What changed in this filing

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Item 1. Financial Statements

2022-08-11 compared with 2022-05-12 · 141 added, 139 removed, 430 unchanged (39% of the section changed)

3 unchanged sentences

Condensed Consolidated Statements of Operations

Condensed Consolidated Statements of Comprehensive (Loss) Income

Condensed Consolidated Statements of Comprehensive Income (Loss)

Condensed Consolidated Statements of Stockholders’ Equity

32 unchanged sentences

Preferred stock, $ 0.0001 par value;

100,000,000 shares authorized as of both April 2, 2022 and December 31, 2021;

no shares issued and outstanding as of both April 2, 2022 and December 31, 2021

100,000,000 shares authorized as of both July 2, 2022 and December 31, 2021;

no shares issued and outstanding as of both July 2, 2022 and December 31, 2021

Common stock, $ 0.0001 par value;

900,000,000 shares authorized as of April 2, 2022 and December 31, 2021;

119,469,747 and 119,445,611 shares issued and outstanding , as of April 2, 2022 and December 31, 2021, respectively

900,000,000 shares authorized as of July 2, 2022 and December 31, 2021;

117,547,558 and 119,445,611 shares issued and outstanding , as of July 2, 2022 and December 31, 2021, respectively

Additional paid-in capital

Accumulated deficit

Accumulated other comprehensive income

Accumulated other comprehensive (loss) income

Total stockholders’ equity

5 unchanged sentences

Fiscal Quarter Ended

April 2, 2022

April 3, 2021

Two Fiscal Quarters Ended

Cost of sales

1 unchanged sentence

Underwriting fees related to offering of common stock

Income from operations

Income (loss) from operations

Other expense (income):

1 unchanged sentence

Loss on extinguishment of debt

Other (income) expense, net

Other expense (income), net

Total other expense, net

Earnings from equity method investment

Income before income taxes

Income (loss) before income taxes

Income tax expense

Net (loss) income

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

Net income (loss)

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

Weighted-average common shares outstanding – basic and diluted

1 unchanged sentence

Latham Group, Inc.

Condensed Consolidated Statements of Comprehensive (Loss) Income

Condensed Consolidated Statements of Comprehensive Income (Loss)

(in thousands)

Fiscal Quarter Ended

April 2, 2022

April 3, 2021

Net (loss) income

Other comprehensive income (loss), net of tax:

Two Fiscal Quarters Ended

Net income (loss)

Other comprehensive (loss) income, net of tax:

Foreign currency translation adjustments

Comprehensive (loss) income

Total other comprehensive (loss) income, net of tax

Comprehensive income (loss)

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

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Balances at April 3, 2021

Foreign currency translation adjustments

Net proceeds from initial public offering

Repurchase and retirement of common stock

( 12,264,438 )

Issuance of restricted stock in connection with the Reorganization

Issuance of common stock upon conversion of Class B units

Stock-based compensation expense

Balances at July 3, 2021

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

15 unchanged sentences

Balances at April 2, 2022

Foreign currency translation adjustments

Repurchases and retirements of common stock under repurchase program

( 2,026,231 )

Issuance of common stock upon release of restricted stock units

Stock-based compensation expense

Balances at July 2, 2022

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

2 unchanged sentences

(in thousands)

Fiscal Quarter Ended

Two Fiscal Quarters Ended

Cash flows from operating activities:

Net (loss) income

Adjustments to reconcile net (loss) income to net cash used in operating activities:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:

Depreciation and amortization

13 unchanged sentences

Other long-term liabilities

Net cash used in operating activities

Net cash (used in) provided by operating activities

Cash flows from investing activities :

Purchases of property and equipment

Proceeds from the sale of property and equipment

Acquisitions of businesses, net of cash acquired

Return of equity method investment

Net cash used in investing activities

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Proceeds from sale of common stock

Repurchase and retirement of common stock

Payments of initial public offering costs

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

Repurchases and retirements of common stock

Net cash provided by financing activities

Effect of exchange rate changes on cash

Net decrease in cash

Net (decrease) increase in cash

Cash at beginning of period

6 unchanged sentences

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

Deferred offering costs included in accounts payable and accrued expenses

Right-of-use operating assets obtained in exchange for lease liabilities

Increase in goodwill from measurement period adjustments related to business combinations

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

10 unchanged sentences

on March 3, 2021.

