What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2024-03-13 compared with 2023-03-07 · 287 added, 342 removed, 907 unchanged (41% of the section changed)

4 unchanged sentences

Consolidated Statements of Operations for the Years Ended December 31, 2023, 2022 and 202 1

Consolidated Statements of Comprehensive (Loss) Income for the Years Ended December 31, 2022, 2021 and 2020

Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2023, 2022 and 202 1

Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2023, 2022 and 202 1

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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.

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We have audited the accompanying consolidated balance sheets of Latham Group Inc.

and subsidiaries (the "Company") as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive (loss) income, stockholders’ equity, and cash flows, for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the "financial statements").

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").

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.

39 unchanged sentences

Total current liabilities

Long-term debt, net of discount and current portion

Long-term debt, net of discount, debt issuance costs, and current portion

Deferred income tax liabilities, net

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Accumulated deficit

Accumulated other comprehensive (loss) income

Accumulated other comprehensive loss

Total stockholders’ equity

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Income (loss) from operations

Other expense (income):

Interest expense

Other expense:

Interest expense, net

Loss on extinguishment of debt

Other expense (income), net

Other (income) expense, net

Total other expense, net

Earnings from equity method investment

Income (loss) before income taxes

Income tax expense

Net (loss) income

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

(Loss) income before income taxes

Income tax (benefit) expense

Net loss per share attributable to common stockholders:

Weighted-average common shares outstanding – basic and diluted

1 unchanged sentence

Latham Group, Inc.

Consolidated Statements of Comprehensive (Loss) Income

Consolidated Statements of Comprehensive Loss

(in thousands)

Year Ended December 31,

Net (loss) income

Other comprehensive (loss) income, net of tax:

Other comprehensive loss, net of tax:

Foreign currency translation adjustments

Total other comprehensive (loss) income, net of tax

Comprehensive (loss) income

Total other comprehensive loss, net of tax

Comprehensive loss

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

4 unchanged sentences

Stockholders’

Balances at December 31, 2019

Foreign currency translation adjustments

Proceeds from issuance of common stock

Repurchase and retirement of common stock

Contingent consideration settlement

Stock-based compensation expense

Balances at December 31, 2020

Balances at January 1, 2021

Foreign currency translation adjustments

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Balances at December 31, 2022

Foreign currency translation adjustments

Retirement of restricted stock

Issuance of common stock upon release of restricted stock units

Stock-based compensation expense

Balances at December 31, 2023

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

4 unchanged sentences

Cash flows from operating activities:

Net (loss) income

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

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization

Gain on insurance proceeds received for capital

Amortization of deferred financing costs and debt discount

Non-cash lease expense

Change in fair value of interest rate swaps

Deferred income taxes

2 unchanged sentences

Loss on extinguishment of debt

Bad debt expense

Other non-cash, net

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Provision on liability for uncertain tax positions

Change in fair value of contingent consideration for Narellan Group Pty Limited

Changes in operating assets and liabilities:

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Purchases of property and equipment

Capital reimbursed from insurance proceeds

Proceeds from the sale of property and equipment

1 unchanged sentence

Return of equity method investment

Equity method investment in Premier Pools & Spas

Proceeds from the sale of portion of equity method investment

4 unchanged sentences

Proceeds from borrowings on revolving credit facilities

Payments on revolving credit facility

Payments on revolving credit facilities

Deferred financing fees paid

1 unchanged sentence

Proceeds from the issuance of common stock

Repayments of finance lease obligations

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

Repurchases and retirements of common stock

Payments of Narellan Group Pty Limited contingent consideration

Net cash provided by financing activities

Repurchase and retirement of common stock

Net cash (used in) provided by financing activities

Effect of exchange rate changes on cash

Net (decrease) increase in cash

Net increase (decrease) in cash

Cash at beginning of period

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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

Fair value of 758,694 shares of common stock issued during the year ended December 31, 2020 in connection with the acquisition of Narellan Pty Limited

Change in defined benefit pension plan liability

Net working capital adjustment receivable

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

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

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Latham offers a portfolio of pools and related products, including in-ground swimming pools, pool liners, and pool covers.

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.

Latham Topco, Inc.

changed its name to Latham Group, Inc.

on March 3, 2021.

Stock Split, Initial Public Offering and Reorganization

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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.

Prior to the closing of the Company’s IPO on April 27, 2021, the Company’s parent entity, Latham Investment Holdings, L.P.

(“Parent”), merged with and into Latham Group, Inc.

(the “Reorganization”).

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Basis of Presentation

The accompanying consolidated financial statements and accompanying notes have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”).

The accompanying consolidated financial statements and notes have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”).

The Company’s consolidated financial statements include the accounts of the Company and its subsidiaries.

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Sales periods having severe weather may also affect net sales.

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.

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.

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”).

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The Company recognizes revenue on the transaction price less any estimated rebates, cash discounts, or other sales incentives.

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.

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.

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In addition, all depreciation expense associated with assets used to manufacture products and make them saleable is included in cost of sales.

The Company records shipping and handling costs associated with outbound freight as cost of sales when the related revenue is recognized in the accompanying consolidated statements of operations.

The Company records shipping and handling costs associated with outbound freight as cost of sales when the related revenue is recognized in the consolidated statements of operations.

Exit or Disposal Costs

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Goodwill is not subject to amortization;

rather, the Company tests goodwill for impairment annually on the first day of the Company’s fourth fiscal quarter and whenever events occur or changes in circumstances indicate that impairment may have occurred.

rather, the Company tests goodwill for impairment annually on the first day of the Company’s fourth quarter and whenever events occur or changes in circumstances indicate that impairment may have occurred.

The Company has one reporting unit for goodwill impairment testing purposes.

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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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As a result, if the Company had used significantly different assumptions or estimates, the fair value of the Company’s stock-based compensation expense could have been materially different.

For stock options, restricted stock awards and restricted stock units, stock-based compensation is recognized using a graded vesting method over the requisite service period in which employees earn the awards.

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.

The Company accounts for forfeitures of stock-based awards as they occur rather than applying an estimated forfeiture rate to stock-based compensation expense.

Contemporaneously with the pricing of the Company’s IPO, on April 22, 2021, the Company effected its Omnibus Incentive Plan (as defined below) in which it granted to certain employees of the Company restricted stock awards, restricted stock units, and stock option awards inclusive of the as converted Class B units as a result of the Reorganization.

Employee Benefit Plans

The Company has various retirement savings plans covering substantially all employees of the Company.

These plans allow eligible employees to make discretionary contributions.

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.

Foreign Currency Translation and Foreign Currency Transactions

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Comprehensive Income (Loss)

Comprehensive income (loss) is a measure of net income and all other changes in equity that result from transactions other than with equity holders and would normally be recorded in the consolidated statements of stockholders’ equity and the consolidated statements of comprehensive income.

Comprehensive income (loss) is a measure of net income (loss) and all other changes in equity that result from transactions other than with equity holders and would normally be recorded in the consolidated statements of stockholders’ equity and the consolidated statements of comprehensive income.

