0001558370-23-018016 | 10-Q | XBRL Viewer

FAIR VALUE MEASUREMENTS

9 Months Ended

Sep. 30, 2023

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.

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.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

RESTRUCTURING COSTS (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended	12 Months Ended
RESTRUCTURING COSTS (Details) - USD ($) $ in Millions	Dec. 31, 2023	Sep. 30, 2023	Sep. 30, 2023	Dec. 31, 2022
RESTRUCTURING COSTS
Restructuring costs		$ 1.8
Severance costs		1.0
Other restructuring costs		0.8
Exit or disposal cost			$ 0.3	$ 0.0
Subsequent Event
RESTRUCTURING COSTS
Other restructuring costs	$ 1.0
Severance and related costs
RESTRUCTURING COSTS
Employee related costs		$ 2.8	$ 2.8

- Definition

Line items represent financial concepts included in a table. These concepts are used to disclose reportable information associated with domain members defined in one or many axes to the table.

+ References + Details

NET SALES (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
NET SALES (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Oct. 01, 2022	Sep. 30, 2023	Oct. 01, 2022
Disaggregation of Revenue [Line Items]
Net sales	$ 160,778	$ 189,398	$ 475,625	$ 587,812
In-ground Swimming Pools
Disaggregation of Revenue [Line Items]
Net sales	82,884	102,334	252,029	326,290
Covers
Disaggregation of Revenue [Line Items]
Net sales	47,460	51,934	108,961	122,848
Liners
Disaggregation of Revenue [Line Items]
Net sales	$ 30,434	$ 35,130	$ 114,635	$ 138,674

- Definition

Line items represent financial concepts included in a table. These concepts are used to disclose reportable information associated with domain members defined in one or many axes to the table.

+ References + Details

- Definition

Amount, excluding tax collected from customer, of revenue from satisfaction of performance obligation by transferring promised good or service to customer. Tax collected from customer is tax assessed by governmental authority that is both imposed on and concurrent with specific revenue-producing transaction, including, but not limited to, sales, use, value added and excise.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 924
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SAB Topic 11.L)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479941/924-10-S99-1

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 5
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-5

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 30
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482810/280-10-50-30

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 42
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482810/280-10-50-42

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 22
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482810/280-10-50-22

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 32
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482810/280-10-50-32

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 40
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482810/280-10-50-40

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 22
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482810/280-10-50-22

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 32
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482810/280-10-50-32

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 41
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482810/280-10-50-41

Reference 11: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 4
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-4

+ Details

INVENTORIES, NET (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
INVENTORIES, NET
Raw materials	$ 60,036	$ 95,388
Finished goods	43,188	69,832
Inventory, Net, Total	$ 103,224	$ 165,220

INVENTORIES, NET

9 Months Ended

Sep. 30, 2023

INVENTORIES, NET

INVENTORIES, NET

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

RELATED PARTY TRANSACTIONS - Bright AI Services (Details) - Bright AI Services - USD ($) $ in Millions	9 Months Ended	12 Months Ended
	Sep. 30, 2023	Dec. 31, 2022
Related Party Transaction [Line Items]
Accounts payable	$ 0.0	$ 0.4
Development Of Internal Use Software
Related Party Transaction [Line Items]
Costs incurred	$ 0.8	$ 0.2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Sep. 30, 2023

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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.

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.

LONG-TERM DEBT - Revolving Credit Facility (Details) - Revolving Credit Facility - USD ($) $ in Millions	Feb. 23, 2022	Sep. 30, 2023
Debt Instrument [Line Items]
Maximum borrowing capacity	$ 75.0	$ 75.0
Commitment fee rate range, depending on leverage ratio	0.375%
Debt issuance costs	$ 0.8
Minimum
Debt Instrument [Line Items]
Commitment fee rate range, depending on leverage ratio	0.25%
Maximum
Debt Instrument [Line Items]
Commitment fee rate range, depending on leverage ratio	0.50%
SOFR
Debt Instrument [Line Items]
Basis spread on variable rate	3.50%
Canadian Prime Rate
Debt Instrument [Line Items]
Basis spread on variable rate	2.50%
EURIBOR or AUD Rate
Debt Instrument [Line Items]
Basis spread on variable rate	3.50%

Condensed Consolidated Statements of Stockholders' Equity (unaudited) - USD ($) $ in Thousands	Common Stock Repurchase Program	Common Stock	Additional Paid-in Capital Repurchase Program	Additional Paid-in Capital	Accumulated Deficit Cumulative Effect, Period of Adoption, Adjustment	Accumulated Deficit	Accumulated Other Comprehensive Income (Loss)	Cumulative Effect, Period of Adoption, Adjustment	Repurchase Program	Total
Balance, beginning of period at Dec. 31, 2021		$ 12		$ 401,846		$ (48,583)	$ 370			$ 353,645
Balance, beginning of period (in shares) at Dec. 31, 2021		119,445,611
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net Income (Loss)						(2,840)				(2,840)
Foreign currency translation adjustments							1,220			1,220
Sale of common stock		$ 1		269,099						269,100
Sale of common stock (in shares)		13,800,000
Repurchase and retirement of common stock		$ (1)		(257,662)						(257,663)
Repurchase and retirement of common stock (in shares)		(13,800,244)
Retirement of restricted stock (in shares)		53,961
Issuance of common stock upon release of restricted stock units (in shares)		78,341
Stock-based compensation expense				16,925						16,925
Balance, end of period at Apr. 02, 2022		$ 12		430,208	$ (291)	(51,714)	1,590	$ (291)		380,096
Balance, end of period (in shares) at Apr. 02, 2022		119,469,747
Balance, beginning of period at Dec. 31, 2021		$ 12		401,846		(48,583)	370			353,645
Balance, beginning of period (in shares) at Dec. 31, 2021		119,445,611
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net Income (Loss)										13,339
Balance, end of period at Oct. 01, 2022		$ 12		438,698		(35,535)	(5,140)			398,035
Balance, end of period (in shares) at Oct. 01, 2022		117,121,134
Balance, beginning of period at Apr. 02, 2022		$ 12		430,208	$ (291)	(51,714)	1,590	$ (291)		380,096
Balance, beginning of period (in shares) at Apr. 02, 2022		119,469,747
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net Income (Loss)						4,303				4,303
Foreign currency translation adjustments							(3,917)			(3,917)
Repurchase and retirement of common stock			$ (15,000)						$ (15,000)
Repurchase and retirement of common stock (in shares)	(2,026,231)
Issuance of common stock upon release of restricted stock units (in shares)		104,042
Stock-based compensation expense				16,429						16,429
Balance, end of period at Jul. 02, 2022		$ 12		431,637		(47,411)	(2,327)			381,911
Balance, end of period (in shares) at Jul. 02, 2022		117,547,558
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net Income (Loss)						11,876				11,876
Foreign currency translation adjustments							(2,813)			(2,813)
Retirement of restricted stock (in shares)		(426,424)
Stock-based compensation expense				7,061						7,061
Balance, end of period at Oct. 01, 2022		$ 12		438,698		(35,535)	(5,140)			398,035
Balance, end of period (in shares) at Oct. 01, 2022		117,121,134
Balance, beginning of period at Dec. 31, 2022		$ 11		440,880		(54,568)	(3,533)			382,790
Balance, beginning of period (in shares) at Dec. 31, 2022		114,667,975
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net Income (Loss)						(14,368)				(14,368)
Foreign currency translation adjustments							(144)			(144)
Issuance of common stock upon release of restricted stock units (in shares)		22,078
Stock-based compensation expense				6,769						6,769
Balance, end of period at Apr. 01, 2023		$ 11		447,649		(68,936)	(3,677)			375,047
Balance, end of period (in shares) at Apr. 01, 2023		114,690,053
Balance, beginning of period at Dec. 31, 2022		$ 11		440,880		(54,568)	(3,533)			382,790
Balance, beginning of period (in shares) at Dec. 31, 2022		114,667,975
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net Income (Loss)										(2,500)
Balance, end of period at Sep. 30, 2023		$ 11		455,767		(57,068)	(6,013)			392,697
Balance, end of period (in shares) at Sep. 30, 2023		114,755,945
Balance, beginning of period at Apr. 01, 2023		$ 11		447,649		(68,936)	(3,677)			375,047
Balance, beginning of period (in shares) at Apr. 01, 2023		114,690,053
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net Income (Loss)						5,715				5,715
Foreign currency translation adjustments							(329)			(329)
Retirement of restricted stock (in shares)		(54,271)
Issuance of common stock upon release of restricted stock units (in shares)		98,974
Stock-based compensation expense				5,764						5,764
Balance, end of period at Jul. 01, 2023		$ 11		453,413		(63,221)	(4,006)			386,197
Balance, end of period (in shares) at Jul. 01, 2023		114,734,756
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net Income (Loss)						6,153				6,153
Foreign currency translation adjustments							(2,007)			(2,007)
Retirement of restricted stock (in shares)		(101,179)
Issuance of common stock upon release of restricted stock units (in shares)		122,368
Stock-based compensation expense				2,354						2,354
Balance, end of period at Sep. 30, 2023		$ 11		$ 455,767		$ (57,068)	$ (6,013)			$ 392,697
Balance, end of period (in shares) at Sep. 30, 2023		114,755,945

