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What changed in Latham Group, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Latham Group, 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.

+554 added−580 removedSource: 10-K (2025-03-05) vs 10-K (2024-03-13)

Top changes in Latham Group, Inc.'s 2024 10-K

554 paragraphs added · 580 removed · 451 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

78 edited+16 added−11 removed62 unchanged
Biggest changeVinyl liners are a required component for the interior surface of a vinyl pool and our liners are highly customizable in shape, size, color, and pattern. Vinyl liners typically need to be replaced every eight to ten years. Replacement vinyl liners provide us with a significant source of stable recurring revenue.
Biggest changeLiners We are the largest replacement liner manufacturer in the North American residential in-ground swimming pool market, serving a market with large, non-discretionary replacement demand. Vinyl liners are a required component for the interior surface of a vinyl pool and our liners are highly customizable in shape, size, color, and pattern.
With an operating history that spans over 65 years, we offer the industry’s broadest portfolio of pools and related products, including in-ground swimming pools, pool liners, and pool covers. We have a heritage of innovation.
With an operating history that spans over 65 years, we offer the industry’s broadest portfolio of pools and related products, including in-ground swimming pools, pool covers, and pool liners. We have a heritage of innovation.
Our coast-to-coast network of facilities allows us to be within close proximity of our customers with shorter lead times and lower transportation costs. This is a key competitive advantage as transportation costs of fiberglass pools become increasingly expensive with longer shipping distances.
Our coast-to-coast network of facilities allows us to be within a close proximity to our customers with shorter lead times and lower transportation costs. This is a key competitive advantage as transportation costs of fiberglass pools become increasingly expensive with longer shipping distances.
Latham’s diversity initiatives include, but are not limited to, our practices and policies on recruitment and selection; compensation; benefits plan design; professional development and training; promotions; transfers; internal communications; social and recreational programs; terminations; and both ongoing development of a work environment that encourages and enforces respectful communication, teamwork, work/life balance, and engaging in community efforts that promote a greater understanding and respect for the principles of diversity.
Latham’s initiatives include, but are not limited to, our practices and policies on recruitment and selection; compensation; benefits plan design; professional development and training; promotions; transfers; internal communications; social and recreational programs; terminations; and both ongoing development of a work environment that encourages and enforces respectful communication, teamwork, work/life balance, and engaging in community efforts that promote a greater understanding and respect for the principles of diversity.
Item 1. Business Overview We are the largest designer, manufacturer, and marketer of in-ground residential swimming pools in North America, Australia, and New Zealand. We hold the #1 position in North America in every product category in which we compete.
Item 1. Business Overview We are the largest designer, manufacturer, and marketer of in-ground residential swimming pools in North America, Australia, and New Zealand. We hold the leading position in North America in every product category in which we compete.
With our differentiated portfolio of products, manufacturing capabilities, customer service, and homeowner connectivity, we have developed a reputation as an innovative and dependable partner to our dealers and distributors. At our “Latham University” training program, our dealer partners discover firsthand the benefits of fiberglass pools, including the ease and speed of installation.
With our differentiated portfolio of products, manufacturing capabilities, customer service, and homeowner connectivity, we have developed a reputation as an innovative and dependable partner to our dealers and distributors. Through our “Latham University” training program, our dealer partners discover firsthand the benefits of fiberglass pools, including the ease and speed of installation.
See “Risk Factors—Risks Related to Our Operations and Industry—We face competition both from within our industry and from other outdoor living products and if we are not able to compete effectively, our prospects for future success will be jeopardized.” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Factors Affecting Our Performance—Volume of Products Sold.” Seasonality Although we generally have demand for our products throughout the year, our business is seasonal, and weather is one of the principal external factors affecting the business.
See “Risk Factors—Risks Related to Our Operations and Industry—We face competition both from within our industry and from other outdoor living products and if we are not able to compete effectively, our prospects for future success will be jeopardized.” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Factors Affecting Our Performance—Volume of Products Sold.” 10 Table of Contents Seasonality Although we generally have demand for our products throughout the year, our business is seasonal, and weather is one of the principal external factors affecting the business.
Our fiberglass pools can be installed in as little as two to three days, compared to three months for comparable concrete pools. While we believe that our fiberglass pools are the future of the industry and meet the majority of the market of pools sold, fiberglass pools do have some limitations.
Our fiberglass pools can be installed in as little as two to three days, compared to three months or more for comparable concrete pools. While we believe that our fiberglass pools are the future of the industry and meet the majority of the market of pools sold, fiberglass pools do have some limitations.
For our polymer wall vinyl pools, we have a facility that produces all of our polymer panels on structural foam equipment, which require unique and specialized molds for each panel, as well as a system to inject the resin into the molds.
For our polymer wall vinyl pools, we have a facility that produces all of our polymer panels on structural foam equipment, which requires unique and specialized molds for each panel, as well as a system to inject the resin into the molds.
Demand for our products is also affected by the level of interest rates and the availability of credit, consumer confidence and spending, housing affordability, demographic trends, employment levels, and other macroeconomic factors that may influence the extent to which consumers engage in renovations to their backyard, including pool installation projects to enhance the outdoor living spaces of their homes.
Demand for our products has also been affected by the level of interest rates and the availability of credit, consumer confidence and spending, housing affordability, demographic trends, employment levels, and other macroeconomic factors that may influence the extent to which consumers engage in renovations to their backyard, including pool installation projects to enhance the outdoor living spaces of their homes.
We use finite element analysis, which is a computerized method for predicting how a product reacts to real-world forces, vibration, heat, fluid flow, and other physical effects. This allows us to model the fiberglass pools that 7 Table of Contents we build to minimize the risk of any structural weak points in the designs.
We use finite element analysis, which is a computerized method for predicting how a product reacts to real-world forces, vibration, heat, fluid flow, and other physical effects. This allows us to model the fiberglass pools that we build to minimize the risk of any structural weak points in the designs.
It also allows homeowners to opt for an eye- and skin-friendly saltwater pool, without concern for corrosion. ● Lifetime warranty . Our fiberglass pools are guaranteed to the original purchaser for a lifetime and do not need to be resurfaced or repainted every eight to ten years like legacy materials.
It also allows homeowners to opt for an eye- and skin-friendly saltwater pool, without concern for corrosion. ● Lifetime warranty . Our fiberglass pools are guaranteed to the original purchaser for a lifetime and do not need to be resurfaced or repainted every eight to ten years like legacy materials such as concrete.
These forward-looking statements reflect our views with respect to future events as of the date of this Annual Report on Form 10-K or the date specified herein, and we have based these forward-looking statements on our current expectations and projections about future events and trends. Given these uncertainties, you should not place undue reliance on these forward-looking statements.
These forward-looking statements reflect our views with respect to future events as of the date of this Annual Report or the date specified herein, and we have based these forward-looking statements on our current expectations and projections about future events and trends. Given these uncertainties, you should not place undue reliance on these forward-looking statements.
Our broad and compelling product offering, proven ability to serve as a value added partner to our dealers and distributors, and our connectivity with homeowners have been critical in achieving the leading position in every pool product category in which we compete. Below is a summary of our products.
Our broad and compelling product offering, proven ability to serve as a value added partner to our dealers and distributors, 5 Table of Contents and our connectivity with homeowners have been critical in achieving the leading position in every pool product category in which we compete. Below is a summary of our products.
Our supply agreements with key suppliers are typically 8 Table of Contents negotiated on an annual basis. The cost of the raw materials used in our manufacturing processes has historically varied and has been affected by changes in supply and demand. We have minimal fixed-price contracts with our major vendors.
Our supply agreements with key suppliers are typically negotiated on an annual basis. The cost of the raw materials used in our manufacturing processes has historically varied and has been affected by changes in supply and demand. We have minimal fixed-price contracts with our major vendors.
Based on our knowledge of our dealers, we believe it takes approximately three months to install a concrete pool compared to two to three days for fiberglass. We do not participate in the concrete pool market other than to provide automatic safety covers and all-season covers for concrete pools.
Based on our knowledge of our dealers, we believe it takes three months or more to install a concrete pool compared to two to three days for fiberglass. We do not participate in the concrete pool market other than to provide automatic safety covers and all-season covers for concrete pools.
The contents of our website or any other website referenced are not a part of this report. ​ Cautionary Note Regarding Forward-Looking Statements Certain statements in this Annual Report on Form 10-K constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
The contents of our website or any other website referenced are not a part of this report. ​ Cautionary Note Regarding Forward-Looking Statements Certain statements in this Annual Report on Form 10-K (this “Annual Report” or “report” constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
For example, the Latham Augmented Reality Pool Visualizer app allows homeowners to browse fiberglass models and to select from a variety of options from their mobile device. Our digital strategy has resulted in superior search engine optimization performance.
For example, the Latham Augmented Reality Pool Visualizer app allows homeowners to browse fiberglass 4 Table of Contents models and to select from a variety of options from their mobile device. Our digital strategy has resulted in superior search engine optimization performance.
These statements involve known and unknown risks, uncertainties, assumptions and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including those set forth under the section of this Annual Report on Form 10-K titled “Risk Factors,” "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this Annual Report on Form 10-K, or as described on other subsequent reports we file or furnish with the SEC.
These statements involve known and unknown risks, uncertainties, assumptions and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or 13 Table of Contents achievements expressed or implied by the forward-looking statements, including those set forth under the section of this Annual Report titled “Risk Factors,” "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this Annual Report, or as described on other subsequent reports we file or furnish with the SEC.
Except as required by law, we undertake no obligation to update or review publicly any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this Annual Report on Form 10-K. We anticipate that subsequent events and developments will cause our views to change.
Except as required by law, we undertake no obligation to update or review publicly any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this Annual Report. We anticipate that subsequent events and developments will cause our views to change.
We believe we compete favorably with respect to these factors through our differentiated consumer value proposition; brand, breadth and quality of our product portfolio; national manufacturing footprint in the United States; leading sales force; and large network of dealers.
We believe we compete favorably with respect to these factors through our differentiated consumer value proposition; brand, breadth and quality of our product portfolio; national manufacturing footprint in the United States; and large network of dealers.
Our forward-looking statements do not reflect the potential impact of any future acquisitions, merger, dispositions, joint ventures, or investments we may undertake. We qualify all of our forward-looking statements by these cautionary statements. 13 Table of Contents ​ ​
Our forward-looking statements do not reflect the potential impact of any future acquisitions, merger, dispositions, joint ventures, or investments we may undertake. We qualify all of our forward-looking statements by these cautionary statements.
In an industry that has traditionally marketed from pool manufacturer to dealer, we pioneered the first “direct-to-homeowner” digital and social marketing strategy that has transformed the homeowner’s purchase journey. Through this marketing strategy, we are able to create demand for our pools and to provide high quality, purchase-ready consumer leads to our dealer partners.
In an industry that has traditionally marketed on a business-to-business basis (pool manufacturer to dealer), we pioneered the first “direct-to-homeowner” digital and social marketing strategy that has transformed the homeowner’s purchase journey. Through this marketing strategy, we are able to create demand for our pools and to provide high quality, purchase-ready consumer leads to our dealer partners.
Investments in innovation and product development have led to historical growth of our fiberglass pool sales, with increased potential for further growth and margin expansion. 5 Table of Contents Packaged Pools We believe that we are the largest manufacturer of custom vinyl pools in the North American residential in-ground swimming pool market.
Investments in innovation and product development have led to historical growth of our fiberglass pool sales, with increased potential for further growth and margin expansion. Packaged Pools We are the largest manufacturer of custom vinyl pools in the North American residential in-ground swimming pool market.
Our top ten dealer and distributor relationships accounted for 40.4% of our net sales in 2023, 39.4% of our net sales in 2022 and 46.0% of our net sales in 2021. Manufacturing We are a global manufacturer based in the United States, delivering quality products with a competitive cost position. Our manufacturing processes require significant capital investment and expertise.
Our top ten dealer and distributor relationships accounted for 42.8% of our net sales in 2024, 40.4% of our net sales in 2023 and 39.4% of our net sales in 2022. Manufacturing We are a global manufacturer based in the United States, delivering quality products with a competitive cost position. Our manufacturing processes require significant capital investment and expertise.
Our largest distributor, which provides valuable local market support with a network of over 300 locations, accounted for 20.3% of our net sales in 2023, 20.3% of our net sales in 2022, and 25.0% of our net sales in 2021.
Our largest distributor, which provides valuable local market support with a network of over 300 locations, accounted for 21.0% of our net sales in 2024, 20.3% of our net sales in 2023, and 20.3% of our net sales in 2022.
All statements contained in this report other than statements of historical fact may constitute forward-looking statements, including statements regarding our future operating results and financial position, our business strategy and plans, business and market trends, our objectives for future operations, macroeconomic and geopolitical conditions, the implementation of our cost reduction plans and expected benefits, and the sufficiency of our cash balances, working capital and cash generated from operating, investing, and financing activities for our future liquidity and capital resource needs.
All statements contained in this report other than statements of historical fact may constitute forward-looking statements, including statements regarding our future operating results and financial position, our business strategy and plans, business and market trends, our objectives for future operations, macroeconomic and geopolitical conditions, changes in U.S. trade priorities, policies, regulations and tariffs, the implementation of our cost reduction plans and expected benefits, and the sufficiency of our cash balances, working capital and cash generated from operating, investing, and financing activities for our future liquidity and capital resource needs.
Our special finishing process allows a smooth and lustrous finish for traction where you need it (such as steps). 3 Table of Contents ● Less chemicals . The smooth non-porous finish of fiberglass dramatically reduces the need for harsh chemicals to treat the pool.
Our special finishing process allows a smooth and lustrous finish for traction where you need it (such as steps). ● Less chemicals . The smooth non-porous finish of fiberglass significantly reduces the need for harsh chemicals to treat the pool.
We employ an environmental, health, and safety team that is responsible for managing, auditing, and executing unified, companywide safety and compliance programs, as well as working directly with site leadership and associates on safety awareness, reports, and preventative measures. Websites and Additional Information ​ The U.S.
We regularly monitor our total recordable incident rate. We employ an environmental, health, and safety team that is responsible for managing, auditing, and executing unified, companywide safety and compliance programs, as well as working directly with site leadership and associates on safety awareness, reports, and preventative measures. Websites and Additional Information ​ The U.S.
We provide regular training and competency development to verify and ensure compliance with health and safety procedures and regulations. Diversity, Equity, and Inclusion Diversity, equity, inclusion, and belonging are fundamental principles in our culture. We are committed to fostering, cultivating, celebrating, and preserving a culture of diversity, equity, inclusion, and belonging among our employees, customers, and suppliers.
We provide regular training and competency development to verify and ensure compliance with health and safety procedures and regulations. Employee Engagement and Inclusion Employee engagement and inclusion, and belonging are fundamental principles in our culture. We are committed to fostering, cultivating, celebrating, and preserving a culture of belonging among our employees, customers, 11 Table of Contents and suppliers.
In 2023, we purchased supplies from 267 suppliers, with 65% of supplies being purchased from our top ten suppliers and 16% of supplies being purchased from our largest supplier. The primary raw materials used in our products are PVC, galvanized steel, fiberglass, aluminum, various resins, high impact polystyrene, gelcoat and polypropylene fabric.
In 2024, we purchased supplies from 236 suppliers, with 64% of supplies being purchased from our top ten suppliers and 13% of supplies being purchased from our largest supplier. The primary raw materials used in our products are PVC, galvanized steel, fiberglass, aluminum, various resins, high impact polystyrene, gelcoat and polypropylene fabric.
Fiberglass pools are underpenetrated in the United States residential in-ground swimming pool market relative to other geographic markets. A conversion to fiberglass pools from legacy pool construction materials is being driven by greater homeowner awareness of the benefits of fiberglass products.
Fiberglass pools are underpenetrated in the United States residential in-ground swimming pool market relative to other geographic markets, such as Australia, New Zealand, and Western Europe. A conversion to fiberglass pools from legacy pool construction materials is being driven by greater homeowner awareness of the benefits of fiberglass products.
In our one-step distribution channel, which we exclusively use to sell our fiberglass pools, we sell our products directly to dealers who, in turn, sell our products to homeowners. Latham provides the delivery service for our dealers, shipping direct from our factories to the consumers’ backyard.
Distribution Our products are sold through both one-step and two-step business-to-business distribution channels. In our one-step distribution channel, which we exclusively use to sell our fiberglass pools, we sell our products directly to dealers who, in turn, sell our products to homeowners. Latham provides the delivery service for our dealers, shipping direct from our factories to the consumers’ backyard.
In launching our formal ESG program in 2021, we worked with independent consultants to assess our ESG performance, benchmark our efforts against our competitors, and establish a comprehensive strategy to manage ESG risks and opportunities effectively.
Since launching our formal environmental, social and governance (“ESG”) program in 2021, we have worked with independent consultants to assess our ESG performance, benchmark our efforts against our competitors, and establish and implement a comprehensive strategy to manage ESG risks and opportunities effectively.
Additionally, we provide on-site installation assistance to our new dealer partners on their initial fiberglass pool installation. In early 2023, we launched Measure by Latham ("Measure"), a proprietary advanced AI-powered device that dramatically reduces dealer time and error in measuring swimming pool safety covers.
Additionally, we provide on-site installation assistance to our new dealer partners on their initial fiberglass pool installation. In 2024, we continued the roll-out of Measure by Latham ("Measure"), a proprietary advanced AI-powered device that significantly reduces dealer time and error in measuring swimming pool safety covers, which we initially launched in early 2023.
Acquisitions and Partnerships We have made four acquisitions since 2018: the purchase of certain fiberglass pool manufacturing assets in Seminole, Oklahoma in November 2022; the purchase of Radiant Pools in November 2021, a manufacturer of vinyl-lined and aluminum-walled swimming pools; the purchase of GLI, a vinyl liner and safety cover manufacturer based in Ohio, in October 2020; and the purchase of Narellan, a manufacturer of fiberglass pools in Australia and New Zealand in May 2019.
Acquisitions and Partnerships We have made five strategic acquisitions and one strategic investment since 2019: the purchase of CoverStar Central, an automatic safety cover dealer, in August 2024; the purchase of certain fiberglass pool manufacturing assets in Seminole, Oklahoma, in November 2022; the purchase of Radiant Pools, a manufacturer of vinyl-lined and aluminum-walled swimming pools, in November 2021; the purchase of GLI, a vinyl liner and safety cover manufacturer based in Ohio, in October 2020; and the purchase of Narellan, a manufacturer of fiberglass pools in Australia and New Zealand, in May 2019.
Partnership with our dealers is integral to our collective success, and we have enjoyed long-tenured relationships averaging over 14 years. We support our dealer network with business development tools, co-branded marketing programs, and in-house training. Our operations consist of approximately 1,800 employees across all of our locations.
Partnership with our dealers is integral to our collective success, and we have enjoyed long-tenured relationships averaging over 14 years. We support our dealer network with business development tools, co-branded marketing programs, and in-house training.
We are generating our own leads, including via our online platform, mobile app, and consumer hotline. This allows us to provide high quality, purchase-ready leads to our dealer partners. Our new digital platform engages the consumer early in the pool buying process and facilitates the buying journey from inspiration and design to a Latham pool purchase.
This allows us to provide high quality, purchase-ready leads to our dealer partners. Our new digital platform engages the consumer early in the pool buying process and facilitates the buying journey from inspiration and design to a Latham pool purchase.
We use our own fleet of trucks and drivers, as well as third-party common carriers to ship our finished products. In-ground Swimming Pools The manufacture of fiberglass pools requires highly specialized equipment and a technically skilled workforce.
We are in the middle of our digital transformation effort to upgrade our enterprise technology and resource planning systems. We use our own fleet of trucks and drivers, as well as third-party common carriers to ship our finished products. In-ground Swimming Pools The manufacture of fiberglass pools requires highly specialized equipment and a technically skilled workforce.
The main alternative to vinyl and fiberglass pools are concrete pools, which are built in the ground and are constructed by pouring concrete over steel rods to create the shell of the pool. Concrete pools are highly customizable when compared to fiberglass pools (which use a pre-manufactured shell), but they require frequent and more costly maintenance than fiberglass.
The main alternative to vinyl and fiberglass pools are concrete pools, which are built in the ground and are constructed by pouring concrete over steel rods to create the shell of the pool. Concrete pools require frequent and more costly maintenance than fiberglass.
We believe that we are the most desirable brand in the pool industry and the only pool company that has established a direct relationship with the homeowner. We are Latham, The Pool Company TM .
It is our view that we are the most sought-after brand in the pool industry and the only pool company that has established a direct relationship with the homeowner. We are Latham, The Pool Company TM .
Brands In North America, we operate under one banner, Latham, the Pool Company. Our literature for dealers, marketing materials, our website, social media, advertising and promotion and our co-branding of dealer premises each reflect the Latham branding.
Brands In North America, we operate under one banner, Latham, the Pool Company. Our literature for dealers, marketing materials, our website, social media, advertising and promotion and our co-branding of dealer premises each reflect the Latham branding. Our sub-brands, which sit under the Latham master brand, include Narellan TM , CoverStar TM , Radiant, and GLI, among others.
Our centralized sourcing model focuses on achieving competitive costs and ensuring supply availability. The manufacturing facilities coordinate all material deliveries with respect to volume and timing to ensure proper alignment between consumption and working capital programs.
Our centralized sourcing model focuses on achieving competitive costs and ensuring supply availability. The manufacturing facilities coordinate all material deliveries with respect to volume and timing to ensure proper alignment between consumption and working capital programs. In particular, we have implemented enhanced procurement programs to further diversify our supplier base in the last two years.
In general, net sales and net income are highest during spring and summer, representing the peak months of swimming pool use, pool installation, and remodeling and repair activities.
In general, net sales and net income are highest (or net loss is lowest) during the second and third quarters, representing the peak months of swimming pool use, pool installation, and remodeling and repair activities.
As a result of material conversion away from legacy pool construction materials such as concrete, market share growth of fiberglass pool starts in the United States is meaningfully outpacing that of the broader in-ground swimming pool market. Despite this growth, fiberglass pools still have significant runway for growth in the United States relative to comparable international markets.
As a result of material conversion away from legacy pool construction materials such as concrete, market share growth of fiberglass pool starts in the United States is meaningfully outpacing that of the broader in-ground swimming pool market.
We also have a strong distribution network with over 475 distributor branch locations that represent our products. Through our significant investment in partnerships with dealers and distributors and our consumer-oriented marketing efforts, we have created a “push and pull” dynamic for our products in the marketplace.
Through our significant investment in partnerships with dealers and distributors and our consumer-oriented marketing efforts, we have created a “push and pull” dynamic for our products in the marketplace.
Occasionally, based on market conditions, we utilize hedges to control our raw material costs. Prices for spot market purchases are negotiated on a continuous basis in line or better than current market prices. Other than occasional strategic purchases of larger quantities of certain raw materials, we generally buy materials on an as-needed basis.
Prices for spot market purchases are negotiated on a continuous basis in line or better than current market prices. Other than occasional strategic purchases of larger quantities of certain raw materials, we generally buy materials on an as-needed basis. Changes in prices of our raw materials have a direct impact on our cost of sales.
As the only participant with national distribution in the fiberglass pool product category, we intend to continue pursuing strategic partnerships with priority dealers in underpenetrated geographical markets that can help us accelerate our growth.
Dealers also learn both basic and advanced fiberglass pool installation techniques. We have exclusive supply arrangements with many of our top dealer partners. As the only participant with national distribution in the fiberglass pool product category, we intend to continue pursuing strategic partnerships with priority dealers in underpenetrated geographical markets that can help us accelerate our growth.
To facilitate the decision to buy, we offer warranties for our products. In addition, to assist consumers in financing their pool purchase, we connect them to specialist pool financing providers with which we partner. Competition We hold the leading position by volume in each of our product categories.
In addition, to assist consumers in financing their pool purchase, we connect them to specialist pool financing providers with which we partner. Competition We hold the leading position in each of our product categories in North America, Australia and New Zealand.
We also operate in New Zealand and Australia, where we hold the leading position by volume in the fiberglass pools category. We compete with regional and local manufacturers on the basis of a number of considerations, including brand recognition and loyalty, quality, performance, product characteristics, marketing, product development, sales and distribution, and price.
We compete with regional and local manufacturers on the basis of a number of considerations, including brand recognition and loyalty, quality, performance, product characteristics, marketing, product development, sales and distribution, and price.
We further intend to onboard, train, and support dealers with the same emphasis we have placed on our existing dealer partnerships, 4 Table of Contents including our co-branding programs, “Latham University” and our “Business Excellence” coaching, designed to help them manage their growth.
We further intend to onboard, train, and support dealers with the same emphasis we have placed on our existing dealer partnerships, including our co-branding programs, “Latham University” and our “Business Excellence” coaching, designed to help them manage their growth. Leveraging our investments and management expertise positions us to play a key role in growing the industry’s pool building capacity.
Each Latham Grand dealer operates in specified territories, and our agreements with our Latham Grand dealers are generally perpetual and terminable at will by both parties. Our exclusive supply agreement with Premier Pools & Spas governs the sales of certain of our products to Premier Pools & Spas franchisees.
Each Latham Grand dealer operates in specified territories, and our agreements with our Latham Grand dealers are generally perpetual and terminable at will by both parties.
These laws, regulations, and ordinances, among other matters, govern activities and operations that may have adverse environmental effects, such as discharges to air, soil, and water, and establish standards for the handling of hazardous and toxic substances and the handling and disposal of solid and hazardous wastes. 11 Table of Contents Certain of our operations require environmental, health and safety permits, or other approvals from governmental authorities, and certain of these permits and approvals are subject to expiration, denial, revocation, or modification under various circumstances.
These laws, regulations, and ordinances, among other matters, govern activities and operations that may have adverse environmental effects, such as discharges to air, soil, and water, and establish standards for the handling of hazardous and toxic substances and the handling and disposal of solid and hazardous wastes.
Measure is an end-to-end solution that 9 Table of Contents provides dealers with a simple, cost-effective user experience, high-performance measuring accuracy, and a modernized ordering process. In the future, we will add the capability to measure vinyl liners.
