What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2021-07-23 compared with 2020-07-24 · 169 added, 168 removed, 140 unchanged (71% of the section changed)

1 unchanged sentence

Any of the risks and uncertainties described below could materially adversely affect our business, financial condition, and results of operations and should be considered in evaluating us.

While we believe we have identified and discussed below the key risk factors affecting our business, there may be additional risks

and uncertainties that are not presently known or that are not currently believed to be significant that may adversely affect our business, performance, or financial condition in the future.

Risks Relating to our Business

Although the risks are organized by headings and each risk is described separately, many of the risks are interrelated.

While we believe we have identified and discussed below the key risk factors affecting our business, there may be additional risks and uncertainties that are not presently known or that are not currently believed to be significant that may adversely affect our business, performance, or financial condition in the future.

COVID-19 Pandemic Risks

The COVID-19 pandemic could have an adverse impact on our business, financial condition, and results of operations.

In December 2019, there was an outbreak of a novel strain of coronavirus (COVID-19) in China that has since spread to nearly all regions of the world.

The outbreak was subsequently declared a pandemic by the World Health Organization in March 2020.

To date, the COVID-19 outbreak and preventative measures taken to contain or mitigate the outbreak have caused, and are continuing to cause, business slowdowns or shutdowns in affected areas and significant disruption in the financial markets both globally and in the United States.

In response to the COVID-19 pandemic and related mitigation measures, we created an internal COVID-19 pandemic team in order to review and assess the evolving COVID-19 pandemic and began implementing changes in our business in March 2020 to protect our employees and customers, and to support appropriate health and safety protocols.

For example, we installed physical barriers between employees in production facilities, implemented extensive cleaning and sanitation processes for both production and office spaces, and implemented broad work-from-home initiatives for office personnel.

While all of these measures have been necessary and appropriate, they have resulted in additional costs, which we expect will continue in fiscal 2021 as we work to address employee safety.

Although we have experienced some challenges in connection with the COVID-19 pandemic, including temporary closings of production facilities and reduced demand for certain of our products, at this time, we have not experienced a net negative impact on our liquidity or results of operations.

While we generally expect demand levels for our products to return to historical norms as we progress through fiscal 2021, we are unable to predict the ultimate impact of the COVID-19 outbreak, including the nature and timing of when such demand normalization may occur.

The continued spread of COVID-19 could negatively impact our business, financial condition and results of operations in a number of ways in the future, including but not limited to:

further shutdowns or slowdowns of one or more of our production facilities;

disruptions in our supply chain and our ability to obtain ingredients, packaging and other sourced materials due to labor shortages, governmental restrictions or the failure of our suppliers, distributors or manufacturers to meet their obligations to us;

strains on our supply chain due to increased consumer demand for certain of our products as a result of increased at-home consumption;

increases in raw material and commodity costs;

Although we have experienced challenges in connection with the COVID-19 pandemic, including temporary closings of production facilities, employee illnesses, increased costs, supply chain interruptions and reduced demand in our Foodservice segment, the pandemic has not to-date had a net negative impact on our liquidity or results of operations.

However, the continued spread of COVID-19 could negatively impact our business, financial condition, and results of operations in a number of ways in the future.

These impacts could include, but are not limited to:

shutdowns or slowdowns of one or more of our production facilities;

disruptions in our supply chain and in our ability to obtain ingredients, packaging, and other sourced materials due to labor shortages, governmental restrictions, or the failure of our suppliers, distributors, or manufacturers to meet their obligations to us;

continued increases in raw material and commodity costs;

the inability of a significant portion of our workforce, including our management team, to work as a result of illness or government restrictions;

shifts and volatility in consumer spending and purchasing behaviors due to the economic downturn;

decreased consumer traffic in away-from-home food outlets;

shifts and volatility in consumer spending and purchasing behaviors;

reduced availability of credit or financing upon acceptable terms or at all.

The situation surrounding the COVID-19 pandemic remains fluid, and given its inherent uncertainty, we expect that it could have an adverse impact on our business in the future.

The duration and extent of the impact from the COVID-19 pandemic depends on future developments that cannot be accurately predicted at this time, such as the severity and transmission rate of the virus, the extent and effectiveness of containment actions and the impact of these and other factors on our employees, customers, suppliers, distributors and manufacturers.

The duration and extent of the impact from the COVID-19 pandemic depends on future developments that cannot be accurately predicted at this time, such as the severity and transmission rate of the virus, the emergence and spread of variants, infection rates in areas where we operate, the extent and effectiveness of containment actions, including the continued availability and effectiveness of vaccines in the markets where we operate, and the impact of these and other factors on our employees, customers, suppliers, distributors, and manufacturers.

Should these conditions persist for a prolonged period, the COVID-19 pandemic, including any of the above factors and others that are currently unknown, could have a material adverse effect on our business, financial condition, and results of operations.

