What changed in this filing

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Item 1. Financial Statements

2025-05-07 compared with 2024-11-06 · 180 added, 221 removed, 371 unchanged (52% of the section changed)

3 unchanged sentences

Condensed Consolidated Statements of Operations

Condensed Consolidated Statements of Comprehensive Income (Loss)

Condensed Consolidated Statements of Comprehensive Loss

Condensed Consolidated Statements of Stockholders’ Equity

4 unchanged sentences

(in thousands, except share and per share data)

September 28,

Current assets:

12 unchanged sentences

Accounts payable

Accounts payable – related party

Current maturities of long-term debt

10 unchanged sentences

Preferred stock, $ 0.0001 par value;

100,000,000 shares authorized as of both September 28, 2024 and December 31, 2023;

no shares issued and outstanding as of both September 28, 2024 and December 31, 2023

100,000,000 shares authorized as of both March 29, 2025 and December 31, 2024;

no shares issued and outstanding as of both March 29, 2025 and December 31, 2024

Common stock, $ 0.0001 par value;

900,000,000 shares authorized as of September 28, 2024 and December 31, 2023;

115,592,865 and 114,871,782 shares issued and outstanding , as of September 28, 2024 and December 31, 2023, respectively

900,000,000 shares authorized as of March 29, 2025 and December 31, 2024;

116,362,977 and 115,764,839 shares issued and outstanding, as of March 29, 2025 and December 31, 2024, respectively

Additional paid-in capital

8 unchanged sentences

Fiscal Quarter Ended

Three Fiscal Quarters Ended

September 28, 2024

September 30, 2023

September 28, 2024

September 30, 2023

March 29, 2025

March 30, 2024

Cost of sales

Selling, general, and administrative expense

Income from operations

Loss from operations

Other expense:

3 unchanged sentences

Earnings from equity method investment

Income before income taxes

Loss before income taxes

Income tax (benefit) expense

Net income (loss)

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

Net loss per share attributable to common stockholders:

Weighted-average common shares outstanding – basic and diluted

1 unchanged sentence

Latham Group, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

Condensed Consolidated Statements of Comprehensive Loss

(in thousands)

Fiscal Quarter Ended

Three Fiscal Quarters Ended

September 28, 2024

September 30, 2023

September 28, 2024

September 30, 2023

Net income (loss)

March 29, 2025

March 30, 2024

Other comprehensive income (loss), net of tax:

1 unchanged sentence

Total other comprehensive income (loss), net of tax

Comprehensive income (loss)

Comprehensive loss

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

8 unchanged sentences

Stock-based compensation expense

Balances at April 1, 2023

Foreign currency translation adjustments

Repurchase and retirement of common stock under repurchase program

Issuance of common stock upon release of restricted stock units

Stock-based compensation expense

Balances at July 1, 2023

Foreign currency translation adjustments

Retirement of restricted stock

Issuance of common stock

Stock-based compensation expense

Balances at September 30, 2023

Balances at March 30, 2024

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

7 unchanged sentences

Issuance of common stock upon release of restricted stock units

Common stock withheld for taxes on restricted stock units

Stock-based compensation expense

Balances at March 29, 2025

Foreign currency translation adjustments

Issuance of common stock upon release of restricted stock units

Stock-based compensation expense

Balances at June 29, 2024

Foreign currency translation adjustments

Issuance of common stock upon release of restricted stock units

Stock-based compensation expense

Balances at September 28, 2024

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

2 unchanged sentences

(in thousands)

Three Fiscal Quarters Ended

September 28,

September 30,

Fiscal Quarter Ended

Cash flows from operating activities:

Net income (loss)

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

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization

Unrealized foreign currency (gain) loss

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

Stock-based compensation expense

10 unchanged sentences

Other long-term liabilities

Net cash provided by operating activities

Net cash used in operating activities

Cash flows from investing activities :

5 unchanged sentences

Proceeds from borrowings on revolving credit facility

Payments on revolving credit facilities

Repayments of finance lease obligations

Net cash used in financing activities

Common stock withheld for taxes on restricted stock units

Net cash provided by (used in) financing activities

Effect of exchange rate changes on cash

Net (decrease) increase in cash

Net decrease in cash

Cash at beginning of period

7 unchanged sentences

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

Notes to Condensed Consolidated Financial Statements

Notes to Condensed Consolidated Financial Statements (unaudited)

NATURE OF THE BUSINESS

Latham Group, Inc.

