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What changed in YETI Holdings, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of YETI Holdings, Inc.'s 2022 and 2023 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 2023 report.

+336 added−329 removedSource: 10-K (2023-02-27) vs 10-K (2022-02-28)

Top changes in YETI Holdings, Inc.'s 2023 10-K

336 paragraphs added · 329 removed · 229 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

43 edited+14 added−12 removed23 unchanged
Biggest changeOur 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. Seasonality We are affected by seasonality.
Biggest changeThese 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.
In the Drinkware category, we compete against well-known brands such as HydroFlask, BruMate, S’well, 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, 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.
We collaborate with our YETI Ambassadors, a diverse group of men and women throughout the United States and select international markets, comprised of world-class anglers, hunters, rodeo cowboys, barbecue pitmasters, surfers, brewmasters, fitness experts, skateboarders, and outdoor adventurers who embody our brand, and industry professionals to test our prototypes and provide feedback that is incorporated into final product designs.
We collaborate with our YETI Ambassadors, a diverse group of people throughout the United States and select international markets, comprised of world-class anglers, hunters, rodeo cowboys, barbecue pitmasters, surfers, brewmasters, fitness experts, skateboarders, and outdoor adventurers who embody our brand, and industry professionals to test our prototypes and provide feedback that is incorporated into final product designs.
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, and Europe.
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.
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, Hopper BackFlip™, Hopper Flip ® , Daytrip™ Lunch Bag, and Daytrip™ Lunch Box.
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.
Available Information We file annual, quarterly and current reports and other documents with the SEC under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ” ). The public can obtain any documents that we file with the SEC at www.sec.gov.
Available Information We file annual, quarterly and current reports and other documents with the United States Securities and Exchange Commission (the “ SEC ”) under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ” ). The public can obtain any documents that we file with the SEC at www.sec.gov.
In 2021, net sales of Coolers & Equipment, Drinkware, and Other represented 39%, 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.
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.
Drinkware Our Drinkware product family is made with durable, kitchen-grade, 18/8 stainless-steel, double-wall vacuum insulation, and our innovative No Sweat™ design. The result is high-performing drinkware products that keep beverages at their preferred temperature — whether hot or cold — for hours at a time without condensation.
Drinkware Most of our Drinkware products are made with durable, kitchen-grade, 18/8 stainless-steel, double-wall vacuum insulation, and our innovative No Sweat™ design. The result is high-performing drinkware products that keep beverages at their preferred temperature — whether hot or cold — for hours at a time without condensation.
After these aspects of the process are complete, we seek intellectual property protection to the fullest extent possible, including applying for patents and for registration of trademarks and copyrights. We have a proactive online marketplace monitoring and seller/listing termination program to disrupt any online counterfeit offerings. In addition, we work to shut down counterfeit stand-alone sites through litigation.
After these aspects of the process are complete, we seek intellectual property protection to the fullest extent possible, including applying for patents and for registration of trademarks and copyrights. We have a proactive online marketplace monitoring and seller/listing termination program to disrupt any online counterfeit offerings. In addition, we work to shut down websites selling counterfeit products through litigation.
Our fiscal years ended January 1, 2022 (“2021”) and December 28, 2019 (“2019”) 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.
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.
Our cargo, bags, and outdoor living product category includes: the Panga™ submersible duffel bag, Panga™ Backpack, LoadOut ® Bucket™, LoadOut ® GoBox™, Crossroads™ Collection of backpacks, duffel bags and luggage, Camino™ Carryall, Hondo™ Base Camp Chair, Trailhead™ Camp Chair, Lowlands™ Blanket, Trailhead™ Dog Bed, and Boomer Dog Bowls.
Our cargo, bags, and outdoor living product category includes: LoadOut ® Bucket™, LoadOut ® GoBox™, the Panga™ submersible duffel bag, Panga™ Backpack, Crossroads™ Collection of backpacks, duffel bags, luggage, and packing cubes, Camino™ Carryall, Hondo™ Base Camp Chair, Trailhead™ Camp Chair, Lowlands™ Blanket, Trailhead™ Dog Bed, Boomer™ Dog Bowls, and SideKick Dry gear case.
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. 6 Table of Contents
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 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 January 1, 2022, we employed approximately 823 people worldwide, representing seven countries. Of these, approximately 91% 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 31, 2022, we employed approximately 922 people worldwide, representing seven countries. Of these, approximately 90% of our workforce was located in the United States.
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.
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.
For additional information, see Part I-Item 1A, “Risk Factors - Risks Related to Our Business, Operations and Industry,” included herein for updates to our risk factors regarding the potential impact of government regulations on our business.
Compliance with laws, rules and regulations could harm our current and future business and operations. For additional information, see Part I, Item 1A, “Risk Factors - Risks Related to Our Business, Operations and Industry,” included herein for updates to our risk factors regarding the potential impact of government regulations on our business.
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. 5 Table of Contents For more detailed information regarding our programs and initiatives related to our people and human capital management, please see the “People” section of our 2021 Environmental, Social, and Governance Report (“ESG Report”), located on our website at www.yeti.com/en_US/esg.html.
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. 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.
Our corporate sales program offers customized products to corporate customers for a wide-range of related 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.
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.
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. We match sourcing partnerships to deliver flexibility and scalability to support multiple product introductions and evolving channel strategies.
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.
In 2021 and 2020, our DTC channel accounted for 56% and 53% of our net sales, respectively, and our wholesale channel accounted for 44% and 47% of our 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.
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.
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.
Additionally, we employ a variety of recognition programs to recognize leadership and other employees who best exemplify our core values. We also encourage and provide opportunity for our employees to give back to the communities that support us.
Consistent with our focus on employee growth and development, we offer employees the opportunity to participate in educational activities and periodic trainings. Additionally, we employ a variety of recognition programs to recognize leadership and other employees who best exemplify our core values. We also encourage and provide opportunity for our employees to give back to the communities that support us.
We are expanding internationally by focusing on brand awareness, wholesale expansion, and our DTC channel. We believe there are meaningful growth opportunities in expanding into additional international markets, such as Asia, as many of the market dynamics and premium, performance-based consumer needs that we have successfully identified domestically are also valued in these markets.
We believe there are meaningful growth opportunities in expanding into additional international markets, such as Asia, as many of the market dynamics and premium, performance-based consumer needs that we have successfully identified domestically are also valued in these markets. Product Design and Development We design and develop our products to provide superior performance and functionality in a variety of environments.
Other We offer an array of YETI-branded gear, such as hats, shirts, bottle openers, and ice substitutes. Segment Information We operate as one reportable segment. Sales Channels We offer our products in the United States, Canada, Australia, New Zealand, Europe, and Japan through a diverse omni-channel strategy, comprised of our wholesale and our direct-to-consumer ( “ DTC ” ) channels.
Sales Channels We offer our products in the United States, Canada, Australia, New Zealand, Europe, and Japan through a diverse omni-channel strategy, comprised of our wholesale and our direct-to-consumer ( “ DTC ” ) channels.
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, and other plastic materials and coatings. We believe these materials are readily available from multiple vendors.
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 use our purpose-built, state-of-the-art research and development centers to generate design prototypes and test performance. We follow a disciplined, stage-gate product development process that is designed to provide consistent quality control while optimizing speed-to-market.
We follow a disciplined, stage-gate product development process that is designed to provide consistent quality control while optimizing speed-to-market.
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 upon delivery to our United States-based third-party logistics 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 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.
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.
We expand our existing product families and enter new product categories by designing solutions grounded in consumer insights and relevant product knowledge. We use high-quality materials, as well as advanced design and manufacturing processes, to create premium products that redefine consumer expectations and deliver best-in-class product performance.
We use high-quality materials, as well as advanced design and manufacturing processes, to create premium products that redefine consumer expectations and deliver best-in-class product performance. We continue to expand our product line by introducing anchor products, followed by product expansions, such as additional sizes and colorways, and then offering corresponding accessories.
Product Design and Development We design and develop our products to provide superior performance and functionality in a variety of environments. Our products are carefully designed and rigorously tested to maximize performance while minimizing complexity, allowing us to deliver highly functional products with simple, clean, and distinct designs.
Our products are carefully designed and rigorously tested to maximize performance while minimizing complexity, allowing us to deliver highly functional products with simple, clean, and distinct designs. We expand our existing product families and enter new product categories by designing solutions grounded in consumer insights and relevant product knowledge.
We are committed to building an inclusive and diverse culture through a variety of initiatives on employee recruitment, employee training and development.
We are committed to building an inclusive and diverse culture through a variety of initiatives on employee recruitment, employee training and development. Our DE&I Council is composed of a group of employees representing different demographics, backgrounds, and teams that provides perspective and counsel on DE&I-related topics.
