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Item 1A. Risk Factors

2026-03-04 compared with 2025-03-05 · 209 added, 207 removed, 293 unchanged (59% of the section changed)

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These risks include, but are not limited to, the following:

● unfavorable economic conditions and the related impact on consumer spending and demand for our products;

• potential cyber-attacks or system failures on our information technology infrastructure;

• global and domestic political uncertainty and instability resulting in changes in international trade relationships and financial market volatility could make it more difficult for us to access financing and adversely affect our business and operations;

• inflationary impacts, including on our costs of labor, raw materials and services and on consumer demand for pool products;

● our reliance on global third-party suppliers and related impact on price, quality and quantity of raw materials;

• the impact of trade policies, including tariffs, on products, raw materials and components we import into the U.S.;

● declining home ownership rates adversely affect demand for our products;

● competition that we face;

● natural disasters, including resulting from climate change, geopolitical events, war, terrorism, public health emergencies or other catastrophic events;

● our reliance on our information technology systems and potential disturbances or breaches to our technological infrastructure;

• catastrophic events such as natural disasters, including those resulting from earthquakes, wildfires and floods, war, terrorism, public health emergencies such as pandemics;

• adverse weather conditions impacting our sales and timing of sales;

● pricing pressures resulting from industry consolidation;

• interruption of our production capability at one or more of our manufacturing facilities from accident, fire, calamity or other causes or events affecting the global economy;

● product quality issues, warranty claims, installation or safety concerns and other claims, including those due to the failure of builders to follow our product installation instructions and specifications and our installation of autocovers;

● our ability to keep pace with rapidly evolving technological developments and standards, such as generative artificial intelligence;

• adverse economic conditions and the related impact on consumer spending and demand for our products;

• our ability to keep pace with and integrate into our operations rapidly evolving technological developments and standards, such as artificial intelligence;

• compliance with new and existing government regulations;

• declining home ownership rates adversely affecting demand for our products;

• delays in, or systems disruptions issues caused by, the implementation of our enterprise resource planning system;

• our reliance on global third-party suppliers and related impact on price, quality and quantity of raw materials;

• competition that we face;

• our ability to generate sufficient cash flow to satisfy our debt service obligations;

• product quality issues, warranty claims, installation or safety concerns and other claims, including those due to the failure of builders to follow our product installation instructions and specifications and our installation of autocovers;

• our ability to realize the anticipated growth opportunities and cost synergies from acquisitions;

• our ability to attract, develop and retain highly qualified personnel;

• pricing pressures resulting from industry consolidation;

• our ability to collect accounts receivables from our customers;

● compliance with new and existing government regulations;

● our ability to obtain transportation services to deliver our product and to obtain raw materials timely or increases in the cost of transportation;

• our ability to obtain, maintain and enforce intellectual property protection for our current and future products, and third-party claims against us for violation of their intellectual property;

• the risks of doing business internationally;

● our ability to realize the anticipated growth opportunities and cost synergies from acquisitions;

• possible impairments to our goodwill, other intangible assets or fixed assets;

● our ability to secure financing and our substantial indebtedness;

• the other factors set forth under “Risk Factors.”

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Risks Related to Our Operations and Industry

Net sales of our swimming pools and related products are adversely affected by unfavorable economic conditions and the related impact on consumer spending, which are driven by factors outside of our control.

Consumer discretionary spending affects our sales of swimming pools and related products and is impacted by factors outside of our control, including general economic conditions, housing affordability, demographic trends, employment rates and wage levels, interest rate fluctuations, inflation, disposable income levels, consumer confidence and spending and to the availability of credit .

In particular, we believe that the availability of credit is an important factor enabling the purchase of new pools because a significant percentage of consumers finance their pool installations.

The recent and continued combination of high interest rates and high inflation have reduced the affordability of mortgages and increased the cost of home improvement projects.

Tightening consumer credit or increases in interest rates could reduce the number of consumers that obtain financing for pools, which would negatively impact our sales.

