FNCL Series 2007 Other Floating Rate Instrument

Company Overview

Business Model: YETI Holdings, Inc. is a global designer, retailer, and distributor of innovative outdoor products, including coolers, drinkware, bags, and apparel. The company's products are built for diverse outdoor pursuits and are characterized by high performance, exceptional quality, and premium pricing. YETI Holdings, Inc. employs an omni-channel distribution strategy, encompassing both a direct-to-consumer (DTC) channel and a wholesale channel. The DTC channel includes YETI Holdings, Inc. websites, YETI Authorized on the Amazon Marketplace, YETI Holdings, Inc. retail stores, and a corporate sales program for customized products. The wholesale channel serves a network of approximately 4,700 national, regional, and independent retail partners worldwide. The company maintains supply discipline and enforces a minimum advertised price (MAP) policy to uphold its premium brand positioning.

Market Position: YETI Holdings, Inc. competes in the large outdoor and recreation market, as well as related markets such as housewares, home and garden, outdoor living, industrial, and commercial. Competition is based on product quality, performance, durability, styling, brand image, recognition, and price. YETI Holdings, Inc. believes it competes successfully through its brand, superior design capabilities, product development, DTC capabilities, and extensive network of retail partners. Key competitors in the Coolers & Equipment category include Igloo, Coleman, Pelican, OtterBox, and private label brands. In the Drinkware category, competitors include HydroFlask, Stanley, and Owala. The market is highly fragmented and competitive, with low barriers to entry.

Recent Strategic Developments:

• Acquisitions:
  • In the first quarter of 2024, YETI Holdings, Inc. acquired Mystery Ranch, LLC, a designer and manufacturer of durable load-bearing backpacks, bags, and pack accessories, integrating its operations and products into the bags category. A limited release of the first Mystery Ranch-inspired Bozeman pack was launched in the fourth quarter of 2024.
  • Also in the first quarter of 2024, YETI Holdings, Inc. acquired Butter Pat Industries, LLC, a designer and manufacturer of cast iron cookware, expanding its cookware offerings within the Drinkware category with the launch of a new YETI Holdings, Inc.-branded Cast Iron Skillet in the third quarter of 2024.
  • In the fourth quarter of 2024, YETI Holdings, Inc. acquired powered cooling technology patents for $32.5 million to develop a unique powered cooler platform.
• Product Launches & Expansions in 2024:
  • Drinkware: Expanded offerings with the Yonder Bottle with Straw Cap, Rambler Stackable cup (new sizes), Rambler French Press, Flask and Shot Glasses, Rambler Pitcher, Food Storage containers, and the new Cast Iron Skillet.
  • Coolers & Equipment: Expanded the SideKick Dry and Roadie cooler family with new sizes, and launched the LoadOut Swivel Seat.
  • Introduced new seasonal colorways across product categories.
• Product Recall Update: Following voluntary recalls in March 2023 of the Hopper M30 Soft Cooler, Hopper M20 Soft Backpack Cooler, and SideKick Dry gear case, redesigned and improved versions of the affected products were introduced in the fourth quarter of 2023, along with new sizes. Recall reserve adjustments resulted in an unfavorable impact of $8.8 million to net sales in 2024 and $21.7 million in 2023. The total unfavorable impact to operating income related to the recalls was $9.9 million in 2024 and $1.9 million in 2023. As of December 28, 2024, the reserve for estimated recall expenses was $12.1 million.

Geographic Footprint: YETI Holdings, Inc. operates in the United States, Canada, Australia, New Zealand, Europe, and Japan. In 2024, the United States accounted for 81% of total net sales, with international sales representing 19%. The company is actively expanding its international presence, particularly in Canada, Australia, New Zealand, Asia, and Europe, identifying meaningful growth opportunities in additional international markets such as Asia. Corporate headquarters are in Austin, Texas, with additional leased office and building spaces in Montana, Australia, Canada, China, Germany, and the Netherlands. Primary distribution centers are leased and managed by third-party logistics providers in Memphis, Tennessee; Salt Lake City, Utah; Sumner, Washington (domestic); and Australia, Canada, the United Kingdom, New Zealand, Vietnam, and the Netherlands (international). As of December 28, 2024, YETI Holdings, Inc. leased and operated 24 retail stores across the United States.

