Top Five Interesting 10-Q Tidbits
With every earnings season, investors are not only bombarded with profit reports and outlooks, but also Securities and Exchange Commission (SEC) quarterly filings.
Many companies don’t tout the details of what’s in their 10-Q’s, but that doesn’t mean these filings don’t make for compelling reading. Quite the contrary. SEC filings are where the real corporate nuggets find a home, and some may contain profitable ideas. Here are five tidbits worth reading from the most recent batch of 10-Q’s.
1) Jobs Isn’t Traveling Much
Shareholders and Apple (AAPL) fans should be relieved to know that co-founder and CEO Steve Jobs isn’t traveling much these days, perhaps as part of his effort to take it easy and get back to good health.
From page 20 of the company’s most recent 10-Q:
The Company entered into a Reimbursement Agreement with its CEO, Steve Jobs, for the reimbursement of expenses incurred by Mr. Jobs in the operation of his private plane when used for Apple business. The Company did not recognize any expenses pursuant to the Reimbursement Agreement during the three months ended March 26, 2011 and recognized a total of $15,000 in expenses pursuant to the Reimbursement Agreement during the six-month period ended March 26, 2011. The Company recognized a total of $127,000 and $143,000 in expenses pursuant to the Reimbursement Agreement during the three- and six-month periods ended March 27, 2010, respectively.
2) To the Cloud
Microsoft (MSFT), the world’s largest software maker, wants to become a big player in cloud computing, a fact highlighted by those commercials with the catchy “To the Cloud” slogan. But the company isn’t ready to hang its hat on cloud computing just yet.
From pages 45-46 of its most recent 10-Q:
The cloud-based computing model presents execution and competitive risks. We are transitioning to a computing environment characterized by cloud-based services used with smart client devices. Our competitors are rapidly developing and deploying cloud-based services for consumers and business customers. Pricing and delivery models are evolving. Devices and form factors influence how users access services in the cloud. We are devoting significant resources to develop and deploy our own competing cloud-based software plus services strategies. While we believe our expertise, investments in infrastructure, and the breadth of our cloud-based services provides us with a strong foundation to compete, it is uncertain whether our strategies will attract the users or generate the revenue required to be successful.
3) Anadarko: Yikes!
Anadarko Petroleum (APC) recently said it would be willing to come to the table with BP (BP) about some financial liabilities related to the Gulf of Mexico oil spill. Anadarko holds a 25% non-operating stake in the Macondo well project. On page seven of Anadarko’s most recent 10-Q, the company says BP has stuck it with a bill for $4.7 billion. Investors can only hope that Anadarko isn’t forced to pay all of that because that sum represents a hefty portion of the company’s $38.38 billion market cap (as of Tuesday’s close).
4) Transocean: Yikes, Part II.
Transocean (RIG) owned the Deepwater Horizon rig and is firmly ensconced in the Gulf spill tragedy. The company’s latest 10-Q contains some ominous wording regarding potential liabilities:
Although we are unable to estimate the full impact that the Macondo well incident will have on our business, the incident could ultimately have a material adverse effect on our consolidated statement of financial position, results of operations or cash flows.
Transocean said the Macondo spill will cost an estimated $100 million this year alone, net of insurance recoveries, primarily due to legal expenses for lawsuits and investigations. That would be almost a third of the company’s first-quarter net income. The problem is that the spill lawsuits won’t even start being heard until later this year, so the really big financial hit will likely not be felt until at least 2012.
5) Netflix Gets Levered
You had to figure that Netflix (NFLX) 10-Q would be good for some interesting reading, and it is. Jim Pyke highlights the company’s rising leverage and the drain on book equity due to share buybacks, among other issues that might prove to be concerns down the road in Seeking Alpha.
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