In economic downturns such as we experienced in 2023 and 2024, and which is expected to continue into 2025, the demand for swimming pools and related products has declined and we expect that such demand will be constrained in the future until we see a recovery in discretionary consumer spending among pool eligible households.

Any substantial deterioration in general economic conditions that diminishes consumer confidence or discretionary income, or consumer access to credit, may reduce our sales and materially adversely affect our business, financial condition, and results of operations.

In addition, the cyclicality in consumer demand for our products that we do not control increases the risk of making critical business decisions based on our forecasts, and means that the results for any prior period may not be indicative of results for any future period.

Further, a recessionary economic environment could weaken the financial condition of our suppliers potentially leading to shortages of critical raw materials, manufacturing equipment, components, and services, and increase the risk of dealer and distributor closures or bankruptcies that could shrink our potential customer base and inhibit our ability to collect on their receivables.

Even in generally favorable economic conditions, severe and/or prolonged downturns in the housing market could have a material adverse impact on our financial performance due to our industry’s alignment with the housing market.

Inflation could adversely impact our financial condition and results of operations.

While inflation in the United States began to plateau or subside in 2024, higher costs of labor and services, and could continue to cause costs to increase as well as scarcity of certain products and there are indications that recent deflation in raw material costs may reverse.

The imposition of tariffs on products and materials by the United States and other countries may negatively impact current inflation rates for an extended period of time, result in increases to our operating costs and negatively impact our business.

See “—Changes in trade policies, including the imposition of tariffs, could negatively impact our business, financial condition, and results of operations.” There is substantial risk that inflation will escalate should these tariffs, and the potential imposition of tariffs by the Trump administration on additional countries, continue for an extended period of time.

As a consequence of these inflationary risks, there is a risk that demand for our products may continue to soften as we continue to increase the prices of our products to offset the inflationary pressure.

There are indications in the market that some consumers are reluctant to purchase pool products due to escalating prices to offset inflation.

To the extent we are unable to recover higher operating costs resulting from inflation or otherwise mitigate the impact of such costs on our business, our net sales and gross margins could decrease, and our financial condition and results of operations could be adversely affected.

We depend on a global network of third-party suppliers to provide components and raw materials essential to the manufacturing of our pools and price increases or deviations in the quantity or quality of the raw materials used to manufacture our products could adversely affect our net sales and operating results.

We rely on global manufacturers and other suppliers to provide us with the components and raw materials to manufacture our products.

The primary raw materials used in our products are polyvinyl chloride (“PVC”) plastic, galvanized steel, fiberglass, aluminum, various resins, high impact polystyrene, gelcoat and polypropylene fabric.

The cost of many of the raw materials we use in the manufacture of our products, such as steel, is subject to price volatility.

Changes in prices of our raw materials have a direct impact on our cost of sales.

Accordingly, we are exposed to the risk of increases in the market prices of raw materials used in the manufacture of our products.

We continue to experience inflationary pressures in certain areas of our business, including with respect to prices of our raw materials and employee wages.

Such pressures may continue and escalate as a result of U.S.

and global tariff policies.

See “—Inflation could adversely impact our financial condition and results of operations” and “—Changes in trade policies, including the imposition of tariffs, could negatively impact our business, financial condition and results of operations” for additional information.

Increases in the cost of the raw materials used to manufacture our products could adversely affect our net sales and operating results.

Other than occasional strategic purchases of larger quantities of certain raw materials, we generally buy materials on an as-needed basis.

We are dependent upon the ability of our suppliers to consistently provide raw materials and components that meet our specifications, quality standards and other applicable criteria.

Our suppliers’ failure to provide raw materials and components that meet such criteria on a timely basis could adversely affect production schedules and our product quality, which in turn could materially adversely affect our business, financial condition, and results of operations.

While we are of the view that our relationships with our current suppliers are sufficient to provide the materials necessary to meet present production demand, these relationships may not continue or the quantity or quality of materials available from these suppliers may not be sufficient to meet our future needs, irrespective of whether we successfully implement our growth strategy, and we may not be able to obtain supplies on favorable terms.