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

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

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

Latham Pool Products offers a portfolio of in-ground swimming pools and related products, including 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 condensed consolidated financial statements and notes thereto reflect the impact of the amended and restated certificate of incorporation and the stock split.

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

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

Prior to the closing of the Company’s IPO, the Company’s parent entity, Latham Investment Holdings, L.P., merged with and into Latham Group, Inc.

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

Basis of Presentation

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

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

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

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The unaudited condensed consolidated balance sheet at December 31, 2024 was derived from audited financial statements but does not include all disclosures required by GAAP.

The accompanying unaudited condensed consolidated financial statements as of September 28, 2024 and for the fiscal quarter and three fiscal quarters ended September 28, 2024 and September 30, 2023, respectively, have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements.

The accompanying unaudited condensed consolidated financial statements as of March 29, 2025 and for the fiscal quarters ended March 29, 2025 and March 30, 2024, respectively, have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements.

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

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

The Company’s results of operations for the fiscal quarter and three fiscal quarters ended September 28, 2024 are not necessarily indicative of the results of operations that may be expected for the fiscal year ending December 31, 2024 or other interim periods thereof.

The Company’s results of operations for the fiscal quarter ended March 29, 2025 are not necessarily indicative of the results of operations that may be expected for the fiscal year ending December 31, 2025 or other interim periods thereof.

Use of Estimates

1 unchanged sentence

Actual results could differ from those estimates.

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

Estimates are evaluated on an ongoing basis and

revised as there are changes in circumstances, facts, and experience.

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

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

Changes in estimates are recorded in the period in which they become known.

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

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

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 (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.

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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 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, and interim periods within fiscal years beginning after December 15, 2024.

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 condensed consolidated financial statements.

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

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

The amendments should be applied prospectively with retrospective application permitted.

The a mendments 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 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 condensed 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 15 for further detail.

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

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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.

Adoption of the new standard did not have an impact on the Company’s condensed consolidated financial statements.

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 $ 66.1 million in cash (including an estimated net working capital adjustment of $ 0.8 million) and a non-cash settlement of preexisting obligations of $ 4.9 million.

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.

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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”).

The Company accounted for the Coverstar Central Acquisition using the acquisition method of accounting in accordance with FASB ASC 805, Business Combinations.

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

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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 preliminary allocation for the Company’s acquisition of Coverstar Central as of September 28, 2024:

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

(in thousands)

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

The goodwill recognized is not deductible for tax purposes.

The goodwill recognized is deductible for tax purposes.

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

4 unchanged sentences

Order backlog

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 September 28, 2024:

(in thousands)

Pro Forma Financial Information (Unaudited)

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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, 2024 and is not necessarily indicative of the Company’s future financial results.

Three Fiscal Quarters Ended

September 28,

September 30,

Fiscal Quarter Ended

(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 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 three fiscal quarters ended September 30, 2023.

Transaction costs for Coverstar Central are reflected within pro forma net loss for the fiscal quarter ended March 30, 2024.

Other Business Combinations

During the fiscal quarter ended March 29, 2025, the Company completed the acquisition of two autocover dealers located in New York and Tennessee that qualified as a business combination.

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

FAIR VALUE MEASUREMENTS

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market approach, income approach or cost approach.

There were no transfers between fair value measurement levels during the three fiscal quarters ended September 28, 2024 or September 30, 2023.

There were no transfers between fair value measurement levels during the fiscal quarters ended March 29, 2025 and March 30, 2024.

Assets and liabilities measured at fair value on a nonrecurring basis

3 unchanged sentences

The Company considers the carrying amounts of cash, trade receivables, prepaid expenses and other current assets, accounts payable, and accrued expenses and other current liabilities to approximate fair value because of the short-term maturities of these instruments.