Other comprehensive income (loss) consists of foreign currency translation adjustments and defined benefit plan adjustments.

1 unchanged sentence

Earnings Per Share

Basic net income per share is calculated by dividing net income (loss) available to common stockholders by the weighted-average number of shares of common stock outstanding for the period.

Basic net income (loss) per share is calculated by dividing net income (loss) available to common stockholders by the weighted-average number of shares of common stock outstanding for the period.

Diluted net income (loss) per share is calculated by dividing net income (loss) available to common stockholders by the diluted weighted-average number of shares of common stock outstanding for the period.

Potentially dilutive shares are included in the diluted per-share calculations when the effect of their inclusion is dilutive.

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

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The Company may choose to early adopt any new or revised accounting standards whenever such early adoption is permitted for private companies.

In February 2016, the FASB issued ASU 2016-02 , Leases (Topic 842) (“ASU 2016-02”), which sets out the principles for the recognition, measurement, presentation, and disclosure of leases for both parties to a contract (i.e., lessees and lessors).

The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee.

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.

In July 2018, the FASB issued ASU No.

2018-11, Leases (Topic 842) , which added an optional transition method that allows companies to adopt the standard as of the beginning of the year of adoption as opposed to the earliest comparative period presented.

In November 2019, the FASB issued guidance delaying the effective date for all entities, except for public business entities.

For nonpublic entities, this guidance is effective for annual periods beginning after December 15, 2020.

In June 2020, the FASB issued additional guidance delaying the effective date for all entities, except for public business entities.

The Company adopted ASU 2016-02 on January 1, 2022 using the modified retrospective approach and elected the package of practical expedients to use in transition, which permitted the Company to not reassess, under the new standard, its prior conclusions about lease identification and lease classification.

The adoption resulted in the addition of $ 33.5 million of operating lease right-of-use assets, and $ 34.0 million of operating lease liabilities, a decrease of $ 0.2 million to deferred rent and a decrease of $ 0.3 million to retained earnings for the cumulative effect of initially applying the new standard.

The adoption did not have a material impact on the Company’s consolidated statements of operations, consolidated statements of stockholders’ equity, or consolidated statements of cash flows.

See Note 13, “Leases” for additional information related to the Company’s leases and accounting policy elections.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326):

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ASU 2019-05 provides an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis.

For public entities that are U.S.

Securities and Exchange Commission 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 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.

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 during the year ended December 31, 2022 did not have a material impact on the Company’s 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.

In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848):

Scope , that clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition.

Specifically, this guidance applies to derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform.

This guidance is effective for all entities upon issuance on March 12, 2020 and may be applied through December 31, 2022.

The expedients and exceptions in this guidance are optional.

The Company elected the optional expedient in connection with amending its interest rate swap to replace the reference rate from LIBOR to SOFR to consider the amendment as a continuation of the existing contract without having to perform an assessment that would otherwise be required under GAAP.

The adoption of this standard on January 1, 2023 did not have a material impact on the Company’s consolidated financial statements.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805):

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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 its consolidated financial statements.

Narellan Group Pty Limited

On May 31, 2019 (the “Acquisition Date”), Latham Pool Products acquired Narellan Group Pty Limited and its subsidiaries (collectively “Narellan”) for a total purchase price of $ 35.2 million (the “Narellan Acquisition”).

The results of Narellan’s operations have been included in the consolidated financial statements since that date.

Narellan is a fiberglass pool manufacturer based in Australia with operations in Australia, New Zealand, and Canada.

The acquisition expanded the Company’s operations to a broader geographical footprint.

Additionally, the acquisition provided the Company with an increase in dealer and franchise relationships.

In connection with the Narellan Acquisition, consideration paid included $ 20.2 million in cash, $ 7.6 million in equity consideration, and $ 7.4 million of contingent consideration as of the Acquisition Date.

The cash consideration was funded, in part, through long-term debt proceeds of $ 22.3 million, net of discount of $ 0.7 million.

The equity consideration consisted of common stock.

The valuation of the common stock was prepared using a quantitative put options method.

The Company incurred $ 1.1 million in transaction costs.

The Company agreed to pay the contingent consideration in the form of cash and equity consideration to the seller if certain EBITDA targets were achieved for any of the trailing twelve months periods ended December 31, 2019, June 30, 2020, or the year ended December 31, 2020 (the “Contingent Consideration”).

The fair value of the Contingent Consideration at the Acquisition Date was $ 7.4 million.

On September 25, 2020, the Company amended the terms of the Narellan share purchase agreement to accelerate the settlement of the Contingent Consideration with the selling shareholders of Narellan based upon estimated EBITDA for the year ended December 31, 2020.

The Contingent Consideration was settled through a cash payment of $ 6.6 million and the issuance of an additional 758,697 shares of common stock as equity consideration, which had a contractual value of $ 2.2 million and was recorded as a capital contribution on the consolidated statements of stockholders’ equity.

Since the fair value of the common stock issued of $ 2.8 million exceeded the contractual value of $ 2.2 million and the selling shareholders were also employees of the Company as of the settlement date, the Company recorded the excess remuneration paid to the selling shareholders of $ 0.6 million as stock-based compensation in the consolidated statements of operations and as contributed capital in the consolidated statements of stockholders’ equity as of and for the year-ended December 31, 2020.

GL International, LLC

On October 22, 2020, Latham Pool Products acquired GL International, LLC ( “GLI”) for a total purchase price of $ 79.7 million (the “GLI Acquisition”).

The results of GLI’s operations have been included in the consolidated financial statements since that date.

GLI specializes in manufacturing custom pool liners and safety covers.

As a result, this acquisition expanded the Company’s liner and safety cover product offerings.

In connection with the GLI Acquisition, consideration paid was $ 79.7 million in cash, or $ 74.7 million net of cash acquired of $ 5.0 million, and excluding a net working capital adjustment receivable of $ 0.8 million.

The net working capital adjustment receivable was recorded in prepaid expenses and other current assets in the consolidated balance sheet as of December 31, 2020.

The cash consideration was funded from existing cash on hand.

The Company incurred $ 2.4 million in transaction costs.

The Company accounted for the GLI Acquisition using the acquisition method of accounting in accordance with FASB ASC 805, Business Combinations (“ASC 805”).

This requires that the assets acquired and liabilities assumed be measured at fair value.

The Company estimated, using Level 3 inputs, the fair value of certain fixed assets using a combination of the cost approach and the market approach.

Inventories were valued using the comparative sales method, less the cost of disposal.

Specific to intangible assets, dealer relationships were valued using the multi-period excess earnings method, whereas trade names were valued using the relief from royalty method.

The Company recorded the assets acquired and liabilities assumed at their respective fair values as of the acquisition date.

