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What changed in YETI Holdings, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of YETI Holdings, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+316 added−322 removedSource: 10-K (2024-02-26) vs 10-K (2023-02-27)

Top changes in YETI Holdings, Inc.'s 2024 10-K

316 paragraphs added · 322 removed · 232 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeWe provide up to four hours of paid time off to vote, as part of our participation in Time to Vote, and offer employees the chance to dedicate one full day of work to volunteering for an organization of their choice. 8 Table of Content s For more detailed information regarding our programs and initiatives related to human capital management and our progress towards achieving company-wide DE&I goals, please see the “People” section of our 2022 and 2021 Environmental, Social, and Governance Reports (“ESG Report”), located on our website at www.yeti.com/en_US/esg.html.
Biggest changeFor more detailed information regarding our programs and initiatives related to human capital management, please see the “People” section of our 2023 Environmental, Social, and Governance Report (“ESG Report”), located on our website at www.yeti.com/en_US/esg.html.
In our wholesale channel, we sell to several large retailers with a national presence, including Dick’s Sporting Goods, REI, Academy Sports + Outdoors, Bass Pro Shops, Ace Hardware, and Scheels, and an assemblage of independent retail partners throughout the United States, Canada, Australia, New Zealand, Europe, and Japan, among others.
In our wholesale channel, we sell to several large retailers with a national presence, including Dick’s Sporting Goods, REI, Academy Sports + Outdoors, Bass Pro Shops, Ace Hardware, Scheels, and Tractor Supply Company, and an assemblage of independent retail partners throughout the United States, Canada, Australia, New Zealand, Europe, and Japan, among others.
Our ESG Report does not constitute part of, and shall not be deemed to be incorporated by reference into, this Annual Report on Form 10-K. Compliance with Government Regulations Our business activities are global and are subject to various federal, state, local, and foreign laws, rules and regulations.
Our ESG Report does not constitute part of, and shall not be deemed to be incorporated by reference into, this Annual Report on Form 10-K. 9 Table of Contents Compliance with Government Regulations Our business activities are global and are subject to various federal, state, local, and foreign laws, rules and regulations.
In the Drinkware category, we compete against well-known brands such as HydroFlask, BruMate, Stanley, and CamelBak, as well as numerous other brands and retailers that offer competing products. The outdoor and recreation market is highly fragmented and highly competitive, with low barriers to entry.
In the Drinkware category, we compete against well-known brands such as HydroFlask, Stanley, and Owala, as well as numerous other brands and retailers that offer competing products. The outdoor and recreation market is highly fragmented and highly competitive, with low barriers to entry.
None of our employees are currently covered by a collective bargaining agreement. We have no labor-related work stoppages and believe our relations with our employees are positive and stable. Diversity, Equity and Inclusion (DE&I) . We believe that an equitable, inclusive, and culturally diverse environment is imperative and key to our long-term growth.
None of our employees are currently covered by a collective bargaining agreement. We have no labor-related work stoppages and believe our relations with our employees are positive and stable. Diversity, Equity and Inclusion (“DE&I”) . We believe that an equitable, inclusive, and culturally diverse environment is imperative and key to our long-term growth.
We are not including the information contained on, or accessible through, any website as a part of, or incorporating it by reference into, this Report, unless expressly noted. 9 Table of Content s
We are not including the information contained on, or accessible through, any website as a part of, or incorporating it by reference into, this Report, unless expressly noted. 10 Table of Contents
Additionally, we offer customized products with licensed marks and original artwork through our corporate sales program and at YETI.com. Our corporate sales program offers customized products to corporate customers for a wide-range of events and activities, and in certain instances may also offer products to re-sell. Additionally, we sell our full line of products at our retail stores.
Our corporate sales program offers customized products to corporate customers for a wide-range of events and activities, and in certain instances may also offer products to re-sell. Additionally, we sell our full line of products at our retail stores.
We believe our brand, culture, and employees are central to our success and our ability to attract, develop, motivate, and retain highly-skilled talent. As of December 31, 2022, we employed approximately 922 people worldwide, representing seven countries. Of these, approximately 90% of our workforce was located in the United States.
We believe our brand, culture, and employees are central to our success and our ability to attract, develop, motivate, and retain highly-skilled talent. As of December 30, 2023, we employed approximately 1,050 people worldwide, representing eight countries. Of these, approximately 88% of our workforce was located in the United States.
Our Products Our product portfolio is comprised of three categories: Coolers & Equipment; Drinkware; and Other. We have a history of consistently broadening our high-performance, premium-priced product portfolio to meet our expanding customer base and their evolving pursuits. Our culture of innovation and success in identifying customer needs and wants drives our robust product roadmap.
We have a history of consistently broadening our high-performance, premium-priced product portfolio to meet our expanding customer base and their evolving pursuits. Our culture of innovation and success in identifying customer needs and wants drives our robust product roadmap. In 2023, net sales of Coolers & Equipment, Drinkware, and Other represented 36%, 62%, and 2% of net sales, respectively.
In 2022 and 2021, our DTC channel accounted for 58% and 56% of our net sales, respectively, and our wholesale channel accounted for 42% and 44% of our net sales, respectively.
In 2023 and 2022, our DTC channel accounted for 60% and 58% of our net sales, respectively, and our wholesale channel accounted for 40% and 42% of our net sales, respectively.
Marketing We employ a wide range of marketing tactics and outlets to cultivate our relationships with experts, serious enthusiasts, and everyday consumers, including a combination of traditional, digital, social media, and grass-roots initiatives to support our premium brand, in addition to original short films and high-quality content for YETI.com. 6 Table of Content s Supply Chain and Quality Assurance We manage a global supply chain of highly qualified, third-party manufacturing and logistics partners to produce and distribute our products.
Marketing We employ a wide range of marketing tactics and outlets to cultivate our relationships with experts, serious enthusiasts, and everyday consumers, including a combination of traditional, digital, social media, and grass-roots initiatives to support our premium brand, in addition to original short films and high-quality content on YETI websites.
Our global supply chain management team researches materials and equipment, qualifies raw material suppliers, vets potential manufacturing partners for advanced production and quality assurance processes, directs our production planning, approves and manages product purchasing plans, and oversees product transportation. Additionally, we work closely with our manufacturing partners regarding product quality and manufacturing process efficiency.
We match sourcing partnerships to deliver flexibility and scalability to support multiple product introductions and evolving channel strategies. Our global supply chain management team researches materials and equipment, qualifies raw material suppliers, vets potential manufacturing partners for advanced production and quality assurance processes, directs our production planning, approves and manages product purchasing plans, and oversees product transportation.
To ensure consistent product quality, we provide detailed specifications for our products and inspect finished goods both at our manufacturing partners as well as periodically upon delivery to our third-party logistics partners.
Our manufacturers do not have unique skills, technologies, processes, or intellectual property that prevent us from migrating to other manufacturing partners. To ensure consistent product quality, we provide detailed specifications for our products and inspect finished goods both at our manufacturing partners as well as periodically upon delivery to our third-party logistics partners.
Our DTC channel enables us to directly interact with our customers, more effectively deliver our brand experience, better understand consumer behavior and preferences, and offer exclusive products, content, and customization capabilities. We believe our control over our DTC channel provides our customers the highest level of brand engagement and further builds customer loyalty, while generating attractive margins.
Our DTC channel enables us to directly interact with our customers, more effectively deliver our brand experience, better understand consumer behavior and preferences, and offer exclusive products, content, and customization capabilities.
In 2022, net sales of Coolers & Equipment, Drinkware, and Other represented 38%, 59%, and 2% of net sales, respectively. Refer to Note 2 of the Notes to Consolidated Financial Statements for net sales by product category. Coolers & Equipment Our Coolers & Equipment family is comprised of hard coolers, soft coolers, cargo, bags, outdoor living, and associated accessories.
Refer to Note 2 of the Notes to Consolidated Financial Statements for net sales by product category. Coolers & Equipment Our Coolers & Equipment family is comprised of hard coolers, soft coolers, cargo, bags, outdoor living, and associated accessories. Hard Coolers. Our hard coolers are built with seamless rotomolded construction or injection molding construction, making them nearly indestructible.
Additionally, we continue to expand internationally and grow our presence in Canada, Australia, New Zealand, Japan, and Europe, among others. We are expanding internationally by focusing on brand awareness, wholesale expansion, and our DTC channel.
The outdoor recreation products market is a large, growing, and diverse economic sector, which includes consumers of all genders, ages, ethnicities, and income levels. Additionally, we continue to expand internationally and grow our presence in Canada, Australia, New Zealand, Japan, and Europe, among others. We are expanding internationally by focusing on brand awareness, wholesale expansion, and our DTC channel.
We have an unwavering commitment to outdoor and recreation communities, and we are relentless in our pursuit of building superior products for people to confidently enjoy life outdoors and beyond.
We have an unwavering commitment to outdoor and recreation communities, and we are relentless in our pursuit of building superior products for people to confidently enjoy life outdoors and beyond. We were founded in 2006 by avid outdoorsmen, Roy and Ryan Seiders, who were frustrated with equipment that could not keep pace with their interests in hunting and fishing.
During 2022, we introduced Yonder™ Water Bottles, our first lightweight water bottle made of durable and safe BPA-free material. Our Drinkware product line currently includes ten product families including the Rambler Colsters, Rambler Lowball, Rambler Wine Tumbler, Rambler Stackable Pints, Rambler Mugs, Rambler Tumblers, Rambler Straw Mugs & Cups, Rambler Bottles, Rambler Jugs, and Yonder™ Water Bottles.
Our Drinkware product line also includes the Rambler Colsters, Rambler Lowball, Rambler Wine Tumbler, Rambler Stackable Pints, Rambler Mugs, Rambler Tumblers, Rambler Straw Mugs & Cups, Rambler Bottles, Rambler Jugs, and Yonder Water Bottles.
Hard Coolers. Most of our hard coolers are built with seamless rotationally-molded, or rotomolded, construction, making them nearly indestructible. For superior ice retention, we pressure-inject up to two inches of commercial-grade polyurethane foam into the walls and lid and utilize a freezer-quality gasket to seal the lid.
For superior ice retention, we pressure-inject up to two inches of commercial-grade polyurethane foam into the walls and lid and utilize a freezer-quality gasket to seal the lid. Our hard cooler category includes YETI Tundra, YETI Roadie, YETI V Series hard coolers, YETI TANK ice bucket, and YETI Silo 6G water cooler.
Many of our core products are manufactured in China, the Philippines, Vietnam, Taiwan, Poland, Mexico, Thailand, and Malaysia. In addition, we have other key third-party manufacturing partners in Mexico and Italy. We continue to mitigate the concentration risk in our supply chain by pursuing a higher diversification of manufacturing partners, with both sourcing and geographical advantages.
Additionally, we work closely with our manufacturing partners regarding product quality and manufacturing process efficiency. 7 Table of Contents Many of our core products are manufactured in China, the Philippines, Vietnam, Taiwan, Poland, Mexico, Thailand, and Malaysia. In addition, we have other key third-party manufacturing partners in Mexico and Italy.
We own the molds and tooling used in the production of our products, create and provide the specifications for our products, and work closely with our manufacturing partners to improve production yields and efficiency. Our manufacturers do not have unique skills, technologies, processes, or intellectual property that prevent us from migrating to other manufacturing partners.
We hold our manufacturers to rigorous quality and product conformance standards through frequent involvement and regular product inspecting. We own the molds and tooling used in the production of our products, create and provide the specifications for our products, and work closely with our manufacturing partners to improve production yields and efficiency.
The primary raw materials and components used by our manufacturing partners include polyethylene, polyurethane foam, stainless-steel, polyester fabric, zippers, magnets, and other plastic materials and coatings. We believe these materials are readily available from multiple vendors. We stipulate approved suppliers and control the specifications for key raw materials used in our products.
We believe these materials are readily available from multiple vendors. We stipulate approved suppliers and control the specifications for key raw materials used in our products. We do not directly source significant amounts of these raw materials and components. We do not own or operate any manufacturing facilities.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.” See Part I, Item 1A “Risk Factors - Risks Related to Our Business, Operations and Industry.” Cargo, Bags, and Outdoor Living.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.” 5 Table of Contents Cargo, Bags, and Outdoor Living.
Our hard cooler category includes YETI Tundra™, YETI Roadie ® , YETI V Series™ hard coolers, YETI TANK ® ice bucket, and YETI Silo™ 6G water cooler. We also offer related accessories, including locks, dry baskets, beverage holders, dividers, an ice scoop, and other add-ons, to enhance our products’ versatility. Soft Coolers.
We also offer related accessories, including locks, dry baskets, beverage holders, dividers, an ice scoop, and other add-ons, to enhance our products’ versatility. Soft Coolers. The Hopper is our line of soft coolers, which are designed to be leakproof and provide superior durability and ice retention compared to ordinary soft coolers.
For 2022, our largest single wholesale customer represented approximately 11% of gross sales. 5 Table of Content s We sell our products in our DTC channel to customers on YETI.com, country and region-specific YETI websites, and YETI Authorized on the Amazon Marketplace, as well as in our thirteen retail stores.
We sell our products in our DTC channel to customers on YETI.com, country and region-specific YETI websites, and YETI Authorized on the Amazon Marketplace, as well as in our retail stores. Additionally, we offer customized products with licensed marks and original artwork through our corporate sales program, on YETI.com, certain country-specific YETI websites, and at select retail stores.
Our original hard cooler not only delivered exceptional performance, it anchored an authentic, passionate, and durable bond among customers and our company. Our principal corporate offices are located in Austin, Texas. Unless the context requires otherwise, references to “YETI,” the “Company,” “we,” “us,” and “our” used herein refer to YETI Holdings, Inc. and its consolidated subsidiaries.
Unless the context requires otherwise, references to “YETI,” the “Company,” “we,” “us,” and “our” used herein refer to YETI Holdings, Inc. and its consolidated subsidiaries.
Our soft coolers also include related accessory options such as the Rambler Bottle Sling, MOLLE Zinger retractable lanyard, and a mountable MOLLE Bottle Opener. 4 Table of Content s In January 2023, we notified the U.S.
The Hopper soft cooler product line includes: Hopper M15 Soft Cooler, Hopper M12 Soft Backpack Cooler, Hopper M30 Soft Cooler, Hopper M20 Backpack Cooler, Hopper Flip Soft Cooler, Daytrip Lunch Bag, and Daytrip Lunch Box. Our soft coolers also include related accessory options such as the Rambler Bottle Sling, MOLLE Zinger retractable lanyard, and a mountable MOLLE Bottle Opener.
