Net sales increased 7%
Net income grew 51%
Adjusted Net Income increased 81%
AUSTIN, Texas--(BUSINESS WIRE)--
YETI Holdings, Inc. (NYSE: YETI) today reported financial results for
its third quarter ended September 29, 2018.
Third Quarter 2018 Highlights as Compared to Third Quarter 2017
-
Net sales increased 7% to $196.1 million
-
Gross margin improved 480 basis points to 49.7%
-
Net income increased 51% to $17.0 million, or $0.21 per diluted share
-
Adjusted Net Income grew 81% to $20.2 million, or $0.24 per diluted
share
-
Adjusted EBITDA increased 26% to $38.4 million
The Company’s results are reported in this press release on a GAAP
and as adjusted, non-GAAP basis. A reconciliation of non-GAAP to GAAP
financial information is provided at the end of this press release. The
non-GAAP adjustments include, non-cash stock-based compensation expense;
asset impairment charges; early extinguishment of debt; investments in
new retail locations and international market expansion; transition to
Cortec majority ownership; transition to the ongoing senior management
team; and transition to a public company.
Matt Reintjes, President and Chief Executive Officer of YETI Holdings,
Inc., commented, “We are pleased with our performance in the third
quarter which resulted in a significant increase in both gross margin
and net income. We continue to support and stoke a passionate customer
base, design and develop superior product, and optimally balance our
omni-channel distribution.Looking ahead, we remain committed to
executing against our growth strategies through expanding our customer
base as we drive brand awareness, introducing new and innovative
products, accelerating DTC sales and expanding our international
presence. YETI is an exceptional brand with enormous opportunity.I
want to thank all of our customers and YETI employees whose passion has
built YETI into the brand it is today.”
For the Three Months (Thirteen Weeks) Ended September 29, 2018:
Net sales increased 7% to $196.1 million compared with $183.0
million during the same period last year.
Wholesale channel net sales were approximately flat at $125.0 million
compared to the same period last year with lower Coolers & Equipment net
sales, offset by an increase in Drinkware net sales. The decrease in
Coolers & Equipment net sales was due primarily to a prior year
non-recurring disposition of certain prior generation, excess end of
life soft cooler inventories. The increase in Drinkware net sales in the
wholesale channel was a result of replenishment orders from retail
partners due to strong product sell through, sales of new products, and
additional colorways for existing products.
Net sales through the Company’s direct-to-consumer (“DTC”) channel
increased 23%, to $71.2 million compared to $58.0 million during the
same period last year. DTC sales were driven by an increase in customer
purchases on the Company’s website, YETI.com, and YETI Authorized on the
Amazon Marketplace, as well as increased consumer and corporate
customized Drinkware, primarily from YETIcustomshop.com.
Coolers & Equipment net sales decreased 16%, to $86.7 million compared
to $102.9 million during the same period last year. The decrease was
within the wholesale channel and primarily due to the aforementioned
disposition of certain prior generation, excess end of life soft cooler
inventories during the third quarter of 2017.
Drinkware net sales increased 37%, to $104.0 million compared to
$75.8 million during the same period last year driven by strong growth
in both the wholesale and DTC channels. Growth in both channels
benefitted from the expansion of the Drinkware product line, new
Drinkware accessories, and the introduction of new Drinkware colorways.
Gross profit increased 19% to $97.5 million, or 49.7% of net
sales, compared to $82.2 million, or 44.9% of net sales, during the same
period last year. The 480 basis point increase in gross profit margin
was driven largely by cost improvements across the product portfolio,
the lapping of the aforementioned inventory disposition, increased
higher margin DTC channel sales and fixed cost leverage, partially
offset by price reductions in select hard and soft coolers as the
Company planned for new product introductions.
SG&A expense increased 21% to $69.4 million, or 35.4% of net
sales, compared to $57.5 million, or 31.4% of net sales, during the same
period last year. The increase in SG&A dollars was mainly attributable
to higher employee wages and benefits due to increased headcount and
incentive compensation, professional fees, and increased facility,
utility and outbound freight expenses.
Operating income increased 14% to $28.1 million, or 14.3% of net
sales, compared to $24.7 million, or 13.5% of net sales, during the same
period last year.
Adjusted Operating Income increased 29% to $31.7 million, or 280
basis points to 16.2% of net sales, compared to $24.6 million, or 13.4%
of net sales, during the same period last year.
Balance Sheet and Cash Flow Highlights
Cash at the end of the third quarter totaled $52.1 million.
Inventory at the end of the quarter was $157.7 million compared
to $227.2 million at the end of the third quarter of 2017.
