What changed in this filing

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Item 1. Financial Statements

2021-11-10 compared with 2021-08-05 · 162 added, 143 removed, 545 unchanged (36% of the section changed)

36 unchanged sentences

Preferred stock, $ 0.0001 par value;

100,000,000 and no shares authorized as of July 3, 2021 and December 31, 2020, respectively;

no shares issued and outstanding as of both July 3, 2021 and December 31, 2020

100,000,000 and no shares authorized as of October 2, 2021 and December 31, 2020, respectively;

no shares issued and outstanding as of both October 2, 2021 and December 31, 2020

Common stock, $ 0.0001 par value;

900,000,000 and 500,000,000 shares authorized as of July 3, 2021 and December 31, 2020, respectively;

120,409,271 and 118,854,249 shares issued and outstanding as of July 3, 2021 and December 31, 2020, respectively

900,000,000 and 500,000,000 shares authorized as of October 2, 2021 and December 31, 2020, respectively;

119,849,589 and 118,854,249 shares issued and outstanding as of October 2, 2021 and December 31, 2020, respectively

Additional paid-in capital

8 unchanged sentences

Fiscal Quarter Ended

Two Fiscal Quarters Ended

June 27, 2020

Three Fiscal Quarters Ended

October 2, 2021

September 26, 2020

October 2, 2021

September 26, 2020

Cost of sales

4 unchanged sentences

Other (income) expense, net

Total other expense (income), net

Total other expense, net

Earnings from equity method investment

3 unchanged sentences

Net (loss) income per share attributable to common stockholders:

Weighted average common shares outstanding:

Weighted-average common shares outstanding – basic and diluted

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3 unchanged sentences

Fiscal Quarter Ended

Two Fiscal Quarters Ended

Three Fiscal Quarters Ended

October 2, 2021

September 26, 2020

October 2, 2021

September 26, 2020

Net (loss) income

Other comprehensive income (loss):

Other comprehensive (loss) income, net of tax:

Foreign currency translation adjustments

Total other comprehensive income (loss)

Comprehensive (loss) income

15 unchanged sentences

Balances at June 27, 2020

Foreign currency translation adjustments

Issuance of common stock

Stock-based compensation expense

Balances at September 26, 2020

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

10 unchanged sentences

( 21,666,653 )

Distributions

Stock-based compensation expense

8 unchanged sentences

Balances at July 3, 2021

Foreign currency translation adjustments

Retirement of restricted stock

Stock-based compensation expense

Balances at October 2, 2021

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

2 unchanged sentences

(in thousands)

Two Fiscal Quarters Ended

Three Fiscal Quarters Ended

September 26,

Cash flows from operating activities:

2 unchanged sentences

Depreciation and amortization

Amortization of deferred financing costs and discounts

Amortization of deferred financing costs and debt discount

Stock-based compensation expense

Other non-cash

Gain on sale of equity method investment

Earnings from equity method investment

10 unchanged sentences

Purchases of property and equipment

Proceeds from sale of equipment

Proceeds from the sale of property and equipment

Return of equity method investment

Proceeds from the sale of equity method investment

Net cash used in investing activities

Cash flows from financing activities :

Proceeds from borrowings on term loan

Payments on term loan

Proceeds from long-term debt borrowings

Payments on long-term debt borrowings

Proceeds from borrowings on revolving credit facility

1 unchanged sentence

Deferred financing fees paid

Distributions

Dividend to Class A unitholders

Proceeds from the issuance of common stock

Proceeds from initial public offering, net of underwriting discounts, commissions and offering costs

Repurchase and retirement of treasury stock

Net cash provided (used in) by financing activities

Payments of Narellan Group Pty Limited contingent consideration

Net cash provided by (used in) financing activities

Effect of exchange rate changes on cash

Net increase in cash

Net increase (decrease) in cash

Cash at beginning of period

6 unchanged sentences

Capitalized internal-use software included in accounts payable – related party

Fair value of equity issued by Parent to settle contingent consideration in connection with the acquisition of Narellan Group Pty Limited

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

6 unchanged sentences

On December 18, 2018, Latham Investment Holdings, LP (“Parent”), an investment fund managed by affiliates of Pamplona Capital Management (the “Sponsor”), Wynnchurch Capital, L.P.

and management acquired all of the outstanding equity interests of Latham Topco., Inc.

a newly incorporated entity in the State of Delaware.

and management acquired all of the outstanding equity interests of Latham Topco., Inc., a newly incorporated entity in the State of Delaware.

Latham Topco, Inc.

9 unchanged sentences

The Reorganization was accounted for as an equity reorganization between entities under common control.

As the Class A units were akin to common shares as all holders held economic interest of the Parent and were entitled to distributions on a pro rata basis to their respective the individual holders’ ownership, the conversion of Class A units to common shares as part of the Reorganization was considered to be the equivalent to a stock split , which requires retrospective treatment for accounting purposes.