Consumer Product Safety Commission (“CPSC”) of a potential safety concern regarding the magnet-lined closures of our Hopper ® M30 Soft Cooler, Hopper ® M20 Soft Backpack Cooler, and SideKick Dry gear case (the “affected products”) and initiated a global stop sale of the affected products.
In March 2023, we announced separate, voluntary recalls of our Hopper M30 Soft Cooler, Hopper M20 Soft Backpack Cooler, and SideKick Dry gear case (the “affected products”) in collaboration with the U.S. Consumer Product Safety Commission (“CPSC”).
Our current and potential competitors may be able to develop and market superior products or sell similar products at lower prices.
Our current and potential competitors may be able to develop and market superior products or sell similar products at lower prices. These companies may have competitive advantages, including larger retailer bases, global product distribution, greater financial strength, superior relations with suppliers and manufacturing partners, or larger marketing budgets and brand recognition.
Our Market Our premium products are designed for use in a wide variety of activities, from professional to recreational and outdoor to indoor, and can be used year round. As a result, the markets we serve are broad as well as deep, including, for example, outdoor, housewares, home and garden, outdoor living, industrial, and commercial.
As a result, the markets we serve are broad as well as deep, including, for example, outdoor, housewares, home and garden, outdoor living, industrial, and commercial. While our product reach extends into numerous and varied markets, we currently primarily serve the North American outdoor recreation market.
Our fiscal years ended December 31, 2022 (“2022”) and January 1, 2022 (“2021”) spanned 52 weeks each, whereas our fiscal year ended January 2, 2021 (“2020”) included 53 weeks. Unless otherwise stated, references to particular years, quarters, months and periods refer to our fiscal years ended in December and the associated quarters, months, and periods of those fiscal years.
Unless otherwise stated, references to particular years, quarters, months and periods refer to our fiscal years ended in December and the associated quarters, months, and periods of those fiscal years. Our Products Our product portfolio is comprised of three categories: Coolers & Equipment; Drinkware; and Other.
See Note 1 of the Notes to Consolidated Financial Statements included herein for further discussion of concentration risk. We hold our manufacturers to rigorous quality and product conformance standards through frequent involvement and regular product inspecting.
We continue to mitigate the concentration risk in our supply chain by pursuing a higher diversification of manufacturing partners, with both sourcing and geographical advantages. See Note 1 of the Notes to Consolidated Financial Statements included herein for further discussion of concentration risk.
However, we expect the stop sale of the products related to the voluntary recalls to impact our traditional seasonal patterns in 2023, with expected net sales to be highest in the fourth quarter of 2023. Intellectual Property and Brand Protection We own patents, trademarks, copyrights, and other intellectual property rights that support key aspects of our brand and products.
In 2022, our net sales in the first, second, third, and fourth quarters represented 18%, 26%, 27%, and 29%, respectively, of our total net sales for the year. 8 Table of Contents Intellectual Property and Brand Protection We own patents, trademarks, copyrights, and other intellectual property rights that support key aspects of our brand and products.
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We were founded in 2006 by avid outdoorsmen, Roy and Ryan Seiders (our “Founders”), who were frustrated with equipment that could not keep pace with their interests in hunting and fishing. By utilizing forward-thinking designs and advanced manufacturing techniques, they developed a nearly indestructible hard cooler with superior ice retention.
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By utilizing forward-thinking designs and advanced manufacturing techniques, they developed a nearly indestructible hard cooler with superior ice retention. Our original hard cooler not only delivered exceptional performance, it anchored an authentic, passionate, and durable bond among customers and our company. Our principal corporate offices are located in Austin, Texas.
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The Hopper ® is our line of soft coolers, which are designed to be leakproof and provide superior durability and ice retention compared to ordinary soft coolers. The Hopper soft cooler product line includes: the next-generation Hopper ® M30 Soft Cooler, Hopper ® M20 Backpack Cooler, Hopper Flip ® Soft Cooler, Daytrip™ Lunch Bag, and Daytrip™ Lunch Box.
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Our fiscal years ended December 30, 2023 (“2023”), December 31, 2022 (“2022”) and January 1, 2022 (“2021”) spanned 52 weeks each. Our fiscal year ending December 28, 2024 (“2024”) will span 52 weeks.
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In February 2023, we proposed a voluntary recall of the affected products to the CPSC and other relevant global regulatory authorities, which we refer to throughout this Report as the “voluntary recalls” unless otherwise indicated.
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In the fourth quarter of 2023, we introduced the redesigned and improved versions of the affected products, and also launched two new sizes with the Hopper M15 Soft Cooler and the Hopper M12 Soft Backpack Cooler. For additional information on the financial impact of the voluntary recalls, see Part II, Item 7, “Item 7.
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We are working in cooperation with the CPSC and other relevant global regulatory authorities on the corrective action plan and hope to begin implementing the voluntary recalls in the coming weeks. Once our proposed voluntary recall plans are approved, consumers will have the ability to return the affected products for a remedy.
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During 2022, we introduced Yonder Water Bottles, our first lightweight water bottle made of durable and safe BPA-free material. During 2023, we introduced several tableware products such as the Rambler beverage bucket, Rambler wine chiller, and Rambler cocktail shaker, and also expanded size offerings of various mugs, cups, and water bottles.
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We are also working on solutions to address the potential safety concern of the affected products and intend to resume the sale of the redesigned products in the fourth quarter of 2023.
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As of December 30, 2023, we sold through a diverse base of approximately 4,500 retail partners in the United States, Canada, Australia, New Zealand, and Europe. No single customer accounted for 10% or more of our gross sales in 2023.
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However, there are a number of factors that could impact our ability to resume sales at that time and our estimate of the date for sales of the redesigned products to resume may change. For additional information on the financial impact of the voluntary recalls, see Part II, Item 7, “Item 7.
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We believe our control over our DTC channel provides our customers the highest level of brand engagement and further builds customer loyalty, while generating attractive margins. 6 Table of Contents Our Market Our premium products are designed for use in a wide variety of activities, from professional to recreational and outdoor to indoor, and can be used year round.
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As of December 31, 2022, we sold through a diverse base of approximately 2,900 independent retail partners.
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Supply Chain and Quality Assurance We manage a global supply chain of highly qualified, third-party manufacturing and logistics partners to produce and distribute our products. The primary raw materials and components used by our manufacturing partners include polyethylene, polyurethane foam, stainless-steel, polyester fabric, zippers, magnets, and other plastic materials and coatings.
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While our product reach extends into numerous and varied markets, we currently primarily serve the North American outdoor recreation market. The outdoor recreation products market is a large, growing, and diverse economic sector, which includes consumers of all genders, ages, ethnicities, and income levels.
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Seasonality Historically, we have experienced our highest levels of net sales in the fourth quarter of the year coinciding with the seasonal holiday shopping season. In 2023, our net sales in the first, second, third, and fourth quarters represented 18%, 24%, 26%, and 32%, respectively, of our total net sales for the year.
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We do not directly source significant amounts of these raw materials and components. We do not own or operate any manufacturing facilities. We match sourcing partnerships to deliver flexibility and scalability to support multiple product introductions and evolving channel strategies.
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We provide up to four hours of paid time off to vote, as part of our participation in Time to Vote, and offer employees the chance to dedicate one full day of work to volunteering for an organization of their choice.
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These companies may have competitive advantages, including larger retailer bases, global product distribution, greater financial strength, superior relations with suppliers and manufacturing partners, or larger marketing budgets and brand recognition. 7 Table of Content s Seasonality Historically, we have experienced net sales to be highest in the fourth and second quarters, due in part to seasonal holiday demand, followed by the third quarter, and the lowest sales in the first quarter.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

131 edited+37 added−50 removed174 unchanged
Biggest changeOur Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws: • provide that our Board of Directors is classified into three classes of directors; • prohibit stockholders from taking action by written consent; • provide that stockholders may remove directors only for cause, and only with the approval of holders of at least 66 2/3% of our then outstanding common stock; • provide that the authorized number of directors may be changed only by resolution of the Board of Directors; • provide that all vacancies, including newly created directorships, may, except as otherwise required by law or as set forth in the Stockholders Agreement be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum; • provide that stockholders seeking to present proposals before a meeting of stockholders or to nominate candidates for election as directors at a meeting of stockholders must provide notice in writing in a timely manner, and also specify requirements as to the form and content of a stockholder’s notice; • restrict the forum for certain litigation against us to Delaware; • do not provide for cumulative voting rights (therefore allowing the holders of a majority of the shares of common stock entitled to vote in any election of directors to elect all of the directors standing for election); • provide that special meetings of our stockholders may be called only by the Chairman of the Board of Directors, our CEO, or the Board of Directors pursuant to a resolution adopted by a majority of the total number of authorized directors; • provide that stockholders will be permitted to amend our Amended and Restated Bylaws only upon receiving at least 66 2/3% of the votes entitled to be cast by holders of all outstanding shares then entitled to vote generally in the election of directors, voting together as a single class; and • provide that certain provisions of our Amended and Restated Certificate of Incorporation may only be amended upon receiving at least 66 2/3% of the votes entitled to be cast by holders of all outstanding shares then entitled to vote, voting together as a single class. 28 Table of Content s These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our Board of Directors, which is responsible for appointing the members of our management.
Biggest changeOur Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws: • provide that our Board of Directors is classified into three classes of directors; • prohibit stockholders from taking action by written consent; • provide that stockholders may remove directors only for cause, and only with the approval of holders of at least 66 2/3% of our then outstanding common stock; • provide that the authorized number of directors may be changed only by resolution of the Board of Directors; • provide that all vacancies, including newly created directorships, may, except as otherwise required by law or as set forth in the Stockholders Agreement be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum; 28 Table of Contents • provide that stockholders seeking to present proposals before a meeting of stockholders or to nominate candidates for election as directors at a meeting of stockholders must provide notice in writing in a timely manner, and also specify requirements as to the form and content of a stockholder’s notice; • restrict the forum for certain litigation against us to Delaware or the federal district courts of the United States, as applicable; • do not provide for cumulative voting rights (therefore allowing the holders of a majority of the shares of common stock entitled to vote in any election of directors to elect all of the directors standing for election); • provide that special meetings of our stockholders may be called only by the Chairman of the Board of Directors, our CEO, or the Board of Directors pursuant to a resolution adopted by a majority of the total number of authorized directors; • provide that stockholders will be permitted to amend our Amended and Restated Bylaws only upon receiving at least 66 2/3% of the votes entitled to be cast by holders of all outstanding shares then entitled to vote generally in the election of directors, voting together as a single class; and • provide that certain provisions of our Amended and Restated Certificate of Incorporation may only be amended upon receiving at least 66 2/3% of the votes entitled to be cast by holders of all outstanding shares then entitled to vote, voting together as a single class.
Further, as we expand internationally, we are subject to additional privacy rules, such as the GDPR, many of which are significantly more stringent than those in the United States.
Further, as we expand internationally, we are subject to additional privacy rules, such as GDPR, many of which are significantly more stringent than those in the United States.
We also may not achieve the anticipated benefits from future acquisitions due to a number of factors, including: (a) an inability to integrate or benefit from acquisitions in a profitable manner; (b) unanticipated costs or liabilities associated with the acquisition; (c) the incurrence of acquisition-related costs; (d) the diversion of management’s attention from other business concerns; (e) the loss of our or the acquired business’ key employees; or (f) the issuance of dilutive equity securities, the incurrence of debt, or the use of cash to fund such acquisitions.
We also may not achieve the anticipated benefits from such acquisitions due to a number of factors, including: (a) an inability to integrate or benefit from acquisitions in a profitable manner; (b) unanticipated costs or liabilities associated with the acquisition; (c) the incurrence of acquisition-related costs; (d) the diversion of management’s attention from other business concerns; (e) the loss of our or the acquired business’ key employees; or (f) the issuance of dilutive equity securities, the incurrence of debt, or the use of cash to fund such acquisitions.
Ineffective marketing, ongoing and sustained promotional activities, negative publicity, product diversion to unauthorized distribution channels, product or manufacturing defects, counterfeit products, unfair labor practices, and failure to protect the intellectual property rights in our brand are some of the potential threats to the strength of our brand, and those and other factors could rapidly and severely diminish customer confidence in us.
Ineffective marketing, ongoing and sustained promotional activities, negative publicity, product diversion to unauthorized distribution channels, product or manufacturing defects, product recalls, counterfeit products, unfair labor practices, and failure to protect the intellectual property rights in our brand are some of the potential threats to the strength of our brand, and those and other factors could rapidly and severely diminish customer confidence in us.
Factors that could affect our ability to accurately forecast demand for our products include: (a) an increase or decrease in consumer demand for our products; (b) our failure to accurately forecast consumer acceptance for our new products; (c) product introductions by competitors; (d) unanticipated changes in general market conditions or other factors, which may result in cancellations of advance orders or a reduction or increase in the rate of reorders or at-once orders placed by retailers; (e) the impact on consumer demand due to unseasonable weather conditions; (f) weakening economic conditions or consumer confidence in future economic conditions or inflationary conditions resulting in rising prices, which could each reduce demand for discretionary items, such as our products; and (g) terrorism or acts of war, or the threat thereof, or political or labor instability or unrest, riots, or public health crises, which could adversely affect consumer confidence and spending or interrupt production and distribution of product and raw materials.
Factors that could affect our ability to accurately forecast demand for our products include: (a) an increase or decrease in consumer demand for our products; (b) our failure to accurately forecast consumer acceptance for our new products; (c) product introductions by competitors; (d) unanticipated changes in general market conditions or other factors, which may result in cancellations of advance orders or a reduction or increase in the rate of reorders or at-once orders placed by retailers; (e) impacts on consumer demand due to unseasonable weather conditions; (f) weakening economic conditions or consumer confidence in future economic conditions or inflationary conditions resulting in rising prices, which could each reduce demand for discretionary items, such as our products; and (g) terrorism or acts of war, or the threat thereof, or political or labor instability or unrest, riots, or public health crises, which could adversely affect consumer confidence and spending or interrupt production and distribution of product and raw materials.
For example, on August 16, 2022, the U.S. government enacted the Inflation Reduction Act of 2022 (the “IRA”) which includes changes to the U.S. corporate income tax system, a 15% book minimum tax on corporations with three-year average annual adjusted financial statement income exceeding $1 billion and a 1% excise tax on share repurchases.