Total debt was $387.8 million and net debt, which is total debt
less cash of $52.1 million, to Adjusted EBITDA for the trailing twelve
months was 2.6 times as of September 29, 2018. Adjusted EBITDA for the
trailing twelve months was $130.0 million and is calculated using the
fiscal 2017 Adjusted EBITDA of $97.5 million, as disclosed in our Final
Prospectus for our initial public offering, (IPO), less Adjusted EBITDA
for the nine months ended September 30, 2017 of $64.3 million, plus
Adjusted EBITDA for the nine months ended September 29, 2018 of $96.8
million.
Cash flow provided by operating activities was $35.2 million and
capital expenditures were $6.3 million for the third quarter 2018.
For the Nine Months (Thirty-Nine Weeks) Ended September 29, 2018:
Net sales increased 23% to $537.7 million compared with $437.1
million during the same period last year.
Wholesale channel net sales increased 13%, to $360.7 million compared to
$318.8 million during the same period last year. Net sales through the
Company’s DTC channel increased 49%, to $176.9 million compared to
$118.4 million during the same period last year.
Coolers & Equipment net sales increased by 5%, to $240.0 million
compared to $229.2 million during the same period last year. Drinkware
net sales increased by 44%, to $280.7 million compared to $194.4 million
during the same period last year.
Gross profit increased 27% to $255.3 million, or 47.5% of net
sales, compared to $201.5 million, or 46.1% of net sales, during the
same period last year.
SG&A expense increased 18% to $190.7 million, or 35.5% of net
sales, compared to $161.4 million, or 36.9% of net sales, during the
same period last year.
Operating income increased 61% to $64.6 million, or 12.0% of net
sales, compared to $40.1 million, or 9.2% of net sales, during the same
period last year.
Adjusted Operating Income increased 64% to $78.3 million, or
14.6% of net sales, compared to $47.9 million, or 11.0% of net sales,
during the same period last year.
Net income increased 185% to $32.6 million, or $0.39 per diluted
share, versus net income of $11.4 million, or $0.14 per diluted share,
during the same period last year.
Adjusted Net Income increased 166% to $43.6 million, or $0.53 per
diluted share, versus Adjusted Net Income of $16.4 million, or $ 0.20
per diluted share, during the same period last year.
Adjusted EBITDA increased by 51%, to $96.8 million from $64.3
million during the same period last year.
Company Updates
-
On October 24, 2018, the Company consummated its IPO at an offering
price to the public of $18.00 per share.
-
The Company sold 2.5 million shares of its common stock in the IPO,
resulting in total net proceeds of $37.9 million after deducting
underwriters' discounts and expenses and other offering costs.
-
The Company plans to use the net proceeds from the IPO plus additional
cash on hand to repay $50 million of debt under its outstanding credit
facility.
For Fiscal 2018 the Company expects the following:
-
Net sales to increase between 19% and 20% compared to Fiscal
2017 with higher sales growth in the DTC channel relative to the
wholesale channel;
-
Operating income as a percentage of net sales between 12.8% and
13.1%, primarily driven by higher gross margin;
-
Adjusted Operating Income as a percentage of net sales between
15.2% and 15.5%, primarily driven by higher gross margin;
-
Net income per diluted share between $0.60 and $0.64. This
assumes a tax rate of approximately 22.5% and approximately 83 million
shares outstanding;
-
Adjusted Net Income per diluted share between $0.79 and $0.82,
as compared to $0.28 last year;
-
Adjusted EBITDA between $141 million and $144 million, as
compared to $97.5 million last year; and
-
Capital expenditures to be between $21 million and $24 million.
Conference Call Details
A conference call to discuss the third quarter fiscal 2018 financial
results is scheduled for today, November 29, 2018, at 8:00 a.m. Eastern
Time. Investors and analysts interested in participating in the call are
invited to dial 877-451-6152 (international callers please dial
201-389-0879) approximately 10 minutes prior to the start of the call. A
live audio webcast of the conference call will be available online at http://investors.yeti.com
and by dialing 844-512-2921 and entering the access code 13684291. The
replay will be available until December 13, 2018. A copy of this press
release will be furnished to the Securities and Exchange Commission on a
Current Report on Form 8-K, and will be posted to our investor relations
web site, prior to the conference call.
Non-GAAP Financial Measures
We refer to certain financial measures that are not recognized under
U.S. generally accepted accounting principles ("GAAP"). Please see "Note
Regarding Non-GAAP Financial Information and "Reconciliation of GAAP to
Non-GAAP Financial Information" below for additional information and a
reconciliation of the non-GAAP financial measures to the most comparable
GAAP financial measures.
