Hayward Holdings, Inc 10-K for FY2024
Hayward Holdings, Inc. (HAYW)
10-K
2025-02-27
For: 2024-12-31
View Original
Added on
April 12, 2026
About this 10-K
Hayward Holdings, Inc filed this 10-K on February 27, 2025, covering the fiscal year ended December 31, 2024 (FY2024).
Headline figures
Fiscal year ended December 31, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $1.05B
- up 6.0% from $992.45M a year earlier
- Net income
- $118.66M
- up 47.1% from net income of $80.69M a year earlier
- Diluted EPS
- $0.54
- up 45.9% from $0.37 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the fiscal year ended December 31 , 2024
or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
Commission file number 001-40208
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||
| (Address of Principal Executive Offices) | (Zip Code) | ||||
(704 ) 837-8002
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☒ Yes ☐ No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐ Yes ☒ No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.
| ☒ | Accelerated Filer | ☐ | ||||||||||||
| Non-accelerated filer | ☐ | Smaller reporting company | ||||||||||||
| Emerging growth company | ||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes ☒ No
The aggregate market value of common stock of the registrant held by non-affiliates of the registrant as of June 29, 2024 was $1,754,627,091 . As of February 25, 2025, there were 215,906,251 shares of common stock of the registrant outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive proxy statement for the 2025 annual meeting of stockholders are incorporated by reference into Part III.
| HAYWARD HOLDINGS, INC. | |||||
| Table of Contents | |||||
| Part I | |||||
| Part II | |||||
| Part III | |||||
| Part IV | |||||
1
Cautionary Statement Regarding Forward-looking Statements
This Annual Report on Form 10-K contains certain “forward-looking statements” as that term is defined under the Private Securities Litigation Reform Act of 1995 (the “Act”) and releases issued by the Securities and Exchange Commission (the “SEC”). Such forward-looking statements relating to us are based on the beliefs of our management as well as assumptions made by, and information currently available to, us. These forward-looking statements include, but are not limited to, statements about our strategies, plans, objectives, expectations, intentions, expenditures and assumptions and other statements contained in or incorporated by reference in this Annual Report on Form 10-K that are not historical facts. When used in this document, words such as “may,” “will,” “should,” “could,” “intend,” “potential,” “continue,” “anticipate,” “believe,” “estimate,” “expect,” “plan,” “target,” “predict,” “project,” “seek” and similar expressions as they relate to us are intended to identify forward-looking statements. We believe that it is important to communicate our future expectations to our shareholders, and we therefore make forward-looking statements in reliance upon the safe harbor provisions of the Act. However, there may be events in the future that we are not able to accurately predict or control, and actual results may differ materially from the expectations we describe in our forward-looking statements.
Examples of forward-looking statements include, among others, statements we make regarding: our financial position; business plans and objectives; general economic and industry trends; business prospects; future product development and acquisition strategies; future channel stocking levels; growth and expansion opportunities; operating results; and working capital and liquidity. The forward-looking statements in this Annual Report on Form 10-K are only predictions. We may not achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place significant reliance on our forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of forward-looking statements taken from third-party industry and market reports.
Important factors that could affect our future results and could cause those results or other outcomes to differ materially from those indicated in our forward-looking statements include the following.
•our relationships with and the performance of distributors, builders, buying groups, retailers and servicers who sell our products to pool owners;
•impacts on our business from the sensitivity of our business to seasonality and unfavorable economic and business conditions;
•competition from national and global companies, as well as lower-cost manufacturers;
•our ability to develop, manufacture and effectively and profitably market and sell our new planned and future products;
•our ability to execute on growth strategies and expansion opportunities;
•our exposure to credit risk on our accounts receivable;
•impacts on our business from political, regulatory, economic, trade and other risks associated with operating foreign businesses, including risks associated with geopolitical conflict;
•our ability to maintain favorable relationships with suppliers and manage disruptions to our global supply chain and the availability of raw materials;
•our ability to identify emerging technological and other trends in our target end markets;
•failure of markets to accept new product introductions and enhancements;
•the ability to successfully identify, finance, complete and integrate acquisitions;
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•our reliance on information technology systems and susceptibility to threats to those systems, including cybersecurity threats, and risks arising from our collection and use of personal information data;
•misuse of our technology-enabled products could lead to reduced sales, liability claims or harm to our reputation;
•the impact of product manufacturing disruptions, including as a result of catastrophic and other events beyond our control;
•tariffs and other trade restrictions could adversely affect our business;
•regulatory changes and developments affecting our current and future products;
•volatility in currency exchange rates and interest rates;
•our ability to service our existing indebtedness and obtain additional capital to finance operations and our growth opportunities;
•our ability to establish, maintain and effectively enforce intellectual property protection for our products, as well as our ability to operate our business without infringing, misappropriating or otherwise violating the intellectual property rights of others;
•the impact of material cost and other inflation;
•our ability to attract and retain senior management and other qualified personnel;
•the impact of changes in laws, regulations and administrative policy, including those that limit U.S. tax benefits, impact trade agreements, or address the impacts of climate change;
•the outcome of litigation and governmental proceedings;
•uncertainties related to distribution channel inventory practices and the impact on our net sales volumes;
•our ability to realize cost savings from restructuring activities; and
•other factors set forth in “Item 1A. Risk Factors” of this Annual Report on Form 10-K.
Many of these factors are macroeconomic in nature and are, therefore, beyond our control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, our actual results, performance or achievements may vary materially from those described in this Annual Report on Form 10-K as anticipated, believed, estimated, expected, intended, planned or projected. The forward-looking statements included in this Annual Report on Form 10-K are made only as of the date of this report. Unless required by United States federal securities laws, we neither intend nor assume any obligation to update these forward-looking statements for any reason after the date of this Annual Report on Form 10-K to conform these statements to actual results or to changes in our expectations.
Trademarks, Tradenames and Service Marks
We own or have rights to trademarks or trade names that we use in conjunction with the operation of our business and that appear in this Annual Report on Form 10-K. This Annual Report on Form 10-K also contains trademarks, service marks, trade names and copyrights of other companies which, to our knowledge, are the property of their respective owners. Solely for convenience, trademarks and trade names referred to in this Annual Report on Form 10-K may appear without the ® or ™ symbols, but the absence of such symbols does not indicate the registration status of the trademarks and is not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the right of the applicable licensor to such trademarks and trade names.
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Risk Factor Summary
This risk factor summary contains a high-level summary of risks associated with our business. It does not contain all the information that may be important to you, and you should read this risk factor summary together with the more detailed discussion of risks and uncertainties set forth in Item 1A “Risk Factors” of this Annual Report on Form 10-K. A summary of our risks includes, but is not limited to, the following:
•Our business depends on the performance of distributors, builders, buying groups, retailers and servicers.
•The demand for our swimming pool equipment products may be adversely affected by unfavorable economic and business conditions.
•We compete in markets with high levels of competition, which may result in pressure on our profit margins and limit our ability to maintain or increase the market share of our products.
•Our future success depends on developing, manufacturing and attaining market adoption of new products.
•Our results of operations and cash flows may fluctuate from quarter to quarter for many reasons, including seasonality and weather conditions.
•A loss of, or material cancellation, reduction or delay in purchases by, one or more of our largest customers could harm our business.
•We are exposed to credit risk on our accounts receivable, particularly during periods when economic conditions worsen.
•We are exposed to political, regulatory, economic, trade and other risks that arise from our international business operations, including the risks associated with geopolitical conflicts.
•Past growth may not be indicative of future growth.
•We may not be able to identify, finance and complete suitable acquisitions, and any completed acquisitions may be unsuccessful or consume significant resources.
•We may be negatively impacted by litigation and other claims.
•We have significant goodwill and intangible assets and future impairment of our goodwill and intangible assets could have a material adverse effect on our results of operations.
•We are subject to risks related to exchange rate fluctuations.
•Changes in our effective tax rate or exposure to additional income tax liabilities could adversely affect our financial results.
•We may experience cost and other inflation.
•We depend on our ability to attract, develop and retain highly qualified personnel.
•Disruptions in the financial markets could adversely affect us, and our customers, consumers and suppliers.
•We rely on information technology systems to support our business operations, and are subject to risk, including cybersecurity threats, because of such reliance.
•We may encounter difficulties in operating or implementing a new enterprise resource planning (“ERP”) system, which may adversely affect our operations and financial reporting.
•Misuse of our technology-enabled products could lead to reduced sales, increased costs, liability claims or harm to our reputation.
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•We depend on suppliers, including single-source suppliers and, in a few cases, sole-source suppliers, to consistently supply us with components for our products, and any failure to procure such components could have a material adverse effect on our business, product inventories, sales and profit margins.
•Product manufacturing disruptions, including as a result of catastrophic and other events beyond our control, could cause us to be unable to meet customer demands or increase our costs.
•Tariffs and other trade restrictions could adversely affect our business and financial results.
•The cost and availability of raw materials could cause our results of operations to suffer.
•If we or our customers do not manage product inventory in an effective and efficient manner, it could adversely affect profitability.
•The nature of our business subjects us to compliance with, and liabilities under, employment, environmental, health, transportation, safety and other governmental regulations.
•Our handling of personal information could give rise to significant costs and liabilities, including as a result of governmental regulation.
•Our employees, commercial partners and vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.
•Violations of domestic and foreign anti-corruption laws could have a material adverse effect on us.
•Our failure to satisfy international trade compliance regulations, and changes in U.S. government sanctions, could have a material adverse effect on us.
•Climate change and legal or regulatory responses thereto may have an adverse impact on our business.
•If we are unable to adequately obtain and maintain our intellectual property rights or if we are accused of violating the intellectual property of others, our competitive position could be harmed, or we could be required to incur significant expenses to enforce or defend our rights.
•We may not be able to adequately protect our trademarks.
•We rely on access to intellectual property owned by third parties, so our rights to develop and commercialize certain products are subject to the terms and conditions of licenses granted to us by others.
•We may be subject to claims that our employees, consultants or advisors have wrongfully used or disclosed trade secrets or intellectual property that do not belong to them.
•We may not be able to effectively enforce our intellectual property rights throughout the world.
•If we fail to maintain an effective system of internal controls, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired.
•Our indebtedness could adversely affect our financial condition.
•Provisions in our charter documents and Delaware law may deter takeover efforts that stockholders may believe to be beneficial to stockholder value.
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| Part I | ||
ITEM 1. | BUSINESS | ||||
As used in this report, the terms “we,” “us,” “our,” “Hayward” and “Company” mean Hayward Holdings, Inc. and its subsidiaries (unless the context indicates another meaning). The term “common stock” means the common stock of Hayward Holdings, Inc., par value $0.001 per share.
Overview
We are an industry-leading global designer, manufacturer and marketer of a broad portfolio of pool equipment and associated automation systems. With the pool as the centerpiece of the growing outdoor living space, the pool industry has attractive market characteristics, including significant aftermarket requirements (such as the ongoing repair, replacement, remodeling and upgrading of equipment for existing pools), innovation-led growth opportunities and a favorable industry structure. We are a leader in this market with a highly recognized brand, one of the largest installed bases of pool equipment in the world, decades-long relationships with our key channel partners and trade customers and a history of technological innovation. Our engineered products, which include various energy efficient and more environmentally sustainable offerings, enhance the pool owner’s outdoor living lifestyle while also delivering high quality water, pleasant ambiance and ease of use for the ultimate backyard experience. Aftermarket replacements and upgrades to higher value Internet of Things (“IoT”) and energy efficient models are a primary growth driver for our business, as historically aftermarket sales have represented approximately 80% of net sales. We estimate aftermarket sales based upon feedback from certain representative customers and management’s interpretation of available industry and government data, and not upon our GAAP net sales results.
Hayward Holdings, Inc. was incorporated in Delaware in June 2017 in connection with the acquisition by CCMP Capital Advisors, LP (“CCMP”), MSD Partners, L.P. (a predecessor firm to BDT & MSD Partners) (“MSD Partners”) and Alberta Investment Management Corporation (“AIMCo”), as well as members of management and our board of directors, of our underlying business, which was founded in 1925. We completed our initial public offering of common stock in March 2021. As a result of a series of sales of our common stock by CCMP and AIMCo, we are no longer a “controlled company” within the meaning of the New York Stock Exchange’s corporate governance standards.
We maintain an Internet website at global.hayward.com. We will make this annual report, in addition to our other annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, amendments to these reports, our proxy statements for meetings of our stockholders and other filings with the Securities and Exchange Commission (the “SEC”), available free of charge on our website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. The SEC maintains an Internet site that contains these filings and they can be accessed via the Internet address https://www.sec.gov. Our corporate governance guidelines and the charters for each of our standing board committees (audit, nominating and corporate governance and compensation committees) are also available on our website, and copies of this information are available in print to any stockholder who requests it. Information included on or linked to our website is not incorporated by reference into this annual report.
Segments
We operate in a global pool equipment market with an installed base that we estimate to be approximately 25 million pools globally. North America and Europe are the two largest pool markets, accounting for an estimated 68% of the total global installed base and 84% of total equipment sales according to market studies.
Our business is organized into two reportable segments: North America (“NAM”) and Europe & Rest of World (“E&RW”). We determined our operating segments based on how the Chief Operating Decision Maker (“CODM”) reviews the Company’s operating results in assessing performance and allocating resources. NAM and E&RW accounted for approximately 85% and 15%, and 83% and 17%, of total net sales for Fiscal Year 2024 and the fiscal year ended December 31, 2023 (“Fiscal Year 2023”), respectively. For financial information with respect to our business segments, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and Note 12. “Segments and Related Information” of Notes to Consolidated Financial Statements in
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this Form 10-K. Item 7 contains information about sales and profits for each segment, and Note 12. “Segments and Related Information” contains information about each segment’s sales, significant segment expenses, capital expenditures, depreciation, and amortization.
North America
Our North American business segment consists of the United States and Canada. We have residential and commercial field-based teams selling directly to specialized pool distributors, large retailers, major builders and specialized online resellers. U.S. trade customer shipments are fulfilled from either our East Coast or West Coast distribution centers depending on the customer’s location. Canadian trade customers are served through our distribution center in Oakville, Ontario.
Europe and Rest of World
Our Europe and Rest of World business segment consists of all countries outside of the United States and Canada. Europe and Australia make up a sizable portion of this business segment. Europe and Australia have similar sales structures to the United States. Customer shipments in Europe are fulfilled through our France or Spain distribution centers and Australia has its own smaller regional distribution hubs. The other more than 20 countries in this segment are predominantly served through U.S.-based regional managers who in turn deal through established distributors in each of the markets. Products are consolidated into containers and shipped to global locations from the United States.
Products and Services
Since our founding in 1925, we have been delivering a growing portfolio of pool equipment that is differentiated by innovative features and high quality. Our broad portfolio of pool equipment and associated automation systems are connected through built-in IoT capabilities, many of which form part of the SmartPad™ platform of advanced IoT enabled products. Our products perform various core and auxiliary functions to deliver the holistic pool experience for pool owners.
Full Spectrum of Pool Equipment
We offer a wide range of pool equipment, including single and high efficiency variable speed pumps, filters, robotic, suction and pressure cleaners, high efficiency gas heaters and heat pumps, LED illumination solutions, water features and landscape lighting, water sanitizers, salt chlorine generators, safety equipment and in-floor automated cleaning systems. Our products are connected through OmniLogic, our mobile application that allows our end users to conveniently manage their connected pool equipment.
Our more environmentally sustainable products provide increased value for pool owners through various advanced functions that help drive energy savings, minimize chemical usage and reduce water consumption. For example, our large-capacity cartridge pool filters conserve up to 92% more water than standard sand filters as they do not need to be backwashed. Given these advanced functions, we are able to charge a higher price on key products such as variable speed pumps, energy efficient heaters, efficient filters and LED lights. The addition of IoT based controls and alternative sanitizers, including salt chlorination systems and UV/Ozone systems, also increases the potential equipment spend on a pool pad while providing greater ease of use for pool owners and potential energy savings and chemical reduction. Pool owners are typically willing to pay higher prices upfront in order to enjoy functional product benefits and ultimate cost savings. Pool owners appreciate the more environmentally sustainable features and understand that they can expect a payback over several years. For example, the average payback period on a variable speed pump is approximately one to two years.
Our products cater to all types of pools including both in-ground and above ground pools. Our wide range of offerings can be found in entry, mid-range and premium pools. In general, there is a base cost of pool equipment for an entry level pool, and equipment on premium pools can exceed 10 times the equipment cost of an entry level pool. Typically, equipment cost is only a fraction of the total pool cost. Approximately 50% of our net sales are derived from non-discretionary products that are essential to operating a residential or commercial pool.
Recent product development has targeted key pool industry trends such as energy efficiency, advanced sanitization, reduced chemical usage, water conservation and enhanced IoT-driven pool experiences.
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Customers
We sell our products through a variety of channels to a diverse global trade customer base. The majority of our sales are through specialty distributors, who in turn sell to thousands of pool builders and servicers. The remaining sales are directly to large retailers, pool builders and buying groups. Our two largest customers represented approximately 36% and 11%, respectively, of our net sales in Fiscal Year 2024.
Raw Materials and Suppliers
We maintain longstanding relationships with approximately 640 suppliers. We mainly purchase assembled components such as motors, metal parts, cables and extrusions from our suppliers. We also purchase raw materials, such as resins (ABS, PP, HDPE, PVC), metals (copper, steel, aluminum, titanium, ruthenium) and liner board (packaging), which expose us to changes in commodity pricing and the availability of materials within the global supply chain. We seek to mitigate the effects of fluctuations in commodity prices through our agreements with our suppliers that typically provide for fixed pricing over a three to 12-month period to manage raw material inflation. We have dedicated supply chain employees who manage global sourcing, strategic consolidation and supplier relationships. We typically perform an audit on any new suppliers, and periodically evaluate our existing supplier base to enable maximum service and quality. Our supplier base is “sticky” as suppliers must invest to receive certain approvals, creating an economic incentive to maintain a long and productive relationship.
We have had an average relationship of over 15 years across our top 30 suppliers. We have had a more than 40-year relationship with our top vendor and over 10-year relationships with nine out of our top ten suppliers, with an average of 17 years of supply continuity.
Sales Channels
The pool equipment market is served through several sales channels.
Distributors: The majority of our net sales come from an authorized network of regional and national distributors who service the pool trade (i.e., builders, retailers and servicers). We have long-standing relationships with these trade customers and we have contractual agreements to support our continued net sales of our products through this channel. Distributors are responsible for ordering, stocking, training, delivering and taking on credit responsibility from their trade customers. Many distributors also sell our products to online retailers.
Builders, Retailers and Servicers (Direct Sales): We sell to several major builders and retailers, which includes e-commerce customers. These customers are large in scale and are capable of managing their own demand planning and inventory. Builders and retailers who buy directly from us typically cross geographies beyond what many wholesalers can serve.
Buying Groups: We sell to several major buying groups, which are composed of members who are independent businesses. Buying groups receive competitive pricing and special incentives. Members can place orders with the group’s corporate headquarters or order from us directly. We ship directly to member locations.
According to management estimates, in Fiscal Year 2024, approximately 77% of residential pool equipment in the United States was sold through specialty distributors such as Pool Corporation, Heritage Pool Supply Group, and Baystate Pool Supplies. Approximately 18% was sold directly to retailers, and approximately 5% was sold to builders. In Europe, approximately 80% of sales was sold through distributors and 20% are through direct sales.
Across regions, the market is based on a “prescriber model.” The purchasing decisions of the end consumer (i.e., pool owners) are strongly influenced by pool builders and pool servicers.
Buying patterns through the various sales channels discussed above can also affect our sales for a given period. The level of inventory held by our distributor and retail customers is based upon factors beyond our control, such as end-user sales, supply chain lead times and macroeconomic factors, which may cause our revenue to fluctuate from period to period.
Seasonality
Our business is seasonal with sales typically higher in the second and fourth quarters. During the second quarter of a fiscal year, sales are higher in anticipation of the start of the summer pool season. In the fourth quarter, we incentivize trade customers to buy and stock up in preparation for next year’s pool season under an “Early Buy”
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program that features a price discount and extended payment terms. Shipments for the 2024 Early Buy program began in late third quarter and will continue through approximately the first quarter of 2025. We expect to receive payments for most of these shipments during the second quarter of 2025.
Our aim is to keep our manufacturing plants running at a consistent level throughout the year. Consequently, we typically build inventory in the first and third quarters and inventory is typically sold-down in the second and fourth quarters. Our accounts receivable balance increases from October to April as a result of the early-buy extended terms and remains elevated through June due to higher sales in the second quarter.
Weather can affect our sales; however, we primarily serve the aftermarket, which is less affected than new pool construction equipment sales. Unseasonably cold weather or significant amounts of rainfall can suspend new pool construction and reduce the sale of pool equipment to new-pool builders.
For discussion regarding the effects seasonality had on our results of operations in Fiscal Year 2024, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Trends and Uncertainties Regarding Our Existing Business.”
Competition
The markets for our products are geographically diverse and highly competitive. We compete against large and well-established national and global companies, as well as regional and local niche original equipment manufacturers (“OEMs”) and lower cost manufacturers. Competition may also result from new entrants into the markets we serve, offering products that compete with us. Our competitors offer pool equipment of varied quality and across a wide range of retail price points.
We compete based on brand recognition with distributors, retailers, pool builders and pool owners, strong relationships with our distributors and resellers, and the loyalty of our builders and servicers with whom we have built a large installed base. We offer our Totally Hayward loyalty program, an incentive-based program that allows us to better connect with our trade partners and drive expansion across our product lines and across our international markets. In addition, we compete based on our technical innovation, intellectual property, reputation for providing quality and reliable products, competitive pricing and contractual terms. We believe our extensive inventory of products enables us to meet both residential and commercial needs, which creates a one-stop-shop for many of our trade partners. Some of our competitors, in particular smaller companies, compete based primarily on price and local relationships, especially with respect to products that do not require significant engineering or technical expertise.
Some geographic markets we serve, particularly the four largest and higher pool density U.S. markets of California, Texas, Florida and Arizona, have a greater concentration of competition than other U.S. markets. The European pool equipment market is generally more fragmented.
Intellectual Property
Patents and trademarks are important to our business. As of December 31, 2024, we held approximately 220 issued U.S. patents and 247 issued foreign patents relating to our technologies, such as pumps, filters, heaters, drains and white goods, robotic cleaners, in-floor cleaning systems, lights, automation and controls, sanitization, valves and flow control, and IoT and other technologies, as well as approximately 143 U.S. trademark registrations and 708 foreign trademark registrations covering our marks, brands and products. As of December 31, 2024, we also held approximately 39 pending U.S. patent applications, 53 pending foreign patent applications, 6 pending U.S. trademark applications and 31 pending foreign trademark applications. We also license patents to certain technologies used in our products, such as our pool cleaning and lighting products.
We also have a brand enforcement program under which we monitor and pursue action against unauthorized online resales and infringements of our intellectual property, such as our trademark rights. When needed, we send cease and desist letters, which frequently result in the desired compliance without the need for litigation. From time to time, we initiate litigation on these matters to enforce our rights.
We do not regard our business as being materially dependent upon any single patent or proprietary technology. Patents, patent applications and license agreements will expire or terminate over time by operation of law, in accordance with their terms or otherwise.
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Human Capital Resources
As of December 31, 2024, we had approximately 2,080 total full-time equivalent employees of whom approximately 7% are temporary or contract workers. Our total number of temporary and contract workers fluctuates due to business cycles during the year. We believe our ability to maintain a flexible, modular workforce enhances our manufacturing capabilities. Our employees are primarily located in the United States, with about 29% employed at our international locations in Canada, Spain, France, Australia and China. As of December 31, 2024, approximately 8% of our global workforce is represented by a union, all of which employees are located in China. We have relationships with works councils in Spain and France.
As part of our human capital resource objectives, we seek to attract, retain, develop and reward our employees through a variety of mechanisms, creating a foundation for long-term sustainability as a company. We continue to advance our efforts to develop a performance culture by strengthening performance management processes through management training and the development and implementation of consistent documentation and methodologies designed to facilitate a robust process for all employees. We schedule performance discussions for all employees each year and establish clearly defined goals and incentive programs to drive employee performance. In addition, we have implemented a coordinated approach in managing our overall compensation structure and regularly conduct full evaluations of our compensation and incentive programs to be competitive in these areas. We monitor our performance by measuring numerous elements relating to our human capital management efforts, including, but not limited to, employee turnover and time to fill open roles.
Information Systems
We believe that our website and information technology systems are equipped to support the operation of our business, and we use commercially reasonable efforts to maintain and protect our information technology systems. See Item 1C. “Cybersecurity” for information about the Company’s management of risks related to our information technology systems.
Data Privacy and Security
We are subject to numerous U.S. federal, state, local and foreign laws and regulations that address privacy, data protection and the collection, storing, sharing, use, transfer, disclosure and protection of certain types of data. Such regulations include state data breach notification laws, California Consumer Privacy Act (the “CCPA”), the European Union General Data Protection Regulation (the “GDPR”), Canada’s Personal Information Protection and Electronic Documents Act and Australia’s Privacy Act, amongst others. Additionally, our evolution into offering smart products that can connect to the IoT may subject us to other IoT-specific laws and regulations, including the California Internet of Things Security Law. Because of our marketing activities, we may also be subject to applicable marketing privacy laws, including the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 (the “CAN-SPAM Act”) and the Telephone Consumer Protection Act of 1991 (the “TCPA”), among others.
These laws and regulations are increasing in number and complexity and are subject to varying interpretations by regulators and the courts, resulting in higher risk of enforcement, fines and other penalties.
We have taken steps to monitor and comply with changing requirements. For example, we maintain an updated website privacy policy that explains our online information collection and use practices and applicable rights of European Union and California residents under the GDPR and CCPA, respectively. We also make reasonable efforts to implement and maintain security controls to align with industry standards. See Item 1C. “Cybersecurity” for information about the Company’s management of risks related to our information technology systems.
Environmental, Health and Safety Matters
Our operations are subject to various laws and governmental regulations concerning environmental, health and safety matters, including employee health and safety, in the United States and other countries. U.S. federal environmental, health and safety regulations that apply to operations at one or more of our United States facilities include, without limitation, regulations promulgated under the Resource Conservation and Recovery Act, the Environmental Planning and Community Right-To-Know Act, the National Pollutant Discharge Elimination System Act, the Spill Prevention, Control and Countermeasures requirements and the Comprehensive Environmental Response, Compensation and Liability Act. We are also subject to regulation by the Occupational Safety and Health
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Administration (“OSHA”) concerning employee health and safety matters. In addition, we and certain of our affiliates store certain types of hazardous materials and chemicals at various locations and the storage of these items is strictly regulated by local fire codes. We also sell UV, Ozone, Salt Chlorinator and related products that are regulated under the Federal Insecticide, Fungicide and Rodenticide Act (“FIFRA”), which primarily relates to testing, use, reporting, sale, distribution, licensing and market verification of these products. Moreover, the U.S. Environmental Protection Agency (the “USEPA”), OSHA, and other federal and foreign, state and/or local agencies have the authority to promulgate laws and regulations in the future that may impact our operations going forward. In addition to the federal environmental laws identified above that apply to our operations, various states have been delegated certain authority under the aforementioned federal statutes (and others), and under state corollaries to the federal laws, to regulate environmental, health and safety matters at our U.S. facilities. Compliance with, or liabilities under, such laws and regulations in the future could prove to be costly and could affect various aspects of the business.
Sustainability
As a leading provider of environmentally friendly and energy efficient products, Hayward strives to promote sustainability throughout our business operations and within our culture. We believe that a healthy environment is necessary for the well-being of our people and our businesses and is the foundation for a sustainable and strong economy. Championing our core sustainability values (“Sustainability”), we are committed to providing innovative and environmentally sustainable products, upholding responsible manufacturing practices, fostering a safe and inclusive workplace and maintaining strong governance and compliance practices.
We take our responsibility for environmental stewardship seriously and believe as a global designer and manufacturer, we play a constructive role in helping to address environmental challenges. Our Sustainability framework, established following our inaugural assessment in 2021, sets the foundation for our principle-based approach to integrating these values across our business. Guiding our strategy and the implementation of Sustainability initiatives are our four pillars: Products, Planet, People and Principles.
To enhance our Sustainability performance, we are undertaking an evaluation to set clear, actionable goals for future progress. In our initial steps towards comprehensive sustainability reporting, we published our first data sheet on Sustainability in 2022. We published updated data sheets in both 2023 and 2024, and we are consistently improving the information available on our Sustainability webpage.
Hayward respects, values and celebrates the unique attributes, characteristics and perspectives that make each person who they are, and we believe that the success of our employees determines the success of our business. An inclusive workforce, where individuals can feel a sense of belonging regardless of background, enables different perspectives to be shared and supports a collaborative and engaged company culture.
We believe bringing individuals from a variety of backgrounds together allows us to more effectively address the challenges that may face our organization. Our commitment lies in cultivating a community bonded by our shared values: Care, Respect, Lead and Grow, and collective responsibility fostering the well-being of both individuals and the Company through mutual respect and learning.
Our people are fundamental to our long-term business success. We strive to attract, retain, develop and reward our employees by continuously enhancing various employee-focused initiatives while working to achieve and maintain hiring practices that give qualified individuals an equal opportunity to succeed regardless of background.
Our employee development programs include a variety of skill trainings for our employees to advance in their careers and cultivate leadership from within the Company. Our regular and transparent performance discussions with all employees also play a pivotal role in maintaining the competitiveness of our compensation and incentive programs, contributing to the sustainable growth for our business.
We take pride in our robust, comprehensive OSHA-aligned safety standards and go a step further to create an open feedback culture. During the year ended December 31, 2024, we implemented over 688 employees’ suggestions for improvements and regularly held global town hall meetings.
To enable good governance, our Sustainability strategy is governed by our Board of Directors through the Nominating and Corporate Governance Committee. Our committee in charge of Sustainability comprises members
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of the senior leadership team and meets on a monthly cadence to oversee our Sustainability efforts. We are committed to transparency and communications to our stakeholders.
We maintain a Sustainability section of our website (https://investor.hayward.com) to provide detailed information to interested groups. For the avoidance of doubt, none of our sustainability data sheets or other reporting or information available on our website is hereby incorporated into the Annual Report on Form 10-K absent express language to the contrary.
Regulatory Matters
We are also subject to foreign, federal, state, and local laws and regulations relating to matters such as product labeling, weights and measures, zoning, land use, and fire codes, including regulation by the Federal Communications Commission, the Consumer Product Safety Commission, the National Fire Protection Agency, and the Federal Trade Commission. Most of these requirements govern the packaging, labeling, handling, transportation, storage, sale and use of our products. In addition, we are subject to regulations passed by the U.S. Department of Energy (the “DOE”) relating to the labeling, testing, reporting and certification of new and replacement pumps sold for swimming pools. Compliance with such laws and regulations in the future could prove to be costly and could affect various aspects of the business.
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ITEM 1A. RISK FACTORS
In addition to the risks stated elsewhere in this Annual Report on Form 10-K, set forth below are certain risk factors that we believe are material. If any of these risks occur, our business, financial condition, results of operations, cash flows and reputation could be harmed. You should also consider these risk factors when you read forward-looking statements elsewhere in this report.
Risks Related to Our Business
Our business depends on the performance of distributors, builders, buying groups, retailers and servicers.
We distribute our products through our customers who are distributors, builders, buying groups, retailers and servicers, many of whom sell products of competing manufacturers. We rely on our customers to stock, market and recommend our products to pool owners and our business depends on retaining good relationships with our customers. However, the financial condition of these resellers could weaken, they could stop distributing our products or reduce sales of our products in favor of our competitors. Further, uncertainty regarding demand for our products could cause them to reduce their ordering and marketing of our products. As a result, our business, financial condition, results of operations and cash flows could be materially impacted.
In several geographic markets, such as Europe, many potential consumers prefer local suppliers, in some cases because of existing relationships and in other cases because of local legal restrictions or incentives that favor local businesses. Our success in these markets depends on obtaining and maintaining relationships with local channel partners who can effectively sell our products to pool owners in the applicable market.
We have invested and intend to continue to invest in programs designed to enhance sales to distributors, builders, buying groups, retailers and servicers, including through volume rebates with key distributors. However, these programs may not be successful in retaining or increasing product purchases by these customers or in maintaining or increasing our net income.
The demand for our swimming pool equipment products may be adversely affected by unfavorable economic and business conditions.
We compete in various geographic regions and product markets around the world. Among these, the most significant are residential markets in the United States, Canada, Europe and Australia, as well as commercial markets in the United States and Europe. We have experienced, and expect to continue to experience, fluctuations in sales and results of operations due to economic and business cycles. Consumer spending affects sales of our products for initial pool installation and, more broadly, to our customers, such as distributors, builders, buying groups, retailers and servicers, who sell our products to pool owners and who must account for anticipated changes in consumer demand when they purchase our products from us. Consumer spending is impacted by factors outside of our control, including general economic and geopolitical conditions, interest rates, the residential housing market, unemployment rates and wage levels, inflation, disposable income levels, consumer confidence, and access to credit. In economic downturns, the demand for swimming pool equipment products and the growth rate of pool-eligible households and swimming pool construction may decline. A weak economy may also cause pool owners to defer replacement and refurbishment activity or upgrades to new pool equipment, or to purchase less expensive brands, and historically our aftermarket product sales have comprised most of our net sales. Even in generally favorable economic conditions, severe and/or prolonged downturns in the housing market could have a material adverse impact on our financial performance.
In addition, we believe that homeowners’ access to consumer credit is a critical factor enabling the purchase of new pools and related products. High interest rates and tightened credit markets limit the ability of homeowners to access financing for new swimming pools and related supplies, and consequently, replacement, repair and operation of equipment, which could negatively impact our product sales.
Any of the above factors, individually or in the aggregate, could reduce demand for our products, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
We operate in markets with high levels of competition, which may result in pressure on our profit margins and limit our ability to maintain or increase the market share of our products.
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The markets for our products are geographically diverse and highly competitive. We compete against large and well-established national and global companies, as well as regional and local niche OEM’s, lower cost manufacturers and new market entrants. Our competitors offer pool equipment of varied quality and across a wide range of retail price points. We compete based on brand recognition with pool owners, strong relationships with our distributors and resellers, and the loyalty of our builders and servicers with whom we have built a large installed base. In addition, we compete based on our technical innovation, intellectual property, reputation for providing quality and reliable products, competitive pricing and contractual terms. Some of our competitors, in particular smaller companies, compete based primarily on price and local relationships, especially with respect to products that do not require significant engineering or technical expertise. In addition, during economic downturns average selling prices tend to decrease as market participants compete more aggressively on price, which may significantly and adversely impact our profit margins. Moreover, demand for our products is affected by changes in customer order and consumer purchasing patterns, such as changes in the levels of inventory maintained by customers and the timing of customer and consumer purchases, and changes in customers’ and consumers’ preferences for our products. For example, our results of operations have been negatively impacted, and in the future may continue to be negatively impacted, by customer decisions to reduce inventory levels. Consumer purchasing behavior may also shift by product mix in the market or result in a shift to new distribution channels, including e-commerce, which is a rapidly developing area.
In addition, our products have and may continue to become subject to competition from counterfeit products, which are products sold under the same or very similar brand names and/or having a similar appearance to genuine products, but which are sold without proper licenses or approvals. Similarly, our products also have and may continue to be subject to competition from producers that attempt to reverse engineer our products, produce similar products in low cost-of-labor locations, and sell those products at low margins, significantly undercutting our pricing. In each case, such products divert sales from genuine products, often are of lower cost and quality, and have the potential to damage the reputation for quality and effectiveness of the genuine product and of our brands.
If we are unable to continue to differentiate our products or adapt to changes in consumer purchasing behavior or shifts in distribution channels, or if we are forced to cut prices or to incur additional costs to remain competitive, it could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Our future success depends on developing, manufacturing and attaining market adoption of new products. Even if we attain significant market acceptance of our planned or future products, the commercial success of these products is not guaranteed.
Our future financial success will depend substantially on our ability to develop, manufacture, market and sell products we develop. Pool owners are increasingly demanding “smart home” technology, automation and environmentally friendly, sustainable and ethical product features to enhance their pools. Staying at the forefront of product innovation and consumer demand is important to our future success. We must continue to develop and bring to market innovative products, which requires hiring and retaining technical staff, maintaining and upgrading manufacturing facilities and equipment and expanding our intellectual property rights. We must also identify emerging technological and commercial trends in our target end markets, as well as understand and react to potential regulatory changes. Successful growth of our sales and marketing efforts will depend on the strength of our marketing infrastructure and the effectiveness of our sales and marketing strategies, as well as the continued quality, reliability and innovation of our products. Because we sell our products primarily through distributors, we rely in part on the efforts of third-party sales representatives, who may be required to learn about the new features or other aspects of our new products to effectively sell those products, which may prove challenging. Further, our ability to satisfy product demand driven by our sales and marketing efforts will be largely dependent on our ability to maintain a commercially viable manufacturing process that is compliant with regulatory standards. Failure to manufacture, market and sell our newly developed products could have a material adverse effect on our business, financial condition, and results of operations.
Our results of operations and cash flows may fluctuate from quarter to quarter for many reasons, including seasonality and weather conditions.
We experience seasonal demand with customers and pool owners and, as a result, we experience fluctuations in quarterly results. During the second quarter of a fiscal year, sales are typically higher in anticipation of the start of the summer pool season. In the fourth quarter, we incentivize trade customers to buy and stock up in preparation for
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next year’s pool season under an “Early Buy” program, which features a price discount and extended payment terms. Under the 2024 Early Buy program, we generally ship products beginning in the late third quarter through approximately the first quarter of 2025 and expect to receive payments for most of these shipments during the second quarter of 2025. As a result, our accounts receivable balance increases from September to April before the Early Buy payment is received. In addition, cash flow is higher in the second quarter as the seasonality of our business peaks and payments are received. Also, because most of our sales are to distributors whose inventory of our products may vary due to reasons beyond our control, such as end-user demand, supply chain lead times and macroeconomic factors, our revenue may fluctuate from period-to-period. For example, our results of operations have been negatively impacted, and in the future may be negatively impacted, by distributors reducing inventory levels.
As a result, management believes that period-to-period comparisons of results of operations are not necessarily meaningful and should not be relied upon as any indication of future performance or results expected for the fiscal year. In addition, seasonal effects in our business may vary from year to year and be impacted by weather patterns, particularly by temperature, heavy flooding and droughts, which patterns may become less predictable and more extreme as a result of climate change. Additionally, while the majority of our sales are driven by aftermarket repair, replacement and remodeling products, adverse weather conditions, such as cold or wet weather, may negatively affect demand for, and sales of, pool equipment as a result of diminished use and reduced construction speed.
A loss of, or material cancellation, reduction or delay in purchases by, one or more of our largest customers could harm our business.
Most of our net sales are generated from sales to distributors, including our largest customer, Pool Corporation, which represented approximately 36% of our net sales in Fiscal Year 2024 and approximately 47% of our accounts receivable on December 31, 2024. Another customer accounted for 11% of our net sales in Fiscal Year 2024 and approximately 11% of our accounts receivable on December 31, 2024. Our top five customers accounted for approximately 61% of our net sales in Fiscal Year 2024. Our concentration of sales to a relatively small number of larger customers makes our relationship with each of these customers important to our business. Our success is dependent on retaining these customers, which requires us to successfully manage relationships and anticipate the needs of our customers in the channels in which we sell our products. The loss of one or more of our largest customers, any material cancellation, reduction or delay in purchases by these customers, or our inability to successfully develop relationships with additional customers could have a material adverse effect on our business, financial condition, results of operations and cash flows. Additionally, as our largest customers continue to evolve their approach relative to assessing their necessary and historic inventory levels on hand, our net sales have been and in the future could be adversely affected by purchasing decisions of our largest customers associated with a reduction of their inventory levels.
We are exposed to credit risk on our accounts receivable and this risk is heightened during periods when economic conditions worsen.
We distribute our products through distributors, large pool builders, buying groups, services and specialty online resellers. A substantial majority of our outstanding accounts receivables are not covered by collateral, third-party bank support or financing arrangements, or credit insurance. Further, a significant portion of our accounts receivables are typically concentrated within a relatively small number of distributors, builders, buying groups, retailers and servicers. As of December 31, 2024, our largest customer represented approximately 47% of our accounts receivable, and another customer represented approximately 11% of our accounts receivable. In addition, our exposure to credit and collectability risk on our accounts receivable is higher in certain international markets, and our ability to mitigate such risks is limited. There can be no assurance that our procedures to monitor and limit exposure to credit risk on our accounts receivable will effectively limit our credit risk and avoid losses. If general economic conditions worsen, it may be more likely that one or more of our customers will default on payments owed to us, and it may be harder for us to enforce any judgment debts against such customers, which may result in a significant write-off of accounts receivable and may have a material adverse effect on our results of operations.
We are exposed to political, regulatory, economic, trade and other risks that arise from our international business operations, including the risks associated with geopolitical conflicts.
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Sales outside of the United States for Fiscal Year 2024 accounted for approximately 22% of our net sales. Furthermore, we obtain some components and raw materials from non-U.S. suppliers and have manufacturing facilities in Europe and China. Accordingly, our business is subject to the political, regulatory, economic, trade and other risks that are inherent in operating in numerous countries. These risks include:
•adverse changes in general economic and political conditions in countries where we operate, particularly in emerging markets;
•the imposition of tariffs, duties, exchange controls, licensing requirements and restrictions or other trade restrictions;
•geopolitical conflicts, including sanctions imposed in response to geopolitical conflicts, may be unpredictable;
•changes in tax treaties, laws or rulings that could have a material adverse impact on our effective tax rate;
•the difficulty of enforcing agreements and collecting receivables through non-U.S. legal systems;
•the difficulty of communicating and monitoring evolving standards and directives across our product lines, services, and global facilities;
•the threat of nationalization and expropriation and limitations on repatriation of earnings or other regionally-imposed capital requirements;
•difficulty in staffing and managing widespread operations in non-U.S. labor markets;
•the difficulty of protecting intellectual property and other proprietary rights in non-U.S. countries; and
•changes in and required compliance with a variety of non-U.S. laws and regulations.
In addition, changes in U.S. or foreign government administrative policy, including between the U.S. and China, may affect our ability, or the ability of our partners and contract manufacturers to import products or raw materials into the United States. We maintain a manufacturing facility in China and purchase certain of our key parts and components from suppliers in China, and we maintain a manufacturing facility in Europe. As such, we are exposed to risks relating to any deterioration in the relationship between the U.S. and China, or the U.S. and the European Union, including through increases in tariffs between the United States and such regions.
Our success depends in part on our ability to anticipate and effectively manage these and other risks. We cannot provide assurance that these and other factors will not have a material adverse effect on our international operations or on our business.
Past growth may not be indicative of future growth.
Historically, we have experienced substantial sales growth through organic market share gains, geographic expansion, technological innovation, new product offerings, increased demand for outdoor living products and acquisitions that have increased our size, scope and geographic footprint. During the first two years of the COVID-19 pandemic, residential pool equipment sales increased. This increase in demand was experienced broadly across all of our product lines as consumers refocused their attention on improving the quality of the homeowner’s outdoor living experience. In addition, because of channel customer expectations with respect to increased lead-times during the COVID-19 pandemic, demand for our products was partially accelerated. As the impact of the COVID-19 pandemic has lessened, we believe that these pandemic-fueled trends have generally abated and the industry has returned to more normalized historical seasonal trends.
Our various business strategies and initiatives, including our growth initiatives, are subject to business, economic and competitive uncertainties and contingencies, many of which are beyond our control. If we are not able to continue to compete in our markets, expand into new markets, and grow our business, our business, financial condition, results of operations and cash flows could be adversely affected.
We may not be able to identify, finance and complete suitable acquisitions, and any completed acquisitions may be unsuccessful or consume significant resources.
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Our business strategy includes acquiring businesses that complement our existing businesses. To date, we have experienced significant growth through acquisitions, completing multiple acquisitions over the past two decades, but we may not be able to maintain this growth. We continue to analyze and evaluate the acquisition of strategic businesses or product lines with the potential to strengthen our industry position or enhance our existing set of product offerings. We may not be able to identify suitable acquisition candidates, obtain financing or have sufficient cash necessary for acquisitions in the future. Acquisitions may involve significant cash expenditures, debt incurrences, equity issuances, operating losses and expenses. Acquisitions involve numerous other risks, including:
•diversion of management time and attention from daily operations;
•difficulties integrating acquired businesses, technologies and personnel into our business;
•difficulties in obtaining and verifying the financial statements and other data of acquired businesses;
•inability to obtain required regulatory approvals;
•cybersecurity risk related to the integration of acquired information technology systems;
•potential loss of key employees, contractual relationships or customers of acquired companies or of ours;
•assumption of the liabilities and exposure to unforeseen liabilities of acquired companies, including risks relating to anti-corruption laws such as the FCPA and privacy laws, including the GDPR; and
•the incurrence of indebtedness or the dilution of interests of holders of our shares through the issuance of equity securities or equity-linked securities.
Any acquisitions or investments may not be successful or meet our expectations and may ultimately result in impairment charges and have a material adverse effect on our business, financial condition, results of operations and cash flows.
