IMPACT OF THE COVID-19 PANDEMIC

6 Months Ended

Jun. 27, 2020

COVID-19 PANDEMIC

Subsequent Event [Line Items]

IMPACT OF THE COVID-19 PANDEMIC

IMPACT OF THE COVID-19 PANDEMIC

In March 2020, the World Health Organization declared the novel strain of coronavirus (COVID-19) a global pandemic and recommended containment and mitigation measures. Since then, extraordinary actions have been taken by international, federal, state, and local public health and governmental authorities to contain and combat the outbreak and spread of COVID-19 in regions throughout the world. The pandemic has significantly impacted global economies, resulting in workforce and travel restrictions, supply chain and production disruptions for certain companies and reduced demand and spending across many industries.

During March and April 2020, in response to the COVID-19 outbreak and business disruption resulting from quarantines, “stay-at-home” orders, and similar mandates, we prioritized the health and safety of our employees and temporarily closed our retail stores, our domestic customization operations, and offices, including our innovation center, and implemented a remote work policy for all of our non-production employees. To date, we have experienced minimal supply chain disruptions related to the pandemic and have been able to meet our customers’ needs. Our supply chain, customization and logistics operations are all fully functioning. Our remote work arrangements remain in place for our non-production employees and have been designed to allow for continued operation of our business, including our financial reporting systems and internal controls. During the second quarter of 2020, our retail stores reopened in line with guidance from local authorities. Additionally, we have added safety and cleaning protocols at our stores, customization and logistics operations, and offices.

Our digital commerce remains open via YETI.com, country and region-specific YETI websites, and YETI Authorized on the Amazon Marketplace, supported by third-party logistics providers and our employees working remotely.

On March 24, 2020, as a precautionary measure to enhance our liquidity position and to increase available cash on hand, we drew down $50.0 million on our $150.0 million revolving credit facility maturing on December 17, 2024 (the “Revolving Credit Facility”). During the second quarter of 2020, we repaid in full the $50.0 million borrowed under the Revolving Credit Facility. As of June 27, 2020, we had no outstanding borrowings and $150.0 million of availability under the Revolving Credit Facility.

In an effort to further enhance our liquidity position and provide additional financial flexibility in response to the impact of COVID-19, we have taken steps to preserve cash, including reductions in discretionary spending, lowering capital expenditures and investments, along with ongoing management of forward inventory receipts, and reducing payroll costs.

On May 7, 2020, we announced the withdrawal of our full year 2020 outlook. We also announced the suspension of new hires, employee furloughs, workforce reductions, temporary reductions of our senior leadership team’s base salaries and our Board of Directors’ waiver of annual cash compensation. Concurrent with the reopening of our retail stores, we have begun to bring employees back from furlough. We will continue to monitor the impact of the COVID-19 pandemic and may adjust our action plans accordingly as the situation progresses. At this time, we do not intend to provide a full year 2020 outlook.

Given the novel and dynamic nature of this situation, we cannot reasonably estimate the full impact of the COVID-19 pandemic on YETI, its impact on our customers, retail partners, and suppliers, how quickly normal economic conditions will resume, or the related impact on our operations and demand for our products. Given the uncertainty of the situation, we believe that the pandemic could have a material adverse impact on our future revenue growth, financial condition, and future results of operations depending on the duration and severity of the COVID-19 pandemic, measures by federal, state, and local authorities to prevent its spread and any worsening of the global economic conditions. We will continue to actively monitor the effects of COVID-19 on our business. A prolonged period of store closures, changes in customer behaviors, and reductions of consumer discretionary spending would require us re-evaluate our business assumptions and estimates. These conditions would likely result in lower future net sales, as well as, cash flow and supply chain disruptions, including manufacturing delays, product shortages, as well as product excesses if we are unable to appropriately manage our inventory levels.

Although the potential magnitude and duration of the business and economic impacts of COVID-19 are uncertain, we believe that the actions taken to date, together with our current operating plan, our strong cash position, inventory on hand and availability under our Revolving Credit Facility, will provide sufficient liquidity to fund our operations for at least the next twelve months.