Sunday, November 11, 2018
Cost of Revenue, SG&A: Q3 Update

Monday, November 5, 2018
Lease Accounting: FedEx vs. UPS

Saturday, November 3, 2018
New Email Alerting Powers

Wednesday, October 31, 2018
PTC and Two Tales of Revenue

Tuesday, October 30, 2018
10-K/Q Section Text Change Detection

Sunday, October 28, 2018
Finding Purchase Price Allocation

Sunday, October 21, 2018
Charting Netflix Growth in Three Ways

Wednesday, October 17, 2018
Interesting Data on Interest Income

Thursday, October 11, 2018
The Decline of Sears in Three Charts

Wednesday, October 3, 2018
Buying Revenue At Any Cost...The (Not So) New Strategy For IPOs?

Sunday, September 30, 2018
Campbell Soup Gets Squeezed

Wednesday, September 26, 2018
Exchange Rate Effects on Cash

Monday, September 24, 2018
The Missing Unremitted Foreign Earnings

Tuesday, September 18, 2018
Thoughts on Structured Data

Sunday, September 16, 2018
Calcbench Goes to the Movies

Wednesday, September 12, 2018
The First-Ever Calcbench Webinar

Friday, August 31, 2018
Q&A: Ahmet Kurt and Researching Financial Data Quality

Friday, August 17, 2018
Leasing Costs and the Income Statement

Wednesday, August 15, 2018
Costs of Revenue, SG&A: Q2 Update

Tuesday, August 14, 2018
Who is affected by Turkey?

Archive  |  Search:
Cost of Revenue, SG&A: Q3 Update
Sunday, November 11, 2018

A solid majority of the S&P 500 have now filed their third-quarter 2018 numbers, so you know what that means: another look at whether cost of revenue and SG&A costs are accelerating faster than revenue.

Calcbench began studying that question earlier this year amid trade wars and tight labor markets, to see if those pressures were outpacing revenue growth. From time to time they were outpacing revenue, which consequently must lead to a decline in operating income. That pressure could also explain some of the stock market decline we’ve seen across 2018.

Overall, the third quarter looked much better for large companies. We examined the filings of more than 360 of the S&P 500. The bottom line: revenues up briskly, expenses up modestly, and therefore operating income rose a pleasant 12.2 percent compared to the year-ago period. See our nifty chart, below.

That said, the devil remains in the details. In our sample of 361 companies, 148 of them had the cost of revenue growing faster than revenue overall, and 158 had SG&A costs rising faster than revenue overall. So while the collective picture might look good, financial analysts will still find plenty of specific companies where the direction of revenue and costs does not look good.

And for those who need a reminder — why are we doing this at all?

Because if costs rise faster than revenue, operating income falls. In theory, companies facing that predicament could still please the Wall Street gods with good net income thanks to certain outside factors, such as last year’s huge corporate tax cut. That’s exactly what we saw at the start of this year when companies reported 2017 numbers.

The problem: for many companies, that tax cut accounted for most of their growth in net income. The feel-good high from that one-time injection to the income statement is long gone. Congress won’t be cutting corporate taxes again this year.

So now companies need to boost net income the old-fashioned way, by generating revenue and controlling costs. They need to do that just as several new outside factors — tariffs and a tight labor market — make controlling costs more difficult. So increasing revenue becomes more important.

Right now it seems like plenty of companies are navigating that path well enough. Then again, plenty of other companies aren’t.

Lease Accounting: FedEx vs. UPS
Monday, November 5, 2018

Calcbench has been hot on the new accounting standard for operating leases lately, since the standard goes into effect on Dec. 15 and could have significant implications for companies that carry large operating lease obligations on their balance sheet.

Now, if you want an example of just how significant those implications can be, look no further than rival shipping giants FedEx and UPS.

We picked them because the two firms are roughly similar in revenue, net income, assets, and liabilities. FedEx, however, pursues a business model where it leases much more space than UPS does. The upshot: FedEx’s obligations for future lease payments are 11 times larger than those for UPS.

Now, recall that the new lease accounting standard requires companies to report those future lease payment obligations as liabilities on the balance sheet; and to add a corresponding “right of use” asset on the asset side of the balance sheet too.

Well, return on assets equals net income divided by total assets. So when you add items to the asset side of the balance sheet, you are expanding the denominator of that formula and your ROA must decline. It’s math.

Take a look at this comparison of FedEx and UPS, all pulled from Calcbench data.

We examined the companies’ current leasing obligations, added them to the liabilities side, and then added an equal amount to the asset side for the offsetting right-of-use asset. Then we recalculated an adjusted ROA according to the new leasing standard.

This is the result: Two companies of similar size, but one (FedEx) experiencing a considerable change in ROA simply because of an accounting change, rather than some fundamental change in business operations.

Financial analysts, therefore, might want to ask FedEx on its next earnings call: do you have any debt covenants that might be triggered when ROA falls below 7.5 or 7 percent? Do any executive compensation agreements tie to ROA? Anything else we should know about involving changes to ROA?

You get the picture. (Like, literally; we supplied the picture three paragraphs above.) Calcbench can dig up the data you need. Whether you feed it into your own Excel models or just fiddle around on the fly, we have it. You can find it.

New Email Alerting Powers
Saturday, November 3, 2018

Great news for financial analysts paranoid about getting the latest data as soon as it’s filed! Calcbench has overhauled our email alert function so you can be even more specific in what alerts you want to receive for the companies you follow.

Our expanded alert system lets you designate email alerts for standard 10-K and 10-Q filings as always — plus earnings releases, SEC comment letters, IPO prospectuses (prospectii?), and a bevy of other events that trigger Form 8-K filings. You can now get alerts on 8-K events such as merger announcements, material agreements, delistings, auditor changes, executive officer departures, and more.

Even better, we have redesigned the user interface to set those alerts. Now just visit your email alert preferences at, and you’ll see all the peer groups and companies you follow in neat rows with check-boxes for the types of alerts you want. Take a look at Figure 1, below.

