published by the
BRASS Business Reference in Academic Libraries Committee
Teaching EDGAR in a Business Class
Joyner Library, East Carolina University
At East Carolina University, all BSBA students must successfully complete a 4000-level capstone course offered through the Department of Management. The Business Policy course is described in the undergraduate catalog as an “integrated analysis of administration and policy determination from overall management point of view under conditions of uncertainty.” The course can only be taken by declared School of Business majors with senior standing who have completed 12 hours of prerequisites. Many students take Business Policy their final semester, so there is always an undercurrent of both pressure and anticipation. During spring semester 2007, ten sections of Business Policy were offered, taught by five faculty members. While most sections are taught in traditional classrooms, at least one section each semester is offered as an Internet course.
Over the years, business librarians at ECU have worked diligently to build a close relationship with faculty who teach Business Policy. As the undergraduate and MBA programs have grown, new faculty have been added to the roster. Thanks to the active support of two tenured faculty members in the Department of Management, a library session is part of the sample syllabus for the course and new instructors are encouraged to bring their classes to the library for a session taught by the business librarian. Currently, all faculty who teach Business Policy include on their syllabus either one or two research sessions, held during regular class time. Students in the Internet classes are required to attend an online instruction session; those who live near the university are invited to attend a face-to-face session as well. The research sessions focus on course assignments requiring in-depth analysis of specific companies and industries. Time is precious in these sessions, and instructors need to limit the number of resources covered to avoid information overload. One of the instruction guides given to students is a list of “Top Ten Sources for Company and Industry Analysis.” The specific sources included on this list have changed dramatically over the past five years as more resources have become available online and the university’s subscriptions have changed, yet one free source always remains on the list – the EDGAR database from the Securities and Exchange Commission (SEC). Although a number of value-added EDGAR services are available and much of the information contained in company filings will make its way into other venues, it is important for students to understand these points:
- public domestic companies and non-US companies that trade on US exchanges are required to make certain filings on EDGAR
- the information is available for free on a federal government website
- they will be able to access the SEC data even after they graduate and no longer have off-campus access to the University’s subscription databases.
The remainder of this article will discuss the filings most useful to students in Business Policy classes and the manner they use the EDGAR database in their case analyses.
EDGAR – short for “Electronic Data Gathering, Analysis, and Retrieval” system - was phased in over a three-year period ending May 6, 1996. As of that date, all public domestic companies were required to make their filings on EDGAR, unless granted a hardship exemption. EDGAR offers several search features. Simple Company Searches by name or ticker symbol usually are sufficient for the company research required of Business Policy students. The initial results screen provides the company name, CIK, SIC, location, fiscal year end date, and links to the forty most recent forms filed by the company. Students are often amazed by the extent of information available in SEC filings, and by the sheer number of filings companies must make. The results page listing all the filings can seem overwhelming at first. Luckily, the Form Type search box near the top of the screen is a handy way to limit by form or date. Business Policy students generally find the following forms most helpful:
- 10-K Annual Report
- business summary provides information about the company’s history, its products and services, acquisitions, expansion plans, concepts and strategies, distribution systems, market differentiation, operations, competition, number of employees, and industry and business risk factors
- five years of financial data in table form
- Management’s Discussion and Analysis of Financial Condition and Results of Operation – this narrative explains the financials and often elaborates on matters mentioned in the business summary and discuss progress made on company strategies; students use it to identify key factors which can be used in evaluating and assessing the company and opportunities and threats within the industry
- 10-Q Quarterly Report>
- earnings reports issued for each of the company’s first three fiscal quarters of the reporting year
- snapshot of company performance compared to the previous year
- also includes Management’s Discussion and Analysis
- 8-K Current Report
- unscheduled filings that disclose changes that materially affect the company and its financials
- Many of the items covered in 8-K’s are also the subject of press releases available on the company’s website, and the press release is usually included as an exhibit to the 8-K. EDGAR’s system for searching within 8-K’s is fairly cumbersome. Students may prefer searching press releases first, then checking for 8-K’s issued on the same date.
- There are sometimes unexpected bonuses included in the exhibits to 8-Ks. For example, Ryder System Inc. regularly includes color PowerPoint presentations as part of its announcements of quarterly results. Dynegy Inc.’s December 13, 2006 8-K includes a presentation about its proposed combination with another company, as well as a summary of its cash flow and earnings for the previous quarter. While these types of materials may be available on the company’s website for only a limited time, submission to the SEC insures their availability for researchers in the future.
- 20-F Annual and Transition Report of Foreign Private Issuers
- filing which must be made by non-US companies that trade on US exchanges
- contains information similar to that found in the 10-K, including financial data, industry and business risk factors, company history, business overview, strategies and initiatives, product development, competition, and production
- DEF 14A Definitive Proxy Statement
- notice of annual meeting and matters to be voted on by shareholders or their proxies
- description of corporate governance structure, including committees established by the Board of Directors
- short biographies of top executives and persons nominated for election to the Board
- table showing total compensation and each component (salary, bonus, stock options and other long-term compensation) for top executives for the most recent three years
- beneficial ownership of stock by directors and executive officers
- S-1 Registration Statement
- Prospectus filing made in conjunction with an initial public offering of shares of stock
- Shows the company’s detailed business plan, how it plans to use the proceeds of the IPO, and risk factors
- Includes short biographies of executive officers and directors, a summary executive compensation table, and a list of principal stockholders
- The information contained in S-1 filings provides a benchmark that students can use for comparison with the company’s subsequent 10-K filings. Students also find it interesting to see how information from S-1’s makes its way into newspaper and magazine articles. Google’s S-1 filing was widely quoted in sources ranging from Wall Street Journal to Newsweek.
Once students see examples of “information they can use” in these filings, they are sold on their value. Students regularly pore over SEC filings to identify elements for their SWOT analyses, issues that are ripe for additional research using ABI-Inform Complete and other article databases, and red flags that may appear in Morningstar, ValueLine and other analyst reports. Combining these primary and secondary materials, students are able to master the intricacies of company analysis, at least to the extent necessary to pass their Business Policy course. Hopefully, they will also remember that this information will be available to them in the future, if they need to research a competitor or supplier, or make investment decisions.