Reading a 10-K with Arche

Arche begins with reading. Annual reports matter even for companies that never become candidates, because an industry becomes intelligible only after several competitors have been studied side by side. The 10-K — the annual report a public company must file with the SEC — is the densest, least varnished document it produces. It is also free.

The three sections that earn their pages

A 10-K can run 300 pages; three sections do most of the work.

Item 1 — Business. Management’s own description of what the company sells, to whom, and against whom. Read it asking the circle-of-competence question: can I retell this in one paragraph? Notice what’s named precisely (real segments, real customers) versus what hides in fog (“solutions,” “platforms”). A business that can explain a complex economic engine in language a teenager could follow is offering evidence through its clarity.

Item 1A — Risk Factors. Mostly boilerplate lawyers require — every company faces “general economic conditions.” The skill is spotting the specific risk among the generic ones: the customer that’s 30% of revenue, the patent expiring in 2027, the regulator with an open inquiry. Companies tell you exactly how they can be hurt; almost nobody reads it.

Item 7 — Management’s Discussion & Analysis. Management explains the year’s numbers in prose. Two things to grade: candor — do they own failures plainly, or does every miss have weather attached? And consistency — pull three years of MD&A and see whether the strategy holds steady or reinvents itself every cycle. Vague accounting language is a reason to investigate, not an invitation to supply management’s missing explanation.

Reading the statements themselves

• Start with ten years, not one — a single year is a photograph; a decade is a biography. (Our Long View charts are exactly this.)
• Read the cash flow statement against the income statement: profits are an opinion, cash is a fact, and the gap between them is the owner-earnings bridge.
• Footnotes outrank headlines. Pension assumptions, lease obligations, stock-compensation detail, segment economics — the load-bearing numbers live in small print.
• Compare management’s adjusted metrics to GAAP over several years. A widening, permanent gap is the adjective doing the earning.

How this site uses the 10-K

Every research report here digests the current 10-K’s Items 1, 1A, and 7 — quoting them verbatim where they matter — and the From the 10-K section on company pages links the filings themselves. Treat our summaries as a reading guide, not a substitute. Arche’s discipline is to read the source.