These are the actual peer groups of a certain Calcbench staffer who obsesses over the retail sector and competitors to Dunkin Donuts, among other firms. Along the top are the types of alerts available for each group. Then you can check the box for whatever alert you want, for each peer group or company you follow.

That’s really all there is to it. Any time a firm then files a triggering event with the Securities & Exchange Commission, Calcbench will index that filing within a few minutes; and the email alert will be in your inbox soon after that.

Any time you want to change your alert preferences, just return to the preferences page and click away. You can also clear prior settings, or simply check the “all filings” option and get everything we have.


PTC and Two Tales of Revenue
Wednesday, October 31, 2018

Financial reporting is a wide world where you see lots of unusual things — and we saw another odd one recently, from software company PTC Corp.

PTC filed its latest earnings release on Oct. 24. This was the first time PTC reported revenues according to ASC 606, the new accounting standard for revenue recognition that all firms had to start using this year.

Important point: PTC sells software, and specifically sells subscription-based software. And as we’ve noted in prior posts, software firms in that line of work are particularly prone to changes in the nature and timing of their revenue streams thanks to that new standard.

Essentially, ASC 606 forces software companies to recognize revenue from long-term subscription contracts all at once. So a firm implementing ASC 606 for the first time might see a spike in revenue for that specific quarter, as it recognizes all that subscription revenue; and then lower, more volatile revenue streams in future quarters.

Sure enough, PTC fits that description. So first the company gave investors this head’s up in its disclosures:

In connection with its adoption of ASC 606, PTC expects to record an adjustment to retained earnings of $350 million to $380 million related to deferred revenue and unbilled deferred revenue amounts… This adjustment will be reflected on PTC’s consolidated balance sheets for the first quarter of fiscal 2019 ending December 29, 2018. We estimate this adjustment will reduce future annual subscription revenue as follows: for FY’19: $200 million - $220 million; FY’20: $100 million - $105 million; FY’21: $35 million - $40 million; FY’22: $15 million.

We expect that this will have a material adverse effect on reported revenue in FY’19 that will be only partially offset by the upfront revenue recognition of the license portion of new subscription contracts and renewals. In FY20 and beyond, we expect the adverse impact related to the retained earnings adjustment will be more than offset by upfront revenue recognition of the license portion of subscription contracts.

In other words, turbulence lies ahead for PTC in fiscal 2019. Fair enough; we’ve seen other software firms make similar disclosures.

Then PTC went above and beyond with its estimates for 2019. The company presented its business outlook twice — once according to ASC 606 as required by accounting rules; and again under the old accounting standard, ASC 605.

Take a look. Figure 1 on top presents PTC’s outlook according to the old ASC 605 standard. Figure 2 at the bottom is the outlook according to the new ASC 606 standard.

The subscription revenue line-item (flagged in red) is the key point here. ASC 606 cuts that revenue from somewhere around $141 million (the old standard) to $93 million (under the new standard).

Can a firm do that with its financial reporting? Um, sure; there’s no law against it. PTC does obey all SEC rules about presenting both versions in identical format and clearly stating why PTC believes the older standard is worth noting. That’s what a company has to do to include a non-GAAP metric, which the outdated revenue standard now is.

We just didn’t expect a firm to go to such extremes. Then again, that’s what makes financial analysis so interesting.

10-K/Q Section Text Change Detection
Tuesday, October 30, 2018

The Code


Reduce the amount of time analysts spend reading 10-K/Qs by highlighting the sections which change the most between periods.


The cosine distance between Term Frequency - Inverse Document Frequencey (TF-IDF) vectors of 10-K sections is a useful proxy for semantic change in 10-K sections across time.


  1. Use the Calcbench Python API Client to download the Risk Factors section of the 10-K from Calcbench
  2. Tokenize the sections
  3. Build TF-IDF matrices
  4. Compute the cosine distance between each section and the same section from the previous filing/period
  5. Render the matrix of distances with largest distances highlighted.
  6. Review large changes by “diffing” documents with distance above a certain threshold.

Highlight Risk Factors with Greatest Change

Brightest cells are those documents which changed the most vis-a-vis the previous period.
2018 2017 2016 2015 2014 2013 2012 2011 2010 2009
JNJ 0 0.01 0.607 0.02 0.57 0 0.042 0 0.026 0
JPM 0 0.55 0.008 0.008 0.013 0.023 0.013 0.028 0.427 0
WBA 0.007 0.014 0.017 0.187 0 0.063 0.244 0.099 0 0
DWDP 0 0.24 0.135 0.045 0.033 0.02 0.033 0.01 0.068 0
V 0 0.034 0.153 0.066 0.007 0.027 0.021 0.016 0.097 0
MCD 0 0.014 0.019 0.015 0.178 0.045 0.038 0.04 0.051 0
VZ 0 0.012 0.061 0.053 0.049 0.097 0.035 0.029 0.063 0
WMT 0.061 0.056 0.025 0.084 0.03 0.076 0.02 0.024 0 0
PFE 0 0.015 0.074 0.063 0.034 0.02 0.039 0.047 0.044 0
PG 0.026 0.02 0.02 0.069 0.022 0.018 0.102 0.026 0 0
UTX 0 0.022 0.006 0.031 0.009 0.04 0.033 0.072 0.069 0
HD 0 0.037 0.018 0.03 0.12 0.017 0.012 0.02 0.025 0
CVX 0 0.013 0.028 0.045 0.02 0.001 0.005 0.075 0.057 0
INTC 0 0 0.011 0.002 0.068 0.018 0.032 0.094 0.017 0
AXP 0 0.009 0.015 0.032 0.016 0.031 0.025 0.022 0.059 0
KO 0 0.013 0.007 0.014 0.012 0.011 0.037 0.035 0.065 0
UNH 0 0.008 0.006 0.006 0.009 0.023 0.014 0.052 0.038 0
MSFT 0.024 0.013 0.012 0.012 0.031 0.012 0.035 0.017 0 0
BA 0 0.005 0.005 0.002 0.004 0.009 0.032 0.036 0.046 0
MMM 0 0.008 0.008 0.026 0.007 0.009 0.005 0.044 0.026 0
DIS 0 0.003 0.003 0.006 0.026 0.012 0.025 0.035 0.014 0
MRK 0 0.014 0.006 0.019 0.012 0.009 0.012 0.022 0.023 0
GS 0 0.013 0.01 0.015 0.012 0.009 0.006 0.024 0.02 0
CAT 0 0.002 0.009 0.004 0.009 0.011 0.018 0.013 0.04 0
NKE 0.015 0.009 0.005 0.01 0.01 0.023 0.017 0.007 0 0
XOM 0 0.031 0.008 0.018 0.003 0.007 0.012 0.015 0 0
AAPL 0 0.004 0.003 0.001 0.004 0.003 0.027 0.017 0.004 0
TRV 0 0.005 0.006 0.002 0.005 0.012 0.007 0.012 0.016 0
CSCO 0.004 0.002 0.004 0.002 0.006 0.012 0.003 0.01 0 0
IBM 0 0.004 0.004 0.003 0.001 0.011 0.001 0.001 0.005 0

