0001833197--12-312022Q2P0Y11754755811944561110P0Yfalse0001833197swim:RepurchaseProgramMember2022-07-020001833197swim:RepurchaseProgramMember2022-05-102022-05-100001833197swim:RepurchaseProgramMember2022-05-100001833197us-gaap:CommonStockMember2021-01-012021-04-030001833197us-gaap:CommonStockMember2022-04-032022-07-020001833197us-gaap:CommonStockMemberus-gaap:OverAllotmentOptionMember2022-01-112022-01-110001833197us-gaap:CommonStockMember2021-04-132021-04-130001833197us-gaap:RetainedEarningsMember2022-07-020001833197us-gaap:AdditionalPaidInCapitalMember2022-07-020001833197us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-07-020001833197srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:RetainedEarningsMember2022-04-020001833197us-gaap:RetainedEarningsMember2022-04-020001833197us-gaap:AdditionalPaidInCapitalMember2022-04-020001833197us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-04-020001833197srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2022-04-0200018331972022-04-020001833197us-gaap:RetainedEarningsMember2021-12-310001833197us-gaap:AdditionalPaidInCapitalMember2021-12-310001833197us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-12-310001833197us-gaap:RetainedEarningsMember2021-07-030001833197us-gaap:AdditionalPaidInCapitalMember2021-07-030001833197us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-07-030001833197us-gaap:RetainedEarningsMember2021-04-030001833197us-gaap:AdditionalPaidInCapitalMember2021-04-030001833197us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-04-0300018331972021-04-030001833197us-gaap:RetainedEarningsMember2020-12-310001833197us-gaap:AdditionalPaidInCapitalMember2020-12-310001833197us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-310001833197us-gaap:CommonStockMember2022-07-020001833197us-gaap:CommonStockMember2022-04-020001833197us-gaap:CommonStockMember2021-12-310001833197us-gaap:CommonStockMember2021-07-030001833197us-gaap:CommonStockMember2021-04-030001833197us-gaap:CommonStockMember2020-12-310001833197us-gaap:EmployeeStockOptionMember2021-01-012021-12-310001833197us-gaap:EmployeeStockOptionMember2022-07-020001833197us-gaap:EmployeeStockOptionMember2021-12-310001833197us-gaap:EmployeeStockOptionMember2022-01-012022-07-0200018331972021-04-120001833197us-gaap:RestrictedStockUnitsRSUMember2022-07-020001833197us-gaap:RestrictedStockMember2022-07-020001833197us-gaap:RestrictedStockUnitsRSUMember2021-12-310001833197us-gaap:RestrictedStockMember2021-12-310001833197us-gaap:RestrictedStockUnitsRSUMember2022-01-012022-07-020001833197us-gaap:RestrictedStockMember2022-01-012022-07-020001833197us-gaap:CommonStockMember2022-01-110001833197swim:LinersMember2022-04-032022-07-020001833197swim:InGroundSwimmingPoolsMember2022-04-032022-07-020001833197swim:CoversMember2022-04-032022-07-020001833197swim:LinersMember2022-01-012022-07-020001833197swim:InGroundSwimmingPoolsMember2022-01-012022-07-020001833197swim:CoversMember2022-01-012022-07-020001833197swim:LinersMember2021-04-042021-07-030001833197swim:InGroundSwimmingPoolsMember2021-04-042021-07-030001833197swim:CoversMember2021-04-042021-07-030001833197swim:LinersMember2021-01-012021-07-030001833197swim:InGroundSwimmingPoolsMember2021-01-012021-07-030001833197swim:CoversMember2021-01-012021-07-030001833197swim:DevelopmentOfInternalUseSoftwareMemberswim:BrightAiServicesMember2022-01-012022-07-020001833197swim:DevelopmentOfInternalUseSoftwareMemberswim:BrightAiServicesMember2021-01-012021-12-310001833197swim:ManagementFeeArrangementMemberswim:SponsorMember2022-04-032022-07-020001833197swim:ManagementFeeArrangementMemberswim:SponsorMember2021-04-042021-07-030001833197swim:ManagementFeeArrangementMemberswim:SponsorMember2021-01-012021-07-0300018331972022-02-232022-02-230001833197us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-04-032022-07-020001833197us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-01-012022-04-020001833197us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-04-042021-07-030001833197us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-01-012021-04-030001833197us-gaap:RetainedEarningsMember2022-04-032022-07-020001833197us-gaap:RetainedEarningsMember2022-01-012022-04-020001833197us-gaap:RetainedEarningsMember2021-04-042021-07-030001833197us-gaap:RetainedEarningsMember2021-01-012021-04-030001833197us-gaap:RevolvingCreditFacilityMember2018-12-180001833197srt:MinimumMemberswim:NewRevolvingCreditFacilityMember2022-02-232022-02-230001833197srt:MaximumMemberswim:NewRevolvingCreditFacilityMember2022-02-232022-02-230001833197swim:NewRevolvingCreditFacilityMember2022-02-232022-02-230001833197swim:NewRevolvingCreditFacilityMember2022-07-020001833197us-gaap:FairValueInputsLevel2Memberus-gaap:InterestRateSwapMember2022-07-020001833197us-gaap:FairValueInputsLevel2Memberus-gaap:InterestRateSwapMember2021-12-310001833197us-gaap:UnpatentedTechnologyMember2022-07-020001833197us-gaap:OrderOrProductionBacklogMember2022-07-020001833197us-gaap:EmploymentContractsMember2022-07-020001833197us-gaap:UnpatentedTechnologyMember2021-12-310001833197us-gaap:OrderOrProductionBacklogMember2021-12-310001833197us-gaap:EmploymentContractsMember2021-12-310001833197us-gaap:CommonStockMember2022-01-112022-01-110001833197us-gaap:InterestRateSwapMember2022-02-280001833197us-gaap:InterestRateSwapMemberus-gaap:SecuredOvernightFinancingRateSofrOvernightIndexSwapRateMember2022-02-280001833197swim:NewRevolvingCreditFacilityMember2022-02-230001833197swim:SeniorSecuredTermLoanFacilityMember2022-01-012022-07-020001833197us-gaap:FairValueInputsLevel2Memberus-gaap:EstimateOfFairValueFairValueDisclosureMemberswim:SeniorSecuredTermLoanFacilityMember2022-07-020001833197us-gaap:FairValueInputsLevel2Memberus-gaap:CarryingReportedAmountFairValueDisclosureMemberswim:SeniorSecuredTermLoanFacilityMember2022-07-020001833197us-gaap:FairValueInputsLevel2Memberus-gaap:EstimateOfFairValueFairValueDisclosureMemberswim:AmendedTermLoanMember2021-12-310001833197us-gaap:FairValueInputsLevel2Memberus-gaap:CarryingReportedAmountFairValueDisclosureMemberswim:AmendedTermLoanMember2021-12-310001833197swim:SeniorSecuredTermLoanFacilityMember2022-07-020001833197swim:AmendedTermLoanMember2021-12-310001833197srt:MinimumMemberswim:SeniorSecuredTermLoanFacilityMemberus-gaap:SecuredOvernightFinancingRateSofrOvernightIndexSwapRateMember2022-02-232022-02-230001833197srt:MinimumMemberswim:SeniorSecuredTermLoanFacilityMemberus-gaap:BaseRateMember2022-02-232022-02-230001833197srt:MaximumMemberswim:SeniorSecuredTermLoanFacilityMemberus-gaap:SecuredOvernightFinancingRateSofrOvernightIndexSwapRateMember2022-02-232022-02-230001833197srt:MaximumMemberswim:SeniorSecuredTermLoanFacilityMemberus-gaap:BaseRateMember2022-02-232022-02-230001833197swim:NewRevolvingCreditFacilityMemberus-gaap:SecuredOvernightFinancingRateSofrOvernightIndexSwapRateMember2022-02-232022-02-230001833197swim:NewRevolvingCreditFacilityMemberswim:EuroInterbankOfferedRateAndAustralianDollarRateMember2022-02-232022-02-230001833197swim:NewRevolvingCreditFacilityMemberswim:CanadianPrimeRateMember2022-02-232022-02-2300018331972022-01-1100018331972021-07-0300018331972020-12-310001833197swim:TrojanLeisureProductsLlcDbaRadiantPoolsMember2021-11-242021-11-240001833197swim:TrojanLeisureProductsLlcDbaRadiantPoolsMember2022-01-012022-07-020001833197swim:TrojanLeisureProductsLlcDbaRadiantPoolsMember2021-11-252021-11-250001833197us-gaap:RestrictedStockUnitsRSUMember2022-04-032022-07-020001833197us-gaap:EmployeeStockOptionMember2022-04-032022-07-020001833197us-gaap:RestrictedStockUnitsRSUMember2022-01-012022-07-020001833197us-gaap:EmployeeStockOptionMember2022-01-012022-07-020001833197us-gaap:RestrictedStockUnitsRSUMember2021-04-042021-07-030001833197us-gaap:RestrictedStockMember2021-04-042021-07-030001833197us-gaap:EmployeeStockOptionMember2021-04-042021-07-030001833197us-gaap:RestrictedStockUnitsRSUMember2021-01-012021-07-030001833197us-gaap:RestrictedStockMember2021-01-012021-07-030001833197us-gaap:EmployeeStockOptionMember2021-01-012021-07-030001833197us-gaap:SellingGeneralAndAdministrativeExpensesMember2022-04-032022-07-020001833197us-gaap:CostOfSalesMember2022-04-032022-07-020001833197us-gaap:SellingGeneralAndAdministrativeExpensesMember2022-01-012022-07-020001833197us-gaap:CostOfSalesMember2022-01-012022-07-020001833197us-gaap:SellingGeneralAndAdministrativeExpensesMember2021-04-042021-07-030001833197us-gaap:CostOfSalesMember2021-04-042021-07-030001833197us-gaap:SellingGeneralAndAdministrativeExpensesMember2021-01-012021-07-030001833197us-gaap:CostOfSalesMember2021-01-012021-07-030001833197us-gaap:AdditionalPaidInCapitalMember2022-04-032022-07-0200018331972022-04-032022-07-020001833197us-gaap:AdditionalPaidInCapitalMember2022-01-012022-04-0200018331972022-01-012022-04-020001833197us-gaap:AdditionalPaidInCapitalMember2021-01-012021-04-0300018331972021-01-012021-04-030001833197swim:TrojanLeisureProductsLlcDbaRadiantPoolsMemberus-gaap:UnpatentedTechnologyMember2022-01-012022-07-020001833197swim:TrojanLeisureProductsLlcDbaRadiantPoolsMemberus-gaap:TradeNamesMember2022-01-012022-07-020001833197swim:TrojanLeisureProductsLlcDbaRadiantPoolsMemberus-gaap:OrderOrProductionBacklogMember2022-01-012022-07-020001833197swim:TrojanLeisureProductsLlcDbaRadiantPoolsMemberus-gaap:CustomerRelationshipsMember2022-01-012022-07-020001833197swim:TrojanLeisureProductsLlcDbaRadiantPoolsMemberswim:PoolDesignsMember2022-01-012022-07-020001833197srt:RevisionOfPriorPeriodAccountingStandardsUpdateAdjustmentMemberus-gaap:AccountingStandardsUpdate201602Member2021-12-310001833197swim:ManagementFeeArrangementMemberswim:SponsorMember2022-07-020001833197swim:ManagementFeeArrangementMemberswim:SponsorMember2021-12-310001833197swim:BrightAiServicesMember2022-07-020001833197swim:BrightAiServicesMember2021-12-310001833197us-gaap:CommonStockMemberus-gaap:OverAllotmentOptionMember2021-04-272021-04-270001833197us-gaap:CommonStockMember2021-04-272021-04-2700018331972021-04-122021-04-120001833197us-gaap:CommonStockMember2022-01-012022-04-020001833197srt:MaximumMemberswim:ManagementFeeArrangementMemberswim:SponsorMember2022-01-012022-07-020001833197swim:SeniorSecuredTermLoanFacilityMember2022-02-232022-02-230001833197swim:SeniorSecuredTermLoanFacilityMember2022-02-230001833197swim:ManagementFeeArrangementMemberswim:SponsorMember2022-01-012022-07-0200018331972021-04-272021-04-270001833197us-gaap:CommonStockMember2021-04-042021-07-030001833197us-gaap:AdditionalPaidInCapitalMember2021-04-042021-07-0300018331972021-04-042021-07-030001833197us-gaap:TrademarksAndTradeNamesMember2022-07-020001833197us-gaap:TechnologyBasedIntangibleAssetsMember2022-07-020001833197us-gaap:FranchiseRightsMember2022-07-020001833197us-gaap:CustomerRelationshipsMember2022-07-020001833197swim:PoolDesignsMember2022-07-020001833197us-gaap:TrademarksAndTradeNamesMember2021-12-310001833197us-gaap:TechnologyBasedIntangibleAssetsMember2021-12-310001833197us-gaap:FranchiseRightsMember2021-12-310001833197us-gaap:CustomerRelationshipsMember2021-12-310001833197swim:PoolDesignsMember2021-12-310001833197us-gaap:MediumTermNotesMember2021-11-240001833197us-gaap:MediumTermNotesMember2021-01-250001833197us-gaap:MediumTermNotesMember2020-10-140001833197us-gaap:MediumTermNotesMember2019-05-2900018331972022-07-0200018331972021-12-3100018331972021-01-012021-07-030001833197swim:TrojanLeisureProductsLlcDbaRadiantPoolsMember2021-11-2400018331972022-08-0900018331972022-01-012022-07-02xbrli:sharesiso4217:USDxbrli:pureiso4217:USDxbrli:sharesswim:segment