Measure is an end-to-end solution that provides dealers with a simple, cost-effective user experience, high-performance measuring accuracy, and a modernized ordering process. As of February 2025, we have added the capability to measure vinyl liners. To facilitate the decision to buy, we offer warranties for our products.
The benefits of fiberglass products include: ● Lower up-front and lifecycle costs . Fiberglass pools cost less and have lower operating and repair expenses compared to concrete pools. ● Faster and easier installation .
Despite this growth, fiberglass pools still have significant runway for growth in the United States relative to comparable international markets. 3 Table of Contents The benefits of fiberglass products include: ● Lower up-front and lifecycle costs . Fiberglass pools cost less and have lower operating and repair expenses compared to concrete pools. ● Faster and easier installation .
Environmental, Social, and Governance To achieve long-term success as a business, we recognize the need to align our business strategy and priorities with the expectations of our stakeholders, and our ambition is to lead our industry towards a more sustainable future.
Our environmental compliance costs in the future will depend, in part, on the nature and extent of our manufacturing activities, regulatory developments and future requirements that cannot presently be predicted. 12 Table of Contents Environmental, Social, and Governance To achieve long-term success as a business, we recognize the need to align our business strategy and priorities with the expectations of our stakeholders, and our ambition is to lead our industry towards a more sustainable future.
Expand Margins through Mix Shift Towards Fiberglass and Productivity Initiatives We have made significant manufacturing capacity investments not only to support long-term growth of fiberglass pools, but also to continue to deliver the compelling margin profile of our fiberglass pool offering.
Expand Margins through Mix Shift Towards Fiberglass and Productivity Initiatives We have made significant manufacturing capacity investments to support the long-term growth of fiberglass pools and we have an opportunity to increase our margins as we grow into our capacity investments and our product mix.
Our Board views oversight and effective management of ESG related risks and opportunities as essential to the Company’s ability to execute its strategy and achieve long-term sustainable growth. Our management team develops ESG strategy and related goals and policies through an ESG working group, and our ESG program is overseen by our Nominating and Corporate Governance Committee.
Our Board of Directors (“Board”) views oversight and effective management of ESG related risks and opportunities as essential to the Company’s ability to execute its strategy and achieve long-term sustainable growth.
Those requirements obligate us to obtain and maintain permits from one or more governmental agencies in order to conduct our operations. Such permits are typically issued by state agencies, but permits and approvals may also be required from federal or local governmental agencies.
Such permits are typically issued by state agencies, but permits and approvals may also be required from federal or local governmental agencies.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Key Factors Affecting Our Performance — Acquisitions and Partnerships.” Environmental, Health and Safety Laws and Regulations Our operations and properties are subject to extensive and frequently changing federal, state, and local environmental protection and health and safety laws, regulations, and ordinances.
Environmental, Health and Safety Laws and Regulations Our operations and properties are subject to extensive and frequently changing federal, state, and local environmental protection and health and safety laws, regulations, and ordinances.
In addition, we employ various other methods, including confidentiality and nondisclosure agreements with third parties and employees who have access to trade secrets, to protect our trade secrets and know-how.
In addition, we employ various other methods, including confidentiality and nondisclosure agreements with third parties and employees who have access to trade secrets, to protect our trade secrets and know-how. Our intellectual property rights may be challenged by third parties and may not be effective in excluding competitors from using the same or similar technologies, brands, or works.
In order to strengthen our relationship with our most loyal dealer partners, we have implemented our “Latham Grand” dealer program, whereby we have secured exclusivity with over 300 of our largest dealers in North America. Included in this dealer population is the largest franchised dealer network in the United States, Premier Pools & Spas.
In order to strengthen our relationship with our most loyal dealer partners, we have implemented our “Latham Grand” dealer program, whereby we have secured exclusivity with over 300 of our largest dealers in North America. We also have a strong distribution network with over 475 distributor branch locations that represent our products.
Health and Safety Matters Our health and safety policies and practices include an employee training and competency development program to regularly train, verify, and encourage compliance with health and safety procedures and regulations. We regularly monitor our total recordable incident rate.
We have since published, and plan to continue to publish, an annual ESG report to update our stakeholders on our ongoing journey. Health and Safety Matters Our health and safety policies and practices include an employee training and competency development program to regularly train, verify, and encourage compliance with health and safety procedures and regulations.
Our Nominating and Corporate Governance Committee and ESG working group are involved in policy planning and the coordination of corporate-wide ESG efforts. The working group is a cross-functional team managing the day-to-day implementation of company initiatives and accountability for performance.
Our management team develops ESG strategy and related goals and policies through an ESG working group, and our ESG program is overseen by the Nominating and Corporate Governance Committee of our Board. The working group is a cross-functional team managing the day-to-day implementation of company initiatives and accountability for performance.
Changes in prices of our raw materials have a direct impact on our cost of sales. We strive to maintain strong and collaborative relationships with our suppliers and believe that the sources for these inputs are well-established, generally available on world markets, and in sufficient quantity.
We strive to maintain strong and collaborative relationships with our suppliers and believe that the sources for these inputs are well-established, generally available on world markets, and in sufficient quantity. We do not undertake defined purchase agreements requiring fixed commitments or “take or pay” requirements with our suppliers.
We have continuously invested to expand our manufacturing capacity and to improve our manufacturing processes for efficiency and consistency. We have sufficient capacity and capability to support our growth targets over the next several years. We are in the middle of our digital transformation effort to upgrade all of our technology and enterprise resource planning systems.
We have continuously invested to expand our manufacturing capacity and to improve our manufacturing processes for efficiency and consistency. In particular, we have implemented significant value engineering and lean manufacturing initiatives in the last two years. We have sufficient capacity and capability to support our growth targets over the next several years.
We also offer the most complete automatic safety cover portfolio when compared to our competitors, since our products range from affordable luxury options to premium covers. Additionally, our automatic safety covers are compatible with fiberglass, vinyl, and concrete pools of almost any shape, size and brand, driving homeowner preference for our CoverStar TM brand.
Additionally, more and more pool owners are buying covers as local building codes push for safer pools. We also offer the most complete automatic safety cover portfolio when compared to our competitors, since our products range from affordable luxury options to premium covers.
Utilize Leading Brand and Digital Assets to Generate Greater Volumes and Quality of Homeowner Leads Since 2019, we have increased our investments in our digital strategies and consumer marketing. Our marketing campaigns and digital platform, including our easy to use interactive website and mobile app, inform homeowners on the benefits of fiberglass.
Our marketing campaigns and digital platform, including our easy to use interactive website and mobile app, inform homeowners on the benefits of fiberglass.
The broad geographic reach of our manufacturing and distribution network allows us to service our customers at short lead times and to deliver a fiberglass pool in a cost-effective manner. Our mission is to design and manufacture high-quality pool products, with the homeowner in mind, and to be a value-added partner to our dealers.
Our mission is to design and manufacture high-quality pool products, with the homeowner in mind, and to be a value-added partner to our dealers.
The wall system for our custom vinyl pools is built of either non-corrosive steel or composite polymer, which provides our dealers with ease of installation. Liners We believe we are the largest replacement liner manufacturer in the North American residential in-ground swimming pool market, serving a market with large, non-discretionary replacement demand.
The wall system for our custom vinyl pools is built of either non-corrosive steel or composite polymer, which provides our dealers with ease of installation. Covers There are two types of covers in the pool market, automatic safety covers and all-season pool covers.
Latham’s unique “direct-to-homeowner” marketing strategy is driving a greater understanding of the benefits of owning a pool, specifically a fiberglass pool, and generating significant consumer demand. We have made meaningful, ongoing investments to position Latham as the brand of choice for the homeowner. Our continued investment in consumer engagement has been a key driver of our historical sales growth.
We have made meaningful, ongoing investments to position Latham as the brand of choice for the homeowner. 9 Table of Contents Our continued investment in consumer engagement has been a key driver of our historical sales growth. We are generating our own leads, including via our online platform, mobile app, and consumer hotline.
We have production capacity to support custom liners with a three-day delivery promise from design to shipment, better than the industry standard delivery window. Covers Our automatic safety cover manufacturing facilities cut, sew, and assemble highly engineered motorized safety covers in a build-to-order model at or better than the industry standard delivery window, from design to shipment.
We also have a thermoforming machine that produces all of our thermoformed one piece drop-in steps utilizing a wide variety of specialized molds of various shapes and sizes. 8 Table of Contents Covers Our automatic safety cover manufacturing facilities cut, sew, and assemble highly engineered motorized safety covers in a build-to-order model at or better than the industry standard delivery window, from design to shipment.
Covers There are two types of covers in the pool market, automatic safety covers and all-season pool covers. Automatic safety covers are used in the pool season to cover and secure the pool after a refreshing swim. All-season pool covers are generally used after the swimming season.
Automatic safety covers are used in the pool season to cover and secure the pool after a refreshing swim. All-season pool covers are generally used after the swimming season. They protect the pool and its immediate surroundings from debris and weather, and they also provide safety for homeowners and their guests.
Our Nominating and Corporate Governance Committee reviews the Company’s progress towards the achievement of its ESG strategy and goals on a periodic basis. We published our inaugural ESG report in the second quarter of 2022, which included information regarding our first materiality assessment undertaken by an independent third party.
Our Nominating and Corporate Governance Committee reviews the Company’s progress towards the achievement of its ESG strategy and goals on a periodic basis.
Our automatic safety covers provide increased safety, especially for children, and convenience for our homeowners while also driving savings by reducing energy, chemical and cleaning costs, and lowering water evaporation. Additionally, more and more pool owners are buying covers as local building codes push for safer pools.
Replacement vinyl liners provide us with a significant source of stable recurring revenue. 6 Table of Contents Automatic Safety Covers Our automatic safety covers provide increased safety, especially for children, and convenience for our homeowners while also driving savings by reducing energy, chemical and cleaning costs, and lowering water evaporation.
Our processing equipment offers tight tolerance and flexible manufacturing with compressed lead times across the various laser cutters, bending, assembly, and test equipment. Raw Materials and Suppliers We utilize a centralized sourcing model that includes a dedicated team of procurement professionals so that we can coordinate and leverage our purchases across a diverse supplier base.
Our processing equipment offers tight tolerance and flexible manufacturing with compressed lead times across the various laser cutters, bending, assembly, and test equipment.
All-Season Pool Covers We believe we are the leader in the category for all-season pool covers by volume in North America. Our winterizing mesh and solid covers are used during the off-season, reducing maintenance requirements for our homeowners.
Additionally, our automatic safety covers are compatible with fiberglass, vinyl, and concrete pools of almost any shape, size and brand, driving homeowner preference for our CoverStar TM brand. All-Season Pool Covers Our winterizing mesh and solid covers are used during the off-season, reducing maintenance requirements for our homeowners.
We believe we have an opportunity to increase our margins as we grow into our capacity investments and our product mix continues to shift towards fiberglass pools. Additionally, we expect that our investments in people, processes, and equipment aimed at enhancing our manufacturing efficiency will expand our margins.
Additionally, we expect that our investments in people, processes, and equipment aimed at enhancing our manufacturing efficiency will expand our margins. In particular, we have structurally changed our cost base in the last two years through value engineering, lean manufacturing and other cost reduction initiatives as well as enhanced procurement programs.
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Dealers also learn both basic and advanced fiberglass pool installation techniques. We have exclusive supply arrangements with many of our top dealer partners, including the nation’s largest franchised dealer network, Premier Pools & Spas.
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The full resources of our company are dedicated to designing and manufacturing high-quality pool products, with the homeowner in mind, and positioning ourselves as a value-added partner to our dealers. We conduct our business as one operating and reportable segment that designs, manufactures, and markets in-ground swimming pools, pool covers, and pool liners.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThese risks include, but are not limited to, the following: ● Net sales for our swimming pools and related products are adversely affected by unfavorable economic conditions and related impact on consumer spending; ● adverse weather conditions impacting our sales, and can lead to significant variability of sales in reporting periods; ● natural disasters, including resulting from climate change, geopolitical events, war, terrorism, public health issues or other catastrophic events; ● competition that we face; ● our ability to attract, develop and retain highly qualified personnel; ● inflationary impacts, including on consumer demand for pool products; ● our ability to source the quantity or quality of raw materials and components that we need to manufacture our products, and increases in their costs; ● our ability to collect accounts receivables from our customers; ● our ability to keep pace with rapidly evolving technological developments and standards, such as generative artificial intelligence; ● the potential loss of our largest customers and pricing pressures resulting from industry consolidation; ● interruption of our production capability at one or more of our manufacturing facilities from accident, fire, calamity, regulatory action or other causes or events; ● product quality issues, warranty claims or safety concerns and other claims, including those due to the failure of builders to follow our product installation instructions and specifications; ● delays in, or systems disruptions issues caused by, the implementation of our enterprise resource planning system; ● cyber-security breaches and data leaks, and our dependence on information technology systems; ● compliance with government regulations; ● our ability to obtain transportation services to deliver our product and to obtain raw materials timely or increases in the cost of transportation; ● our ability to obtain, maintain and enforce intellectual property protection for our current and future products, and third-party claims against us for violation of their intellectual property; ● the risks of doing business internationally; ● our ability to secure financing and our substantial indebtedness; and ● the other factors set forth under “Risk Factors.” Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business, financial condition, results of operations and cash flows. 14 Table of Contents Risks Related to Our Operations and Industry Net sales of our swimming pools and related products are adversely affected by unfavorable economic conditions and the related impact on consumer spending, which are driven by factors outside of our control.
Biggest changeThese risks include, but are not limited to, the following: ● unfavorable economic conditions and the related impact on consumer spending and demand for our products; ● inflationary impacts, including on our costs of labor, raw materials and services and on consumer demand for pool products; ● our reliance on global third-party suppliers and related impact on price, quality and quantity of raw materials; ● the impact of trade policies, including tariffs, on products, raw materials and components we import into the U.S.; ● declining home ownership rates adversely affect demand for our products; ● competition that we face; ● natural disasters, including resulting from climate change, geopolitical events, war, terrorism, public health emergencies or other catastrophic events; ● our reliance on our information technology systems and potential disturbances or breaches to our technological infrastructure; ● adverse weather conditions impacting our sales and timing of sales; ● pricing pressures resulting from industry consolidation; 14 Table of Contents ● interruption of our production capability at one or more of our manufacturing facilities from accident, fire, calamity or other causes or events affecting the global economy; ● product quality issues, warranty claims, installation or safety concerns and other claims, including those due to the failure of builders to follow our product installation instructions and specifications and our installation of autocovers; ● our ability to keep pace with rapidly evolving technological developments and standards, such as generative artificial intelligence; ● delays in, or systems disruptions issues caused by, the implementation of our enterprise resource planning system; ● our ability to attract, develop and retain highly qualified personnel; ● our ability to collect accounts receivables from our customers; ● compliance with new and existing government regulations; ● our ability to obtain transportation services to deliver our product and to obtain raw materials timely or increases in the cost of transportation; ● our ability to obtain, maintain and enforce intellectual property protection for our current and future products, and third-party claims against us for violation of their intellectual property; ● the risks of doing business internationally; ● our ability to realize the anticipated growth opportunities and cost synergies from acquisitions; ● possible impairments to our goodwill, other intangible assets or fixed assets; ● our ability to secure financing and our substantial indebtedness; and ● the other factors set forth under “Risk Factors.” ​ Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business, financial condition, results of operations and cash flows. 15 Table of Contents Risks Related to Our Operations and Industry Net sales of our swimming pools and related products are adversely affected by unfavorable economic conditions and the related impact on consumer spending, which are driven by factors outside of our control.
While our operations are primarily within North America and we have no operations in Russia or Ukraine, and we do not have direct exposure to customers and vendors in Russia and Ukraine, we continue to monitor any adverse impact that such events may have on the global economy in general, on our business and operations and on the businesses and operations of our business partners, suppliers and customers.
While our operations are primarily within North America and we have no operations in Russia or Ukraine, and we do not have direct exposure to customers and vendors in Russia or Ukraine, we continue to monitor any adverse impact that such events may have on the global economy in general, on our business and operations and on the businesses and operations of our business partners, suppliers and customers.
Product quality, warranty claims or safety concerns and other claims due to the failure of third party installers to follow our product installation instructions and procedures could negatively impact our sales, lead to increased costs, and expose us to litigation. Other litigation and regulatory matters incidental to our business also may adversely impact our business and financial results.
Product quality, warranty claims, installation or safety concerns and other claims due to the failure of third party installers to follow our product installation instructions and procedures could negatively impact our sales, lead to increased costs, and expose us to litigation. Other litigation and regulatory matters incidental to our business also may adversely impact our business and financial results.
There can be no assurance that market conditions will be favorable at the times that we require new or additional financing. In addition, the New Credit Agreement contains restrictive covenants that limit our subsidiaries from making dividend payments, loans, or advances to the Company, unless certain conditions are met.
There can be no assurance that market conditions will be favorable at the times that we require new or additional financing. In addition, the Credit Agreement contains restrictive covenants that limit our subsidiaries from making dividend payments, loans, or advances to the Company, unless certain conditions are met.
Our Board of Directors has the authority to cause us to issue, without any further vote or action by the stockholders, shares of preferred stock, par value $0.0001 per share, in one or more series, to designate the number of shares constituting any series, and to fix the rights, preferences, privileges, and restrictions thereof, including dividend rights, voting rights, rights and terms of redemption, redemption price or prices, and liquidation preferences of such series.
Our Board has the authority to cause us to issue, without any further vote or action by the stockholders, shares of preferred stock, par value $0.0001 per share, in one or more series, to designate the number of shares constituting any series, and to fix the rights, preferences, privileges, and restrictions thereof, including dividend rights, voting rights, rights and terms of redemption, redemption price or prices, and liquidation preferences of such series.
Our organizational documents and Delaware law may impede or discourage a takeover, which could deprive our investors of the opportunity to receive a premium on their shares. Provisions of our certificate of incorporation and bylaws may make it more difficult for, or prevent a third party from, acquiring control of us without the approval of our Board of Directors.
Our organizational documents and Delaware law may impede or discourage a takeover, which could deprive our investors of the opportunity to receive a premium on their shares. Provisions of our certificate of incorporation and bylaws may make it more difficult for, or prevent a third party from, acquiring control of us without the approval of our Board.
Our ability to satisfy the financial ratio can be affected by events beyond our control, and we may not satisfy such a test. A breach of covenants could result in a default under the New Credit Agreement. By reason of cross-acceleration or cross-default provisions, other indebtedness may then become immediately due and payable.
Our ability to satisfy the financial ratio can be affected by events beyond our control, and we may not satisfy such a test. A breach of covenants could result in a default under the Credit Agreement. By reason of cross-acceleration or cross-default provisions, other indebtedness may then become immediately due and payable.
In addition, the financial and other covenants set forth in the New Credit Agreement may limit our ability to incur additional indebtedness, make investments, and engage in other transactions, and the leverage may cause potential lenders to be less willing to loan funds to us in the future. Our business and operations may consume resources faster than we anticipate.
In addition, the financial and other covenants set forth in the Credit Agreement may limit our ability to incur additional indebtedness, make investments, and engage in other transactions, and the leverage may cause potential lenders to be less willing to loan funds to us in the future. Our business and operations may consume resources faster than we anticipate.
Our failure to comply with such covenants may result in default, which could result in the acceleration of all our debt. Our indebtedness is variable rate, subjecting us to interest rate risk, which could cause our indebtedness service obligations to increase significantly. Borrowings under the New Credit Agreement accrue interest at variable rates and expose us to interest rate risk.
Our failure to comply with such covenants may result in default, which could result in the acceleration of all our debt. Our indebtedness is variable rate, subjecting us to interest rate risk, which could cause our indebtedness service obligations to increase significantly. Borrowings under the Credit Agreement accrue interest at variable rates and expose us to interest rate risk.
Interest rates have fluctuated significantly and are expected to fluctuate significantly in the future. As a result, although we hedged part of our interest rate exposure under the New Credit Agreement, interest rates on the New Credit Agreement or other variable rate debt obligations could be higher or lower than current levels.
Interest rates have fluctuated significantly and are expected to fluctuate significantly in the future. As a result, although we hedged part of our interest rate exposure under the Credit Agreement, interest rates on the Credit Agreement or other variable rate debt obligations could be higher or lower than current levels.
We rely on manufacturers and other suppliers to provide us with the components and raw materials to manufacture our products. The primary raw materials used in our products are polyvinyl chloride (“PVC”) plastic, galvanized steel, fiberglass, aluminum, various resins, high impact polystyrene, gelcoat and polypropylene fabric.
We rely on global manufacturers and other suppliers to provide us with the components and raw materials to manufacture our products. The primary raw materials used in our products are polyvinyl chloride (“PVC”) plastic, galvanized steel, fiberglass, aluminum, various resins, high impact polystyrene, gelcoat and polypropylene fabric.
These provisions include: ● providing that our Board of Directors will be divided into three classes, with each class of directors serving staggered three-year terms; ● providing for the removal of directors only for cause and only upon the affirmative vote of the holders of at least 66 2/3% in voting power of all the then-outstanding shares of stock of the Company entitled to vote thereon, voting together as a single class, if less than a majority of the voting power of our outstanding common stock is beneficially owned by our Principal Stockholders; ● empowering only the Board to fill any vacancy on our Board of Directors (other than in respect of our Principal Stockholders’ directors (as defined below)), whether such vacancy occurs as a result of an increase in the number of directors or otherwise, if less than a majority of the voting power of our outstanding common stock is beneficially owned by our Principal Stockholders; ● authorizing the issuance of “blank check” preferred stock without any need for action by stockholders; ● prohibiting stockholders from acting by written consent if less than a majority of the voting power of our outstanding common stock is beneficially owned by our Principal Stockholders; ● to the extent permitted by law, prohibiting stockholders from calling a special meeting of stockholders if less than a majority of the voting power of our outstanding common stock is beneficially owned by our Principal Stockholders; and ● establishing advance notice requirements for nominations for election to our Board of Directors or for proposing matters that can be acted on by stockholders at stockholder meetings.
These provisions include: ● providing that our Board will be divided into three classes, with each class of directors serving staggered three-year terms; ● providing for the removal of directors only for cause and only upon the affirmative vote of the holders of at least 66 2/3% in voting power of all the then-outstanding shares of stock of the Company entitled to vote thereon, voting together as a single class, if less than a majority of the voting power of our outstanding common stock is beneficially owned by our Principal Stockholders; ● empowering only the Board to fill any vacancy on our Board (other than in respect of our Principal Stockholders’ directors (as defined below)), whether such vacancy occurs as a result of an increase in the number of directors or otherwise, if less than a majority of the voting power of our outstanding common stock is beneficially owned by our Principal Stockholders; ● authorizing the issuance of “blank check” preferred stock without any need for action by stockholders; 32 Table of Contents ● prohibiting stockholders from acting by written consent if less than a majority of the voting power of our outstanding common stock is beneficially owned by our Principal Stockholders; ● to the extent permitted by law, prohibiting stockholders from calling a special meeting of stockholders if less than a majority of the voting power of our outstanding common stock is beneficially owned by our Principal Stockholders; and ● establishing advance notice requirements for nominations for election to our Board or for proposing matters that can be acted on by stockholders at stockholder meetings.
Our ability to keep pace with rapidly evolving technological developments and standards, such as generative artificial intelligence, could impact our future growth and increase our costs and liability risk. ​ To be successful in our industry, we must keep pace with technological developments and innovations (such as the use of artificial intelligence and machine learning) and evolving industry standards.
Our ability to keep pace with rapidly evolving technological developments and standards, such as generative artificial intelligence, could impact our future growth and increase our costs and liability risk. ​ To be successful in our industry, we must keep pace with technological developments and innovations (such as the use of artificial intelligence (“AI”) and machine learning) and evolving industry standards.
The New Credit Agreement contains a number of covenants, including a financial covenant that requires us to maintain a certain first lien net leverage ratio if the outstanding usage under the New Revolving Credit Facility (as defined below) exceeds 40% of the commitments under the New Revolving Credit Facility, tested quarterly.
The Credit Agreement contains a number of covenants, including a financial covenant that requires us to maintain a certain first lien net leverage ratio if the outstanding usage under the Revolving Credit Facility (as defined below) exceeds 40% of the commitments under the Revolving Credit Facility, tested quarterly.
In particular, a significant portion of our finished goods is transported by flatbed trucks, which are occasionally in high demand (especially at the end of calendar quarters) and/or subject to price fluctuations based on market conditions and the price of fuel.
In particular, a significant portion of our finished goods is transported by flatbed trucks, which are occasionally in high demand (especially at the end of quarters) and/or subject to price fluctuations based on market conditions and the price of fuel.
If amounts owed under the New Credit Agreement are accelerated because of a default and we are unable to pay such amounts, the investors may have the right to assume control of substantially all of the assets securing the New Credit Agreement.
If amounts owed under the Credit Agreement are accelerated because of a default and we are unable to pay such amounts, the investors may have the right to assume control of substantially all of the assets securing the Credit Agreement.
Such volatility may continue in response to various factors, some of which are beyond our control, including: ● market conditions in the broader stock market; ● fluctuations in the values of companies perceived by investors to be comparable to us; ● sales, or the anticipation of sales, of our common stock by us, our insiders or our other stockholders, including the impacts if we are no longer a controlled company; 28 Table of Contents ● guidance, if any, that we may provide to the public, any changes in this guidance or our failure to meet this guidance; ● public response to press releases or other public announcements by us or third parties, including our filings with the SEC; and ● the realization of any risks described under this “Risk Factors” section, or other risks that may materialize in the future.
Such volatility may continue in response to various factors, some of which are beyond our control, including: ● market conditions in the broader stock market; ● fluctuations in the values of companies perceived by investors to be comparable to us; ● sales, or the anticipation of sales, of our common stock by us, our insiders or our other stockholders, including the impacts if we are no longer a controlled company; ● guidance, if any, that we may provide to the public, any changes in this guidance or our failure to meet this guidance; ● public response to press releases or other public announcements by us or third parties, including our filings with the SEC; and ● the realization of any risks described under this “Risk Factors” section, or other risks that may materialize in the future.