Accordingly, all share and per share amounts in these condensed consolidated financials statements and related notes have been retroactively restated, where applicable, for all periods herein, to give effect to the conversion ratio applied in connection with the Reorganization.

As the Class A units were akin to common shares as all holders held economic interest of the Parent and were entitled to distributions on a pro rata basis to their ownership, the conversion of Class A units to common shares as part of the Reorganization was considered to be equivalent to a stock split , which requires retrospective treatment for accounting purposes.

Accordingly, all share and per share amounts in these condensed consolidated financial statements and related notes have been retroactively restated, where applicable, to give effect to the conversion ratio applied in connection with the Reorganization.

Class B units were historically accounted for as compensatory arrangements in accordance with ASC 718 “ Compensation – Stock Compensation ”, akin to stock appreciation rights, that, when vested, would share on the economic appreciation of the equity value of Parent over the agreed hurdles.

1 unchanged sentence

A portion of the Class B units vest based on continued employment by the holder, or time-vesting units, and the remaining Class B units vest upon defined performance and market conditions, or performance-vesting units.

Therefore, the Company has considered any unvested restricted shares as contingentable issuable shares until they vest.

Therefore, the Company has considered any unvested restricted shares as contingently issuable shares until they vest.

The conversion of time-vesting Class B units to restricted shares is retrospectively included in the weighted-average common shares outstanding for diluted net income (loss) per share using the treasury stock method for each period in which the individual unit holder’s threshold was met at the reporting date and therefore the individual unit holder would have participated in a hypothetical distribution to the Parent unit holders.

7 unchanged sentences

The consolidated balance sheet at December 31, 2020 was derived from audited financial statements but does not include all disclosures required by GAAP.

The accompanying unaudited condensed consolidated financial statements as of July 3, 2021 and for the fiscal quarters and two fiscal quarters ended July 3, 2021 and June 27, 2020 have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements.

The accompanying unaudited condensed consolidated financial statements as of October 2, 2021 and for the fiscal quarters and three fiscal quarters ended October 2, 2021 and September 26, 2020 have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements.

Certain information and footnote disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations.

1 unchanged sentence

333-254930 on file with the SEC.

In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the Company’s financial position as of July 3, 2021 and results of operations for the fiscal quarters and two fiscal quarters ended July 3, 2021 and June 27, 2020 and cash flows for the two fiscal quarters ended July 3, 2021 and June 27, 2020 have been made.

The Company’s results of operations for the fiscal quarter and two fiscal quarters ended July 3, 2021 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2021.

In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the Company’s financial position as of October 2, 2021 and results of operations for the fiscal quarters and three fiscal quarters ended October 2, 2021 and September 26, 2020 and cash flows for the three fiscal quarters ended October 2, 2021 and September 26, 2020 have been made.

The Company’s results of operations for the fiscal quarter and three fiscal quarters ended October 2, 2021 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2021.

Use of Estimates

34 unchanged sentences

The Company records its proportionate share of earnings or losses of Premier Holdco, LLC (“Premier Pools & Spas”) within earnings from equity method investment in the condensed consolidated statements of operations on a three-month lag.

The Company recorded its interest in the net earnings of Premier Pools & Spas of $ 0.8 million and $ 1.0 million, respectively, for the fiscal quarter and two fiscal quarters ended July 3, 2021, which included a less than $ 0.1 million and $ 0.1 million adjustment for the amortization of basis differences, within earnings from equity method investment in the condensed consolidated statements of operations during the fiscal quarter and two fiscal quarters ended July 3, 2021.

As the Company initially invested in Premier Pools & Spas on October 30, 2020 there was no earnings from equity method investment recorded during the fiscal quarter and the two fiscal quarters ended June 27, 2020.

The Company received distributions of $ 0.9 million and $ 1.1 million during the fiscal quarter and two fiscal quarters ended July 3, 2021, respectively.

The Company recorded its interest in the net earnings of Premier Pools & Spas of $ 0.8 million and $ 1.8 million, respectively, for the fiscal quarter and three fiscal quarters ended October 2, 2021, which included a $ 0.1 million and $ 0.2 million adjustment for the amortization of basis differences, within earnings from equity method investment in the condensed consolidated statements of operations during the fiscal quarter and three fiscal quarters ended October 2, 2021.

As the Company initially invested in Premier Pools & Spas on October 30, 2020, there was no earnings from equity method investment recorded during the fiscal quarter and the three fiscal quarters ended September 26, 2020.

The Company received distributions of $ 1.1 million and $ 2.2 million during the fiscal quarter and three fiscal quarters ended October 2, 2021, respectively.

For presentation in the condensed consolidated statements of cash flows, the Company utilizes the cumulative earnings approach for purposes of determining whether distributions should be classified as either a return on investment, which are be included in operating activities, or a return of investment, which would be included in investing activities.

