Introduction to Financial Filings

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Navigate the 10-K and Other Financial Reports

Learn to quickly read and analyze the 10-K, 10-Q, 8-K, S-4, S-1 and more.

02:39:35 of on-demand video • Updated September 2014

  • At course completion, you will be able to efficiently find your way around financial reports such as the 10-K, 10-Q, 8-K, S-4, S-1, and many others.
English [Auto] The goal of this course is to expose students and finance professionals to the structure and typical contents of some of the most frequently used financial filings in the United States. Public companies must submit quarterly and annual filings with the Securities and Exchange Commission or the FCC which in turn makes these filings available to the public. In addition the FCC also requires that companies file disclosures anytime there's a merger a sale of securities including the IPO. A shareholder vote buying and selling of shares by management as well as insiders or anything else that is considered a material event. Understanding how to navigate financial reports is an important part of effective financial analysis along with of course a foundation accounting financial statement analysis and corporate finance. Understanding what is contained in these filings that we're going to go through in this course as well as what is not contained in these filings is what really enables finance professionals to apply financial analysis concept onto real companies without financial reports. It would be virtually impossible for investors to appropriately analyze company performance filings made with the FCC or public information and can be found on the official Web site. SCC dug up for filings in other countries there is usually some platform that's similar to the FCC but usually less comprehensive in fact it's fairly safe to say that the FCC provides the most comprehensive clearinghouse of financial filings examples of the FCC equivalent in other countries in the UK for example is Companies House dot gov dot uk and Canada. Its Ceder dotcom. In addition you can usually find recent company filings on the individual company websites and usually there's an Investor Relations section where all the filings are collected and distributed. In addition data services both free like Yahoo Finance and Google Finance as well as subscription or fee services like Capital IQ. Thompson facts at Bloomberg and Morningstar also provide historical financial information that's contained these filings. The goal of this course is not to go through every single filing that the CC requires. There are many of those types of filings in some filings you'll probably never ever have to look at. The goal of this program is to get you acquainted with the structure and layout of some of the most commonly used financial filings specifically the financial filings that are used to build financial statement models discounted cash flow models leverage buy and trading comps models are listed here in this slide. They represent the most common types of financial analyses for investment banking a.e research and corporate finance professionals. So when I'm going to do here is just spend just a few moments going over some of these primary filings. This is what's going to represent the bulk of our course. So perhaps the most common and most important financial filing that you're going to encounter in practice is the 10-K. This is the annual filing. It provides the latest share count on the front cover and the meat of the document are financial statements. Select financial data detailed footnotes and what's called the management discussion analysis section. We are going to spend the bulk of our course really dissecting and understanding this particular filing the 10-Q is the less detailed version of the 10-K it's the quarterly filing as opposed to the annual filing that is the 10-K it contains less detail in footnotes and the management discussion and analysis section in the 10-K it's usually missing critical information on for example option tranches that's disclosed in the 10-Ks footnotes but isn't in the Qs and it often requires even if the latest financial information that's available is for the middle of a company's fiscal year in the middle of some third you know second or third quarter you still end up having to go back to use the 10-K for filling in some of those pieces that are missing in the Qs. The AK is a filing that's required anytime there's a material event we're going to go through various examples of AKAs. But the most consistent 8-K and the one that you're going to be looking at most frequently is the AK that's filed every time the company announces their quarterly and annual earnings so specifically earnings press releases are filed as a case. They're less detailed than their corresponding 10-K and tend to document with the exception of potentially fuller gap versus non-GAAP reconciliations which we're going to look at. But the key thing is they also arrive several weeks before the 10-Ks and 10-Qs for any given quarter or year. And that's what makes them useful especially for folks that are trying to analyze companies in real time. Sometimes the press release also includes a supplementary exhibit with even more financial details so that's a nuance of the press releases that they also contain potentially important exhibits. Next we turn to probably far less frequently used filing but finally and it's important nonetheless for comment analysis and that's the proxy. If it's the most recent filing from the ones that we've listed above like the 10-K Q or a k it will actually contain the latest basic share count so that's probably the most common context in which you want to use the proxy to get the latest share count. If the prior 10-K 10-Q is stale it also contains management compensation as well as a listing of major shareholders. So this is the document you go to if you want to understand management compensation as well as who the shareholders are. Who are the major stakeholders. Last but not least we get hit the 20 F the 20th is an annual report that has to be filed by foreign issuers who have securities trading in the United States. So a company like Unilever is based outside of the United States they still have their stock trading in the United States and the FCC requires that they provide a 20th which is an annual report that conforms to U.S. gap as opposed to filing in their native IFRS or whatever the accounting standards are for the particular filer. So finding filings that detail M&A transactions is actually critical for performing things like a precedent transaction analysis as well as the premiums paid analysis. Analysts often use services like capital IQ. SNL in fact said to run an initial screen for prior transactions. But it's very important to go to the source filings and understand where these data aggregators actually get their source data because there are often mistakes in these services and sourced data is critical for a thorough analysis. So once that initial screen is done the relevant filings for these deals that the screen spits out need to be aggregated to perform the analysis. And here we list the FCC filings that will provide deal related disclosures. So first it's the same usual suspects the 10-K the 10-Q and the earnings releases for the target are important because you're going to need the targets. Most recent financials as of the announcement date of a deal to calculate deal multiples. Next we turn to the 8-K that's associated with the acquisition. So we talked in the prior slide about how eight are filed not just for earnings releases but also for any material event. Well an acquisition would certainly constitute a material event for many companies and so they'll usually be a press release associated with the acquisition and may be issued by either the target or the acquirer or both depending on the nature and the size of the deal and whether both target and acquire public forcing them to file the 8-K. You only have to file an AK If you are in some way a public entity that's going to contain the deal terms. It's going to include announcement data specifically with the data is what the former consideration is as well as other relevant financial information. The next filing it's going to be critical for M&A if it's available is the proxy so proxy the title of it in the S.E.C. filing language is any thing that is called the 14th. So preliminary 14 day a definitive 14 seats or anything that has 14 in it. That's what you want to look for. Either filed by the target or the acquire and that proxy that we talked about in the prior slide in the context of an acquisition is also a document that contains a lot of information related to a deal basically a proxy is a filing that implies that the company is soliciting a vote from its shareholders. So there are annual proxy statements every year company issues a proxy that requires a vote on certain matters. But when there's something like an acquisition in that case you need shareholder approval for a vote. You don't always need a shareholder approval for an acquisition but when the acquisition is sufficiently large proxy is filed and that proxy will contain comprehensive deal information. Next we turn to the fore whenever there is registration of new securities issued in the context of an M&A deal. Perfect example for when you'd see and as for is when two public companies merge and they and it's a stock deal they exchange stock. So the acquirer will issue and as for and that's going to contain a very comprehensive deal data we're going to look through all these filings in the course of this class next 14 D are scheduled to go. These are filings required for tender offers. And so if the squire has filed a 14 day or scheduled to go that will likely contain deal terms. Lastly and s one although not necessarily directly related. In fact the last one is a registration statement for securities issued in an initial public offering. So some of you may be wondering what does this have to do with them in a filing. Well when all else fails the information in a deal for private companies doesn't ever get disclosed anywhere. But if the company does become public does go public. Either the acquiring company or somehow the the the acquired company the target gets spun off into a into a public company. The information from that deal may eventually become public if one of the parties undergoes an IPO or a high yield that offering as well. So any sort of securities registration after the fact may also contain some information about a deal that was done before and this is admittedly a far less useful filing for them and they the ones that we talked about above it are far more useful typically.