Given the density and demand for pools, some geographic markets that we serve tend to have a higher concentration of competitors than others, particularly California, Texas, Florida, Arizona, and Australia. In addition, new competitors may emerge. We have seen increased interest from pool manufacturing companies from Canada and Australia in entering the U.S. market.
Given the density and demand for pools, some geographic markets that we serve tend to have a higher concentration of competitors than others, particularly California, Texas, Florida, Arizona, and Australia. In addition, new competitors may emerge. We have seen increased interest from pool manufacturing companies from Canada, Brazil, Mexico and Australia in entering the U.S. market.
If a court were to find the choice of forum provision contained in our certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could materially adversely affect our business, financial condition, and results of operations. ​
If a court were to find the choice of forum provision contained in our certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could materially adversely affect our business, financial condition, and results of operations. ​ Item 1B.
Our certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware is the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our 31 Table of Contents directors, officers, employees or agents to us or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL or of our certificate of incorporation or our bylaws or (iv) any action asserting a claim related to or involving the Company that is governed by the internal affairs doctrine.
Our certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware is the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, employees or agents to us or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL or of our certificate of incorporation or our bylaws or (iv) any action asserting a claim related to or involving the Company that is governed by the internal affairs doctrine.
In the event of a shortage of our raw materials, we may not be able to arrange for alternative sources of such materials on a timely basis or on equally favorable terms, and we could experience a disruption to our operations as alternative suppliers are identified and qualified and new supply arrangements are entered into.
In the event of a shortage of our raw materials, we may not be able to arrange for alternative sources of such materials on a timely basis or on equally favorable terms, and we could experience a disruption to our operations as alternative suppliers are identified and qualified and we enter into new supply arrangements.
In the event that these service providers do not appropriately protect our data, the result could be a security breach or loss of our data. Any such loss of data by our third-party service providers could have a 20 Table of Contents material adverse impact on our business and results of operations.
In the event that these service providers do not appropriately protect our data, the result could be a security breach or loss of our data. Any such loss of data by our third-party service providers could have a 19 Table of Contents material adverse impact on our business and results of operations.
As long as affiliates of our Principal Stockholders own or control a majority of our outstanding voting power, our Principal Stockholders and their affiliates have the ability to exercise substantial control over all corporate actions requiring stockholder approval, irrespective of how our other stockholders may vote, including: ● the election and removal of directors and the size of our Board of Directors; ● any amendment of our articles of incorporation or bylaws; or ● the approval of mergers and other significant corporate transactions, including a sale of substantially all of our assets.
As long as affiliates of our Principal Stockholders own or control a majority of our outstanding voting power, our Principal Stockholders and their affiliates have the ability to exercise substantial 31 Table of Contents control over all corporate actions requiring stockholder approval, irrespective of how our other stockholders may vote, including: ● the election and removal of directors and the size of our Board; ● any amendment of our articles of incorporation or bylaws; or ● the approval of mergers and other significant corporate transactions, including a sale of substantially all of our assets.
These covenants limit the ability of certain of our subsidiaries to, among other things: ● sell assets; 27 Table of Contents ● engage in mergers, acquisitions, and other business combinations; ● declare dividends or redeem or repurchase capital stock; ● incur, assume, or permit to exist additional indebtedness or guarantees; ● make loans and investments; ● incur liens; and ● enter into transactions with affiliates.
These covenants limit the ability of certain of our subsidiaries to, among other things: ● sell assets; ● engage in mergers, acquisitions, and other business combinations; ● declare dividends or redeem or repurchase capital stock; ● incur, assume, or permit to exist additional indebtedness or guarantees; ● make loans and investments; ● incur liens; and ● enter into transactions with affiliates.
These potential conflicts of interest could have a material adverse effect on our business, financial condition, results of operations, or prospects if attractive corporate opportunities are allocated by one of our Principal Stockholders to itself or its affiliated funds, the portfolio companies owned by such funds or any affiliates of a Principal Stockholder instead of to us.
These potential conflicts of interest could have a material adverse effect on our business, financial condition, results of operations, or prospects if attractive corporate opportunities are allocated by one 33 Table of Contents of our Principal Stockholders to itself or its affiliated funds, the portfolio companies owned by such funds or any affiliates of a Principal Stockholder instead of to us.
In addition, we cannot be sure that any pending trademark or service mark applications will be granted or will not be challenged or opposed by third parties. 22 Table of Contents We generally rely on a combination of unpatented proprietary know-how and trade secrets and, to a lesser extent, patents to preserve our position in the market.
In addition, we cannot be sure that any pending trademark or service mark applications will be granted or will not be challenged or opposed by third parties. We generally rely on a combination of unpatented proprietary know-how and trade secrets and, to a lesser extent, patents to preserve our position in the market.
Department of The Treasury’s Office of Foreign Assets Control; ● tariffs and other import/export trade restrictions; 23 Table of Contents ● currency fluctuations; ● limitations on our ability to enforce legal rights and remedies with third parties or partners outside the United States; ● foreign investment and cash repatriation regulations; ● adverse tax consequences; and ● dependence on other economies.
Department of The Treasury’s Office of Foreign Assets Control; ● tariffs and other import/export trade restrictions; ● currency fluctuations; ● limitations on our ability to enforce legal rights and remedies with third parties or partners outside the United States; ● foreign investment and cash repatriation regulations; ● adverse tax consequences; and ● dependence on other economies.
Any of these events, especially in our peak selling season, could have a material adverse effect on our business and results of operations. Our business operations could suffer if we fail to protect adequately our intellectual property rights, and we may experience claims by third parties that we are violating their intellectual property rights.
Any of these events, especially in our peak selling season, could have a material adverse effect on our business and results of operations. 24 Table of Contents Our business operations could suffer if we fail to protect adequately our intellectual property rights, and we may experience claims by third parties that we are violating their intellectual property rights.
Natural disasters, including resulting from climate change, geopolitical events, war, terrorism, public health issues, or other catastrophic events could adversely affect our business. financial condition and results of operations.
Natural disasters, including resulting from climate change, geopolitical events, war, terrorism, public health emergencies, or other catastrophic events could adversely affect our business. financial condition and results of operations.
Even if we are successful in integrating acquired businesses, these integrations may not result in the realization of the full benefit of any anticipated growth opportunities or cost synergies or we may not realize these benefits within the expected time frames, which could result in an impairment of acquired assets.
Even if we are successful in integrating acquired businesses, these integrations may not result in the realization of the full benefit of any anticipated growth opportunities or cost synergies or we may not realize these benefits within 27 Table of Contents the expected time frames, which could result in an impairment of acquired assets.
It is possible that cyber attackers might compromise our security measures and obtain the personal and/or confidential information of the customers, employees, and suppliers that we hold or our business information.
It is possible that cyber attackers could compromise our security measures and obtain the personal and/or confidential information of the customers, employees, and suppliers that we hold or our business information.
Our suppliers’ failure to provide raw materials and components that meet such criteria on a timely basis could adversely affect production schedules and our product quality, which in turn could materially adversely affect our business, financial condition, and 17 Table of Contents results of operations.
Our suppliers’ failure to provide raw materials and components that meet such criteria on a timely basis could adversely affect production schedules and our product quality, which in turn could materially adversely affect our business, financial condition, and results of operations.
Should consolidation among our dealers 18 Table of Contents and distributors through acquisitions, mergers and other transactions, we may face increased pressure from the remaining dealers and distributors to lower the price of our products, which could have an adverse effect on sales and profitability.
Should consolidation among our dealers and distributors through acquisitions, mergers and other transactions, we may face increased pressure from the remaining dealers and distributors to lower the price of our products, which could have an adverse effect on sales and profitability.
Consolidation by industry participants could increase their resources and result in competitors with expanded market share, larger customer bases, greater diversified product offerings and greater technological and marketing expertise, which may allow them to compete more effectively against us.
Consolidation could increase their resources and result in competitors with expanded market share, larger customer bases, greater diversified product offerings and greater technological and marketing expertise, which may allow them to compete more effectively against us.
Any new products that we develop may not receive market acceptance or otherwise generate any 16 Table of Contents meaningful net sales or profits for us relative to our expectations based on, among other things, existing and anticipated investments in manufacturing capacity and commitments to fund advertising, marketing, promotional programs, and research and development.
Any new products that we develop may not receive market acceptance or otherwise generate any meaningful net sales or profits for us relative to our expectations based on, among other things, existing and anticipated investments in manufacturing capacity and commitments to fund advertising, marketing, promotional programs, and research and development.
We sell all of our products to key channel partners, dealers and distributors, who resell the products to consumers and other dealers, respectively. Some of our customers also sell our competitors’ products. The customers’ success in reselling our products to consumers is a key driver of our net sales.
We sell all of our products to key channel partners, dealers and distributors, who resell the products to consumers and other dealers, respectively. Some of our customers also sell our competitors’ products. The customers’ 20 Table of Contents success in reselling our products to consumers is a key driver of our net sales.
In particular, we believe that access to consumer credit is an important factor enabling the purchase of new pools because a significant percentage of consumers finance their pool installations. The recent and continued combination of high interest rates and high inflation have reduced the affordability of mortgages and increased the cost of home improvement projects.
In particular, we believe that the availability of credit is an important factor enabling the purchase of new pools because a significant percentage of consumers finance their pool installations. The recent and continued combination of high interest rates and high inflation have reduced the affordability of mortgages and increased the cost of home improvement projects.
We are vulnerable to interruption by fire, natural disasters, power loss, telecommunication failures, internet failures, security breaches and other catastrophic events.
We are vulnerable to interruption by fire, natural disasters, power loss, telecommunication failures, internet failures, cybersecurity threats security breaches and other catastrophic events.
Any substantial deterioration in general economic conditions that diminishes consumer confidence or discretionary income may reduce our sales and materially adversely affect our business, financial condition, and results of operations.
Any substantial deterioration in general economic conditions that diminishes consumer confidence or discretionary income, or consumer access to credit, may reduce our sales and materially adversely affect our business, financial condition, and results of operations.
Moreover, compliance with such laws and regulations in the future could prove to be costly. Although we presently do not expect to incur any capital or other expenditures relating to regulatory matters in amounts that may be material to us, we may be required to make such expenditures in the future.
Moreover, compliance with such laws and regulations in the future could prove to be costly. Although we presently do not expect to incur any capital or other expenditures relating to regulatory 23 Table of Contents matters in amounts that may be material to us, we may be required to make such expenditures in the future.
Advances in computer and software capabilities, encryption technology and other discoveries such as generative artificial intelligence increase the complexity of our technological environment, including how each interact with our various software platforms.
Advances in computer and software capabilities, encryption technology and other discoveries such as generative AI increase the complexity of our technological environment, including how each interact with our various software platforms.
Exposure to various types of cyber-attacks such as malware, computer viruses, worms or other malicious acts, as well as human error, also could potentially disrupt our operations or result in a significant interruption in the delivery of our goods and services.
Exposure to various types of cybersecurity threats such as malware, computer viruses, worms or other malicious acts, as well as human error, also could potentially disrupt our operations or result in a significant interruption in the delivery of our goods and services.
In particular, we rely on a technically skilled workforce to operate the specialized equipment required to manufacture fiberglass pools, panels, liners and pool covers in a challenging production environment that may not appeal to many potential workers.
In particular, we rely on a technically skilled workforce to operate the specialized equipment required to manufacture 22 Table of Contents fiberglass pools, panels, liners and pool covers in a challenging production environment that may not appeal to many potential workers.
Item 1A. Risk Factors You should carefully consider the following risks and uncertainties, together with all of the other information contained in this Annual Report on Form 10-K, or this Annual Report, including our Consolidated Financial Statements and related notes included elsewhere in this Annual Report, before making an investment decision.
Item 1A. Risk Factors You should carefully consider the following risks and uncertainties, together with all of the other information contained in this Annual Report, including our Consolidated Financial Statements and related notes included elsewhere in this Annual Report, before making an investment decision.
If third parties take actions that affect our rights or the value of our intellectual property or proprietary rights, or if we are unable to protect our intellectual property from infringement or misappropriation, other companies may be able to offer competitive products at lower prices, and we may not be able to effectively compete against these companies.
If third parties take actions that affect our rights or the value of our intellectual property or proprietary rights, or if we are unable to protect our intellectual property , including in response to developing AI technologies, from infringement or misappropriation, other companies may be able to offer competitive products at lower prices, and we may not be able to effectively compete against these companies.
These laws 21 Table of Contents and regulations have changed substantially and rapidly and we anticipate that there will be continuing changes, which may require us to incur costs to maintain our business.
These laws and regulations have changed substantially and rapidly and we anticipate that there will be continuing changes, which may require us to incur costs to maintain our business.
Our international operations, which accounted for 16.1% of our net sales in 2023 and a significant portion of our purchased supplies, expose us to certain additional risks, including: ● difficulty in staffing international subsidiary operations and increased costs of managing international operations; ● different political, economic, and regulatory conditions; ● local laws and customs and enforcement thereof; ● violations of anti-bribery and anti-corruption laws, such as the United States Foreign Corrupt Practices Act; ● violations of economic sanctions laws, such as the regulations enforced by the U.S.
Our international operations, which accounted for 15.6% of our net sales in 2024 and a significant portion of our purchased supplies, expose us to certain additional risks, including: ● difficulty in staffing international subsidiary operations and increased costs of managing international operations; ● different political, economic, and regulatory conditions; 25 Table of Contents ● local laws and customs and enforcement thereof; ● violations of anti-bribery and anti-corruption laws, such as the United States Foreign Corrupt Practices Act; ● violations of economic sanctions laws, such as the regulations enforced by the U.S.
Our Board of Directors consists of nine members, four of whom are our Principal Stockholders’ directors.
Our Board consists of eight members, four of whom are our Principal Stockholders’ directors.
Any write-down would have a negative effect on our consolidated financial statements and may be material. Based on the results of the quantitative assessment performed for our one reporting unit, we determined that goodwill was not impaired at October 1, 2023.
Any write-down would have a negative effect on our consolidated financial statements and may be material. Based on the results of the assessment performed for our one reporting unit, we determined that goodwill was not impaired at September 29, 2024.
As with most companies, we have experienced cyber-attacks, attempts to breach our systems and other similar incidents, none of which were material to our operations or financial results in 2023.
As with most companies, we have experienced cybersecurity threats, attempts to breach our systems and other similar incidents, none of which were material to our operations or financial results in 2024.
A significant disturbance or breach of our technological infrastructure could adversely affect our financial condition and results of operations. Additionally, failure to maintain the security of confidential information could damage our reputation and expose us to litigation.
We rely on information technology systems to support our business operations. A significant disturbance or breach of our technological infrastructure could adversely affect our business, financial condition and results of operations. Additionally, failure to maintain the security of confidential information could damage our reputation and expose us to litigation.
However, our certificate of incorporation includes a provision that restricts us from engaging in any business combination with an interested stockholder for three years following the date that person becomes an interested stockholder, but such restrictions shall not apply to any business combination between our Principal Stockholders and any affiliate thereof or their direct and indirect transferees, on the one hand, and us, on the other. 30 Table of Contents Any issuance by us of preferred stock could delay or prevent a change in control of us.
However, our certificate of incorporation includes a provision that restricts us from engaging in any business combination with an interested stockholder for three years following the date that person becomes an interested stockholder, but such restrictions shall not apply to any business combination between our Principal Stockholders and any affiliate thereof or their direct and indirect transferees, on the one hand, and us, on the other.
Actual, potential, or perceived product safety concerns, including health-related concerns, could expose us to litigation, as well as government enforcement actions, and result in costly product recalls and other liabilities. Installation services for our pool products for homeowners is provided by dealers and other third party installers. We provide installers with pool installation specifications, instructions and training.
Actual, potential, or perceived product safety concerns, including health-related concerns, could expose us to litigation, as well as government enforcement actions, and result in costly product recalls and other liabilities. Installation services for our pool products for homeowners is provided by us in the case of our autocover products and our dealers and other third party installers.
A temporary or permanent loss of the use of one or more of our manufacturing facilities due to accidents, fire (such as the fire at our Texas facility in April 2022 that resulted in a total loss of the manufacturing facility), explosions, labor issues, tornadoes, other weather conditions, natural disasters, condemnation, cancellation or non-renewals of leases, terrorist attacks or other acts of violence or war or otherwise could have a material adverse effect on our operating costs.
A temporary or permanent loss of the use of one or more of our manufacturing facilities due to accidents, fire, explosions, labor issues, tornadoes, other weather conditions, natural disasters, condemnation, cancellation or non-renewals of leases, terrorist attacks or other acts of violence or war or otherwise could have a material adverse effect on our operating costs.
Consumer discretionary spending affects our sales of swimming pools and related products and is impacted by factors outside of our control, including general economic conditions, the residential housing market, unemployment rates and wage levels, interest rate fluctuations, inflation, disposable income levels, consumer confidence and access to credit.
Consumer discretionary spending affects our sales of swimming pools and related products and is impacted by factors outside of our control, including general economic conditions, housing affordability, demographic trends, employment rates and wage levels, interest rate fluctuations, inflation, disposable income levels, consumer confidence and spending and to the availability of credit .
Increases in the cost of the raw materials used to manufacture our products could adversely affect our operating results. The cost of many of the raw materials we use in the manufacture of our products, such as steel, is subject to price volatility. Changes in prices of our raw materials have a direct impact on our cost of sales.
The cost of many of the raw materials we use in the manufacture of our products, such as steel, is subject to price volatility. Changes in prices of our raw materials have a direct impact on our cost of sales.
Cyber-attacks are rapidly evolving and those threats and the means for obtaining access to information in digital and other storage media are becoming increasingly sophisticated and may not immediately produce signs of intrusion. Moreover, such cyber-attacks may disrupt access to our and/or our suppliers’ networks and systems.
Cybersecurity threats are rapidly evolving and those threats and the means for obtaining access to information in digital and other storage media are becoming increasingly sophisticated and may not immediately produce signs of intrusion. The development of AI technologies may exacerbate these risks. Moreover, such cybersecurity threats may disrupt access to our and/or our suppliers’ networks and systems.
An interruption in our production capabilities could also require us to make substantial capital expenditures to replace damaged or destroyed facilities or equipment (as we incurred following the Texas facility fire). Any of these events could result in substantial repair costs and higher operating costs.
An interruption in our production capabilities could also require us to make substantial capital expenditures to replace damaged or destroyed facilities or equipment. Any of these events could result in substantial repair costs and higher operating costs.
Our operations and financial results have been, and may be in the future, adversely impacted by local, regional, national or global catastrophic events or extraordinary circumstances, such as natural or environmental disasters, weather 15 Table of Contents events driven by climate change or other factors, public health issues such as the COVID-19 pandemic, and other serious disruption to our facilities due to fire, flood, hurricane, earthquake, war, acts of terrorism, civil insurrection or social unrest.
Our operations and financial results have been, and may be in the future, adversely impacted by local, regional, national or global catastrophic events or extraordinary circumstances, such as: natural or environmental disasters; weather events driven by climate change or other factors; public health emergencies, epidemics or pandemics; other serious disruption to our facilities due to fire, flood, hurricane, earthquake, war, acts of terrorism, civil insurrection or social unrest; political uncertainty; and regional or global conflicts, including the conflicts in the Middle East and Ukraine.
The implementation may also cause complications to ongoing operations, result in material weaknesses to our internal control framework, increase regulatory compliance risks, and impact our ability to process transactions efficiently, all of which may have a material adverse effect on our business and results of operations. We rely on information technology systems to support our business operations.
The implementation may also cause complications to ongoing operations, result in material weaknesses to our internal control framework, increase regulatory compliance risks, and impact our ability to process transactions efficiently, all of which may have a material adverse effect on our business and results of operations. We depend on our ability to attract, develop, and retain highly qualified personnel.
The availability of these transportation services is subject to various risks, some of which we have recently incurred due to macroeconomic and inflationary conditions, including those associated with supply shortages, change in fuel prices, work stoppages, operating hazards, and interstate transportation regulations.
The availability of these transportation services is subject to various risks, some of which we have recently incurred due to macroeconomic and inflationary conditions, including those associated with supply shortages, change in fuel prices, work stoppages, operating hazards, disruption to transportation routes, changes in tariffs or duties imposed on imported products or raw materials, and interstate transportation regulations.
Further, such events could have macro implications, such as adversely impacting consumer discretionary spending, causing geopolitical uncertainty, and resulting in a macroeconomic downturn and disruption in the financial markets.
Further, such events could also adversely impact consumer discretionary spending, causing geopolitical uncertainty, and resulting in a macroeconomic downturn and disruption in the financial markets.
Such consolidation could also lead to the loss of our largest customers if the surviving dealers choose to discontinue purchases of our products, which could also reduce sales and profitability. Our customers generally are not contractually obligated to purchase from us.
Such consolidation could also lead to the loss of our largest customers if the surviving dealers choose to discontinue purchases of our products, which could also reduce sales and profitability.
These cyber-incidents could also subject us to liability, expose us to significant expense, and cause significant harm to our reputation and our business. Third-party service providers, such as distributors, subcontractors, vendors, and data processors have access to certain portions of our data.
The occurrence of any cybersecurity incident or security breach could also subject us to liability, expose us to significant expense, and cause significant harm to our reputation and our business. Third-party service providers, such as distributors, subcontractors, vendors, and data processors have access to certain portions of our data.
The financial health of many of our customers is affected by changes in the economy. The effects of any protracted or severe economic declines may cause our customers to be unable to satisfy their payment obligations, including with us.
A significant portion of our accounts receivables are typically concentrated within a relatively small number of customers. The financial health of many of our customers is affected by changes in the economy. The effects of any protracted or severe economic declines may cause our customers to be unable to satisfy their payment obligations, including with us.
This project has required and will continue to require significant capital and human resources, the re-engineering of many processes of our business, and the attention of our management and other personnel who would otherwise be focused on other aspects of our business.
We are in the process of a multi-year implementation of a new enterprise resource planning system. This project has required and will continue to require significant capital and human resources, the re-engineering of many processes of our business, and the attention of our management and other personnel who would otherwise be focused on other aspects of our business.
The defense of such claims can also be a distraction to management and to our warranty team, as well as cause reputational harm. 19 Table of Contents We are also involved or may be involved in various disputes, litigation, and regulatory matters incidental to and in the ordinary course of our business, including employment matters, personal injury claims, intellectual property disputes, commercial disputes, government compliance matters, environmental matters, and other matters arising out of the normal conduct of our business.
We are also involved or may be involved in various disputes, litigation, and regulatory matters incidental to and in the ordinary course of our business, including employment matters, personal injury claims, intellectual property disputes, commercial disputes, government compliance matters, environmental matters, and other matters arising out of the normal conduct of our business.
To the extent that our specifications and instructions are not adhered to by the installer, our pools may be damaged or not function properly leading to homeowner dissatisfaction.
We provide dealer and third party installers with pool installation specifications, instructions and training. To the extent that our specifications and instructions are not adhered to by the installer, our pools may be damaged or not function properly leading to homeowner dissatisfaction.
These risks are heightened with respect to our largest customer, which accounted for 20.3% of our net sales in 2023, and our top ten dealers and distributors, which accounted for 40.4% of our net sales in 2023.
These risks are heightened with respect to our largest customer, which accounted for 21.0% of our net sales in 2024, and our top ten dealers and distributors, which accounted for 42.8% of our net sales in 2024.
A reduction in sales to our customers, particularly the loss of, or a reduction in sales to, our largest customers, could have a material adverse effect on our business, financial condition, and results of operations.
A reduction in sales to our customers, particularly the loss of, or a reduction in sales to, our largest customers, could have a material adverse effect on our business, financial condition, and results of operations. If one or more of our competitors were to merge, the change in the competitive landscape could adversely affect our competitive position.
Even in generally favorable economic conditions, severe and/or prolonged downturns in the housing market could have a material adverse impact on our financial performance due to our industry’s alignment with the housing market. Adverse weather conditions could negatively impact our sales, as well as result in significant variability of sales in reporting periods.
Even in generally favorable economic conditions, severe and/or prolonged downturns in the housing market could have a material adverse impact on our financial performance due to our industry’s alignment with the housing market. Inflation could adversely impact our financial condition and results of operations.
Developing, testing, and deploying resource-intensive AI systems may require additional investment and increase our costs. ​ Consolidation among our network of dealers and distributors could lead to downward pressure on the price of our products or the loss of our largest customers, which could adversely affect our business, financial condition, and results of operations.
Industry consolidation, including among our network of dealers and distributors could lead to downward pressure on the price of our products or the loss of our largest customers, which could adversely affect our business, financial condition, and results of operations.
Within our industry, we directly compete against various international, regional and local pool manufacturing companies. In the current economic environment, where consumer demand has softened due to higher interest rates, inflation and other concerns, competition has intensified resulting in pressure to reduce prices and to offer more innovative products and materials, which could adversely affect our business.
In the current economic environment, where consumer demand has softened due to higher interest rates, inflation and other concerns, competition has intensified resulting in pressure to reduce prices and to offer more innovative products and materials, which has adversely affected and could continue to adversely affect our business, financial condition and results of operations.
As of December 31, 2023, we have $309.3 million face value of indebtedness in the form of the New Term Loan outstanding under the New Credit Agreement and $75.0 million of availability under the New Revolving Credit Facility under the New Credit Agreement (each as defined below).
As of December 31, 2024, we have $288.1 million face value of indebtedness in the form of the Term Loan outstanding under the Credit Agreement and $75.0 million of availability under the Revolving Credit Facility under the Credit Agreement (each as defined below). Our obligations under the Credit Agreement are secured by substantially all of our and our subsidiaries’ assets.
Weather is one of the principal external factors affecting our business, and the impact of bad weather is further exacerbated by the seasonality of our sales cycle. Adverse weather can interfere with ordinary transportation of our products and installation and cause a resulting delay, or if such delay is prolonged may lead to a cancelled order.
Adverse weather can interfere with ordinary transportation of our products and installation and cause a resulting delay, or if such delay is prolonged may lead to a cancelled order.