NET INCOME (LOSS) PER SHARE (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended						9 Months Ended
	Sep. 30, 2023	Jul. 01, 2023	Apr. 01, 2023	Oct. 01, 2022	Jul. 02, 2022	Apr. 02, 2022	Sep. 30, 2023	Oct. 01, 2022	Dec. 31, 2022
Numerator:
Net income (loss) attributable to common stockholders	$ 6,153	$ 5,715	$ (14,368)	$ 11,876	$ 4,303	$ (2,840)	$ (2,500)	$ 13,339
Weighted-average common shares outstanding
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
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
Common stock issued and outstanding for accounting purposes	113,574,696						113,574,696		112,091,756
Restricted stock awards
Net income (loss) per share attributable to common stockholders:
Potentially dilutive securities outstanding	64,329			3,842,873			909,375	1,280,958
Restricted stock units
Net income (loss) per share attributable to common stockholders:
Potentially dilutive securities outstanding	57,885			212,183			220,255	108,570
Employee Stock Option
Net income (loss) per share attributable to common stockholders:
Potentially dilutive securities outstanding	1,644,520			1,963,331			1,753,740	1,655,462
Stock appreciation rights
Net income (loss) per share attributable to common stockholders:
Potentially dilutive securities outstanding	738,940						422,874

GOODWILL AND INTANGIBLE ASSETS, NET

9 Months Ended

Sep. 30, 2023

GOODWILL AND INTANGIBLE ASSETS, NET

GOODWILL AND INTANGIBLE ASSETS, NET

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.

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

LONG-TERM DEBT

9 Months Ended

Sep. 30, 2023

LONG-TERM DEBT

LONG-TERM DEBT

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.

Term Loan

The Term Loan matures on February 23, 2029. Loans outstanding under the Term Loan bear interest, at the borrower’s option, at a rate per annum based on Term SOFR (as defined in the Credit Agreement), plus a margin ranging from 3.75% to 4.00%, depending on the First Lien Net Leverage Ratio, or based on the Base Rate (as defined in the Credit Agreement), plus a margin ranging from 2.75% to 3.00%, depending on the First Lien Net Leverage Ratio. Loans under the Term Loan are subject to scheduled quarterly amortization payments of $812,500, equal to 0.25% of the initial principal amount of the Term Loan. The Credit Agreement contains customary mandatory prepayment provisions, including requirements to make mandatory prepayments with 50% of any excess cash flow and with 100% of the net cash proceeds from the incurrence of indebtedness not otherwise permitted to be incurred by the covenants, asset sales, and casualty and condemnation events, in each case, subject to customary exceptions.

Outstanding borrowings as of September 30, 2023 were $301.6 million, net of unamortized discount and debt issuance costs of $8.5 million. In connection with the Term Loan, the Company is subject to various negative, reporting, financial, and other covenants, including maintaining specific liquidity measurements.

As of September 30, 2023, the unamortized debt issuance costs and discount on the Term Loan were $4.7 million and $3.8 million, respectively. The effective interest rate was 10.26% at September 30, 2023, including the impact of the Company’s interest rate swaps.

As of September 30, 2023, the Company was in compliance with all financial covenants under the Credit Agreement.

Interest Rate Risk

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

The Company executed an interest rate swap on April 30, 2020. The swap had an effective date of May 18, 2020 and a termination date of May 18, 2023. In February 2022, the Company amended its interest rate swap to change the index rate from LIBOR to SOFR in connection with the entry into the Credit Agreement. Under the terms of the amended swap, the Company fixed its SOFR borrowing rate at 0.496% on a notional amount of $200.0 million. The interest rate swap was not designated as a hedging instrument for accounting purposes (see Note 3).

Additionally, the Company entered into an interest rate swap that was executed on March 10, 2023. The swap has an effective date of May 18, 2023 and a termination date of May 18, 2026. Under the terms of the swap, the Company fixed its SOFR borrowing rate at 4.3725% on a notional amount of $161.0 million. The interest rate swap is not designated as a hedging instrument for accounting purposes (see Note 3).

Debt Maturities

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



Year Ended	Term Loan
Remainder of fiscal 2023	$	813
2024		3,250
2025		3,250
2026		3,250
2027		3,250
Thereafter		296,312
	$	310,125

The obligations under the Credit Agreement are guaranteed by certain wholly owned subsidiaries (the “Guarantors”) of the Company as defined in the security agreement. The obligations under the Credit Agreement are secured by substantially all of the Guarantors’ tangible and intangible assets, including their accounts receivables, equipment, intellectual property, inventory, cash and

cash equivalents, deposit accounts, and security accounts. The Credit Agreement also restricts payments and other distributions unless certain conditions are met, which could restrict the Company’s ability to pay dividends.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1B
-Subparagraph (h)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1B

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 235
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-Paragraph 1
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-URI https://asc.fasb.org//1943274/2147480678/235-10-S99-1

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-URI https://asc.fasb.org//470/tableOfContent

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
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Reference 5: http://www.xbrl.org/2003/role/disclosureRef
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-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1B

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
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-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1B

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
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Reference 8: http://www.xbrl.org/2003/role/disclosureRef
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Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
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Reference 10: http://www.xbrl.org/2003/role/disclosureRef
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Reference 11: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
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-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1I

Reference 12: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
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-Section 50
-Paragraph 1I
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1I

Reference 13: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1I
-Subparagraph (d)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1I

+ Details

Condensed Consolidated Balance Sheets (unaudited) (Parenthetical) - $ / shares	Sep. 30, 2023	Dec. 31, 2022
Condensed Consolidated Balance Sheets (unaudited)
Preferred stock, par value	$ 0.0001	$ 0.0001
Preferred stock, shares authorized	100,000,000	100,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, shares authorized	900,000,000	900,000,000
Common stock, shares issued	114,755,945	114,667,975
Common stock, shares outstanding	114,755,945	114,667,975

NET SALES (Tables)

9 Months Ended

Sep. 30, 2023

NET SALES.

Summary of disaggregation of net sales by product line

The following table sets forth the Company’s disaggregation of net sales by product line (in thousands):



	Fiscal Quarter Ended				Three Fiscal Quarters Ended
	September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
In-ground Swimming Pools	$	82,884	$	102,334	$	252,029	$	326,290
Covers		47,460		51,934		108,961		122,848
Liners		30,434		35,130		114,635		138,674
	$	160,778	$	189,398	$	475,625	$	587,812

FAIR VALUE MEASUREMENTS - Fair value of financial instruments (Details) - Level 2 - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Term loan \| Carrying Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Amount	$ 301,621	$ 312,881
Term loan \| Estimated Fair Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Amount	292,572	290,979
Interest Rate Swap
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Fair value of interest rate swap asset	$ 1,700	$ 3,500

Condensed Consolidated Statements of Cash Flows (unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2023	Oct. 01, 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

NET SALES

9 Months Ended

Sep. 30, 2023

NET SALES.

