What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-03-05 compared with 2024-03-13 · 193 added, 296 removed, 898 unchanged (35% of the section changed)

57 unchanged sentences

Deferred income tax liabilities, net

Liability for uncertain tax positions

Non-current operating lease liabilities

22 unchanged sentences

Underwriting fees related to offering of common stock

Income (loss) from operations

Income from operations

Other expense:

1 unchanged sentence

Loss on extinguishment of debt

Other (income) expense, net

Other expense (income), net

Total other expense, net

1 unchanged sentence

(Loss) income before income taxes

Income tax (benefit) expense

Income tax expense (benefit)

Net loss per share attributable to common stockholders:

16 unchanged sentences

Balances at January 1, 2022

Cumulative effect of adoption of new accounting standard- leases (Note 2)

Cumulative effect of adoption of new revenue recognition standard (Note 2)

Foreign currency translation adjustments

Dividend to Class A unitholders ($1.00 per share)

Issuance of restricted stock in connection with the Reorganization

Issuance of common stock upon conversion of Class B units

Net proceeds from initial public offering

Proceeds from sale of common stock

Repurchase and retirement of common stock

( 13,800,244 )

Retirement of restricted stock

Repurchases and retirements of common stock under Repurchase Program

( 4,483,620 )

Retirement of restricted stock

Issuance of common stock upon release of restricted stock units

1 unchanged sentence

Balances at December 31, 2022

Cumulative effect of adoption of new accounting standard- leases

Foreign currency translation adjustments

Proceeds from sale of common stock

Repurchase and retirement of common stock

( 13,800,244 )

Repurchases and retirements of common stock under Repurchase Program

( 4,483,620 )

Retirement of restricted stock

3 unchanged sentences

Foreign currency translation adjustments

Retirement of restricted stock

Issuance of common stock upon release of restricted stock units

10 unchanged sentences

Gain on insurance proceeds received for capital

Unrealized foreign currency loss (gains)

Amortization of deferred financing costs and debt discount

Non-cash lease expense

Change in fair value of interest rate swaps

Change in fair value of interest rate swap

Deferred income taxes

4 unchanged sentences

Other non-cash, net

Gain on sale of portion of equity method investment

Earnings from equity method investment

13 unchanged sentences

Proceeds from the sale of property and equipment

Acquisitions of businesses, net of cash acquired

Return of equity method investment

Proceeds from the sale of portion of equity method investment

Acquisition of business, net of cash acquired

Net cash used in investing activities

2 unchanged sentences

Payments on long-term debt borrowings

Proceeds from borrowings on revolving credit facilities

Proceeds from borrowings on revolving credit facility

Payments on revolving credit facilities

Deferred financing fees paid

Dividend to Class A unitholders

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

Repurchase and retirement of common stock

1 unchanged sentence

Effect of exchange rate changes on cash

Net increase (decrease) in cash

Net (decrease) increase in cash

Cash at beginning of period

11 unchanged sentences

Latham Group, Inc.

(the “Company”) wholly owns Latham Pool Products, Inc.

(“Latham Pool Products”) (together, “Latham”), a designer, manufacturer, and marketer of in-ground residential swimming pools in North America, Australia, and New Zealand.

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

Stock Split, Initial Public Offering and Reorganization

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

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

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

Refer to Note 19 for additional detail.

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

The aggregate net proceeds received by the Company from the IPO were $ 399.3 million, after deducting underwriting discounts and commissions and other offering costs.

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

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

(the “Reorganization”).

Refer to Note 19 for additional detail.

(the “Company” or “Latham”) wholly owns Latham Pool Products, Inc.

(“Latham Pool Products”) a designer, manufacturer, and marketer of in-ground residential swimming pools in North America, Australia, and New Zealand.

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

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

10 unchanged sentences

Although the Company generally has demand for its products throughout the year, its business is seasonal and weather is one of the principal external factors affecting the business.

In general, net sales and net income are highest during spring and summer, representing the peak months of swimming pool use, pool installation, and remodeling and repair activities.

Sales periods having severe weather may also affect net sales.

In general, net sales and net income are highest (or net loss is the lowest) during the second and third quarters, representing the peak months of swimming pool use, pool installation, and remodeling and repair activities.

Severe weather may also affect net sales in all periods.

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”).

Under this method of adoption, the comparative information has not been revised and continues to be reported under the previously applicable lease accounting guidance.

For leases with initial terms greater than 12 months, the Company considers these right-of-use assets and records the related asset and obligation at the present value of lease payments over the term.