98 unchanged sentences

The Company allocated a portion of the purchase price to specific intangible asset categories as follows:

Amortization Period

Definite-lived intangible assets:

6 unchanged sentences

Fiscal Quarter Ended

Two Fiscal Quarters

Three Fiscal Quarters Ended

(in thousands)

June 27, 2020

Ended June 27, 2020

Net income (loss)

The pro forma financial information presented above has been calculated after adjusting for the results of the GLI Acquisition for the fiscal quarter and the two fiscal quarters ended June 27, 2020 to reflect the accounting effects as a result of the acquisition, including the amortization expense from acquired intangible assets, the depreciation and amortization expense from acquired property and equipment, the additional cost of sales from acquired inventory, interest expense from debt financing, and any related tax effects.

September 26, 2020

The pro forma financial information presented above has been calculated after adjusting for the results of the GLI Acquisition for the fiscal quarter and the three fiscal quarters ended September 26, 2020 to reflect the accounting effects as a result of the acquisition, including the amortization expense from acquired intangible assets, the depreciation and amortization expense from acquired property and equipment, the additional cost of sales from acquired inventory, interest expense from debt financing, and any related tax effects.

EQUITY METHOD INVESTMENT

On October 30, 2020, the Company entered into a securities purchase agreement to purchase 28 % of the common units of Premier Pools & Spas for $ 25.4 million.

The Company concluded that it holds common stock of Premier Pools & Spas and has the ability to exercise significant influence over Premier Pools & Spas but does not have a controlling financial interest.

On August 6, 2021, the Company entered into a securities purchase agreement, together with Premier Holdco LLC, Premier Pools Management Corp.

Holdco, Premier Franchise Management Holdco, PFC Holdco, and PPSF, LLC, pursuant to which Premier Group Holdings Inc., an affiliate of Wynnchurch Capital, L.P., acquired 29.8 % of the common units of Premier Pools & Spas in aggregate from all sellers, including the Company.

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.

As a result of the transaction, the Company received cash proceeds of $ 6.8 million and recorded a gain on the sale of equity method investment of $ 3.9 million, which was recorded within other (income) expense, net on the condensed consolidated statements of operations during the fiscal quarter ended October 2, 2021.

The Company’s post-sale ownership interest in Premier Pools & Spas is 20.1 %.

The Company concluded, both before and after the sale of common units on August 6, 2021, that it holds common stock of Premier Pools & Spas and has the ability to exercise significant influence over Premier Pools & Spas but does not have a controlling financial interest.

Accordingly, the Company accounts for this investment using the equity method of accounting.

9 unchanged sentences

The Rebates will be paid directly to Premier Pools Management Corp.

As of July 3, 2021, the Company’s carrying amount for the equity method investment in Premier Pools & Spas was $ 25.3 million.

During the two fiscal quarters ended July 3, 2021, Premier Pools & Spas paid the Company dividends of $ 1.1 million that are presented on the condensed consolidated statement of cash flows as distribution received from equity method investment of $ 1.0 million and return of equity method investment of $ 0.1 million, respectively.

As of October 2, 2021, the Company’s carrying amount for the equity method investment in Premier Pools & Spas was $ 22.0 million.

During the three fiscal quarters ended October 2, 2021, Premier Pools & Spas paid the Company dividends of $ 2.2 million that are presented on the condensed consolidated statement of cash flows as distribution received from equity method investment of $ 1.8 million and return of equity method investment of $ 0.4 million, respectively.

The Company has elected a three-month financial reporting lag.

The Company recorded its interest in net earnings of Premier Pools & Spas of $ 0.8 million and $ 1.0 million for the fiscal quarter and two fiscal quarters ended July 3, 2021, along with a basis difference adjustment of less than $ 0.1 million and $ 0.1 million, respectively.

The Company recorded its interest in net earnings of Premier Pools & Spas of $ 0.8 million and $ 1.8 million for the fiscal quarter and three fiscal quarters ended October 2, 2021, along with a basis difference adjustment of $ 0.1 million and $ 0.2 million, respectively.

FAIR VALUE MEASUREMENTS

12 unchanged sentences

market approach, income approach or cost approach.

There were no transfers between fair value measurement levels during the two fiscal quarters ended July 3, 2021 or June 27, 2020.

There were no transfers between fair value measurement levels during the three fiscal quarters ended October 2, 2021 or September 26, 2020.

Assets and liabilities measured at fair value on a nonrecurring basis

7 unchanged sentences

On September 25, 2020, the Company amended the terms of the Narellan Share Purchase Agreement and settled the Contingent Consideration with the selling shareholders of Narellan based upon estimated EBITDA for the year ended December 31, 2020.

The fair value of the Company’s Contingent Consideration is measured and recorded on the condensed consolidated balance sheets using Level 3 inputs because it is valued based on unobservable inputs and other estimation techniques due to the absence of quoted market prices.