1 unchanged sentence

Deterioration of general economic conditions could harm our business and results of operations.

Our business and results of operations may be adversely affected by changes in national or global economic conditions, including inflation, interest rates, availability of capital markets, consumer spending rates, energy availability and costs (including

fuel surcharges), the negative impacts caused by pandemics and public health crises (including the COVID-19 pandemic ), and the effects of governmental initiatives to manage economic conditions.

Volatility in financial markets and deterioration of national and global economic conditions could impact our business and operations in a variety of ways, including as follows:

consumers may shift purchases to more generic, lower-priced, or other value offerings, or may forego certain purchases altogether during economic downturns, which could result in a reduction in sales of higher margin products or a shift in our product mix to lower margin offerings adversely affecting the results of our operations;

restrictions on public gatherings or interactions may limit the opportunity for our customers and consumers to purchase our products;

Our business and results of operations have in the past been and may continue to be adversely affected by changes in national or global economic conditions, including inflation, interest rates, availability of capital markets, consumer spending rates, energy availability and costs (including fuel surcharges), the negative impacts caused by pandemics and public health crises (including the COVID-19 pandemic), and the effects of governmental initiatives to manage economic conditions.

Volatility in financial markets and deterioration of national and global economic conditions has impacted and could continue to impact our business and operations in a variety of ways, including as follows:

consumers shifting purchases to more generic, lower-priced, or other value offerings, or foregoing certain purchases altogether during economic downturns, which could result in a reduction in sales of higher margin products or a shift in our product mix to lower margin offerings adversely affecting the results of our operations;

decreased demand in the restaurant business (including due to the COVID-19 pandemic), particularly casual and fine dining, may adversely affect our Foodservice operations;

2 unchanged sentences

it may become more costly or difficult to obtain debt or equity financing to fund operations or investment opportunities, or to refinance our debt in the future, in each case on terms and within a time period acceptable to us.

Our existing and future debt may limit cash flow available to invest in the ongoing needs of our business and could prevent us from fulfilling our debt obligations.

As of May 31, 2020, we had total debt of approximately $9.75 billion, including approximately $9.44 billion aggregate principal amount of senior notes.

Our ability to make payments on our debt, fund our other liquidity needs, and make planned capital expenditures will depend on our ability to generate cash in the future.

Our existing and future debt may limit cash flow available to invest in the ongoing needs of our business and could prevent us from fulfilling our debt obligations or returning cash to stockholders.

As of May 30, 2021, we had total debt of approximately $9.01 billion, including approximately $8.21 billion aggregate principal amount of outstanding senior notes.

Our ability to make payments on our debt, fund our other liquidity needs, make planned capital expenditures and return cash to stockholders, will depend on our ability to generate cash in the future.

Our historical financial results have been, and we anticipate that our future financial results will be, subject to fluctuations.

Our ability to generate cash, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory, and other factors that are beyond our control.

We cannot guarantee that our business will generate sufficient cash flow from our operations or that future borrowings will be available to us in an amount sufficient to enable us to make payments of our debt, fund other liquidity needs, and make planned capital expenditures.

Our level of debt could have important consequences for shareholders.

Our level of debt could have important consequences.

For example, it could:

2 unchanged sentences

restrict us from repurchasing shares of our common stock;

negatively impact our ability to pay a cash dividend at an attractive level;

limit flexibility to plan for, or react to, changes in the businesses and industries in which we operate, which may adversely affect our operating results and ability to meet our debt service obligations;

5 unchanged sentences

Additionally, any failure to meet required payments on our debt, or failure to comply with any covenants in the instruments governing our debt, could result in an event of default under the terms of those instruments and a downgrade to our credit ratings.

A downgrade in our credit ratings would increase our borrowing costs and could affect our ability to issue commercial paper.

In the event of a default, the holders of our debt could elect to declare all the amounts outstanding under such instruments to be due

In the event of a default, the holders of our debt could elect to declare all the amounts outstanding under such instruments to be due and payable.

Any default under the agreements governing our debt and the remedies sought by the holders of such debt could render us unable to pay principal and interest on our debt.

Recently, we have increasingly accessed the commercial paper markets for ongoing funding requirements.

A downgrade in our credit ratings would increase our borrowing costs and could affect our ability to issue commercial paper.

Additionally, disruptions in the commercial paper market or other effects of volatile economic conditions on the credit markets could also reduce the amount of commercial paper that we could issue and raise our borrowing costs.

A significant portion of our operations are conducted through our subsidiaries.

7 unchanged sentences

Finally, changes in the laws of foreign jurisdictions in which we operate may adversely affect the ability of some of our foreign subsidiaries to repatriate funds to us.

Competition Risks

Increased competition may result in reduced sales or profits.