Our soft coolers also include related accessory options such as the SideKick Dry gear case, MOLLE Zinger retractable lanyard, and a mountable MOLLE Bottle Opener. 1 Table of Contents Cargo, Bags, and Outdoor Living.
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.
We actively communicate and listen to employees through multiple internal channels and encourage employees to provide feedback about their experiences through ongoing employee engagement activities, including employee satisfaction surveys and pulse surveys on specific issues.
We actively communicate and listen to employees through multiple internal channels and encourage employees to provide feedback about their experiences through ongoing employee engagement activities, including employee satisfaction surveys. We strive to address feedback in real time and provide an environment where our employees can have fulfilling careers and be more productive, creative, happy, and healthy.
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. We offer five product ranges within our core hard cooler category: YETI Tundra™, YETI Roadie ® , Tundra Haul™, YETI TANK ® , and YETI Silo™ 6G.
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.
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.
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 expect that this seasonality will continue to be a factor in our results of operations and sales. 4 Table of Contents Intellectual Property and Brand Protection We own the patents, trademarks, copyrights, and other intellectual property rights that support key aspects of our brand and products.
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.
For 2021, our largest single wholesale customer represented approximately 10% of gross sales. 2 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.
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.
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 are expanding internationally as we continue to grow our presence in North America (including Canada), Australia, New Zealand, Japan, and Europe.
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.
We also offer related accessories, including locks, beverage holders, and other add-ons, to enhance our products’ versatility.
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 continue to expand our product line by introducing anchor products, followed by product expansions, such as additional sizes and colorways, and then offering corresponding accessories. To ensure our continued success in bringing category-redefining products to market, our marketing and product development teams collaborate to identify consumer needs and wants to drive our robust product roadmap.
To ensure our continued success in bringing category-redefining products to market, our marketing and product development teams collaborate to identify consumer needs and wants to drive our robust product roadmap. We use our purpose-built, state-of-the-art research and development centers to generate design prototypes and test performance.
As of January 1, 2022, we sold through a diverse base of approximately 2,900 independent retail partners. We sell our products in our DTC channel to consumers on YETI.com, country and region-specific YETI websites, and YETI Authorized on the Amazon Marketplace, as well as customized products with licensed marks and original artwork through our corporate sales program and at YETI.com.
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.
Our Drinkware product line currently includes eight product families including the Rambler Colster, Rambler Lowball, Rambler Wine Tumbler, Rambler Stackable Pints, Rambler Mugs, Rambler Tumblers, Rambler Bottles, and Rambler Jug. Related accessories include the Rambler Bottle Straw Cap, Rambler Tumbler Handles, Rambler Jug Mount, and Rambler Bottle Sling.
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.
In 2020, YETI formed its DE&I Council, a group of employees representing different demographics, backgrounds, and teams that provides perspective and counsel on DE&I topics for YETI, and we also launched six voluntary, employee-led affinity groups that foster a diverse and inclusive workplace aligned with our core values, goals, and business practices.
We continue to support our voluntary, employee-led affinity groups that foster a diverse and inclusive workplace aligned with our core values, goals, and business practices. Compensation and Benefits . We strive to hire, develop and retain top talent.
Additionally, we work closely with our manufacturing partners regarding product quality and manufacturing process efficiency. 3 Table of Contents Many of our products are manufactured in the United States, the Philippines, Vietnam, Taiwan, Poland, China, Thailand, Mexico, and Malaysia.
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.
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We completed our initial public offering (“IPO”) in October 2018 and our common stock is listed on the New York Stock Exchange (the “NYSE”) under the symbol “YETI.” 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.
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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.
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Coolers & Equipment could change over time as we add new product categories and incubate them within Coolers & Equipment. Hard Coolers. Unlike conventional hard coolers, our hard coolers are built with seamless rotationally-molded, or rotomolded, construction, making them nearly indestructible.
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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 2019, we advanced innovation and performance in hard coolers by introducing the stainless-steel body YETI V Series™ Hard Cooler, which combines the high-performing vacuum insulation technology used in our Drinkware with the construction of our iconic hard coolers to produce more efficient insulation. Soft Coolers.
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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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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 United States outdoor recreation market.
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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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To mitigate the concentration risk in our supply chain, we are pursuing a higher diversification of manufacturing partners, with both sourcing and geographical advantages and, over time, intend to shift the current allocation of production to a different balance among them. See Note 1 of the Notes to Consolidated Financial Statements included herein for further discussion of concentration risk.
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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 have historically 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.
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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.
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Since joining the CEO Action for Diversity & Inclusion in 2020, we have demonstrated our commitment to DE&I through initiatives such as hosting events led by our employee affinity groups to foster communication and education on the importance of diversity and inclusion both inside and outside of YETI; offering a six-week course on unconscious bias; updating our corporate holidays to include annual recognition of Dr.
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Related accessories include the Rambler Bottle Straw Cap, Rambler Bottle Chug Cap, Rambler Magslider Lid, Rambler Straw Lid, Rambler Magslider color pack, Rambler Tumbler Handles, and Rambler Jug Mount. Other Our Other category offers an array of apparel and gear, such as hats, shirts, bottle openers, and ice substitutes. Segment Information We operate as one reportable segment.
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Martin Luther King, Jr. Day; and hosting an information session to discuss the origins of Equal Pay Day and YETI’s approach to pay equity. Compensation and Benefits . We strive to hire, develop and retain top talent.
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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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We strive to address feedback in real time in order to continue to provide an environment where our employees can have fulfilling careers and be more productive, creative, happy, and healthy. Consistent with our focus on employee growth and development, we offer employees the opportunity to participate in educational activities and periodic trainings.
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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.
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The information on our website, including our ESG Report is not, and shall not be deemed to be, a part of this Annual Report on Form 10-K or incorporated into any other filings we make with the United States Securities and Exchange Commission (the “ SEC ”) .
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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.
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Compliance with Government Regulations We are subject to a wide variety of local, state, and federal laws and regulations in the countries where it conducts business.
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Our current and potential competitors may be able to develop and market superior products or sell similar products at lower prices.
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While compliance with these laws and regulations often requires the dedication of time and effort of employees, as well as financial resources, in 2021, compliance with the regulations applicable to our company did not have a material effect on its capital expenditures, earnings, or competitive position.
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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.
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For example, substantially all of our import operations are subject to complex trade and customs laws, regulations and tax requirements. In addition, the countries in which our products are manufactured or imported may from time to time impose additional duties, tariffs or other restrictions on our imports or adversely modify existing restrictions.
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Changes in tax policy or trade regulations, or the imposition of new tariffs on imported products, could have an adverse effect on our business and results of operations. In addition, we are subject to changing regulatory restrictions and requirements, including in the areas of data privacy, sustainability and responses to climate change.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

124 edited+58 added−60 removed173 unchanged
Biggest changeOur reliance on only two geographical locations for our distribution centers makes us more vulnerable to natural disasters, weather-related disruptions, accidents, system failures, public health issues such as the COVID-19 pandemic (or other future pandemics or epidemics), or other unforeseen events that could delay or impair our ability to fulfill retailer orders and/or ship merchandise purchased on our website, which could harm our sales. 10 Table of Contents We import our products, and we are also vulnerable to risks associated with products manufactured abroad, including, among other things: (a) risks of damage, destruction, or confiscation of products while in transit to our distribution centers; and (b) transportation and other delays in shipments, including as a result of heightened security screening, port congestion, container and labor shortages, and inspection processes or other port-of-entry limitations or restrictions in the United States.
Biggest changeWe are also vulnerable to risks associated with products manufactured abroad, including, among other things: (a) risks of damage, destruction, or confiscation of products while in transit to our distribution centers; and (b) transportation and other delays in shipments, including as a result of heightened security screening, port congestion, container and labor shortages, and inspection processes or other port-of-entry limitations or restrictions.
The ability of our subsidiaries to distribute cash to us is also be subject to, among other things, restrictions that may be contained in our subsidiary agreements (as entered into from time to time), availability of sufficient funds in such subsidiaries and applicable laws and regulatory restrictions.
The ability of our subsidiaries to distribute cash to us is also subject to, among other things, restrictions that may be contained in our subsidiary agreements (as entered into from time to time), availability of sufficient funds in such subsidiaries and applicable laws and regulatory restrictions.
If we cannot maintain prices or effectively implement price increases, our margins may decrease. Increasing demand, supply constraints, inflation, and other market conditions have resulted in increasing shortages and higher costs for the production of some of our products, leading us to implement a price increase for certain of our products effective in February 2022.