Finding Purchase Price Allocation
Sunday, October 28, 2018

Calcbench offers a wealth of data and analytical tools to our subscribers. Today we’re going to focus on one of our lesser known but quite nifty features: purchase price allocation.

All mergers and acquisitions have a total price that you read about in the headlines. The details are usually reported much later, where the company discloses how it allocated that total price across various components: how much for inventory, how much for accounts receivable, how much for goodwill, how much for other intangible assets, and so forth.

That’s purchase price allocation — commonly abbreviated as “PPA” and yes, we track that stuff. Here’s how you can find it.

Start at our Segments, Rollforwards, and Breakouts page. You’ll see a blank page when you first arrive, so you’ll need to select a company or group of companies to research. For our purposes here, we’ll work with one of our defaults, the Dow Jones Industrial Average.

Once you select your group, a menu option will appear on the left side of the page. Open it and a list of about 25 choices will appear. Toward the bottom are three choices related to business combinations. In the middle you’ll find “Business Combinations — Purchase Price Allocation.” (See Figure 1, below; PPA is highlighted in blue.)

Once you select that choice, you get a list of records on your screen — and be warned, this can be a long list. We return one record for every PPA item disclosed by every company, in every period you select. So you might see something that looks like Figure 2, below.

In the above image, we focused on a few PPA items disclosed by Caterpillar and DowPuPont (because that’s all we could fit on one sample screen), for calendar year 2017. We couldn’t even include all PPA items for either company in Figure 2.

So if someone wants to search all PPA disclosures in the whole S&P 500 for several years, you can see that suddenly we’re talking about lots of data. Calcbench has it all; just understand what you’re getting into.

What the Data Means

Once you get those records, you can then use the handy Calcbench Trace Feature to investigate whatever number catches your eye. That will whisk you back to the exact disclosure the company made, where usually you can see all the details of how the company allocated the purchase across all line items.

Let’s use the very first record in Figure 2 as an example. Caterpillar reported $26 million in receivables for a freight rail acquisition it did in 2017. Move your cursor to that $26 million and the Trace option appears. Click on that, and you get a disclosure as seen in Figure 3, below. (We’ve magnified that image a few times for clarity.)

As you can see, that $26 million relates to Caterpillar acquiring the Downer Freight Rail business for $99 million, in a deal that closed on Jan. 2 of 2018. That acquisition included $92 million of tangible assets — including $26 million of accounts receivables.

If you wanted, you could scroll to the top of that sidebar and find the “Open in Disclosure Viewer” option. Click on that, and Calcbench whisks you to our Interactive Disclosure Viewer where you’d find the exact same disclosure, presented as Caterpillar presents in the footnotes. It would still be presented in writing, and rather dense to read at that.

Not every PPA disclosure will be dense narrative like that. Lots of them will be presented in tabular format.

For example, we scrolled further down and the first entry for Intel was $10.3 billion of goodwill acquired during an acquisition. We traced that number and the disclosure is shown in Figure 4, below. That $10.3 billion relates to Intel’s acquisition of Mobileye in August 2017 for $14.5 billion.

You can see the exact $10.3 billion number in a blue square, and several paragraphs above is a line-by-line accounting of the whole price: $4.4 billion in intangible assets, a few other items for $500 million or less — but the vast majority of the purchase price was allocated to goodwill. Was it worth it? That’s not for Calcbench to say. That’s for analysts to ask about. We just show you how to find the exact numbers as reported, so you can ask quickly and precisely.

Charting Netflix Growth in Three Ways
Sunday, October 21, 2018

Netflix filed its latest quarterly report last week, and we first were poking around its Commitments and Contingencies disclosures to see what leasing obligations the company might have.

Almost immediately, however, we stumbled upon a different commitment Netflix reports: streaming content obligations. That makes sense, given that Netflix has huge licensing and royalty expenses to stream all that content to its customers.

We just weren’t prepared for the staggering size of Netflix’ streaming content obligations — more than $18.6 billion dollars, as of Sept. 30.

How fast have those obligations been growing, we wondered? And were Netflix revenue and income keeping pace?

Answering those questions is actually quite easy in Calcbench. Here’s how we did it.

Streaming Content Obligations

First, we saw that $18.6 billion amount in Netflix’ disclosures. Of course that figure is a number, so as always, we could use the Calcbench Trace feature to find where that number comes from. We simply moved our cursor over the $18.6 billion, and several boxes magically appeared. See Figure 1, below.

In the lower box, you get an option called “Show Tag History” (circled in red). Click on that option, and a display will appear that lists the values for that specific financial item as far back as Calcbench has the data. In our case here, we could see the history for “PurchaseObligation” that Netflix had reported, as far back as second quarter 2012.

We wanted more, however. So we went to the other box that magically appeared above the $18.6 billion (circled in blue) giving us the “Export History” option. We pressed that, and blammo! Calcbench downloaded all that data into an Excel spreadsheet for us.

Then we just worked in Excel to create the chart below for you to see. It shows that obligations rose by 293 percent — from $6.38 billion to $18.6 billion — over the last six years. Wow. (See Chart 1, below.)