The following summarizes the purchase price allocation for the Company’s acquisition of GLI:

(in thousands)

October 22, 2020

Total consideration

Allocation of purchase price:

Trade receivables

Prepaid expenses and other current assets

Property and equipment

Intangible assets

Total assets acquired

Accounts payable

Accrued expenses and other current liabilities

Other long-term liabilities

Total liabilities assumed

Total fair value of net assets acquired, excluding goodwill

The excess of the purchase price over the fair value of the identifiable assets acquired and the liabilities assumed in the acquisition was allocated to goodwill in the amount of $ 13.1 million.

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

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

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

Definite-lived intangible assets:

(in thousands)

Period (in years)

Dealer relationships

The following are the net sales and net loss from GLI included in the Company’s results from the GLI Acquisition Date through December 31, 2020:

(in thousands)

December 31, 2020

The Company adopted this standard early on January 1, 2023 and it did not have a material impact on the Company’s consolidated financial statements.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which improves financial reporting by requiring disclosure of incremental segment information on an annual and interim basis for all public entities to enable investors to develop more decision-useful analysis.

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.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures (“ASU 2023-09”), in an effort to enhance the transparency and decision usefulness of income tax disclosures.

For all entities, ASU 2023-09 is effective for fiscal years beginning after December 15, 2024.

amendments should be applied prospectively with retrospective application permitted.

Early adoption is also permitted.

The Company is currently evaluating ASU 2023-09 and its potential impact on the notes to the 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 was paid during the fiscal quarter ended July 2, 2022.

The net working capital adjustment was paid during the 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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Other Business Combinations

During the fiscal quarter ended December 31, 2022, the Company completed the acquisition of certain fiberglass pool manufacturing assets in Seminole, Oklahoma that qualified as a business combination.

During the quarter ended December 31, 2022, the Company completed the acquisition of certain fiberglass pool manufacturing assets in Seminole, Oklahoma that qualified as a business combination.

This transaction resulted in an increase to goodwill, but was not material to our consolidated financial statements, and as a result, additional business combination disclosures for this acquisition have been omitted.

There were no other business combinations during the year ended December 31, 2022.

Pro Forma Financial Information (Unaudited)

The following pro forma financial information presents the statements of operations of the Company with GLI and Radiant as if the acquisitions occurred on January 1, 2020.

The following pro forma financial information presents the statements of operations of the Company with Radiant as if the acquisition occurred on January 1, 2021.

The pro forma results do not include any anticipated synergies, cost savings, or other expected benefits of an acquisition.

The pro forma financial information is not necessarily indicative of what the financial results would have been had the acquisitions been completed on January 1, 2020 and is not necessarily indicative of the Company’s future financial results.

The pro forma financial information is not necessarily indicative of what the financial results would have been had the acquisition been completed on January 1, 2021, and is not necessarily indicative of the Company’s future financial results.

(in thousands)

Net (loss) income

The pro forma financial information presented above reflects the effects as a result of the acquisitions, 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.

Transaction costs for Radiant are reflected within pro forma net income for the year ended December 31, 2020.

The pro forma financial information presented above reflects the 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.

Transaction costs for Radiant are reflected within pro forma net loss for the year ended December 31, 2021.

EQUITY METHOD INVESTMENT

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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 consolidated statements of operations for the fiscal year ended December 31, 2021.

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’s post-sale ownership interest in Premier Pools & Spas was 20.1 % following such transaction.

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

As required when there is a change in facts or circumstances, the Company reassessed its ability to exercise significant influence during the fiscal quarter ended December 31, 2022.

As required when there is a change in facts or circumstances, the Company reassessed its ability to exercise significant influence during the quarter ended December 31, 2022.

The Company concluded that it no longer had the ability to exercise significant influence.

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In connection with Latham’s investment in Premier Pools & Spas, the Company entered into an exclusive supply agreement with Premier Pools & Spas, the Premier Companies, and Premier Pools & Spas’ franchisees (“Premier Franchisees”) (together, the “Customer”).

In February 2024, a new supply agreement was entered into with an effective date of January 1, 2024.

Premier Pools & Spas does not consolidate the operations of the Premier Franchisees.

1 unchanged sentence

These products include fiberglass products and packaged pool products.

The initial term of the supply agreement is ten years .

For the first three years of the supply agreement, the Customer is entitled to a low-teens percentage rebate for all fiberglass pools sold and an additional growth rebate of a low single-digit to low-teens percentage based on year over year sales growth on fiberglass pools (the “Rebates”).

The term of the supply agreement runs through October 20, 2030.

The Customer is entitled to a low-teens percentage rebate for all fiberglass pools sold and an additional growth rebate of a low single-digit to low-teens percentage based on year over year sales growth on fiberglass pools (the “Rebates”).

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

1 unchanged sentence

As of December 31, 2023 and 2022, the Company’s carrying amount for the equity method investment in Premier Pools & Spas was $ 25.9 million and $ 25.1 million, respectively.

During the fiscal 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 investment.

During the fiscal year ended December 31, 2021, Premier Pools & Spas paid the Company dividends of $ 2.2 million that are presented on the 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.

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, 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.

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.

FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value.

Level 1 — Quoted prices in active markets for identical assets or liabilities.

Level 2 — Inputs, other than quoted prices in active markets, that are observable either directly or indirectly.

Level 3 — Unobservable inputs that reflect the Company’s own assumptions incorporated into valuation techniques.

These valuations require significant judgment.

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.

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.

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 on a nonrecurring basis

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

New Term Loan

Amended Prior Term Loan

Interest rate swap

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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 December 31, 2022 and 2021, the Company’s interest rate swap asset was $ 3.5 million and $ 0.5 million, respectively, which was recorded within other assets on the consolidated balance sheets.

As of December 31, 2023 and

2022, the Company’s interest rate swap was a liability of $ 1.2 million and an asset of $ 3.5 million, respectively, which was recorded within other long-term liabilities and other assets on the consolidated balance sheets, respectively.

GOODWILL AND INTANGIBLE ASSETS, NET

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Balance as of December 31, 2021

Measurement period adjustment

Foreign currency translation adjustment

Balance as of December 31, 2022

Measurement period adjustment

Foreign currency translation adjustment

Balance as of December 31, 2023

The Company performed an annual test for goodwill impairment in the fourth quarter of the fiscal years ended December 31, 2022 and 2021 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.

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.

Intangible Assets

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Depreciation and amortization expense related to property and equipment during the years ended December 31, 2023, 2022 and 2021 was $ 13.8 million, $ 10.0 million, and $ 9.7 million, respectively.

Construction in progress recorded as of December 31, 2022 and 2021 primarily related to an increase in fiberglass molds and fiberglass production capacity.

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.

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.

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

New Term Loan

Amended Prior Term Loan

Revolving Credit Facility

Unamortized discount and debt issuance costs

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Total long-term debt

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 (the “New Term Loan”) in an initial principal amount of $ 325.0 million (the “Refinancing”).

On the closing date, proceeds under the New Credit Agreement were used to terminate the Credit Agreement (as defined below) by repayment of $ 294.0 million of outstanding debt thereunder and for general corporate purposes.

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.

