THE DAY AHEAD: Watch those filings
COMMENTARY--Earnings season is over. Executives have given the all-important "guidance" about upcoming quarters and the outlook. So what should an enterprising investor do now? It's simple, watch those regulatory filings.
It's time for 10-Qs and 10-Ks, also known as quarterly filings and annual reports. These often long-winded reports have to be filed with the Securities and Exchange Commission following a company's earnings release.
These filings are going to pick up over the next few weeks and you should be watching. Given that companies aren't going to leak out details about upcoming quarters because of Regulation Fair Disclosure, the filings are becoming increasingly important. Yahoo! (Nasdaq: YHOO), Amazon (Nasdaq: AMZN) and a host of other heavy hitters should be filing reports in upcoming weeks.
Hundreds of companies are giving the intimate details of their business. Just last week, Apple Computer (Nasdaq: AAPL) and Akamai (Nasdaq: AKAM) filed their quarterly reports.
Finding these reports is relatively simple. Go to www.freeedgar.com, www.sec.gov, 10K Wizard and www.edgar-online.com, which is a pay service. Make it a routine to check in on the companies in your portfolio. Below are a few items worth noting from Apple's 10-Q. These highlights are standard across most filings.
Apple's figures: The company released its earnings and gave details on its conference call, but it's the filings that hold more detail than you'll ever need. For example, Apple had a good breakdown of its inventory progress. According to its regulatory filings, Apple nearly halved its finished goods inventory to $16 million as of Dec. 30 from $30 million on Sept. 30. The company still carried twice the amount of purchased parts as it did three months earlier. For a PC maker, inventory is everything. In general, be sure to read the footnotes, especially for Internet companies.
Investments: Every company carries holdings of privately held and public securities. These investments are also cashed in to smooth out earnings. In Apple's filings, the company detailed that it sold 1 million shares of Akamai for a gain of $39 million. However, the value of Apple's Akamai holdings fell dramatically. As of Sept. 30, Apple's 4.1 million stake was $216 million. Even adding back Apple's gains from the sale of Akamai shares, the value of the investment was more than halved in three months. The value of Apple's investment in EarthLink also fell.
Executive perks: Apple took a charge of $90 million so it could buy CEO Steve Jobs an airplane for turning the company around. "Approximately half of the total charge is the cost of the aircraft. The other half represents all other costs and taxes associated with the bonus," the company said.
Discussion: The company's outlook for the next quarter and future. The company also gives hints about what could derail future results. In Apple's case, there wasn't any new information. The company expects sales to fall year over year, but it will be profitable the next three quarters.
Risks: Here's where companies often leave tidbits that raise red flags. Look for warnings about competition, falling profit margins and price wars.
TDAIN
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