11 unchanged sentences

The expanding presence of e-commerce retailers has impacted, and may continue to impact, consumer preferences and market dynamics, which in turn may negatively affect our sales or profits.

If we do not achieve the appropriate cost structure in the highly competitive food industry, our profitability could decrease.

Our future success and earnings growth depend in part on our ability to achieve the appropriate cost structure and operate efficiently in the highly competitive food industry, particularly in an environment of volatile input costs.

We continue to

implement profit-enhancing initiatives that impact our supply chain and general and administrative functions.

These initiatives are focused on cost-saving opportunities in procurement, manufacturing, logistics, and customer service, as well as general and administrative overhead levels.

Gaining additional efficiencies may become more difficult over time.

Our failure to reduce costs through productivity gains or by eliminating redundant costs resulting from acquisitions could adversely affect our profitability and weaken our competitive position.

If we do not continue to effectively manage costs and achieve additional efficiencies, our competitiveness and our profitability could decrease.

Commodity Risks

We are subject to increases in the price of raw materials, labor, manufacturing, distribution, and other inputs necessary for the production and distribution of our products, and we may not be able to fully offset this input cost inflation on a timely basis or at all.

Many of the components of our cost of goods sold are subject to price increases that are attributable to factors beyond our control, including but not limited to, changes in crop size, product scarcity, demand dynamics, currency rates, water supply, weather conditions, import and export requirements, and other factors.

The cost of raw materials, labor, manufacturing, energy, fuel, packaging materials, and other inputs related to the production and distribution of our products can also increase unexpectedly.

In the latter part of fiscal 2021 and the early part of fiscal 2022, input costs have increased materially and at a rapid rate.

We expect the pressures of input cost inflation to continue into fiscal 2022.

The Company uses a variety of strategies to seek to offset this input cost inflation.

However, we may not be able to generate sufficient productivity improvements, price increases or commodity hedging benefits to fully offset these costs, or do so on an acceptable timeline.

To the extent we are unable to offset present and future input cost increases, our operating results could be materially and adversely affected.

Increases in commodity costs may have a negative impact on profits.

11 unchanged sentences

We utilize derivatives to manage price risk for some of our principal ingredients and energy costs, including grains (wheat, corn, and oats), oils, beef, pork, poultry, and energy.

Changes in the values of these derivatives are generally recorded in earnings

currently, resulting in volatility in both gross margin and net earnings.

Changes in the values of these derivatives are generally recorded in earnings currently, resulting in volatility in both gross margin and net earnings.

These gains and losses are reported in cost of goods sold in our Consolidated Statements of Earnings and in unallocated general corporate expenses in our segment operating results until we utilize the underlying input in our manufacturing process, at which time the gains and losses are reclassified to segment operating profit.

We may experience volatile earnings as a result of these accounting treatments.

If we do not achieve the appropriate cost structure in the highly competitive food industry, our profitability could decrease.

We continue to implement profit-enhancing initiatives that impact our supply chain and general and administrative functions.

These initiatives are focused on cost-saving opportunities in procurement, manufacturing, logistics, and customer service, as well as general and administrative overhead levels.

Gaining additional efficiencies may become more difficult over time.

Our failure to reduce costs through productivity gains or by eliminating redundant costs resulting from acquisitions could adversely affect our profitability and weaken our competitive position.

If we do not continue to effectively manage costs and achieve additional efficiencies, our competitiveness and our profitability could decrease.

We may not realize the benefits that we expect from our restructuring plans, including the Pinnacle Integration Restructuring Plan.

Strategic Transaction Risks

We may not realize the benefits that we anticipated from the Pinnacle Foods acquisition.

The benefits that are expected to result from the Pinnacle acquisition will continue to depend, in part, on our ability to realize the anticipated growth opportunities and cost synergies as the result of the acquisition.

Our success in realizing these growth opportunities and cost synergies, and the timing of this realization, depends on the successful integration of Pinnacle.

In fiscal 2019, we announced a restructuring and integration plan related to the ongoing integration of Pinnacle for the purpose of achieving significant cost synergies (the "Pinnacle Integration Restructuring Plan").

We expect to incur material charges for exit and disposal activities under U.S.

We expect to continue incur ring material charges over a multi-year period for exit and disposal activities under U.S.

generally accepted accounting principles.

The successful design and implementation of the Pinnacle Integration Restructuring Plan presents significant organizational design and infrastructure challenges.

In many cases, it will require successful negotiations with third parties, including labor organizations, suppliers, business partners, and other stakeholders.

We recognized charges of $31.7 million, $73.8 million, and $168.2 million in connection with the Pinnacle Integration Restructuring Plan in fiscal 2021, 2020, and 2019, respectively.

The successful implementation of the Pinnacle Integration Restructuring Plan presents significant organizational design and infrastructure challenges.

In many cases, it requires successful negotiations with third parties, including labor organizations, suppliers, business partners, and other stakeholders.

