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

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What Does ‘Other’ Mean? An Example

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Another Tale, Buried in the Footnotes

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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
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Thursday, January 31, 2019
Talking About Huawei Exposure

Wednesday, January 30, 2019
Another Discrepancy in Reported Numbers

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Finding Revised Facts: Hertz Edition

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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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Casey’s Stores Has Story to Sell
Monday, July 2, 2018

Casey’s General Stores is a chain of convenience stores based in Iowa, with stores across the south and Midwest. Casey’s just filed its annual report last Friday — so today is its turn under the Calcbench microscope to how tax reform is both magnifying and masking its financial performance.

As you can see from the financials below, Casey’s saw annual revenue increase 11.8 percent last year, to nearly $8.4 billion. Alas, cost of goods sold increased even more: 13.7 percent. And this was the second consecutive year where cost of goods sold grew faster than overall revenue.

Further down the income statement, operating expenses grew by 9.44 percent— less than revenue growth (good), but depreciation and interest costs also outpaced revenue (bad). So income before taxes actually fell by 20.5 percent, from $269.67 million last year to $214.4 million this year. See Figure 1, below.

Normally that would leave Casey’s in an uncomfortable situation. Its effective tax rates for the prior two years were 34.1 percent and 35.2 percent, respectively. So if we split the difference and assumed an effective tax rate this year of 34.5 percent, that would lead to net income somewhere around $140.5 million: a decline of about 20.8 percent.

Except, of course, we don’t need to assume any effective tax rate for this year. We have tax reform!

As Casey’s explains in its tax disclosures, last year’s tax reform allowed it to revalue its deferred tax assets and liabilities, resulting in a one-time gain of $173 million. That, in turn, led to a tax benefit of $103 million.

Presto! Casey’s can now report net income of $317.9 million — an increase of 79 percent from last year, even as operating profit fell and the company has more than one expense item growing faster than revenues.

The big question is what Casey’s will do next year, after that one-time gain has ridden into the sunset. The company still has pesky problems with cost of goods sold compared to revenue growth, and other operating expenses within spitting distance of revenue growth, too.

Calcbench users can take that example and compare it to peers, if you follow this sector. Or financial analysts might want to ask about these trends on the next earnings call.

Then again, Casey’s stock has fallen from a high of $127 in January to $96 as recently as June. Maybe they’re already asking.

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