We may be negatively impacted by litigation and other claims, including intellectual property, product liability or warranty claims, and health and safety concerns, including product recalls.
We have been, and in the future may be, made a party to litigation arising in the ordinary course of our business, including those relating to commercial or contractual disputes with suppliers, customers or parties to acquisitions and divestitures, intellectual property matters, product liability, the use or installation of our products, consumer matters, employment and labor matters, violations of securities laws and environmental, health and safety matters, including claims based on alleged exposure to asbestos-containing product components. The outcome of such legal proceedings cannot be predicted with certainty, and some may be disposed of unfavorably to us. Regardless of the outcome, legal proceedings can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors. In addition, we have agreed to provide indemnification in connection with prior acquisitions or dispositions for certain of these matters, and we cannot provide any assurance that material indemnification claims will not be brought against us in the future. Relatedly, we have been, and in the future may be, subject to lawsuits or other actions related to products produced by companies we have acquired.
We have in the past and may in the future implement a voluntary recall or market withdrawal or may be required to do so by a regulatory authority. A recall or market withdrawal of one of our products would be costly and would divert management resources. A recall or withdrawal of one of our products, or a similar product processed by another entity, also could impair sales of our products because of confusion concerning the scope of the recall or withdrawal, or because of the damage to our reputation for quality and safety.
If our products are, or are alleged to be, defectively designed, manufactured or labeled, contain or are alleged to contain, defective components or components containing hazardous materials, such as asbestos, or are misused, we may become subject to costly litigation initiated by pool owners as well as government enforcement actions. Product liability claims could harm our reputation, divert management’s attention from our core business, be expensive to defend, reduce product sales and may result in sizable damage awards against us. Although we maintain product liability insurance, we may not have sufficient insurance coverage for future product liability claims, and claims brought against us, with or without merit, could increase our product liability insurance rates or prevent us from securing continuing coverage. In addition, successful product liability claims made against one of our competitors could cause claims to be made against us or expose us to a perception that we are vulnerable to similar claims.
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We have significant goodwill and intangible assets and future impairment of our goodwill and intangible assets could have a material adverse effect on our results of operations.
We test goodwill and other indefinite-lived intangible assets for impairment on at least an annual basis, and more frequently if circumstances warrant. As of December 31, 2024, our goodwill and intangible assets were $1,974.1 million and represented approximately 66% of our total assets. Declines in value could result in future goodwill and intangible asset impairment charges.
Exchange rate fluctuations could adversely affect our financial condition, results of operations and cash flows.
We incur currency transaction risk whenever we enter into either a purchase or sale transaction using a currency other than the local currency of the transacting entity. We conduct business in various locations throughout the world and are subject to market risk due to changes in value of foreign currencies in relation to our reporting currency, the U.S. dollar. The functional currencies of our international operating locations are generally the local currency. We manage various operating activities at the local level and net sales, costs, assets and liabilities are denominated in both the local currency and the U.S. dollar. Our results of operations and assets and liabilities are reported in U.S. dollars and thus will fluctuate with changes in applicable exchange rates, affecting our reported results and the comparability of our results of operations and cash flows between periods.
The Company’s financial instruments that can be affected by foreign currency fluctuations and exchange risks consist primarily of cash and cash equivalents, trade receivables, trade payables and net sales denominated in currencies other than the U.S. dollar. For the Fiscal Year 2024, approximately 17% of our net sales were made by our international operating locations that use a functional currency other than the U.S. dollar. These sales were primarily transacted in Euros as well as Canadian dollars. Consequently, we are exposed to the impact of exchange rate volatility between the U.S. dollar and these currencies. We periodically enter into foreign currency derivative contracts to manage these risks.
We expect that the amount of our sales denominated in non-dollar currencies may increase in future periods. Given the volatility of exchange rates, there can be no assurance that we will be able to effectively manage our currency transaction risks or that any volatility in currency exchange rates will not have a material adverse effect on our financial condition or results of operations. See “Quantitative and Qualitative Disclosures about Market Risk.” Further, currency fluctuations may negatively affect our debt service requirements, which are primarily in U.S. dollars.
Changes in our effective tax rate or exposure to additional income tax liabilities could adversely affect our financial results.
Taxation and tax policy changes, tax rate changes, new tax laws, revised tax law interpretations and changes in accounting standards and guidance related to tax matters may cause fluctuations in our effective tax rate. In addition, our effective tax rate may also be impacted by changes in the geographic mix of our earnings.
We may experience cost and other inflation.
In the past, we have experienced material cost and other inflation in several of our businesses. Recently, cost inflation has caused prices to increase across various sectors of the economy and we have been impacted by increases in the prices of our raw materials and other associated manufacturing costs. We strive for productivity improvements and seek to implement increases in selling prices to help mitigate cost increases in raw materials (especially metals and resins), energy and other costs including wages, pension, health care and insurance. We continue to implement operational initiatives designed to mitigate the impacts of this inflation and reduce our costs. However, these actions may not be successful in managing our costs or increasing our productivity. Continued cost inflation or the failure of our initiatives to generate cost savings or improve productivity could have a material adverse effect on our business, financial condition, results of operations and cash flows.
We depend on our ability to attract, develop, and retain highly qualified personnel, including key members of management.
Our future success depends on the continued efforts of the members of our executive management team. If one or more of our executives or other key personnel are unable or unwilling to continue in their present positions, or if
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we are unable to attract and retain high-quality executives or key personnel in the future, our business may be adversely affected.
In addition, we consider our employees to be the foundation for our growth and success. As such, our future success depends in large part on our ability to attract, train, retain, and motivate qualified personnel. For example, during periods of unexpected demand for our products, we may need to hire additional personnel to maintain sufficient inventory levels. If we are unable to attract, hire and retain qualified personnel, our operating results could be adversely affected.
Disruptions in the financial markets could adversely affect us, our customers, consumers and suppliers by increasing funding costs or reducing the availability of credit.
In the normal course of our business, we may access credit markets to, for example, refinance or repay indebtedness, complete acquisitions, add to working capital, repurchase shares, make capital expenditures and make investments in our subsidiaries. Our access to and the cost of capital could be negatively impacted by disruptions in the credit markets, which have occurred in the past and made financing terms for borrowers unattractive or unavailable. In addition, financial market disruptions may make it more difficult for our suppliers to obtain financing to meet demand for their products or for our customers and prospective consumers of our products to obtain financing to commence new projects. Disruptions in the financial markets have had adverse effects on other areas of the economy and have led to a slowdown in general economic activity that may adversely affect our businesses. One or more of these factors could adversely affect our business, financial condition, results of operations or cash flows.
We rely on information technology systems to support our business operations. A significant disturbance or breach of our technological infrastructure, or those of our vendors or others with which we do business, could adversely affect our financial condition and results of operations. Additionally, failure to maintain the security of confidential information could damage our reputation and expose us to litigation.
We rely upon information technology systems and networks in connection with a variety of business activities, some of which are managed by third parties, whose products, services and systems are beyond our control. We expect our reliance on information technology systems to increase as we implement new technologies to facilitate our operations, such as our new ERP system and new human resources information system, which are in the process of being implemented. As a result, our ability to operate effectively on a day-to-day basis and accurately report our results depends on a reliable technological infrastructure, which is inherently susceptible to internal and external threats, including malicious code embedded in open-source software, or misconfigurations, “bugs” or other vulnerabilities in commercial software that is integrated into our (or our suppliers’ or service providers’) information technology systems and networks, products or services. We are vulnerable to interruption and breakdown by system downtime or failure, fire, natural disaster, power loss, telecommunication failures, internet failures, security breaches and other catastrophic events.
We are subject to vulnerabilities in our software and systems and those of third parties. We and certain of our third-party service providers have in the past experienced, and we expect in the future will continue to experience, cybersecurity attacks and other incidents that threaten the confidentiality, integrity and availability of information technology systems and networks and confidential information, including personal information, that we or third parties collect, maintain and/or process. We periodically evaluate and test the adequacy of our systems, measures, controls and procedures and perform third-party risk assessments. However, such threats have increased in frequency, scope, and potential impact in recent years. Because the techniques used to obtain unauthorized access or to sabotage systems change frequently and are often not recognized until after they are launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. We prioritize the remediation of identified security vulnerabilities based on known and anticipated risks, and we aim to patch vulnerabilities within reasonable timeframes. However, we are unable to comprehensively identify all vulnerabilities (particularly as related to third-party software and systems), apply patches or confirm that mitigating measures are in place, or ensure that any patches will be applied by us or third parties before exploitation by a threat actor. If attackers are able to exploit vulnerabilities before patches are installed or mitigating measures are implemented, significant compromises could impact our systems and data.
The development of artificial intelligence technologies may exacerbate these cybersecurity risks and pose new or unknown cybersecurity risks and challenges. As a result, we may be unable to detect, investigate, remediate or
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recover from future attacks or incidents, or to avoid a material adverse impact to our information technology systems and networks, confidential information or business. The accidental or willful security breaches or other unauthorized access by third parties to our information technology systems or facilities, or those of our vendors and/or others with which we do business, or the existence of computer viruses, such as ransomware or other malware, in our or their data or software, and/or any other failure of our or their information technology systems could expose us to a risk of information loss, the misappropriation of proprietary and confidential information, work stoppages, reputational damage, regulatory investigations and enforcement actions, regulatory fines or penalties, litigation by affected parties, possible financial obligations for liabilities and damages related to the theft or misuse of this information and/or the defective manufacture or defective design of our products, which could expose us to liability, and/or significant incident response, system restoration or remediation and future compliance costs. In addition, while we currently maintain insurance coverage that, subject to its terms and conditions, is intended to address costs associated with certain aspects of cybersecurity incidents and information systems failures, this insurance coverage may not, depending on the specific facts and circumstances surrounding an incident, cover all losses or all types of claims that arise from an incident, or the damage to our reputation that may result from an incident. The occurrence of any of these events could have an adverse effect on our business, financial condition, results of operations and reputation. There can be no assurance that our cybersecurity risk management program and processes, including our policies, controls or procedures, will be fully implemented, complied with or effective in protecting our information technology systems and confidential information.
Establishing and maintaining systems and processes to address these threats may increase our costs and may be mandated by regulation. For example, the California Internet of Things Security Law, which became effective in 2020, requires us to implement reasonable security measures for IoT devices, and failure to do so could expose us to penalties.
We may encounter difficulties in operating or implementing a new ERP system and human resources information system, which may adversely affect our operations and financial reporting.
We are in the process of implementing a new ERP system for most of our business as part of our ongoing efforts to improve and strengthen our operational and financial processes and our reporting systems. In addition, we are implementing a new human resources information system, which is designed to improve the efficiency of our global HR process. These systems may not provide the benefits anticipated, could add costs and complications to ongoing operations, and may impact our ability to process transactions efficiently, all of which may have a material adverse effect on our business and results of operations.
Misuse of our technology-enabled products could lead to reduced sales, increased costs, liability claims or harm to our reputation.
As we continue to design and develop products, services and solutions that leverage our hosted or cloud-based resources, the IoT and other wireless/remote technologies, such as our OmniLogic app, and include networks of distributed and interconnected devices that contain sensors, data transfers and other computing capabilities, our customers’ data and systems may be subjected to harmful or illegal content or attacks, including potential cybersecurity threats. Additionally, we may not have adequately anticipated or precluded such cybersecurity threats through our product design or development. These products, services and solutions may contain vulnerabilities or critical security defects which may not have been remedied and cannot be disclosed without compromising security. We may also make prioritization decisions in determining which vulnerabilities or security defects to fix, and the timing of these fixes, which could result in compromised security. These vulnerabilities and security defects could expose us or our customers to a risk of loss, disclosure, or misuse of information/data; result in litigation, liability or regulatory action; deter customers or sellers from using our products, services and solutions; cause damage to our or our customers’ property; and otherwise harm our business and reputation.
If we fail to maintain an effective system of internal controls, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired.
As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, and the rules and regulations and the listing standards of the NYSE.
The Sarbanes-Oxley Act requires, among other things, that we evaluate the effectiveness of our disclosure controls and procedures and internal control over financial reporting. For fiscal years ended December 31, 2022 and
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2021, we identified material weaknesses in our internal control over financial reporting relating to our policies and procedures and controls over the segregation of duties within our financial reporting function and the preparation and review of journal entries, among other items. While no material weaknesses have been identified since fiscal 2022, there can be no assurance that we will not experience additional material weaknesses in the future.
If we fail to maintain an effective system of internal control over financial reporting in the future, we may not be able to accurately or timely report our financial condition or results of operations or prevent fraud, which may adversely affect investor confidence in us and, as a result, the value of our common stock. Any failure to maintain effective disclosure controls and procedures and internal control over financial reporting could have an adverse effect on our business and results of operations and financial condition. In addition, if we are unable to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion on the effectiveness of our internal control, investors may lose confidence in the accuracy and completeness of our financial reports, which could cause the price of our common stock to decline, or may risk the Company being delisted from the NYSE.
Risks Related to the Manufacturing, Supply and Distribution of Our Products
We depend on suppliers, including single-source suppliers and, in a few cases, sole-source suppliers, to consistently supply us with components for our products, and any failure to procure such components could have a material adverse effect on our business, product inventories, sales and profit margins.
Our suppliers (and those they depend upon for materials and services) are subject to risks, including labor disputes or constraints, union organizing activities, financial liquidity, inclement weather, public health epidemics, natural disasters, significant public health and safety events, supply constraints, and general economic and political conditions that could limit their ability to provide us with materials at acceptable prices or at all. Although we have manufacturing and supply agreements with the most strategic and critical of our suppliers, for most of our suppliers we place purchase orders on an as-needed basis. Our suppliers could discontinue the manufacturing or supply of these components at any time. We carry safety stocks within our inventory, but these may not suffice to meet our needs. Our suppliers may not be able to meet our demand for their products, either because of acts of nature, the nature of our agreements with those manufacturers or our relative importance to them as a customer, and these manufacturers may decide in the future to discontinue or reduce the level of business they conduct with us.
In addition, we rely on single-source suppliers for certain types of parts in our products, and, in a few cases, on sole-source suppliers. A single-source supplier is a supplier from which we make all purchases of a particular component used in our products even though other suppliers of the component exist. A sole-source supplier is a supplier from which we make all purchases of a particular component used in our product, and the supplier is the only source of that particular component in the market. Establishing additional or replacement suppliers for any of these materials or components, if required, or any supply interruption from our suppliers, could limit our ability to manufacture our products, result in production delays and increased costs and adversely affect our ability to deliver products to our customers on a timely basis or at all. If we are not able to identify alternate sources of supply for the components, we might need to modify our product to use substitute components, which could cause delays in shipments, increase design and manufacturing costs and increase prices for our products. Any such modified product might not be as effective as the predecessor product or might not gain market acceptance. This could lead to customer or consumer dissatisfaction and damage to our reputation and could materially and adversely affect our business, product inventories, sales and profit margins.
If we or our customers do not manage product inventory in an effective and efficient manner, it could adversely affect profitability.
Many factors affect the efficient use and planning of product inventory, such as effectiveness of predicting demand, preparing manufacturing to meet demand, meeting product mix and product demand requirements, and managing product expiration. We typically build-up product inventory during the first quarter in anticipation of the upcoming pool season and during the third quarter in anticipation of shipments of products purchased through our Early Buy program in the fourth quarter. However, we may not accurately anticipate the level of demand during these periods. We may be unable to manage our inventory efficiently, keep inventory within expected budget goals, keep our work-in-process inventory on hand or manage it efficiently, control expired product, or keep sufficient product on hand to meet demand. Failure to do so may harm our long-term growth prospects. Moreover, we sell our
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products primarily through distributors whose inventory of our products may fluctuate due to changes in demand, perception of our ability to meet demand, changes in customer order patterns, such as changes in the levels of inventory maintained by customers and the timing of customer purchases, adoption of new technology and connected products, and changes in customers’ preferences for our products, or other reasons. We cannot control the level of inventory of the distributors who sell our products, and may experience difficulties in forecasting demand as a result. Reductions in the inventory levels of our distributors have adversely affected and in the future may adversely affect our net sales in a particular period and our ability to manage our inventory efficiently.
Product manufacturing disruptions, including as a result of catastrophic and other events beyond our control, could cause us to be unable to meet customer demands or increase our costs.
If operations at any of our manufacturing facilities, warehouses or any of our suppliers were to be disrupted as a result of significant equipment failures, natural or man-made disasters, earthquakes, power outages, fires, explosions, terrorism, adverse weather conditions, hurricanes, labor disputes, public health epidemics or other catastrophic events or events outside of our control, we may be unable to fill customer orders and otherwise meet customer demand for our products. In addition, in some instances, we maintain inventory and own manufacturing equipment at locations owned and operated by third parties, limiting our ability to mitigate these risks. As a result, any of such events could have a material adverse effect on our business, financial condition, results of operations and cash flows.
We have in the past, and may in the future, experience higher costs and delays, with respect to obtaining raw materials and components and shipping finished goods to customers. Geopolitical conflicts, labor disputes and adverse weather events made worse by climate change, have all caused increases in shipping costs in recent years, and such conditions, or others affecting the global supply chain, may worsen. In the past, supply chain disruptions have resulted in higher costs for raw materials and other associated manufacturing costs, which have had an adverse impact on our profitability.
Interruptions in production, in particular at our manufacturing facilities, could increase our costs and reduce our sales. Any interruption in production capability could require us to make substantial capital expenditures to fill customer orders. While we maintain property damage insurance, as well as business interruption insurance to mitigate losses resulting from any production interruption or shutdown caused by an insured loss, any recovery under our insurance policies may not offset the lost sales or increased costs, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Tariffs and other trade restrictions could adversely affect our business and financial results, and we may not be able to raise prices sufficiently to offset increased costs caused by any such tariffs.
Our business is impacted by international or cross-border trade, including the import and export of products and goods into and out of the United States and trade tensions among nations. The U.S. government has implemented or proposed implementing significant tariffs on certain goods, including goods from China, and on all steel and aluminum imports, all of which could significantly increase our costs. We purchase key parts and components from suppliers in China and use steel and aluminum in many of our products. Relatedly, we sell our products globally, and if other countries enact retaliatory tariffs in response to U.S. trade policy, our sales into such countries may be impacted. While we historically have been able to pass along price increases to our consumers to help offset price increases we incur, we may not be able to continue to do so, thereby adversely impacting our margins as a result of any tariffs imposed on our operations.
The cost of raw materials could increase our cost of goods sold and cause our results of operations and financial condition to suffer.
Our principal raw materials are resins (ABS, PP, HDPE, PVC), metals (copper, steel, aluminum, titanium, ruthenium) and liner board (packaging), which are commodity materials. The prices of these commodity materials are a function of, among other things, manufacturing capacity and demand. While we have generally passed through raw material price increases to our consumers, we may not always be able to do so. We purchase most of our key parts and components primarily from large suppliers in the United States, Mexico and China. We believe that alternate sources of supply are available for all of our raw materials. However, we may not always have access to reliable sources of supply. Additionally, significant price fluctuations or shortages in raw materials needed for our products may increase our cost of goods sold and cause our results of operations and financial condition to suffer.
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Risks Related to Government Regulation
The nature of our business subjects us to compliance with, and liabilities under, employment, environmental, health, transportation, safety, and other governmental regulations.
We are subject to foreign, federal, state, and local laws and regulations relating to matters such as product labeling, weights and measures, zoning, land use, environmental protection, local fire codes and health and safety, including regulation by the USEPA, the Federal Communications Commission, the Consumer Product Safety Commission, OSHA, the National Fire Protection Agency, and the Federal Trade Commission. Most of these requirements govern the packaging, labeling, handling, transportation, storage, sale and use of our products. We and certain of our affiliates store certain types of hazardous materials and chemicals at various locations, and the storage of these items is strictly regulated by local fire codes. In addition, we sell UV, Ozone, and Salt Chlorinator and related products that are regulated under FIFRA, which primarily relate to testing, use, reporting, sale, distribution, licensing and market verification of these products. We are also subject to regulation passed by the DOE relating to the labeling, testing, reporting and certification of new and replacement pumps sold for swimming pools.
Failure to comply with these laws and regulations, or others that we may be subject to in the future, may result in investigations, the assessment of administrative, civil and criminal fines, damages, seizures, disgorgements, penalties, cessation of operations or the imposition of injunctive relief. These laws and regulations have changed substantially and rapidly in recent years, and we anticipate that there will be continuing changes.
The clear trend in environmental, health, transportation, and safety regulations is to place more restrictions and limitations on activities that impact the environment, such as the use and handling of hazardous materials and chemicals. Under certain environmental laws and regulations, we could be held strictly, jointly and severally liable for costs related to contamination at our currently or formerly owned, leased or operated properties or at third-party sites where we have sent wastes. We could also be liable to third parties for related damages, including property damage or personal injuries. Certain of our properties have had a history of industrial and other uses that have resulted in contamination. In addition, from time to time, we have been involved in investigation and remediation activities, and there can be no assurance that any future costs or liabilities relating to such activities will not be material.
Increasingly, strict restrictions and limitations have resulted in higher costs for us and it is possible that the costs of compliance with such laws and regulations will continue to increase. We cannot provide any assurance that we will not incur material costs to comply with such laws and regulations in the future.
Our handling of personal information could give rise to significant costs and liabilities, including as a result of governmental regulation, which may have a material adverse effect on our reputation, business, financial condition and results of operations.
We collect, use, store, transmit and otherwise process data that is sensitive to the Company and its employees, customers, dealers and suppliers. A variety of state, federal, and foreign laws, regulations and binding industry standards apply to the collection, use, retention, protection, disclosure, transfer and other processing of certain types of data, including the California Consumer Privacy Act (CCPA), the European Union’s General Data Protection Regulation (GDPR), Canada’s Personal Information Protection and Electronic Documents Act, and Australia’s Privacy Act. Furthermore, other states in the United States have enacted data privacy laws that have come into effect or will come into effect in the coming months and years. Some jurisdictions also are considering or have passed legislation requiring local storage and processing of data, or similar requirements, which could increase the cost and complexity of delivering our products and services. For example, the GDPR generally restricts the transfer of personal information, including employee and consumer information, to countries outside of the EEA without appropriate safeguards or other measures. If we cannot implement a valid compliance mechanism for cross-border privacy and security transfers, we may face increased exposure to regulatory actions, substantial fines and injunctions against processing or transferring personal information from Europe or elsewhere.
Many foreign data privacy regulations, including the GDPR, which has extraterritorial scope, are more stringent than laws and regulations in the United States. The GDPR has resulted and will continue to result in significantly greater compliance burdens and costs for companies with customers, users, or operations in the European Union. The GDPR’s requirements for using and sharing personal information may be operationally costly, and fines of up to 20 million Euros or up to 4% of the annual global revenues of the infringer, whichever is greater, can be imposed for
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violations. Similarly, the regulations of many U.S. states may impose obligations and potential liability on us. The CCPA, for example, requires covered companies to provide certain disclosures to California consumers and provide such consumers data protection and privacy rights, including the ability to opt-out of certain sales of personal information. The CCPA provides for civil penalties for violations enforceable by the California Attorney General, as well as a private right of action for certain data breaches that result in the loss of personal information.
We make public statements about our use and disclosure of personal information through our privacy policies, information provided on our website and press statements. The publication of our privacy policies and other statements that provide promises and assurances about data privacy and security can subject us to potential government or legal action if they are found to be deceptive, unfair or misrepresentative of our actual practices.
Obligations related to data privacy and security are quickly changing, becoming increasingly stringent, and creating regulatory uncertainty. Additionally, these obligations may be subject to differing applications and interpretations, which may be inconsistent or conflict among jurisdictions. Compliance with existing and forthcoming data privacy and security laws, regulations and industry standards can be costly and time consuming, and may require changes to our information technologies, systems and practices and to those of any third parties that process personal information on our behalf. If we or the third parties on which we rely fail, or are perceived to have failed, to address or comply with obligations related to data privacy and security, we could face significant consequences, including, but not limited to, proceedings against the company by governmental entities (for example, investigations, fines, penalties, audits, inspections) or other entities or individuals, additional reporting requirements or oversight bans, damage to our reputation and credibility, or inability to process data or operate in certain jurisdictions, any of which could have a negative impact on our business, reputation, revenues and profits.
Our employees, commercial partners, and vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.
We are exposed to the risk that our employees, commercial partners, and vendors may engage in fraudulent or illegal activity. Misconduct by these parties could include intentional, reckless, or negligent conduct that violates the rules of the applicable regulatory bodies, manufacturing standards, data privacy laws, or laws that require the complete and accurate reporting of financial information or data.
It is not always possible to identify and deter misconduct by our employees and other third parties, and the precautions we take to detect and prevent these activities may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with such laws or regulations. Whether or not we are successful in defending against any such actions or investigations, even if no misconduct occurred, we could incur substantial costs, which could have a material adverse effect on our business, financial condition and results of operations.
Violations of the U.S. Foreign Corrupt Practices Act (the “FCPA”), U.K. Bribery Act, and other anti-corruption laws outside the United States could have a material adverse effect on us.
The FCPA, U.K. Bribery Act and other anti-corruption laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to government officials or other persons for the purpose of obtaining or retaining business. Although the U.S. Government recently announced a 180-day cessation on FCPA enforcement actions, recent years have seen a substantial increase in anti-bribery law enforcement activity, including increased enforcement activity by non-U.S. regulators and increases in criminal and civil proceedings brought against companies and individuals. Our policies mandate compliance with these anti-bribery laws. We operate in many parts of the world that are recognized as having governmental and commercial corruption and in certain circumstances, strict compliance with anti-bribery laws may conflict with local customs and practices. Because many of our suppliers, customers and consumers are involved in infrastructure construction and energy production, they are often subject to increased scrutiny by regulators. We cannot provide any assurance that our internal control policies and procedures will always protect us from reckless or criminal acts committed by our employees or third-party intermediaries. Violations of these laws may require costly investigations, self-disclosure to government agencies and result in criminal or civil sanctions, which could disrupt our business and result in a material adverse effect on our reputation, business, financial condition, results of operations and cash flows.
Our failure to satisfy international trade compliance regulations, and changes in U.S. government sanctions, could have a material adverse effect on us.
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Our global operations require importing and exporting goods and technology across international borders on a regular basis. Certain of the products we manufacture are “dual use” products, which are products that may have both civil and military applications, or may otherwise be involved in weapons proliferation, and may be subject to more stringent export controls. From time to time, we obtain or receive information alleging improper activity in connection with imports or exports. Our policy mandates strict compliance with U.S. and non-U.S. trade laws applicable to our products, including investigating allegations of improper activity and, if warranted, reporting our findings to the relevant governmental authorities. However, these policies may not protect us from violations and, even when we are in strict compliance with law and our policies, we may suffer reputational damage if certain of our products are sold through various intermediaries to entities operating in sanctioned countries. Any improper actions could subject us to civil or criminal penalties, including material monetary fines, or other adverse actions including denial of import or export privileges, and could damage our reputation and business prospects.
Climate change and legal or regulatory responses thereto may have an adverse impact on our business and results of operations.
The impacts of climate change are highly unpredictable, and there is growing concern that a gradual increase in global average temperatures as a result of increased concentration of greenhouse gases in the atmosphere is causing, and will in the future cause, significant changes in weather patterns around the globe and an increase in the frequency and severity of natural disasters. Such climate change and the adverse weather conditions caused thereby may impair our production capabilities, disrupt our supply chain or impact demand for our products. The impacts of climate change present potential challenges to water-related products, such as degradation of water quality and changes in water conservation or efficiency requirements. Certain events may disrupt our operations or negatively affect the demand for our products in impacted regions, while other events may drive increased demand for our products if pools gain popularity in warming regions, which may create volatility in our business and results of operations.
Growing concern over climate change also may result in additional legal or regulatory requirements designed to reduce the output of greenhouse gases or mitigate the effects of climate change on the environment. For example, the European Union enacted the Corporate Sustainability Reporting Directive, which will require in-scope companies, including us, to provide detailed information about climate change impacts facing them and their own greenhouse gas emissions, among other items. Compliance with this law will likely be costly and time consuming. In addition, increased energy or compliance costs and expenses as a result of increased legal or regulatory requirements may cause disruptions in, or an increase in the costs associated with, the manufacturing and distribution of our products. The impacts of climate change and legal or regulatory initiatives to address climate change could have a long-term adverse impact on our business and results of operations.
There is increasing scrutiny from stakeholders on environmental, social, and other sustainability matters.
Investors, customers, policymakers, and other stakeholders are increasingly attuned to companies’ management of environmental, social, and other sustainability (“Sustainability”) matters, such as climate change and human capital. We engage in various initiatives to manage such matters and address stakeholder expectations; however, such initiatives can be costly and may not have the desired effect. For example, many of our Sustainability initiatives leverage methodologies, standards, and data that are complex, at times reliant on third-parties, and continue to evolve. Moreover, stakeholders have different, and at times conflicting, expectations, and proponents and opponents of varying topics are increasingly resorting to activism, including litigation, to advance their perspectives. Addressing stakeholder expectations on Sustainability matters, including evolving legal requirements, entails costs, and any failure to successfully navigate such expectations, as well as evolving interpretations of any existing laws or regulations, may result in reputational harm, loss of customers or employees, regulatory or investor engagement, or other adverse impacts to our business.
Risks Related to Intellectual Property Matters
If we are unable to adequately obtain and maintain our intellectual property and proprietary rights or if we are accused of infringing on, misappropriating or otherwise violating the intellectual property of others, our competitive position could be harmed or we could be required to incur significant expenses to enforce or defend our rights.
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Patents, trademarks and other intellectual property rights are important to our business, and our success depends in part on our ability to obtain and maintain patent and trademark protection in the United States and other countries. As of December 31, 2024, we held approximately 220 issued U.S. patents and 247 issued foreign patents relating to our technologies, such as pumps, filters, heaters, drains and white goods, robotic cleaners, in-floor cleaning systems, lights, automation and controls, sanitization, valves and flow control, and IoT and other technologies, as well as approximately 143 U.S. trademark registrations and 708 foreign trademark registrations covering our marks, brands and products. As of December 31, 2024, we also held approximately 39 pending U.S. patent applications, 53 pending foreign patent applications, 6 pending U.S. trademark applications and 31 pending foreign trademark applications. See “Business—Intellectual Property.” In addition, we have in-licensed patents and patent applications to certain technologies incorporated in our products.
Pending and future patent applications may not result in patents being issued that protect our products or which effectively prevent others from commercializing competitive technologies and products. Moreover, the coverage claimed in a patent application can be significantly reduced before the patent is issued. Even once issued, the scope, validity, enforceability and commercial value of patent rights are uncertain. This uncertainty has been exacerbated by recent actions by the U.S. Congress, the U.S. federal courts and the USPTO, modifying and in some instances weakening the laws and regulations governing patents. Further, any patents that we hold or in-license may be challenged, narrowed, circumvented or invalidated by third parties, and this could allow others to commercialize our technology or products and compete directly with us or result in our inability to manufacture or commercialize products without infringing third-party rights. Even if we obtain intellectual property protection for our products and technology, it may not preclude competitors from developing products similar to ours or from challenging our names, brands or products. In addition, participants in our markets may use challenges to intellectual property as a means to compete.
If we do not adequately maintain our intellectual property, we may lose our rights. For example, we are required to pay various periodic and renewal fees on registered intellectual property, and our failure to do so could result in the affected intellectual property being partially or completely invalidated. If this were to occur, our competitors may be able to use our technologies, names, brands or the goodwill we have acquired in the marketplace and erode or negate any competitive advantage we may have.
Competitors have in the past, and may in the future, infringe our intellectual property. To defend against such actions can be expensive and time-consuming, and an adverse result in any proceeding could put our intellectual property rights at risk of being invalidated or narrowed. In addition, it may be difficult or impossible to obtain evidence of infringement in a third party’s product. We may need to spend significant resources monitoring, enforcing and defending our intellectual property rights. As discussed above, competitors who infringe on our intellectual property or otherwise create products that mimic ours may supplant demand for our products and otherwise damage our business. We may not prevail in any disputes that we initiate and the damages or other remedies awarded if we were to prevail may not be commercially meaningful. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of dispute.
From time to time, we have been notified that we may be infringing certain patents or other intellectual property rights of third parties. The defense costs and settlements for patent infringement lawsuits are not covered by insurance. If we do not prevail in any dispute regarding intellectual property, in addition to any damages we might have to pay, we could be required to cease the infringing activity or obtain a license requiring us to make royalty payments. It is possible that a required license may not be available to us on commercially acceptable terms, if at all, potentially precluding us from making use of affected products.
If we fail to successfully enforce our intellectual property rights or register new patents, our competitive position could suffer, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
If our trademarks and trade names are not adequately protected, we may not be able to build name recognition in our markets of interest, and third parties could assert trademark infringement claims against us.
If our trademarks and trade names are not successfully registered and adequately protected, we may not be able to build name recognition in our target markets and our business may be adversely affected. Competitors or other
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third parties have in the past, and may in the future, adopt trade names or trademarks similar to ours, thereby impeding our ability to build brand identity, possibly leading to market confusion and potentially requiring us to pursue legal action. In addition, there could be potential trade name or trademark infringement claims brought by owners of other registered trademarks or trademarks that incorporate variations of our unregistered trademarks or trade names. Our efforts to enforce or protect our proprietary rights related to trademarks, domain names or other similar intellectual property may be ineffective and could result in substantial costs, diversion of resources and the payment by us of money damages or injunctive relief preventing us from using certain of such intellectual property, each of which could adversely impact our financial condition or results of operations.
We rely on access to intellectual property owned by third parties, so our rights to develop and commercialize certain products are subject to the terms and conditions of licenses granted to us by others.
Some of our products incorporate intellectual property owned by third parties and as a result, we are reliant on licenses from such third parties. For example, we license patents to certain technologies used in our pool cleaner and lighting products. These licenses may not provide us rights (whether exclusive or non-exclusive) to use such intellectual property for all purposes or in all territories that we may wish to commercialize our products, now and in the future. As a result, others may also include such intellectual property in their products, which may weaken any competitive advantage that our licensed intellectual property may provide us. In addition, if our licensors fail to prosecute, maintain, enforce, and defend such intellectual property or otherwise lose their rights therein, the rights we have licensed may be reduced or eliminated, and our right to develop and commercialize any of our products that are the subject of such licensed rights could be adversely affected. Furthermore, disputes with our licensors, or future negotiations with respect to such licenses, may result in the termination or modification of such license agreements, which could eliminate our ability to exclusively develop and commercialize products covered by these license agreements or at all.
We may be subject to claims that our employees, consultants, or advisors have wrongfully used or disclosed alleged trade secrets of their current or former employers or claims asserting ownership of what we regard as our own intellectual property.
Third parties may in the future make claims challenging the inventorship or ownership of our intellectual property. For example, although we take measures to prevent our employees, consultants and advisors from using the proprietary information or know-how of others in their work for us, we may be subject to claims that we or these individuals have used or disclosed intellectual property of others. In addition, we may face claims by third parties that our agreements with employees obligating them to assign intellectual property to us are invalid, which could result in ownership disputes regarding intellectual property we have developed or will develop and interfere with our ability to capture the commercial value of such intellectual property. Litigation may be necessary to resolve an ownership dispute, and if we are not successful, we may be precluded from using certain intellectual property or may lose our exclusive rights in such intellectual property. Either outcome could harm our business and competitive position.
We may not be able to effectively enforce our intellectual property rights throughout the world.
The laws of some foreign countries do not afford intellectual property protection to the same extent as the laws of the United States, and many companies have encountered significant problems in protecting and defending intellectual property rights in certain foreign jurisdictions. For example, many foreign countries have compulsory licensing laws under which a patent owner must grant licenses to third parties. Consequently, we may not be able to prevent third parties from utilizing our patented technologies outside the United States or exporting otherwise infringing products to territories where we have patent protection and competing with our products.
Risks Related to Our Indebtedness
Our indebtedness could adversely affect our financial condition.
As of December 31, 2024, the Company’s indebtedness totaled approximately $973.9 million, including $965.0 million under our first lien term loan facility, $2.4 million of finance lease obligations and $6.5 million of other long-term debt. In addition, our asset-based lending facility (the “ABL Facility”) permits us to borrow up to $425.0 million, or $475.0 million in certain seasons of year, subject to compliance with certain financial covenants. Draws are subject to a borrowing base calculation which may lower the amount available to borrow in any given
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month. As of December 31, 2024, we had no outstanding borrowings under our ABL Facility and approximately $163.4 million of undrawn lines of credit available under the ABL Facility.
Our substantial indebtedness, combined with our other financial obligations and contractual commitments, could have important consequences, including:
•requiring us to dedicate a substantial portion of our cash flows from operations to payments on our indebtedness, thereby reducing funds available for working capital, capital expenditures, acquisitions, selling and marketing efforts, product development and other purposes;
•increasing our vulnerability to adverse economic and industry conditions, which could place us at a competitive disadvantage compared to our competitors that have relatively less indebtedness;
•increasing our exposure to rising interest rates, as certain of our borrowings are at variable interest rates;
•limiting our flexibility in planning for, or reacting to, changes in our business and the industries in which we operate;
•restricting us from making strategic acquisitions or causing us to make non-strategic divestitures; and
•limiting our ability to borrow additional funds, or to dispose of assets to raise funds, if needed, for working capital, capital expenditures, acquisitions, product development and other corporate purposes.
Although the terms of the agreements governing our indebtedness contain restrictions on the incurrence of additional indebtedness, such restrictions are subject to a number of important exceptions and indebtedness incurred in compliance with such restrictions could be substantial. If we and our restricted subsidiaries incur significant additional indebtedness, including under the ABL Facility, the related risks that we face could increase.
Servicing our debt requires a significant amount of cash. Our ability to generate sufficient cash depends on numerous factors beyond our control, and we may be unable to generate sufficient cash flow to service our debt obligations.
Our business may not generate sufficient cash flow from operating activities to service our debt obligations. Moreover, a significant portion of our indebtedness is subject to variable interest rates. While we enter into interest rate swap agreements in an effort to mitigate the risk of variable interest rates, we may still experience higher debt service costs if interest rates rise. Based on our December 31, 2024 variable rate loan balances, an increase or decrease of 1% in the effective interest rate would have caused an increase or decrease in interest cost of approximately $3.7 million, net of interest rate swap settlements. Our ability to make payments on and to refinance our debt and to fund planned capital expenditures depends on our ability to generate cash in the future. To some extent, this is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.
If we are unable to generate sufficient cash flow from operations to service our debt and meet our other commitments, we may need to refinance all or a portion of our debt, sell material assets or operations, delay capital expenditures or raise additional debt or equity capital. We may not be able to effect any of these actions on a timely basis, on commercially reasonable terms or at all, and these actions may not be sufficient to meet our capital requirements. In addition, the terms of our existing or future debt agreements may restrict us from pursuing any of these alternatives. Moreover, because a significant portion of our indebtedness bears interest at variable rates, increases in market interest rates could require a greater portion of our cash flow to be used to pay interest, which could further hinder our operations.
The terms of our indebtedness restrict our current and future operations, particularly our ability to respond to change or to take certain actions.
The agreements governing our outstanding indebtedness contain several restrictive covenants that impose operating and financial restrictions on us and may limit our ability to engage in acts that may be in our long-term best interest, including, among other things, restrictions on our ability to:
•incur additional indebtedness;
•create liens on assets;
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•declare or pay certain dividends and other distributions;
•make certain investments, loans, guarantees or advances;
•consolidate, amalgamate, merge, sell or otherwise dispose of all or substantially all of our assets; and
•enter into certain transactions with our affiliates;
In addition, the ABL Facility contains a financial covenant requiring us to maintain a specified fixed charge coverage ratio during the specified periods described therein. These restrictions could impede our ability to operate our business by, among other things, limiting our ability to take advantage of financing, merger and acquisition and other corporate opportunities. See Note 9. “Long-Term Debt” of Notes to Consolidated Financial Statements in this Form 10-K.
Various risks, uncertainties and events beyond our control could affect our ability to comply with these covenants and maintain these financial tests and ratios. A breach of such covenants could result in an event of default unless we obtain a waiver to avoid such default. If we are unable to obtain a waiver, such a default may allow our creditors to accelerate the related debt and may result in the acceleration of, or default under, any other debt to which a cross-acceleration or cross-default provision applies. In the event our lenders accelerate the repayment of our borrowings, we and our subsidiaries may not have sufficient assets to repay that indebtedness.
Because our operations are conducted through our subsidiaries, we are dependent on the receipt of distributions and dividends or other payments from our subsidiaries for cash to fund our operations and expenses, including to make future dividend payments, if any.
Our operations are conducted through our subsidiaries. As a result, our ability to make future dividend payments, if any, is dependent on the earnings of our subsidiaries and the payment of those earnings to us in the form of dividends, loans or advances and through repayment of loans or advances from us. Payments to us by our subsidiaries will be contingent upon our subsidiaries’ earnings and other business considerations and may be subject to statutory or contractual restrictions. We do not currently expect to declare or pay dividends on our common stock for the foreseeable future. However, to the extent that we determine in the future to pay dividends on our common stock, the ability of Hayward Holdings, Inc.’s operating subsidiaries to pay dividends is restricted by the credit agreements governing our indebtedness.
Despite our debt, we may still be able to incur significantly more debt, which would increase the risks described herein. We may also require additional capital, which may not be available on acceptable terms, if at all.
Despite our current indebtedness levels, we may increase our levels of debt in the future to finance our operations or in connection with acquisitions. The agreements relating to our indebtedness limit but do not prohibit our ability to incur additional debt. If we increase our total indebtedness, our debt service obligations, and our exposure to the risks described above, will increase. Our ABL Facility permits us to borrow up to $425.0 million, or $475.0 million in certain seasons of the year, subject to compliance with certain financial covenants. Draws are subject to a borrowing base calculation which may lower the amount available to borrow in any given month. As of December 31, 2024, we had approximately $163.4 million of undrawn lines of credit available under the ABL Facility. We regularly consider market conditions and our ability to incur indebtedness to either refinance existing indebtedness or for working capital.
We may require more financing to fund our operations or finance acquisitions. However, financing may not be available to us on acceptable terms, if at all. If we incur additional debt or raise equity, the terms of the debt or capital shares issued may give the holders rights, preferences and privileges senior to those of holders of our ordinary shares, particularly in the event of liquidation. The terms of the debt may also impose additional and more stringent restrictions on our operations than we currently have. If we raise funds through the issuance of additional equity, the percentage ownership of existing shareholders in our company would decline. If we are unable to raise additional capital when needed, our financial condition could be adversely affected. Unfavorable changes in the ratings that rating agencies assign to our debt may ultimately negatively impact our access to the debt capital markets and increase the costs we incur to borrow funds.
Risks Related to our Corporate Structure
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Provisions in our charter documents and Delaware law may deter takeover efforts that stockholders may believe to be beneficial to stockholder value.
Provisions in our certificate of incorporation and bylaws and Delaware law could make it harder for a third party to acquire us, even if doing so might be beneficial to our stockholders, and could also make it difficult for stockholders to elect directors that are not nominated by the current members of our Board of Directors or take other corporate actions, including effecting changes in our management. These provisions include a classified board of directors and the ability of our Board of Directors to issue preferred stock without stockholder approval that could be used to dilute a potential hostile acquiror. Our certificate of incorporation also imposes certain restrictions on mergers and other business combinations between us and any holder of 15% or more of our outstanding common stock other than certain specified entities. As a result, stockholders may lose their ability to sell their stock for a price in excess of the prevailing market price due to these protective measures, and efforts by stockholders to change the direction or management of the company may be unsuccessful.
Our certificate of incorporation, as currently amended, designates specific courts as the sole and exclusive forum for certain claims or causes of action that may be brought by our stockholders, which could discourage lawsuits against us and our directors and officers.
Our certificate of incorporation, as currently amended (our “certificate of incorporation”), provides that, subject to limited exceptions, the Court of Chancery of the State of Delaware is, to the fullest extent permitted by applicable law, the sole and exclusive forum for certain types of claims, including any derivative claim brought in the right of the Company, any claim asserting a breach of a fiduciary duty to the Company or the Company’s stockholders owed by any current or former director, officer or other employee or stockholder of the Company, any claim against the Company arising pursuant to any provision of the Delaware General Corporation Law, our certificate of incorporation or our amended and restated bylaws, any claim to interpret, apply, enforce or determine the validity of our certificate of incorporation or our amended and restated bylaws, any claim against the Company governed by the internal affairs doctrine, and any other claim, not subject to exclusive federal jurisdiction and not asserting a cause of action arising under the Securities Act of 1933, as amended. This provision does not apply to claims brought to enforce a duty or liability created by the Exchange Act. Our certificate of incorporation further provides that the federal district courts of the United States of America are the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act.
The choice of forum provisions contained in our certificate of incorporation may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, other employees or stockholders, which may discourage lawsuits with respect to such claims. While the Delaware courts have determined that such choice of forum provisions are facially valid, it is possible that a court of law in another jurisdiction could rule that the choice of forum provisions contained in our certificate of incorporation are inapplicable or unenforceable if they are challenged in a proceeding or otherwise, which could cause us to incur additional costs associated with resolving such action in other jurisdictions.