Stock Split, Initial Public Offering and Reorganization

On April 13, 2021, the Company’s certificate of incorporation was amended and restated.

On April 13, 2021, the Company effected a 109,673.709 -for-one stock split of its issued and outstanding shares of common stock.

Accordingly, all share and per share data included in these condensed consolidated financial statements and notes thereto have been adjusted retroactively to reflect the impact of the amended and restated certificate of incorporation and the stock split.

On April 27, 2021, the Company completed its initial public offering (the “IPO”), pursuant to which it issued and sold 23,000,000 shares of common stock, inclusive of 3,000,000 shares sold by the Company pursuant to the full exercise of the underwriters’ option to purchase additional shares.

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.

Prior to the closing of the Company’s IPO on April 27, 2021 (the “Closing of the IPO”), the Company’s parent entity, Parent, merged with and into Latham Group, Inc.

(the “Reorganization”).

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.

The Company received proceeds of $ 257.7 million from this offering, net of $ 11.4 million of underwriting fees.

The proceeds of $ 257.7 million were used to purchase 13,800,000 shares of common stock from certain of the Company’s stockholders, primarily investment funds managed by the Sponsor and Wynnchurch Capital, L.P., and also a small percentage of shares of common stock owned by some of our directors and executive officers.

As of April 2, 2022 and December 31, 2021, 113,720,584 and 113,642,487 shares of common stock are issued and outstanding for accounting purposes, respectively.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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The consolidated balance sheet at December 31, 2021 was derived from audited financial statements but does not include all disclosures required by GAAP.

The accompanying unaudited condensed consolidated financial statements as of April 2, 2022 and for the fiscal quarters ended April 2, 2022 and April 3, 2021 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.

The accompanying unaudited condensed consolidated financial statements as of July 2, 2022 and for the fiscal and two fiscal quarters ended July 2, 2022 and July 3, 2021 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.

These condensed consolidated financial statements should be read in conjunction with Latham Group, Inc.’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2021 included in the Company’s 2021 Annual Report on Form 10-K, filed with the SEC on March 10, 2022 (the “Annual Report”).

In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of these condensed consolidated financial statements.

The Company’s results of operations for the fiscal quarter ended April 2, 2022 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2022.

In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of these condensed consolidated financial statements, have been included.

The Company’s results of operations for the fiscal and two fiscal quarters ended July 2, 2022 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2022.

Use of Estimates

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Actual results could differ from those estimates.

The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances.

The Company bases its estimates on historical experience, known trends and other market-specific relevant factors that it believes to be reasonable under the circumstances.

Estimates are evaluated on an ongoing basis and revised as there are changes in circumstances, facts and experience.

1 unchanged sentence

Segment Reporting

The Company identifies operating segments based on how the chief operating decision maker (“CODM”) manages the business, allocates resources, makes operating decisions and evaluates operating performance.

The Company identifies operating segments based on how the chief operating decision maker manages the business, allocates resources, makes operating decisions and evaluates operating performance.

The Company conducts its business as one operating and reportable segment that designs, manufactures and markets in-ground swimming pools, liners and covers.

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Historically, 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.

Sales periods having severe weather may also affect net sales.

Severe weather may also affect net sales in all periods.

Accounting Policies

Refer to the Company’s Annual Report for a discussion of the Company’s accounting policies, as updated below for recently adopted accounting standards.

Refer to the Company’s Annual Report for a discussion of the Company’s accounting policies, as updated below.

Recently Issued Accounting Pronouncements

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This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease.