In the event of a shortage of our raw materials, we may not be able to arrange for alternative sources of such materials on a timely basis or on equally favorable terms, and we could experience a disruption to our operations as alternative suppliers are identified and qualified and we enter into new supply arrangements.

The foregoing risks are heightened with respect to our largest supplier, which accounted for 13% of our purchased supplies in 2024, and our top ten suppliers, which accounted for 64% of our purchased supplies in 2024.

Changes in trade policies, including the imposition of or increase in tariffs, could negatively impact our business, financial condition, and results of operations.

We procure certain raw materials and components we use in the manufacturing of our products directly or indirectly from outside of the U.S.

We also import finished products into the U.S.

from our Canadian production facility in Kingston, Ontario.

The imposition of or increase in tariffs on raw materials such as steel and aluminum, the imposition of or increase in tariffs on finished products that we import, and other potential changes in U.S.

and global trade policy could substantially increase the cost of and limit the availability of raw materials or our finished products.

The variability and complexity of tariffs and duties exposes us to the risk of higher costs and inadvertent noncompliance associated with our imported products.

There have recently been a number of tariffs and retaliatory tariffs announced by the U.S.

and other countries that would impact certain of our raw materials and finished products, the implementation, size and timing of which remain uncertain and rapidly evolving.

The implementation of these tariffs and future tariffs, or any changes in trade policies that have a similar effect, or the threat of any of the foregoing, could result in further interruptions in the supply chain.

If we are unable to pass price increases on to our customer base or otherwise mitigate the costs or availability of products and raw materials associated with tariffs and other similar trade policies, our business, financial condition and operating results could be materially adversely affected.

Declining home ownership rates could lead to reduced demand for our products and adversely affect our business, financial condition and results of operations.

Recent trends towards higher interest rates, decreases in the availability of credit, shortages in the supply of homes and increasing home prices in many U.S.

markets have had, and may continue to have, the affect of reducing home purchases.

As a result of these trends, prospective home owners are increasingly choosing to rent their homes as the more affordable option.

Declining home ownership rates could also have the affect of reducing home improvement investments, such as acquiring and installing swimming pools, which could have a material adverse affect on our sales, profitability and overall financial results.

Even in generally favorable economic conditions, severe and/or prolonged downturns affecting the U.S.

housing market could have a similar material adverse impact on our financial performance.

We face competition both from within our industry and from other outdoor living products and if we are not able to compete effectively, our prospects for future success will be jeopardized.

Within our industry, we directly compete against various international, regional and local pool manufacturing companies.

In the current economic environment, where consumer demand has softened due to higher interest rates, inflation and other concerns, competition has intensified resulting in pressure to reduce prices and to offer more innovative products and materials, which has adversely affected and could continue to adversely affect our business, financial condition and results of operations.

Outside of our industry, we compete indirectly with alternative suppliers of big ticket consumer discretionary outdoor living products, such as decks and patios, and with other companies who rely on discretionary homeowner expenditures, such as home remodelers.

Given the density and demand for pools, some geographic markets that we serve tend to have a higher concentration of competitors than others, particularly California, Texas, Florida, Arizona, and Australia.

In addition, new competitors may emerge.

We have seen increased interest from pool manufacturing companies from Canada, Brazil, Mexico and Australia in entering the U.S.

If one or more of our competitors were to merge, the change in the competitive landscape could adversely affect our competitive position.

We may not be able to compete as effectively with our competitors, and ultimately satisfy the needs and preferences of our customers, unless we can continue to enhance existing products and technologies and develop new innovative products and marketing strategies for the markets in which we compete.

Product development requires significant financial, technological, and other resources.

Pool owners are increasingly demanding “smart home” technology, automation and environmentally friendly, sustainable and ethical product features to enhance their pools.

Staying at the forefront of product innovation and consumer demand is important to our future success.

We must continue to develop and bring to market innovative products, which requires hiring and retaining technical staff, maintaining and upgrading manufacturing facilities and equipment and expanding our intellectual property rights.