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 2, 2022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from     to    

Commission file number: 001-40358

LATHAM GROUP, Inc.

(Exact name of registrant as specified in its charter)

Delaware

    

83-2797583

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer Identification No.)

787 Watervliet Shaker Road, Latham, NY

12110

(Address of principal executive offices)

(Zip Code)

(800) 833-3800

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, par value $0.0001 per share

SWIM

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filers

Accelerated filers

Non-accelerated filers

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of August 9, 2022, 117,121,134 shares of the registrant’s common stock, $0.0001 par value were outstanding.

Table of Contents

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION

3

Item 1. Financial Statements

3

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

25

Item 3. Quantitative and Qualitative Disclosures About Market Risk

39

Item 4. Controls and Procedures

40

PART II — OTHER INFORMATION

40

Item 1. Legal Proceedings

40

Item 1A. Risk Factors

40

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

42

Item 6. Exhibits

43

SIGNATURES

2

Table of Contents

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

Index to Condensed Consolidated Financial Statements (Unaudited)

Condensed Consolidated Balance Sheets

    

4

Condensed Consolidated Statements of Operations

5

Condensed Consolidated Statements of Comprehensive Income (Loss)

6

Condensed Consolidated Statements of Stockholders’ Equity

7

Condensed Consolidated Statements of Cash Flows

9

Notes to Condensed Consolidated Financial Statements

10

3

Table of Contents

Latham Group, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

(unaudited)

July 2,

December 31,

    

2022

    

2021

Assets

Current assets:

 

  

 

  

Cash

$

25,220

$

43,952

Trade receivables, net

 

104,704

 

60,753

Inventories, net

 

161,919

 

109,556

Income tax receivable

 

5,388

 

4,039

Prepaid expenses and other current assets

 

9,888

 

10,766

Total current assets

 

307,119

 

229,066

Property and equipment, net

 

74,831

 

63,506

Equity method investment

 

24,624

 

23,362

Deferred tax assets

 

9,796

 

10,603

Operating lease right-of-use assets

35,470

Goodwill

 

128,628

 

128,871

Intangible assets, net

 

323,024

 

338,310

Other assets

5,728

765

Total assets

$

909,220

$

794,483

Liabilities and Stockholders’ Equity

 

  

 

  

Current liabilities:

 

  

 

  

Accounts payable

$

53,830

$

37,998

Accounts payable – related party

 

900

 

850

Current maturities of long-term debt

 

3,250

 

17,220

Current operating lease liabilities

6,641

Accrued expenses and other current liabilities

 

59,849

 

59,097

Total current liabilities

 

124,470

 