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.

As of December 31, 2023, the Company was in compliance with all financial covenants under the New Credit Agreement.

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.

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.

The New Revolving Credit Facility matures on February 23, 2027.

Loans outstanding under the New Revolving Credit Facility denominated in U.S.

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 %.

The Revolving Credit Facility matures on February 23, 2027.

Loans outstanding under the Revolving Credit Facility denominated in U.S.

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 %.

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.

A commitment fee accrues on any unused portion of the commitments under the 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 (as defined in the New Credit Agreement, the “First Lien Net Leverage Ratio”).

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

Borrowings under the Revolving Credit Facility are due at maturity.

The Company incurred debt issuance costs of $ 0.8 million related to the New Revolving Credit Facility.

The debt issuance costs were recorded within other assets on the consolidated balance sheet and are being amortized over the life of the New Revolving Credit Facility.

The debt issuance costs were recorded within other assets on the consolidated balance sheet and are being amortized over the life of the Revolving Credit Facility.

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.

As of December 31, 2022, there were no outstanding borrowings on the New Revolving Credit Facility.

New Term Loan

As of December 31, 2023, there were no outstanding borrowings on the Revolving Credit Facility and $ 75.0 million was available for future borrowing.

Pursuant to the New Credit Agreement, Latham Pool Products borrowed $ 325.0 million in term loans.

The New Term Loan matures on February 23, 2029.

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, 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 under the New Term Loan are subject to scheduled quarterly amortization payments of $ 812,500 , equal to 0.25 % of the initial principal amount of the New Term Loan.

The New Term Loan contains customary mandatory prepayment provisions, including requirements to make mandatory prepayments with 50 % of any excess cash flow and with 100 % of the net cash proceeds from the incurrence of indebtedness not otherwise permitted to be incurred by the covenants, asset sales, and casualty and condemnation events, in each case, subject to customary exceptions.

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

The Term Loan matures on February 23, 2029.

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, 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 are subject to scheduled quarterly amortization payments of $ 812,500 , equal to 0.25 % of the initial principal amount of the Term Loan.

The Term Loan contains customary mandatory prepayment provisions, including requirements to make mandatory prepayments with 50 % of any excess cash flow and with 100 % of the net cash proceeds from the incurrence of indebtedness not otherwise permitted to be incurred by the covenants, asset sales, and casualty and condemnation events, in each case, subject to customary exceptions.

During the first quarter of 2024, the Company made a payment of $ 18.0 million.

Outstanding borrowings as of December 31, 2023 were $ 301.2 million, net of discount and debt issuance costs of $ 8.1 million.

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The effective interest rate was 10.82 % at December 31, 2023, including the impact of the Company’s interest rate swap.

As of December 31, 2023, the Company was in compliance with all financial covenants under the Credit Agreement.

Prior 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 “Prior Revolving Credit Facility”) in the amount of up to $ 30 million, as well as the Prior Term Loan (as described and defined below).

million, as well as the Prior Term Loan (as described and defined below).

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

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The Company was 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, and make prepayments.

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

There were no amounts outstanding as of December 31, 2021 on the Revolver or Letters of Credit.

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

There were 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.

Prior Term Loan

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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, Latham Pool Products amended its Term Loan to revise the applicable reporting

requirements (the “Fourth Amendment”).

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

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 Prior Term Loan.

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Net Leverage Ratio in the table above was defined, as of any date of determination, as the ratio of net indebtedness at such date to consolidated earnings before interest, taxes, depreciation, and amortization.

There was no estimated mandatory prepayment to be paid as of December 31, 2021.

There also was negative covenants, including, but not limited to, 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 December 31, 2021, the Company was in compliance with all financial-related covenants related to the Term Loan.

As of December 31, 2021, the unamortized debt issuance costs and discount on the Amended Prior Term Loan were $ 2.5 million and $ 1.1 million, respectively.

The effective interest rate was 7.04 % at December 31, 2021.

The Amended Prior Term Loan was repaid and terminated in connection with the Refinancing.

Interest Rate Risk

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

The swap has an effective date of May 18, 2020 and a termination date of May 18, 2023.

In February of 2022, the Company amended its interest rate swap to change the index rate from LIBOR to SOFR in connection with the entry into the New Credit Agreement.

Interest rate risk associated with the Credit Agreement is mitigated partially through interest rate swaps.

The Company executed an interest rate swap on April 30, 2020.

The swap had an effective date of May 18, 2020 and a termination date of May 18, 2023.

In February 2022, the Company amended its interest rate swap to change the index rate from LIBOR to SOFR in connection with the entry into the Credit Agreement.

Under the terms of the amended swap, the Company fixed its SOFR borrowing rate at 0.496 % on a notional amount of $ 200.0 million.

The interest rate swap is not designated as a hedging instrument for accounting purposes.

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

Additionally, the Company entered into an interest rate swap that was executed on March 10, 2023.

The swap has an effective date of May 18, 2023 and a termination date of May 18, 2026.

Under the terms of the swap, the Company fixed its SOFR borrowing rate at 4.3725 % on a notional amount of $ 161.0 million.

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

Debt Maturities

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):

The obligations under the New Credit Agreement are guaranteed by certain wholly owned subsidiaries (the “Guarantors”) of the Company as defined in the security agreement.

The obligations under the New Credit Agreement are secured by substantially all of the Guarantors’ tangible and intangible assets, including their accounts receivables, equipment, intellectual property, inventory, cash and cash equivalents, deposit accounts, and security accounts.

The New Credit Agreement also restricts payments and other distributions unless certain conditions are met, which could restrict the Company’s ability to pay dividends.

The obligations under the Credit Agreement are guaranteed by certain wholly owned subsidiaries (the “Guarantors”) of the Company as defined in the security agreement.

The obligations under the Credit Agreement are secured by substantially all of the Guarantors’ tangible and intangible assets, including their accounts receivables, equipment, intellectual property, inventory, cash and cash equivalents, deposit accounts, and security accounts.

The Credit Agreement also restricts payments and other distributions unless certain conditions are met, which could restrict the Company’s ability to pay dividends.

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.

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Accrued interest

Accrued third-party services

Income taxes payable

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

Balance at the beginning of the year

Accruals for warranties issued

Warranty liabilities assumed in GLI Acquisition

Balance at the beginning of the fiscal year

Adjustments to reserve

Warranty liabilities assumed in Radiant Acquisition

Settlements made (in cash or in kind)

Balance at the end of the year

Balance at the end of the fiscal year

EXIT OR DISPOSAL COSTS

On November 8, 2022, the Company approved a cost reduction plan focused on efforts to improve efficiencies and decrease costs.

On November 8, 2022, the Company approved a plan to implement cost reduction programs and lean manufacturing initiatives the structurally reduce our cost basis.

The plan involved the closure of the Company’s manufacturing facility in Bossier City, Louisiana, and a reduction to the Company’s workforce.

The Company expects to incur charges for employee severance and related costs, as well as fixed asset and facility related expenses, of approximately $ 1.6 million.