The Company values the Contingent Consideration using a Monte Carlo simulation, which relies on management’s projections of EBITDA and the estimated probability of achieving such targets.

The changes in the fair value of the Contingent Consideration for the fiscal quarter and the two fiscal quarters ended June 27, 2020 of $ 0.9 million and $( 0.2 ) million, respectively, were due to foreign currency translation.

The fair value of the Company’s Contingent Consideration was measured and recorded on the condensed consolidated balance sheets using Level 3 inputs because it was valued based on unobservable inputs and other estimation techniques due to the absence of quoted market prices.

The Company valued the Contingent Consideration using a Monte Carlo simulation, which relied on management’s projections of EBITDA and the estimated probability of achieving such targets.

Estimates of fair value are subjective in nature, involve uncertainties and matters of significant judgment, and are made at a specific point in time.

Thus, changes in key assumptions from period to period could significantly affect the estimate of fair value.

The Monte Carlo simulation utilized the following unobservable inputs to determine the fair value of the Contingent Consideration as of June 27, 2020:

Two Fiscal Quarters Ended

June 27, 2020

EBITDA Risk Adjustment

Annual EBITDA Volatility

Risk-free rate of return

The fair value of the benefit plan assets related to the Company’s pension plan is measured and was recorded on the condensed consolidated balance sheets using Level 2 inputs.

The fair value of the Company’s plan assets was $ 1.3 million as of June 27, 2020.

During the year ended December 31, 2020, the Company terminated its defined benefit pension plan.

The fair value of the benefit plan assets related to the Company’s pension plan was historically measured and recorded on the condensed consolidated balance sheets using Level 2 inputs.

During the fiscal quarter ended September 26, 2020, the Company terminated its defined benefit pension plan.

Fair value of financial instruments

4 unchanged sentences

The following table sets forth the carrying amount and fair value of the term loan (in thousands):

October 2, 2021

December 31, 2020

Carrying Value

Interest rate swap

1 unchanged sentence

The fair value is estimated by comparing (i) the present value of all future monthly fixed rate payments versus (ii) the variable payments based on the forward LIBOR curve.

As of July 3, 2021 and December 31, 2020, the Company’s interest rate swap liability was $ 0.7 million and $ 0.3 million, respectively, which was recorded within other long-term liabilities on the condensed consolidated balance sheets.

As of October 2, 2021 and December 31, 2020, the Company’s interest rate swap liability was $ 0.6 million and $ 0.3 million, respectively, which was recorded within other long-term liabilities on the condensed consolidated balance sheets.

GOODWILL AND INTANGIBLE ASSETS, NET

The carrying amount of goodwill as of July 3, 2021 and as of December 31, 2020 was $ 115.5 million and $ 115.8 million, respectively.

The change in the carrying value during the two fiscal quarters ended July 3, 2021 was solely due to fluctuations in foreign currency exchange rates.

The carrying amount of goodwill as of October 2, 2021 and as of December 31, 2020 was $ 115.2 million and $ 115.8 million, respectively.

The change in the carrying value during the three fiscal quarters ended October 2, 2021 was solely due to fluctuations in foreign currency exchange rates.

Intangible Assets

Intangible assets, net as of July 3, 2021 consisted of the following (in thousands):

Gross Carrying

Intangible assets, net as of October 2, 2021 consisted of the following (in thousands):

October 2, 2021

Trade names and trademarks

3 unchanged sentences

Non-competition agreements

The Company recognized $ 5.5 million and $ 11.1 million of amortization expense related to intangible assets during the fiscal quarter and the two fiscal quarters ended July 3, 2021, respectively.

The Company recognized $ 5.5 million and $ 16.6 million of amortization expense related to intangible assets during the fiscal quarter and the three fiscal quarters ended October 2, 2021, respectively.

Intangible assets, net as of December 31, 2020 consisted of the following (in thousands):

December 31, 2020

Gross Carrying

Trade names and trademarks

3 unchanged sentences

Non-competition agreements

The Company recognized $ 4.1 million and $ 8.1 million of amortization expense related to intangible assets during the fiscal quarter and the two fiscal quarters ended June 27, 2020, respectively.

The Company recognized $ 4.0 million and $ 12.2 million of amortization expense related to intangible assets during the fiscal quarter and the three fiscal quarters ended September 26, 2020, respectively.

The Company estimates that amortization expense related to definite-lived intangible assets will be as follows in each of the next five years and thereafter (in thousands):

Estimated Future

Amortization Expense

Remainder of fiscal 2021

1 unchanged sentence

Inventories, net consisted of the following (in thousands):

October 2, 2021

December 31, 2020

3 unchanged sentences

The components of the Company’s outstanding debt obligations consisted of the following (in thousands):

October 2, 2021

December 31, 2020

Revolving credit facility

Unamortized discount and debt issuance costs

3 unchanged sentences

On December 18, 2018, the Latham Pool Products entered into an agreement (the “Credit Agreement”) with Nomura Corporate Funding Americas, LLC (“Nomura”) that included a revolving line of credit (the “Revolver”) and letters of credit (“Letters of Credit” or collectively with the Revolver, the “Revolving Credit Facility”), as well as a term loan (as described below).