About YETI:
YETI is a rapidly growing designer, marketer, retailer, and distributor
of a variety of innovative, branded, premium products to a wide-ranging
customer base. Our brand promise is to ensure each YETI product delivers
exceptional performance and durability in any environment, whether in
the remote wilderness, at the beach, or anywhere else life takes you. We
bring our products to market through a diverse and powerful omni-channel
strategy, comprised of our select group of national and independent
retail partners and our DTC channel. By consistently delivering
high-performing products, we have built a following of engaged brand
loyalists throughout the United States, Canada, Australia, and
elsewhere, ranging from serious outdoor enthusiasts to individuals who
simply value products of uncompromising quality and design. Our
relationship with customers continues to thrive and deepen as a result
of our innovative new product introductions, expansion and enhancement
of existing product families, and multifaceted branding activities.
Forward-looking statements:
This press release 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 press release 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, including those set forth in the quote from
the Company’s President and CEO, and the Fiscal 2018 guidance provided
herein. 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: our ability
to maintain and strengthen our brand and generate and maintain ongoing
demand for our products; our ability to successfully design and develop
new products; our ability to effectively manage our growth; our ability
to expand into additional consumer markets, and our success in doing so;
the success of our international expansion plans; our ability to compete
effectively in the outdoor and recreation market and protect our brand;
problems with, or loss of, our third-party contract manufacturers and
suppliers, or an inability to obtain raw materials; fluctuations in the
cost and availability of raw materials, equipment, labor, and
transportation and subsequent manufacturing delays or increased costs;
our ability to accurately forecast demand for our products and our
results of operations; our relationships with our independent retail
partners, who account for a significant portion of our sales; the impact
of natural disasters and failures of our information technology on our
operations and the operations of our manufacturing partners; our ability
to attract and retain skilled personnel and senior management, and to
maintain the continued efforts of our management and key employees; the
impact of our indebtedness on our ability to invest in the ongoing needs
of our business; and other risks and uncertainties listed in YETI’s
filings with the United States Securities and Exchange Commission (the
“SEC”), including under the heading “Risk Factors” and elsewhere in
YETI’s final prospectus dated October 24, 2018 filed with the SEC on
October 25, 2018, as such risk factors may be amended, supplemented or
superseded from time to time by other reports the Company files with the
SEC. These forward-looking statements are made based upon detailed
assumptions and reflect management’s current expectations and beliefs.
While YETI believes that these assumptions underlying the
forward-looking statements are reasonable, YETI cautions that it is very
difficult to predict the impact of known factors, and it is impossible
for YETI to anticipate all factors that could affect actual results.
The forward-looking statements included here are made only as of the
date hereof. YETI undertakes 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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YETI Holdings, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
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Three Months Ended
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Nine Months Ended
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September 29,
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September 30,
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September 29,
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September 30,
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|
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2018
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|
2017
|
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|
2018
|
|
|
2017
|
|
Net sales
|
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|
$
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196,109
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|
|
$
|
183,032
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|
|
$
|
537,654
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|
|
$
|
437,140
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|
Cost of goods sold
|
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|
|
98,568
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|
100,840
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|
282,354
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|
235,662
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Gross profit
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|
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|
97,541
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|
|
82,192
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|
|
|
255,300
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|
201,478
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|
Selling, general, and administrative expenses
|
|
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|
69,417
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|
|
|
57,473
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|
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|
190,746
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|
|
161,381
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Operating income
|
|
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|
28,124
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|
|
|
24,719
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|
|
|
64,554
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|
40,097
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Interest expense
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|
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|
(7,755)
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|
(8,351)
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|
(24,474)
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|
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|
(23,961)
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Other (expense) income
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|
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|
(214)
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|
|
|
111
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|
|
|
(325)
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|
|
|
1,261
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|
Income before income taxes
|
|
|
|
20,155
|
|
|
|
16,479
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|
|
|
39,755
|
|
|
|
17,397
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Income tax expense
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|