During the year ended December 31, 2022, the Company recognized costs related to the plan totaling $ 1.1 million, comprised primarily of $ 1.0 million for severance and related costs and $ 0.1 million of fixed asset and facility related expenses.

The Company incurred charges for employee severance and related costs, as well as fixed asset and facility related expenses, of approximately $ 0.5 million and $ 1.6 million during the years ended December 31, 2023 and 2022, respectively.

During the second and third quarters of 2023, the Company initiated an additional plan focused on efforts to improve efficiencies and decrease costs.

The plan involved a reduction in the Company’s workforce as well as closures

of various manufacturing facilities.

During the year ended December 31, 2023, the Company recognized costs related to the plan totaling $ 2.8 million, comprised primarily of $ 1.1 million for severance and related costs and $ 1.7 million relating to the facility closures.

These charges were included in cost of sales and selling, general, and administrative expenses in the consolidated statements of operations.

The remaining costs under the plan of approximately $ 0.5 million are expected to be incurred and recognized in 2023.

The Company did not have an exit or disposal cost related liability as of December 31, 2022 or 2021.

The Company had an exit or disposal cost related liability of $0.2 million as of December 31, 2023 and no liability as of December 31, 2022.

The Company leases vehicles, manufacturing facilities, office space, land, and equipment under operating leases.

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The Company does not have material finance leases.

The components of lease expense for the year ended December 31, 2022 were as follows (in thousands):

The components of lease expense for the years ended December 31, 2023 and 2022 were as follows (in thousands):

December 31, 2023

December 31, 2022

Operating lease expense

Finance lease amortization of assets

Finance lease interest on lease liabilities

Short-term lease expense

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Total lease expense

The table below presents supplemental information related to leases as of December 31, 2022:

Operating and finance lease right of use assets and lease-related liabilities as of December 31, 2023 and 2022 were as follows (in thousands):

December 31, 2023

December 31, 2022

Classification

Lease right-of-use assets:

Operating leases

Operating lease right-of-use assets

Finance leases

Total lease right-of-use assets

Lease-related liabilities

Operating leases

Current operating lease liabilities

Finance leases

Accrued expenses and other current liabilities

Operating leases

Non-current operating lease liabilities

Finance leases

Other long-term liabilities

Total lease liabilities

The table below presents supplemental information related to leases as of December 31, 2023 and 2022:

December 31, 2023

December 31, 2022

Weighted-average remaining lease term (years)

Finance leases

Operating leases

Weighted-average discount rate

Finance leases

Operating leases

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December 31, 2023

December 31, 2022

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

Operating cash flows for operating leases

The following table summarizes maturities of operating lease liabilities as of December 31, 2022:

The following table summarizes maturities of operating lease liabilities as of the years ended December 31, 2023 (in thousands):

Operating Leases

Finance Leases

Total lease payments

Present value of lease liability

Under ASC 840, the minimum annual rental commitments under non-cancelable operating leases as of December 31, 2021 were as follows (in thousands):

Under ASC 840, rental expense during the years ended December 31, 2021 and 2020 was $ 8.8 million and $ 6.8 million, respectively.

Under ASC 840, rental expense during the year ended December 31, 2021 was $ 8.8 million.

The following table sets forth the Company’s disaggregation of net sales by product line (in thousands):

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The Company is subject to United States federal, state, and local income taxes, as well as other foreign income taxes.

The domestic and foreign components of its income (loss) before income taxes are as follows (in thousands):

Income (loss) before income taxes:

Current and deferred income tax expense (benefit) is composed of the following (in thousands):

The domestic and foreign components of its (loss) income before income taxes are as follows (in thousands):

(Loss) income before income taxes:

Current and deferred income tax (benefit) expense is composed of the following (in thousands):

Current income tax expense:

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Deferred income tax (benefit) expense:

Total deferred tax (benefit) expense

Total income tax expense

The reconciliation of the statutory federal income tax rate with the Company’s effective income tax rate is as follows (% of Income (Loss) Before Income Taxes):

Total deferred tax (benefit)

Total income tax (benefit) expense

The reconciliation of the statutory federal income tax rate with the Company’s effective income tax rate is as follows (% of (Loss) Income Before Income Taxes):

December 31, 2023

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Transaction costs not deductible for tax

Other non-deductible expense

Nondeductible stock compensation

Stock compensation shortfall (windfall)

Other compensation

Canadian branch income

Foreign tax restructuring

Other permanent items

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tax code, including, but not limited to (1) reducing the U.S.

federal corporate tax rate from 35 % to 21 % effective January 1, 2018, (2) bonus depreciation that allows for full expensing of qualified property, (3) interest expense deduction limitation rules, and (4) new international tax provisions including, but not limited to, global intangible low-tax income (“GILTI”) and Foreign Derived Intangible Income (“FDII”).

federal corporate tax rate from 35% to 21% effective January 1, 2018, (2) bonus depreciation that allows for full expensing of qualified property, (3) interest expense deduction limitation rules, and (4) new international tax provisions including, but not limited to, GILTI and Foreign Derived Intangible Income (“FDII”).

The Act also required companies to record/pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred.

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The Company has elected with respect to its treatment of GILTI to account for taxes on GILTI as incurred.

For the year ended December 31, 2022, the Act's amendments to research and development (“R&D”) expenditures no longer permit an immediate deduction for R&D expenditures, including those related to internally developed software, in the tax year that such costs are incurred.

Companies are now required to capitalize and amortize all R&D expenditures and requires taxpayers to determine the proper amount of their R&D costs.

The Company considered these new requirements and recorded the deferred tax asset on the capitalization of the R&D expenditures.

In addition, the Act Section 163(j) provides for a change to the interest deduction limitation for tax years starting January 1, 2022, and later.

Taxable income no longer is adjusted for depreciation, amortization, and depletion in arriving at adjusted taxable income ("ATI"), resulting in lower ATI and potentially a greater interest disallowance.

The Company adjusted the interest expense limitation calculation within the GILTI calculation to account for the Section 163(j) update.

As of 2022, the Act's amendments to Section 174 no longer permitted an immediate deduction for research and development (R&D) expenditures, including those related to internally developed software, in the tax year that such costs are incurred.

Instead, companies are required to capitalize and amortize all R&D expenditures and taxpayers are required to determine the proper amount of their Section 174 costs.

The Company considered these requirements and recorded a deferred tax asset on the capitalization of the R&D expenditures.

In addition, the Act provides for a change to the interest deduction limitation (Section 163(j)) for tax years starting January 1, 2022, and later.

Taxable income no is longer adjusted for depreciation, amortization, and depletion in arriving at adjusted taxable income ("ATI"), resulting in lower ATI and potentially a greater interest expense disallowance.

The Company's interest expense deduction is limited in the current year and has established a deferred tax asset for the carry-forward balance.