Risks Related to Ownership of our Common Stock
Future sales of our common stock, or the perception in the public markets that these sales may occur, may depress the price of common stock.
In the future, we may issue additional shares of our common stock. Issuing additional shares of our common stock or other equity securities or securities convertible into equity may dilute the economic and voting rights of our existing stockholders and reduce the market price of our common stock.
As of December 31, 2024, we had 215,778,520 shares of common stock outstanding and 505,555,111 shares of common stock issuable upon potential exchanges and/or conversions. We have filed a registration statement on Form S-8 under the Securities Act registering 30,639,900 shares of our common stock reserved for issuance under the Second Amended and Restated 2017 Equity Incentive Plan, the 2021 Equity Incentive Plan and the 2021 Employee Stock Purchase Plan and a shelf registration statement on Form S-3 under the Securities Act pursuant to which certain stockholders, including investment funds affiliated with certain of our large stockholders, may sell shares from time to time. Additional sales of a substantial number of our shares of common stock in the public market, or the perception that sales could occur, could have a material adverse effect on the price of our common stock and could impair our ability to raise capital through the sale of additional stock.
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The price of our common stock has been, and may in the future be, volatile and your investment in our common stock could suffer a decline in value.
The market price for our common stock has been, and may in the future be, volatile and could fluctuate significantly in response to a number of factors, most of which we cannot control. These factors include, among others, factors described in these risk factors; guidance, if any, that we provide to the public, any changes in such guidance or our failure to meet such guidance; changes in financial estimates or ratings by any securities analysts who follow our common stock, our failure to meet such estimates or failure of those analysts to initiate or maintain coverage of our common stock; and price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole. In the past, stockholders have instituted securities class action litigation following periods of market volatility, and as discussed under Note 14. “Commitments and Contingencies” of Notes to Consolidated Financial Statements in this Form 10-K, we are currently the subject of a securities class action lawsuit. We may incur substantial costs and our resources and the attention of management could be diverted from our business as a result of this, or any similar, lawsuit.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 1C. CYBERSECURITY
Our Board of Directors (the “Board”) recognizes the importance of cybersecurity in today’s digital landscape. We are committed to safeguarding our information systems and data assets. This enables us to maintain the trust and confidence of our customers, clients, business partners and employees. The Board is actively involved in overseeing our risk management program, and cybersecurity represents an important component of our overall approach to risk management. Our cybersecurity processes are based on recognized frameworks established by the National Institute of Standards and Technology, the International Organization for Standardization and other applicable industry standards. We seek to address cybersecurity risks through a comprehensive, cross-functional approach that is focused on preserving the confidentiality, security and availability of the information we collect and store, including information regarding our customers, suppliers and employees. As part of our risk management program, we actively work to identify, prevent and mitigate cybersecurity threats, and take steps to be prepared to effectively respond to cybersecurity incidents when they occur.
Risk Management and Strategy
•Maintaining a comprehensive International Organization for Standardization-based Information Security Policy. The Information Security Policy is reviewed and certified by our Vice President of Information Technology.
•Inclusion of Sarbanes-Oxley Information Technology General Controls in our Risk and Control Matrix, which are routinely tested by our Internal Audit team.
•Regular risk and vulnerability assessments to identify and address potential weaknesses in our systems. We primarily utilize in-house resources for assessing, identifying and managing cybersecurity threats.
•Engaging external cyber security firms, as needed, leveraging their expertise as part of our ongoing effort to evaluate and enhance our cybersecurity program. They help with cybersecurity defense capabilities and recommending steps to mitigate threats, enhance our cybersecurity posture and meet our evolving needs.
•Routine screening of potential and existing third-party vendors to assess their cybersecurity posture and the incremental risk that they may pose to us. Third-party vendor access to critical information systems is subject to regular review and assessment by management, and management evaluates the cybersecurity risks and safeguards of potential third-party vendors prior to engaging such vendors.
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•Mandatory employee cybersecurity training to equip our employees with the tools and knowledge to enhance the cybersecurity posture across the organization.
•Continuous monitoring of networks and systems for suspicious activity, leveraging firewalls, intrusion detection and prevention systems, endpoint anti-virus and anti-malware solutions, and a privileged access management system.
•A comprehensive incident response plan, which has been developed to enhance the Company’s ability to respond to, and recover from, cybersecurity incidents.
We engage in the periodic assessment and testing of our processes that are designed to address cybersecurity threats and incidents, including with respect to third-party vendors. The results of such assessments are reported to management and the Board. Adjustments to our cybersecurity processes are made as necessary.
Governance
The Audit Committee is primarily responsible for overseeing our management of risks arising from cybersecurity threats. The Audit Committee receives quarterly presentations on cybersecurity risks, addressing matters such as evolving standards; vulnerability assessments, including results of third-party penetration testing; audits of our cybersecurity IT controls; and independent reviews of our cybersecurity processes. Management and the Board also receive prompt and timely information regarding any significant or potentially material cybersecurity incident and our remediation efforts.
ITEM 2. PROPERTIES
The Company’s corporate headquarters is located on leased premises in Charlotte, North Carolina. We own four of our seven global manufacturing facilities and one of our eight global distribution facilities. All the other facilities are leased, except for two locations operated by third-party logistics providers, which are provided under service agreements.
Most of our leases contain renewal options, some of which involve rent increases. In addition to minimum rental payments, which are set at competitive rates, certain leases require reimbursement for taxes, maintenance and insurance. We do not believe that any single lease is material to our operations.
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The following is a summary of our principal properties as of December 31, 2024, including manufacturing, distribution, warehouse, and corporate offices:
| No. of Facilities | ||||||||||||||||||||||||||
| Location | Manufacturing | Distribution | Warehouse | Corporate Headquarters | ||||||||||||||||||||||
| North America | ||||||||||||||||||||||||||
| Arizona | 0 | 1 | 0 | 0 | ||||||||||||||||||||||
| Georgia | 1 | 0 | 0 | 0 | ||||||||||||||||||||||
| North Carolina | 1 | 1 | 1 | 1 | ||||||||||||||||||||||
| Rhode Island | 1 | 0 | 1 | 0 | ||||||||||||||||||||||
| Tennessee | 1 | 0 | 2 | 0 | ||||||||||||||||||||||
| Canada | 0 | 1 | 0 | 0 | ||||||||||||||||||||||
| Europe and Rest of World | ||||||||||||||||||||||||||
| Australia | 0 | 4 | 0 | 0 | ||||||||||||||||||||||
| China | 1 | 0 | 0 | 0 | ||||||||||||||||||||||
| France | 0 | 1 | 0 | 0 | ||||||||||||||||||||||
| Spain | 2 | 0 | 2 | 0 | ||||||||||||||||||||||
We believe that our facilities as well as the related machinery and equipment, are well maintained and suitable for their purpose and are adequate to support our business.
ITEM 3. LEGAL PROCEEDINGS
In addition to the matters discussed in this report and in the notes to our audited consolidated financial statements, we are from time to time subject to, and are presently involved in, other litigation and legal proceedings arising in the ordinary course of business. These proceedings could relate to commercial or contractual disputes with suppliers, customers or parties to acquisitions and divestitures, intellectual property matters, product liability, the use or installation of our products, consumer matters, employment and labor matters, and environmental, safety and health matters, including claims based on alleged exposure to asbestos-containing product components. Where appropriate, these matters have been submitted to the Company’s insurance carriers. We believe that the outcome of such other litigation and legal proceedings will not have a material adverse effect on our business, financial condition, results of operations and cash flows.
On August 2, 2023, a securities class action complaint was filed in the United States District Court for the District of New Jersey against the Company and certain of our current directors and officers (Kevin Holleran and Eifion Jones) and MSD Partners and CCMP Capital Advisors, LP on behalf of a putative class of stockholders who acquired shares of our common stock between March 2, 2022 and July 27, 2022. That action is captioned City of Southfield Fire and Police Retirement System vs. Hayward Holdings, Inc., et al., 2:23-cv-04146-WJM-ESK (D.N.J.) (“City of Southfield”). On September 28, 2023, a second, related securities class action complaint was filed in the United States District Court for the District of New Jersey against the Company and certain of our current directors and officers (Kevin Holleran and Eifion Jones) and MSD Partners and CCMP Capital Advisors, LP on behalf of a putative class of stockholders who acquired shares of our common stock between October 27, 2021 and July 28, 2022. That action is captioned Erie County Employees’ Retirement System vs. Hayward Holdings, Inc., et al., 2:23-cv-04146-WJM-ESK (D.N.J.) (“Erie County”). On December 19, 2023, the Court issued a ruling consolidating the two securities class actions (City of Southfield and Erie County) under the City of Southfield docket (the “Securities Class Action”) and appointing a lead plaintiff. In a consolidated class action complaint filed March 4, 2024, the Securities Class Action alleged on behalf of a putative class of stockholders who acquired shares of our common stock between October 27, 2021 and July 28, 2022, among other things, that the Company, Kevin Holleran, and Eifion Jones violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by, among other things, making materially false or misleading statements regarding inventory, growth, and demand trends and the Company’s financial projections for 2022. On October 2, 2024, the Court issued an Opinion and Order dismissing
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the consolidated class action complaint and granting the lead plaintiff leave to file an amended complaint within 30 days. On November 1, 2024, lead plaintiff filed a consolidated amended class action complaint making substantially similar allegations as in the consolidated class action complaint, but adding additional defendants affiliated with MSD Partners and CCMP Capital Advisors, LP. On December 18, 2024, the Company and all other defendants moved to dismiss the consolidated amended class action complaint. Under the current schedule, briefing on the motion to dismiss will be complete on March 4, 2025. The Securities Class Action seeks unspecified monetary damages on behalf of a putative class and an award of costs and expenses, including reasonable attorneys’ fees.
On November 27, 2023, a shareholder derivative lawsuit was filed in the United States District Court for the District of New Jersey against current and past officers and directors of the Company captioned Heicklen v. Holleran, et al., 2:23-cv-22649 (D.N.J.) (the “Derivative Action”). The Derivative Action alleges breaches of fiduciary duties to Company stockholders, aiding and abetting breaches of fiduciary duties, unjust enrichment, corporate waste, and violations of Section 10(b) of the Securities Exchange Act of 1934 in connection with the claims in the Securities Class Action. The Derivative Action seeks recovery of unspecified damages and attorney’s fees and costs, as well as improvements to the Company’s corporate governance and internal procedures. The Derivative Action has been stayed pending final decision on the motion to dismiss filed in the Securities Class Action.
We dispute the allegations of wrongdoing in the Securities Class Action and the Derivative Action and intend to vigorously defend ourselves in these matters. In view of the complexity and ongoing and uncertain nature of the outstanding proceedings and inquiries, at this time we are unable to estimate a reasonably possible financial loss or range of financial loss, if any, that we may incur to resolve or settle the Securities Class Action and the Derivative Action.
ITEM 4. MINE SAFETY DISCLOSURES
None.
INFORMATION ABOUT OUR EXECUTIVE OFFICERS
Information concerning our executive officers is set forth below:
| Name | Age | Position | ||||||||||||
| Kevin Holleran | 56 | President, Chief Executive Officer and Director | ||||||||||||
| Eifion Jones | 57 | Senior Vice President, Chief Financial Officer | ||||||||||||
| Susan Canning | 55 | Senior Vice President, Chief Legal Officer and Corporate Secretary | ||||||||||||
| John Collins | 48 | Senior Vice President, Chief Commercial Officer | ||||||||||||
| Raymond Lewis | 60 | Senior Vice President, Chief Human Resources Officer | ||||||||||||
| Eric Sejourne | 58 | Senior Vice President, Chief Global Operations Officer | ||||||||||||
| Kevin Gallagher | 54 | Vice President, Chief Engineering Officer | ||||||||||||
| Darío Vicario | 58 | Vice President, General Manager, Europe & Rest of World | ||||||||||||
Kevin Holleran has served as President, Chief Executive Officer, and Director of the Company since August 2019. Prior to joining Hayward, beginning in 2017, Mr. Holleran served as President and Chief Executive Officer of the Industrial Segment within Textron, Inc. (“Textron”). Textron’s Industrial Segment is composed of Textron Specialized Vehicles, Inc. (“Textron Specialized Vehicles”), a leading global manufacturer of purpose-built vehicles and equipment for a variety of commercial and recreational applications across a number of brands, as well as, Kautex, a tier one automotive supplier of fuel systems, selective catalytic reduction systems and cleaning solutions. Prior to 2017, Mr. Holleran served for 10 years as the President and Chief Executive Officer of Textron Specialized Vehicles, Inc., during which time he grew revenue and profitability substantially through organic growth and acquisitions. Prior to his time at Textron, Mr. Holleran held several management positions at Ingersoll Rand and
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Terex Corporation across the sales, marketing, and product management functions. He holds an MBA from Wake Forest University and an undergraduate degree from Cornell University.
Eifion Jones has served as Senior Vice President, Chief Financial Officer of the Company since April 2020. From 2011 until he joined Hayward, Mr. Jones served as the Chief Financial Officer of Cornerstone Holdings Inc. (“Cornerstone”), a portfolio company of private equity firms HIG Capital and, later, Littlejohn & Co. LLC. In this role he oversaw the governance, performance, and financial management of Cornerstone’s U.S. and European companies, including leading all acquisition evaluation, diligence and integration efforts. Prior to Cornerstone, Mr. Jones spent 21 years with Akzo Nobel N.V., where he held financial and managerial leadership roles in the Americas and Europe, including SVP and General Manager for their Americas O&G protective coatings business and prior to that, SVP and CFO for their Americas industrial coatings business. He began his financial career with Courtaulds Plc in their European fibers businesses prior to its sale to Akzo Nobel N.V.
Susan Canning has served as Senior Vice President, Chief Legal Officer and Corporate Secretary since joining the Company in June 2021. From 2018, until she joined Hayward, Ms. Canning served as Senior Vice President, General Counsel and Corporate Secretary at GNC and was responsible for legal, compliance, ethics and quality matters. Prior to that, Ms. Canning held roles on the Legal and Compliance team at Kellogg Company, including three years, based in Manchester, UK, as Kellogg Europe’s Regional General Counsel and seven years in Kellogg’s global headquarters counseling on securities, governance, investor relations, and corporate development matters. Additionally, from 1991 to 2008, Ms. Canning served in a variety of legal roles with JPMorgan Chase & Co., focused on mutual funds and counseling SEC-registered investment advisors.
John Collins has served as Senior Vice President and Chief Commercial Officer since December 2023. Previously he served as the Company’s Senior Vice President, Chief Supply Chain Officer. Prior to joining Hayward, Mr. Collins spent twenty years at Textron Specialized Vehicles, where he served in roles of progressively increasing responsibility, and most recently as the Senior Vice President and General Manager of E-Z-GO. In this role, from 2020 to 2022, Mr. Collins led product management and global sales for Textron’s E-Z-GO and Cushman vehicle lines. Prior to 2020, Mr. Collins served in several leadership roles with Textron, including plant manager; director of sourcing; Vice President, Integrated Supply Chain; Vice President, Parts & Services and Vice President, Consumer Business.
Raymond Lewis has served as Senior Vice President, Chief Human Resources Officer of the Company since May 2024. From February 2019 until he joined Hayward, Mr. Lewis served as Vice President, Human Resources, Residential HVAC & Supply at Trane Technologies. From 2016 to 2018, Mr. Lewis served as Executive Vice President and Chief HR Officer of Catalina Marketing, a digital media portfolio company of private equity firm Berkshire Partners, LLC. Prior to Catalina Marketing, Mr. Lewis served as Senior Vice President and Chief HR Officer at Allegion, the security business spin off from Ingersoll Rand, where he had spent the prior six years as Vice President, HR, for several Ingersoll Rand businesses, including a year as Chief People Officer for Doosan, a divestiture of Ingersoll Rand, overseeing the U.S. and the Republic of Korea. Mr. Lewis served in the U.S. Army as a commissioned officer and helicopter test pilot, before joining GE Corporation in 1996, where he began his human resources career.
Eric Sejourne has served as Senior Vice President and Chief Global Operations Officer of the Company since April 2024. From 2010 until he joined Hayward, Mr. Sejourne held various leadership positions at Assa Abloy, a lock, door, gate and entrance automation manufacturing company. His roles included President of the Access & Egress Hardware Group - Americas, Chief Operations Officer - Americas and President of the Architectural Accessories and Door Control Group. From 2008 until joining Assa Abloy, Mr. Sejourne held the position of Vice President of Lean & Operational Excellence at Watts Water Technology, overseeing operations across North America, Asia and Europe. Prior to Watts Water Technology, he held positions of increasing seniority, including General Manager of Operations for the Northeast region, of Allegion, the security business spin-off from Ingersoll Rand, where he began his career in engineering and manufacturing.
Kevin Gallagher has served as global Vice President, Chief Engineering Officer of the Company since May 2024. From 2021 until he joined Hayward, Mr. Gallagher served as Chief Technology Officer, Personal Protective Equipment (PPE) at Honeywell. From 2016 to 2021, Mr. Gallagher was Vice President of Global Engineering and Quality at InVue, an international merchandising, security, and IoT solutions company, where he led product development, innovation, quality and program management. Beginning in 2007, he served as Vice President of Global Engineering and Quality at Dorman Products, Inc., a manufacturer of aftermarket automotive products. Mr.
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Gallagher began his career in the automotive industry at Chrysler Corporation, where during his 13-year tenure he held engineering roles of increasing responsibility.
Darío Vicario has served as Vice President, General Manager, Europe & Rest of World of the Company since May 2024, based in Spain. From 2022 until he joined Hayward, Mr. Vicario served as CEO of Azkoyen Group, a multinational vending, payment and security technology company, as well as non-executive Board member. Prior to Azkoven, from 2018 to 2021, he served as CEO of Thyssenkrupp Elevator for Iberia and Africa, where he oversaw the company’s digitalization and investment in Internet of Things (IoT) solutions. From 2012 through 2017, Mr. Vicario served as Managing Director South Europe for Gunnebo, a security integrations and payment technology company. Prior to that, he served as General Manager for the tire manufacturer Goodyear in Iberia and the Scandinavian region. As an industrial engineer, Mr. Vicario began his career at Bridgestone Europe, a global leader in premium tires and sustainable mobility solutions.
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| Part II | ||
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock is publicly traded on the New York Stock Exchange (“NYSE”) under the symbol “HAYW.” As of February 25, 2025, there were 370 holders of record of our common stock. The actual number of stockholders is greater than the number of record holders, and includes stockholders who are beneficial owners, whose shares are held of record by banks, brokers and other financial institutions.
We do not currently expect to declare or pay dividends on our common stock for the foreseeable future.
On July 26, 2022, the Board renewed the initial authorization of its share repurchase program (the “Share Repurchase Program”) such that the Company is authorized commencing at that time to repurchase from time to time up to an aggregate of $450 million of our common stock with such authority expiring on July 26, 2025. Under the repurchase program, we may purchase shares of our common stock on a discretionary basis from time to time. The Share Repurchase Program is primarily expected to be conducted through privately negotiated transactions, including with certain of our large stockholders, as well as through open market repurchases or other means, including through Rule 10b-18 trading plans or through the use of other techniques such as accelerated share repurchases. The actual timing, number and nature of shares repurchased will depend on a variety of factors, including stock price, trading volume, and general business and market conditions. The Share Repurchase Program does not require the Company to acquire any number of shares in any specific period or at all and may be amended, suspended or discontinued at any time at our discretion.
The following table sets forth all purchases made by us or on our behalf or any “affiliated purchaser,” as defined in Rule 10b-18(a)(3) under the Exchange Act, of shares of our common stock during each month in the quarter ended December 31, 2024.
| Period | (a) Total Number of Shares Purchased | (b) Average Price Paid per Share | (c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Program (1) | (d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Program | ||||||||||||||||||||||
| September 29 – November 2, 2024 | — | — | — | $ | 400,000,000 | |||||||||||||||||||||
| November 3 – November 30, 2024 | — | — | — | 400,000,000 | ||||||||||||||||||||||
| December 1 – December 31, 2024 | — | — | — | 400,000,000 | ||||||||||||||||||||||
| Total | — | — | — | $ | 400,000,000 | |||||||||||||||||||||
(1) On July 26, 2022, the Board authorized the repurchase of up to an aggregate of $450 million of the Company’s outstanding shares of common stock, with such authorization expiring on July 26, 2025. Pursuant to this authorization, the Company may purchase shares of its common stock on a discretionary basis from time to time, which may be conducted through privately negotiated transactions, including with MSD Partners, as well as through open market repurchase or other means, including through Rule 10b5-1(c) trading plans or through the use of other techniques such as accelerated share repurchases. During Fiscal Year 2024, the Company did not repurchase any shares of its common stock under the plan.
CUMULATIVE TOTAL RETURN PERFORMANCE GRAPH
Set forth below is a line graph showing the change in the cumulative total shareholder return for our common stock as compared to similar returns for the S&P 500® Index and the Russell 1000® Stock Index. We believe the Russell 1000® Stock Index includes companies with market capitalization comparable to ours. We chose the Russell 1000® Index for comparison, as opposed to an industry index, because we do not believe that we can reasonably identify a peer group or a published industry or line-of-business index that contains companies in a similar line of business.
Each of the cumulative returns is calculated assuming the investment of $100 in each of the securities at the closing price on the first day of trading of our common stock on the NYSE (March 12, 2021), and reinvestment of
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dividends into additional shares of the respective equity securities when paid. The graph plots the respective values beginning on March 12 and continuing through December 31, 2024. Past performance is not necessarily indicative of future performance.
| March 12, 2021 | December 31, 2021 | December 31, 2022 | December 31, 2023 | December 31, 2024 | |||||||||||||
Hayward Holdings, Inc. | $100.00 | $154.29 | $55.29 | $80.00 | $89.94 | ||||||||||||
Russell 1000 Stock Index | $100.00 | $119.96 | $97.19 | $121.94 | $152.68 | ||||||||||||
S&P 500 Index | $100.00 | $122.15 | $99.95 | $126.13 | $157.52 | ||||||||||||
ITEM 6. [RESERVED]
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion of our results of operations and financial condition together with the discussion in Part I, Item 1A, “Risk Factors,” and our audited consolidated financial statements and notes thereto, each included elsewhere in this Form 10-K. In addition to historical financial information, this discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results may differ materially from those contained in or implied by any forward-looking statements.
We define the year ended December 31, 2024 as “Fiscal Year 2024” and the year ended December 31, 2023 as “Fiscal Year 2023.” Our fiscal quarters are 13 weeks except the fourth quarter that ends on December 31 of each fiscal year. The first quarter 2024 refers to the quarter ended March 30, the second quarter 2024 refers to the quarter ended June 29, the third quarter 2024 refers to the quarter ended September 28, and the fourth quarter 2024 refers to the quarter ended December 31.
Our Company
We are an industry-leading global designer, manufacturer, and marketer of a broad portfolio of pool equipment and associated automation systems. With the pool as the centerpiece of the growing outdoor living space, the pool industry has attractive market characteristics, including significant aftermarket requirements (such as the ongoing repair, replacement, remodeling and upgrading of equipment for existing pools), innovation-led growth opportunities, and a favorable industry structure. We are a leader in this market with a highly-recognized brand, one of the largest installed bases of pool equipment in the world, decades-long relationships with our key channel partners and trade customers and a history of technological innovation. Our engineered products, which include various energy efficient and more environmentally sustainable offerings, enhance the pool owner’s outdoor living lifestyle while also delivering high quality water, pleasant ambiance and ease of use for the ultimate backyard experience. Aftermarket replacements and upgrades to higher value IoT and energy efficient models are a primary growth driver for our business.
We have an estimated North American seasonal residential pool market share of approximately 33%. We believe that we are well-positioned for future growth. Historically aftermarket sales represented 80% of our net sales and are generally recurring in nature since these products are critical to the ongoing operation of pools given requirements for water quality and sanitization. Our product replacement cycle of approximately 8 to 11 years drives multiple replacement opportunities over the typical life of a pool, creating opportunities to generate aftermarket product sales as pool owners repair and replace equipment and remodel and upgrade their pools. We estimate aftermarket sales based upon feedback from certain representative customers and management’s interpretation of available industry and government data, and not upon our GAAP net sales results.
We manufacture our products at seven facilities worldwide, which are located in North Carolina, Georgia, Tennessee, Rhode Island, Spain (two) and China.
Segments
Our business is organized into two reportable segments: North America (“NAM”) and Europe & Rest of World (“E&RW”). The Company determined its reportable segments based on how the Chief Operating Decision Maker (“CODM”) reviews the Company’s operating results in assessing performance and allocating resources. NAM and E&RW accounted for approximately 85% and 15%, and 83% and 17%, of total net sales for Fiscal Year 2024 and Fiscal Year 2023, respectively.
The NAM segment manufactures and sells a complete line of residential and commercial swimming pool equipment and supplies in the United States and Canada and manufactures and sells flow control products.
The E&RW segment manufactures and sells residential and commercial swimming pool equipment and supplies in Europe, Central and South America, the Middle East, Australia and other Asia Pacific countries.
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Key Trends and Uncertainties Regarding Our Existing Business
The following trends and uncertainties affect the period-to-period comparability of our results of operations and may affect our financial performance in the future:
•Demand related to the aging base of pools and the COVID-19 pandemic. Irrespective of broader macroeconomic trends, the primary driver for the industry continues to be aftermarket spending on the base of installed pools. In the United States, our primary market, the record construction of pools from 1999 to 2005 is manifesting itself in the aftermarket repair, replace, and remodel cycle given that the average age of this pool cohort is over 20 years. Residential pool equipment sales increased during the first two years of the COVID-19 pandemic. This increase in demand was experienced broadly across all our product lines as consumers refocused attention on improving the quality of the homeowner’s outdoor living experience. We believe that during this period, the pandemic reinforced existing pool industry growth trends, as well as partially accelerated demand due to the impact of longer lead times that resulted from supply chain shortages. As the impact of the COVID-19 pandemic has lessened, we believe that these pandemic-fueled demand trends have generally abated, and the industry has returned to more normalized historical seasonal trends.
•Seasonality. Our business is seasonal, with sales typically higher in the second and fourth quarters. During the second quarter, sales are higher in anticipation of the start of the summer pool season and in the fourth quarter, we incent trade customers to buy and stock in preparation for next year’s pool season under an “Early Buy” program, which features a price discount and extended payment terms. Shipments for the 2024 Early Buy program began in the late third quarter and will continue through approximately the first quarter of 2025. The favorable payment terms extended as part of the Early Buy program generally do not exceed 180 days. Revenue is recognized upon shipment of products, which cannot be returned after ten days from receipt of goods. For more information, see “—Key Factors and Measures We Use to Evaluate Our Business—Net Sales.’’ We aim to keep our manufacturing plants running at a constant level throughout the year and consequently we generally build inventory in the first and third quarters and inventory is sold-down in the second and fourth quarters. Our accounts receivable balance increases from September to April as a result of the Early Buy extended terms and increases through June due to higher sales in the second quarter. Also, because most of our sales are to distributors whose inventory of our products may vary, including due to reasons beyond our control, such as end-user demand, supply chain lead times and macroeconomic factors, our revenue may fluctuate from period to period.
•Targeted expansion efforts. We continue to pursue attractive product and global geographic market opportunities to grow our presence in new markets or markets in which we have less penetration. We believe that our business can effectively address these opportunities through new product development and scalable sales, marketing, and administration. We also have and may in the future pursue acquisitions to opportunistically add product offerings or increase our geographic footprint. If we do not execute this strategic objective, our core net sales growth will likely be limited or may decline.
•New product offerings. Our business is primarily driven by aftermarket spending. Pool owners are increasingly demanding new technologies, such as IoT-enabled and more energy efficient products, as they replace or upgrade their existing pool equipment. In Fiscal Year 2024, approximately 20% of gross sales was from new or next-generation products launched in the last three years. These new products offer higher energy efficiency, automation capabilities and enhanced water care solutions, and we expect will become primary drivers of our sales growth. Staying at the forefront of technological innovation and introducing new product offerings with new features will continue to be critical in growing our market share and revenue.
•Geopolitical events. Geopolitical conflicts around the world have created substantial uncertainty in the global economy, including as a result of sanctions and penalties imposed in response to these conflicts. In particular, armed conflicts in the Middle East and in Ukraine and Russia have adversely affected market demand in the Middle East and Asia, which has negatively impacted our results in our E&RW segment. See “—Segment—Europe & Rest of World (“E&RW”),” below. Given the nature of our business and global operations, if these or other geopolitical conflicts continue or worsen, our business and results of operations may be adversely affected.
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Key Factors and Measures We Use to Evaluate Our Business
We consider a variety of financial and operating measures in assessing the performance of our business. The key GAAP measures we use are net sales, gross profit and gross profit margin, selling, general, and administrative (“SG&A”) expense, research, development and engineering (“RD&E”) expense, operating income and operating income margin. The key non-GAAP measures we use are EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted segment income and adjusted segment income margin.
Net sales
We offer a broad range of pool equipment including pumps, filters, heaters, automatic cleaners, sanitizers, chlorine generators, controls, LED lights, as well as industrial thermoplastic valves and process liquid control products. Sales are impacted by product and geographic segment mix, as well as promotional and competitive activities. Growth of our sales is primarily driven by market demand, expansion of our trade customers and product offering.
Revenue is recognized upon shipment and recorded net of related discounts, allowances, returns, and sales tax. Customers are offered volume discounts and other promotional benefits. We estimate these volume discounts, promotional allowance benefits, and returns based upon the terms of the customer contracts and historical experience and record such amounts as a reduction of gross sales with either an offsetting adjustment to accounts receivable or recognition of an accrued liability. We regularly monitor the adequacy of these allowances.
Gross profit and gross profit margin
Gross profit is equal to net sales less cost of sales. Cost of sales includes the direct cost of manufacturing, including direct materials, labor and related overhead, as well as inbound and outbound freight and import duties.
Gross profit margin is gross profit as a percentage of net sales. Gross profit margin is impacted by costs of raw material, product mix, salary and wage inflation, production costs, shipping and handling costs, and import duties, all of which can vary.
Selling, general and administrative expense
Our SG&A includes expenses arising from activities in selling, marketing, technical and customer services, warranty, warehousing, and administrative expenses. Other than warranty and variable compensation, SG&A is generally not directly proportional to net sales.
Research, development and engineering expense
The Company primarily conducts RD&E activities in its own facilities. These expenses consist primarily of salaries, supplies and overhead costs related to the active development of new products, enhanced product applications and improved manufacturing and value engineering of existing products.
Generally, RD&E costs are expensed as incurred. Certain RD&E costs applicable to the development of software are capitalized and amortized over the expected life of the product.
Amortization of intangible assets
Customer relationships, trademarks and other intangible assets arising from business combinations are amortized over their expected useful lives of 5-20 years.
Acquisition and restructuring related costs (or income)
The Company records costs or expenses incurred related to business combinations, organizational restructuring, or gains or losses attributable to any sales or dispositions of assets, including impairments, to acquisition and restructuring related expense, net.
Operating income
Operating income is gross profit less SG&A, RD&E, acquisition and restructuring related expense or income and amortization of intangible assets. Operating income excludes interest expense, income tax expense, and other non-operating expenses, net. We use operating income as well as other indicators as a measure of the profitability of our business.
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Interest expense, net
The Company incurs interest expense on its Credit Facilities, as defined herein. The amortization of debt issuance costs and impact of our interest rate hedging instruments are also included in interest expense.
Net income
Net income is operating income less net interest expense, other non-operating items, and provision for income taxes.
EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted segment income, Adjusted segment income margin
EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted segment income and adjusted segment income margin are key metrics used by management and our Board of Directors to assess our financial performance. For information about our use of these Non-GAAP measures and a reconciliation of these metrics to the nearest GAAP metric see “—Non-GAAP Reconciliation.”
Results of Operations
The following tables summarize key components of our results of operations for the periods indicated, both in dollars and as a percentage of our net sales. We derived the consolidated statements of operations for the Fiscal Years 2024 and 2023 from our audited consolidated financial statements. Our historical results are not necessarily indicative of the results that may be expected in the future. A discussion regarding our financial condition and results of operations for the year ended December 31, 2023, compared to the year ended December 31, 2022, is included under “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on February 29, 2024.
The following table summarizes our results of operations and a comparison of the change between the periods (in thousands):
| Years Ended December 31, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| Net Sales | $ | 1,051,606 | $ | 992,452 | |||||||||||||||||||
| Cost of sales | 520,849 | 515,502 | |||||||||||||||||||||
| Gross profit | 530,757 | 476,950 | |||||||||||||||||||||
| Selling, general, and administrative expense | 260,928 | 233,607 | |||||||||||||||||||||
| Research, development, and engineering expense | 25,778 | 24,547 | |||||||||||||||||||||
| Acquisition and restructuring related expense | 6,464 | 13,213 | |||||||||||||||||||||
| Amortization of intangible assets | 28,800 | 30,361 | |||||||||||||||||||||
| Operating income | 208,787 | 175,222 | |||||||||||||||||||||
| Interest expense, net | 62,163 | 73,584 | |||||||||||||||||||||
| Loss on debt extinguishment | 4,926 | — | |||||||||||||||||||||
Other expense (income), net | (2,484) | 551 | |||||||||||||||||||||
| Total other expense | 64,605 | 74,135 | |||||||||||||||||||||
| Income from operations before income taxes | 144,182 | 101,087 | |||||||||||||||||||||
| Provision for income taxes | 25,527 | 20,400 | |||||||||||||||||||||
| Net income | $ | 118,655 | $ | 80,687 | |||||||||||||||||||
Adjusted EBITDA (a) | $ | 277,447 | $ | 247,273 | |||||||||||||||||||
(a) See “— Non-GAAP Reconciliation.”
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Fiscal Year 2024 Compared to Fiscal Year 2023
Net sales
Net sales increased to $1,051.6 million in Fiscal Year 2024 from $992.5 million in Fiscal Year 2023, an increase of $59.1 million, or 6.0%. See segment discussion below for further information.
| 2024 | |||||
| Volume | 1.8 | % | |||
| Price, net of discounts and allowances | 3.2 | % | |||
| Acquisitions | 1.1 | % | |||
| Currency and other | (0.1) | % | |||
| Total | 6.0 | % | |||
The Fiscal Year 2024 increase in net sales was primarily driven by an increase in net price, as well as by an increase in volume and the favorable impact from acquisitions. The increase in net price was due to price increases enacted to offset inflationary pressures. The increase in volume was primarily the result of normalized channel inventory movements, partially offset by market declines in the Middle East and Asia and lower new construction and remodel activity in the United States.
Gross profit and Gross profit margin
Gross profit increased to $530.8 million in Fiscal Year 2024 from $477.0 million in Fiscal Year 2023, an increase of $53.8 million or 11.3%.
Gross profit margin increased to 50.5% in Fiscal Year 2024 compared to 48.1% in Fiscal Year 2023, an increase of 240 basis points primarily due to operational efficiencies, net price increases and management of our manufacturing costs, partially offset by an increase to cost of goods sold resulting from the fair value inventory step-up adjustment recognized as part of the purchase accounting for the acquisition of ChlorKing HoldCo, LLC and related entities (“ChlorKing”) ($3.3 million) and discrete inventory adjustments in Europe.
Selling, general and administrative expense
Selling, general and administrative expense increased to $260.9 million in Fiscal Year 2024 from $233.6 million in Fiscal Year 2023, an increase of $27.3 million or 11.7%, driven by normalized annual incentive compensation, higher salary costs driven by wage inflation, targeted investments in our customer care, selling and business analytics teams, and discrete legal expenses, partially offset by decreased warranty costs.
As a percentage of net sales, SG&A increased to 24.8% in Fiscal Year 2024 as compared to 23.5% in Fiscal Year 2023, an increase of 130 basis points, primarily due to the factors described above.
Research, development and engineering expense
RD&E expense increased to $25.8 million in Fiscal Year 2024 compared to $24.5 million in Fiscal Year 2023, an increase of $1.3 million, or 5.0%. As a percentage of net sales, RD&E remained relatively flat at 2.5% in each year. RD&E spend continues to be focused on new product development and new product quality.
Acquisition and restructuring related expense
Acquisition and restructuring related expense decreased to $6.5 million in Fiscal Year 2024 as compared to $13.2 million in Fiscal Year 2023, a decrease of $6.7 million.
The $6.5 million expense in Fiscal Year 2024 was primarily driven by $4.3 million of acquisition and integration costs associated with the acquisition of the ChlorKing business, including $3.2 million of compensation expenses for the retention of key employees acquired in the ChlorKing acquisition. Fiscal Year 2024 also included costs associated with the centralization and consolidation of operations in Europe. In comparison, the $13.2 million expense in Fiscal Year 2023 was primarily driven by costs related to the discontinuation of a product line leading to an impairment of the associated fixed assets, inventory and intangible assets, programs to centralize and consolidate manufacturing operations and professional services in Europe, as well as costs associated with the relocation of the corporate headquarters to Charlotte, North Carolina.
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For additional information, see Note 19. “Acquisition and Restructuring Related Expense” of Notes to Consolidated Financial Statements in this Form 10-K.
Amortization of intangible assets
Amortization of intangible assets decreased to $28.8 million in Fiscal Year 2024 from $30.4 million in Fiscal Year 2023, a decrease of $1.6 million, or 5.1%, due to the amortization pattern of certain intangibles based on the declining balance method.
Operating income and operating income margin
Operating income increased to $208.8 million in Fiscal Year 2024 from $175.2 million in Fiscal Year 2023, an increase of $33.6 million, or 19.2%, due to the accumulated effect of the items described above. Operating income as a percentage of net sales (“operating margin”) was 19.9% in Fiscal Year 2024, a 220 basis point increase from the 17.7% operating margin in Fiscal Year 2023.
Interest expense, net
Interest expense, net, decreased to $62.2 million in Fiscal Year 2024 from $73.6 million in Fiscal Year 2023, a decrease of $11.4 million, or 15.5%. The decrease was primarily due to the repayment of the Incremental Term Loan B principal balance in April 2024 and interest income on cash investment balances.
Interest expense in Fiscal Year 2024 consisted of $68.0 million of interest on the outstanding debt, net of the impact from the interest rate swaps, and $4.2 million of amortization of deferred financing fees, partially offset by $10.1 million of interest income. Interest expense in Fiscal Year 2023 consisted of $76.0 million on the outstanding debt and $4.7 million of amortization of deferred financing fees, partially offset by $7.1 million of interest income.
Loss on extinguishment of debt
The $4.9 million loss on extinguishment of debt was incurred as a result of the voluntary repayment of the Incremental Term Loan B principal balance in April 2024.
Provision for income taxes
We incurred income tax expense of $25.5 million for Fiscal Year 2024 and $20.4 million for Fiscal Year 2023, a increase of $5.1 million or 25.1%. This increase in tax expense was primarily due to increased income from operations.
Our effective income tax rate decreased to 17.7% for Fiscal Year 2024 from 20.2% for Fiscal Year 2023 primarily due to decreased foreign withholding taxes and state taxes, partially offset by decreased excess tax benefit from stock compensation.
Net income
As a result of the foregoing, net income increased to $118.7 million in Fiscal Year 2024 compared to net income of $80.7 million in Fiscal Year 2023, an increase of $38.0 million, or 47.1%.
Adjusted EBITDA
Adjusted EBITDA increased to $277.4 million in Fiscal Year 2024 from $247.3 million in Fiscal Year 2023, an increase of $30.1 million, or 12.2%, driven primarily by increased net sales and an increase in gross profit of $53.8 million, partially offset by an increase in SG&A expenses of $27.3 million.
See “— Non-GAAP Reconciliation” for a reconciliation of these non-GAAP measures to the most directly comparable GAAP measures.
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Segment Results of Operations
The Company manages its business primarily on a geographic basis. The Company’s reportable segments consist of NAM and E&RW.
We evaluate performance based on net sales, segment income and adjusted segment income, and use segment income margin and adjusted segment income margin as comparable performance measures for our reporting segments.
Segment income represents net sales less cost of sales, less segment SG&A and RD&E, excluding acquisition and restructuring related expense, as well as amortization of intangible assets. Adjusted segment income represents segment income adjusted for the impact of depreciation, amortization of certain intangible assets, stock-based compensation and certain non-cash, nonrecurring or other items that are included in segment income that we do not consider indicative of the ongoing segment operating performance. See “—Non-GAAP Reconciliation” for a reconciliation of these non-GAAP measures to the most directly comparable GAAP measures.
North America (“NAM’’)
(Dollars in thousands)
| Years Ended December 31, | ||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||
| Net sales | $ | 895,498 | $ | 823,276 | ||||||||||||||||
| Gross profit | $ | 474,274 | $ | 410,641 | ||||||||||||||||
| Gross profit margin % | 53.0 | % | 49.9 | % | ||||||||||||||||
| Segment income | $ | 261,735 | $ | 215,425 | ||||||||||||||||
| Segment income margin % | 29.2 | % | 26.2 | % | ||||||||||||||||
Adjusted segment income(a) | $ | 290,964 | $ | 237,693 | ||||||||||||||||
Adjusted segment income margin %(a) | 32.5 | % | 28.9 | % | ||||||||||||||||
(a)See “—Non-GAAP Reconciliation.”
Year-over-year net sales increase was driven by the following:
| 2024 | |||||
| Volume | 4.0 | % | |||
| Price, net of discounts and allowances | 3.6 | % | |||
| Acquisitions | 1.4 | % | |||
| Currency and other | (0.2) | % | |||
| Total | 8.8 | % | |||
Net sales
Net sales increased to $895.5 million in Fiscal Year 2024 from $823.3 million in Fiscal Year 2023, an increase of $72.2 million, or 8.8%.
This increase was primarily the result of volume growth and an increase in net price, as well as the favorable impact of acquisitions. The increase in volume was primarily the result of normalized channel inventory movements. The increase in the net price was due to price increases enacted to offset inflation, while the favorable impact from acquisitions resulted from the acquisition of the ChlorKing business in June 2024.
Gross profit and Gross profit margin
Gross profit increased to $474.3 million in Fiscal Year 2024 from $410.6 million in Fiscal Year 2023, an increase of $63.7 million, or 15.5%.
Gross profit margin increased to 53.0% in Fiscal Year 2024 from 49.9% in Fiscal Year 2023, an increase of 310 basis points, primarily due to operational efficiencies, net price increases and management of our manufacturing
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costs, partially offset by an increase to cost of goods sold resulting from the fair value inventory step-up adjustment recognized as part of the purchase accounting for the acquisition of ChlorKing.
Segment income and Segment income margin
Segment income increased to $261.7 million in Fiscal Year 2024 from $215.4 million in Fiscal Year 2023, an increase of $46.3 million, or 21.5%. This was primarily driven by an increase in sales and gross profit as discussed above, partially offset by higher SG&A expense driven by normalized annual incentive compensation. As a percentage of segment net sales, SG&A and RD&E expenses remained consistent at 23.7% for each year.
Segment income margin increased to 29.2% in Fiscal Year 2024 from 26.2% in Fiscal Year 2023, an increase of 300 basis points primarily resulting from the increase in sales and gross profit as discussed above.
Adjusted segment income and Adjusted segment income margin
Adjusted segment income increased to $291.0 million in Fiscal Year 2024 from $237.7 million in Fiscal Year 2023, an increase of $53.3 million, or 22.4%. This was driven by higher segment income as discussed above, adjusted for additional non-cash or non-recurring charges.
Adjusted segment income margin increased to 32.5% in Fiscal Year 2024 from 28.9% in Fiscal Year 2023, an increase of 360 basis points.
Europe & Rest of World (“E&RW”)
(Dollars in thousands)
| Years Ended December 31, | ||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||
| Net sales | $ | 156,108 | $ | 169,176 | ||||||||||||||||
| Gross profit | $ | 56,483 | $ | 66,309 | ||||||||||||||||
| Gross profit margin % | 36.2 | % | 39.2 | % | ||||||||||||||||
| Segment income | $ | 21,632 | $ | 33,518 | ||||||||||||||||
| Segment income margin % | 13.9 | % | 19.8 | % | ||||||||||||||||
Adjusted segment income(a) | $ | 22,857 | $ | 34,503 | ||||||||||||||||
Adjusted segment income margin %(a) | 14.6 | % | 20.4 | % | ||||||||||||||||
(a)See “—Non-GAAP Reconciliation.”
Year-over-year net sales decrease was driven by the following:
| 2024 | |||||
| Volume | (8.5) | % | |||
| Price, net of discounts and allowances | 1.0 | % | |||
| Currency and other | (0.2) | % | |||
| Total | (7.7) | % | |||
Net sales
Net sales decreased to $156.1 million in Fiscal Year 2024 from $169.2 million in Fiscal Year 2023, a decrease of $13.1 million, or 7.7%.
The decrease in net sales was primarily due to a decline in volume, partially offset by the favorable impact of net price. The decline in volume was primarily driven by market declines in the Middle East and Asia, partially as a result of the impact of geopolitical conflicts in the Middle East.
Gross profit and Gross profit margin
Gross profit decreased to $56.5 million in Fiscal Year 2024 from $66.3 million in Fiscal Year 2023, a decrease of $9.8 million or 14.8%.