Financial Performance

Revenue Analysis

Profitability Metrics:

• Gross Margin: 58.1% (2024), 56.9% (2023)
• Operating Margin: 13.4% (2024), 13.6% (2023)
• Net Margin: 9.6% (2024), 10.2% (2023)

Investment in Growth:

• R&D Expenditure: $21.1 million (1.2% of revenue)
• Capital Expenditures: $41.8 million
• Strategic Investments:
  • Acquisition of Mystery Ranch, LLC: $36.2 million (net of cash acquired)
  • Acquisition of powered cooling technology patents: $32.5 million

Business Segment Analysis

YETI Holdings, Inc. operates as one reportable operating segment. The following provides a breakdown by product category and sales channel.

Product Categories (2024 Net Sales Distribution)

• Coolers & Equipment: 38%
• Drinkware: 60%
• Other: 2%

Sales Channels (2024 Net Sales Distribution)

• Direct-to-consumer (DTC): 59%
• Wholesale: 41%

Drinkware

Financial Performance:

• Revenue: $1,094.2 million (+7.0% YoY)
• Key Growth Drivers: Driven by demand for continued expansion and innovation of Drinkware product offerings and new seasonal colorways.

Product Portfolio:

• Major product lines include Rambler Beverage Bucket, Rambler Wine Chiller, Rambler Cocktail Shaker, Rambler Colsters, Rambler Lowball, Rambler Wine Tumbler, Rambler Stackable Pints, Rambler Mugs, Rambler Tumblers, Rambler Straw Mugs and Cups, Rambler Bottles, Rambler Jugs, and Yonder Water Bottles.
• New product launches in 2024 included the Rambler French Press, Rambler Pitcher, Rambler Pour Over, Flask and Shot Glasses, Food Storage containers, and the Cast Iron Skillet (marking the launch of a new Cookware category).

Market Dynamics:

• Competes against well-known brands such as HydroFlask, Stanley, and Owala, in addition to numerous other brands and retailers.

Coolers & Equipment

Financial Performance:

• Revenue: $698.6 million (+17.0% YoY)
• Key Growth Drivers: Primarily driven by strong performance in bags, soft coolers, and hard coolers.
• Note: Net sales for this category included an unfavorable impact of $8.8 million in 2024 and $21.7 million in 2023 due to recall reserve adjustments.

Product Portfolio:

• Hard Coolers: Includes YETI Tundra, YETI Roadie (expanded with two new sizes in 2024), YETI V Series hard coolers, YETI TANK ice bucket, and YETI Silo 6G water cooler.
• Soft Coolers: The Hopper line includes Hopper M15 Soft Cooler, Hopper M12 Soft Backpack Cooler, Hopper M30 Soft Cooler, Hopper M20 Backpack Cooler, Hopper Flip Soft Cooler, Daytrip Lunch Bag, and Daytrip Lunch Box. Redesigned and improved versions of the Hopper M30, Hopper M20, and SideKick Dry gear case were introduced in the fourth quarter of 2023 following voluntary recalls.
• Cargo, Bags, and Outdoor Living: Includes LoadOut Bucket, LoadOut Swivel Seat, LoadOut GoBox, 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 (expanded with two new sizes in 2024). Also includes Mystery Ranch branded products, with the first Mystery Ranch-inspired Bozeman pack launched in the fourth quarter of 2024.

Market Dynamics:

• Competes against established and well-known legacy cooler brands such as Igloo and Coleman, as well as numerous new competitors including Pelican, OtterBox, and private label brands.

