SEC Filings Master Class - Form 10Qs by Michelle Leder
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Michelle Leder, founder of Footnoted.com, presents "Diving into the 10-Q and other key filings" as part of the free, three-part, investigative business journalism webinar, "SEC Filings Master Class." For more information about how to use SEC Filings in your reporting, please visit http://bit.ly/secfilings2013. For more information about free training for business journalists, please visit http://businessjournalism.org.
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SEC Filings Master Class - Form 10Qs by Michelle Leder
- 1. Diving into the 10-Q and other key filings Michelle Leder editor/founder footnoted mleder@footnoted.com @footnoted Photo by flickr user Derek Keats
- 2. Homework review: Barnes & Noble • A textbook wholesaler whose majority owner is B&N founder Leonard Riggio did $93.5m in business with the company in 2013. • Company leases office space from another Riggio company. • A trucking company with ties to Riggio family was paid over $50m in 2013.
- 3. Quartz had a good round-up http://qz.com/109325/the-nook-isnt-the-only-thing-dragging-down-barnes-noble-so-are-its-ties-to-founder- leonard-riggio/
- 4. POLL QUESTION #1 How often do you at least skim the 10-Q? • I’ve never looked at one. • Once or twice • Periodically for companies I follow • It’s my favorite hobby.
- 5. 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).
- 6. 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
- 7. 10-Q table of contents
- 8. 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, especially if a company has done any big deals • Employment/severance agreements with top executives
- 9. POLL QUESTION #2 Companies file 8-Ks to disclose a “material” event. • True • False
- 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
- 11. 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 about unrelated things • Companies massaging the truth in the filing • Using vague language or making you check another filing for an answer • Anything filed after 4 p.m. on a Friday.
- 12. 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 on odd days when SEC open, but markets are closed (Columbus Day, Good Friday, few others) • 9% of all 8Ks filed in 2012 were filed after 4 p.m. on Friday! • On some Fridays, number is closer to 50%!!! Photo by flickr user wyofile Photo by flickr user WarmSleepy
- 13. Quick exercise: The Friday Night Dump • At 5:12 p.m. on the Friday before the long Labor Day holiday weekend, Microsoft filed an 8-K, which is excerpted on the next slide. You’re on your way to the beach for the weekend. Kids in tow. What do you tweet? Photo by flickr user downing.amanda
- 14. …
- 15. Quick exercise: The Headline
- 16. Other key filings: ownership • Forms 3,4,5 (ownership by directors,officers) • 13D, 13G (5% holders) • 13F (institutional investors) • Be on lookout for any amended filings here too (4/A, 13D/A, etc) Photo by flickr user Victor1558
- 17. 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 • Tesla Motors filed 9 amended filings before going public in July 2010. • Twitter filed to go public on Sept. 13, but chose to file documents confidentially so they're not available publicly
- 18. Other key filings: M&A • PREM14A: preliminary merger filing, filed by company being acquired • DEFM14A: final merger proxy • S-4 (securities in biz combination) Photo by flickr user jairoagua
- 19. From the merger proxy
- 20. 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
- 21. Homework: Goodwill games • Read footnote #6 on Page 19 in the 10-Q that Google filed on July 25, 2013. • Now read footnote #4 on Page 12 in the 10-Q that Yahoo filed on Aug. 8, 2013. • Write a paragraph on what is going on. Email: cassandra.nicholson@businessjournalism.org your answer by noon ET Oct. 11 to be entered in a drawing for Michelle's book.