Smithfield Foods (SFD) risk factors, FY2024 10-K

Risks Relating to Our Business and Operations

1. 01Our results of operations are cyclical and could be adversely affected by fluctuations in the commodity prices for meat, livestock (primarily hogs) and feed ingredients
2. 02Disruption of our supply chain could adversely affect our business, financial condition and results of operations
3. 03An inability to realize savings and efficiency gains could adversely affect profitability and we may be unable to achieve any or all of our financial and operational targets
4. 04The food industry in which we operate is highly competitive, and our inability to compete successfully, or the effects of such competition, could adversely affect our business, financial condition and results of operations
5. 05Changes in consumer preferences and failure to maintain favorable consumer perception of our brands and products could negatively impact our business
6. 06We are subject to risks relating to our ability to maintain animal health and control diseases. Real or perceived livestock health problems could adversely impact our production, our supply of raw materials and consumer confidence in all of our operating segments
7. 07Our operations are subject to the general risks associated with the food industry, including perceived or real health risks related to our products or the food industry generally and risks associated with government regulations
8. 08Product liability claims or product recalls can adversely affect our business reputation, expose us to increased scrutiny by federal and state regulators and may not be covered by insurance
9. 09Our reliance on third-party service providers can have an adverse effect on our business
10. 10Due to seasonality or changes in our promotional activities, our revenue and operating results may vary from quarter to quarter
11. 11Significant increases in the cost of distribution could adversely affect our business, financial condition and results of operations
12. 12Our operations are subject to the risks associated with acquisitions, investments in joint ventures and divestitures
13. 13We are subject to risks associated with our international sales, including disruptions to the worldwide economy due to changes in U.S. trade policy
14. 14We depend on availability of, and satisfactory relations with, our employees
15. 15We are subject to various risks relating to worker employment and health and safety
16. 16We depend upon the continued services of certain key members of our senior management team, without whom our business operations could be significantly disrupted
17. 17The consolidation of customers and/or the loss of our customers could adversely impact our business
18. 18Impairment in the carrying value of goodwill or intangible assets could negatively impact our consolidated results of operations and net worth
19. 19the carrying amount of an indefinite life intangible asset exceeds the estimated fair value of that intangible asset. Identified intangible assets with definite lives are tested for recoverability whenever events or changes in circumstances indicate that their carrying amount may not be recoverable
20. 20The loss of any trademark or other intellectual property right could enable other companies to compete more effectively with us
21. 21Deterioration of economic conditions could negatively impact our business
22. 22If tax laws change or we experience adverse outcomes resulting from examination of our tax returns or disagreements with taxing authorities, it could adversely affect our business, financial condition and results of operations
23. 23We face risks associated with the long-term trend toward increased activism against companies in the food products industry

Risks Relating to Government Regulations

1. 24We are subject to extensive governmental regulations, which require significant compliance expenditures
2. 25Governmental authorities may take further action restricting our ability to produce and/or sell livestock or adopt new regulations impacting our production or processing operations, which could adversely affect our business
3. 26We are, and could become, subject to legal proceedings and regulatory investigations that may result in significant expenses, fines and reputational damage
4. 27We intend to vigorously defend against these claims, but we cannot assure you that we will be successful or that additional similar claims will not arise in the future. We established a reserve for these claims, however we cannot assure you that the reserve will not have to be increased, as applicable
5. 28Government antitrust and foreign investment policies and regulations may limit our strategic growth opportunities, including certain acquisitions and joint ventures
6. 29Environmental regulation and related litigation and commitments could have a material adverse effect on us
7. 30Climate change, or legal, regulatory, voluntary or market measures to address climate change, may negatively affect our business, operations or reputation

Risks Relating to Our Capital Structure

1. 31We may require additional financing to achieve our goals, and the failure to obtain this necessary capital when needed on acceptable terms, or at all, may force us to delay, limit, reduce or terminate our product manufacturing and development, and other operations
2. 32Our level of indebtedness and the terms of our indebtedness could adversely affect our business and liquidity position
3. 33our secured indebtedness to our lenders, these lenders could proceed against the collateral securing that indebtedness, which could include substantially all of our accounts receivable assets in the U.S
4. 34We may not be able to generate sufficient cash to service all of our indebtedness
5. 35If drawn upon, our current variable rate indebtedness would subject us to interest rate risk, which could cause our debt service obligations to increase
6. 36Despite current indebtedness levels and restrictive covenants, we may incur additional indebtedness. This could further exacerbate the risks associated with our financial leverage

Risks Relating to Our Relationship with WH Group

1. 37We are a “controlled company” within the meaning of the rules of Nasdaq and, as a result, qualify for, and rely on, exemptions from certain corporate governance requirements. You will not have the same protections afforded to shareholders of other companies that are subject to such requirements
2. 38WH Group controls us, and their interests may conflict with ours or yours in the future
3. 39Group, and any entity that acquires a majority of our then outstanding shares of common stock directly from any of the foregoing that is a shareholder of our company
4. 40WH Group owns a controlling equity interest in our company and therefore has the ability, should it choose to do so, to sell some or all of its shares of our common stock in a privately negotiated transaction, which, if sufficient in size, could result in a change of control of our company
5. 41Certain of our directors may have actual or potential conflicts of interest because of their equity interest in WH Group. Also, certain of WH Group’s current executive officers also serve as directors of our company, which may create conflicts of interest, or the appearance of conflicts of interest
6. 42executive officers or non-independent directors in respect of the relevant matter, the actual or perceived conflicts of interest that may arise could cause reputational or other harm
7. 43WH Group indemnifies us for certain liabilities. However, there can be no assurance that the indemnity will be sufficient to insure us against the full amount of such liabilities, or that WH Group’s ability to satisfy its indemnification obligation will not be impaired in the future
8. 44Our controlling shareholder is required by the stock exchange on which its shares are listed to disclose and obtain approval from its board of directors or shareholders for certain corporate actions that we undertake

Risks Relating to the Ownership of Our Common Stock

1. 45The obligations associated with being an independent, publicly traded company require significant resources and management attention
2. 46Failure to comply with requirements to design, implement, and maintain effective internal controls could have a material adverse effect on our business and stock price
3. 47We cannot be certain that an active trading market for our common stock will be sustained
4. 48Our stock price may fluctuate significantly, and you could lose all or part of your investment as a result
5. 49We expect to continue paying regular dividends to our shareholders, but our ability to do so is subject to the discretion of our board and may be limited by our financial condition, our credit facilities, the indentures governing the notes we previously issued and applicable law
6. 50Any shareholder whose principal currency is not the U.S. dollar will be subject to exchange rate fluctuations
7. 51Future sales or issuances, or the perception of future sales or issuances, by us or our existing shareholders in the public market could cause the market price for our common stock to decline
8. 52Our quarterly results of operations may fluctuate significantly and could fall below the expectations of securities analysts and investors due to seasonality and other factors, some of which are beyond our control, resulting in a decline in our stock price
9. 53If securities analysts do not publish research or reports about our business or if they downgrade our stock or our sector, our stock price and trading volume could decline
10. 54Anti-takeover provisions in our organizational documents and provisions in existing and future debt agreements could delay or prevent a change of control
11. 55Our board is authorized to issue and designate shares of our preferred stock in additional classes and series without shareholder approval