Capital Allocation Strategy

Shareholder Returns:

• Share Repurchases: In 2024, YETI Holdings, Inc. repurchased $200.0 million of common stock through two accelerated share repurchase agreements. This included 2,641,175 shares at an average cost of $37.86 per share under the February ASR Agreement and 2,485,256 shares at an average cost of $40.24 per share under the November ASR Agreement. In 2022, $100.0 million was used to repurchase 1,676,551 shares at an average cost of $59.66 per share.
• Dividend Payments: YETI Holdings, Inc. has not declared or paid any cash dividends on its common stock and intends to retain any future earnings.
• Future Capital Return Commitments: As of December 28, 2024, $100.0 million remained available under the Share Repurchase Program. In the first quarter of 2025, the Board of Directors increased the authorization by $350.0 million, bringing the total available under the program to $450.0 million as of February 24, 2025.

Balance Sheet Position (as of December 28, 2024):

• Cash and Equivalents: $358.8 million
• Total Debt: $81.5 million (comprising $78.0 million Term Loan A principal and $3.4 million finance lease debt)
• Net Cash Position: $277.3 million
• Debt Maturity Profile:
  • 2025: $6.5 million (Term Loan A principal: $4.2 million; Finance lease principal: $2.3 million)
  • 2026: $5.2 million (Term Loan A principal: $4.2 million; Finance lease principal: $1.0 million)
  • 2027: $4.3 million (Term Loan A principal: $4.2 million; Finance lease principal: $0.1 million)
  • 2028: $65.5 million (Term Loan A principal: $65.4 million; Finance lease principal: $0.1 million)
  • 2029: $0
  • The Term Loan A matures on June 22, 2028.
  • A $300.0 million Revolving Credit Facility was available with no outstanding borrowings as of December 28, 2024. YETI Holdings, Inc. was in compliance with all covenants under its Credit Facility as of December 28, 2024.

Cash Flow Generation (Fiscal Year Ended December 28, 2024):

• Operating Cash Flow: $261.4 million
• Free Cash Flow (derived): Approximately $219.6 million (Operating Cash Flow less Capital Expenditures of $41.8 million)

Operational Excellence

Production & Service Model: YETI Holdings, Inc. designs and develops its products to deliver superior performance and functionality, with a focus on maximizing performance while minimizing complexity. The company utilizes high-quality materials and advanced design and manufacturing processes. A disciplined, stage-gate product development process ensures consistent quality control and optimizes speed-to-market. YETI Holdings, Inc. collaborates with YETI Ambassadors and industry professionals for prototype testing and feedback. The company does not own or operate manufacturing facilities, instead partnering with global third-party contract manufacturers. YETI Holdings, Inc. owns the molds and tooling used in production, provides detailed product specifications, and conducts frequent inspections at manufacturing partners and upon delivery to third-party logistics providers to ensure quality.

Supply Chain Architecture: YETI Holdings, Inc. manages a global supply chain of highly qualified, third-party manufacturing and logistics partners. Sourcing partnerships are matched to provide flexibility and scalability for product introductions and evolving channel strategies. The global supply chain management team is responsible for material and equipment research, raw material supplier qualification, manufacturing partner vetting, production planning, product purchasing, and transportation oversight. The company actively mitigates concentration risk by diversifying its manufacturing partners across various geographies.

Key Suppliers & Partners:

• Raw Materials & Components: Primary materials include polyethylene, polyurethane foam, stainless-steel, polyester fabric, zippers, magnets, and other plastic materials and coatings. These are believed to be readily available from multiple vendors, with YETI Holdings, Inc. stipulating approved suppliers and controlling specifications.
• Manufacturing Partners: Core products are manufactured by third parties in China, the Philippines, Vietnam, Taiwan, Poland, Mexico, Thailand, and Malaysia, with other key partners in Mexico and Italy. The two largest manufacturers for Coolers & Equipment comprised approximately 36% of production volume in 2024, while the two largest for Drinkware comprised approximately 74% of production volume in 2024. Manufacturers do not possess unique skills or intellectual property that would prevent YETI Holdings, Inc. from migrating to other partners.
• Logistics Partners: Global third-party logistics providers manage warehousing and distribution from facilities in Memphis, Tennessee; Salt Lake City, Utah; Sumner, Washington (domestic); and Australia, Canada, the United Kingdom, New Zealand, Vietnam, and the Netherlands (international).

