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Comparing LinkedIn, Twitter Revenue
Wednesday, August 14, 2019

Fans of the Calcbench blog may know that we often spread news of our posts on LinkedIn and Twitter. So we were wondering the other day: How much revenue do those businesses make, anyway?

Comparing those revenue streams can be a pain, because LinkedIn has been part of Microsoft ($MSFT) since 2016. Yes, Microsoft does report LinkedIn revenue as a separate operating segment; but financial analysts first need to find that data, then carry it over to a spreadsheet with Twitter ($TWTR) revenue data. Less than ideal.

We decided to run this comparison ourselves, to see how much Calcbench databases can reduce that pain. We even included a third social media company, Snapchat ($SNAP), just to give ourselves a bit more challenge. Plus the interns around here tell us that’s what they use these days.

Figure 1, below, shows quarterly revenue for all three companies from the start of 2017 through Q2 2019. As you can see, LinkedIn has always been far larger than the other two, and has been pulling away from them for the last three quarters.



So, conclusion number one: There’s more money to be made catering to professionals worried about their careers, than there is catering to people screeching about politics or posting photos of avocado toast.

That said, we also have some lessons in financial analysis here, since gathering all this data is a bit tricky.

How We Did It

First, we pulled the revenue data for Twitter and Snapchat. That was easy. We visited the Multi-Company page, pulled up quarterly revenue for both firms from Q1 2017 through Q2 2019, and exported it to Excel. Finis.

Step 2 was to find the LinkedIn revenue from Microsoft. We first hit up the Segments & Breakouts page, and searched for Microsoft revenue by operating segment. Microsoft offers a lot of operating segments, including LinkedIn. When you filter for “LinkedIn,” the numbers come right up.

Ah, but wait — Microsoft doesn’t report segment numbers for the second quarter! What gives?

Remember that Microsoft runs on a June 30 fiscal year-end. That means its numbers for the April-June quarter are subsumed into whatever numbers are reported for the whole fiscal year.

To find those second quarter numbers requires an extra bit of math. You need to find cumulative LinkedIn revenue for the first three quarters, and then deduct that amount from the fiscal year’s total. The difference is LinkedIn revenue for that missing second quarter.

Calcbench makes this (relatively) easy. When you see the fiscal year-end total, use our Trace feature to pull up the original footnote disclosure for the operating segment. Move your cursor over that number. A small window appears that includes a “Tag History” option at the bottom. Click on that, and you can see all prior numbers reported for that fiscal year — including the cumulative amount for the last three quarters.

See Figure 2, below, as an example. Microsoft reported $6.754 billion in LinkedIn revenue for fiscal 2019. When we searched the tag history, we found that Microsoft reported $4.919 billion in LinkedIn revenue for the first three fiscal quarters. Therefore, revenue for Q2 2019 must be $1.835 billion.



Run that same calculation for 2018 and 2017, and you fill in the data for our missing Q2s. Then you can compare LinkedIn revenue to that of Twitter and Snapchat.

That’s all there is to it. We pulled together all that data in less than five minutes. After that, all we had to do was write up this summary to post it on LinkedIn and Twitter.


We return today to the new standard for lease accounting, and the profound effects that new standard can have on certain filers. Today we’re going to look at the retail sector.

The retail sector intrigues us because those firms lease huge amounts of space for their stores. So once the new leasing standard (ASC 842) went into effect at the start of this year, and firms had to start reporting all those costs on the balance sheet — what happened to the balance sheet of retailers?

To explore, we compiled a peer group of 21 large retailers to study. Then we visited the Data Query page and looked at total liabilities per quarter, from the start of 2016 through first-quarter 2019. See Figure 1, below.



Look at that spike at the end of the chart. Liabilities jump 18.6 percent — from $354.6 billion at the end of fourth-quarter 2018, to $420.5 billion for first-quarter 2019.

We also know that operating lease liabilities in first-quarter 2019 were $72.4 billion. So if you do the math, all of the increase in liabilities for these retailers came from adopting the lease accounting standard. (In fact, other liabilities actually fell by a small amount in the first quarter.)

But wait, there’s more! ASC 842 also requires firms to report the value of leased items as a “right of use” asset, to offset those liabilities. So we also looked at what the retailers were reporting for total assets.

As you can see in Figure 2, the same spike happened for assets. They jumped $61.79 billion in Q1 2019, an increase of 12.3 percent.



Again, this is entirely due to the retailers reporting right-of-use assets on the balance sheet. Those ROU assets totaled $66.4 billion in Q1 2019. So just like liabilities for this group, assets actually would have declined at the start of this year had it not been for a new accounting standard.

Let’s also remember that operating lease liabilities were $72.4 billion, while ROU assets were $66.4 billion — a difference of $6 billion. One question would be whether retailers are paying too much for those leased assets. That’s not necessarily the case, but considering the long-term decline in shopping mall traffic, it’s a legitimate point to ponder. If you found a gap like that in a specific retailer, you might want to follow up with questions about foot traffic, TTM sales, and the like.

Calcbench is preparing a more in-depth report looking at a larger set of retailers and ASC 842. That will be out in the next two weeks or so. Stay tuned.


Using Calcbench to Find China Exposure
Thursday, August 1, 2019

President Trump tweeted today that he will raise tariffs again on some $300 billion of Chinese imports coming into the United States, starting Sept. 1. What’s the Calcbench play on that news? A reminder of how you research firms’ exposure to China in our databases!


One place to start is our Segments, Rollforwards, and Breakouts page. This is where you can research what firms report by various sub-categories, including geographic and operating segments.

For example, Figure 1 below is a look at the disclosures by geographic segment that Apple ($AAPL) makes. Apple only reports this segment revenue annually, not quarterly; but it does report both revenue and property, plant & equipment.



The PPE number is especially interesting to us, because Trump’s tariffs won’t affect Apple sales in China; they will only affect goods manufactured in China and then imported back to the United States. Apple’s PPE investments in China give us a sense of its manufacturing capacity there, which can give you a sense of the hit to sales that tariffs might cause here.

If you’re looking at a group of companies, be warned: the results can get unwieldy if you don’t narrow your search parameters. For example, if you search segment disclosures among the S&P 500, Calcbench will give every segment reported by every firm its own line.