Product improvements and new product introductions also require significant research, planning, design, development, engineering, and testing at the technological, product, and manufacturing process levels, and we may not be able to timely develop and introduce product improvements or new products.

Our competitors’ new products may beat our products to market, be higher quality or more reliable, be more effective with more features and/or less expensive than our products, obtain better market acceptance, or render our products obsolete.

Any new products that we develop may not receive market acceptance or otherwise generate any meaningful net sales or profits for us relative to our expectations based on, among other things, existing and anticipated investments in manufacturing capacity and commitments to fund advertising, marketing, promotional programs, and research and development.

Natural disasters, including resulting from climate change, geopolitical events, war, terrorism, public health emergencies, or other catastrophic events could adversely affect our business.

financial condition and results of operations.

Our operations and financial results have been, and may be in the future, adversely impacted by local, regional, national or global catastrophic events or extraordinary circumstances, such as:

natural or environmental disasters;

weather events driven by climate change or other factors;

public health emergencies, epidemics or pandemics;

other serious disruption to our facilities due to fire, flood, hurricane, earthquake, war, acts of terrorism, civil insurrection or social unrest;

political uncertainty;

and regional or global conflicts, including the conflicts in the Middle East and Ukraine.

Any such event could disrupt our supply chain, our ability to manufacture and deliver our products, and our dealers’ and distributors’ ability to install our products, as well as adversely impact customer demand for our products.

For example, the conflict in the Middle East could disrupt our ability to deliver product to customers in Israel resulting in delayed or lost sales.

Further, such events could also adversely impact consumer discretionary spending, causing geopolitical uncertainty, and resulting in a macroeconomic downturn and disruption in the financial markets.

Given the seasonality inherent in our business, the impact of such events or circumstances on our business would be particularly severe if the timing coincides with the peak months of swimming pool use and pool installation and maintenance.

Our response and the response of other impacted persons to any such event may result in an increase in our operating costs and require significant management resources, and we could incur impairment expense for any impacted assets.

The ongoing war between Russia and Ukraine, and related sanctions and other actions that have been or may be enacted by the United States, the European Union, or other governing entities could have a lasting impact on regional and global economies and adversely affect our business, our business partners, our suppliers, and our customers.

While our operations are primarily within North America and we have no operations in Russia or Ukraine, and we do not have direct exposure to customers and vendors in Russia or Ukraine, we continue to monitor any adverse impact that such events may have on the global economy in general, on our business and operations and on the businesses and operations of our business partners, suppliers and customers.

We rely on information technology systems to support our business operations.

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We are vulnerable to interruption by fire, natural disasters, power loss, telecommunication failures, internet failures, cybersecurity threats security breaches and other catastrophic events.

Exposure to various types of cybersecurity threats such as malware, computer viruses, worms or other malicious acts, as well as human error, also could potentially disrupt our operations or result in a significant interruption in the delivery of our goods and services.

Exposure to various types of cybersecurity threats such as malware, phishing, computer viruses, worms, ransomware attacks or other malicious acts, as well as human error, also could potentially disrupt our operations, lead to unauthorized payments or result in a significant interruption in the delivery of our goods and services.

As with most companies, we have experienced cybersecurity threats, attempts to breach our systems and other similar incidents, none of which were material to our operations or financial results in 2025.

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Such disruptions could result in delays or cancellations of customer orders, delays or interruptions in the shipment of orders, lower net sales, increased insurance costs, litigation, increased regulatory oversight and additional investments by the Company in threat prevention technology.

In addition, cybersecurity threats may cause us to incur significant remediation costs, result in delays and disruptions to key business operations, damage business relationships or our reputation or divert attention of management and key information technology resources.

and key information technology resources.

With some employees working remotely, there may be increased opportunities for unauthorized access and cybersecurity threats.

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In the event that these service providers do not appropriately protect our data, the result could be a security breach or loss of our data.

Any such loss of data by our third-party service providers could have a

material adverse impact on our business and results of operations.