Facility Network:

• Corporate Headquarters: A 169,000 square foot leased facility in Austin, Texas.
• Research & Development: Purpose-built, state-of-the-art research and development centers are utilized for design prototypes and performance testing.
• Distribution: Leased and managed by third-party logistics providers, with domestic centers in Memphis, Tennessee; Salt Lake City, Utah; and Sumner, Washington, and international centers in Australia, Canada, the United Kingdom, New Zealand, Vietnam, and the Netherlands.
• Retail: 24 leased and operated retail stores across the United States.
• Other Office/Building Space: Leased in Montana, Australia, Canada, China, Germany, and the Netherlands, and additional building space in Austin, Texas.

Operational Metrics:

• Inventory reserves: $6.1 million as of December 28, 2024.
• Warranty reserves: $9.4 million as of December 28, 2024.
• Warranty costs included in cost of goods sold: $5.3 million in 2024.
• Distribution and fulfillment expenses: $323.0 million in 2024.

Market Access & Customer Relationships

Go-to-Market Strategy: YETI Holdings, Inc. employs a diverse omni-channel strategy, emphasizing premium positioning, supply discipline, and enforcement of its minimum advertised price (MAP) policy. The company primarily utilizes a one-step distribution model.

Distribution Channels:

• Direct Sales: Products are sold directly to consumers through YETI Holdings, Inc. websites, YETI Authorized on the Amazon Marketplace (which accounted for approximately 15% of net sales in 2024), and YETI Holdings, Inc. retail stores. The corporate sales program also offers customized products with licensed marks and original artwork to corporate customers.
• Channel Partners (Wholesale): YETI Holdings, Inc. sells through a diverse base of approximately 4,700 retail partners worldwide. This network includes large national retailers such as Dick’s Sporting Goods, REI, Academy Sports + Outdoors, Bass Pro Shops, Ace Hardware, Scheels, and Tractor Supply Company, as well as independent outdoor specialty, hardware, sporting goods, and farm and ranch supply stores. Retail partners are carefully selected to align with the company's premium brand image and pricing.

Customer Portfolio:

• Enterprise Customers: The corporate sales program provides customized products for a wide range of corporate events and activities, with some instances allowing for resale.
• Strategic Partnerships: YETI Holdings, Inc. collaborates with YETI Ambassadors, a diverse group of elite anglers, hunters, rodeo cowboys, barbecue pitmasters, surfers, brewmasters, fitness experts, skateboarders, and outdoor adventurers, who test prototypes and embody the brand.
• Customer Concentration: No single customer accounted for 10% or more of gross sales in 2024. One customer accounted for 12% of total accounts receivable, net, as of December 28, 2024.

Geographic Revenue Distribution (Fiscal Year Ended December 28, 2024):

• United States: $1,490.5 million (81% of total net revenue)
• International: $339.4 million (19% of total net revenue)
• Growth Markets: YETI Holdings, Inc. continues to expand its presence in Canada, Australia, New Zealand, Asia, and Europe, believing there are meaningful growth opportunities in additional international markets, such as Asia.

Competitive Intelligence

Market Structure & Dynamics

Industry Characteristics: YETI Holdings, Inc. operates in the large and highly competitive outdoor and recreation market, which is characterized by new product introductions, frequent enhancements, and evolving customer demands. The market is fragmented with low barriers to entry. Consumers are increasingly technologically savvy and expect a seamless omni-channel experience.

