SEC Filing - Latham Group, Inc.

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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 September 30, 2023


☐	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 filer	☐	Accelerated filer	☒	Non-accelerated filer	☐	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 November 3, 2023, 114,755,945 shares of the registrant’s common stock, $0.0001 par value, were outstanding.

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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		24
Item 3. Quantitative and Qualitative Disclosures About Market Risk		39
Item 4. Controls and Procedures		39
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		41
Item 5. Other Information		41
Item 6. Exhibits		42
SIGNATURES

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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

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Latham Group, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

(unaudited)


	September 30,		December 31,
	2023		2022
Assets
Current assets:
Cash	$	78,113	$	32,626
Trade receivables, net		72,413		48,847
Inventories, net		103,224		165,220
Income tax receivable		3,855		2,316
Prepaid expenses and other current assets		5,973		5,998
Total current assets		263,578		255,007
Property and equipment, net		110,331		98,184
Equity method investment		25,234		25,095
Deferred tax assets		7,867		7,762
Operating lease right-of-use assets		31,934		38,308
Goodwill		130,875		131,383
Intangible assets, net		288,749		309,215
Other assets		6,917		4,729
Total assets	$	865,485	$	869,683
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	27,390	$	25,449
Accounts payable – related party		8		358
Current maturities of long-term debt		3,250		3,250
Current operating lease liabilities		6,895		6,923
Accrued expenses and other current liabilities		49,398		50,885
Total current liabilities		86,941		86,865
Long-term debt, net of discount, debt issuance costs, and current portion		298,371		309,631
Deferred income tax liabilities, net		50,181		50,181
Liability for uncertain tax positions		7,503		7,123
Non-current operating lease liabilities		26,121		32,391
Other long-term liabilities		3,671		702
Total liabilities	$	472,788	$	486,893
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.0001 par value; 100,000,000 shares authorized as of both September 30, 2023 and December 31, 2022; no shares issued and outstanding as of both September 30, 2023 and December 31, 2022		—		—
Common stock, $0.0001 par value; 900,000,000 shares authorized as of September 30, 2023 and December 31, 2022; 114,755,945 and 114,667,975 shares issued and outstanding, as of September 30, 2023 and December 31, 2022, respectively		11		11
Additional paid-in capital		455,767		440,880
Accumulated deficit		(57,068)		(54,568)
Accumulated other comprehensive loss		(6,013)		(3,533)
Total stockholders’ equity		392,697		382,790
Total liabilities and stockholders’ equity	$	865,485	$	869,683

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

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Latham Group, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share data)

(unaudited)


	Fiscal Quarter Ended				Three Fiscal Quarters Ended
	September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
Net sales	$	160,778	$	189,398	$	475,625	$	587,812
Cost of sales		112,633		130,521		343,877		390,674
Gross profit		48,145		58,877		131,748		197,138
Selling, general, and administrative expense		23,431		26,749		86,697		113,778
Underwriting fees related to offering of common stock		—		—		—		11,437
Amortization		6,635		7,156		19,902		21,504
Income from operations		18,079		24,972		25,149		50,419
Other expense:
Interest expense, net		5,980		4,264		21,270		9,193
Loss on extinguishment of debt		—		—		—		3,465
Other expense, net		1,031		1,052		205		1,614
Total other expense, net		7,011		5,316		21,475		14,272
Earnings from equity method investment		1,771		1,329		2,468		2,591
Income before income taxes		12,839		20,985		6,142		38,738
Income tax expense		6,686		9,109		8,642		25,399
Net income (loss)	$	6,153	$	11,876	$	(2,500)	$	13,339
Net income (loss) per share attributable to common stockholders:
Basic	$	0.05	$	0.10	$	(0.02)	$	0.12
Diluted	$	0.05	$	0.10	$	(0.02)	$	0.12
Weighted-average common shares outstanding – basic and diluted
Basic		113,538,533		113,171,655		112,629,851		113,521,425
Diluted		114,656,761		113,202,846		112,629,851		114,867,164

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

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Latham Group, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(in thousands)

(unaudited)


	Fiscal Quarter Ended				Three Fiscal Quarters Ended
	September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
Net income (loss)	$	6,153	$	11,876	$	(2,500)	$	13,339
Other comprehensive loss, net of tax:
Foreign currency translation adjustments		(2,007)		(2,813)		(2,480)		(5,510)
Total other comprehensive loss, net of tax		(2,007)		(2,813)		(2,480)		(5,510)
Comprehensive income (loss)	$	4,146	$	9,063	$	(4,980)	$	7,829

