payments on more of its bills and is preserving cash, so cash flows should increase.
  • As a general guide, if a current asset increases that means that cash flow decreases. If a current liability decreases, it means that cash flow decreases. For example, though it may seem counterintuitive, if inventories increase that means the company spent more money building up its inventories, so cash flow should decrease.

Following steps 2 through 4 should allow you to arrive at operating cash flow.

For cash flows from investing activities, you follow the same protocols described above using the balance sheet’s non-current assets section, and look at the changes in values of those accounts. Be careful to look at non-depreciated values for property, plant and equipment, as well as non-amortized amounts for goodwill.

For cash flows from financing activities, follow the same protocols, but most of the changes are going to be in the non-current liabilities and shareholders’ equity accounts.

March through all of that, and you should arrive at an independent cash flow estimate.

An Example of Creating Your Own Cash Flow Statement

Let's use the disclosures in General Electric’s 10-K filing as an example. Here are the reported amounts from GE, along with my estimates for these same accounts. (The sources of the figures are shown in parentheses.)

As you can see from the above estimates, there is a difference of $569 million, or 15.8 percent, in GE’s reported cash flow from operations ($3,596 million) compared to my estimate ($4,165). (Also note that GE’s numbers are occasionally a tiny bit off, because the firm rounds the numbers it reports.)

While this may seem like a wide disparity, I must give GE credit. Why? Because my usual experience in doing this exercise is that it’s almost impossible to derive the values reported by companies in their cash flow statements. For example, years ago I did an analysis for Luis Vuitton. Items like depreciation were more than 100 percent off, despite a careful reading of the company’s 20-F and its many disclosures.

To my thinking, one of the great unaddressed issues in finance and investing is that deriving an accurate estimate of cash flow by this method is so difficult. If the accounting and disclosures are sound, we should be able to do this with ease.

But for GE, most of the numbers are exactly the same when comparing the amounts GE reports on its cash flow statement to those estimated by me, and gathered from the income statement, balance sheet, and footnotes.

In fact, of the above accounts shown, 15 of the 18 accounts are within 10 percent of one another. Trust me: this is not a bad result. That said, some of the accounts are wildly off — and this is where things get very interesting for a research analyst.

As an example, GE’s “(Gains) losses on equity securities (Notes 2, 19)” is 3.7 percent different. But if we examine the company’s footnote disclosure, there is nothing reported that accounts for the difference.

Next, take a look at the company’s “Cash recovered (paid) during the year for income taxes (Note 15)” which is off by a less respectable 10.5 percent. Yet, the amount I estimated comes directly from GE’s footnote.

What accounts for the difference? We don’t know. Nowhere in the financial statements are we given enough information to assess this for ourselves. In both cases, it appears that GE is underreporting its cash flows from operations.

You may think this is not so interesting. But within a company’s reporting, we would assume that the net working capital accounts — that is, the ones closest to being cash — should be the easiest for us to estimate, and the hardest to have discrepancies.

Wrong. In GE’s case these accounts are where everything starts to break down. For example, inventories are among the easiest of accounts for us to estimate: this year’s inventories minus last year’s inventories. But for GE, even when accounting for the inventory nuances reported in its Footnote 6, the estimated cash inflow should be $1,325 million. Instead it's a paltry $1,105 million.

This is mysterious, and suggests a class of questions derived from this exercise that we should direct at investor relations pros:

  1. What do we not understand about the company’s operations, such that our estimate is off? Or, assuming that we aren’t in error…
  2. Why is the company inconsistent in its reporting of accounts? Or, assuming that it is consistent…
  3. Why does the company not disclose enough information to allow us to estimate these accounts as a check on its disclosures? Or...
  4. Why is the company’s reporting so complex as to defy easy digestion of its information content? Or...
  5. What if something is underhanded going on?

Each of these are key questions that this exercise makes possible.

Continuing on with GE, the company’s accounts payable and equipment project accruals should also be easy to estimate from balance sheet entries — but they’re off by more than $300 million. Sadly, GE does not provide a reconciliation or explanation for what accounts for the differences. Ouch.

Most mysterious of all of GE’s operating cash flow accounts is its ill-defined, ill-described “All other operating activities.” Of all of the accounts where my estimate is off by more than 10 percent, this one concerns me the most. That single account, even accepting GE’s reported figure of $2,040 million, is a whopping 56.7 percent of its total reported operating cash flow of $3,596 million.

What’s going on in there? We have no way of knowing. The figure I estimated (of $2,257 million) took me nearly an hour to engineer by combining different accounts with one another. Still, my estimate is very different — and I have a masters’ degree in accounting!

In all likelihood, nothing nefarious is happening. Then again, investing is a lot like watching an automobile race: It's not worth watching to see people drive in circles for hours, but we pay close attention for the occasional fiery crash.


One way that investors can improve their results is to dive deeper into a company’s accounting. A time-tested method for doing this is to create an independently derived cash flow statement from a business’ disclosures in its income statement, balance sheet, and footnotes.