To avoid that, you want to enter text in that “Filter” field at the top of the Segment column — and you might need to use some creativity. Obviously you can enter “China” or even just “Chi” to filter the results, but you might also want to enter “Far East,” “APAC,” “Hong Kong” or similar phrases.

Look closely at the results from those filters, too. For example, we’ve seen “China” return “China excluding Hong Kong” and “Asia excluding China.” You’d want to make note of those results and continue searching accordingly.

Figure 2, below, shows some results from the S&P 500, this time for Q1 2019. Again, we see some firms reporting both revenue and PPE. We also see Boeing reporting “Asia other than China,” and thank the company for proving the point we just made above.



Using the Segments page, you could identify firms with large exposure to China (say, ranking them by PPE or assets in China) and then tailor your investment strategies accordingly.

Narrative Discussion

You can also visit the Interactive Disclosures page to search for footnote discussion of China, tariffs, trade tensions, or anything else, really. Simply select the company (or companies) and the period (or periods) that you want to research; and then type “China” or “tariffs” or whatever into the text box on the right side. See what results come up, and go from there.


Leasing Details: The Comcast Example
Tuesday, July 30, 2019

Our exploration of the new accounting standard for leases continues today with a look at how companies can adopt the new standard’s disclosure rules, yet still not report leasing costs and assets specifically on the balance sheet.

Yes, that’s possible. Case in point: Comcast Corp.

First, let’s remember what the new standard (ASC 842, Leases) seeks to accomplish. Companies must report the costs of operating leases as liabilities on the balance sheet, rather than keep those numbers tucked away in the footnotes. Companies are also supposed to report the value of leased items as right-of-use (ROU) assets on the asset side.

The leasing standard went into effect at the start of 2019. Since then we’ve seen many companies report those leasing assets and liabilities as individual line items on the balance sheet, clear and easy to find. (You can see our prior coverage of leasing disclosures in our blog archives, and don’t forget our special report on leasing costs among the S&P 500.)

One small point, however — companies don’t necessarily need to report leasing costs and assets as separate line items. Which brings us to Comcast ($CMCSA).

Technically, ASC 842 allows companies to include the amounts of lease assets and liabilities within other line items on the balance sheet, so long as the detailed amounts are clearly reported in the footnotes. That’s what Comcast does.

See Figure 1, below, which lists Comcast’s assets for the first two quarters of 2019. An item for ROU assets is not there.



But if you dive into Comcast’s footnotes, in the Accounting Policies section, Comcast says this about the effect of the new leasing standard: “Upon adoption, we recorded $4.2 billion and $4.8 billion for operating lease assets and liabilities, respectively.”

Then Comcast refers readers to Note 11, the Commitments and Contingencies section. There, Comcast reports $4.1 billion in ROU assets and $4.7 billion in liabilities (apparently each item declined a bit between start and end of Q1), which are rolled into Other Noncurrent Assets and Other Noncurrent Liabilities, respectively.

Other Noncurrent Assets were at $8.64 billion in Q1, and Other Noncurrent Liabilities were $18.81 billion. So clearly Comcast has indeed reported its leasing expenses. It just reported them in a way that leaves the numbers hard to find unless you know how the ASC 842 standard works, and where to look for the fine print.

More Details

Another fun fact: a company cannot report operating and financing leases in the same line item. So while Comcast reports its operating lease ROU assets in Other Noncurrent Assets, it reports the assets for its finance leases in the Property, Plant & Equipment line. Likewise, the liabilities for finance leases are rolled into Long-Term Debt.

All of that is disclosed in the footnotes. Comcast has done nothing wrong. Critics might say that Comcast still hasn’t fulfilled the spirit of ASC 842, since the point of the standard was to make leasing items more visible to investors.

Calcbench takes no view on that argument. We only want to note that companies can report numbers this way, and Comcast is not alone in doing it.

Calcbench offers a few solutions here. First, you can use our Interactive Disclosures page to search the footnotes, including text searches for “operating leases.” We always recommend reading the footnotes, so that’s one idea.

Second, you can use our Multi-Company page to search for leasing disclosures. You can search either by standardized metric or by XBRL tag, and we will pull those morsels of data from the footnotes, no matter what a company reports on its balance sheet.

Either way, you’ll get the data you need. Calcbench has you covered.


Now it is easy to get started doing fundamental analysis in Python with the Calcbench API client. If you are an equity analyst who wants to move beyond Excel this is a good place to start. 

Calcbench has added our Python API client to the PIP index. Assuming you have Python installed on your computer you can install the client with- pip install calcbench-api-client 

If you do not already have Calcbench credentials you can sign up for a two week free trial @ calcbench.com/join

Calcbench has created easy to read documentation for the Python API client @ http://calcbench.github.io/python_api_client/html/index.html

Once you have installed the API client and have your Calcbench credentials you can find examples of analysis @ https://github.com/calcbench/notebooks

If you have questions email me @ andrew@calcbench.com.


Students of corporate tax rates might have seen a front-page article in the Wall Street Journal today exploring how the tax cuts of 2017 have changed effective tax rates for large public filers.

We certainly noticed the article — because it’s based on Calcbench data!

Of course we’re flattered that the Journal would rely on us for their calculations. Calcbench has been tracking corporate tax disclosures, including effective tax rates and the adjustments that filers make to arrive at those numbers, for years. You can find them using the standardized metrics we offer on our Company-in-Detail and Multi-Company databases; or by searching text disclosures in our Interactive Disclosure page.

We recommend reading the full article, but the heart of the tale is told in these lines:

[Q1 2019] marked the third straight quarter [with median tax rates] below 20 percent, and is consistent with the goals and structure of the tax overhaul, which lowered the federal corporate rate to 21 percent from 35 percent. The law’s authors wanted to help U.S. multinationals compete in foreign markets and aid domestic companies with high tax burdens, while reducing the value of tax breaks and making it harder to achieve single-digit tax rates.

Much of the decline is coming because fewer firms are paying rates at the highest end, according to the Journal analysis.