If we cannot maintain prices or effectively implement price increases, our margins may decrease. Increasing demand, supply constraints, inflation, and other market conditions have resulted in increasing shortages and higher costs for the production of some of our products, leading us to implement a price increase for certain of our products effective in 2022.
As a designer, marketer, retailer, and distributor of consumer products, we are subject to the United States Consumer Products Safety Act of 1972, as amended by the Consumer Product Safety Improvement Act of 2008, which empowers the Consumer Products Safety Commission to exclude from the market products that are found to be unsafe or hazardous, and similar laws under foreign jurisdictions.
As a designer, marketer, retailer, and distributor of consumer products, we are subject to the United States Consumer Products Safety Act of 1972, as amended by the Consumer Product Safety Improvement Act of 2008, which empowers the Consumer Products Safety Commission (“CPSC”) to exclude from the market products that are found to be unsafe or hazardous, and similar laws under foreign jurisdictions.
Revenues and certain expenses in markets outside of the United States are recognized in local foreign currencies, and we are exposed to potential gains or losses from the translation of those amounts into U.S. dollars for consolidation into our financial statements.
Revenues and certain expenses in markets outside of the United States are recognized in local foreign currencies, and we are exposed to gains or losses from the translation of those amounts into U.S. dollars for consolidation into our financial statements.
There are, however, significant costs and risks inherent in selling our products in international markets, including: (a) failure to effectively translate and establish our core brand identity, particularly in markets with a less-established heritage of outdoor and recreational activities; (b) time and difficulty in building a widespread network of retail partners; (c) increased shipping and distribution costs, which could increase our expenses and reduce our margins; (d) potentially lower margins in some regions; (e) longer collection cycles in some regions; (f) increased competition from local providers of similar products; (g) compliance with foreign laws and regulations, including taxes and duties, enhanced privacy laws, rules, and regulations, and product liability laws, rules, and regulations, particularly in the European Union and Japan; (h) establishing and maintaining effective internal controls at foreign locations and the associated increased costs; (i) increased counterfeiting and the uncertainty of protection for intellectual property rights in some countries and practical difficulties of enforcing rights abroad; (j) compliance with anti-bribery, anti-corruption, sanctions, and anti-money laundering laws, such as the FCPA, the Bribery Act, and OFAC regulations, by us, our employees, and our business partners; (k) currency exchange rate fluctuations and related effects on our results of operations; (l) economic weakness, including inflation, or political instability in foreign economies and markets; (m) compliance with tax, employment, immigration, and labor laws for employees living or traveling abroad; (n) workforce uncertainty in countries where labor unrest is more common than in the United States; (o) business interruptions resulting from geopolitical actions, including war and terrorism, natural disasters, including earthquakes, typhoons, floods, and fires, public health issues, including the outbreak of a pandemic or contagious disease, such as COVID-19, or xenophobia resulting therefrom; (p) the imposition of tariffs on products that we import into international markets that could make such products more expensive compared to those of our competitors; (q) that our ability to expand internationally could be impacted by the intellectual property rights of third parties that conflict with or are superior to ours; and (r) other costs and risks of doing business internationally.
There are, however, significant costs and risks inherent in selling our products in international markets, including: (a) failure to effectively translate and establish our core brand identity, particularly in markets with a less-established heritage of outdoor and recreational activities; (b) time and difficulty in building a widespread network of retail partners; (c) increased shipping and distribution costs, which could increase our expenses and reduce our margins; (d) potentially lower margins in some regions; (e) longer collection cycles in some regions; (f) increased competition from local providers of similar products; (g) compliance with foreign laws and regulations, including taxes and duties, enhanced privacy laws, rules, and regulations, and product liability laws, rules, and regulations, particularly in the European Union and Japan; (h) establishing and maintaining effective internal controls at foreign locations and the associated increased costs; (i) increased counterfeiting and the uncertainty of protection for intellectual property rights in some countries and practical difficulties of enforcing rights abroad; (j) compliance with anti-bribery, anti-corruption, sanctions, and anti-money laundering laws, such as the FCPA, the Bribery Act, and OFAC regulations, by us, our employees, and our business partners; (k) currency exchange rate fluctuations and related effects on our results of operations; (l) economic weakness, including inflation, or political instability in foreign economies and markets; (m) compliance with tax, employment, immigration, and labor laws for employees living or traveling abroad; (n) workforce uncertainty in countries where labor unrest is more common than in the United States; (o) business interruptions resulting from geopolitical actions, including war and terrorism, natural disasters, including earthquakes, typhoons, floods, and fires, public health emergencies, including the outbreak of a pandemic or other public health crisis; (p) the imposition of tariffs on products that we import into international markets that could make such products more expensive compared to those of our competitors; (q) that our ability to expand internationally could be impacted by the intellectual property rights of third parties that conflict with or are superior to ours; and (r) other costs and risks of doing business internationally.
Our ability to maintain prices or effectively implement price increases, including our recent price increase, 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 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.
In addition, if we underestimate our growth rate and the demand for our products, our manufacturers may not be able to produce products to meet our customer requirements, and this could result in delays in the shipment of our products and our ability to recognize revenue, lost sales, as well as damage to our reputation and retailer and distributor relationships.
In addition, if we underestimate the demand for our products, our manufacturers may not be able to produce products to meet our customer requirements, and this could result in delays in the shipment of our products and our ability to recognize revenue, lost sales, as well as damage to our reputation and retailer and distributor relationships.
The GSP program expired on December 31, 2020, resulting in additional duties and negatively impacting gross margin. YETI is expecting the GSP program to be renewed and made retroactive; however if this does not occur, it will continue to have a negative impact on our expected results.
The GSP program expired on December 31, 2020, resulting in additional duties and negatively impacting gross margin. YETI expects the GSP program to be renewed and made retroactive; however if this does not occur, it will continue to have a negative impact on our expected results.
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 could 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. Our financial results and future growth have been, and could in the future be, harmed by currency exchange rate fluctuations.
We may be the target of strategic transactions, which could divert our management's attention and otherwise disrupt our operations and adversely affect our business. 27 Table of Contents Other companies may seek to acquire us or enter into other strategic transactions. We will consider, discuss, and negotiate such transactions as we deem appropriate.
We may be the target of strategic transactions, which could divert our management's attention and otherwise disrupt our operations and adversely affect our business. Other companies may seek to acquire us or enter into other strategic transactions. We will consider, discuss, and negotiate such transactions as we deem appropriate.
The impacts include, but are not limited to: • the possibility of renewed 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 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 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.
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 of economic conditions or consumer confidence in future economic conditions or inflationary pressures 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, public health crises such as the COVID-19 pandemic (or other future pandemics or epidemics), or xenophobia resulting therefrom, 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) 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.
Estimates used for future sales growth rates, gross profit performance, and other assumptions used to estimate fair value could cause us to record material non-cash impairment charges, which could harm our results of operations and financial condition. Changes in tax laws or unanticipated tax liabilities could adversely affect our effective income tax rate and profitability.
Estimates used for future sales growth rates, gross profit performance, and other assumptions used to estimate fair value could cause us to record material non-cash impairment charges, which could harm our results of operations and financial condition. 26 Table of Content s Changes in tax laws or unanticipated tax liabilities could adversely affect our effective income tax rate and profitability.
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. 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. 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.
The substantial management time and resources, which any future retail store expansion strategy may require, could also result in disruption to our existing business operations, which may decrease our net sales and profitability. 15 Table of Contents Insolvency, credit problems or other financial difficulties that could confront our retail partners could expose us to financial risk.
The substantial management time and resources, which any future retail store expansion strategy may require, could also result in disruption to our existing business operations, which may decrease our net sales and profitability. Insolvency, credit problems or other financial difficulties that could confront our retail partners could expose us to financial risk.
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.
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.
As a result, these types of claims could have a material adverse effect on our business, results of operations, and financial condition. 18 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, 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. 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 .
Therefore, the success of our business depends significantly on economic factors and trends in consumer spending. There are a number of factors that influence consumer spending, including actual and perceived economic conditions, consumer confidence, disposable consumer income, consumer credit availability, unemployment, and tax rates in the markets where we sell our products.
Our products are discretionary items for customers. Therefore, the success of our business depends significantly on economic factors and trends in consumer spending. There are a number of factors that influence consumer spending, including actual and perceived economic conditions, consumer confidence, disposable consumer income, consumer credit availability, unemployment, and tax rates in the markets where we sell our products.
Risks Related to Our Business, Operations and Industry Our business depends on maintaining and strengthening our brand to generate and maintain ongoing demand for our products, and a significant reduction in such demand could harm our results of operations.