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|
(3,125)
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|
|
|
(5,208)
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|
(7,161)
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|
|
|
(5,970)
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Net income
|
|
|
$
|
17,030
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|
|
$
|
11,271
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|
|
$
|
32,594
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|
|
$
|
11,427
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Net income per share
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Basic
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$
|
0.21
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$
|
0.14
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$
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0.40
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|
|
$
|
0.14
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Diluted
|
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$
|
0.21
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|
|
$
|
0.14
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|
|
$
|
0.39
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|
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$
|
0.14
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Weighted average common shares outstanding
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Basic
|
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81,147
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|
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81,479
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|
|
81,238
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|
|
|
81,460
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Diluted
|
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|
82,924
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|
|
|
82,988
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|
|
82,946
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|
|
|
83,015
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YETI Holdings, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
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September 29,
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December 30,
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|
September 30,
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(in thousands, except share data)
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2018
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2017
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2017
|
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ASSETS
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Current assets
|
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Cash
|
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$
|
52,100
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|
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$
|
53,650
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$
|
34,736
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Accounts receivable, net
|
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|
|
61,915
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|
|
|
67,152
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|
|
|
64,861
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Inventory
|
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|
|
157,669
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|
|
|
175,098
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|
|
|
227,154
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Prepaid expenses and other current assets
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|
12,957
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|
7,134
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|
|
|
11,688
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Total current assets
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|
|
284,641
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|
|
|
303,034
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|
|
|
338,439
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Property and equipment, net
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|
72,405
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|
|
|
73,783
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|
|
|
77,567
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Goodwill
|
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|
54,293
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|
|
|
54,293
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|
|
|
54,426
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Intangible assets, net
|
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|
|
81,113
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|
|
|
74,302
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|
|
|
73,177
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Deferred income taxes
|
|
|
|
9,088
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|
|
|
10,004
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|
5,496
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Deferred charges and other assets
|
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|
1,052
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|
|
|
1,011
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|
|
966
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Total assets
|
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$
|
502,592
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$
|
516,427
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$
|
550,071
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LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
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Current liabilities
|
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Accounts payable
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$
|
76,851
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$
|
40,342
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|
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$
|
31,396
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Accrued expenses and other current liabilities
|
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44,674
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45,862
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|
|
|
40,725
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Taxes payable
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|
6,185
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|
|
|
12,280
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|
|
|
18,178
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Accrued payroll and related costs
|
|
|
|
11,201
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|
|
|
6,364
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|
|
|
5,065
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Current maturities of long-term debt
|
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|
47,050
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|
47,050
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|
|
|
46,550