The Coronavirus Aid, Relief, and Economic Security ("CARES") Act was passed into law on March 27, 2020 and included a provision to temporarily increased the bonus depreciation deduction from 80% to 100% for qualified property acquired and placed in service after September 27, 2017, and before January 1, 2023.

The 100% bonus depreciation provision under the CARES Act expired on December 31, 2022 and as a result, the Company has reverted to the 80% bonus depreciation rate for qualified property acquired and placed in service during 2023.

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 (“NOL”) and tax credit carryforwards.

impact of available net operating loss (“NOL”) and tax credit carryforwards.

These items are stated at the enacted tax rates that are expected to be in effect when taxes are actually paid or recovered.

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Net operating loss carryforwards

Capital loss carryforwards

Inventories, net

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Profits interest units

Section 163(j)

Accrued expenses

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Future branch taxes

Gross deferred tax assets

Valuation allowance

Total deferred tax asset

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ASC 740, Income Taxes , requires that the Company reduce its deferred income tax assets by a valuation allowance if, based on the weight of the available evidence, it is more likely than not that all or a portion of a deferred tax asset will not be realized.

After consideration of all evidence, both positive and negative, management concluded that it is more likely than not that it would be able to realize all of its deferred tax assets and that a valuation allowance of $ 12.7 million was no longer necessary as of December 31, 2021.

Accordingly, the valuation allowance was released during the year ended December 31, 2021.

For the year ended December 31, 2022, management considered all evidence, both positive and negative, and concluded that it is more likely than not that it will be able to realize all of its deferred tax assets and no valuation allowance was needed.

As of December 31, 2022, the Company had net operating loss (“NOL”) carryforwards of approximately $ 7.3 million (tax effected), which will be available to offset future taxable income and tax liabilities.

The NOL carryforwards expire in calendar years 2026 through 2039.

As of December 31, 2023, after consideration of all evidence, both positive and negative, management concluded that it is not more likely than not that it would be able to realize all of its deferred tax assets and that a valuation allowance of $ 3.1 million for the Company's capital loss carryforward deferred tax asset was necessary as of December 31, 2023.

This deferred tax asset was previously presented net in the balance sheet with the Company's uncertain tax position liability.

With the release of the Company's uncertain tax position liability during the fourth quarter of 2023, management concluded a valuation allowance was necessary for the capital loss carryforward.

It is reasonably possible that the Company’s estimates of future taxable income may change within the next 12 months, resulting in a change to the valuation allowance in one or more jurisdictions.

As of December 31, 2023, the Company had net NOL carryforwards of approximately $ 6.7 million (tax effected), which will be available to offset future taxable income.

The foreign NOL carryforwards expire in calendar years 2036 through 2040.

The Company reinvests earnings of foreign operations indefinitely and, accordingly, does not provide for income taxes that could result from the remittance of such earnings.

The Company acknowledges that it would need to accrue and pay taxes should it decide to repatriate cash generated from earnings of its foreign subsidiaries that are considered indefinitely reinvested but expect that the potential tax liability would be insignificant.

The Company acknowledges that it would need to accrue and pay taxes should it decide to repatriate cash generated from earnings of its foreign subsidiaries that are considered indefinitely reinvested but expects that the potential tax liability would be insignificant.

Tax Uncertainties

The liability related to uncertain tax positions, exclusive of interest, is $ 6.4 million at December 31, 2022.

Of this amount, $ 6.4 million, if recognized, would impact the effective tax rate.

The Company does not expect this balance to significantly change within the next twelve months.

The Company’s policy is to record interest and penalties related to unrecognized tax benefits in the income tax provision (benefit).

As of December 31, 2022, the Company had $ 0.6 million of accrued interest and no accrued penalties.

The liability related to uncertain tax positions, exclusive of interest, was $ 6.4 million at December 31, 2022.

As of December 31, 2023, the statute of limitations expired with respect to the Company’s 2019 U.S.

Federal income tax return for which the uncertain tax position liability had been recorded.

As a result of the expiration of the statute of limitations, the Company released the uncertain tax position liability with a corresponding net tax benefit of $ 7.5 million (a gross tax benefit of $ 10.6 million from the liability release offset by tax expense of $ 3.1 million from establishing a valuation allowance on an associated deferred tax asset) during the fourth fiscal quarter of 2023.

The Company is subject to income taxes in the U.S., certain states, and numerous foreign jurisdictions.

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It is possible the outcomes from these examinations will have a material adverse effect on our financial condition and operating results.

Tax years from the fiscal year ended December 31, 2019 through present are open for examination in the U.S.

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 Company’s 2019 Illinois return is currently under examination by the state of Illinois.

The Latham 2019 and 2020 Illinois returns are currently under examination by the state of Illinois.

Tax years and tax periods from June 30, 2020 through present are currently open for examination in Canada.

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Balance at the beginning of the year

Additions for tax positions taken during prior years

Additions for tax positions taken during the current year

Gross amounts of increases and decreases in unrecognized tax benefits as a result of tax positions taken during a prior period

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

Balance at the end of the year

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In the normal course of its business, the Company is involved in various legal proceedings involving contractual and employment relationships, product liability claims, trademark rights, and a variety of other matters.

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.

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.

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.

EMPLOYEE BENEFIT PLANS

The Company has various retirement savings plans covering substantially all employees of the Company.

These plans allow eligible employees to make discretionary contributions.

The Company makes discretionary matching and other contributions depending on the plan and recognized expense of $ 1.7 million, $ 2.0 million, and $ 0.8 million related to such plans during the years ended December 31, 2022, 2021 and 2020, respectively.

During the year-ended December 31, 2020, the Company terminated its defined benefit pension plan, liquidating the existing plan assets and settling all remaining plan obligations associated with the Company’s pension plans, which resulted in an immaterial impact to the consolidated financial statements.

PROFITS INTEREST UNITS

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As part of the Reorganization, the vested and unvested PIUs of the Parent were converted on a pro rata basis into equivalent restricted stock units and restricted stock awards of the Company’s common stock.

The following table summarizes the activity for all PIUs during the years ended December 31, 2021 and 2020:

The following table summarizes the activity for all PIUs during the years ended December 31, 2021:

Weighted-Average

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( 1,266,068 )

Balance at December 31, 2020

( 1,266,068 )

Converted at IPO in connection with the Reorganization

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As the employee’s profits interest units had not vested from an accounting perspective, the retention and immediate vesting of the retained time-vesting units was accounted for as a modification.

A cumulative catch-up charge of $ 1.1 million was recorded during the fiscal quarter ended April 3, 2021 to reflect the incremental fair value of the awards as of the date of the modification, as compared to the grant-date fair value.

A cumulative catch-up charge of $ 1.1 million was recorded during the quarter ended April 3, 2021 to reflect the incremental fair value of the awards as of the date of the modification, as compared to the grant-date fair value.

The Company used the following assumptions in conjunction with the Contingent Claims Analysis Model to estimate the fair value of the PIUs:

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Expected dividend yield

During the year ended December 31, 2020, the Company recorded $ 0.6 million in stock-based compensation expense related to the settlement of the Contingent Consideration, which is recorded in selling, general, and administrative expense in the consolidated statements of operations.

