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What changed in Hayward Holdings, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Hayward Holdings, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+341 added−299 removedSource: 10-K (2025-02-27) vs 10-K (2024-02-29)

Top changes in Hayward Holdings, Inc.'s 2024 10-K

341 paragraphs added · 299 removed · 255 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeHuman Capital Resources As of December 31, 2023, we had approximately 1,875 total full-time equivalent employees of whom approximately 3% are temporary or contract workers. Our total number of temporary and contract workers fluctuates due to business cycles during the year. We believe our ability to maintain a flexible, modular workforce enhances our manufacturing capabilities.
Biggest changeOur total number of temporary and contract workers fluctuates due to business cycles during the year. We believe our ability to maintain a flexible, modular workforce enhances our manufacturing capabilities. Our employees are primarily located in the United States, with about 29% employed at our international locations in Canada, Spain, France, Australia and China.
Information Systems We believe that our website and information technology systems are equipped to support the operation of our business and use commercially reasonable efforts to maintain and protect our information technology systems. See Item 1C. “Cybersecurity” for information about the Company’s management of risks related to our information technology systems.
Information Systems We believe that our website and information technology systems are equipped to support the operation of our business, and we use commercially reasonable efforts to maintain and protect our information technology systems. See Item 1C. “Cybersecurity” for information about the Company’s management of risks related to our information technology systems.
U.S. federal environmental, health and safety regulations that apply to operations at one or more of our United States facilities 10 include, without limitation, regulations promulgated under the Resource Conservation and Recovery Act, the Environmental Planning and Community Right-To-Know Act, the National Pollutant Discharge Elimination System Act, the Spill Prevention, Control and Countermeasures requirements and the Comprehensive Environmental Response, Compensation and Liability Act.
U.S. federal environmental, health and safety regulations that apply to operations at one or more of our United States facilities include, without limitation, regulations promulgated under the Resource Conservation and Recovery Act, the Environmental Planning and Community Right-To-Know Act, the National Pollutant Discharge Elimination System Act, the Spill Prevention, Control and Countermeasures requirements and the Comprehensive Environmental Response, Compensation and Liability Act.
We are also subject to regulation by the Occupational Safety and Health Administration (“OSHA”) concerning employee health and safety matters. In addition, we and certain of our affiliates store certain types of hazardous materials and chemicals at various locations and the storage of these items is strictly regulated by local fire codes.
We are also subject to regulation by the Occupational Safety and Health 10 Administration (“OSHA”) concerning employee health and safety matters. In addition, we and certain of our affiliates store certain types of hazardous materials and chemicals at various locations and the storage of these items is strictly regulated by local fire codes.
In the fourth quarter, we 8 incentivize trade customers to buy and stock up in preparation for next year’s pool season under an “Early Buy” program that features a price discount and extended payment terms. Shipments for the 2023 Early Buy program began in late third quarter and will continue through approximately the first quarter of 2024.
In the fourth quarter, we incentivize trade customers to buy and stock up in preparation for next year’s pool season under an “Early Buy” 8 program that features a price discount and extended payment terms. Shipments for the 2024 Early Buy program began in late third quarter and will continue through approximately the first quarter of 2025.
Most of these requirements govern the packaging, labeling, handling, transportation, storage, sale and use of our products. In addition, we are subject to regulation passed by the U.S. Department of Energy (the “DOE”) relating to the labeling, testing, reporting and certification of new and replacement pumps sold for swimming pools.
Most of these requirements govern the packaging, labeling, handling, transportation, storage, sale and use of our products. In addition, we are subject to regulations passed by the U.S. Department of Energy (the “DOE”) relating to the labeling, testing, reporting and certification of new and replacement pumps sold for swimming pools.
We expect to receive payments for most of these shipments during the second quarter of 2024. Our aim is to keep our manufacturing plants running at a consistent level throughout the year. Consequently, we typically build inventory in the first and third quarters and inventory is typically sold-down in the second and fourth quarters.
We expect to receive payments for most of these shipments during the second quarter of 2025. Our aim is to keep our manufacturing plants running at a consistent level throughout the year. Consequently, we typically build inventory in the first and third quarters and inventory is typically sold-down in the second and fourth quarters.
For discussion regarding the effects seasonality had on our results of operations in Fiscal Year 2023, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Trends and Uncertainties Regarding Our Existing Business.” Competition The markets for our products are geographically diverse and highly competitive.
For discussion regarding the effects seasonality had on our results of operations in Fiscal Year 2024, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Trends and Uncertainties Regarding Our Existing Business.” Competition The markets for our products are geographically diverse and highly competitive.
As of December 31, 2023, we held approximately 207 issued U.S. patents and 241 issued foreign patents relating to our technologies, such as pumps, filters, heaters, drains and white goods, robotic cleaners, in-floor cleaning systems, lights, automation and controls, sanitization, valves and flow control, and IoT and other technologies, as well as approximately 134 U.S. trademark registrations and 711 foreign trademark registrations covering our marks, brands and products.
As of December 31, 2024, we held approximately 220 issued U.S. patents and 247 issued foreign patents relating to our technologies, such as pumps, filters, heaters, drains and white goods, robotic cleaners, in-floor cleaning systems, lights, automation and controls, sanitization, valves and flow control, and IoT and other technologies, as well as approximately 143 U.S. trademark registrations and 708 foreign trademark registrations covering our marks, brands and products.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and Note 12 . “Segments and Related Information” of Notes to Consolidated Financial Statements in 6 this Form 10-K. Item 7 contains information about sales and profits for each segment, and Note 12 . “Segments and Related Information” contains information about each segment’s sales, capital expenditures, depreciation, and amortization.
“Segments and Related Information” of Notes to Consolidated Financial Statements in 6 this Form 10-K. Item 7 contains information about sales and profits for each segment, and Note 12. “Segments and Related Information” contains information about each segment’s sales, significant segment expenses, capital expenditures, depreciation, and amortization.
Builders, Retailers and Servicers (Direct Sales) : We sell to several major builders and retailers. These customers are large in scale and are capable of managing their own demand planning and inventory. Builders and retailers who buy directly from us typically cross geographies beyond what many wholesalers can serve.
These customers are large in scale and are capable of managing their own demand planning and inventory. Builders and retailers who buy directly from us typically cross geographies beyond what many wholesalers can serve. Buying Groups : We sell to several major buying groups, which are composed of members who are independent businesses.
According to management estimates, in Fiscal Year 2023 approximately 80% of residential pool equipment in the United States is sold through specialty distributors such as Pool Corporation, Heritage Pool Supply Group, and Baystate Pool Supplies. Approximately 13% was sold directly to retailers, and approximately 7% was sold to builders.
According to management estimates, in Fiscal Year 2024, approximately 77% of residential pool equipment in the United States was sold through specialty distributors such as Pool Corporation, Heritage Pool Supply Group, and Baystate Pool Supplies. Approximately 18% was sold directly to retailers, and approximately 5% was sold to builders.
This effort was furthered with an updated data sheet in 2023, and we are consistently improving the information available on our Sustainability webpage. Hayward respects, values and celebrates the unique attributes, characteristics and perspectives that make each person who they are, and we believe that the success of our employees determines the success of our business.
We published updated data sheets in both 2023 and 2024, and we are consistently improving the information available on our Sustainability webpage. Hayward respects, values and celebrates the unique attributes, characteristics and perspectives that make each person who they are, and we believe that the success of our employees determines the success of our business.
In Europe, the sales channel is more direct than in the United States as approximately 74% of sales are through distributors and 26% are through direct sales. Across regions, the market is based on a “prescriber model.” The purchasing decisions of the end consumer (i.e., pool owners) are strongly influenced by pool builders and pool servicers.
In Europe, approximately 80% of sales was sold through distributors and 20% are through direct sales. Across regions, the market is based on a “prescriber model.” The purchasing decisions of the end consumer (i.e., pool owners) are strongly influenced by pool builders and pool servicers.
An inclusive and diverse workforce enables different perspectives to be shared and supports a collaborative and engaged company culture. We believe bringing diverse individuals together allows us to more effectively address the challenges that may face our organization.
An inclusive workforce, where individuals can feel a sense of belonging regardless of background, enables different perspectives to be shared and supports a collaborative and engaged company culture. We believe bringing individuals from a variety of backgrounds together allows us to more effectively address the challenges that may face our organization.
Buying Groups : We sell to several major buying groups, which are composed of members who are independent businesses. Buying groups receive competitive pricing and special incentives. Members can place orders with the group’s corporate headquarters or order from us directly. We ship directly to member locations.
Buying groups receive competitive pricing and special incentives. Members can place orders with the group’s corporate headquarters or order from us directly. We ship directly to member locations.
As of December 31, 2023, we also held approximately 50 pending U.S. patent applications, 68 pending foreign patent applications, 14 pending U.S. trademark applications and 42 pending foreign trademark applications. We also license patents to certain technologies used in our products, such as our pool cleaner and lighting products.
As of December 31, 2024, we also held approximately 39 pending U.S. patent applications, 53 pending foreign patent applications, 6 pending U.S. trademark applications and 31 pending foreign trademark applications. We also license patents to certain technologies used in our products, such as our pool cleaning and lighting products.
(“MSD Partners” and together with CCMP, the “Sponsors”) and Alberta Investment Management Corporation, as well as members of management and our board of directors, of our underlying business, which was founded in 1925. We completed our initial public offering of common stock in March 2021.
(a predecessor firm to BDT & MSD Partners) (“MSD Partners”) and Alberta Investment Management Corporation (“AIMCo”), as well as members of management and our board of directors, of our underlying business, which was founded in 1925. We completed our initial public offering of common stock in March 2021.
The majority of our sales are through specialty distributors, who in turn sell to thousands of pool builders and servicers. The remaining sales are directly to large retailers, pool builders and buying groups.
The majority of our sales are through specialty distributors, who in turn sell to thousands of pool builders and servicers. The remaining sales are directly to large retailers, pool builders and buying groups. Our two largest customers represented approximately 36% and 11%, respectively, of our net sales in Fiscal Year 2024.
NAM and E&RW accounted for approximately 83% and 17% and 84% and 16% of total net sales for Fiscal Year 2023 and the fiscal year ended December 31, 2022 (“Fiscal Year 2022”), respectively. For financial information with respect to our business segments, see Item 7 .
NAM and E&RW accounted for approximately 85% and 15%, and 83% and 17%, of total net sales for Fiscal Year 2024 and the fiscal year ended December 31, 2023 (“Fiscal Year 2023”), respectively. For financial information with respect to our business segments, see Item 7 . “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and Note 12.
We have had an average relationship of over 15 years across our top 30 suppliers. We have had a more than 40 year relationship with our top vendor and over 10 year relationships with 7 out of our top 10 suppliers, with an average of 18 years of supply continuity.
We have had an average relationship of over 15 years across our top 30 suppliers. We have had a more than 40-year relationship with our top vendor and over 10-year relationships with nine out of our top ten suppliers, with an average of 17 years of supply continuity. Sales Channels The pool equipment market is served through several sales channels.
Our accounts receivable balance increases from October to April as a result of the early-buy extended terms and remains elevated through June due to higher sales in the second quarter.
Our accounts receivable balance increases from October to April as a result of the early-buy extended terms and remains elevated through June due to higher sales in the second quarter. Weather can affect our sales; however, we primarily serve the aftermarket, which is less affected than new pool construction equipment sales.
As a result of a series of sales of our common stock by certain of the Sponsors, the Sponsors no longer hold a majority of the outstanding shares of our common stock. As a result, we are no longer a “controlled company” within the meaning of the New York Stock Exchange’s corporate governance standards.
As a result of a series of sales of our common stock by CCMP and AIMCo, we are no longer a “controlled company” within the meaning of the New York Stock Exchange’s corporate governance standards. We maintain an Internet website at global.hayward.com.
From time to time, we initiate litigation on these matters to enforce our rights. 9 We do not regard our business as being materially dependent upon any single patent or proprietary technology. Patents, patent applications and license agreements will expire or terminate over time by operation of law, in accordance with their terms or otherwise.
From time to time, we initiate litigation on these matters to enforce our rights. We do not regard our business as being materially dependent upon any single patent or proprietary technology.
In addition, we have implemented a coordinated approach in managing our overall compensation structure and regularly conduct full evaluations of our compensation and incentive programs to be competitive in these areas.
In addition, we have implemented a coordinated approach in managing our overall compensation structure and regularly conduct full evaluations of our compensation and incentive programs to be competitive in these areas. We monitor our performance by measuring numerous elements relating to our human capital management efforts, including, but not limited to, employee turnover and time to fill open roles.
Our largest customer represented approximately 36% of our net sales in Fiscal Year 2023, but no other customer represented more than 10% of our net sales in Fiscal Year 2023. Raw Materials and Suppliers We maintain longstanding relationships with approximately 700 suppliers. We mainly purchase assembled components such as motors, metal parts, cables and extrusions from our suppliers.
Raw Materials and Suppliers We maintain longstanding relationships with approximately 640 suppliers. We mainly purchase assembled components such as motors, metal parts, cables and extrusions from our suppliers.
Sales Channels The pool equipment market is served through several sales channels. Distributors : The majority of our net sales come from an authorized network of regional and national distributors who service the pool trade (i.e., builders, retailers and servicers).
Distributors : The majority of our net sales come from an authorized network of regional and national distributors who service the pool trade (i.e., builders, retailers and servicers). We have long-standing relationships with these trade customers and we have contractual agreements to support our continued net sales of our products through this channel.
We have long-standing relationships with these trade customers and we have contractual agreements to support our continued net sales of our products through this channel. Distributors are responsible for ordering, stocking, training, delivering and taking on credit responsibility from their trade customers. Many distributors also sell our products to online retailers.
Distributors are responsible for ordering, stocking, training, delivering and taking on credit responsibility from their trade customers. Many distributors also sell our products to online retailers. Builders, Retailers and Servicers (Direct Sales) : We sell to several major builders and retailers, which includes e-commerce customers.
Our committee in charge of Sustainability comprises members of the senior leadership team and meets on a monthly cadence to oversee our Sustainability efforts. We are committed to transparency and communications to our stakeholders. We maintain a Sustainability section of our website (https://investor.hayward.com) to provide detailed information to interested groups.
To enable good governance, our Sustainability strategy is governed by our Board of Directors through the Nominating and Corporate Governance Committee. Our committee in charge of Sustainability comprises members 11 of the senior leadership team and meets on a monthly cadence to oversee our Sustainability efforts. We are committed to transparency and communications to our stakeholders.
Our employees are primarily located in the United States, with about 26% employed at our international locations in Canada, Spain, France, Australia and China. As of December 31, 2023, none of our employees were represented by a union in the United States and we have relationships with works councils in Spain and France.
As of December 31, 2024, approximately 8% of our global workforce is represented by a union, all of which employees are located in China. We have relationships with works councils in Spain and France.
Our regular and transparent performance discussions with all employees also play a pivotal role in maintaining the competitiveness of our compensation and incentive programs, contributing to the sustainable growth for our business. 11 We take pride in our robust, comprehensive OSHA-aligned safety standards and go a step further to create an open feedback culture.
Our employee development programs include a variety of skill trainings for our employees to advance in their careers and cultivate leadership from within the Company. Our regular and transparent performance discussions with all employees also play a pivotal role in maintaining the competitiveness of our compensation and incentive programs, contributing to the sustainable growth for our business.
We strive to attract, retain, develop and reward our employees by continuously enhancing various employee-focused initiatives, while incorporating diversity and inclusivity into our hiring practices. Our employee development programs include a variety of skill trainings for our employees to advance in their careers and cultivate leadership from within the Company.
We strive to attract, retain, develop and reward our employees by continuously enhancing various employee-focused initiatives while working to achieve and maintain hiring practices that give qualified individuals an equal opportunity to succeed regardless of background.
Removed
We typically utilize our asset-based lending facility in the first quarter to finance our operating expenses and reduce our credit utilization in the second quarter as the seasonality of our business peaks and payments are received. Weather can affect our sales; however, we primarily serve the aftermarket, which is less affected than new pool construction equipment sales.