Competitive Positioning Matrix:

Direct Competitors

Primary Competitors:

• Coolers & Equipment: Established brands such as Igloo and Coleman, as well as newer entrants like Pelican, OtterBox, and various private label brands.
• Drinkware: Well-known brands including HydroFlask, Stanley, and Owala, alongside numerous other brands and retailers.

Emerging Competitive Threats: The market faces potential threats from new entrants, disruptive technologies (including artificial intelligence), and alternative solutions. Competitors may develop superior products, offer lower prices, adapt more quickly to consumer changes, or possess greater resources in areas such as retail presence, global distribution, financial strength, supplier relationships, R&D, and marketing.

Competitive Response Strategy: YETI Holdings, Inc. aims to maintain its competitive advantage by continuously introducing new products and enhancing existing ones, investing in sales and marketing (including dedicated sales forces for newer regions), and developing and improving technologies to ensure a convenient and consistent customer experience. The company aggressively pursues and defends its intellectual property rights, employing proactive online marketplace monitoring and litigation to combat counterfeit offerings and infringement.

Risk Assessment Framework

Strategic & Market Risks

Market Dynamics: YETI Holdings, Inc.'s sales are sensitive to general economic conditions, consumer confidence, disposable income, credit availability, unemployment, and tax rates, as its products are discretionary items. Adverse economic conditions, including inflationary pressures and rising interest rates, could reduce demand. The company faces risks if it fails to attract new customers, maintain its brand image, or accurately forecast demand, particularly when expanding into new markets or launching new products. Technology Disruption: The outdoor and recreation products industry is characterized by frequent new product introductions and enhancements. Failure to successfully design, develop, and market new products in a timely manner could harm the business. Customer Concentration: While no single customer accounted for 10% or more of gross sales in 2024, one customer represented 12% of total accounts receivable, net, in both 2024 and 2023, indicating some credit risk. International Expansion: Expansion into international markets (Canada, Australia, Europe, Asia) carries significant risks, including challenges in establishing brand identity, building retail networks, increased shipping costs, lower margins, longer collection cycles, local competition, compliance with diverse foreign laws (e.g., privacy, product liability, trade, labor), intellectual property protection difficulties, currency fluctuations, and political/economic instability. ESG Matters: YETI Holdings, Inc.'s ESG aspirations and disclosures expose it to risks, including potential reputational damage, financial performance impacts, increased scrutiny, lawsuits, or market access restrictions if goals are not met or accurately reported, or if actions are perceived negatively by stakeholders. Climate Change: New governmental requirements or changing consumer preferences related to climate change could increase costs, reduce demand, or impact raw material availability. Physical risks from extreme weather and natural disasters could disrupt the supply chain, increase production costs, and affect consumer purchasing patterns.

Operational & Execution Risks

Supply Chain Vulnerabilities: Reliance on third-party contract manufacturers exposes YETI Holdings, Inc. to risks such as production delays, quality control issues, manufacturer financial difficulties, or disruptions from catastrophic events. The concentration of production volume with a few key manufacturers (e.g., 36% for Coolers & Equipment, 74% for Drinkware from two largest manufacturers each) creates dependency risk. Inability to replace or supplement manufacturing capacity could increase costs and delay product delivery. Logistics & Distribution: Dependence on a limited number of domestic distribution centers (Memphis, Salt Lake City, Sumner) makes operations vulnerable to natural disasters or system failures. International shipping is subject to risks like labor disputes, port congestion, container/labor shortages, increased transportation costs, and geopolitical conflicts (e.g., Red Sea disruptions). Product Recalls: The company is subject to product recall and warranty liability claims. The voluntary recalls in 2023 for certain soft coolers and gear cases resulted in substantial costs and sales impacts, and future recalls could similarly affect reputation, earnings, and financial condition. Growth Management: Rapid expansion of operations, headcount, geographic footprint, and product offerings can strain resources, leading to difficulties in sourcing, logistics, recruiting, marketing, product design, and maintaining internal controls. Third-Party Compliance: Risks arise if independent suppliers, manufacturers, or retail partners fail to comply with ethical business practices, labor laws, or other legal and regulatory requirements, potentially harming YETI Holdings, Inc.'s reputation and business.