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Total current liabilities
|
|
|
|
185,961
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|
|
|
151,898
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|
|
|
141,914
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Long-term debt, net of current portion
|
|
|
|
340,743
|
|
|
|
428,632
|
|
|
|
480,230
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Other liabilities
|
|
|
|
13,047
|
|
|
|
12,128
|
|
|
|
11,687
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|
Total liabilities
|
|
|
|
539,751
|
|
|
|
592,658
|
|
|
|
633,831
|
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Commitments and contingencies
|
|
|
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|
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Equity
|
|
|
|
|
|
|
|
|
|
|
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|
Common stock, par value $0.01; 400,000 shares authorized; 81,147,
81,535, and 81,535 shares outstanding at September 29, 2018,
December 30, 2017, and September 30, 2017, respectively
|
|
|
|
811
|
|
|
|
815
|
|
|
|
815
|
|
Additional paid-in capital
|
|
|
|
227,159
|
|
|
|
219,095
|
|
|
|
214,888
|
|
Accumulated deficit
|
|
|
|
(265,113)
|
|
|
|
(296,184)
|
|
|
|
(299,514)
|
|
Accumulated other comprehensive (loss) income
|
|
|
|
(16)
|
|
|
|
43
|
|
|
|
51
|
|
Total stockholders’ deficit
|
|
|
|
(37,159)
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|
|
|
(76,231)
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|
|
|
(83,760)
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Total liabilities and stockholders’ equity
|
|
|
$
|
502,592
|
|
|
$
|
516,427
|
|
|
$
|
550,071
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
YETI Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
September 29,
|
|
|
September 30,
|
|
|
|
2018
|
|
|
2017
|
|
Cash Flows from Operating Activities:
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
$
|
32,594
|
|
|
|
11,427
|
|
Adjustments to reconcile net income to cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
18,218
|
|
|
|
15,171
|
|
Amortization of deferred loan costs
|
|
|
|
2,774
|
|
|
|
1,661
|
|
Stock-based compensation
|
|
|
|
10,031
|
|
|
|
9,186
|
|
Deferred income taxes
|
|
|
|
916
|
|
|
|
13,410
|
|
Impairment of long-lived assets
|
|
|
|
598
|
|
|
|
—
|
|
Gain on disposal of long-lived assets
|
|
|
|
(20)
|
|
|
|
—
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net
|
|
|
|
5,197
|
|
|
|
(29,676)
|
|
Inventory
|
|
|
|
17,373
|
|
|
|
18,950
|
|
Income tax receivable
|
|
|
|
—
|
|
|
|
(257)
|
|
Other current assets
|
|
|
|
(3,104)
|
|
|
|
14,436
|
|
Accounts payable and accrued expenses
|
|
|
|
39,261
|
|
|
|
13,234
|
|
Taxes payable
|
|
|
|
(6,099)
|
|
|
|
(6,907)
|
|
Other
|
|
|
|
1,095
|
|
|
|
10,484
|
|
Net cash provided by operating activities
|
|
|
|
118,834
|
|
|
|
71,119
|
|
Cash Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
|
Additions to property and equipment
|
|
|
|
(13,339)
|
|
|
|
(40,470)
|
|
(Additions) reductions to intangible assets, net
|
|
|
|
(10,752)
|
|
|
|
4,968
|
|
Changes in notes receivables
|
|
|
|
—
|
|
|
|
596
|
|
Cash paid to Rambler On for acquisition
|
|
|
|
—
|
|
|
|
(2,000)
|
|
Proceeds from sale of long-lived assets
|
|
|
|
165
|
|
|
|
—
|
|
Net cash used in investing activities
|
|
|
|
(23,926)
|
|
|
|
(36,906)
|
|
Cash Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
|
Changes in revolving line of credit
|
|
|
|
—
|
|
|
|
20,000
|
|
Repayments of long-term debt
|
|
|
|
(90,663)
|
|
|
|
(34,163)
|
|
Payments of deferred financing fees
|
|
|
|
—
|
|
|
|
(1,957)
|
|
Cash paid for repurchase of common stock
|
|
|
|
(1,967)
|
|
|
|
—
|
|
Proceeds from employee stock transactions
|
|
|
|
53
|
|
|
|
99
|
|
Taxes paid in connection with exercise of stock options
|
|
|
|
(57)
|
|
|
|
(2,018)
|
|
Dividends
|
|
|
|
(2,523)
|
|
|
|
(2,812)
|
|
Payments of offering costs
|
|
|
|
(1,315)
|
|
|
|
—
|
|
Net cash used in financing activities
|
|
|
|
(96,472)
|
|
|
|
(20,851)
|
|
Effect of exchange rate changes on cash
|
|
|
|
14
|
|
|
|
83
|
|
Net change in cash
|
|
|
|
(1,550)
|
|
|
|
13,445
|
|
Cash, beginning of period
|
|
|
|
53,650
|
|
|
|
21,291
|
|
Cash, end of period
|
|
|
$
|
52,100
|
|
|
$
|
34,736
|
|
|
|
|
|
|
|
|
|
Note Regarding Non-GAAP Financial Information
This press release includes financial measures that are not calculated
in accordance with GAAP, including Adjusted Operating Income, Adjusted
Net Income, Adjusted Net Income per diluted share, and Adjusted EBITDA.
Adjusted Operating Income and Adjusted Net Income are defined as
operating income and net income, respectively, adjusted for non-cash
stock-based compensation expense, asset impairment charges, investments
in new retail locations and international market expansion, transition
to Cortec majority ownership, transition to the ongoing senior
management team, and transition to a public company, and, in the case of
Adjusted Net Income, also adjusted for early extinguishment of debt and
the tax impact of all adjustments. Adjusted Net Income per share is
calculated using Adjusted Net Income, as defined above, and diluted
weighted average shares outstanding. We define Adjusted EBITDA as net
income before interest expense, net, provision (benefit) for income
taxes and depreciation and amortization, adjusted for the impact of
certain other items, including: non-cash stock-based compensation
expense; asset impairment charges; early extinguishment of debt;
investments in new retail locations and international market expansion;
transition to Cortec majority ownership; transition to the ongoing
senior management team; and transition to public company. The expenses
incurred related to these transitional events include: management fees
and contingent consideration related to the transition to Cortec
majority ownership; severance, recruiting, and relocation costs related
to the transition to our ongoing senior management team; consulting
fees, recruiting fees, salaries and travel costs related to members of
our Board of Directors, fees associated with Sarbanes-Oxley Act
compliance, and incremental audit and legal fees in connection with our
transition to a public company. All of these transitional costs are
reported in selling, general, and administrative, or SG&A, expenses.
Adjusted Operating Income, Adjusted Net Income, Adjusted Net Income per
diluted share, and Adjusted EBITDA are not defined under GAAP and may
not be comparable to similarly titled measures reported by other
entities. We use these non-GAAP measures, along with GAAP measures, as a
measure of profitability. These measures help us compare our performance
to other companies by removing the impact of our capital structure; the
effect of operating in different tax jurisdictions; the impact of our
asset base, which can vary depending on the book value of assets and
methods used to compute depreciation and amortization; the effect of
non-cash stock-based compensation expense, which can vary based on plan
design, share price, share price volatility, and the expected lives of
equity instruments granted; as well as certain expenses related to what
we believe are events of a transitional nature. We also disclose
Adjusted Operating Income, Adjusted Net Income, and Adjusted EBITDA as a
percentage of net sales to provide a measure of relative profitability.