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

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Latham Group, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except share amounts)

(unaudited)


								Accumulated
				Additional				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)
Repurchase and retirement 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

Net income	—		—		—		11,876		—		11,876
Foreign currency translation adjustments	—		—		—		—		(2,813)		(2,813)
Retirement of restricted stock	(426,424)		—		—		—		—		—
Stock-based compensation expense	—		—		7,061		—		—		7,061
Balances at October 1, 2022	117,121,134	$	12	$	438,698	$	(35,535)	$	(5,140)	$	398,035

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

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Latham Group, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except share amounts)

(unaudited)


								Accumulated
				Additional				Other		Total
				Paid-in		Accumulated		Comprehensive		Stockholders'
	Shares	Amount		Capital		Deficit		Loss		Equity
Balances at December 31, 2022	114,667,975	$	11	$	440,880	$	(54,568)	$	(3,533)	$	382,790
Net loss	—		—		—		(14,368)		—		(14,368)
Foreign currency translation adjustments	—		—		—		—		(144)		(144)
Issuance of common stock upon release of restricted stock units	22,078		—		—		—		—		—
Stock-based compensation expense	—		—		6,769		—		—		6,769
Balances at April 1, 2023	114,690,053	$	11	$	447,649	$	(68,936)	$	(3,677)	$	375,047

Net income	—		—		—		5,715		—		5,715
Foreign currency translation adjustments	—		—		—		—		(329)		(329)
Retirement of restricted stock	(54,271)		—		—		—		—		—
Issuance of common stock upon release of restricted stock units	98,974		—		—		—		—		—
Stock-based compensation expense	—		—		5,764		—		—		5,764
Balances at July 1, 2023	114,734,756	$	11	$	453,413	$	(63,221)	$	(4,006)	$	386,197

Net income	—		—		—		6,153		—		6,153
Foreign currency translation adjustments	—		—		—		—		(2,007)		(2,007)
Retirement of restricted stock	(101,179)		—		—		—		—		—
Issuance of common stock upon release of restricted stock units	122,368		—		—		—		—		—
Stock-based compensation expense	—		—		2,354		—		—		2,354
Balances at September 30, 2023	114,755,945	$	11	$	455,767	$	(57,068)	$	(6,013)	$	392,697

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

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Latham Group, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	Three Fiscal Quarters Ended
	September 30,		October 1,
	2023		2022
Cash flows from operating activities:
Net (loss) income	$	(2,500)	$	13,339
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization		29,784		28,834
Amortization of deferred financing costs and debt discount		1,290		1,140
Non-cash lease expense		5,874		5,596
Change in fair value of interest rate swaps		1,790		(4,203)
Stock-based compensation expense		14,887		40,415
Underwriting fees related to offering of common stock		—		11,437
Loss on extinguishment of debt		—		3,465
Bad debt expense		4,984		1,457
Other non-cash, net		34		6,496
Earnings from equity method investment		(2,468)		(2,591)
Distributions received from equity method investment		2,330		—
Changes in operating assets and liabilities:
Trade receivables		(28,652)		(44,875)
Inventories		61,738		(59,139)
Prepaid expenses and other current assets		(25)		2,458
Income tax receivable		(1,539)		(2,051)
Other assets		(4,289)		(442)
Accounts payable		2,085		3,702
Accrued expenses and other current liabilities		(169)		(92)
Other long-term liabilities		2,969		290
Net cash provided by operating activities		88,123		5,236
Cash flows from investing activities:
Purchases of property and equipment		(28,273)		(29,002)
Proceeds from the sale of property and equipment		—		24
Acquisitions of businesses, net of cash acquired		—		(384)
Net cash used in investing activities		(28,273)		(29,362)
Cash flows from financing activities:
Proceeds from long-term debt borrowings		—		320,125
Payments on long-term debt borrowings		(12,437)		(285,634)
Proceeds from borrowings on revolving credit facilities		48,000		25,000
Payments on revolving credit facilities		(48,000)		(25,000)
Deferred financing fees paid		—		(6,865)
Proceeds from the issuance of common stock		—		257,663
Repayments of finance lease obligations		(437)		—
Repurchase and retirement of common stock		—		(272,663)
Net cash (used in) provided by financing activities		(12,874)		12,626
Effect of exchange rate changes on cash		(1,489)		(1,832)
Net increase (decrease) in cash		45,487		(13,332)
Cash at beginning of period		32,626		43,952
Cash at end of period	$	78,113	$	30,620
Supplemental cash flow information:
Cash paid for interest	$	18,538	$	8,760
Income taxes paid, net		2,990		20,000
Supplemental disclosure of non-cash investing and financing activities:
Purchases of property and equipment included in accounts payable and accrued expenses	$	484	$	2,202
Capitalized internal-use software included in accounts payable – related party		—		800
Right-of-use operating and finance lease assets obtained in exchange for lease liabilities		5,766		45,876