28 unchanged sentences

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.

22 unchanged sentences

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

The Company accounts for exit or disposal of activities in accordance with ASC 420, Exit or Disposal Cost Obligations .

The Company defines an exit or disposal activity as one that includes but is not limited to a program which is planned and controlled by management and materially changes either the scope of a business or the manner in which that business is conducted.

Business exit costs may include (i) one-time termination benefits related to employee separations, (ii) contract termination costs and (iii) other related costs associated with exit or disposal activities.

The Company records one-time employee termination benefits as an operating expense when the benefit arrangement is communicated to the employee and no significant future services are required.

Trade Receivables, Net

42 unchanged sentences

After the measurement period, all adjustments are recorded in the consolidated statements of operations as operating expenses or income.

Acquisition-related contingent consideration was recorded in the consolidated balance sheets at its acquisition-date estimated fair value, in accordance with the acquisition method of accounting.

The fair value of the acquisition-related contingent consideration was remeasured each reporting period, with changes in fair value recorded in other expense (income), net in the consolidated statements of operations.

The fair value measurement is based on significant inputs not observable by market participants and thus represents a Level 3 input in the fair value hierarchy.

Refer to Note 3 for additional detail.

Equity Method Investments

Investments and ownership interests in common stock or in-substance common stock are accounted for under the equity method accounting if the Company has the ability to exercise significant influence over the entity, but does not have a controlling financial interest.

not have a controlling financial interest.

The Company also uses the equity method of accounting for investments in a partnership or limited liability company with specific ownership accounts, if the Company has an ownership interest of 5% or more.

5 unchanged sentences

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

Under the cumulative

earnings approach, the Company compares the distributions received to its cumulative equity-method earnings since inception.

Under the cumulative earnings approach, the Company compares the distributions received to its cumulative equity-method earnings since inception.

Any distributions received up to the amount of cumulative equity earnings are be considered a return on investment and classified in operating activities.

27 unchanged sentences

The Company evaluates the carrying value of its long-lived assets for impairment whenever events or circumstances indicate that the carrying value of the assets may not be recoverable.

Conditions that may indicate impairment include, but are not limited to, a significant decrease in the market price of an asset, a significant adverse change in the extent or manner in which an

asset is being used or a significant decrease in its physical condition, and operating or cash flow performance that demonstrates continuing losses associated with an asset or asset group.

Conditions that may indicate impairment include, but are not limited to, a significant decrease in the market price of an asset, a significant adverse change in the extent or manner in which an asset is being used or a significant decrease in its physical condition, and operating or cash flow performance that demonstrates continuing losses associated with an asset or asset group.

The Company also considers non-financial data such as changes in the operating environment, competitive information, market trends, and business relationships.

13 unchanged sentences

Order backlog

10 – 12 months

The Company accounts for goodwill as the excess of the purchase price over the net amount of identifiable assets acquired and liabilities assumed in a business combination measured at fair value.

3 unchanged sentences

Impairment testing is performed for the Company’s reporting unit by first assessing qualitative factors to see if further testing of goodwill is required.

If the Company concludes that it is more likely than not that its reporting unit’s fair value is less than its carrying amount based on the qualitative assessment, then a quantitative test is required.

If the Company concludes that it is more likely than not that its reporting unit’s

fair value is less than its carrying amount based on the qualitative assessment, then a quantitative test is required.

The Company may also choose to bypass the qualitative assessment and perform the quantitative test.

9 unchanged sentences

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.

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

The Company’s Chief Executive Officer, who is the chief operating decision maker, reviews financial information presented on a consolidated basis for purposes of assessing financial performance and allocating resources.

14 unchanged sentences

The Company’s policy is to classify interest and penalties related to unrecognized tax benefits as a component of income tax expense (benefit) within the consolidated statements of operations.

The Company had $ 0.0 million of accrued interest and no accrued penalties as of December 31, 2023.

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

The Company had $ 0.0 million of

accrued interest and no accrued penalties as of December 31, 2024 and December 31, 2023.

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 has evaluated the impact of Pillar Two (as defined below) in the jurisdictions in which the Company operates and has determined no additional top up tax is required.

Stock-Based Compensation

8 unchanged sentences

The Company considers the historical volatility of the Company’s stock price, as well as its implied volatility.

The Company utilized a dividend yield of zero, since it has no history or plan of declaring

dividends on its common stock.

The Company utilized a dividend yield of zero, since it has no history or plan of declaring dividends on its common stock.