Revenue and Operating Income

That’s a lot of obligation, so we then wanted to see whether Netflix’s revenue and operating income were growing at comparable rates. Yes, we could use the Trace feature and Export History option two more times, but we were too lazy to do all that again twice.

Instead, we went to the Data Query Tool. There, we could set our search range for Q2-2012 through Q3-2018, and then select revenue and operating income from the choices on the Income Statement list. (See Figure 2, below.) Scroll to the bottom of the page, press the Export to Excel button, and blammo again! Now we had all the quarterly data for both items.

Then it was just a matter of putting that data on charts again. We found that revenue rose 373 percent, from $1.07 billion to $4 billion last quarter (see Chart 2, below); and operating income rose more than 800 percent — from $57.1 million to $480.7 million (see Chart 3, below).

Now, revenue and operating income do fluctuate more than streaming obligations, but that’s no surprise. Spending obligations are often dictated by contracts with orderly payment schedules, while revenue and operating income are subject to the whims of customers and changes in operations costs.

Any way you cut it, however, you have to give Netflix its due. The company might be racking up expenses at a brisk pace, but sales and income are moving even faster.

And you can confirm all that multiple ways through Calcbench.

Interesting Data on Interest Income
Wednesday, October 17, 2018

US Bancorp filed its third-quarter earnings release on Wednesday, and we noticed something in the nitty-gritty: its net interest income rose much faster from second quarter (1.7 percent) than non-interest income (0.2 percent).

That’s not surprising, of course. The Federal Reserve has been raising interest rates slowly but surely since 2016, and one would therefore expect banks to follow suit with their rates, and see more interest income. We just hadn’t noticed that change until today. (So much financial data to read, after all.)

So we started to wonder — is that hypothesis true? Are financial firms seeing more growth in interest income than non-interest income? Are total revenues tilting that way?

Indeed they are.

We visited our handy Data Query Tool and pulled up the data for all depository institutions — a list of 853 firms ranging from publicly traded community banks all the way up to Citigroup, Bank of America, and the other big boys. Then we looked for interest income and non-interest income from first-quarter 2015 to second-quarter 2015.

Across all quarters, interest income has always been larger than non-interest income. So we also divided interest income into non-interest income, and expressed that number as a ratio. The ratio went from 1.24 at the start of 2015 to 1.42 by summer 2018.

OK, that sounds like a lot, but too many numbers make our head hurt. So we graphed them onto a chart, and got this, below.

The trend-line in red tells the tale. Interest income is pulling away from non-interest income as the primary revenue source for banks. The slope on that line is 14.5 percent. Try that on a treadmill and your hamstrings will never speak to you again.

And while we don’t show it in this chart, when you examine the changes within each year and from one year to the next (we did), that growth in interest income is accelerating. So we’ll be back in a few weeks once third-quarter numbers are completely filed with an update.

Analysts following financial firms, meanwhile, may want to contemplate what that acceleration toward interest income means.

The Decline of Sears in Three Charts
Thursday, October 11, 2018

Ah, Sears, we hardly knew ye.

No, for real — we hardly ever shop there. Then again, that seems to be the company’s fundamental problem. Nobody does.

News broke in the Wall Street Journal this week that Sears’ long-time financial lifeline Eddie Lampert — the company’s chief executive, largest shareholder, and largest creditor all rolled into one — has finally reached the end of his patience. Lampert is not planning to lend Sears any more of his hedge fund cash.

That’s grim news for Sears, since the company has a $134 million debt payment due on Oct. 15, which it can’t make without another Lampert bailout. So bankruptcy and liquidation proceedings now seem imminent.

Calcbench has decided to note the occasion with three charts.

First, in Figure 1 below, we have Sears’ cash on hand for the last 12 quarters. While the individual amounts fluctuate, the trend line in red says it all. That slope is steeper than a double-black diamond trail at a Vail ski resort.

Figure 2 shows Sears’ current assets over the same period. Assets fell 46.4 percent, from $7.22 billion to $3.87 billion. This trend line might be more like a blue square trail in Vermont, but still: if people are using ski slope metaphors to describe you financial performance, you’re losing.

And Figure 3 shows Sears’ current liabilities. Yes, liabilities have declined too, but much less (29.8 percent) than assets or cash have dropped. And heed the vertical axis: liabilities at the end of Q2 2018 were about $400 million greater than assets.

That pretty much says it all for Sears. Calcbench users can do their own financial analysis of Sears’ dismal performance by using the Company-in-Detail or Data Query pages. Just select Sears as your company to study, and you can barrel down any hill of financial data you like.

Meanwhile, like so many consumers, we’re off to look at Target and Amazon.

At Calcbench we don’t give investment advice; that’s your job. But we like to help people make informed decisions from available data. That’s why the Oct. 1 WSJ article about money-losing IPOs caught our eye.

“Money-losing companies are going public at a record rate as investors hunger for new issues.” Funny, they make it sound like it’s a bad thing…

But seriously, just because a company is making a loss at IPO, does that necessarily predict much? Heck, was making a loss at IPO.

You need to dig deepr to figure out what kind of loss the filer is making, and what it means for the future.

To discuss this, we will revisit a post we wrote when went public in 2014. And it turned out to be prescient, since the company’s stock languished well below the $17 IPO price for several years.

At the time we called it “Buying revenue at any cost… the new strategy for IPOs?’

The first time I noticed a pattern was when I was looking at Groupon’s prospectus. Then came Splunk, Yelp, and several others in the past couple of years. And just today I saw a new one…

What pattern am I talking about? Companies that spend their pre-IPO year(s) with blowout revenue growth and equally dramatic growth in their costs and losses.

This is expected from early-stage startups. But early-stage startups don’t IPO; late-stage startups do.

Increasingly it seems there is a playbook that investment bankers are selling to hot startups, that reads something like this: If you buy revenue growth at any cost, we can take you public.   

Anyone who has worked in corporate finance can tell you there is revenue and there is revenue. Some is good and some is bad. Revenue that loses the company money is bad…unless you need it to make your company look like it is growing.