In addition, the Pinnacle Integration Restructuring Plan may not advance our business strategy as expected.

2 unchanged sentences

Any failure to implement the Pinnacle Integration Restructuring Plan in accordance with our expectations could adversely affect our financial condition, results of operations, and cash flows.

In addition, the complexity of the Pinnacle Integration Restructuring Plan will require a substantial amount of management and operational resources.

Our management team must successfully implement administrative and operational changes necessary to achieve the anticipated benefits of the Pinnacle Integration Restructuring Plan.

These and related demands on our resources may divert the organization's attention from existing core businesses, integrating financial or other systems, have adverse effects on existing business relationships with suppliers and customers, and impact employee morale.

As a result, our financial condition, results of operations, and cash flows could be adversely affected.

The process of integrating operations could cause an interruption of, or loss of momentum in, our activities.

Members of our senior management may be required to devote considerable amounts of time to this integration process, which will decrease the time they will have to manage the Company, service existing customers, attract new customers, and develop new products or strategies.

If senior management is not able to effectively manage the integration process, or if any significant business activities are interrupted as a result of the integration process, our business could suffer.

There can be no assurance that we will successfully or cost-effectively integrate Pinnacle.

The failure to do so could have a material adverse effect on our business, financial condition, and results of operations.

If we are unable to complete acquisitions or integrate acquired businesses, our financial results could be materially and adversely affected.

From time to time, we evaluate acquisition candidates that may strategically fit our business objectives.

If we are unable to complete acquisitions or to successfully integrate and develop acquired businesses, our financial results could be materially and adversely affected.

Moreover, we may incur asset impairment charges related to acquisitions that reduce our profitability.

Our acquisition activities may present financial, managerial, and operational risks.

Those risks include diversion of management attention from existing businesses, difficulties integrating personnel and financial and other systems, effective and immediate implementation of control environment processes across our employee population, adverse effects on existing business relationships with suppliers and customers, inaccurate estimates of fair value made in the accounting for acquisitions and amortization of acquired intangible assets which would reduce future reported earnings, potential loss of customers or key employees of acquired businesses, and indemnities and potential disputes with the sellers.

Any of these factors could affect our sales, financial condition, and results of operations.

If we are unable to complete certain divestitures, our financial results could be materially and adversely affected.

From time to time, we may divest businesses that do not meet our strategic objectives or do not meet our growth or profitability targets.

We may not be able to complete desired divestitures on terms favorable to us.

Gains or losses on the sales of, or lost operating income from, those businesses may affect our profitability and margins.

Moreover, we may incur asset impairment charges related to divestitures that reduce our profitability.

Our divestiture activities may present financial, managerial, and operational risks.

Those risks include diversion of management attention from existing businesses, difficulties separating personnel and financial and other systems, possible need for providing transition services to buyers, adverse effects on existing business relationships with suppliers and customers and indemnities and potential disputes with the buyers.

Any of these factors could adversely affect our product sales, financial condition, and results of operations.

We may be exposed to claims and liabilities or incur operational difficulties as a result of our spinoff of the Lamb Weston business (the "Spinoff").

The Spinoff involves a number of risks, including, among other things, certain indemnification risks.

In connection with the Spinoff, we entered into a separation and distribution agreement and various other agreements (including a transition services

agreement, a tax matters agreement, an employee matters agreement, and a trademark license agreement), which we refer to as the Lamb Weston agreements.

The Lamb Weston agreements govern the Spinoff and the relationship between the two companies going forward.

The Lamb Weston agreements provide for indemnification obligations designed to make Lamb Weston financially responsible for certain liabilities that may exist relating to its business activities, whether incurred prior to or after the distribution, including any pending or future litigation.

It is possible that a court would disregard the allocation agreed to between us and Lamb Weston and require us to assume responsibility for obligations allocated to Lamb Weston.

Third parties could also seek to hold us responsible for any of these liabilities or obligations, and the indemnity rights we have under the separation and distribution agreement may not be sufficient to fully cover all of these liabilities and obligations.

Even if we are successful in obtaining indemnification, we may have to bear costs temporarily.

In addition, our indemnity obligations to Lamb Weston may be significant.

These risks could negatively affect our business, financial condition, or results of operations.

The Lamb Weston agreements could also lead to disputes over rights to certain shared property and rights and over the allocation of costs and revenues for products and operations.

If Lamb Weston is unable to satisfy its obligations under these agreements, including its indemnification obligations, we could incur losses.

Operating Risks

We may be subject to product liability claims and product recalls, which could negatively impact our profitability.

10 unchanged sentences

meaning that no intent is required to be established.

If we fail to comply with applicable laws

and regulations, we may be subject to civil remedies, including fines, injunctions, recalls, or seizures, as well as criminal sanctions, any of which could have a material adverse effect on our business, financial condition, or results of operations.