115,165

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

 

310,471

 

263,188

Deferred income tax liabilities, net

 

56,343

 

56,343

Liability for uncertain tax positions

 

5,790

 

5,689

Non-current operating lease liabilities

29,550

Other long-term liabilities

 

685

 

453

Total liabilities

 

527,309

 

440,838

Commitments and contingencies

 

  

 

  

Stockholders’ equity:

 

  

 

  

Preferred stock, $0.0001 par value; 100,000,000 shares authorized as of both July 2, 2022 and December 31, 2021; no shares issued and outstanding as of both July 2, 2022 and December 31, 2021

Common stock, $0.0001 par value; 900,000,000 shares authorized as of July 2, 2022 and December 31, 2021; 117,547,558 and 119,445,611 shares issued and outstanding, as of July 2, 2022 and December 31, 2021, respectively

 

12

 

12

Additional paid-in capital

 

431,637

 

401,846

Accumulated deficit

 

(47,411)

 

(48,583)

Accumulated other comprehensive (loss) income

 

(2,327)

 

370

Total stockholders’ equity

 

381,911

 

353,645

Total liabilities and stockholders’ equity

$

909,220

$

794,483

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

4

Table of Contents

Latham Group, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share data)

(unaudited)

Fiscal Quarter Ended

Two Fiscal Quarters Ended

    

July 2, 2022

    

July 3, 2021

   

July 2, 2022

    

July 3, 2021

Net sales

$

206,800

$

180,889

$

398,414

$

329,635

Cost of sales

 

139,193

 

122,534

 

260,153

 

218,840

Gross profit

 

67,607

 

58,355

 

138,261

 

110,795

Selling, general and administrative expense

 

41,804

 

95,288

 

87,029

 

122,460

Underwriting fees related to offering of common stock

11,437

Amortization

 

7,156

 

5,479

 

14,348

 

11,074

Income (loss) from operations

 

18,647

 

(42,412)

 

25,447

 

(22,739)

Other expense (income):

 

  

 

  

 

  

 

  

Interest expense

 

3,164

 

7,516

 

4,929

 

16,572

Loss on extinguishment of debt

3,465

Other expense (income), net

 

917

 

(794)

 

562

 

(1,349)

Total other expense, net

 

4,081

 

6,722

 

8,956

 

15,223

Earnings from equity method investment

720

754

1,262

998

Income (loss) before income taxes

 

15,286

 

(48,380)

 

17,753

 

(36,964)

Income tax expense

 

10,983

 

5,218

 

16,290

 

8,101

Net income (loss)

$

4,303

$

(53,598)

$

1,463

$

(45,065)

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

 

  

 

  

 

  

 

  

Basic

$

0.04

$

(0.49)

$

0.01

$

(0.41)

Diluted

$

0.04

$

(0.49)

$

0.01

$

(0.41)

Weighted-average common shares outstanding – basic and diluted

 

  

 

  

 

  

 

  

Basic

 

113,692,160

 

109,163,698

 

113,695,354

 

109,115,991

Diluted

 

115,384,273

 

109,163,698

 

115,698,368

 

109,115,991

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

5

Table of Contents

Latham Group, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(in thousands)

(unaudited)

Fiscal Quarter Ended

Two Fiscal Quarters Ended

    

July 2, 2022

    

July 3, 2021

   

July 2, 2022

    

July 3, 2021

Net income (loss)

$

4,303

$

(53,598)

$

1,463

$

(45,065)

Other comprehensive (loss) income, net of tax:

 

  

 

  

 

  

 

  

Foreign currency translation adjustments

 

(3,917)

 

164

 

(2,697)

 

(1,037)

Total other comprehensive (loss) income, net of tax

 

(3,917)

 

164

 

(2,697)

 

(1,037)

Comprehensive income (loss)

$

386

$

(53,434)

$

(1,234)

$

(46,102)

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

6

Table of Contents

Latham Group, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except share amounts)

(unaudited)

    

    

    

    

Retained 

    

Accumulated 

    

Additional

Earnings

Other

Total

 Paid-in 

 (Accumulated

 Comprehensive

 Stockholders'

Shares

Amount

Capital

 Deficit)

 Income (Loss)

 Equity

Balances at December 31, 2020

 

118,854,249

$

12

$

265,478

$

13,765

$

2,354

$

281,609

Net income

 

 

 

 

8,533

 

 

8,533

Foreign currency translation adjustments

 

 

 

 

 

(1,201)

 

(1,201)

Dividend to Class A unitholders ($1.00 per share)

(110,033)

(110,033)

Repurchase and retirement of common stock

(21,666,653)

(2)

(64,936)

(64,938)

Stock-based compensation expense

 

 

 

1,464

 

 

 

1,464

Balances at April 3, 2021

 

97,187,596

$

10

$

91,973

$

22,298

$

1,153

$

115,434

Net loss

 

 

 

 

(53,598)

 

 

(53,598)

Foreign currency translation adjustments

 

 

 

 

 

164

 

164

Net proceeds from initial public offering

23,000,000

2

399,262

399,264

Repurchase and retirement of common stock

 

(12,264,438)

 

(1)

 

(216,699)

 

 

 

(216,700)

Issuance of restricted stock in connection with the Reorganization

8,340,126

1

(1)

Issuance of common stock upon conversion of Class B units

4,145,987

Stock-based compensation expense

75,511

75,511

Balances at July 3, 2021

 

120,409,271

$

12

$

350,046

$

(31,300)

$

1,317

$

320,075

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

7

Table of Contents

Latham Group, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except share amounts)

