More and more companies are moving toward online 10-K formats and printing fewer copies to cut costs. In fact, electronic annual-report budgets have grown 31% since 2010 and 44% since 2008, while budgets for printed annual reports have plummeted during the past decade, a survey released last week by the National Investor Relations Institute found.
The survey, made up of a random sample of 1,000 NIRI corporate members who responded via e-mail from November 5, 2012, to November 19, 2012, found that the average total budget for the online version of an annual report, including all aspects of production, was $15,330 in 2012.
The budget for print copies increased 2% in 2012 after a steady decrease. But the median budget for the preparation and printing of annual reports was $65,000 in 2012, down from $192,717 (or $138,800 before adjusting for inflation) in 1999.
“Because we’re now in an environment that has increasingly more regulatory requirements, people are using electronic media to get their message out,” explains Jeff Morgan, NIRI chief executive officer. “And because it’s more immediate as opposed to print publication, people are using that to complement other things that they’re putting out. They’re not doing away with print, but increasing on the electronic side now that consumers and investors have iPads and other tablet devices.”
Electronic or online annual reports first emerged in the late 1990s, says Morgan, and have grown in popularity right along with the Internet itself. “Companies realized they wanted to make corporate websites, and ultimately the [investor-relations] portion became part of those websites,” he says. “As we hit the 2000s, that practice increased at great velocity and has continued [because] people are reading more on their tablets and other devices that make the Internet the first place for information.”
According to the survey, 7% of respondents do not use any type of electronic format, while 5% use only an online format. The rest take advantage of both print and online formats to reach their investors. A portable document format (PDF) of the printed annual report is by far the most popular format of electronic/online annual review, chosen by 63% of respondents.
Morgan says he doesn’t expect most companies to stop producing printed copies of the annual report because “most companies are still feeling that, based on their shareholder expectation, there’s still demand for print.” But, he says, the rise in popularity of electronic versions has allowed many organizations to decrease the number of copies they print, which lowers the budget significantly. The survey concluded the median print range to be 5,000 copies or less, compared with between 10,000 and 20,000 copies just four years ago.
Companies are also printing fewer copies because the reports have become lengthier. About 43% of respondents reported printing reports of 101 pages or more in 2012, compared with about 19% in 2004.
But even as the annual report becomes more voluminous, the number of pages concerning financials is declining. This year the median range for number of pages with financial data was 4 to 6, down from 11 to 15 in 2010 and from more than 20 in 2008. Instead, investor-relations departments are including more disclosures.
“People want to be able to understand business issues, so companies are trying to write that type of information in an easily digestible, easily understandable way. That means it’s lengthened over the past few years,” says Morgan. “There are lots of ways investors can get financial information, so because that’s available on a regular basis, there are other things like the MD&A [Management Discussion and Analysis] and CD&A [Compensation Discussion and Analysis] and other insight in the report.”