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Traeger(COOK) - 2024 Q4 - Annual Report
COOKTraeger(COOK)2025-03-07 14:04
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Financial and Operational Restrictions - The First Lien Credit Agreement imposes significant operating and financial restrictions, limiting the company's ability to incur additional debt, make investments, or engage in fundamental changes [216]. - Breaching the covenants of the First Lien Credit Agreement could lead to default, allowing creditors to accelerate debt repayment and potentially resulting in bankruptcy or liquidation [217]. Cybersecurity and Data Privacy - Cybersecurity threats are increasing, and any breach could lead to significant financial penalties, legal liabilities, and damage to the company's reputation [225]. - The company is subject to various data security frameworks and laws, and non-compliance could result in fines and restrictions that adversely affect its business [230]. - Insurance coverage for cybersecurity incidents may be limited, and significant claims could exceed available coverage, impacting financial results [231]. - The company collects and processes personal data, subjecting it to evolving legal obligations related to privacy and security, which could result in liability if not complied with [232]. - The California Consumer Privacy Act (CCPA) requires companies to provide disclosures to California consumers and allows them to opt-out of certain data disclosures, with civil penalties for violations [234]. - The General Data Protection Regulation (GDPR) imposes fines of up to €20 million or £17.5 million, or up to 4% of annual global revenue for non-compliance, whichever is greater [237]. - China's Cybersecurity Law mandates that personal information of Chinese citizens must be collected based on legitimacy, justification, and necessity, with fines up to RMB 100,000 for non-compliance [239]. - The Personal Information Protection Law (PIPL) in China can impose fines of up to RMB 50 million or 5% of the previous year's total annual revenue for violations [243]. - The Data Security Law requires important data to be stored locally in China and imposes penalties for non-compliance, including fines up to RMB 50 million [240]. - The California Privacy Rights Act (CPRA) significantly modifies the CCPA and expands consumer rights regarding sensitive personal data [236]. - The enactment of the CCPA has led to similar privacy statutes being enforced in thirteen states, with more expected to follow, increasing compliance complexity [236]. - Companies must maintain adequate security measures to comply with varying state laws on data breaches, requiring significant resource investments [236]. - The introduction of new foreign privacy laws may restrict marketing and personalization activities, adversely impacting business operations [238]. - Regulatory investigations and enforcement actions may arise from perceived failures in data privacy practices, potentially harming the company's reputation and financial condition [246]. Corporate Governance and Ownership Structure - As of March 3, 2025, funds or entities affiliated with AEA Fund, OTPP, and TCP owned approximately 60% of the voting power of the company's common stock [257]. - Certain actions by the company or its subsidiaries will require prior written consent from AEA Fund, OTPP, and TCP if they collectively own at least 30% of the outstanding shares, including transactions exceeding 250million[257].−ThecompanyhasoptedoutofSection203oftheDelawareGeneralCorporationLaw,whichmayaffecttakeoverattemptsandmanagementchanges[255].−Theconcentrationofownershipamongalimitednumberofstockholdersmayconflictwiththeinterestsofotherstockholdersandaffectmarketprice[259].−Thecompany′sstockpricemaybevolatileduetovariousfactors,includinganticipatedfluctuationsinoperatingresultsandsignificantsalesbyexistingstockholders[253].−Futuresalesofsharesbyexistingstockholderscouldleadtoadeclineinthecompany′sstockprice[261].−Thecompany′scertificateofincorporationallowsfortheissuanceofsharesofundesignatedpreferredstockwithoutfurtheractionbystockholders[260].−Thedoctrineof"corporateopportunity"doesnotapplytocertainstockholders,potentiallyleadingtocompetitionforbeneficialopportunities[265].−Thecompanyisclassifiedasa"controlledcompany,"whichmaylimitstockholderprotectionsandresultinaboardlackingamajorityofindependentdirectors[275].