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Gross profit margin decreased to 36.2% in Fiscal Year 2024 compared to 39.2% in Fiscal Year 2023, a decrease of 300 basis points, primarily driven by lower operating leverage, discrete inventory adjustments and unfavorable mix due to the impact of geopolitical conflicts in the Middle East, partially offset by the net price increases discussed above.
Segment income and Segment income margin
Segment income decreased to $21.6 million in Fiscal Year 2024 from $33.5 million in Fiscal Year 2023, a decrease of $11.9 million, or 35.5%. This was primarily driven by a decrease in sales and gross profit as discussed above. As a percentage of segment net sales, SG&A and RD&E expenses increased from 19.4% in the Fiscal Year 2023 to 22.3% as a result of lower net sales as discussed above.
Segment income margin decreased to 13.9% in Fiscal Year 2024 from 19.8% in Fiscal Year 2023, a decrease of 590 basis points. The decline was primarily attributable to the decreased sales and operating leverage.
Adjusted segment income and Adjusted segment income margin
Adjusted segment income decreased to $22.9 million in Fiscal Year 2024 from $34.5 million in Fiscal Year 2023, a decrease of $11.6 million or 33.8%. This was primarily driven by the decreased sales and operating leverage, adjusted for additional non-cash or non-recurring charges.
Adjusted segment income margin decreased to 14.6% in Fiscal Year 2024 from 20.4% in Fiscal Year 2023, a decrease of 580 basis points.
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Non-GAAP Reconciliation
The Company uses EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted segment income and adjusted segment income margin to supplement GAAP measures of performance to evaluate the effectiveness of our business strategies. These metrics are also frequently used by analysts, investors and other interested parties to evaluate companies in our industry, when considered alongside other GAAP measures.
EBITDA is defined as earnings before interest (including amortization of debt costs), income taxes, depreciation, and amortization. Adjusted EBITDA is defined as EBITDA adjusted for the impact of restructuring related income or expenses, stock-based compensation, currency exchange items and certain non-cash, nonrecurring, or other items that are included in net income and EBITDA that we do not consider indicative of our ongoing operating performance. Adjusted EBITDA margin is defined as adjusted EBITDA divided by net sales. Adjusted segment income is defined as segment income adjusted for the impact of depreciation, amortization of intangible assets recorded within cost of sales, stock-based compensation, and certain non-cash, nonrecurring or other items that are included in segment income that we do not consider indicative of the ongoing segment operating performance. Adjusted segment income margin is defined as adjusted segment income divided by segment net sales.
EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted segment income and adjusted segment income margin are not recognized measures of financial performance under GAAP. We believe these non-GAAP measures provide analysts, investors and other interested parties with additional insight into the underlying trends of our business and assist these parties in analyzing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance, which allows for a better comparison against historical results and expectations for future performance. Management uses these non-GAAP measures to understand and compare operating results across reporting periods for various purposes including internal budgeting and forecasting, short and long-term operating planning, employee incentive compensation and debt compliance. These non-GAAP measures are not intended to replace the presentation of our financial results in accordance with GAAP.
Use of the terms EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted segment income and adjusted segment income margin may differ from similar measures reported by other companies. EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted segment income and adjusted segment income margin are not calculated in the same manner by all companies, and accordingly, are not necessarily comparable to similarly entitled measures of other companies and may not be an appropriate measure for performance relative to other companies. EBITDA, adjusted EBITDA, and adjusted segment income should not be construed as indicators of a company’s operating performance in isolation from, or as a substitute for, net income (loss) and operating income, which are prepared in accordance with GAAP. We have presented EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted segment income and adjusted segment income margin solely as supplemental disclosure because we believe it allows for a more complete analysis of results of operations. In the future we may incur expenses such as those added back to calculate adjusted EBITDA. Our presentation of adjusted EBITDA and adjusted segment income should not be construed as an inference that our future results will be unaffected by these items.
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Following is a reconciliation from net income to adjusted EBITDA (dollars in thousands):
| Years Ended December 31, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| Net income | $ | 118,655 | $ | 80,687 | |||||||||||||||||||
| Depreciation | 20,078 | 15,983 | |||||||||||||||||||||
| Amortization | 35,783 | 37,079 | |||||||||||||||||||||
| Interest expense | 62,163 | 73,584 | |||||||||||||||||||||
| Income taxes | 25,527 | 20,400 | |||||||||||||||||||||
| Loss on extinguishment of debt | 4,926 | — | |||||||||||||||||||||
| EBITDA | 267,132 | 227,733 | |||||||||||||||||||||
Stock-based compensation(a) | 608 | 1,270 | |||||||||||||||||||||
Currency exchange items(b) | (836) | 786 | |||||||||||||||||||||
Acquisition and restructuring related expense, net(c) | 6,464 | 13,213 | |||||||||||||||||||||
Other(d) | 4,079 | 4,271 | |||||||||||||||||||||
| Total Adjustments | 10,315 | 19,540 | |||||||||||||||||||||
| Adjusted EBITDA | $ | 277,447 | $ | 247,273 | |||||||||||||||||||
| Net income margin | 11.3 | % | 8.1 | % | |||||||||||||||||||
| Adjusted EBITDA margin | 26.4 | % | 24.9 | % | |||||||||||||||||||
| (a) | Represents non-cash stock-based compensation expense related to equity awards issued to management, employees, and directors. The adjustment includes only expense related to awards issued under the 2017 Equity Incentive Plan, which were awards granted prior to the effective date of Hayward’s initial public offering (the “IPO”). | |||||||
| (b) | Represents unrealized non-cash (gains) losses on foreign denominated monetary assets and liabilities and foreign currency contracts. | |||||||
| (c) | Adjustments in the year ended December 31, 2024 are primarily driven by $3.2 million of compensation expenses for the retention of key employees acquired in the ChlorKing acquisition. Pursuant to the ChlorKing acquisition agreement, this $3.2 million was part of a total $6.3 million employee retention payment that was deposited into an escrow account on the date of acquisition. The full amount held in escrow will be released to the specified key employees if such employees are employed by Hayward on the one-year anniversary of the acquisition. These payments are contingent on continued employment and are not dependent on the achievement of any metric or performance measure. The retention costs will be recognized over the twelve-month period from the date of acquisition. Further, other adjustments for the year ended December 31, 2024 include $1.1 million of transaction and integration costs associated with the acquisition of the ChlorKing business, $0.9 million of termination benefits related to a reduction-in-force within E&RW, $0.8 million of separation and other costs associated with the centralization and consolidation of operations in Europe and $0.4 million of costs to finalize restructuring actions initiated in prior years. Adjustments in the year ended December 31, 2023 primarily include $6.7 million of costs related to the discontinuation of a product line leading to an impairment of the associated fixed assets, inventory and intangible assets, $2.4 million related to programs to centralize and consolidate manufacturing operations and professional services in Europe, $1.9 million of costs associated with the relocation of the corporate headquarters to Charlotte, North Carolina, $1.2 million separation costs associated with the 2022 cost reduction program and $0.8 million of costs associated with integration costs from prior acquisitions. | |||||||
| (d) | Adjustments in the year ended December 31, 2024 are primarily driven by a $3.3 million increase in cost of goods sold resulting from the fair value inventory step-up adjustment recognized as part of the purchase accounting for the acquisition of the ChlorKing business, $0.7 million of costs sustained from flood damage associated with a hurricane at a contract manufacturing facility and $0.5 million of costs incurred related to litigation, partially offset by $0.5 million of gains on the sale of assets. Adjustments in the year ended December 31, 2023 primarily include $1.8 million related to inventory and fixed asset write-offs in Europe and $1.5 million of costs incurred related to the selling stockholder offerings of shares in March, May and August 2023, which are reported in SG&A in our consolidated statements of operations. | |||||||
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Following is a reconciliation from segment income to adjusted segment income for NAM (dollars in thousands):
| Years Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Segment income | $ | 261,735 | $ | 215,425 | |||||||
| Depreciation | 17,989 | 14,610 | |||||||||
| Amortization | 6,985 | 6,718 | |||||||||
Stock-based compensation (a) | 176 | 437 | |||||||||
Other (b) | 4,079 | 503 | |||||||||
| Total Adjustments | 29,229 | 22,268 | |||||||||
| Adjusted segment income | $ | 290,964 | $ | 237,693 | |||||||
| Segment income margin | 29.2 | % | 26.2 | % | |||||||
| Adjusted segment income margin | 32.5 | % | 28.9 | % | |||||||
| (a) | Represents non-cash stock-based compensation expense related to equity awards issued to management, employees, and directors. The adjustment includes only expense related to awards issued under the 2017 Equity Incentive Plan, which were awards granted prior to the effective date of the IPO. | |||||||
| (b) | Adjustments in the year ended December 31, 2024 for NAM include a $3.3 million increase in cost of goods sold resulting from the fair value inventory step-up adjustment recognized as part of the purchase accounting for the acquisition of the ChlorKing business and $0.7 million of costs related to a flood sustained at a contract manufacturer. Adjustments in the year ended December 31, 2023 for NAM include miscellaneous items we believe are not representative of our ongoing business operations. | |||||||
Following is a reconciliation from segment income to adjusted segment income for E&RW (dollars in thousands):
| Years Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Segment income | $ | 21,632 | $ | 33,518 | |||||||
| Depreciation | 1,215 | 940 | |||||||||
| Amortization | — | — | |||||||||
Stock-based compensation (a) | 10 | 45 | |||||||||
| Total Adjustments | 1,225 | 985 | |||||||||
| Adjusted segment income | $ | 22,857 | $ | 34,503 | |||||||
| Segment income margin | 13.9 | % | 19.8 | % | |||||||
| Adjusted segment income margin | 14.6 | % | 20.4 | % | |||||||
| (a) | Represents non-cash stock-based compensation expense related to equity awards issued to management, employees, and directors. The adjustment includes only expense related to awards issued under the 2017 Equity Incentive Plan, which were awards granted prior to the effective date of the IPO. | |||||||
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Liquidity and Capital Resources
Our primary sources of liquidity are net cash provided by operating activities and availability under the ABL Facility. Primary working capital requirements are for raw materials, assembled components and certain finished goods inventories and supplies, payroll, manufacturing, freight and distribution, facility, and other operating expenses. Cash flow and working capital requirements fluctuate during the year, driven primarily by the seasonal demand for our products, an Early Buy program, the timing of inventory purchases and receipt of customer payments. As such, the utilization of the ABL Facility fluctuates during the year.
During the end of the year we incentivize trade customers to buy and stock up in preparation for next year’s pool season under an “Early Buy” program that features a price discount and extended payment terms. Shipments under the 2024 Early Buy program began in the late third quarter and will continue through approximately the first quarter of 2025. We expect to receive payments for the majority of these shipments during the second quarter of 2025. As a result, our accounts receivable balance increases from the late third quarter through the first quarter of 2025 before the Early Buy payments are received. In addition, cash flow is higher in the second quarter as the seasonality of our business peaks and payments are received.
Unrestricted cash and cash equivalents totaled $196.6 million as of December 31, 2024, which is an increase of $18.5 million from $178.1 million at December 31, 2023. As of December 31, 2024 and December 31, 2023, the Company had zero and $25 million, respectively, in certificates of deposit, which was included in short-term investments on the consolidated balance sheets.
We focus on increasing cash flow, solidifying the liquidity position through working capital initiatives, and paying our debt obligations, while continuing to fund business growth initiatives and return of capital to stockholders. We believe that net cash provided by operating activities and availability under the ABL Facility will be adequate to finance our working capital requirements, inclusive of capital expenditures, and debt service over the next 12 months.
The Organisation for Economic Co-operation and Development introduced an international tax framework under Pillar Two which includes a global minimum tax of 15%. While the United States has not enacted legislation to adopt Pillar Two, certain countries in which we operate have adopted legislation, and other countries are in the process of introducing legislation to implement Pillar Two. We do not expect Pillar Two to have a material impact on our effective tax rate or taxes paid.
Accounts Receivable Sales
On July 3, 2024, we entered into a Receivables Purchase Agreement under which we may offer to sell eligible accounts receivable. The agreement is uncommitted and the eligible accounts receivable to be sold under the agreement consist of up to $125 million in accounts receivable generated by sales to specified customers of the Company. The Company will be paid a discounted purchase price for each receivable sold. The discount rate used to determine the purchase price for the subject receivables is based upon an annual interest rate equal to the forward-looking term rate based on the secured overnight financing rate for the period of time between payment to the Company and the due date for the receivable plus a buffer period specific to the obligor, plus a margin applicable to the specified obligor.
Transactions under this agreement are accounted for as sales of accounts receivable, and the receivables sold are removed from the consolidated balance sheets at the time of the sales transaction. For ease of administration, the Company collects customer payments related to the receivables sold and remits those payments to the purchaser. Proceeds received from the sales of accounts receivable are classified as operating cash flows and collections of previously sold accounts receivable not yet submitted to the financial institution are classified as financing cash flows in the consolidated statements of cash flows. We record the discount in the “Other expense, net” line in the consolidated statements of operations. During the twelve months ended December 31, 2024, there were immaterial proceeds from the sale of receivables under the Receivables Purchase Agreement.
Credit Facilities
The First Lien Term Facility and ABL Facility (collectively “Credit Facilities”) contain various restrictions, covenants and collateral requirements. Refer to Note 9, “Long-Term Debt” of Notes to the Consolidated Financial Statements in this Form 10-K for further information on the terms of the Credit Facilities.
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Long-term debt consisted of the following (in thousands):
| December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| First Lien Term Facility, due May 28, 2028 | $ | 965,000 | $ | 975,000 | |||||||
| Incremental Term Loan B, due May 28, 2028 | — | 123,438 | |||||||||
| ABL Revolving Credit Facility | — | — | |||||||||
| Other bank debt | 6,461 | 8,775 | |||||||||
| Finance lease obligations | 2,448 | 4,729 | |||||||||
| Subtotal | 973,909 | 1,111,942 | |||||||||
| Less: Current portion of long-term debt | (13,991) | (15,088) | |||||||||
| Less: Unamortized debt issuance costs | (9,356) | (17,574) | |||||||||
| Total | $ | 950,562 | $ | 1,079,280 | |||||||
ABL Facility
The aggregate amount of the revolving loan commitments on the ABL Facility is $425.0 million, with a peak season commitment of $475.0 million, subject to a borrowing base calculation based on available eligible receivables, inventory, and qualified cash in North America. Accounts receivable sold under the Receivables Purchase Agreement are not eligible receivables under the ABL Facility. An amount of up to 30% (or up to 40% with agent consent) of the then-outstanding commitments under the ABL Facility is available to our Canada and Spain subsidiaries. A portion of the ABL Facility not to exceed $50.0 million is available for the issuance of letters of credit in U.S. Dollars, of which $20.0 million is available for the issuance of letters of credit in Canadian dollars. The ABL Facility also includes a $50.0 million swingline loan facility and a $17.5 million First-In, Last-Out Sublimit (“FILO Sublimit”).
The borrowings under the ABL Facility bear interest at a rate equal to an adjusted term of the Secured Overnight Financing Rate (“SOFR”) or a base rate plus a margin of between 1.25% to 1.75% or 0.25% to 0.75%, respectively, while the FILO Sublimit borrowings bear interest at a rate equal to SOFR or a base rate plus a margin of between 2.25% to 2.75% or 1.25% to 1.75%, respectively. The ABL Facility matures June 1, 2026. We have the option to increase the ABL Facility, subject to certain conditions, including the commitment of the participating lenders.
For the year ended December 31, 2024, the average borrowing base under the ABL Facility was $212.6 million and the average loan balance outstanding was zero. As of December 31, 2024, the loan balance was zero with a borrowing availability of $163.4 million.
For the year ended December 31, 2023, the average borrowing base under the ABL Facility was $265.8 million and the average loan balance outstanding was $17.3 million. As of December 31, 2023 the loan balance was zero with a borrowing availability of $256.5 million.
First Lien Term Facilities
The First Lien Term Facility bears interest at a rate equal to a base rate or SOFR (which includes an applicable credit spread adjustment), plus, in either case, an applicable margin. In the case of SOFR tranches, the applicable margin is 2.75% per annum with a 0.50% floor, with a stepdown to 2.50% per annum with a 0.50% floor when net secured leverage as defined by the First Lien Credit Agreement is less than 2.5x. The loan under the First Lien Term Facility amortizes quarterly at a rate of 0.25% of the original principal amount and requires a $2.5 million repayment of principal on the last business day of each March, June, September and December. For the periods prior to May 22, 2023, before the Company entered into the Fifth Amendment to the Company’s First Lien Credit Agreement to replace the LIBOR based reference rate with an adjusted term SOFR, the borrowings under the First Lien Term Facility bore interest at a rate equal to LIBOR or a base rate plus an applicable margin of 2.75% per annum with a 0.50% floor, with a stepdown to 2.50% per annum with a 0.50% floor when net secured leverage ratio as defined by the credit agreement is less than 2.5x.
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The First Lien Term Facility included an incremental term loan in an aggregate original principal amount of $125 million (the “Incremental Term Loan B”). The Incremental Term Loan B bore interest at an annual floating rate based on SOFR (with a 0.50% floor) plus 3.25% and a 0.10% credit spread adjustment. In April 2024, the Company voluntarily prepaid the Incremental Term Loan B in full.
Under the agreement governing the First Lien Credit Facility (the “First Lien Credit Agreement”), the Company must make an annual mandatory prepayment of principal for between 0% and 50% of the excess cash and subject to permitted deductions, as defined in the First Lien Credit Agreement, generated in the prior calendar year. The amount due varies with the First Lien Leverage Ratio as defined in the First Lien Credit Agreement, from zero if the First Lien Leverage Ratio is less than or equal to 2.5x, to 50% if the First Lien Leverage Ratio is greater than 3.0x, less certain allowed deductions, in each case as of December 31 of the prior year. Pursuant to this provision, the Company does not have a mandatory excess cash flow prepayment in 2025 based on the First Lien Leverage Ratio and permitted deductions as of December 31, 2024. The First Lien Term Facility matures on May 28, 2028.
As of December 31, 2024, the balance outstanding under the First Lien Term Facility was $965.0 million. The effective interest rate on borrowings under the First Lien facilities, including the impact of an interest rate hedge, was 6.77%.
As of December 31, 2023, the balance outstanding under the First Lien Term Facility was $975.0 million and the balance outstanding under the Incremental Term Loan B was $123.4 million. The effective interest rate on borrowings under the First Lien facilities, including the impact of an interest rate hedge, was 6.85%.
Covenant Compliance
The Credit Facilities contain various restrictions, covenants and collateral requirements. As of December 31, 2024, we were in compliance with all covenants under the Credit Facilities.
Sources and Uses of Cash
Following is a summary of our cash flows from operating, investing, and financing activities (dollars in thousands):
| Years Ended December 31, | ||||||||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||||||||
| Net cash provided by operating activities | $ | 212,068 | $ | 184,540 | ||||||||||||||||||||||
| Net cash used in investing activities | (54,131) | (55,381) | ||||||||||||||||||||||||
| Net cash used in financing activities | (136,790) | (7,612) | ||||||||||||||||||||||||
| Effect of exchange rate changes on cash and cash equivalents and restricted cash | (2,655) | 373 | ||||||||||||||||||||||||
| Change in cash and cash equivalents and restricted cash | $ | 18,492 | $ | 121,920 | ||||||||||||||||||||||
Net cash provided by operating activities
Net cash provided by operating activities increased to $212.1 million for the year ended December 31, 2024 from $184.5 million for the year ended December 31, 2023, an increase of $27.6 million, or 14.9%. The increase was driven by the increase in net income.
Net cash used in investing activities
Net cash used in investing activities decreased to $54.1 million for the year ended December 31, 2024 compared to $55.4 million for the year ended December 31, 2023, a decrease of $1.3 million, or 2.3%. For the year ended December 31, 2024, net cash used in investing activities was driven by the acquisition of the ChlorKing business and purchases of property, plant and equipment, partially offset by the proceeds of certificates of deposit investments. For the year ended December 31, 2023, net cash used in investing activities was driven by purchases of property, plant and equipment along with investments made into certificates of deposit.
Net cash (used in) provided by financing activities
Net cash used in financing activities increased to $136.8 million for the year ended December 31, 2024 compared to $7.6 million for the year ended December 31, 2023, an increase of $129.2 million. The increase was primarily driven by the prepayment of the Incremental Term Loan B.
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Contractual Obligations and Other Commitments
The following table summarizes our contractual cash obligations as of December 31, 2024 (in thousands):
| 2025 | 2026 | 2027 | 2028 | 2029 | Thereafter | Total | |||||||||||||||||||||||||||||||||||
Long-term debt (a) | $ | 12,424 | $ | 12,420 | $ | 11,117 | $ | 935,347 | $ | 102 | $ | 51 | $ | 971,461 | |||||||||||||||||||||||||||
| Letters of credit | 4,310 | — | — | — | — | — | 4,310 | ||||||||||||||||||||||||||||||||||
Operating lease commitments (b) | 11,517 | 10,148 | 8,040 | 7,302 | 7,216 | 33,767 | 77,990 | ||||||||||||||||||||||||||||||||||
| Finance lease commitments | 1,836 | 272 | 270 | 177 | 30 | — | 2,585 | ||||||||||||||||||||||||||||||||||
| Total | $ | 30,087 | $ | 22,840 | $ | 19,427 | $ | 942,826 | $ | 7,348 | $ | 33,818 | $ | 1,056,346 | |||||||||||||||||||||||||||
(a) For further information on the terms of the Credit Facilities, please see Note 9. “Long-Term Debt” of Notes to Consolidated Financial Statements in this Form 10-K and “Liquidity and Capital Resources”.
(b) Operating lease commitments primarily relate to our office, distribution, and manufacturing facilities. All of these obligations require cash payments to be made by us over varying periods of time. Certain leases are renewable at our option for periods of one to ten years and certain of these arrangements are cancellable on short notice while others require payment upon early termination. Refer to Note 15. “Leases” of Notes to Consolidated Financial Statements in this Form 10-K for further information.
Off-Balance Sheet Arrangements
We had $4.3 million of outstanding letters of credit on our ABL Facility as of each of December 31, 2024 and December 31, 2023.
Critical Accounting Estimates
Our consolidated financial statements have been prepared in accordance with GAAP. The preparation of our consolidated financial statements and notes to consolidated financial statements requires us to make estimates that affect the reported amounts of assets, liabilities, sales and expenses, and related disclosures of contingent assets and liabilities. We base these estimates on historical results and various other assumptions believed to be reasonable, all of which form the basis for making estimates concerning the carrying value of assets and liabilities that are not readily available from other sources. Actual results may differ from these estimates.
Our significant accounting policies are described in the notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. We believe that the following critical accounting estimates include the most significant estimates and management judgments used in preparing the consolidated financial statements.
Customer Rebates
Many of our major customer agreements provide for rebates, some of which require achievement of various performance targets. We account for customer rebates as a reduction of gross sales with either a corresponding offset to accounts receivable or recognition of an accrued liability. We estimate the rebates based on our latest projection of customer performance. We update the estimates regularly to reflect any changes to the projection of customer performance for the applicable period.
Goodwill and Indefinite Lived Intangibles
We review goodwill and indefinite lived intangible assets for impairment annually or on an interim basis whenever events or changes in circumstances indicate the fair value of such assets may be below their carrying amount. As of December 31, 2024, goodwill and indefinite lived intangible assets were $943.6 million and $736.0 million, respectively.
For goodwill, we may first make a qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less than its carrying value. The qualitative impairment assessment includes considering various factors including macroeconomic conditions, industry and market conditions, cost factors and any reporting unit specific events. If it is determined through the qualitative assessment that the reporting unit’s fair value is more
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likely than not greater than its carrying value, the quantitative impairment assessment is not required. If the qualitative assessment indicates it is more likely than not that the reporting unit’s fair value is no greater than its carrying value, we must perform a quantitative impairment assessment. If it is determined a quantitative assessment is necessary, we would compare the fair value of the reporting unit to the respective carrying value, which includes goodwill. If the fair value of the reporting unit exceeds its carrying value, goodwill is not considered impaired. If the carrying value is higher than the fair value, the difference would be recognized as an impairment loss. Fair value of the reportable unit is estimated using a discounted six-year projected cash flow analyses and a terminal value calculation at the end of the six-year period. For the year-ended December 31, 2024, the Company performed a qualitative analysis and determined that the fair values of the reporting units were more likely than not greater than the carrying amounts. As such, the Company did not need to proceed beyond the qualitative analysis, and no goodwill impairments were recorded. For the year-ended December 31, 2023, the Company performed a quantitative analysis and determined that the fair value of each of the reporting units exceeded the corresponding carrying value.
Similar to the test for impairment of goodwill, we may first make a qualitative assessment of whether it is more likely than not that an indefinite lived intangible assets’ fair value is less than its carrying value to determine whether it is necessary to perform a quantitative impairment assessment. If it is determined a quantitative assessment is necessary, we would compare their estimated fair values to their carrying values. Fair value is generally estimated using discounted cash flows or relief from royalty approaches. We would recognize an impairment charge when the estimated fair value of the indefinite lived intangible asset is less than its carrying value. We annually evaluate whether the trade names continue to have an indefinite life.
Stock-Based Compensation
We recognize stock-based compensation expense for awards of equity instruments based on the grant-date fair value of those awards. The grant-date fair value of the award is recognized as compensation expense ratably over the requisite service period, which generally equals the vesting period of the award. We also grant performance-based restricted share units (“PSUs”). PSU awards are recognized as compensation expense beginning at the grant date and reassessed quarterly for probability. We reassess the probability of achievement at each reporting period and adjust compensation cost, as necessary. If there are any changes in our probability assessment, we recognize a cumulative catch-up adjustment in the period of the change in estimate, with the remaining unrecognized expense recognized prospectively over the remaining requisite service period. If we subsequently determine that the performance criteria are not met or are not expected to be met, any amounts previously recognized as compensation expense are reversed in the period when such determination is made. We record actual forfeitures in the period in which the forfeiture occurs. We use the Black-Scholes option pricing model to estimate the fair value of option awards.
Warranties
We provide base warranties on the products we sell for specific periods of time, which vary depending upon the type of product and the geographic location of its sale. Pursuant to these warranties, we will repair, replace or remodel all parts that are defective in factory-supplied materials or workmanship. We accrue the estimated cost of warranty coverages at the time of sale using historical information regarding the nature, frequency, and average cost of claims for each product. We then compare the resulting accruals with present spending rates, among other factors, to assess whether the balances are adequate to meet expected future obligations. Based on this data, we update the estimates as necessary.
Inventory Valuation
Inventories consist of merchandise held for sale and are stated at the lower of cost or net realizable value. When evidence exists that the net realizable value of inventory is lower than its cost, the difference is recorded in cost of sales in our consolidated statement of operations as a loss in the period in which it occurs. We provide provisions for losses related to inventories based on historical purchase cost, selling price, margin and current business trends. The estimates have calculations that require us to make assumptions based on the current rate of sales, age, salability of inventory, and profitability of inventory, all of which may be affected by changes in merchandising mix and consumer preferences. We review and update these reserves on a quarterly basis.
Due to the uncertainty and potential volatility of the factors used in establishing estimates, changes in assumptions could materially affect our financial condition and results of operations.
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Acquisitions
We apply the provisions of the Accounting Standards Codification (“ASC”) 805, Business Combinations. Under this provision, we use the acquisition method of accounting where the purchase consideration is allocated to the underlying net tangible and intangible assets acquired, based on their respective fair values. The excess of the purchase consideration over the estimated fair values of the net assets acquired is recorded as goodwill. Identifiable assets acquired, liabilities assumed and any noncontrolling interest in the acquiree are recognized and measured as of the acquisition date at fair value. Additionally, any contingent consideration is recorded at fair value on the acquisition date and classified as a liability. Goodwill is recognized to the extent by which the aggregate of the acquisition-date fair value of the consideration transferred and any noncontrolling interest in the acquiree exceeds the recognized basis of the identifiable assets acquired, net of assumed liabilities.
Determining the fair value of assets acquired, liabilities assumed and noncontrolling interest requires management’s judgement and often involves the use of estimates and assumptions, including but not limited to, the selection of appropriate valuation methodology, projected revenue, expense and cash flows, weighted average cost of capital, discount rates, estimate of customer turnover, estimates of terminal values, and royalty rates. We may use third party valuation specialists to determine the assets acquired, liabilities assumed, and corresponding offset to goodwill.
Recently Issued and Adopted Accounting Standards
See Note 2. “Significant Accounting Policies” of Notes to Consolidated Financial Statements in this Form 10-K for additional information.
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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk is the potential economic loss that may result from adverse changes in the fair value of financial instruments. We are exposed to various market risks, including changes in interest rates and foreign currency rates. Periodically, we use derivative financial instruments to manage or reduce the impact of changes in interest rates and foreign currency rates. Counterparties to all derivative contracts are major financial institutions. All instruments are entered into for other than trading purposes.
Currency Fluctuation Risk
We conduct business in various locations throughout the world and are subject to market risk due to changes in value of foreign currencies in relation to our reporting currency, the U.S. dollar. The functional currencies of our international operating locations are generally the local currency. For the Fiscal Year 2024, approximately 17% of our net sales were made by our international operating locations that use a functional currency other than the U.S. dollar. These sales were transacted in Euros, Canadian dollars and Australian dollars. Consequently, we are exposed to the impact of exchange rate volatility between the U.S. dollar and these currencies. We manage various operating activities at the local level and net sales, costs, assets and liabilities are denominated in both the local currency and the U.S. dollar. Our results of operations and assets and liabilities are reported in U.S. dollars and thus will fluctuate with changes in applicable exchange rates.
The Company’s transactions, including those arising from intercompany transactions, that can be affected by foreign currency fluctuations and exchange risks consist primarily of cash and cash equivalents, trade receivables, trade payables and expenses denominated in currencies other than the functional currency of the operating entity. Periodically, we use derivative financial instruments to manage the risks around the non-functional currency cash flows of our operating entities and may use forward and option contracts denominated in the Canadian dollar, the Euro and Australian dollar.
Based on the Fiscal Year 2024, an aggregate increase or decrease of 10% in the currency exchange rate would have caused a translational increase or decrease of approximately $18 million and $2 million in net sales and net income, respectively.
Interest Rate Risk
Our results are subject to risk from interest rate fluctuations on borrowings under the Credit Facilities. Our borrowings bear interest at a variable rate, therefore, we are exposed to market risks relating to changes in interest rates. As of December 31, 2024, we had $965.0 million of outstanding variable rate loans under the First Lien Term Facility. Based on our December 31, 2024 variable rate loan balances, an increase or decrease of 1% in the effective interest rate would have caused an increase or decrease in interest cost of approximately $3.7 million, net of interest rate swap settlements.
As of each of December 31, 2024 and December 31, 2023, the Company was a party to interest rate swap agreements of a notional amount of $600.0 million. During the year-ended December 31, 2024, the Company entered into interest rate swap agreements with a notional amount of $250.0 million that will become effective in March 2025 and replace existing swap agreements with a notional amount of $250.0 million that had March 2025 maturity dates. These new agreements mature in March 2028.
Impact of Inflation
Our results of operations and financial condition are presented based on historical cost. We actively manage the impact of inflation, including import duties and tariffs, through strong relationships with our diverse supplier base, vendor terms negotiations, and price and promotion management. Historically, we have been able to realize price increases to partially or fully offset cost inflation. We strategically invest through inventory purchases to obtain favorable pricing ahead of vendor price increases. As a result, we believe we have the ability to mitigate negative impacts of inflation.
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ITEM 8. FINANCIAL STATEMENTS
HAYWARD HOLDINGS, INC.
Index to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm (PCAOB ID No. | |||||
| Consolidated Financial Statements | |||||
| Notes to Consolidated Financial Statements | |||||
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Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Hayward Holdings, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Hayward Holdings, Inc. and its subsidiaries (the "Company") as of December 31, 2024 and 2023, and the related consolidated statements of operations, of comprehensive income, of changes in redeemable stock and stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2024, including the related notes (collectively referred to as the "consolidated financial statements"). We also have audited the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
As described in Management’s Report on Internal Control over Financial Reporting, management has excluded ChlorKing HoldCo, LLC and related entities (“ChlorKing”) from its assessment of internal control over financial reporting as of December 31, 2024, because it was acquired by the Company in a purchase business combination during 2024. We have also excluded ChlorKing from our audit of internal control over financial reporting. ChlorKing is a wholly-owned subsidiary whose total assets and total revenues excluded from management’s assessment and our audit of internal control over financial reporting represent approximately 1% and 1%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2024.
59
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Revenue Recognition
As described in Note 3 to the consolidated financial statements, the Company primarily sells pool equipment to its customers. The Company’s consolidated net sales were $1,051.6 million for the year ended December 31, 2024. An arrangement with a customer contains a single performance obligation for sale of the products. Transfer of the individual product is considered the performance obligation. The Company ships its products via Free on Board (FOB) shipping point and recognizes revenue at the point-in-time of shipment to the customer. The Company recognizes revenue net of rebates and other discounts.
The principal consideration for our determination that performing procedures relating to revenue recognition is a critical audit matter is a high degree of auditor effort in performing procedures related to the Company’s revenue recognition.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the revenue recognition process. These procedures also included, among others, (i) testing the revenue recognized for a sample of revenue transactions by obtaining and inspecting source documents, such as purchase orders, invoices, proof of shipment, and subsequent cash receipts; (ii) testing a sample of rebate and other discount transactions by obtaining and inspecting source documents, such as support for the nature of the rebate or other discount, the amount, agreement with the customer, underlying calculations, and cash payment; (iii) testing a sample of rebates and other discounts accrued as of December 31, 2024 by obtaining and inspecting source documents, such as support for the nature of the rebate or other discount, the amount, agreement with the customer, underlying calculations, and subsequent cash payment; and (iv) confirming a sample of outstanding customer invoice balances as of December 31, 2024 and, for confirmations not returned, obtaining and inspecting source documents, such as purchase orders, invoices, proof of shipment, and subsequent cash receipts.
/s/ PricewaterhouseCoopers LLP
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February 27, 2025
We have served as the Company’s auditor since 1999.
61
Hayward Holdings, Inc.
Consolidated Balance Sheets
(Dollars in thousands, except per share data)
| December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Assets | |||||||||||
| Current assets | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
Short-term investments | |||||||||||
Accounts receivable, net of allowances of $ | |||||||||||
| Inventories, net | |||||||||||
| Prepaid expenses | |||||||||||
| Income tax receivable | |||||||||||
| Other current assets | |||||||||||
| Total current assets | |||||||||||
| Property, plant and equipment, net | |||||||||||
| Goodwill | |||||||||||
| Trademark | |||||||||||
| Customer relationships, net | |||||||||||
| Other intangibles, net | |||||||||||
| Other non-current assets | |||||||||||
| Total assets | $ | $ | |||||||||
| Liabilities, Redeemable Stock and Stockholders’ Equity | |||||||||||
| Current liabilities | |||||||||||
Current portion of long-term debt | $ | $ | |||||||||
| Accounts payable | |||||||||||
| Accrued expenses and other liabilities | |||||||||||
| Income taxes payable | |||||||||||
| Total current liabilities | |||||||||||
| Long-term debt | |||||||||||
| Deferred tax liabilities, net | |||||||||||
| Other non-current liabilities | |||||||||||
| Total liabilities | |||||||||||
| Commitments and contingencies (Note 14) | |||||||||||
| Stockholders’ equity | |||||||||||
Preferred stock, $ | |||||||||||
Common stock $ | |||||||||||
| Additional paid-in capital | |||||||||||
Treasury stock; | ( | ( | |||||||||
| Retained earnings | |||||||||||
Accumulated other comprehensive income (loss) | ( | ||||||||||
| Total stockholders’ equity | |||||||||||
| Total liabilities, redeemable stock and stockholders’ equity | $ | $ | |||||||||
See accompanying notes to consolidated financial statements.
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Hayward Holdings, Inc.
Consolidated Statements of Operations
(Dollars in thousands, except per share data)
| Years Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Net sales | $ | $ | $ | ||||||||||||||
| Cost of sales | |||||||||||||||||
| Gross profit | |||||||||||||||||
Selling, general and administrative expense | |||||||||||||||||
Research, development and engineering expense | |||||||||||||||||
| Acquisition and restructuring related expense | |||||||||||||||||
| Amortization of intangible assets | |||||||||||||||||
| Operating income | |||||||||||||||||
| Interest expense, net | |||||||||||||||||
| Loss on debt extinguishment | |||||||||||||||||
| Other (income) expense, net | ( | ( | |||||||||||||||
| Total other expense | |||||||||||||||||
| Income from operations before income taxes | |||||||||||||||||
| Provision for income taxes | |||||||||||||||||
| Net income | $ | $ | $ | ||||||||||||||
| Earnings per common share | |||||||||||||||||
| Basic | $ | $ | $ | ||||||||||||||
| Diluted | $ | $ | $ | ||||||||||||||
| Weighted average common share outstanding | |||||||||||||||||
| Basic | |||||||||||||||||
| Diluted | |||||||||||||||||
See accompanying notes to consolidated financial statements.
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Hayward Holdings, Inc.
Consolidated Statements of Comprehensive Income
(In thousands)
| 2024 | 2023 | 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gross | Taxes | Net | Gross | Taxes | Net | Gross | Taxes | Net | ||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustments | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net change on cash flow hedges | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Comprehensive income | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||
See accompanying notes to consolidated financial statements.
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Hayward Holdings, Inc.
Consolidated Statements of Changes in Redeemable Stock and Stockholders’ Equity
(Dollars in thousands)
| Common Stock | Additional Paid-In Capital | Treasury Stock | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2021 | $ | $ | $ | ( | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for compensation plans | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Repurchase of stock | ( | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2022 | $ | $ | $ | ( | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for compensation plans | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Repurchase of stock | — | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2023 | $ | $ | $ | ( | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for compensation plans | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Repurchase of stock | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2024 | $ | $ | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||||||||||
See accompanying notes to consolidated financial statements.
65
Hayward Holdings, Inc.
Consolidated Statements of Cash Flows
(In thousands)
| Years Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Cash flows from operating activities | |||||||||||||||||
| Net income | $ | $ | $ | ||||||||||||||
| Adjustments to reconcile net income to net cash provided by operating activities | |||||||||||||||||
| Depreciation | |||||||||||||||||
| Amortization of intangible assets | |||||||||||||||||
| Amortization of deferred debt issuance fees | |||||||||||||||||
| Stock-based compensation | |||||||||||||||||
| Deferred income taxes | ( | ( | ( | ||||||||||||||
| Allowance for bad debts | ( | ( | |||||||||||||||
| Loss on debt extinguishment | |||||||||||||||||
| Loss on impairment | |||||||||||||||||
| (Gain) loss on sale of property, plant and equipment | ( | ||||||||||||||||
| Changes in operating assets and liabilities | |||||||||||||||||
| Accounts receivable | ( | ( | ( | ||||||||||||||
| Inventories | ( | ||||||||||||||||
| Other current and non-current assets | ( | ( | |||||||||||||||
| Accounts payable | ( | ||||||||||||||||
| Accrued expenses and other liabilities | ( | ( | |||||||||||||||
| Net cash provided by operating activities | |||||||||||||||||
| Cash flows from investing activities | |||||||||||||||||
| Purchases of property, plant, and equipment | ( | ( | ( | ||||||||||||||
Purchases of short-term investments | ( | ||||||||||||||||
| Acquisitions, net of cash acquired | ( | ( | |||||||||||||||
| Proceeds from sale of property, plant, and equipment | |||||||||||||||||
| Proceeds from short-term investments | |||||||||||||||||
| Net cash used in investing activities | ( | ( | ( | ||||||||||||||
| Cash flows from financing activities | |||||||||||||||||
| Purchases of common stock for treasury | ( | ( | |||||||||||||||
| Proceeds from issuance of long-term debt | |||||||||||||||||
| Debt issuance costs | ( | ||||||||||||||||
| Payments of long-term debt | ( | ( | ( | ||||||||||||||
| Proceeds from revolving credit facility | |||||||||||||||||
| Payments on revolving credit facility | ( | ( | |||||||||||||||
| Proceeds from issuance of short term debt | |||||||||||||||||
| Payments of short term debt | ( | ( | ( | ||||||||||||||
| Other, net | ( | ||||||||||||||||
| Net cash (used in) provided by financing activities | ( | ( | ( | ||||||||||||||
Effect of exchange rate changes on cash and cash equivalents | ( | ( | |||||||||||||||
Change in cash and cash equivalents | ( | ||||||||||||||||
Cash and cash equivalents, beginning of year | |||||||||||||||||
Cash and cash equivalents, end of year | $ | $ | $ | ||||||||||||||
66
Hayward Holdings, Inc.
Consolidated Statements of Cash Flows
(In thousands)
| Supplemental disclosures of cash flow information: | |||||||||||||||||
| Cash paid-interest | $ | $ | $ | ||||||||||||||
| Cash paid-income taxes | |||||||||||||||||
Non-cash investing and financing activities: | |||||||||||||||||
Accrued and unpaid purchases of property, plant, and equipment | $ | $ | $ | ||||||||||||||
| Equipment financed under finance leases | ( | ||||||||||||||||
See accompanying notes to consolidated financial statements.
67
Notes to Consolidated Financial Statements
Note 1. Nature of Operations and Organization
Note 2. Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. Certain prior period amounts have been reclassified for comparative purposes to conform to the current presentation.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Significant items subject to estimates and assumptions include the valuation of allowances for receivables, inventories, the carrying value of goodwill and other intangible assets, fair value measurements, derivative financial instruments, revenue recognition, income taxes, stock-based compensation, self-insurance and warranty obligations and the fair value of acquired assets and liabilities. Actual results may differ significantly from those estimates.
Cash and Cash Equivalents
Cash equivalents primarily consist of cash on deposit with banks, readily marketable and highly rated investments in government securities and commercial paper with an original maturity date of three months or less at date of purchase; and money market funds that invest substantially all their assets in the types of investments aforementioned.
Periodically throughout the period, the Company’s cash balance exceeded the amount insured by the Federal Deposit Insurance Corporation (“FDIC”). The Company maintains cash balances at banking institutions in Australia, China, Canada, France, Spain and the United Kingdom which are not protected by FDIC insurance. The Company mitigates potential cash risk by maintaining bank accounts with credit-worthy financial institutions. The Company does not believe that its cash balances are subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships.
Short-term Investments
The Company classifies its investments as cash and cash equivalents or short-term investments based upon the terms of the investment. As of December 31, 2024 and December 31, 2023, the Company had certificates of deposit of zero and $25 million, respectively, reported as short-term investments in the consolidated balance sheets. Short-term investments are recorded at amortized cost, which approximates fair value, and realized gains or losses are reported in earnings.
Accounts Receivable, Net
Accounts receivable is presented net of accrued rebates and allowances for returns and doubtful accounts. The Company’s allowance for doubtful accounts is an estimate of current expected credit losses that is determined based on a variety of factors that affect the potential collectability of related receivables, including customer history, customer credit ratings, financial stability of customers, specific one-time events and overall economic environment.
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Activity in the Company’s allowance for doubtful accounts is as follows (in thousands):
| Balance at Beginning of Period | Charges (Recoveries) to Costs and Expenses | (Deductions) | Balance at End of Period | |||||||||||||||||||||||||||||
| 2022 | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||
| 2023 | ( | ( | ||||||||||||||||||||||||||||||
| 2024 | ( | ( | ||||||||||||||||||||||||||||||
On July 3, 2024, the Company entered into a Receivables Purchase Agreement under which it may offer to sell eligible accounts receivable. The agreement is uncommitted and the eligible accounts receivable to be sold under the agreement consist of up to $125 million in accounts receivable generated by sales to specified customers of the Company. The Company will be paid a discounted purchase price for each receivable sold. The discount rate used to determine the purchase price for the subject receivables is based upon an annual interest rate equal to the forward-looking term rate based on the secured overnight financing rate for the period of time between payment to the Company and the due date for the receivable plus a buffer period specific to the obligor, plus a margin applicable to the specified obligor.
Transactions under this agreement are accounted for as sales of accounts receivable, and the receivables sold are removed from the consolidated balance sheets at the time of the sales transaction. Proceeds received from the sales of accounts receivable are classified as operating cash flows and collections of previously sold accounts receivable not yet submitted to the financial institution are classified as financing cash flows in the consolidated statements of cash flows. We record the discount in the “Other expense, net” line in the consolidated statements of operations. The Company, as the servicer under the Receivables Purchase Agreement, continues to service the accounts receivable sold. For the year ended December 31, 2024, there were immaterial proceeds from the sale of receivables under the Receivables Purchase Agreement and all sold receivables had been collected and remitted to the transferee as of December 31, 2024.
Inventories
Property, Plant, and Equipment
Property, plant and equipment is recorded at cost and depreciated using the straight-line method of depreciation based upon the following estimated useful lives:
•Buildings and improvements—10 to 40 years
•Machinery, tools and equipment—3 to 20 years
Repairs and maintenance are charged to expense as incurred. Upon disposition, the asset and corresponding accumulated depreciation are removed from the related accounts and any gains or losses are reflected in operating income.