The Company’s Term Loan (as defined below;

see Note 7) is carried at amortized cost;

however, the Company estimates the fair value of the Term Loan for disclosure purposes.

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

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

September 28, 2024

Term loans are carried at amortized cost;

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

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

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

March 29, 2025

December 31, 2024

Interest rate swap

The Company estimates the fair value of interest rate swaps (see Note 7) on a fiscal quarterly basis using Level 2 inputs, including the forward SOFR curve.

The Company estimates the fair value of the interest rate swap on a quarterly basis using Level 2 inputs, including the forward SOFR curve.

The 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 September 28, 2024 and December 31, 2023, the fair value of the Company’s interest rate swap was a liability of $ 2.1 million and $ 1.2 million, respectively, which were recorded within other long-term liabilities on the condensed consolidated balance sheets.

As of March 29, 2025 and December 31, 2024, the Company’s interest rate swap was a liability of $ 0.7 million and $ 0.4 million, respectively, which were recorded within other long-term liabilities on the condensed consolidated balance sheets.

GOODWILL AND INTANGIBLE ASSETS, NET

The carrying amount of goodwill as of September 28, 2024 and as of December 31, 2023 was $ 153.0 million and $ 131.4 million, respectively.

The change in the carrying value during the three fiscal quarters ended September 28, 2024 was primarily driven by an addition of $ 21.6 million relating to the Coverstar Central Acquisition.

The carrying amount of goodwill as of March 29, 2025 and as of December 31, 2024 was $ 154.7 million and $ 152.6 million, respectively.

The change in the carrying value during the fiscal quarter ended March 29, 2025 was primarily driven by acquisitions made in the first fiscal quarter of 2025.

Intangible Assets

Intangible assets, net as of September 28, 2024 consisted of the following (in thousands):

September 28, 2024

Intangible assets, net as of March 29, 2025 consisted of the following (in thousands):

March 29, 2025

Trade names and trademarks

4 unchanged sentences

Non-competition agreements

The Company recognized $ 7.0 million and $ 19.8 million of amortization expense related to intangible assets during the fiscal quarter and three fiscal quarters ended September 28, 2024, respectively.

The Company recognized $ 6.6 million and $ 19.9 million of amortization expense related to intangible assets during the fiscal quarter and three fiscal quarters ended September 30, 2023, respectively.

The Company recognized $ 7.2 million of amortization expense related to intangible assets during the fiscal quarter ended March 29, 2025.

The Company recognized $ 6.4 million of amortization expense related to intangible assets during the fiscal quarter ended March 30, 2024.

The change in the carrying value of dealer relationships is driven by the acquisitions made in the first fiscal quarter of 2025.

Intangible assets, net as of December 31, 2024 consisted of the following (in thousands):

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

September 28, 2024

March 29, 2025

December 31, 2024

3 unchanged sentences

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

September 28, 2024

March 29, 2025

December 31, 2024

3 unchanged sentences

Total long-term debt

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.

On February 23, 2022, Latham Pool Products and certain subsidiary guarantors entered into a credit and guaranty 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 facility (the “Term Loan”) in an initial principal amount of $ 325.0 million.

As of September 28, 2024, the Company was in compliance with all financial covenants under the Credit Agreement.

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 March 29, 2025, the Company was in compliance with all financial covenants under the Credit Agreement.

Revolving Credit Facility

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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 initially was 0.375 % per annum and thereafter accrues 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).

Borrowings under the Revolving Credit Facility are due at maturity.

Borrowings under the Revolving Credit Facility are not subject to amortization and are due at maturity.

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 condensed consolidated balance sheet as of the applicable period and are being amortized over the life of the Revolving Credit Facility.

The Company is required to meet certain financial covenants in connection with the Revolving Credit Facility, including maintaining specific liquidity measurements.

There are also negative covenants, including certain restrictions on the Company’s and its subsidiaries’ 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, make dividend payments, loans, or advances to the Company, declare dividends and make restricted payments and other distributions.