For example, on August 16, 2022, the U.S. government enacted the Inflation Reduction Act of 2022 which includes changes to the U.S. corporate income tax system, a 15% book minimum tax on corporations with three-year average annual adjusted financial statement income exceeding $1 billion and a 1% excise tax on share repurchases.
Consumers also have discretion as to where to spend their disposable income and may choose to purchase other items or services if we do not continue to provide authentic, compelling, and high-quality products at appropriate price points.
Consumers also have discretion as to where to spend their disposable income and may choose to purchase other items or services if we do not continue to provide authentic, compelling, and high-quality premium products at appropriate price points.
In addition, increased demand for online purchases of products has impacted our fulfillment operations and small parcel network, resulting in potential delays in delivering products to our customers. Other future public health crises could have a similar effect.
In addition, increased demand for online purchases of products impacted our fulfillment operations and small parcel network, resulting in potential delays in delivering products to our customers. Other future public health crises could have a similar effect.
The YETI name and premium brand image are integral to the growth of our business, as well as to the implementation of our strategies for expanding our business. Our success depends on the value and reputation of our brand, is rooted in passion for the outdoors.
The YETI name and premium brand image are integral to the growth of our business, as well as to the implementation of our strategies for expanding our business. Our success depends on the value and reputation of our brand, which is rooted in passion for the outdoors.
Our ability to execute our marketing and growth strategy depends on many factors, such as the quality, design, performance, functionality, and durability of our products, the image of our e-commerce platform and retail partner floor spaces, our communication activities, including advertising, social media, and public relations, and our management of the customer experience, including direct interfaces through customer service.
Our ability to execute our marketing and growth strategy depends on many factors, such as the quality, design, performance, functionality, and durability of our products, the image and reputation of our e-commerce platform, the design of our retail partner floor spaces, the impact of our communication activities, including advertising, social media, and public relations, and our management of the customer experience, including direct interfaces through customer service.
The COVID-19 pandemic contributed significantly to global supply chain constraints, with restrictions and limitations on related activities causing disruption and delay. These disruptions and delays strained domestic and international supply chains, resulting in port congestion, transportation delays as well as labor and container shortages, and affected the flow or availability of certain products.
For example, the COVID-19 pandemic contributed significantly to global supply chain constraints, with restrictions and limitations on related activities causing disruption and delay. These disruptions and delays strained domestic and international supply chains, resulting in port congestion, transportation delays as well as labor and container shortages, and affected the flow or availability of certain products.
We depend on our information technology systems, as well as those of third parties, to design and develop new products, process financial and accounting information, manage inventory and our supply chain, operate our website, host and manage our services, support our remote-working employees, store data, process transactions, respond to user inquiries and conduct and manage various other operational activities.
We depend on our information technology systems, as well as those of third parties, to design and develop new products, process financial and accounting information, manage inventory and our supply chain, operate our websites, host and manage our services, support our remote-working employees, store data, process transactions, respond to user inquiries, and conduct and manage various other operational activities.
Even if the markets in which we compete expand, we cannot assure you that our business will grow at similar rates, if at all.
Even if the markets in which we compete expand, we cannot assure you that our business will grow at similar rates, or at all.
In addition, privacy laws, rules, and regulations are constantly evolving in the United States and abroad and may be inconsistent from one jurisdiction to another.
Privacy laws, rules, and regulations are constantly evolving in the United States and abroad and may be inconsistent from one jurisdiction to another.
For example, in December 2020, the State of California enacted the California Privacy Rights Act, or CPRA, which becomes effective on January 1, 2023, and substantially amends and expands the current California Consumer Privacy Act bringing the California regulations more in line with the European Union’s General Data Protection Regulation, or GDPR.
For example, in December 2020, the State of California enacted the California Privacy Rights Act, or CPRA, which became effective on January 1, 2023, and substantially amends and expands the current California Consumer Privacy Act bringing the California regulations more in line with the European Union’s General Data Protection Regulation, or GDPR.
If a material number of our retail partners were not able to meet their payment obligations, our results of operations could be harmed. 27 Table of Content s Risks Related to Ownership of Our Common Stock If we are unable to maintain effective internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our reported financial information and the market price of our common stock may be negatively affected.
If a material number of our retail partners were not able to meet their payment obligations, our results of operations could be harmed. 27 Table of Contents Risks Related to Ownership of Our Common Stock If we are unable to maintain effective internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our reported financial information and the market price of our common stock may be negatively affected.
We are subject to credit risk in connection with providing credit to our retail partners, and our results of operations could be harmed if a material number of our retail partners were not able to meet their payment obligations. We are exposed to credit risk primarily on our accounts receivable.
We are subject to credit risk in connection with providing credit to our retail partners, and our results of operations could be harmed if a material number of our retail partners were not able to meet their payment obligations. We are exposed to credit risk primarily relating to our accounts receivable.
The choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees, which may discourage such lawsuits against us and our directors, officers, and other employees.
The choice of forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees, which may discourage such lawsuits against us and our directors, officers, and other employees.
New governmental requirements or changing consumer preferences could negatively impact our ability to obtain raw materials or increase our acquisition and compliance costs, which could make our products more costly, less competitive than other competitive products or reduce consumer demand.
New governmental requirements or changing consumer preferences could negatively impact our ability to obtain raw materials or increase our acquisition and compliance costs, which could make our products more costly, less attractive to consumers than other competitive products or reduce consumer demand.
We believe many of our competitors and potential competitors have significant competitive advantages, including longer operating histories, ability to leverage their sales efforts and marketing expenditures across a broader portfolio of products, global product distribution, larger and broader retailer bases, more established relationships with a larger number of suppliers and manufacturing partners, greater brand recognition, larger or more effective brand ambassador and endorsement relationships, greater financial strength, larger research and development teams, larger marketing budgets, and more distribution and other resources than we do.
We believe many of our competitors and potential competitors have significant competitive advantages, including longer operating histories, ability to leverage their sales efforts and marketing expenditures across a broader portfolio of products, global product distribution, larger and broader base of retail partners, more established relationships with a larger number of suppliers and manufacturing partners, greater brand recognition, larger or more effective brand ambassador and endorsement relationships, greater financial strength, larger research and development teams, larger marketing budgets, and more distribution and other resources than we do.
While we believe that our exposure to concentrations of credit risk with respect to trade receivables is mitigated by our large retail partner base, and we make allowances for doubtful accounts, we nevertheless run the risk of our retail partners not being able to meet their payment obligations, particularly in a future economic downturn.
While we believe that our exposure to concentrations of credit risk with respect to trade receivables is mitigated by our large retail partner base, and we make allowances for credit losses, we nevertheless run the risk of our retail partners not being able to meet their payment obligations, particularly in a future economic downturn.
Accordingly, if we are unable to successfully expand internationally or manage the complexity of our global operations, we may not achieve the expected benefits of this expansion and our financial condition and results of operations could be harmed. Our financial results and future growth have been, and could in the future be, harmed by currency exchange rate fluctuations.
Accordingly, if we are unable to successfully expand internationally or manage the complexity of our global operations, we may not achieve the expected benefits of this expansion and our financial condition and results of operations could be harmed. 21 Table of Contents Our financial results and future growth have been, and could in the future be, harmed by currency exchange rate fluctuations.
Further, as our brand becomes more widely known, future marketing campaigns may not attract new customers at the same rate as past campaigns. Inflation and rising product costs may also affect our ability to provide products in a cost-effective manner and hinder us from attracting new customers.
Further, as our brand becomes more widely known, future marketing campaigns may not attract new customers at the same rate as past campaigns. Inflation or higher product costs may also affect our ability to provide products in a cost-effective manner and hinder us from attracting new customers.
The further spread of COVID-19 or the emergence of another pandemic, epidemic or infectious disease outbreak, including any required or voluntary actions to help limit the spread of illness, could impact our ability to carry out our business and may materially adversely impact global economic conditions, our business, results of operations, cash flows and financial condition.
The emergence of another pandemic, epidemic or infectious disease outbreak, including any required or voluntary actions to help limit the spread of illness, could impact our ability to carry out our business and may materially adversely impact global economic conditions, our business, results of operations, cash flows and financial condition.
The occurrence of a significant uninsured claim or a claim in excess of the insurance coverage limits maintained by us could harm our business, results of operations, and financial condition. 22 Table of Content s Risks Related to Market and Global Economic Conditions Our net sales and profits depend on the level of customer spending for our products, which is sensitive to general economic conditions and other factors; adverse economic conditions, such as a downturn in the economy or inflationary conditions resulting in rising prices, could adversely affect consumer purchases of discretionary items, which could materially harm our sales, profitability, and financial condition.
The occurrence of a significant uninsured claim or a claim in excess of the insurance coverage limits maintained by us could harm our business, results of operations, and financial condition. 23 Table of Contents Risks Related to Market and Global Economic Conditions Our net sales and profits depend on the level of customer spending for our products, which is sensitive to general economic conditions and other factors; adverse economic conditions, such as a downturn in the economy or inflationary conditions resulting in rising prices, could adversely affect consumer purchases of discretionary items, which could materially harm our sales, profitability, and financial condition.
Our failure to successfully respond to these risks might adversely affect sales in our DTC channel, as well as damage our reputation and brand. We currently have a limited number of country and region-specific YETI websites and are planning to expand our e-commerce platform to others.
Our failure to successfully respond to these risks might adversely affect sales in our DTC channel, as well as damage our reputation and brand. We currently have a limited number of country and region-specific YETI websites and have plans to expand our e-commerce platform to others.
In the future, we may acquire or invest in businesses, products, or technologies that we believe could complement or expand our business, enhance our capabilities, or otherwise offer growth opportunities.
We have, and may in the future, acquire or invest in businesses, products, or technologies that we believe could complement or expand our business, enhance our capabilities, or otherwise offer growth opportunities.
The pursuit of potential acquisitions may divert the attention of management and cause us to incur various costs and expenses in identifying, investigating, and pursuing suitable acquisitions, whether or not they are consummated. In any future acquisitions, we may not be able to successfully integrate acquired personnel, operations, and technologies, or effectively manage the combined business following the acquisition.
The pursuit of potential acquisitions may divert the attention of management and cause us to incur various costs and expenses in identifying, investigating, and pursuing suitable acquisitions, whether or not they are completed. We may not be able to successfully integrate acquired personnel, operations, and technologies, or effectively manage the combined business following the acquisition.
Any failure to comply could significantly harm our brand, reputation, business, financial condition and results of operations. 19 Table of Content s Our plans for international expansion may not be successful; our limited operating experience and limited brand recognition in new markets may make it more difficult to execute our expansion strategy and cause our business and growth to suffer.
Any failure to comply could significantly harm our brand, reputation, business, financial condition and results of operations. Our plans for international expansion may not be successful; our limited operating experience and limited brand recognition in new markets may make it more difficult to execute our expansion strategy and cause our business and growth to suffer.
Our business is vulnerable to damage or interruption from earthquakes, fires, floods, power losses, telecommunications failures, terrorist attacks, acts of war, riots, public health crises, human errors, criminal acts, and similar events.
Our business is vulnerable to damage or interruption from earthquakes, fires, floods, power losses, telecommunications failures, terrorist attacks, acts of war, riots, public health crises, and similar events.
If we do not adapt to meet these evolving challenges, the strength of our brand may erode, the quality of our products may suffer, we may not be able to deliver products on a timely basis to our customers, and our corporate culture may be harmed. 11 Table of Content s Our growth depends, in part, on expanding into additional consumer markets, and we may not be successful in doing so.
If we do not adapt to meet these evolving challenges, the strength of our brand may erode, the quality of our products may suffer, we may not be able to deliver products on a timely basis to our customers, and our corporate culture may be harmed. 12 Table of Contents Our growth depends, in part, on expanding into additional consumer markets, and we may not be successful in doing so.
If such losses are greater than expected or if we lose distribution due to a price increase, our business, financial condition and results of operations may be materially and adversely affected. 15 Table of Content s Fluctuations in the cost and availability of raw materials, equipment, labor, and transportation could cause manufacturing delays or increase our costs.
If such losses are greater than expected or if we lose distribution due to a price increase, our business, financial condition and results of operations may be materially and adversely affected. 16 Table of Contents Fluctuations in the cost and availability of raw materials, equipment, labor, and transportation could cause manufacturing delays or increase our costs.
As current tariffs are implemented, or if additional tariffs or other restrictions are placed on foreign imports or any related counter-measures are taken by other countries, our business and results of operations could be harmed.
If additional tariffs or other restrictions are placed on foreign imports or any related counter-measures are taken by other countries, our business and results of operations could be harmed.
These countries may impose different and evolving laws governing the operation and marketing of e-commerce websites, as well as the collection, storage, and use of information on customers interacting with those websites.
Expanding into these countries and regions may impose different and evolving laws governing the operation and marketing of e-commerce websites, as well as the collection, storage, and use of information on customers interacting with those websites.
If we experienced any significant disruption to our financial information systems that we are unable to mitigate, our ability to timely report our financial results could be impacted, which could negatively impact our stock price.
Further, if we experience any significant disruption to our financial information systems that we are unable to mitigate, our ability to timely report our financial results could be impacted, which could negatively impact our stock price.
In addition, any payments we are required to make, and any injunction we are required to comply with as a result of such infringement, could harm our reputation and financial results. 13 Table of Content s We rely on third-party contract manufacturers, and problems with, or loss of, our suppliers or an inability to obtain raw materials could harm our business and results of operations.
In addition, any payments we are required to make, and any injunction we are required to comply with as a result of such infringement, could harm our reputation and financial results. 14 Table of Contents We rely on third-party contract manufacturers, and problems with, or loss of, our suppliers or an inability to obtain raw materials could harm our business and results of operations.
General Risk Factors Our future success depends on the continuing efforts of our management and key employees, and on our ability to attract and retain highly skilled personnel and senior management. We depend on the talents and continued efforts of our senior management and key employees.
Our future success depends on the continuing efforts of our management and key employees, and on our ability to attract and retain highly skilled personnel and senior management. We depend on the talents and continued efforts of our senior management and key employees.
Any new products that we develop and market may not generate sufficient revenues to recoup their development, production, marketing, selling and other costs. 10 Table of Content s Our business could be materially harmed if we are unable to accurately forecast our growth rate and demand for our products.
Any new products that we develop and market may not generate sufficient revenues to recoup their development, production, marketing, selling and other costs. 11 Table of Contents Our business could be materially harmed if we are unable to accurately forecast our growth rate and demand for our products.