NET SALES

9. NET SALES

The following table sets forth the Company’s disaggregation of net sales by product line (in thousands):



	Fiscal Quarter Ended				Three Fiscal Quarters Ended
	September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
In-ground Swimming Pools	$	82,884	$	102,334	$	252,029	$	326,290
Covers		47,460		51,934		108,961		122,848
Liners		30,434		35,130		114,635		138,674
	$	160,778	$	189,398	$	475,625	$	587,812

- Definition

The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 9
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-9

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
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-URI https://asc.fasb.org//1943274/2147479806/606-10-50-10

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
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Reference 4: http://www.xbrl.org/2003/role/disclosureRef
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-URI https://asc.fasb.org//1943274/2147479806/606-10-50-12

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
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-Paragraph 12
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-12

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
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-Section 50
-Paragraph 12
-Subparagraph (c)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-12

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
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-Section 50
-Paragraph 12
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-URI https://asc.fasb.org//1943274/2147479806/606-10-50-12

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
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-Publisher FASB
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Reference 9: http://www.xbrl.org/2003/role/disclosureRef
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-URI https://asc.fasb.org//1943274/2147479806/606-10-50-13

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Name Accounting Standards Codification
-Topic 606
-Publisher FASB
-URI https://asc.fasb.org//606/tableOfContent

+ Details

STOCK-BASED COMPENSATION (Tables)

9 Months Ended

Sep. 30, 2023

PROFITS INTEREST UNITS

Summary of stock-based compensation expense



	Fiscal Quarter Ended				Three Fiscal Quarters Ended
	September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
Cost of sales	$	143	$	730	$	(57)	$	3,046
Selling, general, and administrative		2,211		6,331		14,944		37,369
	$	2,354	$	7,061	$	14,887	$	40,415

Schedule of assumptions used to determine the fair value of option awards granted

The following table sets forth the significant assumptions used in the Black-Scholes option-pricing model on a weighted-average basis to determine the fair value of stock option awards granted:


	Three Fiscal Quarters Ended
	October 1, 2022
Risk-free interest rate	2.04	%
Expected volatility	39.67	%
Expected term (in years)	6.25
Expected dividend yield	0.00	%

No stock options were granted under this plan during the fiscal quarter ended September 30, 2023.

The following table sets forth the significant assumptions used in the Black-Scholes option-pricing model on a weighted-average basis to determine the fair value of stock appreciation rights awards granted:


	Three Fiscal Quarters Ended
	September 30, 2023
Risk-free interest rate	3.45	%
Expected volatility	40.29	%
Expected term (in years)	6.25
Expected dividend yield	0.00	%

Schedule of restricted stock awards

The following table represents the Company’s restricted stock awards activity during the three fiscal quarters ended September 30, 2023:


		Weighted-
		Average Grant-
	Shares	Date Fair Value
Outstanding at January 1, 2023	2,576,219	$	19.00
Granted	—		—
Vested	(1,239,520)		19.00
Forfeited	(155,450)		19.00
Outstanding at September 30, 2023	1,181,249	$	19.00

Schedule of restricted stock units

The following table represents the Company’s restricted stock units activity during the three fiscal quarters ended September 30, 2023:


		Weighted-
		Average Grant-
	Shares	Date Fair Value
Outstanding at January 1, 2023	617,941	$	8.37
Granted	2,232,040		3.23
Vested	(243,420)		10.42
Forfeited	(247,685)		3.94
Outstanding at September 30, 2023	2,358,876	$	3.76

Schedule of stock option activity

The following table represents the Company’s stock option activity during the three fiscal quarters ended September 30, 2023:


			Weighted-	Weighted-
			Average	Average
		Exercise Price		Remaining	Aggregate
	Shares	per Share		Contract Term	Intrinsic Value
				(in years)	(in thousands)
Outstanding at January 1, 2023	1,914,670	$	14.85
Granted	—		—
Exercised	—		—
Forfeited	(325,433)		11.80
Outstanding at September 30, 2023	1,589,237	$	15.47	7.86	$	—
Vested and expected to vest at September 30, 2023	1,589,237	$	15.47	7.86	$	—
Options exercisable at September 30, 2023	583,527	$	16.58	7.13	$	—

Schedule of stock appreciation rights activity


			Weighted-	Weighted-
			Average	Average
		Exercise Price		Remaining	Aggregate
	Shares	per Share		Contract Term	Intrinsic Value
				(in years)	(in thousands)
Outstanding at January 1, 2023	—	$	—
Granted	790,181		3.24
Exercised	—		—
Forfeited	(93,256)		3.24
Outstanding at September 30, 2023	696,925	$	3.24	9.59	$	—
Vested and expected to vest at September 30, 2023	696,925	$	3.24	9.59	$	—
Stock appreciation rights exercisable at September 30, 2023	—	$	—	—	$	—

GOODWILL AND INTANGIBLE ASSETS, NET - Goodwill (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2023 USD ($) segment	Dec. 31, 2022 USD ($)
GOODWILL AND INTANGIBLE ASSETS, NET
Goodwill \| $	$ 130,875	$ 131,383
Number of reporting units \| segment	1

- Definition

Amount after accumulated impairment loss of an asset representing future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized.

+ References + Details

Document and Entity Information - shares	9 Months Ended
Document and Entity Information - shares	Sep. 30, 2023	Nov. 03, 2023
Document and Entity Information [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Sep. 30, 2023
Entity File Number	001-40358
Entity Registrant Name	LATHAM GROUP, Inc.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	83-2797583
Entity Address State Or Province	NY
Entity Address, Address Line One	787 Watervliet Shaker Road
Entity Address, City or Town	Latham
Entity Address, Postal Zip Code	12110
City Area Code	800
Local Phone Number	833-3800
Title of 12(b) Security	Common stock, par value $0.0001 per share
Trading Symbol	SWIM
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	true
Entity Ex Transition Period	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		114,755,945
Entity Central Index Key	0001833197
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q3
Amendment Flag	false

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)	9 Months Ended
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)	Sep. 30, 2023
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Unaudited Interim Financial Information	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	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	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.
Seasonality	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	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	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.

LONG-TERM DEBT (Details) - USD ($) $ in Thousands	Feb. 23, 2022	Sep. 30, 2023	Dec. 31, 2022
Debt Instrument [Line Items]
Gross debt		$ 310,125
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
Revolving Credit Facility
Debt Instrument [Line Items]
Total debt		0
Maximum borrowing capacity	$ 75,000	75,000
Repayment of debt	$ 294,000
Term loan
Debt Instrument [Line Items]
Gross debt		$ 310,125	$ 322,562

INCOME TAXES

9 Months Ended

Sep. 30, 2023

INCOME TAXES

INCOME TAXES

10. INCOME TAXES

The effective income tax rate for the fiscal and three fiscal quarters ended September 30, 2023 was 52.1% and 140.7%, respectively, compared to 43.4% and 65.6% for the fiscal and three fiscal quarters ended October 1, 2022, respectively. The differences between the U.S. federal statutory income tax rate and the Company's effective income tax rates for the fiscal quarter ended September 30, 2023 and the fiscal quarter ended October 1, 2022 were primarily attributable to the discrete impacts of stock-based compensation expense for which there is no associated tax benefit.

On October 15, 2023, the statute of limitations expired with respect to the Company’s 2019 U.S. Federal income tax return for which the Company has a liability related to uncertain tax positions recorded. As a result of the expiration of the statute of limitations, the Company will release the uncertain tax position liability with a corresponding net tax benefit of $7.5 million (a gross tax benefit of $10.7 million from the liability release offset by tax expense of $3.2 million from establishing a valuation allowance on an associated deferred tax asset) during the fourth fiscal quarter of 2023.

