COMMITMENTS AND CONTINGENCIES

12 Months Ended

Dec. 28, 2024

Commitments and Contingencies Disclosure [Abstract]

Future commitments under non-cancelable agreements at December 28, 2024 were as follows (in thousands):


			Fiscal Year
	Total		2025		2026		2027		2028		2029		Thereafter
Non-cancelable agreements(1)	$	166,765	$	64,707	$	53,305	$	21,046	$	14,957	$	11,498	$	1,252

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(1)We have entered into commitments for service and maintenance agreements related to our management information systems, distribution contracts, advertising, sponsorships, and licensing agreements.

As we are unable to reasonably predict the timing of settlement of liabilities related to unrecognized tax benefits and other noncurrent tax liabilities, the table above does not include $21.2 million, net, of such liabilities that are on our consolidated balance sheet as of December 28, 2024.

We are involved in various claims and legal proceedings, some of which are covered by insurance. We believe that the existing claims and proceedings, and potential losses relating to such contingencies, will not have a material adverse effect on our consolidated financial position, results of operations, or cash flows.

Supplier Finance Program Obligations

We have a supplier finance program (“SFP”) with a financial institution which provides certain suppliers the option, at their sole discretion, to participate in the program and sell their receivables due from us for early payment.

The following table summarizes the activity of the SFP for the year ended December 28, 2024 (in thousands):


Outstanding payment obligations as of December 30, 2023	$	77,254
Invoices confirmed during the period	415,238
Confirmed invoices paid during the period	(429,365)
Outstanding payment obligations as of December 28, 2024	$	63,127

Product Recall Reserves

In January 2023, we notified the U.S. Consumer Product Safety Commission (“CPSC”) of a potential safety concern regarding the magnet-lined closures of our Hopper M30 Soft Cooler, Hopper M20 Soft Backpack Cooler, and SideKick Dry gear case (the “affected products”) and initiated a global stop sale of the affected products. In February 2023, we proposed a voluntary recall of the affected products to the CPSC, and other relevant global regulatory authorities, which we refer to as the “voluntary recalls” herein unless otherwise indicated. In conjunction with the stop sale, we determined that the affected products inventory held by us, our suppliers and our wholesale customers is unsalable, and notified our wholesale customers to return the affected products. In March 2023, we announced separate, voluntary recalls of the affected products in collaboration with the CPSC and subsequently began processing recall claims and returns.

We establish reserves for the estimated costs of a product recall when circumstances giving rise to the recall become known and when such costs are probable and estimable. As a result of the voluntary recalls, we established a reserve as of December 31, 2022, for expected future returns and the estimated cost of recall remedies for consumers with affected products. The reserve for the estimated product recall expenses is included within accrued expenses and other current liabilities on our consolidated balance sheets. Estimating the cost of recall remedies required significant judgment and is primarily based on (i) expected consumer participation rates; and (ii) the estimated costs of the consumer’s elected remedy in the recalls, including the estimated cost of either product replacements or gift card elections, logistics costs, and other recall-related costs. We reevaluate these assumptions each period, and the related reserves are adjusted when factors indicate that the reserve is either not sufficient to cover or exceeds the estimated product recall costs. The ultimate impact from the approved voluntary recalls could differ materially from these estimates.

The reserve for the estimated product recall expenses was $12.1 million and $13.1 million as of December 28, 2024 and December 30, 2023, respectively.

During the second quarter of 2023, we began processing recall-related claims and returns. Based on such experience and observed trends during 2023, we reevaluated our prior assumptions and adjusted our estimated product recall reserve. These trends included higher than anticipated elections by consumers to receive gift cards in lieu of product replacement remedies, lower than anticipated consumer recall participation rates, variations in individual product participation rates, and lower logistics costs than previously estimated. As a result, we updated our recall reserve assumptions throughout 2023, which increased the estimated recall expense reserve by $3.6 million during the year ended December 30, 2023.

During 2024, we experienced higher than anticipated consumer recall participation rates. Based on such experience and trends, we reevaluated our prior assumptions and adjusted our estimated product recall reserve. As a result, we increased the estimated recall expense reserve by $9.9 million during the year ended December 28, 2024.

The following table summarizes the activity in the reserve for the estimated product recall expenses (in thousands):


	December 28, 2024
Balance, December 30, 2023	$	13,090
Actual product refunds, replacements and recall-related costs	(3,803)
Gift card issuances(1)	(7,166)
Reserve adjustment	9,938
Balance, December 28, 2024	$	12,059

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(1)For the year ended December 28, 2024, we recognized net sales of $8.8 million from redeemed recall-related gift cards. As of December 28, 2024, we had $2.9 million in unredeemed recall-related gift card liabilities, which are included in contract liabilities within accrued expenses and other current liabilities on our consolidated balance sheet.

The product recalls, which include recall reserve adjustments and other incurred costs, had the following effect on our income before income taxes (in thousands):


	Fiscal Year Ended
	December 28, 2024		December 30, 2023
Decrease to net sales(1)	$	(8,832)	$	(21,700)
Decrease (increase) to cost of goods sold(2)	735		8,423
Decrease to gross profit	(8,097)		(13,277)
Decrease (increase) to selling, general and administrative expenses(3)	(1,841)		11,382
Decrease to income before income taxes	$	(9,938)	$	(1,895)

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(1)For the year ended December 28, 2024, reflects the impact of an unfavorable recall reserve adjustment related to higher estimated consumer recall-related participation rates. For the year ended December 30, 2023, primarily reflects the unfavorable impact of a recall reserve adjustment mainly related to higher estimated future recall remedies (i.e., estimated gift card elections). Of the total net sales impact, $8.3 million and $0.6 million was allocated to our DTC and wholesale channels for the year ended December 28, 2024, and $7.3 million and $14.4 million was allocated to our DTC and wholesale channels for the year ended December 30, 2023. These amounts were allocated based on the historical channel sell-in basis of the affected products.

(2)For the year ended December 28, 2024, reflects the impact of favorable recall reserve adjustments related to lower recall-related costs. For the year ended December 30, 2023, reflects the impact of favorable recall reserve adjustments primarily related to lower estimated costs of future product replacement remedy elections and logistics costs and lower recall-related costs.

(3)For the year ended December 28, 2024, reflects the impact of unfavorable recall reserve adjustments primarily related to higher estimated other recall-related costs as a result of higher estimated consumer recall-related participation rates. For the year ended December 30, 2023, reflects the impact of favorable recall reserve adjustments primarily related to lower estimated other recall-related costs.

The ultimate impact from the recalls may differ materially from our estimates, and may harm our business, financial condition, and results of operations. See Part I, Item 1A “Risk Factors - Risks Related to Our Business, Operations and Industry.”