If we fail to comply with applicable laws and regulations, we may be subject to civil remedies, including fines, injunctions, recalls, or seizures, as well as criminal sanctions, any of which could have a material adverse effect on our business, financial condition, or results of operations.

Any damage to our reputation could have a material adverse effect on our business, financial condition, and results of operations.

Maintaining a good reputation is critical to selling our products.

Product contamination or tampering, the failure to maintain high standards for product quality, safety, and integrity, including with respect to raw materials and ingredients obtained from suppliers, or allegations of product quality issues, mislabeling, or contamination, even if untrue, may reduce demand for our products or cause production and delivery disruptions.

Our reputation could also be adversely impacted by any of the following, or by adverse publicity (whether or not valid) relating thereto:

the failure to maintain high ethical, social, and environmental standards for all of our operations and activities;

the failure to achieve any stated goals with respect to the nutritional profile of our products;

our research and development efforts;

or our environmental impact, including use of agricultural materials, packaging, energy use, and waste management.

Moreover, the growing use of social and digital media by consumers has greatly increased the speed and extent that information or misinformation and opinions can be shared.

Failure to comply with local laws and regulations, to maintain an effective system of internal controls or to provide accurate and timely financial information could also hurt our reputation.

Damage to our reputation or loss of consumer confidence in our products for any of these or other reasons could result in decreased demand for our products and could have a material adverse effect on our business, financial condition, and results of operations, as well as require additional resources to rebuild our reputation.

Due to the seasonality of the business, our revenue and operating results may vary from quarter to quarter.

Our sales and cash flows are affected by seasonal cyclicality.

Sales of frozen foods, including frozen vegetables and frozen complete bagged meals, tend to be marginally higher during the winter months.

Seafood sales peak during Lent, in advance of the Easter holiday.

Since many of the raw materials we process are agricultural crops, production of these products is predominantly seasonal, occurring during and immediately following the purchase of such crops.

For these reasons, sequential quarterly comparisons are not a good indication of our performance or how we may perform in the future.

If we are unable to obtain access to working capital or if seasonal fluctuations are greater than anticipated, there could be a material adverse effect on our financial condition, results of operations, or cash flows.

Customer Risks

We must identify changing consumer preferences and develop and offer food products to meet their preferences.

1 unchanged sentence

Introduction of new products and product extensions requires significant development and marketing investment.

If our products fail to meet consumer preferences, or we fail to introduce new and improved products on a timely basis, then the return on that investment will be less than anticipated and our strategy to grow sales and profits with investments in acquisitions, marketing, and innovation will be less successful.

Trends indicate that people are generally cooking at home more often as a result of the COVID-19 pandemic, and our consumers are repurchasing our products across a number of our leading brands at higher rates.

If our products fail to meet changing consumer preferences or habits, or if we fail to introduce new and improved products on a timely basis, then the return on that investment will be less than anticipated and our strategy to grow sales and profits with investments in acquisitions, marketing, and innovation will be less successful.

Similarly, demand for our products could be affected by consumer concerns or perceptions regarding the health effects of ingredients such as sodium, trans fats, sugar, processed wheat, or other product ingredients or attributes.

7 unchanged sentences

Our customers, such as supermarkets, warehouse clubs, and food distributors, have continued to consolidate, resulting in fewer customers on which we can rely for business.

These consolidations, the growth of supercenters, and the growth of e-commerce customers have produced large, sophisticated customers with increased buying power and negotiating strength who are more capable of resisting price increases and can demand lower pricing, increased promotional programs, or specialty tailored products.

These consolidations, the growth of supercenters, and the growth of e-commerce customers have produced large, sophisticated customers with increased buying power and negotiating strength who are more capable of resisting price increases and who can demand lower pricing, increased promotional programs, or specialty tailored products.

In addition, larger retailers have the scale to develop supply chains that permit them to operate with reduced inventories or to develop and market their own retailer brands.

4 unchanged sentences

For example, if our customers cannot access sufficient funds or financing, then they may delay, decrease, or cancel purchases of our products, or delay or fail to pay us for previous purchases.

If we are unable to complete proposed acquisitions or integrate acquired businesses, our financial results could be materially and adversely affected.

From time to time, we evaluate acquisition candidates that may strategically fit our business objectives.

If we are unable to complete acquisitions or to successfully integrate and develop acquired businesses, our financial results could be materially and adversely affected.

Moreover, we may incur asset impairment charges related to acquisitions that reduce our profitability.

Our acquisition activities may present financial, managerial, and operational risks.

Any of these factors could affect our product sales, financial condition, and results of operations.

If we are unable to complete our proposed divestitures, our financial results could be materially and adversely affected.

From time to time, we may divest businesses that do not meet our strategic objectives or do not meet our growth or profitability targets.

We may not be able to complete desired or proposed divestitures on terms favorable to us.

