Spring has officially sprung and April showers hover just around the corner. April is an important month for a number of reasons:
- April is tax time! File your return or at least an extension by the 18th (thanks to a holiday extension), or suffer the consequences.
- Like every year, it's National Poetry Month again. Yes, you will probably see some stock market reporting in the form of blank verse or prose poems around here.
- Of course, April Fools' Day is practically a Foolish holiday.
- And another earnings season kicks off about halfway through April. That's a busy time for us financial reporters, and it's all thanks to the popularity of fiscal years that match calendar years.
By definition
So what the heck is a fiscal year? According to our Foolsaurus, it's the business year used for accounting purposes, often but not always the same as the regular calendar year. Every company must pick a date to start and end the year, and then keep their books accordingly.
In most cases, there's no particular reason to redefine the Gregorian calendar, so a lot of fiscal years start on (or around -- more on that in a second) Jan. 1. Berkshire Hathaway (NYSE: BRK-B) is apparently too diverse to care much about seasonality, as it uses a straight calendar year. Likewise, ExxonMobil (NYSE: XOM) always has heavy demand for its products and sees no reason to complicate things. For calendar-year companies, SEC filing deadlines work out so that the middle of January to the middle of February become very, very busy, and then things die down until mid-April.
Fast-forward three months, lather, rinse, and repeat. Some companies, including Intel (Nasdaq: INTC) and Alcoa (NYSE: AA), take pride in delivering their results early and will almost always announce during the first week or two of each earnings season's peak reporting period.
Exceptions to confirm the rule
But like I said, there are lots of exceptions and it's rare to find a day without earnings reports. Linux vendor Red Hat (NYSE: RHT) twists the year around a bit, ending its year on Feb. 28. The reason for this is to avoid being swamped with year-end bookkeeping and budget drafts while most of its enterprise-class customers on calendar-centric fiscal years are doing their budget flushes. You may have noticed that quarterly reports tend to come in clusters, industry by industry. That's because direct competitors typically face similar business environments, which leads to a natural syncing of their fiscal years.
That's also why very few consumer-facing retailers stick with regular calendar years, as it would have them closing their books in the midst of the holiday rush and subsequent discount-mania. Video game retailer GameStop (NYSE: GME) offsets its accounting year by a month and closes out at the end of January; Costco (Nasdaq: COST) takes the next logical step and jumps another seven months toward the end of August.
But it's not the very end of August -- Costco went home on Aug. 29 last year and the 28th this year. The company's 10-K filings explain how this works: "We report on a 52/53-week fiscal year, consisting of thirteen four-week periods and ending on the Sunday nearest the end of August." Likewise, Intel's year ends on the last Saturday of December. As you can see, some people don't want the hassle of starting an accounting period in the middle of a working week.
What it all boils down to is a torrent of earnings reports that recurs like clockwork every three months. Add your favorite stocks to your Foolish watchlist and watch their reports rolling in right on schedule, one quarter after another. And if you can't decide which stocks to follow, just put your email address in the box below to receive a free report that details six of Tom and David Gardner's favorites. Either way, you'll have plenty to read in April.
