Doing 10-K research on Canadian public companies

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In a nutshell, this article answers the following question: What is the equivalent of form 10-K for companies publicly traded in Canada? And the answer is: the equivalent consists of 3 forms, namely the Annual Information Form (AIF), Annual Financial Statement and Management Discussion and Analysis (MD&A).

Summary

U.S. toolDescriptionCanadian counterpart
EDGAR databaseDatabase that contains public filingsSEDAR database
Form 10-KAnnual SEC filing that contains a plethora of insights on the companyAnnual Information Form (AIF), Annual Financial Statement, and Management Discussion and Analysis (MD&A)
Item 1 of 10-KGeneral description of the businessItem 5 of AIF
Item 1A of 10-KRisks, including competitionItem 5.2 of AIF
Item 7 of 10-KManagement’s discussion and analysis on the financial resultsMD&A (a separate form filed to Canadian authorities)
Item 8 of 10-KFinancial results and notesAnnual Financial Statement

Introduction

If you have done researches on publicly traded companies in the U.S., you may be used to reading 10-K forms. Form 10-K is a required annual filing that all public companies must submit to the U.S. Securities and Exchange Commission (SEC). It gives an overview of the business in the past year, therefore is a popular tool for company research.

However, what if the company is not listed in a U.S. exchange but rather a Canadian one, such as the Toronto Stock Exchange (TSX)? The company would certainly not be required to submit U.S. SEC filings, so what form(s) can we use?

I recently did some competitive research on companies in the communication services space, and one of them happened to be a company listed on the TSX. As such, I did some research to find the equivalent of 10-K in Canada, and learned the following.

Comparisons

First, the Form 10-K is found in SEC’s EDGAR database (Electronic Data Gathering, Analysis, and Retrieval). The equivalent of this database is called SEDAR (System for Electronic Document Analysis and Retrieval), which contains all filings of Canadian public companies. Unlike the U.S. SEC, Canada doesn’t have one federal agency that regulates all security and exchange matters; rather, such regulation happens at the province/territory level in Canada. SEDAR database is a unified source for filings from all across Canada.

Second, as can be seen in a regulation named National Instrument 51-102, Continuous Disclosure Obligations, any stock-issuing company must file a list of disclosures. The closest one in nature to the SEC’s 10-K is the Annual Information Form (AIF). However, for business research purposes, the AIF doesn’t possess all the fields most interesting in the 10-K, which is where the Annual Financial Statement and Management Discussion and Analysis (MD&A) come in to supplement the AIF.

In my own experience, the following items in a form 10-K are the most interesting in researches.

  • Item 1, general description of the business. The form AIF has a section 5 precisely corresponding to this.
    • In fact, the NI 51-102 specifically compares the AIF to the 10-K, and requires that if a company is listed in both Canada and the U.S., it must file the AIF no later than it files its 10-K.
  • Item 1A, risk factors including key competitors. Similarly, AIF’s section 5.2 corresponds to this.
  • Item 6 or Item 8, financial results. While this is a useful tool to understand the size and health of the business, Canadian companies don’t report these in the AIF, but rather in audited, separate financial statements.
  • Item 7, MD&A, where the company’s management discusses the financial results and “how did we get here”. This is a great source of insight as it is directly reported by the company’s executives. In Canada, similar to financial results, this is disclosed in a separate MD&A form, which can be found in the SEDAR database.

(Please keep in mind the scope is business research and not financial/investment research, therefore some items such as the proxy statement are not discussed.)

To summarize, when you are looking for general information on a Canadian public company, you can begin with the AIF, especially items 5 to have a high-level understanding of the business. Then move on to item 5.2 to see risks and competitors. Financial data and notes, as well as the management’s point-of-view on its operation results, can be found in separate financial statements and MD&A forms, respectively.

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