Throughout 2018 and 2019, Calcbench has looked at specific examples of that trend. We found some firms with much higher effective rates during transitional periods in 2018; we found other firms with effective rates that plummeted; and still more firms whose effective rates have kinda sorta stayed flat. You can search our blog for “tax reform” and find a long list of posts on the subject.

One fine point: The WSJ article did include a line, “Companies typically don’t make public what they pay the Internal Revenue Service each tax year.”

Calcbench actually does track “Income Taxes Paid” from the Statement of Cash Flows. That is the amount of money a filer hands over to the IRS in a given fiscal year. It’s not the same as Provision for Income Taxes on the income statement, since that provision can include all sorts of deferred items or other adjustments.

But Calcbench has you covered for all things tax, no matter how specific you want to be. We got the data.


Downshifting in the Trucking World
Wednesday, July 17, 2019

We noticed that Knight-Swift Transportation ($KNX) updated its earnings guidance today, and the update was not good.

The company said adjusted EPS for the second quarter will likely arrive at $0.57 or $0.58, rather than the originally forecast $0.63. Third-quarter adjusted EPS will also likely decline from earlier estimates, although Q4 will move higher and 2020 looks good so far.

The downgrade was “primarily a result of the oversupply of capacity in the truckload freight market that resulted in greater than expected downward pressure on revenue per loaded mile,” the company said. “We expect these trends to continue through the back half of the year.”

OK, Knight-Swift, thanks for the tip. So how can Calcbench subscribers use that one morsel of insight to see what other transportation companies are saying about possible slowdowns?

Easily, actually. Here’s how.

First, you can find a company that files an earnings release or guidance by scanning our Recent Filings page on a regular basis. For example, we had Knight-Swift’s earnings guidance indexed in our database at 9:03 a.m. today, roughly one minute after the company had filed it with the SEC. So obviously you should sit in front of your computer all day long, refreshing our Recent Filings page constantly.

When you read that earnings guidance in Calcbench, it resides in our Interactive Disclosures page. Once you’re done absorbing the news, jump to our Company-in-Detail page, using the tab at the top of your screen. You’ll then see line-item financial statements for whatever firm you were just researching on the Disclosures page.

On the Company-in-Detail page, you can see several peers of the company you’re researching listed in the upper-right corner. See Figure 1, below, with the black arrow. In this case we’re looking at five peers of Knight-Swift: Hunt Transport Services; Schneider National; Old Dominion Freight; Werner Enterprises; and YRC Worldwide.



Click on those ticker symbols, and Calcbench whisks you to the financial information for those firms. Then you can hop-scotch back to the Interactive Disclosures page for any of them, to see what they said in their latest earnings release or guidance.

So that’s no more than six clicks, to go from discovering that Firm X has published an earnings release, to reading it, to finding its peers, to seeing whether they’ve said anything similar in their latest earnings releases.

At random, we picked Hunt Transport Services ($JBHT) as one of Knight-Swift’s peers to examine, and discovered that Hunt had also filed a Q2-2019 earnings release today. (For real, we didn’t plan that.) Lo and behold, Hunt reported lower earnings compared to the year-ago period, although revenue rose 6 percent to $2.26 billion.

Further down, however, Hunt talked about declining load volumes for its trucking business. Then again, there was no mention in this earnings release about future guidance (either better or worse), so we’re not quite sure what’s going.

Then again, Calcbench is just the data source — we don’t need to know what’s going on. You do. Our job is to help you understand what’s going on by providing timely, precise, easily located data. This is one example of how we do that, day in and day out.


Devout readers of the Calcbench blog already know how much we love the new accounting standard for leasing costs. Now we have even more for those of you who also follow this subject closely: our latest in-depth look at leasing accounting costs among the S&P 500.

The new standard went into effect at the start of this year. It requires firms to report the costs of operating leases as liabilities on the balance sheet, and also to add a corresponding right-of-use (ROU) asset on the asset side.

In theory, leasing liabilities and ROU assets should offset each other. In practice, most firms have a discrepancy one way or the other between those two items — assets greater than liabilities, or liabilities greater than assets. Our paper examines the S&P 500 to see how large those discrepancies are.

The complete paper is available for download on the Calcbench Research page. Meanwhile, we have a few key findings here.

First, most firms do have discrepancies between assets and liabilities. Among the 382 firms in the S&P 500 that reported leasing items, only 21 had leasing liabilities and ROU assets in Q1 2019 where the values were exactly equal. Most firms had liabilities larger than assets, although a small number did have assets larger than liabilities.

To be clear — the discrepancies themselves are fine. They don’t violate financial reporting rules. The new accounting standard only aims to give investors a better sense of a firm’s assets and liabilities, and discrepancies are allowed. We just found lots of firms fitting that scenario.

Second, those discrepancies do add up. Collectively, those 382 firms had $475.2 billion in assets and $495.8 billion in liabilities. That means leasing liabilities exceeded ROU assets by 4.16 percent. The median firm had $434 million in assets and $446 million in liabilities, a difference of 2.69 percent. (See Table 1, below.)



When you examine specific firms those discrepancies can become significant, in either relative or absolute dollar terms.

For example, AT&T ($T) had $20.23 billion in assets, and $21.32 billion in liabilities. That is, its leasing liabilities were more than $1 billion larger than ROU assets. Meanwhile, Wynn Resorts ($WYNN) had ROU assets of $444.1 million, but liabilities of only $158.6 million.

Our report lists the firms with the largest differences in both absolute and relative terms. The names may surprise you.

Third, this new standard can have big effects on a firm’s balance sheet. Last summer we examined firms that were carrying large leasing liabilities off the balance sheet, under the prior accounting standard. We estimated how those firms’ total liabilities would increase if you added those off-balance sheet leasing liabilities onto the balance sheet. In some cases, total liabilities would increase 300 percent or more.

Now that the new standard is here, we revisited those same firms to see how their balance sheets actually did change in Q1 2019. Most of our predictions were close; a few were larger, and a few smaller.

Regardless, this standard can have a big effect on the balance sheet. That, in turn, has an effect on financial metrics such as return on assets or debt-to-equity ratios — all due to a change in accounting rules, rather than any change to business performance. (We did a deep dive on this issue just last week, looking at Chipotle Mexican Grille ($CMG), if you’re curious.)