As of September 28, 2024, there were no outstanding borrowings on the Revolving Credit Facility and $ 75.0 million was available for future borrowing.

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

As of March 29, 2025, there was $ 25.0 million of outstanding borrowings on the Revolving Credit Facility and $ 50.0 million was available for future borrowing.

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

The Term Loan matures on February 23, 2029.

The Term Loan bears 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.

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

The Credit Agreement contains customary mandatory prepayment provisions for the Term Loan, 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 three fiscal quarters ended September 28, 2024, the Company made a payment of $ 18.0 million.

Outstanding borrowings as of September 28, 2024 were $ 282.8 million, net of unamortized discount and debt issuance costs of $ 6.9 million.

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 (each, 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 fiscal quarter ended March 30, 2024, the Company made a pre-payment of $ 18.0 million in addition to the required annual payments of $ 3.3 million.

No additional pre-payments are expected to be made during the year ending December 31, 2025.

Outstanding borrowings as of March 29, 2025 were $ 281.9 million, net of discount and debt issuance costs of $ 6.2 million.

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 September 28, 2024, the unamortized debt issuance costs and discount on the Term Loan were $ 3.9 million and $ 3.1 million, respectively.

The effective interest rate was 9.22 % at September 28, 2024, including the impact of the Company’s interest rate swaps.

As of March 29, 2025, the unamortized debt issuance costs and discount on the Term Loan were $ 3.4 million and $ 2.7 million, respectively.

The effective interest rate was 9.31 % at March 29, 2025, including the impact of the Company’s interest rate swap.

Interest Rate Risk

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 was not designated as a hedging instrument for accounting purposes (see Note 4).

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

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

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.

2 unchanged sentences

Debt Maturities

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

Fiscal Year Ending

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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.

PRODUCT WARRANTIES

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

Three Fiscal Quarters Ended

September 28, 2024

September 30, 2023

Fiscal Quarter Ended

March 29, 2025

March 30, 2024

Balance at the beginning of the fiscal year

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The Company also leases certain vehicles and equipment under finance leases.

The Company determines if an arrangement is a lease at

The Company determines if an arrangement is a lease at inception.

A contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

The components of lease expense for the fiscal quarter and three fiscal quarters ended September 28, 2024 and September 30, 2023 were as follows (in thousands):

The components of lease expense for the fiscal quarters ended March 29, 2025 and March 30, 2024 were as follows (in thousands):

Fiscal Quarter Ended

Three Fiscal Quarters Ended

September 28, 2024

September 30, 2023

September 28, 2024

September 30, 2023

March 29, 2025

March 30, 2024

Operating lease expense

4 unchanged sentences

Total lease expense

Operating and finance lease right-of-use assets and lease-related liabilities as of September 28, 2024 and December 31, 2023 were as follows (in thousands):

September 28, 2024

Operating and finance lease right-of-use assets and lease-related liabilities as of March 29, 2025 and December 31, 2024 were as follows (in thousands):

March 29, 2025

December 31, 2024

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Total lease liabilities

The table below presents supplemental information related to leases as of September 28, 2024 and December 31, 2023:

September 28, 2024

The table below presents supplemental information related to leases as of March 29, 2025 and December 31, 2024:

March 29, 2025

December 31, 2024

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

Three Fiscal Quarters Ended

September 28, 2024

September 30, 2023

Fiscal Quarter Ended

March 29, 2025

March 30, 2024

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

Operating cash flows for operating leases

The following table summarizes fiscal year maturities of operating lease liabilities as of September 28, 2024 (in thousands):

The following table summarizes fiscal year maturities of operating lease liabilities as of March 29, 2025 (in thousands):

Operating Leases

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Fiscal Quarter Ended

Three Fiscal Quarters Ended

September 28, 2024

September 30, 2023

September 28, 2024

September 30, 2023

March 29, 2025

March 30, 2024

In-ground Swimming Pools

The effective income tax rate for the fiscal quarter and three fiscal quarters ended September 28, 2024 was ( 0.7 )% and 7.6 %, respectively, compared to 52.1 % and 140.7 %, respectively, for the fiscal quarter and three fiscal quarters ended September 30, 2023.