(unaudited)

    

    

    

    

Retained 

    

Accumulated 

    

Additional

Earnings

Other

Total

 Paid-in 

 (Accumulated

 Comprehensive

 Stockholders'

Shares

Amount

Capital

 Deficit)

 Income (Loss)

 Equity

Balances at December 31, 2021

 

119,445,611

$

12

$

401,846

$

(48,583)

$

370

$

353,645

Cumulative effect of adoption of new accounting standard- leases

(291)

(291)

Net loss

 

 

 

 

(2,840)

 

 

(2,840)

Foreign currency translation adjustments

 

 

 

 

 

1,220

 

1,220

Sale of common stock

13,800,000

1

269,099

269,100

Repurchase and retirement of common stock

(13,800,244)

(1)

(257,662)

(257,663)

Retirement of restricted stock

(53,961)

Issuance of common stock upon release of restricted stock units

78,341

Stock-based compensation expense

 

 

 

16,925

 

 

 

16,925

Balances at April 2, 2022

 

119,469,747

$

12

$

430,208

$

(51,714)

$

1,590

$

380,096

Net income

 

 

 

 

4,303

 

 

4,303

Foreign currency translation adjustments

 

 

 

 

 

(3,917)

 

(3,917)

Repurchases and retirements of common stock under repurchase program

 

(2,026,231)

 

 

(15,000)

 

 

 

(15,000)

Issuance of common stock upon release of restricted stock units

104,042

Stock-based compensation expense

16,429

16,429

Balances at July 2, 2022

 

117,547,558

$

12

$

431,637

$

(47,411)

$

(2,327)

$

381,911

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

8

Table of Contents

Latham Group, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

Two Fiscal Quarters Ended

July 2,

July 3,

    

2022

    

2021

Cash flows from operating activities:

Net income (loss)

$

1,463

$

(45,065)

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

 

  

 

  

Depreciation and amortization

 

19,274

 

15,670

Amortization of deferred financing costs and debt discount

 

709

 

5,698

Stock-based compensation expense

 

33,354

 

76,975

Underwriting fees related to offering of common stock

11,437

Loss on extinguishment of debt

3,465

Other non-cash, net

2,648

1,041

Earnings from equity method investment

(1,262)

(998)

Distributions received from equity method investment

998

Changes in operating assets and liabilities:

 

  

 

  

Trade receivables

 

(45,696)

 

(44,472)

Inventories

 

(53,182)

 

(9,455)

Prepaid expenses and other current assets

 

759

 

(3,680)

Income tax receivable

 

(1,349)

 

(75)

Other assets

(375)

830

Accounts payable

 

15,865

 

11,007

Accrued expenses and other current liabilities

 

(2,428)

 

5,551

Other long-term liabilities

 

232

 

113

Net cash (used in) provided by operating activities

 

(15,086)

 

14,138

Cash flows from investing activities:

 

  

 

  

Purchases of property and equipment

 

(16,750)

 

(12,967)

Proceeds from the sale of property and equipment

 

23

 

16

Acquisitions of businesses, net of cash acquired

 

(384)

 

Return of equity method investment

108

Net cash used in investing activities

 

(17,111)

 

(12,843)

Cash flows from financing activities:

 

  

 

  

Proceeds from long-term debt borrowings

 

320,125

 

172,813

Payments on long-term debt borrowings

 

(284,822)

 

(161,275)

Proceeds from borrowings on revolving credit facilities

25,000

16,000

Payments on revolving credit facilities

(25,000)

(16,000)

Deferred financing fees paid

(6,865)

(1,250)

Dividend to Class A unitholders

(110,033)

Proceeds from sale of common stock

257,663

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

399,264

Repurchases and retirements of common stock

(272,663)

(281,638)

Net cash provided by financing activities

 

13,438

 

17,881

Effect of exchange rate changes on cash

 

27

 

(1,969)

Net (decrease) increase in cash

 

(18,732)

 

17,207

Cash at beginning of period

 

43,952

 

59,310

Cash at end of period

$

25,220

$

76,517

Supplemental cash flow information:

 

  

 

  

Cash paid for interest

$

5,080

$

10,267

Income taxes paid, net

13,353

6,751

Supplemental disclosure of non-cash investing and financing activities:

 

 

  

Purchases of property and equipment included in accounts payable and accrued expenses

$

990

$

530

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

900

1,350

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

39,501

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

9

Table of Contents

Notes to Condensed Consolidated Financial Statements 

1. NATURE OF THE BUSINESS

Latham Group, Inc. (the “Company”) wholly owns Latham Pool Products, Inc. (“Latham Pool Products”) (together, “Latham”) and is a designer, manufacturer and marketer of in-ground residential swimming pools in North America, Australia and New Zealand. Latham offers a portfolio of pools and related products, including in-ground swimming pools, pool liners and pool covers.

On December 18, 2018, Latham Investment Holdings, LP (“Parent”), an investment fund managed by affiliates of Pamplona Capital Management (the “Sponsor”), Wynnchurch Capital, L.P. and management acquired all of the outstanding equity interests of Latham Topco., Inc., a newly incorporated entity in the State of Delaware. Latham Topco, Inc. changed its name to Latham Group, Inc. on March 3, 2021.