Financial analysts need to understand and anticipate those changes in the firms that they follow. This research report provides a sense of what’s to come, and some specific examples that demonstrate the new standard’s practical effects.

You can also use Calcbench’s Company-in-Detail page or our Multi-Company page to further research firms yourself.

It’s a big change, this new lease accounting standard. Rest assured, Calcbench is on top of it and can give you the data you need, every step of the way.


We often talk about the new lease accounting standard on this blog. Today we’re going to explore one specific example of the consequences of the new standard — that is, how a change in accounting rules can lead to changes in a firm’s financial and operating metrics, without any change in actual finances or operations.

Fellow data devotees, we give you Chipotle Mexican Grill ($CMG).

As you might know, the new lease accounting standard requires firms to report the value of operating leases on the balance sheet. The cost of a firm’s operating leases shows up in the liabilities section, while the value of those leases appears in the asset section as a right-of-use (ROU) asset.

For retailers, who lease lots of space, those numbers can be substantial. Since important performance metrics like a firm’s return on assets or its debt-to-equity ratio derive from total assets and liabilities, that means any big shift in total assets or liabilities will also change those metrics.

Chipotle is an excellent example of this. In relative terms, its leasing obligations are substantial. So when it implemented the new standard in Q1 2019, the size of its balance sheet ballooned. Total assets more than doubled from $2.26 billion at the end of 2018 to $4.63 billion in Q1. Total liabilities went from $824.18 million to $3.14 billion — an increase of (gulp) 281 percent.

See Figure 1, below. We zoomed into the liabilities because that’s the bigger shift, but you can also see the shift in total assets near the top.



So what does this mean for Chipotle’s performance metrics? Lots.

We’ll first look at return on assets, calculated as net income divided into total assets. To smooth out any seasonal changes, we’ll compare first-quarter 2018 (before the new lease accounting standard) to first-quarter 2019 (after the standard). See Table 1, below.

Q1 2018 Q1 2019
Net Income $59,446,000 $88,132,000
Total Assets $2,097,444,000 $4,625,482,000
Estimated ROA* 11.3% 7.6%

That’s a steep drop in ROA even after a quite respectable jump in net income, all because a new accounting standard changed the location of where Chipotle reported a number.

Chipotle’s debt-to-equity ratio, calculated as total liabilities divided into total shareholder equity, also changes. See Table 2, below.

Q1 2018 Q1 2019
Total Liabilities $733,399,000 $3,141,683,000
Total Equity $1,364,045,000 $1,483,799,000
Debt to Equity 0.54 2.12

In both cases, we have significant changes in performance metrics without any comparable shift in, ya know, actual performance. This sort of thing will happen to all firms as they adopt the new lease accounting standard — although as Chipotle demonstrates, it will happen to some firms much more severely than others. Changes in those metrics can also have real consequences, such as triggering a debt covenant or perhaps influencing the strategy of some automated trading algorithm out there.

Calcbench automatically presents debt-to-equity ratio when you examine a firm’s balance sheet in the Company-in-Detail page. You can also search for ROA and debt-to-equity in our standardized metrics in the Multi-Company page. And don’t forget, we have leasing research galore on our Research page.

* We annualized Net Income to project the total ROA


The consequences of tax reform in 2017 continue to be seen today, 18 months after Congress cut the corporate tax rate from 35 to 21 percent. Case in point: Casey’s General Stores ($CASY), which filed its latest annual report on June 28.

Casey reported broadly pleasing numbers: revenue growth up by 11.5 percent, cost of goods sold up by 11.7 percent, other operating expenses up by only 8.4 percent. Income before taxes was reported at $263.4 million, a 22.8 percent increase from 2018.

Then we get to the tax line item.

As you can see from Figure 1, below, Casey’s tax payments have bounced up and down over the last three years, and that has had an enormous effect on net income.



Taxes yo-yo’ed from a payment of $92.2 million in 2017; to a benefit of $103.5 million in 2018, the first full year of corporate tax reform; back to another payment of $59.5 million in 2019.

So yes, Casey’s is paying less in taxes from here forward thanks to tax reform — but all of its growth in net income came from that corporate tax cut going into effect in 2018.

Moreover, once we read the details via our Interactive Disclosure viewer, we find that most of that tax benefit ($98.2 million of the $103.5 million total) comes from a one-time revaluation of Casey’s deferred tax assets and liabilities. It’s not as if the firm received a $103.5 million rebate check in the mail, which then went to opening more general stories.

Fundamentally, Casey’s revenue is growing, but quite as fast as cost of goods sold, operating expenses, depreciation and amortization, or interest. Hence pretax income in 2019 ($263.4 million) is down 24.4 percent from where it was in 2016 ($348.7 million).

Only a generous accounting maneuver from tax reform let Casey’s hit last year’s net income out of the park. That maneuver is gone, and now Casey’s is struggling at bat.


The Latest Share Repurchase Data
Thursday, June 27, 2019

Calcbench just dropped a new report about firms’ spending on share repurchase programs, perhaps confirming what you already suspected — yep, corporations are spending a lot of money buying back shares.

We examined seven years’ worth of data, charting how much all U.S.-listed firms spent on share repurchases from the start of 2012 through first-quarter 2019. The full report is available for (free) download, and we’ll recap a few highlights here.

First, firms have been spending huge sums on buybacks: $4.95 trillion over the 29 quarters we examined, and on a per quarter basis, that spending has increased over time. In 2012, for example, quarterly totals fell somewhere from $100 billion to $150 billion. By 2018, quarterly totals were north of $200 billion. See Figure 1, below.



Second, a small number of large firms account for a big part of all money spent on share repurchases. For example, of the more than $220 billion spent on share repurchases in Q1 2019, five firms (Apple, Oracle, Pfizer, Bank of America, and Cisco Systems) accounted for 25 percent of all money spent.

Third, buyback spending soared starting in fourth-quarter 2017, even as spending on R&D and capital equipment stayed relatively flat. See Figure 2, below.