The assumptions underlying these valuations represented the Company’s best estimate, which involved inherent uncertainties and the application of judgment.

17 unchanged sentences

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.

Income tax (benefit) expense on the components of other comprehensive income (loss) was not significant for the years ended December 31, 2023, 2022 and 2021.

Other comprehensive income (loss) consists of foreign currency translation adjustments.

Income tax expense (benefit) on the components of other comprehensive income (loss) was not significant for the years ended December 31, 2024, 2023 and 2022.

Earnings Per Share

9 unchanged sentences

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

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

Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost.

ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss model.

It also eliminates the concept of other-than-temporary impairment and requires credit losses related to available-for-sale debt securities to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities.

These changes will result in earlier recognition of credit losses.

In November 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments — Credit Losses, which narrowed the scope and changed the effective date for nonpublic entities for ASU 2016-13.

The FASB subsequently issued supplemental guidance within ASU 2019-05, Financial Instruments — Credit Losses (Topic 326):

Targeted Transition Relief (“ASU 2019-05”).

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 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.

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):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”), which amends ASC 805 by requiring acquiring entities to apply ASC 606 to recognize and measure contract assets and contract liabilities in a business combination.

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

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

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

The Company 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):

1 unchanged sentence

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.

The 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

On November 24, 2021, Latham Pool Products acquired Trojan Leisure Products, LLC d/b/a Radiant Pools (“Radiant”) for a total purchase price of $ 90.7 million (the “Radiant Acquisition”).

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

Radiant specializes in manufacturing proprietary vinyl liner aluminum swimming pools that can be built completely in-ground, semi-in-ground, or above ground.

As a result, this acquisition expanded the Company’s product offerings.

In connection with the Radiant Acquisition, consideration paid was $ 90.7 million in cash, or $ 90.5 million net of cash acquired of $ 0.2 million.

The cash consideration was funded, in part, through long-term debt proceeds of $ 50.0 million.

In March 2024, the FASB issued ASU 2024-01, Compensation – Stock Compensation (Topic 718):

Scope Application of Profits Interest and Similar Awards (“ASU 2024-01”), which improves financial reporting by providing clarity on when an entity should apply the scope guidance in paragraph 718-10-15-3.

ASU 2024-01 is effective for public business entities for fiscal years beginning after December 15, 2024.

For all other entities, the amendments are effective for fiscal years beginning after December 15, 2025.

The amendments should be applied retrospectively to all prior periods presented in the financial statements, with early adoption permitted.

The Company is currently evaluating ASU 2024-01 and its potential impact on the condensed consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40 (“ASU 2024-03”)), which improves disclosures to provide more detailed information about a business entity’s expenses.

ASU 2024-03 is effective for public business entities for fiscal

years beginning after December 15, 2026.

The amendments should be applied retrospectively to all prior periods presented in the financial statements, with early adoption permitted.

The Company is currently evaluating ASU 2024-03 and its potential impact on the consolidated financial statements.

Recently Adopted Accounting Pronouncements

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

Improvements to Reportable Segment Disclosures (“ASU 2023-07”), requiring public entities to disclose information about their reportable segments’ significant expenses and other segment items on an interim and annual basis.

Public entities with a single reportable segment are required to apply the disclosure requirements in ASU 2023-07, as well as all existing segment disclosures and reconciliation requirements in ASC 280 on an interim and annual basis.

The Company adopted ASU 2023-07 during the year ended December 31, 2024.

See Note 20 for further detail.

Coverstar Central, LLC

On August 2, 2024 (the “Acquisition Date”), Latham Pool Products acquired Coverstar Central, LLC (“Coverstar Central”) for total consideration of $ 71.5 million (the “Coverstar Central Acquisition”).

The total consideration included $ 66.5 million in cash (including a net working capital adjustment of $ 1.2 million) and a non-cash settlement of preexisting obligations of $ 4.9 million.

Preexisting relationships are effectively settled since such a relationship becomes intercompany upon the acquisition and is eliminated in post-combination financial statements.

The cash consideration was funded with cash on hand.

The Company incurred $ 0.9 million in transaction costs.

Subsequent to the acquisition date, there was an additional amount due to the seller of $ 0.4 million related to the finalization of the net working capital adjustment, which was accounted for as a measurement period adjustment.

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 quarter ended July 2, 2022.

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

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

Coverstar Central is an automatic safety cover dealer based in the United States.

The acquisition allows for vertical integration of the Company’s automatic safety cover product category.