Added
Patents, patent applications and license agreements will expire or terminate over time by operation of law, in accordance with their terms or otherwise. 9 Human Capital Resources As of December 31, 2024, we had approximately 2,080 total full-time equivalent employees of whom approximately 7% are temporary or contract workers.
Removed
We monitor our performance by measuring numerous elements relating to our human capital management efforts, including, but not limited to, employee turnover, time to fill open roles and general diversity statistics.
Added
We take pride in our robust, comprehensive OSHA-aligned safety standards and go a step further to create an open feedback culture. During the year ended December 31, 2024, we implemented over 688 employees’ suggestions for improvements and regularly held global town hall meetings.
Removed
During the twelve months ended December 31, 2023, we implemented over 680 employees’ suggestions for improvements and regularly hold global town hall meetings. To enable good governance, our Sustainability strategy is governed by our Board of Directors through the Nominating and Corporate Governance Committee.
Added
We maintain a Sustainability section of our website (https://investor.hayward.com) to provide detailed information to interested groups. For the avoidance of doubt, none of our sustainability data sheets or other reporting or information available on our website is hereby incorporated into the Annual Report on Form 10-K absent express language to the contrary.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

89 edited+38 added−10 removed154 unchanged
Biggest changeAs a result, any of such events could have a material adverse effect on our business, financial condition, results of operations and cash flows. As an example, as a result of the COVID-19 pandemic and the related transportation disruptions, we experienced higher costs and delays, both for obtaining raw materials and components and shipping finished goods to customers.
Biggest changeIn addition, in some instances, we maintain inventory and own manufacturing equipment at locations owned and operated by third parties, limiting our ability to mitigate these risks. As a result, any of such events could have a material adverse effect on our business, financial condition, results of operations and cash flows.
We are in the process of implementing a new ERP system for most of our business as part of our ongoing efforts to improve and strengthen our operational and financial processes and our reporting systems. In addition, we are implementing a human resources information system, which is designed to improve the efficiency of our global HR process.
We are in the process of implementing a new ERP system for most of our business as part of our ongoing efforts to improve and strengthen our operational and financial processes and our reporting systems. In addition, we are implementing a new human resources information system, which is designed to improve the efficiency of our global HR process.
The agreements governing our outstanding indebtedness contain several restrictive covenants that impose operating and financial restrictions on us and may limit our ability to engage in acts that may be in our long-term best interest, including, among other things, restrictions on our ability to: • incur additional indebtedness; • create liens on assets; • declare or pay certain dividends and other distributions; • make certain investments, loans, guarantees or advances; • consolidate, amalgamate, merge, sell or otherwise dispose of all or substantially all of our assets; and • enter into certain transactions with our affiliates; In addition, the ABL Facility contains a financial covenant requiring us to maintain a specified fixed charge coverage ratio during the specified periods described therein.
The agreements governing our outstanding indebtedness contain several restrictive covenants that impose operating and financial restrictions on us and may limit our ability to engage in acts that may be in our long-term best interest, including, among other things, restrictions on our ability to: • incur additional indebtedness; • create liens on assets; 28 • declare or pay certain dividends and other distributions; • make certain investments, loans, guarantees or advances; • consolidate, amalgamate, merge, sell or otherwise dispose of all or substantially all of our assets; and • enter into certain transactions with our affiliates; In addition, the ABL Facility contains a financial covenant requiring us to maintain a specified fixed charge coverage ratio during the specified periods described therein.
Whether or not we are successful in defending against any such actions or investigations, even if no misconduct occurred, we could incur substantial costs, which could have a material adverse effect on our business, financial condition and results of operations. Violations of the U.S. Foreign Corrupt Practices Act, U.K.
Whether or not we are successful in defending against any such actions or investigations, even if no misconduct occurred, we could incur substantial costs, which could have a material adverse effect on our business, financial condition and results of operations. Violations of the U.S. Foreign Corrupt Practices Act (the “FCPA”), U.K.
This increase in demand was experienced broadly across all of our product lines as consumers refocused their attention on improving the quality of the homeowner’s outdoor living experience. In addition, because of channel customer expectations with respect to increased lead- 14 times during the COVID-19 pandemic, demand for our products was partially accelerated.
This increase in demand was experienced broadly across all of our product lines as consumers refocused their attention on improving the quality of the homeowner’s outdoor living experience. In addition, because of channel customer expectations with respect to increased lead-times during the COVID-19 pandemic, demand for our products was partially accelerated.
For example, our results of operations have been negatively impacted, and in the future may continue to be negatively impacted, by distributors reducing inventory levels. As a result, management believes that period-to-period comparisons of results of operations are not necessarily meaningful and should not be relied upon as any indication of future performance or results expected for the fiscal year.
For example, our results of operations have been negatively impacted, and in the future may be negatively impacted, by distributors reducing inventory levels. As a result, management believes that period-to-period comparisons of results of operations are not necessarily meaningful and should not be relied upon as any indication of future performance or results expected for the fiscal year.
Moreover, we sell our products primarily through distributors whose inventory of our products may fluctuate due to changes in demand, perception of our ability to meet demand, changes in customer order patterns, such as changes in the levels of inventory maintained by customers and the timing of customer purchases, adoption of new technology and connected products, and changes in customers’ preferences for our products, or other reasons.
Moreover, we sell our 21 products primarily through distributors whose inventory of our products may fluctuate due to changes in demand, perception of our ability to meet demand, changes in customer order patterns, such as changes in the levels of inventory maintained by customers and the timing of customer purchases, adoption of new technology and connected products, and changes in customers’ preferences for our products, or other reasons.
This provision does not apply to claims brought to enforce a duty or liability created by the Exchange Act. Our certificate of incorporation further provides that the 28 federal district courts of the United States of America are the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act.
This provision does not apply to claims brought to enforce a duty or liability created by the Exchange Act. Our certificate of incorporation further provides that the federal district courts of the United States of America are the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act.
We compete based on brand recognition with pool owners, strong relationships with our distributors and resellers, and the loyalty of our builders and servicers with whom we have built a large installed 13 base. In addition, we compete based on our technical innovation, intellectual property, reputation for providing quality and reliable products, competitive pricing and contractual terms.
We compete based on brand recognition with pool owners, strong relationships with our distributors and resellers, and the loyalty of our builders and servicers with whom we have built a large installed base. In addition, we compete based on our technical innovation, intellectual property, reputation for providing quality and reliable products, competitive pricing and contractual terms.
In addition, successful product liability claims made against one of our competitors could cause claims to be made against us or expose us to a perception that we are vulnerable to similar claims. We have significant goodwill and intangible assets and future impairment of our goodwill and intangible assets could have a material adverse effect on our results of operations.
In addition, successful product liability claims made against one of our competitors could cause claims to be made against us or expose us to a perception that we are vulnerable to similar claims. 17 We have significant goodwill and intangible assets and future impairment of our goodwill and intangible assets could have a material adverse effect on our results of operations.
If one or more of our executives or other key personnel are unable or unwilling to continue in their present positions, or if we are unable to attract and retain high-quality executives or key personnel in the future, our business may be adversely affected. In addition, we consider our employees to be the foundation for our growth and success.
If one or more of our executives or other key personnel are unable or unwilling to continue in their present positions, or if 18 we are unable to attract and retain high-quality executives or key personnel in the future, our business may be adversely affected. In addition, we consider our employees to be the foundation for our growth and success.
Further, any patents that we hold or in-license may be challenged, narrowed, circumvented or invalidated by third parties, and this could allow others to commercialize our 24 technology or products and compete directly with us or result in our inability to manufacture or commercialize products without infringing third-party rights.
Further, any patents that we hold or in-license may be challenged, narrowed, circumvented or invalidated by third parties, and this could allow others to commercialize our technology or products and compete directly with us or result in our inability to manufacture or commercialize products without infringing third-party rights.
For fiscal years ended December 31, 2022 and 2021, we identified material weaknesses in our internal control over financial reporting relating to our policies and procedures and controls over the segregation of duties within our financial reporting function and the preparation and review of journal entries, among other items.
For fiscal years ended December 31, 2022 and 20 2021, we identified material weaknesses in our internal control over financial reporting relating to our policies and procedures and controls over the segregation of duties within our financial reporting function and the preparation and review of journal entries, among other items.
Payments to us by our subsidiaries will be contingent upon our subsidiaries’ earnings and other business considerations and may be subject 27 to statutory or contractual restrictions. We do not currently expect to declare or pay dividends on our common stock for the foreseeable future.
Payments to us by our subsidiaries will be contingent upon our subsidiaries’ earnings and other business considerations and may be subject to statutory or contractual restrictions. We do not currently expect to declare or pay dividends on our common stock for the foreseeable future.
Competitors or other third parties have in the past, and may in the future, adopt trade names or trademarks similar to ours, thereby impeding our ability to build brand identity, possibly leading to market confusion and potentially requiring us to pursue legal action.
Competitors or other 26 third parties have in the past, and may in the future, adopt trade names or trademarks similar to ours, thereby impeding our ability to build brand identity, possibly leading to market confusion and potentially requiring us to pursue legal action.
Furthermore, disputes with our licensors, or 25 future negotiations with respect to such licenses, may result in the termination or modification of such license agreements, which could eliminate our ability to exclusively develop and commercialize products covered by these license agreements or at all.
Furthermore, disputes with our licensors, or future negotiations with respect to such licenses, may result in the termination or modification of such license agreements, which could eliminate our ability to exclusively develop and commercialize products covered by these license agreements or at all.
We operate in markets with high levels of competition, which may result in pressure on our profit margins and limit our ability to maintain or increase the market share of our products. The markets for our products are geographically diverse and highly competitive.
We operate in markets with high levels of competition, which may result in pressure on our profit margins and limit our ability to maintain or increase the market share of our products. 13 The markets for our products are geographically diverse and highly competitive.
If we are not able to identify alternate sources of supply for the 20 components, we might need to modify our product to use substitute components, which could cause delays in shipments, increase design and manufacturing costs and increase prices for our products.
If we are not able to identify alternate sources of supply for the components, we might need to modify our product to use substitute components, which could cause delays in shipments, increase design and manufacturing costs and increase prices for our products.
We may not be able to identify suitable acquisition candidates, obtain financing or have sufficient 16 cash necessary for acquisitions in the future. Acquisitions may involve significant cash expenditures, debt incurrences, equity issuances, operating losses and expenses.
We may not be able to identify suitable acquisition candidates, obtain financing or have sufficient cash necessary for acquisitions in the future. Acquisitions may involve significant cash expenditures, debt incurrences, equity issuances, operating losses and expenses.
Although the terms of the agreements governing our indebtedness contain restrictions on the incurrence of additional indebtedness, such restrictions are subject to a number of important exceptions and indebtedness incurred 26 in compliance with such restrictions could be substantial.
Although the terms of the agreements governing our indebtedness contain restrictions on the incurrence of additional indebtedness, such restrictions are subject to a number of important exceptions and indebtedness incurred in compliance with such restrictions could be substantial.
We have filed a registration statement on Form S-8 under the Securities Act registering 30,639,900 shares of our common stock reserved for issuance under the Second Amended and Restated 2017 Equity Incentive Plan, the 2021 Equity Incentive Plan and the 2021 Employee Stock Purchase Plan and a shelf registration statement on Form S-3 under the Securities Act pursuant to which certain stockholders, including investment funds affiliated with the Sponsors, may sell shares from time to time.
We have filed a registration statement on Form S-8 under the Securities Act registering 30,639,900 shares of our common stock reserved for issuance under the Second Amended and Restated 2017 Equity Incentive Plan, the 2021 Equity Incentive Plan and the 2021 Employee Stock Purchase Plan and a shelf registration statement on Form S-3 under the Securities Act pursuant to which certain stockholders, including investment funds affiliated with certain of our large stockholders, may sell shares from time to time.
Additionally, significant price fluctuations or shortages in raw materials needed for our products may increase our cost of goods sold and cause our results of operations and financial condition to suffer. 21 Risks Related to Government Regulation The nature of our business subjects us to compliance with, and liabilities under, employment, environmental, health, transportation, safety, and other governmental regulations.
Additionally, significant price fluctuations or shortages in raw materials needed for our products may increase our cost of goods sold and cause our results of operations and financial condition to suffer. 22 Risks Related to Government Regulation The nature of our business subjects us to compliance with, and liabilities under, employment, environmental, health, transportation, safety, and other governmental regulations.
For the Fiscal Year 2023, approximately 17% of our net sales were made by our international operating locations that use a functional currency other than the U.S. dollar. These sales were primarily transacted in Euros as well as Canadian dollars. Consequently, we are exposed to the impact of exchange rate volatility between the U.S. dollar and these currencies.
For the Fiscal Year 2024, approximately 17% of our net sales were made by our international operating locations that use a functional currency other than the U.S. dollar. These sales were primarily transacted in Euros as well as Canadian dollars. Consequently, we are exposed to the impact of exchange rate volatility between the U.S. dollar and these currencies.
Under the 2023 Early Buy program, we generally ship products beginning in the late third quarter through approximately the first quarter of 2024 and expect to receive payments for most of these shipments during the second quarter of 2024. As a result, our accounts receivable balance increases from September to April before the Early Buy payment is received.
Under the 2024 Early Buy program, we generally ship products beginning in the late third quarter through approximately the first quarter of 2025 and expect to receive payments for most of these shipments during the second quarter of 2025. As a result, our accounts receivable balance increases from September to April before the Early Buy payment is received.
The GDPR’s requirements for using and sharing personal information may be operationally costly, and fines of up to 20 million Euros or up to 4% of the annual global revenues of the infringer, whichever is greater, can be imposed for 22 violations. Similarly, the regulations of many U.S. states may impose obligations and potential liability on us.
The GDPR’s requirements for using and sharing personal information may be operationally costly, and fines of up to 20 million Euros or up to 4% of the annual global revenues of the infringer, whichever is greater, can be imposed for 23 violations. Similarly, the regulations of many U.S. states may impose obligations and potential liability on us.
Bribery Act, and other anti-corruption laws outside the United States could have a material adverse effect on us. The FCPA, U.K. Bribery Act and other anti-corruption laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to government officials or other persons for the purpose of obtaining or retaining business.
Bribery Act, and other anti-corruption laws outside the United States could have a material adverse effect on us. The FCPA, U.K. Bribery Act and other anti-corruption laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to government officials or other persons for the purpose of obtaining or retaining business. Although the U.S.
We must continue to develop and bring to market innovative products, which requires hiring and retaining technical staff, maintaining and upgrading manufacturing facilities and equipment and expanding our intellectual property rights. We must also identify emerging technological and ESG trends in our target end markets, as well as understand and react to potential regulatory changes.
We must continue to develop and bring to market innovative products, which requires hiring and retaining technical staff, maintaining and upgrading manufacturing facilities and equipment and expanding our intellectual property rights. We must also identify emerging technological and commercial trends in our target end markets, as well as understand and react to potential regulatory changes.
Our future success depends on developing, manufacturing and attaining market adoption of new products. Even if we attain significant market acceptance of our planned or future products, the commercial success of these products is not guaranteed. Our future financial success will depend substantially on our ability to develop, manufacture and effectively and profitably market and sell our future new products.
Our future success depends on developing, manufacturing and attaining market adoption of new products. Even if we attain significant market acceptance of our planned or future products, the commercial success of these products is not guaranteed. Our future financial success will depend substantially on our ability to develop, manufacture, market and sell products we develop.
If operations at any of our manufacturing facilities were to be disrupted as a result of significant equipment failures, natural or man-made disasters, earthquakes, power outages, fires, explosions, terrorism, adverse weather conditions, labor disputes, public health epidemics or other catastrophic events or events outside of our control, we may be unable to fill customer orders and otherwise meet customer demand for our products.
If operations at any of our manufacturing facilities, warehouses or any of our suppliers were to be disrupted as a result of significant equipment failures, natural or man-made disasters, earthquakes, power outages, fires, explosions, terrorism, adverse weather conditions, hurricanes, labor disputes, public health epidemics or other catastrophic events or events outside of our control, we may be unable to fill customer orders and otherwise meet customer demand for our products.
