For any business journalist—even if you don’t focus on finance—a public company’s 10-Ks (financial reports for the year) and 10-Qs (quarterly earnings reports) filed with the Securities and Exchange Commission are foundational documents. Both have mounds of information. Here are some tips on using them more effectively.
Don’t confuse them with similar documents
Public companies provide other financial documents. For example, with every earnings announcement comes a press release, often with accompanying materials. A company typically releases them before they file the official 10-Q with the SEC. Similarly, there’s often a slick “annual report” that can be different from the 10-K.
A company can’t use the extra material to safely say something that wouldn’t pass SEC muster. But it can and will omit large amounts of information that are required in the 10-Q or 10-K. Also notice that companies tend to release these other documents tend a few days before the SEC filings.
There isn’t a technical reason why they must. A public company could file either a 10-Q or 10-K the day they release their results. So why don’t they?
Call me cynical, but my guess is that it lets them focus immediate coverage, knowing that most reporters won’t dig into the bigger filings because, hey, the news hook is over and other stories are already filed. That leads to the next point.
You have no control over when companies release their SEC filings. If they do so after an earnings announcement, neither you, your editors, nor your publication can turn time back to have the information a few days before.
But nothing stops you from using 10-Ks and 10-Qs differently. For example, plan follow-up stories that take deep dives into what a company has been doing. Even a few days or a week later you can open opportunities as there will inevitably be material.
Also, during other coverage, return to the documents on a regular basis. How does a developing situation or business condition or market action fit into the company’s strategies, its revenues and profits, cash on hand, and upcoming debt payments?
Be skeptical about the easy points
I cringe the many times I see some journalist trot something out of the section of a 10-K that lists the risks the company faces, as if proving a point. Not to say you can’t learn something from them.
For example, the company may position the CEO as completely irreplaceable, in which case you should wonder about the succession strategy, because no one can be expected to stay in one place forever. Illness, accident, a better offer from another company—a corporate officer may suddenly become unavailable to fulfill their duties at any moment.
But often pieces largely supported on such observations go too far. Corporate lawyers are trying to envision every possible mistake, issue, or shortcoming to document it, no matter how unlikely, to avoid a shareholder lawsuit in the future. These lists are largely defensive measures. If they thought it was necessary, everyone would be regaled with concerns over the underinflated right rear tire of the CFO as it might deflate, causing him or her to be late for an important meeting with bankers.
Dig, dig, dig to support your reporting, and remember not to tip over the deep end.