These provisions are generally effective for tax years beginning after December 31, 2022. If we become subject to additional taxes under the IRA, particularly in connection with any future share repurchase program, our financial condition, results of operations, effective tax rate, and cash flows could be negatively impacted.
These provisions are generally effective for tax years beginning after December 31, 2022. If we become subject to additional taxes under the Inflation Reduction Act of 2022, particularly in connection with our current or any future share repurchase program, our financial condition, results of operations, effective tax rate, and cash flows could be negatively impacted.
The party claiming infringement might have greater resources than we do to pursue its claims, and we could be forced to incur substantial costs and devote significant management resources to defend against such litigation, even if the claims are meritless and even if we ultimately prevail.
The party claiming infringement might have greater resources than we do to pursue its claims, and we have been, and may in the future be, forced to incur substantial costs and devote significant management resources to defend against such litigation, even if the claims are meritless and even if we ultimately prevail.
Adverse economic conditions in markets in which we sell our products, particularly in the United States, may materially harm our sales, profitability, and financial condition. Public health crises, such as COVID-19 pandemic, could negatively impact our business, sales, financial condition, results of operations and cash flows.
Adverse economic conditions in markets in which we sell our products, particularly in the United States, may materially harm our sales, profitability, and financial condition. Public health crises could negatively impact our business, sales, financial condition, results of operations and cash flows.
The imposition of taxes, duties and quotas, the withdrawal from or material modification to trade agreements, and/or if CBP detains shipments of our goods pursuant to a withhold release order could have a material adverse effect on our business, results of operations and financial condition. 16 Table of Content s Current and potential additional tariffs have the potential to significantly raise the cost of our products, particularly our Drinkware.
The imposition of taxes, duties and quotas, the withdrawal from or material modification to trade agreements, and/or if CBP detains shipments of our goods pursuant to a withhold release order could have a material adverse effect on our business, results of operations and financial condition. 17 Table of Contents Tariffs have the potential to significantly raise the cost of our products, particularly our Drinkware.
As a result, foreign currency exchange rate fluctuations may adversely impact our results of operations. 20 Table of Content s We may become involved in legal or regulatory proceedings and audits.
As a result, foreign currency exchange rate fluctuations may adversely impact our results of operations. We may become involved in legal or regulatory proceedings and audits.
For example, increased oil costs caused by the ongoing conflict in Ukraine, inflationary conditions resulting in rising prices, including the prices of our products, and increased interest rates could lead to declines in discretionary spending by consumers, resulting in a reduction in demand for our products, and in turn may materially adversely impact our sales, profitability, and financial condition.
For example, inflationary conditions resulting in rising prices, including the prices of our products, and increased interest rates could lead to declines in discretionary spending by consumers, resulting in a reduction in demand for our products, and in turn may materially adversely impact our sales, profitability, and financial condition.
If our globalization efforts fail to produce planned efficiencies, or the transition is not managed effectively, we may experience excess inventories, inventory shortage, late deliveries, lost sales, or increased costs. Any business disruption arising from our globalization efforts, or our failure to effectively execute our internal plans for globalization, could harm our results of operations and financial condition.
If our globalization efforts fail to produce planned efficiencies, or are not managed effectively, we may experience excess inventories, inventory shortage, late deliveries, lost sales, or increased costs. Any business disruption arising from our globalization efforts, or our failure to effectively execute our internal plans to expand globally, could harm our results of operations and financial condition.
This expansion to a global scale requires significant investment of capital and human resources, the re-engineering of many business processes, and the attention of many managers and other employees who would otherwise be focused on other aspects of our business.
Our expansion to a global scale requires significant investment of capital and human resources, the adaptation and evolution of many business processes, and the attention of many managers and other employees who would otherwise be focused on other aspects of our business.
As a result, the physical effects of climate change could have a long-term adverse impact on our business and results of operations. A significant portion of our sales are to independent retail partners.
As a result, the physical effects of climate change could have a long-term adverse impact on our business and results of operations. A significant portion of our sales are to national, regional, and independent retail partners in our wholesale channel.
Our ability to maintain prices or effectively implement price increases, including our recent price increases in 2022, may be affected by several factors, including pricing pressure due to intense competition in the retail industry, effectiveness of our marketing programs, the continuing growth of our brand, general economic conditions, and changes in consumer demand.
If we cannot maintain prices or effectively implement price increases, our margins may decrease. Our ability to maintain prices or effectively implement price increases may be affected by several factors, including pricing pressure due to intense competition in the retail industry, effectiveness of our marketing programs, the continuing growth of our brand, general economic conditions, and changes in consumer demand.
Our ability to open new retail stores in a timely manner and operate them profitably depends on a number of factors, many of which are beyond our control, including: • our ability to manage the financial and operational aspects of our retail growth strategy, including making appropriate investments in our software systems, information technology, and operational infrastructure; • our ability to identify suitable locations, including our ability to gather and assess demographic and marketing data to accurately determine customer demand for our products in the locations we select; • our ability to negotiate favorable lease agreements; • our ability to properly assess the potential profitability and payback period of potential new retail store locations; • the availability of financing on favorable terms; • our ability to secure required governmental permits and approvals and our ability to effectively comply with state and local employment and labor laws, rules, and regulations; • our ability to hire and train skilled store operating personnel, especially management personnel; • the availability of construction materials and labor and the absence of significant construction delays or cost overruns; • our ability to provide a satisfactory mix of merchandise that is responsive to the needs of our customers living in the areas where new retail stores are established; • our ability to establish a supplier and distribution network able to supply new retail stores with inventory in a timely manner; • our competitors, or our retail partners, building or leasing stores near our retail stores or in locations we have identified as targets for a new retail store; • customer demand for our products; • governmental orders requiring adherence to social distancing practices, temporary store closures, or reduced hours; and • general economic and business conditions affecting consumer confidence and spending and the overall strength of our business. 18 Table of Content s We have limited experience in opening retail stores and may not be able to successfully address the risks that they entail.
Our ability to open new retail stores in a timely manner and operate them profitably depends on a number of factors, many of which are beyond our control, including: • our ability to manage the financial and operational aspects of our retail growth strategy, including making appropriate investments in our software systems, information technology, and operational infrastructure; • our ability to identify suitable locations, including our ability to gather and assess demographic and marketing data to accurately determine customer demand for our products in the locations we select; • our ability to negotiate favorable lease agreements; • our ability to properly assess the potential profitability and payback period of potential new retail store locations; • the availability of financing on favorable terms; • our ability to secure required governmental permits and approvals and our ability to effectively comply with state and local employment and labor laws, rules, and regulations; • our ability to hire and train skilled store operating personnel, especially management personnel; • the availability of construction materials and labor and the absence of significant construction delays or cost overruns; • our ability to provide a satisfactory mix of merchandise that is responsive to the needs of our customers living in the areas where new retail stores are established; • our ability to establish a supplier and distribution network able to supply new retail stores with inventory in a timely manner; • our competitors, or our retail partners, building or leasing stores near our retail stores or in locations we have identified as targets for a new retail store; • customer demand for our products; and • general economic and business conditions affecting consumer confidence and spending and the overall strength of our business.
If such a campaign or proposal were to be made against us, we would likely incur substantial costs, such as legal fees and expenses, and divert management’s and our Board’s attention and resources from our businesses and strategic plans.
If such a campaign or proposal were to be made against us, we would likely incur substantial costs, such as legal fees and expenses, and divert management’s and our Board of Director’s (the “Board”) attention and resources from our businesses and strategic plans.
The Credit Facility is jointly and severally guaranteed by certain of our wholly-owned material subsidiaries, including YETI Coolers, LLC, which we refer to as YETI Coolers, and YETI Custom Drinkware LLC, which we refer to as YCD, and any of our future subsidiaries that become guarantors, together, which we refer to as the Guarantors, and is also secured by a first-priority lien on substantially all of our assets and the assets of the Guarantors, in each case subject to certain customary exceptions.
The Credit Facility is jointly and severally guaranteed by certain of our wholly-owned subsidiaries and any of our future subsidiaries that become guarantors, together, which we refer to as the Guarantors, and is also secured by a first-priority lien on substantially all of our assets and the assets of the Guarantors, in each case subject to certain customary exceptions.
Failure to comply with these laws and regulations could subject us to lawsuits and other proceedings, and could also lead to damage awards, fines, and penalties. We may become involved in a number of legal proceedings and audits, including government and agency investigations, and consumer, employment, tort, and other litigation.
Failure to comply with these laws and regulations could subject us to lawsuits and other proceedings, and could also lead to damage awards, fines, and penalties. We are periodically involved in, and may in the future become involved in, legal proceedings and audits, including government and agency investigations, and consumer, employment, tort, and other litigation.
Furthermore, the implementation of new information technology systems, such as our SAP upgrade, or any remediation of our key information systems requires investment of capital and human resources, the re-engineering of business processes, and the attention of many employees who would otherwise be focused on other areas of our business.
Furthermore, the implementation of new information technology systems or any remediation of our key information systems may require investment of capital and human resources, the re-engineering of business processes, and the attention of many employees who would otherwise be focused on other areas of our business.
We may be subject to liability if we infringe upon the intellectual property rights of third parties. Third parties may sue us for alleged infringement of their proprietary rights.
We may be subject to liability if we infringe upon the intellectual property rights of third parties. Third parties have sued us and may in the future sue us for alleged infringement of their proprietary rights.
As we grow our business, slower growing or reduced demand for our products, increased competition, a decrease in the growth rate of our overall market, failure to develop and successfully market new products, or the maturation of our business or market could harm our business.
As we grow our business, slower growing or reduced demand for our products, increased competition, a decrease in the growth rate of our overall market, failure to develop and successfully market new products, or the maturation of our business or market could harm our business. We have made and expect to continue to make significant investments in our business.
Factors that could affect our ability to maintain or expand our sales to these independent retail partners include: (a) failure to accurately identify the needs of our customers; (b) a lack of customer acceptance of new products or product expansions; (c) unwillingness of our independent retail partners and customers to attribute premium value to our new or existing products or product expansions relative to competing products; (d) failure to obtain shelf space from our retail partners; (e) new, well-received product introductions by competitors; (f) damage to our relationships with independent retail partners due to brand or reputational harm; (g) delays or defaults on our retail partners' payment obligations to us; (h) store closures, decreased foot traffic, or other adverse effects resulting from public health crises; and (i) economic conditions, including levels of consumer discretionary spending, which may be impacted by rising inflation, unemployment and interest rates. 17 Table of Content s We cannot assure you that our independent retail partners will continue to carry our current products or carry any new products that we develop.
Factors that could affect our ability to maintain or expand sales in our wholesale channel include: (a) failure to accurately identify the needs of our customers; (b) a lack of customer acceptance of new products or product expansions; (c) unwillingness of our retail partners and customers to attribute premium value to our new or existing products or product expansions relative to competing products; (d) failure to obtain shelf space from our retail partners; (e) new, well-received product introductions by competitors; (f) damage to our relationships with retail partners due to brand or reputational harm; (g) delays or defaults on our retail partners' payment obligations to us; (h) store closures, decreased foot traffic, or other adverse effects resulting from public health crises; and (i) economic conditions, including levels of consumer discretionary spending, which may be impacted by high inflation, unemployment and interest rates.
In order to pursue our retail store strategy, we will be required to expend significant cash resources prior to generating any sales in these stores. We may not generate sufficient sales from these stores to justify these expenses, which could harm our business and profitability.
We may not be able to successfully address the risks that opening retail stores entails. In order to pursue our retail store strategy, we will be required to expend significant cash resources prior to generating any sales in these stores. We may not generate sufficient sales from these stores to justify these expenses, which could harm our business and profitability.
We do not receive long-term purchase commitments from our independent retail partners, and orders received from our independent retail partners are cancellable.
We do not receive long-term purchase commitments from many of our retail partners, and orders received from our retail partners are often cancellable.
We may also be the target of short sellers who engage in negative publicity campaigns that may use selective information that may be presented out of context or that may misrepresent facts and circumstances. Any of the foregoing could adversely affect our business and operating results.
We may also be the target of short sellers who engage in negative publicity campaigns that may use selective information that may be presented out of context or that may misrepresent facts and circumstances. Any of the foregoing could adversely affect our business and operating results. 30 Table of Contents Item 1B. Unresolved Staff Comments None.
As a result, these types of claims could have a material adverse effect on our business, results of operations, and financial condition. 21 Table of Content s Our business is subject to the risk of earthquakes, fire, power outages, floods, and other catastrophic events, and to interruption by problems such as terrorism, public health crises, cyberattacks, or failure of key information technology systems .
As a result, these types of claims could have a material adverse effect on our business, results of operations, and financial condition. 22 Table of Contents Our business is subject to the risk of earthquakes, fire, power outages, floods, and other catastrophic events, and to interruption by problems such as terrorism, public health crises, cybersecurity incidents or other cybersecurity threats, or events affecting our information technology systems.
Our Amended and Restated Certificate of Incorporation provides that, unless we consent to the selection of an alternative forum, the Court of Chancery of the State of Delaware is the sole and exclusive forum for: (a) any derivative action or proceeding brought on our behalf; (b) any action asserting a claim of breach of fiduciary duty owed by any of our stockholders, directors, officers, or other employees to us or to our stockholders; (c) any action asserting a claim arising pursuant to the DGCL; or (d) any action asserting a claim governed by the internal affairs doctrine.
Our Amended and Restated Certificate of Incorporation provides that, unless we consent to the selection of an alternative forum, (i) the Court of Chancery of the State of Delaware is the sole and exclusive forum for: (a) any derivative action or proceeding brought on our behalf; (b) any action asserting a claim of breach of fiduciary duty owed by any of our stockholders, directors, officers, or other employees to us or to our stockholders; (c) any action asserting a claim arising pursuant to the DGCL; or (d) any action asserting a claim governed by the internal affairs doctrine; and (ii) the federal district courts of the United States are the exclusive forum for the resolution of any complaint asserting a cause of action under the Securities Act of 1933, as amended.
Therefore, our ability to fund and conduct our business, service our debt, and pay dividends, if any, depends on the ability of our subsidiaries to generate sufficient cash flow to make upstream cash distributions to us.
As a holding company, our principal source of cash flow is distributions from our subsidiaries. Therefore, our ability to fund and conduct our business, service our debt, and pay dividends, if any, depends on the ability of our subsidiaries to generate sufficient cash flow to make upstream cash distributions to us.