By comparing the reported figures with the estimated figures, many different insights may be gleaned about a prospective investment. Usually this is just a deeper understanding of the nuances of a company, but sometimes we can discover the ways that companies obscure their performance.

This is a monthly column written by Jason Apollo Voss — investment manager, financial analyst, and these days CEO of Deception and Truth Analysis, a financial analytics firm. You can find his previous columns on the Calcbench blog archives, usually running the first week of every month.

Thursday, September 30, 2021

As many of you might already know, last week Calcbench hosted a webinar on the current state of goodwill assets, along with Valuation Research Corp. and the CFA Institute. We had a great time studying goodwill valuations, proposals to change how goodwill is reported on the balance sheet, and lots of other related issues.

Today we wanted to share some of the numbers we presented in that webinar, so everyone who missed it can also consider the trends in goodwill that are happening.

First, how has goodwill changed among the S&P 500 firms in recent years? Take a look at Figure 1, below.

As you can see, goodwill assets rose by more than $700 billion from 2017 through mid-2021— an increase of 24.5 percent. More firms are reporting goodwill, and the average goodwill per firm is also going up.

Second, how much net goodwill did the S&P 500 add annually over the last four years? Remember, you need to calculate that by first looking at gross goodwill added, then subtracting goodwill impairments, to arrive at the net change. See Figure 2, below.

What’s interesting here is that gross goodwill fell in 2020, while impairment charges spiked. That’s largely due to the pandemic — which pretty much froze M&A deals in the first half of the year, so less gross goodwill was added; and also forced companies to declare many more goodwill impairments than usual. So we’ll be curious to see how 2021 numbers look when firms start reporting them sometime next spring.

Despite the sheer size of those goodwill numbers, however, goodwill as a percentage of total assets and of book value held relatively steady in recent years. Figure 3, below, shows total goodwill among the S&P 500 as a percent of total assets.

That’s not much of a change, even as we went from booming economy before the pandemic to awful economy during it. Figure 4, below, shows goodwill as a percentage of book value.

OK, the percentage levels are higher, but they’re still as flat as a highway in North Dakota.

Always remember, however, that these percentage levels are for all S&P 500 companies combined. Individual firms can have much a much higher percentage of their value tied up in goodwill.

In fact, we found 88 S&P 500 firms that have negative book value if you eliminate the goodwill assets from their balance sheet. Which can sometimes happen without warning, and leave investors facing a bear of an unwanted earnings surprise.

And One Specific Example

We’d be remiss if we didn’t also include our favorite example of why keen understanding of goodwill is so important: Microsoft ($MSFT) and its purchase of LinkedIn in 2016. It’s an oldie, but still a goodie.

Microsoft announced the deal in June 2016, stating that it would acquire LinkedIn for $26.2 billion — $196 per share, a roughly 50 percent premium over where LinkedIn stock had been trading until then.

Only several months later in a 10-Q filing long after the gauzy headlines had faded, did Microsoft disclose the purchase price allocation for the deal. A whopping $16.8 billion was allocated to goodwill — 63.3 percent of the total purchase price. Another $7.9 billion was allocated to intangible assets. So more than 90 percent of the purchase price went to assets that don’t physically exist. See Figure 5, below.

Is that too much? Not enough? Totally crazy? It’s not the place of Calcbench to say. But we do have all the data to let you see the numbers and answer those questions yourself.

Sunday, September 19, 2021

Another fascinating dispatch today from the crack Calcbench research department, this time looking at the kingpins in share repurchase programs.

Share repurchase programs have been all the rage on Wall Street for years as a means to boost earning per share. We found, however, that the total amount of dollars spent on share buybacks is increasingly top-heavy — to the point that in 2020, only 10 firms in the S&P 500 accounted for half of all money spent on share buybacks.

Moreover, that top-heaviness in share buybacks has been increasing over time. The 10 biggest spenders in any given year are accounting for more and more of all money the S&P 500 spends on buybacks. See Table 1, below.

The 10 specific firms might vary from one year to the next, although several big names — looking at you, Apple ($AAPL) — do recur plenty of times. We ranked the top 10 for 2020, and they’re in Table 2, below.

Spending on share repurchases did decline in 2020 amid the pandemic’s economic uncertainty, but now seems to be rebounding briskly for 2021. That’s been driven by healthy corporate profits so far this year, and the Fed allowing more banks to resume spending on share repurchase programs.

Who will crack the Top 10 list for 2021? We’ll let you know in a few more months!

We’re a bunch of cheapskates here at Calcbench, so when Hormel Foods filed its latest quarterly report the other day, we dove into it immediately. What did Hormel have to say about the cost of goods sold, and whether rising costs for supplies are pushing up its prices?