The Company believes that these non-GAAP measures, when reviewed in
conjunction with GAAP financial measures, and not in isolation or as
substitutes for analysis of our results of operations under GAAP, are
useful to investors as they are widely used measures of performance and
the adjustments we make to these non-GAAP measures provide investors
further insight into our profitability and additional perspectives in
comparing our performance to other companies and in comparing our
performance over time on a consistent basis. Adjusted Operating Income,
Adjusted Net Income, and Adjusted EBITDA have limitations as
profitability measures in that they do not include the interest expense
on our debts, our provisions for income taxes, and the effect of our
expenditures for capital assets and certain intangible assets. In
addition, all of these non-GAAP measures have limitations as
profitability measures in that they do not include the effect of
non-cash stock-based compensation expense, the effect of asset
impairments, the effect of investments in new retail locations and
international market expansion, and the impact of certain expenses
related to transitional events that are settled in cash. Because of
these limitations, the Company relies primarily on its GAAP results.
In the future, we may incur expenses similar to those for which
adjustments are made in calculating Adjusted Operating Income, Adjusted
Net Income, and Adjusted EBITDA. Our presentation of these non-GAAP
measures should not be construed as a basis to infer that our future
results will be unaffected by extraordinary, unusual or non-recurring
items.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of GAAP to Non-GAAP Financial Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
|
September 29,
|
|
|
September 30,
|
|
|
September 29,
|
|
|
September 30,
|
|
|
(dollars in thousands)
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
Operating income
|
|
|
$
|
28,124
|
|
|
$
|
24,719
|
|
|
$
|
64,554
|
|
|
$
|
40,097
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash stock-based compensation expense(a)(b)
|
|
|
|
2,923
|
|
|
|
2,678
|
|
|
|
10,031
|
|
|
|
9,186
|
|
|
Investments in new retail locations and international market
expansion(a)(d)
|
|
|
|
52
|
|
|
|
—
|
|
|
|
292
|
|
|
|
—
|
|
|
Transition to Cortec majority ownership(a)(e)
|
|
|
|
—
|
|
|
|
—
|
|
|
|
750
|
|
|
|
750
|
|
|
Transition to the ongoing senior management team(a)(f)
|
|
|
|
350
|
|
|
|
90
|
|
|
|
1,694
|
|
|
|
90
|
|
|
Transition to a public company(a)(g)
|
|
|
|
233
|
|
|
|
(2,935)
|
|
|
|
1,003
|
|
|
|
(2,228)
|
|
|
Adjusted Operating Income
|
|
|
$
|
31,682
|
|
|
$
|
24,552
|
|
|
$
|
78,324
|
|
|
$
|
47,895
|
|
|
Net income
|
|
|
$
|
17,030
|
|
|
$
|
11,271
|
|
|
$
|
32,594
|
|
|
$
|
11,427
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash stock-based compensation expense(a)(b)
|
|
|
|
2,923
|
|
|
|
2,678
|
|
|
|
10,031
|
|
|
|
9,186
|
|
|
Early extinguishment of debt(c)
|
|
|
|
614
|
|
|
|
—
|
|
|
|
614
|
|
|
|
—
|
|
|
Investments in new retail locations and international market
expansion(a)(d)
|
|
|
|
52
|
|
|
|
—
|
|
|
|
292
|
|
|
|
—
|
|
|
Transition to Cortec majority ownership(a)(e)
|
|
|
|
—
|
|
|
|
—
|
|
|
|
750
|
|
|
|
750
|
|
|
Transition to the ongoing senior management team(a)(f)
|
|
|
|
350
|
|
|
|
90
|
|
|
|
1,694
|
|
|
|
90
|
|
|
Transition to a public company(a)(g)
|
|
|
|
233
|
|
|
|
(2,935)
|
|
|
|
1,003
|
|
|
|
(2,228)
|
|
|
Tax impact of adjusting items(h)
|
|
|
|
(1,014)
|
|
|
|
60
|
|
|
|
(3,337)
|
|
|
|
(2,794)
|
|
|
Adjusted Net Income
|
|
|
$
|
20,188
|
|
|
$
|
11,164
|
|
|
$
|
43,641
|
|
|
$
|