The effective income tax rate for the fiscal quarter ended March 29, 2025 was 40.6 % compared to ( 7.2 )% for the fiscal quarter ended March 30, 2024.

The differences between the U.S.

federal statutory income tax rate and the Company’s effective income tax rates for the fiscal quarter ended September 28, 2024 and the fiscal quarter ended September 30, 2023 were primarily attributable to the impacts of stock-based compensation expense and foreign income.

federal statutory income tax rate and the Company’s effective income tax rates for the fiscal quarter ended March 29, 2025 and the fiscal quarter ended March 30, 2024 were primarily attributable to the discrete impact of stock-based compensation expense for which there is no associated tax benefit and the effects of branch accounting for Latham Canada.

STOCKHOLDERS’ EQUITY

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 by May 2025.

On May 10, 2022, the Board of Directors of the Company (the “Board”) 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 by May 2025.

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

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

As of September 28, 2024, $ 77.0 million remained available for share repurchases pursuant to the Repurchase Program.

The Company did not repurchase any shares of its common stock during the fiscal quarter ended September 28, 2024.

As of March 29, 2025, $ 77.0 million remained available for share repurchases pursuant to the Repurchase Program.

The Company did no t repurchase any shares of its common stock during the fiscal quarter ended March 29, 2025.

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

STOCK-BASED COMPENSATION

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.

On April 12, 2021, the Company’s stockholders approved the Latham Group, Inc.

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, performance 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 of the Company, the stockholders approved the first amendment (the “First Amendment”) to the 2021 Omnibus Equity Plan, which was previously approved by the Board of Directors of the Company.

The First Amendment became effective upon stockholder approval, and included 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.

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

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

On May 2, 2023, at the 2023 annual meeting of stockholders of the Company, the stockholders approved the first amendment (the “Equity Plan First Amendment”) to the 2021 Omnibus Equity Plan, which was previously approved by the Board.

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):

Fiscal Quarter Ended

Three Fiscal Quarters Ended

September 28, 2024

September 30, 2023

September 28, 2024

September 30, 2023

Cost of sales

March 29, 2025

March 30, 2024

Selling, general, and administrative

As of September 28, 2024, total unrecognized stock-based compensation expense related to all unvested stock-based awards was $ 11.6 million, which is expected to be recognized over a weighted-average period of 2.0 years.

Restricted Stock Awards

The following table represents the Company’s restricted stock awards activity during the three fiscal quarters ended September 28, 2024:

Average Grant-

Date Fair Value

Outstanding at January 1, 2024

Outstanding at September 28, 2024

As of March 29, 2025, total unrecognized stock-based compensation expense related to all unvested stock-based awards was $ 15.7 million, which is expected to be recognized over a weighted-average period of 2.2 years.

Restricted Stock Units

The following table represents the Company’s restricted stock units activity during the three fiscal quarters ended September 28, 2024:

The following table represents the Company’s restricted stock units activity during the fiscal quarter ended March 29, 2025:

Average Grant-

1 unchanged sentence

Outstanding at January 1, 2025

Outstanding at September 28, 2024

Outstanding at March 29, 2025

Stock Options

The following table represents the Company’s stock options activity during the three fiscal quarters ended September 28, 2024:

The following table represents the Company’s stock option activity during the fiscal quarter ended March 29, 2025:

Exercise Price

3 unchanged sentences

Outstanding at January 1, 2025

Outstanding at September 28, 2024

Vested and expected to vest at September 28, 2024

Options exercisable at September 28, 2024

Outstanding at March 29, 2025

Vested and expected to vest at March 29, 2025

Options exercisable at March 29, 2025

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 .

Stock Appreciation Rights

During the fiscal 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.

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 grant of stock appreciation rights remained subject to stockholder approval of the First Amendment.