If these independent retail partners cease to promote or carry our current products or choose not to promote or carry new products that we develop, our brand as well as our results of operations and financial condition could be harmed.
If these retail partners cease to promote or carry our current products or choose not to promote or carry new products that we develop, our brand as well as our results of operations and financial condition could be harmed. We sell a significant amount of our products through our wholesale channel, consisting of national, regional, and independent retail partners.
Climate change, and related legislative and regulatory responses to climate change, may adversely impact our business. As climate change and other environmental concerns become more prevalent, federal, state and local governments, non-governmental organizations and our customers, consumers and investors are increasingly concerned about these issues.
As climate change and other environmental concerns become more prevalent, federal, state and local governments, non-governmental organizations and our customers, consumers and investors are increasingly concerned about these issues.
Any material disruption or slowdown of our systems or those of third parties that we depend upon could cause information, including data related to orders, to be lost or delayed, which could result in delays in the delivery of products to retailers and customers or lost sales, which could reduce demand for our products, harm our brand and reputation, and cause our sales to decline.
Any material disruption or slowdown of our systems or those of third parties that we depend upon could cause information, including data related to orders, to be lost or delayed. Such loss or delay of information could result in delays in the delivery of products to retailers and customers.
The impacts of such public health crises include, but are not limited to: • the possibility of retail store closures or reduced operating hours and/or decreased retail traffic; • disruption to our distribution centers and our third-party manufacturing partners and other vendors, including the effects of facility closures as a result of outbreaks of COVID-19 or other illnesses, or measures taken by federal, state or local governments to reduce its spread, reductions in operating hours, labor shortages, and real time changes in operating procedures, including for additional cleaning and disinfection procedures; and • significant disruption of global financial markets, which could have a negative impact on our ability to access capital in the future.
The emergence of a pandemic, epidemic, or infectious disease outbreak could, among other risks, lead to: • the possibility of retail store closures or reduced operating hours and/or decreased retail traffic; • disruption to our distribution centers and our third-party manufacturing partners and other vendors, including the effects of facility closures as a result of outbreaks of illnesses, or measures taken by federal, state or local governments to reduce the spread of illness, reductions in operating hours, labor shortages, and real time changes in operating procedures, including for additional cleaning and disinfection procedures; and • significant disruption of global financial markets, which could have a negative impact on our ability to access capital in the future.
We also face exposure to product liability claims and unusual or significant litigation in the event that one of our products is alleged to have resulted in bodily injury, property damage, or other adverse effects.
Any of these events or claims could harm our reputation, business, financial condition and results of operations. We also face exposure to product liability claims and unusual or significant litigation in the event that one of our products is alleged to have resulted in bodily injury, property damage, or other adverse effects.
In addition, member states of the Organization for Economic Co-Operation and Development are continuing discussions surrounding fundamental changes to the taxing rights of governments and allocation of profits among tax jurisdictions in which companies do business, including proposed rules on the implementation of a global minimum tax rate.
The member states of the Organization for Economic Co-Operation and Development (“OECD”) are continuing discussions surrounding fundamental changes to the taxing rights of governments and allocation of profits among tax jurisdictions in which companies do business.
We may incur additional costs and operational challenges in complying with these laws, and differences in these laws may cause us to operate our business differently, and less effectively, in different territories. If so, we may incur additional costs and may not fully realize the investment in our international expansion.
We may incur additional costs and operational challenges in complying with these laws, and differences in these laws may cause us to operate our business differently, and less effectively, in different territories.
Additionally, the cost of logistics and transportation fluctuates in large part due to the price of oil and available capacity. Any fluctuations in the cost and availability of any of our raw materials or other sourcing or transportation costs related to our raw materials or products could harm our gross margins and our ability to meet customer demand.
Any fluctuations in the cost and availability of any of our raw materials or other sourcing or transportation costs related to our raw materials or products could harm our gross margins and our ability to meet customer demand.
Further, the current economic environment has resulted in severely diminished liquidity and credit availability, increases in inflation rates, rising interest rates, declines in consumer confidence, declines in economic growth, and uncertainty about economic stability, any of which may lead to a material reduction in sales of our products by our retail partners.
Further, economic conditions resulting in diminished liquidity or credit availability, increases in inflation rates, rising interest rates, declines in consumer confidence, declines in economic growth, or uncertainty about economic stability, may lead to a material reduction in sales of our products by our retail partners.
Our Amended and Restated Certificate of Incorporation provides that the Court of Chancery of the State of Delaware is the sole and exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.
Our Amended and Restated Certificate of Incorporation provides that the Court of Chancery of the State of Delaware is the sole and exclusive forum for substantially all disputes between us and our stockholders and our Amended and Restated bylaws provide that the federal district courts of the United States are the exclusive forum for complaints asserting a cause of action under the Securities Act, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.
Our business could be harmed if we fail to execute our internal plans to transition our supply chain and certain other business processes to a global scale. We are in the process of re-engineering certain of our supply chain management processes, as well as certain other business processes, to support our expanding scale.
Our business could be harmed if we fail to execute our internal plans to transition our supply chain and certain other business processes to a global scale. We continually assess, and re-engineer as needed, our supply chain management and business processes to support our expanding scale.
Future rapid growth may increase the strain on our resources, and we could experience operating difficulties, including difficulties in sourcing, logistics, recruiting, maintaining internal controls, marketing, designing innovative products, and meeting consumer needs.
Consequently, if our operations continue to grow at a rapid pace, we may experience difficulties in managing our growth and building the appropriate processes and controls. Future rapid growth may increase the strain on our resources, and we could experience operating difficulties, including difficulties in sourcing, logistics, recruiting, maintaining internal controls, marketing, designing innovative products, and meeting consumer needs.
Although we have taken steps to protect the security of our information systems and the data maintained in those systems, we have, from time to time, experienced threats to our data and systems, including malware and computer virus attacks and it is possible that in the future our safety and security measures will not prevent the systems’ improper functioning or damage, or the improper access or disclosure of personally identifiable information such as in the event of cyber-attacks.
Although we have taken steps to protect the security of our information systems and the data maintained in those systems, we have, from time to time, experienced cybersecurity threats to our data and systems, including malware and computer virus attacks. It is possible that our safety and security measures will not prevent our systems from functioning improperly or becoming damaged.
As of December 31, 2022, we had $90.0 million principal amount of indebtedness outstanding under the Credit Facility (as defined in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources” of this Report).
As of December 30, 2023, we had $82.3 million principal amount of indebtedness outstanding under the Credit Facility (as defined in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations- Business Overview” of this Report).
We may acquire or invest in other companies, which could divert our management’s attention, result in dilution to our stockholders, and otherwise disrupt our operations and harm our results of operations.
Risks Related to Acquisitions, Strategic Transactions, and Stockholder Activism We have acquired and may in the future acquire or invest in other companies, which could divert our management’s attention, result in dilution to our stockholders, and otherwise disrupt our operations and harm our results of operations.
If our suppliers, manufacturers, or retail partners fail to comply with applicable laws, regulations, safety codes, employment practices, human rights standards, quality standards, environmental standards, production practices, or other obligations, norms, or ethical standards, our reputation and brand image could be harmed, and we could be exposed to litigation and additional costs that would harm our business, reputation, and results of operations.
If our suppliers, manufacturers, or retail partners fail to comply with applicable laws, regulations, safety codes, employment practices, human rights standards, quality standards, environmental standards, production practices, or other obligations, norms, or ethical standards, our reputation and brand image could be harmed, and we could be exposed to litigation and additional costs that would harm our business, reputation, and results of operations. 20 Table of Contents We are subject to payment-related risks that may result in higher operating costs or the inability to process payments, either of which could harm our business, financial condition and results of operations.
Variations in weather conditions may also harm our quarterly results of operations. In addition, we may not be able to adjust our spending in a timely manner to compensate for any unexpected shortfall in our sales.
In addition, we may not be able to adjust our spending in a timely manner to compensate for any unexpected shortfall in our sales.
A failure to accurately predict the level of demand for our products could adversely impact our profitability or cause us not to achieve our expected financial results. We may not be able to effectively manage our growth.
Difficulty in forecasting demand also makes it difficult to estimate our future results of operations and financial condition from period to period. A failure to accurately predict the level of demand for our products could adversely impact our profitability or cause us not to achieve our expected financial results. We may not be able to effectively manage our growth.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeOur primary distribution centers are leased and managed by third-party logistics providers and, as of December 31, 2022, were located in Salt Lake City, Utah, Memphis, Tennessee, Australia, Canada, the United Kingdom, New Zealand, and the Netherlands. In addition, we lease and operate thirteen retail stores across the United States.
Biggest changeOur primary distribution centers are leased and managed by third-party logistics providers and, as of December 30, 2023, were located in Salt Lake City, Utah, Memphis, Tennessee, Australia, Canada, the United Kingdom, New Zealand, and the Netherlands. In addition, as of December 30, 2023, we leased and operated 18 retail stores across the United States.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings From time to time, we are involved in various legal proceedings. Although no assurance can be given, we do not believe that any of our currently pending proceedings will have a material adverse effect on our consolidated financial condition, results of operations, or cash flows. Item 4. Mine Safety Disclosures Not applicable. PART II
Biggest changeAlthough no assurance can be given and the outcome of litigation is inherently uncertain, we do not believe that any of our currently pending legal proceedings, individually or in the aggregate, are material or will have a material adverse effect on our consolidated financial condition, results of operations, or cash flows. Item 4. Mine Safety Disclosures Not applicable. PART II
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Item 3. Legal Proceedings From time to time, we are involved in various legal proceedings.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 31 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 31 Item 6. Reserved 32 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 33 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 42 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 33 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 33 Item 6. Reserved 34 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 35 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 44 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe graph assumes that $100 was invested on October 25, 2018 (the date our common stock commenced trading on the NYSE) in our common stock, the S&P 500 Index, and Standard & Poor’s 500 Apparel, Accessories & Luxury Goods Index and assumes reinvestment of any dividends, if any.
Biggest changeThe graph assumes that $100 was invested on December 29, 2018 in our common stock, the S&P 500 Index, and Standard & Poor’s 500 Apparel, Accessories & Luxury Goods Index and assumes reinvestment of any dividends, if any. Stockholder returns over the indicated period should not be considered indicative of future stockholder returns.
We intend to retain any future earnings and do not expect to pay any dividends in the foreseeable future. 31 Table of Content s Stock Performance Graph The following graph shows a comparison of the cumulative total return for our common stock with that of the Standard & Poor’s 500 Stock Index (“S&P 500 Index”) and Standard & Poor’s 500 Apparel, Accessories & Luxury Goods Index.
We intend to retain any future earnings and do not expect to pay any dividends in the foreseeable future. 33 Table of Contents Stock Performance Graph The following graph shows a comparison of the cumulative total return for our common stock with that of the Standard & Poor’s 500 Stock Index (“S&P 500 Index”) and Standard & Poor’s 500 Apparel, Accessories & Luxury Goods Index.
Holders of Record As of February 9, 2023, there were approximately 48 shareholders of record of our common stock. This does not include the significant number of beneficial owners whose stock is in nominee or “street name” accounts through brokers, banks or other nominees. Dividend Policy We have not declared or paid any cash dividends on our common stock.
Holders of Record As of February 15, 2024, there were approximately 53 shareholders of record of our common stock. This does not include the significant number of beneficial owners whose stock is in nominee or “street name” accounts through brokers, banks or other nominees. Dividend Policy We have not declared or paid any cash dividends on our common stock.
Comparison of Cumulative Total Return Since October 25, 2018 Assumes Initial Investment of $100 10/25/2018 12/29/2018 12/28/2019 1/2/2021 1/1/2022 12/31/2022 YETI Holdings, Inc. $ 100.00 $ 87.18 $ 205.76 $ 402.76 $ 487.42 $ 243.00 S&P 500 Index 100.00 91.87 119.75 138.83 176.16 141.91 S&P 500 Apparel, Accessories & Luxury Goods Index 100.00 81.85 99.78 87.75 91.52 50.01 The performance graph shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities under that section and shall not be deemed to be incorporated by reference into any of our filings under the Securities Act or the Exchange Act.
Comparison of 5-Year Cumulative Total Return Since December 29, 2018 Assumes Initial Investment of $100 12/29/2018 12/28/2019 1/2/2021 1/1/2022 12/31/2022 12/30/2023 YETI Holdings, Inc. $ 100.00 $ 236.03 $ 462.01 $ 558.91 $ 278.74 $ 349.39 S&P 500 Index 100.00 132.97 157.02 202.09 165.49 209.00 S&P 500 Apparel, Accessories & Luxury Goods Index 100.00 121.90 107.21 111.81 61.10 59.03 The performance graph shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities under that section and shall not be deemed to be incorporated by reference into any of our filings under the Securities Act or the Exchange Act.
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Stockholder returns over the indicated period should not be considered indicative of future stockholder returns.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeUnless otherwise stated, references to particular years, quarters, months and periods refer to our fiscal years ended in December and the associated quarters, months, and periods of those fiscal years. 34 Table of Content s Results of Operations The following table sets forth selected statement of operations data, and their corresponding percentage of net sales, for the periods indicated (dollars in thousands): Fiscal Year Ended December 31, 2022 January 1, 2022 January 2, 2021 Statement of Operations Net sales $ 1,595,222 100 % $ 1,410,989 100 % $ 1,091,721 100 % Cost of goods sold (1) 831,821 52 % 594,876 42 % 462,918 42 % Gross profit 763,401 48 % 816,113 58 % 628,803 58 % Selling, general, and administrative expenses 637,040 40 % 541,175 38 % 414,570 38 % Operating income 126,361 8 % 274,938 19 % 214,233 20 % Interest expense (4,466) — % (3,339) — % (9,155) 1 % Other (expense) income (5,718) — % (3,189) — % 123 — % Income before income taxes 116,177 7 % 268,410 19 % 205,201 19 % Income tax expense (26,484) 2 % (55,808) 4 % (49,400) 5 % Net income $ 89,693 6 % $ 212,602 15 % $ 155,801 14 % ______________________________ (1) Includes $6.4 million of inbound freight expense related to an out-of-period adjustment for year ended December 31, 2022.
