A Form 10-K is the annual report every US public company has to file with the Securities and Exchange Commission. It's the company's own numbers with the company's own explanation. It's where every figure in this course came from.
A Form 10-K is the annual report every US public company has to file with the Securities and Exchange Commission. It's the company's own numbers with the company's own explanation. It's where every figure in this course came from.
It's long. Costco's runs past 80 pages. You don't read it. You go to four places in order.
Item 1. Business. What the company does in its own words. Item 1A. Risk factors. What could go wrong. Read the first five. Item 7. Management's discussion and analysis. The year explained by the people who ran it. Item 8. Financial statements. The P&L. The balance sheet. The cash flow statement. And the notes.
Costco's 10-K for the year ended September 3 2023. Ten minutes. Here's the route.
Minute 1. Item 1. Costco says what it is. A membership warehouse business. That sentence tells you to read the membership line first.
Minutes 2 to 3. Item 1A. The first risks are about competition and about the membership model. If the top risk matches the top line of the business you've understood the company.
Minutes 4 to 6. Item 7. Find the table that explains net sales. Costco splits growth into comparable sales and new warehouses. Find the membership fee paragraph. It states the renewal rate. That number isn't on any statement and it's the one that matters.
Minutes 7 to 10. Item 8. Three statements. Pull four numbers. Total revenue $242,290 million. Net income $6,292 million. Membership fees $4,580 million. Cash from operations from the cash flow statement. Then one note. The revenue note explains how membership fees are counted over the year.
That's the company. You could brief someone.
The trap is starting at page one.
The front of a 10-K is the part lawyers wrote. The cover. The definitions. The list of exhibits. Ten minutes there tells you nothing. Item 7 and Item 8 are where the year is. Go there first every time. The table of contents has the page numbers.
The second trap is the press release. A company's earnings release is a summary the company chose. The 10-K is the version it's legally responsible for. When they disagree the 10-K wins.
You've never seen Nike's 10-K. Your manager asks for three numbers before a meeting. Use the route from today. The app will show you Costco's document in place of Nike's so the answers can be checked.
Total revenue for the most recent year. Where do you look?
Item 8. The income statement. First line. For Costco that's $242,290 million.
Net income. Where?
Item 8. The income statement. Last line. $6,292 million.
The biggest risk the company names. Where?
Item 1A. The first risk factor listed.
Your manager asks what share of profit came from the company's most important line. For Costco that's membership fees.
$4,580 million divided by $6,292 million is 0.728. About 73%. You found that in the revenue note in Item 8 and the membership paragraph in Item 7.
Ten minutes. Free. Nothing to install.
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