Gains or losses on

the sales of, or lost operating income from, those businesses may affect our profitability and margins.

Moreover, we may incur asset impairment charges related to divestitures that reduce our profitability.

Our divestiture activities may present financial, managerial, and operational risks.

Any of these factors could adversely affect our product sales, financial condition, and results of operations.

Third-Party Partner Risks

Disruption of our supply chain could have an adverse impact on our business, financial condition, and results of operations.

Our ability to make, move, and sell our products is critical to our success.

Damage or disruption to our supply chain, including third-party manufacturing or transportation and distribution capabilities, due to weather, including any potential effects of climate change, natural disaster, fire or explosion, terrorism, pandemics (such as the coronavirus (COVID-19) pandemic), strikes, government action, or other reasons beyond our control or the control of our suppliers and business partners, could impair our ability to manufacture or sell our products.

government action, or other reasons beyond our control or the control of our suppliers and business partners, could impair our ability to manufacture or sell our products.

Failure to take adequate steps to mitigate the likelihood or potential impact of such events, or to effectively manage such events if they occur, particularly when a product is sourced from a single supplier or location, could adversely affect our business or financial results.

In addition, disputes with significant suppliers, including disputes regarding pricing or performance, could adversely affect our ability to supply products to our customers and could materially and adversely affect our product sales, financial condition, and results of operations.

In particular, we are actively monitoring the recent COVID-19 pandemic and its potential impact on our supply chain and our consolidated results of operations.

Although our products are manufactured in North America and we source the significant majority of our ingredients and raw materials from North America, due to restrictions resulting from the pandemic, global supply may become constrained, which may cause the price of certain ingredients and raw materials used in our products to increase and/or we may experience disruptions to our operations.

Any damage to our reputation could have a material adverse effect on our business, financial condition, and results of operations.

Maintaining a good reputation globally is critical to selling our products.

Our reputation could also be adversely impacted by any of the following, or by adverse publicity (whether or not valid) relating thereto:

the failure to maintain high ethical, social, and environmental standards for all of our operations and activities;

the failure to achieve any stated goals with respect to the nutritional profile of our products;

our research and development efforts;

or our environmental impact, including use of agricultural materials, packaging, energy use, and waste management.

Moreover, the growing use of social and digital media by consumers has greatly increased the speed and extent that information or misinformation and opinions can be shared.

Failure to comply with local laws and regulations, to maintain an effective system of internal controls or to provide accurate and timely financial information could also hurt our reputation.

In particular, we continue to monitor the COVID-19 pandemic and its potential impact on our supply chain and our consolidated results of operations.

Although our products are manufactured in North America and we source the significant majority of our ingredients and raw materials from North America, due to restrictions resulting from the COVID-19 pandemic, global supply may become constrained, which may cause the price of certain ingredients and raw materials used in our products to increase and/or we may experience disruptions to our operations.

The termination or expiration of current co-manufacturing arrangements could reduce our sales volume and adversely affect our results of operations.

Our businesses periodically enter into co-manufacturing arrangements with manufacturers of products.

The terms of these agreements vary.

Although many agreements are for a relatively short period of time, some of the co-manufacturing agreements are for extended periods.

Volumes produced under each of these agreements can fluctuate significantly based upon the product's life cycle, product promotions, alternative production capacity, and other factors, none of which are under our direct control.

Our future ability to enter into co-manufacturing arrangements is not guaranteed, and a decrease in current co-manufacturing levels could have a significant negative impact on sales volume.

As we outsource certain functions, we become more dependent on the third parties performing those functions.

As part of a concerted effort to achieve cost savings and efficiencies, we have entered into agreements with third-party service providers under which we have outsourced certain information systems, sales, finance, accounting, and other functions, and we may enter into managed services agreements with respect to other functions in the future.

If any of these third-party service providers do not perform according to the terms of the agreements, or if we fail to adequately monitor their performance, we may not be able to achieve the expected cost savings or we may have to incur additional costs to correct errors made by such service providers, and our reputation could be harmed.

Depending on the function involved, such errors may also lead to business interruption, damage or disruption of information technology systems, processing inefficiencies, the loss of or damage to intellectual property or non-public company sensitive information, effects on financial reporting, litigation or remediation costs, or damage to our reputation, any of which could have a material adverse effect on our business.

If any of our third-party service providers experience a cyber breach or system failure, their businesses could be negatively impacted, and it may result in disruption to our end-to-end supply chain or affect our ability to fulfill customer orders, both of which could have a material adverse effect on our business.

If our third-party service providers do not respond or perform effectively in connection with a cyber breach or system failure, our business may be impacted.

In addition, if we transition functions to one or more new, or among existing, external service providers, we may experience challenges that could have a material adverse effect on our results of operations or financial condition.

Our operations are dependent on a wide array of third parties.