Other than occasional strategic purchases of larger quantities of certain raw materials, we generally buy materials on an as-needed basis. We are dependent upon the ability of our suppliers to consistently provide raw materials and components that meet our specifications, quality standards and other applicable criteria.
We are dependent upon the ability of our suppliers to consistently provide raw materials and components that meet our specifications, quality standards and other applicable criteria.
Pamplona has the right to nominate to our Board of Directors a number of designees on a sliding scale depending on Pamplona’s affiliates’ ownership of our common stock, ranging from Pamplona being able to nominate at least a majority of the total number of directors so long as its affiliates beneficially own at least 50% of the shares of our common stock to Pamplona being able to nominate at least 10% of the total number of directors as long as its affiliates beneficially own at least 5%. 29 Table of Contents Moreover, ownership of our shares by affiliates of our Principal Stockholders may also adversely affect the trading price for our common stock to the extent investors perceive disadvantages in owning shares of a company with a controlling shareholder.
Pamplona has the right to nominate to our Board a number of designees on a sliding scale depending on Pamplona’s affiliates’ ownership of our common stock, ranging from Pamplona being able to nominate at least a majority of the total number of directors so long as its affiliates beneficially own at least 50% of the shares of our common stock to Pamplona being able to nominate at least 10% of the total number of directors as long as its affiliates beneficially own at least 5%.
Pamplona Capital Partners V, L.P., an investment fund (the “Pamplona Fund”) managed by affiliates of Pamplona Capital Management, LLC (together with its respective subsidiaries and affiliates, “Pamplona”) and Wynnchurch Capital Partners IV, L.P. (“Wynnchurch IV”) and WC Partners Executive IV, L. P. (“WC Executive”) (collectively, the “Wynnchurch Funds”) managed by affiliates of Wynnchurch Capital, L.P.
Pamplona Capital Partners V, L.P., an investment fund managed by affiliates of Pamplona Capital Management, LLC (together with its respective subsidiaries and affiliates, “Pamplona”) and Wynnchurch Capital Partners IV, L.P. and WC Partners Executive IV, L. P. managed by affiliates of Wynnchurch Capital, L.P. (together with its respective subsidiaries and affiliates, “Wynnchurch”) are currently our majority stockholders (the “Principal Stockholders”).
We generally seek to comply with industry standards and are subject to the terms of our own privacy policies and privacy-related obligations to third parties. We strive to comply with all applicable laws, policies, legal obligations, and industry codes of conduct relating to privacy and data protection to the extent possible.
We strive to comply with all applicable laws, policies, legal obligations, and industry codes of conduct relating to privacy and data 26 Table of Contents protection to the extent possible.
We depend on a global network of third-party suppliers to provide components and raw materials essential to the manufacturing of our pools and price increases or deviations in the quantity or quality of the raw materials used to manufacture our products could adversely affect our net sales and operating results.
To the extent we are unable to recover higher operating costs resulting from inflation or otherwise mitigate the impact of such costs on our business, our net sales and gross margins could decrease, and our financial condition and results of operations could be adversely affected. ​ 16 Table of Contents We depend on a global network of third-party suppliers to provide components and raw materials essential to the manufacturing of our pools and price increases or deviations in the quantity or quality of the raw materials used to manufacture our products could adversely affect our net sales and operating results.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeHowever, risks from cybersecurity threats, including from prior cyber incidents, have not materially affected, or are not reasonably likely to materially affect, our Company, including our business strategy, results of operations or financial condition in 2023 and recent years We carry cyber risk insurance that provides protection against a breach or other data security incident, but such insurance may not be sufficient, and any related insurance proceeds may not be timely paid to us.
Biggest changeWe carry cyber risk insurance that provides protection against a breach or other data security incident, but such insurance may not be sufficient, and any related insurance proceeds may not be timely paid to us. See “Risk Factors — Risks Related to Our Operations and Industry — We rely on information technology systems to support our business operations.
Each high-level risk is assigned to a member of senior management as the risk owner for oversight, with the risk owner developing a risk mitigation plan that is tracked to completion. We have prioritized cybersecurity risks and made investments of time and resources in recent years to mitigate this risk area.
Each identified high-level risk is assigned to a member of senior management as the risk owner for oversight, with the risk owner developing a risk mitigation plan that is tracked to completion. We have prioritized cybersecurity risks and made investments of time and resources in recent years to mitigate this risk area.
Our executive leadership team further includes several executives with prior experience in information technology systems, including potential cybersecurity, data privacy regulation, enterprise risk management, assessment and auditing of internal controls related to data security.
Our executive leadership team further includes several executives with prior experience in information technology systems, including cybersecurity, data privacy regulation, enterprise risk management, assessment and auditing of internal controls related to data security.
Our CIO/CISO is a direct report of our Chief Executive Officer Our CIO/CISO has 25 years of experience, including serving in similar roles leading and overseeing cybersecurity and information technology programs.
Our CIO/CISO is a direct report of our Chief Executive Officer. Our CIO/CISO has over 25 years of experience, including serving in similar roles leading and overseeing cybersecurity and information technology programs.
Item 1C. Cybersecurity Information technology supports several aspects of our business, including among others, product ordering and fulfillment, pricing, customer service, transaction processing, financial reporting, collections, and cost management. Further, our business operations rely on the secure collection, storage, transmission, and other processing of proprietary, confidential, and sensitive data of the Company and third parties.
Item 1C. Cybersecurity Information technology supports several aspects of our business, including product ordering and fulfillment, pricing, customer service, transaction processing, financial reporting, collections, and cost management. Further, our business operations rely on the secure collection, storage, transmission, and other processing of proprietary, confidential, and sensitive data of the Company and third parties.
Our incident response plan is led by our CIO/CISO and includes a multidisciplinary team, including members of our IT security function, executive management of our legal, finance, human resources, corporate communications and internal audit/risk functions. ​ ​ 34 Table of Contents
Our incident response plan is led by our CIO/CISO and includes a multidisciplinary team, including members of our IT security function, executive management of our legal, finance, human resources, corporate communications and internal audit/risk functions. ​
We maintain a managed detection and response system and a security operations center that operates 24 hours per day, 7 days per week.
We maintain a managed detection and response system and a security operations center that operates 24 hours per day, seven days per week.
Additionally, failure to maintain the security of confidential information could damage our reputation and expose us to litigation,” for additional discussion about cybersecurity-related risks. 33 Table of Contents Governance Oversight Our Board of Directors oversees the Company’s cybersecurity program by receiving quarterly reports (or more often, if necessary) from management on potential threats (including emerging risks) and any incidents, and the measures we have taken to prevent and to mitigate the impact of cyber attacks on our systems.
Additionally, failure to maintain the security of confidential information could damage our reputation and expose us to litigation,” for additional discussion about cybersecurity-related risks. 35 Table of Contents Governance Oversight Our Board oversees the Company’s cybersecurity program by receiving quarterly reports (or more often, if necessary) from our Chief Executive Officer and our combined Chief Information Officer and Chief Information Security Officer (our “CIO/CISO”) on potential threats (including emerging risks) and any incidents, and the measures we have taken to prevent and to mitigate the impact of cyber-attacks on our systems.
He also has been certified in matters relevant to cybersecurity risk management as follows: certified information systems auditor (CISA); certified information systems security professional (CISSP); certified data privacy solutions professional (CDPSE); and certified in risk information systems and controls (CRISC). IT team members that support our CIO/CISO and our information security program have relevant educational and industry experience.
He also has been certified in matters relevant to cybersecurity risk management as follows: certified information systems auditor; certified information systems security professional; certified data privacy solutions professional; and certified in risk information systems and controls (CRISC). The members of our IT security function that support our CIO/CISO and our information security program also have relevant educational and industry experience.
Risk Management and Strategy We assess, identify and manage the material risks associated with cybersecurity threats as part of our enterprise risk management (“ERM”) program addressing our strategic, operational, compliance and financial risks across the organization. Our ERM program includes feedback from senior management and certain functional leaders.
Risk Management and Strategy We assess, identify and manage the material risks associated with cybersecurity threats as part of our annual enterprise risk management (“ERM”) program addressing our strategic, operational, compliance and financial risks across the organization. Our ERM program incorporates feedback from senior management, certain functional leaders and third-party service providers.
Our management presenters includes our Chief Executive Officer and our combined Chief Information Officer and Chief Information Security Officer (our “CIO/CISO”). Our Board also reviews the efficacy of our cybersecurity program, the status of key information security initiatives, and approves, as appropriate, reasonable investments to enhance the protection of our information technology systems.
Our Board also reviews the efficacy of our cybersecurity program, the status of key information security initiatives, and approves, as appropriate, reasonable investments to enhance the protection of our information technology systems.
See “Risk Factors — Risks Related to Our Operations and Industry — We rely on information technology systems to support our business operations. A significant disturbance or breach of our technological infrastructure could adversely affect our financial condition and results of operations.
A significant disturbance or breach of our technological infrastructure could adversely affect our business, financial condition and results of operations.
As with most companies, we have experienced cyber-attacks, attempts to breach our systems and other similar incidents.
As with most companies, we have experienced cyber-attacks, attempts to breach our systems and other similar incidents. However, risks from cybersecurity threats, including from prior cyber incidents, have not materially affected in 2024, and are not reasonably likely to materially affect in 2025 , our Company, including our business strategy, results of operations or financial condition.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties Our headquarters are located in Latham, New York. We have manufacturing, warehouse, storage and office facilities in the United States, Canada, New Zealand, and Australia.
Biggest changeItem 2. Properties As of December 31, 2024, we have around 30 locations across the United States, Canada, New Zealand and Australia, which are primarily for manufacturing, warehouse, storage and office space. Our headquarters is located in Latham, New York.
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We believe our facilities are adequate and suitable for our current needs. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Ownership Location Purpose Size (Sq. ft.) (owned or leased) Melbourne, Australia Storage facility and office 6,243 Leased Picton, Australia Fiberglass facility 49,514 Leased Picton, Australia ​ Storage ​ 115,174 (1) ​ Leased Sydney, Australia Office 6,889 Leased Yalta, Australia Fiberglass facility 30,591 Leased Brisbane, Australia ​ Fiberglass facility ​ 32,292 ​ Leased Ajax, Canada ​ Fiberglass steps ​ 88,051 ​ Leased Brantford, Canada ​ Liners, steel panels and covers facility ​ 116,000 ​ Leased Loyalist, Canada Fiberglass facility 164,000 Owned Hamilton, New Zealand Fiberglass facility 21,528 Leased Hamilton, New Zealand Mold building facility 10,764 Leased Williams, California Fiberglass facility 44,000 Leased Zephyrhills, Florida Fiberglass facility 42,000 Leased Suwanee, Georgia Liners and covers facility 151,200 Leased Fort Wayne, Indiana Liners, kits and covers facility 161,500 Leased Plainfield, Indiana Automatic safety covers facility 99,288 Leased De Witt, Iowa Fiberglass facility 40,000 Leased Breaux Bridge, Louisiana Fiberglass facility 22,463 Leased Albany, New York ​ Aluminum kit facility ​ 60,000 ​ Leased Albany, New York ​ Warehouse ​ 8,000 ​ Leased Latham, New York Headquarters, polymer panels and thermoformed steps facility 92,000 Owned Queensbury, New York Fiberglass depot 2,400 Leased Scotia, New York Liners and covers facility 120,000 Leased Menands, New York ​ Warehouse - manufacturing ​ 86,000 ​ Leased Powells Point, North Carolina Fiberglass depot 1,200 Leased Rockingham, North Carolina Fiberglass facility 42,781 Owned Youngstown, Ohio Warehouse — finished products 105,000 Leased Youngstown, Ohio Warehouse — raw materials 85,868 Leased Youngstown, Ohio Liners and covers facility 16,982 Leased Seminole, Oklahoma ​ Fiberglass facility ​ 17,956 ​ Owned Fayetteville, Tennessee Fiberglass facility 59,441 Owned Odessa, Texas Fiberglass facility 25,000 Leased Lindon, Utah Automatic safety covers facility 55,000 Leased Lindon, Utah ​ Warehouse and office ​ 6,750 ​ Leased Jane Lew, West Virginia Fiberglass facility 31,050 Leased Jane Lew, West Virginia Storage facility and office 55,000 Leased (1) Land Only ​ ​ ​ ​ 35 Table of Contents
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We have a coast to coast network of nine fiberglass plants across continental North America and an additional three fiberglass plants in Australia and New Zealand. We lease most of these properties and/or own a portion of these properties. We believe our facilities are adequate and suitable for our current need s. ​

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings From time to time, we may be involved in litigation relating to claims arising out of our operations and businesses that cover a wide range of matters, including, among others, contract and employment claims, personal injury claims, intellectual property claims, product liability claims and warranty claims.
Biggest changeItem 3. Legal Proceedings From time to time, we may be involved in legal proceedings in the ordinary course of business, including, among others, contract and employment claims, personal injury claims, intellectual property claims, product liability claims and warranty claims.
Currently, there are no claims or proceedings against us that we believe will have a material adverse effect on our business, financial condition, results of operations or cash flows. Further, no material legal proceedings were terminated, settled, or otherwise resolved during the fourth quarter of the year ended December 31, 2023.
Currently, there are no legal proceedings against us that we believe will have a material adverse effect on our business, financial condition, results of operations or cash flows. Further, no material legal proceedings were terminated, settled, or otherwise resolved during the fourth quarter of the year ended December 31, 2024.
However, the results of any current or future litigation cannot be predicted with certainty and, regardless of the outcome, we may incur significant costs and experience a diversion of management resources as a result of litigation. ​ Item 4. Mine Safety Disclosures Not applicable. ​ 36 Table of Contents ​ ​ Part II
However, the results of any current or future legal proceedings cannot be predicted with certainty and, regardless of the outcome, we may incur significant costs and experience a diversion of management resources as a result of legal proceedings. ​ Item 4. Mine Safety Disclosures Not applicable. 36 Table of Contents Part II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeWe did not pay any dividends during the period reflected in the graph. 37 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 4/23/2021 ​ 12/31/2021 ​ 12/31/2022 ​ 12/31/2023 Latham Group, Inc. $ 100.00 ​ $ 91.85 ​ $ 11.82 ​ $ 9.65 Russell 2000 $ 100.00 ​ $ 99.56 ​ $ 79.21 ​ $ 92.62 S&P SmallCap 600 Consumer Discretionary Index $ 100.00 ​ $ 98.11 ​ $ 70.82 ​ $ 73.83 ​ ​ ​ ​ ​ Item 6.
Biggest changeWe did not pay any dividends during the period reflected in the graph. 37 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 4/23/2021 ​ 12/31/2021 ​ 12/31/2022 ​ 12/31/2023 ​ 12/31/2024 Latham Group, Inc. ​ $ 100.00 ​ $ 91.85 ​ $ 11.82 ​ $ 9.65 ​ $ 25.54 Russell 2000 ​ $ 100.00 ​ $ 99.56 ​ $ 79.21 ​ $ 92.62 ​ $ 103.31 S&P SmallCap 600 Consumer Discretionary Index ​ $ 100.00 ​ $ 98.11 ​ $ 70.82 ​ $ 73.83 ​ $ 77.79 ​ ​ Item 6.
See “Risk Factors—Risks Relating Ownership of our Common Stock—We do not anticipate paying any cash dividends, and accordingly, stockholders must rely on stock appreciation for any return on their investment” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.” Performance Graph The following graph compares the cumulative total return on our common stock since it began trading on the NASDAQ Global Select Market on April 23, 2021 with the cumulative total return of the Russell 2000 Index and the S&P SmallCap 600 Consumer Discretionary Index.
See “Risk Factors—Risks Relating Ownership of our Common Stock—We do not anticipate paying any quarterly cash dividends, and accordingly, stockholders must rely on stock appreciation for any return on their investment” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.” Performance Graph The following graph compares the cumulative total return on our common stock since it began trading on the Nasdaq Global Select Market on April 23, 2021 with the cumulative total return of the Russell 2000 Index and the S&P SmallCap 600 Consumer Discretionary Index.
Issuer Purchases of Equity Securities On May 10, 2022, our Board of Directors approved a stock repurchase program, which authorizes us to repurchase up to $100.0 million of our shares of common stock over the next three years. We may effect these repurchases in open market transactions, privately negotiated purchases, or other acquisitions.
Issuer Purchases of Equity Securities On May 10, 2022, our Board approved a stock repurchase program, which authorizes us to repurchase up to $100.0 million of our shares of common stock over the next three years. We may effect these repurchases in open market transactions, privately negotiated purchases, or other acquisitions.
Any declaration and payment of cash dividends in the future, will be at the discretion of our Board of Directors and will depend upon such factors as earnings levels, cash flows, capital requirements, levels of indebtedness, restrictions imposed by applicable law, our overall financial condition, restrictions in our debt agreements, and any other factors deemed relevant by our Board of Directors.
Any declaration and payment of cash dividends in the future, will be at the discretion of our Board and will depend upon such factors as earnings levels, cash flows, capital requirements, levels of indebtedness, restrictions imposed by applicable law, our overall financial condition, restrictions in our debt agreements, and any other factors deemed relevant by our Board.
As a holding company, our ability to pay dividends depends on our receipt of cash dividends from our operating subsidiaries. Our ability to pay dividends will therefore be restricted as a result of restrictions on their ability to pay dividends to us under our New Credit Agreement and under other current and future indebtedness that we or they may incur.
As a holding company, our ability to pay dividends depends on our receipt of cash dividends from our operating subsidiaries. Our ability to pay dividends will therefore be restricted as a result of restrictions on their ability to pay dividends to us under our Credit Agreement and under other current and future indebtedness that we or they may incur.
No shares were repurchased during the fourth quarter of the year ended December 31, 2023. As of December 31, 2023, $77.0 million remained available under our stock repurchase program. Dividends We currently do not intend to pay cash dividends on our common stock. However, we may in the future decide to pay dividends on our common stock.
No shares were repurchased during the fourth quarter of the year ended December 31, 2024. As of December 31, 2024, $77.0 million remained available under our stock repurchase program. Dividends We currently do not intend to pay cash dividends on our common stock. However, we may in the future decide to pay dividends on our common stock.
The graph assumes, in each case, an initial investment of $100 on April 23, 2021, based on the market price at the end of each month through and including December 31, 2023, and that all dividends paid by companies included in these indices have been reinvested.
The graph assumes, in each case, an initial investment of $100 on April 23, 2021, based on the market price at the end of each month through and including December 31, 2024, and that all dividends paid by companies included in these indices have been reinvested.
On December 31, 2023, there were 27 registered holders of record of our common stock. A greater number of holders are “street name” or beneficial holders, whose shares are held of record by banks, brokers, and other financial institutions.
On December 31, 2024, there were 27 registered holders of record of our common stock. A greater number of holders are “street name” or beneficial holders, whose shares are held of record by banks, brokers, and other financial institutions.

Item 7. Management's Discussion & Analysis

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

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Biggest changeFor a discussion of Adjusted EBITDA and Adjusted EBITDA margin and the limitations on their use, and the reconciliation of Adjusted EBITDA to net income (loss), the most directly comparable GAAP financial measure, and our calculation of Adjusted EBITDA margin see “— Non-GAAP Financial Measures” below. ​ 44 Table of Contents Results of Operations Year ended December 31, 2023 Compared to Year ended December 31, 2022 The following table summarizes our results of operations for the years ended December 31, 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Change ​ ​ ​ ​ ​ ​ % of ​ ​ ​ ​ % of ​ Change ​ % of ​ ​ 2023 Net Sales 2022 Net Sales Amount Net Sales ​ ​ (dollars in thousands) Net sales ​ $ 566,492 ​ 100.0 % $ 695,736 ​ 100.0 % $ (129,244) ​ — % Cost of sales ​ 413,548 73.0 % 479,267 68.9 % (65,719) 4.1 % Gross profit ​ 152,944 27.0 % 216,469 31.1 % (63,525) (4.1) % Selling, general, and administrative expense ​ 110,296 19.5 % 146,842 21.1 % (36,546) (1.6) % Underwriting fees related to offering of common stock ​ ​ — ​ — % ​ 11,437 ​ 1.6 % ​ (11,437) (1.6) % Amortization ​ 26,519 4.7 % 28,180 4.1 % (1,661) 0.6 % Income from operations ​ 16,129 2.8 % 30,010 4.3 % (13,881) (1.5) % Other expense (income): ​ ​ ​ ​ ​ ​ ​ Interest expense, net ​ 30,916 5.5 % 15,753 2.3 % 15,163 3.2 % Loss on extinguishment of debt ​ ​ — ​ — % ​ 3,465 ​ 0.5 % (3,465) (0.5) % Other (income) expense, net ​ (1,004) (0.2) % 1,301 0.1 % (2,305) (0.3) % Total other expense, net ​ 29,912 5.3 % 20,519 2.9 % 9,393 2.4 % Earnings from equity method investment ​ ​ 3,723 ​ 0.7 % ​ 4,230 ​ 0.6 % ​ (507) ​ 0.1 % (Loss) income before income taxes ​ (10,060) (1.8) % 13,721 2.0 % (23,781) (3.8) % Income tax (benefit) expense ​ (7,672) (1.4) % 19,415 2.8 % (27,087) (4.2) % Net loss ​ $ (2,388) (0.4) % $ (5,694) (0.8) % $ 3,306 0.4 % Adjusted EBITDA ​ $ 88,025 15.5 % $ 143,252 20.6 % $ (55,227) (5.1) % ​ Net Sales Net sales was $566.5 million for the year ended December 31, 2023, compared to $695.7 million for the year ended December 31, 2022.
Biggest changeAdjusted EBITDA Margin Adjusted EBITDA margin was 15.8% for the year ended December 31, 2024, compared to 15.5% for the year ended December 31, 2023. ​ 47 Table of Contents Year ended December 31, 2023 Compared to Year ended December 31, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Change ​ ​ ​ ​ ​ ​ % of ​ ​ ​ ​ % of ​ Change ​ % of ​ ​ 2023 Net Sales 2022 Net Sales Amount Net Sales ​ ​ (dollars in thousands) Net sales ​ $ 566,492 ​ 100.0 % $ 695,736 ​ 100.0 % $ (129,244) ​ — % Cost of sales ​ 413,548 73.0 % 479,267 68.9 % (65,719) 4.1 % Gross profit ​ 152,944 27.0 % 216,469 31.1 % (63,525) (4.1) % Selling, general, and administrative expense ​ 110,296 19.5 % 146,842 21.1 % (36,546) (1.6) % Underwriting fees related to offering of common stock ​ ​ — ​ — % ​ 11,437 ​ 1.6 % ​ (11,437) (1.6) % Amortization ​ 26,519 4.7 % 28,180 4.1 % (1,661) 0.6 % Income from operations ​ 16,129 2.8 % 30,010 4.3 % (13,881) (1.5) % Other expense (income): ​ ​ ​ ​ ​ ​ ​ ​ Interest expense, net ​ 30,916 5.5 % 15,753 2.3 % 15,163 3.2 % Loss on extinguishment of debt ​ ​ — ​ — % 3,465 ​ 0.5 % (3,465) (0.5) % Other (income) expense, net ​ (1,004) (0.2) % 1,301 0.1 % (2,305) (0.3) % Total other expense, net ​ 29,912 5.3 % 20,519 2.9 % 9,393 2.4 % Earnings from equity method investment ​ ​ 3,723 ​ 0.7 % ​ 4,230 ​ 0.6 % ​ (507) 0.1 % (Loss) income before income taxes ​ (10,060) (1.8) % 13,721 2.0 % (23,781) (3.8) % Income tax (benefit) expense ​ (7,672) (1.4) % 19,415 2.8 % (27,087) (4.2) % Net loss ​ $ (2,388) (0.4) % $ (5,694) (0.8) % $ 3,306 0.4 % Adjusted EBITDA ​ $ 88,025 15.5 % $ 143,252 20.6 % $ (55,227) (5.1) % ​ For discussion on comparison of the years ended December 31, 2023 and 2022, see the Results of Operations section disclosed in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on March 13, 2024.
With an operating history that spans over 65 years, we offer the industry’s broadest portfolio of pools and related products, including in-ground swimming pools, pool liners, and pool covers. We have a heritage of innovation.
With an operating history that spans over 65 years, we offer the industry’s broadest portfolio of pools and related products, including in-ground swimming pools, pool covers, and pool liners. We have a heritage of innovation.
The full resources of our company are dedicated to designing and manufacturing high-quality pool products, with the homeowner in mind, and positioning ourselves as a value-added partner to our dealers. We conduct our business as one operating and reportable segment that designs, manufactures, and markets in-ground swimming pools, liners, and covers.
The full resources of our company are dedicated to designing and manufacturing high-quality pool products, with the homeowner in mind, and positioning ourselves as a value-added partner to our dealers. We conduct our business as one operating and reportable segment that designs, manufactures, and markets in-ground swimming pools, pool covers, and pool liners.
Products are sold directly to the franchisees, third parties independent of Premier Pools and Spas, and are therefore not considered related party transactions.
Products are sold directly to the franchisees, third parties independent of Premier Pools & Spas, and are therefore not considered related party transactions.
Key Performance Indicators ​ Net Sales We derive our revenue from the design, manufacture, and sale of in-ground swimming pools, pool covers, and liners.
Key Performance Indicators ​ Net Sales We derive our revenue from the design, manufacture, and sale of in-ground swimming pools, pool covers, and pool liners.
We use Adjusted EBITDA and Adjusted EBITDA margin to supplement GAAP measures of performance to evaluate the effectiveness of our business strategies, to make budgeting decisions, to utilize as a significant performance metric in our annual management incentive bonus plan compensation, and to compare our performance against that of other companies using similar measures.
We use Adjusted EBITDA and Adjusted EBITDA margin to supplement GAAP measures of performance to evaluate the effectiveness of our business strategies, to make budgeting decisions, to utilize as a significant performance metric in our annual management incentive bonus plan compensation, and to compare our performance against that of other companies using similar measures.
Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures and should not be considered as alternatives to net income (loss) as a measure of financial performance or any other performance measure derived in accordance with GAAP, and they should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.
Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures and should not be considered as alternatives to net income (loss) as a measure of financial performance or any other performance measure derived in accordance with GAAP, and they should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.
You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis. In evaluating Adjusted EBITDA and Adjusted EBITDA margin, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in this presentation.
You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis. In evaluating Adjusted EBITDA and Adjusted EBITDA margin, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in this presentation.
Financing Activities During the year ended December 31, 2023, financing activities used $13.9 million of cash, primarily consisting of repayments on revolving credit facilities of $48.0 million, repayments on long-term debt borrowings of $13.2 million, and repayments of finance lease obligations of $0.6 million, partially offset by borrowings on revolving credit facilities of $48.0 million.
During the year ended December 31, 2023, financing activities used $13.9 million of cash, primarily consisting of repayments on revolving credit facilities of $48.0 million, repayments on long-term debt borrowings of $13.2 million, and repayments of finance lease obligations of $0.6 million, partially offset by borrowings on revolving credit facilities of $48.0 million.
The amount of the benefit that may be recognized is the largest amount that has a greater than 50% likelihood of being realized on ultimate settlement. The actual benefits ultimately realized may differ from the estimates. We classify interest and penalties related to unrecognized tax benefits as a component of income tax (benefit) expense within the consolidated statements of operations.
The amount of the benefit that may be recognized is the largest amount that has a greater than 50% likelihood of being realized on ultimate settlement. The actual benefits ultimately realized may differ from the estimates. We classify interest and penalties related to unrecognized tax benefits as a component of income tax expense (benefit) within the consolidated statements of operations.
As a result, if we had used significantly different assumptions or estimates, the fair value of our stock-based compensation expense could have been materially different. 55 Table of Contents For stock options, restricted stock awards, restricted stock units and stock appreciation rights, stock-based compensation is recognized using a graded vesting method over the requisite service period in which employees earn the awards.
As a result, if we had used significantly different assumptions or estimates, the fair value of our stock-based compensation expense could have been materially different. 55 Table of Contents For stock options, restricted stock awards, restricted stock units, stock appreciation rights and performance stock units, stock-based compensation is recognized using a graded vesting method over the requisite service period in which employees earn the awards.
Loans outstanding under the New Term Loan bear interest, at the borrower’s option, at a rate per annum based on Term SOFR (as defined in the New Credit Agreement), plus a margin ranging from 3.75% to 4.00%, depending on the First Lien Net Leverage Ratio (as defined in the New Credit Agreement, the “First Lien Net Leverage Ratio”), or based on the Base Rate (as defined in the New Credit Agreement), plus a margin ranging from 2.75% to 3.00%, depending on the First Lien Net Leverage Ratio.
Loans outstanding under the Term Loan bear interest, at the borrower’s option, at a rate per annum based on Term SOFR (as defined in the Credit Agreement), plus a margin ranging from 3.75% to 4.00%, depending on the First Lien Net Leverage Ratio (as defined in the Credit Agreement, the “First Lien Net Leverage Ratio”), or based on the Base Rate (as defined in the Credit Agreement), plus a margin ranging from 2.75% to 3.00%, depending on the First Lien Net Leverage Ratio.
It is our belief that our existing cash, cash generated from operations and availability under our New Revolving Credit Facility, will be adequate to fund our operating expenses and capital expenditure requirements over the next 12 months, as well as our longer-term liquidity needs.
It is our belief that our existing cash, cash generated from operations and availability under our Revolving Credit Facility, will be adequate to fund our operating expenses and capital expenditure requirements over the next 12 months, as well as our longer-term liquidity needs.
We have presented Adjusted EBITDA and 48 Table of Contents Adjusted EBITDA margin solely as supplemental disclosures because we believe they allow for a more complete analysis of results of operations and assist investors and analysts in comparing our operating performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance, such as (i) depreciation and amortization, (ii) interest expense, (iii) income tax (benefit) expense, (iv) loss (gain) on sale and disposal of property and equipment, (v) restructuring charges, (vi) stock-based compensation expense, (vii) unrealized (gains) losses on foreign currency transactions, (viii) strategic initiative costs, (ix) acquisition and integration related costs, (x) loss on extinguishment of debt, (xi) underwriting fees related to offering of common stock, (xii) the Odessa fire and other such unusual events, (xiii) IPO costs and (xiv) other.
We have presented Adjusted EBITDA and Adjusted EBITDA margin solely as 48 Table of Contents supplemental disclosures because we believe they allow for a more complete analysis of results of operations and assist investors and analysts in comparing our operating performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance, such as (i) depreciation and amortization, (ii) interest expense, net, (iii) income tax expense (benefit), (iv) loss (gain) on sale and disposal of property and equipment, (v) restructuring charges, (vi) stock-based compensation expense, (vii) unrealized (gains) losses on foreign currency transactions, (viii) strategic initiative costs, (ix) acquisition and integration related costs, (x) loss on extinguishment of debt, (xi) underwriting fees related to offering of common stock, (xii) the Odessa fire and other such unusual events, and (xiii) other.
We have presented Adjusted EBITDA and Adjusted EBITDA margin solely as supplemental disclosures because we believe they allow for a more complete analysis of results of operations and assist investors and analysts in comparing our operating performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance, such as (i) depreciation and amortization, (ii) interest expense, (iii) income tax (benefit) expense, (iv) loss (gain) on sale and disposal of property and equipment, (v) restructuring charges, (vi) stock-based compensation expense, (vii) unrealized (gains) losses on foreign currency transactions, (viii) strategic initiative costs, (ix) acquisition and integration related costs, (x) loss on extinguishment of debt, (xi) underwriting fees related to offering of common stock, (xii) the Odessa fire and other such unusual events, (xiii) IPO costs and (xiv) other.
We have presented Adjusted EBITDA and Adjusted EBITDA margin solely as supplemental disclosures because we believe they allow for a more complete analysis of results of operations and assist investors and analysts in comparing our operating performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance, such as (i) depreciation and amortization, (ii) interest expense, net, (iii) income tax expense (benefit), (iv) loss (gain) on sale and disposal of property and equipment, (v) restructuring charges, (vi) stock-based compensation expense, (vii) unrealized (gains) losses on foreign currency transactions, (viii) strategic initiative costs, (ix) acquisition and integration related costs, (x) loss on extinguishment of debt, (xi) underwriting fees related to offering of common stock, (xii) the Odessa fire and other such unusual events, and (xiii) other.
Dollars and Canadian Dollars bear interest, at the borrower’s option, at a rate per annum based on Term SOFR or CDO (each, as defined in the New Credit Agreement), as applicable, plus a margin of 3.50%, or at a rate per annum based on the Base Rate or the Canadian Prime Rate (each, as defined in the New Credit Agreement), plus a margin of 2.50%.
Dollars and Canadian Dollars bear interest, at the borrower’s option, at a rate per annum based on Term SOFR or CDO (each, as defined in the Credit Agreement), as applicable, plus a margin of 3.50%, or at a rate per annum based on the Base Rate or the Canadian Prime Rate (each, as defined in the Credit Agreement), plus a margin of 2.50%.
Loans under the New Term Loan are subject to scheduled quarterly amortization payments equal to 0.25% of the initial principal amount of the New Term Loan.
Loans under the Term Loan are subject to scheduled quarterly amortization payments equal to 0.25% of the initial principal amount of the Term Loan.
To address these limitations, we have reconciled Adjusted EBITDA to the applicable most comparable GAAP measure, net income (loss), throughout this Annual Report. Adjusted EBITDA and Adjusted EBITDA Margin Adjusted EBITDA and Adjusted EBITDA margin are key metrics used by management and our Board of Directors to assess our financial performance.
To address these limitations, we have reconciled Adjusted EBITDA to the applicable most comparable GAAP measure, net income (loss), throughout this Annual Report. Adjusted EBITDA and Adjusted EBITDA Margin Adjusted EBITDA and Adjusted EBITDA margin are key metrics used by management and our Board to assess our financial performance.
Our investment in Premier Pools & Spas is reflected as an equity method investment on our consolidated balance sheet as of December 31, 2023 and 2022, and our proportionate share of earnings or losses of Premier Pools & Spas is recognized in earnings (losses) from equity method investment in our consolidated statement of operations on a three-month lag.
Our investment in Premier Pools & Spas is reflected as an equity method investment on our consolidated balance sheet as of December 31, 2024 and 2023, and our proportionate share of earnings or losses of Premier Pools & Spas is recognized in earnings (losses) from equity method investment in our consolidated statement of operations on a three-month lag.
Adjusted EBITDA and Adjusted EBITDA Margin Adjusted EBITDA and Adjusted EBITDA margin are key metrics used by management and our Board of Directors to assess our financial performance. Adjusted EBITDA and Adjusted EBITDA margin are also frequently used by analysts, investors, and other interested parties to evaluate companies in our industry, when considered alongside other GAAP measures.
Adjusted EBITDA and Adjusted EBITDA Margin Adjusted EBITDA and Adjusted EBITDA margin are key metrics used by management and our Board to assess our financial performance. Adjusted EBITDA and Adjusted EBITDA margin are also frequently used by analysts, investors, and other interested parties to evaluate companies in our industry, when considered alongside other GAAP measures.
Contractual Obligations Our largest contractual obligations as of December 31, 2023 consisted of principal payments related to our long-term indebtedness that are included in our consolidated balance sheet and the related periodic interest payments, and non-cancelable operating leases.
Contractual Obligations Our largest contractual obligations as of December 31, 2024 consisted of principal payments related to our long-term indebtedness that are included in our consolidated balance sheet and the related periodic interest payments, and non-cancelable operating leases.
For discussion on operating, investing, and financing activities of the year ended December 31, 2021, see the Liquidity and Capital Resources section disclosed in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the SEC on March 7, 2023.
For discussion on operating, investing, and financing activities of the year ended December 31, 2022, see the Liquidity and Capital Resources section disclosed in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on March 13, 2024.
We also have a strong distribution network as a result of over 475 distributor branch locations that represent our products. 40 Table of Contents Through our significant investments in partnerships with dealers and distributors and our consumer-oriented marketing efforts, we have created both a “push and pull” demand dynamic for our products in the marketplace.
We also have a strong distribution network as a result of over 475 distributor branch locations that represent our products. Through our significant investments in partnerships with dealers and distributors and our consumer-oriented marketing efforts, we have created both a “push and pull” demand dynamic for our products in the marketplace.
Investing Activities During the year ended December 31, 2023, investing activities used $31.7 million of cash, primarily consisting of the purchase of property and equipment for $33.2 million partially offset by capital reimbursed from insurance 52 Table of Contents proceeds for $1.5 million. The purchase of property and equipment was primarily to expand capacity for production, especially for fiberglass pools.
During the year ended December 31, 2023, investing activities used $31.7 million of cash, primarily consisting of the purchase of property and equipment for $33.2 million partially offset by capital reimbursed from insurance proceeds for $1.5 million. The purchase of property and equipment was primarily to expand capacity for production, especially for fiberglass pools.
The income tax benefit of ($7.7) million for the year ended December 31, 2023 was primarily because of a $10.3 million benefit related to the release of uncertain tax positions and a $2.1 million benefit related to foreign tax restructuring, partially offset by a $3.1 million expense related to a change in valuation allowance and a $2.4 million expense related to non-deductible stock compensation.
The income tax benefit of $7.7 million for the year ended December 31, 2023 was primarily due to a $10.3 million benefit related to the release of uncertain tax positions and a $2.1 million benefit related to restructuring, partially offset by $3.1 million expense related to a change in valuation allowance and non-deductible stock compensation of $2.4 million.
We evaluate these estimates on an ongoing basis. Actual results may differ from estimates. Our significant accounting policies are presented in Note 2 of our consolidated financial statements.
We evaluate these estimates on an ongoing basis. Actual results may differ from estimates. Our significant accounting policies are presented in Note 2 to our Consolidated Financial Statements.
In addition, other companies, including companies in our industry, may not calculate Adjusted 43 Table of Contents EBITDA and Adjusted EBITDA margin at all or may calculate Adjusted EBITDA and Adjusted EBITDA margin differently and accordingly, are not necessarily comparable to similarly entitled measures of other companies, which reduces the usefulness of Adjusted EBITDA and Adjusted EBITDA margin as tools for comparison.
In addition, other companies, including companies in our industry, may not calculate Adjusted EBITDA and Adjusted EBITDA margin at all or may calculate Adjusted EBITDA and Adjusted EBITDA margin differently and accordingly, are not necessarily comparable to similarly entitled measures of other companies, which reduces the usefulness of Adjusted EBITDA and Adjusted EBITDA margin as tools for comparison.
There can be no assurance that we will not modify the presentation of Adjusted EBITDA and Adjusted EBITDA margin in the future, and any such modification may be material. Our presentation of Adjusted EBITDA and Adjusted EBITDA margin should not be construed to imply that our future results will be unaffected by any such adjustments.
There can be no assurance that we will not modify the presentation of Adjusted EBITDA and 43 Table of Contents Adjusted EBITDA margin in the future, and any such modification may be material. Our presentation of Adjusted EBITDA and Adjusted EBITDA margin should not be construed to imply that our future results will be unaffected by any such adjustments.
Inflation We are experiencing inflationary pressures in certain areas of our business, including with respect to prices of our raw materials and employee wages, although, to date, we have been able to offset such pressures, to some extent, through price increases and other measures.
Inflation We are experiencing inflationary pressures in certain areas of our business, including with respect to our employee wages, although, to date, we have been able to offset such pressures, to some extent, through price increases and other measures.
Cost and Availability of Materials Raw material costs, including costs of polyvinyl chloride (“PVC”) plastic, galvanized steel, fiberglass, aluminum, various resins, high impact polystyrene, gelcoat and polypropylene fabric, represent a majority of our cost of sales. Our supply agreements with key suppliers are typically negotiated on an annual basis.
Cost and Availability of Materials Raw material costs, including costs of PVC plastic, galvanized steel, fiberglass, aluminum, various resins, high impact polystyrene, gelcoat and polypropylene fabric, represent a majority of our cost of sales. Our supply agreements with key suppliers are typically negotiated on an annual basis.
Loans outstanding under the New Revolving Credit Facility denominated in Euros or Australian Dollars bear interest based on EURIBOR or the AUD Rate (each, as defined in the New Credit Agreement), respectively, plus a margin of 3.50%. A commitment fee accrues on any unused portion of the commitments under the New Revolving Credit Facility.
Loans outstanding under the Revolving Credit Facility denominated in Euros or Australian Dollars bear interest based on EURIBOR or the AUD Rate (each, as defined in the Credit Agreement), respectively, plus a margin of 3.50%. 51 Table of Contents A commitment fee accrues on any unused portion of the commitments under the Revolving Credit Facility.
These assumptions require a significant amount of judgment, including estimates of future taxable income. As of December 31, 2023 and 2022, our valuation allowance was $3.1 million and $0.0 million, respectively. We continue to assess whether any significant changes in circumstances or assumptions have occurred that could materially affect our ability to realize deferred tax assets.
These assumptions require a significant amount of judgment, including estimates of future taxable income. As of December 31, 2024 and 2023, our valuation allowance was $8.7 million and $3.1 million, respectively. We continue to assess whether any significant changes in circumstances or assumptions have occurred that could materially affect our ability to realize deferred tax assets.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations should be read in conjunction with other sections of this Annual Report, including “Item 1.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations should be read in conjunction with other sections of this Annual Report, including “Item 1. Business,” “Item 1A.
For a description of our contractual obligations and commitments, see Notes 9 “Long-Term Debt” and 13 “Leases” to our Consolidated Financial Statements included elsewhere in this Annual Report. Critical Accounting Policies and Estimates Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States.
For a description of our contractual obligations and commitments, see Notes 9 and 13 to our Consolidated Financial Statements included elsewhere in this Annual Report. Critical Accounting Policies and Estimates Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States.
Our liabilities for uncertain tax positions were $0.0 million and $7.1 million for the years ended December 31, 2023 and 2022, respectively. Changes in recognition and measurement estimates are recorded in income tax (benefit) expense and liability in the period in which such changes occur.
Our liabilities for uncertain tax positions were $0.0 million and $0.0 million for the years ended December 31, 2024 and 2023, respectively. Changes in recognition and measurement estimates are recorded in income tax expense (benefit)and liability in the period in which such changes occur.
(“Latham Pool Products”), our wholly owned subsidiary, entered into the New Credit Agreement with Barclays Bank PLC, which provides a senior secured multicurrency revolving line of credit (the “New Revolving Credit Facility”) in an initial principal amount of $75.0 million and a U.S. Dollar senior secured term loan (the “New Term Loan”) in an initial principal amount of $325.0 million.
(“Latham Pool Products”), our wholly owned subsidiary, entered into the Credit Agreement with Barclays Bank PLC (the “Credit Agreement”), which provides a senior secured multicurrency revolving line of credit (the “Revolving Credit Facility”) in an initial principal amount of $75.0 million and a U.S. Dollar senior secured term loan (the “Term Loan”) in an initial principal amount of $325.0 million.
We utilized a dividend yield of zero, as we have no history or plan of declaring dividends on our common stock. The assumptions underlying these valuations represented our best estimate, which involved inherent uncertainties and the application of judgment.
We consider the historical volatility of our stock price, as well as implied volatility. We utilized a dividend yield of zero, as we have no history or plan of declaring dividends on our common stock. The assumptions underlying these valuations represented our best estimate, which involved inherent uncertainties and the application of judgment.
Based on the results of the quantitative assessment performed for our one reporting unit, we determined that goodwill was not impaired at October 1, 2023. Based on the results of the qualitative assessment performed for our one reporting unit, we determined that goodwill was not impaired at October 3, 2022.
Based on the results of the qualitative assessment performed for our one reporting unit, we determined that goodwill was not impaired at September 29, 2024. Based on the results of the quantitative assessment performed for our one reporting unit, we determined that goodwill was not impaired at October 1, 2023.
Earnings from Equity Method Investments Earnings from equity method investment of Premier Pools & Spa was $3.7 million for the year ended December 31, 2023, compared to $4.2 million for the year ended December 31, 2022, primarily because of the financial performance of Premier Pools & Spa.
Earnings from Equity Method Investments Earnings from equity method investment of Premier Pools & Spas was $4.1 million for the year ended December 31, 2024, compared to $3.7 million for the year ended December 31, 2023, primarily because of the financial performance of Premier Pools & Spas.
Management compensates for these limitations by primarily relying on our GAAP results, while using Adjusted EBITDA and Adjusted EBITDA margin as supplements to the corresponding GAAP financial measures. 49 Table of Contents The following table provides a reconciliation of our net loss to Adjusted EBITDA for the periods presented and the calculation of Adjusted EBITDA margin: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2023 2022 2021 ​ ​ (in thousands) Net loss ​ $ (2,388) ​ $ (5,694) ​ $ (62,348) ​ Depreciation and amortization ​ 40,751 ​ 38,175 ​ 32,230 ​ Interest expense, net ​ 30,916 ​ 15,753 ​ 24,433 ​ Income tax (benefit) expense ​ (7,672) ​ 19,415 ​ 8,818 ​ Loss on sale and disposal of property and equipment ​ 138 ​ 193 ​ 275 ​ Restructuring charges (a) ​ 3,727 ​ 1,607 ​ 906 ​ Stock-based compensation expense (b) ​ 18,804 ​ 50,634 ​ 128,775 ​ Unrealized (gains) losses on foreign currency transactions (c) ​ (110) ​ 2,534 ​ 1,151 ​ Strategic initiative costs (d) ​ 4,092 ​ 3,948 ​ 2,531 ​ Acquisition and integration related costs (e) ​ 911 ​ 326 ​ 3,576 ​ Loss on extinguishment of debt (f) ​ ​ — ​ ​ 3,465 ​ ​ — ​ Underwriting fees related to offering of common stock (g) ​ ​ — ​ ​ 11,437 ​ ​ — ​ Odessa fire (h) ​ ​ (2,600) ​ ​ 869 ​ ​ — ​ IPO costs (i) ​ — ​ — ​ 3,956 ​ Other (j) ​ ​ 1,456 ​ 590 ​ (4,484) ​ Adjusted EBITDA ​ $ 88,025 ​ $ 143,252 ​ $ 139,819 ​ Net sales ​ $ 566,492 ​ $ 695,736 ​ $ 630,456 ​ Net loss margin ​ (0.4) % (0.8) % (9.9) % Adjusted EBITDA margin ​ 15.5 % 20.6 % 22.2 % (a) Represents costs related to a cost reduction plan that includes severance and other costs for our executive management changes and additional costs related to our cost reduction plans, which include further actions to reduce our manufacturing overhead by reducing headcount in addition to facility shutdowns.
Management compensates for these limitations by primarily relying on our GAAP results, while using Adjusted EBITDA and Adjusted EBITDA margin as supplements to the corresponding GAAP financial measures. 49 Table of Contents The following table provides a reconciliation of our net loss to Adjusted EBITDA for the periods presented and the calculation of Adjusted EBITDA margin: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2024 2023 2022 ​ (in thousands) Net loss $ (17,860) ​ $ (2,388) ​ $ (5,694) ​ Depreciation and amortization 44,446 ​ 40,751 ​ 38,175 ​ Interest expense, net 24,840 ​ 30,916 ​ 15,753 ​ Income tax expense (benefit) 9,120 ​ (7,672) ​ 19,415 ​ Loss on sale and disposal of property and equipment 408 ​ 138 ​ 193 ​ Restructuring charges (a) 512 ​ 3,727 ​ 1,607 ​ Stock-based compensation expense (b) 7,392 ​ 18,804 ​ 50,634 ​ Unrealized losses (gains) on foreign currency transactions (c) 6,223 ​ (110) ​ 2,534 ​ Strategic initiative costs (d) 3,329 ​ 4,092 ​ 3,948 ​ Acquisition and integration related costs (e) 2,348 ​ 911 ​ 326 ​ Loss on extinguishment of debt (f) ​ — ​ ​ — ​ ​ 3,465 ​ Underwriting fees related to offering of common stock (g) ​ — ​ ​ — ​ ​ 11,437 ​ Odessa fire (h) ​ — ​ ​ (2,600) ​ ​ 869 ​ Other (i) ​ (539) ​ 1,456 ​ 590 ​ Adjusted EBITDA $ 80,219 ​ $ 88,025 ​ $ 143,252 ​ Net sales $ 508,520 ​ $ 566,492 ​ $ 695,736 ​ Net loss margin (3.5) % (0.4) % (0.8) % Adjusted EBITDA margin 15.8 % 15.5 % 20.6 % (a) Represents costs related to a cost reduction plan that includes severance and other costs for our executive management changes and additional costs related to our cost reduction plans, which include further actions to reduce our manufacturing overhead by reducing headcount in addition to facility shutdowns.
Net cash used in changes in our operating assets and liabilities for the year ended December 31, 2022 consisted primarily of a $57.0 million increase in inventories, a $0.5 million increase in other assets, a $19.4 million decrease in accrued expenses and other current liabilities, and a $12.4 million decrease in accounts payable, partially offset by a $9.0 million decrease in trade receivables, a $4.7 million decrease in prepaid expenses and other current assets, a $1.7 million decrease in income tax receivable, and a $0.2 million increase in other long-term liabilities.
Net cash provided in changes in our operating assets and liabilities for the year ended December 31, 2024 consisted primarily of a $22.7 million decrease in inventories and a $1.3 million decrease in other assets, partially offset by a $4.0 million decrease in accounts payable, a $3.0 million increase in income tax receivable, a $2.4 million increase in trade receivables, a $2.0 million increase in prepaid expenses and other current assets, a $1.3 million decrease in accrued expenses and other current liabilities and a $0.7 million decrease in other long-term liabilities.
Cash provided by operating activities was further driven by changes in our operating assets and liabilities, which used $73.6 million.
Cash provided by operating activities was further driven by changes in our operating assets and liabilities, which provided $59.3 million.
Stock-Based Compensation Stock-based compensation is measured and recognized based on the grant date fair value of the awards. The fair value of our common stock is determined based on the quoted market price of our common stock for purposes of computing stock-based compensation expense. For stock options, we use a Black-Scholes model for estimating the grant date fair value.
Stock-Based Compensation Stock-based compensation is measured and recognized based on the grant date fair value of the awards. The fair value of our common stock is determined based on the quoted market price of our common stock for purposes of computing stock-based compensation expense.
Net loss, after adjustments for non-cash items, provided cash of $57.1 million. Cash provided by operating activities was further driven by changes in our operating assets and liabilities, which provided $59.3 million.
Net loss, after adjustments for non-cash items, provided cash of $50.8 million. Cash provided by operating activities was further driven by changes in our operating assets and liabilities, which provided $10.5 million.
Cash Flows The following table summarizes our sources and uses of cash for each of the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2023 2022 2021 ​ ​ (in thousands) Net cash provided by operating activities ​ $ 116,369 ​ $ 32,309 ​ $ 33,690 Net cash used in investing activities ​ (31,726) ​ (45,018) ​ (108,205) Net cash (used in) provided by financing activities ​ (13,875) ​ 3,775 ​ 60,018 Effect of exchange rate changes on cash ​ (631) ​ (2,392) ​ (861) Net increase (decrease) in cash ​ $ 70,137 ​ $ (11,326) ​ $ (15,358) ​ Operating Activities During the year ended December 31, 2023, operating activities provided $116.4 million of cash.
Cash Flows The following table summarizes our sources and uses of cash for each of the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2024 2023 2022 ​ ​ (in thousands) Net cash provided by operating activities ​ $ 61,307 ​ $ 116,369 ​ $ 32,309 Net cash used in investing activities ​ (84,643) ​ (31,726) ​ (45,018) Net cash (used in) provided by financing activities ​ (22,021) ​ (13,875) ​ 3,775 Effect of exchange rate changes on cash ​ (1,008) ​ (631) ​ (2,392) Net (decrease) increase in cash ​ $ (46,365) ​ $ 70,137 ​ $ (11,326) ​ Operating Activities During the year ended December 31, 2024, operating activities provided $61.3 million of cash.
