Hayward Holdings Inc
For the period ended Dec 31, 2024. Filed Feb 27, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Feb 27, 2025
HAYW$16.89+4.0%Stored close · as of Nov 9, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-02-29.
0001834622-24-000010
Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-02-27.
0001834622-25-000009
Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 169 previous paragraphs and 172 current paragraphs.
96 unchanged; 53 reworded; 21 added; 19 removed; 1 previous and 2 current paragraphs rearranged.
Tables are not compared: 18 previous and 15 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (21)
Current report
•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.
Current report
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%.
Current report
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.
Current report
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.
Current report
Loss on extinguishment of debt
Current report
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.
Current report
Adjusted EBITDA
Current report
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%.
Current report
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%.
Current report
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 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.
Current report
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.
Current report
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.
Current report
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%.
Current report
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%.
Current report
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.
Current report
Accounts Receivable Sales
Current report
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.
Current report
Transactions under this agreement are accounted for as sales of accounts receivable, and the receivables sold are removed from the consolidated balance sheetsat 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.
Current report
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.
Current report
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.
Current report
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.
Removed paragraphs (19)
Previous report
•Macroeconomic Factors on Variable Rate Indebtedness. Rising interest rates resulting from central banks’ efforts to combat macroeconomic price inflation has caused increases in the cost to service our variable rate indebtedness. The Company limits its exposure to these risks by following established risk management policies and procedures, including the use of derivatives. The Company uses interest rate swaps to manage the exposure to changes in rates and the related cost of debt. See Item 7A. “Quantitative and Qualitative Disclosure about Market Risk – Interest Rate Risk.”
Previous report
EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Consolidated segment income, Adjusted segment income, Adjusted segment income margin
Previous report
Gross profit decreased to $477.0 million in Fiscal Year 2023 from $597.0 million in Fiscal Year 2022, a decrease of $120.0 million or 20.1%.
Previous report
Gross profit margin increased to 48.1% in Fiscal Year 2023 compared to 45.4% in Fiscal Year 2022, an increase of 270 basis points primarily due to the management of our manufacturing costs, partially offset by lower operating leverage. The comparable prior-year period experienced increased costs related to off-contract inventory purchases and increased procurement costs for certain components due to supply constraints.
Previous report
Selling, general and administrative expense decreased to $233.6 million in Fiscal Year 2023 from $248.8 million in Fiscal Year 2022, a decrease of $15.2 million or 6.1% primarily as a result of cost reductions and lower compensation related expenses associated with the reduction in headcount from the enterprise cost reduction program implemented during 2022, the absence of a one-time expense associated with the discontinuation of a product joint development agreement present in Fiscal Year 2022, as well as decreased professional and bad debt expenses, partially offset by higher warranty expense.
Previous report
The $8.2 million expense in Fiscal Year 2022 was primarily driven by restructuring expenses related to the relocation of the corporate headquarters to Charlotte, North Carolina and the Company’s enterprise cost reduction program, as well as acquisition transaction and integration costs associated with the purchase of the specialty lighting business of Halco Lighting Technologies, LLC, which includes the brands J&J Electronics and Sollos (the “Specialty Lighting Business”), partially offset by a gain resulting from the release of certain reserves associated with the exit of an early-stage product line discontinued in 2021.
Previous report
Adjusted EBITDA margin decreased to 24.9% in Fiscal Year 2023 compared to 28.0% in Fiscal Year 2022, a decrease of 310 basis points.
Previous report
(a)Consolidated segment income is a non-GAAP measure.
Previous report
(b)See “—Non-GAAP Reconciliation.”
Previous report
Net sales decreased to $823.3 million in Fiscal Year 2023 from $1,108.9 million in Fiscal Year 2022, a decrease of $285.6 million or 25.8%.
Previous report
Gross profit decreased to $410.6 million in Fiscal Year 2023 from $514.9 million in Fiscal Year 2022, a decrease of $104.3 million or 20.2%.
Previous report
Gross profit margin increased to 49.9% in Fiscal Year 2023 from 46.4% in Fiscal Year 2022, an increase of 350 basis points, primarily due to the management of our manufacturing costs, including reduced costs specifically in freight and tariffs, partially offset by lower operating leverage.
Previous report
Segment income decreased to $215.4 million in Fiscal Year 2023 from $308.6 million in Fiscal Year 2022, a decrease of $93.2 million or 30.2%. This was primarily driven by a decrease in sales and gross profit as discussed above, partially offset by the absence of a one-time expense in SG&A associated with the discontinuation of a product joint development agreement. As a percentage of segment net sales, SG&A and RD&E expenses increased from 18.6% in the Fiscal Year 2022 to 23.7% as a result of the decline in sales as discussed above.
Previous report
Adjusted segment income margin decreased to 28.9% in Fiscal Year 2023 from 30.7% in Fiscal Year 2022, a decrease of 180 basis points.