Risks Related to Our Business, Operations and Industry Our business depends on maintaining and strengthening our brand to attract new customers and generate and maintain ongoing demand for our products, and a significant reduction in such demand could harm our results of operations.
Any failure to comply could significantly harm our brand, reputation, business, financial condition and results of operations. 16 Table of Contents 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. 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.
If we do not successfully implement our future retail store expansion, our growth and profitability could be harmed. We have and may continue to expand our existing DTC channel by opening new retail stores. We currently operate nine retail stores across six states.
If we do not successfully implement our future retail store expansion, our growth and profitability could be harmed. We have and may continue to expand our existing DTC channel by opening new retail stores. We currently operate thirteen retail stores across eight states.
Our annual and quarterly results of operations may also fluctuate significantly as a result of a variety of other factors, including, among other things, the timing of the introduction of and advertising for our new products and those of our competitors and changes in our product mix. Variations in weather conditions may also harm our quarterly results of operations.
Our annual and quarterly results of operations may also fluctuate significantly as a result of a variety of other factors, including, among other things, the timing of the introduction of and advertising for our new products and those of our competitors and changes in our product mix.
Our 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.
Our 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.
Due to the volume and sensitivity of the personal information and data we manage, the security features of our information systems are critical. Threats to information technology security can take a variety of forms.
Due to the volume and sensitivity of the personal information and data we manage, the security features of our information systems are critical. 24 Table of Content s Threats to information technology security can take a variety of forms.
We also rely on the timely and free flow of goods through open and operational ports from our suppliers and manufacturers.
We import our products, and rely on the timely and free flow of goods through open and operational ports from our suppliers and manufacturers.
Our operations are subject to many hazards and operational risks inherent to our business, including: (a) general business risks; (b) product liability; (c) product recall; and (d) damage to third parties, our infrastructure, or properties caused by fires, floods and other natural disasters, power losses, telecommunications failures, terrorist attacks, riots, public health crises such as the COVID-19 pandemic (and other future pandemics or epidemics), human errors, and similar events.
Our operations are subject to many hazards and operational risks inherent to our business, including: (a) general business risks; (b) product liability; (c) product recall; and (d) damage to third parties, our infrastructure, or properties caused by fires, floods and other natural disasters, power losses, telecommunications failures, terrorist attacks, riots, public health crises, human errors, and similar events.
As a result, foreign currency exchange rate fluctuations may adversely impact our results of operations. 17 Table of Contents 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. 20 Table of Content s We may become involved in legal or regulatory proceedings and audits.
A significant portion of our sales are to independent retail partners. If these independent retail partners cease to carry our current products or choose not to carry new products that we develop, our brand as well as our results of operations and financial condition could be harmed.
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.
Although it is uncertain if some or all of these proposals will be enacted as the Senate has not yet passed this legislation, a significant change in U.S. tax law, or that of other countries where we operate or have a presence, may materially and adversely impact our income tax liability, provision for income taxes and effective tax rate.
Although it is uncertain if some or all of these proposals will be enacted, a significant change in U.S. tax law, or that of other countries where we operate or have a presence, may materially and adversely impact our income tax liability, provision for income taxes and effective tax rate.
Failure to procure our products from our third-party contract manufacturers and deliver merchandise to our retail partners and DTC channel in a timely, effective, and economically viable manner could reduce our sales and gross margins, damage our brand, and harm our business.
Failure to procure our products from our third-party contract manufacturers and deliver merchandise to our retail partners and DTC channel in a timely, effective, and economically viable manner could reduce our sales and gross margins, damage our brand, and harm our business. Our business is subject to the risk of manufacturer concentrations.
We depend on our information technology systems, as well as those of third parties, to design and develop new products, operate our website, host and manage our services, store data, process transactions, respond to user inquiries, and manage inventory and our supply chain as well as to conduct and manage other 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 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.
As our international business grows, our results of operations could be adversely impacted by changes in foreign currency exchange rates.
As our international business grows, our results of operations have been and could in the future be adversely impacted by changes in foreign currency exchange rates.
If we are not able to overcome these potential competitive challenges, effectively market our current and future products, and otherwise compete effectively against our current or potential competitors, our prospects, results of operations, and financial condition could be harmed. Competitors have imitated and attempted to imitate, and will likely continue to imitate or attempt to imitate, our products and technology.
If we are not able to overcome these potential competitive challenges, effectively market our current and future products, and otherwise compete effectively against our current or potential competitors, our prospects, results of operations, and financial condition could be harmed.
In the future, if our acquisitions do not yield expected returns, we may be required to take charges to our results of operations based on this impairment assessment process, which could harm our results of operations. We may be subject to liability if we infringe upon the intellectual property rights of third parties.
In the future, if our acquisitions do not yield expected returns, we may be required to take charges to our results of operations based on this impairment assessment process, which could harm our results of operations.
The ability of our manufacturers to effectively satisfy our production requirements could also be impacted by manufacturer financial difficulty or damage to their operations caused by fire, terrorist attack, riots, natural disaster, public health issues such as the COVID-19 pandemic (or other future pandemics or epidemics), or other events.
The ability of our manufacturers to effectively satisfy our production requirements could also be impacted by manufacturer financial difficulty or damage to their operations caused by fire, terrorist attack, riots, natural disaster, public health emergencies, or other events.
Although we extensively and rigorously test new and enhanced products, there can be no assurance we will be able to detect, prevent, or fix all defects. Under certain circumstances, the Consumer Products Safety Commission or comparable foreign agency could require us to repurchase or recall one or more of our products.
Although we extensively and rigorously test new and enhanced products, there can be no assurance we will be able to detect, prevent, or fix all defects. Under certain circumstances, the CPSC, and other relevant global regulatory authorities, could require us to repurchase or recall one or more of our products.
In addition, recent New York state legislation effectively codified the use of SOFR as the alternative to LIBOR in the absence of another chosen replacement rate, which may affect contracts governed by New York state law, including our Credit Agreement. SOFR is calculated based on short-term repurchase agreements, backed by Treasury securities.
In addition, recent New York state legislation effectively codified the use of SOFR as the alternative to LIBOR in the absence of another chosen replacement rate, which may affect contracts governed by New York state law, including our Credit Agreement.
Accordingly, we are subject to the risks, including labor disputes, union organizing activity, inclement weather, public health crises such as the COVID-19 pandemic (or other future pandemics or epidemics), and increased transportation costs, associated with our third-party contract manufacturers’ and carriers’ ability to provide products and services to meet our requirements.
Accordingly, we are subject to certain risks, including labor disputes, union organizing activity, inclement weather, public health crises, and increased transportation costs, associated with our third-party contract manufacturers’ and carriers’ ability to provide products and services to meet our requirements.
Our products are produced by third-party contract manufacturers. We face the risk that these third-party contract manufacturers may not produce and deliver our products on a timely basis or at all. We have experienced, and will likely continue to experience, operational difficulties with our manufacturers.
We therefore face the risk that these third-party contract manufacturers may not produce and deliver our products in adequate quantities, on a timely basis or at all, or that they will fail to comply with our quality standards. We have experienced, and will likely continue to experience, operational difficulties with our manufacturers.
To sustain long-term growth, we must continue to successfully promote our products to consumers who identify with or aspire to these activities, as well as to individuals who simply value products of uncompromising quality and design.
To sustain long-term growth, we must continue to successfully promote our products to consumers who align with the values of our brand, as well as to individuals who simply value products of uncompromising quality and design.
Any one of these risks could harm our ability to deliver our products on time, or at all, damage our reputation and our relationships with our retail partners and customers, and increase our product costs thereby reducing our margins.
In addition, our manufacturers may raise prices in the future, which would increase our costs and harm our margins. Any of these risks could harm our ability to deliver our products on time, or at all, damage our reputation and our relationships with our retail partners and customers, and increase our product costs thereby reducing our margins.
Current and additional tariffs have the potential to significantly raise the cost of our products, particularly our Drinkware. In such a case, there can be no assurance that we will be able to shift manufacturing and supply agreements to non-impacted countries, including the United States, to reduce the effects of the tariffs.
In such a case, there can be no assurance that we will be able to shift manufacturing and supply agreements to non-impacted countries, including the United States, to reduce the effects of the tariffs.
Our success depends on the value and reputation of our brand, which, in turn, depends on 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 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.
We have made, and we expect that we will continue to make, significant investments in attracting new customers, including through the use of corporate partnerships, YETI Ambassadors, traditional, digital, and social media, original YETI films, and participation in, and sponsorship of, community events. Marketing campaigns can be expensive and may not result in the cost-effective acquisition of customers.