At first glance, that line item seems troubling for Hormel ($HRL). Cost of goods sold (technically reported as cost of products sold) was $2.44 billion in its quarter that ended July 25, up 24.6 percent from $1.96 billion in the year-ago period. That jump in costs was larger than the 20.2 percent increase in revenue that Hormel saw at the same time. So even though Hormel just reported its best revenue quarter ever, that increase in cost of goods sold kept gross profit essentially flat. See Figure 1, below.

But wait! There’s a more complex story here. In June 2021 Hormel closed a $3.4 billion acquisition of Planter’s, the snack nuts business, from Kraft Heinz Co. ($KHC). So Hormel’s latest quarterly numbers aren’t necessarily comparable to what the company reported one year ago.

To get a better sense of things, we opened our Interactive Disclosures database to look into the footnotes. There, in the Acquisitions  & Divestitures section, Hormel offered some pro forma numbers of what its financial performance would have looked like if the Planters acquisition had happened in October 2019. See Figure 2, below.

Revenue would have been about $120 million higher, and net income would have been 22 percent higher. Here in the real world, however, higher Sales, General & Administrative costs, as well as higher interest expense, cut into operating profit and net income.

What you may want to take away from this disclosure is that when companies disclose Pro Forma numbers, those too, are available in the Calcbench database.  Users can grab them and use them in models.  Models like the one here which attempts to back out the Planters Revenue and Net Income in order to analyze the acquisition.  Note that Hormel paid 3.4 billion dollars to acquire Planters from Kraft-Heinz!  If our back of the envelope math is correct, it looks like it will take 88 quarters at current profitability (GAAP Net Income) to make back the purchase price.

Another notable piece of information from the Purchase Price Allocation disclosure that Hormel filed?  The Goodwill paid for the Planters acquisition was $2.3 Billion, or 67% of the total acquisition price.  

If you’d like to hear more, head to our webinar on the 23rd.  Register here

Searching for Inflation

Wow!  Now, what did Hormel say about future pressures on cost of goods sold?

All we had to do was search for the word “inflation,” and things started coming into focus. Right at the start of the Management Discussion & Analysis, Hormel had this to say: “All four business segments absorbed higher input costs due to inflation on raw materials, freight, labor, and supplies.”

Further down, Hormel devoted an entire section to cost of goods sold. It started with this:

Cost of products sold for the third quarter and first nine months of fiscal 2021 increased due to inflationary pressures stemming from raw materials, packaging, freight, labor and many other inputs. The inclusion of the Planters snack nuts business during the third quarter also was a driver of higher costs.

All right, maybe we need to cut back on the peanuts during football season; that’s probably good for the blood pressure anyway. Then came this comparison of supply chain costs from last year to 2021:

Direct incremental supply chain costs related to the COVID-19 pandemic for the third quarter and first nine months of fiscal 2021 were approximately $2 million and $21 million, respectively. This compares to approximately $40 million and $60 million of higher operational costs related to the COVID-19 pandemic incurred in the third quarter and the first nine months of fiscal 2020.

The company expects to operate in a high cost environment for the remainder of the year.

Fair enough. But the question for financial analysts is which costs are increasing this year, and why. That is, we’re not surprised that supply costs rose sharply in 2020 — the world was suffering through enormous disruption, and scads of firms had to purchase more supplies for the health and safety of employees.

Were those higher costs in 2020 one-time expenditures for, say, plastic dividers on the shop floor? And if so, what does that mean for this year’s higher costs? Are these new costs new one-time expenditures, or transitory inflation, or something more permanent?

We at Calcbench don’t know; but we can help you find the data and disclosures companies are making, so you can ask better questions.

What Comes Next

We kept reading through Hormel’s MD&A. At the discussion of gross profit, we found a quick table showing a year-over-year decline in the company’s gross profit for both the quarter and year to date. See Figure 3, below — and also pay close heed to the narrative disclosure underneath the numbers.

Hmmm. “Broad-based inflationary pressures” affecting all four Hormel business segments. A “lag in mitigating pricing actions,” which sounds like Hormel didn’t pass along higher costs to supermarket chains and consumers — yet.

Even more telling, Hormel expects gross profit to recover “as additional pricing actions go into effect,” so it sounds like those price hikes will be coming. We may be paying a bit more at the supermarket soon; the moths that live in our wallets will not be pleased.

Conduct Your Own Research

Calcbench does make it easy for you to research the cost of goods sold at whatever firms you follow. Just visit our Multi-Company page and start typing “cost of…” in the standardized metrics field. You’ll quickly be able to search Cost of Goods Sold (COGS), the formal line item; as well as numerous metrics for guidance on cost of goods sold that companies might offer, including several non-GAAP metrics related to cost of goods sold.

But as our Hormel example demonstrates, once you find the numbers, read the footnotes anyway! Just use the Interactive Disclosures database to search relevant terms such as “inflation”, “supply chain,” or even “climate disaster” if you’re researching an agribusiness firm.  

The data is in there somewhere. We’re here to help you pull it out.

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