Yes, capex spending did rise in 2018, and R&D fluctuated a bit — but neither of those trends are anywhere near the climb that buyback spending saw starting at the end of 2017. That’s when Congress enacted its steep cut in corporate tax rates. So those who say Corporate America then spent all that newfound money on share repurchase programs have data on their side.

The report also…

  • Lists the companies that spent the most on buybacks (Apple topping the list, of course);
  • Tracks “share buyback yield,” which essentially measures how much of a firm’s market cap is acquired in a repurchase;
  • Compares median and mean dollars spent on repurchases;
  • Compares repurchases versus dividends as ways to funnel value to shareholders.

Be sure to visit our Research page to see prior years’ share repurchase analyses, going back to 2014.


J.M. Smucker Co. ($SJM) filed its annual report earlier this week, and at first glance the numbers looked, shall we say, less than sweet.

Net sales rose by 6.5 percent to $7.84 billion, but Smuckers’ cost of goods sold rose even faster, which led to gross profit only rising a modest 2.9 percent. Then came SG&A costs, amortization, and the always-popular “other” costs, all rising compared to the year-prior periods, and suddenly, this week’s numbers were not looking good. See Figure 1, below.



Most interesting, however, is this: $97.9 million in goodwill impairment, and another $107.2 million in impairment to other intangible assets.

Hmmm. We’re always game to nose around a company’s impairment charges, so we fired up the Interactive Disclosures database to look.

Smuckers does a respectable job disclosing where those goodwill impairments happened within its food product empire. We can clearly see that the $97.9 million impairment to goodwill happened in its U.S. Retail Foods operation, and also that Smuckers had a goodwill increase of $617.8 million in its Pet Foods operation.

Remember that part about the pet foods, because we’ll return to it later.

Further down, Smuckers says this about the impairments to its other intangible assets—

[W]e made some decisions related to certain brands resulting in a reduction in our long-term forecasted net sales of certain indefinite-lived trademarks within the U.S. Retail Pet Foods segment, excluding the acquired Ainsworth business. As a result of the strategic decisions made at that time, the reduction in long-term forecasted net sales for these indefinite-lived trademarks… resulted in an impairment charge of $107.2.

So, wait — Smuckers impaired $107.2 million of intangible assets related to the Pet Foods segment, but also increased the goodwill in that segment by a whopping $617.8 million? What’s that about?

The crucial detail is “excluding the acquired Ainsworth business.” We jumped from the Goodwill disclosures to the Acquisitions disclosures, and found that at the beginning of Smuckers’ 2019 fiscal year it acquired Ainsworth for $1.9 billion. For those unfamiliar with Ainsworth, Smuckers helpfully notes that “the majority of Ainsworth’s sales are generated by the Rachael Ray Nutrish brand, which is driving significant growth in the premium pet food category.”

This is also where Smuckers gives up the purchase price allocation (PPA) for the Ainsworth deal, and that’s where we find that Smuckers included $617.8 million in goodwill, plus another $1.26 billion in other intangible assets. So almost all of the Ainsworth deal’s $1.9 billion net purchase price is tied up in goodwill, licensing agreements, trademarks, and so forth. Thirty-two percent of the deal price is tied up in goodwill alone — which may be reasonable, if you believe that Rachel Ray has brand appeal and customer loyalty.

String all of those disclosures together, and a certain logic emerges. Smuckers decided to bet big on Ainsworth to revitalize the Pet Foods division; and as part of that strategic shift, put a few long-standing intangible assets out to pasture.

It’s worth noting that those two impairments equal 22.1 percent of Smuckers’ $928.6 million in operating income. If those two charges hadn’t hit Smuckers’ income statement, operating income would have been $1.13 billion — the highest since 2016.

Here in the real world, however, that didn’t happen. Smuckers made a big bet with its Ainsworth deal. That harkens back to our Calcbench Masterclass earlier this spring with Jason Voss, who encouraged people to connect numbers to narrative.

This is Smuckers’ connection. Let’s see how sweet things look in another 12 months.


Not Much Fizz in LaCroix Right Now
Tuesday, June 11, 2019

The bubbles seem to have burst for National Beverage, maker of LaCroix soda water.

National Beverage, delightfully tickered as $FIZZ, took a 10 percent hit to its stock price on Tuesday. Why? Because a new lawsuit has emerged against the company, alleging that senior executives were preparing to declare that LaCroix soda cans are free of the toxic chemical Bisphenol A — which, the plaintiff in the lawsuit says, is misleading.

The plaintiff is a former National Beverage executive, Albert Dejewski, who also says that when he tried to raise his concerns to management, the company fired him.

Now, whistleblower complaints against large companies are not new, and for the record, National Beverage denies any wrongdoing. But the lawsuit did prompt a flurry of analyst notes about the company and its prospects, which don’t seem to rosy right now. (One analyst diplomatically called National Beverage “effectively in free fall.”)

So what do the numbers say? We pulled up the Company-in-Detail page for $FIZZ and looked.

Figure 1, below, compares National Beverage’s most recent quarterly filing to the year-ago period. Pretty much every number is moving in the wrong direction: revenue down, cost of sales up, gross profit down, SG&A expenses up, pretax income down. Heck, even the company’s provision for taxes is up. How often do you see that since Congress cut corporate taxes 18 months ago?



Then we jumped over to FIZZ’s footnote disclosures. Nothing to leave you feeling refreshed in those filings, either.

Sales by case volume were down 4.1 percent, “principally due to widespread media coverage of litigation regarding the marketing and labeling of LaCroix” — and those were prior lawsuits alleging contaminants in LaCroix, not to be confused with this whistleblower retaliation lawsuit filed this week. Costs were up due to higher fixed costs, including the price of aluminum and freight shipping.

The company’s cash position is still rising, but it rose only $19 million in the most recent quarter, compared to rising $26.2 million a year earlier. The company also reported a decrease in working capital because of a special cash dividend paid to shareholders last November that cost $135.2 million.

So perhaps surprising nobody, LaCroix’s share price has been tumbling for the better part of a year: from $124 per share last November, to $47.50 this week.



The firm’s last 10-Q was filed on March 7 — which means its next earnings report should arrive any day now. Let’s see what happens when the company cracks open that can.