Biggest changeThe following table sets forth selected statement of operations data, and their corresponding percentage of net sales, for the periods indicated (dollars in thousands): Fiscal Year Ended December 30, 2023 December 31, 2022 Statement of Operations Net sales $ 1,658,713 100 % $ 1,595,222 100 % Cost of goods sold (1) 715,527 43 % 831,821 52 % Gross profit 943,186 57 % 763,401 48 % Selling, general, and administrative expenses 717,728 43 % 637,040 40 % Operating income 225,458 14 % 126,361 8 % Interest expense (942) — % (4,466) — % Other income (expense), net 1,430 — % (5,718) — % Income before income taxes 225,946 14 % 116,177 7 % Income tax expense (56,061) 3 % (26,484) 2 % Net income $ 169,885 10 % $ 89,693 6 % ______________________________ (1) Includes $6.4 million of inbound freight expense related to an out-of-period adjustment for year ended December 31, 2022.
Gross profit reflects net sales less cost of goods sold, which primarily includes the purchase cost of our products from our third-party contract manufacturers, inbound freight and duties, product quality testing and inspection costs, depreciation expense of our molds and equipment, and the cost of customizing Drinkware products. We calculate gross margin as gross profit divided by net sales.
Gross profit reflects net sales less cost of goods sold, which primarily includes the purchase cost of our products from our third-party contract manufacturers, inbound freight and duties, product quality testing and inspection costs, depreciation expense of our molds, tooling, and equipment, and the cost of customizing products. We calculate gross margin as gross profit divided by net sales.
Based on our qualitative assessment performed during the fourth quarter of 2022, we determined that it is not more likely than not that the fair value of each reporting unit is lower than its carrying value; therefore, the quantitative impairment test was not required.
Based on our qualitative assessment performed during the fourth quarter of 2023, we determined that it is not more likely than not that the fair value of each reporting unit is lower than its carrying value; therefore, the quantitative impairment test was not required.
Our domestic national and regional specialty retailers include Dick’s Sporting Goods, REI, Academy Sports + Outdoors, Bass Pro Shops, Ace Hardware, and Scheels. We sell our products in our DTC channel to customers on YETI.com, country and region specific YETI websites, and YETI Authorized on the Amazon Marketplace, as well as in our retail stores.
Our domestic national and regional specialty retailers include Dick’s Sporting Goods, REI, Academy Sports + Outdoors, Bass Pro Shops, Ace Hardware, Scheels, and Tractor Supply Company. We sell our products in our DTC channel to customers on YETI.com, country and region-specific YETI websites, and YETI Authorized on the Amazon Marketplace, as well as in our retail stores.
We perform physical inventory counts and cycle counts throughout the year and adjust the shrink provision accordingly. Historically, physical inventory shrinkage has not been significant. Valuation of Goodwill and Indefinite-Lived Intangible Assets Goodwill and intangible assets are recorded at cost, or at their estimated fair values at the date of acquisition.
We perform physical inventory counts and cycle counts throughout the year and adjust the shrink provision accordingly. Historically, physical inventory shrinkage has not been significant. 43 Table of Contents Valuation of Goodwill and Indefinite-Lived Intangible Assets Goodwill and intangible assets are recorded at cost, or at their estimated fair values at the date of acquisition.
Additionally, we offer customized products with licensed marks and original artwork through our corporate sales program and at YETI.com. Our corporate sales program offers customized products to corporate customers for a wide-range of events and activities, and in certain instances may also offer products to re-sell.
Additionally, we offer customized products with licensed trademarks and original artwork through our corporate sales program, at YETI.com and certain country-specific YETI websites. Our corporate sales program offers customized products to corporate customers for a wide-range of events and activities, and in certain instances may also offer products to re-sell.
Consistent across many industries, we have experienced, and expect to continue to experience, inflationary pressures and supply chain challenges, including port congestion, container and labor shortages, which have resulted in longer transit times, higher distribution, logistics, and product input costs. As a result, we have experienced, and may continue to experience, decreased profitability and delayed product availability for certain products.
Consistent across many industries, we experienced inflationary pressures and supply chain challenges, including port congestion, container and labor shortages, which resulted in longer transit times, higher distribution, logistics, and product input costs. As a result, we experienced decreased profitability and delayed product availability for certain products in 2022.
A 10% change in our estimated reserve for sales returns, discounts, and miscellaneous claims for 2022 would have impacted net sales by $1.0 million.
A 10% change in our estimated reserve for sales returns, discounts, and miscellaneous claims for 2023 would have impacted net sales by $1.2 million.
The table of our material cash requirements above excludes unrecognized tax benefits as we are unable to reasonably predict the timing of settlement of liabilities, if any, related to unrecognized tax benefits. As of December 31, 2022, we had unrecognized tax benefits of $14.6 million.
The table of our material cash requirements above excludes unrecognized tax benefits as we are unable to reasonably predict the timing of settlement of liabilities, if any, related to unrecognized tax benefits. As of December 30, 2023, we had unrecognized tax benefits of $17.6 million.
Revenue is recognized net of estimates of variable consideration, including product returns, customer discounts and allowances, sales incentive programs, and miscellaneous claims from customers. We determine these estimates based on contract terms, evaluations of historical experience, anticipated trends, and other factors. The actual amount of customer returns and customer allowances, which is inherently uncertain, may differ from our estimates.
Revenue is recognized net of estimates of variable consideration, including product returns, customer discounts and allowances, sales incentive programs, and miscellaneous claims from customers. We determine these estimates based on contract terms, evaluations of historical experience, anticipated trends, and other factors.
We fund our working capital, primarily inventory and accounts receivable, and capital investments from cash flows from operating activities, cash on hand, and borrowings available under our Revolving Credit Facility (as defined below). We may also use cash to repurchase shares of our common stock.
We fund our working capital, which primarily consists of inventory and accounts receivable, and our capital investments from cash flows from operating activities, cash on hand, and borrowings available under our Revolving Credit Facility. Pursuant to our new share repurchase plan described below, we also plan to use cash to repurchase shares of our common stock.
Actual returns and discounts in any future period are inherently uncertain and thus may differ from our estimates. If actual or expected future returns and discounts were significantly greater or lower than the reserves we had established, we would record a reduction or increase to net sales in the period in which we made such determination.
If actual or expected future returns and discounts were significantly greater or lower than the reserves we had established, we would record a reduction or increase to net sales in the period in which we made such determination.
At December 31, 2022, we had $90.0 million principal amount of indebtedness outstanding under the Term Loan A and no outstanding borrowings under the Revolving Credit Facility. The weighted average interest rate for borrowings under Term Loan A was 3.49% during the year ended December 31, 2022.
At December 30, 2023, we had $82.3 million principal amount of indebtedness outstanding under the Term Loan A and no outstanding borrowings under the Revolving Credit Facility. The weighted average interest rate for borrowings under Term Loan A was 6.83% during the year ended December 30, 2023.
Our Coolers & Equipment category includes hard coolers, soft coolers, bags, outdoor equipment, and cargo, as well as accessories and replacement parts for these products. Our Drinkware category is primarily composed of our stainless-steel drinkware products and related accessories.
We discuss the net sales of our products in our two primary categories: Coolers & Equipment and Drinkware. Our Coolers & Equipment category includes hard coolers, soft coolers, bags, outdoor equipment, and cargo, as well as accessories and replacement parts for these products. Our Drinkware category is primarily composed of our stainless-steel drinkware products and related accessories.
Proposed Voluntary Recalls In January 2023, we notified the CPSC of a potential safety concern regarding the magnet-lined closures of our Hopper ® M30 Soft Cooler, Hopper ® M20 Soft Backpack Cooler, and SideKick Dry gear case and initiated a global stop sale of the affected products.
Product Recall Update In January 2023, we notified the Consumer Products Safety Commission (“CPSC”) of a potential safety concern regarding the magnet-lined closures of our Hopper M30 Soft Cooler, Hopper M20 Soft Backpack Cooler, and SideKick Dry gear case (the “affected products”) and initiated a global stop sale of the affected products.
Business Overview Headquartered in Austin, Texas, YETI is a global designer, retailer, and distributor of innovative outdoor products. From coolers and drinkware to bags and apparel, YETI products are built to meet the unique and varying needs of diverse outdoor pursuits, whether in the remote wilderness, at the beach, or anywhere life takes you.
From coolers and drinkware to bags and apparel, YETI products are built to meet the unique and varying needs of diverse outdoor pursuits, whether in the remote wilderness, at the beach, or anywhere life takes you.
However, there are a number of factors that could impact our ability to resume sales at that time and our estimate of the date for sales of the redesigned products to resume may change. 33 Table of Content s For the year ended December 31, 2022, we recorded a reduction to net sales for estimated future returns and recall remedies of $38.4 million; recorded costs in cost of goods sold of $58.6 million primarily related to an inventory write-off of $34.1 million for our unsalable inventory on-hand as well as estimated costs of future product replacement remedies and logistics costs; and recorded $31.9 million associated with estimated recall-related costs in selling, general, and administrative expenses.
For the year ended December 31, 2022, we recorded a reduction to net sales for estimated future returns and recall remedies of $38.4 million; recorded costs in cost of goods sold of $58.6 million primarily related to an inventory write-off of $34.1 million for our unsalable inventory on-hand as well as estimated costs of future product replacement remedies and logistics costs; and recorded $31.9 million associated with estimated recall-related costs in selling, general, and administrative expenses.
Net sales are comprised of wholesale channel sales to our retail partners and sales through our DTC channel. Net sales in both channels reflect the impact of product returns as well as discounts for certain sales programs or promotions. We discuss the net sales of our products in our two primary categories: Coolers & Equipment and Drinkware.
General Components of Our Results of Operations Net Sales . Net sales are comprised of wholesale channel sales to our retail partners and sales through our DTC channel. Net sales in both channels reflect the impact of product returns as well as discounts for certain sales programs or promotions.
The decrease in the effective tax rate was primarily due to a higher tax benefit related to stock-based compensation in 2021 compared to 2020. Liquidity and Capital Resources General Our cash requirements have principally been for working capital purposes, long-term debt repayments, and capital expenditures.
The increase in the effective tax rate was primarily due to a lower tax benefit from our export sales deductions and an unfavorable tax impact related to stock-based compensation in 2023. Liquidity and Capital Resources General Our cash requirements have principally been for working capital purposes, long-term debt repayments, and capital expenditures.
The decrease in cash provided by operating activities in 2022 is primarily due to an increase in cash used for working capital, partially offset by net income, adjusted for non-cash items, including the impact of our voluntary recalls, for the periods compared.
The increase in cash provided by operating activities in 2023 was primarily due to an increase in cash received for working capital, and to a smaller extent, net income, adjusted for non-cash items, including the impact of our voluntary recalls, for the periods compared.
Our fiscal years 2022 and 2021 ended on December 31, 2022 and January 1, 2022, respectively, were 52 weeks each, whereas our fiscal year 2020 ended January 2, 2021 included 53 weeks.
Our fiscal years 2023, 2022 and 2021 ended on December 30, 2023, December 31, 2022 and January 1, 2022, respectively, and were 52 weeks each.
We may also, at our sole discretion, provide our retail partners with sales discounts and allowances. We record estimated sales returns, discounts, and miscellaneous customer claims as reductions to net sales at the time revenues are recorded. We base our estimates upon historical experience and trends, and upon approval of specific returns or discounts.
We may accept, and have at times accepted, returns outside our terms of sale at our sole discretion. We may also, at our sole discretion, provide our retail partners with sales discounts and allowances. We record estimated sales returns, discounts, and miscellaneous customer claims as reductions to net sales at the time revenues are recorded.
We did not record any goodwill or indefinite-lived intangible assets impairment charges during the years ended December 31, 2022, January 1, 2022, and January 2, 2021. 41 Table of Content s Valuation of Long-Lived Assets We assess the recoverability of our long-lived assets, which include property and equipment, operating lease right-of-use-assets, and definite-lived intangible assets, for impairment whenever events or changes in circumstances indicate the carrying amount of such assets may not be recoverable.
Valuation of Long-Lived Assets We assess the recoverability of our long-lived assets, which include property and equipment, operating lease right-of-use-assets, and definite-lived intangible assets, for impairment whenever events or changes in circumstances indicate the carrying amount of such assets may not be recoverable.
The reserve for the estimated product recall expenses of $94.8 million is included within accrued expenses and other current liabilities on our consolidated balance sheet as of December 31, 2022. In addition, we recorded an inventory reserve or write-off of $34.1 million for our unsalable inventory on-hand as of December 31, 2022.
The reserve for the estimated product recall expenses of $13.1 million and $94.8 million is included within accrued expenses and other current liabilities on our consolidated balance sheet as of December 30, 2023 and December 31, 2022, respectively.
As a result, the total unfavorable impact of the proposed voluntary recalls to operating income was $128.9 million for the year ended December 31, 2022. As of December 31, 2022, our reserve for estimated recall expenses was $94.8 million.
The total unfavorable impact to operating income related to the recalls was $1.9 million in 2023. As of December 30, 2023 and December 31, 2022, our reserve for estimated recall expenses was $13.1 million and $94.8 million, respectively.
The increase in cash used for working capital was primarily due to an increase in inventory and a decrease in accounts payable, partially offset by a decrease in accounts receivable.
The increase in cash received for working capital was primarily due to a decrease in inventory and an increase in accounts payable and other accrued expenses, partially offset by an increase in accounts receivable. Investing Activities The increase in cash used in investing activities in 2023 compared to 2022 was primarily related to increased purchases of intangible assets.
At December 31, 2022, we were in compliance with all covenants and expect to remain in compliance with all covenants under the Credit Facility. Share Repurchase Plan On February 27, 2022, the Board of Directors authorized a common stock repurchase program of up to $100.0 million.
At December 30, 2023, we were in compliance with all covenants and expect to remain in compliance with all covenants under the Credit Facility. 40 Table of Contents Share Repurchase Program On February 1, 2024, our Board of Directors authorized the repurchase of up to $300 million (exclusive of fees and commissions) of YETI’s common stock.
We elected to account for shipping and handling as fulfillment activities, and not as separate performance obligations. Shipping and handling fees billed to customers are included in net sales. All shipping and handling activity costs are recognized as selling, general and administrative expenses at the time the related revenue is recognized.
Product warranty costs are estimated based on historical and anticipated trends and are recorded as cost of goods sold at the time revenue is recognized. We elected to account for shipping and handling as fulfillment activities, and not as separate performance obligations. Shipping and handling fees billed to customers are included in net sales.
In February 2023, we proposed a voluntary recall of the affected products to the CPSC and other relevant global regulatory authorities. In conjunction with the stop sale, we determined that the affected products inventory held by us, our suppliers, and our wholesale customers is unsalable and notified our wholesale customers to return the affected products.