The commitment fee is due and payable quarterly in arrears and is, initially, 0.375% per annum and will, thereafter, accrue at a rate per annum ranging from 0.25% to 0.50%, depending on the First Lien Net Leverage Ratio.
The commitment fee is due and payable quarterly in arrears and is, initially, 0.375% per annum and will, thereafter, accrue at a rate per annum ranging from 0.25% to 0.50%, depending on the First Lien Net Leverage Ratio. The Revolving Credit Facility is not subject to amortization. Term Loan The Term Loan matures on February 23, 2029.
We hold the leading position in North America in every product category in which we compete. It is our view that we are the most sought-after brand in the pool industry and the only pool company that has established a direct relationship with the homeowner. We are Latham, The Pool Company.
It is our view that we are the most sought-after brand in the pool industry and the only pool company that has established a direct relationship with the homeowner. We are Latham, The Pool Company.
Severe weather also may play a role in affecting sales growth, as particularly rainy or cold years tend to slow the volume of sales, including as a result of complicating conditions for pool installations. Catastrophic events, such as hurricanes, tornadoes, and earthquakes can cause interruptions to our operations.
Severe weather also may play a role in affecting sales growth, as particularly rainy or cold years tend to slow the volume of sales, including as a result of complicating conditions for pool installations.
Cost of Sales and Gross Margin Cost of sales was $413.5 million for the year ended December 31, 2023, compared to $479.3 million for the year ended December 31, 2022, and increased as a percentage of net sales by 4.1%.
Cost of Sales and Gross Margin Cost of sales was $354.8 million for the year ended December 31, 2024, compared to $413.5 million for the year ended December 31, 2023, and decreased as a percentage of net sales by 3.2%.
Our primary cash needs are to fund working capital, capital expenditures, debt service requirements, and any acquisitions or investments we may undertake. As of December 31, 2023, we had $102.8 million of cash, $301.2 million of outstanding borrowings, and an additional $75.0 million of availability under our New Revolving Credit Facility.
Our primary cash needs are to fund working capital, capital expenditures, debt service requirements, and any acquisitions or investments we may undertake. As of December 31, 2024, we had $56.4 million of cash, $281.5 million of outstanding borrowings, and an additional $75.0 million of availability under our Revolving Credit Facility. On August 2, 2024, we completed the Coverstar Central Acquisition.
The changes in accrued expenses and other current liabilities, and accounts payable were primarily because of volume of purchases and timing of payments. During the year ended December 31, 2022, operating activities provided $32.3 million of cash. Net loss, after adjustments for non-cash items, provided cash of $105.9 million.
The changes in accrued expenses and other current liabilities, and accounts payable were primarily because of volume of purchases and timing of payments, as well as an increase in incentive compensation. During the year ended December 31, 2023, operating activities provided $116.4 million of cash. Net loss, after adjustments for non-cash items, provided cash of $57.1 million.
Recent Developments Highlights for the year ended December 31, 2023 ● Decrease in net sales of 18.6%, or $129.2 million, to $566.5 million for the year ended December 31, 2023, compared to $695.7 million for the year ended December 31, 2022. ● Decrease in net loss of $3.3 million, to $2.4 million for the year ended December 31, 2023, compared to a net loss of $5.7 million for the year ended December 31, 2022, representing a 0.4% net loss margin for the year ended December 31, 2023. ● Decrease in Adjusted EBITDA (as defined below) of $55.3 million, to $88.0 million for the year ended December 31, 2023, compared to $143.3 million for the year ended December 31, 2022. ​ 39 Table of Contents Business Update Ongoing macroeconomic challenges have impacted and are expected to continue to impact consumer spending and demand.
Recent Developments Highlights for the year ended December 31, 2024 ● Decrease in net sales of 10.2%, or $58.0 million, to $508.5 million for the year ended December 31, 2024, compared to $566.5 million for the year ended December 31, 2023. ● Increase in net loss of $15.5 million, to $17.9 million for the year ended December 31, 2024, compared to a net loss of $2.4 million for the year ended December 31, 2023, representing a 3.5% net loss margin for the year ended December 31, 2024. ● Decrease in Adjusted EBITDA (as defined below) of $7.8 million, to $80.2 million for the year ended December 31, 2024, compared to $88.0 million for the year ended December 31, 2023. 39 Table of Contents Business Update Ongoing macroeconomic softness has impacted and is expected to continue to impact consumer spending and demand.
Income Tax (Benefit) Expense Income tax benefit was ($7.7) million for the year ended December 31, 2023, compared to $19.4 million income tax expense for the year ended December 31, 2022. Our effective tax rate was 76.3% for the year ended December 31, 2023, compared to 141.5% for the year ended December 31, 2022.
Income Tax Expense (Benefit) Income tax expense was $9.1 million for the year ended December 31, 2024, compared to a $ (7.7) million income tax benefit for the year ended December 31, 2023. Our effective tax rate was (104.3)% for the year ended December 31, 2024, compared to 76.3% for the year ended December 31, 2023.
Contemporaneously with the pricing of our IPO, on April 22, 2021, we effected the Omnibus Incentive Plan in which we granted to certain of our employees restricted stock awards, restricted stock units, and option awards inclusive of the as converted Class B units as a result of the Reorganization.
Contemporaneously with the pricing of our initial public offering, on April 22, 2021, we effected the Latham Group, Inc. 2021 Omnibus Incentive Plan in which we granted to certain of our employees restricted stock awards, restricted stock units, and option awards inclusive of the as converted Class B units as a result of the Company’s parent entity, Latham Investment Holdings, L.P. merged with and into Latham Group, Inc.
Gross margin decreased by 4.1% to 27.0% for the year ended December 31, 2023, compared to 31.1% for the year ended December 31, 2022. The $65.8 million, or 13.7%, decrease in cost of sales was primarily the result of a decrease in sales volume.
Gross margin increased by 3.2% to 30.2% for the year ended December 31, 2024, compared to 27.0% for the year ended December 31, 2023. The $58.7 million, or 14.2%, decrease in cost of sales was primarily the result of a decrease in sales volume.
Partnership with our dealers is integral to our collective success, and we have enjoyed long-tenured relationships averaging over 14 years. We support our dealer network with business development tools, co-branded marketing programs, and in-house training, as well as an operations platform consisting of approximately 1,800 employees across approximately 24 locations.
Partnership with our dealers is integral to our collective success, and we have enjoyed long-tenured relationships averaging over 14 years. We support our dealer network with business development tools, co-branded marketing programs.
We have completed our recent multi-year capital plan to invest in our facilities. We are in the middle of our digital transformation effort to upgrade all of our technology and enterprise resource planning systems. We expect to fund these capital expenditures from net cash provided by operating activities.
We are in the middle of our digital transformation effort to upgrade all of our technology and enterprise resource planning systems. We expect to fund these capital expenditures from net cash provided by operating activities or the utilization of a portion of our borrowing availability under our Revolving Credit Facility.
We also sell all-season covers, which are winterizing mesh or solid pool covers that protect pools against debris and cold or inclement weather, and automatic safety covers for pools that can be operated with a switch. 42 Table of Contents Our sales are made through one-step and two-step business-to-business distribution channels.
We sell liners for the interior surface of vinyl pools (including pools that were not manufactured by us). We also sell all-season covers, which are winterizing mesh or solid 42 Table of Contents pool covers that protect pools against debris and cold or inclement weather, and automatic safety covers for pools that can be operated with a switch.
In our one-step distribution channel, we sell our products directly to dealers who, in turn, sell our products to consumers. In our two-step distribution channel, we sell our products to distributors who warehouse our products and sell them on to dealers, who ultimately sell our products to consumers. Each product shipped is considered to be one performance obligation.
Our sales are made through one-step and two-step business-to-business distribution channels. In our one-step distribution channel, we sell our products directly to dealers who, in turn, sell our products to consumers. In our two-step distribution channel, we sell our products to distributors who warehouse our products and sell them on to dealers, who ultimately sell our products to consumers.
We continue to take a disciplined approach to capital investments, with the focus on the completion of previously announced projects such as our recent multi-year capital plan to invest in our facilities. This includes the completion of our Kingston, Ontario facility in April 2023, as well as integrating our acquired fiberglass manufacturing assets in Seminole, Oklahoma.
We continue to take a disciplined approach to capital investments, with the focus on the completion of previously announced projects such as our recent multi-year capital plan to invest in our facilities, technology and systems.
These scenarios are partially mitigated by our geographic diversity, both across the United States and through international markets. 41 Table of Contents Pricing In general, our products are priced to be competitive in the in-ground swimming pool market, including the prices for concrete pools, and to keep in line with changes in our input costs.
Pricing In general, our products are priced to be competitive in the in-ground swimming pool market, including the prices for concrete pools, and to keep in line with changes in our input costs.
The 0.4% decrease in net loss margin was driven by a $3.3 million decrease in net loss and a $129.2 million decrease in net sales, compared to the year ended December 31, 2022 because of the factors described above.
The 3.1% increase in net loss margin was driven by a $15.5 million increase in net loss and a $58.0 million decrease in net sales, compared to the year ended December 31, 2023 because of the factors described above. 46 Table of Contents Adjusted EBITDA Adjusted EBITDA was $80.2 million for the year ended December 31, 2024, compared to $88.0 million for the year ended December 31, 2023.
The ($2.3) million increase in other (income) expense, net was primarily driven by a favorable change in net foreign currency transaction gains and losses associated with our international subsidiaries.
Other Expense (Income), Net Other expense (income), net was $6.2 million for the year ended December 31, 2024, compared to $ (1.0) million for the year ended December 31, 2023. The $7.2 million increase in other expense (income), net was primarily driven by an unfavorable change in net foreign currency transaction gains and losses associated with our international subsidiaries.
The $15.1 million, or 96.3%, increase in interest expense was primarily the result of the change in the fair value of our interest rate swaps and a higher effective interest rate, compared to the year ended December 31, 2022.
The $6.1 million, or 19.7%, decrease in interest expense, net was primarily the result of the change in the fair value of our interest rate swap, compared to the year ended December 31, 2023.
The $3.3 million, or 58.1%, decrease in net loss was primarily driven by the factors described above. Net Loss Margin Net loss margin was 0.4% for the year ended December 31, 2023, compared to net loss margin of 0.8% for the year ended December 31, 2022.
Net Loss Net loss was $17.9 million for the year ended December 31, 2024, compared to $2.4 million for the year ended December 31, 2023. The $15.5 million, or 647.9%, increase in net loss was primarily driven by the factors described above.
New Revolving Credit Facility The New Revolving Credit Facility may be utilized to finance ongoing general corporate and working capital needs and permits Latham Pools Products to borrow loans in U.S. Dollars, Canadian Dollars, Euros and Australian Dollars. The New Revolving Credit Facility matures on February 23, 2027. Loans outstanding under the New Revolving Credit Facility denominated in U.S.
Dollars, Canadian Dollars, Euros and Australian Dollars. The Revolving Credit Facility matures on February 23, 2027. Loans outstanding under the Revolving Credit Facility denominated in U.S.
The Black-Scholes pricing model requires critical assumptions including risk-free rate, volatility, expected term and expected dividend yield. The expected term is computed using the simplified method. We use the simplified method to calculate expected term of the stock options since we do not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term.
We use the simplified method to calculate expected term of the stock options since we do not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term. The risk-free interest rate is based on the yield available on U.S. Treasury zero-coupon issues similar in duration to the expected term of the stock-based award.
The $13.8 million pricing increase reflects the impact of pricing actions to address inflation. The decrease in total net sales across our product lines was $87.6 million for in-ground swimming pools, $17.5 million for covers and $24.0 million for liners.
The decrease in total net sales across our product lines was $38.6 million for in-ground swimming pools, $9.7 million for liners and $9.6 million for covers.
The 4.1% decrease in gross margin was primarily driven by lower utilization, partially offset by lower total fixed costs and modest material cost deflation. 45 Table of Contents Selling, General, and Administrative Expense Selling, general, and administrative expense was $110.3 million for the year ended December 31, 2023, compared to $146.8 million for the year ended December 31, 2022, and decreased as a percentage of net sales by 1.6%.
Selling, General, and Administrative Expense Selling, general, and administrative expense was $108.4 million for the year ended December 31, 2024, compared to $110.3 million for the year ended December 31, 2023, and increased as a percentage of net sales by 1.8%.
In order to strengthen our relationship with our loyal dealer partners, we have implemented “Latham Grand,” a key dealer strategy whereby we have secured exclusivity from over 300 of our largest dealers in North America, which also includes the United States’ largest franchised dealer network, Premier Pools & Spas.
Through this marketing strategy, we are able to create demand for our pools and generate and provide high quality, purchase-ready consumer leads to our dealer partners. 40 Table of Contents In order to strengthen our relationship with our loyal dealer partners, we have implemented “Latham Grand,” a key dealer strategy whereby we have secured exclusivity from over 300 of our largest dealers in North America.
(j) Other costs consist of other discrete items as determined by management, primarily including: (i) fees paid to external advisors for various matters, (ii) the cost incurred and insurance proceeds related to our production facility fire in Picton, Australia in 2020, (iii) non-cash adjustments to record the step-up in the fair value of inventory related to the acquisitions of GLI and Radiant, which were amortized through cost of sales in the consolidated statements of operations, (iv) gain on sale of portion of equity method investment, and (v) other items. 50 Table of Contents Liquidity and Capital Resources Overview Our primary sources of liquidity are net cash provided by operating activities and availability under our New Revolving Credit Facility.
(i) Other costs consist of other discrete items as determined by management, primarily including: (i) fees paid to external advisors for various matters, (ii) other items. ​ 50 Table of Contents Liquidity and Capital Resources Overview Our primary sources of liquidity are net cash provided by operating activities and availability under our Revolving Credit Facility.
On the closing date, proceeds under the agreement were used to repay and replace $294.0 million under, and terminate, the Credit Agreement (as defined below) and for general corporate purposes.
On the closing date, proceeds under the agreement were used to repay and replace $294.0 million under, and terminate, the previous credit agreement and for general corporate purposes. Revolving Credit Facility The Revolving Credit Facility may be utilized to finance ongoing general corporate and working capital needs and permits Latham Pool Products to borrow loans in U.S.
Adjusted EBITDA Margin Adjusted EBITDA margin was 15.5% for the year ended December 31, 2023, compared to 20.6% for the year ended December 31, 2022.
Net Loss Margin Net loss margin was 3.5% for the year ended December 31, 2024, compared to net loss margin of 0.4% for the year ended December 31, 2023.
(b) Represents non-cash stock-based compensation expense. (c) Represents unrealized foreign currency transaction losses associated with our international subsidiaries.
(b) Represents non-cash stock-based compensation expense. (c) Represents unrealized foreign currency transaction losses associated with our international subsidiaries. (d) Represents fees paid to external consultants and other expenses for our strategic initiatives. (e) Represents acquisition and integration costs as well as other costs related to potential transactions.
The $1.7 million, or 5.9%, decrease in amortization was driven by certain definite-lived intangible assets becoming fully amortized during the year ended December 31, 2022. Interest Expense, Net Interest expense, net was $30.9 million for the year ended December 31, 2023, compared to $15.8 million for the year ended December 31, 2022.
Interest Expense, Net Interest expense, net was $24.8 million for the year ended December 31, 2024, compared to $30.9 million for the year ended December 31, 2023.
Acquisitions and Partnerships On November 24, 2021, we acquired Radiant Pools, a manufacturer of vinyl-lined and aluminum-walled swimming pools. The acquisition expanded our product portfolio into vinyl-lined and aluminum-walled swimming pools. On November 8, 2022, we acquired certain fiberglass pool manufacturing assets in Seminole, Oklahoma, that qualified as a business combination.
Acquisitions and Partnerships On August 2, 2024, we acquired Coverstar Central, our exclusive dealer of automatic safety covers. This acquisition has allowed us to vertically integrate the automatic safety cover product line and to align on sales and marketing strategies. On November 8, 2022, we acquired certain fiberglass pool manufacturing assets in Seminole, Oklahoma, which qualified as a business combination.
The change in trade receivables was primarily driven by the timing of net sales, and the increase in inventories was primarily driven by a business decision to carry more inventory, as well as higher costs. The changes in accrued expenses and other current liabilities, and accounts payable were primarily because of volume of purchases and timing of payments.
The change in trade receivables was primarily driven by the amount and timing of net sales, and the decrease in inventories was primarily driven by a business decision to right size our inventory levels to better align with demand.
Underwriting Fees Related to Offering of Common Stock Underwriting fees related to our offering of common stock completed in January 2022 were $11.4 million for the year ended December 31, 2022. Amortization Amortization was $26.5 million for the year ended December 31, 2023, compared to $28.2 million for the year ended December 31, 2022.
Amortization Amortization was $27.1 million for the year ended December 31, 2024, compared to $26.5 million for the year ended December 31, 2023. The $0.6 million, or 2.2%, increase in amortization was driven by the acquisition of Coverstar Central.
Business,” and our audited consolidated financial statements and related notes for the three years ended December 31, 2023, 2022 and 2021, included elsewhere in this Annual Report. Overview We are the largest designer, manufacturer, and marketer of in-ground residential swimming pools in North America, Australia, and New Zealand.
Overview We are the largest designer, manufacturer, and marketer of in-ground residential swimming pools in North America, Australia, and New Zealand. We hold the leading position in North America in every product category in which we compete.
The $129.2 million, or 18.6%, decrease in net sales was driven by a $143.0 million decrease from volume, partially offset by a $13.8 million increase from pricing. The $143.0 million volume decrease was largely driven by the decrease in new in-ground pool starts and continued destocking of inventory in the wholesale distribution channel.
The $58.0 million, or 10.2%, decrease in net sales was driven by a $55.1 million decrease from volume and a $2.9 million decrease from pricing. The $55.1 million volume decrease was largely driven by soft industry conditions.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

160 edited+31 added−81 removed110 unchanged
Biggest changeConsolidated Statements of Stockholders’ Equity (in thousands, except share amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Accumulated ​ Other ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ Deficit) ​ Comprehensive ​ Total ​ ​ Common Stock ​ Paid-in ​ Retained ​ Income ​ Stockholders’ ​ Shares Amount Capital Earnings (Loss) Equity Balances at January 1, 2021 118,854,249 ​ $ 12 ​ $ 265,478 ​ $ 13,765 ​ $ 2,354 ​ $ 281,609 Net loss — ​ — ​ — ​ (62,348) ​ — ​ (62,348) Foreign currency translation adjustments — ​ — ​ — ​ — ​ (1,984) ​ (1,984) Dividend to Class A unitholders ($1.00 per share) ​ — ​ ​ — ​ ​ (110,033) ​ ​ — ​ ​ — ​ ​ (110,033) Issuance of restricted stock in connection with the Reorganization ​ 8,340,126 ​ ​ 1 ​ ​ (1) ​ ​ — ​ ​ — ​ ​ — Issuance of common stock upon conversion of Class B units ​ 4,145,987 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Net proceeds from initial public offering ​ 23,000,000 ​ ​ 2 ​ ​ 399,262 ​ ​ — ​ ​ — ​ ​ 399,264 Repurchase and retirement of common stock (33,931,091) ​ (3) ​ (281,635) ​ — ​ — ​ (281,638) Retirement of restricted stock (1,014,976) ​ — ​ — ​ — ​ — ​ — Issuance of common stock upon release of restricted stock units ​ 51,316 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Stock-based compensation expense — ​ — ​ 128,775 ​ — ​ — ​ 128,775 Balances at December 31, 2021 119,445,611 ​ 12 ​ 401,846 ​ (48,583) ​ 370 ​ 353,645 Cumulative effect of adoption of new accounting standard- leases ​ — ​ ​ — ​ ​ — ​ ​ (291) ​ ​ — ​ ​ (291) Net loss — ​ — ​ — ​ (5,694) ​ — ​ (5,694) Foreign currency translation adjustments — ​ — ​ — ​ — ​ (3,903) ​ (3,903) Proceeds from sale of common stock ​ 13,800,000 ​ ​ 1 ​ ​ 269,099 ​ ​ — ​ ​ — ​ ​ 269,100 Repurchase and retirement of common stock ​ (13,800,244) ​ ​ (1) ​ ​ (257,662) ​ ​ — ​ ​ — ​ ​ (257,663) Repurchases and retirements of common stock under Repurchase Program ​ (4,483,620) ​ ​ (1) ​ ​ (23,037) ​ ​ — ​ ​ — ​ ​ (23,038) Retirement of restricted stock ​ (480,385) ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Issuance of common stock upon release of restricted stock units ​ 186,613 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Stock-based compensation expense ​ — ​ ​ — ​ ​ 50,634 ​ ​ — ​ ​ — ​ ​ 50,634 Balances at December 31, 2022 114,667,975 ​ ​ 11 ​ ​ 440,880 ​ ​ (54,568) ​ ​ (3,533) ​ ​ 382,790 Net loss ​ — ​ ​ — ​ ​ — ​ ​ (2,388) ​ ​ — ​ ​ (2,388) Foreign currency translation adjustments ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ (6) ​ ​ (6) Retirement of restricted stock ​ (155,450) ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Issuance of common stock upon release of restricted stock units ​ 359,257 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Stock-based compensation expense ​ — ​ ​ — ​ ​ 18,804 ​ ​ — ​ ​ — ​ ​ 18,804 Balances at December 31, 2023 114,871,782 ​ $ 11 ​ $ 459,684 ​ $ (56,956) ​ $ (3,539) ​ $ 399,200 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ ​ 65 Table of Contents Latham Group, Inc.
Biggest changeConsolidated Statements of Stockholders’ Equity (in thousands, except share amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ Comprehensive ​ Total ​ ​ Common Stock ​ Paid-in ​ Accumulated ​ Income ​ Stockholders’ ​ Shares Amount Capital Deficit (Loss) Equity Balances at January 1, 2022 119,445,611 ​ $ 12 ​ $ 401,846 ​ $ (48,583) ​ $ 370 ​ $ 353,645 Cumulative effect of adoption of new accounting standard- leases (Note 2) ​ — ​ ​ — ​ ​ — ​ ​ (291) ​ ​ — ​ ​ (291) Net loss — ​ — ​ — ​ (5,694) ​ — ​ (5,694) Cumulative effect of adoption of new revenue recognition standard (Note 2) — ​ — ​ — ​ — ​ — ​ — Foreign currency translation adjustments — ​ — ​ — ​ — ​ (3,903) ​ (3,903) Proceeds from sale of common stock 13,800,000 ​ 1 ​ 269,099 ​ — ​ — ​ 269,100 Repurchase and retirement of common stock (13,800,244) ​ (1) ​ (257,662) ​ — ​ — ​ (257,663) Repurchases and retirements of common stock under Repurchase Program ​ (4,483,620) ​ ​ (1) ​ ​ (23,037) ​ ​ ​ ​ ​ ​ ​ ​ (23,038) Retirement of restricted stock (480,385) ​ — ​ — ​ — ​ — ​ — Issuance of common stock upon release of restricted stock units ​ 186,613 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Stock-based compensation expense — ​ — ​ 50,634 ​ — ​ — ​ 50,634 Balances at December 31, 2022 114,667,975 ​ 11 ​ 440,880 ​ (54,568) ​ (3,533) ​ 382,790 Net loss — ​ — ​ — ​ (2,388) ​ — ​ (2,388) Foreign currency translation adjustments — ​ — ​ — ​ — ​ (6) ​ (6) Retirement of restricted stock ​ (155,450) ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Issuance of common stock upon release of restricted stock units ​ 359,257 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Stock-based compensation expense ​ — ​ ​ — ​ ​ 18,804 ​ ​ — ​ ​ — ​ ​ 18,804 Balances at December 31, 2023 114,871,782 ​ ​ 11 ​ ​ 459,684 ​ ​ (56,956) ​ ​ (3,539) ​ ​ 399,200 Net loss ​ — ​ ​ — ​ ​ — ​ ​ (17,860) ​ ​ — ​ ​ (17,860) Foreign currency translation adjustments ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ (1,511) ​ ​ (1,511) Issuance of common stock upon release of restricted stock units ​ 893,057 ​ ​ 1 ​ ​ — ​ ​ — ​ ​ — ​ ​ 1 Stock-based compensation expense ​ — ​ ​ — ​ ​ 7,392 ​ ​ — ​ ​ — ​ ​ 7,392 Balances at December 31, 2024 115,764,839 ​ $ 12 ​ $ 467,076 ​ $ (74,816) ​ $ (5,050) ​ $ 387,222 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ 65 Table of Contents Latham Group, Inc.
Assessment of the significance of a particular input to the fair value measurement in its entirety requires substantial judgment and consideration of factors specific to the asset or liability. Level 3 inputs are inherently difficult to estimate. Changes to these inputs can have significant impact on fair value measurements.
Assessment of the significance of a particular input to the fair value measurement in its entirety requires substantial judgment and consideration of factors specific to the asset or liability. Level 3 inputs are inherently difficult to estimate. Changes to these inputs can have significant impact on fair value measurements.
The Company received proceeds of $257.7 million from this offering, net of $11.4 million of underwriting fees.
The Company received proceeds of $257.7 million from this offering, net of $11.4 million of underwriting fees.
The weighted-average estimated useful lives (in years) of the Company’s definite-lived intangible assets are as follows: ​ ​ ​ ​ ​ ​ Estimated Asset Useful Life Trade names and trademarks 9 – 25 years Technology ​ 15 years Pool designs 14 – 15 years Dealer relationships 5 – 13 years Patented technology 5 – 10 years Non-competition agreements 5 years Franchise relationships 4 years Order backlog 10 months ​ Goodwill The Company accounts for goodwill as the excess of the purchase price over the net amount of identifiable assets acquired and liabilities assumed in a business combination measured at fair value.
The weighted-average estimated useful lives (in years) of the Company’s definite-lived intangible assets are as follows: ​ ​ ​ ​ ​ ​ Estimated Asset Useful Life Trade names and trademarks 9 – 25 years Technology ​ 15 years Pool designs 14 – 15 years Dealer relationships 5 – 13 years Patented technology 5 – 10 years Non-competition agreements 5 years Franchise relationships 4 years Order backlog 10 – 12 months ​ Goodwill The Company accounts for goodwill as the excess of the purchase price over the net amount of identifiable assets acquired and liabilities assumed in a business combination measured at fair value.
