Hayward (HAYW)2025-02-27 12:06Sales and Market Segments - North America and Europe & Rest of World segments accounted for approximately 85% and 15% of total net sales for Fiscal Year 2024, respectively[25]. - The company’s two largest customers represented approximately 36% and 11% of net sales in Fiscal Year 2024[34]. - Approximately 50% of net sales are derived from non-discretionary products essential for pool operation[32]. - In Fiscal Year 2024, approximately 77% of residential pool equipment in the U.S. was sold through specialty distributors, with 18% sold directly to retailers[41]. Supplier and Patent Information - The company maintains relationships with approximately 640 suppliers, with an average relationship of over 15 years across the top 30 suppliers[35][36]. - The company holds approximately 220 issued U.S. patents and 247 issued foreign patents as of December 31, 2024[51]. - The company has approximately 39 pending U.S. patent applications and 53 pending foreign patent applications as of December 31, 2024[150]. Product Development and Sustainability - Recent product development focuses on energy efficiency, advanced sanitization, reduced chemical usage, and enhanced IoT-driven experiences[33]. - The company’s environmentally sustainable products can conserve up to 92% more water compared to standard sand filters[31]. - The company is committed to sustainability through responsible manufacturing practices and innovative environmentally sustainable products[62]. - The company published its first sustainability data sheet in 2022, with updates in 2023 and 2024, indicating a commitment to transparency in sustainability reporting[64]. Operational Efficiency and Employee Engagement - The company implemented over 688 employee suggestions for improvements during the year ended December 31, 2024[69]. - The company is in the process of implementing a new ERP system and a new human resources information system to improve operational efficiency[117]. Financial Risks and Cost Management - The company has experienced material cost inflation, particularly in raw materials, and is striving for productivity improvements to mitigate these costs[107]. - The company expects an increase in sales denominated in non-dollar currencies, which may expose it to currency transaction risks[105]. - Fluctuations in the prices of raw materials, such as metals and resins, could increase the cost of goods sold and negatively affect financial results[131]. - Compliance with evolving environmental and safety regulations may result in higher operational costs and potential liabilities[135]. - The company faces potential increases in costs due to tariffs on imports, particularly from China, which could impact profit margins[130]. Regulatory and Compliance Issues - The company is subject to various federal and state regulations that could impact operations and compliance costs[72]. - The company is subject to stringent data privacy regulations, such as GDPR and CCPA, which could lead to significant compliance costs and liabilities[136]. - Misconduct by employees or third-party vendors could expose the company to regulatory investigations and substantial costs[142]. - Violations of anti-corruption laws, such as the FCPA, could result in costly investigations and sanctions, adversely affecting the company's reputation and financial condition[143]. - Changes in international trade compliance regulations and U.S. government sanctions could have a material adverse effect on the company's operations[144]. Debt and Financial Position - As of December 31, 2024, the company's total indebtedness was approximately 965.0 million under the first lien term loan facility[161]. - The company has an asset-based lending facility that allows borrowing up to 163.4 million of undrawn lines of credit available as of December 31, 2024[162]. - A 1% increase in the effective interest rate would result in an increase in interest costs of approximately $3.7 million, net of interest rate swap settlements[163]. - The company may need to refinance debt or raise additional capital if unable to generate sufficient cash flow from operations[164]. - The company’s ability to generate cash flow is subject to various external factors, which may impact its financial condition[163]. Stock and Shareholder Considerations - The company had 215,778,520 shares of common stock outstanding and 505,555,111 shares of common stock issuable upon potential exchanges and/or conversions as of December 31, 2024[177]. - The company has filed a registration statement on Form S-8 for 30,639,900 shares reserved for issuance under various equity incentive plans[177]. - The company does not currently expect to declare or pay dividends on its common stock for the foreseeable future[169]. - Future sales of common stock may dilute existing shareholders' economic and voting rights[176]. - The company’s ability to make future dividend payments is contingent upon the earnings of its subsidiaries[169]. Market and Operational Challenges - The business is seasonal, with higher sales typically in the second and fourth quarters due to the summer pool season[44]. - Disruptions in manufacturing due to natural disasters or equipment failures could significantly impact the company's ability to meet customer demand and increase operational costs[127]. - Recent geopolitical conflicts and adverse weather events have led to increased shipping costs, adversely affecting profitability[128]. - The company relies on single-source and sole-source suppliers for certain components, which poses risks of supply interruptions and increased costs[124]. - The market price of the company’s common stock has been volatile and may fluctuate significantly due to various factors[178].