You may have seen that article in the Wall Street Journal this week about growth in sour loans among big banks, led by credit card debt. According to data from the FDIC, commercial and industrial loans more than 90 days overdue surged by 22.8 percent, while write-offs of credit card debt jumped by $543 million in the first quarter.

That’s what data at the FDIC tells you. So what can data from Calcbench tell you?

To be clear, we don’t track all the same information that banks report to the FDIC. Information about gross and net charge-offs, however — we do track that, since banks disclose that data in their SEC filings. So we built a simple model to let you view charge-off information over time.

See the image below. We created a model in Excel using formulas that pull charge-off data from our databases. All you need to do is enter a bank’s ticker symbol in the upper-left field, and Calcbench does the rest.



In this example from Capital One Financial ($COF), you can see that net charge-offs have been piling up for the last few years, although first-quarter 2019’s $1.6 billion in charge-offs were slightly less than Q1 2018’s amounts. A financial analyst could use this model for any number of banks (we did) from Citigroup, to Wells Fargo, to Bank of America.

We also want to call out that this model tracks cumulative changes in charge-offs — which can be tricky to calculate, because Q4 numbers typically aren’t reported separately; they’re bundled into year-end totals. Our model automatically tracks cumulative amounts for the first three quarters and then subtracts that from the year-end total, so you can see Q4 on a stand-alone basis. (This harkens back to what Jason Voss said in our financial analysis master class earlier this year, about tracking financial disclosures over time.)

So how can you get your hands on this model? Just ask us at us@calcbench.com. We’re happy to share.

We also have, or are developing, other models that work in Excel, pulling data directly from our archives into a spreadsheet for easy analysis. If you have ideas for what you’d like us to build, let us know.

And of course, you can always tinker with your own models using our Excel Add-In. We have a whole YouTube video about how to do that.



Research Paper: Capex Spending
Monday, May 20, 2019

Financial analysts looking for more PPT decks to read, Calcbench has your back! We just posted a new research paper looking at trends in capital expenditures for most of the last decade.

The full paper (11 pages) is available for free on the Research Page of our website. We crunched the data on more than 9,900 firms that have reported “capex” spend since 2010, with a deeper analysis into spending trends since 2013.

We encourage you to read the full report, and meanwhile, we also have some spoilers about the primary findings here.

First, as a whole, capex spending is on its way down. Spending among all 9,908 firms peaked in 2015 at $1.236 trillion, then drifted downward to $1.102 trillion by 2018.

Second, the biggest capex spenders are BIG spenders. The U.S. firms spending the most on capital equipment this decade are, in order:

  • Exxon Mobil
  • Chevron
  • AT&T
  • Verizon Communications
  • Berkshire Hathaway
  • Walmart
  • Intel
  • Apple
  • Google
  • Comcast

The spending of those 10 firms in 2013-18 ($926.34 billion) accounted for 13.7 percent of all capex spending, among our entire sample of 9,908 firms ($6.764 trillion). In every year of that six-year period, at least eight of those 10 firms were among the year’s 10 biggest spenders.

Third, concentrated spending has held remarkably steady since 2013. Capex among the S&P 500 accounted for 50 to 55 percent of all capex every year, 2013-18. Throughout that same period, the 100 biggest spenders (regardless of which firms they were) accounted for progressively more of all capex spend.

(As an aside, be sure to read the Wall Street Journal article today about declines in capex spending among large firms, with data provided by yours truly.)

Fourth, average spending among the S&P 500 was actually drifting downward until a jump in 2018; and average spending among non-S&P 500 filers accelerated even faster. Among the big firms, average spending rose 10.6 percent from 2013-18, but largely due to a notable increase in 2018. Among smaller firms, the rise was 54.5 percent.

Fifth, the number of firms reporting capex spending dropped sharply last year — from 5,844 to 4,295. That could explain why average spending is rising among various groups, even though total spending is falling: the decline in firms reporting any capex spending at all is falling faster than the decline in overall spending, so averages get larger even while absolute numbers get smaller.

We’ll keep doing more analysis here, and we can share cuts of company-specific data upon request. Meanwhile, down the report, read our findings, and ponder what it all might mean for 2019 economic performance.


Psst: Got Any Weed?
Thursday, May 16, 2019

Canadian weed company Tilray ($TLRY) filed its most recent quarterly earnings report this week, and for all the industry enthusiasts’ talk about the potential for revenue and income, another thought struck us while blazing through Tilray’s balance sheet.

Has anyone noticed the inventory these businesses have?

Seriously. Tilray’s inventory went from $16.2 million at the end of 2018 to more than $48.7 million by March 31. The company’s value for “finished goods,” because apparently that’s what we’re calling it these days, rose by 510 percent. Take a look at the disclosure below.



That’s at least enough weed to do a live re-enactment of Pineapple Express. Maybe even a sequel, which is long overdue, by the way.

Legalized weed is still relatively new in Canada (or anywhere else that isn’t Amsterdam), and Tilray is a relatively young company. Since it started filing quarterly statements in mid-2018, however, its inventory has increased dramatically.

Clearly Tilray is also planting a stake in the ground, since its PPE has nearly doubled in nine months too — from $65.7 million last summer, to $129 million today. Most of that investment came in buildings and leashold improvements (up from $51 million to $75 million), or in lab equipment (up from $6.1 million to $20.1 million). Grow operations don’t come cheap, after all.

Those disclosures from Tilray got us wondering — who else has lots of weed? How much do they have? So we kept searching our Company-in-Detail database for more nuggets of information.

Dope Information

There’s Cronos Group ($CRON, naturally); they disclosed $8.5 million in inventory at the end of 2018, most of it as “works in progress,” which certainly puts a new spin on the phrase “growing like weeds.”

Really interesting: Cronos discloses not only the value of its grass, but also the physical amount it has. That means you can reverse engineer the value per ounce. Not that we have any experience with weed purchases. We swear.

Anyway, see Figure 2, below. (Note that the amounts below are Canadian dollars, which we calculate at 1.34 CAD equals 1 USD.)



Assuming 2.2 pounds per kilogram, and at 16 ounces per pound, that’s 6,582 ounces of inventory, valued at $109.70 per ounce — which is, we’re told by smokers who know, “an amazing price.” Then again, we assume there is a markup before anything reaches the retail counter.