The Revolving Credit Facility was utilized to finance ongoing general corporate and working capital needs with the Revolver of up to $ 30.0 million.

The Revolving Credit Facility is available to finance ongoing general corporate and working capital needs with the Revolver of up to $ 30.0 million.

The Revolving Credit Facility matures on December 18, 2023.

6 unchanged sentences

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 and make prepayments.

As of July 3, 2021 and December 31, 2020, the Company was in compliance with all financial-related covenants related to the Credit Agreement.

There were no amounts outstanding as of both July 3, 2021 and December 31, 2020, on the Revolving Credit Facility or Letters of Credit.

As of October 2, 2021 and December 31, 2020, the Company was in compliance with all financial-related covenants related to the Credit Agreement.

There were no amounts outstanding as of both October 2, 2021 and December 31, 2020, on the Revolving Credit Facility or Letters of Credit.

Term Loan Facility

15 unchanged sentences

The Company recorded an aggregate of $ 1.2 million of debt issuance costs as a direct reduction to the carrying amount of long-term debt on the condensed consolidated balance sheet.

During the fiscal quarter ended July 3, 2021, in accordance with the terms of the Amended Term Loan, the Company elected to change the terms of the prepayment schedule from an inverse application to a pro rata application and as a result the Company is required to repay the outstanding principal balance of the Amended Term Loan in fixed quarterly payments of $ 3.6 million, commencing June 30, 2021.

During the fiscal quarter ended July 3, 2021, in accordance with the terms of the Amended Term Loan, the Company elected to change the terms of the prepayment schedule from an inverse application

to a pro rata application and as a result the Company is required to repay the outstanding principal balance of the Amended Term Loan in fixed quarterly payments of $ 3.6 million, commencing June 30, 2021.

The Amended Term Loan allowed for the $ 175.0 million of proceeds to be distributed to Class A unitholders.

1 unchanged sentence

On April 27, 2021, upon completion of the IPO, the Company used $ 152.7 million of the net proceeds from the IPO to repay $ 152.7 million of the Amended Term Loan.

The Term Loan bears interest at (1) a base rate equal to the highest of (i) the Federal Funds Rate plus 1∕2 of 1% , (ii) the “prime rate” published in the Money Rates section of the Wall Street Journal and (iii) LIBOR plus 1.00 % (2) plus a Loan Margin of (i) 6.00 % for Eurocurrency Rate Loans and (ii) 5.00 % for Base Rate Loans, as defined in the Credit Agreement.

The Term Loan bears interest at (1) a base rate equal to the highest of (i) the Federal Funds Rate plus 1∕2 of 1% , (ii) the “prime rate” published in the Money Rates section of the Wall Street Journal and (iii) LIBOR (2) plus a Loan Margin of (i) 6.00 % for Eurocurrency Rate Loans and (ii) 5.00 % for Base Rate Loans, as defined in the Credit Agreement.

Principal payments under the First Amendment were calculated as 0.629 % of the outstanding principal balance.

Outstanding borrowings as of July 3, 2021 and December 31, 2020 were $ 237.3 million and $ 221.5 million, respectively, net of discount and debt issuance costs of $ 4.5 million and $ 6.7 million, respectively.

Outstanding borrowings as of October 2, 2021 and December 31, 2020 were $ 234.2 million and $ 221.5 million, respectively, net of discount and debt issuance costs of $ 4.1 million and $ 6.7 million, respectively.

In connection with the Term Loan, the Company is subject to various financial reporting, financial and other covenants, including maintaining specific liquidity measurements.

As of July 3, 2021, the unamortized debt issuance costs and discount on the Term Loan were $ 3.4 million and $ 1.1 million, respectively.

As of October 2, 2021, the unamortized debt issuance costs and discount on the Term Loan were $ 2.9 million and $ 1.2 million, respectively.

As of December 31, 2020, the unamortized debt issuance costs and discount on the Term Loan were $ 6.3 million and $ 0.4 million, respectively.

The effective interest rate was 11.57 % and 8.03 % for the fiscal quarters ended July 3, 2021 and June 27, 2020, respectively, and 10.34 % and 8.03 % for the two fiscal quarters ended July 3, 2021 and June 27, 2020, respectively.

The effective interest rate was 7.24 % at October 2, 2021.

Interest rate risk associated with the Company’s Credit Agreement is managed through an interest rate swap which the Company executed on April 30, 2020.

2 unchanged sentences

The interest rate swap is not designated as a hedging instrument for accounting purposes (see Note 2 and Note 5).

