Diving into the

10-Q and other

key filings

Michelle Leder

editor/founder footnoted

mleder@footnoted.com

@footnoted

Photo by flickr user Derek Keats

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.

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/

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.

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, especially if a company has done

any big deals

• Employment/severance agreements with top

executives

POLL QUESTION #2

Companies file 8-Ks to disclose a “material” event.

• True

• False

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 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.

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

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

…

Quick exercise: The Headline

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

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

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

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: 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.