Financial & Regulatory Risks

Market & Financial Risks: YETI Holdings, Inc. relies on cash flow from operations for growth. Global economic factors, such as diminished liquidity, high interest rates, and inflation, could impact its ability to obtain additional financing. Its indebtedness under the Credit Facility may limit investment flexibility and requires compliance with financial covenants. Unsecured accounts receivable expose the company to credit risk from retail partners. Impairment of goodwill or other intangible assets could result in charges to earnings. Foreign Exchange: International operations expose YETI Holdings, Inc. to currency exchange rate fluctuations, which can adversely impact revenues, operating expenses, and intercompany balances. The company anticipates adverse impacts from foreign currency headwinds in 2025 due to the strengthening U.S. dollar. Accounting Estimates: The preparation of financial statements involves significant estimates (e.g., revenue recognition, product recall reserves, inventory valuation, long-lived assets, income taxes). Inaccurate estimates could lead to material misstatements or impact financial results. Tax Laws: Changes in tax laws (e.g., OECD Pillar Two, U.S. tax law) or unanticipated tax liabilities could adversely affect the effective income tax rate and profitability. Regulatory & Compliance Risks: YETI Holdings, Inc. must comply with a wide array of federal, state, local, and foreign laws and regulations, including those related to trade, customs, labor, consumer protection, data privacy (e.g., CPRA, GDPR), information security, sustainability, and climate change. Non-compliance could result in lawsuits, fines, penalties, and reputational damage. AI Use: The integration and use of AI in business operations present risks such as bias, miscalculations, data errors, unintended consequences, regulatory issues, reputational harm, operational disruptions, increased data security risks, and potential competitive disadvantages. The evolving legal and regulatory environment for AI could also entail significant compliance costs.

Geopolitical & External Risks

Geopolitical Exposure: Geopolitical conflicts, acts of war or terrorism, and political instability can disrupt supply chains, increase transportation costs, and impact consumer confidence. Sanctions and export control measures could limit business operations. Trade Relations: The imposition of new or increased tariffs or other trade restrictions (e.g., by the Trump Administration) could significantly raise product costs, erode margins, or necessitate price increases, potentially leading to customer loss. Catastrophic Events: The business is vulnerable to damage or interruption from natural disasters (earthquakes, fires, floods), power outages, telecommunications failures, public health crises (e.g., COVID-19 pandemic's impact on supply chains), and cybersecurity incidents. Insurance coverage may be insufficient or unavailable for all potential losses.

Innovation & Technology Leadership

Research & Development Focus: YETI Holdings, Inc. maintains a strong focus on research and development to drive innovation and technology leadership.

• Core Technology Areas: The company designs and develops products for superior performance and functionality, leveraging consumer insights and product knowledge to inform a robust product roadmap. This involves using high-quality materials and advanced design and manufacturing processes to create premium, category-redefining products.
• Innovation Pipeline: YETI Holdings, Inc. operates purpose-built, state-of-the-art research and development centers for generating design prototypes and conducting rigorous performance testing. A disciplined, stage-gate product development process is employed to ensure consistent quality control and optimize speed-to-market. Collaboration with YETI Ambassadors and industry professionals provides critical feedback for final product designs.
• Recent Developments: In the fourth quarter of 2024, YETI Holdings, Inc. acquired powered cooling technology patents to develop a unique powered cooler platform, indicating a strategic move into new technological areas.

Intellectual Property Portfolio: YETI Holdings, Inc. owns patents, trademarks, copyrights, and other intellectual property rights that are considered critical to its success and competitive advantage.