In addition, if we are unable to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion on the effectiveness of our internal control, investors may lose confidence in the accuracy and completeness of our financial reports, which could cause the price of our common stock to decline, or may risk being delisting from the NYSE.
In addition, if we are unable to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion on the effectiveness of our internal control, investors may lose confidence in the accuracy and completeness of our financial reports, which could cause the price of our common stock to decline, or may risk the Company being delisted from the NYSE.
If this were to occur, our competitors may be able to use our technologies, names, brands or the goodwill we have acquired in the marketplace and erode or negate any competitive advantage we may have. Competitors may infringe our intellectual property.
If this were to occur, our competitors may be able to use our technologies, names, brands or the goodwill we have acquired in the marketplace and erode or negate any competitive advantage we may have. Competitors have in the past, and may in the future, infringe our intellectual property.
Because we sell our products primarily through distributors, we are reliant in part on the efforts of third-party sales representatives, who may be required to learn about the new features or other aspects of our new products to effectively sell those products, which may prove challenging.
Because we sell our products primarily through distributors, we rely in part on the efforts of third-party sales representatives, who may be required to learn about the new features or other aspects of our new products to effectively sell those products, which may prove challenging.
Further, our ability to satisfy product demand driven by our sales and marketing efforts will be largely dependent on our ability to maintain a commercially viable manufacturing process that is compliant with regulatory standards. Failure to manufacture, market and sell our planned or future products could have a material adverse effect on our business, financial condition, and results of operations.
Further, our ability to satisfy product demand driven by our sales and marketing efforts will be largely dependent on our ability to maintain a commercially viable manufacturing process that is compliant with regulatory standards. Failure to manufacture, market and sell our newly developed products could have a material adverse effect on our business, financial condition, and results of operations.
As such, we are exposed to risks relating to any deterioration in the relationship between the U.S. and China, including through increases in tariffs between the United States and China. Our success depends in part on our ability to anticipate and effectively manage these and other risks.
As such, we are exposed to risks relating to any deterioration in the relationship between the U.S. and China, or the U.S. and the European Union, including through increases in tariffs between the United States and such regions. Our success depends in part on our ability to anticipate and effectively manage these and other risks.
Our certificate of incorporation also imposes certain restrictions on mergers and other business combinations between us and any holder of 15% or more of our outstanding common stock other than our Sponsors.
Our certificate of incorporation also imposes certain restrictions on mergers and other business combinations between us and any holder of 15% or more of our outstanding common stock other than certain specified entities.
Such products divert sales from genuine products, often are of lower cost and quality, and have the potential to damage the reputation for quality and effectiveness of the genuine product and of our brands.
In each case, such products divert sales from genuine products, often are of lower cost and quality, and have the potential to damage the reputation for quality and effectiveness of the genuine product and of our brands.
We are exposed to political, regulatory, economic, trade and other risks that arise from our international business operations, including the risks associated with geopolitical conflicts. Sales outside of the United States for Fiscal Year 2023 accounted for approximately 23% of our net sales.
We are exposed to political, regulatory, economic, trade and other risks that arise from our international business operations, including the risks associated with geopolitical conflicts. 15 Sales outside of the United States for Fiscal Year 2024 accounted for approximately 22% of our net sales.
We rely on our customers to stock, market and recommend our products to pool owners and our business depends on retaining good relationships with our customers. However, the financial condition of these resellers could weaken, they could stop distributing our products or reduce sales of our products and prefer others.
We rely on our customers to stock, market and recommend our products to pool owners and our business depends on retaining good relationships with our customers. However, the financial condition of these resellers could weaken, they could stop distributing our products or reduce sales of our products in favor of our competitors.
The accidental or willful security breaches or other unauthorized access by third parties to our information technology systems or facilities, or those of our vendors and/or others with which we do business, or the existence of computer viruses, such as ransomware or other malware, in our or their data or software, and/or any other failure of our or their information technology systems could expose us to a risk of information loss, the misappropriation of proprietary and confidential information, work stoppages, reputational damage, regulatory fines or penalties, litigation by affected parties, possible financial obligations for liabilities and damages related to the theft or misuse of this information and/or the defective manufacture or defective design of our products, which could expose us to liability.
The accidental or willful security breaches or other unauthorized access by third parties to our information technology systems or facilities, or those of our vendors and/or others with which we do business, or the existence of computer viruses, such as ransomware or other malware, in our or their data or software, and/or any other failure of our or their information technology systems could expose us to a risk of information loss, the misappropriation of proprietary and confidential information, work stoppages, reputational damage, regulatory investigations and enforcement actions, regulatory fines or penalties, litigation by affected parties, possible financial obligations for liabilities and damages related to the theft or misuse of this information and/or the defective manufacture or defective design of our products, which could expose us to liability, and/or significant incident response, system restoration or remediation and future compliance costs.
In the past, we have experienced material cost and other inflation in several of our businesses. Cost inflation stemming from the COVID-19 pandemic has caused prices to increase across various sectors of the economy and we have been impacted by increases in the prices of our raw materials and other associated manufacturing costs.
In the past, we have experienced material cost and other inflation in several of our businesses. Recently, cost inflation has caused prices to increase across various sectors of the economy and we have been impacted by increases in the prices of our raw materials and other associated manufacturing costs.
We test goodwill and other indefinite-lived intangible assets for impairment on at least an annual basis, and more frequently if circumstances warrant. As of December 31, 2023, our goodwill and intangible assets were 17 $1,971.4 million and represented approximately 67% of our total assets. Declines in value could result in future goodwill and intangible asset impairment charges.
We test goodwill and other indefinite-lived intangible assets for impairment on at least an annual basis, and more frequently if circumstances warrant. As of December 31, 2024, our goodwill and intangible assets were $1,974.1 million and represented approximately 66% of our total assets. Declines in value could result in future goodwill and intangible asset impairment charges.
Because the techniques used to obtain unauthorized access or to sabotage systems change frequently and are often not recognized until after they are launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. The development of artificial intelligence technologies may exacerbate these risks.
Because the techniques used to obtain unauthorized access or to sabotage systems change frequently and are often not recognized until after they are launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures.
If general economic conditions worsen, it may be more likely that one or more of our customers will default on payments owed to us, which may result in a significant write-off of accounts receivable and may have a material adverse effect on our results of operations.
If general economic conditions worsen, it may be more likely that one or more of our customers will default on payments owed to us, and it may be harder for us to enforce any judgment debts against such customers, which may result in a significant write-off of accounts receivable and may have a material adverse effect on our results of operations.
As of December 31, 2023, we held approximately 207 issued U.S. patents and 241 issued foreign patents relating to our technologies, such as pumps, filters, heaters, drains and white goods, robotic cleaners, in-floor cleaning systems, lights, automation and controls, sanitization, valves and flow control, and IoT and other technologies, as well as approximately 134 U.S. trademark registrations and 711 foreign trademark registrations covering our marks, brands and products.
As of December 31, 2024, we held approximately 220 issued U.S. patents and 247 issued foreign patents relating to our technologies, such as pumps, filters, heaters, drains and white goods, robotic cleaners, in-floor cleaning systems, lights, automation and controls, sanitization, valves and flow control, and IoT and other technologies, as well as approximately 143 U.S. trademark registrations and 708 foreign trademark registrations covering our marks, brands and products.
Most of our net sales are generated from sales to distributors, including our largest customer, Pool Corporation, who represented approximately 36% of our net sales in Fiscal Year 2023 and approximately 38% of our accounts receivable on December 31, 2023.
Most of our net sales are generated from sales to distributors, including our largest customer, Pool Corporation, which represented approximately 36% of our net sales in Fiscal Year 2024 and approximately 47% of our accounts receivable on December 31, 2024.
There is growing concern that a gradual increase in global average temperatures as a result of increased concentration of greenhouse gases in the atmosphere will cause significant changes in weather patterns around the globe and an increase in the frequency and severity of natural disasters.
The impacts of climate change are highly unpredictable, and there is growing concern that a gradual increase in global average temperatures as a result of increased concentration of greenhouse gases in the atmosphere is causing, and will in the future cause, significant changes in weather patterns around the globe and an increase in the frequency and severity of natural disasters.
We may incur substantial costs and our resources and the attention of management could be diverted from our business as a result of this, or any similar, lawsuit.
We may incur substantial costs and our resources and the attention of management could be diverted from our business as a result of this, or any similar, lawsuit. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
We rely upon information technology systems and networks in connection with a variety of business activities, some of which are managed by third parties.
We rely upon information technology systems and networks in connection with a variety of business activities, some of which are managed by third parties, whose products, services and systems are beyond our control.
We expect our reliance on information technology systems to increase as we continue to develop IoT-enabled products, such as our Omni mobile app, and implement new technologies to facilitate our operations, such as our ERP system and human resources information system, which are in the process of being implemented.
We expect our reliance on information technology systems to increase as we implement new technologies to facilitate our operations, such as our new ERP system and new human resources information system, which are in the process of being implemented.
As such, our future success depends in large part on our ability to attract, train, retain, and motivate qualified personnel. For example, 18 during periods of unexpected demand for our products, we may need to hire additional personnel to maintain sufficient inventory levels.
As such, our future success depends in large part on our ability to attract, train, retain, and motivate qualified personnel. For example, during periods of unexpected demand for our products, we may need to hire additional personnel to maintain sufficient inventory levels. If we are unable to attract, hire and retain qualified personnel, our operating results could be adversely affected.
As of December 31, 2023, we also held approximately 50 pending U.S. patent applications, 68 pending foreign patent applications, 14 pending U.S. trademark applications and 42 pending foreign trademark applications. See “Business—Intellectual Property.” In addition, we have in-licensed patents and patent applications to certain technologies incorporated in our products.
As of December 31, 2024, we also held approximately 39 pending U.S. patent applications, 53 pending foreign patent applications, 6 pending U.S. trademark applications and 31 pending foreign trademark applications. See “Business—Intellectual Property.” In addition, we have in-licensed patents and patent applications to certain technologies incorporated in our products.
In addition, financial market disruptions may make it more difficult for our suppliers to meet demand for their products or for our customer and prospective consumers of our products to commence new projects, as our customers, consumers and suppliers may experience increased costs of debt financing or difficulties in obtaining debt financing.
In addition, financial market disruptions may make it more difficult for our suppliers to obtain financing to meet demand for their products or for our customers and prospective consumers of our products to obtain financing to commence new projects.
Violations of these laws may require costly investigations, self-disclosure to government agencies and result in criminal or civil sanctions, which could disrupt our business and result in a material adverse effect on our reputation, business, financial condition, results of operations and cash flows. 23 Our failure to satisfy international trade compliance regulations, and changes in U.S. government sanctions, could have a material adverse effect on us.
Violations of these laws may require costly investigations, self-disclosure to government agencies and result in criminal or civil sanctions, which could disrupt our business and result in a material adverse effect on our reputation, business, financial condition, results of operations and cash flows.
Additional sales of a substantial number of our shares of common stock in the public market, or the perception that sales could occur, could have a material adverse effect on the price of our common stock and could impair our ability to raise capital through the sale of additional stock.
Additional sales of a substantial number of our shares of common stock in the public market, or the perception that sales could occur, could have a material adverse effect on the price of our common stock and could impair our ability to raise capital through the sale of additional stock. 30 The price of our common stock has been, and may in the future be, volatile and your investment in our common stock could suffer a decline in value.
While no material weaknesses were identified in Fiscal Year 2023, there can be no assurance that we will not experience additional material weaknesses in the future.
While no material weaknesses have been identified since fiscal 2022, there can be no assurance that we will not experience additional material weaknesses in the future.
Risks Related to Our Indebtedness Our indebtedness could adversely affect our financial condition. As of December 31, 2023, the Company’s indebtedness totaled approximately $1,111.9 million, including $1,098.4 million under our first lien term loan facility, $4.7 million of finance lease obligations and $8.8 million of other long-term debt.
Risks Related to Our Indebtedness Our indebtedness could adversely affect our financial condition. As of December 31, 2024, the Company’s indebtedness totaled approximately $973.9 million, including $965.0 million under our first lien term loan facility, $2.4 million of finance lease obligations and $6.5 million of other long-term debt.
In addition, changes in U.S. or foreign government administrative policy, including between the U.S. and China, may affect our ability, or the ability of our partners and contract manufacturers to import products or raw materials into the United States. We maintain a manufacturing facility in China and purchase certain of our key parts and components from suppliers in China.
In addition, changes in U.S. or foreign government administrative policy, including between the U.S. and China, may affect our ability, or the ability of our partners and contract manufacturers to import products or raw materials into the United States.
If we are not able to continue to compete in our markets, expand into new markets, and grow our business, our business, financial condition, results of operations and cash flows could be adversely affected. Our results of operations and cash flows may fluctuate from quarter to quarter for many reasons, including seasonality and weather conditions.
If we are not able to continue to compete in our markets, expand into new markets, and grow our business, our business, financial condition, results of operations and cash flows could be adversely affected.
These systems may not provide the benefits anticipated, could add costs and complications to ongoing operations, and may impact our ability to process transactions efficiently, all of which may have a material adverse effect on our business and results of operations.
These systems may not provide the benefits anticipated, could add costs and complications to ongoing operations, and may impact our ability to process transactions efficiently, all of which may have a material adverse effect on our business and results of operations. Misuse of our technology-enabled products could lead to reduced sales, increased costs, liability claims or harm to our reputation.
In the fourth quarter, we incentivize trade customers to buy and stock up in preparation for next year’s pool season under an “Early Buy” program, which features a price discount and extended payment terms.
During the second quarter of a fiscal year, sales are typically higher in anticipation of the start of the summer pool season. In the fourth quarter, we incentivize trade customers to buy and stock up in preparation for 14 next year’s pool season under an “Early Buy” program, which features a price discount and extended payment terms.
From time to time, we obtain or receive information alleging improper activity in connection with imports or exports. Our policy mandates strict compliance with U.S. and non-U.S. trade laws applicable to our products, including investigating allegations of improper activity and, if warranted, reporting our findings to the relevant governmental authorities.
Our policy mandates strict compliance with U.S. and non-U.S. trade laws applicable to our products, including investigating allegations of improper activity and, if warranted, reporting our findings to the relevant governmental authorities.
In addition, investment funds affiliated with our Sponsors may sell a substantial number of shares of our common stock. Issuing additional shares of our common stock or other equity securities or securities convertible into equity may dilute the economic and voting rights of our existing stockholders and reduce the market price of our common stock.
Issuing additional shares of our common stock or other equity securities or securities convertible into equity may dilute the economic and voting rights of our existing stockholders and reduce the market price of our common stock.
Risks Related to Intellectual Property Matters If we are unable to adequately obtain and maintain our intellectual property and proprietary rights or if we are accused of infringing on, misappropriating or otherwise violating the intellectual property of others, our competitive position could be harmed or we could be required to incur significant expenses to enforce or defend our rights.
Risks Related to Intellectual Property Matters If we are unable to adequately obtain and maintain our intellectual property and proprietary rights or if we are accused of infringing on, misappropriating or otherwise violating the intellectual property of others, our competitive position could be harmed or we could be required to incur significant expenses to enforce or defend our rights. 25 Patents, trademarks and other intellectual property rights are important to our business, and our success depends in part on our ability to obtain and maintain patent and trademark protection in the United States and other countries.
The impacts of climate change and legal or regulatory initiatives to address climate change could have a long-term adverse impact on our business and results of operations.
The impacts of climate change and legal or regulatory initiatives to address climate change could have a long-term adverse impact on our business and results of operations. There is increasing scrutiny from stakeholders on environmental, social, and other sustainability matters.
Such climate change may impair our production capabilities, disrupt our supply chain or impact demand for our products. Growing concern over climate change also may result in additional legal or regulatory requirements designed to reduce the output of greenhouse gases or mitigate the effects of climate change on the environment.
Growing concern over climate change also may result in additional legal or regulatory requirements designed to reduce the output of greenhouse gases or mitigate the effects of climate change on the environment.
In the normal course of our business, we may access credit markets to, for example, refinance or repay indebtedness, complete acquisitions, add to working capital, repurchase shares, make capital expenditures and make investments in our subsidiaries.
