Let's look now at the 10-K that's included in PepsiCo's Annual Report. I've switched to the SEC website, sec.gov, to look at the 10-K report there. It's the exact same 10-K report that's in the PepsiCo Annual Report, it's just easier for us to navigate here, because it has an interactive table of contents. The 10-K is that document that the SEC requires all public companies to file annually. It contains a lot of cool and interesting information, but it's not presented in the flashy, colorful way that the rest of the annual report is presented. I'd like to call your attention to several sections in the 10-K. Let me click on the Table of Contents here so we can see what's included. First of all, we'll see about 30 pages or so, that's devoted to a discussion of the company's business. This can be an interesting read and no doubt you'd learn something that you didn't know before. For example, did you know that PepsiCo owns Frito-Lay, or Gatorade, or even Tropicana? Lot of interesting stuff can be found in this section on the business. The next section I'd like to call your attention to is the Management Discussion and Analysis. So I'm going to click on that and move into that section. In the Management Discussion and Analysis, management discusses the business, but it goes into more detail and for example, is going to discuss some of the major risks that the company faces. It's going to discuss the accounting policies that it thinks are critical to the way it portrays the financial information in the financial statements. And then it's going to discuss its perspective on the financial results. And this is where management tells its story around the numbers, so you get to see how they're interpreting things. The next section I'd like to call your attention to is the section that contains the financial statements. Now, you'll notice here that this section only runs about six pages, so it's not very long, each statement only takes up one to two pages. But after the financial statements, we have a section that runs about 40 pages that's called the Footnotes to the Financial Statements. And that's where you get the real scoop. So for example, if you're reading the balance sheet of the company, I'm going to go to PepsiCo's balance sheet. You might notice a line called, I'm going to pick one, property, plant and equipment, that's a pretty big number. You might have a question about what that is. Well, one place that you can go to start to find out is the footnotes. Let me show you. Just go back here, we'll see that there is a footnote on property, plant and equipment. So we could click on that, and go find a lot of detail about what the company owns. Or you might notice that the company has a lot of debt outstanding. That's another big number on this balance sheet, you might wonder what that is. You can go to the footnote on debt obligations and commitments. And you can find out a lot of detail. You can find out what type of loans the company has, when they're due, what interest rate is paying, and things like that. You know, you'll notice that PepsiCo has 15 footnotes on various topics. So there's a lot to be learned by reading those when you have questions. The final section that I'd like to call your attention to is that section that follows those footnotes. There's a couple of pages here that include some letters. The first letter is a letter from management. And it's in this letter that the Chief Financial Officer and the Chief Executive Officer have to take ownership of the integrity of the financial reporting process, and the integrity of the financial statements. And then below that is a letter from the independent auditor. And in this letter, the auditor is telling us whether or not essentially the company passed the audit. They're being asked to render an opinion about whether the financial statements are being prepared in accordance with US generally accepted accounting principles. So here's where we looked to the auditor to check off things and say things in the financial statements look fine to us. Wow, that's a lot of information, isn't it? And there's much, much more if you'd like to sit down and read through one of these, but we've hit what I think are the main highlights. The letter to shareholders, the MD and A, the financial statements, the footnotes, and the letters from management and independent auditors. So now some time when you have some extra time, pick up an annual report of a company that you know. Give it a read and see what you learn, it can be a lot of fun.