Any such loss of data by our third-party service providers could have a material adverse impact on our business and results of operations.

Moreover, an employee, contractor or third party with whom we work or to whom we outsource business operations may fail to monitor their or our systems effectively, may fail to maintain appropriate safeguards, may misuse the personal and/or confidential information to which they have access, may attempt to circumvent our security measures, may purposefully or inadvertently allow unauthorized access to our or their systems or to personal and/or confidential information or may otherwise disrupt our business operations.

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It could require significant expenditures to remediate any such failure or breach, severely damage our reputation and our relationships with customers, result in unwanted media attention and lost sales and expose us to risks of litigation and liability.

Advances in computer and software capabilities, encryption technology and other discoveries such as generative AI increase the complexity of our technological environment, including how each interact with our various software platforms.

Advances in computer and software capabilities, encryption technology and other discoveries such as generative and agentic AI increase the complexity of our technological environment, including how each interact with our various software platforms.

Such advances could delay or hinder our ability to process transactions or could compromise the integrity of our data, resulting in a material adverse impact on our financial condition and results of operations.

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The failure to successfully implement and maintain information systems could have an adverse effect on our ability to obtain new business, retain existing business and maintain or increase our sales and profit margins.

Global political uncertainty and financial market volatility caused by political instability, changes in international trade relationships and conflicts could make it more difficult for us to access financing and could adversely affect our business and operations.

Political uncertainty, an increase in trade protectionism or geopolitical conflict could have a material adverse effect on global macroeconomic activities and trade and adversely affect our business, results of operations and financial condition.

The rise of economic nationalist sentiments, trade protectionism and geopolitical security has led to increasing political uncertainty and unpredictability throughout the world.

Additionally, there can be no assurance that additional or new trade tensions, imposition of import and export restrictions and tariffs will not arise between various trade partners.

These potential developments, market perceptions concerning these and related issues and the attendant regulatory uncertainty regarding, for example, the posture of governments with respect to international trade or national security issues, could have a material adverse effect on global trade and economic growth which, in turn, can adversely affect our business, results of operation and financial condition.

Increased trade protectionism or the perception that it may occur could materially adversely affect our business.

Increasing trade protectionism may cause an increase in the cost of products exported from regions globally, the length of time required to transport products, and the risks associated with exporting products.

Such increases may have an adverse impact on our business, operating schedule and financial condition.

If the current global economy or outlook is undermined by downside risks and there is a prolonged economic downturn, governments may resort to new or enhanced trade barriers to protect their domestic industries against imports, thereby depressing demand.

Protectionist developments or adverse international political tensions or developments, or the perception they may occur, may have a material adverse effect on global economic conditions, and may significantly reduce global trade.

Increasing trade protectionism in the markets could increase the risks associated with exporting goods to such markets.

These developments could have a material adverse effect on our business, results of operations and financial condition.

Inflation could adversely impact our financial condition and results of operations.

Higher costs of labor, goods and services, and could continue to cause costs to increase as well as scarcity of certain products.

There are indications in the market that some consumers are reluctant to purchase pool products due to escalating prices to offset inflation.

Changes in trade policies, including the imposition of or increase in tariffs, could negatively impact our business, financial condition, and results of operations.

We procure certain raw materials and components we use in the manufacturing of our products directly or indirectly from outside of the U.S.

We also import finished products into the U.S.

from our Canadian production facility in Kingston, Ontario.

The imposition of or increase in tariffs on raw materials such as steel and aluminum, the imposition of or increase in tariffs on finished products that we import, and other potential changes in U.S.

and global trade policy could substantially increase the cost of and limit the availability of raw materials or our finished products.

The variability and complexity of tariffs and duties exposes us to the risk of higher costs and inadvertent noncompliance associated with our imported products.

Tariffs and retaliatory tariffs announced by the U.S.

and other countries could impact the cost of certain of our raw materials and finished products, the implementation, size and timing of which remain uncertain and rapidly evolving.