STOCK-BASED COMPENSATION

On April 12, 2021, the Company’s stockholders approved the 2021 Omnibus Incentive Plan (the “Omnibus Incentive Plan”), which became effective on April 22, 2021, upon pricing of the IPO.

The Omnibus Incentive Plan provides for the issuance of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, and other stock-based and cash-based awards.

The maximum aggregate number of shares reserved for issuance under the Omnibus Incentive Plan is 13,170,212 shares.

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, will be $ 750,000 .

Contemporaneously with the pricing of the Company’s IPO, on April 22, 2021 the Company granted 8,340,126 of restricted stock awards, 341,301 of restricted stock units and 886,862 of option awards under the Omnibus Incentive Plan to employees of the Company.

Of the 8,340,126 restricted stock awards granted, (i) 6,799,414 vest every six months in equal installments beginning on December 27, 2021 and ending on December 27, 2023, and (ii) 1,540,712 vest every six months in equal installments, beginning on December 27, 2021 and ending on December 27, 2024.

Of the 341,301 restricted stock unit awards granted, (i) 251,828 vest 1/3 on the nine-month anniversary of the Closing of the IPO, 1/3 on the first anniversary of the Closing of the IPO, and 1/3 on the two-year anniversary of the Closing of the IPO;

(ii) 22,367 vest on the first anniversary of the Closing of the IPO;

(iii) 51,316 vest on December 16, 2021;

and (iv) 15,790 vest evenly on each of the first three anniversaries of the Closing of the IPO.

All 886,862 of the option awards vest 25 % annually on each of the first four anniversaries of the Closing of the IPO.

The option awards were granted with a strike price of $ 19.00 per share.

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

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

On April 12, 2021, the Company’s stockholders approved the 2021 Omnibus Equity Incentive Plan (the “2021 Omnibus Equity Plan”), which became effective on April 22, 2021, upon pricing of its initial public offering.

The 2021 Omnibus Equity Plan provides for the issuance of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, and other stock-based and cash-based awards.

The maximum grant date fair value of cash and equity awards that may be awarded to a non-employee director under the 2021 Omnibus Equity Plan during any one fiscal year, together with any cash fees paid to such non-employee director during such fiscal year, is $ 750,000 .

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.

The Equity Plan First Amendment became effective upon stockholder approval, and provides for (i) an increase by 8,000,000 shares of the share pool, i.e.

the maximum number of shares of the Company’s common stock that may be issued pursuant to awards granted under the 2021 Omnibus Equity Plan, (ii) a prohibition on recycling of shares withheld or remitted to pay taxes for all awards, (iii) a minimum vesting period of one year for all awards, with an exception for shares representing 5% of the share pool, and (iv) a prohibition on the transfer of stock options and stock appreciation rights for value or to third-party financial institutions without stockholder approval.

Except as amended by the Equity Plan First Amendment, the other terms of the 2021 Omnibus Equity Plan remain in full force and effect.

Subsequent to the Equity Plan First Amendment, the maximum aggregate number of shares reserved for issuance under the 2021 Omnibus Equity Plan is 21,170,212 shares.

The following table summarizes the Company’s stock-based compensation expense (in thousands):

Cost of sales

Selling, general, and administrative

Of the $ 128.8 million of stock-based compensation expense recorded during the year ended December 31, 2021, $ 0.5 million was related to the accelerated vesting of restricted stock and $ 49.0 million was related to the modification as a result of the Reorganization.

Refer to Note 18 above for detail regarding the Company’s equity-based awards issued in the form of PIUs prior to the Reorganization and IPO.

The recognized income tax benefit related to stock-based compensation was $ 0.5 million for the year ended December 31, 2023.

The recognized income tax benefit related to stock-based compensation was $ 0.8 million for the year ended December 31, 2022.

There was no recognized income tax benefit related to stock-based compensation for the year ended December 31, 2020.

The recognized income tax benefit related to stock-based compensation was $ 0.1 million for the year ended December 31, 2021.

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.

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 stock appreciation rights awards granted:

December 31, 2023

Risk-free interest rate

Expected volatility

Expected term (in years)

Expected dividend yield

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:

December 31, 2022

Risk-free interest rate

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Expected dividend yield

No stock options were granted under this plan during the year ended December 31, 2023.

Restricted Stock Awards

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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 years ended December 31, 2022 and 2021 was $ 5.53 per share and $ 7.25 per share, respectively.

No stock options were granted during the year ended December 31, 2023.

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”).

At the time of such approval, the Company did not have enough shares of the Company’s common stock in the share pool under the 2021 Omnibus Equity Plan to support such grant.

As of April 1, 2023, the Contingent Grants remained subject to stockholder approval of the Equity Plan First Amendment.

On May 2, 2023, following stockholder approval of the Equity Plan First Amendment, the foregoing stock appreciation right awards became effective without condition.

The following table represents the Company’s stock appreciation rights activity during the year ended December 31, 2023:

Exercise Price

Contract Term

Intrinsic Value

(in thousands)

Outstanding at January 1, 2023

Outstanding at December 31, 2023

Vested and expected to vest at December 31, 2023

Stock appreciation rights exercisable at December 31, 2023

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

The weighted average grant-date fair value of stock appreciation rights granted during the year ended December 31, 2023 was $ 1.08 per share.

SHAREHOLDER’S EQUITY

Equity Structure Prior to Reorganization

Prior to the IPO and the Reorganization, the Parent owned 100 % of the issued and outstanding common stock of the Company.

The capital structure of the Parent consisted of two different classes of limited partnership interests, Class A and Class B units (profits interests).

Prior to the Reorganization, none of the Class B units would have been vested for accounting purposes because of the Parent’s $ 0 Repurchase Right, which applied in the event of a voluntary termination or termination without cause, since it functions as a vesting condition.

Reorganization

Prior to the Closing of the IPO, the Company’s parent entity, Parent, merged with and into Latham Group, Inc., The purpose of the Reorganization was to allow existing indirect owners of the Company to become direct shareholders of the Company.

In connection with the Reorganization, Class A units of the Parent (the “Class A units”) were converted into economically equivalent number of shares of the Company’s common stock on a pro rata basis to the individual holders’ ownership , and Class B units of the Parent (the “Class B units”) were converted into an economically equivalent number of restricted and unrestricted shares of the Company’s common stock, based on each individual’s respective equity value, as derived by individual Class B ownership.

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 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 consolidated financial 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 a result of the retrospective application of the Reorganization, any transaction between the Company and Parent has been eliminated from these consolidated financial statements as these represent intercompany transactions.

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 in the economic appreciation of the equity value of Parent over the agreed hurdles.

As a result of the Reorganization, the Company determined that only vested Class B units are considered outstanding for accounting purposes.

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 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 used to calculate 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, if dilutive.