The Company recorded interest expense associated with the Revolving Credit Facility, Second Amendment, Third Amendment and interest rate swap, as follows (in thousands):

Fiscal Quarter Ended

Two Fiscal Quarters Ended

June 27, 2020

Interest expense

Amortization of debt issuance costs

Amortization of original issue discount

Interest rate swap

Total interest expense

Principal payments due on the outstanding debt in the next five fiscal years, excluding any potential payments based on excess cash flow levels, are as follows (in thousands):

Term Loan Facility

Remainder of fiscal 2021

4 unchanged sentences

The warranty reserve activity consisted of the following (in thousands):

Two Fiscal Quarters Ended

June 27, 2020

Three Fiscal Quarters Ended

October 2, 2021

September 26, 2020

Balance at the beginning of the year

4 unchanged sentences

Fiscal Quarter Ended

Two Fiscal Quarters Ended

June 27, 2020

Three Fiscal Quarters Ended

October 2, 2021

September 26, 2020

October 2, 2021

September 26, 2020

In-ground Swimming Pools

The effective income tax rate for the fiscal quarter and two fiscal quarters ended July 3, 2021 was ( 10.8 )% and ( 21.9 )%, respectively, compared to 25.0 % and 71.7 % for the fiscal quarter and two fiscal quarters ended June 27, 2020, respectively.

The difference between the U.S.

federal statutory income tax rate and our effective income tax rate for the fiscal quarter ended July 3, 2021 was primarily attributable to the impact of stock compensation expense pursuant to the Reorganization.

The results for the fiscal quarter ended July 3, 2021 include pre-tax stock compensation expense of $73.5 million related to the Reorganization for which there is no associated tax benefit.

The effective income tax rate for the fiscal quarter and three fiscal quarters ended October 2, 2021 was ( 223.8 )% and ( 39.3 )%, respectively, compared to 24.7 % and 30.6 % for the fiscal quarter and three fiscal quarters ended September 26, 2020, respectively.

The difference between the U.S.

federal statutory income tax rate and our effective income tax rate for the fiscal quarter ended April 3, 2021 was impacted primarily by state income tax expense.

federal statutory income tax rate and our effective income tax rate for the fiscal quarter and three fiscal quarters ended October 2, 2021 was primarily attributable to the discrete impact of stock compensation expense pursuant to the Reorganization.

The results for the quarter include pre-tax stock compensation expense of $ 25.4 million and $ 98.9 million for fiscal quarters and three fiscal quarters ended October 2, 2021 related to the Reorganization for which there is no associated tax benefit.

The difference between the U.S.

federal statutory income tax rate and our effective income tax rate for the fiscal quarter and two fiscal quarters ended June 27, 2020 was primarily impacted by the Company switching to an income position for the fiscal quarter ended June 27, 2020.

The pre-tax income for the two fiscal quarters included losses in tax jurisdictions for which the company did not record a tax benefit, which increased the effective income tax rate for the fiscal quarter ended June 27, 2020.

federal statutory income tax rate and our effective income tax rate for the fiscal quarter and three fiscal quarters ended September 26, 2020 was impacted by a variety of factors, primarily stemming from impact of state taxes.

The pre-tax income for three fiscal quarters ended September 26, 2020 included losses in tax jurisdictions for which the company did not record a tax benefit, which increased the effective income tax rate for the fiscal quarter ended September 26, 2020.

SHAREHOLDERS’ EQUITY

11 unchanged sentences

On April 22, 2021, the Company’s certificate of incorporation was further amended and restated to, among other things, increase the authorized shares to 1,000,000,000 , of which 900,000,000 are shares of common stock, par value $ 0.0001 per share and 100,000,000 are shares of preferred stock, par value 0.0001 per share.

As of July 3, 2021 and December 31, 2020 112,153,832 and 118,854,249 shares of common stock are issued and outstanding for accounting purposes, respectively.

As of October 2, 2021 and December 31, 2020, 112,153,832 and 118,854,249 shares of common stock are issued and outstanding for accounting purposes, respectively.

PROFITS INTEREST UNITS

Prior to the Reorganization, the Company’s Parent granted PIUs in the form of Class B units of the Parent to certain key employees and directors for purposes of retaining them and enabling such individuals to participate in the long-term growth and financial success of the Company.

The following table summarizes the activity for all PIUs during the two fiscal quarters ended July 3, 2021 and the year ended December 31, 2020:

Average Grant-

The following table summarizes the activity for all PIUs during the three fiscal quarters ended October 2, 2021 and the year ended December 31, 2020:

Weighted-Average

Number of PIUs

Date Fair Value

Balance at January 1, 2020

5 unchanged sentences

( 26,158,894 )

Balance at July 3, 2021

Balance at October 2, 2021

On January 29, 2021 an employee holder of PIUs terminated his employment with the Company, at which time all 1,055,057 of his performance-vesting units were forfeited.

