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Learn About SEC Form 10-K

TL;DR

  • What it is: The comprehensive annual report every public company must file within 60-90 days of fiscal year end.
  • Why it matters: The single most complete picture of a company's business, risks, and financials.
  • Key sections: Business overview (Item 1), Risk Factors (1A), MD&A (Item 7), Financial Statements (Item 8).
  • Investor edge: Reading 10-Ks reveals details that earnings calls and investor decks often gloss over.

What Is Form 10-K?

The 10-K is the annual report marathon — typically 100-300 pages of everything investors need to know about a company. Filed once per year, it's the most comprehensive disclosure document required by the SEC.

Unlike the quarterly 10-Q, the 10-K includes audited financial statements and extensive narrative sections covering the business model, competitive landscape, and risk factors. It's the document Warren Buffett reads first.

Filing Deadlines by Company Size:

  • Large Accelerated Filers ($700M+ float): 60 days after fiscal year end
  • Accelerated Filers ($75M-$700M float): 75 days
  • Non-Accelerated Filers (<$75M float): 90 days

10-K Structure Breakdown

The 10-K follows a standardized structure. Here's what each part contains and why it matters:

Part I

Item 1: Business

Core operations, products, competition

💡 Read this first for company overview

Item 1A: Risk Factors

All material risks to the business

💡 Often 20+ pages of worst-case scenarios

Item 1B: Unresolved Staff Comments

SEC questions still pending

💡 Red flag if many unresolved issues

Item 2: Properties

Real estate, facilities owned/leased

💡 Shows physical footprint and commitments

Item 3: Legal Proceedings

Material lawsuits and regulatory actions

💡 Can reveal hidden liabilities

Part II

Item 5: Market for Common Stock

Stock performance, dividends

💡 Historical returns and shareholder data

Item 6: Selected Financial Data

5-year financial summary

💡 Quick trend analysis (Note: Optional after 2020)

Item 7: MD&A

Management discussion of financials

💡 Most important section - explains the numbers

Item 7A: Market Risk Disclosures

Interest rate, FX, commodity risks

💡 Critical for understanding hedging strategy

Item 8: Financial Statements

Audited financials and notes

💡 The actual numbers - income, balance sheet, cash flow

Part III

Item 10: Directors and Executive Officers

Board and management bios

💡 Look for relevant experience and turnover

Item 11: Executive Compensation

Pay packages and incentives

💡 Shows how management is motivated

Item 12: Security Ownership

Insider and institutional holdings

💡 Who controls the company

Part IV

Item 15: Exhibits and Schedules

Material contracts, bylaws

💡 Source documents often revealing

Item 16: Form 10-K Summary

Optional summary section

💡 Rarely used but helpful when present

Most Important Sections for Investors

1. Item 7: Management's Discussion & Analysis (MD&A)

This is where management explains what happened and why. Look for:

  • Revenue and cost drivers
  • Margin explanations
  • Future outlook and guidance
  • Capital allocation priorities

2. Item 1A: Risk Factors

Companies must disclose everything that could go wrong. Focus on:

  • New risks added year-over-year
  • Risks moved to the top (higher priority)
  • Industry-specific vs company-specific risks
  • Regulatory and legal risks

3. Item 8: Financial Statements & Notes

The audited numbers. Critical areas include:

  • Revenue recognition policies (Note 2 usually)
  • Segment reporting (geographic and product breakdowns)
  • Debt maturities and covenants
  • Stock-based compensation expense
  • Tax rate and deferred tax assets

Key Metrics to Extract

Smart investors calculate these metrics from 10-K data:

Growth Metrics

  • • Revenue growth rate
  • • Operating margin trends
  • • EPS growth
  • • Free cash flow generation

Health Metrics

  • • Debt-to-equity ratio
  • • Current ratio
  • • Interest coverage
  • • Days sales outstanding

Returns Metrics

  • • ROE (Return on Equity)
  • • ROA (Return on Assets)
  • • ROIC (Return on Invested Capital)
  • • Gross/Operating/Net margins

Valuation Metrics

  • • Share count changes
  • • Stock-based compensation
  • • Dividend policy
  • • Share buyback programs

Red Flags to Watch For

These warning signs in a 10-K often precede stock declines:

Frequent restatements

Multiple corrections to past financials suggest accounting problems

Auditor changes

Switching auditors, especially mid-year, often signals disputes

Going concern warnings

Auditor doubts about company survival in next 12 months

Material weaknesses

Serious deficiencies in internal financial controls

Related party transactions

Deals with insiders that may not be arm's length

Declining gross margins

Core profitability erosion, competitive pressure

Rising DSO/inventory days

Cash collection problems or inventory obsolescence

Off-balance sheet entities

Hidden liabilities or aggressive accounting

Pro Tips for Reading 10-Ks

  1. 1.Compare year-over-year: Always read this year's 10-K alongside last year's. What changed?
  2. 2.Ctrl+F is your friend: Search for "material weakness", "going concern", "restatement", "discontinued"
  3. 3.Read footnotes: The devil is in the details — major issues hide in financial statement notes
  4. 4.Check the auditor's opinion: Anything other than "unqualified" is a red flag
  5. 5.Track insider ownership: High insider ownership usually means aligned interests

Investor Takeaways

  • •The 10-K is your single best source for understanding a company — better than any analyst report
  • •Focus on Items 1A (Risks), 7 (MD&A), and 8 (Financials) for the most actionable insights
  • •Changes matter more than levels — track what's new or different from prior years
  • •Read competitors' 10-Ks too — they often reveal industry dynamics your company won't discuss