Disruptions in the financial markets could adversely affect us, our customers, consumers and suppliers by increasing funding costs or reducing the availability of credit. In the normal course of our business, we may access credit markets to, for example, refinance or repay indebtedness, complete acquisitions, add to working capital, repurchase shares, make capital expenditures and make investments in our subsidiaries.
We may need to spend significant resources monitoring, enforcing and defending our intellectual property rights. We may not prevail in any disputes that we initiate and the damages or other remedies awarded if we were to prevail may not be commercially meaningful.
We may not prevail in any disputes that we initiate and the damages or other remedies awarded if we were to prevail may not be commercially meaningful.
The supply chain disruptions resulted in higher costs for raw materials and other associated manufacturing costs, which had an impact on our profitability. Interruptions in production, in particular at our manufacturing facilities, could increase our costs and reduce our sales. Any interruption in production capability could require us to make substantial capital expenditures to fill customer orders.
In the past, supply chain disruptions have resulted in higher costs for raw materials and other associated manufacturing costs, which have had an adverse impact on our profitability. Interruptions in production, in particular at our manufacturing facilities, could increase our costs and reduce our sales.
Our success is dependent on retaining these customers, which requires us to successfully manage relationships and anticipate the needs of our customers in the channels in which we sell our products.
Our concentration of sales to a relatively small number of larger customers makes our relationship with each of these customers important to our business. Our success is dependent on retaining these customers, which requires us to successfully manage relationships and anticipate the needs of our customers in the channels in which we sell our products.
We may in the future, and have in the past, experienced cybersecurity attacks and other unauthorized or inadvertent disclosure of certain confidential information, including personal information. We periodically evaluate and test the adequacy of our systems, measures, controls and procedures and perform third-party risk assessments. However, such threats have increased in frequency, scope, and potential impact in recent years.
We periodically evaluate and test the adequacy of our systems, measures, controls and procedures and perform third-party risk assessments. However, such threats have increased in frequency, scope, and potential impact in recent years.
We are exposed to credit risk on our accounts receivable and this risk is heightened during periods when economic conditions worsen. We distribute our products through distributors, large pool builders, buying groups, services and specialty online resellers.
We are exposed to credit risk on our accounts receivable and this risk is heightened during periods when economic conditions worsen. We distribute our products through distributors, large pool builders, buying groups, services and specialty online resellers. A substantial majority of our outstanding accounts receivables are not covered by collateral, third-party bank support or financing arrangements, or credit insurance.
We cannot provide assurance that these and other factors will not have a material adverse effect on our international operations or on our business. We may not be able to identify, finance and complete suitable acquisitions, and any completed acquisitions may be unsuccessful or consume significant resources. Our business strategy includes acquiring businesses that complement our existing businesses.
We may not be able to identify, finance and complete suitable acquisitions, and any completed acquisitions may be unsuccessful or consume significant resources. 16 Our business strategy includes acquiring businesses that complement our existing businesses.
Recent years have seen a substantial increase in anti-bribery law enforcement activity, with more frequent and aggressive investigations and enforcement proceedings by both the U.S. Department of Justice and the SEC, increased enforcement activity by non-U.S. regulators and increases in criminal and civil proceedings brought against companies and individuals. Our policies mandate compliance with these anti-bribery laws.
Government recently announced a 180-day cessation on FCPA enforcement actions, recent years have seen a substantial increase in anti-bribery law enforcement activity, including increased enforcement activity by non-U.S. regulators and increases in criminal and civil proceedings brought against companies and individuals. Our policies mandate compliance with these anti-bribery laws.
We regularly consider market conditions and our ability to incur indebtedness to either refinance existing indebtedness or for working capital. We may require more financing to fund our operations or finance acquisitions. However, financing may not be available to us on acceptable terms, if at all.
We may require more financing to fund our operations or finance acquisitions. However, financing may not be available to us on acceptable terms, if at all.
Unfavorable changes in the ratings that rating agencies assign to our debt may ultimately negatively impact our access to the debt capital markets and increase the costs we incur to borrow funds. Risks Related to our Corporate Structure Provisions in our charter documents and Delaware law may deter takeover efforts that stockholders may believe to be beneficial to stockholder value.
Unfavorable changes in the ratings that rating agencies assign to our debt may ultimately negatively impact our access to the debt capital markets and increase the costs we incur to borrow funds.
Although we have procedures to monitor and limit exposure to credit risk on our accounts receivable, there can be no assurance such procedures will effectively limit our credit risk and avoid losses.
In addition, our exposure to credit and collectability risk on our accounts receivable is higher in certain international markets, and our ability to mitigate such risks is limited. There can be no assurance that our procedures to monitor and limit exposure to credit risk on our accounts receivable will effectively limit our credit risk and avoid losses.
We have in the past and may in the future implement a voluntary recall or market withdrawal or may be required to do so by a regulatory authority. A recall or market withdrawal of one of our products would be costly and would divert management resources.
Relatedly, we have been, and in the future may be, subject to lawsuits or other actions related to products produced by companies we have acquired. We have in the past and may in the future implement a voluntary recall or market withdrawal or may be required to do so by a regulatory authority.
To some extent, this is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.
Our ability to make payments on and to refinance our debt and to fund planned capital expenditures depends on our ability to generate cash in the future. To some extent, this is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.
As of December 31, 2023, we had 214,165,676 shares of common stock outstanding and 507,167,955 shares of common stock issuable upon potential exchanges and/or conversions.
As of December 31, 2024, we had 215,778,520 shares of common stock outstanding and 505,555,111 shares of common stock issuable upon potential exchanges and/or conversions.
The demand for our swimming pool equipment products may be adversely affected by unfavorable economic and business conditions. We compete in various geographic regions and product markets around the world. Among these, the most significant are residential markets in the United States, Canada, Europe and Australia, as well as commercial markets in the United States and Europe.
However, these programs may not be successful in retaining or increasing product purchases by these customers or in maintaining or increasing our net income. The demand for our swimming pool equipment products may be adversely affected by unfavorable economic and business conditions. We compete in various geographic regions and product markets around the world.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThird-party vendor access to critical information systems is subject to regular review and assessment by management, and management evaluates the cybersecurity risks and safeguards of potential third-party vendors prior to engaging such vendors. • Mandatory employee cybersecurity training to equip the employees with the tools and knowledge to enhance the cybersecurity posture across the organization. • Continuous monitoring of networks and systems for suspicious activity; leveraging firewalls; intrusion detection and prevention systems; endpoint anti-virus and anti-malware solutions; and a privileged access management system. • A comprehensive incident response plan, which has been developed to enhance the Company’s ability to respond to, and recover from, cybersecurity incidents.
Biggest changeThird-party vendor access to critical information systems is subject to regular review and assessment by management, and management evaluates the cybersecurity risks and safeguards of potential third-party vendors prior to engaging such vendors. 31 • Mandatory employee cybersecurity training to equip our employees with the tools and knowledge to enhance the cybersecurity posture across the organization. • Continuous monitoring of networks and systems for suspicious activity, leveraging firewalls, intrusion detection and prevention systems, endpoint anti-virus and anti-malware solutions, and a privileged access management system. • A comprehensive incident response plan, which has been developed to enhance the Company’s ability to respond to, and recover from, cybersecurity incidents.
However, we face ongoing risks from certain cybersecurity threats that, if realized, are reasonably likely to materially affect business strategy, results of operations, or financial condition. See “Risk Factors—We rely on information technology systems to support our business operations.
However, we face ongoing risks from cybersecurity threats that, if realized, are reasonably likely to materially affect business strategy, results of operations, or financial condition. See “Risk Factors—We rely on information technology systems to support our business operations.
A significant disturbance or breach of our technological infrastructure, or those of our vendors or others with which we 30 do business, could adversely affect our financial condition and results of operations.
A significant disturbance or breach of our technological infrastructure, or those of our vendors or others with which we do business, could adversely affect our financial condition and results of operations.
They help with cybersecurity defense capabilities and recommending steps to mitigate associated threats, reduce risk, enhance our cybersecurity posture and meet our evolving needs. • Routine screening of potential and existing third-party vendors to assess their cybersecurity posture and the incremental risk that they may pose to us.
They help with cybersecurity defense capabilities and recommending steps to mitigate threats, enhance our cybersecurity posture and meet our evolving needs. • Routine screening of potential and existing third-party vendors to assess their cybersecurity posture and the incremental risk that they may pose to us.
Through the aforementioned processes, we did not identify risks from current or past cybersecurity threats or cybersecurity incidents that have materially affected or are reasonably likely to materially affect our business strategy, results of operations, or financial condition.
Through these processes, we did not identify risks from current or past cybersecurity threats or cybersecurity incidents that have materially affected or are reasonably likely to materially affect our business strategy, results of operations, or financial condition.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe following is a summary of our principal properties as of December 31, 2023, including manufacturing, distribution, warehouse, and corporate offices: No. of Facilities Location Manufacturing Distribution Warehouse Corporate Headquarters North America Arizona 0 1 0 0 North Carolina 1 1 1 1 Rhode Island 1 0 1 0 Tennessee 1 0 3 0 Canada 0 1 0 0 Europe and Rest of World Australia 0 4 0 0 China 1 0 0 0 France 0 1 0 0 Spain 2 0 1 0 31 We believe that our facilities as well as the related machinery and equipment, are well maintained and suitable for their purpose and are adequate to support our business.
Biggest changeWe do not believe that any single lease is material to our operations. 32 The following is a summary of our principal properties as of December 31, 2024, including manufacturing, distribution, warehouse, and corporate offices: No. of Facilities Location Manufacturing Distribution Warehouse Corporate Headquarters North America Arizona 0 1 0 0 Georgia 1 0 0 0 North Carolina 1 1 1 1 Rhode Island 1 0 1 0 Tennessee 1 0 2 0 Canada 0 1 0 0 Europe and Rest of World Australia 0 4 0 0 China 1 0 0 0 France 0 1 0 0 Spain 2 0 2 0 We believe that our facilities as well as the related machinery and equipment, are well maintained and suitable for their purpose and are adequate to support our business.
ITEM 2. PROPERTIES The Company’s corporate headquarters is located on leased premises in Charlotte, North Carolina. We own four of our six global manufacturing facilities and one of our eight global distribution facilities. All the other facilities are leased, except for two locations operated by third-party logistics providers, which are provided under service agreements.
ITEM 2. PROPERTIES The Company’s corporate headquarters is located on leased premises in Charlotte, North Carolina. We own four of our seven global manufacturing facilities and one of our eight global distribution facilities. All the other facilities are leased, except for two locations operated by third-party logistics providers, which are provided under service agreements.
Most of our leases contain renewal options, some of which involve rent increases. In addition to minimum rental payments, which are set at competitive rates, certain leases require reimbursement for taxes, maintenance and insurance. We do not believe that any single lease is material to our operations.
Most of our leases contain renewal options, some of which involve rent increases. In addition to minimum rental payments, which are set at competitive rates, certain leases require reimbursement for taxes, maintenance and insurance.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeThe Securities Class Action alleges, among other things, that the Company and certain of our current directors and officers violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by, among other things, making materially false or misleading statements regarding growth and demand trends following our initial public offering in March 2021.
Biggest changeIn a consolidated class action complaint filed March 4, 2024, the Securities Class Action alleged on behalf of a putative class of stockholders who acquired shares of our common stock between October 27, 2021 and July 28, 2022, among other things, that the Company, Kevin Holleran, and Eifion Jones violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by, among other things, making materially false or misleading statements regarding inventory, growth, and demand trends and the Company’s financial projections for 2022.
In addition to the matters discussed in this report and in the notes to our audited consolidated financial statements, we are from time to time subject to, and are presently involved in, other litigation and legal proceedings arising in the ordinary course of business.
ITEM 3. LEGAL PROCEEDINGS In addition to the matters discussed in this report and in the notes to our audited consolidated financial statements, we are from time to time subject to, and are presently involved in, other litigation and legal proceedings arising in the ordinary course of business.
We believe that the outcome of such other litigation and legal proceedings will not have a material adverse effect on our business, financial condition, results of operations and cash flows.
Where appropriate, these matters have been submitted to the Company’s insurance carriers. We believe that the outcome of such other litigation and legal proceedings will not have a material adverse effect on our business, financial condition, results of operations and cash flows.
Holleran, et al., 2:23-cv-22649 (D.N.J.) (the “Derivative Action”). The Derivative Action alleges breaches of fiduciary duties to Company stockholders, aiding and abetting breaches of fiduciary duties, unjust enrichment, corporate waste, and violations of Section 10(b) of the Securities Exchange Act of 1934 in connection with the claims in the Securities Class Action.
The Derivative Action alleges breaches of fiduciary duties to Company stockholders, aiding and abetting breaches of fiduciary duties, unjust enrichment, corporate waste, and violations of Section 10(b) of the Securities Exchange Act of 1934 in connection with the claims in the Securities Class Action.
The Derivative Action seeks recovery of unspecified damages and attorney’s fees and costs, as well as improvements to the Company’s corporate governance and internal procedures. We dispute the allegations of wrongdoing in the Securities Class Action and the Derivative Action and intend to vigorously defend ourselves in these matters.
We dispute the allegations of wrongdoing in the Securities Class Action and the Derivative Action and intend to vigorously defend ourselves in these matters.
The Securities Class Action seeks unspecified monetary damages on behalf of a putative class and an award of costs and expenses, including reasonable attorneys’ fees. On November 27, 2023, a shareholder derivative lawsuit was filed in the United States District Court for the District of New Jersey against current and past officers and directors of the Company captioned Heicklen v.
On November 27, 2023, a shareholder derivative lawsuit was filed in the United States District Court for the District of New Jersey against current and past officers and directors of the Company captioned Heicklen v. Holleran, et al., 2:23-cv-22649 (D.N.J.) (the “Derivative Action”).
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ITEM 3. LEGAL PROCEEDINGS For a discussion of our “Legal Proceedings,” refer to Note 14 . “Commitments and Contingencies” of Notes to Consolidated Financial Statements in this Form 10-K, which discussion is incorporated by reference herein.
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On October 2, 2024, the Court issued an Opinion and Order dismissing 33 the consolidated class action complaint and granting the lead plaintiff leave to file an amended complaint within 30 days.
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On November 1, 2024, lead plaintiff filed a consolidated amended class action complaint making substantially similar allegations as in the consolidated class action complaint, but adding additional defendants affiliated with MSD Partners and CCMP Capital Advisors, LP. On December 18, 2024, the Company and all other defendants moved to dismiss the consolidated amended class action complaint.
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Under the current schedule, briefing on the motion to dismiss will be complete on March 4, 2025. The Securities Class Action seeks unspecified monetary damages on behalf of a putative class and an award of costs and expenses, including reasonable attorneys’ fees.
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The Derivative Action seeks recovery of unspecified damages and attorney’s fees and costs, as well as improvements to the Company’s corporate governance and internal procedures. The Derivative Action has been stayed pending final decision on the motion to dismiss filed in the Securities Class Action.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeMINE SAFETY DISCLOSURES None. 32 INFORMATION ABOUT OUR EXECUTIVE OFFICERS Information concerning our executive officers is set forth below: Name Age Position Kevin Holleran 56 President, Chief Executive Officer and Director Eifion Jones 56 Senior Vice President, Chief Financial Officer John Collins 47 Senior Vice President, Chief Commercial Officer Susan Canning 54 Senior Vice President, Chief Legal Officer and Corporate Secretary Fernando Blasco 49 Vice President, General Manager, Europe & Rest of World Kevin Holleran has served as President, Chief Executive Officer, and Director of the Company since August 2019.
Biggest changeINFORMATION ABOUT OUR EXECUTIVE OFFICERS Information concerning our executive officers is set forth below: Name Age Position Kevin Holleran 56 President, Chief Executive Officer and Director Eifion Jones 57 Senior Vice President, Chief Financial Officer Susan Canning 55 Senior Vice President, Chief Legal Officer and Corporate Secretary John Collins 48 Senior Vice President, Chief Commercial Officer Raymond Lewis 60 Senior Vice President, Chief Human Resources Officer Eric Sejourne 58 Senior Vice President, Chief Global Operations Officer Kevin Gallagher 54 Vice President, Chief Engineering Officer Darío Vicario 58 Vice President, General Manager, Europe & Rest of World Kevin Holleran has served as President, Chief Executive Officer, and Director of the Company since August 2019.