17 unchanged sentences

Under the terms of the Omnibus Incentive Plan, all stock options will expire if not exercised within ten years of the grant date.

Stock-based compensation expense for the fiscal quarters and two fiscal quarters ended July 3, 2021 was $ 75.5 million and $ 77.0 million, respectively.

Stock-based compensation expense for the fiscal quarters and two fiscal quarters ended June 27, 2020 was and $ 0.2 million and $ 0.5 million, respectively.

Stock-based compensation expense of $4.9 million and $70.6 was recorded in cost of sales and selling, general and administrative expense, respectively, for the fiscal quarter ended July 3, 2021.

Stock-based compensation expense of $4.9 million and $72.1 was recorded in cost of sales and selling, general and administrative expense, respectively, for the two fiscal quarters ended July 3, 2021.

Stock-based compensation expense for the fiscal quarters and two fiscal quarters ended June 27, 2020 was was recorded in selling, general and administrative expense on the condensed consolidated statements of operations.

Of the $ 75.5 million of stock-based compensation expense recorded during the fiscal quarter ended July 3, 2021, $ 0.5 million was due to the accelerated vesting of restricted stock and $ 49.0 million was due to the modification as a result of the Reorganization.

The remaining $26.0 million in stock-based compensation expense for the fiscal quarter ended July 3, 2021 was recognized based on the grant date fair value over the requisite service period.

Stock-based compensation expense for the fiscal quarters and three fiscal quarters ended October 2, 2021 was $ 27.6 million and $ 104.6 million, respectively.

Stock-based compensation expense for the fiscal quarters and three fiscal quarters ended September 26, 2020 was and $ 1.0 million and $ 1.4 million, respectively.

Stock-based compensation expense of $ 1.9 million and $ 25.7 was recorded

in cost of sales and selling, general and administrative expense, respectively, for the fiscal quarter ended October 2, 2021.

Stock-based compensation expense of $ 6.8 million and $ 97.8 was recorded in cost of sales and selling, general and administrative expense, respectively, for the three fiscal quarters ended October 2, 2021.

Stock-based compensation expense for the fiscal quarters and three fiscal quarters ended September 26, 2020 was recorded in selling, general and administrative expense on the condensed consolidated statements of operations.

Of the $ 104.6 million of stock-based compensation expense recorded during the three fiscal quarters ended October 2, 2021, $ 0.5 million was due to the accelerated vesting of restricted stock and $ 49.0 million was due to the modification as a result of the Reorganization.

Refer to Note 12 above for detail regarding the Company’s equity-based awards issued in the form of PIUs prior to the Reorganization and IPO.

As of July 3, 2021, total unrecognized stock-based compensation expense related to all unvested stock-based awards of $ 145.4 million, which is expected to be recognized over a weighted-average period of 1.84 years.

As of October 2, 2021, total unrecognized stock-based compensation expense related to all unvested stock-based awards of $ 106.2 million, which is expected to be recognized over a weighted-average period of 1.49 years.

The following table sets forth the significant assumptions used in the Black-Scholes option-pricing model on a weighted-average basis to determine the fair value of option awards granted:

Two Fiscal Quarters

Ended July 3, 2021

Three Fiscal Quarters Ended

October 2, 2021

Risk-free interest rate

3 unchanged sentences

Restricted Stock Awards

The following table represents the Company’s restricted stock awards activity during the two fiscal quarters ended July 3, 2021:

Weighted-Average

Grant-Date Fair

The following table represents the Company’s restricted stock awards activity during the three fiscal quarters ended October 2, 2021:

Average Grant-

Date Fair Value

Outstanding at January 1, 2021

Outstanding at July 3, 2021

Outstanding at October 2, 2021

Restricted Stock Units

The following table represents the Company’s restricted stock units activity during the two fiscal quarters ended July 3, 2021:

Weighted-Average

Grant-Date Fair

The following table represents the Company’s restricted stock units activity during the three fiscal quarters ended October 2, 2021:

Average Grant-

Date Fair Value

Outstanding at January 1, 2021

Outstanding at July 3, 2021

Outstanding at October 2, 2021

Stock Options

The following table represents the Company’s stock option activity during the two fiscal quarters ended July 3, 2021:

Average Exercise

Price per Share

The following table represents the Company’s stock option activity during the three fiscal quarters ended October 2, 2021:

Exercise Price

Contract Term

2 unchanged sentences

Outstanding on January 1, 2021

Outstanding at July 3, 2021

Vested and expected to vest at July 3, 2021

Options exercisable at July 3, 2021

Outstanding at October 2, 2021

Vested and expected to vest at October 2, 2021

Options exercisable at October 2, 2021

The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common stock for those stock options that had exercise prices lower than the fair value of the Company’s common stock .

The weighted average grant-date fair value of stock options granted during the two fiscal quarters ended July 3, 2021 was $ 7.20 per share.