−Thecompanyisan"emerginggrowthcompany,"allowingittotakeadvantageofreduceddisclosurerequirements,whichmayaffecttheattractivenessofitscommonstocktoinvestors[276][277].FinancialPerformanceandReporting−Thecompanyhasincurredapproximately250 million [257]. - The company has opted out of Section 203 of the Delaware General Corporation Law, which may affect takeover attempts and management changes [255]. - The concentration of ownership among a limited number of stockholders may conflict with the interests of other stockholders and affect market price [259]. - The company's stock price may be volatile due to various factors, including anticipated fluctuations in operating results and significant sales by existing stockholders [253]. - Future sales of shares by existing stockholders could lead to a decline in the company's stock price [261]. - The company's certificate of incorporation allows for the issuance of shares of undesignated preferred stock without further action by stockholders [260]. - The doctrine of "corporate opportunity" does not apply to certain stockholders, potentially leading to competition for beneficial opportunities [265]. - The company is classified as a "controlled company," which may limit stockholder protections and result in a board lacking a majority of independent directors [275]. - The company is an "emerging growth company," allowing it to take advantage of reduced disclosure requirements, which may affect the attractiveness of its common stock to investors [276][277]. Financial Performance and Reporting - The company has incurred approximately 40.5 million in accelerated stock-based compensation expense for the year ended December 31, 2022, and 27.5millionfortheyearendedDecember31,2023,duetomodificationsandcancellationsofstockawards[273][274].−Thecompanyiscurrentlyimplementinganewproductlifecyclemanagement(PLM)systemtoenhancedatacompilationandanalysisrelatedtoproductlifecycles,whichmayincursignificantcostsandrequiresubstantialemployeeattention[272].−Thecompanyintendstoretainfutureearningsforbusinessoperationsandexpansion,withnoplanstodeclareorpaydividendsintheforeseeablefuture[279].−Thecompanyhasmadestrategicacquisitions,includingthepurchaseofApptionLabsonJuly1,2021,whichmayinvolveunforeseenoperationaldifficultiesandadditionalliabilities[281].−Thecompanyhasalegalobligationtomaintaineffectiveinternalcontrolsoverfinancialreporting,withpotentialimplicationsforfinancialstatementaccuracyandinvestorconfidence[267][271].−ThecompanymayfaceincreasedlegalandfinancialcompliancecostsduetoreportingrequirementsundertheSarbanes−OxleyActandtheDodd−FrankAct[267].−Thecompanymayexperienceadeclineinsharepriceandtradingvolumeifanalystsdowngradeitssharesorceasecoverage[278].−Thecompanymayincuradditionalcostsandoperationaldisruptionsifitfailstoimplementnecessarysystemsandprocedureseffectively[272].CashandDebtManagement−Thecompanyhadcashandcashequivalentsof27.5 million for the year ended December 31, 2023, due to modifications and cancellations of stock awards [273][274]. - The company is currently implementing a new product lifecycle management (PLM) system to enhance data compilation and analysis related to product lifecycles, which may incur significant costs and require substantial employee attention [272]. - The company intends to retain future earnings for business operations and expansion, with no plans to declare or pay dividends in the foreseeable future [279]. - The company has made strategic acquisitions, including the purchase of Apption Labs on July 1, 2021, which may involve unforeseen operational difficulties and additional liabilities [281]. - The company has a legal obligation to maintain effective internal controls over financial reporting, with potential implications for financial statement accuracy and investor confidence [267][271]. - The company may face increased legal and financial compliance costs due to reporting requirements under the Sarbanes-Oxley Act and the Dodd-Frank Act [267]. - The company may experience a decline in share price and trading volume if analysts downgrade its shares or cease coverage [278]. - The company may incur additional costs and operational disruptions if it fails to implement necessary systems and procedures effectively [272]. Cash and Debt Management - The company had cash and cash equivalents of 15.0 million and 29.9millionasofDecember31,2024and2023,respectively[395].−Theoutstandingdebtwas29.9 million as of December 31, 2024 and 2023, respectively [395]. - The outstanding debt was 403.6 million and 403.8millionasofDecember31,2024and2023,respectively[395].−Forevery100basispointincreaseininterestrates,thecompanywouldincurapproximately403.8 million as of December 31, 2024 and 2023, respectively [395]. - For every 100 basis point increase in interest rates, the company would incur approximately 4.0 million of additional annual interest expense [395]. Market and Economic Risks - The company is exposed to commodity price fluctuations, particularly in steel, which is a primary raw material for manufacturing [399]. - A 25% tariff on all steel imports will become effective on March 12, 2025, which may impact costs [399]. - The company may face adverse effects from sustained high inflation rates if selling prices do not increase accordingly [401]. - The company utilizes hedging strategies to manage currency transaction risks but cannot guarantee effectiveness [286]. - The company is subject to various legal proceedings that could materially harm its business and financial condition [283].