Meanwhile, CannTrust ($CTST) reported $25.9 million in inventory, about 45 percent weed and 55 percent extracts. That’s triple the inventory from 12 months ago, when it stood at $8.7 million.

You can find other cannabis businesses (more than you’d expect) either by looking for related firms listed in the upper-right corner of the company you’re studying; or by going to the Interactive Disclosures page and searching “cannabis” in the text-search field.

After that, it’s reefer madness.




Open Letter: SEC Proposed Rule for BDCs
Wednesday, May 15, 2019

The Securities and Exchange Commission is proposing rules that would modify the registration, communications, and offering processes for business development companies (BDCs) and other closed-end investment companies under the Securities Act of 1933. As part of that proposal, the SEC has called for public comment on its amendments.

Calcbench recently posted its response, the text of which is below. Have you? The comment period ends on June 10. We encourage you to provide your feedback to the Commission. Here’s the link.

_____________________________

Dear Acting Secretary Countryman, U.S. Securities & Exchange Commission,

We, the founders of Calcbench, write this letter to express our support for S7-03-19, specifically the structured data reporting provisions that require Business Development Companies (BDCs) to tag their financial statements using Inline eXtensible Business Reporting Language (XBRL). Currently XBRL is mandated for corporate filings by the Commission. Yet BDCs traditionally have been exempt. The proposed changes to Securities Act 4 would close this loophole and move BDCs toward more modern, transparent, and accessible reporting.

Since 2009, when the Commission adopted rules requiring operating companies to submit information from the financial statements accompanying their registration statements and periodic and current reports in a structured, machine-readable format using XBRL format, use of XBRL by investors has grown exponentially. Much of this has to do with InLine XBRL, which has improved the quality and usability of XBRL data. Today, some of the largest asset managers, most influential researchers, and top public companies are using XBRL to gain critical insights. How do we know? Many of them are our clients.

Calcbench, our company, is powered by XBRL. With just a click of a button or a data feed, we provide investors, researchers, and corporations with an interactive database to access face financials and hard-to-find information hidden in the dark corners of the footnotes. Our customers use this XBRL data to get accurate, timely information to accelerate and refine their analysis.

While it behooves us to give our clients access to BDC-tagged information, and we believe in rule parity for public companies, the primary reason we believe BDCs (and frankly all investment companies) should have mandatory Inline XBRL tagging is that XBRL works. In a nutshell, investment firms can get what they want from the filings directly, from the source that filed it. They also get it FAST. There is no delay in obtaining the information once it is in the public domain. This makes capital markets more efficient.

While less publicized, one of the critical aspects to the XBRL mandate is investor protection. We believe the transparency that XBRL enables investors to do their own research quickly and conveniently to ensure that they are understanding the risk that they are taking purchasing BDCs.By our estimate, total stock market dollar volume in BDCs is roughly $165 million per day. These are neither small firms nor inadequate dollar volumes that are exchanged.

In conclusion, we believe that reporting in a structured data format makes financial information easier for investors to access and analyze. Given that XBRL is the standard by which all other public operating companies file, we believe there should be consistency in BDC reporting to ensure accuracy and timely results.

Sincerely,

Pranav R. Ghai and Alexander M. Rapp

Co-Founders, Calcbench Inc.


General Motors and Workhorse
Friday, May 10, 2019

We noticed the other day that General Motors ($GM) has been talking up the idea of selling its factory in Lordstown, Ohio, to Workhorse ($WKHS), an electric-vehicle business that supposedly wants to use the factory to make electric trucks.

You might already know some of the history here. Last November, GM announced that it would eliminate 14,000 jobs across the whole company and “unallocate” several factories — including the Lordstown plant, which employed more than 1,200 people until it closed its doors on March 8.

Since then, General Motors, the autoworkers’ union, and politicians have been scrambling to figure out the factory’s ultimate fate. Technically GM cannot close the plant without first negotiating with the union; hence invention of the word “unallocating” instead. GM has also been trying to sell the plant so it can get that liability off its balance sheet.

Including, apparently, an electric vehicle firm called Workhorse.

How feasible is that sale, really? We fired up the Calcbench databases to take a look.

First, our Company-in-Detail page shows some pretty sparse financials at Workhorse. The company had only $2.85 million in cash and equivalents at the end of first-quarter 2019, and only $7.8 million in current assets. More than half of that amount was tied up in inventory and prepaid expenses.

Meanwhile, Workhorse also has more than $9 million in warranty liabilities, plus $8.4 million in long-term debt. Stockholders’ equity stands at negative $18 million.

Then there’s the income statement, which is no better. Workhorse at $364,000 in sales in the first quarter. Aside from a stretch in mid-2016 to mid-2017 where sales were in the low several millions per quarter, revenue has been pitiful. Like, $11,000 in the third quarter of 2018 pitiful.

Then we went to the Interactive Disclosures database to see what Workhorse said about its controls and procedures. Workhorse wins points for candor:

We identified the following material weaknesses in our internal control over financial reporting as of December 31, 2018:
  • The Company has not established adequate financial reporting monitoring activities to mitigate the risk of accounting errors.
  • The lack of a fully implemented enterprise resource planning (“ERP”) system caused over reliance on manual entries.
Because of the material weaknesses noted above, management has concluded that it did not maintain effective internal control over financial reporting.

Workhorse did say it has hired an accounting firm for a top-to-bottom review of its accounting systems, and vowed to finish an ERP implementation to get a grip on its inventory and purchase order issues.

Our disclosures database also has the auditor’s opinion from Workhorse. The company’s firm is Grant Thornton, and it also gives a thumbs down to Workhorse’s internal controls, for the same reasons management cites.

Most interesting, however, might be the $35 million that Workhorse has borrowed from Marathon Asset Management, a hedge fund that apparently sees a horse worth betting on here.

In theory, Workhorse could ask Marathon for enough capital to buy the Lordstown plant, especially if GM is under political and business pressure to sell the plant pronto.