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The Company did not have any long-lived asset impairment charges for the year ended December 31, 2024. For the year ended December 31, 2023, the Company recorded a $3.9 million impairment charge in its North America reportable segment for significant long-lived assets associated with the discontinuation of a product line. The charge is recorded within acquisition and restructuring related expense in the consolidated statements of operations. For the year ended December 31, 2022, the Company recorded a $5.5 million impairment charge in its North America reportable segment for significant long-lived assets associated with the discontinuation of a product joint development agreement. The charge is recorded within selling, general and administrative expense within the consolidated statements of operations.
Goodwill and Intangible Assets
The purchase price in excess of net assets of businesses acquired is classified as goodwill in the accompanying consolidated balance sheets.
The Company tests goodwill at the reporting unit level, which is defined as an operating segment or one level below an operating segment that constitutes a business for which financial information is available and is regularly reviewed by the Chief Operating Decision Maker (“CODM”). The Company determined that it has 4 reporting units for this purpose. The Company tests for impairment at least annually or if there is an indication that goodwill may be impaired.
The Company has the option to first complete a qualitative assessment (i.e., “Step 0”) to determine whether it is more likely than not that the fair value of the business is less than its carrying amount. If the Company determines that this is the case, it is required to perform the currently prescribed quantitative impairment test to identify potential goodwill impairment and measure the amount of goodwill impairment loss to be recognized for that reporting unit, if any. In addition to the more likely than not assessment as part of the Step 0, if significant time has elapsed since the prior valuation or economic conditions have been volatile, the Company may elect to perform a quantitative assessment.
Under the quantitative assessment, the Company compares the carrying value of goodwill at a reporting unit level to an estimate of the fair value of the respective reporting unit. Fair value of the reporting unit is estimated using a discounted six-year projected cash flow analyses and a terminal value calculation at the end of the six-year period. If the fair value of the reporting unit exceeds its carrying value, the goodwill associated with the reporting unit is not impaired. If the carrying value of the reporting unit exceeds its fair value, an impairment loss is recognized for the amount by which the reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill.
For the year ended December 31, 2024, the Company completed a qualitative assessment and for the year ended December 31, 2023, the Company completed a quantitative impairment analysis of goodwill for each of its reporting units at November 30, 2024 and 2023, respectively. The qualitative assessment for the year ended December 31, 2024 indicated that it was more likely than not that the fair values of the reporting units were more than the carrying values. The results of the quantitative assessment for the year ended December 31, 2023 indicated the fair value of each of the reporting units exceeded the corresponding carrying value.
Intangible assets with indefinite lives (i.e., trademarks) are not amortized; rather, they are tested for impairment whenever events or circumstances exist that would make it more likely than not that an impairment exists. The Company first assesses qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired. If adverse qualitative trends are identified that could negatively impact the fair value of the asset, then quantitative impairment tests are performed to compare the carrying value of the asset to its undiscounted expected future cash flows. If this test indicates that there is impairment, the impaired asset is written down to fair value.
For the year ended December 31, 2024, the Company completed a qualitative impairment analysis of indefinite-lived intangible assets at November 30, 2024. The results of the qualitative assessment indicated that it was more likely than not that the fair values of the indefinite-lived intangible assets were more than the carrying values. For the year ended December 31, 2023, the Company completed a quantitative assessment of indefinite-lived intangible assets in conjunction with its quantitative impairment analysis of goodwill at November 30, 2023. The results of the quantitative assessment for the year ended December 31, 2023 indicated the fair values exceeded the corresponding carrying values.
70
Intangible assets with finite lives are amortized based on the estimated useful life of the intangible asset using a method that reflects the pattern in which the economic benefits of the intangible assets are consumed or otherwise used, or, if that pattern cannot be reliably determined, using a straight-line amortization method.
Fair Value Measurements
The Company measures certain of its assets and liabilities at fair value, which is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants, in either the principal market or the most advantageous market. The principal market is the market with the greatest level of activity and volume for the asset or liability.
The common framework for measuring fair value utilizes a three-level hierarchy to prioritize the inputs used in the valuation techniques to derive fair values. The basis for fair value measurements for each level within the hierarchy is described below with Level 1 having the highest priority and Level 3 having the lowest.
Level 1 Quoted prices in active markets for identical assets or liabilities.
Level 2 Quoted prices in active markets for similar assets or liabilities; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable in active markets.
Level 3 Valuations derived from valuation techniques in which one or more significant inputs are unobservable.
Derivatives
In the normal course of business, the Company is exposed to the impact of interest rate changes and foreign currency fluctuations. The Company manages its economic and transactional exposure to certain market risks through the use of foreign currency derivative instruments and interest rate swaps. The Company’s objective in holding derivatives is to reduce the volatility of net earnings, cash flows and net asset value associated with changes in foreign currency exchange rates and interest rates. The Company does not hold derivative instruments for trading or speculative purposes.
The Company limits its exposure to these risks by following established risk management policies and procedures, including the use of derivatives. For interest rate exposures, derivatives are used to manage the related cost of debt. As a result of the use of derivative instruments, the Company is exposed to the risk that counterparties to derivative contracts will fail to meet their contractual obligations. To mitigate counterparty credit risk, the Company only enters into contracts with credit-worthy counterparties.
In accordance with Accounting Standards Codification (“ASC”) Topic 815, Derivatives and Hedging, the Company records all derivative instruments on its consolidated balance sheets at fair value and evaluates hedge effectiveness prospectively and retrospectively when electing to apply hedge accounting. When electing to apply hedge accounting, the Company formally documents all derivative hedges at inception and the underlying hedged items, as well as the risk management objectives and strategies for undertaking the hedge transaction.
71
Revenue Recognition
Revenue is recognized by the Company, net of sales taxes, when goods or services obligated in a contract with a customer have been transferred, and no further performance obligation on such transfer is required, in an amount that reflects the consideration expected to be received. For the sale of the Company’s products, revenue is typically recognized upon shipment.
Customers are offered volume discounts and other promotional benefits. The Company estimates volume discounts, promotional benefits, and returns based upon the terms of the customer contracts and actual historical experience and records such amounts as a reduction of gross sales with either an offsetting adjustment to accounts receivable or recognition of an accrued liability. The Company regularly monitors the adequacy of these offsets by comparing to actual results.
The Company considers shipping and handling activities as a fulfillment activity. Net sales include outbound shipping and handling charges billed to customers. Cost of sales includes all costs incurred in connection with inbound and outbound shipping and handling.
Income Taxes
The Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes. Under ASC Topic 740, deferred tax assets and deferred tax liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted rates in effect for the year in which the differences are expected to reverse. A valuation allowance is recorded if it is more likely than not that a deferred tax asset will not be realized.
The Company follows the guidance in ASC Topic 740-10 in assessing uncertain tax positions. The standard applies to all tax positions and clarifies the recognition of tax benefits in the financial statements by providing for a two-step approach of recognition and measurement. The first step involves assessing whether the tax position is more-likely-than-not to be sustained upon examination based upon its technical merits. The second step involves measurement of the amount to be recognized. Tax positions that meet the more-likely-than-not threshold are measured at the amount of tax benefit that is greater than 50% likely of being realized upon ultimate agreement with the taxing authority. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences impact income tax expense in the period in which such determination is made. Interest and penalties, if any, related to accrued liabilities for potential tax assessments are included in income tax expense. See Note 8. Income Taxes.
The Company’s policy is to record estimated interest and penalties related to uncertain tax positions in income tax expense, of which there was no
Concentration of Credit Risks
The Company’s largest customer accounted for approximately 36 47 % and 38 % of total accounts receivable at December 31, 2024 and 2023, respectively. Another customer accounted for approximately 11 % of consolidated sales for the year ended December 31, 2024 and represented 11 % and 10 % of total accounts receivable at December 31, 2024 and 2023, respectively. The Company’s sales to these customers are included in both the North America and Europe & Rest of World reportable segments. The Company has adequate availability of suppliers. The loss of any one supplier would not have a long-term material effect on the Company’s operations.
Research, Development, and Engineering
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Advertising Costs
Stock-Based Compensation
The Company uses its common stock, par value $0.001 per share (“Common Stock”), for various forms of share-based compensation arrangements entered into with its employees and directors. Share-based compensation arrangements are accounted for at fair value on the date of grant. The fair value of stock options is determined using a Black-Scholes valuation model. The fair value of other share-based awards is based on the valuation of the Common Stock on the date of grant. The fair value of time-based awards that are ultimately expected to vest is recognized as an expense on a straight-line basis over the requisite service period. The fair value of performance-based awards is recognized in the period the performance condition is probable of occurring. The Company recognizes forfeitures as they occur. Stock-based compensation costs are recorded in selling, general and administrative expenses in the consolidated statements of operations. See Note 17. Stock-based Compensation.
Earnings per Share
The Company presents both basic and diluted earnings per share amounts. Basic earnings per share is calculated by dividing net earnings attributable to the Company by the weighted average number of common shares outstanding during the year. Diluted earnings per share is based upon the weighted average number of common and common equivalent shares outstanding during the year, which is calculated using the treasury stock method for outstanding share-based compensation awards.
Insurance
The Company obtains standard corporate insurance policies with an insured position subject to retention (deductible) for risks including, but not limited to, fire, flood, cyber, directors and officers, business interruption, ocean cargo, workers’ compensation in the United States, automobile, property and casualty, general liability and product liability. The Company offers employee medical benefits in the United States under a self-funded plan combined with stop-loss coverage to limit its exposure to large claims. Insurance claims filed and claims incurred but not reported are accrued based upon estimates of the ultimate costs to be incurred using historical experience.
Foreign Currency Translation
The Company predominantly uses the U.S. dollar as its functional currency. The Company has international subsidiaries whose local currency has been determined to be their functional currency. For these subsidiaries, the assets and liabilities are translated using period-end exchange rates, and the revenues and expenses are translated at the average rates of exchange prevailing during the period. The adjustments resulting from translation are recorded separately in stockholders’ equity as a component of accumulated other comprehensive loss. The effect of exchange rate changes on intercompany transactions of a long-term and permanent nature are credited or charged directly to a separate component of stockholders’ equity. Foreign currency transaction gains and losses, including the remeasurement of monetary assets or liabilities denominated in a currency other than the functional currency, are reported in other income or expense.
Acquisitions
The Company accounts for business combinations by applying the acquisition method. The Company’s consolidated financial statements include the operating results of acquired entities from the respective dates of acquisition. The Company recognizes and measures the identifiable assets acquired, liabilities assumed, and any non-controlling interest as of the acquisition date at fair value. The excess, if any, of total consideration transferred in a business combination over the fair value of identifiable assets acquired, liabilities assumed and any non-controlling interest is recognized as goodwill in the accompanying consolidated balance sheets. Costs incurred by the Company to effect a business combination other than costs related to the issuance of debt or equity securities are included in the accompanying consolidated statements of operations in the period the costs are incurred.
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Asset acquisitions are accounted for using a cost accumulation and allocation model and the cost of the acquisition is allocated to the assets acquired and liabilities assumed. In an acquisition of assets, acquisition-related costs are capitalized and goodwill is not assigned. Contingent consideration obligations incurred in connection with an asset acquisition are recorded when it is probable that they will occur and they can be reasonably estimated.
Leases
The Company determines whether a contract is or contains a lease at contract inception based on the presence of identified assets and its right to obtain substantially all the economic benefit from and to direct the use of such assets. When the Company determines a lease exists, it records a right-of-use (“ROU”) asset and corresponding lease liability on its consolidated balance sheet. ROU assets represent the Company’s right to use an underlying asset for the lease term. Lease liabilities represent the Company’s obligation to make lease payments arising from the lease. The Company’s lease liabilities are recognized at the applicable lease commencement date based on the present value of the lease payments required to be paid over the lease term. When the rate implicit in the lease is not readily determinable, the Company uses the incremental borrowing rate to discount the lease payments to present value. The estimated incremental borrowing rate is derived from information available at the lease commencement date and factors in a hypothetical interest rate on a collateralized basis with similar terms, payments and economic environments. The Company’s ROU assets are also recognized at the applicable lease commencement date. The ROU asset equals the carrying amount of the related lease liability, adjusted for any lease payments made prior to lease commencement, minus any lease incentives received, and any direct costs incurred by the lessee.
Recently Adopted Accounting Standards
Segment Reporting
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Improvements to Reportable Segment Disclosures, which requires enhanced disclosures about significant segment expenses. For the year ended December 31, 2024, the Company adopted the standard resulting in additional segment expense disclosures. Refer to Note 12 for additional details regarding the Company’s segment disclosures.
Reference Rate Reform
In March 2020, the FASB issued guidance that provides optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by the transition away from reference rates expected to be discontinued to alternative reference rates. The guidance was effective upon issuance and may be applied prospectively to contract modifications made and hedging relationships entered into on or before December 31, 2022. In December 2022, the FASB issued additional guidance deferring the sunset date of Topic 848 - Reference Rate Reform until December 31, 2024.
During the year-ended December 31, 2023, the Company completed the transition of its financial instruments and debt agreements effected by reference rate reform, including its existing First Lien Credit Agreement, to an alternative base rate instead of LIBOR. The adoption of this standard has not had a material impact on the Company’s consolidated financial statements. Refer to Note 9 for additional details regarding the Company’s amendments to its debt agreements.
Recently Issued Accounting Standards
Income Taxes
In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures, which is intended to improve income tax disclosure requirements by requiring (i) consistent categories and greater disaggregation of information in the rate reconciliation and (ii) the disaggregation of income taxes paid by jurisdiction. The guidance makes several other changes to the income tax disclosure requirements. The amendments in ASU 2023-09 are effective for fiscal years beginning after December 15, 2024, with early adoption permitted, and is required to be applied prospectively with the option of retrospective application. The Company is evaluating the impact of the standard on its income tax disclosures and does not intend to early adopt.
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Disaggregation of Income Statement Expenses
In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses, which includes requirements that an entity disclose in the notes to the financial statements specified information about certain costs and expenses, including the amounts of (a) purchases of inventory, (b) employee compensation, (c) depreciation and (d) intangible asset amortization included in each relevant expense caption presented on the statement of operations. The standard also requires disclosure of a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively, as well as the total amount of selling expenses and an entity’s definition of selling expenses. The amendments in this update are effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is evaluating the impact of the standard on its disclosures.
Note 3. Revenue Recognition
The Company primarily sells pool equipment including pumps, filters, heaters, cleaners, salt chlorinators, automation, lighting, safety and flow control products to its customers. An arrangement with a customer contains a single performance obligation for sale of the products. Transfer of the individual product is considered the performance obligation. The Company ships its products via Free on Board (“FOB”) shipping point and recognizes revenue at the point-in-time of shipment to the customer. The Company’s standard customer payment terms are net thirty days. The Company has established an early-buy program for select customers for purchases made outside of peak season that extends favorable payment terms, generally not to exceed 180 days, and applies the practical expedient in Accounting Standards Codification (the “ASC”) 606-10-32-18 to not adjust the amount of consideration for the effects of a significant financing component. The Company recognizes revenue net of rebates and other discounts.
Under some arrangements, the Company and its customer agree to an annual incentive agreement. These incentive agreements establish all potential rebates and discounts. The transaction price is reduced for certain customer programs and offerings including pricing arrangements and other volume-based rebates and discounts that represent variable consideration.
Volume-based rebates are negotiated at or prior to the time of sale with the customer and are redeemable only if the customer achieves a specified cumulative level of sales or sales increase. Under these rebate programs, at the time of sale, the Company determines the most likely amount of the rebate based on forecasted sales levels. These forecasts are updated at least quarterly for each customer, and the anticipated cost of the rebate reduces gross sales.
The following tables disaggregate net sales between product groups and geographic regions, respectively (in thousands):
| Years Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Product groups | |||||||||||||||||
| Residential pool | $ | $ | $ | ||||||||||||||
| Commercial pool | |||||||||||||||||
| Flow control | |||||||||||||||||
| Total | $ | $ | $ | ||||||||||||||
| Geographic | |||||||||||||||||
| United States | $ | $ | $ | ||||||||||||||
| Canada | |||||||||||||||||
| Europe | |||||||||||||||||
| Rest of World | |||||||||||||||||
| Total International | |||||||||||||||||
| Total | $ | $ | $ | ||||||||||||||
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Note 4. Inventories
Inventories consist of the following (in thousands):
| December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Raw materials | $ | $ | |||||||||
| Work in progress | |||||||||||
| Finished goods | |||||||||||
| Total | $ | $ | |||||||||
Activity in the Company’s inventory obsolescence reserve is as follows (in thousands):
| Balance at Beginning of Period | Charges to Costs and Expenses | Deductions | Balance at End of Period | ||||||||||||||||||||||||||
| 2022 | $ | $ | $ | ( | $ | ||||||||||||||||||||||||
| 2023 | ( | ||||||||||||||||||||||||||||
| 2024 | $ | $ | $ | ( | $ | ||||||||||||||||||||||||
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Note 5. Property, Plant and Equipment, Net
The carrying value of property, plant, and equipment is as follows (in thousands):
| December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Land | $ | $ | |||||||||
| Buildings and improvements | |||||||||||
| Machinery, tools and equipment | |||||||||||
Information technology equipment and software | |||||||||||
| Construction in progress | |||||||||||
| Owned equipment | |||||||||||
| Machinery, tools and equipment | |||||||||||
| Construction in progress | |||||||||||
| Equipment under finance lease | |||||||||||
| Less: Accumulated depreciation | ( | ( | |||||||||
| Total | $ | $ | |||||||||
Depreciation expense was $20.1 million, $16.0 million, and $19.2 million (of which $14.6 million, $12.6 million and $15.1 million is included within cost of sales) for the years ended December 31, 2024, 2023, and 2022, respectively.
The following table presents property, plant, and equipment, net, by country (in thousands):
| December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| United States | $ | $ | |||||||||
| China | |||||||||||
| Canada | |||||||||||
| Spain | |||||||||||
| France | |||||||||||
| Other | |||||||||||
| Total | $ | $ | |||||||||
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Note 6. Goodwill and Intangible Assets
Goodwill
A summary of changes in goodwill is as follows (in thousands):
| North America | Europe & Rest of World | Total | |||||||||||||||
Balance at December 31, 2022 | $ | $ | $ | ||||||||||||||
| Currency translation | |||||||||||||||||
Balance at December 31, 2023 | |||||||||||||||||
| Acquisitions | |||||||||||||||||
| Currency translation | ( | ( | ( | ||||||||||||||
Balance at December 31, 2024 | $ | $ | $ | ||||||||||||||
As of November 30, 2024 the Company performed a qualitative analysis and determined that the fair values of the reporting units were more likely than not greater than the carrying amounts. In 2023, the Company performed a quantitative impairment analysis, and no goodwill impairments were recorded.
Intangible Assets
Intangible assets consist of the following (in thousands):
| December 31, 2024 | December 31, 2023 | ||||||||||||||||||||||||||||||||||
| Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | ||||||||||||||||||||||||||||||
| Customer relationships | $ | $ | ( | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||
| Covenant not to compete | ( | ( | |||||||||||||||||||||||||||||||||
| Trademarks | ( | ( | |||||||||||||||||||||||||||||||||
| Product technology | ( | ( | |||||||||||||||||||||||||||||||||
| Total amortizable intangibles | ( | ( | |||||||||||||||||||||||||||||||||
| Trademarks | — | — | |||||||||||||||||||||||||||||||||
| Total intangible assets | $ | $ | ( | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||
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| Estimated Useful Lives | Net Carrying Amount December 31, 2023 | Additions | Amortization | Impairment | Currency Translation | Net Carrying Amount December 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||
| Customer relationships | $ | $ | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||||
| Covenant not to compete | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
| Trademarks | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
| Product technology | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||
| Total amortizable intangibles | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||
| Trademarks | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Total intangible assets | $ | $ | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||||
| Estimated Useful Lives | Net Carrying Amount December 31, 2022 | Additions | Amortization | Currency Translation | Net Carrying Amount December 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||
| Customer relationships | $ | $ | $ | ( | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||
| Covenant not to compete | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
| Trademarks | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||
| Product technology | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||
| Total amortizable intangibles | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||
| Trademarks | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Total intangible assets | $ | $ | $ | ( | $ | ( | $ | $ | ||||||||||||||||||||||||||||||||||||||||||
Amortization expense was $35.8 million, $37.1 million and $38.4 million (of which $7.0 million, $6.7 million and $6.3 million is included within cost of sales) for the years ended December 31, 2024, 2023 and 2022, respectively.
At December 31, 2024, the weighted-average remaining lives of definite-lived intangible assets is approximately 10.7 years. The weighted-average remaining lives at December 31, 2024 for customer relationships, trademarks, product technology and covenants not to compete are approximately 12.0 , 8.6 , 7.7 and 2.6 years, respectively.
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Estimated future amortization expense related to amortizable intangibles as of December 31, 2024 is as follows (in thousands):
| 2025 | $ | ||||
| 2026 | |||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
| Thereafter | |||||
| Total | $ | ||||
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Note 7. Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities consist of the following (in thousands):
| December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Selling, promotional and advertising | $ | $ | |||||||||
| Insurance reserve | |||||||||||
| Employee compensation and benefits | |||||||||||
| Warranty reserve | |||||||||||
| Inventory purchases | |||||||||||
| Freight | |||||||||||
| Operating lease liability - short term | |||||||||||
| Payroll taxes | |||||||||||
| Deferred income | |||||||||||
| Professional fees | |||||||||||
Taxes - non-income | |||||||||||
| Short term notes payable | |||||||||||
| Business restructuring costs | |||||||||||
| Other accrued liabilities | |||||||||||
| Total | $ | $ | |||||||||
The Company offers warranties on certain of its products and records an accrual for estimated future claims. Such accruals are based on historical experience and management’s estimate of the level of future claims.
Changes in the warranty reserve are as follows (in thousands):
Balance at January 1, 2022 | $ | ||||
| Accrual for warranties issued during the period | |||||
| Payments | ( | ||||
Balance at December 31, 2022 | |||||
| Accrual for warranties issued during the period | |||||
| Payments | ( | ||||
Balance at December 31, 2023 | |||||
| Accrual for warranties issued during the period | |||||
| Acquisition | |||||
| Payments | ( | ||||
Balance at December 31, 2024 | $ | ||||
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Note 8. Income Taxes
The components of income from operations before income taxes by jurisdiction are as follows (in thousands):
| December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| United States | $ | $ | $ | ||||||||||||||
| International | ( | ||||||||||||||||
| Total | $ | $ | $ | ||||||||||||||
The provision for income taxes is comprised of the following (in thousands):
| Years Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Current | |||||||||||||||||
| Federal | $ | $ | $ | ||||||||||||||
| State | |||||||||||||||||
| International | ( | ||||||||||||||||
| Deferred | |||||||||||||||||
| Federal | ( | ( | ( | ||||||||||||||
| State | ( | ( | ( | ||||||||||||||
| International | ( | ||||||||||||||||
| ( | ( | ( | |||||||||||||||
| Provision for income taxes | $ | $ | $ | ||||||||||||||
Reconciliation between the effective tax rate on income from operations and the statutory tax rate is as follows:
| December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| U.S. federal statutory income tax rate | % | % | % | ||||||||||||||
| State and local income taxes—net of federal benefit | |||||||||||||||||
| International withholding taxes—net of federal benefit | |||||||||||||||||
| GILTI | |||||||||||||||||
| Research & development tax credit | ( | ( | ( | ||||||||||||||
| Foreign derived intangible income (“FDII”) deduction | ( | ( | ( | ||||||||||||||
| Valuation allowance | ( | ||||||||||||||||
Prior-year tax return adjustments | ( | ( | |||||||||||||||
| Stock compensation | ( | ( | ( | ||||||||||||||
| Non-deductible compensation subject to 162(m) limitation | |||||||||||||||||
| Permanent differences | |||||||||||||||||
| International rate differential | |||||||||||||||||
| Other | ( | ( | |||||||||||||||
| Effective tax rate | % | % | % | ||||||||||||||
The decrease in the Company’s effective tax rate from 20.2 % for the year ended December 31, 2023 to 17.7 % for the year ended December 31, 2024 was primarily due to decreased foreign withholding and state taxes, partially offset by decreased tax benefit from stock compensation.
82
The tax effects of temporary differences that give rise to significant components of the deferred tax assets and liabilities are as follows (in thousands):
| December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Deferred tax asset | |||||||||||
Lease liabilities | $ | $ | |||||||||
Inventory | |||||||||||
| Warranty reserve | |||||||||||
Research and development capitalization | |||||||||||
Accrued liabilities | |||||||||||
| Net operating loss carryforwards | |||||||||||
| Deferred compensation and stock options | |||||||||||
| Insurance reserve | |||||||||||
| Interest expense | |||||||||||
| Tax credits | |||||||||||
| Other | |||||||||||
| Total deferred tax asset | |||||||||||
| Deferred tax liability | |||||||||||
| Intangible assets | ( | ( | |||||||||
| Property, plant & equipment | ( | ( | |||||||||
| Right of use assets | ( | ( | |||||||||
| Other current assets | ( | ( | |||||||||
| Derivatives | ( | ( | |||||||||
| Foreign withholding tax accrual | ( | ( | |||||||||
Net investment in lease | ( | ||||||||||
| Deferred financing costs | ( | ( | |||||||||
Unrealized foreign exchange (gain) | ( | ( | |||||||||
| Total deferred tax liability | ( | ( | |||||||||
| Subtotal | ( | ( | |||||||||
| Valuation allowance | ( | ( | |||||||||
| Net deferred tax liability | $ | ( | $ | ( | |||||||
Deferred taxes are reflected in the Company’s consolidated balance sheet based on tax jurisdiction as follows (in thousands):
| December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Deferred tax asset | $ | $ | |||||||||
| Deferred tax liability | ( | ( | |||||||||
| Net deferred tax liability | $ | ( | $ | ( | |||||||
The Company has U.S. federal net operating loss (“NOL”) carryforwards in the amount of $12.6 million and $12.6 million as of December 31, 2024 and 2023, respectively, from historical acquisitions. The NOL carryforwards expire between 2035 and 2037. The Internal Revenue Code of 1986 contains certain provisions that can limit a taxpayer’s ability to utilize net operating loss and tax credit carryforwards in any given year resulting from ownership changes in excess of 50 percent over a three-year period. The Company estimates that all of these NOL carryforwards may be subject to limitation and potentially expire prior to their utilization. The Company maintains a $12.6 million valuation allowance on these NOL carryforwards.
83
In addition, the Company’s France subsidiary has NOL carryforwards totaling approximately $1.6 million and $3.1 million as of December 31, 2024 and 2023, respectively, which have no expiration.
In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities and projected future taxable income in making this assessment. Management evaluates the need for valuation allowances on the deferred tax assets according to the provisions of ASC 740, Income Taxes. In making this determination, the Company assesses all available evidence (positive and negative) including recent earnings, internally-prepared income projections, and historical financial performance.
The Company’s total valuation allowance of $2.8 million and $3.0 million as of December 31, 2024 and 2023, respectively, consists of U.S. NOL carryforwards and U.S. tax credits.
The following table is a roll forward of the valuation allowance applied against certain deferred tax assets (in thousands):
| Balance at Beginning of Period | Provision for Income Taxes | Deductions | Balance at End of Period | ||||||||||||||||||||||||||
| 2022 | $ | $ | $ | $ | |||||||||||||||||||||||||
| 2023 | $ | $ | $ | ( | $ | ||||||||||||||||||||||||
| 2024 | $ | $ | $ | ( | $ | ||||||||||||||||||||||||
As of 2023, the Company no longer asserts that its undistributed earnings in one jurisdiction are permanently reinvested. Accordingly, the Company recorded a deferred tax liability of $2.1 million for the estimated taxes associated with the repatriation of the undistributed earnings in that jurisdiction. The Company will continue its practice and intention to reinvest the earnings of certain non-U.S. subsidiaries in those operations. As of December 31, 2024 and 2023, the Company has not made a provision for U.S. state tax or foreign withholding taxes on approximately $95.4 million for 2024 and $90.1 million for 2023 of its undistributed earnings and profits that are indefinitely reinvested. Quantification of the deferred tax liability, if any, associated with indefinitely reinvested earnings and outside basis differences is not practicable.
The Company will recognize a tax benefit in the financial statements for an uncertain tax position only if the Company’s assessment is that the position is “more likely than not” (i.e., a likelihood greater than 50 percent) to be allowed by the tax jurisdiction based solely on the technical merits of the position. The term “tax position” refers to a position in a previously filed tax return or a position expected to be taken in a future tax return that is reflected in measuring current or deferred income tax assets and liabilities for financial reporting purposes.
The following table is a reconciliation of unrecognized tax benefits including any interest and penalties (in thousands):
Balance at January 1, 2022 | $ | ||||
| Currency | |||||
Balance at December 31, 2022 | |||||
| Currency | |||||
Balance at December 31, 2023 | |||||
Additions based on tax positions related to current year | |||||
Additions based on tax positions related to prior years | |||||
Balance at December 31, 2024 | $ | ||||
The Company files tax returns in various global jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local, examinations for years before 2021. The statute of limitations in foreign
84
Note 9. Long-Term Debt
Long-term debt consists of the following (in thousands):
| December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| First Lien Term Facility, due May 28, 2028 | $ | $ | |||||||||
| Incremental Term Loan B, due May 28, 2028 | |||||||||||
| ABL Revolving Credit Facility | |||||||||||
| Other bank debt | |||||||||||
| Finance lease obligations | |||||||||||
| Subtotal | |||||||||||
Less: Current portion of long-term debt | ( | ( | |||||||||
| Less: Unamortized debt issuance costs | ( | ( | |||||||||
| Total | $ | $ | |||||||||
Interest expense, net for the years ended December 31, 2024, 2023, and 2022 consisted of the following (in thousands):
| Years Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Interest expense on outstanding debt | $ | $ | $ | ||||||||||||||
| Amortization of deferred financing fees | |||||||||||||||||
| Interest (income) | ( | ( | ( | ||||||||||||||
| Interest expense, net | |||||||||||||||||
| Loss on debt extinguishment | |||||||||||||||||
| Total | |||||||||||||||||
The Company’s existing ABL Revolving Credit Facility (the “ABL Facility”) includes revolving loan commitments of $425.0 million, with a peak season commitment of $475.0 million, subject to a borrowing base calculation based on available eligible receivables, inventory, and qualified cash in North America. Accounts receivable sold under the Receivables Purchase Agreement are not eligible receivables under the ABL Facility. An amount of up to 30 % (or up to 40 % with agent consent) of the then-outstanding commitments under the ABL Facility is available to the Company’s Canada and Spain subsidiaries. A portion of the ABL Facility not to exceed $50.0 million is available for the issuance of letters of credit in U.S. dollars, of which $20.0 million is available for the issuance of letters of credit in Canadian dollars. The ABL Facility also includes a $50.0 million swingline loan facility and a $17.5 million First-In, Last-Out Sublimit (“FILO Sublimit”).
As of December 31, 2024, the Company had approximately $163.4 million of undrawn lines of credit available under the ABL Facility, subject to certain conditions, including compliance with certain financial covenants. The ABL Facility matures on June 1, 2026. The borrowings under the ABL Facility bear interest at a rate equal to an adjusted term Secured Overnight Financing Rate (“SOFR”) or a base rate plus a margin of between 1.25 % to 1.75 % or 0.25 % to 0.75 %, respectively, while the FILO Sublimit borrowings bear interest at a rate equal to SOFR or a base rate plus a margin of between 2.25 % to 2.75 % or 1.25 % to 1.75 %, respectively. The Company has the option to increase the ABL Facility, subject to certain conditions, including the commitment of the participating lenders.
On June 26, 2024, the Company entered into the Fourth Amendment to its existing ABL Facility to replace the Canadian reference rate from the Canadian Dollar Offered Rate (“CDOR”) to the Canadian Overnight Repo Rate Average (“CORRA”).
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The Company’s First Lien Credit Agreement (the “First Lien Term Facility”) bears interest at a rate equal to a base rate or SOFR (which includes an applicable credit spread adjustment), plus, in either case, an applicable margin. In the case of SOFR tranches, the applicable margin is 2.75 % per annum with a 0.50 % floor, with a stepdown to 2.50 % per annum with a 0.50 % floor when net secured leverage as defined in the First Lien Credit Agreement is less than 2.5 x. The loan under the First Lien Term Facility amortizes quarterly at a rate of 0.25 % of the original principal amount and requires a $2.5 million repayment of principal on the last business day of each March, June, September and December.
Under the First Lien Term Facility, the Company had an incremental term loan in an aggregate original principal amount of $125 million (the “Incremental Term Loan B”). In April 2024, the Company voluntarily prepaid the Incremental Term Loan B in full.
The First Lien Term Facility and ABL Facility (collectively “Credit Facilities”) contain collateral requirements, restrictions, and covenants, including restrictions under the First Lien Term Facility on the Company’s ability to pay dividends on the Common Stock. Per the First Lien Credit Agreement, the Company must also make an annual mandatory prepayment of principal commencing April 2023 for between 0 % and 50 % of the excess cash, as defined in the First Lien Credit Agreement, generated in the prior calendar year. The amount due varies with the First Lien Leverage Ratio as defined in the First Lien Credit Agreement, from zero if the First Lien Leverage Ratio is less than or equal to 2.5 x, to fifty percent if the First Lien Leverage Ratio is greater than 3.0 x less certain allowed deductions. The Company did not have a mandatory prepayment for 2025 based on the First Lien Leverage Ratio as of December 31, 2024 and the applicable criteria under the First Lien Credit Agreement. All outstanding principal is due at maturity on May 28, 2028. As of December 31, 2024, the Company was in compliance with all covenants under the Credit Facilities.
At December 31, 2024, the future principal payments of the Company’s long-term debt obligations, excluding finance lease obligations, are as follows (in thousands):
| 2025 | $ | ||||
| 2026 | |||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
| Thereafter | |||||
| Total | $ | ||||
Note 10. Derivatives and Hedging Transactions
The Company holds derivative financial instruments for the purpose of hedging the risks of certain identifiable and anticipated transactions. In general, the types of risks hedged are those relating to the variability of future earnings and cash flows caused by movements in foreign currency exchange rates and interest rates. In hedging the transactions, the Company in the normal course of business, holds the following types of derivatives.
Interest Rate Swap Agreements
The Company enters into interest rate swap agreements designated as cash flow hedges to manage its interest rate risk related to its variable rate debt obligations. As cash flow hedges, unrealized gains are recognized as assets while unrealized losses are recognized as liabilities. The interest rate swap agreements are highly correlated to the changes in interest rates to which the Company is exposed. Unrealized gains and losses on these instruments have been designated as effective and as such, the related gains or losses have been recorded as a component of accumulated other comprehensive income, net of tax. Other comprehensive income or loss is reclassified into current period income when the hedged interest expense affects earnings.
As of each of December 31, 2024 and December 31, 2023, the Company was a party to interest rate swap agreements of a notional amount of $600.0 250.0 million matures in March 2025, a notional amount of $100.0 million matures in March 2026 and a notional amount of $250.0 million in January 2027.
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During the year ended December 31, 2024, the Company entered into interest rate swap agreements with a notional amount of $250.0 million that will become effective in March 2025 and replace the existing swap agreements with a notional amount of $250.0 million that had March 2025 maturity dates. These new agreements mature in March 2028.
Foreign Exchange Contracts
The Company periodically enters into foreign exchange contracts to manage risks associated with foreign currency transactions and future variability of intercompany cash flows arising from those transactions that may be adversely affected by changes in exchange rates. These contracts are marked-to-market with the resulting gains and losses recognized in earnings. For the year ended December 31, 2024 and December 31, 2023, the Company recognized $3.2 million of income and $2.1 million of expense, respectively, in Other (income) expense, net, related to foreign exchange contracts.
The following table summarizes the gross fair values and location on the consolidated balance sheet of the Company’s significant derivative instruments (in thousands):
| Years Ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Other Current Assets | Other Non-Current Assets | Other Non-Current Liabilities | Other Current Assets | Other Non-Current Assets | Accrued Expenses and Other Liabilities | Other Non-Current Liabilities | ||||||||||||||||||||||||||||||||||||||||||||
Interest rate swaps (1) | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||
| Foreign exchange contracts | $ | |||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||
(1) The Company estimates that $ | ||||||||||||||||||||||||||||||||||||||||||||||||||
The following tables present the effects of derivative instruments by contract type in accumulated other comprehensive income (loss) in the consolidated statements of comprehensive income (in thousands):
Unrealized Gain (Loss) Recognized in AOCI (1) | Gain (Loss) Reclassified from AOCI to Earnings (2) | Location of Gain (Loss) Reclassified from AOCI into Earnings | ||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | 2022 | 2024 | 2023 | 2022 | |||||||||||||||||||||||||||||||||
| Interest rate swaps | $ | $ | $ | $ | $ | $ | ( | Interest Expense | ||||||||||||||||||||||||||||||
(1) The tax expense on the gain recognized in AOCI for the twelve months ended December 31, 2024, December 31, 2023 and December 31, 2022 was $ | ||||||||||||||||||||||||||||||||||||||
(2) The tax expense on the gain (loss) reclassified from AOCI to earnings for the twelve months ended December 31, 2024, December 31, 2023 and December 31, 2022 was $ | ||||||||||||||||||||||||||||||||||||||
Note 11. Fair Value Measurements
The Company is required to disclose the estimated fair values of all financial instruments, even if they are not carried at their fair value. The fair values of financial instruments are estimates based upon market conditions and perceived risks. These estimates require management’s judgment and may not be indicative of the future fair values of the assets and liabilities.
The Company’s financial instruments include cash and cash equivalents, accounts receivable, and accounts payable. The carrying amount of these instruments approximate fair value because of their short-term nature.
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The Company’s interest rate swaps and foreign exchange contracts are measured in the financial statements at fair value on a recurring basis. The fair values of these instruments are estimated using industry standard valuation models using market-based observable inputs, including interest rate curves. These instruments are customary, over-the-counter contracts with various bank counterparties that are not traded in active markets. Accordingly, the fair value measurements of the interest rate swaps and forward exchange contracts are categorized as Level 2.
The Company’s investment plan assets as part of the nonqualified Hayward Industries Supplemental Retirement Plan (the “Supplemental Retirement Plan”) are measured in the financial statement at fair value on a recurring basis and are based on quoted market prices in active markets. Accordingly, the fair value measurements of the Supplemental Retirement Plan assets are categorized as Level 1. Refer to Note 18, “Retirement Plans” for further information on the plan assets.
The following table sets forth the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis (in thousands):
| December 31, 2024 | December 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||||||||||||||||||
Assets: | |||||||||||||||||||||||||||||||||||||||||||||||
Interest rate swaps | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
Foreign exchange contracts | |||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Retirement Plan assets | |||||||||||||||||||||||||||||||||||||||||||||||
Liabilities: | |||||||||||||||||||||||||||||||||||||||||||||||
Interest rate swaps | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
Foreign exchange contracts | |||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Retirement Plan liabilities | |||||||||||||||||||||||||||||||||||||||||||||||
The following table sets forth the Company’s financial assets and liabilities that were not carried at fair value (in thousands):
| December 31, 2024 | December 31, 2023 | ||||||||||||||||||||||
| Carrying Value | Fair Value | Carrying Value | Fair Value | ||||||||||||||||||||
Assets: | |||||||||||||||||||||||
Short-term investments | $ | $ | $ | $ | |||||||||||||||||||
Liabilities: | |||||||||||||||||||||||
Long-term debt and related current maturities | $ | $ | $ | $ | |||||||||||||||||||
The estimated fair value of the long-term debt and related current maturities (excluding finance leases, the ABL Facility, and other bank debt) is based on observable quoted prices in active markets for similar liabilities and is classified as a Level 2 input. The fair value of the ABL Facility approximates its carrying value.
Note 12. Segments and Related Information
The Company has two reportable segments to align to its key geographies and go-to market strategy: North America (“NAM”) and Europe & Rest of World (“E&RW”). Operating segments have not been aggregated to form the reportable segments. The Company’s CODM is the President and Chief Executive Officer. The Company determined its reportable segments based on how the CODM reviews the Company’s operating results in assessing performance and allocating resources. The CODM uses segment income in assessing performance of and allocating resources to the reportable segments. Segment income is defined as net sales less cost of sales, less segment SG&A and RD&E, excluding acquisition and restructuring related expense, as well as amortization of intangible assets.
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The CODM does not evaluate reportable segments using asset information as these are managed on an enterprise-wide basis. The accounting policies of the segments are the same as those described in the summary of significant accounting policies.
The NAM segment manufactures and sells residential and commercial swimming pool equipment and supplies as well as equipment that controls the flow of fluids.
The E&RW segment manufactures and sells residential and commercial swimming pool equipment and supplies.
The Company sells its products primarily through distributors and retailers. Financial information by reportable segment is included in the following summary (in thousands):
| Year Ended December 31, 2024 | |||||||||||||||||
| North America | Europe & Rest of World | Total | |||||||||||||||
| External net sales | $ | $ | $ | ||||||||||||||
| Significant Segment Expenses | |||||||||||||||||
| Cost of sales | |||||||||||||||||
| Segment selling, general and administrative expense | |||||||||||||||||
| Research, development and engineering expense | |||||||||||||||||
| Segment income | |||||||||||||||||
| Capital expenditures | |||||||||||||||||
| Depreciation and amortization | |||||||||||||||||
| Intersegment sales | |||||||||||||||||
| Year Ended December 31, 2023 | ||||||||||||||||||||
| North America | Europe & Rest of World | Total | ||||||||||||||||||
| External net sales | $ | $ | $ | |||||||||||||||||
| Significant Segment Expenses | ||||||||||||||||||||
| Cost of sales | ||||||||||||||||||||
| Segment selling, general and administrative expense | ||||||||||||||||||||
Research, development and engineering expense | ||||||||||||||||||||
| Segment income | ||||||||||||||||||||
| Capital expenditures | ||||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||
| Intersegment sales | ||||||||||||||||||||
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| Year Ended December 31, 2022 | ||||||||||||||||||||
| North America | Europe & Rest of World | Total | ||||||||||||||||||
| External net sales | $ | $ | $ | |||||||||||||||||
| Significant Segment Expenses | ||||||||||||||||||||
| Cost of sales | ||||||||||||||||||||
| Segment selling, general and administrative expense | ||||||||||||||||||||
Research, development and engineering expense | ||||||||||||||||||||
| Segment income | ||||||||||||||||||||
| Capital expenditures | ||||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||
| Intersegment sales | ||||||||||||||||||||
The following table presents a reconciliation of segment income to income from operations before income taxes (in thousands):
| Years Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Total segment income | $ | $ | $ | ||||||||||||||
| Corporate expense, net | |||||||||||||||||
| Acquisition and restructuring related expense | |||||||||||||||||
| Amortization of intangible assets | |||||||||||||||||
| Operating income | |||||||||||||||||
| Interest expense, net | |||||||||||||||||
| Loss on debt extinguishment | |||||||||||||||||
| Other (income) expense, net | ( | ( | |||||||||||||||
| Total other expense | |||||||||||||||||
| Income from operations before income taxes | $ | $ | $ | ||||||||||||||
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Note 13. Earnings Per Share
The following table sets forth the computation of basic and diluted net income per share attributable to common stockholders (in thousands, except share and per share data):
| Years Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Net income | $ | $ | $ | ||||||||||||||
| Weighted average number of common shares outstanding, basic | |||||||||||||||||
Effect of dilutive securities(a) | |||||||||||||||||
| Weighted average number of common shares outstanding, diluted | |||||||||||||||||
| Earnings per share attributable to common stockholders, basic | $ | $ | $ | ||||||||||||||
| Earnings per share attributable to common stockholders, diluted | $ | $ | $ | ||||||||||||||
(a) For the years ended December 31, 2024, 2023, and 2022 there were potential common shares totaling approximately | |||||||||||||||||
Note 14. Commitments and Contingencies
Litigation
The Company is involved in litigation arising in the normal course of business, including involving product liability claims. Where appropriate, these matters have been submitted to the Company’s insurance carrier. The Company determines whether an estimated loss from a contingency should be accrued by assessing whether a loss is deemed probable and can be reasonably estimated. It is not possible to quantify the ultimate liability, if any, in these matters.
On August 2, 2023, a securities class action complaint was filed in the United States District Court for the District of New Jersey against the Company and certain of its current directors and officers (Kevin Holleran and Eifion Jones) and MSD Partners, L.P. and CCMP Capital Advisors, LP on behalf of a putative class of stockholders who acquired shares of the Company’s common stock between March 2, 2022 and July 27, 2022. That action is captioned City of Southfield Fire and Police Retirement System vs. Hayward Holdings, Inc., et al., 2:23-cv-04146-WJM-ESK (D.N.J.) (“City of Southfield”). On September 28, 2023, a second, related securities class action complaint was filed in the United States District Court for the District of New Jersey against the Company and certain of its current directors and officers (Kevin Holleran and Eifion Jones) and MSD Partners, L.P. and CCMP Capital Advisors, LP on behalf of a putative class of stockholders who acquired shares of the Company’s common stock between October 27, 2021 and July 28, 2022. That action is captioned Erie County Employees’ Retirement System vs. Hayward Holdings, Inc., et al., 2:23-cv-04146-WJM-ESK (D.N.J.) (“Erie County”). On December 19, 2023, the Court issued a ruling consolidating the two securities class actions (City of Southfield and Erie County) under the City of Southfield docket (the “Securities Class Action”) and appointing a lead plaintiff. In a consolidated class action complaint filed March 4, 2024, the Securities Class Action alleged on behalf of a putative class of stockholders who acquired shares of our common stock between October 27, 2021 and July 28, 2022, among other things, that the Company, Kevin Holleran, and Eifion Jones violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by, among other things, making materially false or misleading statements regarding inventory, growth, and demand trends and the Company’s financial projections for 2022. On October 2, 2024, the Court issued an Opinion and Order dismissing the consolidated class action complaint and granting the lead plaintiff leave to file an amended complaint within 30 days. On November 1, 2024, lead plaintiff filed a consolidated amended class action complaint making substantially similar allegations as in the consolidated class action complaint, but adding additional defendants affiliated with MSD Partners, L.P. and CCMP Capital Advisors, LP. On December 18, 2024, the Company and all other defendants moved to dismiss the consolidated amended class action complaint. Under the current schedule, briefing on the motion to dismiss will be complete on March 4, 2025.