In addition, a lessee is required to record (i) a right-of-use asset and a lease liability on its balance sheet for all leases with accounting lease terms of more than 12 months regardless of whether it is an operating or financing lease and (ii) lease expense in its consolidated statement of operations

for operating leases and amortization and interest expense in its consolidated statement of operations for financing leases.

Leases with a term of 12 months or less may be accounted for similar to how operating leases were accounted for under the prior guidance.

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For public entities that are SEC filers, excluding entities eligible to be smaller reporting companies, ASU 2016-13 is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years.

For all other entities, ASU 2016-13 is effective for annual periods beginning after December 15, 2022, including interim periods within those fiscal years.

For all other entities, ASU 2016-13 is effective for

annual periods beginning after December 15, 2022, including interim periods within those fiscal years.

Early adoption is permitted.

The Company is currently evaluating the impact that the adoption of ASU 2016-13 will have on its consolidated financial statements.

In January 2020, the FASB issued ASU 2020-01, Investments — Equity Securities (Topic 321), Investments — Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) (“ASU 2020-01”), which is intended to clarify the interaction of the accounting for equity securities under Topic 321 and investments accounted for under the equity method of accounting in Topic 323 and the accounting for certain forward contracts and purchased options accounted for under Topic 815.

For public entities, ASU 2020-01 is effective for annual periods beginning after December 15, 2020, and interim periods within those reporting periods.

For nonpublic companies, ASU 2020-01 is effective for annual periods beginning after December 15, 2021, and interim periods within those reporting periods.

The adoption of this standard did not have an impact on the Company’s consolidated financial statements.

As an “emerging growth company”, the Company is not yet required to adopt the standard and is currently evaluating the impact that the adoption of ASU 2016-13 will have on its consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by the discontinuation of the London Interbank Offered Rate (“LIBOR”) or by another reference rate expected to be discontinued.

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For public entities, ASU 2021-08 is effective for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2022.

other entities, ASU 2021-08 is effective for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2023.

For all other entities, ASU 2021-08 is effective for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2023.

The amendments should be applied prospectively to business combinations occurring on or after the effective date of the amendments, with early adoption permitted.

The Company is currently evaluating ASU 2021-08 and its potential impact on our consolidated financial statements.

The Company is currently evaluating ASU 2021-08 and its potential impact on its consolidated financial statements.

Trojan Leisure Products, LLC d/b/a Radiant Pools

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The measurement period adjustment resulted in an increase in the total consideration transferred of $ 0.4 million and an increase to goodwill of $ 0.4 million.

The net working capital adjustment payable was recorded in accrued expenses and other current liabilities in the condensed consolidated balance sheet as of April 2, 2022.

The net working capital adjustment was settled during the fiscal quarter ended July 2, 2022.

The Company accounted for the Radiant Acquisition using the acquisition method of accounting in accordance with ASC 805.

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The excess of the purchase price over the fair value of the identifiable assets acquired and the liabilities assumed in the Radiant Acquisition was allocated to goodwill in the amount of $ 14.1 million.

Goodwill resulting from the Radiant Acquisition was

attributable to the expanded market share and product offerings.

Goodwill resulting from the Radiant Acquisition was attributable to the expanded market share and product offerings.

Goodwill resulting from the Radiant Acquisition is deductible for tax purposes.

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market approach, income approach or cost approach.

There were no transfers between fair value measurement levels during the fiscal quarters ended April 2, 2022 or April 3, 2021.

There were no transfers between fair value measurement levels during the two fiscal quarters ended July 2, 2022 or July 3, 2021.

Assets and liabilities measured at fair value on a nonrecurring basis

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however, the Company estimates the fair value of term loans for disclosure purposes.

The fair value of term loans is determined using inputs based on observable market data of a non-public exchange using, which are classified as Level 2 inputs.

The fair value of term loans is determined using inputs based on observable market data of a non-public exchange, which are classified as Level 2 inputs.

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

April 2, 2022

December 31, 2021

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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 SOFR curve.

As of April 2, 2022 and December 31, 2021, the fair value of the Company’s interest rate swap asset was $ 3.3 million and $ 0.5 million, respectively, which was recorded within other assets on the condensed consolidated balance sheets.