The Inflation Reduction Act ("IRA") was effective beginning in 2023. Key provisions from the IRA include the implementation of a 15% corporate alternative minimum tax for corporations with book income in excess of $1 billion, an excise tax on the fair market value of stock buybacks (offset by the fair market value of stock issued in the same tax year), and significant tax incentives for energy and climate initiatives. Enactment of the new law has not impacted the Company’s financial condition, results of operations or cash flows for the period ended September 30, 2023 and the Company does not expect a material impact on our future results at this time. The Company will continue to monitor any impacts of further guidance on the IRA as released and assess any impacts as applicable.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 13
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480990/946-20-50-13

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 235
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08(h)(2))
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480678/235-10-S99-1

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-Name Accounting Standards Codification
-Publisher FASB
-URI https://asc.fasb.org//740/tableOfContent

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 14
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482685/740-10-50-14

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 21
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482685/740-10-50-21

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 270
-Name Accounting Standards Codification
-Section 50
-Paragraph 1
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482526/740-270-50-1

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 17
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482685/740-10-50-17

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SAB TOPIC 6.I.5.Q1)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479360/740-10-S99-1

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 2
-Subparagraph (SAB Topic 11.C)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479360/740-10-S99-2

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 30
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482603/740-30-50-2

+ Details

STOCK-BASED COMPENSATION

9 Months Ended

Sep. 30, 2023

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

12. STOCK-BASED COMPENSATION

On April 12, 2021, the Company’s stockholders approved the 2021 Omnibus Equity Incentive Plan (the “2021 Omnibus Equity Plan”), which became effective on April 22, 2021, upon pricing of its initial public offering. The 2021 Omnibus Equity Plan provides for the issuance of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, and other stock-based and cash-based awards. The maximum grant date fair value of cash and equity awards that may be awarded to a non-employee director under the 2021 Omnibus Equity Plan during any one fiscal year, together with any cash fees paid to such non-employee director during such fiscal year, is $750,000.

On May 2, 2023, at the 2023 annual meeting of stockholders the Company, the stockholders approved the first amendment (the “First Amendment”) to the Latham Group, Inc. 2021 Omnibus Equity Plan, which was previously approved by the Board of Directors of the Company. The First Amendment became effective upon stockholder approval, and provides for (i) an increase by 8,000,000 shares of the share pool, i.e. the maximum number of shares of the Company’s common stock that may be issued pursuant to awards granted under the 2021 Omnibus Equity Plan, (ii) a prohibition on recycling of shares withheld or remitted to pay taxes for all awards, (iii) a minimum vesting period of one year for all awards, with an exception for shares representing 5% of the share pool, and (iv) a prohibition on the transfer of stock options and stock appreciation rights for value or to third-party financial institutions without stockholder approval.

Except as amended by the First Amendment, the other terms of the 2021 Omnibus Equity Plan remain in full force and effect. Subsequent to the First Amendment, the maximum aggregate number of shares reserved for issuance under the 2021 Omnibus Equity Plan is 21,170,212 shares.

The following table summarizes the Company’s stock-based compensation expense (in thousands):



	Fiscal Quarter Ended				Three Fiscal Quarters Ended
	September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
Cost of sales	$	143	$	730	$	(57)	$	3,046
Selling, general, and administrative		2,211		6,331		14,944		37,369
	$	2,354	$	7,061	$	14,887	$	40,415

As of September 30, 2023, total unrecognized stock-based compensation expense related to all unvested stock-based awards was $11.2 million, which is expected to be recognized over a weighted-average period of 1.3 years.

The following table sets forth the significant assumptions used in the Black-Scholes option-pricing model on a weighted-average basis to determine the fair value of stock option awards granted:


	Three Fiscal Quarters Ended
	October 1, 2022
Risk-free interest rate	2.04	%
Expected volatility	39.67	%
Expected term (in years)	6.25
Expected dividend yield	0.00	%

No stock options were granted under this plan during the fiscal quarter ended September 30, 2023.


	Three Fiscal Quarters Ended
	September 30, 2023
Risk-free interest rate	3.45	%
Expected volatility	40.29	%
Expected term (in years)	6.25
Expected dividend yield	0.00	%

Restricted Stock Awards

The following table represents the Company’s restricted stock awards activity during the three fiscal quarters ended September 30, 2023:


		Weighted-
		Average Grant-
	Shares	Date Fair Value
Outstanding at January 1, 2023	2,576,219	$	19.00
Granted	—		—
Vested	(1,239,520)		19.00
Forfeited	(155,450)		19.00
Outstanding at September 30, 2023	1,181,249	$	19.00

Restricted Stock Units

The following table represents the Company’s restricted stock units activity during the three fiscal quarters ended September 30, 2023:


		Weighted-
		Average Grant-
	Shares	Date Fair Value
Outstanding at January 1, 2023	617,941	$	8.37
Granted	2,232,040		3.23
Vested	(243,420)		10.42
Forfeited	(247,685)		3.94
Outstanding at September 30, 2023	2,358,876	$	3.76

Stock Options

The following table represents the Company’s stock option activity during the three fiscal quarters ended September 30, 2023:


			Weighted-	Weighted-
			Average	Average
		Exercise Price		Remaining	Aggregate
	Shares	per Share		Contract Term	Intrinsic Value
				(in years)	(in thousands)
Outstanding at January 1, 2023	1,914,670	$	14.85
Granted	—		—
Exercised	—		—
Forfeited	(325,433)		11.80
Outstanding at September 30, 2023	1,589,237	$	15.47	7.86	$	—
Vested and expected to vest at September 30, 2023	1,589,237	$	15.47	7.86	$	—
Options exercisable at September 30, 2023	583,527	$	16.58	7.13	$	—

The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common stock for those stock options that had exercise prices lower than the fair value of the Company’s common stock.

Stock Appreciation Rights

During the fiscal quarter ended April 1, 2023, as a portion of the annual equity award grants to the Company’s executive officers, the Compensation Committee of the Board of Directors approved stock appreciation rights for an aggregate of 790,181 shares of the Company’s common stock, with a strike price of $3.24 per share (the “Contingent Grants”). At the time of such approval, the Company did not have enough shares of the Company’s common stock in the share pool under the 2021 Omnibus Equity Plan to support such grant. As of April 1, 2023, the Contingent Grants remained subject to stockholder approval of the First Amendment. On May 2, 2023, following stockholder approval of the First Amendment, the foregoing stock appreciation right awards became effective without condition.

The following table represents the Company’s stock appreciation rights activity during the three fiscal quarters ended September 30, 2023:


			Weighted-	Weighted-
			Average	Average
		Exercise Price		Remaining	Aggregate
	Shares	per Share		Contract Term	Intrinsic Value
				(in years)	(in thousands)
Outstanding at January 1, 2023	—	$	—
Granted	790,181		3.24
Exercised	—		—
Forfeited	(93,256)		3.24
Outstanding at September 30, 2023	696,925	$	3.24	9.59	$	—
Vested and expected to vest at September 30, 2023	696,925	$	3.24	9.59	$	—
Stock appreciation rights exercisable at September 30, 2023	—	$	—	—	$	—

The aggregate intrinsic value of stock appreciation rights is calculated as the difference between the strike price of the stock appreciation rights and the fair value of the Company’s common stock for those stock appreciation rights that had strike prices lower than the fair value of the Company’s common stock.

No stock appreciation rights were granted under this plan during the fiscal quarter ended September 30, 2023.