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The Securities Class Action seeks unspecified monetary damages on behalf of a putative class and an award of costs and expenses, including reasonable attorneys’ fees.
On November 27, 2023, a shareholder derivative lawsuit was filed in the United States District Court for the District of New Jersey against current and past officers and directors of the Company captioned Heicklen v. Holleran, et al., 2:23-cv-22649 (D.N.J.) (the “Derivative Action”). The Derivative Action alleges breaches of fiduciary duties to Company stockholders, aiding and abetting breaches of fiduciary duties, unjust enrichment, corporate waste, and violations of Section 10(b) of the Securities Exchange Act of 1934 in connection with the claims in the Securities Class Action. The Derivative Action seeks recovery of unspecified damages and attorney’s fees and costs, as well as improvements to the Company’s corporate governance and internal procedures. The Derivative Action has been stayed pending final decision on the motion to dismiss filed in the Securities Class Action.
We dispute the allegations of wrongdoing in the Securities Class Action and the Derivative Action and intend to vigorously defend ourselves in these matters. In view of the complexity and ongoing and uncertain nature of the outstanding proceedings and inquiries, at this time we are unable to estimate a reasonably possible financial loss or range of financial loss, if any, that we may incur to resolve the Securities Class Action and the Derivative Action.
As of December 11, 2024, during the discovery phase of litigation in which the Company was one of several named defendants, the Company reached a mutual understanding to settle its liability in a wrongful death lawsuit related to a discontinued product. We expect the resolution to include payment in the amount of $22.0 million, which amount will be paid entirely by the Company’s insurance carriers pursuant to agreement among the Company and its insurance carriers. Accordingly, the Company recorded an accrual for a loss contingency of $22.0 million and insurance receivables of $22.0 million, which are recorded within other current assets and accrued expenses and other liabilities on the consolidated balance sheets, respectively. The Company expects the resolution payment to be made within the next five to nine months.
Contingencies
Note 15. Leases
The Company’s operating and finance lease portfolio primarily consists of manufacturing and warehouse space, office space, IT equipment, office equipment, and vehicles. Operating lease ROU assets are presented within other non-current assets. The current portion of operating lease liabilities are presented within accrued expenses and other liabilities, and the non-current portion of operating lease liabilities are presented within other non-current liabilities on the consolidated balance sheets. Finance lease assets are included in property, plant and equipment - net, and the finance lease obligations are included in current portion of long-term debt and in long-term debt on the consolidated balance sheets.
The Company has elected to use the short-term lease recognition exemption for all asset classes. This means, for those leases that qualify, the Company will not recognize ROU assets or lease liabilities, and this includes not recognizing ROU assets or lease liabilities for existing short-term leases of those assets. For these short-term leases, expense will be recognized on a straight-line basis over the terms of the leases. The Company has also elected the practical expedient to not separate lease and non-lease components for all asset classes, meaning all consideration that is fixed, or in-substance fixed, will be captured as part of its lease components for balance sheet purposes.
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The following lease cost is included in the consolidated statements of operations (in thousands):
| Year Ended December 31, 2024 | Year Ended December 31, 2023 | ||||||||||
Lease cost (a) | |||||||||||
| Operating leases cost | $ | $ | |||||||||
| Amortization of ROU assets | |||||||||||
| Interest on lease liabilities | |||||||||||
| Finance leases cost | |||||||||||
| Total lease cost | $ | $ | |||||||||
(a) With the exception of interest on lease liabilities, the Company records lease costs to cost of sales or selling, general and administrative expense on the consolidated statements of operations, depending on the use of the leased asset. Interest on lease liabilities are recorded to interest expense, net on the consolidated statements of operations. | |||||||||||
Supplemental cash flow information related to leases was as follows (in thousands):
| Year Ended December 31, 2024 | Year Ended December 31, 2023 | ||||||||||
| Cash paid for amounts included in the measurement of lease liabilities: | |||||||||||
| Operating cash flows from operating leases | $ | $ | |||||||||
| Operating cash flows from finance leases | |||||||||||
| Financing cash flows from finance leases | |||||||||||
| Right-of-use assets obtained in exchange for lease obligations: | |||||||||||
| Operating leases | $ | $ | |||||||||
| Finance leases | ( | ||||||||||
Supplemental balance sheet information related to leases as of December 31, 2024 was as follows (in thousands):
| December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Operating leases | |||||||||||
| $ | $ | ||||||||||
| Total operating lease liabilities | |||||||||||
| Finance leases | |||||||||||
| Property, plant and equipment | |||||||||||
| Accumulated depreciation | ( | ( | |||||||||
| Total finance lease liabilities | $ | $ | |||||||||
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Weighted average information:
| December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Finance leases | |||||||||||
| Remaining lease term (in years) | |||||||||||
| Discount rate | % | % | |||||||||
| Operating leases | |||||||||||
| Remaining lease term (in years) | |||||||||||
| Discount rate | % | % | |||||||||
As of December 31, 2024, maturities of lease liabilities were as follows (in thousands):
| Operating Leases | Finance Leases | ||||||||||
| 2025 | $ | $ | |||||||||
| 2026 | |||||||||||
| 2027 | |||||||||||
| 2028 | |||||||||||
| 2029 | |||||||||||
| Thereafter | |||||||||||
| Total lease payments | |||||||||||
| Less: interest | ( | ( | |||||||||
| Total | $ | $ | |||||||||
Note 16. Stockholders’ Equity
Preferred Stock
The Company’s Second Restated Certificate of Incorporation authorizes the Company to issue up to 100,000,000 shares of preferred stock, $0.001 value per share, all of which is undesignated.
Common Stock
The Company’s Second Restated Certificate of Incorporation authorizes the Company to issue up to 750,000,000 shares of Common Stock, $0.001 value per share. Each share of Common Stock is entitled to one vote on all matters submitted to a vote of the Company’s stockholders. The holders of Common Stock are entitled to receive dividends, if any, as may be declared by the board of directors.
Dividends paid
For the years ended December 31, 2024 and 2023, no
Share Repurchases
The Board of Directors authorized the Company’s share repurchase program (the “Share Repurchase Program”) such that the Company is authorized to repurchase from time to time up to an aggregate of $450 million of its outstanding shares of common stock, which authorization expires on July 26, 2025. The Company had no 400.0 million remained available for additional share repurchases under the program.
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Note 17. Stock-based Compensation
Stock-based compensation expense recorded in the consolidated statements of operations for equity-classified stock-based awards was $10.6 million, $9.2 million, and $7.9 million for the years ended December 31, 2024, 2023 and 2022, respectively.
The Company has established two equity incentive plans as described below.
2021 Equity Incentive Plan
In March 2021, the Company adopted the 2021 Equity Incentive Plan (the “2021 Plan”). Under the 2021 Plan, up to 13,737,500 shares of Common Stock may be granted to employees, directors and consultants in the form of stock options, restricted stock units and other stock-based awards. The terms of awards granted under the 2021 Plan are determined by the Compensation Committee of the Board of Directors, subject to the provisions of the 2021 Plan. As of December 31, 2024, there were 10,197,246 shares available for future issuance under the 2021 Plan.
Options granted under the 2021 Plan expire no later than ten years from the date of grant. The vesting period of stock options and restricted stock units granted under the 2021 Plan is generally three years from the date of grant.
Performance-Based Restricted Stock Units
The Company utilizes performance-based restricted stock units (“PSUs”) as part of its equity awards program for certain senior management and executive officers. The vesting of the PSUs granted during 2024 is tied to adjusted EBITDA margin, gross profit margin and return on gross invested capital in 2024, with relative weightings of 40 %, 40 % and 20 %, respectively, subject to a modifier of up to plus or minus 15 % based on the Company’s absolute total shareholder return over a 3-year performance period. The vesting of the PSUs granted during 2023 is tied to return on gross invested capital and adjusted EBITDA margin while the PSUs granted during 2022 is tied to organic net revenue growth and adjusted EBITDA margin, each with a relative weighting of 50 %. The PSUs are generally measured over 3-year performance periods with a minimum of 50 % of the target awarded PSUs to be earned for threshold performance and a maximum of 200 % of the target awarded PSUs to be earned for maximum performance. The Company reassesses at each reporting date whether achievement of the performance condition is probable and accrues compensation expense if and when achievement of the performance condition is probable.
The following table summarizes activity for PSUs under the 2021 Plan:
| Number of Shares | Weighted- average grant date fair value | ||||||||||
| Outstanding as of December 31, 2023 | $ | ||||||||||
| Granted | |||||||||||
| Forfeited | ( | ||||||||||
| Vested and converted to common | |||||||||||
| Outstanding as of December 31, 2024 | $ | ||||||||||
At December 31, 2024 total unrecognized compensation cost related to the performance based stock units granted under the 2021 plan is estimated to be $5.2 million, to be recognized over a weighted-average period of 2.2 years.
The following table presents the weighted-average fair value of PSUs granted during the year:
Years Ended December 31, | ||||||||||||||
| 2024 | 2023 | 2022 | ||||||||||||
Weighted-average fair value per share of PSUs granted during the year | $ | $ | $ | |||||||||||
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Time-based Stock Options
The following table summarizes activity for stock options under the 2021 Plan (aggregate intrinsic value in thousands):
| Number of Shares | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Life (years) | Aggregate Intrinsic Value | ||||||||||||||||||||
Outstanding as of December 31, 2023 | $ | $ | |||||||||||||||||||||
| Granted | |||||||||||||||||||||||
| Exercised | ( | ||||||||||||||||||||||
| Forfeited | ( | ||||||||||||||||||||||
Outstanding as of December 31, 2024 | |||||||||||||||||||||||
Options exercisable as of December 31, 2024 | |||||||||||||||||||||||
Options expected to vest as of December 31, 2024 | $ | $ | |||||||||||||||||||||
The Company determined the fair value of these time-based stock options at the date of grant using the Black-Scholes option-pricing model. The following table sets forth fair value per share information, including related weighted-average assumptions, used to determine compensation cost:
Years Ended December 31, | |||||||||||
| 2024 | 2023 | 2022 | |||||||||
Weighted-average fair value per share of options granted during the year | $ | $ | $ | ||||||||
| Assumptions: | |||||||||||
| Risk-free interest rate | % | % | % | ||||||||
| Expected life (years) | — | ||||||||||
| Expected dividend yield | % | % | % | ||||||||
| Expected volatility | % | % | % | ||||||||
The risk-free interest rate was based on the U.S. Treasury yield curve at date of grant over the expected term of these stock options. The expected volatility was based upon comparable public company historical volatility. The expected life was based on the average of the weighted-average vesting period and the contractual term of the stock option awards by utilizing the “simplified method,” as prescribed in SEC’s Staff Accounting Bulletin (SAB) No. 107, as the Company does not have sufficient available historical data to estimate the expected term of these stock option awards.
At December 31, 2024, the total unrecognized compensation cost related to the stock options granted under the 2021 Plan was $1.5 million, to be recognized over a weighted-average period of 1.1 years.
The following table presents the aggregate intrinsic value of options exercised during the year (in thousands):
Years Ended December 31, | |||||||||||
| 2024 | 2023 | 2022 | |||||||||
| Aggregate intrinsic value of options exercised during the year | $ | $ | $ | ||||||||
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Time-based Restricted Stock Units
The following table summarizes activity for time-based restricted stock units under the 2021 Plan:
| Number of Shares | Weighted- Average Grant- Date Fair Value | ||||||||||
Outstanding as of December 31, 2023 | $ | ||||||||||
| Granted | |||||||||||
| Forfeited | ( | ||||||||||
| Vested and converted to common | ( | ||||||||||
Outstanding as of December 31, 2024 | $ | ||||||||||
At December 31, 2024, the total unrecognized compensation cost related to restricted stock units granted under the 2021 Plan was $11.4 million, to be recognized over a weighted-average period of 2.6 years.
The total fair value of restricted stock awards vested was $4.0 million and $2.3 million in the years ended 2024 and 2023, respectively.
The following table presents the weighted-average fair value of time-based restricted stock units granted during the year:
Years Ended December 31, | |||||||||||
| 2024 | 2023 | 2022 | |||||||||
Weighted-average fair value per share of time-based restricted stock units granted during the year | $ | $ | $ | ||||||||
2017 Equity Incentive Plan
In August 2017, the Company adopted the 2017 Equity Incentive Plan (the “2017 Plan”), which provided for the issuance of stock options, restricted stock and restricted stock awards to officers, directors and employees. The stock options granted under the 2017 Plan generally have a maximum term of up to ten years . Restricted stock, restricted stock awards, and stock options granted under the 2017 Plan generally are eligible to vest based on continued service, generally over five years , or upon an initial public offering and post-initial public offering stock price performance. Due to the Company’s IPO on March 12, 2021 and subsequent stock price performance, all performance-vesting conditions were satisfied on March 26, 2021.
For presentation purposes in this document the Company has recast all figures to reflect the 195 -for-1 stock split in the Common Stock that occurred on March 2, 2021.
As of December 31, 2024, there were 5,993,808 outstanding options and no outstanding restricted stock awards under the 2017 Plan. No future awards will be made under the 2017 Plan following the Company’s IPO. Shares underlying awards under the 2017 Plan that expire or become unexercisable without delivery of shares, are forfeited to, or repurchased for cash by, the Company, are settled in cash, or otherwise become available again for grant as available for future awards under the 2021 Plan (as described above).
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Time-Based Stock Options
The following table summarizes activity for time-based stock options under the 2017 Plan (aggregate intrinsic value in thousands):
| Number of Shares | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Life (years) | Aggregate Intrinsic Value | ||||||||||||||||||||
Outstanding as of December 31, 2023 | $ | $ | |||||||||||||||||||||
| Exercised | ( | ||||||||||||||||||||||
| Forfeited | ( | ||||||||||||||||||||||
Outstanding as of December 31, 2024 | |||||||||||||||||||||||
Options exercisable as of December 31, 2024 | |||||||||||||||||||||||
Options expected to vest as of December 31, 2024 | $ | $ | |||||||||||||||||||||
The total intrinsic value of options exercised was $13.6 million, $14.3 million, and $11.8 million in the years ended 2024, 2023 and 2022, respectively. At December 31, 2024, the total unrecognized compensation cost related to the time-based stock options granted under the 2017 Plan was $0.1 million, to be recognized over a weighted-average period of 0.3 year.
No stock options under the 2017 Plan were granted during the years ended December 31, 2024, December 31, 2023 and December 31, 2022.
The following table presents the aggregate intrinsic value of options exercised during the year (in thousands):
Years Ended December 31, | |||||||||||
| 2024 | 2023 | 2022 | |||||||||
| Aggregate intrinsic value of options exercised during the year | $ | $ | $ | ||||||||
Stock Options with Market and Performance Conditions
The following table summarizes activity for stock options with market and performance conditions under the 2017 Plan (aggregate intrinsic value in thousands):
| Number of Shares | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Life (years) | Aggregate Intrinsic Value | ||||||||||||||||||||
Outstanding as of December 31, 2023 | $ | $ | |||||||||||||||||||||
| Exercised | ( | ||||||||||||||||||||||
| Forfeited | |||||||||||||||||||||||
Outstanding as of December 31, 2024 | |||||||||||||||||||||||
Options exercisable as of December 31, 2024 | |||||||||||||||||||||||
Options expected to vest as of December 31, 2024 | $ | — | $ | ||||||||||||||||||||
The performance criteria for these awards was met on March 26, 2021 upon the completion of the Company’s initial public offering. As such, all performance-based stock options vested in 2021 and the Company recognized the related stock-based compensation expense in the year ended 2021. As of December 31, 2024, there is no remaining unrecognized compensation cost related to performance-based stock options.
No stock options under the 2017 Plan were granted during the year ended December 31, 2024 and December 31, 2023.
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The following table presents the aggregate intrinsic value of options exercised during the year (in thousands):
Years Ended December 31, | |||||||||||
| 2024 | 2023 | 2022 | |||||||||
| Aggregate intrinsic value of options exercised during the year | $ | $ | $ | ||||||||
Time-Based Restricted Stock Awards
Note 18. Retirement Plans
The Company maintains the Hayward Industries Retirement Plan (the “Retirement Plan”), a defined-contribution 401(k) plan, for substantially all of its U.S. employees. Under the Retirement Plan the Company contributes 3 % of compensation as a non-elective contribution, to eligible employees, regardless of employee deferrals, and an additional non-elective contribution between 1 to 3 % of compensation, based on age, for employees that were hired before January 1, 1996. To be eligible to receive the Company contribution, an employee must have been with the Company for one year and completed at least 1,000 hours of service. Additionally, the Retirement Plan allows employees to elect to defer up to 60 % of their compensation on a pre-tax basis (not to exceed the IRS maximum), unless they are projected to be age 50 or older by the end of the taxable year. The Company matches 50 % of each participant’s deferral contribution, in an amount up to 6 % of the employee’s deferral. The Company’s contribution to the Retirement Plan was approximately $6.0 million, $5.7 million and $6.6 million for the years ended December 31, 2024, 2023, and 2022, respectively.
The Company also maintains the Supplemental Retirement Plan. The Supplemental Retirement Plan allows key executives to contribute up to 25 % of their base salary and up to 100 % of their annual bonus (as defined in the Supplemental Retirement Plan). The Company matches 100 % of an eligible employee’s deferral in an amount up to 9 % of the employee’s eligible compensation contributed to the Supplemental Retirement Plan. The employer contributions vest immediately. The employer contribution was approximately $0.4 million, $0.3 million and $0.8 million for the years ended December 31, 2024, 2023 and 2022, respectively.
The value of investments related to the Supplemental Retirement Plan is included in other assets and a corresponding liability to participants is recorded in other liabilities. The following table presents the fair values of the related investments (in thousands):
Years Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
Value of investments related to Supplemental Retirement Plan | $ | $ | |||||||||
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Note 19. Acquisition and Restructuring Related Expense
Acquisition and restructuring related expense, net consists of the following (in thousands):
| Years Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Business restructuring costs | $ | $ | $ | ||||||||||||||
| Acquisition transaction costs | |||||||||||||||||
| Total | $ | $ | $ | ||||||||||||||
In the third quarter of 2023, the Company initiated programs to centralize and consolidate manufacturing operations and professional services in Europe. For the twelve months ended December 31, 2024, the Company incurred $0.8 million of expense related to the program, bringing the total program cost to $3.2 million. These include severance and employee benefit costs, as well as other direct separation benefit costs.
The following tables summarize the status of the Company’s restructuring related expense and related liability balances (in thousands):
Liability as of January 1, 2024 | 2024 Activity | Liability as of December 31, 2024 | |||||||||||||||||||||||||||
| Costs Recognized | Cash Payments | Non-cash (Charge)/Gain | |||||||||||||||||||||||||||
| Termination benefits | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||
| Facility-related | ( | ||||||||||||||||||||||||||||
| Other | ( | ||||||||||||||||||||||||||||
| Total | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||
Liability as of January 1, 2023 | 2023 Activity | Liability as of December 31, 2023 | |||||||||||||||||||||||||||
| Costs Recognized | Cash Payments | Non-cash (Charge)/Gain | |||||||||||||||||||||||||||
| Termination benefits | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||
| Facility-related | ( | ||||||||||||||||||||||||||||
Other(1) | ( | ( | |||||||||||||||||||||||||||
| Total | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||
(1) “Other” restructuring related activity primarily consists of a $ | |||||||||||||||||||||||||||||
Liability as of January 1, 2022 | 2022 Activity | Liability as of December 31, 2022 | |||||||||||||||||||||||||||
| Costs Recognized | Cash Payments | Non-cash (Charge)/Gain | |||||||||||||||||||||||||||
| Termination benefits | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||
| Facility-related | ( | ( | |||||||||||||||||||||||||||
| Other | ( | ( | |||||||||||||||||||||||||||
| Total | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||
Restructuring costs are included within on the Company’s consolidated statements of operations, while the restructuring liability is included as a component of accrued expenses and other liabilities on the consolidated balance sheet.
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Acquisitions
On June 26, 2024, the Company acquired the equity interests of ChlorKing HoldCo, LLC and related entities (“ChlorKing”). The acquired business includes pool saline chlorinators and UV disinfection systems serving the commercial pools and water treatment market segments. The acquisition broadens the Company’s commercial portfolio of products and expands the market of commercial customers while furthering the Company's commitment to sustainable and energy-efficient technology for both commercial and residential pools. The acquisition is included in our North America segment.
The consideration paid net of cash acquired was $55.2 million. The purchase price was funded with cash on hand. For the twelve months ended December 31, 2024, transaction expenses recognized for the acquisition were $4.3 million. These expenses are included within acquisition and restructuring related costs on the Company’s consolidated statements of operations.
The Company completed its acquisition accounting for this transaction. In addition to recording measurement period adjustments, the Company identified a deferred purchase price payment to seller employees that was determined to be a compensation arrangement. This resulted in a $6.3 million correction of the purchase price. The deferred purchase price payment was deposited into an escrow account at the date of the ChlorKing acquisition and is to be released from escrow to the seller employees one year from the date of the acquisition, subject to their continued employment. The deferred payment is recognized as an acquisition cost on the statement of operations (included within acquisition and restructuring related costs) over the twelve-month service period, but was previously reflected as a component of the purchase consideration. The remaining $3.2 million of deferred costs associated with this compensation arrangement are recorded as a prepaid asset on the consolidated balance sheet at December 31, 2024 (previously recorded as goodwill). The $6.3 million payment was classified as an investing activity in the consolidated statement of cash flows in the preliminary purchase price whereas the payment is classified as an operating activity in the consolidated statement of cash flows for the year ended December 31, 2024. The remainder of the reduction in the preliminary purchase price was related to measurement period adjustments related to working capital. The following table summarizes the consideration transferred and the allocation of the purchase price among the assets acquired and liabilities assumed, including the reduction to the purchase price described above and measurement period adjustments recorded through December 31, 2024:
| Preliminary Allocation | Adjustments (1) | Revised Allocation | ||||||||||||||||||||||||
| As of June 26, 2024 | As of December 31, 2024 | |||||||||||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | |||||||||||||||||||||||
| Receivables | ( | |||||||||||||||||||||||||
| Inventory | ||||||||||||||||||||||||||
| Prepaid expenses and other current assets | ||||||||||||||||||||||||||
| Property, plant and equipment | ||||||||||||||||||||||||||
| Other assets | ||||||||||||||||||||||||||
| Net Investment in Lease | ||||||||||||||||||||||||||
| Intangible assets | ( | |||||||||||||||||||||||||
| Accounts payable and accrued liabilities | ( | ( | ( | |||||||||||||||||||||||
Deferred tax liabilities | ( | ( | ||||||||||||||||||||||||
| Other liabilities | ( | ( | ||||||||||||||||||||||||
| Total identifiable net assets acquired | ( | |||||||||||||||||||||||||
| Goodwill | ( | |||||||||||||||||||||||||
Purchase price | $ | $ | ( | $ | ||||||||||||||||||||||
(1) Adjustments include measurement period adjustments as well as the impact of the $ | ||||||||||||||||||||||||||
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The estimated fair value and useful lives of the identifiable intangible assets are as follows:
| Useful Life | Amount | ||||||||||
| (in years) | (in thousands) | ||||||||||
| Finite lived intangible assets | |||||||||||
| Tradename | $ | ||||||||||
| Customer relationships | |||||||||||
| Developed technology | |||||||||||
| Noncompete agreements | |||||||||||
| Total | $ | ||||||||||
Goodwill is a result of the expected synergies and cross-selling opportunities this acquisition is expected to bring, as well as the expected growth potential from the integration of the ChlorKing products into Hayward’s existing commercial business. The goodwill balance has been recorded to the North America reportable segment and is deductible for tax purposes.
Pro forma results of operations including ChlorKing have not been presented as the impact of ChlorKing on the Company's consolidated financial results is not material.
On June 2, 2022, the Company acquired the specialty lighting business of Halco Lighting Technologies, LLC (“Specialty Lighting Business”) for a net acquisition cost of $61.3 million. The acquired business includes a robust portfolio of lighting solutions serving the residential and commercial pool, spa, fountain, and landscape lighting market segments. The acquisition is included in the North America segment. For the twelve months ended December 31, 2023 and December 31, 2022, transaction and integration expenses recognized for the acquisition were $0.4 million and $1.2 million, respectively. These expenses are included within acquisition and restructuring related costs on the Company’s consolidated statements of operations.
Note 20. Related Party Transactions
For the years ended December 31, 2024 and December 31, 2023, the Company did not incur any significant related party transactions.
For the year ended December 31, 2022, as part of the Company’s previously announced $450 million share repurchase program, the Company agreed to repurchase shares of common stock under two separate agreements from certain affiliates of one of the Company’s then-controlling stockholders, CCMP Capital Advisors, LP (“CCMP”).
First, the Company agreed on January 24, 2022 to repurchase 4.08 million shares at a price per share of $19.80 , for an aggregate consideration of approximately $81 million. The price per share was approved by an independent committee of the Board of Directors and is the same price at which certain affiliates of the Company’s then-controlling stockholders sold their shares in a block trade in compliance with Rule 144. Closing of this share repurchase occurred on March 11, 2022.
Second, on May 2, 2022, the Company agreed to purchase 8.0 million shares being sold as part of an underwritten offering by certain affiliates of CCMP, at a price per share of approximately $13.88 , for an aggregate consideration of approximately $111 million. The price per share was approved by an independent committee of the Board of Directors and is the same price at which the underwriters agreed to purchase shares from the selling stockholders in such underwritten offering. Closing of this share repurchase occurred on May 5, 2022.
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Note 21. Condensed Financial Information of Registrant (Parent Company Only)
Hayward Holdings, Inc. balance sheets are as follows (in thousands, except per share data):
| December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Assets | |||||||||||
| Current Assets | |||||||||||
| Prepaid and other current assets | |||||||||||
| Total current assets | |||||||||||
Other assets (principally investment in and amounts due from wholly owned subsidiaries) | |||||||||||
| Total non-current assets | |||||||||||
| Total assets | $ | $ | |||||||||
| Liabilities, Redeemable Stock and Stockholders’ Equity | |||||||||||
| Current liabilities | |||||||||||
| Intercompany liabilities | $ | ||||||||||
| Accrued expenses | |||||||||||
| Short term notes payable | |||||||||||
| Total current liabilities | |||||||||||
| Total liabilities | |||||||||||
| Stockholders' equity | |||||||||||
Common stock $ | |||||||||||
| Additional paid-in capital | |||||||||||
| Treasury stock | ( | ( | |||||||||
| Retained earnings | |||||||||||
Accumulated other comprehensive income (loss) | ( | ||||||||||
| Total stockholders’ equity | |||||||||||
| Total liabilities, redeemable stock and stockholders’ equity | $ | $ | |||||||||
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Hayward Holdings, Inc. statements of operations and comprehensive income are as follows (in thousands):
| Years Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Equity income in subsidiaries | $ | $ | $ | ||||||||||||||
| Selling, general, and administrative expense | |||||||||||||||||
| Other expense (income), net | |||||||||||||||||
| Income from operations before income taxes | |||||||||||||||||
| Income tax expense (benefit) | |||||||||||||||||
| Net income | $ | $ | $ | ||||||||||||||
| Comprehensive income, net of tax | |||||||||||||||||
| Net income | $ | $ | $ | ||||||||||||||
Foreign currency translation adjustments, net of tax expense (benefit) of $ | ( | ( | |||||||||||||||
Change in fair value of derivatives, net of tax expense (benefit) of $( | ( | ( | |||||||||||||||
| Comprehensive income | $ | $ | $ | ||||||||||||||
Hayward Holdings, Inc. statement of cash flows are as follows (in thousands):
| Years Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Cash flows from operating activities | |||||||||||||||||
| Net cash (used in) provided by operating activities | $ | ( | $ | ( | $ | ( | |||||||||||
| Cash flows from investing activities | |||||||||||||||||
| Distributions received from subsidiaries | |||||||||||||||||
| Capital contributions to subsidiaries | ( | ( | ( | ||||||||||||||
| Net cash provided by (used in) investing activities | |||||||||||||||||
| Cash flows from financing activities | |||||||||||||||||
| Purchases of common stock for treasury | ( | ( | ( | ||||||||||||||
| Proceeds from issuance of short-term debt | |||||||||||||||||
| Payments of short-term debt | ( | ( | ( | ||||||||||||||
| Proceeds from issuance of stock | |||||||||||||||||
| Net cash provided by (used in) financing activities | ( | ||||||||||||||||
| Change in cash and cash equivalents and restricted cash | ( | ||||||||||||||||
| Cash and cash equivalents and restricted cash, beginning of year | |||||||||||||||||
| Cash and cash equivalents and restricted cash, end of year | $ | $ | $ | ||||||||||||||
Basis of Presentation
These condensed parent company only financial statements have been prepared in accordance with Rule 12-04, Schedule I of Regulation S-X, as the restricted net assets of the subsidiaries of Hayward Holdings, Inc. (as defined in Rule 4-08(e)(3) of Regulation S-X) exceed 25% of the consolidated net assets of the Company. The ability of Hayward Holdings, Inc.’s operating subsidiaries to pay dividends is restricted by the credit agreements governing
104
the subsidiaries’ credit facilities. Under the credit agreements, dividends may only be paid to Hayward Holdings, Inc. for corporate overhead expenses and otherwise pursuant to customary dollar baskets and a portion of equity proceeds among other things, subject to satisfying minimum availability requirements for borrowings under the asset based revolving credit agreement and the absence of certain defaults, and an unlimited amount under the term loan credit agreements subject to Hayward Industries, Inc.’s total leverage not exceeding certain thresholds on a pro forma basis. As of December 31, 2024, the restricted net assets totaled approximately $1,193 million under the credit agreements.
These condensed parent company financial statements have been prepared using the same accounting principles and policies described in the notes to the consolidated financial statements, with the only exception being that the parent company accounts for its subsidiaries using the equity method. Under the equity method, the Company elected to apply the nature of the distribution approach. The nature of the distribution approach requires the Company to classify distributions from equity method investments on the basis of the nature of the activities of the investee that generated the distribution as either a return on investment (classified as a cash inflow of operating activities) or a return of investment (classified as a cash inflow from investing activities) when such information is available.
Note 22. Accumulated Other Comprehensive Income
The changes in Accumulated other comprehensive income are provided in the tables below (in thousands):
| Cumulative Translation Adjustment | Unrecognized (Losses) Gain on Derivative Instruments for Cash Flow Hedges | Accumulated Other Comprehensive Income, Net of Taxes | |||||||||||||||
| Balance at December 31, 2021 | $ | $ | $ | ||||||||||||||
Other comprehensive (loss) income before reclassifications | ( | ||||||||||||||||
| Amounts reclassified from accumulated other comprehensive income | |||||||||||||||||
| Net current period other comprehensive (loss) income | ( | ||||||||||||||||
| Tax amounts | ( | ( | |||||||||||||||
| Balance at December 31, 2022 | ( | ||||||||||||||||
| Other comprehensive income before reclassifications | |||||||||||||||||
| Amounts reclassified from accumulated other comprehensive income | ( | ( | |||||||||||||||
| Net current period other comprehensive income (loss) | ( | ( | |||||||||||||||
| Tax amounts | |||||||||||||||||
| Balance at December 31, 2023 | ( | ||||||||||||||||
| Other comprehensive (loss) income before reclassifications | ( | ( | |||||||||||||||
| Amounts reclassified from accumulated other comprehensive income | ( | ( | |||||||||||||||
| Net current period other comprehensive loss | ( | ( | ( | ||||||||||||||
| Tax amounts | |||||||||||||||||
| Balance at December 31, 2024 | $ | ( | $ | $ | ( | ||||||||||||
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Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
None.
Item 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to provide reasonable assurance that information, which is required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to its management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. The Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2024.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in the Exchange Act Rules 13a-15(f) and 15d-15(f). The Company’s internal control over financial reporting includes those policies and procedures that:
•Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company’s assets;
•Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that the Company’s receipts and expenditures are being made only in accordance with authorizations of management and directors; and
•Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.
The Company’s management, including its Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financial reporting as of December 31, 2024, using the criteria described in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on this evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2024.
Management has excluded ChlorKing from its assessment of internal control over financial reporting as of December 31, 2024, because it was acquired by the Company in a purchase business combination during 2024. ChlorKing's total assets and total revenues represent approximately 1% and 1%, respectively, of the Company’s total assets and revenues as of and for the year ended December 31, 2024.
The effectiveness of the Company’s internal control over financial reporting as of December 31, 2024 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report in Item 8 of this Annual Report on Form 10-K.
Changes in Internal Control over Financial Reporting
The Company is implementing a new enterprise resource planning (“ERP”) system on a global basis, which is expected to occur in phases over the next several years. During the three months ended December 31, 2024, the Company deployed the new ERP for Europe in its Europe and Rest of World (“E&RW”) segment. The Company has appropriately considered this change in its design of and testing for effectiveness of internal controls over financial reporting. The new ERP is expected to improve the efficiency of certain financial and related transactional processes.
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Other than the change of our ERP system for a portion of our E&RW segment, there were no changes in the Company’s internal control over financial reporting during the quarter ended December 31, 2024 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
Inherent Limitation on the Effectiveness of Internal Control over Financial Reporting and Disclosure Controls and Procedures
The Company’s management, including its Chief Executive Officer and Chief Financial Officer, does not expect that its disclosure controls and procedures or its internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Item 9B. OTHER INFORMATION
Securities Trading Plans of Directors and Executive Officers
During the three months ended December 31, 2024, none of the Company’s directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted or terminated a “Rule 10b5-1 trading arrangement” or adopted terminated
Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
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| Part III | ||
Item 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE GOVERNANCE; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Information concerning compliance Section 16(a) of the Exchange Act, the audit committee, the Company’s code of ethics, background of the directors and director nominations appearing under the captions “Security Ownership of Certain Beneficial Owners and Management— Section 16 Reports,” “Corporate Governance—Board Committees,” “Corporate Governance—Membership and Functions of the Committees of the Board,” “Corporate Governance—Code of Ethics for Senior Executive and Financial Officers and Business Conduct Policy,” “Corporate Governance—Insider Trading Policy, Hedging and Pledging Policies, Derivative Trading” and “Board of Directors,” in our definitive proxy statement for the 2025 annual meeting of stockholders is incorporated herein by reference.
We have adopted a Code of Ethics for Senior Executive and Financial Officers applicable to our Chief Executive Officer, Chief Financial Officer, Chief Commercial Officer, Treasurer and Corporate Controller and any persons performing similar functions. We intend to disclose future amendments to certain provisions of our Code of Ethics for Senior Executive and Financial Officers, or waivers of such provisions applicable to any principal executive officer, principal financial officer or other persons performing similar functions on our website. A copy of our Code of Ethics for Senior Executive and Financial Officers is available under the investor relations—governance section of our website, global.hayward.com.
Item 11. EXECUTIVE COMPENSATION
The information set forth under the captions “Compensation Discussion and Analysis,” “Executive Compensation” (except for the information under the subheading “Pay versus Performance”), “Corporate Governance—Non-Employee Director Compensation” and “Corporate Governance—Compensation Committee Interlocks and Insider Participation” in our definitive proxy statement for the 2025 annual meeting of stockholders is incorporated herein by reference. The information set forth under the caption “Compensation Committee Report” in our definitive proxy statement for the 2025 annual meeting of stockholders is furnished herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Security ownership data appearing under the caption “Security Ownership of Certain Beneficial Owners and Management” in our definitive proxy statement for the 2025 annual meeting of stockholders is incorporated herein by reference.
The table below contains information as of December 31, 2024, with respect to our compensation plans and arrangements (other than our tax-qualified plans) under which we have options, warrants or rights to receive equity securities authorized for issuance.
| Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (1) | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding) Securities Reflected in Column (a)) | |||||||||||||||||
| (a) | (b) | (c) | ||||||||||||||||||
| Equity compensation plans approved by security holders | 10,175,260 | $ | 5.43 | 10,197,246 | ||||||||||||||||
| Equity compensation plans not approved by security holders | — | — | — | |||||||||||||||||
| Total | 10,175,260 | $ | 5.43 | 10,197,246 | ||||||||||||||||
(1) Column (b) relates to stock options and does not include any exercise price for restricted share awards and restricted stock units because the value of such equity awards is dependent upon attainment of continued employment or service and they are settled for shares of Common Stock on a one-for-one basis. | ||||||||||||||||||||
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Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Information concerning transactions with related persons and the independence of our directors is set forth under the captions, “Related Person Transactions” and “Corporate Governance—Director Independence” in our definitive proxy statement for the 2025 annual meeting of stockholders and is incorporated herein by reference.
Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information appearing under the caption “Ratification of Appointment of Independent Registered Public Accounting Firm” in our definitive proxy statement for the 2025 annual meeting of stockholders is incorporated herein by reference.
| Part IV | ||
Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following documents are filed as part of this report:
1.Financial Statements
The financial statements filed as part of this report are listed in Part II, Item 8 of this report on the Index to Consolidated Financial Statements.
2. Financial Statement Schedule
None.
All other schedules are omitted because of the absence of conditions under which they are required or because the required information is provided in the Consolidated Financial Statements or notes thereto.
3. Exhibits
| Exhibit No. | Description | |||||||
| 3.1 | ||||||||
| 3.2 | ||||||||
| 4.1 | ||||||||
| 4.2 | ||||||||
| 4.3* | ||||||||
| 10.1 | ||||||||
| 10.2 | ||||||||
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| 10.3 | ||||||||
| 10.4 | ||||||||
| 10.5 | ||||||||
| 10.6 | ||||||||
| 10.7 | ||||||||
| 10.8 | ||||||||
| 10.9 | ||||||||
| 10.10 | ||||||||
| 10.11 | ||||||||
| 10.12 | ||||||||
| 10.13+ | ||||||||
| 10.14+ | ||||||||
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| 10.15+ | ||||||||
| 10.16+ | ||||||||
| 10.17+ | ||||||||
| 10.18+ | ||||||||
| 10.19+ | ||||||||
| 10.20+ | ||||||||
| 10.21+ | ||||||||
| 10.22+ | ||||||||
| 10.23+ | ||||||||
| 10.24+ | ||||||||
| 10.25+ | ||||||||
| 10.26+ | ||||||||
| 10.27+ | ||||||||
| 10.28+ | ||||||||
| 10.29+ | ||||||||
| 10.30+* | ||||||||
| 10.31+ | ||||||||
| 10.32+ | ||||||||
| 19.1 | ||||||||
| 21.1* | ||||||||
| 23.1* | ||||||||
| 24.1* | ||||||||
| 31.1* | ||||||||
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| 31.2* | ||||||||
| 32.1* | ||||||||
| 32.2* | ||||||||
| 97.1 | ||||||||
| 101.INS* | Inline XBRL Instance Document | |||||||
| 101.SCH* | Inline XBRL Taxonomy Extension Schema Document | |||||||
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |||||||
| 101.DEF* | Inline XBRL Taxonomy Extension Definitions Linkbase Document | |||||||
| 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document | |||||||
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |||||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in the Interactive Data Files submitted as Exhibits 101.*) | |||||||
* Items marked with an asterisk are filed herewith.
+ Management contract or compensatory plan required to be filed under Item 15(c) of this report and Item 601 of Regulation S-K of the Securities and Exchange Commission.
Item 16. FORM 10-K SUMMARY
None.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on February 27, 2025.
HAYWARD HOLDINGS, INC.
By: /s/ Eifion Jones
Eifion Jones
Senior Vice President & Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons, or in their behalf by their duly appointed attorney-in-fact, on behalf of the registrant in the capacities and on the date indicated.
| Signature | Title | Date | ||||||||||||
| /s/ Kevin Holleran | President and | February 27, 2025 | ||||||||||||
| Chief Executive Officer | ||||||||||||||
| Kevin Holleran | (Principal Executive Officer) and Director | |||||||||||||
| /s/ Eifion Jones | Senior Vice President and | February 27, 2025 | ||||||||||||
| Chief Financial Officer | ||||||||||||||
| Eifion Jones | (Principal Financial Officer and Principal Accounting Officer) | |||||||||||||
| /s/ Christopher Bertrand | Director | February 27, 2025 | ||||||||||||
| Christopher Bertrand* | ||||||||||||||
| /s/ Kevin D. Brown | Director | February 27, 2025 | ||||||||||||
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| Kevin D. Brown* | ||||||||||||||
| /s/ Diane Dayhoff | Director | February 27, 2025 | ||||||||||||
| Diane Dayhoff* | ||||||||||||||
| /s/ Stephen Felice | Director | February 27, 2025 | ||||||||||||
| Stephen Felice* | ||||||||||||||
| /s/ Lawrence Silber | Director | February 27, 2025 | ||||||||||||
| Lawrence Silber* | ||||||||||||||
| /s/ Arthur Soucy | Director | February 27, 2025 | ||||||||||||
| Arthur Soucy* | ||||||||||||||
| /s/ Lori Walker | Director | February 27, 2025 | ||||||||||||
| Lori Walker* | ||||||||||||||
| /s/ Ed Ward | Director | February 27, 2025 | ||||||||||||
| Ed Ward* | ||||||||||||||
*By: /s/ Susan M. Canning | ||||||||||||||
| Susan M. Canning, Attorney-in-Fact | ||||||||||||||
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Exhibit 4.3
Description of Registered Securities
The following summarizes the material terms of the common stock, par value $0.001 per shares (the “common stock”) of Hayward Holdings, Inc. (“Hayward,” the “Company,” “we” or “us”). Hayward is a corporation incorporated under the laws of the State of Delaware, and accordingly its internal corporate affairs are governed by Delaware law, including the Delaware General Corporation Law (the “DGCL”), and by its Second Restated Certificate of Incorporation (“our certificate of incorporation”) and Amended and Restated Bylaws (“our bylaws”), which are filed as exhibits to our most recent Annual Report on Form 10-K. The following summary is qualified in its entirety by reference to the applicable provisions of Delaware law and our certificate of incorporation and bylaws, which are subject to future amendment in accordance with the provisions thereof. The common stock is the only class of our securities registered under Section 12 of the Securities Exchange Act of 1934, as amended.
Authorized Capital Stock
The total amount of our authorized capital stock is 850,000,000 shares, consisting of (i) 750,000,000 shares of common stock and (ii) 100,000,000 shares of Preferred Stock, par value $0.001 per share (“preferred stock”). Such stock may be issued from time to time by the Company for such consideration as may be fixed by the board of directors of the Company (the “Board of Directors”). The number of shares of common stock outstanding as of a recent date is set forth on the cover page of our most recent Annual Report on Form 10-K. No shares of preferred stock are issued and outstanding as of the date of our most recent Annual Report on Form 10-K.
Common Stock
Dividend Rights. Subject to preferences that may apply to shares of preferred stock outstanding at the time, holders of outstanding shares of our common stock are entitled to receive dividends out of assets legally available at the times and in the amounts as the Board of Directors may from time to time determine.
Voting Rights. Each outstanding share of our common stock is entitled to one vote on all matters submitted to a vote of stockholders. Holders of shares of our common stock do not have cumulative voting rights.
Except as otherwise required under the DGCL or provided for in our certificate of incorporation, all matters other than the election of directors will be determined by a majority of the votes cast on the matter and all elections of directors will be determined by a plurality of the votes cast. Any director may resign at any time upon notice given in writing, including by electronic transmission, to the Company. Vacancies and newly-created directorships shall be filled exclusively by vote of a majority of the directors then in office, even if less than a quorum, or by a sole remaining director, except that any vacancy created by the removal of a director by the stockholders for cause shall be filled by vote of a majority of the outstanding shares of our common stock. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director.
Preemptive Rights. Our common stock does not confer upon the holder thereof any preemptive or other similar subscription rights to purchase any of our securities.
Conversion or Redemption Rights. Our common stock does not confer upon the holder thereof any conversion rights and there are no redemption or sinking fund provisions applicable to our common stock.
Liquidation Rights. Upon our liquidation, the holders of our common stock will be entitled to receive pro rata our assets that are legally available for distribution, after payment of all debts and other liabilities and subject to the prior rights of any holders of preferred stock then outstanding.
Stock Exchange Listing. Our common stock is listed for trading on the New York Stock Exchange under the symbol “HAYW.”