As of July 2, 2022 and December 31, 2021, the fair value of the Company’s interest rate swap asset was $ 4.4 million and $ 0.5 million, respectively, which was recorded within other assets on the condensed consolidated balance sheets.

GOODWILL AND INTANGIBLE ASSETS, NET

The carrying amount of goodwill as of April 2, 2022 and as of December 31, 2021 was $ 129.6 million and $ 128.9 million, respectively.

The change in the carrying value during the fiscal quarter ended April 2, 2022 was due to an increase of $ 0.4 million as a result of a measurement period adjustment (see Note 3) and fluctuations in foreign currency exchange rates.

The carrying amount of goodwill as of July 2, 2022 and as of December 31, 2021 was $ 128.6 million and $ 128.9 million, respectively.

The change in the carrying value during the two fiscal quarters ended July 2, 2022 was due to an increase of $ 0.4 million as a result of a measurement period adjustment (see Note 3) and fluctuations in foreign currency exchange rates.

Intangible Assets

Intangible assets, net as of April 2, 2022 consisted of the following (in thousands):

April 2, 2022

Intangible assets, net as of July 2, 2022 consisted of the following (in thousands):

Trade names and trademarks

3 unchanged sentences

Non-competition agreements

The Company recognized $ 7.2 million and $ 5.6 million of amortization expense related to intangible assets during the fiscal quarters ended April 2, 2022 and April 3, 2021, respectively.

The Company recognized $ 7.2 million and $ 14.3 million of amortization expense related to intangible assets during the fiscal and two fiscal quarters ended July 2, 2022, respectively.

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

Intangible assets, net as of December 31, 2021 consisted of the following (in thousands):

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

April 2, 2022

December 31, 2021

3 unchanged sentences

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

April 2, 2022

December 31, 2021

1 unchanged sentence

Amended Term Loan

New Revolving Credit Facility

Unamortized discount and debt issuance costs

2 unchanged sentences

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 “New Revolving Credit Facility”) in an initial principal amount of $ 75.0 million and a U.S.

Dollar senior secured term loan facility (the “New Term Loan Facility”) in an initial principal

amount of $ 325.0 million (the “Refinancing”).

Dollar senior secured term loan facility (the “New Term Loan Facility”) in an initial principal amount of $ 325.0 million (the “Refinancing”).

On the closing date, proceeds under the agreement were used to repay $ 294.0 million and terminate the Credit Agreement (as defined below) and for general corporate purposes.

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A commitment fee accrues on any unused portion of the commitments under the New Revolving Credit Facility.

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.

Borrowings under the New Revolving Credit Facility are due at maturity.

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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.

As of April 2, 2022, there was $ 10.0 million outstanding on the New Revolving Credit Facility.

As of July 2, 2022, there were no outstanding borrowings on the New Revolving Credit Facility.

New Term Loan Facility

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The New Term Loan Facility matures on February 23, 2029.

Loans outstanding under the New Term Loan Facility 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 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.

Loans outstanding under the New Term Loan Facility 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, 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.

Loans under the Term Loan Facility are subject to scheduled quarterly amortization payments equal to 0.25 % of the initial principal amount of the Term Loan Facility.

1 unchanged sentence

The Company recorded $ 6.1 million of debt issuance costs and $ 4.9 million of debt discount related to the New Term Loan Facility as a direct reduction to the carrying amount of long-term debt on the condensed consolidated balance sheet.

Outstanding borrowings as of April 2, 2022 were $ 314.1 million, net of discount and debt issuance costs of $ 10.9 million.

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

As of April 2, 2022, the unamortized debt issuance costs and discount on the New Term Loan were $ 6.0 million and $ 4.8 million, respectively.

The effective interest rate was 4.96 % at April 2, 2022.

As of April 2, 2022, the Company was in compliance with all financial covenants under the New Credit Agreement.