NET INCOME (LOSS) PER SHARE (Tables)

9 Months Ended

Sep. 30, 2023

NET INCOME (LOSS) PER SHARE

Schedule of basic and diluted net income (loss) per share

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


	Fiscal Quarter Ended				Three Fiscal Quarters Ended
	September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
Numerator:
Net income (loss) attributable to common stockholders	$	6,153	$	11,876	$	(2,500)	$	13,339
Denominator:
Weighted-average common shares outstanding
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
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

Schedule of antidilutive securities excluded from computation of diluted net income (loss) per share


	Fiscal Quarter Ended		Three Fiscal Quarters Ended
	September 30, 2023	October 1, 2022	September 30, 2023	October 1, 2022
Restricted stock awards	64,329	3,842,873	909,375	1,280,958
Restricted stock units	57,885	212,183	220,255	108,570
Stock options	1,644,520	1,963,331	1,753,740	1,655,462
Stock appreciation rights	738,940	—	422,874	—

GOODWILL AND INTANGIBLE ASSETS, NET (Tables)

9 Months Ended

Sep. 30, 2023

GOODWILL AND INTANGIBLE ASSETS, NET

Schedule of 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

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

Schedule of estimated amortization expense related to definite-lived intangible assets

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

INVENTORIES, NET (Tables)

9 Months Ended

Sep. 30, 2023

INVENTORIES, NET

Schedule of 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

LEASES

9 Months Ended

Sep. 30, 2023

LEASES

LEASES

8. LEASES

On January 1, 2022, the Company adopted ASU 2016-02, “Leases (Topic 842),” and the related amendments. The optional transition method of adoption was used, in which the cumulative effect of initially applying the new standard to existing leases was $0.3 million to record the operating lease right-of-use assets and the related liabilities as of January 1, 2022. Under this method of adoption, the comparative information has not been revised and continues to be reported under the previously applicable lease accounting guidance.

For leases with initial terms greater than 12 months, the Company considers these right-of-use assets and records the related asset and obligation at the present value of lease payments over the term. For leases with initial terms equal to or less than 12 months, the Company does not consider them as right-of-use assets and instead considers them short-term lease costs that are recognized on a straight-line basis over the lease term. The Company’s leases may include escalation clauses, renewal options, and/or termination options that are factored into the Company’s determination of lease term and lease payments when it is reasonably certain the option will be exercised. The Company elected to take the practical expedient and not separate lease and non-lease components of contracts. The Company estimates an incremental borrowing rate to discount the lease payments based on information available at lease commencement because the implicit rate of the lease is generally not known.

The Company leases manufacturing facilities, office space, land, and certain vehicles and equipment under operating leases. The Company also leases certain vehicles and equipment under finance leases. The Company determines if an arrangement is a lease at inception. A contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

The components of lease expense for the fiscal quarters ended September 30, 2023 and October 1, 2022 were as follows (in thousands):


	Fiscal Quarter Ended				Three Fiscal Quarters Ended
	September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
Operating lease expense	$	2,577	$	2,295	$	7,245	$	6,799
Finance lease amortization of assets		199		21		465		28
Finance lease interest on lease liabilities		87		4		207		7
Short-term lease expense		96		58		246		90
Variable lease expense		315		141		910		445
Total lease expense	$	3,274	$	2,519	$	9,073	$	7,369

Operating and finance lease right-of-use assets and lease-related liabilities as of September 30, 2023 and December 31, 2022 were as follows (in thousands):


	September 30, 2023		December 31, 2022		Classification

Lease right-of-use assets:
Operating leases	$	31,934	$	38,308	Operating lease right-of-use assets
Finance leases		4,013		316	Other assets
Total lease right-of-use assets	$	35,947	$	38,624

Lease-related liabilities
Current
Operating leases	$	6,895	$	6,923	Current operating lease liabilities
Finance leases		703		105	Accrued expenses and other current liabilities
Non-current
Operating leases		26,121		32,391	Non-current operating lease liabilities
Finance leases		3,402		193	Other long-term liabilities
Total lease liabilities	$	37,121	$	39,612

The table below presents supplemental information related to leases as of September 30, 2023 and December 31, 2022:


	September 30, 2023			December 31, 2022
Weighted-average remaining lease term (years)
Finance leases		5.5			2.8
Operating leases		5.9			6.5
Weighted-average discount rate
Finance leases		8.2	%		5.4	%
Operating leases		5.0	%		4.9	%

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


	Three Fiscal Quarters Ended
	September 30, 2023		October 1, 2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	5,763	$	5,249

The following table summarizes maturities of operating lease liabilities as of September 30, 2023 (in thousands):


	Operating Leases		Finance Leases		Total
Remainder of fiscal 2023	$	2,183	$	253	$	2,436
2024		8,108		1,013		9,121
2025		7,309		958		8,267
2026		5,789		865		6,654
2027		4,086		820		4,906
Thereafter		10,738		1,187		11,925
Total lease payments		38,213		5,096		43,309
Less: Interest		(5,197)		(991)		(6,188)
Present value of lease liability	$	33,016	$	4,105	$	37,121

NATURE OF THE BUSINESS

9 Months Ended

Sep. 30, 2023

NATURE OF THE BUSINESS

NATURE OF THE BUSINESS

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.

STOCK-BASED COMPENSATION - Weighted average basis for fair value option award granted (Details)	9 Months Ended
	Sep. 30, 2023	Oct. 01, 2022
PROFITS INTEREST UNITS
Risk-free interest rate	3.45%	2.04%
Expected volatility	40.29%	39.67%
Expected term (in years)	6 years 3 months	6 years 3 months
Expected dividend yield	0.00%	0.00%

PRODUCT WARRANTIES (Details) - USD ($) $ in Thousands	9 Months Ended
PRODUCT WARRANTIES (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Oct. 01, 2022
Movement in Standard Product Warranty Accrual [Roll Forward]
Balance at the beginning of the fiscal year	$ 3,399	$ 4,909
Adjustments to reserve	4,737	5,479
Less: Settlements made (in cash or in kind)	(4,724)	(5,072)
Balance at the end of the fiscal quarter	$ 3,412	$ 5,316

LONG-TERM DEBT - Term Loan Facility (Details) - USD ($)		9 Months Ended
LONG-TERM DEBT - Term Loan Facility (Details) - USD ($)	Feb. 23, 2022	Sep. 30, 2023	Oct. 01, 2022	Dec. 31, 2022
Debt Instrument [Line Items]
Gross debt		$ 310,125,000
Amount outstanding, net of discount and issuance costs		301,621,000		$ 312,881,000
Discount and debt issuance costs		8,504,000		$ 9,681,000
Repayment of long term debt		12,437,000	$ 285,634,000
Term Loan Facility
Debt Instrument [Line Items]
Principal payments calculated as percent of outstanding principal	0.25%
Mandatory prepayment rate as a percentage of excess cash flow	50.00%
Mandatory prepayment rate as a percentage of non-permitted indebtedness	100.00%
Debt issuance costs		4,700,000
Unamortized discount		3,800,000
Amount outstanding, net of discount and issuance costs		$ 301,600,000
Maximum borrowing capacity	$ 325,000,000.0
Effective interest rate		10.26%
Repayment amount to be paid quarterly	$ 812,500
Term Loan Facility \| SOFR \| Minimum
Debt Instrument [Line Items]
Basis spread on variable rate	3.75%
Term Loan Facility \| SOFR \| Maximum
Debt Instrument [Line Items]
Basis spread on variable rate	4.00%
Term Loan Facility \| Base Rate \| Minimum
Debt Instrument [Line Items]
Basis spread on variable rate	2.75%
Term Loan Facility \| Base Rate \| Maximum
Debt Instrument [Line Items]
Basis spread on variable rate	3.00%

INCOME TAXES (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
INCOME TAXES (Details) - USD ($) $ in Millions	Sep. 30, 2023	Oct. 01, 2022	Sep. 30, 2023	Oct. 01, 2022
INCOME TAXES
Effective income tax rate	52.10%	43.40%	140.70%	65.60%
Tax benefit of release of uncertain tax position liability	$ 7.5
Gross tax benefit of release of uncertain tax position liability	10.7
Tax expense from valuation allowance	$ 3.2