Preferred Stock
Our certificate of incorporation authorizes our Board of Directors to establish one or more series of preferred stock (including convertible preferred stock). Our Board of Directors may, without further action by our stockholders, from time to time, direct the issuance of shares of preferred stock in series and may, at the time of issuance, determine the designations, powers, preferences, privileges, and relative participating, optional or special rights as well as the qualifications, limitations or restrictions thereof, including dividend rights, conversion rights, voting rights, terms of redemption and liquidation preferences, any or all of which may be greater than the rights of the common stock. Satisfaction of any dividend preferences of outstanding shares of preferred stock would reduce the amount of funds available for the payment of dividends on shares of our common stock. Holders of shares of preferred stock may be entitled to receive a preference payment in the event of our liquidation before any payment is made to the holders of shares of our common stock. Under certain circumstances, the issuance of shares of preferred stock may render more difficult or tend to discourage a merger, tender offer or proxy contest, the assumption of control by a holder of a large block of our securities or the removal of incumbent management. Upon the affirmative vote of a majority of the total number of directors then in office, our Board of Directors, without stockholder approval, may issue shares of preferred stock with voting and conversion rights which could adversely affect the holders of shares of our common stock and the market value of our common stock.
Anti-Takeover Effects of Our Certificate of Incorporation and Bylaws and Certain Provisions of Delaware Law
Our certificate of incorporation and bylaws contain certain provisions that are intended to enhance the likelihood of continuity and stability in the composition of the Board of Directors and which may have the effect of delaying, deferring or preventing a future takeover or change in control of the company unless such takeover or change in control is approved by the Board of Directors.
These provisions include:
Classified Board. Our certificate of incorporation provides that our Board of Directors is divided into three classes of directors, with the classes as nearly equal in number as possible. As a result, approximately one-third of our Board of Directors are to be elected each year. The classification of directors has the effect of making it more difficult for stockholders to change the composition of our board. Our certificate of incorporation also provides that, subject to any rights of holders of preferred stock to elect additional directors under specified circumstances, the number of directors will be fixed exclusively pursuant to a resolution adopted by our Board of Directors.
Special Meetings of Stockholders. Our certificate of incorporation and bylaws provide that, except as otherwise required by law, special meetings of the stockholders may be called only (i) by our chairperson of the Board of Directors or (ii) by a resolution adopted by a majority of our Board of Directors.
Removal of Directors. Our certificate of incorporation provides that no member of our Board of Directors may be removed from office except for cause by the affirmative vote of the holders of at least seventy-five percent (75%) of the voting power of our outstanding shares of capital stock entitled to vote thereon.
Elimination of Stockholder Action by Written Consent. Our certificate of incorporation eliminates the right of stockholders to act by written consent without a meeting.
Advance Notice Procedures. Our bylaws establish an advance notice procedure for stockholder proposals to be brought before an annual meeting of our stockholders, including proposed nominations of persons for election to the Board of Directors. Stockholders at an annual meeting are be able to consider only proposals or nominations specified in the notice of meeting or brought before the meeting by or at the direction of the Board of Directors or by a stockholder who was a stockholder of record on the record date for the meeting, who is entitled to vote at the meeting and who has given our Secretary timely written notice, in proper form, of the stockholder’s intention to bring that business before the meeting, among other requirements set forth in our bylaws. Although the bylaws do not give the Board of Directors the power to approve or disapprove stockholder nominations of candidates or proposals regarding other business to be conducted at a special or annual meeting, the bylaws may have the effect of precluding the conduct of certain business at a meeting if the proper procedures are not followed or may discourage or deter a potential acquiror from conducting a solicitation of proxies to elect its own slate of directors or otherwise attempting to obtain control of the company.
Authorized but Unissued Shares. Our authorized but unissued shares of common stock and preferred stock are available for future issuance without stockholder approval. These additional shares may be utilized for a variety of corporate purposes, including future public offerings to raise additional capital, corporate acquisitions and employee benefit plans. The existence of authorized but unissued shares of common stock and preferred stock could render more difficult or discourage an attempt to obtain control of a majority of our common stock by means of a proxy contest, tender offer, merger or otherwise.
Business Combinations with Interested Stockholders. Our certificate of incorporation provides that the Company is not subject to Section 203 of the DGCL, an antitakeover law. In general, Section 203 prohibits a publicly held Delaware corporation from engaging in a business combination, such as a merger, with a person or group owning 15% or more of the Company’s voting stock for a period of three years following the date the person became an interested stockholder, unless (with certain exceptions) the business combination or the transaction in which the person became an interested stockholder is approved in a prescribed manner. Accordingly, we are not subject to any anti-takeover effects of Section 203. However, our certificate of incorporation contains provisions that have the same effect as Section 203, except that they provide that certain entities are not deemed to be “interested stockholders,” regardless of the percentage of our voting stock owned by them, and accordingly are not subject to such restrictions.
Choice of Forum. Our certificate of incorporation provides that, subject to limited exceptions, the Court of Chancery of the State of Delaware (or, if, and only if, the Court of Chancery of the State of Delaware dismisses a Covered Claim (as defined below) for lack of subject matter jurisdiction, any other state or federal court in the State of Delaware that does have subject matter jurisdiction) will, to the fullest extent permitted by applicable law, be the sole and exclusive forum for the following types of claims: (i) any derivative claim brought in the right of the Company, (ii) any claim asserting a breach of a fiduciary duty to the Company or the Company’s stockholders owed by any current or former director, officer or other employee or stockholder of the Company, (iii) any claim against the Company arising pursuant to any provision of the DGCL, our certificate of incorporation or bylaws, (iv) any claim to interpret, apply, enforce or determine the validity of our certificate of incorporation or bylaws, (v) any claim against the Company governed by the internal affairs doctrine, and (vi) any other claim, not subject to exclusive federal jurisdiction and not asserting a cause of action arising under the Securities Act of 1933, as amended (the “Securities Act”), brought in any action asserting one or more of the claims specified in clauses (i) through (v) herein above (each a “Covered Claim”).
Our certificate of incorporation further provides that the federal district courts of the United States of America are the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act. In addition, our certificate of incorporation provides that any person or entity purchasing or otherwise acquiring any interest in the shares of capital stock of the Company will be deemed to have notice of and consented to these choice-of-forum provisions and waived any argument relating to the inconvenience of the forums in connection with any Covered Claim.
The choice of forum provisions contained in our certificate of incorporation may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, other employees or stockholders, which may discourage lawsuits with respect to such claims,
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although our stockholders will not be deemed to have waived our compliance with federal securities laws and the rules and regulations thereunder. While the Delaware courts have determined that such choice of forum provisions are facially valid, it is possible that a court of law in another jurisdiction could rule that the choice of forum provisions to be contained in our certificate of incorporation are inapplicable or unenforceable if they are challenged in a proceeding or otherwise, which could cause us to incur additional costs associated with resolving such action in other jurisdictions.
Amendment of Charter Provisions and Bylaws. The amendment of any of the above provisions, except for the provision making it possible for our Board of Directors to issue common stock or preferred stock, would require the affirmative vote of the holders of at least seventy-five percent (75%) of the voting power of our outstanding shares of capital stock entitled to vote thereon.
The provisions of Delaware law, our certificate of incorporation and our bylaws could have the effect of discouraging others from attempting hostile takeovers and, as a consequence, they may also inhibit temporary fluctuations in the market price of our common stock that often result from actual or rumored hostile takeover attempts. These provisions may also have the effect of preventing changes in the composition of our Board of Directors and management. It is possible that these provisions could make it more difficult to accomplish transactions that stockholders may otherwise deem to be in their best interests.
Corporate Opportunities
Our certificate of incorporation provides that we renounce any interest or expectancy in the business opportunities of certain specified entities and all of their respective all of their respective partners, principals, directors, officers, members, managers and/or employees, including any of the foregoing who serve as directors of the Company, and each such party shall not have any obligation to offer us those opportunities.
Limitations on Liability and Indemnification of Officers and Directors
Our certificate of incorporation limits the liability of our directors to the fullest extent permitted by the DGCL or any other law of the state of Delaware and our bylaws provide that we may indemnify our directors and our officers that are appointed by the Board of Directors to the fullest extent permitted by applicable law. We enter into indemnification agreements with our directors and executive officers to provide for such indemnification.
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Exhibit 10.30
EMPLOYMENT AGREEMENT
This Employment Agreement (the “Agreement”) is made and entered into as of the date last signed by and among Hayward Industries, Inc. (the “Company”), Hayward Holdings, Inc. (the “Parent”) and Eric Sejourne (the “Executive”) (the Company, the Parent and the Executive, individually, a “Party” and, collectively, the “Parties”) and is effective as of April 15, 2024, the Executive’s first date of employment (hereinafter, the “Effective Date”). (Hereinafter the Company and the Parent together may be referred to as the “Companies.”)
Terms used herein with initial capitalization not otherwise defined are defined in Section 24 hereof.
WITNESSETH:
WHEREAS, the Company desires the Executive to serve as Senior Vice President, Chief Global Operations Officer of the Company and the Executive is willing to do so pursuant to the terms of this Agreement; and
WHEREAS, the Parent desires to employ the Executive as Senior Vice President, Chief Global Operations Officer of the Company and the Executive is willing to do so pursuant to the terms of this Agreement.
NOW THEREFORE, in consideration of the premises and of the covenants and agreements set forth herein and for other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, the Companies and the Executive hereby agree as follows:
1.Employment. The Companies agree to employ the Executive pursuant to the terms of this Agreement, and the Executive agrees to be so employed, for a period commencing on the Effective Date and continuing until the Executive’s employment is terminated pursuant to Section 9 hereof (the “Employment Period”).
2.Position and Duties. During the Employment Period, the Executive shall serve as Senior Vice President, Chief Global Operations Officer of the Company, reporting directly to the Chief Executive Officer of the Company. In such capacity, the Executive shall have the duties, responsibilities and authorities customarily associated with the position of Senior Vice President, Chief Global Operations Officer in companies the size and nature of the Company. The Executive shall devote the Executive’s reasonable best efforts and substantially all of the Executive’s business time to the performance of the Executive’s duties and responsibilities hereunder; provided that the Executive shall be entitled to manage the Executive’s personal and family investments, to the extent such activities do not materially interfere with the performance of the Executive’s duties and responsibilities hereunder (including, for the avoidance of doubt, the terms of Sections 6, 7 and 8 hereof).
3.Place of Performance. During the Employment Period, the Executive shall be based primarily at the Company’s principal executive office in Charlotte, North Carolina. The Executive understands and agrees that the Executive may be required to travel from time to time for business purposes.
4.Compensation and Benefits; Incentive Awards.
(a)Base Salary. During the Employment Period, the Company shall pay to the Executive a base salary (the “Base Salary”) at the rate of $470,000 per calendar year, less applicable deductions. The Base Salary shall be reviewed for increase by the Board or the Compensation Committee of the Board (the “Compensation Committee”) no less frequently than annually and may be increased in the sole discretion of the Board or the Compensation Committee and any such adjusted Base Salary shall thereafter constitute the “Base Salary” for purposes of this Agreement. The Base Salary shall be paid in substantially equal installments in accordance with the Company’s regular payroll procedures.
(b)Annual Bonus. During the Employment Period, the Executive shall be eligible to receive an annual cash performance bonus (an “Annual Bonus”) under the Company’s annual incentive plan (as in effect from time to time for senior executives) in respect of each plan year that ends during the Employment Period, to the extent earned based on the achievement of performance criteria set by the Board or the Compensation Committee. The performance criteria for a plan year shall be determined by the Board or the Compensation Committee, in good faith, no later than sixty (60) days after the commencement of such plan year. The Executive’s target annual bonus opportunity shall be 60% of the Executive’s Base Salary as of the beginning of the applicable plan year (the “Target Bonus”) if target levels of performance for that year are achieved. The Executive’s actual Annual Bonus for any plan year shall be determined by the Board or the Compensation Committee after the end of such plan year and shall be paid to the Executive no later than seventy-five (75) calendar days following the end of such plan year. For purposes of Section 24(a) hereof, if the Executive’s employment is terminated pursuant to the terms of Section 9 hereof after the end of any plan year (other than pursuant to Section 9(c)), but prior to such Annual Bonus determination by the Board or the Compensation Committee with respect to that plan year, and the Board or the Compensation Committee subsequently determines that the Annual Bonus for that plan year has been earned by the Executive, then any such earned Annual Bonus, in an amount equal to such earned Annual Bonus payout percentage as determined by the Board or the Compensation Committee, shall be considered an Accrued Benefit.
(c)Equity Incentive Awards. During the Employment Period, the Executive shall be eligible to participate in any equity incentive plan that may be made available, from time to time, to other senior executives of the Companies.
(d)Vacation Benefits. During the Employment Period, the Executive shall be entitled to four (4) weeks paid vacation annually (accruing ratably on an annual basis) and to participate in employee benefits made available, from time to time, to senior executive officers of the Company.
5.Expenses. The Company shall reimburse the Executive promptly for all expenses reasonably incurred by the Executive in the performance of his duties hereunder in accordance with policies that may be adopted from time to time by the Company following presentation by the Executive of an itemized account, including reasonable substantiation, of such expenses. The Executive’s right to payment or reimbursement for business expenses and other amounts hereunder shall be subject to the following additional rules: (a) the amount of expenses eligible for payment or reimbursement during any calendar year shall not affect the expenses eligible for payment or reimbursement in any other calendar year, (b) payment or reimbursement shall be made no later than December 31 of the calendar year following the calendar year in which the expense or payment was incurred, and (c) the right to payment or reimbursement shall not be subject to liquidation or exchange for any other benefit.
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6.Confidentiality and Assignment of Intellectual Property. The Executive hereby acknowledges and agrees that the business, financial and other non-public information of the Companies and the Companies’ direct and indirect parents and subsidiaries is of a confidential and proprietary nature. The Executive hereby further acknowledges and agrees that, during the course of their employment by the Companies, they have received, developed or learned of, and will continue to receive, develop, or learn of, confidential and proprietary information of the Companies and the Companies’ direct and indirect parents and subsidiaries not previously known to them and not known or used generally. The Executive hereby agrees that, they will not disclose other than as required for the performance of their duties under this Agreement, will continue to keep in strict secrecy and confidence, and continue to treat as the property of the Parent, the Company or any of the Companies’ direct or indirect parents or subsidiaries, as the case may be, and will not use for their own benefit or for the benefit of others any and all information, knowledge and other data relating to the business and affairs of the Parent, the Company or any of the Companies’ direct or indirect parents or subsidiaries, as the case may be (whether or not such information, knowledge or other data is in written form), that they have acquired, received, developed or learned, or may acquire, receive, develop or learn in the course of their employment by the Parent, Company or any of the Companies’ direct or indirect subsidiaries. For the avoidance of doubt, (a) nothing contained in this Agreement limits, restricts or in any other way affects the Executive’s communicating with any governmental, administrative or legislative agency or entity (including a committee thereof), or communicating with any official or staff person of a governmental, administrative or legislative agency or entity, concerning matters relevant to such agency or entity, or requires the Executive to provide prior notice of such communication to the Company or Parent, (b) nothing contained in this Agreement limits, restricts or in any other way affects any disclosures by the Executive required by law or court order, and (c) nothing contained in this Agreement limits, restricts or in any other way affects, and the Executive will not be held criminally or civilly liable under any federal or state trade secret law for, the Executive’s disclosing a trade secret (A) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney, solely for the purpose of reporting or investigating a suspected violation of law, or (B) in a complaint or other document filed under seal in a lawsuit or other proceeding; provided, however, that notwithstanding this immunity from liability, the Executive may be held liable if they unlawfully access trade secrets subject to this Section 6 by unauthorized means. Anything herein to the contrary notwithstanding, information, knowledge and other data relating to the business and affairs of the Parent, the Company or any direct or indirect parent or subsidiary of either, including trade secrets, that are subject to the confidentiality provisions of this Section 6 shall cease to be subject to such provisions if the data becomes known to the public other than due to any wrongful action or negligence of the Executive.
The Executive, as part of the consideration for this Agreement and for their employment by the Companies, hereby assigns, and agrees to assign, to (or as otherwise directed by) the Companies their entire right, title and interest in and to any and all inventions, trade secrets, improvements, plans and specifications (i) which they, alone or in conjunction with others, may make, conceive or develop during the period of their employment with the Companies which relate to the business of the Parent, the Company or any of the Companies’ direct or indirect subsidiaries, or (ii) which they, alone or in conjunction with others, may make or conceive within a period of one (1) year after the Date of Termination which derive from any confidential or proprietary information, knowledge or other data of the Parent, the Company or any of their respective direct or indirect subsidiaries with respect to which they have become informed by reason of their engagement by the Companies (including, without limitation, their relations with the Companies’ direct or indirect subsidiaries). The Executive further agrees that they will promptly disclose fully to the Companies their aforesaid inventions, trade secrets, improvements,
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plans and specifications and will at any time during and after their employment with the Companies render to the Companies such cooperation and assistance as they may deem to be advisable in order to obtain copyrights or patents, as the case may be, on or otherwise perfect or defend the rights of the Company and/or the Parent in each such invention, trade secret, improvement, plan or specification, including, but not limited to, the execution of any and all applications for copyrights or patents, assignments of copyrights or patents and other written instruments which the Companies, their officers or attorneys reasonably may deem necessary or desirable, and the aforesaid obligation shall be binding on the Executive’s assigns, executors, administrators and other legal representatives.
The Executive hereby irrevocably grants to each of the Companies and their successors and assigns, to the full extent permitted by law, power of attorney to institute and prosecute from time to time, at their sole expense, any proceedings at law, in equity or otherwise, that any of the Companies, their successors or assigns, may deem proper in order to transfer to the Companies, assert or enforce any claim, right or title of any kind in and to the inventions, trade secrets, improvements and other proprietary interests described under this Section 6, to defend and settle any and all actions, suits or proceedings in respect of any of said inventions, trade secrets, improvements and other proprietary interests and, generally to do any and all such acts and things in relation thereto as any of the Companies, their successors or assigns, shall deem advisable, including, but not limited to, execution of any and all applications, assignments and instruments contemplated under this Section 6. The Executive declares and acknowledges that the appointment hereby made and the powers hereby granted are coupled with an interest and shall be irrevocable by them.
7.Non-Competition and Non-Solicitation.
(a)During the Employment Period and for a period of one (1) year thereafter (the “Non-Compete Period”), the Executive shall not engage, directly or indirectly, whether as principal, agent, employee, consultant, distributor, representative, five percent (5%) or greater stockholder or otherwise, in any business activities in the United States of America or any other jurisdiction in which the Parent or any of its direct or indirect subsidiaries operate, which are in any way competitive with the business conducted by the Parent or any of its direct or indirect subsidiaries during the Employment Period.
(b)During the Employment Period and for a period of two (2) years thereafter (the “Non-Solicitation Period” and together with the Non-Compete Period, the “Restricted Period”), the Executive shall not, directly or indirectly (whether alone or jointly with another Person), (i) solicit for employment, hire, employ, or engage any Person who, at any time during the Non-Solicitation Period, is an officer or employee of the Parent or any of its direct or indirect subsidiaries, including the Company; provided, however, that the preceding sentence does not prohibit the Executive from (A) soliciting or hiring any Person whose employment, or engagement for services, was terminated by any such Person at least twelve (12) months prior to the date of such solicitation or hire; and provided, further, that such termination was not encouraged by the Executive, or (B) engaging in any general solicitation not targeted at any employee of any such Person, including a non-directed executive search or placing general advertisements for employees in newspapers or other media of general circulation so long as such employee is not hired, directly or indirectly, by the Executive or any of their controlled Affiliates or (ii) solicit business from any customer or solicit products or services from any vendor of the Parent or any of its direct or indirect subsidiaries, including the Company, that
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interferes with or jeopardizes the business or relationships of any such Person with any such customer or vendor.
(c)The Parties acknowledge and agree that the Executive’s obligations under Section 6, this Section 7 and the following Section 8(c) (collectively, the “Covenants”) are of a special, unique and extraordinary nature, that there may be no adequate remedy at law for any breach thereof, that any such breach may allow third parties to compete unfairly with the Parent or any of its direct or indirect parents or subsidiaries, including the Company, resulting in irreparable harm to any such Person, and, therefore, upon any such breach or any threat thereof, the Companies shall be entitled to preliminary and permanent, mandatory or negative injunctive relief against any breach or threatened breach by the Executive of any of the Covenants, without having to post a bond, in addition to whatever remedies they may have at law. The Executive hereby agrees that (i) the terms of the Covenants are reasonable, (ii) the foregoing restrictions will not prevent them from obtaining gainful employment in their occupation or field of expertise or cause them undue hardship, and (iii) in the event a court determines that any of the provisions of the Covenants are unreasonable or contrary to public policy, or invalid or unenforceable for any reason in fact, law or equity, then such provision shall be deemed to be modified to permit its enforcement to the maximum extent permitted by law. So that the Companies may enjoy the full benefits of the covenants set forth in this Section 7, the Executive further agrees that the Restricted Period shall be tolled, and shall not run, during the period of time during which the Executive is in breach of any of the covenants contained in this Section 7, after such time the Company has informed the Executive that they are so in breach. It is also agreed that each of the Parent and its direct or indirect parents or subsidiaries, including the Company, shall have the right to enforce all of the Executive’s obligations to that Affiliate under this Agreement, including without limitation pursuant to this Section 7.
8.Mutual Non-Disparagement. During the Employment Period and thereafter, the Executive agrees not to make public statements or communications, or statements or communications that, at the time made, are intended or reasonably likely to become public, that disparage or criticize the Parent or any of its direct or indirect parents or subsidiaries, including the Company, or any of their respective businesses, services or products or their current, former or future equityholders, directors or executive officers (in their capacities as such). During the Employment Period and thereafter, each of the Company and the Parent shall not authorize, and shall instruct its directors and executive officers to not make, public statements or communications that disparage or criticize the Executive. For purposes of this Section 8, “public” as used in reference to a statement or communication means the public generally, including the current, former or future equityholders, directors or executive officers of the Parent and its direct or indirect parents or subsidiaries, including the Company, and the customers, vendors or other business partners of any such Person. The foregoing shall not be violated by (a) truthful statements in response to legal process, required governmental testimony or filings, or administrative or arbitral proceedings (including, without limitation, depositions in connection with such proceedings), (b) public comments, such as in media interviews, which include good faith, candid discussions or acknowledgements regarding the performance or business of Parent or any of its direct or indirect parents or subsidiaries, including the Company, or (c) discussions regarding the Executive in connection with performance evaluations, including impromptu evaluations and feedback and good faith criticism.
9.Termination of Employment. A termination of the Executive’s employment with either the Parent or the Company shall be treated as a termination of the Executive’s employment with both of the Companies.
(a)Death. If the Executive’s employment with the Companies is terminated during the Employment Period as a result of the Executive’s death, the Employment Period shall terminate without further notice or any action required by the Companies or the Executive’s
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estate or other legal representative. Upon the Executive’s death, the Company shall pay or provide to the Executive’s estate or other legal representative (i) all Accrued Benefits and (ii) a Pro-Rata Bonus.
(b)Disability. If the Companies, or either of them, terminate the Executive’s employment during the Employment Period because of the Executive’s Disability, the Company shall pay or provide to the Executive (i) all Accrued Benefits, (ii) a Pro-Rata Bonus, (iii) the COBRA Coverage Benefits, and (iv) the Post-Termination Benefits.
(c)Termination by the Companies for Cause or by the Executive without Good Reason. If, during the Employment Period, the Companies, or either of them, terminate the Executive’s employment for Cause or the Executive terminates their employment with either of the Companies without Good Reason, the Company shall pay to the Executive all Accrued Benefits.
(d)Termination by the Companies without Cause or by the Executive for Good Reason. If, during the Employment Period, the Companies, or either of them, terminate the Executive’s employment without Cause (other than due to Disability) or if the Executive terminates their employment with either of the Companies for Good Reason, the Company shall pay or provide the Executive (or the Executive’s estate or other legal representative, if the Executive dies after such termination but before receiving such amount) (i) all Accrued Benefits, (ii) a Pro-Rata Bonus, (iii) an amount equal to the sum of the Executive’s Base Salary and Target Bonus, payable in equal installments paid at the same time as normal payroll payments are made for the twelve (12) month period following the Date of Termination, with such payments to commence on the first payroll date following the Payment Date (as defined below), but retroactive to the day following the Date of Termination, subject to Section 9(i) hereof, (iv) the COBRA Coverage Benefits, (v) outplacement counseling services for six (6) months following the Date of Termination, and (vi) the Post-Termination Benefits.
(e)Notice of Termination. Any termination of the Executive’s employment by the Companies or by the Executive (other than because of the Executive’s death) shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 11 hereof. For purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon. Termination of the Executive’s employment shall take effect on the Date of Termination.
(f)Effect of Termination. Upon any termination of the Executive’s employment with the Companies, or either of them, the Executive shall resign from, and shall be considered to have simultaneously resigned from, all positions with the Companies and all of the Companies’ Affiliates.
(g)Release. As a condition to the Executive’s entitlements (other than the Accrued Benefits), as provided in Section 9(b) and 9(d) hereof (the “Severance Benefits”), the Executive must timely execute and deliver to the Companies, and not revoke, a release of claims in substantially the form attached as Exhibit A hereto (the “Release”); provided, that for the avoidance of doubt, the foregoing Release requirement shall not apply to the Company’s obligation to provide the Accrued Benefits or any amounts payable under Section 9(a). The Release must be executed and delivered by the Executive (and no longer be subject to revocation) as provided in Section 3.c of Exhibit A. The Release must become effective, if at all, by the date specified therein (and in all events no later than the ninetieth (90th) calendar day following the Date of Termination). The first payment of the Severance Benefits (excluding the Pro Rata Bonus) will be made on the Company’s next regular payday following the earlier of (i) the date upon which the Release (if applicable) becomes effective, binding and irrevocable and
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(ii) the expiration of ninety (90) calendar days from the Date of Termination (the “Payment Date”), but will be retroactive to the day following the Date of Termination.
(h)No Offset. In the event of termination of their employment, the Executive shall be under no obligation to seek other employment and there shall be no offset against amounts due to them on account of any remuneration or benefits provided by any subsequent employment he may obtain, except as provided under Section 24(d) hereof. The Companies’ obligation to make any payment pursuant to, and otherwise to perform its obligations under, this Agreement shall not be affected by any offset, counterclaim or other right that the Parent, the Company or any of the Companies’ Affiliates may have against the Executive for any reason.
(i)Section 280G. If any payment or benefit that the Executive may receive following a change of control of the Company, the Executive’s termination of employment, or otherwise, whether or not payable or provided under this Agreement (“Payment”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then such Payment shall be reduced to the Reduced Amount. The “Reduced Amount” shall be either (A) the largest portion of the Payment that would result in no portion of the Payment being subject to the Excise Tax or (B) the largest portion, up to and including the total amount, of the Payment, whichever of the amounts determined under (A) and (B), after taking into account all applicable federal, state and local employment taxes, income taxes, and the Excise Tax (all computed at the highest applicable marginal rate), results in the Executive’s receipt, on an after-tax basis, of the greater amount of the Payment notwithstanding that all or some portion of the Payment may be subject to the Excise Tax. If a reduction in payments or benefits constituting “parachute payments” is necessary so that the Payment equals the Reduced Amount, reduction shall occur in the following order: reduction of cash payments; cancellation of accelerated vesting of outstanding equity awards; and reduction of employee benefits. In the event that acceleration of vesting of outstanding equity awards is to be reduced, such acceleration of vesting shall be undertaken in the reverse order of the date of grant of the Executive’s outstanding equity awards. All calculations and determinations made pursuant this Section 9(i) will be made by an independent accounting or consulting firm or independent tax counsel appointed by the Company (the “Tax Counsel”) whose determinations shall be conclusive and binding on the Company and the Executive for all purposes. For purposes of making the calculations and determinations required by this Section 9(i), the Tax Counsel may rely on reasonable, good faith assumptions and approximations concerning the application of Section 280G of the Code and Section 4999 of the Code. The Company shall bear all costs the Tax Counsel may reasonably incur in connection with its services.
(j)Satisfaction of Obligations. Anything herein to the contrary notwithstanding, upon satisfaction of their respective applicable obligations as set forth in this Section 9, the Companies shall have no further obligations to the Executive under this Agreement, except as set forth in Section 13 hereof. The obligation of the Companies to provide the Severance Benefits (or, if such Severance Benefits have commenced, to continue providing the Severance Benefits) to the Executive is expressly conditioned upon the Executive’s continued performance of and compliance with their obligations under the Covenants; provided, however, that an immaterial and unintentional breach by the Executive of the Covenants provided in Section 6 or Section 8 hereof shall not be deemed to be a failure to perform or comply with such obligations. In the event of the Executive’s death after their termination of employment but prior to their receiving, in full, the payments or other benefits to which they are entitled hereunder, their estate or other legal representative shall succeed to such entitlements.
10.Indemnification. During the Employment Period and thereafter, the Companies will indemnify the Executive to the fullest extent permitted by law and each of the Companies’
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certificate of incorporation, bylaws or other governing documents, as applicable, and cause them to be covered under such directors and officers’ insurance policies as the Companies maintain in effect from time to time. The Executive agrees to promptly notify the Companies of any actual or threatened claim arising out of or as a result of the Executive’s employment hereunder or any office or directorship held with Parent, the Company or any of their Affiliates.
11.Notices. All notices, demands, requests, or other communications which may be or are required to be given or made by any party to any other party pursuant to this Agreement shall be in writing and shall be hand delivered, mailed by first-class registered or certified mail, return receipt requested, postage prepaid, delivered by overnight air courier, or transmitted by facsimile transmission addressed as follows:
If to the Company, to:
Hayward Industries, Inc.
1415 Vantage Park Drive, Suite 400
Charlotte, NC 28203
Attn: Chief Executive Officer
cc: Chief Legal Officer
If to the Parent, to:
Hayward Holdings, Inc.
1415 Vantage Park Drive, Suite 400
Charlotte, NC 28203
Attn: Chief Executive Officer
cc: Chief Legal Officer
If to the Executive, to: Address last shown on the Company’s records.
Each party may designate by notice in writing a new address to which any notice, demand, request or communication may thereafter be so given, served or sent. Each notice, demand, request, or communication that shall be given or made in the manner described above shall be deemed sufficiently given or made for all purposes at such time as it is delivered to the addressee (with the return receipt, the delivery receipt, confirmation of facsimile transmission or the affidavit of messenger being deemed conclusive but not exclusive evidence of such delivery) or at such time as delivery is refused by the addressee upon presentation.
12.Severability. The invalidity or unenforceability of any one or more provisions of this Agreement, including, without limitation, Sections 6, 7 and 8, shall not affect the legality, validity or enforceability of the other provisions of this Agreement, which shall remain in full force and effect.
13.Survival. It is the express intention and agreement of the Parties that the provisions hereof shall survive the termination of employment of the Executive, in accordance with the respective terms of such provisions. In addition, all obligations of the Company or the Parent to the Executive under applicable compensation benefit plans and programs and to make
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payments or settle equity awards granted thereunder shall survive any termination of this Agreement, to the extent permitted by law, in accordance with the terms of such plans, programs and/or awards.
14.Assignment. The rights and obligations of the Parties to this Agreement shall not be assignable or delegable except that (a) in the event of the Executive’s death, the personal representative or legatees or distributees of the Executive’s estate, or the trustees of any trusts established under the Executive’s will or by the Executive during their lifetime, as the case may be, shall have the right to receive any amount owing and unpaid to the Executive hereunder and (b) the respective rights and obligations of the Company and the Parent hereunder shall be assignable and delegable in connection with any subsequent merger, consolidation, reorganization, sale of all or substantially all of the assets or equity interests of the Company or the Parent, or similar transaction involving the Company or the Parent or a successor to either of them. In connection with any assignment pursuant to clause (b) of the preceding sentence, the Parent and the Company shall require any such successor to the Parent or the Company or to their respective business and assets to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Parent and the Company would be required to perform it if no such succession had taken place; provided, for the avoidance of doubt, that no such express assumption and agreement shall be required where any such successor becomes subject to this Agreement by operation of law as part of any transaction described in the foregoing clause (b). As used in this Agreement, “Company” shall include any successor to the Company’s business and/or assets and “Parent” shall include any successor to the Parent’s business and/or assets.
15.Binding Effect. Subject to any provisions hereof restricting assignment, this Agreement shall be binding upon the Parties and shall inure to the benefit of the Parties and their respective heirs, devisees, executors, administrators, legal representatives, successors and assigns.
16.Amendment; Waiver. This Agreement shall not be amended, altered or modified except by an instrument in writing duly executed by the party against whom enforcement is sought. Neither the waiver by any of the Parties of a breach of or a default under any of the provisions of this Agreement, nor the failure of any of the Parties, on one or more occasions, to enforce any of the provisions of this Agreement or to exercise any right or privilege hereunder, shall thereafter be construed as a waiver of any subsequent breach or default of a similar nature, or as a waiver of any such provisions, rights or privileges hereunder.
17.Headings. Section and subsection headings contained in this Agreement are inserted for convenience of reference only, shall not be deemed to be a part of this Agreement for any purpose, and shall not in any way define or affect the meaning, construction or scope of any of the provisions hereof.
18.Governing Law. This Agreement, the rights and obligations of the Parties, and any claims or disputes relating thereto, shall be governed by and construed in accordance with the laws of the New Jersey (but not including any choice of law rule thereof that would cause the laws of another jurisdiction to apply).
19.Dispute Resolution.
(a)Arbitration. In the event of any dispute between the Parties, including but not limited to any claims arising from or related to this Agreement or the termination of this Agreement, any claims related to Executive’s employment or the termination of the Executive’s employment, or any claims arising under the state and federal laws governing employment, such dispute will be determined exclusively, upon the written request of either Party, by binding
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arbitration under the auspices of and pursuant to the Employment Dispute Resolution Rules of the American Arbitration Association. Such arbitration shall be conducted in New York City, New York before a single arbitrator who is a retired judge. This agreement to arbitrate shall include, without limitation, any and all disputes, controversies and/or claims against Parent, the Company or any of their Affiliates or the current or former partners, members, officers or employees of any of them, whether arising under theories of liability or damages based on contract, tort or statute, to the fullest extent permitted by law, such as, without limitation, claims for breach of contract or breach of the covenant of good faith and fair dealing, any claims of discrimination or other claims under Title VII of the Civil Rights Act of 1964, as amended, the Age Discrimination in Employment Act of 1967, the Americans with Disabilities Act, the Family and Medical Leave Act, the Fair Labor Standards Act, ERISA and/or any applicable or equivalent state or local laws, claims for wrongful termination, including employment termination in violation of public policy, and claims for personal injury including, without limitation, defamation, fraud and infliction of emotional distress. The only claims not covered by this agreement to arbitrate are claims for benefits under workers’ compensation or unemployment insurance statutes and other claims that cannot be arbitrated as a matter of law. As a material part of this agreement to arbitrate claims, the Executive, Parent, and the Company expressly waive all rights to a jury trial in court on all statutory or other claims, including, without limitation, those identified in this Section 19. The Executive also acknowledges and agrees that no claims will be arbitrated on a class action or collective action basis. The arbitrator will have no power to add to, subtract from, or otherwise modify any of the terms of this Agreement except that a provision otherwise invalid, illegal or unenforceable shall be modified to the least extent necessary to make it valid, legal and enforceable. The decision of the arbitrator shall be final, conclusive and binding and may be enforced by any court of competent jurisdiction, and all Parties consent to the personal jurisdiction of the state and federal courts of the State of New Jersey for such purposes. Notwithstanding the foregoing, the Parent and the Company shall be entitled to seek injunctive relief and other provisional remedies against the Executive in any court of competent jurisdiction for any breach or threatened breach of any provisions of this Agreement. All reasonable fees, costs and expenses (including reasonable attorneys’ fees, expenses and costs) incurred by the prevailing party in any arbitration will be borne by the other party. Any claim must be brought to arbitration within the statute of limitations for bringing such claim in court or before the appropriate administrative agency, as applicable.
(b)Court Proceeding. Each of the Parties agrees that any dispute between the Parties in respect of which resolution by a court of any issue is required either (i) in accordance with the provisions of Section 19(a) or (ii) for the purpose of the recognition and enforcement of any judgment by the arbitrator, shall be resolved only in the courts of New Jersey or the United States District Court for the District of New Jersey and the appellate courts having jurisdiction of appeals from such courts.
20.Entire Agreement. This Agreement and all other agreements and plans relating to the subject matter hereof, including, without limitation, agreements for amending awards granted under such plans, to the extent not inconsistent with any terms set forth herein, constitute the entire understanding of the Company and the Parent on the one hand, and the Executive on the other hand, with respect to the subject matter hereof and supersede all other prior understandings, written or oral, concerning such subject matter.
21.Counterparts. This Agreement may be executed in two counterparts, each of which shall be an original and all of which shall be deemed to constitute one and the same instrument.
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22.Withholding. The Company may withhold from any benefit or compensation payment under this Agreement all federal, state, city or other taxes as shall be required pursuant to any law or governmental regulation or ruling.
23.Section 409A.
(a)The intent of the Parties is that payments and benefits under this Agreement comply with Section 409A of the Code and the regulations and guidance promulgated thereunder (collectively “Code Section 409A”) and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be in compliance therewith. Specifically, if any provision of this Agreement is ambiguous, such that one interpretation of the provision would comply with Code Section 409A and another interpretation would result in a failure to comply with any applicable requirement under Code Section 409A, the Parties intend that the interpretation that complies with Code Section 409A shall be the one that governs. To the extent permitted under Code Section 409A, this Agreement, and the terms of any Plan (as defined in Section 23(f) below) to the extent they relate to the Executive’s entitlements thereunder, shall be modified, either as reasonably requested by the Executive, with the Company’s and Parent’s consent), or as the Company may propose (or, as the Parent may propose, with respect to any Plan maintained by it) with the Executive’s consent, to the extent necessary to comply with all applicable requirements of, and to avoid the imposition of any additional tax, interest or penalties under, Code Section 409A in connection with the payments and benefits to be paid or provided to the Executive hereunder or under such Plan. To the extent that any provision hereof, or of any Plan, is modified in order to comply with Code Section 409A, such modification shall be made in good faith, shall not impose any additional costs on the Parent or the Company and shall, to the maximum extent reasonably possible, maintain the original intent and economic benefit to the Executive and the Companies of the applicable provision without violating the provisions of Code Section 409A.
(b)A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits upon or following a termination of employment unless such termination is also a “separation from service” within the meaning of Code Section 409A and, for purposes of any such provision of this Agreement, references to a “termination,” “termination of employment” or like terms shall mean “separation from service.” If the Executive is deemed on the date of termination to be a “specified employee” within the meaning of that term under Code Section 409A(a)(2)(B), then with regard to any payment or the provision of any benefit that is considered deferred compensation under Code Section 409A (after taking into account all exclusions applicable to such payment or benefit under Code Section 409A) and that is payable or to be provided to the Executive on account of their “separation from service,” such payment or benefit shall be made or provided at the date which is the earliest to occur of (i) the expiration of the six (6)-month period measured from the date of the Executive’s “separation from service, (ii) the date of the Executive’s death, or (iii) such earlier date as may be permitted under Code Section 409A. Upon the expiration of the foregoing delay period, all payments and benefits delayed pursuant to this Section 23(b) (whether they would have otherwise been payable in a single sum or in installments in the absence of such delay) shall be paid or reimbursed to the Executive in a lump sum, and any remaining payments and benefits due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein.
(c)To the extent that the reimbursement of any expenses eligible for reimbursement or the provision of any in-kind benefits under this Agreement constitute “nonqualified deferred compensation” for purposes of Code Section 409A (after taking into account all exclusions applicable to such reimbursements or benefits under Code Section 409A): (i) reimbursement of any such expense shall be made as soon as practicable after such expense has been incurred, but any event no later than December 31 of the year following the year in which the Executive incurs
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such expense; (ii) the amount of such expenses eligible for reimbursement, or in-kind benefits to be provided, in any calendar year shall not affect the amount of expenses eligible for reimbursement, or in-kind benefits to be provided, in any other calendar year; and (iii) the Executive’s right to receive such reimbursements or in-kind benefits shall not be subject to liquidation or exchange for any other benefit.
(d)For purposes of Code Section 409A, the Executive’s right to receive any installment payments pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments. Whenever a payment under this Agreement specifies a payment period with reference to a number of days, the actual date of payment within the specified period shall be within the sole discretion of the Company.
(e)Notwithstanding any other provision of this Agreement to the contrary, in no event shall any payment under this Agreement that constitutes “nonqualified deferred compensation” for purposes of Code Section 409A be subject to offset by any other amount unless otherwise permitted by Code Section 409A.
(f)For purposes of the foregoing, the term “Plan” shall mean any plan, program, agreement (other than this Agreement) or other arrangement maintained by the Company, the Parent or any of the Companies’ Affiliates that is a “nonqualified deferred compensation plan” within the meaning of Code Section 409A, and under which any payments or benefits are to be made or provided to the Executive, to the extent they constitute a deferral of compensation subject to the requirements of Code Section 409A after taking into account all exclusions applicable to such payments or benefits under Code Section 409A.
24.Definitions.
(a)“Accrued Benefits” means (i) any unpaid Base Salary through the date the Executive’s employment terminates, (ii) except in the case of a termination of employment pursuant to Section 9(c), any earned and payable, but unpaid, Annual Bonus (including any Annual Bonus payable pursuant to the last sentence of Section 4(b)); (iii) any accrued and unpaid vacation; (iv) any amounts or benefits owing to the Executive or to the Executive’s beneficiaries under the then applicable benefit plans of the Company in which the Executive participated immediately prior to the Date of Termination (excluding any severance plan, program, agreement or arrangement); and (v) any amounts owing to the Executive for reimbursement of business expenses properly incurred by the Executive prior to the Date of Termination and which are reimbursable in accordance with Section 4 or Section 5, provided that the Executive, or his estate or other legal representative, submits all expenses and supporting documentation required within thirty (30) days of the Date of Termination (or one-hundred eighty (180) days in the case of termination due to death). Amounts payable (A) under clauses (i), (ii) and (iii) shall be paid promptly after the Date of Termination but in any event by no later than thirty (30) days after such date (or, in the case of (ii), when bonuses are paid to executives of the Company generally); (B) under clause (iv) shall be paid in accordance with the terms and conditions of the applicable plan, program or arrangement; and (C) under clause (v) shall be paid in accordance with the terms of the applicable expense policy but in any event by no later than the time for payment of the reimbursement required pursuant to Section 23(c)(i) above.
(b)“Affiliate” of a person or entity means any entity controlled by, in control of, or under common control with, such person or entity.
(c)“Cause” means: (i) conduct by the Executive constituting a material act of misconduct in connection with the performance of his duties, including, without limitation, misappropriation of funds or property of the Parent, the Company or any of their Subsidiaries or Affiliates other than the occasional, customary and de minimis use of Company or Parent
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property for personal purposes; (ii) the Executive’s commission of a felony or commission of a misdemeanor involving fraud or any misconduct by the Executive that results in material injury or reputational harm to the Company, the Parent or any of their Subsidiaries and Affiliates; (iii) any act or omission that constitutes a material breach by the Executive of (A) any of their obligations under any material agreement with the Company, the Parent or any of their Affiliates (including this Agreement) or (B) any material written policy of the Company, the Parent or any of their Subsidiaries and Affiliates, including the continued non-performance by the Executive of their duties (other than by reason of the Executive’s physical or mental illness, incapacity or disability), in each case, which has continued for more than thirty (30) days following written notice from the Board delineating such non-performance; (iv) a breach by the Executive of any restrictive covenant by the Executive contained in any agreement between such Executive and the Company, the Parent or any of their Affiliates (including in any incentive award agreement), provided, that an immaterial and unintentional breach of the Covenants provided in Section 6 or Section 8 hereof shall not constitute “Cause”; (v) the Executive’s engaging in any intentional act of dishonesty, violence or threat of violence (including any violation of federal securities Laws) which is or could reasonably be expected to be materially injurious to the financial condition or business reputation of the Company, the Parent or any of their Subsidiaries or Affiliates; (vi) the Executive’s illegal use of controlled substances during the performance of the Executive’s duties that adversely affects the reputation or best interest of the Company, the Parent or any Affiliate thereof; or (vii) the Executive’s failure to cooperate with a bona fide internal investigation or an investigation by regulatory or law enforcement authorities, after being instructed by the Company or the Parent to cooperate, or the willful destruction or failure to preserve documents or other materials known to be relevant to such investigation or the inducement of others to fail to cooperate or to produce documents or other materials in connection with such investigation.