We have made, and we expect that we will continue to make, significant investments in promoting our products and attracting new customers, including through the use of corporate partnerships, YETI Ambassadors, traditional, digital, and social media, original YETI films, and participation in, and sponsorship of, community events.
Any of these information systems could fail or experience a service interruption for a number of reasons, including computer viruses, programming errors, hacking or other unlawful activities, disasters or our failure to properly maintain system redundancy or protect, repair, maintain or upgrade our systems.
Any of these information systems could fail or experience a service interruption for a number of reasons, including our or a third party’s failure to successfully manage significant increases in user volume, computer viruses, ransomware, programming errors, security breaches, hacking or other unlawful activities, disasters, system failures or a third party’s failure to properly maintain system redundancy or protect, repair, maintain or upgrade our or their systems.
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.
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.
We regularly assess all of these matters to determine the adequacy of our income tax provision, which is subject to significant judgment. The phase-out of LIBOR may negatively impact our financial results. LIBOR, the London interbank offered rate, is the interest rate benchmark used as a reference rate on our variable rate debt, including our Credit Facility.
We regularly assess all of these matters to determine the adequacy of our income tax provision, which is subject to significant judgment. The phase-out of LIBOR and transition to SOFR as a benchmark interest rate may negatively impact our financial results.
Consequently, actual results could be materially lower than anticipated. 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, if at all.
However, our Amended and Restated Certificate of Incorporation provides substantially the same limitations as are set forth in Section 203 but also provides that Cortec Group Fund V, L.P., our controlling stockholder at the time of our initial public offering, and its affiliates and any of their direct or indirect transferees and any group as to which such persons are a party do not constitute “interested stockholders” for purposes of this provision. 26 Table of Contents 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.
However, our Amended and Restated Certificate of Incorporation provides substantially the same limitations as are set forth in Section 203 but also provides that Cortec Group Fund V, L.P., our controlling stockholder at the time of our initial public offering, and its affiliates and any of their direct or indirect transferees and any group as to which such persons are a party do not constitute “interested stockholders” for purposes of this provision.
In addition, we may not be able to adjust our spending in a timely manner to compensate for any unexpected shortfall in our sales.
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.
Consequently, if our operations continue to grow at a rapid pace, we may experience difficulties in managing this 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.
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.
Any material disruption or slowdown of our systems or those of third parties that we depend upon, including a disruption or slowdown caused by our or their failure to successfully manage significant increases in user volume or successfully upgrade our or their systems, system failures, viruses, ransomware, security breaches, or other causes, 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, 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.
The partial or complete loss of our key manufacturers, or a significant adverse change in our relationship with any of these manufacturers, could result in lost sales, added costs, and distribution delays that could harm our business and customer relationships. Our results of operations could be materially harmed if we are unable to accurately forecast demand for our products.
The partial or complete loss of our key manufacturers, or a significant adverse change in our relationship with any of these manufacturers, could result in lost sales, added costs, and distribution delays that could harm our business and customer relationships.
Our insurance coverage may be inadequate to cover our liabilities related to such hazards or operational risks. For example, our insurance coverage does not cover us for business interruptions as they relate to the COVID-19 pandemic.
Our insurance coverage may be inadequate to cover our liabilities related to such hazards or operational risks. For example, our insurance coverage does not cover us for business interruptions as they relate to public health crises and may not offer coverage for such interruptions related to future pandemics or epidemics.
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; and (h) store closures, decreased foot traffic, recession or other adverse effects resulting from public health crises such as the COVID-19 pandemic (or other future pandemics or epidemics).
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.
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.
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.
Furthermore, if we fail to accurately forecast our results of operations and growth rate, we may experience excess inventory levels or a shortage of product to deliver to our customers.
If we fail to accurately forecast customer demand, including relating to our expected growth, we may experience excess inventory levels or a shortage of product to deliver to our customers.
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.
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 are unable to protect or preserve our brand image and proprietary rights, our business may be harmed. As our business continues to expand, our competitors have imitated or attempted to imitate, and will likely continue to imitate or attempt to imitate, our product designs and branding, which could harm our business and results of operations.
As our business continues to expand, our competitors have imitated or attempted to imitate, and will likely continue to imitate or attempt to imitate, our product designs and branding, which could harm our business and results of operations.
Cyberthreats are constantly evolving, increasing the difficulty of detecting and successfully defending against them. 21 Table of Contents Any breach of our data security or that of our service providers could result in an unauthorized release or transfer of customer, consumer, user or employee information, or the loss of valuable business data or cause a disruption in our business.
Any breach of our data security or that of our service providers could result in an unauthorized release or transfer of customer, consumer, user or employee information, or the loss of valuable business data or cause a disruption in our business.
We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. These estimates form the basis for making judgments about the carrying values of assets, liabilities, and equity and the amount of sales and expenses that are not readily apparent from other sources.
These estimates form the basis for making judgments about the carrying values of assets, liabilities, and equity and the amount of sales and expenses that are not readily apparent from other sources.
In order to meet demand for a product, we have chosen in the past, and may choose in the future, to arrange for additional quantities of the product, if available, to be delivered through air freight, which is significantly more expensive than standard shipping by sea and, consequently, adversely impacts our gross margins.
Although we do not do business in Ukraine, downstream effects of the conflict have resulted in higher fuels costs, which has resulted in, and could continue to result in, higher costs to deliver products, which could harm our profitability. 14 Table of Content s In order to meet demand for a product, we have chosen in the past, and may choose in the future, to arrange for additional quantities of the product, if available, to be delivered through air freight, which is significantly more expensive than standard shipping by sea and, consequently, adversely impacts our gross margins.
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 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.
The further spread of COVID-19 and its effects, including required actions to take action to help limit the spread of the illness and continued global supply chain disruptions or constraints, could impact our ability to carry out our business as usual and may materially adversely impact global economic conditions, our business, results of operations, cash flows and financial condition.
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.
Failure to comply with these covenants and certain other provisions of the Credit Facility, or the occurrence of a change of control, could result in an event of default and an acceleration of our obligations under the Credit Facility or other indebtedness that we may incur in the future. 23 Table of Contents If such an event of default and acceleration of our obligations occurs, the lenders under the Credit Facility would have the right to proceed against the collateral we granted to them to secure such indebtedness, which consists of substantially all of our assets.
Failure to comply with these covenants and certain other provisions of the Credit Facility, or the occurrence of a change of control, could result in an event of default and an acceleration of our obligations under the Credit Facility or other indebtedness that we may incur in the future.
Maintaining, promoting, and positioning our brand are important to expanding our customer base and will depend largely on the success of our marketing and merchandising efforts and our ability to provide consistent, high-quality customer experiences. We intend to continue making substantial investments in these areas in order to maintain and enhance our brand, and such investments may not be successful.
Maintaining, promoting, and positioning our brand are important to expanding our customer base and will depend largely on the success of our marketing and merchandising efforts and our ability to provide consistent, high-quality customer experiences.
We currently have a limited number of country and region-specific YETI websites and are planning to expand our e-commerce platform to others. 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.
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.
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. We also communicate electronically throughout the world with our employees and with third parties, such as customers, suppliers, vendors and consumers.
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.
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. 13 Table of Contents The previous administration put into place tariffs and other trade restrictions between the United States and China.
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 consideration of such transactions, even if not consummated, could divert management’s attention from other business matters, result in adverse publicity or information leaks, and could increase our expenses. 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.
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.
Further, while certain of our long-term contracts stipulate contractual exclusivity, those manufacturers could choose to breach our agreements and work with our competitors.
As a result, our manufacturers could produce similar products for our competitors, some of which could potentially purchase products in significantly greater volume. Further, while certain of our long-term contracts stipulate contractual exclusivity, those manufacturers could choose to breach our agreements and work with our competitors.
The COVID-19 pandemic and preventative measures taken to contain or mitigate such have caused, and may continue to cause, business slowdowns or shutdowns in affected areas and significant disruption in the financial markets both globally and in the United States, which could lead to a decline in discretionary spending by consumers, and in turn impact, possibly materially, our business, sales, financial condition and results of operations.
The COVID-19 pandemic and preventative measures taken to contain or mitigate such have caused, and may continue to cause, business slowdowns or shutdowns in affected areas and significant disruption in the financial markets both globally and in the United States. The emergence of another pandemic, epidemic, or infectious disease outbreak could have a similar effect.
Competition for this type of personnel is intense, and we may not be successful in attracting, integrating, and retaining the personnel required to grow and operate our business effectively. There can be no assurance that our current management team or any new members of our management team will be able to successfully execute our business and operating strategies.