STOCKHOLDER'S EQUITY (Details) - USD ($) $ / shares in Units, $ in Thousands			3 Months Ended		9 Months Ended
	May 10, 2022	Jan. 11, 2022	Jul. 02, 2022	Apr. 02, 2022	Oct. 01, 2022	Sep. 30, 2023	Dec. 31, 2022
Common stock, par value		$ 0.0001				$ 0.0001	$ 0.0001
Value of shares repurchased and retired				$ 257,663
Underwriting fees					$ 11,437
Repurchase Program
Value of shares repurchased and retired			$ 15,000
Amount authorized	$ 100,000
Term of repurchase program	3 years
Amount remaining for repurchases						$ 77,000
Common Stock
Proceeds from sale of common stock (in shares)		13,800,000		13,800,000
Offering price per share		$ 19.50
Value of shares repurchased and retired		$ 257,700		$ 1
Underwriting fees		$ 11,400
Number of shares repurchased and retired during the period		13,800,000		(13,800,244)
Common Stock \| Repurchase Program
Number of shares repurchased and retired during the period			(2,026,231)
Common Stock \| Underwriters Option
Proceeds from sale of common stock (in shares)		1,800,000

Condensed Consolidated Balance Sheets (unaudited) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
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
Current liabilities:
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
Related Party
Current liabilities:
Accounts payable	8	358
Nonrelated Party
Current liabilities:
Accounts payable	$ 27,390	$ 25,449

LONG-TERM DEBT - Principal payments due (Details) $ in Thousands	Sep. 30, 2023 USD ($)
Principal payments due
Remainder of fiscal 2023	$ 813
2024	3,250
2025	3,250
2026	3,250
2027	3,250
Thereafter	296,312
Total payments due	$ 310,125

RELATED PARTY TRANSACTIONS

9 Months Ended

Sep. 30, 2023

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS

14. RELATED PARTY TRANSACTIONS

BrightAI Services

Starting in 2020, BrightAI has rendered services to the Company, for which the cost has been capitalized as internal-use software. A co-founder of BrightAI Services has served on the Company’s Board of Directors since December 9, 2020. In December 2022, the Company executed an additional agreement with BrightAI for the provision of hardware to run the technology developed by BrightAI and the Company. During the three fiscal quarters ended September 30, 2023 and the fiscal year ended December 31, 2022, the Company incurred $0.8 million and $0.2 million, respectively, associated with services performed by BrightAI, which is recorded as construction in progress within property and equipment, net on the condensed consolidated balance sheet as of September 30, 2023. As of September 30, 2023 and December 31, 2022, the Company had accounts payable related to BrightAI of $0.0 million and $0.4 million, respectively.

Expense Reimbursement

The Company entered into a Stockholders’ Agreement with the Sponsor and Wynnchurch Capital, L.P. on April 27, 2021. The Stockholders’ Agreement requires the Company to reimburse the Sponsor and Wynnchurch Capital, L.P. for their reasonable out-of-pocket costs and expenses in connection with monitoring and overseeing their investment in the Company.

The Company recognized no amount and $0.2 million for the reimbursement of out-of-pocket costs and expenses to Wynnchurch Capital, L.P. and no amounts for the reimbursement of out-of-pocket costs and expenses to the Sponsor during the fiscal quarter and three fiscal quarters ended September 30, 2023, respectively. The Company recognized $0.2 million for the reimbursement of out-of-pocket costs and expenses to the Sponsor and $0.1 million for the reimbursement of out-of-pocket costs and expenses to the Wynnchurch Capital, L.P. during the fiscal quarter and the three fiscal quarters ended October 1, 2022. As of both September 30, 2023 and December 31, 2022, there was less than $0.1 million outstanding amounts payable to the Sponsor and no outstanding amounts payable to Wynnchurch Capital, L.P.

- Definition

The entire disclosure for related party transactions. Examples of related party transactions include transactions between (a) a parent company and its subsidiary; (b) subsidiaries of a common parent; (c) and entity and its principal owners; and (d) affiliates.

+ References

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+ Details

Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Oct. 01, 2022	Sep. 30, 2023	Oct. 01, 2022
Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited)
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

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

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+ Details

NET INCOME (LOSS) PER SHARE

9 Months Ended

Sep. 30, 2023

NET INCOME (LOSS) PER SHARE

NET INCOME (LOSS) PER SHARE

13. NET INCOME (LOSS) PER SHARE

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


	Fiscal Quarter Ended				Three Fiscal Quarters Ended
	September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
Numerator:
Net income (loss) attributable to common stockholders	$	6,153	$	11,876	$	(2,500)	$	13,339
Denominator:
Weighted-average common shares outstanding
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
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

As of September 30, 2023 and December 31, 2022, 113,574,696 and 112,091,756 shares of common stock were issued and outstanding for accounting purposes, respectively.

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


	Fiscal Quarter Ended		Three Fiscal Quarters Ended
	September 30, 2023	October 1, 2022	September 30, 2023	October 1, 2022
Restricted stock awards	64,329	3,842,873	909,375	1,280,958
Restricted stock units	57,885	212,183	220,255	108,570
Stock options	1,644,520	1,963,331	1,753,740	1,655,462
Stock appreciation rights	738,940	—	422,874	—

STOCK-BASED COMPENSATION - Narrative (Details) - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
	Apr. 12, 2021	Sep. 30, 2023	Oct. 01, 2022	Sep. 30, 2023	Oct. 01, 2022	May 02, 2023
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares reserved for issuance		21,170,212		21,170,212		8,000,000
Maximum grant date fair value of cash and equity awards that may be awarded to a non-employee director	$ 750,000
Stock-based compensation expense		$ 2,354	$ 7,061	$ 14,887	$ 40,415
Total unrecognized stock-based compensation expense		11,200		$ 11,200
Total unrecognized stock-based compensation expense expected to be recognized over a weighted-average period				1 year 3 months 18 days
Cost of sales
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense		143	730	$ (57)	3,046
Selling, general and administrative expense
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense		$ 2,211	$ 6,331	$ 14,944	$ 37,369

- Definition

Line items represent financial concepts included in a table. These concepts are used to disclose reportable information associated with domain members defined in one or many axes to the table.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 718
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+ Details

RESTRUCTURING COSTS

9 Months Ended

Sep. 30, 2023

RESTRUCTURING COSTS

RESTRUCTURING COSTS

15. RESTRUCTURING COSTS

During the second and third fiscal quarters of 2023, the Company initiated an additional cost reduction plan focused on efforts to improve efficiencies and decrease costs. The plan involved a reduction in the Company’s workforce as well as closures of various manufacturing facilities. The Company expects to incur charges for employee severance and related costs, as well as fixed asset and facility related expenses, of approximately $2.8 million. During the quarter ended September 30, 2023, the Company recognized costs related to the plan totaling $1.8 million, comprised primarily of $1.0 million for severance and related costs and $0.8 million relating to the facility closures. These charges were included in cost of sales and selling, general, and administrative expenses in the condensed consolidated statements of operations. The remaining costs under the plan of approximately $1.0 million are expected to be incurred and recognized in the fourth fiscal quarter of 2023. The Company had an exit or disposal cost related liability of $0.3 million as of September 30, 2023 and no liability as of December 31, 2022.