Holleran served for 10 years as the President and Chief Executive Officer of Textron Specialized Vehicles, Inc., during which time he grew revenue and profitability substantially through organic growth and acquisitions. Prior to his time at Textron, Mr. Holleran held several management positions at Ingersoll Rand and Terex Corporation across the sales, marketing, and product management functions.
Holleran served for 10 years as the President and Chief Executive Officer of Textron Specialized Vehicles, Inc., during which time he grew revenue and profitability substantially through organic growth and acquisitions. Prior to his time at Textron, Mr. Holleran held several management positions at Ingersoll Rand and 34 Terex Corporation across the sales, marketing, and product management functions.
Collins served in several leadership roles with Textron, including plant manager; director of sourcing; Vice President, Integrated Supply Chain; Vice President, Parts & Services and Vice President, Consumer Business. Susan Canning has served as Senior Vice President, Chief Legal Officer and Corporate Secretary since joining the Company in June 2021. From 2018, until she joined Hayward, Ms.
Collins served in several leadership roles with Textron, including plant manager; director of sourcing; Vice President, Integrated Supply Chain; Vice President, Parts & Services and Vice President, Consumer Business. Raymond Lewis has served as Senior Vice President, Chief Human Resources Officer of the Company since May 2024. From February 2019 until he joined Hayward, Mr.
He began his financial career with Courtaulds Plc in their European fibers businesses prior to its sale to Akzo Nobel N.V. John Collins has served as Senior Vice President and Chief Commercial Officer since December 2023. Previously he served as the Company’s Senior Vice President, Chief Supply Chain Officer. Prior to joining Hayward, Mr.
He began his financial career with Courtaulds Plc in their European fibers businesses prior to its sale to Akzo Nobel N.V. Susan Canning has served as Senior Vice President, Chief Legal Officer and Corporate Secretary since joining the Company in June 2021. From 2018, until she joined Hayward, Ms.
Canning served in a variety of legal roles with JPMorgan Chase & Co., focused on mutual funds and counseling SEC-registered investment advisors. Fernando Blasco has served as Vice President, General Manager, Europe & Rest of World since May 2019 and as General Manager of Hayward Iberica, S.L.U. since January 2020. From April 2012 to May 2019, Mr.
Canning served in a variety of legal roles with JPMorgan Chase & Co., focused on mutual funds and counseling SEC-registered investment advisors. John Collins has served as Senior Vice President and Chief Commercial Officer since December 2023. Previously he served as the Company’s Senior Vice President, Chief Supply Chain Officer. Prior to joining Hayward, Mr.
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Blasco was Chief Executive Officer of the Adequa, Piping Systems Business of Uralita Group. Also within Uralita Group, Mr. Blasco held positions such as Managing Director of the Injection Business Unit from 2010 to 2012 and Corporate Sales Development Manager from 2008 to 2010.
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Lewis served as Vice President, Human Resources, Residential HVAC & Supply at Trane Technologies. From 2016 to 2018, Mr. Lewis served as Executive Vice President and Chief HR Officer of Catalina Marketing, a digital media portfolio company of private equity firm Berkshire Partners, LLC. Prior to Catalina Marketing, Mr.
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Prior to that, from 2004 to 2008, he worked at GE Consumer & Industrial in roles of progressively increasing responsibility, ultimately serving as EMEA Prescription Manager. 33 Part II
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Lewis served as Senior Vice President and Chief HR Officer at Allegion, the security business spin off from Ingersoll Rand, where he had spent the prior six years as Vice President, HR, for several Ingersoll Rand businesses, including a year as Chief People Officer for Doosan, a divestiture of Ingersoll Rand, overseeing the U.S. and the Republic of Korea. Mr.
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Lewis served in the U.S. Army as a commissioned officer and helicopter test pilot, before joining GE Corporation in 1996, where he began his human resources career. Eric Sejourne has served as Senior Vice President and Chief Global Operations Officer of the Company since April 2024. From 2010 until he joined Hayward, Mr.
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Sejourne held various leadership positions at Assa Abloy, a lock, door, gate and entrance automation manufacturing company. His roles included President of the Access & Egress Hardware Group - Americas, Chief Operations Officer - Americas and President of the Architectural Accessories and Door Control Group. From 2008 until joining Assa Abloy, Mr.
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Sejourne held the position of Vice President of Lean & Operational Excellence at Watts Water Technology, overseeing operations across North America, Asia and Europe.
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Prior to Watts Water Technology, he held positions of increasing seniority, including General Manager of Operations for the Northeast region, of Allegion, the security business spin-off from Ingersoll Rand, where he began his career in engineering and manufacturing. Kevin Gallagher has served as global Vice President, Chief Engineering Officer of the Company since May 2024.
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From 2021 until he joined Hayward, Mr. Gallagher served as Chief Technology Officer, Personal Protective Equipment (PPE) at Honeywell. From 2016 to 2021, Mr. Gallagher was Vice President of Global Engineering and Quality at InVue, an international merchandising, security, and IoT solutions company, where he led product development, innovation, quality and program management.
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Beginning in 2007, he served as Vice President of Global Engineering and Quality at Dorman Products, Inc., a manufacturer of aftermarket automotive products. Mr. 35 Gallagher began his career in the automotive industry at Chrysler Corporation, where during his 13-year tenure he held engineering roles of increasing responsibility.
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Darío Vicario has served as Vice President, General Manager, Europe & Rest of World of the Company since May 2024, based in Spain. From 2022 until he joined Hayward, Mr. Vicario served as CEO of Azkoyen Group, a multinational vending, payment and security technology company, as well as non-executive Board member.
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Prior to Azkoven, from 2018 to 2021, he served as CEO of Thyssenkrupp Elevator for Iberia and Africa, where he oversaw the company’s digitalization and investment in Internet of Things (IoT) solutions. From 2012 through 2017, Mr. Vicario served as Managing Director South Europe for Gunnebo, a security integrations and payment technology company.
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Prior to that, he served as General Manager for the tire manufacturer Goodyear in Iberia and the Scandinavian region. As an industrial engineer, Mr. Vicario began his career at Bridgestone Europe, a global leader in premium tires and sustainable mobility solutions. 36 Part II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeWe chose the Russell 1000® Index for comparison, as opposed to an industry index, because we do not believe that we can reasonably identify a peer group or a published industry or line-of-business index that contains companies in a similar line of business. 34 Each of the cumulative returns is calculated assuming the investment of $100 in each of the securities at the closing price on the first day of trading of our common stock on the NYSE (March 12, 2021), and reinvestment of dividends into additional shares of the respective equity securities when paid.
Biggest changeEach of the cumulative returns is calculated assuming the investment of $100 in each of the securities at the closing price on the first day of trading of our common stock on the NYSE (March 12, 2021), and reinvestment of 37 dividends into additional shares of the respective equity securities when paid.
On July 26, 2022, the board of directors renewed the initial authorization of its share repurchase program (the “Share Repurchase Program”) such that the Company is authorized commencing at that time to repurchase from time to time up to an aggregate of $450 million of our common stock with such authority expiring on July 26, 2025.
On July 26, 2022, the Board renewed the initial authorization of its share repurchase program (the “Share Repurchase Program”) such that the Company is authorized commencing at that time to repurchase from time to time up to an aggregate of $450 million of our common stock with such authority expiring on July 26, 2025.
The following table sets forth all purchases made by us or on our behalf or any “affiliated purchaser,” as defined in Rule 10b-18(a)(3) under the Exchange Act, of shares of our common stock during each month in the quarter ended December 31, 2023.
The following table sets forth all purchases made by us or on our behalf or any “affiliated purchaser,” as defined in Rule 10b-18(a)(3) under the Exchange Act, of shares of our common stock during each month in the quarter ended December 31, 2024.
During Fiscal Year 2023, the Company did not repurchase any shares of common stock. CUMULATIVE TOTAL RETURN PERFORMANCE GRAPH Set forth below is a line graph showing the change in the cumulative total shareholder return for our common stock as compared to similar returns for the S&P 500® Index and the Russell 1000® Stock Index.
During Fiscal Year 2024, the Company did not repurchase any shares of its common stock under the plan. CUMULATIVE TOTAL RETURN PERFORMANCE GRAPH Set forth below is a line graph showing the change in the cumulative total shareholder return for our common stock as compared to similar returns for the S&P 500® Index and the Russell 1000® Stock Index.
The Share Repurchase Program is primarily expected to be conducted through privately negotiated transactions, including with the Sponsors, as well as through open market repurchases or other means, including through Rule 10b-18 trading plans or through the use of other techniques such as accelerated share repurchases.
The Share Repurchase Program is primarily expected to be conducted through privately negotiated transactions, including with certain of our large stockholders, as well as through open market repurchases or other means, including through Rule 10b-18 trading plans or through the use of other techniques such as accelerated share repurchases.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is publicly traded on the New York Stock Exchange (“NYSE”) under the symbol “HAYW.” As of February 27, 2024, there were 310 holders of record of our common stock.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is publicly traded on the New York Stock Exchange (“NYSE”) under the symbol “HAYW.” As of February 25, 2025, there were 370 holders of record of our common stock.
Under the Share Repurchase Program, the Company may purchase shares of its common stock on a discretionary basis from time to time, which may be conducted through privately negotiated transactions, including with the Sponsors, as well as through open market repurchase or other means, including through Rule 10b5-1(c) trading plans or through the use of other techniques such as accelerated share repurchases.
Pursuant to this authorization, the Company may purchase shares of its common stock on a discretionary basis from time to time, which may be conducted through privately negotiated transactions, including with MSD Partners, as well as through open market repurchase or other means, including through Rule 10b5-1(c) trading plans or through the use of other techniques such as accelerated share repurchases.
Period (a) Total Number of Shares Purchased (b) Average Price Paid per Share (c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Program (1) (d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Program October 1 – November 4, 2023 — — — $ 400,000,000 November 5 – December 2, 2023 — — — 400,000,000 December 3 – December 31, 2023 — — — 400,000,000 Total — — — $ 400,000,000 (1) On July 28, 2022, the Company announced that the Board renewed the initial authorization of the Share Repurchase Program on July 26, 2022, such that the Company is authorized commencing at that time to repurchase from time to time up to an aggregate of $450 million of its outstanding shares of common stock, with such authorization expiring on July 26, 2025.
Period (a) Total Number of Shares Purchased (b) Average Price Paid per Share (c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Program (1) (d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Program September 29 – November 2, 2024 — — — $ 400,000,000 November 3 – November 30, 2024 — — — 400,000,000 December 1 – December 31, 2024 — — — 400,000,000 Total — — — $ 400,000,000 (1) On July 26, 2022, the Board authorized the repurchase of up to an aggregate of $450 million of the Company’s outstanding shares of common stock, with such authorization expiring on July 26, 2025.
The graph plots the respective values beginning on March 12 and continuing through December 31, 2023. Past performance is not necessarily indicative of future performance. March 12, 2021 December 31, 2021 December 31, 2022 December 31, 2023 Hayward Holdings, Inc. $100.00 $154.29 $55.29 $80.00 Russell 1000 Stock Index $100.00 $119.96 $97.19 $121.94 S&P 500 Index $100.00 $122.15 $99.95 $126.13
March 12, 2021 December 31, 2021 December 31, 2022 December 31, 2023 December 31, 2024 Hayward Holdings, Inc. $100.00 $154.29 $55.29 $80.00 $89.94 Russell 1000 Stock Index $100.00 $119.96 $97.19 $121.94 $152.68 S&P 500 Index $100.00 $122.15 $99.95 $126.13 $157.52
We believe the Russell 1000® Stock Index includes companies with market capitalization comparable to ours.
We believe the Russell 1000® Stock Index includes companies with market capitalization comparable to ours. We chose the Russell 1000® Index for comparison, as opposed to an industry index, because we do not believe that we can reasonably identify a peer group or a published industry or line-of-business index that contains companies in a similar line of business.
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The graph plots the respective values beginning on March 12 and continuing through December 31, 2024. Past performance is not necessarily indicative of future performance.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeAdjustments in the year ended December 31, 2022 include $5.5 million of expenses associated with the discontinuation of a product joint development agreement and a $3.3 million non-cash increase in cost of goods sold resulting from the fair value inventory step-up adjustment recognized as part of the purchase accounting for the Specialty Lighting Business, $0.2 million bad debt reserves related to certain customers impacted by the conflict in Russia and Ukraine, and other immaterial items. 47 Following is a reconciliation from segment income to adjusted segment income for NAM (dollars in thousands): Years Ended December 31, 2023 2022 Segment income $ 215,425 $ 308,627 Depreciation 14,610 17,049 Amortization 6,718 6,265 Stock-based compensation (a) 437 (494) Other (b) 503 9,332 Total Adjustments 22,268 32,152 Adjusted segment income $ 237,693 $ 340,779 Adjusted segment income margin 28.9 % 30.7 % (a) Represents non-cash stock-based compensation expense related to equity awards issued to management, employees, and directors.
Biggest changeAdjustments in the year ended December 31, 2023 primarily include $1.8 million related to inventory and fixed asset write-offs in Europe and $1.5 million of costs incurred related to the selling stockholder offerings of shares in March, May and August 2023, which are reported in SG&A in our consolidated statements of operations. 49 Following is a reconciliation from segment income to adjusted segment income for NAM (dollars in thousands): Years Ended December 31, 2024 2023 Segment income $ 261,735 $ 215,425 Depreciation 17,989 14,610 Amortization 6,985 6,718 Stock-based compensation (a) 176 437 Other (b) 4,079 503 Total Adjustments 29,229 22,268 Adjusted segment income $ 290,964 $ 237,693 Segment income margin 29.2 % 26.2 % Adjusted segment income margin 32.5 % 28.9 % (a) Represents non-cash stock-based compensation expense related to equity awards issued to management, employees, and directors.
Other than warranty and variable compensation, SG&A is generally not directly proportional to net sales. Research, development and engineering expense The Company conducts RD&E activities in its own facilities. These expenses consist primarily of salaries, supplies and overhead costs related to the active development of new products, enhanced product applications and improved manufacturing and value engineering of existing products.
Other than warranty and variable compensation, SG&A is generally not directly proportional to net sales. Research, development and engineering expense The Company primarily conducts RD&E activities in its own facilities. These expenses consist primarily of salaries, supplies and overhead costs related to the active development of new products, enhanced product applications and improved manufacturing and value engineering of existing products.
(c) Adjustments in the year ended December 31, 2023 primarily include $6.7 million of costs related to the discontinuation of a product line leading to an impairment of the associated fixed assets, inventory and intangible assets, $2.4 million related to programs to centralize and consolidate manufacturing operations and professional services in Europe, $1.9 million of costs associated with the relocation of the corporate headquarters to Charlotte, North Carolina, $1.2 million separation costs associated with the 2022 cost reduction program and $0.8 million of costs associated with integration costs from prior acquisitions.
Adjustments in the year ended December 31, 2023 primarily include $6.7 million of costs related to the discontinuation of a product line leading to an impairment of the associated fixed assets, inventory and intangible assets, $2.4 million related to programs to centralize and consolidate manufacturing operations and professional services in Europe, $1.9 million of costs associated with the relocation of the corporate headquarters to Charlotte, North Carolina, $1.2 million separation costs associated with the 2022 cost reduction program and $0.8 million of costs associated with integration costs from prior acquisitions.
The qualitative impairment assessment includes considering various factors including macroeconomic conditions, industry and market conditions, cost factors and any reporting unit specific events. If it is determined through the qualitative assessment that the reporting unit’s fair value is more likely than not greater than its carrying value, the quantitative impairment assessment is not required.
The qualitative impairment assessment includes considering various factors including macroeconomic conditions, industry and market conditions, cost factors and any reporting unit specific events. If it is determined through the qualitative assessment that the reporting unit’s fair value is more 54 likely than not greater than its carrying value, the quantitative impairment assessment is not required.