• Patent Strategy: The company seeks intellectual property protection in the United States and certain international jurisdictions, applying for patents, and registering trademarks and copyrights.
• IP Litigation: YETI Holdings, Inc. aggressively pursues and defends its intellectual property rights, employing experienced legal and brand protection teams to identify, protect, and optimize IP assets globally. This includes proactive online marketplace monitoring and litigation to disrupt online counterfeit offerings and enforce rights against infringers.

Technology Partnerships: YETI Holdings, Inc. utilizes products and services from third parties that incorporate integrated artificial intelligence technology.

Leadership & Governance

Executive Leadership Team

Leadership Continuity: YETI Holdings, Inc. depends on the talents and continued efforts of its senior management and key employees. The ability to manage future expansion requires attracting, motivating, and retaining additional qualified personnel.

Board Composition: The Board of Directors is classified into three classes of directors. The Audit Committee holds primary oversight responsibility for YETI Holdings, Inc.'s overall enterprise risk assessment and risk management policies, including those related to information technology and security systems and cybersecurity threats. The Audit Committee receives quarterly presentations from the Chief Information Officer and Director, Cyber Security, on information security matters.

Human Capital Strategy

Workforce Composition (as of December 28, 2024):

• Total Employees: Approximately 1,340 people worldwide.
• Geographic Distribution: Approximately 88% of the workforce is located in the United States, with employees representing ten countries globally.

Talent Management:

• Acquisition & Retention: YETI Holdings, Inc. strives to attract and retain top talent by offering market-competitive compensation, comprehensive healthcare, retirement benefits, paid time off, bonding leave, and mental health, wellness, and financial planning programs. The company's brand and culture are considered central to its ability to attract, develop, motivate, and retain highly-skilled talent.
• Employee Value Proposition: The company fosters a unique culture that values ideas, innovation, collaboration, and personal development, aiming to provide an environment where employees can have fulfilling careers and be productive, creative, happy, and healthy.

Diversity & Development:

• Diversity Metrics: YETI Holdings, Inc. is committed to building an inclusive and diverse culture through various initiatives focused on employee recruitment, training, and development.
• Development Programs: Employees are offered opportunities to participate in educational activities and trainings. The company also employs programs to recognize leadership and employees who exemplify its core values.
• Culture & Engagement: YETI Holdings, Inc. actively communicates with and listens to employees through multiple internal channels, encouraging feedback via ongoing employee engagement activities, including satisfaction surveys. The company reports no labor-related work stoppages and believes its relations with employees are positive and stable. None of its employees are currently covered by a collective bargaining agreement.

Environmental & Social Impact

Environmental Commitments: YETI Holdings, Inc. acknowledges the evolving focus on climate change and other environmental matters from governments, NGOs, customers, and investors. The company is subject to changing regulatory restrictions and requirements in areas such as sustainability and responses to climate change.

Supply Chain Sustainability: YETI Holdings, Inc. expects its independent suppliers and manufacturing partners to comply with ethical business practices and applicable laws and regulations, including those related to child labor, wages, forced labor, discrimination, safe working conditions, human rights, and environmental standards.

Social Impact Initiatives: YETI Holdings, Inc. expresses an unwavering commitment to outdoor and recreation communities. The company is committed to building an inclusive and diverse culture through employee recruitment, training, and development initiatives, and supports voluntary, employee-led resource groups.

Business Cyclicality & Seasonality

Demand Patterns:

• Seasonal Trends: YETI Holdings, Inc. historically experiences its highest net sales in the fourth quarter, coinciding with the seasonal holiday shopping season. The first quarter typically generates the lowest sales. In 2024, net sales distribution by quarter was 19% (Q1), 25% (Q2), 26% (Q3), and 30% (Q4). In 2023, it was 18% (Q1), 24% (Q2), 26% (Q3), and 32% (Q4).
• Economic Sensitivity: As YETI Holdings, Inc. products are discretionary items, sales are significantly influenced by economic factors such as actual and perceived economic conditions, consumer confidence, disposable income, consumer credit availability, unemployment, and tax rates. Consumer purchases of discretionary items tend to decline during recessionary periods or times of economic instability, and inflationary conditions or rising interest rates could reduce demand.