2. 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 Company’s unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Unaudited Interim Financial Information

The consolidated balance sheet at December 31, 2021 was derived from audited financial statements but does not include all disclosures required by GAAP. The accompanying unaudited condensed consolidated financial statements as of July 2, 2022 and for the fiscal and two fiscal quarters ended July 2, 2022 and July 3, 2021 have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. These condensed consolidated financial statements should be read in conjunction with Latham Group, Inc.’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2021 included in the Company’s 2021 Annual Report on Form 10-K, filed with the SEC on March 10, 2022 (the “Annual Report”). In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of these condensed consolidated financial statements, have been included. The Company’s results of operations for the fiscal and two fiscal quarters ended July 2, 2022 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2022.

Use of Estimates

The preparation of the Company’s condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. 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. Changes in estimates are recorded in the period in which they become known.

Segment Reporting

The Company identifies operating segments based on how the chief operating decision maker manages the business, allocates resources, makes operating decisions and evaluates operating performance. The Company conducts its business as one operating and reportable segment that designs, manufactures and markets in-ground swimming pools, liners and covers. The Company’s chief executive officer, who is the chief operating decision maker, reviews financial information presented on a consolidated basis for purposes of assessing financial performance and allocating resources.

10

Table of Contents

Seasonality

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. Historically, net sales and net income are highest during spring and summer, representing the peak months of swimming pool use, pool installation and remodeling and repair activities. Severe weather may also affect net sales in all periods.

Accounting Policies

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

Recently Issued Accounting Pronouncements

The Company qualifies as “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 and has elected to “opt in” to the extended transition related to complying with new or revised accounting standards, which means that when a standard is issued or revised and it has different application dates for public and nonpublic companies, the Company will adopt the new or revised standard at the time nonpublic companies adopt the new or revised standard and will do so until such time that the Company either (i) irrevocably elects to “opt out” of such extended transition period or (ii) no longer qualifies as an emerging growth company. The Company may choose to early adopt any new or revised accounting standards whenever such early adoption is permitted for private companies.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”), which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. In addition, a lessee is required to record (i) a right-of-use asset and a lease liability on its balance sheet for all leases with accounting lease terms of more than 12 months regardless of whether it is an operating or financing lease and (ii) lease expense in its consolidated statement of operations for operating leases and amortization and interest expense in its consolidated statement of operations for financing leases. Leases with a term of 12 months or less may be accounted for similar to how operating leases were accounted for under the prior guidance. In July 2018, the FASB issued ASU No. 2018-11, Leases (Topic 842), which added an optional transition method that allows companies to adopt the standard as of the beginning of the year of adoption as opposed to the earliest comparative period presented. In November 2019, the FASB issued guidance delaying the effective date for all entities, except for public business entities. For nonpublic entities, this guidance is effective for annual periods beginning after December 15, 2020. In June 2020, the FASB issued additional guidance delaying the effective date for all entities, except for public business entities. The Company adopted ASU 2016-02 on January 1, 2022 using the modified retrospective approach and elected the package of practical expedients to use in transition, which permitted us not to reassess, under the new standard, our prior conclusions about lease identification and lease classification. The adoption resulted in the addition of $33.5 million of operating lease right-of-use assets, and $34.0 million of operating lease liabilities, a decrease of $0.2 million to deferred rent and a decrease of $0.3 million to retained earnings for the cumulative effect of initially applying the new standard. The adoption did not have a material impact on the Company’s Condensed Consolidated Statements of Operations, Condensed Consolidated Statements of Stockholders’ Equity or Condensed Consolidated Statements of Cash Flows. See Note 9, “Leases” for additional information related to the Company’s leases and accounting policy elections.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss model. It also eliminates the concept of other-than-temporary impairment and requires credit losses related to available-for-sale debt securities to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. These changes will result in earlier recognition of credit losses. In November 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments — Credit Losses, which narrowed the scope and changed the effective date for nonpublic entities for ASU 2016-13. The FASB subsequently issued supplemental guidance within ASU 2019-05, Financial Instruments — Credit Losses (Topic 326): Targeted Transition Relief (“ASU 2019-05”). ASU 2019-05 provides an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis. For public entities that are SEC filers, excluding entities eligible to be smaller reporting companies, ASU 2016-13 is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. For all other entities, ASU 2016-13 is effective for

11

Table of Contents

annual periods beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted. As an “emerging growth company”, the Company is not yet required to adopt the standard and is currently evaluating the impact that the adoption of ASU 2016-13 will have on its consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by the discontinuation of the London Interbank Offered Rate (“LIBOR”) or by another reference rate expected to be discontinued. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope, which clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. Specifically, this guidance applies to derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform. This guidance is effective for all entities upon issuance on March 12, 2020 and may be applied through December 31, 2022. The expedients and exceptions in this guidance are optional. The Company elected the optional expedient in connection with amending its interest rate swap to replace the reference rate from LIBOR to SOFR to consider the amendment as a continuation of the existing contract without having to perform an assessment that would otherwise be required under GAAP.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”), which amends ASC 805 by requiring acquiring entities to apply ASC 606 to recognize and measure contract assets and contract liabilities in a business combination. For public entities, ASU 2021-08 is effective for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2022. For all other entities, ASU 2021-08 is effective for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2023. The amendments should be applied prospectively to business combinations occurring on or after the effective date of the amendments, with early adoption permitted. The Company is currently evaluating ASU 2021-08 and its potential impact on its consolidated financial statements.

