Reading the 8-K company report

This is where companies report anything they need to disclose

Listed companies are required to file a report known as an 8-K to the U.S. Securities and Exchange Commission (SEC) whenever a significant event occurs that is required to be disclosed. Companies may file numerous 8-K reports throughout the year, or they may only file an 8-K to release their earnings results if there is nothing else that’s required to be declared throughout the year.

These events can be anything from a director resigning, to the preliminary earnings, or a company filing for bankruptcy protection. Stockholders can readily ascertain the significance of these events and make investment decisions accordingly in a timely manner.

The 8-K reports can be viewed and downloaded from the SECs EDGAR website. Summary versions are available from a variety of sources including yahoo finance.

The 8-K report is a standardized reporting format and the items are the same for every company that files an 8-K with the SEC.

The list of disclosure items is quite extensive and following is a list of items that stock investors tend to find more important.

Item 1.01 – Entry into a Material Definitive Agreement

Certain agreements that a company enters into which are not part of its ordinary business, these must be disclosed here. These agreements could be a new long-term loan the company makes to finance its expansion.

Item 1.02 – Termination of a Material Definitive Agreement

If an agreement is terminated early by either party, then this must be disclosed here. For example, a company enters into a 20 year loan and after 5 years the company decides to refinance with a new loan at a lower rate. Only agreements that are terminated early need to be disclosed here, if they expire as part of the agreement they are not required to be disclosed.

Item 1.03 – Bankruptcy or Receivership

This item provides investors with information regarding any bankruptcy or receivership court filings imposed on the company. Any orders for reorganization or liquidation are included.

Item 1.04 – Mine Safety – Reporting of Shutdowns and Patterns of Violations

This item deals with mines such as coal mines who must disclose of any shutdowns or any violations of mandatory health or safety standards

Item 2.01 – Completion of Acquisition or Disposition of Assets

If a company acquires or disposes of a significant amount of assets that is not in the course of its normal business operations, then details must be disclosed in this item. This includes buying another business or merging with another company.

Item 2.02 – Results of Operations and Financial Condition

Companies may include a summary of their quarterly (10-Q) or annual (10-K) financial statements in this item. Usually the 8-K is released first which may include a press release prior to the quarterly or annual reports being released.

Item 2.03 – Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant

Any long-term financial agreements that a company enters into must be disclosed here. These include any loans or leases. Also included are short-term loans that are not part of the company’s ordinary business operations.

Item 2.04 – Triggering Events That Accelerate or Increase a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement

If a company can not repay a loan or falls behind in its repayments as a consequence of cash flow problems the company may have, then this must be disclosed here.

Item 2.05 – Costs Associated with Exit or Disposal Activities

If a company disposes of a significant asset or terminates employees under a plan of termination, the company is required to disclose the estimated costs, such as the cost to dispose of the asset or the cost to lay-off these employees.

Item 2.06 – Material Impairments

If a company determines that the estimated value of its assets (including intangible assets and goodwill) will be significantly reduced and it determines this before preparing its 10-Q or 10-K reports, then this is required to be included in this item.

Item 3.01 – Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard; Transfer of Listing

If a company has received notice from a stock exchange that it does not satisfy a rule or standard for continued listing on the exchange, then this must be stated here. The noncompliance may be that the company’s stock price has been trading below a minimum level set by the exchange for an extended period of time.

Item 3.02 – Unregistered Sales of Equity Securities

A company must disclose if more than 1% of its shares outstanding in that class of stock has been sold that the market is not aware off. A 5% rule applies to smaller companies.

Item 3.03 – Material Modification to Rights of Security Holders

A company is required to disclose any information that will affect the rights of its stockholders such as the company issuing preferred stock or canceling its dividend payments.

Item 4.01 – Changes in Registrant’s Certifying Accountant

If a company dismisses an independent accountant who was engaged to audit the company’s financial statements, this must be disclosed here. Also, if the auditing accountant declines to conduct any future audits, this must also be disclosed. If the company engages a new auditing accountant, this is also required to be disclosed. Some stock investors may be concerned when the auditing accountant changes, but this does depend on the reasons for the change which are stated in this item.

Item 4.02 – Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review

If a company or its auditing accountant becomes aware of any reason that the previously issued financial statements should no longer be relied upon because of an error in these financial statements, this must be disclosed here. The company will then reissue the affected financial statements, but this can take some time. Stock investors may be concerned with this as there may be alterations to the previously reported earnings.

Item 5.01 – Changes in Control of Registrant

Any change in the control of the company along with the percentage of voting stock owned is required to be disclosed in this item.

Item 5.02 – Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers

If a director has resigned or refuses to stand for re-election to the board of directors, or a director has been removed from the board, then the company must outline the circumstances. Also if a key employee resigns or is dismissed, details need to be provided here. If the company appoints a new director or key employee, details are provided here including their salary and bonus information such as shares or options.

Item 5.03 – Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year

Should a company alter its articles of incorporation or bylaws or changes the month its fiscal year starts, this is disclosed here.

Item 8.01 – Other Events

The company may disclose information here that it considers important and should be disclosed, but the company has not been required to disclose this in any of the other items.

Item 9.01 – Financial Statements and Exhibits

The financial statements are included in this item; these may be statements from a business it has acquired. Any items that the company completed in this 8-K form that require attachments, these are included here.