Outstanding borrowings as of July 2, 2022 were $ 313.7 million, net of discount and debt issuance costs of $ 10.5 million.

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

As of July 2, 2022, the unamortized debt issuance costs and discount on the New Term Loan were $ 5.8 million and $ 4.7 million, respectively.

The effective interest rate was 5.95 % at July 2, 2022, including the impact of the Company’s interest rate swap.

As of July 2, 2022, the Company was in compliance with all financial covenants under the New Credit Agreement.

Revolving Credit Facility

On December 18, 2018, Latham Pool Products entered into an agreement (the “Credit Agreement”) with Nomura Corporate Funding Americas, LLC 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 and defined 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.

On December 18, 2018, Latham Pool Products entered into an agreement (the “Credit Agreement”) with Nomura Corporate Funding Americas, LLC 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”) in the amount of up to $ 30 million, as well as a Term Loan (as described and defined below).

The Revolving Credit Facility was utilized to finance ongoing general corporate and working capital needs.

The Revolving Credit Facility was terminated in connection with the Refinancing.

1 unchanged sentence

Pursuant to the Credit Agreement, Latham Pool Products also borrowed $ 215.0 million in term loans (the “Term Loan”).

The Term Loan was amended on May 29, 2019, to provide additional borrowings of $ 23.0 million, which was accounted for as a modification to the Term Loan, to fund our acquisition of Narellan Group Pty Limited and its subsidiaries (the “Narellan Acquisition”) (the “First Amendment”).

On October 14, 2020, we amended the First Amendment to provide additional borrowings of $ 20.0 million, which was accounted for as new debt (the “Second Amendment”).

The Term Loan was amended on May 29, 2019, to provide additional borrowings of $ 23.0 million, which was accounted for as a modification to the Term Loan, to fund the Company’s acquisition of Narellan Group Pty Limited and its subsidiaries (the “First Amendment”).

On October 14, 2020, Latham Pool Products amended the First Amendment to provide additional borrowings of $ 20.0 million, which was accounted for as new debt (the “Second Amendment”).

The Second Amendment was further amended on January 25, 2021, to provide an additional incremental term loan of $ 175.0 million (the “Third Amendment”).

On January 25, 2021, Latham Pool Products borrowed the incremental term loan, and the proceeds were used on February 2, 2021 to purchase and retire equity interests and to pay a distribution.

On March 31, 2021, we amended our Term Loan to revise the applicable reporting requirements (the “Fourth Amendment”).

On November 24, 2021, we amended the Term Loan to provide additional borrowings of $ 50 million (the “Fifth Amendment”).

On March 31, 2021, Latham Pool Products amended our Term Loan to revise the applicable reporting requirements (the “Fourth Amendment”).

On November 24, 2021, Latham Pool Products amended the Term Loan to provide additional borrowings of $ 50 million (the “Fifth Amendment”).

The proceeds from this incremental term loan were used to finance the Radiant Acquisition in part.

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

Fiscal Quarter Ended

April 2, 2022

April 3, 2021

Two Fiscal Quarters Ended

Balance at the beginning of the year

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Balance at the end of the year

On January 1, 2022, the Company adopted ASU 2016-02, "Leases (Topic 842),"

and the related amendments (collectively "ASC 842").

On January 1, 2022, the Company adopted ASU 2016-02, “Leases (Topic 842),” and the related amendments (collectively “ASC 842”).

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.

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The Company does not have material finance leases.

The components of lease expense for the fiscal quarter ended April 2, 2022 were as follows (in thousands):

The components of lease expense for the fiscal and two fiscal quarters ended July 2, 2022 were as follows (in thousands):

Fiscal Quarter Ended

April 2, 2022

Two Fiscal Quarters Ended

Operating lease expense

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Total lease expense

The table below presents supplemental information related to leases as of April 2, 2022:

April 2, 2022

The table below presents supplemental information related to leases as of July 2, 2022:

Weighted-average remaining lease term (years)

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The table below presents supplemental information related to the cash flows for operating leases recorded on the condensed consolidated statements of cash flows (in thousands):