The weighted average grant-date fair value of stock options granted during the three fiscal quarters ended October 2, 2021 was $ 7.20 per share.

NET INCOME (LOSS) PER SHARE

1 unchanged sentence

Fiscal Quarter Ended

Two Fiscal Quarters Ended

June 27, 2020

Net income (loss) attributable to common stockholders

Three Fiscal Quarters Ended

October 2, 2021

September 26, 2020

October 2, 2021

September 26, 2020

Net (loss) income attributable to common stockholders

Weighted-average common shares outstanding

Net income (loss) per share attributable to common stockholders:

Net (loss) income per share attributable to common stockholders:

The following table includes the number of shares that may be dilutive common shares in the future that were not included in the computation of diluted net income (loss) per share because the effect was anti-dilutive:

Fiscal Quarter Ended

Two Fiscal Quarters Ended

June 27, 2020

Three Fiscal Quarters Ended

October 2, 2021

September 26, 2020

October 2, 2021

September 26, 2020

Restricted stock awards

5 unchanged sentences

A co-founder of BrightAI Services has served on the Company’s board of directors since December 9, 2020.

During the two fiscal quarters ended July 3, 2021 and the year ended December 31, 2020, the Company incurred $ 1.3 million and $ 0.5 million, respectively, associated with services performed by BrightAI, which is recorded as construction in progress within property and equipment, net on the condensed consolidated balance sheet as of July 3, 2021.

As of July 3, 2021 and December 31, 2020, the Company had accounts payable - related party to BrightAI of $ 1.4 million and $ 0.5 million, respectively.

There were no services rendered by BrightAI during the two fiscal quarters ended June 27, 2020.

During the three fiscal quarters ended October 2, 2021 and the year ended December 31, 2020, the Company incurred $ 1.9 million and $ 0.5 million, respectively, associated with services performed by BrightAI, which is recorded as construction in progress within property and equipment, net on the condensed consolidated balance sheet as of October 2, 2021.

As of October 2, 2021 and December 31, 2020, the Company had accounts payable - related party to BrightAI of $ 1.1 million and $ 0.5 million, respectively.

There were no services rendered by BrightAI during the three fiscal quarters ended September 26, 2020.

Expense Reimbursement and Management Fees

3 unchanged sentences

The management fee arrangement terminated upon consummation of the Company’s IPO.

There were no management fees incurred by the Company during the two fiscal quarters ended July 3, 2021 and June 27, 2020.

As of both July 3, 2021 and June 27, 2020, there was less than $ 0.1 million outstanding amounts payable to the Sponsor and Wynnchurch Capital, L.P.

The Company entered into a Stockholders’ Agreement with the Sponsor and Wynnchurch Capital, L.P.

on April 27, 2021.

The Stockholders’ Agreement requires the Company to reimburse the Sponsor and Wynnchurch Capital, L.P.

the reasonable out-of-pocket costs and expenses in connection with monitoring and overseeing their investment in the Company.

There were no management fees incurred by the Company during the three fiscal quarters ended October 2, 2021 and September 26, 2020.

The Company reimbursed less than $ 0.1 million of out-of-pocket costs and expenses to the Sponsor and Wynnchurch Capital, L.P.

during both the three fiscal quarters ended October 2, 2021 and September 26, 2020.

As of October 2, 2021, there were no outstanding amounts payable to the Sponsor and Wynnchurch Capital, L.P.

As of September 26, 2020, there was less than $ 0.1 million outstanding amounts payable to the Sponsor and Wynnchurch Capital, L.P.

Operating Lease

1 unchanged sentence

The lease expires in June 2028.

As of July 3, 2021 and December 31, 2020, future minimum lease payments totaled $ 3.9 million and $ 4.2 million, respectively, related to this lease.

The Company recognized $ 0.1 million of rent expense related to this lease during each of the fiscal quarters ended July 3, 2021 and June 27, 2020, as well as $ 0.2 million of rent expense during each of the two fiscal quarters ended July 3, 2021 and June 27, 2020, which is recognized within selling, general and administrative expense on the condensed consolidated statements of operations.

As of October 2, 2021 and December 31, 2020, future minimum lease payments related to this lease totaled $ 3.6 million and $ 4.2 million, respectively.

The Company recognized $ 0.1 million of rent expense related to this lease during each of the fiscal quarters ended October 2, 2021 and September 26, 2020, as well as $ 0.4 million and $ 0.3 million of rent expense during the three fiscal quarters ended October 2, 2021 and September 26, 2020, which is recognized within selling, general and administrative expense on the condensed consolidated statements of operations.

SEGMENT AND GEOGRAPHIC INFORMATION

7 unchanged sentences

Fiscal Quarter Ended

Two Fiscal Quarters Ended

June 27, 2020

Three Fiscal Quarters Ended

October 2, 2021

September 26, 2020

October 2, 2021

September 26, 2020

United States

3 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements