Winter 2012 Release Notes:
Mid-year 2012q2 data has been posted for all major report series:
-Industry Financial Profiles: 2007-2012q2
-Micro-Firm Profit and Loss series: 2007-2012q2
-US Market Research Reports: 2009-2012q2
-State-Metro Industry Market Reports: 2009-2012q2
-Industry Market Snapshots: 2010-2012q2
-Competitive Market Analyzer: 2012q2
December 2012 Release Notes
The December 2012 release incorporates new content for the real-time period ending 2012q2. Data with this time series indicates either a fixed time data point (for example, industry population) or a full year times series running from June 30, 2011-June 30, 2012. Both Financial and Industry Market reports retain their complete 3-5 year year-end data plus this additional 2012q2 data point.
The classification for Pizza Restaurants-Full Serve (722110.16) has been deleted due to the ambiguity of the classification. Data from has been folded into the classification for Italian Restaurants-Full-Serve (722110.0210).
Our taxonomy continues to operate with the NACS 2007 basis. Introduction of the official NAICS 2012 system, which makes relatively minor changes, is planned for our next release of year-end data in Summer, 2013. Our extended taxonomy (detailed business segments indicated by decimals after the official NAICS-6 codes) will continue.
The tightened roll-up protocol we introduced in June 2012 remains in effect. (For detail, see the June, 2012 Release Notes below.) However, we discovered that the new protocol continued to include data from offspring industries that did not have sufficient content to be included in rollup calculations. These have now been filtered out of all roll-up reports. As a result, some relatively small changes may be found in certain rollups of industry-wide financial reports, roll-up versions of NAICS-2-3-4-5 reports for specific sales class segments and in some detailed segment reports.
Small Business Counts:
In some instances, business counts in our Industry Market reports have been updated to correct technical errors made in the June 2011 release. Changes in these counts may affect small business average annual sales in the same report series.
PRIOR RELEASE NOTES
To avoid confusion regarding division display of negative value line items, adjustments were made to display "n/a" rather than negative ratios except in cases of negative net income.
Outlier Values: In August we completed and released our QC review of all Profit and Loss lines to improve consistency our financial statements, as detailed above. We have now completed the same process for balance sheet values. The process has reduced year-to-year variances while maintaining the integrity of the common size statements themselves. Narrowing filters naturally increases the stability of displayed values and changes numbers that may have appeared in prior releases.
August 2012 Release:
Micro-Firm Profit and Loss Series: Both the Sole Proprietor and Startup versions of the Micro-Firm Profit and Loss series have been subjected to a QC review similar to the Industry Financial series described above. However, because of the peculiarities of the sole proprietorship reporting format, parameters have not been drawn as tightly as is the case for the IF series, and the normalization process has been modified. This is largely due to complications caused by the Net Profit line in the Micro-Firm series, which (like IRS sole proprietorship reporting) includes all owner compensation, whether it represents strict profit or some form of labor in any of the other line categories: Cost of Sales; Wages-Salary; Commissions or SG&A. Broader line item variations in the Micro-Firm reports invariably result from varying levels and type of owner activity in day to day operations. For example, the owner’s Net Profit line may be 20% three years in a row, but the portion of that 20% that represents actual profit in one year might be total; the portion representing owner’s labor which would otherwise be classified as cost of sales might be half of the 20% in a second year; and the portion representing administrative work might be half of the 20% in the third. Due to the nature of standard reporting formats, more specific breakdowns of the composition of the Net Profit line are not possible. In addition, due to a programming error in the previous release, the previous Micro-Firm series release included some incorrect dollar content, which has now been revised across the board.
Industry Financial Profiles: After a final review round which eliminated previously unidentified outlier data points in <5% of the Industry Financial series reports, the entire series was re-released in August 2012. In addition, due to a programming error in the initial release, sales data was revised in some industry segments (2007-08-09 only). Reports accessed before the August release are not revised, and continue to bear a June 2012 release date.
Franchise Reports: Our new Franchise Report series will be posted on a slightly delayed basis in mid-August, with new releases each six months thereafter. Each Franchise Report will include measures for an individually selected franchise chain and its US industry counterpart, allowing the reader to easily compare overall industry trends against franchise performance. The metrics in the Franchise Report series will be comparable to those in the US Industry Market Report series.
June 2012 Release:
Since our last update in December 2011, customer feedback and our own internal review process have noted larger than usual year-to-year fluctuations in some financial reports.
In part, continuing ripples from the 2008 recession has generated less consistent profit and loss statements and balance sheets in many industry groups. This results from both relative economic instability and from concentrated efforts in some industry sectors to attain greater efficiencies. Either tendency can disrupt the consistency that is most comfortable for those reviewing aggregate financial statements.
However, two other factors also affected our reporting: The first involves the relatively relaxed parameters we have used to filter out outliers during our analysis process (see more on Outlier Values below). The second concerns widely varying line item allocation choices, especially in the profit and loss statement, among companies in some industries. In the past we have been reluctant to “normalize” these, but have now changed course (see more on Line Item Allocation below).
In response to these two factors, we are completing a four-month quality control review of our Industry Financial and Micro-Firm Profit and Loss reporting series. While with few exceptions previously displayed data was correctly analyzed and reported, we recognize that our previous approach to outlier data and line item allocations may have made the interpretation of the data more difficult than it should have been. Our quality control review process has addressed these and other issues, with major focus on the Profit and Loss section of reports.
Outlier Values: We have tightened our outlier parameters to improve consistency of numbers in our financial statement. This process has reduced year-to-year variances while maintaining the integrity of the common size statements themselves. Narrowing filters naturally increases the stability of displayed values and changes numbers that may have appeared in prior releases. In some cases, we have modified the composition of our sample pool. In others, we revised specific measures which were unduly influenced by outlier firms.
Line Item Allocation: We have undertaken a “normalization” process regarding subjective allocations of related line item data, especially in regard to the labor portion of Cost of Sales, Salary-Wages; the labor portion of Sales, General & Administrative; and, to a lesser extent, Benefits-Pension. Our review evaluated significant swings in the base data that reflect subjective allocation choices in company statements, rather than changes in expenditure. We found that in many cases, even within a given industry, choices to allocate the same expenditures could result in three or four different results in different company statements, significantly affecting our efforts to develop a common size P&L. The normalization process is aimed at smoothing some of these variances. For example, where we saw a dramatic drop in the labor portion of COS and a corresponding increase in Wages-Salary, we might have revised the allocations while maintaining overall compensation costs.
In small business sales classes, we also conducted a review of Officers Compensation and Net Profit, since these items often represent tax decisions rather than a real difference in operations. For example, a small firm that allocates 20% of revenue to officer compensation one year with 5% net profit, and 5% officer compensation the following year with 15% net profit has not performed differently so much as made different tax decisions. In such a case, we might have revised the allocations to normalize the year-to-year result, increasing year-to-year consistency. The most significant use of this process was in small service industries (such as offices of physicians, other professional or technical services) where a limited number of owner-operators or partners tend to capture a large share of compensation and profit.
The result of these changes is financial statements that appear more stable and are more easily interpreted, in most cases without much if any impact on the bottom line result. This process also necessarily means that some data displayed in prior years will change., Some troughs and spikes do remain; this is a normal result of industry fluctuations (especially around recessionary or high growth periods) and, quite often, the scale of business activity.
Roll-up Protocol: In the past, the industry-wide versions of our Industry Financial reports included all data available in any given year. For example, data for a specific sales class was included even if that particular sales class might not have been available in one or more other years of the report. This tended to exaggerate spike and trough values in industry-wide reports. Under our revised protocol, industry-wide reports include rolled-up data only from sales classes which are available in each of the prior five reporting years (in the new release, 2007-2011). Sales classes included in the NAICS-6 roll-up of a particular release are now listed on P1 of each NAICS-6 industry-wide report. This change tends to stabilize year-to-year data in the rolled-up reports. As additional sales classes become consistently available, they will be added to new NAICS-6 industry-wide and rolled-up NAICS-2-3-4-5 report releases.
In addition, NAICS 2-3-4-5 reports are roll-ups from those NAICS-6 industries for which we have complete (3-year or 5-year) data. Offspring industries applied to roll-ups will now be listed on P1 of NAICS-2-3-4-5 roll-up reports.
Treatment of Interest Income and Other Income: Certain industry sectors consistently reflect ambiguity and overlap between core Business Revenue, Interest Income and Other Income allocations. This issue is particularly prevalent in industries, such as Finance-Insurance, Real Estate and Management of Companies which rely heavily on all three. Differentiating these line items has in the past resulted in confusion around the display of the P&L breakdown and the Asset:Sales relationship (since the Sales portion is based on Business Revenue only). For this reason, all three income lines in the affected sectors (NAICS 52xxxx-53xxxx-55xxxx) are now collapsed into a single top-line Income item. Because of persistent inconsistencies in Cost of Sales allocations in financial statements, Cost of Sales has been fixed at zero for NAICS 522-523-525-55. The Insurance Agencies, Brokerages, and Other Insurance Related Activities (NAICS 5242) industry group does not exhibit any of these same income or Cost of Sales variances, and is not subjected to either of these special treatments.
Because of heavy and consistent dependence on Other Income in agricultural industries 1111xxx-Crops and some 112xxx-Animal Production (likely subsidy income) and in NAICS 813-Religious, Grantmaking, Civic, Professional, and Similar Organizations (likely non-program revenue and donations), we considered the aggregation of Other Income into Business Revenue in these industries, but did not make that adjustment in this release.