Catastrophic events, including earthquakes, wildfires, floods, war, terrorism, public health emergencies, or other such events could adversely affect our business.

financial condition and results of operations.

Our operations and financial results have been, and may be in the future, adversely impacted by local, regional, national or global catastrophic events or extraordinary circumstances, such as:

natural or environmental disasters;

weather events;

public health emergencies, epidemics or pandemics;

other serious disruption to our facilities due to fire, flood, hurricane, earthquake, war, acts of terrorism, civil insurrection or social unrest;

political uncertainty;

and regional or global conflicts, including the conflicts in the Middle East and Ukraine.

Further, such events could also adversely impact consumer discretionary spending, and resulting in a macroeconomic downturn and disruption in the financial markets.

seasonality inherent in our business, the impact of such events or circumstances on our business would be particularly severe if the timing coincides with the peak months of swimming pool use and pool installation and maintenance.

Adverse weather conditions could negatively impact our sales, as well as result in significant variability of sales in reporting periods.

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Further, adverse weather conditions can cause the timing of sales and cash flows to shift significantly between quarterly and annual reporting periods and therefore significantly impact the meaningfulness of period-to-period comparisons of financial and operating results.

For example, as a result of the hurricanes that impacted the west coast of Florida and other areas of the southeastern U.S.

in the second half of 2024, we experienced a temporary decline in demand for our products and prospective customers were focused on recovering from the damage caused by the storms to their homes.

Industry consolidation, including among our network of dealers and distributors could lead to downward pressure on the price of our products or the loss of our largest customers, which could adversely affect our business, financial condition, and results of operations.

We sell all of our products to key channel partners, dealers and distributors, who resell the products to consumers and other dealers, respectively.

Some of our customers also sell our competitors’ products.

The customers’

success in reselling our products to consumers is a key driver of our net sales.

Should consolidation among our dealers and distributors through acquisitions, mergers and other transactions, we may face increased pressure from the remaining dealers and distributors to lower the price of our products, which could have an adverse effect on sales and profitability.

Such consolidation could also lead to the loss of our largest customers if the surviving dealers choose to discontinue purchases of our products, which could also reduce sales and profitability.

These risks are heightened with respect to our largest customer, which accounted for 21.0% of our net sales in 2024, and our top ten dealers and distributors, which accounted for 42.8% of our net sales in 2024.

A reduction in sales to our customers, particularly the loss of, or a reduction in sales to, our largest customers, could have a material adverse effect on our business, financial condition, and results of operations.

If one or more of our competitors were to merge, the change in the competitive landscape could adversely affect our competitive position.

Consolidation could increase their resources and result in competitors with expanded market share, larger customer bases, greater diversified product offerings and greater technological and marketing expertise, which may allow them to compete more effectively against us.

In addition, our competitors may develop products that are superior to our products (on a price-to-value basis or otherwise) or may adapt more quickly to new technologies or evolving customer requirements.

If we do not compete effectively, it could have a material adverse effect on our business, financial condition and results of operations.

An interruption of our production capability at one or more of our manufacturing facilities from accident, calamity or other causes, or events affecting the global economy, could adversely affect our business and results of operations.

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Any of these events could result in substantial repair costs and higher operating costs.

Product quality, warranty claims, installation or safety concerns and other claims due to the failure of third party installers to follow our product installation instructions and procedures could negatively impact our sales, lead to increased costs, and expose us to litigation.

Other litigation and regulatory matters incidental to our business also may adversely impact our business and financial results.

Product quality issues could negatively impact consumer confidence in our brands and our business.

If our product offerings do not meet applicable legal standards or consumers’ expectations regarding safety or quality, we could experience lost sales and increased costs and be exposed to legal, financial, and reputational risks, as well as governmental enforcement actions.

Since we provide various warranties on our products, generally ranging from five years to lifetime warranties, we become liable for warranty obligations should problems arise.

Warranty obligations in excess of our reserves could have a material adverse effect on our financial condition and results of operations.

