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.
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
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
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
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
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.