The success of our end-to-end supply chain relies on the continued performance of a wide array of third parties.

Suppliers, co-manufacturers, third-party outsourcers, warehousing partners, and transportation providers are among our critical partners.

Although we take steps to qualify and audit third parties with whom we do business, we cannot guarantee that all third parties will perform dependably or at all.

It is possible that events beyond our control, such as operational failures, labor issues, cybersecurity events, pandemics or other health issues, such as COVID-19, or other issues could impact our unaffiliated third parties.

If our third parties fail to deliver on their commitments, introduce unplanned risk to our operations (e.g., through cyber activity), or are unable to fulfill their obligations, we could experience manufacturing challenges, shipment delays, increased costs, or lost revenue.

Legal, Regulatory , and Environmental Risks

If we fail to comply with the many laws applicable to our business, we may face lawsuits or incur significant fines and penalties.

1 unchanged sentence

Our business is subject to a variety of governmental laws and regulations, including food and drug laws, environmental laws, laws related to advertising and marketing practices, accounting standards, taxation requirements, competition laws, employment laws, data privacy laws, and anti-corruption laws, among others, in and outside of the United States.

Our facilities and products are subject to many laws and regulations administered by the United States Department of Agriculture, the Federal Food and Drug Administration, the Occupational Safety and Health Administration, and other federal, state, local, and foreign governmental agencies relating to the processing, packaging, storage, distribution, advertising, labeling, quality, and safety of food products, the health and safety of our employees, and the protection of the environment.

Our operations are subject to various laws and regulations administered by federal, state, local and foreign government agencies, including, but not limited to, the United States Department of Agriculture, the Federal Food and Drug Administration, the Occupational Safety and Health Administration, the Environmental Protection Agency, and the Department of Labor.

In particular, the processing, packaging, transportation, storage, distribution, advertising, labeling, quality, and safety of food products, the health and safety of our employees, and the protection of the environment are each subject to governmental regulation.

Additionally, we are subject to data privacy and security regulations, tax and securities regulations, accounting and reporting standards, and other financial laws and regulations.

Our failure to comply with applicable laws and regulations could subject us to lawsuits, administrative penalties, and civil remedies, including fines, injunctions, and recalls of our products.

3 unchanged sentences

Changes in applicable laws or regulations or evolving interpretations thereof, including increased government regulations to limit carbon dioxide and other greenhouse gas emissions as a result of concern over climate change, may result in increased compliance costs, capital expenditures, and other financial obligations for us, which could affect our profitability or impede the production or distribution of our products, and affect our net operating revenues.

Climate change, or legal, regulatory, or market measures to address climate change, may negatively affect our business and operations.

There is growing concern that carbon dioxide and other greenhouse gases in the atmosphere may have an adverse impact on global temperatures, weather patterns, and the frequency and severity of extreme weather and natural disasters.

In the event that such climate change has a negative effect on agricultural productivity, we may be subject to decreased availability or less favorable pricing for certain commodities that are necessary for our products, such as wheat, tomatoes, and a wide array of vegetables.

Adverse weather conditions and natural disasters can reduce crop size and crop quality, which in turn could reduce our supplies of raw materials, lower recoveries of usable raw materials, increase the prices of our raw materials, increase our cost of transporting and storing raw materials, or disrupt our production schedules.

We may also be subjected to decreased availability or less favorable pricing for water as a result of such change, which could impact our manufacturing and distribution operations.

In addition, natural disasters and extreme weather conditions may disrupt the productivity of our facilities or the operation of our supply chain.

The increasing concern over climate change also may result in more regional, federal, and/or global legal and regulatory requirements to reduce or mitigate the effects of greenhouse gases.

In the event that such regulation is enacted and is more aggressive than the sustainability measures that we are currently undertaking to monitor our emissions and improve our energy efficiency, we may experience significant increases in our costs of operation and delivery.

In particular, increasing regulation of fuel emissions could substantially increase the distribution and supply chain costs associated with our products.

As a result, climate change could negatively affect our business and operations.

Cybersecurity and Information Technology Risks

Our business operations could be disrupted if our information technology systems fail to perform adequately.

We rely on information technology networks and systems, including the Internet, to process, transmit, and store information, to manage and support a variety of business processes and activities, and to comply with regulatory, legal, and tax requirements.

Our information technology systems, some of which are dependent on services provided by third parties, may be vulnerable to damage, interruption, or shutdown due to any number of causes outside of our control such as catastrophic events, natural disasters, fires, power outages, systems failures, telecommunications failures, employee error or malfeasance, security breaches, computer viruses or other malicious codes, ransomware, unauthorized access attempts, denial of service attacks, phishing, hacking, and other cyberattacks.

phishing, hacking, and other cyberattacks.

While we have experienced threats to our data and systems, to date, we are not aware that we have experienced a material breach.