Actual, potential, or perceived product safety concerns, including health-related concerns, could expose us to litigation, as well as government enforcement actions, and result in costly product recalls and other liabilities.

Installation services for our pool products for homeowners is provided by us in the case of our autocover products and our dealers and other third party installers.

We provide dealer and third party installers with pool installation specifications, instructions and training.

To the extent that our specifications and instructions are not adhered to by the installer, our pools may be damaged or not function properly leading to homeowner dissatisfaction.

While the Company disclaims responsibility for faulty installation by dealers and other installers, dissatisfied homeowners may bring warranty or legal claims against us which can cause the Company to incur legal fees and adversely affect our insurance costs.

The defense of such claims can also be a distraction to management and to our warranty team, as well as cause reputational harm.

Following the acquisition of CoverStar Central in April 2024, we are now directly involved in

the installation of autocovers for some homeowners, and we may be subject to direct customer claims based on dissatisfaction with the installation of our autocovers.

We are also involved or may be involved in various disputes, litigation, and regulatory matters incidental to and in the ordinary course of our business, including employment matters, personal injury claims, intellectual property disputes, commercial disputes, government compliance matters, environmental matters, and other matters arising out of the normal conduct of our business.

We generally intend to vigorously defend ourselves in such matters as they arise, as appropriate.

While the impact of litigation has been and may continue to be immaterial, there can be no assurance that the impact of pending and any future claims will not be material to our business, financial condition, or results of operations in the future.

In particular, we believe that the availability of credit is an important factor enabling the purchase of new pools because a significant percentage of consumers finance their pool installations.

The continued combination of higher interest rates and inflation have reduced the affordability of mortgages and increased the cost of home improvement projects.

Tightening consumer credit or increases in interest rates could reduce the number of consumers that obtain financing for pools, which would negatively impact our sales.

In economic downturns such as we experienced in 2024 and 2025, and which is expected to continue into 2026, the demand for swimming pools and related products has declined and we expect that such demand will be constrained in the future until we see a recovery in discretionary consumer spending among pool eligible households.

Our ability to keep pace with rapidly evolving technological developments and standards, such as generative artificial intelligence, could impact our future growth and increase our costs and liability risk.

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If our competitors more successfully incorporate AI into their products and achieve higher market acceptance of their AI solutions than we can our ability to compete effectively could be impaired which may adversely effect our results of operations.

Further, the development, adoption, and uses for generative AI technologies are still in their early stages and ineffective or inadequate AI development or deployment practices by the Company or our third-party vendors could result in unintended consequences, which could impact our future growth and increase our costs and liability risk.

Further, the development, adoption, and uses for generative and agentic AI technologies is rapidly evolving and ineffective or inadequate AI development or deployment practices by the Company or our third-party vendors could result in unintended consequences, which could impact our future growth and increase our costs and liability risk.

For example, the use of artificial intelligence has the potential to result in bias, miscalculations, data errors and other unintended consequences.

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It is also possible that the AI tools we use may negatively affect our reputation, disrupt our operations, or have a material adverse impact on our business, financial condition, and results of operations.

Delays in, or systems disruptions issues caused by, the implementation of our new enterprise resource planning system could adversely affect our operations and results of operations.

We are in the process of a multi-year implementation of a new enterprise resource planning system.

This project has required and will continue to require significant capital and human resources, the re-engineering of many processes of our business, and the attention of our management and other personnel who would otherwise be focused on other aspects of our business.

The implementation may be more expensive and take longer to fully implement than we originally planned, resulting in increased capital investment, higher fees, and expenses of third parties, delayed deployment scheduling, and more on-going maintenance expense once implemented, and, as such, it will be difficult for us to estimate the ultimate costs and schedules.

The implementation may also cause complications to ongoing operations, result in material weaknesses to our internal control framework, increase regulatory compliance risks, and impact our ability to process transactions efficiently, all of which may have a material adverse effect on our business and results of operations.

We depend on our ability to attract, develop, and retain highly qualified personnel.