Control of the goods is considered to have been transferred upon shipping or upon arrival at the customer’s destination, depending on the terms of the purchase order. Revenue that is derived from its extended service warranties, which are separately priced and sold, is recognized over the term of the contract. Refer to Warranties within this same Note for further information.
Control of the goods is considered to have been transferred upon shipping or upon arrival at the customer’s destination, depending on the terms of the purchase order. Revenue that is derived from its extended service warranties, which are separately priced and sold, is recognized over the term of the contract. Refer to “Warranties” within this same Note for further information.
Transaction gains and losses associated with purchases made by Canadian subsidiaries that are denominated in currencies other than Canadian dollar are recognized as a component of other expense, net within the consolidated statements of operations. 58 Table of Contents Currently, our largest foreign currency exposure is that with respect to the Australian dollar and the Canadian dollar.
Transaction gains and losses associated with purchases made by Canadian subsidiaries that are denominated in currencies other than Canadian dollar are recognized as a component of other expense (income), net within the consolidated statements of operations. 58 Table of Contents Currently, our largest foreign currency exposure is that with respect to the Australian dollar and the Canadian dollar.
Changes in these rates may have an impact on future cash flow and earnings. We manage these risks through normal operating and financing activities. Interest Rate Risk We are subject to interest rate risk in connection with our long-term debt. Our principal interest rate risk relates to borrowings under the New Credit Agreement.
Changes in these rates may have an impact on future cash flow and earnings. We manage these risks through normal operating and financing activities. Interest Rate Risk We are subject to interest rate risk in connection with our long-term debt. Our principal interest rate risk relates to borrowings under the Credit Agreement.
Repurchase Program On May 10, 2022, the Board of Directors of the Company approved a stock repurchase program (the “Repurchase Program”), which authorizes the Company to repurchase up to $100 million of the Company’s shares of common stock over the next three years. The Company may effect these repurchases in open market transactions, privately negotiated purchases, or other acquisitions.
Repurchase Program On May 10, 2022, the Board of the Company approved a stock repurchase program (the “Repurchase Program”), which authorizes the Company to repurchase up to $100 million of the Company’s shares of common stock over the next three years. The Company may effect these repurchases in open market transactions, privately negotiated purchases, or other acquisitions.
Assets and liabilities measured at fair value using Level 3 inputs are based on one or more of the following valuation techniques: market approach, income approach or cost approach. There were no transfers between fair value measurement levels during the years ended December 31, 2023 and December 31, 2022.
Assets and liabilities measured at fair value using Level 3 inputs are based on one or more of the following valuation techniques: market approach, income approach, or cost approach. There were no transfers between fair value measurement levels during the years ended December 31, 2024, 2023 and 2022.
Loans outstanding under the New Revolving Credit Facility denominated in Euros or Australian Dollars bear interest based on EURIBOR or the AUD Rate (each, as defined in the New Credit Agreement), respectively, plus a margin of 3.50%. A commitment fee accrues on any unused portion of the commitments under the Revolving Credit Facility.
Loans outstanding under the Revolving Credit Facility denominated in Euros or Australian Dollars bear interest based on EURIBOR or the AUD Rate (each, as defined in the Credit Agreement), respectively, plus a margin of 3.50%. A commitment fee accrues on any unused portion of the commitments under the Revolving Credit Facility.
Under the terms of the New Credit Agreement entered into by the Latham Pool Products, a wholly owned subsidiary of LIMC, which itself is a wholly owned subsidiary of Latham Group, Inc., Latham Pool Products is restricted from making dividend payments, loans or advances to Latham Group, Inc., unless certain conditions are met.
Under the terms of the Credit Agreement entered into by the Latham Pool Products, a wholly owned subsidiary of LIMC, which itself is a wholly owned subsidiary of Latham Group, Inc., Latham Pool Products is restricted from making dividend payments, loans or advances to Latham Group, Inc., unless certain conditions are met.
On May 2, 2023, at the 2023 annual meeting of stockholders the Company, the stockholders approved the first amendment (the “Equity Plan First Amendment”) to the Latham Group, Inc. 2021 Omnibus Equity Plan, which was previously approved by the Board of Directors of the Company.
On May 2, 2023, at the 2023 annual meeting of stockholders the Company, the stockholders approved the first amendment (the “Equity Plan First Amendment”) to the Latham Group, Inc. 2021 Omnibus Equity Plan, which was previously approved by the Board of the Company.
Under this method of adoption, the comparative information has not been revised and continues to be reported under the previously applicable lease accounting guidance (“ASC 840”). For leases with initial terms greater than 12 months, the Company considers these right-of-use assets and records the related asset and obligation at the present value of lease payments over the term.
Under this method of adoption, the comparative information has not been revised and continues to be reported under the previously applicable lease accounting guidance. For leases with initial terms greater than 12 months, the Company considers these right-of-use assets and records the related asset and obligation at the present value of lease payments over the term.
Fair value is measured using appropriate valuation methodologies that would typically include a projected discounted cash flow model using a discount rate the Company believes is commensurate with the risk inherent in its business. The Company did not recognize any impairment losses on long-lived assets during the years ended December 31, 2023 and 2022.
Fair value is measured using appropriate valuation methodologies that would typically include a projected discounted cash flow model using a discount rate the Company believes is commensurate with the risk inherent in its business. The Company did not recognize any impairment losses on long-lived assets during the years ended December 31, 2024 and 2023.
At this time, we do not hedge our foreign currency risk. ​ ​ ​ 59 Table of Contents Item 8 – Financial Statements and Supplementary Data INDEX TO CONSOLIDATED FINANCIAL STATEMENTS ​ ​ ​ Page ​ ​ Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34) 61 Consolidated Balance Sheets as of December 31, 2023 and 2022 62 Consolidated Statements of Operations for the Years Ended December 31, 2023, 2022 and 202 1 63 Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2023, 2022 and 202 1 64 Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2023, 2022 and 202 1 65 Consolidated Statements of Cash Flows for the Years Ended December 31, 2023, 2022 and 202 1 66 Notes to Consolidated Financial Statements 67 ​ ​ ​ 60 Table of Contents Report of Independent Registered Public Accounting Firm REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of Latham Group, Inc.
At this time, we do not hedge our foreign currency risk. ​ 59 Table of Contents Item 8 – Financial Statements and Supplementary Data INDEX TO CONSOLIDATED FINANCIAL STATEMENTS ​ ​ ​ Page ​ ​ Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34) 61 Consolidated Balance Sheets as of December 31, 2024 and 2023 62 Consolidated Statements of Operations for the Years Ended December 31, 2024, 2023 and 2022 63 Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2024, 2023 and 2022 64 Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2024, 2023 and 2022 65 Consolidated Statements of Cash Flows for the Years Ended December 31, 2024, 2023 and 2022 66 Notes to Consolidated Financial Statements 67 ​ ​ 60 Table of Contents Report of Independent Registered Public Accounting Firm REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of Latham Group, Inc.
The key provisions from the IRA include the implementation of a 15% alternative book income minimum tax, an excise tax on stock buybacks, and significant tax incentives for energy and climate initiatives. The Company evaluated the key provisions under the IRA and concluded that the provisions are not applicable to Latham for year ended December 31, 2023.
The key provisions from the IRA include the implementation of a 15% alternative book income minimum tax, an excise tax on stock buybacks, and significant tax incentives for energy and climate initiatives. The Company evaluated the key provisions under the IRA and concluded that the provisions are not applicable to Latham for year ended December 31, 2024.
Offering of Common Stock On January 11, 2022, the Company completed an offering of 13,800,000 shares of common stock, par value $0.0001 per share, including the exercise in full by the underwriters of their option to purchase up to 1,800,000 additional shares of common stock, at a public offering price of $19.50 per share.
STOCKHOLDERS’ EQUITY Offering of Common Stock On January 11, 2022, the Company completed an offering of 13,800,000 shares of common stock, par value $0.0001 per share, including the exercise in full by the underwriters of their option to purchase up to 1,800,000 additional shares of common stock, at a public offering price of $19.50 per share.
As of December 31, 2023 and 2022, substantially all of the consolidated net assets of Latham Pool Products are considered restricted net assets as defined in Rule 4-08(e)(3) of Regulation S-X. Latham Group, Inc. is able to transfer assets from Latham Pool Products in order to pay certain tax liabilities.
As of December 31, 2024 and 2023, substantially all of the consolidated net assets of Latham Pool Products are considered restricted net assets as defined in Rule 4-08(e)(3) of Regulation S-X. Latham Group, Inc. is able to transfer assets from Latham Pool Products in order to pay certain tax liabilities.
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.
The aggregate net proceeds received by the Company from the IPO were $399.3 million, after deducting underwriting discounts and commissions and other offering costs. ​ ​ ​ ​ ​ 105 Table of Contents Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure None ​ ​
The aggregate net proceeds received by the Company from the IPO were $399.3 million, after deducting underwriting discounts and commissions and other offering costs. ​ ​ ​ ​ ​ 102 Table of Contents Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure None ​ ​
The pro forma results do not include any anticipated synergies, cost savings, or other expected benefits of an acquisition.
The pro forma results do not include any anticipated synergies, cost savings or other expected benefits of the acquisition.
Depreciation and amortization expense are recognized using the straight-line method over the estimated useful lives of each respective asset category as follows: ​ ​ ​ ​ ​ ​ Estimated ​ Useful Life Building and improvements ​ 25 years Molds and dyes ​ 5 – 10 years Machinery and equipment (including computer equipment and software) ​ 3 – 10 years Furniture and fixtures ​ 5 – 7 years Vehicles ​ 5 years ​ Leasehold improvements are amortized over the shorter of the term of the related lease or the estimated useful lives of the improvements.
Depreciation and amortization expense are recognized using the straight-line method over the estimated useful lives of each respective asset category as follows: ​ ​ ​ ​ ​ ​ Estimated ​ Useful Life Building and improvements ​ 25 years Molds and dyes ​ 5 – 10 years Machinery and equipment (including computer equipment and software) ​ 3 – 10 years Furniture and fixtures ​ 5 – 7 years Vehicles ​ 5 years ​ 71 Table of Contents Leasehold improvements are amortized over the shorter of the term of the related lease or the estimated useful lives of the improvements.
The ownership chain between Latham Pool Products and the Company consists of a series of holding companies with no material assets, liabilities, or standalone operations other than indirect equity interests in Latham Pool Products. ​ ​ ​ 86 Table of Contents 10.
The ownership chain between Latham Pool Products and the Company consists of a series of holding companies with no material assets, liabilities, or standalone operations other than indirect equity interests in Latham Pool Products. ​ ​ 84 Table of Contents 10.
Conditions that may indicate impairment include, but are not limited to, a significant decrease in the market price of an asset, a significant adverse change in the extent or manner in which an 72 Table of Contents asset is being used or a significant decrease in its physical condition, and operating or cash flow performance that demonstrates continuing losses associated with an asset or asset group.
Conditions that may indicate impairment include, but are not limited to, a significant decrease in the market price of an asset, a significant adverse change in the extent or manner in which an asset is being used or a significant decrease in its physical condition, and operating or cash flow performance that demonstrates continuing losses associated with an asset or asset group.
Sellers who were not related parties of Wynnchurch Capital, L.P. or the Company determined 78 Table of Contents the purchase price per common unit paid by Premier Group Holdings Inc., indicating the amount paid for the common units of Premier Pools & Spas reflects the price that would be paid in an arm’s-length transaction.
Sellers who were not related parties of Wynnchurch Capital, L.P. or the Company determined the purchase price per common unit paid by Premier Group Holdings Inc., indicating the amount paid for the common units of Premier Pools & Spas reflects the price that would be paid in an arm’s-length transaction.
The Company estimates an incremental borrowing rate to discount the lease payments based on information available at lease commencement because the implicit rate of the lease is generally not known. The Company leases vehicles, manufacturing facilities, office space, land, and equipment under operating leases. The Company determines if an arrangement is a lease at inception.
The Company estimates an incremental borrowing rate to discount the lease payments based on information available at lease commencement because the implicit rate of the lease is generally not known. 67 Table of Contents The Company leases vehicles, manufacturing facilities, office space, land, and equipment under operating leases. The Company determines if an arrangement is a lease at inception.
Treasury zero-coupon issues similar in duration to the expected term of the stock-based award. The Company considers the historical volatility of the Company’s stock price, as well as its implied volatility. The Company utilized a dividend yield of zero, since it has no history or plan of declaring 74 Table of Contents dividends on its common stock.
Treasury zero-coupon issues similar in duration to the expected term of the stock-based award. The Company considers the historical volatility of the Company’s stock price, as well as its implied volatility. The Company utilized a dividend yield of zero, since it has no history or plan of declaring dividends on its common stock.
As of December 31, 2023, there were no outstanding borrowings on the Revolving Credit Facility and $75.0 million was available for future borrowing. Term Loan Pursuant to the New Credit Agreement, Latham Pool Products borrowed $325.0 million in term loans. The Term Loan matures on February 23, 2029.
As of December 31, 2024, there were no outstanding borrowings on the Revolving Credit Facility and $75.0 million was available for future borrowing. Term Loan Pursuant to the Credit Agreement, Latham Pool Products borrowed $325.0 million in term loans. The Term Loan matures on February 23, 2029.
In periods where the Company reports a net loss, the effect of anti-dilutive stock options, restricted stock awards, restricted stock units and stock appreciation rights are excluded and diluted loss per share is equal to basic loss per share. 75 Table of Contents Treasury Stock The Company accounts for treasury stock acquisitions using the cost method.
In periods where the Company reports a net loss, the effect of anti-dilutive stock options, restricted stock awards, restricted stock units and stock appreciation rights are excluded and diluted loss per share is equal to basic loss per share. Treasury Stock The Company accounts for treasury stock acquisitions using the cost method.
NATURE OF THE BUSINESS Latham Group, Inc. (the “Company”) wholly owns Latham Pool Products, Inc. (“Latham Pool Products”) (together, “Latham”), a designer, manufacturer, and marketer of in-ground residential swimming pools in North America, Australia, and New Zealand. Latham offers a portfolio of pools and related products, including in-ground swimming pools, pool liners, and pool covers.
NATURE OF THE BUSINESS Latham Group, Inc. (the “Company” or “Latham”) wholly owns Latham Pool Products, Inc. (“Latham Pool Products”) a designer, manufacturer, and marketer of in-ground residential swimming pools in North America, Australia, and New Zealand. Latham Pool Products offers a portfolio of pools and related products, including in-ground swimming pools, pool covers, and pool liners. 2.
The Company does not engage in contracts greater than one year, and therefore does not have any contract costs capitalized as of December 31, 2023, and 2022.
The Company does not engage in contracts greater than one year, and therefore does not have any contract costs capitalized as of December 31, 2024, and 2023.
The Company’s ownership interest in Premier Pools & Spas after the issuance of additional non-voting common units is 18.2% while its’ voting interest remains 20.1%.
The Company’s ownership interest in Premier Pools & Spas after the issuance of additional non-voting common units is 18.2% while its voting interest remains 20.1%.
Under the cumulative 71 Table of Contents earnings approach, the Company compares the distributions received to its cumulative equity-method earnings since inception. Any distributions received up to the amount of cumulative equity earnings are be considered a return on investment and classified in operating activities. Any excess distributions would be considered a return of investment and classified in investing activities.
Under the cumulative earnings approach, the Company compares the distributions received to its cumulative equity-method earnings since inception. Any distributions received up to the amount of cumulative equity earnings are be considered a return on investment and classified in operating activities. Any excess distributions would be considered a return of investment and classified in investing activities.
During the year ended December 31, 2023, Premier Pools & Spas paid the Company dividends of $2.9 million that are presented on the consolidated statement of cash flows as distribution received from equity method investment.
During the year ended December 31, 2023, Premier Pools & Spas paid the Company dividends of $2.9 million that are presented on the consolidated statement of cash flows 78 Table of Contents as distribution received from equity method investment.
Customer rebates, cash discounts, and other sales incentives 68 Table of Contents are estimated by applying the portfolio approach using the most-likely-amount method and are recorded as a reduction to revenue. Estimates are updated each reporting period and any changes are allocated to the performance obligations on the same basis as at inception.
Customer rebates, cash discounts, and other sales incentives are estimated by applying the portfolio approach using the most-likely-amount method and are recorded as a reduction to revenue. Estimates are updated each reporting period and any changes are allocated to the performance obligations on the same basis as at inception.
Tax years and tax periods from June 30, 2020 through present are currently open for examination in Canada. Tax years and tax periods from June 30, 2019 through present are currently open for examination in Australia.
Tax years and tax periods from June 30, 2021 through present are currently open for examination in Canada. Tax years and tax periods from June 30, 2020 through present are currently open for examination in Australia.
The Company does not believe there are any pending legal proceedings that will have a material impact on the Company’s 93 Table of Contents financial position, results of operations, or cash flows.
The Company does not believe there are any pending legal proceedings that will have a material impact on the Company’s financial position, results of operations, or cash flows.
Dollars and Canadian Dollars bear interest, at the borrower’s option, at a rate per annum based on Term SOFR or CDO (each, as defined in the New Credit Agreement), as applicable, plus a margin of 3.50%, or at a rate 83 Table of Contents per annum based on the Base Rate or the Canadian Prime Rate (each, as defined in the New Credit Agreement), plus a margin of 2.50%.
Dollars and Canadian Dollars bear interest, at the borrower’s option, at a rate per annum based on Term SOFR or CDO (each, as defined in the Credit Agreement), as applicable, plus a margin of 3.50%, or at a rate per annum based on the Base Rate or the Canadian Prime Rate (each, as defined in the Credit Agreement), plus a margin of 2.50%.
The Company recorded aggregate losses on sales and disposals of property and equipment of $0.3 million, $0.2 million, and $0.3 million during the years ended December 31, 2023, 2022 and 2021, respectively. ​ 9.
The Company recorded aggregate losses on sales and disposals of property and equipment of $0.1 million, $0.3 million, and $0.2 million during the years ended December 31, 2024, 2023 and 2022, respectively. ​ 9.
We believe that our audits provide a reasonable basis for our opinion. ​ / s/ Deloitte & Touche LLP Hartford Connecticut March 13, 2024 We have served as the Company's auditor since 2020. ​ ​ ​ ​ ​ ​ ​ ​ ​ 61 Table of Contents Latham Group, Inc.
We believe that our audits provide a reasonable basis for our opinion. ​ /s/ Deloitte & Touche LLP Hartford, Connecticut March 5, 2025 ​ We have served as the Company’s auditor since 2020. ​ ​ ​ ​ ​ 61 Table of Contents Latham Group, Inc.
The Company’s policy is to classify interest and penalties related to unrecognized tax benefits as a component of income tax expense (benefit) within the consolidated statements of operations. The Company had $0.0 million of accrued interest and no accrued penalties as of December 31, 2023.
The Company’s policy is to classify interest and penalties related to unrecognized tax benefits as a component of income tax expense (benefit) within the consolidated statements of operations. The Company had $0.0 million of 73 Table of Contents accrued interest and no accrued penalties as of December 31, 2024 and December 31, 2023.
As of December 31, 2023, the Company was in compliance with all financial covenants under the New Credit Agreement. Revolving Credit Facility The Revolving Credit Facility may be utilized to finance ongoing general corporate and working capital needs and permits Latham Pools Products to borrow loans in U.S. Dollars, Canadian Dollars, Euros, and Australian Dollars.
As of December 31, 2024, the Company was in compliance with all financial covenants under the Credit Agreement. Revolving Credit Facility The Revolving Credit Facility may be utilized to finance ongoing general corporate and working capital needs and permits Latham Pool Products to borrow loans in U.S. Dollars, Canadian Dollars, Euros, and Australian Dollars.
Tax years and tax periods from March 31, 2019 through present are currently open for examination in New Zealand. ​ The following is a reconciliation of the beginning and ending amount of uncertain tax positions (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ 2023 2022 Balance at the beginning of the year ​ $ 10,303 ​ $ 10,011 Gross amounts of increases and decreases in unrecognized tax benefits as a result of tax positions taken during a prior period ​ ​ 379 ​ ​ — Gross amounts of increases and decreases in unrecognized tax benefits as a result of tax positions taken during the current period ​ ​ — ​ ​ — The amounts of decreases in the unrecognized tax benefits relating to settlements with taxing authorities ​ — ​ 292 Reductions to unrecognized tax benefits as a result of a lapse of the applicable statute of limitations ​ (10,682) ​ — Balance at the end of the year ​ $ — ​ $ 10,303 ​ ​ 16.
Tax years and tax periods from March 31, 2020 through present are currently open for examination in New Zealand. ​ The following is a reconciliation of the beginning and ending amount of uncertain tax positions (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ 2024 2023 Balance at the beginning of the year ​ $ — ​ $ 10,303 Gross amounts of increases and decreases in unrecognized tax benefits as a result of tax positions taken during a prior period ​ ​ — ​ ​ 379 Gross amounts of increases and decreases in unrecognized tax benefits as a result of tax positions taken during the current period ​ ​ — ​ ​ — The amounts of decreases in the unrecognized tax benefits relating to settlements with taxing authorities ​ — ​ — Reductions to unrecognized tax benefits as a result of a lapse of the applicable statute of limitations ​ — ​ (10,682) Balance at the end of the year ​ $ — ​ $ — ​ ​ 15.
Dollar senior secured term loan (the “Term Loan”) in an initial principal amount of $325.0 million. On the closing date, proceeds under the Credit Agreement were used to terminate the Prior Credit Agreement (as defined below) by repayment of $294.0 million of outstanding debt thereunder and for general corporate purposes.
Dollar senior secured term loan (the “Term Loan”) in an initial principal amount of $325.0 million. On the closing date, proceeds under the Credit Agreement were used to terminate the previous credit agreement by repayment of $294.0 million of outstanding debt thereunder and for general corporate purposes.
At each reporting date, the Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies. The Company expenses as incurred the costs related to such legal proceedings. ​ ​ 17.
At each reporting date, the Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies. The Company expenses as incurred the costs related to such legal proceedings. ​ ​ 90 Table of Contents 16.
The Company performed an annual test for goodwill impairment in the fourth quarter of the year ended December 31, 2022 in accordance with Step 0 of ASC 350 and determined that goodwill was not impaired.
The Company performed an annual test for goodwill impairment in the fourth quarter of the year ended December 31, 2023 in accordance with Step 1 of ASC 350 and determined that goodwill was not impaired.
Deferred Income Taxes Deferred income taxes recognize the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the carrying amounts used for income tax purposes, and the 91 Table of Contents impact of available net operating loss (“NOL”) and tax credit carryforwards.
Deferred Income Taxes Deferred income taxes recognize the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the carrying amounts used for income tax purposes, and the impact of available net operating loss and tax credit carryforwards.
Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Latham Group Inc. and subsidiaries (the "Company") as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive loss, stockholders' equity, and cash flows, for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the "financial statements").
Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Latham Group, Inc. and subsidiaries (the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive loss, stockholders' equity, and cash flows, for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the “financial statements”).
Other comprehensive income (loss) consists of foreign currency translation adjustments and defined benefit plan adjustments. Income tax (benefit) expense on the components of other comprehensive income (loss) was not significant for the years ended December 31, 2023, 2022 and 2021.
Other comprehensive income (loss) consists of foreign currency translation adjustments. Income tax expense (benefit) on the components of other comprehensive income (loss) was not significant for the years ended December 31, 2024, 2023 and 2022.
As of December 31, 2023 and 2022, the Company’s reserve for estimated slow moving products or obsolescence was $9.1 million and $4.6 million, respectively. Property and Equipment, Net Property and equipment are recorded at cost and presented net of accumulated depreciation. Property and equipment acquired through business combinations are recorded at fair value at the acquisition date.
As of December 31, 2024 and 2023, the Company’s reserve for estimated slow moving products or obsolescence was $8.3 million and $9.1 million, respectively. Property and Equipment, Net Property and equipment are recorded at cost and presented net of accumulated depreciation. Property and equipment acquired through business combinations are recorded at fair value at the acquisition date.
The Company’s allowance for bad debt as of December 31, 2023 and 2022 was $7.5 million and $3.2 million, respectively. Concentration of Credit Risk Financial instruments that subject the Company to concentrations of credit risk consist primarily of cash and trade receivables.
The Company’s allowance for bad debt as of December 31, 2024 and 2023 was $5.9 million and $7.5 million, respectively. Concentration of Credit Risk Financial instruments that subject the Company to concentrations of credit risk consist primarily of cash and trade receivables.
The Company makes discretionary matching and other contributions depending on the plan and recognized expense of $1.4 million, $1.7 million, and $2.0 million related to such plans during the years ended December 31, 2023, 2022 and 2021, respectively.
The Company makes discretionary matching and other contributions depending on the plan and recognized expense of $1.5 million, $1.4 million, and $1.7 million related to such plans during the years ended December 31, 2024, 2023 and 2022, respectively.
During the year ended December 31, 2022, Premier Pools & Spas paid the Company dividends of $2.5 million that are presented on the consolidated statement of cash flows as distribution received from equity method.
During the year ended December 31, 2024, Premier Pools & Spas paid the Company dividends of $5.1 million that are presented on the consolidated statement of cash flows as distribution received from equity method investment.
LEASES The Company leases vehicles, manufacturing facilities, office space, land, and equipment under operating leases. As of December 31, 2023, our operating leases substantially have remaining terms of one year to eleven years, some of which include options to extend and/or terminate the leases. The Company does not have material finance leases.
LEASES The Company leases vehicles, manufacturing facilities, office space, land, and equipment under operating leases. As of December 31, 2024, our operating leases substantially have remaining terms of one year to eleven years, some of which include options to extend and/or terminate the leases.
Tax years from the year ended December 31, 2020 through present are open for examination in the U.S. Tax years and tax periods ended December 31, 2019 through present are open for state examination. The Latham 2019 and 2020 Illinois returns are currently under examination by the state of Illinois.