Fiscal Quarter Ended

April 2, 2022

Two Fiscal Quarters Ended

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases

The following table summarizes maturities of operating lease liabilities as of April 2, 2022 (in thousands):

The following table summarizes maturities of operating lease liabilities as of July 2, 2022 (in thousands):

Operating Leases

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Fiscal Quarter Ended

April 2, 2022

April 3, 2021

Two Fiscal Quarters Ended

In-ground Swimming Pools

The effective income tax rate for the fiscal quarter ended April 2, 2022 was 215.1 %, compared to 25.3 % for the fiscal quarter ended April 3, 2021.

The effective income tax rate for the fiscal and two fiscal quarters ended July 2, 2022 was 71.9 % and 91.8 %, respectively, compared to ( 10.8 )% and ( 21.9 )% for the fiscal and two fiscal quarters ended July 3, 2021.

The difference between the U.S.

federal statutory income tax rate and the Company’s effective income tax rate for the fiscal quarter ended April 2, 2022 was primarily attributable to the discrete impact of stock compensation expense for which there is no associated tax benefit.

federal statutory income tax rate and the Company’s effective income tax rate for both the fiscal and two fiscal quarters ended July 2, 2022 was primarily attributable to the discrete impact of stock-based compensation expense for which there is no associated tax benefit.

The difference between the U.S.

federal statutory income tax rate and the Company’s effective income tax rate for the fiscal quarter ended April 3, 2021 was impacted by a variety of factors, primarily the impact of state taxes.

federal statutory income tax rate and the Company’s effective income tax rate for both the fiscal and two fiscal quarters ended July 3, 2021 was primarily attributable to the discrete impact of stock-based compensation expense.

SHAREHOLDERS’ EQUITY

Stock Split, Initial Public Offering and Reorganization

On April 13, 2021, the Company’s certificate of incorporation was amended and restated.

On April 13, 2021, the Company effected a 109,673.709 -for-one stock split of its issued and outstanding shares of common stock.

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.

Prior to the closing of the Company’s IPO on April 27, 2021, the Company’s parent entity, Parent, merged with and into Latham Group, Inc.

(the “Reorganization”).

Offering of Common Stock

The Company received proceeds of $ 257.7 million from this offering, net of $ 11.4 million of underwriting fees.

Repurchase Program

On May 10, 2022, the Company approved a stock repurchase program (the “Repurchase Program”), which authorized 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.

The Company is not obligated to repurchase any of its shares of its common stock under the Repurchase Program and the timing and amount of any repurchases will depend on market conditions, the Company’s stock price, alternative uses of capital, the terms of the Company’s debt instruments and other factors.

During the fiscal quarter ended July 2, 2022, the Company repurchased and concurrently retired 2,026,231 shares of the Company’s common stock for an aggregate amount of $ 15.0 million, pursuant to the Repurchase Program.

As of July 2, 2022, approximately $ 85.0 million remained available for share repurchases pursuant to the Repurchase Program.

The Company accounts for the excess of the repurchase price over the par value of shares acquired as a reduction to additional paid-in capital.

STOCK-BASED COMPENSATION

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The maximum grant date fair value of cash and equity awards that may be awarded to a non-employee director under the Omnibus Incentive Plan during any one fiscal year, together with any cash fees paid to such non-employee director during such fiscal year, is $ 750,000 .

Stock-based compensation expense for the fiscal quarters ended April 2, 2022 and April 3, 2021 was $ 16.9 million and $ 1.5 million, respectively.

Stock-based compensation expense of $ 1.2 million and $ 15.7 was recorded in cost of sales and selling, general and administrative expense, respectively, for the fiscal quarter ended April 2, 2022.

