Diving into the 10-Q and other key filings

Michelle Ledereditor/founder footnotedml@footnoted.org@footnoted

Photo by flickr user Derek Keats

What's a 10-Q all about?

• At its essence, it's the quarterly earnings.

• But companies often bury things in the Q that are not in the earnings release.

• These could be subtle changes or not-so-subtle changes.

• Deadline is 40 days after the end of the quarter (for most companies).

How does 10-Q differ from 10-K?

• They are filed 3 times a year.

• The numbers are unaudited.

• 10-Qs tend to be shorter.• 10-Qs are less

standardized than the 10-K, making them trickier to navigate.

Photo by flickr user Featheredtar

10-Q table of contents

Focus on these key things

• Are the numbers in the earnings release significantly different than the 10-Q?

• Notes to consolidated financial statements (aka the footnotes)

• Legal proceedings

• Goodwill

• Exhibits, especially those starting with the number 10

Catch-all filing: the 8-K

• Filed for all sorts of reasons -- for everything from an earnings release, or investor presentation, to a CEO leaving suddenly after getting arrested

• Commonly thought of as a "material event,” which leaves lots of wiggle room

• Actual definition from SEC is "major event," which leaves even more wiggle room.

• Must be filed within 4 business days after the event

What to look out for:

• Companies burying non-earnings disclosures in an earnings 8-K

• Companies filing more than one 8-K on the same day, particularly in earnings season

• Companies using the same 8-K to make multiple disclosures

• Anything filed after 4 p.m. on a Friday

The Friday Night dump

• Very common for companies to take out the trash on Friday night after markets closed

• Also happens before a holiday, or during a major disaster (Hurricane Sandy) or non-business event (the presidential election)

• 8% of all 8Ks are filed after 4 p.m. on Friday!

Photo by flickr user wyofile Photo by flickr user WarmSleepy

Other key filings: ownership

• Forms 3,4,5 (ownership by directors,officers)

• 13D, 13G (5% holders)• 13F (institutional

investors)

Photo by flickr user marc falardeau

Other key filings: Going public

• Companies file an S-1 before going public.• This is often the first view of a private

company's financials.• Very common for a company to file 5 or more

amended S-1s before they go public• Facebook filed 8 amended filings before

going public last May.

Other key filings: M&A

• PREM14A: preliminary merger filing, filed by company being acquired

• DEFM14A: final merger proxy

• S-4 (securities in biz combination)

From the merger proxy

Merger docs: cheat sheet

• Often 200 pages (or longer) so need to pick and choose

• Background of the deal is almost always worth reading.

• Details on executive pay/perks also worthwhile

• Rearranging the deck chairs

Homework: Facebook earnings

• Facebook released its earnings a few weeks ago.

• Take a closer look at the release and give me three bullet points on what jumps out at you.