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

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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”), 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, 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 unaudited condensed consolidated balance sheet at December 31, 2022 was derived from audited financial statements but does not include all disclosures required by GAAP. The accompanying unaudited condensed consolidated financial statements as of September 30, 2023 and for the fiscal and three fiscal quarters ended September 30, 2023 and October 1, 2022 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 fiscal year ended December 31, 2022 included in the Company’s 2022 Annual Report on Form 10-K, filed with the SEC on March 7, 2023 (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 quarter and three fiscal quarters ended September 30, 2023 are not necessarily indicative of the results of operations that may be expected for the fiscal year ending December 31, 2023.

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.

Reclassifications

Certain prior period balances have been reclassified to conform to the current period presentation in the condensed consolidated financial statements and the accompanying notes.

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Seasonality

Although the Company generally has demand for its products throughout the fiscal year, its business is seasonal and weather is one of the principal external factors affecting the business. Historically, net sales and net income are highest during the second and third fiscal quarters, representing the peak months of swimming pool use, pool installation, and remodeling and repair activities. Severe weather may also affect net sales in all periods.

Significant Accounting Policies

Refer to the Annual Report for a discussion of the Company’s significant 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 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 was effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. For all other entities, ASU 2016-13 was effective for annual periods beginning after December 15, 2022, including interim periods within those fiscal years. The adoption of this standard on January 1, 2023 did not have a material impact on the Company’s condensed consolidated financial statements.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”), which amends ASC 805 by requiring acquiring entities to apply ASC 606 to recognize and measure contract assets and contract liabilities in a business combination. For public entities, ASU 2021-08 was effective for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2022. For all other entities, ASU 2021-08 is effective for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2023. The amendments should be applied prospectively to business combinations occurring on or after the effective date of the amendments, with early adoption permitted. The Company adopted this standard early on January 1, 2023 and it did not have a material impact on the Company’s condensed consolidated financial statements.

3. 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.

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

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. When there is more than one input at different levels within the hierarchy, the fair value is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Assessment of the significance of a particular input to the fair value measurement in its entirety requires substantial judgment and consideration of factors specific to the asset or liability. Level 3 inputs are inherently difficult to estimate. Changes to these inputs can have significant impact on fair value measurements. Assets and liabilities measured at fair value using Level 3 inputs are based on one or more of the following valuation techniques: market approach, income approach or cost approach. There were no transfers between fair value measurement levels during the three fiscal quarters ended September 30, 2023 or October 1, 2022.

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 and 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 because of the short-term maturities of these instruments.

Term loan

The Company’s term loan (see Note 6) is carried at amortized cost; however, the Company estimates the fair value of the term loan for disclosure purposes. The fair value of the term loan is determined using inputs based on observable market data of a non-public exchange, which are classified as Level 2 inputs. The following table sets forth the carrying amount and fair value of its term loan (in thousands):



	September 30, 2023				December 31, 2022
	Carrying		Estimated		Carrying		Estimated
	Value		Fair Value		Value		Fair Value
Term Loan	$	301,621	$	292,572	$	312,881	$	290,979

Interest rate swaps

The Company estimates the fair value of interest rate swaps (see Note 6) on a fiscal quarterly basis using Level 2 inputs, including the forward SOFR curve. The fair value is estimated by comparing (i) the present value of all future monthly fixed rate payments versus (ii) the variable payments based on the forward SOFR curve. As of September 30, 2023 and December 31, 2022, the net fair value of the Company’s interest rate swaps was an asset balance of $1.7 million and $3.5 million, respectively, which were recorded within other assets on the condensed consolidated balance sheets.

4. GOODWILL AND INTANGIBLE ASSETS, NET

Goodwill

The carrying amount of goodwill as of September 30, 2023 and as of December 31, 2022 was $130.9 million and $131.4 million, respectively. The change in the carrying value during the three fiscal quarters ended September 30, 2023 was solely because of fluctuations in foreign currency exchange rates.