Stock-based compensation expense for the fiscal quarter ended April 3, 2021 was recorded in selling, general and administrative expense on the condensed consolidated statements of

As of April 2, 2022, total unrecognized stock-based compensation expense related to all unvested stock-based awards was $ 64.1 million, which is expected to be recognized over a weighted-average period of 1.45 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:

The following table summarizes the Company’s stock-based compensation expense:

Fiscal Quarter Ended

April 2, 2022

Two Fiscal Quarters Ended

Cost of sales

Selling, general and administrative

As of July 2, 2022, total unrecognized stock-based compensation expense related to all unvested stock-based awards was $ 47.0 million, which is expected to be recognized over a weighted-average period of 1.36 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

Risk-free interest rate

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Restricted Stock Awards

The following table represents the Company’s restricted stock awards activity during the fiscal quarter ended April 2, 2022:

The following table represents the Company’s restricted stock awards activity during the two fiscal quarters ended July 2, 2022:

Average Grant-

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Outstanding at January 1, 2022

Outstanding at April 2, 2022

( 1,373,260 )

Outstanding at July 2, 2022

Restricted Stock Units

The following table represents the Company’s restricted stock units activity during the fiscal quarter ended April 2, 2022:

The following table represents the Company’s restricted stock units activity during the two fiscal quarters ended July 2, 2022:

Average Grant-

1 unchanged sentence

Outstanding at January 1, 2022

Outstanding at April 2, 2022

Outstanding at July 2, 2022

Stock Options

The following table represents the Company’s stock option activity during the fiscal quarter ended April 2, 2022:

The following table represents the Company’s stock option activity during the two fiscal quarters ended July 2, 2022:

Exercise Price

3 unchanged sentences

Outstanding on January 1, 2022

Outstanding at April 2, 2022

Vested and expected to vest at April 2, 2022

Options exercisable at April 2, 2022

Outstanding at July 2, 2022

Vested and expected to vest at July 2, 2022

Options exercisable at July 2, 2022

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 fiscal quarter ended April 2, 2022 was $ 6.51 per share.

The weighted average grant-date fair value of stock options granted during the two fiscal quarters ended July 2, 2022 was $ 6.48 per share.

NET INCOME (LOSS) PER SHARE

1 unchanged sentence

Fiscal Quarter Ended

April 2, 2022

April 3, 2021

Net (loss) income attributable to common stockholders

Two Fiscal Quarters Ended

Net income (loss) attributable to common stockholders

Weighted-average common shares outstanding

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

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

As of July 2, 2022 and December 31, 2021, 113,171,655 and 113,642,487 shares of common stock are issued and outstanding for accounting purposes, respectively.

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

April 2, 2022

April 3, 2021

Two Fiscal Quarters Ended

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 fiscal quarter ended April 2, 2022 and the year ended December 31, 2021, the Company incurred $ 0.3 million and $ 2.1 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 April 2, 2022.

As of both April 2, 2022 and December 31, 2021, the Company had accounts payable - related party to BrightAI of $ 0.9 million.

During the two fiscal quarters ended July 2, 2022 and the year ended December 31, 2021, the Company incurred $ 0.3 million and $ 2.1 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 2, 2022.

As of both July 2, 2022 and December 31, 2021, the Company had accounts payable - related party to BrightAI of $ 0.9 million.

Expense Reimbursement and Management Fees

7 unchanged sentences

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 fiscal quarters ended April 2, 2022 and April 3, 2021.

There were no management fees incurred by the Company during the fiscal and two fiscal quarters ended July 2, 2022 and July 3, 2021.

The Company did not reimburse any out-of-pocket costs or expenses to the Sponsor and Wynnchurch Capital, L.P.

during both the fiscal quarters ended April 2, 2022 and April 3, 2021.

As of both April 2, 2022 and December 31, 2021, there were no outstanding amounts payable to the Sponsor and Wynnchurch Capital, L.P.

SUBSEQUENT EVENTS

The Company may effect these repurchases in open market transactions, privately negotiated purchases or other acquisitions.

during the two fiscal quarters ended July 2, 2022.

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

during the two fiscal quarters ended July 3, 2021.

As of both July 2, 2022 and December 31, 2021, there were no outstanding amounts payable to the Sponsor and Wynnchurch Capital, L.P.

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