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

The Company accounted for the Coverstar Central 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, customer relationships and order backlog were valued using the multi-period excess earnings method, whereas trade names, technology, and pool designs were valued using the relief from royalty method.

Inventories were valued using the comparative sales method.

Specific to intangible assets, backlog and customer relationships were valued using the multi-period excess earnings 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 Radiant:

The fair value of assets acquired and liabilities assumed recorded in the condensed consolidated financial statements may be subject to adjustment pending completion of final evaluation.

These fair value estimates will be reevaluated and adjusted, if needed, during the measurement period of up to one year from the Acquisition Date, and recorded as adjustments to goodwill.

The following summarizes the allocation for the Company’s acquisition of Coverstar Central as of December 31, 2024:

(in thousands)

November 24, 2021

August 2, 2024

Total consideration

Allocation of purchase price:

Trade receivables

2 unchanged sentences

Intangible assets

Total assets acquired

Deferred tax assets

Total assets acquired, excluding goodwill

Accounts payable

Accrued expenses and other current liabilities

Deferred income tax 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 $ 14.1 million.

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

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

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

The excess of the total consideration over the fair value of the identifiable assets acquired and the liabilities assumed in the acquisition was allocated to goodwill in the amount of $ 22.0 million.

Goodwill resulting from the acquisition was attributable to vertical integration, the expanded market share and broader geographical footprint.

The goodwill recognized is deductible for tax purposes.

The Company allocated a portion of the total consideration to specific intangible asset categories as follows:

Definite-lived intangible assets:

(in thousands)

Period (in years)

Dealer relationships

Order backlog

The following are the net sales and net income from Radiant included in the Company’s results from the Radiant Acquisition Date through December 31, 2021:

The following are the incremental net sales and incremental net loss from Coverstar Central included in the Company’s results from the Acquisition Date through December 31, 2024:

(in thousands)

December 31, 2021

Other Business Combinations

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.

Pro Forma Financial Information (Unaudited)

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 following pro forma financial information presents the statements of operations of the Company with Coverstar Central as if the acquisition occurred on January 1, 2022.

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

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, 2022 and is not necessarily indicative of the Company’s future financial results.

(in thousands)

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.

Net (loss) income

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 additional cost of sales from acquired inventory, the elimination of intercompany transactions and the removal of certain costs (primarily payroll costs) that would not have occurred and any related tax effects.

Transaction costs for Coverstar Central are reflected within pro forma net income for the year ended December 31, 2022.

In addition, the Company acquired two of its smaller autocover dealers in February 2025.

EQUITY METHOD INVESTMENT

3 unchanged sentences

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 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.

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.

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

13 unchanged sentences

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

Per the supply agreement, Latham is the exclusive supplier of the Premier Franchisees for specific pool and pool products.

These products include fiberglass products and packaged pool products.

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.

Holdco, assuming the Premier Franchisees are in good standing with respect to amounts owed to the Company.

Per the supply agreement, Latham paid volume and growth rebates based on purchases of Latham fiberglass products by Premier Franchisees.

The January 1, 2024 supply agreement terminated effective January 16, 2025 and was replaced with a non-exclusive, preferred supplier agreement.

As of December 31, 2024 and 2023, the Company’s carrying amount for the equity method investment in Premier Pools & Spas was $ 24.9 million and $ 25.9 million, respectively.

During the year ended December 31, 2024, Premier Pools & Spas paid the Company dividends of $ 5.1 million that are presented on the consolidated statement of cash flows as distribution received from equity method investment.

During the year ended December 31, 2022, Premier Pools & Spas paid the Company dividends of $ 2.5 million that are presented on the consolidated statement of cash flows as distribution received from equity method.

During the year ended December 31, 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.

The Company recorded its interest in net earnings of Premier Pools & Spas of $ 4.1 million and $ 3.7 million for the years ended December 31, 2024 and 2023, respectively, which included basis difference adjustments of $ 0.2 million and $ 0.2 million, respectively.

26 unchanged sentences

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, 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.

As of December 31, 2024 and 2023, the Company’s interest rate swap was a liability of $ 0.4 million and $ 1.2 million, respectively, which was recorded within other long-term liabilities on the consolidated balance sheets.

GOODWILL AND INTANGIBLE ASSETS, NET

1 unchanged sentence

Balance as of December 31, 2022

Measurement period adjustment

Foreign currency translation adjustment

22 unchanged sentences

The Company recognized $ 27.1 million, $ 26.5 million, and $ 28.2 million of amortization expense related to intangible assets during the years ended December 31, 2024, 2023, and 2022, respectively.

