How to Read a 10-K and 10-Q

The numbers that hit the news on earnings day come from a press release. The company's actual report is a document filed with the SEC a few days or weeks later, often running past a hundred pages: the annual 10-K and the quarterly 10-Q. Nobody reads them cover to cover; the parts worth reading are well defined.

Finding the Document

Search EDGAR for the company's name or ticker and filter the filing list by form type. The same reports are also on the company's investor relations page. Deadlines depend on the company's size:

Foreign companies file an annual 20-F and periodic 6-K instead. More: What Are ADRs and SPACs?

The Reading Order

Management's discussion and analysis (MD&A) is the narrative section of the report: why revenue changed, what squeezed margins, where the cash went. Here management explains the numbers in its own words and writes down the trends it is obliged to disclose.

The financial statements are three, and they're read together: the income statement shows profit, the balance sheet assets and liabilities, the cash flow statement the actual money. More: Earnings Reports: What to Read, How and Cash Flow

The notes are the least-read and most informative part of the report. Which business line revenue came from (segment reporting), when debts mature, how large stock-based compensation is, and customer concentration are all written here.

Risk factors grow longer every year, and most are boilerplate. What's valuable are the newly added or rewritten items: putting two years' text side by side shows what the company now sees as a new risk.

The Press Release vs. the Report

The release published on earnings night is furnished to the SEC with an 8-K and carries the numbers the company wants to highlight. Many of them are non-GAAP measures: "adjusted" profit that leaves out stock-based compensation, one-time charges or acquisition costs. The rules require companies to present these alongside their GAAP equivalents and to show the difference.

Five Questions for a Quick Read

• 01Which segment did revenue grow from, and which did it shrink in?
• 02Is operating cash flow above or below net income?
• 03How much debt matures in the next two years?
• 04What share of revenue is stock-based compensation, and is the share count rising?
• 05What was added to the risk factors this year?

Where You'll See It on This Site

The past earnings on stock pages and the analyses on the Earnings screen are fed by the numbers in these reports. If an item in an analysis looks odd, its source is usually in the 10-Q's notes.