yeti-20220702

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________________________________________________________________________________

FORM 10-Q

____________________________________________________________________________________________


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 02, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-38713

_____________________________________________________

YETI Holdings, Inc.

(Exact name of registrant as specified in its charter)

______________________________________________________


Delaware						45-5297111
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

7601 Southwest Parkway

Austin, Texas 78735

(Address of principal executive offices) (Zip Code)

(Registrant’s telephone number, including area code) (512) 394-9384

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common stock, par value $0.01

YETI

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

There were 86,175,820 shares of Common Stock ($0.01 par value) outstanding as of July 28, 2022.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical or current fact included in this Quarterly Report on Form 10-Q are forward-looking statements. Forward-looking statements include statements containing words such as “anticipate,” “assume,” “believe,” “can,” “have,” “contemplate,” “continue,” “could,” “design,” “due,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “likely,” “may,” “might,” “objective,” “plan,” “predict,” “project,” “potential,” “seek,” “should,” “target,” “will,” “would,” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operational performance or other events. For example, all statements made relating to growth strategies, the estimated and projected costs, expenditures, and growth rates, plans and objectives for future operations, growth, or initiatives, or strategies are forward-looking statements. All forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that are expected and, therefore, you should not unduly rely on such statements. The risks and uncertainties that could cause actual results to differ materially from those expressed or implied by these forward-looking statements include but are not limited to the risks and uncertainties listed below under “Risk Factors Summary” and further described under the heading "Risk Factors" in Part II, Item 1A of this Quarterly Report on Form 10-Q, as such risk factors may be amended, supplemented or superseded from time to time by other reports we file with the United States Securities and Exchange Commission.

These forward-looking statements are made based upon detailed assumptions and reflect management’s current expectations and beliefs. While we believe that these assumptions underlying the forward-looking statements are reasonable, we caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect actual results.

The forward-looking statements included herein are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events, or otherwise, except as required by law.

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Risk Factors Summary

Investing in our securities involves a high degree of risk. The following is a summary of the principal factors that make an investment in our securities speculative or risky, all of which are further described below in the section titled “Risk Factors” in Part I, Item 1A of this Report. This summary should be read in conjunction with the “Risk Factors” section and should not be relied upon as an exhaustive summary of the material risks facing our business. In addition to the following summary, you should consider the information set forth in the “Risk Factors” section and the other information contained in this Report before investing in our securities.

Risks Related to Our Business, Operations and Industry

•A significant reduction in demand for our products could harm our results of operations.

•If we are unable to successfully design, develop and market new products, our business may be harmed.

•Our business could be harmed if we are unable to accurately forecast our results of operations and growth rate.

•We may not be able to effectively manage our growth.

•Our marketing strategy may not be successful with existing and future customers.

•If we fail to attract new customers, or fail to do so in a cost-effective manner, we may not be able to increase sales.

•We may not be successful in expanding into additional markets.

•If we fail to compete effectively, we could lose our market position.

•If we are unable to protect or preserve our brand image and proprietary rights, our business may be harmed.

•Problems with, or loss of, our suppliers or an inability to obtain raw materials could harm our business and results of operations.

•If we fail to timely and effectively obtain shipments of products from our manufacturers and deliver products to our retail partners and customers, our business and results of operations could be harmed.

•Our business is subject to the risk of manufacturer concentrations.

•Our results of operations could be materially harmed if we are unable to accurately forecast demand for our products.

•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.

•If we cannot maintain prices or effectively implement price increases, our margins may decrease.

•Some of our manufacturing relationships are not exclusive, which means that these manufacturers could produce similar products for our competitors.

•Fluctuations in the cost and availability of raw materials, equipment, labor, and transportation could cause manufacturing delays or increase our costs.

•Many of our products are manufactured by third parties outside of the United States, and our business may be harmed by legal, regulatory, economic, political and public health risks associated with international trade and those markets.

•As current tariffs are implemented, or if additional tariffs or other restrictions are placed on foreign imports or any related counter-measures are taken by other countries, our business and results of operations could be harmed.

•A significant portion of our sales are to independent retail partners, and if they 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.

•We depend on our retail partners to display and present our products to customers, and our failure to maintain and further develop our relationships with our retail partners could harm our business.

•If our plans to increase sales through our direct-to-consumer channel are not successful, our business and results of operations could be harmed.

•If we do not successfully implement our future retail store expansion, our growth and profitability could be harmed.

•Insolvency, credit problems or other financial difficulties that could confront our retail partners could expose us to financial risk.

•If our independent suppliers and manufacturing partners do not comply with ethical business practices or with applicable laws and regulations, our reputation, business, and results of operations could be harmed.

•We are subject to payment-related risks that may result in higher operating costs or the inability to process payments, either of which could harm our business, financial condition and results of operations.

•Our limited operating experience and limited brand recognition in new markets may make it more difficult to execute our international expansion plan and cause our business and growth to suffer.

•Our financial results and future growth could be harmed by currency exchange rate fluctuations.