In conjunction with the stop sale, we determined that the affected products inventory held by us, our suppliers and our wholesale customers was unsalable, and notified our wholesale customers to return the affected products. In March 2023, we announced separate, voluntary recalls of the affected products in collaboration with the CPSC and subsequently began processing recall claims and returns.
Net sales in our channels were as follows: • DTC channel net sales increased $133.0 million, or 17%, to $917.7 million in 2022 from $784.7 million in 2021, driven by both Drinkware and Coolers & Equipment categories, partially offset by a $6.2 million unfavorable impact related to the voluntary recalls.
Net sales in our channels were as follows: • DTC channel net sales increased $80.0 million, or 9%, to $997.7 million in 2023 from $917.7 million in 2022, driven by both Drinkware and Coolers & Equipment categories.
Critical Accounting Policies and Estimates Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with GAAP.
Financing Activities The decrease in cash used in financing activities in 2023 compared to 2022 was primarily driven by repurchases of common stock in the prior year period. Critical Accounting Policies and Estimates Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with GAAP.
The increase in other expense was due to foreign currency losses on intercompany balances. Income tax expense was $26.5 million in 2022, compared to $55.8 million in 2021. Our effective tax rate for 2022 was 23% compared to 21% for 2021. The decrease in income tax expense was primarily due to lower earnings before taxes in 2022.
Income tax expense was $56.1 million in 2023, compared to $26.5 million in 2022. Our effective tax rate for 2023 was 25% compared to 23% for 2022. The increase in income tax expense was primarily due to an increase in earnings before taxes in 2023.
Non-Operating Expenses Interest expense was $4.5 million in 2022, compared to $3.3 million in 2021. The increase in interest expense was primarily due to rising interest rates partially offset by decreased outstanding long-term debt. Other expense was $5.7 million in 2022, compared to other income of $3.2 million in 2021.
The decrease was primarily driven by higher interest income, partially offset by an increase in interest expense due to higher interest rates on our outstanding long-term debt. Other income, net was $1.4 million in 2023, compared to other expense of $5.7 million in 2022. The increase in other income, net was due to foreign currency gains on intercompany balances.
See Note 10-Stockholders’ Equity of Notes to Consolidated Financial Statements for additional information about the share repurchase program. 38 Table of Content s Material Cash Requirements For 2023, we expect capital expenditures for property and equipment to be approximately $60 million, primarily to support investments in technology, expansion of our customization capacity, retail stores investments, and new product innovation and launches.
Material Cash Requirements For 2024, we expect capital expenditures for property and equipment to be approximately $60 million, primarily to support investments in technology, new product innovation, expansion of our custom portfolio and capacity, and retail stores investments.
The duration of contractual arrangements with our customers is typically less than 1 year. Payment terms with wholesale customers vary depending on creditworthiness and other considerations, with the most common being net 30 days. Payment is due at the time of sale for retail store transactions and at the time of shipment for e-commerce transactions.
The actual amount of customer returns and customer allowances, which is inherently uncertain, may differ from our estimates. 42 Table of Contents The duration of contractual arrangements with our customers is typically less than 1 year. Payment terms with wholesale customers vary depending on creditworthiness and other considerations, with the most common being net 30 days.
The ultimate costs from the approved voluntary recalls may differ materially from our estimates, and may harm our business, financial condition and results of operations. See Part I, Item 1A “Risk Factors - Risks Related to Our Business, Operations and Industry.” Macroeconomic Conditions We continue to experience challenges associated with the complex and uncertain macroeconomic environment in which we operate.
The ultimate impact from the recalls may differ materially from our estimates, and may harm our business, financial condition and results of operations. See Part I, Item 1A “Risk Factors - Risks Related to Our Business, Operations and Industry.” In addition, our 2023 sales were materially adversely impacted by the stop sale of the affected products.
Current Liquidity As of December 31, 2022, we had a cash balance of $234.7 million, $75.1 million of working capital (excluding cash), and $150.0 million of borrowings available under the Revolving Credit Facility (as defined below).
Current Liquidity As of December 30, 2023, we had a cash balance of $439.0 million, $77.1 million of working capital (excluding cash), and $300.0 million of borrowings available under the Revolving Credit Facility. Credit Facility Our Credit Facility provides for a $300.0 million Revolving Credit Facility and an $84.4 million term loan (“Term Loan A”).
Other macroeconomic trends, including rising fuel prices, higher inflation rates, higher interest rates, foreign exchange rate fluctuations, and other related global economic conditions, have led to uncertainty in the economic environment and their impacts remain unknown. While some of these conditions have negatively impacted consumer discretionary spending behavior, we continue to see strong demand for our products.
There is significant uncertainty regarding how macroeconomic trends, including sustained high levels of inflation and higher interest rates, will impact consumer demand. While some of these conditions have negatively impacted consumer discretionary spending behavior, we continue to see strong consumer demand for our products.
The increase in SG&A expenses resulted from: • an increase in variable expenses of $45.6 million (increasing SG&A as a percent of sales by 140 basis points) comprised of: – higher distribution costs including higher outbound freight rates, online marketplace fees, third-party logistics fees, and credit card processing fees; • an increase in non-variable expenses of $18.4 million (decreasing SG&A as a percent of sales by 190 basis points) comprised of: – an increase in marketing expenses, non-variable distribution costs, information technology expenses and facility costs, partially offset by a decline in employee costs primarily driven by incentive compensation, lower professional fees and other operating expenses; and • the unfavorable $31.9 million impact related to the voluntary recalls (increasing SG&A as a percent of sales by 200 basis points).
The increase in SG&A expenses resulted from: • an increase in variable expenses of $39.7 million (increasing SG&A as a percent of sales by 190 basis points) primarily associated with higher DTC channel sales, and comprised of higher distribution costs including higher outbound freight rates, online marketplace fees, third-party logistics fees, and credit card processing fees; • an increase in non-variable expenses of $84.3 million (increasing SG&A as a percent of sales by 420 basis points) comprised of higher employee costs, mainly due to incentive compensation, investments in headcount to support future growth, and non-cash stock-based compensation expense, as well as investments in marketing expenses, warehousing costs, facility costs, and other operating expenses; which were partially offset by • the lower impact of the recall reserves, which favorably impacted SG&A expenses by $43.3 million (decreasing SG&A as a percent of sales by 270 basis points). 39 Table of Contents Non-Operating Expenses Interest expense was $0.9 million in 2023, compared to $4.5 million in 2022.
A continuation or worsening of these macroeconomic trends may continue to adversely impact our business, operations, and financial results. We will continue to monitor and mitigate the effects of the macroeconomic environment on our business. General Components of Our Results of Operations Net Sales .
Although such effects have not materially impacted our business to date, such conditions could worsen. A worsening of any of the macroeconomic trends discussed herein may adversely impact our business, operations, and financial results in the future. We will continue to monitor and, if necessary, mitigate the effects of the macroeconomic environment on our business.
Year Ended December 31, 2022 Compared to Year Ended January 1, 2022 Fiscal Year Ended December 31, 2022 January 1, 2022 Change (dollars in thousands) $ % Net sales $ 1,595,222 $ 1,410,989 $ 184,233 13 % Gross profit 763,401 816,113 (52,712) (6) % Gross margin (Gross profit as a % of net sales) 47.9 % 57.8 % (990) basis points Selling, general, and administrative expenses $ 637,040 $ 541,175 $ 95,865 18 % SG&A as a % of net sales 39.9 % 38.4 % 150 basis points Net Sales Net sales increased $184.2 million, or 13%, to $1,595.2 million in 2022 from $1,411.0 million in 2021.
Year Ended December 30, 2023 Compared to Year Ended December 31, 2022 Fiscal Year Ended December 30, 2023 December 31, 2022 Change (dollars in thousands) $ % Net sales $ 1,658,713 $ 1,595,222 $ 63,491 4 % Gross profit 943,186 763,401 179,785 24 % Gross margin (gross profit as a % of net sales) 56.9 % 47.9 % 900 basis points Selling, general, and administrative expenses $ 717,728 $ 637,040 $ 80,688 13 % SG&A as a % of net sales 43.3 % 39.9 % 340 basis points Net Sales Net sales increased $63.5 million, or 4%, to $1,658.7 million in 2023 from $1,595.2 million in 2022.
Certain products that we sell include a limited warranty which does not meet the definition of a performance obligation within the context of the contract. Product warranty costs are estimated based on historical and anticipated trends and are recorded as cost of goods sold at the time revenue is recognized.
Payment is due at the time of sale for retail store transactions and at the time of shipment for e-commerce transactions. Certain products that we sell include a limited warranty which does not meet the definition of a performance obligation within the context of the contract.
Selling, General, and Administrative Expenses SG&A expenses increased by $126.6 million, or 31%, to $541.2 million in 2021 from $414.6 million in 2020. As a percentage of net sales, SG&A expenses increased 40 basis points to 38.4% in 2021 from 38.0% in 2020.
Selling, General, and Administrative Expenses SG&A expenses increased by $80.7 million, or 13%, to $717.7 million in 2023 from $637.0 million in 2022. As a percentage of net sales, SG&A expenses increased 340 basis points to 43.3% in 2023 from 39.9% in 2022.
Cash Flows from Operating, Investing and Financing Activities The following table summarizes our cash flows from operating, investing and financing activities for the periods indicated (in thousands): Fiscal Year Ended December 31, 2022 January 1, 2022 January 2, 2021 Cash flows provided by (used in): Operating activities $ 100,894 $ 146,520 $ 366,427 Investing activities (56,910) (65,756) (22,944) Financing activities (122,628) (23,019) (163,191) Operating Activities Cash flows related to operating activities are dependent on net income, non-cash adjustments to net income, and changes in working capital.
The ultimate costs from the approved voluntary recalls could differ materially from this estimate, and as such, changes in the estimate may have a material impact on our financial condition, results of operations, and cash flows. 41 Table of Contents Cash Flows from Operating, Investing and Financing Activities The following table summarizes our cash flows from operating, investing and financing activities for the periods indicated (in thousands): Fiscal Year Ended December 30, 2023 December 31, 2022 Cash flows provided by (used in): Operating activities $ 285,942 $ 100,894 Investing activities (72,824) (56,910) Financing activities (13,596) (122,628) Operating Activities Cash flows related to operating activities are dependent on net income, non-cash adjustments to net income, and changes in working capital.
The increase in gross margin was primarily driven by: • lower inventory reserves, which favorably impacted gross margin by approximately 100 basis points; • an increase in the mix of higher margin DTC channel net sales, which favorably impacted gross margin by approximately 60 basis points; • product cost improvements across our product portfolio, net of the impact of product input cost inflation, which favorably impacted gross margin by approximately 40 basis points; and • fewer promotions in our DTC channel, which favorably impacted gross margin by 10 basis points.
The increase in gross margin was primarily driven by: • the lower impact of the recall reserves, which favorably impacted gross margin by 480 basis points; • lower inbound freight, including lower rates, which favorably impacted gross margin by 370 basis points; • lower product costs, which favorably impacted gross margin by 110 basis points; and • an increase in the mix of DTC channel net sales, including our growing Amazon Marketplace business, which favorably impacted gross margin by 50 basis points.
Sales taxes collected from customers and remitted directly to government authorities are excluded from net sales and cost of goods sold. 40 Table of Content s Our terms of sale provide limited return rights. We may accept, and have at times accepted, returns outside our terms of sale at our sole discretion.
All shipping and handling activity costs are recognized as selling, general and administrative expenses at the time the related revenue is recognized. Sales taxes collected from customers and remitted directly to government authorities are excluded from net sales and cost of goods sold. Our terms of sale provide limited return rights.
Net sales in our two primary product categories were as follows: • Drinkware net sales increased $114.8 million, or 14%, to $947.2 million in 2022 from $832.4 million in 2021, primarily driven by the continued expansion of our Drinkware product offerings, including the introduction of new colorways and sizes, and strong demand for customization. • Coolers & Equipment net sales increased $60.7 million, or 11%, to $612.5 million in 2022 from $551.9 million in 2021, primarily driven by the strong performance in bags, soft coolers, and hard coolers, partially offset by a $38.4 million unfavorable impact related to the voluntary recalls. 35 Table of Content s Gross Profit Gross profit decreased $52.7 million, or 6%, to $763.4 million in 2022 from $816.1 million in 2021.
Net sales in our two primary product categories were as follows: • Drinkware net sales increased $75.8 million, or 8%, to $1,023.0 million in 2023 from $947.2 million in 2022, primarily driven by strong demand for the continued expansion and innovation of our Drinkware product offerings, including Rambler straw lid mugs, Rambler and Yonder bottles, specialty coffee cups and tabletop solutions, as well as new seasonal colorways. • Coolers & Equipment net sales decreased $15.0 million, or 2%, to $597.5 million in 2023 from $612.5 million in 2022.
Our DTC channel represented 58% and 56% of total net sales in 2022 and 2021, respectively. • Net sales in our wholesale channel increased $51.3 million, or 8%, to $677.5 million in 2022 from $626.3 million in 2021, primarily driven by Coolers & Equipment, partially offset by a $32.2 million unfavorable impact related to the voluntary recalls.
The decrease in our wholesale channel sales was primarily due to a decline in Coolers & Equipment, partially offset by growth in Drinkware and a favorable impact of $17.9 million related to the recall reserves. Our wholesale channel represented 40% and 42% of total net sales in 2023 and 2022, respectively.
During the third quarter of 2022, we expanded our wheeled cooler offerings with the launch of the Roadie Wheeled Cooler in two sizes, and introduced new seasonal colorways and a new Rambler Colster size for our international markets.
Product Introductions and Updates During the first quarter of 2023, we expanded our cargo offerings with the launch of the new LoadOut GoBox in three sizes, introduced the new stackable Rambler Lowball, built new customization capabilities for our Yonder bottles, and introduced new seasonal colorways.
Product Introductions and Updates During the first quarter of 2022, our new product launches included the Hopper® M20 Soft Backpack Cooler, improved Hopper® M30 Soft Cooler, and two new sizes of the Camino™ Carryall as well as new seasonal colorways.
During the fourth quarter of 2023, we introduced our redesigned and improved SideKick Dry gear case as well as our Hopper M30 Soft Cooler and Hopper M20 Soft Backpack Cooler, and also launched two new sizes with the Hopper M15 Soft Cooler and the Hopper M12 Soft Backpack Cooler (collectively, the “Hopper M Series Soft Cooler line”).