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

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

Estimated Future

Fiscal Year Ending

INVENTORIES, NET

13 unchanged sentences

Depreciation and amortization expense related to property and equipment during the years ended December 31, 2024, 2023 and 2022 was $ 16.5 million, $ 13.8 million, and $ 10.0 million, respectively.

Construction in progress recorded as of December 31, 2023 and 2022 primarily related to an ongoing effort to increase fiberglass molds and fiberglass production capacity as well as ERP costs.

Construction in progress recorded as of December 31, 2024 and 2023 primarily related to an ongoing effort to increase fiberglass molds and fiberglass production capacity as well as our ongoing digital transformation project costs.

The Company recorded aggregate losses on sales and disposals of property and equipment of $ 0.1 million, $ 0.3 million, and $ 0.2 million during the years ended December 31, 2024, 2023 and 2022, respectively.

5 unchanged sentences

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

On February 23, 2022, Latham Pool Products entered into an agreement (the “Credit Agreement”) with Barclays Bank PLC, which provides a senior secured multicurrency revolving line of credit (the “Revolving Credit Facility”) in an initial principal amount of $ 75.0 million and a U.S.

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.

On the closing date, proceeds under the Credit Agreement were used to terminate the previous credit agreement by repayment of $ 294.0 million of outstanding debt thereunder and for general corporate purposes.

As of December 31, 2024, the Company was in compliance with all financial covenants under the Credit Agreement.

Revolving Credit Facility

The Revolving Credit Facility may be utilized to finance ongoing general corporate and working capital needs and permits Latham Pools Products to borrow loans in U.S.

The Revolving Credit Facility may be utilized to finance ongoing general corporate and working capital needs and permits Latham Pool Products to borrow loans in U.S.

Dollars, Canadian Dollars, Euros, and Australian Dollars.

The Revolving Credit Facility matures on February 23, 2027.

Loans outstanding under the 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 %.

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 %.

Loans outstanding under the 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 Credit Agreement), as applicable, plus a margin of 3.50 %, or at a rate per annum based on the Base Rate or the Canadian Prime Rate (each, as defined in the Credit Agreement), plus a margin of 2.50 %.

Loans outstanding under the Revolving Credit Facility denominated in Euros or Australian Dollars bear interest based on EURIBOR or the AUD Rate (each, as defined in the Credit Agreement), respectively, plus a margin of 3.50 %.

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

The commitment fee is due and payable quarterly in arrears and is, initially, 0.375 % per annum and will, thereafter, accrue at a rate per annum ranging from 0.25 % to 0.50 %, depending on the First Lien Net Leverage Ratio (as defined in the New Credit Agreement, the “First Lien Net Leverage Ratio”).

The commitment fee is due and payable quarterly in arrears and is, initially, 0.375 % per annum and will, thereafter, accrue at a rate per annum ranging from 0.25 % to 0.50 %, depending on the First Lien Net Leverage Ratio (as defined in the Credit Agreement, the “First Lien Net Leverage Ratio”).

Borrowings under the Revolving Credit Facility are due at maturity.

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

The Company incurred debt issuance costs of $ 0.8 million related to the 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.

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As of December 31, 2024, 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.

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

The Term Loan matures on February 23, 2029.

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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.

During the fiscal year ended December 31, 2024, the Company made a payment of $ 18.0 million in addition to the required annual payments $ 3.3 million.

No additional payments are expected in the year ended December 31, 2025.

Outstanding borrowings as of December 31, 2024 were $ 281.5 million, net of discount and debt issuance costs of $ 6.5 million.

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

As of December 31, 2023, the unamortized debt issuance costs and discount on the New Term Loan were $ 4.5 million and $ 3.6 million, respectively.

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

As of December 31, 2024, the unamortized debt issuance costs and discount on the Term Loan were $ 3.6 million and $ 2.9 million, respectively.

The effective interest rate was 8.61 % at December 31, 2024, including the impact of the Company’s interest rate swap.

As of December 31, 2024, 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 $ 30.0

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.

The Prior Revolving Credit Facility allowed for either Eurocurrency borrowings, bearing interest ranging from 4.50 % to 4.75 %, or base rate borrowings, bearing interest ranging from 3.50 % to 3.75 % depending on the First Lien Net Leverage Ratio, as defined in the Credit Agreement.

A commitment fee accrued on any unused portion of the commitments under the Prior Revolving Credit Facility.