Here is the game in a nutshell. If your company loses money, it’s impossible to value based on profit, right? So, investors turn to revenue growth instead. But far too few investors seem to realize that revenue growth can kinda sorta be whatever the company wants. Want more revenue? Steal the market by charging less than all of the competitors. Buy more advertising. Sell deals that cost more than they bring in. Whatever it takes. Who cares what it costs. Because investors aren’t looking at the costs.

But what should you look for to know you are not getting a raw deal?

Simple. Ignore the revenue growth. Everyone’s got that. Focus on the incremental margin:

Good companies are characterized by increasing operating leverage, also known as incremental margin.  Over time, for each dollar in revenue growth, a larger portion of that dollar should fall straight to the bottom line. If this doesn’t happen, then there could be something wrong with the business model.

Let’s look at Each $1 of revenue cost $1.47 dollars in 2011. In 2012? $1.43. How about the first 9 months of 2013? $1.42. COME ON! After revenue rose 125 percent, you couldn’t increase the incremental margin at all?

In other words, if this company keeps on the same track, it will never turn a profit. Business model changes will have to happen… and why is a company filing for an IPO if it doesn’t have its business model figured out?

Now for contrast, let’s take a look at Amazon.

Each $1 of revenue cost $1.59 dollars in 1995. In 1996? $1.38. And in the final quarter on 1996? $1.28. Clearly, if Amazon kept going in a straight line, it would turn a profit. And, eventually, it did.

Campbell Soup Gets Squeezed
Sunday, September 30, 2018

Campbell Soup just filed its annual report for its fiscal year ending July 31. If you want a glimpse into all the business issues currently vexing large businesses, pull up a computer screen and take a gander.

First are the financials, which were less than spectacular. Yes, revenue did rise 10 percent to $8.69 billion, but cost of goods sold rose 18.2 percent, marketing costs rose 5.5 percent, and administrative costs rose 18.9 percent. Throw in some restructuring charges and other expenses, and Campbell ended up with total costs rising almost $2 billion last year. Earnings before tax and interest landed at $469 million, two-thirds lower than 2017 numbers. Ugh.

Snoops that we are around here, we were especially interested in that spike in the costs of goods sold. Soup comes in cans, which are made of steel and aluminum. The Trump Administration is currently taxing steel and aluminum as part of its trade war. So we wondered — are those import taxes part of Campbell’s woes?

We visited our Interactive Disclosure viewer to see what Campbell had to say. We discovered a litany of disclosures in the Management Discussion & Analysis that hits pretty much every headache a large business might suffer today.

First Campbell talked about customer concentration generally, and how that consolidation is putting the squeeze on manufacturers of things like soups:

In 2018, U.S. soup sales declined primarily due to a key customer’s different promotional approach for soup. We expect consolidations among retailers will continue to create large and sophisticated customers that may further this trend… In addition, although e-commerce represents only a small percentage of total food sales, we anticipate it will continue to grow rapidly.

Bummer, but what about all those local retailers still fighting the good fight?

At the same time, new and existing retailers continue to grow and promote store brands that compete with branded products.

Sorry to hear that. But we came here to ask about steel and aluminum tariffs, Campbell. What can you tell us about that?

The cost of distribution has increased due to a significant rise in transportation and logistics costs, driven by excess demand, reduced availability and higher fuel costs. In addition, certain ingredients and packaging required for the manufacture of our products, including steel, have been or may be impacted by new or recently proposed tariffs. We expect these cost pressures to continue in 2019.

That’s tough, because those tariffs and higher energy prices aren’t likely to go away any time soon. What about trying to streamline operations? Would that help?

In connection with our transition to our new U.S. warehouse optimization model, we are also experiencing significantly higher than expected cost increases and shipment delays associated with the startup of our Findlay, Ohio distribution facility. The Findlay facility, operated by a third-party logistics service provider, serves as the Midwest hub for distribution of Campbell’s soups, Swanson broth, V8 beverages and Pace, Prego and Plum products.

Geez. Next you’re probably going to tell us Hurricane Florence dropped the whammy on you, too.

In September, our Maxton, North Carolina manufacturing and distribution capabilities were negatively impacted by flooding associated with Hurricane Florence. We expect the collective impact of these cost increases, shipment delays and weather-related issues to have a negative impact on our results of operations for the first quarter ending October 28, 2018.

Oh for pete’s sake, Campbell. We give up. Best of luck to you and we look forward to reading your earnings release in early November.

Exchange Rate Effects on Cash
Wednesday, September 26, 2018

Every year around this time Calcbench examines the effect of exchange rates on corporate cash.

Why? Because the value of the dollar has important effects on cash. For example, a weaker U.S. dollar means purchasing foreign supplies becomes more expensive, potentially driving up your cost of goods sold. At the same time, selling overseas goods also becomes less expensive, because overseas customers have more purchasing power. During periods of a stronger dollar, that situation is reversed.

Companies must track the effect of exchange rates on cash in a line-item on the Statement of Cash Flows, unglamorously called “Effect of Exchange Rate on Cash.”

So Calcbench examined the amount of cash and equivalents that the S&P 500 reported at the end of 2017, and looked to see how much the exchange rate pushed that sum upward or downward.

First, how did the U.S. dollar do in 2017, anyway?

According to the Federal Reserve of St. Louis, not too good. The dollar began 2017 worth roughly 94.6 cents against a basket of major currencies, reached a low point of 86 cents in September 2017, and closed out the year at 87.4 cents. Take a look.

That said, the dollar is still up markedly from earlier in the decade. It bounced around 75 to 80 cents in the early 2010s, before inexorably rising as the Fed began raising interest rates in the mid-2010s.

Long story short: as the Fed raised rates in the mid-2010s, the dollar got stronger, so the exchange rate started to chew into cash and equivalents. Here are the numbers for 2012 through 2017.

What happened in 2016? The dollar stopped rising. It started the year at 95 cents, drifted downward to 90 cents, and ended 2016 right around 95 cents again. Hence the exchange rate effect decelerated to nibble at cash rather than chew.