Planning & Forecasting: The company must forecast inventory needs and place orders with manufacturers in advance of firm customer orders. This forecasting is particularly challenging due to expansion into new markets and geographies, new product development, and macroeconomic uncertainties including consumer discretionary spending, interest rates, inflation, tariffs, and geopolitical events. Inaccurate forecasting can lead to excess inventory or product shortages, impacting brand image, gross margin, and reputation.

Regulatory Environment & Compliance

Regulatory Framework: YETI Holdings, Inc.'s global business activities are subject to various federal, state, local, and foreign laws, rules, and regulations.

• Industry-Specific Regulations: This includes compliance with labor and employment laws, sales and other taxes, customs regulations, and consumer protection laws governing the importation, promotion, and sale of merchandise. The company is also subject to product safety regulations, such as those enforced by the U.S. Consumer Product Safety Commission (CPSC), as demonstrated by its voluntary product recalls.
• International Compliance: Compliance extends to foreign laws and regulations, including enhanced privacy laws (e.g., California Privacy Rights Act (CPRA) and the European Union’s General Data Protection Regulation (GDPR)), information security, sustainability, and climate change responses.
• Trade & Export Controls: Import operations are subject to complex trade and customs laws, duties, indirect taxes, quotas, and non-tariff trade barriers. The company relies on free trade agreements and is subject to U.S. Customs and Border Protection (CBP) regulations. Compliance with U.S. and foreign laws related to foreign operations, such as the U.S. Foreign Corrupt Practices Act (FCPA), the UK Bribery Act 2010, U.S. Office of Foreign Assets Controls (OFAC) regulations, and anti-money laundering laws, is also required.
• Legal Proceedings: YETI Holdings, Inc. is involved in various claims and legal proceedings, some covered by insurance, which it believes are not material.

Tax Strategy & Considerations

Tax Profile:

• Effective Tax Rate: YETI Holdings, Inc.'s effective tax rate was 25% for both 2024 and 2023.
• Geographic Tax Planning: The company is subject to income taxes in the United States (federal and state) and various foreign jurisdictions. Undistributed earnings of foreign subsidiaries are considered indefinitely reinvested, with no taxes recognized on such earnings except for the transition tax from the Tax Cuts and Jobs Act during 2017.
• Tax Reform Impact: YETI Holdings, Inc. is evaluating the impact of the Organization for Economic Co-Operation and Development’s (OECD) Pillar Two global minimum tax framework, which was not material to its consolidated financial statements as of December 28, 2024. Significant changes in U.S. or other countries' tax laws could materially impact income tax liability and effective tax rate.

Insurance & Risk Transfer

Risk Management Framework: YETI Holdings, Inc. operates a risk-based cybersecurity program integrated into its enterprise risk framework, which identifies, aggregates, and evaluates risks across the enterprise, including information technology and security risks. The Chief Information Officer, Director, Cyber Security, and Director, Technology Compliance are primarily responsible for the cybersecurity program, which is based on industry standards (ISO, NIST). The program employs a layered approach to managing cybersecurity threats, including technical safeguards (firewalls, anti-malware, access controls), a comprehensive incident response plan with severity tiers, periodic assessments and testing (e.g., annual penetration tests), and employee education and awareness programs. Processes are also in place to oversee and identify risks from third-party vendors.

Insurance Coverage: YETI Holdings, Inc. maintains a cybersecurity and information security risk insurance policy. However, the company's insurance coverage may be inadequate to cover all liabilities related to operational risks, product liability, product recalls, damage to third parties or infrastructure, or catastrophic events, particularly business interruptions related to public health crises.