Hayward (HAYW)2024-02-29 21:32Sales and Revenue - North America and Europe & Rest of World segments accounted for approximately 83% and 17% of total net sales for Fiscal Year 2023, compared to 84% and 16% for Fiscal Year 2022[26]. - The largest customer represented approximately 36% of net sales in Fiscal Year 2023, with no other customer exceeding 10%[35]. - Approximately 50% of net sales are derived from non-discretionary products essential for pool operation[33]. - In Fiscal Year 2023, approximately 80% of residential pool equipment in the U.S. was sold through specialty distributors, with 13% sold directly to retailers and 7% to builders[42]. Operational Efficiency and Employee Engagement - The company employs approximately 1,875 full-time equivalent employees, with about 26% located at international sites[55]. - The company implemented over 680 employee suggestions for improvements during the twelve months ended December 31, 2023, fostering a culture of open feedback[70]. - The company is in the process of implementing a new ERP system and a human resources information system to improve operational efficiency, which may impact financial reporting[117]. Sustainability and Governance - The company is committed to sustainability, focusing on environmentally friendly and energy-efficient products, and has established a framework based on four pillars: Products, Planet, People, and Principles[63][64]. - In 2023, the company published an updated data sheet on Sustainability, enhancing transparency and information availability on its sustainability webpage[65]. - The company is committed to transparency and governance in its sustainability strategy, overseen by the Board of Directors[71]. Intellectual Property and Innovation - The company holds approximately 207 issued U.S. patents and 241 issued foreign patents as of December 31, 2023, covering various technologies[52]. - The company has approximately 50 pending U.S. patent applications and 68 pending foreign patent applications, indicating ongoing efforts to protect its intellectual property[144]. - The company faces risks related to the enforcement of its intellectual property rights, which could adversely affect its competitive position[149]. Financial Position and Debt - As of December 31, 2023, the company's total indebtedness was approximately 1,098.4 million under the first lien term loan facility[155]. - The company has an asset-based lending facility (ABL Facility) that allows borrowing up to an additional $425.0 million, with a current loan balance of zero[155]. - The company may require additional financing to fund operations or acquisitions, but such financing may not be available on acceptable terms[165]. - The company may incur additional debt in the future, which would increase its debt service obligations and associated risks[164]. Supply Chain and Manufacturing - The business is seasonal, with higher sales typically in the second and fourth quarters, driven by the summer pool season[45]. - The company relies on single-source and sole-source suppliers for certain components, which poses risks to product manufacturing and supply continuity[121][122]. - The company has experienced material cost inflation due to the COVID-19 pandemic, impacting raw material prices and manufacturing costs[109]. - The company experienced higher costs and delays due to supply chain disruptions related to the COVID-19 pandemic, impacting profitability[126]. - Manufacturing disruptions from catastrophic events could hinder the company's ability to meet customer demands and increase operational costs[125]. Regulatory and Compliance Risks - The company is subject to various governmental regulations, including environmental and safety regulations, which may result in increased compliance costs[129]. - Climate change and regulatory responses may adversely impact the company's business, including potential limitations on new pool construction due to drought conditions[142]. - Compliance with data privacy regulations, such as GDPR and CCPA, may impose significant costs and liabilities on the company[133]. - Violations of anti-corruption laws could lead to significant penalties and adversely affect the company's reputation and financial condition[140]. Market and Stock Performance - The market price of the company's common stock has been volatile and may fluctuate significantly due to various uncontrollable factors[172]. - The company is currently subject to a securities class action lawsuit, which may incur substantial costs and divert management's attention from business operations[172].