Our ability to meet our strategic objectives and otherwise grow our business will depend to a significant extent on the continued contributions of our leadership team, as well as our ability to attract, develop and retain other highly qualified managerial, technical, sales and marketing, operations, production and customer service personnel.

In particular, we rely on a technically skilled workforce to operate the specialized equipment required to manufacture

fiberglass pools, panels, liners and pool covers in a challenging production environment that may not appeal to many potential workers.

Competition for these individuals in our manufacturing markets is intense and supply is limited, in particular due to ongoing constraints in the labor market.

Since we operate in a competitive labor market, there is a risk that market increases in compensation could have an adverse effect on our business and operating costs.

While compensation considerations remain important, current and potential employees are increasingly placing a premium on working for companies with strong brand reputation, flexible work arrangements, and other considerations, such as embracing sustainability and diversity, equity and inclusion initiatives.

We may not succeed in identifying, attracting, or retaining qualified personnel on a cost-effective basis.

The loss or interruption of services of any of our key personnel, ability to attract, develop or retain qualified personnel in the future, delays in hiring qualified personnel, or any employee work slowdowns, strikes, or similar actions could make it difficult for us to conduct and manage our business and meet key objectives, which could harm our business, financial condition, and results of operations.

In recent years, we approved cost reduction plans to optimize our production and shift schedules, implement workforce reductions, and streamline our manufacturing footprint by closing certain facilities, and may need to take similar actions in the future if softened demand continues.

Such actions may adversely impact our ability to attract and retain qualified personnel in the future.

Our ability to collect accounts receivables from our customers may adversely impact our cash flows and our ability to reduce our debt.

We extend credit to our customers (dealers in one-step distribution channel or distributor in two-step distribution channel), and we generally do not require collateral to secure these extensions of credit.

A significant portion of our accounts receivables are typically concentrated within a relatively small number of customers.

The financial health of many of our customers is affected by changes in the economy.

The effects of any protracted or severe economic declines may cause our customers to be unable to satisfy their payment obligations, including with us.

While we have procedures to monitor and limit exposure to credit risk on our accounts receivables, there can be no assurance such procedures will effectively limit our credit risk and avoid losses, and our financial condition and results of operations could be materially and adversely affected if our credit losses significantly exceed our estimates.

Declining home ownership rates could lead to reduced demand for our products and adversely affect our business, financial condition and results of operations.

Recent trends towards higher interest rates, decreases in the availability of credit, shortages in the supply of homes and increasing home prices in many U.S.

markets have had, and may continue to have, the affect of reducing home purchases.

As a result of these trends, prospective home owners are increasingly choosing to rent their homes as the more affordable option.

Even in generally favorable economic conditions, severe and/or prolonged downturns affecting the U.S.

housing market could have a similar material adverse impact on our financial performance.

The nature of our business subjects us to compliance with employment, environmental, health, transportation, safety, anti-corruption, trade, and other governmental regulations.

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Our products must also comply with local, state, and international building codes and safety rules and regulations.

Further, we are subject to anti-corruption, anti-bribery, antitrust and other similar laws.

Further, we are subject to anti-corruption, anti-bribery, antitrust and other similar

For example, we have employees and engage with suppliers and customers in many countries with different legal systems, customs and contract laws and regulations, which expose us to risks associated with the United States Foreign Corrupt Practices Act and local anti-corruption and anti-bribery laws and regulations.

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Moreover, compliance with such laws and regulations in the future could prove to be costly.

Although we presently do not expect to incur any capital or other expenditures relating to regulatory

matters in amounts that may be material to us, we may be required to make such expenditures in the future.

Although we presently do not expect to incur any capital or other expenditures relating to regulatory matters in amounts that may be material to us, we may be required to make such expenditures in the future.

These laws and regulations have changed substantially and rapidly and we anticipate that there will be continuing changes, which may require us to incur costs to maintain our business.

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Further, increased energy or compliance costs and expenses as a result thereof may cause disruptions in, or an increase in the costs associated with, the manufacturing and distribution of our products.