Our wholesale channel represented 42% and 44% of total net sales in 2022 and 2021, respectively.
Our DTC channel represented 60% and 58% of total net sales in 2023 and 2022, respectively. 38 Table of Contents • Net sales in our wholesale channel decreased $16.5 million, or 2%, to $661.0 million in 2023 from $677.5 million in 2022.
We are also working on solutions to address the potential safety concern of the affected products and intend to resume the sale of the redesigned products in the fourth quarter of 2023.
We have developed solutions to address the potential safety concern of the affected products. In the fourth quarter of 2023, we introduced our redesigned and improved versions of the affected products. 36 Table of Contents Macroeconomic Conditions During 2021 and 2022, we experienced challenges associated with the complex and uncertain macroeconomic environment in which we operate.
The following table summarizes current and long-term material cash requirements for contractual and other obligations as of December 31, 2022 (in thousands): Material Cash Requirements Total 2023 2024 2025 2026 2027 Thereafter Long-term debt principal payment $ 90,000 $ 22,500 $ 67,500 $ — $ — $ — $ — Interest $ 7,860 4,558 3,302 — — — — Operating lease obligations $ 77,770 14,938 14,948 15,218 11,413 6,892 14,361 Finance leases $ 7,563 2,245 2,325 2,162 831 — — Other noncancellable agreements (1) $ 127,295 54,734 36,948 20,593 3,922 2,152 8,946 Total $ 310,488 $ 98,975 $ 125,023 $ 37,973 $ 16,166 $ 9,044 $ 23,307 _________________________________________ (1) We have entered into commitments for service and maintenance agreements related to our management information systems, distribution contracts, advertising, sponsorships, and licensing agreements.
The following table summarizes current and long-term material cash requirements for contractual and other obligations as of December 30, 2023 (in thousands): Material Cash Requirements Total 2024 2025 2026 2027 2028 Thereafter Long-term debt principal payment $ 82,266 $ 4,219 $ 4,219 $ 4,219 $ 4,219 $ 65,390 $ — Interest $ 26,783 6,520 6,187 5,896 5,582 2,598 — Operating lease obligations $ 107,279 18,571 21,236 17,612 13,280 9,427 27,153 Finance leases $ 6,003 2,300 2,360 1,011 176 156 — Other non-cancellable agreements (1) $ 154,013 73,867 50,515 21,900 6,198 1,533 — Total $ 376,344 $ 105,477 $ 84,517 $ 50,638 $ 29,455 $ 79,104 $ 27,153 _________________________________________ (1) We have entered into commitments for service and maintenance agreements related to our management information systems, distribution contracts, advertising, sponsorships, and licensing agreements.
Removed
During the fourth quarter, we further expanded our Drinkware offerings with the Rambler Straw Mugs in two sizes, and also launched the Yonder™ Water Bottles, our first lightweight water bottles made of durable and safe BPA-free material. During the first quarter of 2022, we strategically implemented price increases on certain hard coolers and tumblers.
Added
A discussion of our results of operations for the year ended December 31, 2022 compared to the year ended January 1, 2022 is included in Part II, Item 7.
Removed
We are working in cooperation with the CPSC and other relevant global regulatory authorities on the corrective action plan and hope to begin implementing the voluntary recalls in the coming weeks. Once our proposed voluntary recall plans are approved, consumers will have the ability to return the affected products for a remedy.
Added
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Form 10-K for the year ended December 31, 2022 , which was filed with the SEC on February 27, 2023. Business Overview Headquartered in Austin, Texas, YETI is a global designer, retailer, and distributor of innovative outdoor products.
Removed
Net sales for fiscal 2022 were negatively impacted by $38.4 million related to the voluntary recalls discussed above. Excluding this impact, the increase in net sales was driven by volume growth in both our DTC and wholesale channels and the benefit of price increases implemented during the first quarter of 2022.
Added
During the second quarter of 2023, we expanded our drinkware offerings with the launch of the new Rambler beverage bucket, introduced new color-matched straw lid Rambler bottles and our first ever cast iron skillet, and continued to expand our seasonal colorways.
Removed
Gross margin decreased 990 basis points to 47.9% in 2022 from 57.8% in 2021. Gross margin for fiscal 2022 was negatively impacted by $97.0 million related to the voluntary recalls.
Added
We believe the improved design of the SideKick Dry gear case and Hopper M Series Soft Cooler line adequately addresses the potential safety concerns caused by the magnet-lined closures of the previous-generation products, which were affected by the product recalls discussed below.
Removed
The decrease in gross margin was primarily driven by: • higher inbound freight rates, which unfavorably impacted gross margin by 510 basis points; • the unfavorable impact of the voluntary recalls, which negatively impacted gross margin by 480 basis points; • higher product costs, which unfavorably impacted gross margin by 120 basis points; • the unfavorable impact of foreign currency exchange rates, which negatively impacted gross margin by 70 basis points; and • the non-renewal of the Global System of Preferences (“GSP”), which negatively impacted gross margin by 30 basis points.
Added
We also continued the expansion of our drinkware offerings with the launch of specialty coffee Rambler cups and mugs, introduced a third size of our Rambler Straw Mugs, a new stackable Rambler mug, and our first ever wine chiller and cocktail shaker as part of our tabletop solutions. 35 Table of Contents 2024 Acquisitions During the first quarter of 2024, we completed the acquisitions of Mystery Ranch, Ltd.
Removed
These decreases were partially offset by 170 basis points from price increases, 30 basis points from the favorable channel mix shift to DTC channel net sales, and 20 basis points from other impacts. Selling, General, and Administrative Expenses SG&A expenses increased by $95.9 million, or 18%, to $637.0 million in 2022 from $541.2 million in 2021.
Added
(“Mystery Ranch”), a designer and manufacturer of durable load-bearing backpacks, bags, and pack accessories, and Butter Pat Industries, LLC (“Butter Pat”), a designer and manufacturer of cast iron cookware. We plan to integrate Mystery Ranch and Butter Pat operations and products into our business to further expand our capabilities in the cookware and bags categories.
Removed
As a percentage of net sales, SG&A expenses increased 150 basis points to 39.9% in 2022 from 38.4% in 2021.
Added
See Note 14—Subsequent Events of the Notes to Consolidated Financial Statements included herein for additional information about these acquisitions. Credit Facility Amendment On March 31, 2023, we amended our senior secured credit agreement (the “Credit Facility”), leaving the material terms of the Credit Facility substantially unchanged, with the exception of certain changes to implement the replacement of LIBOR with SOFR.
Removed
The increase in the effective tax rate was primarily due to a lower tax benefit related to stock-based compensation in 2022 compared to 2021. 36 Table of Content s Year Ended January 1, 2022 Compared to Year Ended January 2, 2021 Fiscal Year Ended January 1, 2022 January 2, 2021 Change (dollars in millions) $ % Net sales $ 1,410,989 $ 1,091,721 $ 319,268 29 % Gross profit 816,113 628,803 187,310 30 % Gross margin (Gross profit as a % of net sales) 57.8 % 57.6 % 20 basis points Selling, general, and administrative expenses $ 541,175 $ 414,570 $ 126,605 31 % SG&A as a % of net sales 38.4 % 38.0 % 40 basis points Net Sales Net sales increased $319.3 million, or 29%, to $1,411.0 million in 2021 from $1,091.7 million in 2020.
Added
On June 22, 2023, we amended our Credit Facility to, among other matters, extend its maturity to June 22, 2028 and increase the commitments under the revolving credit facility (the “Revolving Credit Facility”) from $150.0 million to $300.0 million. For additional information on the Credit Facility, see “Liquidity and Capital Resources - Credit Facility” below.
Removed
The increase in net sales was driven by our faster growing DTC channel as well as growth in our wholesale channel. Net sales in our channels were as follows: • DTC channel net sales increased $203.9 million, or 35%, to $784.7 million in 2021 from $580.9 million in 2020, driven by both Drinkware and Coolers & Equipment categories.
Added
In February 2023, we proposed a voluntary recall of the affected products to the CPSC and other relevant global regulatory authorities. Accordingly, we established reserves for unsalable inventory on-hand, as well as expected future returns and the estimated cost of recall remedies for consumers with affected products as of December 31, 2022.
Removed
Net sales in our DTC channel continue to be favorably impacted by strong demand for outdoor recreation and leisure lifestyle products as well as a favorable shift to online shopping, resulting in an increase in sales volume during the period.
Added
As a result, the total unfavorable impact of the proposed voluntary recalls to operating income was $128.9 million for the year ended December 31, 2022. In March 2023, we announced separate, voluntary recalls of the affected products in collaboration with the CPSC.
Removed
As a result, our channel mix continued to shift towards our DTC channel from 53% in 2020 to 56% in 2021. • Net sales in our wholesale channel increased $115.4 million, or 23%, to $626.3 million in 2021 from $510.9 million in 2020, primarily driven by both Drinkware and Coolers & Equipment.
Added
During the second quarter of 2023, we began processing recall returns and claims and based on such experience and trends, we reevaluated our assumptions and adjusted our estimated recall expense reserve.
Removed
In the second quarter of 2020, wholesale channel net sales were adversely impacted by the t emporary store closures due to the COVID-19 pandemic.
Added
These trends included higher than anticipated elections by consumers to receive gift cards in lieu of product replacement remedies, lower than anticipated consumer recall participation rates, variations in individual product participation rates, and lower logistics costs than previously estimated.
Removed
Net sales in our two primary product categories were as follows: • Drinkware net sales increased $203.9 million, or 32%, to $832.4 million in 2021 from $628.6 million in 2020, primarily driven by the continued expansion of our Drinkware product offerings, including the introduction of new colorways and sizes, and strong demand for customization. • Coolers & Equipment net sales increased $105.3 million, or 24%, to $551.9 million in 2021 from $446.6 million in 2020, primarily driven by the strong performance in bags, outdoor living products, soft coolers, and hard coolers.
Added
As a result, we updated our recall reserve assumptions throughout 2023, which increased the estimated recall expense reserve by $3.6 million in 2023.
Removed
Gross Profit Gross profit increased $187.3 million, or 30%, to $816.1 million in 2021 from $628.8 million in 2020. Gross margin increased 20 basis points to 57.8% in 2021 from 57.6% in 2020.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

8 edited+1 added−2 removed3 unchanged
Biggest changeSustained cost increases, or other inflationary pressures in the future, may have an adverse effect on our ability to maintain or improve current levels of gross margin and SG&A expenses as a percentage of net sales if the selling prices of our products do not increase with these increased costs, or we cannot identify cost efficiencies. 42 Table of Content s Commodity Price Risk The primary raw materials and components used by our contract manufacturing partners include polyethylene, polyurethane foam, stainless-steel, polyester fabric, zippers, and plastic.
Biggest changeAlthough inflationary pressures and global supply chain disruption, such as higher inbound transportation costs, did not have a material negative impact on our gross margin in 2023, sustained cost increases, or other inflationary pressures in the future, may have an adverse effect on our ability to maintain or improve current levels of gross margin and SG&A expenses as a percentage of net sales if the selling prices of our products do not increase with these increased costs, or we cannot identify cost efficiencies.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk Interest Rate Risk In order to maintain liquidity and fund business operations, our long-term Credit Facility bears a variable interest rate based on prime, federal funds, or LIBOR plus an applicable margin based on our total net leverage ratio.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk Interest Rate Risk In order to maintain liquidity and fund business operations, our long-term Credit Facility bears a variable interest rate based on prime, federal funds, or SOFR plus an applicable margin based on our total net leverage ratio.
The nature and amount of our long-term debt can be expected to vary as a result of future business requirements, market conditions, and other factors. We may elect to enter into interest rate swap contracts to reduce the impact associated with interest rate fluctuations, but as of December 31, 2022, we have not entered into any such contracts.
The nature and amount of our long-term debt can be expected to vary as a result of future business requirements, market conditions, and other factors. We may elect to enter into interest rate swap contracts to reduce the impact associated with interest rate fluctuations, but as of December 30, 2023, we have not entered into any such contracts.
During 2022, net sales from our international entities accounted for 11% of our consolidated net sales, and therefore we do not believe exposure to foreign currency fluctuations would have a material impact on our net sales.
During 2023, net sales from our international entities accounted for 16% of our consolidated net sales, and therefore we do not believe exposure to foreign currency fluctuations would have a material impact on our net sales.
Certain of these products use petroleum or natural gas as inputs. However, we do not believe there is a significant direct correlation between petroleum or natural gas prices and the costs of our products.
However, we do not believe there is a significant direct correlation between petroleum or natural gas prices and the costs of our products.
Our operating results and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates. 43 Table of Content s
Our operating results and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates. 45 Table of Contents
We believe these materials are readily available from multiple vendors. We have, and may continue to, negotiate prices with suppliers of these products on behalf of our third-party contract manufacturers in order to leverage the cumulative impact of our volume. We do not, however, source significant amounts of these products directly.
We have, and may continue to, negotiate prices with suppliers of these products on behalf of our third-party contract manufacturers in order to leverage the cumulative impact of our volume. We do not, however, source significant amounts of these products directly. Certain of these products use petroleum or natural gas as inputs.
Based on the balance outstanding under our Term Loan A at December 31, 2022, we estimate that a 1% increase or decrease in underlying interest rates would increase or decrease annual interest expense by $0.9 million in any given fiscal year.
Based on the balance outstanding under our Term Loan A at December 30, 2023, we estimate that a 1% increase or decrease in underlying interest rates would increase or decrease annual interest expense by $0.8 million and $0.9 million for the years ended December 30, 2023 and December 31, 2022, respectively. 44 Table of Contents Inflation Risk Inflationary factors such as increases in the cost of our product and overhead costs may adversely affect our operating results.
Removed
See Item 1A, Risk Factors under “ The phase-out of LIBOR and transition to SOFR as a benchmark interest rate may negatively impact our financial results .” for a discussion of the interest rate risk related the ongoing phase-out of LIBOR.
Added
Commodity Price Risk The primary raw materials and components used by our contract manufacturing partners include polyethylene, polyurethane foam, stainless-steel, polyester fabric, zippers, and plastic. We believe these materials are readily available from multiple vendors.
Removed
Inflation Risk Inflationary factors such as increases in the cost of our product and overhead costs may adversely affect our operating results. During 2022, our gross margin was specifically impacted by higher inbound transportation costs compared to 2021 as a result of global supply chain disruption and inflationary pressures.

Other YETI 10-K year-over-year comparisons