Competition for this type of personnel is intense, and we may not be successful in attracting, integrating, and retaining the personnel required to grow and operate our business effectively.
To ensure adequate inventory supply, we must forecast inventory needs and place orders with our manufacturers before firm orders are placed by our customers. If we fail to accurately forecast customer demand, we may experience excess inventory levels or a shortage of product to deliver to our customers.
To ensure adequate inventory supply, we must forecast inventory needs and place orders with our manufacturers before firm orders are placed by our customers.
Unauthorized use or invalidation of our patents, trademarks, copyrights, trade dress, trade secrets, or other intellectual property or proprietary rights may cause significant damage to our brand and harm our results of operations. 9 Table of Contents While we actively develop and protect our intellectual property rights, there can be no assurance that we will be adequately protected in all countries in which we conduct our business or that we will prevail when defending our patent, trademark, and proprietary rights.
While we actively develop and protect our intellectual property rights, there can be no assurance that we will be adequately protected in all countries in which we conduct our business or that we will prevail when defending our patent, trademark, and proprietary rights.
Even those manufacturers with whom we have purchase orders may breach these agreements, and we may not be able to enforce our rights under these agreements or may incur significant costs attempting to do so.
Our products are produced by third-party contract manufacturers, typically through a series of purchase orders. Manufacturers may breach our agreements with them, including purchase orders, and we may not be able to enforce our rights under these agreements or may incur significant costs attempting to do so.
If this software contains errors, bugs or other vulnerabilities which impede or halt service, this could result in damage to our reputation and brand, loss of users, or loss of revenue. 22 Table of Contents Risks Related to our Financial Condition and Tax Matters We depend on cash generated from our operations to support our growth, and we may need to raise additional capital, which may not be available on terms acceptable to us or at all.
Risks Related to Our Financial Condition and Tax Matters We depend on cash generated from our operations to support our growth, and we may need to raise additional capital, which may not be available on terms acceptable to us or at all.
Our historical sales, expense levels, and profitability may not be an appropriate basis for forecasting future results. 7 Table of Contents Failure to accurately forecast our results of operations and growth rate could cause us to make poor operating decisions and we may not be able to adjust in a timely manner.
Failure to accurately forecast our results of operations and growth rate could also cause us to make poor operating decisions and we may not be able to adjust in a timely manner. Consequently, actual results could be materially lower than anticipated.
If we are unable to attract new customers, or fail to do so in a cost-effective manner, our growth could be slower than we expect and our business will be harmed. 8 Table of Contents Our growth depends, in part, on expanding into additional consumer markets, and we may not be successful in doing so.
If we are unable to attract new customers, or fail to do so in a cost-effective manner, our growth could be slower than we expect and our business could be harmed. If we are unable to successfully design, develop and market new products, our business may be harmed.

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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 January 1, 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 nine retail stores across the United States.
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.

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.
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
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Mine Safety Disclosures Not applicable. 28 Table of Contents PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 28 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 29 Item 6. Reserved 30 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 31 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 41 Item 8.
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.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information for Common Stock Our common stock has been listed and traded on the NYSE under the symbol “YETI” since October 25, 2018. Holders of Record As of February 14, 2022, there were approximately 38 shareholders of record of our common stock.
Biggest changeItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information for Common Stock Our common stock has been listed and traded on the New York Stock Exchange (the “NYSE”) under the symbol “YETI” since October 25, 2018.
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 YETI Holdings, Inc. $ 100.00 $ 87.18 $ 205.76 $ 402.76 $ 487.42 S&P 500 Index 100.00 91.87 119.75 138.83 176.16 S&P 500 Apparel, Accessories & Luxury Goods Index 100.00 81.85 99.78 87.75 91.52 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 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.
We intend to retain any future earnings and do not expect to pay any dividends in the foreseeable future. 29 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.
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.
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 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.

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. 32 Table of Contents 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 January 1, 2022 January 2, 2021 December 28, 2019 Statement of Operations Net sales $ 1,410,989 100 % $ 1,091,721 100 % $ 913,734 100 % Cost of goods sold 594,876 42 % 462,918 42 % 438,420 48 % Gross profit 816,113 58 % 628,803 58 % 475,314 52 % Selling, general, and administrative expenses 541,175 38 % 414,570 38 % 385,543 42 % Operating income 274,938 19 % 214,233 20 % 89,771 10 % Interest expense (3,339) — % (9,155) 1 % (21,779) 2 % Other income (expense) (3,189) — % 123 — % (734) — % Income before income taxes 268,410 19 % 205,201 19 % 67,258 7 % Income tax expense (55,808) 4 % (49,400) 5 % (16,824) 2 % Net income $ 212,602 15 % $ 155,801 14 % $ 50,434 6 % Year Ended January 1, 2022 Compared to Year Ended January 2, 2021 Fiscal Year Ended January 1, 2022 January 2, 2021 Change (dollars in thousands) $ % 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 % Selling, general, and administrative expenses $ 541,175 $ 414,570 $ 126,605 31 % SG&A as a % of net sales 38.4 % 38.0 % Net Sales Net sales increased $319.3 million, or 29%, to $1,411.0 million in 2021 from $1,091.7 million in 2020.
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.
Our variable expenses, including outbound freight, online marketplace fees, third-party logistics fees, and credit card processing fees, will vary as they are dependent on our sales volume and our channel mix. Our DTC channel SG&A costs are generally higher as a percentage of net sales than our wholesale channel distribution costs. Fiscal Year.
Our variable expenses, including outbound freight, online marketplace fees, third-party logistics fees, and credit card processing fees, will vary as they are dependent on our sales volume and our channel mix. Our DTC channel variable SG&A costs are generally higher as a percentage of net sales than our wholesale channel distribution costs. Fiscal Year.
Investing Activities The increase in cash used in investing activities in 2021 compared to 2020 primarily related to increased purchases for technology upgrades and enhancements, including the phased upgrade of our SAP enterprise resource planning (“ERP”) system and investment in data analytics, as well as production molds, tooling and equipment, and facilities.
The increase in cash used in investing activities in 2021 compared to 2020 primarily related to increased purchases for technology upgrades and enhancements, including the phased upgrade of our SAP enterprise resource planning (“ERP”) system and investment in data analytics, as well as production molds, tooling and equipment, and facilities.
In our wholesale channel, we sell our products through select national and regional accounts and an assemblage of independent retail partners throughout the United States, Canada, Australia, New Zealand, Europe, and Japan. We carefully evaluate and select retail partners that have an image and approach that are consistent with our premium brand and pricing.
In our wholesale channel, we sell our products through select national and regional accounts and an assemblage of independent retail partners throughout the United States, Canada, Australia, New Zealand, Europe, and Japan, among others. We carefully evaluate and select retail partners that have an image and approach that are consistent with our premium brand and pricing.
The increase in SG&A expenses resulted from: • an increase in variable expenses of $41.9 million, resulting in a 20 basis point increase as a percent of net sales, driven by the increased mix of our faster growing and higher gross margin DTC channel, which grew to 56% of net sales for the year comprised of: – higher distribution costs including outbound freight, third-party logistics fees, credit card processing fees, and online marketplace fees; and • an increase in non-variable expenses of $84.7 million, resulting in a 20 basis point increase as a percent of net sales, comprised of: – an increase in marketing expenses; employee costs, including higher incentive compensation; non-variable distribution costs, including third-party logistics fees; non-cash stock-based compensation expense; facility costs and other operating expenses; information technology expenses; depreciation and amortization expense; and business optimization expenses associated with our new distribution facility in Memphis, Tennessee.
The increase in SG&A expenses resulted from: • an increase in variable expenses of $41.9 million, resulting in a 20 basis point increase as a percent of net sales, driven by the increased mix of our faster growing and higher gross margin DTC channel, which grew to 56% of net sales for the year comprised of: 37 Table of Content s – higher distribution costs including outbound freight, third-party logistics fees, credit card processing fees, and online marketplace fees; and • an increase in non-variable expenses of $84.7 million, resulting in a 20 basis point increase as a percent of net sales, comprised of: – an increase in marketing expenses; employee costs, including higher incentive compensation; non-variable distribution costs, including third-party logistics fees; non-cash stock-based compensation expense; facility costs and other operating expenses; information technology expenses; depreciation and amortization expense; and business optimization expenses associated with our new distribution facility in Memphis, Tennessee.
Based on our qualitative assessment performed during the fourth quarter of 2021, 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 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.
The increase in net sales was driven by our faster growing DTC channel as well as growth in our wholesale channel. 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.
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.
Our Other category is primarily comprised of ice substitutes, and YETI-branded gear, such as shirts, hats, and other miscellaneous products. Gross profit.