16,431
|
|
|
Net income
|
|
|
$
|
17,030
|
|
|
$
|
11,271
|
|
|
$
|
32,594
|
|
|
$
|
11,427
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
|
7,755
|
|
|
|
8,351
|
|
|
|
24,474
|
|
|
|
23,961
|
|
|
Income tax expense
|
|
|
|
3,125
|
|
|
|
5,208
|
|
|
|
7,161
|
|
|
|
5,970
|
|
|
Depreciation and amortization expense(i)
|
|
|
|
6,333
|
|
|
|
5,815
|
|
|
|
18,218
|
|
|
|
15,171
|
|
|
Non-cash stock-based compensation expense(a)(b)
|
|
|
|
2,923
|
|
|
|
2,678
|
|
|
|
10,031
|
|
|
|
9,186
|
|
|
Early extinguishment of debt(c)
|
|
|
|
614
|
|
|
|
—
|
|
|
|
614
|
|
|
|
—
|
|
|
Investments in new retail locations and international market
expansion(a)(d)
|
|
|
|
52
|
|
|
|
—
|
|
|
|
292
|
|
|
|
—
|
|
|
Transition to Cortec majority ownership(a)(e)
|
|
|
|
—
|
|
|
|
—
|
|
|
|
750
|
|
|
|
750
|
|
|
Transition to the ongoing senior management team(a)(f)
|
|
|
|
350
|
|
|
|
90
|
|
|
|
1,694
|
|
|
|
90
|
|
|
Transition to a public company(a)(g)
|
|
|
|
233
|
|
|
|
(2,935)
|
|
|
|
1,003
|
|
|
|
(2,228)
|
|
|
Adjusted EBITDA
|
|
|
$
|
38,415
|
|
|
$
|
30,478
|
|
|
$
|
96,831
|
|
|
$
|
64,327
|
|
|
Net sales
|
|
|
$
|
196,109
|
|
|
$
|
183,032
|
|
|
$
|
537,654
|
|
|
$
|
437,140
|
|
|
Net income as a % of net sales
|
|
|
|
8.7
|
%
|
|
|
6.2
|
%
|
|
|
6.1
|
%
|
|
|
2.6
|
%
|
|
Adjusted operating income as a % of net sales
|
|
|
|
16.2
|
%
|
|
|
13.4
|
%
|
|
|
14.6
|
%
|
|
|
11.0
|
%
|
|
Adjusted net income as a % of net sales
|
|
|
|
10.3
|
%
|
|
|
6.1
|
%
|
|
|
8.1
|
%
|
|
|
3.8
|
%
|
|
Adjusted EBITDA as a % of net sales
|
|
|
|
19.6
|
%
|
|
|
16.7
|
%
|
|
|
18.0
|
%
|
|
|
14.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
___________________
|
|
(a)
|
|
All of these costs are reported SG&A expenses.
|
|
(b)
|
|
For the three months ended September 29, 2018 and September 30,
2017, non-cash stock-based compensation expense was $2.9 million and
$2.7 million, respectively. For the nine months ended September 29,
2018 and September 30, 2017, non-cash stock-based compensation
expense was $10.0 million and $9.2 million, respectively.
|
|
(c)
|
|
Represents preliminary accelerated amortization of deferred
financing fees caused by early debt paydown of the Credit Facility
during the three months ended September 29, 2018.
|
|
(d)
|
|
Represents retail store pre-opening expenses and costs for expansion
into new international markets.
|
|
(e)
|
|
Represents management fees of $0 and $0 for the three months ended
September 29, 2018 and September 30, 2017, respectively. For the
nine months ended September 29, 2018 and September 30, 2017,
management fees were $0.8 million and $0.8 million, respectively.
|
|
(f)
|
|
Represents severance, recruiting, and relocation costs related to
the transition to our ongoing senior management team.
|
|
(g)
|
|
Represents fees and expenses in connection with our transition to a
public company, including consulting fees, recruiting fees,
salaries, and travel costs related to members of our Board of
Directors, fees associated with Sarbanes-Oxley Act compliance, and
incremental audit and legal fees associated with being a public
company. For the three and nine months ended September 30, 2017, the
expenses included an accrual reversal related to our 2016 IPO
attempt.
|
|
(h)
|
|
Tax impact of adjustments calculated at a 24% and 36% tax rate for
the three months ended September 29, 2018 and September 30, 2017,
respectively. For the nine months ended September 29, 2018 and
September 30, 2017, the tax rate used to calculate the tax impact of
adjustments was 23% and 36%, respectively.
|
|
(i)
|
|
These costs are reported in SG&A expenses and cost of goods sold.