The commitment fee was due and payable quarterly in arrears and was equal to the applicable margin times the actual daily amount by which the $ 30.0 million initial commitment exceeded the sum of the outstanding borrowings under the Revolver and outstanding Letters of Credit obligations.

The applicable margin ranged from 0.375 % to 0.500 % as determined by the Company’s First Lien Net Leverage Ratio as defined in the Credit Agreement.

The Company was required to meet certain financial covenants, including maintaining specific liquidity measurements.

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

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

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

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

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

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

On March 31, 2021, 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.

On November 24, 2021, Latham Pool Products amended the Term Loan to provide additional borrowings of $ 50.0 million (the “Fifth Amendment”).

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

The Prior Term Loan, collectively with the First Amendment, Second Amendment, Third Amendment, the Fourth Amendment, and the Fifth Amendment, is referred to as the “Amended Prior Term Loan.”

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

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

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

Under the Amended Prior Term Loan, the Company was required to make mandatory prepayments based on the Company’s excess cash flow for the year, as follows (as a percentage of the Company’s excess cash flow for the year):

Net Leverage Ratio

> 3.00:1.00 and ≤ 3.50:1.00

> 2.50:1.00 and ≤ 3.00:1.00

> 2.00:1.00 and ≤ 2.50:1.00

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.

Interest Rate Risk

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

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

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

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

The Company entered into an interest rate swap that was executed on March 10, 2023, in connection with its Credit Agreement.

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).

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

Refer to Note 5 for additional detail.

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

Fiscal Year Ending

The obligations under the Credit Agreement are guaranteed by certain wholly owned subsidiaries (the “Guarantors”) of the Company that are party to that certain security agreement, which was executed in connection with the Credit 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.

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Adjustments to reserve

Warranty liabilities assumed in Radiant Acquisition

Settlements made (in cash or in kind)

Balance at the end of the fiscal year

EXIT OR DISPOSAL 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 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 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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Operating cash flows for operating leases

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

The following table summarizes fiscal year maturities of operating lease liabilities as of the year ended December 31, 2024 (in thousands):

Operating Leases

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Present value of lease liability

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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(Loss) income before income taxes:

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

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

Current income tax expense:

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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):

Total income tax expense (benefit)

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

December 31, 2024

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Change in valuation allowance

Meals and entertainment

Foreign expenses not deductible for tax

Transaction costs not deductible for tax

Other non-deductible expense

Nondeductible stock compensation

Stock compensation shortfall (windfall)

Other compensation

Non-deductible stock compensation

Canadian branch income

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Balance at December 31

As of December 31, 2024, 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 of one of its foreign subsidiaries and that a valuation allowance of $ 8.7 million was necessary as of December 31, 2024.

In the prior year, there was a valuation allowance for the Company's capital loss carryforward deferred tax asset which was reversed in the current year because the capital loss carryforward expired.

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.

The Inflation Reduction Act (“IRA”) was passed into law on August 16, 2022.

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The Company evaluated the key provisions under the IRA and concluded that the provisions are not applicable to Latham for year ended December 31, 2024.

On December 22, 2017, the U.S.

government enacted comprehensive tax legislation commonly referred to as the U.S.

Tax Cuts and Jobs Act of 2017 (the “Act”).

The Act made broad and complex changes to the U.S.

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, 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.

The one-time transition tax was based on the Company’s total post-1986 earnings and profits (“E&P”) that were previously deferred for U.S.

income tax purposes.

The Company did not record a liability for the one-time transition tax for all of its foreign subsidiaries as the Company did not have aggregate E&P from those foreign subsidiaries.

During the year ended December 31, 2019, the Company finalized the computations of the income tax effects of the Act.

Although the Company has completed its accounting for the effects of the Act, the determination of the Act’s income tax effects may change following future legislation or further interpretation of the Act based on the publication of recently proposed U.S.

Treasury regulations and guidance from the Internal Revenue Service and state tax authorities.

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

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.

The Organization for Economic Cooperation and Development introduced a framework to implement a global 15% minimum corporate tax (“Pillar Two”).

The European Union issued a directive to its member states to enact the Pillar Two in their local laws effective after December 2023.

A number of other countries have implemented similar legislation with effective dates for the year ended 2024.

The Company has evaluated the impact of Pillar Two in the jurisdictions in which the Company operates and has determined no additional top up tax is required.

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.

