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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 September 30, 2023

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 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.

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

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

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)

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.

4

Table of Contents

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.

5

Table of Contents

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

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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 $