And as the dollar continued to slide against other currencies in 2017 — mostly due to other economies finally reviving, and their currencies strengthening relative to ours — the exchange rate effect actually turned positive. It boosted the value of cash among the S&P 500 by 1.5 percent.

We know what you’re thinking: cool story bro, but what about 2018?

So far, the St. Louis Fed says, the dollar has trended largely downward: from 96.4 cents in January to 89.5 cents as of this week. That may be because of the mushrooming U.S. debt (which puts a lotta dollars out there), or stronger economies elsewhere, or a mix of both.

Regardless, if past is prologue, that means cash levels will get a little extra oomph again early next spring thanks to exchange rates.

The Missing Unremitted Foreign Earnings
Monday, September 24, 2018

We haven’t talked about last year’s tax reform for a while, so let’s revisit one significant item for corporate reporting: unremitted foreign earnings.

They’re still unremitted. More than that, they are unreported.

You may have seen that phenomenon explored in a recent Wall Street Journal article. Reporters examined the filings of 108 companies that account for roughly $2.7 trillion in unremitted foreign earnings, and found that those companies have brought home only about $143 billion so far — and more than $90 billion of that came from only two companies, Cisco Systems and Gilead Sciences. Everyone else in Corporate America is still keeping all those foreign earnings in foreign banks.

That wasn’t supposed to happen. Tax reform imposed a one-time “deemed repatriated earnings” tax on foreign profits, and eliminated most taxes on all future foreign earnings. Republicans said that would entice U.S. companies to bring all those foreign earnings home (roughly $4 trillion) and invest the dollars here.

Apparently Corporate America has decided differently. So what are companies doing with their cash? And how can Calcbench help you figure that out?

You can track companies’ unremitted foreign earnings either individually on our Company-in-Detail page; or compare them in bulk on our Multi-Company page. Just select the group of companies you want to study, and enter “Unremitted Foreign Earnings” in the Standardized Metrics search field. Presto, up come the results.

We Started Digging

For starters, Calcbench examined all the unremitted foreign earnings among the S&P 500, from 2014 through 2017. “UFE” was briskly rising in the first three years of that period, from an average $6.7 billion in 2014 to $7.9 billion in 2016.

Then UFE fell, to an average of $5.22 billion. Among all the S&P 500 together, total unremitted earnings plunged more than 50 percent, from $2.49 trillion to $1.12 trillion.

That’s good, right? Must mean that tax reform is working and companies are bringing home that overseas cash, yes?

Not so fast.

When we examined each company’s financial data individually, we found lots of companies that simply stopped reporting UFE. The fields they had populated with data in previous years were blank. See Figure 1, below.

Why might a company do that? You can research a company’s rationale for changing its disclosure by using our Interactive Disclosure viewer, to see what the company had to say about whatever issue is on your mind.

So we did that for UFE — and then found nothing. Companies just dropped all reference to UFE in their disclosures. Period.

Take Microsoft as an example, in Figure 2, below. The column on the far right is the 10-K tax footnote from fiscal year 2017; the column on the far left is same footnote in the fiscal 2018 10-K. That middle column, and specifically the paragraph circled in red, is the language Microsoft dropped from its 2017 disclosure compared to 2018.

Microsoft is only one example. We found scores of them throughout the S&P 500, including names such as General Electric, Nucor, Walmart, Abbott Labs, Coty, Cigna, and others. All of them disclosed unremitted foreign earnings in 2016 annual reports, but not in 2017.

We don’t yet know why. We’re not sure we will ever know why. We do know, however, that you can use Calcbench to determine whether the companies you follow fall into that category — and then you can ask that question yourself on the next earnings call or at the next investor day.

Thoughts on Structured Data
Tuesday, September 18, 2018

And now for some shameless self-promotion: the CFA Institute has published a new article examining how structured data can help with financial analysis, featuring none other than Calcbench as an example of how to put structured data to work productively.

The paper, Data and Technology: How Information is Consumed in the New Age, reviews the uses of structured data: that is, pieces of data “tagged” with descriptors so computer software know what that data is and what the software can do with it.

For example, when you use our Multi-Company Page to pull up the revenue numbers for the S&P 500, our software is actually searching for all data with a tag so it can display the numeric value after that tag on your computer screen. That’s how structured data works.

In the paper, Mohini Singh, director of financial reporting policy at CFA Institute, uses Calcbench to show how someone might compare a company’s accounting policies over time, to see whether and how those policies might change. Later Singh cites us again and our research into operating leases. (Oooh, double-shameless plug of our research on operating leases, too!)

Singh then goes on to discuss how some preparers of financial statements don’t like the chore of filing statements with XBRL (the structured data language used in financial statements), but consumers of those statements — investors and analysts — wolf down structured data like Pringles.

The paper is freely available, so give it a read and let us know what you think. We’re at

Calcbench Goes to the Movies
Sunday, September 16, 2018

Stop everything! We interrupt our regular posts on leasing costs, tax reform, revenue recognition, and the like to bring you the really important stuff — like, which films are hitting the biggest of the big screens in 2019!

There we were, skimming the latest quarterly report from IMAX, when we saw it in the Management Discussion & Analysis, right there on Page 54: a complete list of all films IMAX currently plans to release in 2019, with planned release dates.

After all, IMAX makes its money from distributing films, so why wouldn’t its looming lineup be something worth discussion in the MD&A? IMAX has firm plans to release 45 films in 2018, and is working to release as many as 60 when all is said and done. (That would be comparable to the 60 films it distributed in 2017.)

So far the company has announced 17 films for 2019. Among the notables:

  • X-Men: Dark Phoenix, coming out in February. Looks like a continuation of the next generation of X-Men films starring Jennifer Lawrence, James McAvoy and Michael Fassbender, which makes us wonder about the supposed reboot Disney might do with the franchise once it gets its clutches on all those assets from 20th Century Fox.
  • Captain Marvel, coming in March. In this film, Captain Marvel carries the hopes and dreams of millions of Disney investors praying she can keep the Marvel Studios juggernaut rolling out one blockbuster after another into the 2020s.
  • Avengers 4, coming in April. Captain Marvel will appear in this film too, so see our above line about hopes and dreams and investors and blockbusters.
  • Spider-Man: Far From Home, due out next July. We have been saying this for months — everyone who dies in Avengers: Infinity War has to come back, because their sequel films are already on the books!
  • Frozen 2, in November 2019. Hey, the first film grossed $1.3 billion. With numbers like that, you knew Disney execs would review a sequel proposal and let it go.
  • Star Wars: Episode IX, coming in December 2019. Well, fine, but we’re still waiting for a Jabba the Hutt solo film. Long overdue.