We have presented EBITDA, adjusted EBITDA, adjusted EBITDA margin, total segment income, adjusted segment income and adjusted segment income margin solely as supplemental disclosure because we believe it allows for a more complete analysis of results of operations. In the future we may incur expenses such as those added back to calculate adjusted EBITDA.
We have presented EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted segment income and adjusted segment income margin solely as supplemental disclosure because we believe it allows for a more complete analysis of results of operations. In the future we may incur expenses such as those added back to calculate adjusted EBITDA.
EBITDA, adjusted EBITDA, adjusted EBITDA margin, total segment income, adjusted segment income and adjusted segment income margin are not calculated in the same manner by all companies, and accordingly, are not necessarily comparable to similarly entitled measures of other companies and may not be an appropriate measure for performance relative to other companies.
EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted segment income and adjusted segment income margin are not calculated in the same manner by all companies, and accordingly, are not necessarily comparable to similarly entitled measures of other companies and may not be an appropriate measure for performance relative to other companies.
EBITDA, adjusted EBITDA, total segment income and adjusted segment income should not be construed as indicators of a company’s operating performance in isolation from, or as a substitute for, net income (loss), operating income and segment income, which are prepared in accordance with GAAP.
EBITDA, adjusted EBITDA, and adjusted segment income should not be construed as indicators of a company’s operating performance in isolation from, or as a substitute for, net income (loss) and operating income, which are prepared in accordance with GAAP.
The E&RW segment manufactures and sells residential and commercial swimming pool equipment and supplies in Europe, Central and South America, the Middle East, Australia and other Asia Pacific countries. 36 Key Trends and Uncertainties Regarding Our Existing Business The following trends and uncertainties affect the period-to-period comparability of our results of operations and may affect our financial performance in the future: • Demand related to the aging base of pools and the COVID-19 pandemic.
The E&RW segment manufactures and sells residential and commercial swimming pool equipment and supplies in Europe, Central and South America, the Middle East, Australia and other Asia Pacific countries. 39 Key Trends and Uncertainties Regarding Our Existing Business The following trends and uncertainties affect the period-to-period comparability of our results of operations and may affect our financial performance in the future: • Demand related to the aging base of pools and the COVID-19 pandemic.
Adjusted segment income margin is defined as adjusted segment income divided by segment net sales. EBITDA, adjusted EBITDA, adjusted EBITDA margin, total segment income, adjusted segment income and adjusted segment income margin are not recognized measures of financial performance under GAAP.
Adjusted segment income margin is defined as adjusted segment income divided by segment net sales. EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted segment income and adjusted segment income margin are not recognized measures of financial performance under GAAP.
Net sales We offer a broad range of pool equipment including pumps, filters, heaters, automatic cleaners, sanitizers, controls, LED lights, as well as industrial thermoplastic valves and process liquid control products. Sales are impacted by product and geographic segment mix, as well as promotional and competitive activities.
Net sales We offer a broad range of pool equipment including pumps, filters, heaters, automatic cleaners, sanitizers, chlorine generators, controls, LED lights, as well as industrial thermoplastic valves and process liquid control products. Sales are impacted by product and geographic segment mix, as well as promotional and competitive activities.
EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Consolidated segment income, Adjusted segment income, Adjusted segment income margin EBITDA, adjusted EBITDA, adjusted EBITDA margin, consolidated segment income, adjusted segment income and adjusted segment income margin are key metrics used by management and our Board of Directors to assess our financial performance.
EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted segment income, Adjusted segment income margin EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted segment income and adjusted segment income margin are key metrics used by management and our Board of Directors to assess our financial performance.
We use operating income as well as other indicators as a measure of the profitability of our business. 38 Interest expense, net The Company incurs interest expense on its Credit Facilities, as defined herein. The amortization of debt issuance costs and impact of our interest rate hedging instruments are also included in interest expense.
We use operating income as well as other indicators as a measure of the profitability of our business. 41 Interest expense, net The Company incurs interest expense on its Credit Facilities, as defined herein. The amortization of debt issuance costs and impact of our interest rate hedging instruments are also included in interest expense.
Use of the terms EBITDA, adjusted EBITDA, adjusted EBITDA margin, total segment income, adjusted segment income and adjusted segment income margin may differ from similar measures reported by other companies.
Use of the terms EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted segment income and adjusted segment income margin may differ from similar measures reported by other companies.
As of December 31, 2023, the balance outstanding under the First Lien Term Facility was $975.0 million and the balance outstanding under the Incremental Term Loan B was $123.4 million. T he effective interest rate on borrowings under the First Lien facilities, including the impact of an interest rate hedge, was 6.85%.
T he effective interest rate on borrowings under the First Lien facilities, including the impact of an interest rate hedge, was 6.77%. As of December 31, 2023, the balance outstanding under the First Lien Term Facility was $975.0 million and the balance outstanding under the Incremental Term Loan B was $123.4 million.
We derived the consolidated statements of operations for the Fiscal Years 2023 and 2022 from our audited consolidated financial statements. Our historical results are not necessarily indicative of the results that may be expected in the future.
We derived the consolidated statements of operations for the Fiscal Years 2024 and 2023 from our audited consolidated financial statements. Our historical results are not necessarily indicative of the results that may be expected in the future.
We estimate aftermarket sales based upon feedback from certain representative customers and management’s interpretation of available industry and government data, and not upon our GAAP net sales results. We manufacture our products at six facilities worldwide, which are located in North Carolina, Tennessee, Rhode Island, Spain (two) and China.
We estimate aftermarket sales based upon feedback from certain representative customers and management’s interpretation of available industry and government data, and not upon our GAAP net sales results. We manufacture our products at seven facilities worldwide, which are located in North Carolina, Georgia, Tennessee, Rhode Island, Spain (two) and China.
A discussion regarding our financial condition and results of operations for the year ended December 31, 2022, compared to the year ended December 31, 2021, is included under “Part II, Item 7.
A discussion regarding our financial condition and results of operations for the year ended December 31, 2023, compared to the year ended December 31, 2022, is included under “Part II, Item 7.
Customer Rebates Many of our major customer agreements provide for rebates upon achievement of various performance targets. We account for customer rebates as a reduction of gross sales with either a corresponding offset to accounts receivable or recognition of an accrued liability. We estimate the rebates based on our latest projection of customer performance.
Customer Rebates Many of our major customer agreements provide for rebates, some of which require achievement of various performance targets. We account for customer rebates as a reduction of gross sales with either a corresponding offset to accounts receivable or recognition of an accrued liability. We estimate the rebates based on our latest projection of customer performance.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on February 28, 2023.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 , filed with the SEC on February 29, 2024.
Off-Balance Sheet Arrangements We had $4.3 million and $4.5 million of outstanding letters of credit on our ABL Facility as of December 31, 2023 and December 31, 2022, respectively. Critical Accounting Estimates Our consolidated financial statements have been prepared in accordance with GAAP.
Off-Balance Sheet Arrangements We had $4.3 million of outstanding letters of credit on our ABL Facility as of each of December 31, 2024 and December 31, 2023. Critical Accounting Estimates Our consolidated financial statements have been prepared in accordance with GAAP.
As of December 31, 2023, goodwill and indefinite lived intangible assets were $935.0 million and $736.0 million, respectively. 52 For goodwill, we may first make a qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less than its carrying value.
As of December 31, 2024, goodwill and indefinite lived intangible assets were $943.6 million and $736.0 million, respectively. For goodwill, we may first make a qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less than its carrying value.
NAM and E&RW accounted for approximately 83% and 17% and 84% and 16% of total net sales for Fiscal Year 2023 and Fiscal Year 2022, respectively. The NAM segment manufactures and sells a complete line of residential and commercial swimming pool equipment and supplies in the United States and Canada and manufactures and sells flow control products.
NAM and E&RW accounted for approximately 85% and 15%, and 83% and 17%, of total net sales for Fiscal Year 2024 and Fiscal Year 2023, respectively. The NAM segment manufactures and sells a complete line of residential and commercial swimming pool equipment and supplies in the United States and Canada and manufactures and sells flow control products.
For information about our use of these Non-GAAP measures and a reconciliation of these metrics to the nearest GAAP metric see “—Non-GAAP Reconciliation.” The reconciliation of consolidated segment income is included in “— Summary of Results of Operations.” Results of Operations The following tables summarize key components of our results of operations for the periods indicated, both in dollars and as a percentage of our net sales.
For information about our use of these Non-GAAP measures and a reconciliation of these metrics to the nearest GAAP metric see “—Non-GAAP Reconciliation.” Results of Operations The following tables summarize key components of our results of operations for the periods indicated, both in dollars and as a percentage of our net sales.
The $13.2 million expense in Fiscal Year 2023 was primarily driven by costs related to the discontinuation of a product line leading to an impairment of the associated fixed assets, inventory and intangible assets, programs to centralize and consolidate manufacturing operations and professional services in Europe as well as costs associated with the relocation of the corporate headquarters to Charlotte, North Carolina.
In comparison, the $13.2 million expense in Fiscal Year 2023 was primarily driven by costs related to the discontinuation of a product line leading to an impairment of the associated fixed assets, inventory and intangible assets, programs to centralize and consolidate manufacturing operations and professional services in Europe, as well as costs associated with the relocation of the corporate headquarters to Charlotte, North Carolina. 43 For additional information, see Note 19.
These new products offer higher energy efficiency, automation capabilities and enhanced water care solutions, and we expect will become primary drivers of our sales growth. Staying at the forefront of technological innovation and introducing new product offerings with new features will continue to be critical in growing our market share and revenue. • Macroeconomic Factors on Variable Rate Indebtedness.
These new products offer higher energy efficiency, automation capabilities and enhanced water care solutions, and we expect will become primary drivers of our sales growth. Staying at the forefront of technological innovation and introducing new product offerings with new features will continue to be critical in growing our market share and revenue. • Geopolitical events.
Interest expense in Fiscal Year 2023 consisted of $76.0 million of interest on the outstanding debt, net of the impact from the interest rate swaps, and $4.7 million of amortization of deferred financing fees, partially offset by $7.1 million of interest income.
Interest expense in Fiscal Year 2023 consisted of $76.0 million on the outstanding debt and $4.7 million of amortization of deferred financing fees, partially offset by $7.1 million of interest income.
We estimate these volume discounts, promotional allowance benefits, and returns based upon the terms of the customer contracts and historical experience and record such amounts as a reduction of gross sales with an offsetting adjustment to account receivable. We regularly monitor the adequacy of these allowances.
We estimate these volume discounts, promotional allowance benefits, and returns based upon the terms of the customer contracts and historical experience and record such amounts as a reduction of gross sales with either an offsetting adjustment to accounts receivable or recognition of an accrued liability. We regularly monitor the adequacy of these allowances.
Shipments for the 2023 Early Buy program began in the late third quarter and will continue through approximately the first quarter of 2024. The favorable payment terms extended as part of the Early Buy program generally do not exceed 180 days. Revenue is recognized upon shipment of products, which cannot be returned unless damaged.
Shipments for the 2024 Early Buy program began in the late third quarter and will continue through approximately the first quarter of 2025. The favorable payment terms extended as part of the Early Buy program generally do not exceed 180 days. Revenue is recognized upon shipment of products, which cannot be returned after ten days from receipt of goods.
Fair value of the reportable unit is estimated using a discounted six-year projected cash flow analyses and a terminal value calculation at the end of the six-year period. In 2023, the Company performed a quantitative analysis and determined that the fair values of the reporting units were more likely than not greater than the carrying amounts.
Fair value of the reportable unit is estimated using a discounted six-year projected cash flow analyses and a terminal value calculation at the end of the six-year period. For the year-ended December 31, 2024, the Company performed a qualitative analysis and determined that the fair values of the reporting units were more likely than not greater than the carrying amounts.
The estimates have calculations that require us to make assumptions based on the current rate of sales, age, salability of inventory, and profitability of inventory, all of which may be affected by changes in merchandising mix and consumer preferences.
The estimates have calculations that require us to make assumptions based on the current rate of sales, age, salability of inventory, and profitability of inventory, all of which may be affected by changes in merchandising mix and consumer preferences. We review and update these reserves on a quarterly basis.
Pool owners are increasingly demanding new technologies, such as IoT-enabled and more energy efficient products, as they replace or upgrade their existing pool equipment. In Fiscal Year 2023, new products launched in the last three years contributed approximately 14% of gross sales.
Pool owners are increasingly demanding new technologies, such as IoT-enabled and more energy efficient products, as they replace or upgrade their existing pool equipment. In Fiscal Year 2024, approximately 20% of gross sales was from new or next-generation products launched in the last three years.
The ABL Facility matures June 1, 2026. We have the option to increase the ABL Facility, subject to certain conditions, including the commitment of the participating lenders. For the year ended December 31, 2023, the average borrowing base under the ABL Facility was $265.8 million and the average loan balance outstanding was $17.3 million.
The ABL Facility matures June 1, 2026. We have the option to increase the ABL Facility, subject to certain conditions, including the commitment of the participating lenders. For the year ended December 31, 2024, the average borrowing base under the ABL Facility was $212.6 million and the average loan balance outstanding was zero.
Dollars, of which $20.0 million is available for the issuance of letters of credit in Canadian dollars. The ABL Facility also includes a $50.0 million swingline loan facility and a $35 million First-In, Last-Out Sublimit (“FILO Sublimit”).
A portion of the ABL Facility not to exceed $50.0 million is available for the issuance of letters of credit in U.S. Dollars, of which $20.0 million is available for the issuance of letters of credit in Canadian dollars. The ABL Facility also includes a $50.0 million swingline loan facility and a $17.5 million First-In, Last-Out Sublimit (“FILO Sublimit”).
In addition to historical financial information, this discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results may differ materially from those contained in or implied by any forward-looking statements. We define the year ended December 31, 2023 as Fiscal Year 2023 and the year ended December 31, 2022 as Fiscal Year 2022.
In addition to historical financial information, this discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results may differ materially from those contained in or implied by any forward-looking statements.
Pursuant to this provision, the Company does not have a mandatory excess cash flow prepayment in 2024 based on the First Lien Leverage Ratio and permitted deductions as of December 31, 2023. The First Lien Term Facility including the Incremental Term Loan B, matures on May 28, 2028.
Pursuant to this provision, the Company does not have a mandatory excess cash flow prepayment in 2025 based on the First Lien Leverage Ratio and permitted deductions as of December 31, 2024. The First Lien Term Facility matures on May 28, 2028. As of December 31, 2024, the balance outstanding under the First Lien Term Facility was $965.0 million.
For the prior year, the borrowings under the First Lien Term Facility bore interest at a rate equal to LIBOR or a base rate plus an applicable margin of 2.75% per annum with a 0.50% floor, with a stepdown to 2.50% per annum with a 0.50% floor when net secured leverage ratio as defined by the credit agreement is less than 2.5x. 50 The First Lien Term Facility also includes an incremental term loan in an aggregate original principal amount of $125 million (the “Incremental Term Loan B”).
For the periods prior to May 22, 2023, before the Company entered into the Fifth Amendment to the Company’s First Lien Credit Agreement to replace the LIBOR based reference rate with an adjusted term SOFR, the borrowings under the First Lien Term Facility bore interest at a rate equal to LIBOR or a base rate plus an applicable margin of 2.75% per annum with a 0.50% floor, with a stepdown to 2.50% per annum with a 0.50% floor when net secured leverage ratio as defined by the credit agreement is less than 2.5x. 52 The First Lien Term Facility included an incremental term loan in an aggregate original principal amount of $125 million (the “Incremental Term Loan B”).
Europe & Rest of World (“E&RW”) (Dollars in thousands) Years Ended December 31, 2023 2022 Net sales $ 169,176 $ 205,277 Gross profit $ 66,309 $ 82,180 Gross profit margin % 39.2 % 40.0 % Segment income $ 33,518 $ 47,388 Segment income margin % 19.8 % 23.1 % Adjusted segment income (a) $ 34,503 $ 48,416 Adjusted segment income margin % (a) 20.4 % 23.6 % (a) See “—Non-GAAP Reconciliation.” Year-over-year net sales decrease was driven by the following: 2023 Volume (22.0) % Price, net of discounts and allowances 4.0 % Currency and other 0.4 % Total (17.6) % Net sales Net sales decreased to $169.2 million in Fiscal Year 2023 from $205.3 million in Fiscal Year 2022, a decrease of $36.1 million or 17.6%.