3. ACQUISITIONS

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

On November 24, 2021, Latham Pool Products acquired Trojan Leisure Products, LLC d/b/a Radiant Pools (“Radiant”) for a total purchase price of $90.7 million (the “Radiant Acquisition”). The results of Radiant’s operations have been included in the consolidated financial statements since that date. Radiant specializes in manufacturing proprietary vinyl liner aluminum swimming pools which can be built completely in-ground, semi-inground, or above ground. As a result, this acquisition expanded the Company’s product offerings. In connection with the Radiant Acquisition, consideration paid was $90.7 million in cash, or $90.5 million net of cash acquired of $0.2 million. The cash consideration was funded, in part, through long-term debt proceeds of $50.0 million. The Company incurred $2.9 million in transaction costs.

Subsequent to the acquisition date, there was an additional amount due to the seller of $0.4 million related to the finalization of the net working capital adjustment, which was accounted for as a measurement period adjustment. The measurement period adjustment resulted in an increase in the total consideration transferred of $0.4 million and an increase to goodwill of $0.4 million. The net working capital adjustment was settled during the fiscal quarter ended July 2, 2022.

The Company accounted for the Radiant Acquisition using the acquisition method of accounting in accordance with ASC 805. This requires that the assets acquired and liabilities assumed be measured at fair value. The Company estimated, using Level 3 inputs, the fair value of certain fixed assets using a combination of the cost approach and the market approach. Inventories were valued using the comparative sales method, less the cost of disposal. Specific to intangible assets, customer relationships and backlog were valued using the multi-period excess earnings method, whereas trade names, technology and pool designs were valued using the relief from royalty method. The Company recorded the assets acquired and liabilities assumed at their respective fair values as of the acquisition date.

12

Table of Contents

The following summarizes the purchase price allocation for the Radiant Acquisition:

(in thousands)

    

November 24, 2021

Total consideration

$

91,109

Allocation of purchase price:

 

  

Cash

 

217

Trade receivables

 

2,805

Inventories

 

5,528

Prepaid expenses and other current assets

 

396

Property and equipment

 

1,263

Intangible assets

 

72,500

Total assets acquired

 

82,709

Accounts payable

 

1,744

Accrued expenses and other current liabilities

 

1,038

Other long-term liabilities

 

2,920

Total liabilities assumed

 

5,702

Total fair value of net assets acquired, excluding goodwill:

 

77,007

Goodwill

$

14,102

The excess of the purchase price over the fair value of the identifiable assets acquired and the liabilities assumed in the Radiant Acquisition was allocated to goodwill in the amount of $14.1 million. Goodwill resulting from the Radiant Acquisition was attributable to the expanded market share and product offerings. Goodwill resulting from the Radiant Acquisition is deductible for tax purposes.

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

Fair Value

Amortization

Definite-lived intangible assets:

    

(in thousands)

    

Period

Dealer relationships

$

37,000

 

13 years

Trade names

 

13,000

 

25 years

Technology

13,000

15 years

Pool designs

7,900

15 years

Backlog

1,600

10 months

$

72,500

4. FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value.

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

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

Level 3 — Unobservable inputs that reflect the Company’s own assumptions incorporated into valuation techniques. These valuations require significant judgment.

13

Table of Contents

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. When there is more than one input at different levels within the hierarchy, the fair value is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Assessment of the significance of a particular input to the fair value measurement in its entirety requires substantial judgment and consideration of factors specific to the asset or liability. Level 3 inputs are inherently difficult to estimate. Changes to these inputs can have significant impact on fair value measurements. Assets and liabilities measured at fair value using Level 3 inputs are based on one or more of the following valuation techniques: market approach, income approach or cost approach. There were no transfers between fair value measurement levels during the two fiscal quarters ended July 2, 2022 or July 3, 2021.

Assets and liabilities measured at fair value on a nonrecurring basis

The Company’s non-financial assets such as goodwill, intangible assets and property and equipment are measured at fair value upon acquisition or remeasured to fair value when an impairment charge is recognized. Such fair value measurements are based predominantly on Level 2 and Level 3 inputs.

Fair value of financial instruments

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 due to the short-term maturities of these instruments.

Term loans

Term loans (see Note 7) are carried at amortized cost; however, the Company estimates the fair value of term loans for disclosure purposes. The fair value of term loans is determined using inputs based on observable market data of a non-public exchange, which are classified as Level 2 inputs. The following table sets forth the carrying amount and fair value of its term loans (in thousands):

July 2, 2022

December 31, 2021

Carrying

Estimated

Carrying

Estimated

    

Value

    

Fair Value

    

Value

    

Fair Value

New Term Loan

$

313,721

$

298,819

$

$

Amended Term Loan

$

$

$

280,408

$

281,926

Interest rate swap

The Company estimates the fair value of the interest rate swap (see Note 7) 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 July 2, 2022 and December 31, 2021, the fair value of the Company’s interest rate swap asset was $4.4 million and $0.5 million, respectively, which was recorded within other assets on the condensed consolidated balance sheets.

5. GOODWILL AND INTANGIBLE ASSETS, NET

Goodwill

The carrying amount of goodwill as of July 2, 2022 and as of December 31, 2021 was $128.6 million and $128.9 million, respectively. The change in the carrying value during the two fiscal quarters ended July 2, 2022 was due to an increase of $0.4 million as a result of a measurement period adjustment (see Note 3) and fluctuations in foreign currency exchange rates.