So on a more serious note, it’s interesting to see the deep ties IMAX has to Disney. Eight of the 17 titles IMAX has confirmed so far for 2019 are Disney titles. More important is that another three titles are from 20th Century Fox — so when Disney does take full control of those assets from the Fox-Disney merger (which investors approved earlier this summer), that will be 11 of 18 films. Disney will be an enormously important partner for IMAX.

Food for thought, along with the popcorn you grab on your way to see Venom or First Man. IMAX is releasing both of those next month.

The First-Ever Calcbench Webinar
Wednesday, September 12, 2018

Great news for Calcbench enthusiasts young and old! We have released our first-ever webinar, where one of the leading thinkers on financial analysis talks about the big challenges he sees for the profession today and how data analytics can help answer them.

The webinar, 48 minutes long, features a discussion with Marc Siegel, a 10-year veteran of the Financial Accounting Standards Board (and a 25-year veteran of financial analysis) who left FASB earlier this summer. Siegel graciously agreed to talk with us about astute ways to wrangle good insight out of financial statements, new accounting standards affecting financial analysis, and more.

You can find the webinar on our website, and on YouTube as well. Free to all, just pull up a computer screen and have a listen.

Siegel takes up the first half of the webinar. Then we talk with our own CEO here, Pranav Ghai, who gives some specific examples of how you can use Calcbench to analyze the issues Siegel raises. Which is also good stuff to watch, and we’re not saying that just because Ghai is the one who signs the paychecks around here.

Some of the specific topics the webinar covers:

  • Rollforwards, and how to interpret the information reported in them;
  • Critical accounting policies and how you can find ones that have changed;
  • New accounting standards for revenue recognition and operating leases, and the implications they have for financial analysis;
  • Where to find all those details specifically in the Calcbench database world.

We’re eager to hear what you think of the webinar, or your ideas for future webinars (subjects we should explore, experts we should interview). Always feel free to drop us a line at

Ever wonder how an academic uses Calcbench? We recently talked with Ahmet Kurt, Ph.D., assistant professor of accounting at Suffolk University, about his extensive use of Calcbench for research and how he is incorporating Calcbench into his classroom this fall.

Q: Tell us a bit about your research and teaching style.

I do archival research on financial reporting quality, corporate governance, and auditing. I value practical research. My work has been cited in the Wall Street Journal, Bloomberg, and

In the classroom, I use my accounting and finance training to explain to students how these two important business functions interact. My teaching style is hands-on, with extensive use of real company data.

Q: What kind of data are you or your students looking for?

For my research on financial reporting quality, I am mostly interested in data pertaining to companies’ corporate financing transactions, such as share repurchases and equity financing.

My students use a variety of information included in the companies’ annual reports, such as financial statement data, management forecasts and discussion, and information on retail outlets and lease agreements.

Q: As a professor, how do you use Calcbench?

The day I started using Calcbench changed the way I collect data. Using Calcbench has cut my hand collection by more than 50 percent; in some cases, there is no hand collection required at all.

During my Ph.D. years, I spent a good amount of my time hand collecting data from companies’ SEC filings. This is a very time-consuming process. With Calcbench, I eliminated the need for manual data collection from the SEC’s website. However, if I still need to access companies’ SEC filings, Calcbench makes that process much easier by providing direct access to relevant filings with the “trace” link. I can also quickly download links to all 10-K filings, proxy statements, and earnings releases on the SEC’s website into a spreadsheet.

For my classroom, this will be the first semester that I am using Calcbench as an instructional tool. In the past, I built an Excel spreadsheet to download financial statement data from Yahoo Finance and other sources. Now the students in my Financial Statement Analysis course will be able to download, analyze, and compare companies’ financials using Calcbench.

Q: Calcbench uses XBRL to power its platform. You’re an author of, An Input Based Measure of Financial Statement Comparability. How is XBRL changing the way you research financial data?

XBRL is a promising technology for accounting and finance research. With the introduction of XBRL, researchers have gained immediate access to detailed financial data as reported by companies. The use of standardized tags, in many cases, facilitates the comparability of financial information across companies. Nevertheless, it is challenging for researchers to use “as is” XBRL data in their analysis because companies’ XBRL reporting practices are not uniform. (For example, there are some differences in how companies label particular XBRL items.) Standardized metrics provided by Calcbench help address this issue.

Q: Share repurchases are a hot topic these days. You recently published an article in CFO Magazine on accelerated stock repurchases (ASRs). Tell us about ASRs and why they are important.

ASRs let firms buy back a large block of their shares quickly from an investment bank. This is different from traditional buybacks where firms gradually repurchase shares in small amounts on the open market.

Shares repurchased in an ASR transaction are immediately recorded in treasury stock, reducing the company’s share count overnight. Some people even refer to ASRs as “overnight share buybacks.” This raises the question of whether firms use ASRs opportunistically to give a quick boost to earnings per share (EPS).

I find some support for this argument. One out of every four ASR firms would have missed analysts’ EPS forecasts had they not initiated the ASR transaction. I also find that the likelihood of using ASRs as an earnings management device is higher among firms that provided their CEOs with EPS-contingent bonus plans and firms that are habitual beaters of analysts’ EPS targets.

For the ASR article in CFO Magazine, I was able to get the most recent information on share repurchases from Calcbench in 30 seconds.

Among your areas of expertise are financial reporting quality, corporate governance, and auditing. How do you see Calcbench helping with financial reporting quality, corporate governance and auditing?

Calcbench provides immediate access to a large amount of data, contributing to information discovery and processing by market participants as well as academics.