Europe & Rest of World (“E&RW”) (Dollars in thousands) Years Ended December 31, 2024 2023 Net sales $ 156,108 $ 169,176 Gross profit $ 56,483 $ 66,309 Gross profit margin % 36.2 % 39.2 % Segment income $ 21,632 $ 33,518 Segment income margin % 13.9 % 19.8 % Adjusted segment income (a) $ 22,857 $ 34,503 Adjusted segment income margin % (a) 14.6 % 20.4 % (a) See “—Non-GAAP Reconciliation.” Year-over-year net sales decrease was driven by the following: 2024 Volume (8.5) % Price, net of discounts and allowances 1.0 % Currency and other (0.2) % Total (7.7) % Net sales Net sales decreased to $156.1 million in Fiscal Year 2024 from $169.2 million in Fiscal Year 2023, a decrease of $13.1 million, or 7.7%.
As a percentage of segment net sales, SG&A and RD&E expenses increased from 17.0% in the Fiscal Year 2022 to 19.4% as a result of lower net sales as discussed above. 44 Segment income margin decreased to 19.8% in Fiscal Year 2023 from 23.1% in Fiscal Year 2022, a decrease of 330 basis points.
As a percentage of segment net sales, SG&A and RD&E expenses increased from 19.4% in the Fiscal Year 2023 to 22.3% as a result of lower net sales as discussed above. Segment income margin decreased to 13.9% in Fiscal Year 2024 from 19.8% in Fiscal Year 2023, a decrease of 590 basis points.
The decline was primarily attributable to the decreased sales and operating leverage. Adjusted segment income and Adjusted segment income margin Adjusted segment income decreased to $34.5 million in Fiscal Year 2023 from $48.4 million in Fiscal Year 2022, a decrease of $13.9 million or 28.7%.
The decline was primarily attributable to the decreased sales and operating leverage. Adjusted segment income and Adjusted segment income margin Adjusted segment income decreased to $22.9 million in Fiscal Year 2024 from $34.5 million in Fiscal Year 2023, a decrease of $11.6 million or 33.8%.
Sources and Uses of Cash Following is a summary of our cash flows from operating, investing, and financing activities (dollars in thousands): Years Ended December 31, 2023 2022 Net cash provided by operating activities $ 184,540 $ 115,944 Net cash used in investing activities (55,381) (92,573) Net cash used in financing activities (7,612) (229,240) Effect of exchange rate changes on cash and cash equivalents and restricted cash 373 (3,750) Change in cash and cash equivalents and restricted cash $ 121,920 $ (209,619) Net cash provided by operating activities Net cash provided by operating activities increased to $184.5 million for the year ended December 31, 2023 from $115.9 million for the year ended December 31, 2022, an increase of $68.6 million, or 59.2%.
Sources and Uses of Cash Following is a summary of our cash flows from operating, investing, and financing activities (dollars in thousands): Years Ended December 31, 2024 2023 Net cash provided by operating activities $ 212,068 $ 184,540 Net cash used in investing activities (54,131) (55,381) Net cash used in financing activities (136,790) (7,612) Effect of exchange rate changes on cash and cash equivalents and restricted cash (2,655) 373 Change in cash and cash equivalents and restricted cash $ 18,492 $ 121,920 Net cash provided by operating activities Net cash provided by operating activities increased to $212.1 million for the year ended December 31, 2024 from $184.5 million for the year ended December 31, 2023, an increase of $27.6 million, or 14.9%.
Provision for income taxes We incurred income tax expense of $20.4 million for Fiscal Year 2023 and $54.9 million for Fiscal Year 2022, a decrease of $34.5 million or 62.8%. This decrease in tax expense was primarily due to decreased income from operations.
Provision for income taxes We incurred income tax expense of $25.5 million for Fiscal Year 2024 and $20.4 million for Fiscal Year 2023, a increase of $5.1 million or 25.1%. This increase in tax expense was primarily due to increased income from operations.
As of December 31, 2023, the loan balance was zero with a borrowing availability of $256.5 million. For the year ended December 31, 2022, the average borrowing base under the ABL Facility was $246.5 million and the average loan balance outstanding was $73.1 million.
As of December 31, 2024, the loan balance was zero with a borrowing availability of $163.4 million. For the year ended December 31, 2023, the average borrowing base under the ABL Facility was $265.8 million and the average loan balance outstanding was $17.3 million.
Our presentation of adjusted EBITDA and adjusted segment income should not be construed as an inference that our future results will be unaffected by these items. 45 Following is a reconciliation from net income to adjusted EBITDA (dollars in thousands): Years Ended December 31, 2023 2022 Net income $ 80,687 $ 179,347 Depreciation 15,983 19,246 Amortization 37,079 38,393 Interest expense 73,584 51,387 Income taxes 20,400 54,890 EBITDA 227,733 343,263 Stock-based compensation (a) 1,270 1,602 Currency exchange items (b) 786 926 Acquisition and restructuring related expense, net (c) 13,213 8,162 Other (d) 4,271 13,622 Total Adjustments 19,540 24,312 Adjusted EBITDA $ 247,273 $ 367,575 Adjusted EBITDA margin 24.9 % 28.0 % (a) Represents non-cash stock-based compensation expense related to equity awards issued to management, employees, and directors.
Our presentation of adjusted EBITDA and adjusted segment income should not be construed as an inference that our future results will be unaffected by these items. 48 Following is a reconciliation from net income to adjusted EBITDA (dollars in thousands): Years Ended December 31, 2024 2023 Net income $ 118,655 $ 80,687 Depreciation 20,078 15,983 Amortization 35,783 37,079 Interest expense 62,163 73,584 Income taxes 25,527 20,400 Loss on extinguishment of debt 4,926 — EBITDA 267,132 227,733 Stock-based compensation (a) 608 1,270 Currency exchange items (b) (836) 786 Acquisition and restructuring related expense, net (c) 6,464 13,213 Other (d) 4,079 4,271 Total Adjustments 10,315 19,540 Adjusted EBITDA $ 277,447 $ 247,273 Net income margin 11.3 % 8.1 % Adjusted EBITDA margin 26.4 % 24.9 % (a) Represents non-cash stock-based compensation expense related to equity awards issued to management, employees, and directors.
Long-term debt consisted of the following (in thousands): December 31, 2023 2022 First Lien Term Facility, due May 28, 2028 $ 975,000 $ 985,000 Incremental Term Loan B, due May 28, 2028 123,438 124,688 ABL Revolving Credit Facility — — Other bank debt 8,775 4,593 Finance lease obligations 4,729 6,728 Subtotal 1,111,942 1,121,009 Less: Current portion of the long-term debt (15,088) (14,531) Less: Unamortized debt issuance costs (17,574) (21,423) Total $ 1,079,280 $ 1,085,055 ABL Facility The aggregate amount of the revolving loan commitments on the ABL Facility is $425.0 million, with a peak season commitment of $475.0 million, subject to a borrowing base calculation based on available eligible receivables, inventory, and qualified cash in North America.
Refer to Note 9 , “Long-Term Debt” of Notes to the Consolidated Financial Statements in this Form 10-K for further information on the terms of the Credit Facilities. 51 Long-term debt consisted of the following (in thousands): December 31, 2024 2023 First Lien Term Facility, due May 28, 2028 $ 965,000 $ 975,000 Incremental Term Loan B, due May 28, 2028 — 123,438 ABL Revolving Credit Facility — — Other bank debt 6,461 8,775 Finance lease obligations 2,448 4,729 Subtotal 973,909 1,111,942 Less: Current portion of long-term debt (13,991) (15,088) Less: Unamortized debt issuance costs (9,356) (17,574) Total $ 950,562 $ 1,079,280 ABL Facility The aggregate amount of the revolving loan commitments on the ABL Facility is $425.0 million, with a peak season commitment of $475.0 million, subject to a borrowing base calculation based on available eligible receivables, inventory, and qualified cash in North America.
Segment income and Segment income margin Segment income decreased to $33.5 million in Fiscal Year 2023 from $47.4 million in Fiscal Year 2022, a decrease of $13.9 million or 29.3%. This was primarily driven by a decrease in sales and gross profit as discussed above, partially offset by lower SG&A expense.
Segment income and Segment income margin Segment income decreased to $21.6 million in Fiscal Year 2024 from $33.5 million in Fiscal Year 2023, a decrease of $11.9 million, or 35.5%. This was primarily driven by a decrease in sales and gross profit as discussed above.
(b) See “—Non-GAAP Reconciliation.” 42 North America (“NAM’’) (Dollars in thousands) Years Ended December 31, 2023 2022 Net sales $ 823,276 $ 1,108,859 Gross profit $ 410,641 $ 514,855 Gross profit margin % 49.9 % 46.4 % Segment income $ 215,425 $ 308,627 Segment income margin % 26.2 % 27.8 % Adjusted segment income (a) $ 237,693 $ 340,779 Adjusted segment income margin % (a) 28.9 % 30.7 % (a) See “—Non-GAAP Reconciliation.” Year-over-year net sales decrease was driven by the following: 2023 Volume (28.7) % Price, net of discounts and allowances 2.3 % Acquisitions 0.8 % Currency and other (0.2) % Total (25.8) % Net sales Net sales decreased to $823.3 million in Fiscal Year 2023 from $1,108.9 million in Fiscal Year 2022, a decrease of $285.6 million or 25.8%.
North America (“NAM’’) (Dollars in thousands) Years Ended December 31, 2024 2023 Net sales $ 895,498 $ 823,276 Gross profit $ 474,274 $ 410,641 Gross profit margin % 53.0 % 49.9 % Segment income $ 261,735 $ 215,425 Segment income margin % 29.2 % 26.2 % Adjusted segment income (a) $ 290,964 $ 237,693 Adjusted segment income margin % (a) 32.5 % 28.9 % (a) See “—Non-GAAP Reconciliation.” Year-over-year net sales increase was driven by the following: 2024 Volume 4.0 % Price, net of discounts and allowances 3.6 % Acquisitions 1.4 % Currency and other (0.2) % Total 8.8 % Net sales Net sales increased to $895.5 million in Fiscal Year 2024 from $823.3 million in Fiscal Year 2023, an increase of $72.2 million, or 8.8%.
Our fiscal quarters are 13 weeks except the fourth quarter that ends on December 31 of each fiscal year.
We define the year ended December 31, 2024 as “Fiscal Year 2024” and the year ended December 31, 2023 as “Fiscal Year 2023.” Our fiscal quarters are 13 weeks except the fourth quarter that ends on December 31 of each fiscal year.
During the end of the year we incentivize trade customers to buy and stock up in preparation for next year’s pool season under an “Early Buy” program that features a price discount and extended payment terms. Shipments under the 2023 Early Buy program began in the late third quarter and will continue through approximately the first quarter of 2024.
As such, the utilization of the ABL Facility fluctuates during the year. During the end of the year we incentivize trade customers to buy and stock up in preparation for next year’s pool season under an “Early Buy” program that features a price discount and extended payment terms.
Net cash used in investing activities Net cash used in investing activities decreased to $55.4 million for the year ended December 31, 2023 compared to $92.6 million for the year ended December 31, 2022, a decrease of $37.2 million, or 40.2%.
The increase was driven by the increase in net income. Net cash used in investing activities Net cash used in investing activities decreased to $54.1 million for the year ended December 31, 2024 compared to $55.4 million for the year ended December 31, 2023, a decrease of $1.3 million, or 2.3%.
The First Lien Term Facility bears interest at a rate equal to a base rate or SOFR (which includes an applicable credit spread adjustment), plus, in either case, an applicable margin.
As of December 31, 2023 the loan balance was zero with a borrowing availability of $256.5 million. First Lien Term Facilities The First Lien Term Facility bears interest at a rate equal to a base rate or SOFR (which includes an applicable credit spread adjustment), plus, in either case, an applicable margin.
Operating income as a percentage of net sales (“operating margin”) was 17.7% in Fiscal Year 2023, a 400 basis point reduction from the 21.7% operating margin in Fiscal Year 2022. Interest expense, net Interest expense, net, increased to $73.6 million in Fiscal Year 2023 from $51.4 million in Fiscal Year 2022, an increase of $22.2 million or 43.2%.
Operating income as a percentage of net sales (“operating margin”) was 19.9% in Fiscal Year 2024, a 220 basis point increase from the 17.7% operating margin in Fiscal Year 2023. Interest expense, net Interest expense, net, decreased to $62.2 million in Fiscal Year 2024 from $73.6 million in Fiscal Year 2023, a decrease of $11.4 million, or 15.5%.
Interest expense in Fiscal Year 2022 consisted of $48.5 million on the outstanding debt and $3.3 million of amortization of deferred financing fees, partially offset by $0.4 million of interest income.
Interest expense in Fiscal Year 2024 consisted of $68.0 million of interest on the outstanding debt, net of the impact from the interest rate swaps, and $4.2 million of amortization of deferred financing fees, partially offset by $10.1 million of interest income.
The first quarter 2023 refers to the quarter ended April 1, the second quarter 2023 refers to the quarter ended July 1, the third quarter 2023 refers to the quarter ended September 30, and the fourth quarter 2023 refers to the quarter ended December 31.
The first quarter 2024 refers to the quarter ended March 30, the second quarter 2024 refers to the quarter ended June 29, the third quarter 2024 refers to the quarter ended September 28, and the fourth quarter 2024 refers to the quarter ended December 31.
Total segment income represents net sales less cost of sales, segment SG&A and RD&E, excluding acquisition and restructuring related expense as well as amortization of intangible assets.
We evaluate performance based on net sales, segment income and adjusted segment income, and use segment income margin and adjusted segment income margin as comparable performance measures for our reporting segments. Segment income represents net sales less cost of sales, less segment SG&A and RD&E, excluding acquisition and restructuring related expense, as well as amortization of intangible assets.
Historically aftermarket sales represented 80% of our net sales and are generally recurring in nature since these products are critical to the ongoing operation of pools given requirements for water quality and sanitization.
We have an estimated North American seasonal residential pool market share of approximately 33%. We believe that we are well-positioned for future growth. Historically aftermarket sales represented 80% of our net sales and are generally recurring in nature since these products are critical to the ongoing operation of pools given requirements for water quality and sanitization.
See segment discussion below for further information. 2023 Volume (27.7) % Price, net of discounts and allowances 2.6 % Acquisitions 0.7 % Currency and other (0.1) % Total (24.5) % The Fiscal Year 2023 decrease in net sales was primarily the result of a decline in volume, partially offset by increases in price and the favorable impact of acquisitions.
See segment discussion below for further information. 2024 Volume 1.8 % Price, net of discounts and allowances 3.2 % Acquisitions 1.1 % Currency and other (0.1) % Total 6.0 % The Fiscal Year 2024 increase in net sales was primarily driven by an increase in net price, as well as by an increase in volume and the favorable impact from acquisitions.
Amortization of intangible assets Amortization of intangible assets decreased to $30.4 million in Fiscal Year 2023 from $32.1 million in Fiscal Year 2022, a decrease of $1.7 million or 5.5%, due to the amortization pattern of certain intangibles based on the declining balance method.
“Acquisition and Restructuring Related Expense” of Notes to Consolidated Financial Statements in this Form 10-K. Amortization of intangible assets Amortization of intangible assets decreased to $28.8 million in Fiscal Year 2024 from $30.4 million in Fiscal Year 2023, a decrease of $1.6 million, or 5.1%, due to the amortization pattern of certain intangibles based on the declining balance method.
Operating income and operating income margin Operating income decreased to $175.2 million in Fiscal Year 2023 from $285.6 million in Fiscal Year 2022, a decrease of $110.4 million or 38.6% due to the accumulated effect of the items described above.
Operating income and operating income margin Operating income increased to $208.8 million in Fiscal Year 2024 from $175.2 million in Fiscal Year 2023, an increase of $33.6 million, or 19.2%, due to the accumulated effect of the items described above.