On May 2, 2023, following stockholder approval of the 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 three fiscal quarters ended September 28, 2024:

The following table represents the Company’s stock appreciation rights activity during the quarter ended March 29, 2025:

Exercise Price

3 unchanged sentences

Outstanding at January 1, 2025

Outstanding at September 28, 2024

Vested and expected to vest at September 28, 2024

Stock appreciation rights exercisable at September 28, 2024

Outstanding at March 29, 2025

Vested and expected to vest at March 29, 2025

Stock appreciation rights exercisable at March 29, 2025

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.

Performance Stock Units

During the three fiscal quarters ended September 28, 2024, the Compensation Committee of the Board of Directors 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.

During the fiscal quarter ended March 29, 2025 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.

Thirty-three percent of the target number of PSUs awarded on the date of grant will be earned annually at 0 % to 200 % of the target number of PSUs based on the Company’s achievement of Adjusted EBITDA (with 100 % of PSUs being earned at target performance, and linear interpolation between threshold and target and maximum performance) as defined in the award agreement, for each year of the three-year performance period beginning January 1, 2025 and ending December 31, 2027.

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 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 and adjusted for management's expectation of the probable outcome of the performance condition.

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 three fiscal quarters ended September 28, 2024:

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

The following table represents the Company’s PSU activity during the fiscal quarter ended March 29, 2025:

Outstanding at January 1, 2025

Adjustment for expected performance achievement (1)

Outstanding at September 28, 2024 (2)

(1) Represents the adjustment to previously granted PSUs based on the Company’s performance expectations as of September 28, 2024.

(2) An additional 443,100 PSUs could potentially be included if the maximum performance level of 200 % is earned for all PSUs outstanding as of September 28, 2024.

NET INCOME (LOSS) PER SHARE

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

Adjustment for performance achievement (1)

Outstanding at March 29, 2025

(1) Represents the adjustment to previously granted PSUs based on performance expectations as of the end of each respective fiscal year.

(2) An additional 325,613 PSUs could potentially be included if the maximum performance level of 200 % is earned for all PSUs granted during the fiscal quarter ended March 29, 2025.

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):

Fiscal Quarter Ended

Three Fiscal Quarters Ended

September 28, 2024

September 30, 2023

September 28, 2024

September 30, 2023

Net income (loss) attributable to common stockholders

March 29, 2025

March 30, 2024

Net loss attributable to common stockholders

Weighted-average common shares outstanding

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

As of September 28, 2024 and December 31, 2023, 115,571,422 and 114,828,896 shares of common stock were issued and outstanding for accounting purposes, respectively.

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

Net loss per share attributable to common stockholders:

As of March 29, 2025 and December 31, 2024, 116,362,977 and 115,764,839 shares of common stock were issued and outstanding, respectively.

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

Fiscal Quarter Ended

Three Fiscal Quarters Ended

September 28, 2024

September 30, 2023

September 28, 2024

September 30, 2023

March 29, 2025

March 30, 2024

Restricted stock awards

3 unchanged sentences

Performance stock units

RELATED PARTY TRANSACTIONS

BrightAI Services

Starting in 2020, BrightAI Corporation (“BrightAI”) has rendered services to the Company, for which the cost has been capitalized as internal-use software.

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

In December 2022, the Company executed an additional agreement with BrightAI for the provision of hardware to run the technology developed by BrightAI and the Company.

During the three fiscal quarters ended September 28, 2024 and September 30, 2023, the Company incurred no material amounts and $ 0.8 million, respectively, associated with services performed by BrightAI, which was recorded as construction in progress within property and equipment, net on the condensed consolidated balance sheet as of September 30, 2023.

As of December 31, 2023, the Company had no accounts payable related to BrightAI.

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 condensed 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):

Fiscal Quarter Ended

March 29, 2025

March 30, 2024

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

Other (income) expense, net

Earnings from equity method investment

Income tax (benefit) expense

(1) Other cost of sales includes total cost of sales (as presented in the condensed consolidated 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 condensed consolidated statements of operations) excluding depreciation, amortization, stock-based compensation, strategic initiative costs and acquisition and integration related 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.

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

What changed 10-Q

Item 1. Financial Statements