(d)“COBRA Coverage Benefits” shall mean continued coverage for the Executive and their dependents under the Company’s group health care benefit plans for a period of twelve (12) months following the Date of Termination, with the Executive (or in the event of the Executive’s death, their dependents) paying the same portion of the total cost of such coverage that the Company’s active employees are required to pay for such coverage, and the Company paying for that portion of such total cost as exceeds the portion paid for by the Executive. The COBRA Coverage Benefits shall be provided to the Executive or their dependents subject to (i) the Executive (or in the event of the Executive’s death, their dependents) making a timely election of continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), and remaining eligible for COBRA coverage during such period, and (ii) the Executive’s (or in the event of the Executive’s death, their dependents’) continued payment of the portion of the total cost of such coverage required to be paid by the Executive as provided in the preceding sentence. The COBRA Coverage Benefits shall immediately cease to be provided hereunder on the date on which the Executive commences to receive equivalent health care benefit coverage under a health care plan, or plans, of any subsequent employer of the Executive. If and to the extent necessary in order for the Executive to avoid being subject to tax under section 105(h) of the Code on any payment or reimbursement of any health care expenses made to them or for their benefit pursuant to Section 9 hereof the Company shall impute as taxable income to the Executive an amount equal to the excess of (A) the full actuarial cost of the health care benefit coverages provided to them and their dependents under Section 9 hereof over (B) the portion of such total cost paid for by the Executive or their dependents for each period during which such coverages are provided.
(e)“Date of Termination” means (i) if the Executive’s employment is terminated by the Executive’s death, automatically on the date of the Executive’s death; (ii) if the Executive’s employment is terminated because of the Executive’s Disability, five (5) calendar days after the Notice of Termination unless the Executive shall have returned to the performance of the Executive’s duties on a full-time basis during such five (5)-day period; or (iii) if the Executive’s employment is terminated during the Employment Period by the Companies or by the Executive,
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the date specified in the Notice of Termination; provided that in the case of a termination by the Companies for Cause or a termination by the Executive for Good Reason the Date of Termination shall occur no sooner than the completion of the applicable notice period (if any) and, if applicable, opportunity to cure, as provided in the definitions of those terms this Section 24.
(f)“Disability” or “Disabled” means the inability of the Executive to perform the Executive’s material duties hereunder due to a physical or mental injury, infirmity or incapacity, which is expected to exceed one hundred eighty (180) days (including weekends and holidays) in any three hundred sixty-five (365)-day period. If any question shall arise as to whether the Executive is Disabled to the extent that the Executive is unable to perform substantially all of his duties and responsibilities for the Company and its Affiliates, the Executive shall, at the request of the Board in accordance with the Americans with Disabilities Act of 1990 and the Family and Medical Leave Act of 1993, each as amended, submit to a medical examination by a physician selected by the Board to whom the Executive or his guardian, if any, has no reasonable objection to determine whether the Executive is so Disabled, and such determination shall for purposes of this Agreement be conclusive of the issue. If such a question arises and the Executive fails to submit to the requested medical examination, the Board’s determination of the issue shall be binding on the Executive.
(g)“Good Reason” means, if occurring without the Executive’s consent: (i) any act taken by the Company that results in any material and sustained diminution in the Executive’s responsibilities or authority from those that are consistent with their title; (ii) a failure of the Company to pay or cause to be paid the Executive’s Base Salary, Annual Bonus or material employee benefits required to be provided to them, when due or (iii) any material breach of this Agreement by the Company (each such event, a “Good Reason Condition”). Notwithstanding the foregoing, Good Reason will not be deemed to exist unless (i) the Executive reasonably determines in good faith that a Good Reason Condition has occurred; (ii) the Executive notifies the Company in writing of the first occurrence of the Good Reason Condition within thirty (30) days of the first occurrence of such condition; (iii) the Executive cooperates in good faith with the Company’s efforts, if any, for a period of not less than thirty (30) days following such notice (the “Cure Period”), to remedy the Good Reason Condition; (iv) notwithstanding such efforts, or in the event the Company does not remedy such event, the Good Reason Condition continues to exist; and (v) the Executive terminates their employment within ninety (90) days after the Good Reason Condition has occurred; provided, that, for the avoidance of doubt, if the Company cures the Good Reason Condition during the Cure Period, Good Reason shall be deemed not to have occurred.
(h)“Post-Termination Benefits” shall mean, at the Parent’s election, either (i) payment by the Companies to the Executive of an amount equal to the cost of any perquisites, welfare benefits, and retirement plan contributions the Executive would otherwise have been eligible to receive in the twelve (12) months following the Executive’s Date of Termination, or (ii) the provision, for twelve (12) months following the Executive’s Date of Termination, in kind by the Company to the Executive of the perquisites, welfare benefits, or retirement plan contributions described in clause (i) of this definition, provided that, in the case of provision of benefits under clause (ii), the Parent has determined in its reasonable and sole discretion that it would be permissible to do so under the terms of any applicable plan and applicable law. For the sake of clarity, COBRA Coverage Benefits shall be as provided in Section 24(d) above.
(i)“Pro-Rata Bonus” shall mean, to the extent actually earned, a pro-rata portion of the Executive’s Annual Bonus for the plan year in which the Executive’s termination occurs based on the actual Annual Bonus earned for the year in which termination occurs (such pro-ration to be determined by multiplying the amount of such bonus which would be payable to the Executive if they had remained in employment with the Company for the full plan year by a
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fraction, the numerator of which is the number of days during the plan year of termination that the Executive was employed by the Company, and the denominator of which is 365), which shall be payable by the Company to the Executive (or in the event of their death, to their estate or legal representatives) at such time when bonuses are paid to executives of the Companies generally or, if later, on the Payment Date.
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IN WITNESS WHEREOF, the undersigned have duly executed and delivered this Agreement as of the last date noted below.
HAYWARD INDUSTRIES, INC.
By: /s/ Kevin P. Holleran
Name: Kevin P. Holleran
Title: President & CEO
Date: February 7, 2024
HAYWARD HOLDINGS, INC.
By: /s/ Kevin P. Holleran
Name: Kevin P. Holleran
Title: President & CEO
Date: February 7, 2024
EXECUTIVE
/s/ Eric Sejourne
Eric Sejourne
Date: February 7, 2024
[Signature Page to Employment Agreement]
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EXHIBIT A
Release
For good and valuable consideration, including the rights and obligations contained in the Employment Agreement dated as of _______________ (the “Employment Agreement”) this agreement and release is entered into by and among Eric Sejourne (the “Executive”), Hayward Industries, Inc. (the “Company”) and Hayward Holdings, Inc. (the “Parent”) (the “Release”). (Together, the Company and the Parent may hereinafter be referred to as the “Companies.”)
1.The Executive, on behalf of themself and their dependents, heirs, administrators, agents, personal representatives, executors, successors and assigns (together with the Executive, the “Executive Releasees”), does hereby irrevocably, completely and unconditionally release, waive and forever discharge the Companies and their past, present and future parents, subsidiaries, affiliated corporations, partnerships, joint ventures, employee benefit plans, insurers and their predecessors, successors and assigns (collectively, “Company Affiliates”) and all of the Company Affiliates’ past, present and future shareholders, directors, officers, employees, agents, trustees, and representatives, both individually and in their official capacities, and their successors and assigns (together with the Company Affiliates, the “Company Releasees”), from any and all actions, rights, claims, demands, obligations, liabilities, attorneys’ fees and causes of action of any kind or description whatsoever, in law, equity or otherwise, whether known or unknown, whether past or present, including, without limitation, those arising out of or in any way related to the Executive’s employment, or termination of employment, with either or both of the Companies or any of the Company Affiliates (including any events, acts, conduct or omissions related thereto) occurring at any time prior to or at the date on which the Executive signs and returns this Release (the “Release Date”), including, but not limited to, any action, claim, demand, obligation, liability or cause of action arising under any federal, state, or local law (including, but not limited to, Title VII of the Civil Rights Act of 1964, the Civil Rights Acts of 1866, 1871, 1964 and 1991, the Equal Pay Act, the Americans with Disabilities Act of 1990, the National Labor Relations Act, the Fair Labor Standards Act of 1938, the Employee Retirement Income Security Act of 1974 (other than any claim as excepted below), the Age Discrimination in Employment Act of 1967, all as amended, and the wage and hour, wage payment and fair employment practices laws of the state or states in which the Executive has been employed), tort, contract or any other legal obligation (collectively, the “Claims”); provided, however, the Executive does not release any of the following Claims:
a.any Claim to workers’ compensation or unemployment insurance benefits;
b.any Claim arising from a breach of the Employment Agreement following the Release Date, including any right to enforce the Employment Agreement;
c.any Claim for indemnification in accordance with applicable laws, the applicable constituent documents (including bylaws
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and certificates of incorporation) of the Company, the Parent or any Company Affiliate, and any applicable insurance policy with respect to any liability the Executive incurs or has incurred as a director, officer or employee of the Company, the Parent or any Company Affiliate;
d.any Claim the Executive may have to obtain contribution as permitted by law in the event of entry of judgment against the Executive as a result of any act or failure to act for which the Executive and the Company, the Parent and/or any Company Affiliate are jointly liable in whole or in part;
e.any Claim that by law may not be released by private agreement without judicial or governmental review and approval; or
f.any Claim that arises after the Release Date.
2.Nothing contained in this Release shall be construed to prohibit the Executive from filing a charge with or participating in any investigation or proceeding conducted by the federal Equal Employment Opportunity Commission or a comparable state or local agency, provided, however, that the Executive hereby agrees to waive his right to recover monetary damages or other individual relief in any such charge, investigation or proceeding or any related complaint or lawsuit filed by the Executive or by anyone else on his behalf.
3.The following shall apply in connection with the signing of this Release:
a.The Executive acknowledges and agrees that they have no less than twenty-one (21) days in which to consider this Release (though he may choose voluntarily to sign it earlier) and is hereby advised that this Release creates a legally binding obligation and that the Executive should therefore consult an attorney about this Release prior to executing the Release (though they may choose voluntarily not to do so).
b.The Executive represents that they have read this Release carefully; has had the opportunity to consult with an attorney of the Executive’s own choosing about the Release; understands fully what this Release means; and is entering into it knowingly, voluntarily, and without coercion.
c.The Executive may not sign and return this Release to the Companies earlier than the Date of Termination (as defined in the Employment Agreement) and must sign and return it no later than twenty-one (21) calendar days following the later of (i) the Date of Termination and (ii) five (5) calendar days following the date of delivery of this Release to the Executive as provided in Section 9(g) of the Employment Agreement (such period of time being the “Release Consideration Period”). The Executive will have an additional seven (7) calendar days after the Release Date in which to revoke his acceptance by providing written notice of revocation to the
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Companies (such period of time the “Release Revocation Period”). The Release will not be effective until the date upon which the Release Revocation Period has expired, which will be the eighth (8th) calendar day after the Release Date, if not previously revoked.
d.By signing this Release, Executive represents that (i) they are signing it voluntarily and with a full understanding of its terms, (ii) they have had sufficient opportunity, before signing this Release, to consider its terms and consult with an attorney (if they so wished to do so) and (iii) they have not relied on any promises or representations, express or implied, that are not set forth expressly in this Release.
4.The Executive represents that as of the date they have executed this Release they have not assigned to any other party, and agrees not to assign, any Claim released by the Executive herein.
5.The Executive represents that they have returned to the Companies any and all documents, materials and information (whether in hardcopy, on electronic media or otherwise) related to the business of the Companies or their affiliates (whether present or otherwise), and all keys, access cards, credit cards, computer hardware and software, telephones and telephone-related equipment and all other property of the Companies or their affiliates in the Executive’s possession or control. Further, the Executive agrees that they have not retained any copy or derivation of any documents, materials or information (whether in hardcopy, on electronic media or otherwise) of the Companies or their affiliates.
6.Whenever possible, each provision of this Release shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Release is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this Release shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.
7.This Release may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument.
8.This Release shall be governed by and construed and interpreted in accordance with the laws of the State of New York without reference regard to principles of conflicts of law that would result in the application of the laws of any other jurisdiction.
[remainder of page intentionally blank]
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IN WITNESS WHEREOF, the Executive, the Company and the Parent have executed this Release each as of the date indicated below.
| AGREED AND EXECUTED: | |||||
| ERIC SEJOURNE | |||||
Dated: _______________, 202_ | |||||
| HAYWARD INDUSTRIES, INC. | |||||
Dated: _______________, 202_ | Name: Title: | ||||
| HAYWARD HOLDINGS, INC. | |||||
Dated: _______________, 202_ | Name: Title: | ||||
Exhibit 19.1
HAYWARD HOLDINGS, INC.
INSIDER TRADING POLICY
1.Purpose. This Insider Trading Policy (this “Policy”) provides guidelines with respect to transactions in the securities of Hayward Holdings, Inc. (the “Company”) and the handling of confidential information about the Company and the companies with which the Company does business. The Company’s Board of Directors (the “Board”) has adopted this Policy to promote compliance with U.S. federal and state securities laws that prohibit certain persons who are aware of material nonpublic information about a company from: (i) trading in securities of that company; or (ii) providing such material nonpublic information to other persons who may trade on the basis of that information, commonly known as “tipping.”
2.Persons Subject to this Policy. This Policy applies to all directors, officers and employees of the Company and its subsidiaries. The same restrictions that apply to such directors, officers and employees also apply to (i) family members who reside with them, (ii) anyone else who lives in their household, (iii) any family members who do not live in their household but whose transactions in Company Securities (as defined below) are directed by them or are subject to their influence or control (such as parents or children who consult with them before they trade in Company Securities) and (iv) family trusts, family partnerships and similar entities controlled by them or any person described in clauses (i)-(iii) (collectively, “Other Covered Persons”). Directors, officers and employees are responsible for transactions by Other Covered Persons and for informing them of this Policy.
The Company may also determine that other persons should be subject to this Policy, such as contractors or consultants who have access to material nonpublic information. Any such other persons will be notified by the Compliance Officer.
3.Transactions Subject to this Policy. This Policy applies to transactions (including gifts) in the Company’s securities, including the Company’s common stock, options to purchase common stock, restricted stock units or any other type of security that the Company may issue, including, but not limited to, preferred stock, convertible debt and warrants (collectively, “Company Securities”).
4.Individual Responsibility. Persons subject to this Policy have ethical and legal obligations to maintain the confidentiality of information about the Company and to not engage in transactions in Company Securities while in possession of material nonpublic information. Each individual is responsible for making sure that he or she complies with this Policy, and that his or her Other Covered Persons also comply with this Policy. In all cases, the responsibility for determining whether an individual is in possession of material nonpublic information rests with that individual, and any action on the part of the Company, the Compliance Officer or any other employee or director pursuant to this Policy (or otherwise) does not in any way constitute legal advice or insulate an individual from liability under applicable securities laws. Persons subject to this Policy could be subject to severe legal penalties and disciplinary action by the Company for any conduct prohibited by this Policy or applicable securities laws, as described below in more detail under the heading “Consequences of Violations.”
5.Administration of this Policy. The Company’s General Counsel or such other officer as is designated by the Chief Executive Officer shall serve, in consultation with the Chief Executive Officer, as the “Compliance Officer” for the purposes of this Policy, and in such role, shall be responsible for the administration of this Policy. In the absence of the Compliance Officer, another employee designated by the Compliance Officer (or, if the Compliance Officer is unavailable, by the Chief Executive Officer, and, if the Chief Executive Officer is unavailable, by the Chief Financial Officer) shall be responsible for administration of this Policy. All
determinations and interpretations by the Compliance Officer or his or her designee shall be final and not subject to further review.
6.Statement of Policy. It is the policy of the Company that a director, officer or other employee of the Company or its subsidiaries (or any other person designated by the Compliance Officer or his or her designee as subject to this Policy) who is aware of material nonpublic information relating to the Company may not directly or indirectly through Other Covered Persons:
•engage in transactions (including gifts) in Company Securities, except as otherwise specified in this Policy under the headings “Transactions Under Company Plans,” “Transactions Not Involving a Purchase or Sale” and “Rule 10b5-1 Plans;”
•pass material nonpublic information on to others or recommend to anyone the purchase or sale of any securities when they are aware of such information;
•disclose material nonpublic information to persons within the Company whose jobs do not require them to have that information, or anyone outside of the Company, including, but not limited to, family, friends, business associates, investors and expert consulting firms, unless any such disclosure is made in accordance with the Company’s policies regarding the protection or authorized external disclosure of information regarding the Company; or
•assist anyone engaged in the above activities in contravention of this Policy.
In addition, it is the policy of the Company that a director, officer or employee of the Company (or any other person designated by the Compliance Officer or his or her designee as subject to this Policy) who, in the course of working for the Company, learns of material nonpublic information about a company with which the Company does business, including a customer or supplier of the Company, may not trade in that company’s securities until the information becomes public or is no longer material.
There are no exceptions to this Policy, except as specifically noted herein. Transactions that may be necessary or justifiable for independent reasons (such as the need to raise money for an emergency expenditure), or small transactions, are not exempt from this Policy. The securities laws do not recognize any mitigating circumstances, and, in any event, even the appearance of an improper transaction must be avoided to preserve the Company’s reputation for adhering to the highest standards of conduct.
7.Definition of Material Nonpublic Information.
7.1Material Information. Information is considered “material” if a reasonable investor would consider that information important in making a decision to buy, hold or sell securities. Any information that could be expected to affect the Company’s stock price, whether it is positive or negative, should be considered material. There is no
bright-line standard for assessing materiality; rather, materiality is based on an assessment of all of the facts and circumstances, and is often evaluated by enforcement authorities with the benefit of hindsight.
While it is not possible to define all categories of material information, the following are some examples of information that ordinarily would be regarded as material:
•projections of future earnings or losses, or other earnings guidance;
•changes to previously announced earnings guidance, or the decision to suspend earnings guidance;
•a pending or proposed merger, acquisition or tender offer;
•a pending or proposed acquisition or disposition of a significant asset;
•a pending or proposed joint venture or licensing arrangement;
•a Company restructuring;
•significant related party transactions;
•a change in dividend policy, the declaration of a stock split or an offering of additional securities;
•bank borrowings or other financing transactions out of the ordinary course;
•the establishment of a repurchase program for Company Securities;
•a change in the Company’s pricing or cost structure;
•major marketing changes;
•a change in management;
•a change in auditors or notification that the auditor’s reports may no longer be relied upon;
•pending or threatened significant litigation, or the resolution of such litigation;
•significant regulatory developments;
•impending bankruptcy or the existence of severe liquidity problems;
•the gain or loss of a significant customer or supplier; and
•the imposition of a ban on trading in Company Securities or the securities of another company.
7.2Nonpublic Information. Information that is not generally known or available to the public is generally considered to be nonpublic information. In order to establish that the information has been disclosed to the public, it may be necessary to demonstrate that the information has been widely disseminated. Information generally would be considered widely disseminated if it has been disclosed through the Dow Jones
“broad tape,” newswire services, a broadcast on widely-available radio or television programs, a widely-available pre-announced webcast, publication in a widely-available newspaper, magazine or news website, a pre-announced quarterly earnings release or public disclosure documents filed with the Securities and Exchange Commission (the “SEC”) that are available on the SEC’s website. By contrast, information would generally not be considered widely disseminated if it is available only to the Company’s employees.
Once information is widely disseminated, it is still necessary to afford the investing public sufficient time to absorb the information. As a general rule, information is considered nonpublic until the end of the second full trading day after the information is released. For example, if the Company announces financial earnings after market close on Monday or before trading begins on a Tuesday, the first time a director, officer or employee can buy or sell Company Securities is the opening of the market on Thursday (assuming he or she is not aware of other material nonpublic information at that time). However, if the Company announces earnings after trading begins on that Tuesday, the first time a director, officer or employee can buy or sell Company Securities is the opening of the market on Friday (again assuming he or she is not aware of other material nonpublic information at that time). Depending on the particular circumstances, the Company may determine that a longer or shorter period should apply to the release of specific material nonpublic information.
8.Transactions Under Company Plans. This Policy does not apply in the case of the following transactions, except as specifically noted:
8.1Stock Option Exercises. This Policy does not apply to the exercise of a stock option acquired pursuant to a Company equity incentive plan or to a transaction in which a person has elected to have the Company withhold shares subject to an option award to satisfy tax withholding requirements. This Policy does, however, apply to any sale of shares as part of a broker-assisted cashless exercise of an option, or any other market sale for the purpose of generating the cash needed to pay the exercise price of or taxes associated with an option.
8.2Restricted Stock and Similar Awards. This Policy does not apply to the vesting of restricted stock, the settlement of restricted stock units, performance-based stock units or similar awards or to a transaction in which there is an election to have the Company withhold shares to satisfy tax withholding requirements upon the vesting of any restricted stock or the vesting or settlement of any restricted stock unit or performance-based stock unit. This Policy does apply, however, to any market sale of shares received upon settlement of any restricted stock unit, performance-based stock unit or similar award.
8.3Employee Stock Purchase Plan. This Policy does not apply to periodic purchases under a Company employee stock purchase plan, if such plan exists, that are made as the result of an election made at the beginning of the purchase period. This Policy would apply, however, to an initial decision to participate in the plan or a decision to increase the level of contribution in a subsequent purchase period. It would also apply to any sales of shares purchased under the plan.
8.4401(k) Plan. This Policy does not apply to purchases of Company Securities in the Company’s 401(k) plan as a result of periodic contributions made
pursuant to payroll deduction. The Policy does apply, however, to initial elections to participate, and increases or decreases in the level of participation, in a Company stock fund and transfers in or out of a Company stock fund (including in connection with a plan loan).
9.Transactions with the Company. Any purchase of Company Securities from the Company or sales of Company Securities to the Company not already identified in Section 8 are not subject to this Policy.
10.Transactions in Mutual Funds. In addition, transactions in mutual funds that are invested in Company Securities are not transactions subject to this Policy.
11.Special and Prohibited Transactions. The Company has determined that the following transactions present a heightened legal risk and the potential appearance of improper or inappropriate conduct. It is therefore the Company’s policy that the persons identified below may not engage in any of the following transactions:
11.1Short-Term Trading. Short-term trading of Company Securities may be distracting to the person engaging in such trades and may unduly focus such person on the Company’s short-term performance instead of the Company’s long-term objectives. For these reasons, and in accordance with Section 16(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), any director or executive officer of the Company who purchases Company Securities may not sell any Company Securities of the same class during the six months following the purchase (or vice versa).
11.2Short Sales. Short sales of Company Securities (i.e., the sale of a security that the seller does not own) may evidence an expectation on the part of the seller that the securities will decline in value and therefore have the potential to signal to the market that the seller lacks confidence in the Company’s prospects. In addition, short sales may reduce a seller’s incentive to seek to improve the Company’s performance if the seller could benefit from a decline in value of the Company’s securities. For these reasons, persons covered by this Policy are prohibited from engaging in any short sales of Company Securities. In addition, Section 16(c) of the Exchange Act prohibits executive officers and directors from engaging in short sales. Short sales arising from certain types of hedging transactions are also governed by the paragraph below captioned “Hedging Transactions.”
11.3Publicly Traded Options. Given the relatively short term of publicly traded options, transactions in options may create the appearance that a director, officer or employee is trading based on material nonpublic information and focus such individual’s attention on short-term performance at the expense of the Company’s long-term objectives. Accordingly, persons covered by this Policy are prohibited from engaging in any transactions in put options, call options or other derivative securities on an exchange or in any other organized market.
11.4Hedging Transactions. Hedging or monetization transactions can be accomplished through a number of possible mechanisms, including through the use of financial instruments such as prepaid variable forwards, equity swaps, collars and exchange funds. Such hedging transactions may permit a director, officer or employee to continue to own Company Securities obtained through employee benefit plans or otherwise, but without the full risks and rewards of ownership. When that occurs, such individual may no longer have the same objectives as the Company’s other shareholders.
Therefore, persons covered by this Policy are prohibited from engaging in any such transactions.
11.5Margin Accounts and Pledged Securities. Securities held in a margin account as collateral for a margin loan may be sold by the broker without the customer’s consent if the customer fails to meet a margin call. Similarly, securities pledged (or hypothecated) as collateral for a loan may be sold in foreclosure if the borrower defaults on the loan. Because a margin sale or foreclosure sale may occur at a time when the pledgor is aware of material nonpublic information or otherwise is not permitted to trade in Company Securities, persons covered by this Policy are prohibited from holding Company Securities in a margin account or otherwise pledging Company Securities as collateral for a loan. An exception may be granted where an individual wishes to pledge Company Securities as collateral for a loan (not including margin debt) and clearly demonstrates the financial capacity to repay the loan without resort to the pledged securities. If an individual wishes to pledge Company Securities as collateral for a loan, he or she must submit a request for approval to the Compliance Officer at least two weeks prior to the proposed execution of documents evidencing the proposed pledge.
11.6Standing and Limit Orders. Standing and limit orders (except standing and limit orders under Rule 10b5-1 Plans, as described below) create heightened risks for insider trading violations similar to the use of margin accounts. There is no control over the timing of purchases or sales that result from standing instructions to a broker, and as a result the broker could execute a transaction when a director, officer or other employee is in possession of material nonpublic information. The Company therefore prohibits placing standing or limit orders on Company Securities other than pursuant to Rule 10b5-1 Plans.
12.Rule 10b5-1 Plans. Rule 10b5-1(c) under the Exchange Act provides a defense from insider trading liability under Rule 10b5-1. In order to be eligible to rely on this defense, a person subject to this Policy must enter into a plan for transactions in Company Securities that meets certain conditions specified in Rule 10b5-1(c) (a “Rule 10b5-1 Plan”). If the plan meets the requirements of Rule 10b5-1(c), Company Securities may be purchased or sold without regard to certain insider trading restrictions.
13.To comply with this Policy, a Rule 10b5-1 Plan must be approved by the Compliance Officer and meet the requirements of Rule 10b5-1(c). A Rule 10b5-1 Plan cannot be adopted during a quarterly Blackout Period or when the person entering into the plan is aware of material nonpublic information, and the first trade made pursuant to a Rule 10b5-1 Plan may not occur until after the “cooling-off period” following the date of adoption of the plan has expired, as set forth in Rule 10b5-1(c). For directors and officers, the “cooling-off period” expires at the later of (a) 90 days after the adoption of the Rule 10b5-1 Plan or (b) two business days following the disclosure of the Company’s financial results in a Form 10-Q or Form 10-K for the completed fiscal quarter in which the Rule 10b5-1 Plan was adopted that discloses the Company’s financial results (but, in any event, this required cooling-off period is subject to a maximum of 120 days after adoption of the Rule 10b5-1 Plan). For all other persons subject to this Policy, the “cooling-off period” expires 30 days after the adoption of the Rule 10b5-1 Plan. The plan must either specify the amount, pricing and timing of transactions in advance or delegate discretion on these matters to an independent third party and once the plan is adopted, the person must not exercise any influence over the amount of securities to be traded, the price at which they are to be traded or the date of the trade. Further, no person subject to this Policy may
enter into or maintain more than one simultaneous Rule 10b5-1 Plan, except that a person may, in addition to one Rule 10b5-1 Plan to purchase or sell Company Securities on the open market, enter into or maintain a Rule 10b5-1 Plan that provides only for eligible sell-to-cover transactions solely to satisfy statutory tax withholding obligations arising exclusively from the vesting of compensatory awards, such as restricted stock units, and the person does not otherwise exercise control over the timing of such sales (an “Eligible Sell-to-Cover Plan”). Additionally, no person subject to this Policy may enter into more than one Rule 10b5-1 Plan in a 12-month period designed to effect a single open-market purchase or sale of all the securities covered by such plan (other than an Eligible Sell-to-Cover Plan).
Rule 10b5-1 Plans will be considered by the Compliance Officer on a case-by-case basis. Any Rule 10b5-1 Plan must be submitted to the Compliance Officer for approval at least five days prior to the entry into the Rule 10b5-1 Plan. No further pre-approval of transactions conducted pursuant to an approved Rule 10b5-1 Plan will be required.
14.Trading Window and Pre-Clearance Procedures. To help prevent inadvertent violations of the federal securities laws and to avoid even the appearance of trading on the basis of inside information, the Board has adopted an Addendum to this Policy that applies to directors, executive officers subject to Section 16 of the Exchange Act and other designated persons who have regular access to material nonpublic information about the Company. The Company will notify those individuals who are subject to the Addendum.
The Addendum generally prohibits persons and entities covered by it from trading in Company Securities, except during the trading windows specified in the Addendum. Directors, Section 16 executive officers and other designated persons also must pre-clear all transactions in Company Securities with the Compliance Officer.
In addition, from time to time, the Company may be involved in activities—such as proposed acquisitions—that are material and that are known only by a few people at the Company. For those individuals whose duties at the Company cause them to be aware of such activity, the Compliance Officer will notify them of an event-specific trading restriction and these individuals will not be permitted to trade in Company Securities during such trading restriction. The existence of an event-specific trading restriction will not be widely announced and should not be communicated to anyone. Even if individuals are not notified of an event-specific trading restriction, they should not trade in Company Securities if they are aware of material nonpublic information.
15.Post-Termination Transactions. This Policy continues to apply to transactions in Company Securities even after termination of service to the Company. If an individual is in possession of material nonpublic information when his or her service terminates, that individual may not trade in Company Securities until that information has become public or is no longer material.
16.Unauthorized Disclosure. Maintaining the confidentiality of Company information is essential for competitive, security and other business reasons, as well as to comply with securities laws. Directors, officers and employees should treat all information they learn about the Company or its business plans in connection with their employment as confidential and
proprietary to the Company. Inadvertent disclosure of confidential or inside information may expose the Company and individuals to significant risk of investigation and litigation.
The timing and nature of the Company’s disclosure of material information to outsiders is subject to legal rules, the breach of which could result in substantial liability to individual directors, officers or employees, the Company and its management. Accordingly, it is important that responses to inquiries regarding the Company from the press, investment analysts or others in the financial community be made on the Company’s behalf only through authorized individuals, as expressly identified by the Compliance Officer.
17.Consequences of Violations. The purchase or sale of securities while aware of material nonpublic information, or the disclosure of material nonpublic information to others who then trade in the Company’s Securities, is prohibited by U.S. federal and state laws. Insider trading violations are pursued vigorously by the SEC, U.S. Attorneys and state enforcement authorities as well as foreign regulatory authorities. Punishment for insider trading violations is severe and could include significant fines and imprisonment. While the regulatory authorities concentrate their efforts on the individuals who trade, or who tip inside information to others who trade, the federal securities laws also impose potential liability on companies and other “controlling persons” if they fail to take reasonable steps to prevent insider trading by company personnel.
In addition, an individual’s failure to comply with this Policy may subject the individual to Company-imposed sanctions, including dismissal for cause, whether or not the employee’s failure to comply results in a violation of law. In addition to the formal sanctions summarized above, a violation of law, or even an SEC investigation that does not result in prosecution, can tarnish a person’s reputation and irreparably damage a career.
18.Company Assistance. Any person who has a question about this Policy or its application to any proposed transaction may obtain additional guidance from the Compliance Officer, who can be reached by telephone at 704.572.6801 or by email at scanning@hayward.com.
Last updated: January 10, 2024
ADDENDUM TO INSIDER TRADING POLICY
The Company has established additional procedures to assist in the administration of the Insider Trading Policy, to facilitate compliance with laws prohibiting insider trading while in possession of material nonpublic information and to avoid the appearance of any impropriety. These additional procedures are applicable only to directors and executive officers subject to Section 16 of the Exchange Act (“Section 16 executive officers”) and other persons who are periodically designated by the Compliance Officer, or his or her designee, as being subject to these additional procedures (as well as their family members, household members and entities whose transactions are subject to the Insider Trading Policy). The Compliance Officer will notify those individuals who are subject to this Addendum.
In all cases, the responsibility for determining whether an individual is in possession of material nonpublic information rests with that individual, and any action on the part of the Company, the Compliance Officer or any other employee or director pursuant to the Insider Trading Policy, including this Addendum (or otherwise) does not in any way constitute legal advice or insulate an individual from liability under applicable securities laws.
1.Pre-Clearance Procedures. Directors, Section 16 executive officers and other persons designated as being subject to this Addendum by the Compliance Officer or his or her designee (as well as their family members, household members and entities whose transactions are subject to the Insider Trading Policy) may not engage in any transaction in Company Securities at any time (other than as specified by the Insider Trading Policy, including this Addendum), even if not subject to a Blackout Period, without first obtaining pre-clearance of the transaction from the Compliance Officer. A request for pre-clearance should be submitted to the Compliance Officer at least two trading days in advance of the proposed transaction. The Compliance Officer is under no obligation to approve a transaction submitted for pre-clearance, and may determine not to permit the transaction. If a person seeks pre-clearance and permission to engage in the transaction is denied, then he or she should refrain from initiating any transaction in Company Securities, and should not inform any other person of the restriction.
2.When a request for pre-clearance is made, the requestor should carefully consider whether he or she may be aware of any material nonpublic information about the Company and should describe fully those circumstances to the Compliance Officer. The requestor should also indicate whether he or she has effected any non-exempt “opposite-way” transactions within the past six months, and should be prepared to report the proposed transaction on an appropriate Form 4 or Form 5, if applicable. The requestor should also be prepared to comply with Rule 144 under the Securities Act of 1933, as amended, and file a Form 144, if necessary, at the time of any sale. After receiving clearance to engage in a trade from the Compliance Officer, the requestor must complete the proposed trade within two trading days or make a new trading request; provided, however, that if the requestor becomes aware of material nonpublic information before the trade is executed, the preclearance is void and the trade must not be completed.
3.Quarterly Trading Restrictions. Directors, Section 16 executive officers and other persons who are designated by the Compliance Officer or his or her designee as being subject to this Addendum (as well as their family members, household members and entities whose transactions are subject to the Insider Trading Policy) may not engage in any transaction in
Company Securities (other than as specified by the Insider Trading Policy, including this Addendum) during a “Blackout Period” beginning two weeks prior to the end of each fiscal quarter and ending after the second full trading day following the date of the public release of the Company’s earnings results for that quarter. In other words, these persons may only conduct transactions in Company Securities during the “Window Period” beginning on the day after the second full trading day following the public release of the Company’s quarterly earnings and ending two weeks prior to the close of the next fiscal quarter. For example, assuming a regular five-business day week, if the earnings release is published on Wednesday, trading may begin on the following Friday and continue until two weeks prior to the end of the fiscal quarter, assuming no event-specific trading restrictions are implemented.
4.Event-Specific Trading Restrictions. From time to time, an event may occur that is material to the Company and is known by only a few directors, executive officers and/or employees. So long as the event remains material and nonpublic, such persons as designated by the Compliance Officer or his or her designee may not trade Company Securities. In addition, the Company’s financial results may be sufficiently material in a particular fiscal quarter that, in the judgment of the Compliance Officer, designated persons should refrain from trading in Company Securities prior to the commencement of the Blackout Period. In that situation, the Compliance Officer may notify these persons that they should not trade in the Company’s Securities without disclosing the reason for the restriction. The existence of an event-specific trading restriction period or extension of a Blackout Period will not be announced to the Company as a whole, and should not be communicated to any other person. Even if the Compliance Officer has not designated you as a person who should not trade due to an event-specific trading restriction, you should not trade while aware of material nonpublic information.
5.Exceptions. The quarterly trading restrictions and event-specific trading restrictions described above do not apply to those transactions to which the Insider Trading Policy does not apply, as described in the Insider Trading Policy under the headings “Transactions Under Company Plans,” “Transactions in Mutual Funds” and “Transactions with the Company.” Further, the requirement for pre-clearance, the quarterly trading restrictions and event-specific trading restrictions do not apply to transactions conducted pursuant to approved Rule 10b5-1 Plans, described in the Insider Trading Policy under the heading “Rule 10b5-1 Plans.”
6.Notifying the Compliance Officer of Modification or Termination of Non-Rule 10b5-1 Trading Arrangements. The Company is required to disclose in its quarterly reports on Form 10-Q and its annual reports on Form 10-K, the adoption, modification or termination by a director or Section 16 executive officer of any Rule 10b5-1 Plan and any “non-Rule 10b5-1 trading arrangement,” which is defined as any written arrangement for the trading of securities that was entered into at a time when the director or Section 16 executive officer was not aware of material nonpublic information and (i) specified the amount of securities to be purchased or sold and the price at which and the date on which the securities were to be purchased or sold, or (ii) included a written formula or algorithm, or computer program, for determining the amount of securities to be purchased or sold and the price at which and the date on which the securities were to be purchased or sold, or (iii) did not permit the covered person to exercise any subsequent influence over how, when, or whether to effect purchases or sales; provided, in addition, that any other person who, pursuant to the trading arrangement, did exercise such influence must not have been aware of material nonpublic information when doing so. While the adoption or modification of a non-Rule 10b5-1 trading arrangement by a director or Section 16 executive officer is subject to the pre-clearance procedures set forth above, to assist the Company with its disclosure obligation, directors and Section 16 executive officers must promptly notify (within two business days) the Compliance Officer of any termination of a non-Rule 10b5-1 trading arrangement.
7.
Last updated: January 10, 2024
Exhibit 21.1
SUBSIDIARIES OF HAYWARD HOLDINGS, INC.
| Entity | Jurisdiction | |||||||||||||
| ChlorKing HoldCo, LLC | Delaware | |||||||||||||
| ChlorKing, LLC | Georgia | |||||||||||||
| ChlorKing-Mexico LLC | Georgia | |||||||||||||
| ConnectedYard, Inc. | Delaware | |||||||||||||
| Global Water & Charcoal Innovations, LLC | Georgia | |||||||||||||
| Goldline Properties LLC | Rhode Island | |||||||||||||
| Hayward Consolidated Pty, Ltd. | Australia | |||||||||||||
| Hayward Enterprises Europe S.A. | Belgium | |||||||||||||
| Hayward Iberica, S.L.U. | Spain | |||||||||||||
| Hayward Industrial Products, Inc. | New Jersey | |||||||||||||
| Hayward Industries, Inc. | New Jersey | |||||||||||||
| Hayward Industries, (Wuxi) Co., Ltd. | China | |||||||||||||
| Hayward Intermediate, Inc. | Delaware | |||||||||||||
| Hayward Pool Europe S.A. | France | |||||||||||||
| Hayward Pool Products (Australia) Pty, Ltd. | Australia | |||||||||||||
| Hayward Pool Products Canada, Inc. | Canada | |||||||||||||
| Hayward Pool Products Trading (Shanghai) Co., Ltd. | China | |||||||||||||
| Hayward/Wright-Austin, Inc. | New Jersey | |||||||||||||
| Sentry UV, LLC | Georgia | |||||||||||||
| Webster Pumps, Inc. | New Jersey | |||||||||||||
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Forms S-3 (No. 333-264617) and S-8 (No. 333-254348) of Hayward Holdings, Inc. of our report dated February 27, 2025 relating to the financial statements and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.
/s/ PricewaterhouseCoopers LLP
New York, New York
February 27, 2025
New York, New York
February 27, 2025
1
Exhibit 24.1
POWER OF ATTORNEY
THE UNDERSIGNED director of Hayward Holdings, Inc. (the “Company”) hereby appoints Kevin Holleran, Eifion Jones and Susan Canning, and each of them singly, with full power to act without the other and with full power of substitution, his true and lawful attorneys-in-fact and agents, for him and in his name, place and stead, to execute on his behalf, the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024, and to file the same with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, and grants unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done as fully as to all intents and purposes as he might or could do in person, and hereby ratifies and confirms all that such attorneys-in-fact or agents, or any of them, or their substitutes shall lawfully do or cause to be done by virtue thereof.
EXECUTED on February 27, 2025.
| /s/ Ed Ward | ||
| Ed Ward | ||
POWER OF ATTORNEY
THE UNDERSIGNED director of Hayward Holdings, Inc. (the “Company”) hereby appoints Kevin Holleran, Eifion Jones and Susan Canning, and each of them singly, with full power to act without the other and with full power of substitution, his true and lawful attorneys-in-fact and agents, for him and in his name, place and stead, to execute on his behalf, the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024, and to file the same with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, and grants unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done as fully as to all intents and purposes as he might or could do in person, and hereby ratifies and confirms all that such attorneys-in-fact or agents, or any of them, or their substitutes shall lawfully do or cause to be done by virtue thereof.
EXECUTED on February 27, 2025.
| /s/ Christopher Bertrand | ||
| Christopher Bertrand | ||
POWER OF ATTORNEY
THE UNDERSIGNED director of Hayward Holdings, Inc. (the “Company”) hereby appoints Kevin Holleran, Eifion Jones and Susan Canning, and each of them singly, with full power to act without the other and with full power of substitution, his true and lawful attorneys-in-fact and agents, for him and in his name, place and stead, to execute on his behalf, the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024, and to file the same with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, and grants unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done as fully as to all intents and purposes as he might or could do in person, and hereby ratifies and confirms all that such attorneys-in-fact or agents, or any of them, or their substitutes shall lawfully do or cause to be done by virtue thereof.
EXECUTED on February 27, 2025.
| /s/ Kevin D. Brown | ||
| Kevin D. Brown | ||
POWER OF ATTORNEY
THE UNDERSIGNED director of Hayward Holdings, Inc. (the “Company”) hereby appoints Kevin Holleran, Eifion Jones and Susan Canning, and each of them singly, with full power to act without the other and with full power of substitution, his true and lawful attorneys-in-fact and agents, for him and in his name, place and stead, to execute on his behalf, the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024, and to file the same with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, and grants unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done as fully as to all intents and purposes as he might or could do in person, and hereby ratifies and confirms all that such attorneys-in-fact or agents, or any of them, or their substitutes shall lawfully do or cause to be done by virtue thereof.
EXECUTED on February 27, 2025.
| /s/ Diane Dayhoff | ||
| Diane Dayhoff | ||
POWER OF ATTORNEY
THE UNDERSIGNED director of Hayward Holdings, Inc. (the “Company”) hereby appoints Kevin Holleran, Eifion Jones and Susan Canning, and each of them singly, with full power to act without the other and with full power of substitution, his true and lawful attorneys-in-fact and agents, for him and in his name, place and stead, to execute on his behalf, the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024, and to file the same with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, and grants unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done as fully as to all intents and purposes as he might or could do in person, and hereby ratifies and confirms all that such attorneys-in-fact or agents, or any of them, or their substitutes shall lawfully do or cause to be done by virtue thereof.
EXECUTED on February 27, 2025.
| /s/ Stephen Felice | ||
| Stephen Felice | ||
POWER OF ATTORNEY
THE UNDERSIGNED director of Hayward Holdings, Inc. (the “Company”) hereby appoints Kevin Holleran, Eifion Jones and Susan Canning, and each of them singly, with full power to act without the other and with full power of substitution, his true and lawful attorneys-in-fact and agents, for him and in his name, place and stead, to execute on his behalf, the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024, and to file the same with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, and grants unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done as fully as to all intents and purposes as he might or could do in person, and hereby ratifies and confirms all that such attorneys-in-fact or agents, or any of them, or their substitutes shall lawfully do or cause to be done by virtue thereof.
EXECUTED on February 27, 2025.
| /s/ Lawrence H. Silber | ||
| Lawrence H. Silber | ||
POWER OF ATTORNEY
THE UNDERSIGNED director of Hayward Holdings, Inc. (the “Company”) hereby appoints Kevin Holleran, Eifion Jones and Susan Canning, and each of them singly, with full power to act without the other and with full power of substitution, his true and lawful attorneys-in-fact and agents, for him and in his name, place and stead, to execute on his behalf, the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024, and to file the same with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, and grants unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done as fully as to all intents and purposes as he might or could do in person, and hereby ratifies and confirms all that such attorneys-in-fact or agents, or any of them, or their substitutes shall lawfully do or cause to be done by virtue thereof.
EXECUTED on February 27, 2025.
| /s/ Arthur Soucy | ||
| Arthur Soucy | ||
POWER OF ATTORNEY
THE UNDERSIGNED director of Hayward Holdings, Inc. (the “Company”) hereby appoints Kevin Holleran, Eifion Jones and Susan Canning, and each of them singly, with full power to act without the other and with full power of substitution, his true and lawful attorneys-in-fact and agents, for him and in his name, place and stead, to execute on his behalf, the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024, and to file the same with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, and grants unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done as fully as to all intents and purposes as he might or could do in person, and hereby ratifies and confirms all that such attorneys-in-fact or agents, or any of them, or their substitutes shall lawfully do or cause to be done by virtue thereof.
EXECUTED on February 27, 2025.
| /s/ Lori Walker | ||
| Lori Walker | ||
Exhibit 31.1
CERTIFICATION PURSUANT TO RULES 13A-14(A) AND 15D-14(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Kevin Holleran, certify that:
1.I have reviewed this annual report on Form 10-K of Hayward Holdings, Inc. (the “registrant”);
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.any, fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: February 27, 2025 /s/ Kevin Holleran
Kevin Holleran, President and Chief Executive Officer
(Principal Executive Officer)
Exhibit 31.2
CERTIFICATION PURSUANT TO RULES 13A-14(A) AND 15D-14(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Eifion Jones, certify that:
1.I have reviewed this annual report on Form 10-K of Hayward Holdings, Inc. (the “registrant”);
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.any, fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: February 27, 2025 /s/ Eifion Jones
Eifion Jones, Senior Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-K of Hayward Holdings, Inc. (the “Company”) for the period ended December 31, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Kevin Holleran, President and Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:
1.the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: February 27, 2025 By: /s/ Kevin Holleran
Chief Executive Officer
(Principal Executive Officer)
Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-K of Hayward Holdings, Inc. (the “Company”) for the period ended December 31, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Eifion Jones, Senior Vice President and Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:
1.the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: February 27, 2025 By: /s/ Eifion Jones
Senior Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)