LEASES (Tables)

9 Months Ended

Sep. 30, 2023

LEASES

Summary of components of lease expense


	Fiscal Quarter Ended				Three Fiscal Quarters Ended
	September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
Operating lease expense	$	2,577	$	2,295	$	7,245	$	6,799
Finance lease amortization of assets		199		21		465		28
Finance lease interest on lease liabilities		87		4		207		7
Short-term lease expense		96		58		246		90
Variable lease expense		315		141		910		445
Total lease expense	$	3,274	$	2,519	$	9,073	$	7,369

Schedule of supplemental lease information

Operating and finance lease right-of-use assets and lease-related liabilities as of September 30, 2023 and December 31, 2022 were as follows (in thousands):


	September 30, 2023		December 31, 2022		Classification

Lease right-of-use assets:
Operating leases	$	31,934	$	38,308	Operating lease right-of-use assets
Finance leases		4,013		316	Other assets
Total lease right-of-use assets	$	35,947	$	38,624

Lease-related liabilities
Current
Operating leases	$	6,895	$	6,923	Current operating lease liabilities
Finance leases		703		105	Accrued expenses and other current liabilities
Non-current
Operating leases		26,121		32,391	Non-current operating lease liabilities
Finance leases		3,402		193	Other long-term liabilities
Total lease liabilities	$	37,121	$	39,612

The table below presents supplemental information related to leases as of September 30, 2023 and December 31, 2022:


	September 30, 2023			December 31, 2022
Weighted-average remaining lease term (years)
Finance leases		5.5			2.8
Operating leases		5.9			6.5
Weighted-average discount rate
Finance leases		8.2	%		5.4	%
Operating leases		5.0	%		4.9	%

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


	Three Fiscal Quarters Ended
	September 30, 2023		October 1, 2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	5,763	$	5,249

Summary of maturities of operating lease liabilities


	Operating Leases		Finance Leases		Total
Remainder of fiscal 2023	$	2,183	$	253	$	2,436
2024		8,108		1,013		9,121
2025		7,309		958		8,267
2026		5,789		865		6,654
2027		4,086		820		4,906
Thereafter		10,738		1,187		11,925
Total lease payments		38,213		5,096		43,309
Less: Interest		(5,197)		(991)		(6,188)
Present value of lease liability	$	33,016	$	4,105	$	37,121

Pay vs Performance Disclosure - USD ($) $ in Thousands	3 Months Ended						9 Months Ended
Pay vs Performance Disclosure - USD ($) $ in Thousands	Sep. 30, 2023	Jul. 01, 2023	Apr. 01, 2023	Oct. 01, 2022	Jul. 02, 2022	Apr. 02, 2022	Sep. 30, 2023	Oct. 01, 2022
Pay vs Performance Disclosure
Net Income (Loss)	$ 6,153	$ 5,715	$ (14,368)	$ 11,876	$ 4,303	$ (2,840)	$ (2,500)	$ 13,339

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References

+ Details

RELATED PARTY TRANSACTIONS - Expense Reimbursement (Details) - Management Fee Arrangement - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Oct. 01, 2022	Sep. 30, 2023	Oct. 01, 2022	Dec. 31, 2022
Sponsor
Related Party Transaction [Line Items]
Reimbursements to related party of out-of-pocket costs or expenses	$ 0.0	$ 0.2	$ 0.0	$ 0.2
Sponsor \| Maximum
Related Party Transaction [Line Items]
Amounts payable	0.1		0.1		$ 0.1
Wynnchurch Capital, L.P.
Related Party Transaction [Line Items]
Reimbursements to related party of out-of-pocket costs or expenses	0.0	$ 0.1	0.2	$ 0.1
Amounts payable	$ 0.0		$ 0.0		$ 0.0

STOCKHOLDER'S EQUITY

9 Months Ended

Sep. 30, 2023

STOCKHOLDER'S EQUITY

STOCKHOLDER'S EQUITY

11. STOCKHOLDERS’ EQUITY

Offering of Common Stock

On January 11, 2022, the Company completed an offering of 13,800,000 shares of common stock, par value $0.0001 per share, including the exercise in full by the underwriters of their option to purchase up to 1,800,000 additional shares of common stock, at a public offering price of $19.50 per share. The Company received proceeds of $257.7 million from this offering, net of $11.4 million of underwriting fees. The proceeds of $257.7 million were used to purchase 13,800,000 shares of common stock from certain of the Company’s stockholders, primarily investment funds managed by the Sponsor and Wynnchurch Capital, L.P., and also a small percentage of shares of common stock owned by some of the Company’s directors and executive officers.

Repurchase Program

On May 10, 2022, the Company approved a stock repurchase program (the “Repurchase Program”), which authorized the Company to repurchase up to $100 million of the Company’s shares of common stock over the next three years. The Company may effect these repurchases in open market transactions, privately negotiated purchases, or other acquisitions. The Company is not obligated to repurchase any of its shares of its common stock under the Repurchase Program and the timing and amount of any repurchases will depend on market conditions, the Company’s stock price, alternative uses of capital, the terms of the Company’s debt instruments, and other factors.

As of September 30, 2023, $77.0 million remained available for share repurchases pursuant to the Repurchase Program. The Company did not repurchase any shares of its common stock during the fiscal quarter ended September 30, 2023. The Company accounts for the excess of the repurchase price over the par value of shares acquired as a reduction to additional paid-in capital.

- Definition

The entire disclosure for equity.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
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+ Details

LONG-TERM DEBT (Tables)

9 Months Ended

Sep. 30, 2023

LONG-TERM DEBT

Components of the Company's outstanding debt obligations



	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

Principal payments due on the outstanding debt



Year Ended	Term Loan
Remainder of fiscal 2023	$	813
2024		3,250
2025		3,250
2026		3,250
2027		3,250
Thereafter		296,312
	$	310,125

- Definition

Tabular disclosure of long-debt instruments or arrangements, including identification, terms, features, collateral requirements and other information necessary to a fair presentation. These are debt arrangements that originally required repayment more than twelve months after issuance or greater than the normal operating cycle of the entity, if longer.

+ References

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+ Details

LEASES - Operating and finance lease right-of-use assets and liabilities and Supplemental information (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2023	Oct. 01, 2022	Dec. 31, 2022
Lease right-of-use assets:
Operating leases	$ 31,934		$ 38,308
Finance leases	$ 4,013		316
Finance Lease, Right-of-Use Asset, Statement of Financial Position [Extensible Enumeration]	Other Assets
Total lease right-of-use assets	$ 35,947		38,624
Lease-related liabilities
Operating leases, Current	6,895		6,923
Finance leases, Current	$ 703		105
Finance Lease, Liability, Current, Statement of Financial Position [Extensible Enumeration]	Other Liabilities, Current
Operating leases, Non-current	$ 26,121		32,391
Finance leases, Non-current	$ 3,402		193
Finance Lease, Liability, Noncurrent, Statement of Financial Position [Extensible Enumeration]	Other Liabilities, Noncurrent
Total finance lease liabilities	$ 37,121		$ 39,612
Weighted-average remaining lease term (years)
Finance leases	5 years 6 months		2 years 9 months 18 days
Operating leases	5 years 10 months 24 days		6 years 6 months
Weighted-average discount rate
Finance leases	8.20%		5.40%
Operating leases	5.00%		4.90%
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$ 5,763	$ 5,249

PRODUCT WARRANTIES (Tables)

9 Months Ended

Sep. 30, 2023

PRODUCT WARRANTIES

Warranty reserve activity

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



	Three Fiscal Quarters Ended
	September 30, 2023		October 1, 2022
Balance at the beginning of the fiscal year	$	3,399	$	4,909
Adjustments to reserve		4,737		5,479
Less: Settlements made (in cash or in kind)		(4,724)		(5,072)
Balance at the end of the fiscal quarter	$	3,412	$	5,316

STOCK-BASED COMPENSATION - Restricted Stock Units (Details) - Restricted stock units	9 Months Ended
	Sep. 30, 2023 $ / shares shares
Shares
Balance at beginning \| shares	617,941
Granted \| shares	2,232,040
Vested \| shares	(243,420)
Forfeited \| shares	(247,685)
Balance at ending \| shares	2,358,876
Weighted-Average Grant Date Fair Value
Balance at beginning \| $ / shares	$ 8.37
Granted \| $ / shares	3.23
Vested \| $ / shares	10.42
Forfeited \| $ / shares	3.94
Balance at ending \| $ / shares	$ 3.76