In addition, our Other category is primarily comprised of ice substitutes and YETI-branded gear, such as shirts, hats, and other miscellaneous products. Gross profit.
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. We may accept, and have at times accepted, returns outside our terms of sale at our sole discretion.
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.
Recent Accounting Pronouncements For a description of recent accounting pronouncements, see “ Recently Adopted Accounting Pronouncements ” and “ Recent Accounting Guidance Not Yet Adopted ” in Note 1 of the Notes to Consolidated Financial Statements included herein. 40 Table of Contents
Recent Accounting Pronouncements For a description of recent accounting pronouncements, see “ Recently Adopted Accounting Pronouncements ” and “ Recent Accounting Guidance Not Yet Adopted ” in Note 1 of the Notes to Consolidated Financial Statements included herein.
These gains were mostly offset by 90 basis points from higher inbound freight, 80 basis points from the unfavorable impact of the non-renewal of the Global System of Preferences (“GSP”), which impacted import duties primarily on our hard coolers, as well as other impacts, which unfavorably impacted gross margin by 20 basis points.
These gains were mostly offset by 90 basis points from higher inbound freight, 80 basis points from the unfavorable impact of the non-renewal of the GSP, which impacted import duties primarily on our hard coolers, as well as other impacts, which unfavorably impacted gross margin by 20 basis points.
In the second quarter of 2020, wholesale channel net sales were adversely impacted by the temporary store closures due to the COVID-19 pandemic.
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.
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. 33 Table of Contents Gross Profit Gross profit increased $187.3 million, or 30%, to $816.1 million in 2021 from $628.8 million in 2020.
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.
Our fiscal years 2021 and 2019 ended on January 1, 2022 and December 28, 2019, respectively, spanned 52 weeks each, whereas our fiscal year 2020 ended January 2, 2021 included 53 weeks.
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.
Financing Activities The decrease in cash used in financing activities in 2021 compared to 2020 was primarily driven by lower repayments of long-term debt in 2021.
Financing Activities The increase in cash used in financing activities in 2022 compared to 2021 was primarily driven by repurchases of common stock. The decrease in cash used in financing activities in 2021 compared to 2020 was primarily driven by lower repayments of long-term debt in 2021.
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 January 1, 2022, we had unrecognized tax benefits of $12.9 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.
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.
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.
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 January 1, 2022 January 2, 2021 December 28, 2019 Cash flows provided by (used in): Operating activities $ 146,520 $ 366,427 $ 86,893 Investing activities (65,756) (22,944) (48,691) Financing activities (23,019) (163,191) (45,687) 37 Table of Contents Operating Activities Cash flows related to operating activities are dependent on net income, non-cash adjustments to net income, and changes in working capital.
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.
At January 1, 2022, we were in compliance with all covenants and expect to remain in compliance with all covenants under the Credit Facility. 36 Table of Contents Share Repurchase Plan On February 27, 2022, the Company’s Board of Directors authorized the repurchase of up to $100 million of the Company’s common stock over the next year.
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.
The increase in working capital was primarily due to an increase in inventory, partially offset by an increase in accounts payable.
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.
Current Liquidity As of January 1, 2022, we had a cash balance of $312.2 million, $54.3 million of working capital (excluding cash), and $150.0 million of borrowings available under the Revolving Credit Facility.
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).
Non-Operating Expenses Interest expense was $3.3 million in 2021, compared to $9.2 million in 2020. The decrease in interest expense was primarily due to decreased outstanding long-term debt under our Credit Facility. Income tax expense was $55.8 million in 2021, compared to $49.4 million in 2020. Our effective tax rate for 2021 was 21% compared to 24% for 2020.
Non-Operating Expenses Interest expense was $3.3 million in 2021, compared to $9.2 million in 2020. The decrease in interest expense was primarily due to decreased outstanding long-term debt under our Credit Facility. Other expense was $3.1 million in 2021, compared to other income of $0.1 million in 2020.
In conducting our annual impairment test, we first review qualitative factors to determine whether it is more likely than not that the fair value of the asset, or reporting units, is less than its carrying amount.
We review goodwill and indefinite-lived intangible assets for impairment annually or whenever events or changes in circumstances indicate the carrying amount may be impaired. In conducting our annual impairment test, we first review qualitative factors to determine whether it is more likely than not that the fair value of the asset, or reporting units, is less than its carrying amount.
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.
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.
At January 1, 2022, we had $112.5 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 1.85%, as of January 1, 2022.
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.
As discussed under “— COVID-19 and Operational Update ” above, although the potential magnitude and economic impacts of COVID-19 and its effects are highly uncertain, we believe that our current operating performance, operating plan, our strong cash position, including cash generated from operations and borrowings available under our Revolving Credit Facility, will be sufficient to satisfy our foreseeable liquidity needs and capital expenditure requirements, including for at least the next twelve months.
We believe that our current operating performance, operating plan, our strong cash position, and borrowings available under our Revolving Credit Facility will be sufficient to satisfy our foreseeable liquidity needs and capital expenditure requirements, including for at least the next twelve months.
The increase in cash provided by operating activities in 2020 compared to cash provided by operating activities in 2019 is primarily due to an increase in cash provided by working capital and an increase in net income, adjusted for non-cash items, for the periods compared.
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.
Gross margin increased 20 basis points to 57.8% in 2021 from 57.6% in 2020.
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.
We make ongoing estimates relating to the net realizable value of inventories based upon our assumptions about future demand and market conditions. If the estimated net realizable value is less than cost, we reflect the lower value of that inventory.
Inventory Inventories are comprised primarily of finished goods and are carried at the lower of cost (weighted-average cost method) or market (net realizable value). We make ongoing estimates relating to the net realizable value of inventories based upon our assumptions about future demand and market conditions.
Our Coolers & Equipment category includes hard coolers, soft coolers, outdoor equipment and other products, as well as accessories and replacement parts for these products. In 2019, we began reporting Boomer Dog Bowl net sales in our Coolers & Equipment instead of in our Other category. Our Drinkware category includes our stainless-steel drinkware products and related accessories.
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.
This methodology recognizes inventory exposures at the time such losses are identified rather than at the time the inventory is actually sold. Due to customer demand and inventory constraints, we have not historically taken material adjustments to the carrying value of our inventory. Our inventory valuation reflects adjustments for anticipated inventory losses that have occurred since the last physical inventory.
Due to customer demand and inventory constraints, we have not historically taken material adjustments to the carrying value of our inventory. Our inventory valuation reflects adjustments for anticipated inventory losses that have occurred since the last physical inventory. We estimate inventory shrinkage based on historical trends from physical inventory counts and cycle counts.
The increase in cash used in financing activities in 2020 compared to 2019 was primarily driven by higher repayments of long-term debt in 2020. 38 Table of Contents 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.
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.
Liquidity and Capital Resources General Our cash requirements have principally been for working capital purposes, long-term debt repayments, and capital expenditures. 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 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.
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. 34 Table of Contents Year Ended January 2, 2021 Compared to Year Ended December 28, 2019 Fiscal Year Ended January 2, 2021 December 28, 2019 Change (dollars in millions) $ % Net sales $ 1,091,721 $ 913,734 $ 177,987 19 % Gross profit 628,803 475,314 153,489 32 % Gross margin (Gross profit as a % of net sales) 57.6 % 52.0 % Selling, general, and administrative expenses $ 414,570 $ 385,543 $ 29,027 8 % SG&A as a % of net sales 38.0 % 42.2 % Net Sales Net sales increased $178.0 million, or 19%, to $1,091.7 million in 2020 from $913.7 million in 2019.
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.
As a percentage of net sales, SG&A expenses decreased 420 basis points to 38.0% in 2020 from 42.2% in 2019.
As a percentage of net sales, SG&A expenses increased 150 basis points to 39.9% in 2022 from 38.4% in 2021.
Our corporate sales program offers customized products to corporate customers for a wide-range of related events and activities, and in certain instances may also offer products to re-sell. Additionally, we sell our full line of products in our retail stores. COVID-19 Pandemic and Operational Update The COVID-19 pandemic continues to significantly impact the global economy and cause disruption and volatility.
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.
Our domestic national and regional specialty retailers include Dick’s Sporting Goods, REI, Academy Sports + Outdoors, Bass Pro Shops, Ace Hardware, and Scheels.
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.
Net sales in our two primary product categories were as follows: • Drinkware net sales increased $102.3 million, or 19%, to $628.6 million in 2020 from $526.2 million in 2019, 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 $77.7 million, or 21%, to $446.6 million in 2020 from $368.9 million in 2019, primarily driven by the strong performance of hard coolers, soft coolers, outdoor living products, and cargo.