14

Table of Contents

Intangible Assets

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

July 2, 2022

Gross

Foreign

Carrying

Currency

Accumulated

Net

    

Amount

    

Translation

    

Amortization

    

Amount

Trade names and trademarks

$

148,100

$

(91)

$

19,684

$

128,325

Patented technology

 

16,126

 

34

 

6,082

 

10,078

Technology

13,000

506

12,494

Pool designs

 

13,628

 

(16)

 

1,569

 

12,043

Franchise relationships

 

1,187

 

40

 

916

 

311

Dealer relationships

 

197,376

 

12

 

38,820

 

158,568

Backlog

1,600

1,120

480

Non-competition agreements

 

2,476

 

 

1,751

 

725

$

393,493

$

(21)

$

70,448

$

323,024

The Company recognized $7.2 million and $14.3 million of amortization expense related to intangible assets during the fiscal and two fiscal quarters ended July 2, 2022, respectively. The Company recognized $5.5 million and $11.1 million of amortization expense related to intangible assets during the fiscal and two fiscal quarters ended July 3, 2021, respectively.

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

December 31, 2021

Gross

Foreign

Carrying

Currency

Accumulated

Net

    

Amount

    

Translation

    

Amortization

    

Amount

Trade names and trademarks

$

148,100

$

439

$

16,382

$

132,157

Patented technology

 

16,126

 

65

 

5,205

 

10,986

Technology

13,000

72

12,928

Pool designs

 

13,628

 

265

 

1,101

 

12,792

Franchise relationships

 

1,187

 

54

 

767

 

474

Dealer relationships

 

197,376

 

22

 

30,838

 

166,560

Backlog

1,600

160

1,440

Non-competition agreements

 

2,476

 

 

1,503

 

973

$

393,493

$

845

$

56,028

$

338,310

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

Estimated Future 

Year Ended

    

Amortization Expense

Remainder of fiscal 2022

$

13,840

2023

 

26,528

2024

 

25,708

2025

 

25,550

2026

 

25,550

Thereafter

 

205,848

$

323,024

15

Table of Contents

6. INVENTORIES, NET

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

    

July 2, 2022

    

December 31, 2021

Raw materials

$

105,131

$

77,510

Finished goods

 

56,788

 

32,046

$

161,919

$

109,556

7. LONG-TERM DEBT

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

    

July 2, 2022

    

December 31, 2021

New Term Loan

$

324,187

$

Amended Term Loan

284,009

Less: Unamortized discount and debt issuance costs

 

(10,466)

 

(3,601)

Total debt

 

313,721

 

280,408

Less: Current portion of long-term debt

 

(3,250)

 

(17,220)

Total long-term debt

$

310,471

$

263,188

On February 23, 2022, Latham Pool Products entered into an agreement (the “New Credit Agreement”) with Barclays Bank PLC, which provides a senior secured multicurrency revolving line of credit (the “New Revolving Credit Facility”) in an initial principal amount of $75.0 million and a U.S. Dollar senior secured term loan facility (the “New Term Loan Facility”) in an initial principal amount of $325.0 million (the “Refinancing”). On the closing date, proceeds under the agreement were used to repay $294.0 million and terminate the Credit Agreement (as defined below) and for general corporate purposes.

New Revolving Credit Facility

On February 23, 2022, Latham Pool Products entered into the New Credit Agreement with Barclays Bank PLC, which provides a senior secured multicurrency revolving line of credit in an initial principal amount of $75.0 million. The New Revolving Credit Facility may be utilized to finance ongoing general corporate and working capital needs and permits Latham Pools Products to borrow loans in U.S. Dollars, Canadian Dollars, Euros and Australian Dollars. The New Revolving Credit Facility matures on February 23, 2027. Loans outstanding under the New Revolving Credit Facility denominated in U.S. Dollars and Canadian Dollars bear interest, at the borrower’s option, at a rate per annum based on Term SOFR or CDO (each, as defined in the New Credit Agreement), as applicable, plus a margin of 3.50%, or at a rate per annum based on the Base Rate or the Canadian Prime Rate (each, as defined in the New Credit Agreement), plus a margin of 2.50%. Loans outstanding under the New Revolving Credit Facility denominated in Euros or Australian Dollars bear interest based on EURIBOR or the AUD Rate (each, as defined in the New Credit Agreement), respectively, plus a margin of 3.50%. A commitment fee accrues on any unused portion of the commitments under the New Revolving Credit Facility. The commitment fee is due and payable quarterly in arrears and is, initially, 0.375% per annum and will, thereafter, accrue at a rate per annum ranging from 0.25% to 0.50%, depending on the First Lien Net Leverage Ratio (as defined in the New Credit Agreement, the “First Lien Net Leverage Ratio”). Borrowings under the New Revolving Credit Facility are due at maturity.

The Company incurred debt issuance costs of $0.8 million related to the New Revolving Credit Facility. The debt issuance costs were recorded within other assets on the condensed consolidated balance and are being amortized over the life of the New Revolving Credit Facility.

The Company is required to meet certain financial covenants, including maintaining specific liquidity measurements. There are also negative covenants, including certain restrictions on the Company’s ability to incur additional indebtedness, create liens, make investments, consolidate or merge with other entities, enter into transactions with affiliates, make prepayments with respect to certain indebtedness and make restricted payments and other distributions.

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

16

Table of Contents

New Term Loan Facility

Pursuant to the New Credit Agreement, Latham Pool Products also borrowed $325.0 million in term loans. The New Term Loan Facility matures on February 23, 2029. Loans outstanding under the New Term Loan Facility bear interest, at the borrower’s option, at a rate per annum based on Term SOFR (as defined in the New Credit Agreement), plus a margin ranging from 3.75% to 4.00%, depending on the First Lien Net Leverage Ratio, or based on the Base Rate (as defined in the Credit Agreement), plus a margin rang