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Based on the results of the qualitative assessment performed for the Company’s one reporting unit, the Company determined that goodwill was not impaired at October 2, 2022. As a result of a decline in the Company’s stock price, the Company plans to perform a quantitative assessment for the 2023 annual test as of October 1, 2023, which may result in a non-cash impairment charge during the fiscal quarter ended December 31, 2023.

Intangible Assets

Intangible assets, net as of September 30, 2023 consisted of the following (in thousands):


	September 30, 2023
	Gross		Foreign
	Carrying		Currency		Accumulated		Net
	Amount		Translation		Amortization		Amount
Trade names and trademarks	$	148,100	$	(554)	$	27,930	$	119,616
Patented technology		16,126		108		8,274		7,960
Technology		13,000		—		1,589		11,411
Pool designs		13,628		(172)		2,738		10,718
Franchise relationships		1,187		140		1,286		41
Dealer relationships		197,376		39		58,517		138,898
Order backlog		1,600		—		1,600		—
Non-competition agreements		2,476		—		2,371		105
	$	393,493	$	(439)	$	104,305	$	288,749

The Company recognized $6.6 million and $19.9 million of amortization expense related to intangible assets during the fiscal quarter and three fiscal quarters ended September 30, 2023. The Company recognized $7.2 million and $21.5 million of amortization expense related to intangible assets during the fiscal quarter and three fiscal quarters ended October 1, 2022.

Intangible assets, net as of December 31, 2022 consisted of the following (in thousands):


	December 31, 2022
	Gross		Foreign
	Carrying		Currency		Accumulated		Net
	Amount		Translation		Amortization		Amount
Trade names and trademarks	$	148,100	$	(84)	$	22,982	$	125,034
Patented technology		16,126		37		6,959		9,204
Technology		13,000		—		939		12,061
Pool designs		13,628		(10)		2,037		11,581
Franchise relationships		1,187		45		1,064		168
Dealer relationships		197,376		13		46,699		150,690
Order backlog		1,600		—		1,600		—
Non-competition agreements		2,476		—		1,999		477
	$	393,493	$	1	$	84,279	$	309,215

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
	Amortization
Year Ended	Expense
Remainder of fiscal 2023	$	6,632
2024		25,708
2025		25,550
2026		25,550
2027		25,550
Thereafter		179,759
	$	288,749

Table of Contents

5. INVENTORIES, NET

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



	September 30, 2023		December 31, 2022
Raw materials	$	60,036	$	95,388
Finished goods		43,188		69,832
	$	103,224	$	165,220

6. LONG-TERM DEBT

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



	September 30, 2023		December 31, 2022
Term Loan	$	310,125	$	322,562
Revolving Credit Facility		—		—
Less: Unamortized discount and debt issuance costs		(8,504)		(9,681)
Total debt		301,621		312,881
Less: Current portion of long-term debt		(3,250)		(3,250)
Total long-term debt	$	298,371	$	309,631

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

Revolving Credit Facility

The Revolving Credit Facility may be utilized to finance ongoing general corporate and working capital needs and permits Latham Pools Products to borrow loans in U.S. Dollars, Canadian Dollars, Euros and Australian Dollars. The Revolving Credit Facility matures on February 23, 2027. Loans outstanding under the Revolving Credit Facility denominated in U.S. Dollars and Canadian Dollars bear interest, at the borrower’s option, at a rate per annum based on Term SOFR or CDO (each, as defined in the Credit Agreement), as applicable, plus a margin of 3.50%, or at a rate per annum based on the Base Rate or the Canadian Prime Rate (each, as defined in the Credit Agreement), plus a margin of 2.50%. Loans outstanding under the Revolving Credit Facility denominated in Euros or Australian Dollars bear interest based on EURIBOR or the AUD Rate (each, as defined in the Credit Agreement), respectively, plus a margin of 3.50%. A commitment fee accrues on any unused portion of the commitments under the Revolving Credit Facility. The commitment fee is due and payable quarterly in arrears, and initially was 0.375% per annum and thereafter accrues at a rate per annum ranging from 0.25% to 0.50%, depending on the First Lien Net Leverage Ratio (as defined in the Credit Agreement, the “First Lien Net Leverage Ratio”). Borrowings under the Revolving Credit Facility are due at maturity.

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

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

As of September 30, 2023, there were no outstanding borrowings on the Revolving Credit Facility and $75.0 million was available for future borrowing.