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.
The following table summarizes current and long-term material cash requirements for contractual and other obligations as of January 1, 2022 (in thousands): Material Cash Requirements Total 2022 2023 2024 2025 2026 Thereafter Long-term debt principal payment $ 112,500 $ 22,500 $ 22,500 $ 67,500 $ — $ — $ — Interest $ 5,590 2,316 1,894 1,380 — — — Operating lease obligations $ 76,184 12,991 13,156 13,224 12,470 11,177 13,166 Finance leases $ 9,807 2,245 2,078 2,325 1,995 1,164 — Other noncancellable agreements (1) $ 68,621 23,637 18,313 8,577 7,571 1,716 8,807 Total $ 272,702 $ 63,689 $ 57,941 $ 93,006 $ 22,036 $ 14,057 $ 21,973 _________________________________________ (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 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.
We estimate inventory shrinkage based on historical trends from physical inventory counts and cycle counts. 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.
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.
Non-Operating Expenses Interest expense was $9.2 million in 2020, compared to $21.8 million in 2019. The decrease in interest expense was primarily due to lower interest rates and decreased outstanding long-term debt under our Credit Facility. Income tax expense was $49.4 million in 2020, compared to $16.8 million in 2019.
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.
Our effective tax rate for 2020 was 24% compared to 25% for 2019. The decrease in the effective tax rate was primarily due to a lower state tax rate and higher tax benefit related to stock-based compensation in 2020 compared to 2019, partially offset by a decrease in our research and development tax credit in 2020 .
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.
A 10% change in our estimated reserve for sales returns, discounts, and miscellaneous claims for 2021 would have impacted net sales by $1.2 million. 39 Table of Contents Inventory Inventories are comprised primarily of finished goods and are carried at the lower of cost (weighted-average cost method) or market (net realizable value).
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.
The decrease in cash used in investing activities in 2020 compared to 2019 primarily related to lower purchases of property and equipment for technology systems infrastructure, production molds, tooling, and equipment, and facilities, and decreased additions of intangibles such as trademarks, patents, and trade dress assets.
The increase in cash used for working capital was primarily due to an increase in inventory, partially offset by an increase in accounts payable. 39 Table of Content s Investing Activities The decrease in cash used in investing activities in 2022 compared to 2021 primarily related to lower purchases for technology upgrades and enhancements, as well as production molds, tooling and equipment, and facilities.
These gains were partially offset by 20 basis points from higher inventory reserves related to new product transitions and other impacts. Selling, General, and Administrative Expenses SG&A expenses increased by $29.0 million, or 8%, to $414.6 million in 2020 from $385.5 million in 2019.
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.
YETI has no obligation to repurchase any amount of its common stock, and such repurchases, if any, may be suspended or discontinued at any time. Material Cash Requirements For 2022, we expect capital expenditures for property and equipment to be approximately $60 million, primarily to support investments in technology and new product innovation and launches.
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.
The increase in net sales was driven by growth in our faster growing DTC channel. DTC channel net sales increased $194.8 million, or 50%, to $580.9 million in 2020 from $386.1 million in 2019, driven by both Drinkware and Coolers & Equipment categories.
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.
Removed
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 customized products with licensed marks and original artwork through our corporate sales program and at YETI.com.
Added
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.
Removed
We continue to monitor the situation and our focus remains to prioritize the health and safety of our employees and our consumers.
Added
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.
Removed
In the final weeks of the first quarter of 2020, our sales were adversely impacted due to the decrease in consumer spending and temporary store closures attributed to the COVID-19 pandemic, which particularly impacted the performance of our wholesale channel.
Added
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.
Removed
However, in the second quarter of 2020, we began to see increased demand for outdoor recreation and leisure lifestyle products and, to date, consumer demand for our products has remained robust. The COVID-19 pandemic has impacted some of our manufacturing partners and logistics providers.
Added
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.
Removed
During 2021, we began experiencing extended inventory transit times, primarily due to port congestion and transportation delays as well as labor and container shortages, which has had, and may continue to have, a negative impact on product availability, most prominently in our wholesale channel.
Added
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.
Removed
As a result, we remain inventory constrained and continue to work to replenish our distribution channels to meet customer demand. The resurgence of COVID-19 lockdowns in key sourcing countries, particularly Vietnam, where one of our manufacturing partners experienced an extended shutdown during the third quarter of 2021, has also resulted in additional supply disruptions.
Added
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.
Removed
Additionally, we have experienced higher inbound freight cost and product input cost inflation as a result of this dynamic environment, which negatively impacted gross margin beginning in the second quarter of 2021.
Added
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.
Removed
We expect inbound freight costs and certain product input costs will continue to be elevated through 2022. 31 Table of Contents To date, the COVID-19 pandemic and its effects have not had a material adverse impact on our net sales or operations.
Added
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.
Removed
We recognize that we are operating in a challenging and highly uncertain landscape and we believe we may continue to experience varying degrees of disruption and volatility. We are continuing to monitor and navigate these conditions, including disruptions to our supply chain and product availability, as well as costs, and potentially take additional actions to address and manage them.
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. As of December 31, 2022, our reserve for estimated recall expenses was $94.8 million.
Removed
While we intend to focus on disciplined investments for future, long-term growth, in certain circumstances, there may be developments outside our control requiring us to adjust our operating plan.
Added
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.
Removed
As such, given the dynamic nature of this situation, including resurgences of COVID-19 and, in particular, new and more contagious or vaccine resistant variants, as well as uncertainties about the magnitude and duration of global supply chain constraints, we cannot reasonably estimate the impacts that these conditions may have on our financial condition, results of operations or cash flows in the future.
Added
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.
Removed
For additional information, see Part I-Item 1A, “Risk Factors - Risks Related to Market and Global Economic Conditions,” included herein for updates to our risk factors regarding risks associated with the COVID-19 pandemic.
Added
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.
Removed
Recent Developments New Distribution Facility To support the continued growth of our business, we entered into a service agreement with a third-party logistics provider to operate a new distribution facility in Memphis, Tennessee with approximately 970,000 square feet. The service agreement commenced at the end of the second quarter of 2021. The initial term of the agreement is 5 years.
Added
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 .
Removed
We began distributing from this facility in the third quarter of 2021, and we exited our distribution facility in Dallas, Texas in the fourth quarter of 2021. 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.
Added
See Note 1 - Organization and Significant Accounting Policies of the Unaudited Condensed Consolidated Financial Statements for additional information.
Removed
Net sales in our DTC channel were favorably impacted by increased demand for outdoor recreation and leisure lifestyle products as the COVID-19 pandemic has significantly impacted consumers’ views towards how they spend their time experiencing nature and the outdoors as well as more consumers shopping online while sheltering-in-place, resulting in increased sales volume during the period.
Added
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.
Removed
As a result, our channel mix significantly shifted towards our DTC channel from 42% in 2019 to 53% in 2020. Net sales in our wholesale channel decreased $16.8 million, or 3%, to $510.9 million in 2020 from $527.6 million in 2019, primarily driven by Coolers & Equipment.
Added
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.
Removed
While wholesale net sales trends returned to positive growth at the end of the second quarter of 2020 and continued during the second half of the year, the sharp decline of net sales during March and April 2020, as a result of COVID-19 related temporary store closures, adversely impacted the performance of the wholesale channel.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

8 edited+1 added−1 removed4 unchanged
Biggest changeAlthough we do not believe that inflation has had a material impact on our financial position or results of operations to date, a high rate of inflation in the future may have an adverse effect on our ability to maintain 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.
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.
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 January 1, 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 31, 2022, we have not entered into any such contracts.
During 2021, net sales from our international entities accounted for 9% 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 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.
Based on the balance outstanding under our Term Loan A at January 1, 2022, we estimate that a 1% increase or decrease in underlying interest rates would increase or decrease annual interest expense by $1.1 million in any given fiscal year.
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.
However, we do not believe there is a significant direct correlation between petroleum or natural gas prices and the costs of our products.
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.
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.
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.
See Item 1A, Risk Factors under “ The uncertainty regarding the phase-out of LIBOR may negatively impact our operating results ” for a discussion of the interest rate risk related the ongoing phase-out of LIBOR. Inflation Risk Inflationary factors such as increases in the cost of our products and overhead costs may adversely affect our operating results.
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.
Our operating results and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates. However, we believe that the exposure to foreign currency fluctuations from operating expenses is not material at this time as the related costs accounted for 8% of our total operating expenses. 41 Table of Contents
Our operating results and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates. 43 Table of Content s
Removed
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.
Added
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.

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