Friday, March 22, 2019
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Thursday, March 21, 2019
Tech Data’s Goodwill Adjustment

Tuesday, March 19, 2019
There’s Taxes, and There’s Taxes

Saturday, March 16, 2019
Adventures in Tax Cuts and Net Income

Monday, March 11, 2019
Big Moves in Goodwill, Intangible Value

Friday, March 8, 2019
CVS, Goodwill, and Enterprise Value

Thursday, February 28, 2019
Summary of Our Goodwill Research/ How-To

Wednesday, February 27, 2019
What Does ‘Other’ Mean? An Example

Thursday, February 21, 2019
Another Tale, Buried in the Footnotes

Wednesday, February 13, 2019
Low Latency Calcbench

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Now Streaming on Hulu: Red Ink

Thursday, February 7, 2019
Early Look at 2018 Tax Decline

Wednesday, February 6, 2019
You Revised WHAT, Netflix?

Thursday, January 31, 2019
Talking About Huawei Exposure

Wednesday, January 30, 2019
Another Discrepancy in Reported Numbers

Wednesday, January 30, 2019
Finding Revised Facts: Hertz Edition

Wednesday, January 23, 2019
GE Commercial Aviation Services: Bringing Numbers to Light

Monday, January 21, 2019
Differences in Earnings Releases and 10-Ks

Wednesday, January 16, 2019
The Importance of Textual Analysis

Tuesday, January 8, 2019
A Look at Climate Change Disclosures

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There has been a lot of activist investor activity in the Voltari (ticker : VLTC) corporation of late. Calcbench decided to look under the hood at some things that might pop up in a systematic analysis of the underlying fundamental financials of the firm. 

 We started by noting that the balance sheet shows a heavy cash burn. Given this rate of use of cash, the firm will likely run out in the summer or fall of 2015. 

In fact, the balance sheet only has total assets of $12 Million and negative book value (shareholders equity). It’s really not that interesting, so why would / should anyone care?


What isn’t on the balance sheet?  

Tax assets!   Using Calcbench’s Footnote tools, we were able to isolate the Deferred Tax Assets of $186.9 Million that the company has put into a Valuation Allowance. The language in the tax note goes further and states that the firm took a “full valuation allowance against its gross deferred tax assets because realization of these benefits could not be reasonably assured.”

This (likely) means that the firm does not expect to be profitable in the near future.  Further, given their cash burn, they will likely have to go the financing route and get some cash soon.  

So we thought, that it might make sense to do an analysis of a theoretical case …

** Disclaimer ** CALCBENCH is not a valuation company. You need to do your own homework.

In a scenario where the company “Duke & Duke” is a buyout candidate, a buyer Beeks Industries would likely value the deferred tax assets.  

Beeks Industries was profitable in 2014 .  It profit before tax at 500M USD.  Tax rate is 35%.

So their tax bill is 175 M so  their net income is 325 M (simplified scenario)  

Beeks Industries  buys Duke & Duke.  They get the Tax Loss Carryforward.   Assume tax loss carry is 100 M and Beeks is able to capture all of it (HOWEVER, IRS Rule 382 may prevent 100% capture).

Beeks Industries  makes 500M profit (again) in 2015.  This time, they apply the Tax loss carry forward of 100M to their profit and now have a profit of 400 M.  Their tax rate of 35% means that they now owe 140M in taxes instead of 175M.  So the carry forward only saved them 35M USD.   

Therefore, it only makes sense to buy Duke&Duke if the price is less than 35M USD (assuming that there are no other assets in the equation).


So what does this mean for a firm like Voltari?  If you look at their shares outstanding in Calcbench, you find that there are 4.668 Million shares outstanding. Assuming that you value the firm at ZERO given it’s negative book value, you should only pay 35% of the valuation allowance of $186,967,000, or about $65 M USD.

So that means that the firm might be worth about $14 under a perfect scenario. OR maybe it is worth ZERO as the likelihood of running out of cash is VERY high. In any case, this is likely not a suitable investment for most people.  

 Now using Calcbench, can you identify firms that have similar characteristics?? 

Hint: You can… just sign up.

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