Tax years from the fiscal year ended December 31, 2021 through present are open for examination in the U.S. Tax years and tax periods ended December 31, 2020 through present are open for state examination. The Latham 2019 Illinois return is currently under examination by the state of Illinois.
The commitment fee is due and payable quarterly in arrears and is, initially, 0.375% per annum and will, thereafter, accrue at a rate per annum ranging from 0.25% to 0.50%, depending on the First Lien Net Leverage Ratio (as defined in the New Credit Agreement, the “First Lien Net Leverage Ratio”).
The commitment fee is due and payable quarterly in arrears and is, initially, 0.375% per annum and will, thereafter, accrue at a rate per annum ranging from 0.25% to 0.50%, depending on the First Lien Net Leverage Ratio (as defined in the Credit Agreement, the “First Lien Net Leverage Ratio”). Borrowings under the Revolving Credit Facility are due at maturity.
The Company recorded its interest in net earnings of Premier Pools & Spas of $3.7 million and $4.2 million for the years ended December 31, 2023 and 2022, respectively, which included basis difference adjustments of $0.2 million and $0.2 million, respectively. ​ 79 Table of Contents 5.
The Company recorded its interest in net earnings of Premier Pools & Spas of $4.1 million and $3.7 million for the years ended December 31, 2024 and 2023, respectively, which included basis difference adjustments of $0.2 million and $0.2 million, respectively. ​ 5.
As of December 31, 2023, total unrecognized stock-based compensation expense related to all unvested stock-based awards was $7.4 million, which is expected to be recognized over a weighted-average period of 1.53 years.
As of December 31, 2024, total unrecognized stock-based compensation expense related to all unvested stock-based awards was $9.7 million, which is expected to be recognized over a weighted-average period of 1.91 years.
Consolidated Statements of Comprehensive Loss (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2023 2022 2021 Net loss ​ $ (2,388) ​ $ (5,694) ​ $ (62,348) Other comprehensive loss, net of tax: ​ ​ ​ Foreign currency translation adjustments ​ (6) ​ (3,903) ​ (1,984) Total other comprehensive loss, net of tax ​ (6) ​ (3,903) ​ (1,984) Comprehensive loss ​ $ (2,394) ​ $ (9,597) ​ $ (64,332) ​ The accompanying notes are an integral part of these consolidated financial statements. ​ ​ 64 Table of Contents Latham Group, Inc.
Consolidated Statements of Comprehensive Loss (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2024 2023 2022 Net loss ​ $ (17,860) ​ $ (2,388) ​ $ (5,694) Other comprehensive loss, net of tax: ​ ​ ​ Foreign currency translation adjustments ​ (1,511) ​ (6) ​ (3,903) Total other comprehensive loss, net of tax ​ (1,511) ​ (6) ​ (3,903) Comprehensive loss ​ $ (19,371) ​ $ (2,394) ​ $ (9,597) ​ The accompanying notes are an integral part of these consolidated financial statements. ​ 64 Table of Contents Latham Group, Inc.
For all entities, ASU 2023-07 is effective for fiscal years beginning after December 15, 2023. The amendments should be applied retrospectively to all prior periods presented in the financial statements, with early adoption permitted. The Company is currently evaluating ASU 2023-07 and its potential impact on the notes to the consolidated financial statements.
For all other entities, the amendments are effective for fiscal years beginning after December 15, 2025. The amendments should be applied retrospectively to all prior periods presented in the financial statements, with early adoption permitted. The Company is currently evaluating ASU 2024-01 and its potential impact on the condensed consolidated financial statements.
LONG-TERM DEBT The components of the Company’s outstanding debt obligations consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2023 2022 Term Loan ​ ​ $ 309,313 ​ $ 322,562 Revolving Credit Facility ​ ​ ​ — ​ ​ — Less: Unamortized discount and debt issuance costs ​ ​ (8,112) ​ (9,681) Total debt ​ ​ 301,201 ​ 312,881 Less: Current portion of long-term debt ​ ​ (21,250) ​ (3,250) Total long-term debt ​ ​ $ 279,951 ​ $ 309,631 ​ On February 23, 2022, Latham Pool Products entered into an agreement (the “New Credit Agreement”) with Barclays Bank PLC, which provides a senior secured multicurrency revolving line of credit (the “Revolving Credit Facility”) in an initial principal amount of $75.0 million and a U.S.
LONG-TERM DEBT The components of the Company’s outstanding debt obligations consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2024 2023 Term Loan ​ ​ $ 288,063 ​ $ 309,313 Revolving Credit Facility ​ ​ ​ — ​ ​ — Less: Unamortized discount and debt issuance costs ​ ​ (6,542) ​ (8,112) Total debt ​ ​ 281,521 ​ 301,201 Less: Current portion of long-term debt ​ ​ (3,250) ​ (21,250) Total long-term debt ​ ​ $ 278,271 ​ $ 279,951 ​ On February 23, 2022, Latham Pool Products entered into an agreement (the “Credit Agreement”) with Barclays Bank PLC, which provides a senior secured multicurrency revolving line of credit (the “Revolving Credit Facility”) in an initial principal amount of $75.0 million and a U.S.
The Revolving Credit Facility matures on February 23, 2027. Loans outstanding under the Revolving Credit Facility denominated in U.S.
The Revolving Credit Facility matures on February 23, 2027. Loans outstanding under the Revolving Credit Facility 82 Table of Contents denominated in U.S.
The Company is required to meet certain financial covenants, including maintaining specific liquidity measurements. There are also negative covenants, including certain restrictions on the Company’s ability to incur additional indebtedness, create liens, make investments, consolidate, or merge with other entities, enter into transactions with affiliates, make prepayments with respect to certain indebtedness, and make restricted payments and other distributions.
There are also negative covenants, including certain restrictions on the Company’s ability to incur additional indebtedness, create liens, make investments, consolidate, or merge with other entities, enter into transactions with affiliates, make prepayments with respect to certain indebtedness, and make restricted payments and other distributions.
Equity Method Investments Investments and ownership interests in common stock or in-substance common stock are accounted for under the equity method accounting if the Company has the ability to exercise significant influence over the entity, but does not have a controlling financial interest.
Refer to Note 3 for additional detail. Equity Method Investments Investments and ownership interests in common stock or in-substance common stock are accounted for under the equity method accounting if the Company has the ability to exercise significant influence over the entity, but does 70 Table of Contents not have a controlling financial interest.
Sales periods having severe weather may also affect net sales. 67 Table of Contents Leases On January 1, 2022, the Company adopted ASU 2016-02, “Leases (Topic 842),” and the related amendments The optional transition method of adoption was used, in which the cumulative effect of initially applying the new standard to existing leases was $0.3 million to record the operating lease right-of-use assets and the related liabilities as of January 1, 2022.
Leases On January 1, 2022, the Company adopted ASU 2016-02, “Leases (Topic 842),” and the related amendments The optional transition method of adoption was used, in which the cumulative effect of initially applying the new standard to existing leases was $0.3 million to record the operating lease right-of-use assets and the related liabilities as of January 1, 2022.
The following table summarizes the Company’s stock-based compensation expense (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ December 31, ​ ​ ​ 2023 ​ 2022 2021 ​ Cost of sales ​ $ 81 ​ $ 3,762 ​ $ 8,697 ​ Selling, general, and administrative ​ 18,723 ​ 46,872 ​ 120,078 ​ ​ ​ $ 18,804 ​ $ 50,634 ​ $ 128,775 ​ ​ The recognized income tax benefit related to stock-based compensation was $0.5 million for the year ended December 31, 2023.
The following table summarizes the Company’s stock-based compensation expense (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ December 31, ​ ​ ​ 2024 ​ 2023 2022 ​ Cost of sales ​ $ — ​ $ 81 ​ $ 3,762 ​ Selling, general, and administrative ​ 7,392 ​ 18,723 ​ 46,872 ​ ​ ​ $ 7,392 ​ $ 18,804 ​ $ 50,634 ​ ​ The recognized income tax benefit related to stock-based compensation was $0.6 million, $0.5 million and $0.8 million for the years ended December 31, 2024, December 31, 2023, and December 31, 2022 respectively.
(Parent Company Only) Condensed Statements of Operations (in thousands, except share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ 2023 2022 2021 Equity in net loss of subsidiary ​ $ (2,388) ​ $ (5,694) ​ $ (62,348) Net loss attributable to common stockholders ​ $ (2,388) ​ $ (5,694) ​ $ (62,348) Net loss per share ​ ​ ​ Net loss per share attributable to common stockholders – basic and diluted ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ $ (0.02) ​ $ (0.05) ​ $ (0.56) Diluted ​ $ (0.02) ​ $ (0.05) ​ $ (0.56) Weighted-average common shares outstanding – basic and diluted ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ ​ 112,899,586 ​ ​ 113,245,421 ​ ​ 110,644,366 Diluted ​ 112,899,586 ​ 113,245,421 ​ 110,644,366 ​ The accompanying notes are an integral part of these condensed financial statements. ​ 102 Table of Contents Latham Group, Inc.
(Parent Company Only) Condensed Statements of Operations (in thousands, except share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ 2024 2023 2022 Equity in net loss of subsidiary ​ $ (17,860) ​ $ (2,388) ​ $ (5,694) Net loss attributable to common stockholders ​ $ (17,860) ​ $ (2,388) ​ $ (5,694) Net loss per share ​ ​ ​ Net loss per share attributable to common stockholders – basic and diluted ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ $ (0.15) ​ $ (0.02) ​ $ (0.05) Diluted ​ $ (0.15) ​ $ (0.02) ​ $ (0.05) Weighted-average common shares outstanding – basic and diluted ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ ​ 115,434,828 ​ ​ 112,899,586 ​ ​ 113,245,421 Diluted ​ 115,434,828 ​ 112,899,586 ​ 113,245,421 ​ The accompanying notes are an integral part of these condensed financial statements. ​ 99 Table of Contents Latham Group, Inc.
The Company’s post-sale ownership interest in Premier Pools & Spas was 20.1% following such transaction. On December 17, 2021, Premier Pools & Spas issued additional non-voting common units to Premier Group Holdings Inc. As a result of the transaction, the Company recorded a gain on the sale of equity method investment of $1.0 million.
On December 17, 2021, Premier Pools & Spas issued additional non-voting common units to Premier Group Holdings Inc. As a result of the transaction, the Company recorded a gain on the sale of equity method investment of $1.0 million.
GOODWILL AND INTANGIBLE ASSETS, NET Goodwill The following table presents the changes in the carrying value of goodwill during the years ended December 31, 2023 and 2022 (in thousands): ​ ​ ​ ​ ​ ​ Amount Balance as of December 31, 2021 ​ $ 128,871 Acquisition ​ 2,753 Measurement period adjustment ​ ​ 384 Foreign currency translation adjustment ​ (625) Balance as of December 31, 2022 ​ ​ 131,383 Foreign currency translation adjustment ​ ​ (20) Balance as of December 31, 2023 ​ $ 131,363 ​ The Company performed an annual test for goodwill impairment in the fourth quarter of the year ended December 31, 2023 in accordance with Step 1 of ASC 350 and determined that goodwill was not impaired.
GOODWILL AND INTANGIBLE ASSETS, NET Goodwill The following table presents the changes in the carrying value of goodwill during the years ended December 31, 2024 and 2023 (in thousands): ​ ​ ​ ​ ​ ​ Amount Balance as of December 31, 2022 ​ $ 131,383 Foreign currency translation adjustment ​ (20) Balance as of December 31, 2023 ​ ​ 131,363 Acquisition ​ ​ 22,047 Foreign currency translation adjustment ​ ​ (785) Balance as of December 31, 2024 ​ $ 152,625 ​ The Company performed an annual test for goodwill impairment in the fourth quarter of the year ended December 31, 2024 in accordance with Step 0 of ASC 350 and determined that goodwill was not impaired.
The following table sets forth the carrying amount and fair value of the term loans (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ ​ 2023 ​ 2022 ​ ​ ​ Carrying ​ Estimated ​ Carrying ​ Estimated ​ ​ Value Fair Value Value Fair Value Term Loan ​ ​ $ 301,201 ​ $ 289,153 ​ $ 312,881 ​ $ 290,979 ​ Interest rate swap The Company estimates the fair value of the interest rate swap on a quarterly basis using Level 2 inputs, including the forward SOFR curve.
The following table sets forth the carrying amount and fair value of the term loans (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ ​ 2024 ​ 2023 ​ ​ ​ Carrying ​ Estimated ​ Carrying ​ Estimated ​ ​ Value Fair Value Value Fair Value Term Loan ​ ​ $ 281,521 ​ $ 276,946 ​ $ 301,201 ​ $ 289,153 ​ 79 Table of Contents Interest rate swap The Company estimates the fair value of the interest rate swap on a quarterly basis using Level 2 inputs, including the forward SOFR curve.
Construction in progress recorded as of December 31, 2023 and 2022 primarily related to an ongoing effort to increase fiberglass molds and fiberglass production capacity as well as ERP costs.
Construction in progress recorded as of December 31, 2024 and 2023 primarily related to an ongoing effort to increase fiberglass molds and fiberglass production capacity as well as our ongoing digital transformation project costs.
(Parent Company Only) Condensed Statements of Comprehensive Loss (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ 2023 2022 2021 Net loss ​ $ (2,388) ​ $ (5,694) ​ $ (62,348) Equity in other comprehensive loss of subsidiary ​ (6) ​ (3,903) ​ (1,984) Comprehensive loss ​ $ (2,394) ​ $ (9,597) ​ $ (64,332) ​ The accompanying notes are an integral part of these condensed financial statements. ​ 103 Table of Contents Latham Group, Inc.
(Parent Company Only) Condensed Statements of Comprehensive Loss (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ 2024 2023 2022 Net loss ​ $ (17,860) ​ $ (2,388) ​ $ (5,694) Equity in other comprehensive loss of subsidiary ​ (1,511) ​ (6) ​ (3,903) Comprehensive loss ​ $ (19,371) ​ $ (2,394) ​ $ (9,597) ​ The accompanying notes are an integral part of these condensed financial statements. ​ 100 Table of Contents Latham Group, Inc.
The weighted average grant-date fair value of stock options granted during the year ended December 31, 2022 was $5.53 per share. ​ Stock Appreciation Rights During the quarter ended April 1, 2023, as a portion of the annual equity award grants to the Company’s executive officers, the Compensation Committee of the Board of Directors approved stock appreciation rights for an aggregate of 790,181 shares of the Company’s common stock, with a strike price of $3.24 per share (the “Contingent Grants”).
No stock options were granted during the year ended December 31, 2024 or December 31, 2023. ​ Stock Appreciation Rights During the quarter ended April 1, 2023, as a portion of the annual equity award grants to the Company’s executive officers, the Compensation Committee of the Board approved stock appreciation rights for an aggregate of 790,181 shares of the Company’s common stock, with a strike price of $3.24 per share (the “Contingent Grants”).
Examinations in material jurisdictions or changes in laws, rules, regulations, or interpretations by local taxing authorities could result in impacts to tax years open under statute or to foreign operating structures currently in place.
The Company does not have any federal audits in process. Examinations in material jurisdictions or changes in laws, rules, regulations, or interpretations by local taxing authorities could result in impacts to tax years open under statute or to foreign operating structures currently in place.
(Parent Company Only) Condensed Statement of Cash Flows (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ 2023 2022 2021 Cash flows from operating activities: ​ ​ ​ Net loss ​ $ (2,388) ​ $ (5,694) ​ $ (62,348) Adjustments to reconcile net loss to net cash provided by operating activities: ​ ​ ​ Equity in net loss of subsidiary ​ 2,388 ​ 5,694 ​ 62,348 Net cash provided by operating activities ​ — ​ — ​ — Cash flows from investing activities: ​ ​ ​ Distribution from subsidiary ​ ​ — ​ ​ 23,038 ​ ​ — Investment in subsidiary ​ — ​ — ​ (117,626) Net cash provided by (used in) investing activities ​ — ​ 23,038 ​ (117,626) Cash flows from financing activities: ​ ​ ​ Proceeds from initial public offering, net of underwriting discounts, commissions and offering costs ​ ​ — ​ ​ — ​ ​ 399,264 Proceeds from issuance of common stock ​ ​ — ​ ​ 257,663 ​ ​ — Repurchase and retirement of common stock ​ ​ — ​ ​ (280,701) ​ ​ (281,638) Net cash (used in) provided by financing activities ​ — ​ (23,038) ​ 117,626 Net increase in cash ​ — ​ — ​ — Cash at beginning of period ​ — ​ — ​ — Cash at end of period ​ $ — ​ $ — ​ $ — ​ The accompanying notes are an integral part of these condensed financial statements. ​ 104 Table of Contents Notes to Condensed Financial Statements of Registrant (Parent Company Only) 1.
(Parent Company Only) Condensed Statement of Cash Flows (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ 2024 2023 2022 Cash flows from operating activities: ​ ​ ​ Net loss ​ $ (17,860) ​ $ (2,388) ​ $ (5,694) Adjustments to reconcile net loss to net cash provided by operating activities: ​ ​ ​ Equity in net loss of subsidiary ​ 17,860 ​ 2,388 ​ 5,694 Net cash provided by operating activities ​ — ​ — ​ — Cash flows from investing activities: ​ ​ ​ Distribution from subsidiary ​ ​ — ​ ​ — ​ ​ 23,038 Net cash provided by investing activities ​ — ​ — ​ 23,038 Cash flows from financing activities: ​ ​ ​ Proceeds from issuance of common stock ​ ​ — ​ ​ — ​ ​ 257,663 Repurchase and retirement of common stock ​ ​ — ​ ​ — ​ ​ (280,701) Net cash used in financing activities ​ — ​ — ​ (23,038) Net increase in cash ​ — ​ — ​ — Cash at beginning of period ​ — ​ — ​ — Cash at end of period ​ $ — ​ $ — ​ $ — ​ The accompanying notes are an integral part of these condensed financial statements. ​ 101 Table of Contents Notes to Condensed Financial Statements of Registrant (Parent Company Only) 1.
(Parent Company Only) Condensed Balance Sheets (in thousands, except share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2023 2022 Assets ​ ​ ​ Investment in subsidiary ​ $ 399,200 ​ $ 382,790 Total assets ​ $ 399,200 ​ $ 382,790 Liabilities and Stockholders’ Equity ​ ​ Total liabilities ​ $ — ​ $ — Stockholders’ Equity ​ ​ Preferred stock, $0.0001 par value; 100,000,000 shares authorized as of both December 31, 2023 and December 31, 2022; no shares issued and outstanding as of both December 31, 2023 and December 31, 2022 ​ ​ — ​ ​ — Common stock, $0.0001 par value; 900,000,000 shares authorized as of December 31, 2023 and December 31, 2022; 114,871,782 and 114,667,975 shares issued and outstanding , as of December 31, 2023 and December 31, 2022, respectively ​ 11 ​ 11 Additional paid-in capital ​ 459,684 ​ 440,880 Accumulated deficit ​ (56,956) ​ (54,568) Accumulated other comprehensive loss ​ (3,539) ​ (3,533) Total stockholders’ equity ​ 399,200 ​ 382,790 Total liabilities and stockholders’ equity ​ $ 399,200 ​ $ 382,790 ​ The accompanying notes are an integral part of these condensed financial statements. ​ 101 Table of Contents Latham Group, Inc.
(Parent Company Only) Condensed Balance Sheets (in thousands, except share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2024 2023 Assets ​ ​ ​ Investment in subsidiary ​ $ 387,222 ​ $ 399,200 Total assets ​ $ 387,222 ​ $ 399,200 Liabilities and Stockholders’ Equity ​ ​ Total liabilities ​ $ — ​ $ — Stockholders’ Equity ​ ​ Preferred stock, $0.0001 par value; 100,000,000 shares authorized as of both December 31, 2024 and December 31, 2023; no shares issued and outstanding as of both December 31, 2024 and December 31, 2023 ​ ​ — ​ ​ — Common stock, $0.0001 par value; 900,000,000 shares authorized as of December 31, 2024 and December 31, 2023; 115,764,839 and 114,871,782 shares issued and outstanding , as of December 31, 2024 and December 31, 2023, respectively ​ 12 ​ 11 Additional paid-in capital ​ 467,076 ​ 459,684 Accumulated deficit ​ (74,816) ​ (56,956) Accumulated other comprehensive loss ​ (5,050) ​ (3,539) Total stockholders’ equity ​ 387,222 ​ 399,200 Total liabilities and stockholders’ equity ​ $ 387,222 ​ $ 399,200 ​ The accompanying notes are an integral part of these condensed financial statements. ​ 98 Table of Contents Latham Group, Inc.
PRODUCT WARRANTIES The warranty reserve activity consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ December 31, ​ ​ 2023 2022 ​ 2021 Balance at the beginning of the fiscal year ​ ​ $ 3,990 ​ $ 4,909 ​ $ 2,882 Adjustments to reserve ​ ​ 5,319 ​ 4,567 ​ 8,824 Warranty liabilities assumed in Radiant Acquisition ​ ​ ​ — ​ ​ — ​ ​ 50 Less: Settlements made (in cash or in kind) ​ ​ (6,148) ​ (5,486) ​ (6,847) Balance at the end of the fiscal year ​ ​ $ 3,161 ​ $ 3,990 ​ $ 4,909 ​ ​ ​ 12.
PRODUCT WARRANTIES The warranty reserve activity consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ December 31, ​ ​ 2024 2023 ​ 2022 Balance at the beginning of the fiscal year ​ ​ $ 3,161 ​ $ 3,990 ​ $ 4,909 Adjustments to reserve ​ ​ 2,615 ​ 5,319 ​ 4,567 Less: Settlements made (in cash or in kind) ​ ​ (3,129) ​ (6,148) ​ (5,486) Balance at the end of the fiscal year ​ ​ $ 2,647 ​ $ 3,161 ​ $ 3,990 ​ ​ 12.
Revenue and expenses are translated using the average monthly exchange rates prevailing throughout the reporting period. The related foreign currency translation adjustments are recorded as a component of accumulated other comprehensive income (loss) in stockholders’ equity.
Assets and liabilities are translated using the current rate of exchange at the balance sheet date or historical rates of exchange, as applicable. Revenue and expenses are translated using the average monthly exchange rates prevailing throughout the reporting period. The related foreign currency translation adjustments are recorded as a component of accumulated other comprehensive (income) loss in stockholders’ equity.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. When there is more than one input at different levels within the hierarchy, the fair value is determined based on the lowest level input that is significant to the fair value measurement in its entirety.
When there is more than one input at different levels within the hierarchy, the fair value is determined based on the lowest level input that is significant to the fair value measurement in its entirety.
Consolidated Statements of Operations (in thousands, except share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2023 2022 2021 Net sales $ 566,492 ​ $ 695,736 ​ $ 630,456 Cost of sales 413,548 ​ 479,267 ​ 426,294 Gross profit 152,944 ​ 216,469 ​ 204,162 Selling, general, and administrative expense 110,296 ​ 146,842 ​ 217,775 Underwriting fees related to offering of common stock ​ — ​ ​ 11,437 ​ ​ — Amortization 26,519 ​ 28,180 ​ 22,566 Income (loss) from operations 16,129 ​ 30,010 ​ (36,179) Other expense: ​ ​ Interest expense, net 30,916 ​ 15,753 ​ 24,433 Loss on extinguishment of debt ​ — ​ ​ 3,465 ​ ​ — Other (income) expense, net (1,004) ​ 1,301 ​ (4,860) Total other expense, net 29,912 ​ 20,519 ​ 19,573 Earnings from equity method investment ​ 3,723 ​ ​ 4,230 ​ ​ 2,222 (Loss) income before income taxes (10,060) ​ 13,721 ​ (53,530) Income tax (benefit) expense (7,672) ​ 19,415 ​ 8,818 Net loss $ (2,388) ​ $ (5,694) ​ $ (62,348) Net loss per share attributable to common stockholders: ​ ​ Basic $ (0.02) ​ $ (0.05) ​ $ (0.56) Diluted $ (0.02) ​ $ (0.05) ​ $ (0.56) Weighted-average common shares outstanding – basic and diluted ​ ​ Basic 112,899,586 ​ 113,245,421 ​ 110,644,366 Diluted 112,899,586 ​ 113,245,421 ​ 110,644,366 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ ​ 63 Table of Contents Latham Group, Inc.
Consolidated Statements of Operations (in thousands, except share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2024 2023 2022 Net sales $ 508,520 ​ $ 566,492 ​ $ 695,736 Cost of sales 354,776 ​ 413,548 ​ 479,267 Gross profit 153,744 ​ 152,944 ​ 216,469 Selling, general, and administrative expense 108,364 ​ 110,296 ​ 146,842 Underwriting fees related to offering of common stock ​ — ​ ​ — ​ ​ 11,437 Amortization 27,103 ​ 26,519 ​ 28,180 Income from operations 18,277 ​ 16,129 ​ 30,010 Other expense: ​ ​ Interest expense, net 24,840 ​ 30,916 ​ 15,753 Loss on extinguishment of debt ​ — ​ ​ — ​ ​ 3,465 Other expense (income), net 6,237 ​ (1,004) ​ 1,301 Total other expense, net 31,077 ​ 29,912 ​ 20,519 Earnings from equity method investment ​ 4,060 ​ ​ 3,723 ​ ​ 4,230 (Loss) income before income taxes (8,740) ​ (10,060) ​ 13,721 Income tax expense (benefit) 9,120 ​ (7,672) ​ 19,415 Net loss $ (17,860) ​ $ (2,388) ​ $ (5,694) Net loss per share attributable to common stockholders: ​ ​ Basic $ (0.15) ​ $ (0.02) ​ $ (0.05) Diluted $ (0.15) ​ $ (0.02) ​ $ (0.05) Weighted-average common shares outstanding – basic and diluted ​ ​ Basic 115,434,828 ​ 112,899,586 ​ 113,245,421 Diluted 115,434,828 ​ 112,899,586 ​ 113,245,421 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ ​ 63 Table of Contents Latham Group, Inc.

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