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

Deferred income tax assets and liabilities recorded on the balance sheets as of December 31, 2023 and 2022 consist of the following (in thousands):

Deferred income tax assets and liabilities recorded on the consolidated balance sheets as of December 31, 2024 and 2023 consist of the following (in thousands):

Deferred tax assets:

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Future branch taxes

Operating lease liabilities

Gross deferred tax assets

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Investments in partnerships

Operating lease right-of-use assets

Total deferred tax liabilities

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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.

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.

During 2024, the Company filed an amended return to account for the tax treatment of leases and as a result has recorded a deferred tax asset for operating lease liabilities and a deferred tax liability for operating lease right-of-use assets as of December 31, 2024.

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.

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Tax Uncertainties

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 year ended December 31, 2020 through present are open for examination in the U.S.

Tax years from the fiscal year ended December 31, 2021 through present are open for examination in the U.S.

Tax years and tax periods ended December 31, 2020 through present are open for state examination.

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

The Latham 2019 Illinois return is currently under examination by the state of Illinois.

Tax years and tax periods from June 30, 2021 through present are currently open for examination in Canada.

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COMMITMENTS AND CONTINGENCIES

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.

In the ordinary course of its business, the Company is involved in various legal proceedings involving contractual and employment claims, personal injury claims, intellectual property claims, product liability claims, and warranty claimes.

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.

PROFITS INTEREST UNITS

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

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:

Weighted-Average

Number of PIUs

Balance at January 1, 2021

( 1,266,068 )

Converted at IPO in connection with the Reorganization

( 26,158,894 )

Balance at December 31, 2021

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

At the time of his termination, the employee held 527,528 of time-vesting units, of which 211,011 time-vesting units were vested.

Per the terms of his termination agreement, the Company accelerated the vesting of an additional 105,506 time-vesting units, such that the total time-vesting units vested were equal to 316,517 upon his termination and the remaining 211,011 of unvested time-vesting units were forfeited upon his termination.

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 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:

December 31, 2021

Expected volatility

Risk-free interest rate

Expected term (in years)

Expected dividend yield

STOCK-BASED COMPENSATION

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.

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.

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.

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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.

2021 Omnibus Equity Plan, which was previously approved by the Board 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.

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Selling, general, and administrative

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.

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

The recognized income tax benefit related to stock-based compensation was $ 0.6 million, $ 0.5 million and $ 0.8 million for the years ended December 31, 2024, December 31, 2023, and December 31, 2022 respectively.

As of December 31, 2024, total unrecognized stock-based compensation expense related to all unvested stock-based awards was $ 9.7 million, which is expected to be recognized over a weighted-average period of 1.91 years.

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Expected dividend yield

No stock appreciation rights were awarded during the year ended December 31, 2024.

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:

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Outstanding at January 1, 2024

( 2,377,883 )

Outstanding at December 31, 2024

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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 .

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.

No stock options were granted during the year ended December 31, 2024 or December 31, 2023.

Stock Appreciation Rights

During the quarter ended April 1, 2023, as a portion of the annual equity award grants to the Company’s executive officers, the Compensation Committee of the Board 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”).

During the quarter ended April 1, 2023, as a portion of the annual equity award grants to the Company’s executive officers, the Compensation Committee of the Board approved stock appreciation rights for an aggregate of 790,181 shares of the Company’s common stock, with a strike price of $ 3.24 per share (the “Contingent Grants”).

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.

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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.

No stock appreciation rights were granted during the year ended December 31, 2024.

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

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

Under the amended and restated certificate of incorporation, the Company has authority to issue 500,000,000 shares of common stock, par value $ 0.0001 per share.

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 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

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

Performance Stock Units

During the year ended December 31, 2024, the Compensation Committee of the Board approved the grant of performance stock units (“PSUs”) as a portion of the annual equity award to the Company’s executive officers.

The PSUs will be earned at 0 % to 200 % of the target PSUs (with 100 % of PSUs being earned at target performance, and linear interpolation between threshold and target and maximum performance) based on the Company’s achievement of Adjusted EBITDA, as defined in the award agreement, over a one -fiscal year performance period ending December 31, 2024.

Any earned PSUs cliff vest on the third anniversary of the grant date.

Adjusted EBITDA is considered a performance condition and the grant date fair value corresponds with management’s expectation of the probable outcome of the performance condition as of the grant date.

The grant date fair value is determined based on the fair market value of the Company’s stock at market close on the grant date multiplied by the target number of shares subject to the award.

The probability of achieving the performance criteria is assessed quarterly during the performance period.

