How to read a 10-Q

Cover: Cover page

The cover identifies the quarter, the filer status and the share count as of a recent date. The share count is the one figure to note, because buybacks and issuance show up here before anywhere else.

What to look for: The quarter end date and the fiscal year it belongs to. Shares outstanding as of the cover date, compared with the last report, for the direction of the share count. Whether the company is a large accelerated filer, which sets its 40-day filing deadline.

Questions worth asking: How many shares were outstanding as of the cover page date of this filing?

Part I, Item 1: Financial Statements

The condensed statements are unaudited, reviewed rather than audited by the accountants, and they omit most of the annual notes. The comparison that matters is with the same quarter last year, since seasonality makes the prior quarter misleading.

What to look for: Revenue, gross margin and operating income against the same quarter a year ago, and the year-to-date column against its prior-year counterpart. The cash flow statement, which is presented year to date, so the quarter alone has to be derived by subtracting the previous 10-Q. Notes that are new or changed: a new segment, an acquisition, a restructuring charge, a change in estimate. The subsequent events note, which covers what happened between quarter end and filing.

Questions worth asking: How did revenue and operating income this quarter compare with the same quarter a year ago, and what explains the difference? Do the notes disclose any acquisition, restructuring, impairment or subsequent event this quarter?

Part I, Item 2: Management's Discussion and Analysis

The quarterly MD&A explains the period against the prior year and updates the liquidity picture. It is shorter than the annual one and tends to reuse its structure, so changes in wording stand out.

What to look for: The explanation for each line that moved, and whether it names volume, price, mix or currency as the driver. Any update to the outlook or guidance, and how it compares with what was said last quarter. Liquidity: cash, revolver availability, debt raised or repaid, and repurchases during the quarter. New critical accounting estimates or a note that none changed.

Questions worth asking: What does management say drove results this quarter, and did it update its outlook? What changed in liquidity and capital resources during the quarter?

Part I, Item 3: Market Risk

Usually a one-line statement that nothing material changed since the 10-K. When it is longer, something did change: new debt, a new currency exposure or a hedging programme.

What to look for: Whether the section says "no material changes" or restates the sensitivities. New floating-rate borrowing or a change in the hedged share of exposures.

Questions worth asking: Does this filing report any material change in market risk since the last annual report?

Part I, Item 4: Controls and Procedures

Management restates each quarter whether disclosure controls are effective and whether internal control changed. A material weakness first surfaces here more often than in a 10-K.

What to look for: The effectiveness conclusion, and any material weakness with its remediation status. Changes in internal control during the quarter, such as a new ERP system or an acquired business not yet covered.

Questions worth asking: Does management conclude that disclosure controls were effective this quarter, and is any material weakness disclosed?

Part II, Item 1: Legal Proceedings

New or changed litigation and regulatory matters since the last report, usually by reference to the contingencies note.

What to look for: New cases or investigations, and any settlement, judgment or accrual during the quarter. A cross-reference to the note, where the accrued amount and the range of possible loss are disclosed.

Questions worth asking: What new or updated legal proceedings does this filing disclose?

Part II, Item 1A: Risk Factors

Only changes from the 10-K risk factors are reported, so "no material changes" is common and a new paragraph is a signal in itself.

What to look for: Whether the section says nothing changed, or adds or rewrites a risk. A new risk that names a specific event: a lost customer, a regulatory action, a supply problem, a financing need.

Questions worth asking: Does this filing add or change any risk factors compared with the annual report, and what do they describe?

Part II, Item 2: Unregistered Sales and Repurchases

The repurchase table by month shows what the company paid for its own shares during the quarter and how much authorisation remains. Unregistered sales show dilution outside the normal share plans.

What to look for: Shares repurchased each month, the average price paid, and the remaining authorisation. Whether repurchases were paused or accelerated relative to earlier quarters. Any unregistered issuance, such as shares issued in an acquisition or a private placement.

Questions worth asking: How many shares did the company repurchase this quarter, at what average price, and how much authorisation remains?

Part II, Item 5: Other Information

Since 2023 this item must disclose Rule 10b5-1 trading plans that officers and directors adopted or terminated during the quarter. It is otherwise a catch-all for anything that should have been an 8-K.

What to look for: Trading plans adopted or ended by named officers, with the number of shares and the plan dates. Any event disclosed here instead of in an 8-K.

Questions worth asking: Did any officer or director adopt or terminate a Rule 10b5-1 trading plan during the quarter?

Part II, Item 6: Exhibits

The exhibit index for the quarter: new contracts, amendments, the officer certifications and any trading plans filed as exhibits.

What to look for: New or amended credit agreements and material contracts entered into during the quarter. Executive agreements and separation agreements, which often precede an announced departure.

Questions worth asking: Which new material contracts or agreements are listed as exhibits to this filing?

Read it with a guide beside the text

Scrutar has a guided read mode in the filing viewer. It steps through the same path beside the document, jumps to each section, and puts each question above to Ask Scrutar with only that filing in scope, so the answer is cited back to the text you are reading.