The conversion of performance-vesting Class B units to restricted shares is not included in the weighted-average shares outstanding used to calculate diluted net income (loss) per share for any period prior to the Reorganization and IPO as the performance vesting thresholds were not satisfied and the performance units were not considered probable to vest historically.

Refer to Note 21 for additional details relating to net income (loss) per share.

Equity Structure Subsequent to the Reorganization

Equity Structure

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

1 unchanged sentence

On April 12, 2021, the Company’s Board of Directors declared and on April 13, 2021, the Company effected a 109,673.709 -for-one stock split of its issued and outstanding shares of common stock.

As a part of the equity Reorganization, on April 22, 2021, 194,207,115 Class A units converted into 97,187,596 shares of common stock and 26,158,894 Class B units converted into 4,145,987 shares of common stock and 8,340,126 shares of unvested restricted stock.

As a part of the equity Reorganization, on April 22, 2021, 194,207,115 Class A units of the Parent converted into 97,187,596 shares of common stock and 26,158,894 Class B units of the Parent converted into 4,145,987 shares of common stock and 8,340,126 shares of unvested restricted stock.

Amendment and Restatement of Certificate of Incorporation

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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 the Company’s directors and executive officers.

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 Pamplona Capital Management (the “Sponsor”) and Wynnchurch Capital, L.P., and also a small percentage of shares of common stock owned by some of the Company’s directors and executive officers.

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 .

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.

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All of the shares were repurchased under a Rule 10b5-1 trading plan.

As of December 31, 2022, approximately $ 77.0 million remained available for share repurchases pursuant to the Repurchase Program.

As of and December 31, 2022 and 2021, 112,091,756 and 113,642,487 shares of common stock are issued and outstanding for accounting purposes, respectively.

NET (LOSS) INCOME PER SHARE

Basic and diluted net income per share attributable to common stockholders was calculated as follows (in thousands, except share and per share data):

No shares were repurchased during the year ended December 31, 2023.

As of December 31, 2023, $ 77.0 million remained available under our Repurchase Program.

As of and December 31, 2023 and 2022, 114,828,896 and 112,091,756 shares of common stock were issued and outstanding for accounting purposes, respectively.

NET LOSS PER SHARE

Basic and diluted net loss per share attributable to common stockholders was calculated as follows (in thousands, except share and per share data):

Year Ended December 31,

Net (loss) income attributable to common stockholders

Net loss attributable to common stockholders

Weighted-average common shares outstanding

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 per share because the effect was anti-dilutive:

Net loss 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 loss per share because the effect was anti-dilutive:

Year Ended December 31,

2 unchanged sentences

Stock options

Stock appreciation rights

RELATED PARTY TRANSACTIONS

1 unchanged sentence

Starting in 2020, BrightAI rendered services to the Company, for which the cost was capitalized as internal-use software.

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

A co-founder of BrightAI Services served on the Company’s Board of Directors from December 9, 2020 until his resignation on February 21, 2024.

During the years ended December 31, 2023, 2022 and 2021, the Company incurred $ 2.0 million, $ 0.2 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 consolidated balance sheets as of December 31, 2023 and 2022.

As of December 31, 2022 and 2021, the Company had accounts payable - related party to BrightAI of $ 0.4 million and $ 0.9 million, respectively.

Expense Reimbursement and Management Fees

The Company had an expense reimbursement agreement (the “management fee arrangement”) with the Sponsor and Wynnchurch Capital, L.P.

for ongoing consulting and advisory services.

The management fee arrangement provided for the aggregate payment of up to $ 1.0 million each year for reimbursement of expenses incurred with services provided and, depending on the extent of services provided, management fees.

The management fee arrangement terminated upon consummation of the Company’s initial public offering.

As of December 31, 2023 and 2022, the Company had accounts payable to BrightAI of $ 0.0 million and $ 0.4 million, respectively.

Expense Reimbursement

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,

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 years ended December 31, 2022, 2021 and 2020.

The Company reimbursed $ 0.2 million, less than $ 0.1 million and less than $ 0.1 million of out-of-pocket costs and expenses to the Sponsor during the years ended December 31, 2022, 2021, and 2020.

As of December 31, 2022 and 2021, there were less than $ 0.1 million and no outstanding amounts payable to the Sponsor, respectively.

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

during each of the years ended December 31, 2022, 2021, and 2020.

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

Operating Lease

In May 2019, in connection with the Narellan Acquisition, the Company assumed an operating lease for the manufacture, sale, and storage of swimming pools and associated equipment with Acquigen Pty Ltd, which was owned by an individual employed by the Company.

The lease expires in June 2028.

The Company recognized $ 0.5 million and $ 0.4 million of rent expense related to this lease during the years ended December 31, 2021 and 2020, respectively, which is recognized within selling, general, and administrative expense on the consolidated statements of operations.

As of December 31, 2021, the individual was no longer employed by the Company and, therefore, no longer considered a related party.

Related party transactions disclosed herein that relate to the individual were recognized while the individual was an employee and considered a related party.

The Company did not have any material transactions with the Sponsor or Wynnchurch Capital, L.P.

during the years ended December 31, 2023, 2022 and 2021.

GEOGRAPHIC INFORMATION

2 unchanged sentences

United States

Our long-lived assets by geographic area, which consist of property and equipment, net assets were as follows (in thousands):

Our long-lived assets by geographic area, which consist of property and equipment, net were as follows (in thousands):

Long-lived assets

17 unchanged sentences

Accumulated deficit

Accumulated other comprehensive (loss) income

Accumulated other comprehensive loss

Total stockholders’ equity

5 unchanged sentences

(in thousands, except share and per share data)

Equity in net (loss) income of subsidiary

Net (loss) income attributable to common stockholders

Net (loss) income per share

Net (loss) income per share attributable to common stockholders – basic and diluted

Equity in net loss of subsidiary

Net loss attributable to common stockholders

Net loss per share

Net loss per share attributable to common stockholders – basic and diluted

Weighted-average common shares outstanding – basic and diluted

2 unchanged sentences

(Parent Company Only)

Condensed Statements of Comprehensive (Loss) Income

Condensed Statements of Comprehensive Loss

(in thousands)

Net (loss) income

Equity in other comprehensive (loss) income of subsidiary

Comprehensive (loss) income

Equity in other comprehensive loss of subsidiary

Comprehensive loss

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

4 unchanged sentences

Cash flows from operating activities:

Net (loss) income

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

Equity in net loss (income) of subsidiary

Adjustments to reconcile net loss to net cash provided by operating activities:

Equity in net loss of subsidiary

Net cash provided by operating activities

28 unchanged sentences

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.

On October 14, 2020 and October 20, 2020, existing shareholders purchased an aggregate of 21,666,653 shares of Latham Group, Inc.’s common stock for an aggregate of $ 64.9 million.

In addition, during the year ended December 31, 2020, the Company issued 205,197 shares of common stock for an aggregate of $ 0.6 million.

Changes In and Disagreements With Accountants on Accounting and Financial Disclosure

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-K

Item 8. Financial Statements and Supplementary Data