Krispy Kreme(DNUT) - 2024 Q4 - Annual Report

Cybersecurity and Operational Risks - The company experienced operational disruptions due to unauthorized activity on its information technology systems, which materially affected business operations, including online ordering in parts of the U.S.[79] - The 2024 Cybersecurity Incident resulted in lost sales and increased expenses related to remediation, highlighting vulnerabilities in the company's cybersecurity measures[84]. - The company identified a material weakness in its internal control over financial reporting, which could impair the ability to produce timely and accurate financial statements[91]. - The company’s business interruption insurance may not fully cover losses from service disruptions caused by system failures, potentially leading to significant financial impacts[82]. - The company acknowledges the potential for future public health risks to impact operations, which may lead to workforce disruptions and affect guest traffic[170]. Financial Performance and Revenue - Total net revenues for the fiscal year ended December 29, 2024, were $1,665,397, a decrease of 1.2$1,686,104 in the previous year[322]. - Product sales amounted to $1,627,778, down from$1,651,166, reflecting a decline of 1.4% year-over-year[322]. - The company reported a net income of $3,815, a significant recovery from a net loss of$36,647 in the prior year[322]. - Operating loss for the year was $8,735, compared to an operating income of$13,145 in the previous year[322]. - The company reported a gain of $124.126 million from the divestiture of Insomnia Cookies, contributing positively to cash flows[334]. Customer and Market Dynamics - The company relies on a diverse customer base, with no single customer contributing more than 10$500 million of its $824.5 million outstanding debt to mitigate the impact of changes in interest rates[295]. - A 100 basis point increase or decrease in the one-month SOFR would result in a$3.2 million increase or decrease in interest expense for a 12-month period based on unhedged debt[295]. - The company may face challenges in paying dividends due to financial performance, capital needs, and existing debt agreements, which could impact liquidity[185]. Regulatory and Compliance Issues - The company operates under various data privacy and security laws, including the GDPR, which impose strict requirements on data handling and could result in significant penalties for non-compliance[89]. - The company is subject to franchise laws that may affect its ability to develop new franchised shops and enforce contractual rights, potentially leading to a decline in franchise revenues[151]. - Changes in regulations regarding health and food quality could negatively impact public perception and consumer preferences towards the company's products[147]. Human Resources and Labor Costs - The company faces challenges in recruiting and retaining personnel, which could adversely affect operations and overall performance[140]. - Rising labor costs, including wages and employee benefits, may impact the company's financial condition and results of operations[141]. - Increased minimum wage regulations and healthcare legislation could lead to higher operational costs for the company[153]. Shareholder and Governance Matters - As of December 29, 2024, JAB Holdings B.V. held approximately 44% of the company's common stock, granting it substantial influence over corporate decisions[180]. - The concentration of voting power held by JAB may limit other shareholders' ability to influence significant corporate decisions, potentially affecting the market price of the common stock[182]. Asset Management and Financial Position - Total assets decreased to $3,072,030 from$3,240,592, representing a decline of 5.2%[327]. - Current liabilities decreased to $486,172 from$525,593, a reduction of 7.5%[327]. - Long-term debt, less current portion, increased slightly to $844,547 from$836,615, indicating a marginal rise of 0.2%[327]. - The company’s cash and cash equivalents decreased to $28,962 from$38,185, a decline of 24.0%[327]. Marketing and Brand Management - The company’s reputation and brand image are essential for success, and negative feedback on social media could severely harm its brand reputation[100]. - Marketing expenses for the fiscal year ended December 29, 2024, were approximately $47.7 million, an increase from$45.9 million in the previous year[358].