However, over time, and particularly recently, the sophistication of these threats continues to increase.

Cyberattacks are occurring more frequently, are constantly evolving in nature and are becoming more sophisticated.

We may incur significant costs in protecting against or remediating cyberattacks or other cyber incidents.

Sophisticated cybersecurity threats pose a potential risk to the security and viability of our information technology systems, as well as the confidentiality, integrity, and availability of the data stored on those systems, including cloud-based platforms.

6 unchanged sentences

Our efforts to comply with privacy and data protection laws may impose significant costs and challenges that are likely to increase over time.

Employee Risks

We rely on our management team and other key personnel.

1 unchanged sentence

In addition, our ability to achieve our operating goals depends on our ability to identify, hire, train, and retain qualified individuals.

We compete with other companies both within and outside of our industry for talented personnel, and we may lose key personnel or fail to attract, train, and retain other talented personnel.

Any such loss or failure could adversely affect our product sales, financial condition, and operating results.

In particular, our continued success will depend in part on our ability to retain the talents and dedication of key employees.

If key employees terminate their employment, become ill as a result of the COVID-19 pandemic, or if an insufficient number of employees is retained to maintain effective operations, our business activities may be adversely affected and our management team's attention may be diverted.

In addition, we may not be able to locate suitable replacements for any key employees who leave, or offer employment to potential replacements on reasonable terms, all of which could adversely affect our product sales, financial condition, and operating results.

If key employees terminate their employment, including by becoming ill as a result of the COVID-19 pandemic, our business activities may be adversely affected.

Our business activities may also be adversely affected if we are unable to locate suitable replacements for any key employees who leave, or offer employment to potential replacements on reasonable terms.

We compete with other companies both within and outside of our industry for talented personnel.

If we do not successfully compete for the best talent, our business activities may be adversely affected.

Our results could be adversely impacted as a result of increased pension, labor, and people-related expenses.

Our labor costs include wages and the cost of providing employee benefits including pension, health and welfare, and severance benefits.

The annual cost of providing these benefits varies as a result of factors such as the availability of skilled labor, the costs of health care, and the outcome of collectively bargained wage and benefit agreements.

In addition, changes in interest rates, mortality rates, health care costs, early retirement rates, investment returns, and the market value of plan assets can affect the funded status of our defined benefit plans and cause volatility in the future funding requirements of the plans.

A significant increase in our wage and benefit costs, pension obligations, or future funding requirements could have a negative impact on our results of operations and cash flows from operations.

Goodwill or Other Intangible Assets Risks

Impairment in the carrying value of goodwill or other intangibles could result in the incurrence of impairment charges and negatively impact our net worth.

1 unchanged sentence

The net carrying value of goodwill represents the fair value of acquired businesses in excess of identifiable assets and liabilities as of the acquisition date (or subsequent impairment date, if applicable).

The net carrying value of other intangibles represents the fair value of trademarks,

customer relationships, and other acquired intangibles as of the acquisition date (or subsequent impairment date, if applicable), net of accumulated amortization.

Goodwill and other acquired intangibles expected to contribute indefinitely to our cash flows are not amortized, but must be evaluated by management at least annually for impairment.

The net carrying value of other intangibles represents the fair value of trademarks, customer relationships, and other acquired intangibles as of the acquisition date (or subsequent impairment date, if applicable), net of accumulated amortization.

Goodwill and other acquired intangibles expected to contribute indefinitely to our cash flows are

not amortized, but must be evaluated by management at least annually for impairment.

Amortized intangible assets are evaluated for impairment whenever events or changes in circumstance indicate that the carrying amounts of these assets may not be recoverable.

Impairments to goodwill and other intangible assets may be caused by factors outside our control, such as the inability to quickly replace lost co-manufacturing business, increasing competitive pricing pressures, lower than expected revenue and profit growth rates, changes in industry EBITDA (earnings before interest, taxes, depreciation and amortization) multiples, changes in discount rates based on changes in cost of capital (interest rates, etc.), or the bankruptcy of a significant customer and could result in the incurrence of impairment charges and negatively impact our net worth.

Our results could be adversely impacted as a result of increased pension, labor, and people-related expenses.

Inflationary pressures and any shortages in the labor market could increase labor costs, which could have a material adverse effect on our operating results or financial condition.

Our labor costs include the cost of providing employee benefits in the U.S.

and foreign jurisdictions, including pension, health and welfare, and severance benefits.

Changes in interest rates, mortality rates, health care costs, early retirement rates, investment returns, and the market value of plan assets can affect the funded status of our defined benefit plans and cause volatility in the future funding requirements of the plans.

A significant increase in our obligations or future funding requirements could have a negative impact on our results of operations and cash flows from operations.

Additionally, the annual costs of benefits vary with increased costs of health care and the outcome of collectively-bargained wage and benefit agreements.