Compensation expense related to unvested PSUs is recognized ratably over the service period.

The following table represents the Company’s PSU activity during the year ended December 31, 2024:

Outstanding at January 1, 2024

Adjustment for performance achievement (1)

Outstanding at December 31, 2024

(1) Represents the adjustment to previously granted PSUs based on the Company’s performance as of December 31, 2024.

STOCKHOLDERS’ EQUITY

Offering of Common Stock

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Repurchase Program

On May 10, 2022, the Board of Directors of the Company approved a stock repurchase program (the “Repurchase Program”), which authorizes the Company to repurchase up to $ 100 million of the Company’s shares of common stock over the next three years .

On May 10, 2022, the Board of the Company approved a stock repurchase program (the “Repurchase Program”), which authorizes the Company to repurchase up to $ 100 million of the Company’s shares of common stock over the next three years .

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

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

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

No shares were repurchased during the years ended December 31, 2024 or 2023.

As of December 31, 2024, $ 77.0 million remained available under our Repurchase Program.

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Stock appreciation rights

Performance stock units

RELATED PARTY TRANSACTIONS

BrightAI Services

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

Expense Reimbursement

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

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

The Company had less than $ 0.1 million in transactions with the Sponsor or Wynnchurch Capital, L.P.

during the years ended December 31, 2024, 2023 and 2022.

SEGMENT REPORTING

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

The Company’s Chief Executive Officer, who is the chief operating decision maker (“CODM”), reviews financial information presented on a consolidated basis for purposes of assessing financial performance and allocating resources.

The Company reports consolidated net income (loss), as management believes that is the measure most consistent with the measurement principles in the Company’s consolidated financial statements.

Consolidated net income (loss) is used by the CODM predominantly in the annual budget and forecasting, including consideration of budget-to-actual variances when making decisions about the allocation of operating and capital resources.

Operations of the Company’s single segment consisted of the following (in thousands):

Year Ended December 31,

Other cost of sales (1)

Other selling, general and administrative expense (2)

Amortization (3)

Stock-based compensation expense

Strategic initiative costs (4)

Acquisition and integration related costs (5)

Restructuring charges (6)

Interest expense, net

Odessa fire (7)

Other expense (income), net

Earnings from equity method investment

Income tax expense (benefit)

Loss on extinguishment of debt

Underwriting fees related to offering of common stock

(1) Other cost of sales includes total cost of sales (as presented in the statements of operations) excluding depreciation, stock-based compensation, restructuring charges, and strategic initiative costs.

(2) Other selling, general and administrative expense includes total selling, general and administrative expense (as presented in the statements of operations) excluding depreciation, amortization, stock-based compensation, strategic initiative costs, acquisition and integration related costs, and Odessa fire costs.

(3) inclusive of finance lease amortization.

(4) Represents fees paid to external consultants and other expenses for our strategic initiatives

(5) Represents acquisition and integration costs as well as other costs related to potential transactions.

(6) Represents costs related to a cost reduction plan that includes severance and other costs for our executive management changes and additional costs related to our cost reduction plans, which include further actions to reduce our manufacturing overhead by reducing headcount in addition to facility shutdowns.

(7) Represents costs incurred and insurance recoveries related to a production facility fire in Odessa, Texas.

GEOGRAPHIC INFORMATION

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Distribution from subsidiary

Investment in subsidiary

Net cash provided by (used in) investing activities

Net cash provided by investing activities

Cash flows from financing activities:

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

Proceeds from issuance of common stock

Repurchase and retirement of common stock

Net cash (used in) provided by financing activities

Net cash used in financing activities

Net increase in cash

7 unchanged sentences

has no material assets or standalone operations other than its ownership in its consolidated subsidiaries.

Under the terms of the New Credit Agreement entered into by the Latham Pool Products, a wholly owned subsidiary of LIMC, which itself is a wholly owned subsidiary of Latham Group, Inc., Latham Pool Products is restricted from making dividend payments, loans or advances to Latham Group, Inc., unless certain conditions are met.

Under the terms of the Credit Agreement entered into by the Latham Pool Products, a wholly owned subsidiary of LIMC, which itself is a wholly owned subsidiary of Latham Group, Inc., Latham Pool Products is restricted from making dividend payments, loans or advances to Latham Group, Inc., unless certain conditions are met.

As of December 31, 2024 and 2023, substantially all of the consolidated net assets of Latham Pool Products are considered restricted net assets as defined in Rule 4-08(e)(3) of Regulation S-X.

10 unchanged sentences

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data