Latham (US:SWIM)2023-11-07 21:30Financial Performance - Net sales decreased by 15.1%, or $28.6 million, to $160.8 million for the fiscal quarter ended September 30, 2023, compared to $189.4 million for the same quarter in 2022[113]. - Net income decreased by $5.7 million to $6.2 million, representing a 3.8% net income margin for the fiscal quarter ended September 30, 2023, compared to net income of $11.9 million for the same quarter in 2022[113]. - Adjusted EBITDA decreased by $6.2 million to $36.1 million for the fiscal quarter ended September 30, 2023, compared to $42.3 million for the same quarter in 2022[113]. - For the three fiscal quarters ended September 30, 2023, net sales decreased by 19.1%, or $112.2 million, to $475.6 million compared to $587.8 million for the same period in 2022[113]. - Net income was $6.2 million for the fiscal quarter ended September 30, 2023, a decrease of $5.7 million, or 48.2%, compared to the same quarter in the previous year[134]. - Adjusted EBITDA decreased by $60.8 million, or 43.7%, to $78.1 million for the three fiscal quarters ended September 30, 2023, compared to $138.9 million for the same period in 2022[152]. Cost Management - The company expects to realize $18.0 million in total cost savings in 2023 due to cost reduction plans initiated in response to economic uncertainty[115]. - Selling, general, and administrative expenses decreased by $3.3 million, or 12.4%, to $23.4 million for the fiscal quarter ended September 30, 2023[128]. Operational Changes - The company is focusing on converting from concrete to fiberglass swimming pools, supported by lead generation efforts and dealer strategy[114]. - The Kingston, Ontario facility was completed in April 2023, along with acquired fiberglass manufacturing assets in Seminole, Oklahoma[114]. - The company operates approximately 2,000 employees across over 30 locations, dedicated to designing and manufacturing high-quality pool products[110]. Debt and Financing - Interest expense, net increased by $12.1 million, or 131.4%, to $21.3 million for the three fiscal quarters ended September 30, 2023[145]. - The Term Loan matures on February 23, 2029, with outstanding borrowings of $301.6 million as of September 30, 2023[167][169]. - The company has a stock repurchase program authorized for up to $100 million, with $77.0 million remaining available for repurchases as of September 30, 2023[170]. Cash Flow and Liquidity - As of September 30, 2023, the company had $78.1 million in cash, $301.6 million in outstanding borrowings, and $75.0 million available under its Revolving Credit Facility[160]. - For the three fiscal quarters ended September 30, 2023, net cash provided by operating activities was $88.1 million, a significant increase from $5.2 million in the same period last year[173][174]. - The company reported a net cash increase of $45.5 million for the three fiscal quarters ended September 30, 2023, compared to a decrease of $13.3 million in the prior year[172]. Inventory and Receivables - The company experienced a $61.7 million decrease in inventories, contributing positively to cash flow, while trade receivables increased by $28.7 million due to the timing of net sales[173]. Future Considerations - The company plans to perform a quantitative assessment for goodwill impairment testing as of October 1, 2023, which may result in a non-cash impairment charge in the fiscal quarter ended December 31, 2023[186]. - A leadership transition was announced with Oliver Gloe appointed as Chief Financial Officer effective November 13, 2023[116]. Market Position - The company holds the 1 position in North America in every product category in which it competes[106]. Margins - Gross margin decreased by 1.2% to 29.9% of net sales for the fiscal quarter ended September 30, 2023, compared to 31.1% for the same quarter in the previous year[127]. - Gross margin for the three fiscal quarters ended September 30, 2023, decreased by 5.8% to 27.7% of net sales compared to 33.5% for the same period in the previous year[141]. - Adjusted EBITDA margin was 16.4% for the three fiscal quarters ended September 30, 2023, down from 23.6% for the same period in 2022, primarily due to the decrease in net sales[153]. Taxation - Effective tax rate was 140.7% for the three fiscal quarters ended September 30, 2023, compared to 65.6% for the same period in the previous year[149]. - Net loss margin was 0.5% for the three fiscal quarters ended September 30, 2023, compared to a net income margin of 2.3% for the same period in 2022, reflecting a $15.8 million increase in net loss and a $112.2 million decrease in net sales[151].