GOODWILL AND INTANGIBLE ASSETS, NET - Amortization Expense (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract]
Remainder of fiscal 2023	$ 6,632
2024	25,708
2025	25,550
2026	25,550
2027	25,550
Thereafter	179,759
Net Amount	$ 288,749	$ 309,215

Insider Trading Arrangements	3 Months Ended
Insider Trading Arrangements	Sep. 30, 2023
Trading Arrangements, by Individual
Rule 10b5-1 Arrangement Adopted	false
Non-Rule 10b5-1 Arrangement Adopted	false
Rule 10b5-1 Arrangement Terminated	false
Non-Rule 10b5-1 Arrangement Terminated	false

STOCK-BASED COMPENSATION - Stock Options (Details) - USD ($)	3 Months Ended		9 Months Ended	12 Months Ended
	Sep. 30, 2023	Apr. 01, 2023	Sep. 30, 2023	Dec. 31, 2022
Employee Stock Option [Member]
Shares
Outstanding at the beginning		1,914,670	1,914,670
Granted	0
Forfeited			(325,433)
Outstanding at the end	1,589,237		1,589,237	1,914,670
Vested and expected to vest	1,589,237		1,589,237
Options exercisable at the end	583,527		583,527
Weighted-Average Exercise Price per Share
Outstanding at the beginning (in dollars per share)		$ 14.85	$ 14.85
Forfeited (in dollars per share)			11.80
Outstanding at the end (in dollars per share)	$ 15.47		15.47	$ 14.85
Vested and expected to vest at the end (in dollars per share)	15.47		15.47
Options exercisable at the end (in dollars per share)	$ 16.58		$ 16.58
Weighted-Average Remaining Contract Term
Outstanding at the end (in years)			7 years 10 months 9 days	0 years
Vested and expected to vest at the end (in years)			7 years 10 months 9 days
Options exercisable at the end (in years)			0 years
Options exercisable at the end (in dollars)
Stock Appreciation Rights (SARs)
Shares
Granted	0	790,181	790,181
Forfeited			(93,256)
Outstanding at the end	696,925		696,925
Vested and expected to vest	696,925		696,925
Weighted-Average Exercise Price per Share
Granted (in dollars per share)		$ 3.24	$ 3.24
Forfeited (in dollars per share)			3.24
Outstanding at the end (in dollars per share)	$ 3.24		3.24
Vested and expected to vest at the end (in dollars per share)	$ 3.24		$ 3.24
Weighted-Average Remaining Contract Term
Outstanding at the end (in years)			9 years 7 months 2 days
Vested and expected to vest at the end (in years)			9 years 7 months 2 days
Options exercisable at the end (in years)			0 years

LEASES - Lease expense (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
LEASES - Lease expense (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Oct. 01, 2022	Sep. 30, 2023	Oct. 01, 2022	Dec. 31, 2022	Dec. 31, 2021
Leases
Retained earnings	$ (57,068)		$ (57,068)		$ (54,568)
Components of lease expense:
Operating lease expense	2,577	$ 2,295	7,245	$ 6,799
Finance lease amortization of assets	199	21	465	28
Finance lease interest on lease liabilities	87	4	207	7
Short-term lease expense	96	58	246	90
Variable lease expense	315	141	910	445
Total lease expense	$ 3,274	$ 2,519	$ 9,073	$ 7,369
ASU 2016-02 \| Adjustment
Leases
Retained earnings						$ (300)

FAIR VALUE MEASUREMENTS (Tables)

9 Months Ended

Sep. 30, 2023

FAIR VALUE MEASUREMENTS

Schedule of financial liabilities at fair value on a recurring basis

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

LEASES - Maturities of operating lease liabilities (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
LEASES
Remainder of fiscal 2023	$ 2,183
2024	8,108
2025	7,309
2026	5,789
2027	4,086
Thereafter	10,738
Total lease payments	38,213
Less: Interest	(5,197)
Present value of lease liability	33,016
Finance Leases
Remainder of fiscal 2023	253
2024	1,013
2025	958
2026	865
2027	820
Thereafter	1,187
Total lease payments	5,096
Less: Interest	(991)
Present value of lease liability	4,105
Total
Remainder of fiscal 2023	2,436
2024	9,121
2025	8,267
2026	6,654
2027	4,906
Thereafter	11,925
Total lease payments	43,309
Less: Interest	(6,188)
Present value of lease liability	$ 37,121	$ 39,612

Condensed Consolidated Statements of Operations (unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Oct. 01, 2022	Sep. 30, 2023	Oct. 01, 2022
Condensed Consolidated Statements of Operations (unaudited)
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

LONG-TERM DEBT - Interest rate swap (Details) - Interest Rate Swap - USD ($) $ in Millions	Mar. 10, 2023	Feb. 28, 2022
Derivative [Line Items]
Derivative notional amount	$ 161.0	$ 200.0
SOFR
Derivative [Line Items]
Fixed borrowing rate	4.3725%	0.496%

PRODUCT WARRANTIES

9 Months Ended

Sep. 30, 2023

PRODUCT WARRANTIES

PRODUCT WARRANTIES

7. PRODUCT WARRANTIES

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



	Three Fiscal Quarters Ended
	September 30, 2023		October 1, 2022
Balance at the beginning of the fiscal year	$	3,399	$	4,909
Adjustments to reserve		4,737		5,479
Less: Settlements made (in cash or in kind)		(4,724)		(5,072)
Balance at the end of the fiscal quarter	$	3,412	$	5,316

GOODWILL AND INTANGIBLE ASSETS, NET - Intangible Assets (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Oct. 01, 2022	Sep. 30, 2023	Oct. 01, 2022	Dec. 31, 2022
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 393,493		$ 393,493		$ 393,493
Foreign Currency Translation	(439)		(439)		1
Accumulated Amortization	104,305		104,305		84,279
Net Amount	288,749		288,749		309,215
Amortization of Intangible Assets	6,635	$ 7,156	19,902	$ 21,504
Trade names and trademarks
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	148,100		148,100		148,100
Foreign Currency Translation	(554)		(554)		(84)
Accumulated Amortization	27,930		27,930		22,982
Net Amount	119,616		119,616		125,034
Patented technology
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	16,126		16,126		16,126
Foreign Currency Translation	108		108		37
Accumulated Amortization	8,274		8,274		6,959
Net Amount	7,960		7,960		9,204
Technology
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	13,000		13,000		13,000
Accumulated Amortization	1,589		1,589		939
Net Amount	11,411		11,411		12,061
Pool designs
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	13,628		13,628		13,628
Foreign Currency Translation	(172)		(172)		(10)
Accumulated Amortization	2,738		2,738		2,037
Net Amount	10,718		10,718		11,581
Franchise relationships
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	1,187		1,187		1,187
Foreign Currency Translation	140		140		45
Accumulated Amortization	1,286		1,286		1,064
Net Amount	41		41		168
Dealer relationships
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	197,376		197,376		197,376
Foreign Currency Translation	39		39		13
Accumulated Amortization	58,517		58,517		46,699
Net Amount	138,898		138,898		150,690
Order backlog
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	1,600		1,600		1,600
Accumulated Amortization	1,600		1,600		1,600
Non-competition agreements
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	2,476		2,476		2,476
Accumulated Amortization	2,371		2,371		1,999
Net Amount	$ 105		$ 105		$ 477

STOCK-BASED COMPENSATION - Restricted Stock Awards (Details) - Restricted stock awards	9 Months Ended
	Sep. 30, 2023 $ / shares shares
Shares
Balance at beginning \| shares	2,576,219
Granted \| shares
Vested \| shares	(1,239,520)
Forfeited \| shares	(155,450)
Balance at ending \| shares	1,181,249
Weighted-Average Grant Date Fair Value
Balance at beginning \| $ / shares	$ 19.00
Granted \| $ / shares
Vested \| $ / shares	19.00
Forfeited \| $ / shares	19.00
Balance at ending \| $ / shares	$ 19.00