High-quality research by analysts, investors, and other users improves transparency in capital markets, which is key to better reporting, auditing, and governance.

Thank you!

Leasing Costs and the Income Statement
Friday, August 17, 2018

As we now know, the new accounting standard for operating leases take effect at the end of this year, and its primary consequences are all about the balance sheet.

Money you owe in operating leases will soon appear there on the liability side, and will be offset by a corresponding “right of use” asset on the asset side. The balance sheet grows, but stockholder equity stays the same. That will change a few financial ratios here and there, but the balance sheet consequences overall are generally easy to understand.

So, um, what about the income statement?

The tricky thing is that any asset listed on your balance sheet (goodwill, financial instruments, inventory, and so forth) is subject to impairment. Operating lease assets will be no different.

We don’t know how often operating lease impairments will happen, but they will happen sometimes. And when they do — boom, negative earnings surprise!

We already see this occasionally among the few companies that already have operating leases on their balance sheet. Take a look at this filer, who shall remain nameless today.

Could these impairments even be used for earnings manipulation? Well, maybe.

Consider this scenario: A company is already having a bad quarter, and then includes a big ol’ lease impairment to boot. Sure, the loss looks bad in the moment, but lease assets amortize over a set schedule. If you impair the asset today, the future amortization per quarter will suddenly be lower, thus making future quarters look better.

Of course, there’s also the possibility of a lease-related gain as well. If you renegotiate a lease down, or first take an impairment and subsequently wiggle out of the contract anyway, you would recognize a “gain on modification of lease.”

So net income and EPS numbers might look better, but only because you’re fiddling with your lease costs rather than any improved performance from operations.

Then again, dickering with the value of assets to make the bottom line look good is a time-honored tradition in financial reporting. Maybe the operating lease standard isn’t such a new thing under the sun after all.

Costs of Revenue, SG&A: Q2 Update
Wednesday, August 15, 2018

Earlier this summer Calcbench looked at first-quarter 2018 numbers to see whether the costs of running a business, as seen in the cost of revenue and the sales, general & administrative line items, were rising faster than revenue.

Our picture back then was so-so: SG&A costs grew slightly slower than revenue (good news), but cost of revenue did grow faster than revenue (bad news). We speculated that if labor costs continue to rise or tariffs raised the price of imported materials, that squeeze could get even tighter.

Well now we have some early numbers for second-quarter 2018 — and so far, among a significant portion of the S&P 500, that squeeze has not emerged.

Calcbench pulled the second-quarter numbers for 366 filers in the S&P 500 and examined year-over-year change in revenue, cost of revenue, and SG&A expense. Here’s what the picture looks like in aggregate.

Broadly speaking, revenues are rising faster than costs, which translates into higher operating income. That’s good news as far as it goes.

On the other hand, plenty of specific companies within our sample population aren’t in that ideal shape. For example, 167 of the 366 companies we studied had cost of revenue rising faster than overall revenue. Likewise, 152 had SG&A costs rising faster than revenue — and 62 firms had both cost of revenue and SG&A costs rising faster than revenue.

Caveats to Contemplate

We hesitate to draw too many conclusions about the economy as a whole from this single snapshot. First, revenue and expense patterns differ from one calendar quarter to the next; so even if you compare year-over-year results for consistency, that’s not the same as studying data across multiple quarters (like, six to eight of them) to identify trends that emerge over time.

Second, the performance of the S&P 500 may not be reflective of corporate filers as a whole, because these big boys have more ability to raise prices than smaller companies — and raising prices is an excellent way to keep revenue going up faster than your costs. Not all filers have that ability.

After all, when we examined the costs of revenue in June and found them rising faster than overall revenue, we looked at a population of more than 1,800 companies. The solid majority of them were not in the S&P 500. (Calcbench will do that again later this fall, once those second quarter numbers arrive from everyone else.)

And we’d be remiss if we didn’t note that this analysis is a retrospective look at events that have already happened. That’s quite different than the daily fluctuations on Wall Street, where traders are trying to make a prospective analysis of what’s likely to happen next. These days, they seem rather unnerved about trade wars and economic instability in Turkey, which might turn into an economic rout among emerging markets generally.

Calcbench subscribers, of course, can do all this analysis yourselves with our Multi-Company database page or our Data Query Tool. A deep dive into retrospective financial data, coupled with sharp thinking about what’s happening now that might appear in Q3 numbers later this fall — that’s getting you somewhere.

Who is affected by Turkey?
Tuesday, August 14, 2018

With the news about the drop in the Turkish lira lately, we were interested in which companies may be affected by a potential economic downturn in Turkey. We looked at companies’ disclosed geographical segments for specific disclosures about Turkey. The Table below shows revenue reported in 2017 to come from Turkey and the percentage it represents out of total revenue.

Looking at the table, we can see some companies that stand out, like ArcelorMittal (MT), a steel and mining company which reported almost $2 billion of Turkish revenue. Although less than 3 percent of total revenue, it is a significant amount. A 30 percent decrease in that revenue stream could translate to about 20 percent of the company’s net income.

The vast majority of Eldorado Gold Corp.’s (EGO) revenue and all of Transatlantic Petroleum’s (TAT) revenue is reported to originate in Turkey. If you are interested in knowing more about Transatlantic Petroleum’s (TAT) business structure, you can check out its business description on Calcbench’s disclosures page.

Another interesting question is the assets held in Turkey. Eldorado Gold (EGO) reported $835,422,000 worth of assets in Turkey, more than 16 percent of total assets. Westwater Resources (WWR) reported $17,979,000 of assets in Turkey, which represents more than one-third of its total assets.

All this information was obtained from Calcbench’s breakout query.

Want more?

Calcbench Professional users, who really want to geek out with the data, can go to Calcbench’s Raw XBRL Query and search for XBRL dimension members that include “Turkey”, yielding companies that report information relating to business in Turkey. This would include companies like Banco Bilbao Vizcaya Argentaria S.A. (BBVA), Chemical & Mining Co. of Chile Inc. (SQM), Hormel Foods (HRL), Unilever (UN), Vodafone Group (VOD) and many others.

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