That said, Workhorse has a lot of disclosure about its financing from Marathon. For example, Workhorse has a debt payment of $10 million due to Marathon at the end of 2021. You can read all the details about the Workhorse-Marathon relationship in the Long-Term Debt disclosures and several other parts of Workhorse’s report. As always just type “Marathon” into the text search box on the right side of the page, and Calcbench will pull up whatever it can find.

So overall — this sale to Workhorse seems like a long-shot bet. A lot of numbers would need to line up just right.


How to Find Earnings Release Data
Monday, May 6, 2019

Calcbench subscribers who use our email alerting function know it’s that time of the quarter again — the time for a flood of earnings releases, quickly followed by quarterly reports. So today let’s have a refresher course in all the ways Calcbench can help you digest the data in earnings releases.

First, as we just mentioned, you can configure your account to receive email alerts any time a company that you follow files an earnings release. Just visit your account preferences at https://www.calcbench.com/account/emailalertpreferences, where you’ll see a list of all our standard peer groups, any peer groups you’ve created, or individual companies you follow. Along the top are the types of alerts available for each group — including earnings releases.



Check that box for whatever companies you want, and within minutes of those companies filing an earnings release, you’ll see an email from Calcbench giving you the head’s up.

Second, you can use our Interactive Disclosure Viewer to read those earnings releases once they’re filed. In the pull-down menu on the left side of that page, you’ll see Earnings Releases as an option under “Choose Footnote/Disclosure Type.”

So on that page, first select the companies and the period (or periods) you want to search. Then select “earnings releases” on the left, and those earnings releases will appear on your screen. Notice you can also choose other options such as “Guidance Update” or “Guidance/Outlook” if you want to narrow your search to companies changing previous guidance. See Figure 2, below.



As always with this page, you can also enter text in the box on the right side, too; in case you wanted to search, say, all earnings releases in the S&P 500 for first-quarter 2019 that use the word “tariffs.” We can give you those results in a jiffy.

Third, our Company-in-Detail page can show you any non-GAAP metrics or other guidance a company might have included in an earnings release, along with the corresponding data filed in the quarterly report.

Simply select the “Show Guidance & Non-GAAP Metrics” button when viewing a company’s financial details. Figure 3, below, shows an example from Telsa’s ($TSLA) 2018 annual report.



Fourth, download and read our Earnings Release Analysis Guide if you want an in-depth look at earnings releases and how Calcbench processes that data. It’s 20 pages of all the background you might need on when earnings releases are filed, how companies typically present information in that document, and the tags Calcbench uses to bring that data to you clearly, quickly, and easily.


Following Restructuring Costs Over Time
Tuesday, April 23, 2019

Earlier this month we had a post reviewing Corporate America’s restructuring costs, including a list of the largest restructuring costs that various companies have reported over the last three years.

This week we’re going to walk through the details of one specific restructuring project. With Calcbench’s Interactive Disclosure Tool you can do that, to see whether a restructuring effort is growing larger or smaller over the years.

Our example is Kimberly Clark Corp. ($KMB). Why? Partly because Kimberly reported more restructuring costs in 2018 than any other firm in the S&P 500, when it disclosed $4.18 billion in costs. A significant chunk of that amount was due to a global restructuring program Kimberly announced in January 2018.

Well, Kimberly Clark just filed its first-quarter 2019 report this week. That gives us the chance to look back at four quarters’ worth of restructuring costs since the plan was announced.

Comparing Notes

The actual comparing of one period’s disclosure to another is easy. First, find the disclosure you want in the Interactive Disclosure Tool. In this case, we’re studying Kimberley’s “Exit or Disposal Cost Obligations,” although other firms might sometimes call this “Restructuring” or some similar name. Then you’ll see several tabs immediately above that disclosure: Add Previous Period, Show All History, and Compare to Previous Period.

Select the tab you want. Calcbench will then pull up the same disclosure for those prior periods. That’s all there is to it.

We first chose Compare to Previous Period. At the top of that second column you see a color-coded key: text shaded in red was in the previous filing, but deleted from the current document; text shaded in green was not in the previous filing, and added to the current filing. Take a look at Figure 1, below.



Some caveats: when you select Compare to Previous Period, you are reviewing changes to the text, rather than seeing the previous period’s actual filing. That’s why the text in the comparison column looks different, and the numerical values in that column aren’t tagged so you can trace them. You aren’t looking at Kimberly Clark’s actual Q1-2018 filing; you’re looking at a color-coded analysis of how that text differs from the Q1-2019 filing.

If you want to compare actual filings — that is, line them up in a more readable format for all — then you’re better served selecting the Add Previous Period or or Show All History tabs. They won’t give you the color-coded passages to see what’s changed, but they do let you line up the disclosures so you can bounce back and forth more easily.

See Figure 2, below. It shows the quarterly costs of Kimberly’s 2018 restructuring program for the most recent three quarters — but that’s only because we don’t have the space to show more. In the Interactive Disclosure Tool, you can scroll backward through time, to the start of the 2018 restructuring program and even earlier quarters before that, when Kimberly was disclosing costs related to a 2014 restructuring program.



What the Numbers Say

Start with Kimberly Clark’s original disclosure 12 months ago, when it first reported the 2018 restructuring plan and expected costs: “Workforce reductions are expected to be in the range of 5,000 to 5,500… Restructuring charges in 2018 are expected to be $1.2 billion to $1.35 billion pre-tax.”

Then came a breakdown of Q1-2018 restructuring costs in table format, which said net charges that quarter were $428 million — roughly $577 million in real charges, offset by $149 million in lower taxes and other offsets.

That was first quarter of 2018. Then you can scroll back and forth across other filings from 2018, to see how the totals keep changing. Kimberly does a good job with the disclosure, providing a breakdown of restructuring costs in more than a dozen line items, for both the period in question and year-to-date cumulative costs. See Figure 3, below.



Total costs related to this restructuring project were $1.036 billion, below the $1.2 billion estimate the company gave at the start of that year. In the Q1-2019 filing submitted this week, Kimberly estimates that 2019 costs will be $600 million to $750 million pre-tax.

How will Kimberly-Clark manage its restructuring oversight in 2019? Will it hit that goal or, like 2018, even finish below that number? We can revisit the issue 12 months from now — and with the Interactive Disclosure tool, also keep tabs on data along the way.


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