|
|
|
|
Reconciliation of Fiscal 2018 Expectations of GAAP to Non-GAAP
Financial Information
|
|
|
|
|
|
|
|
|
|
Fiscal 2018 Expectations
|
|
|
(dollars in thousands)
|
|
Low
|
|
High
|
|
|
Operating income
|
|
$
|
97,500
|
|
$
|
100,500
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
Non-cash stock-based compensation expense(a)(b)
|
|
|
12,900
|
|
|
12,900
|
|
|
Investments in new retail locations and international market
expansion(a)(d)
|
|
|
400
|
|
|
400
|
|
|
Transition to Cortec majority ownership(a)(e)
|
|
|
800
|
|
|
800
|
|
|
Transition to the ongoing senior management team(a)(f)
|
|
|
1,800
|
|
|
1,800
|
|
|
Transition to a public company(a)(g)
|
|
|
2,300
|
|
|
2,300
|
|
|
Adjusted Operating Income
|
|
$
|
115,700
|
|
$
|
118,700
|
|
|
Net income
|
|
$
|
50,500
|
|
$
|
53,500
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
Non-cash stock-based compensation expense(a)(b)
|
|
|
12,900
|
|
|
12,900
|
|
|
Early extinguishment of debt(c)
|
|
|
1,200
|
|
|
1,200
|
|
|
Investments in new retail locations and international market
expansion(a)(d)
|
|
|
400
|
|
|
400
|
|
|
Transition to Cortec majority ownership(a)(e)
|
|
|
800
|
|
|
800
|
|
|
Transition to the ongoing senior management team(a)(f)
|
|
|
1,800
|
|
|
1,800
|
|
|
Transition to a public company(a)(g)
|
|
|
2,300
|
|
|
2,300
|
|
|
Tax impact of adjusting items(h)
|
|
|
(4,365)
|
|
|
(4,365)
|
|
|
Adjusted Net Income
|
|
$
|
65,535
|
|
$
|
68,535
|
|
|
Net income
|
|
$
|
50,500
|
|
$
|
53,500
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
31,900
|
|
|
31,900
|
|
|
Income tax expense
|
|
|
14,000
|
|
|
14,000
|
|
|
Depreciation and amortization expense(i)
|
|
|
25,400
|
|
|
25,400
|
|
|
Non-cash stock-based compensation expense(a)(b)
|
|
|
12,900
|
|
|
12,900
|
|
|
Early extinguishment of debt(c)
|
|
|
1,200
|
|
|
1,200
|
|
|
Investments in new retail locations and international market
expansion(a)(d)
|
|
|
400
|
|
|
400
|
|
|
Transition to Cortec majority ownership(a)(e)
|
|
|
800
|
|
|
800
|
|
|
Transition to the ongoing senior management team(a)(f)
|
|
|
1,800
|
|
|
1,800
|
|
|
Transition to a public company(a)(g)
|
|
|
2,300
|
|
|
2,300
|
|
|
Adjusted EBITDA
|
|
$
|
141,200
|
|
$
|
144,200
|
|
|
Net sales
|
|
$
|
760,694
|
|
$
|
767,087
|
|
|
Operating income as a % of net sales
|
|
|
12.8
|
%
|
|
13.1
|
%
|
|
Adjusted operating income as a % of net sales
|
|
|
15.2
|
%
|
|
15.5
|
%
|
|
_____________________
|
|
(a)
|
|
All of these costs are reported SG&A expenses.
|
|
(b)
|
|
For fiscal 2018, non-cash stock-based compensation expense is
expected to be $12.9 million.
|
|
(c)
|
|
Represents preliminary accelerated amortization of deferred
financing fees caused by early debt paydown of the Credit Facility
expected for fiscal 2018.
|
|
(d)
|
|
Represents retail store pre-opening expenses and costs for expansion
into new international markets expected for fiscal 2018.
|
|
(e)
|
|
Represents management fees of $0.8 million expected for fiscal 2018.
|
|
(f)
|
|
Represents severance, recruiting, and relocation costs related to
the transition to our ongoing senior management team expected for
fiscal 2018.
|
|
(g)
|
|
Represents expected fiscal 2018 fees and expenses in connection with
our transition to a public company, including consulting fees,
recruiting fees, salaries, and travel costs related to members of
our Board of Directors, fees associated with Sarbanes-Oxley Act
compliance, and incremental audit and legal fees associated with
being a public company.
|
|
(h)
|
|
Tax impact of adjustments calculated at an expected rate of 22.5%
for fiscal 2018.
|
|
(i)
|
|
These costs are reported in SG&A expenses and cost of goods sold.
|
View source version on businesswire.com:
https://www.businesswire.com/news/home/20181129005192/en/
Investor Relations Contact:
Jean Fontana, 646-277-1214
jean.fontana@icrinc.com
Jennifer
Davis, 646-677-1813
jennifer.davis@icrinc.com
Media Contact:
Alecia Pulman, 203-682-8224
alecia.pulman@icrinc.com
Brittany
Fraser, 646-277-1231
brittany.fraser@icrinc.com
Source: YETI Holdings, Inc.