Under the current presentation, the stock-based compensation adjustment for the year ended December 31, 2022 would have been income of $0.7 million. (b) Adjustments in the year ended December 31, 2023 for NAM include miscellaneous items we believe are not representative of our ongoing business operations.
Adjustments in the year ended December 31, 2023 for NAM include miscellaneous items we believe are not representative of our ongoing business operations.
Beginning in the three months ended July 2, 2022, the adjustment includes only expense related to awards issued under the 2017 Equity Incentive Plan, which were awards granted prior to the effective date of the IPO, whereas in prior periods, the adjustment included stock-based compensation expense for all equity awards.
The adjustment includes only expense related to awards issued under the 2017 Equity Incentive Plan, which were awards granted prior to the effective date of the IPO.
The decrease in net sales was primarily due to a decline in volume as a result of distribution channel destocking and geopolitical factors and macroeconomic uncertainty, partially offset by the favorable impact of price increases and the favorable impact of foreign currency translation.
The decrease in net sales was primarily due to a decline in volume, partially offset by the favorable impact of net price. The decline in volume was primarily driven by market declines in the Middle East and Asia, partially as a result of the impact of geopolitical conflicts in the Middle East.
As of December 31, 2023, the Company had invested $25 million in certificates of deposit, which is included in short-term investments on the consolidated balance sheets. We focus on increasing cash flow, solidifying the liquidity position through working capital initiatives, and paying our debt obligations, while continuing to fund business growth initiatives and return of capital to stockholders.
We focus on increasing cash flow, solidifying the liquidity position through working capital initiatives, and paying our debt obligations, while continuing to fund business growth initiatives and return of capital to stockholders.
Research, development and engineering expense RD&E expense increased to $24.5 million in Fiscal Year 2023 compared to $22.4 million in Fiscal Year 2022, an increase of $2.1 million or 9.8%. As a percentage of net sales, RD&E increased to 2.5% in Fiscal Year 2023 compared to 1.7% in Fiscal Year 2022.
Research, development and engineering expense RD&E expense increased to $25.8 million in Fiscal Year 2024 compared to $24.5 million in Fiscal Year 2023, an increase of $1.3 million, or 5.0%. As a percentage of net sales, RD&E remained relatively flat at 2.5% in each year. RD&E spend continues to be focused on new product development and new product quality.
The following table summarizes our results of operations and a comparison of the change between the periods (in thousands): Years Ended December 31, 2023 2022 Net Sales $ 992,452 $ 1,314,136 Cost of sales 515,502 717,101 Gross profit 476,950 597,035 Selling, general, and administrative expense 233,607 248,812 Research, development, and engineering expense 24,547 22,359 Acquisition and restructuring related expense 13,213 8,162 Amortization of intangible assets 30,361 32,129 Operating income 175,222 285,573 Interest expense, net 73,584 51,387 Other expense (income), net 551 (51) Total other expense 74,135 51,336 Income from operations before income taxes 101,087 234,237 Provision for income taxes 20,400 54,890 Net income $ 80,687 $ 179,347 Adjusted EBITDA (a) $ 247,273 $ 367,575 (a) See “— Non-GAAP Reconciliation.” 39 Fiscal Year 2023 Compared to Fiscal Year 2022 Net sales Net sales decreased to $992.5 million in Fiscal Year 2023 from $1,314.1 million in Fiscal Year 2022, a decrease of $321.6 million or 24.5%.
The following table summarizes our results of operations and a comparison of the change between the periods (in thousands): Years Ended December 31, 2024 2023 Net Sales $ 1,051,606 $ 992,452 Cost of sales 520,849 515,502 Gross profit 530,757 476,950 Selling, general, and administrative expense 260,928 233,607 Research, development, and engineering expense 25,778 24,547 Acquisition and restructuring related expense 6,464 13,213 Amortization of intangible assets 28,800 30,361 Operating income 208,787 175,222 Interest expense, net 62,163 73,584 Loss on debt extinguishment 4,926 — Other expense (income), net (2,484) 551 Total other expense 64,605 74,135 Income from operations before income taxes 144,182 101,087 Provision for income taxes 25,527 20,400 Net income $ 118,655 $ 80,687 Adjusted EBITDA (a) $ 277,447 $ 247,273 (a) See “— Non-GAAP Reconciliation.” 42 Fiscal Year 2024 Compared to Fiscal Year 2023 Net sales Net sales increased to $1,051.6 million in Fiscal Year 2024 from $992.5 million in Fiscal Year 2023, an increase of $59.1 million, or 6.0%.
Cash flow and working capital requirements fluctuate during the year, driven primarily by the seasonal demand for our products, an Early Buy program, the timing of inventory purchases and receipt of customer payments. As such, the utilization of the ABL Facility fluctuates during the year.
Primary working capital requirements are for raw materials, assembled components and certain finished goods inventories and supplies, payroll, manufacturing, freight and distribution, facility, and other operating expenses. Cash flow and working capital requirements fluctuate during the year, driven primarily by the seasonal demand for our products, an Early Buy program, the timing of inventory purchases and receipt of customer payments.
As of December 31, 2022, the balance outstanding under the First Lien Term Facility was $985.0 million and the balance outstanding under the Incremental Term Loan B was $124.7 million. The effective interest rate on borrowings, including the impact of an interest rate hedge, was 4.61%. Covenant Compliance The Credit Facilities contain various restrictions, covenants and collateral requirements.
The effective interest rate on borrowings under the First Lien facilities, including the impact of an interest rate hedge, was 6.85%. Covenant Compliance The Credit Facilities contain various restrictions, covenants and collateral requirements. As of December 31, 2024, we were in compliance with all covenants under the Credit Facilities.
An amount of up to 30% (or up to 40% with agent consent) of the then-outstanding commitments under the ABL Facility is available to our Canada and Spain subsidiaries. A portion of the ABL Facility not to exceed $50.0 million is available for the issuance of letters of credit in U.S.
Accounts receivable sold under the Receivables Purchase Agreement are not eligible receivables under the ABL Facility. An amount of up to 30% (or up to 40% with agent consent) of the then-outstanding commitments under the ABL Facility is available to our Canada and Spain subsidiaries.
The Incremental Term Loan B bears interest at an annual floating rate based on SOFR (with a 0.50% floor) plus 3.25% and a 0.10% credit spread adjustment. The incremental loan requires a $0.3 million repayment of principal on the last business day of each March, June, September and December.
The Incremental Term Loan B bore interest at an annual floating rate based on SOFR (with a 0.50% floor) plus 3.25% and a 0.10% credit spread adjustment. In April 2024, the Company voluntarily prepaid the Incremental Term Loan B in full.
Non-GAAP Reconciliation The Company uses EBITDA, adjusted EBITDA, adjusted EBITDA margin, total segment income, adjusted segment income and adjusted segment income margin to supplement GAAP measures of performance to evaluate the effectiveness of our business strategies.
Adjusted segment income margin decreased to 14.6% in Fiscal Year 2024 from 20.4% in Fiscal Year 2023, a decrease of 580 basis points. 47 Non-GAAP Reconciliation The Company uses EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted segment income and adjusted segment income margin to supplement GAAP measures of performance to evaluate the effectiveness of our business strategies.
Net income As a result of the foregoing, net income decreased to $80.7 million in Fiscal Year 2023 compared to net income of $179.3 million in Fiscal Year 2022, a decrease of $98.6 million or 55.0%.
Net income As a result of the foregoing, net income increased to $118.7 million in Fiscal Year 2024 compared to net income of $80.7 million in Fiscal Year 2023, an increase of $38.0 million, or 47.1%.
As a percentage of net sales, SG&A increased to 23.5% in Fiscal Year 2023 as compared to 18.9% in Fiscal Year 2022, an increase of 460 basis points, primarily driven by reduced operating leverage.
As a percentage of net sales, SG&A increased to 24.8% in Fiscal Year 2024 as compared to 23.5% in Fiscal Year 2023, an increase of 130 basis points, primarily due to the factors described above.
Adjusted EBITDA and adjusted EBITDA margin Adjusted EBITDA decreased to $247.3 million in Fiscal Year 2023 from $367.6 million in Fiscal Year 2022, a decrease of $120.3 million or 32.7% driven primarily by lower net sales and operating leverage resulting in a decrease in gross profit of $120.1 million, partially offset by a decrease in SG&A expenses of $15.2 million.
Adjusted EBITDA Adjusted EBITDA increased to $277.4 million in Fiscal Year 2024 from $247.3 million in Fiscal Year 2023, an increase of $30.1 million, or 12.2%, driven primarily by increased net sales and an increase in gross profit of $53.8 million, partially offset by an increase in SG&A expenses of $27.3 million.
We expect to receive payments for the majority of these shipments during the second quarter of 2024. As a result, our accounts receivable balance increases from the late third quarter through the first quarter of 2024 before the Early Buy payments are received.
As a result, our accounts receivable balance increases from the late third quarter through the first quarter of 2025 before the Early Buy payments are received. In addition, cash flow is higher in the second quarter as the seasonality of our business peaks and payments are received.
We review and update these reserves on a quarterly basis. 53 Due to the uncertainty and potential volatility of the factors used in establishing estimates, changes in assumptions could materially affect our financial condition and results of operations. Recently Issued and Adopted Accounting Standards See Note 2 .
Due to the uncertainty and potential volatility of the factors used in establishing estimates, changes in assumptions could materially affect our financial condition and results of operations. 55 Acquisitions We apply the provisions of the Accounting Standards Codification (“ASC”) 805, Business Combinations.
Adjusted EBITDA margin decreased to 24.9% in Fiscal Year 2023 compared to 28.0% in Fiscal Year 2022, a decrease of 310 basis points. See “— Non-GAAP Reconciliation” for a reconciliation of these non-GAAP measures to the most directly comparable GAAP measures. 41 Segment Results of Operations The Company manages its business primarily on a geographic basis.
See “— Non-GAAP Reconciliation” for a reconciliation of these non-GAAP measures to the most directly comparable GAAP measures. 44 Segment Results of Operations The Company manages its business primarily on a geographic basis. The Company’s reportable segments consist of NAM and E&RW.
This was driven by the lower segment income as discussed above, adjusted for additional non-cash or non-recurring charges. Adjusted segment income margin decreased to 28.9% in Fiscal Year 2023 from 30.7% in Fiscal Year 2022, a decrease of 180 basis points.
Adjusted segment income and Adjusted segment income margin Adjusted segment income increased to $291.0 million in Fiscal Year 2024 from $237.7 million in Fiscal Year 2023, an increase of $53.3 million, or 22.4%. This was driven by higher segment income as discussed above, adjusted for additional non-cash or non-recurring charges.
Gross profit margin decreased to 39.2% in Fiscal Year 2023 compared to 40.0% in Fiscal Year 2022, a decrease of 80 basis points, primarily driven by lower operating leverage and an increase in obsolescence reserves, partially offset by the net price increases discussed above.
Gross profit and Gross profit margin Gross profit decreased to $56.5 million in Fiscal Year 2024 from $66.3 million in Fiscal Year 2023, a decrease of $9.8 million or 14.8%. 46 Gross profit margin decreased to 36.2% in Fiscal Year 2024 compared to 39.2% in Fiscal Year 2023, a decrease of 300 basis points, primarily driven by lower operating leverage, discrete inventory adjustments and unfavorable mix due to the impact of geopolitical conflicts in the Middle East, partially offset by the net price increases discussed above.
This was primarily driven by the decreased sales and operating leverage adjusted for additional non-cash or non-recurring charges. Adjusted segment income margin decreased to 20.4% in Fiscal Year 2023 from 23.6% in Fiscal Year 2022, a decrease of 320 basis points.
This was primarily driven by the decreased sales and operating leverage, adjusted for additional non-cash or non-recurring charges.
As a percentage of segment net sales, SG&A and RD&E expenses increased from 18.6% in the Fiscal Year 2022 to 23.7% as a result of the decline in sales as discussed above.
As a percentage of segment net sales, SG&A and RD&E expenses remained consistent at 23.7% for each year. Segment income margin increased to 29.2% in Fiscal Year 2024 from 26.2% in Fiscal Year 2023, an increase of 300 basis points primarily resulting from the increase in sales and gross profit as discussed above.
Gross profit and Gross profit margin Gross profit decreased to $477.0 million in Fiscal Year 2023 from $597.0 million in Fiscal Year 2022, a decrease of $120.0 million or 20.1%.
Gross profit and Gross profit margin Gross profit increased to $530.8 million in Fiscal Year 2024 from $477.0 million in Fiscal Year 2023, an increase of $53.8 million or 11.3%.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeWe actively manage the impact of inflation, including import duties, through strong relationships with our diverse supplier base, vendor 54 terms negotiations, and price and promotion management. Historically, we have been able to realize price increases to partially or fully offset cost inflation. We strategically invest through inventory purchases to obtain favorable pricing ahead of vendor price increases.
Biggest changeImpact of Inflation Our results of operations and financial condition are presented based on historical cost. We actively manage the impact of inflation, including import duties and tariffs, through strong relationships with our diverse supplier base, vendor terms negotiations, and price and promotion management. Historically, we have been able to realize price increases to partially or fully offset cost inflation.
For the Fiscal Year 2023, approximately 17% of our net sales were made by our international operating locations that use a functional currency other than the U.S. dollar. These sales were transacted in Euros, Canadian dollars and Australian dollars. Consequently, we are exposed to the impact of exchange rate volatility between the U.S. dollar and these currencies.
For the Fiscal Year 2024, approximately 17% of our net sales were made by our international operating locations that use a functional currency other than the U.S. dollar. These sales were transacted in Euros, Canadian dollars and Australian dollars. Consequently, we are exposed to the impact of exchange rate volatility between the U.S. dollar and these currencies.
Based on the Fiscal Year 2023, an aggregate increase or decrease of 10% in the currency exchange rate would have caused a translational increase or decrease of approximately $17 million and $1 million in net sales and net income, respectively. Interest Rate Risk Our results are subject to risk from interest rate fluctuations on borrowings under the Credit Facilities.
Based on the Fiscal Year 2024, an aggregate increase or decrease of 10% in the currency exchange rate would have caused a translational increase or decrease of approximately $18 million and $2 million in net sales and net income, respectively. Interest Rate Risk Our results are subject to risk from interest rate fluctuations on borrowings under the Credit Facilities.
Our borrowings bear interest at a variable rate, therefore, we are exposed to market risks relating to changes in interest rates. As of December 31, 2023, we had $1,098.4 million of outstanding variable rate loans under the First Lien Term Facility.
Our borrowings bear interest at a variable rate, therefore, we are exposed to market risks relating to changes in interest rates. As of December 31, 2024, we had $965.0 million of outstanding variable rate loans under the First Lien Term Facility.
Based on our December 31, 2023 variable rate loan balances, an increase or decrease of 1% in the effective interest rate would have caused an increase or decrease in interest cost of approximately $5.0 million, net of interest rate swap settlements.
Based on our December 31, 2024 variable rate loan balances, an increase or decrease of 1% in the effective interest rate would have caused an increase or decrease in interest cost of approximately $3.7 million, net of interest rate swap settlements.
As a result, we believe we have the ability to mitigate negative impacts of inflation. 55
We strategically invest through inventory purchases to obtain favorable pricing ahead of vendor price increases. As a result, we believe we have the ability to mitigate negative impacts of inflation. 57
As of December 31, 2023 and December 31, 2022, the Company was a party to interest rate swap agreements of a notional amount of $600.0 million and $500.0 million, respectively . Impact of Inflation Our results of operations and financial condition are presented based on historical cost.
As of each of December 31, 2024 and December 31, 2023, the Co mpany was a party to interest rate swap agreements of a notional amount of $600.0 million.
Removed
In the first quarter of 2023, the Company entered into interest rate swap agreements that effectively convert an initial notional amount of $100.0 million of its variable-rate debt obligations to fixed-rate debt.
Added
During the year-ended December 31, 2024, the Company entered into interest rate swap agreements with a notional amount of $250.0 million that will become effective in March 2025 and replace existing swap agreements with a notional amount of $250.0 million that had March 2025 maturity dates. These new agreements mature in March 2028.

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