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Expected Filing Season Trends, including Coronavirus Disclosures

Two-thirds of the yearly 10-Ks were filed between February and March last year, which should come as no surprise considering the majority of companies have fiscal years ending in December. Therefore, it’s no wonder the coming months are exceptionally busy for financial professionals.

Form 10-K, an annual report filed by US-based public registrants, is the most comprehensive source of information regarding a company’s financials and its underlying business. This form is required to be filed within the following period:

EDGAR, the Electronic Data Gathering, Analysis, Retrieval system used by the US Securities and Exchange Commission, recently released a document identifying peak filing dates by week based on historical data. “This information should help filers be aware of these peak days and plan their filings accordingly.

To provide a better understanding of the filing traffic, the graphic to the left shows the number of 10-K filings per day in the first four months of 2019.

The bars to the right of the calendar represent the total number of 10-Ks filed each week. The number of 10-Ks filed between February 25th and March 1st totaled 21% of the year’s 10-Ks, with more than half of that coming in on February 28th and March 1st alone.

But how does a leap year affect these dates? Looking back to 2008, 2012, and 2016, we see that February 29th took the majority of filings.

This year, however, February 29th falls on a Saturday so we should expect to see a much busier March 2nd.

Filing season is an exciting time around here; we look forward to the hustle and bustle every year. Our analysts comb through the hundreds (literally) of filings each day, identifying any new or interesting disclosures and trends.

One thing, in particular, that we are expecting to see in annual filings this year is disclosures surrounding the novel coronavirus.

On January 30, 2020, the World Health Organization (WHO) declared the outbreak of a new coronavirus – Covid-19, centered in Wuhan, China – a Public Health Emergency of International Concern (PHEIC).

A PHEIC is a formal declaration of “an extraordinary event which is determined to constitute a public health risk to other States through the international spread of diseases and to potentially require a coordinated international response”, formulated when a situation arises that is “serious, sudden, unusual or unexpected”, which “carries implications for public health beyond the affect State’s national border” and “may require immediate international action.”

A declaration of a PHEIC may appear as an economic burden to the state facing the epidemic, but it can also largely affect others.

As of February 11, 2020, only 26 companies have any disclosure regarding coronavirus in an annual report – which makes sense considering not many have issued the annual report yet. However, looking to historical trends for an idea of what we can expect should help us paint a better picture.

There have been six PHEICs since 2009:

The chart below shows the number of disclosures in annual reports mentioning each of the six listed PHEICs:

As you can see, the number of filings containing such disclosure spikes in the year(s) following the declaration of the PHEIC. So, while it may be too early for us to see the effect(s) of the coronavirus in filings, it’s safe to assume that we will be seeing the disclosures sooner rather than later.

While the economic effects of the Wuhan coronavirus are still unknown, it makes sense that the majority of references to the disease have been included in the Risk Factors section of a company’s 10-K. Most of the language seen thus far discusses the uncertainty of the disease’s effects on global macroeconomic conditions, production capabilities, and decreases in international travel; this is similar language used surrounding other risk factors such as political unrest, natural disasters, and terrorism.

However, some companies have discussed the impact of the coronavirus in the Management’s Discussion & Analysis (MD&A) section of the 10-K, indicating that some companies expect to experience significant effects. For example, Carnival Corp [CCL] disclosed in their MD&A that the travel restrictions as a result of the outbreak could have a material impact on financial performance:

Fiscal Year 2020 Coronavirus Risk
In response to the ongoing coronavirus outbreak, China has implemented travel restrictions. As a result, we have suspended cruise operations from Chinese ports between January 25th and February 4th, canceling nine cruises. We also expect that travel restrictions will result in cancellations from Chinese fly-cruise guests booked on cruises embarking in ports outside China… If the travel restrictions in China continue until the end of February, we estimate that this will further impact our financial performance by an additional $0.05 to $0.06 per share… If these travel restrictions continue for an extended period of time, they could have a material impact on our financial performance. 

Carnival Corp, Annual Report for FYE November 30, 2019, filed January 28, 2020.

Other companies that have mentioned coronavirus in the MD&A section include Mondelez International, Inc. [MDLZ], Mettler-Toledo International, Inc. [MTD], and Las Vegas Sands Corp. [LVS].

A full list of companies that have mentioned “coronavirus” or “Covid-19” in a 10-K filing is below:

For more information on this post or any of our databases, please contact us.

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