•We may become involved in legal or regulatory proceedings and audits.

•Our business involves the potential for product recalls, warranty liability, product liability, and other claims against us, which could adversely affect our reputation, earnings and financial condition.

•Our business is subject to the risk of catastrophic events, and to interruption by problems such as terrorism, public health crises, cyberattacks, or failure of key information technology systems.

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•Our results of operations are subject to seasonal and quarterly variations, which could cause the price of our common stock to decline.

•We are subject to many hazards and operational risks that can disrupt our business, some of which may not be insured or fully covered by insurance.

Risks Related to Market and Global Economic Conditions

•Public health crises including the COVID-19 pandemic, could negatively impact our business, sales, financial condition, results of operations and cash flows.

•Adverse economic conditions, such as a downturn in the economy or inflationary conditions resulting in rising prices, could adversely affect consumer purchases of discretionary items, which could materially harm our sales, profitability, and financial condition.

Risks Related to Information Technology and Security

•We rely significantly on information technology and any failure, inadequacy or interruption of that technology could harm our ability to effectively operate our business.

•We collect, store, process, and use personal and payment information and other customer data, which subjects us to regulation and other legal obligations related to privacy, information security, and data protection.

•Any material disruption or breach of our information technology systems or those of third-party partners could materially damage our customer and business partner relationships, and subject us to significant reputational, financial, legal, and operational consequences.

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 indebtedness may limit our ability to invest in the ongoing needs of our business and if we are unable to comply with the covenants in our current Credit Facility, our liquidity and results of operations could be harmed.

•If our goodwill, other intangible assets, or fixed assets become impaired, we may be required to record a charge to our earnings.

•Changes in tax laws or unanticipated tax liabilities could adversely affect our effective income tax rate and profitability.

•The phase-out of LIBOR may negatively impact our financial results.

•Our results of operations could be harmed if a material number of our retail partners were not able to meet their payment obligations.

Risks Related to Ownership of Our Common Stock

•Any future failure to maintain effective internal control over financial reporting could harm us.

•We cannot guarantee that our share repurchase program will enhance long-term stockholder value.

•Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of the Company more difficult, limit attempts by our stockholders to replace or remove our current management, and limit the market price of our common stock.

•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.

•YETI Holdings, Inc. is a holding company with no operations of its own and, as such, it depends on its subsidiaries for cash to fund its operations and expenses, including future dividend payments, if any.

General Risk Factors

•Our future success depends on the continuing efforts of our management and key employees, and on our ability to attract and retain highly skilled personnel and senior management.

•If our estimates or judgments relating to our critical accounting policies prove to be incorrect or change significantly, our results of operations could be harmed.

•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.

•We may be the target of stockholder activism, an unsolicited takeover proposal or a proxy contest or short sellers, which could negatively impact our business.

•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 be subject to liability if we infringe upon the intellectual property rights of third parties.

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Table of Contents


			Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets			1
Condensed Consolidated Statements of Operations			2
Condensed Consolidated Statements of Comprehensive Income			3
Condensed Consolidated Statements of Equity			4
Condensed Consolidated Statements of Cash Flows			6
Notes To Unaudited Condensed Consolidated Financial Statements			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			13
Item 3. Quantitative and Qualitative Disclosures About Market Risk			20
Item 4. Controls and Procedures			21
PART II. OTHER INFORMATION			22
Item 1. Legal Proceedings			22
Item 1A. Risk Factors			22
Item 6. Exhibits			43
Signatures			44

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

YETI HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except per share data)


	July 2, 2022		January 1, 2022
ASSETS
Current assets
Cash	$	91,994	$	312,189
Accounts receivable, net	94,251		109,530
Inventory	490,013		318,864
Prepaid expenses and other current assets	40,767		29,584
Total current assets	717,025		770,167
Property and equipment, net	127,309		119,044
Operating lease right-of-use assets	56,460		54,971
Goodwill	54,293		54,293
Intangible assets, net	97,757		95,314

Other assets	2,514		2,575
Total assets	$	1,055,358	$	1,096,364

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	204,091	$	191,319
Accrued expenses and other current liabilities	129,923		132,309
Taxes payable	17,038		14,514
Accrued payroll and related costs	4,275		30,844
Current operating lease liabilities	11,494		10,167
Current maturities of long-term debt	24,587		24,560
Total current liabilities	391,408		403,713
Long-term debt, net of current portion	83,575		95,741
Operating lease liabilities, non-current	56,269		55,940
Other liabilities	24,245		23,147
Total liabilities	555,497		578,541

Commitments and contingencies (Note 8)

Stockholders’ Equity
Common stock, par value $0.01; 600,000 shares authorized; 87,851 and 86,174 shares issued and outstanding at July 2, 2022, respectively, and 87,727 shares issued and outstanding at January 2, 2021, respectively	878		877
Treasury stock, at cost; 1,677 shares at April 2, 2022	(100,025)		—
Preferred stock, par value $0.01; 30,000 shares authorized; no shares issued or outstanding	—		—
Additional paid-in capital	346,675		337,735
Retained earnings	250,769		178,858
Accumulated other comprehensive income	1,564		353
Total stockholders’ equity	499,861		517,823
Total liabilities and stockholders’ equity	$	1,055,358	$	1,096,364

See Notes to Unaudited Condensed Consolidated Financial Statements

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YETI HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share data)


	Three Months Ended				Six Months Ended
	July 2, 2022		July 3, 2021		July 2, 2022		July 3, 2021
Net sales	$	420,042	$	357,667	$	713,670	$	605,221
Cost of goods sold	200,943		148,550		339,711		250,920
Gross profit	219,099		209,117		373,959		354,301
Selling, general, and administrative expenses	150,753		136,692		272,323		241,827
Operating income	68,346		72,425		101,636		112,474
Interest expense	(960)		(832)		(1,726)		(1,686)
Other expense	(5,823)		(955)		(4,921)		(1,253)
Income before income taxes	61,563		70,638		94,989		109,535
Income tax expense	(15,311)		(14,407)		(23,078)		(22,781)
Net income	$	46,252	$	56,231	$	71,911	$	86,754

Net income per share
Basic	$	0.54	$	0.64	$	0.83	$	0.99
Diluted	$	0.53	$	0.63	$	0.82	$	0.98

Weighted-average common shares outstanding
Basic	86,165		87,327		86,766		87,253
Diluted	86,860		88,652		87,542		88,561

See Notes to Unaudited Condensed Consolidated Financial Statements

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YETI HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(in thousands)


	Three Months Ended				Six Months Ended
	July 2, 2022		July 3, 2021		July 2, 2022		July 3, 2021
Net income	$	46,252	$	56,231	$	71,911	$	86,754
Other comprehensive income
Foreign currency translation adjustments	1,775		630		1,211		959
Total comprehensive income	$	48,027	$	56,861	$	73,122	$	87,713

See Notes to Unaudited Condensed Consolidated Financial Statements

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YETI HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

(In thousands)


	Three Months Ended July 2, 2022
	Common Stock			Additional Paid-In Capital		Treasury Stock			Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity
	Shares	Amount				Shares	Amount
Balance, April 2, 2022	87,836	$	878	$	341,208	(1,677)	$	(100,025)	$	204,517	$	(211)	$	446,367
Stock-based compensation	—	—		5,467		—	—		—		—		5,467
Common stock issued under employee benefit plans	15	—		—		—	—		—		—		—


Other comprehensive loss	—	—		—		—	—		—		1,775		1,775
Net income	—	—		—		—	—		46,252		—		46,252
Balance, July 2, 2022	87,851	$	878	$	346,675	(1,677)	$	(100,025)	$	250,769	$	1,564	$	499,861

	Three Months Ended July 3, 2021
	Common Stock			Additional Paid-In Capital		Treasury Stock			Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity
	Shares	Amount				Shares	Amount
Balance, April 3, 2021	87,239	$	872	$	323,682	—	$	—	$	(3,221)	$	(58)	$	321,275
Stock-based compensation	—	—		4,097		—	—		—		—		4,097
Common stock issued under employee benefit plans	202	2		1,859		—	—		—		—		1,861


Other comprehensive income	—	—		—		—	—		—		630		630
Net income	—	—		—		—	—		56,231		—		56,231
Balance, July 3, 2021	87,441	$	874	$	329,638	—	$	—	$	53,010	$	572	$	384,094

See Notes to Unaudited Condensed Consolidated Financial Statements

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YETI HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

(In thousands)


	Six Months Ended July 2, 2022
	Common Stock			Additional Paid-In Capital				Treasury Stock						Retained Earnings		Accumulated Other Comprehensive Income		Total Stockholders’ Equity
	Shares	Amount						Shares				Amount
Balance, January 1, 2022	87,727	$	877	$	337,735			—				—		$	178,858	$	353	$	517,823
Stock-based compensation	—	—		10,221				—				—		—		—		10,221
Common stock issued under employee benefit plans	143	1		(1)				—				—		—		—		—
Common stock withheld related to net share settlement of stock-based compensation	(19)	—		(1,280)				—				—		—		—		(1,280)
Repurchase of common stock	—	—		—				(1,677)				(100,025)		—		—		(100,025)
Other comprehensive income	—	—		—				—				—		—		1,211		1,211
Net income	—	—		—				—				—		71,911		—		71,911
Balance, July 2, 2022	87,851	$	878	$	346,675	$	—	$	(1,677)	$	—	$	(100,025)	$	250,769	$	1,564	$	499,861

	Six Months Ended July 3, 2021
	Common Stock			Additional Paid-In Capital				Treasury Stock						Accumulated Deficit		Accumulated Other Comprehensive Income (loss)		Total Stockholders’ Equity
	Shares	Amount						Shares				Amount
Balance, January 2, 2020	87,128	$	871	$	321,678			—				—		$	(33,744)

SEC Form 10-Q filed by YETI Holdings Inc.