Previous report
Net sales decreased to $169.2 million in Fiscal Year 2023 from $205.3 million in Fiscal Year 2022, a decrease of $36.1 million or 17.6%.
Previous report
Gross profit decreased to $66.3 million in Fiscal Year 2023 from $82.2 million in Fiscal Year 2022, a decrease of $15.9 million or 19.3%.
Previous report
Adjusted segment income margin decreased to 20.4% in Fiscal Year 2023 from 23.6% in Fiscal Year 2022, a decrease of 320 basis points.
Previous report
Following is a reconciliation from income from operations before income taxes to total segment income and adjusted segment income (dollars in thousands):
Previous report
Net cash used in financing activities decreased to $7.6 million for the year ended December 31, 2023 compared to $229.2 million for the year ended December 31, 2022, a decrease of $221.6 million. For the year ended December 31, 2023, net cash used by financing activities was primarily driven by payments on long-term debt. For the year ended December 31, 2022, net cash used by financing activities was primarily driven by share repurchases, partially offset by the proceeds from the issuance of long-term debt.
Reworded paragraphs (53)
Previous wording
We have an estimated North American seasonal residential pool market share of approximately 34%. We believe that we are well-positioned for future growth. On average, we have over 20 year relationships with our top 20 customers. 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.
Current wording
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.
Previous wording
We manufacture our products at six facilities worldwide, which are located in North Carolina, Tennessee, Rhode Island, Spain (two) and China.
Current wording
We manufacture our products at seven facilities worldwide, which are located in North Carolina, Georgia, Tennessee, Rhode Island, Spain (two) and China.
Previous wording
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 83% and 17% and 84% and 16% of total net sales for Fiscal Year 2023 and Fiscal Year 2022, respectively.
Current wording
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.
Previous wording
•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 2023 Early Buy program began in the late third quarter and will continue through approximately the first quarter of 2024. 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 unless damaged. 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.
Current wording
•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.
Previous wording
•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 2023, new products launched in the last three years contributed approximately 14% of gross sales. 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.
Current wording
•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.
Previous wording
We offer a broad range of pool equipment including pumps, filters, heaters, automatic cleaners, sanitizers, 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.
Current wording
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.
Previous wording
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 an offsetting adjustment to account receivable. We regularly monitor the adequacy of these allowances.
Current wording
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.
Previous wording
The Company 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.
Current wording
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.
Previous wording
EBITDA, adjusted EBITDA, adjusted EBITDA margin, consolidated segment income, 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.” The reconciliation of consolidated segment income is included in “— Summary of Results of Operations.”
Current wording
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.”
Previous wording
Net sales decreased to $992.5 million in Fiscal Year 2023 from $1,314.1 million in Fiscal Year 2022, a decrease of $321.6 million or 24.5%. See segment discussion below for further information.
Current wording
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.
Previous wording
The Fiscal Year 2023 decrease in net sales was primarily the result of a decline in volume, partially offset by increases in price and the favorable impact of acquisitions. The decline in volume was primarily the result of the moderation of end market demand trends due to macroeconomic factors and distribution channel destocking. Geopolitical factors in Europe also contributed to the decline in volume. The increase in the net price was due to price increases enacted to offset inflationary pressure.
Current wording
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.
Previous wording
As a percentage of net sales, SG&A increased to 23.5% in Fiscal Year 2023 as compared to 18.9% in Fiscal Year 2022, an increase of 460 basis points, primarily driven by reduced operating leverage.
Current wording
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.
Previous wording
RD&E expense increased to $24.5 million in Fiscal Year 2023 compared to $22.4 million in Fiscal Year 2022, an increase of $2.1 million or 9.8%. As a percentage of net sales, RD&E increased to 2.5% in Fiscal Year 2023 compared to 1.7% in Fiscal Year 2022. RD&E spend continues to be focused on new product development.
Current wording
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.
Previous wording
Acquisition and restructuring related expense increased to $13.2 million in Fiscal Year 2023 as compared to $8.2 million in Fiscal Year 2022, an increase of $5.0 million.
Current wording
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.
Previous wording
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.
Current wording
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.
Previous wording
Amortization of intangible assets decreased to $30.4 million in Fiscal Year 2023 from $32.1 million in Fiscal Year 2022, a decrease of $1.7 million or 5.5%, due to the amortization pattern of certain intangibles based on the declining balance method.
Current wording
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.
Previous wording
Operating income decreased to $175.2 million in Fiscal Year 2023 from $285.6 million in Fiscal Year 2022, a decrease of $110.4 million or 38.6% due to the accumulated effect of the items described above. Operating income as a percentage of net sales (“operating margin”) was 17.7% in Fiscal Year 2023, a 400 basis point reduction from the 21.7% operating margin in Fiscal Year 2022.
Current wording
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.
Previous wording
Interest expense, net, increased to $73.6 million in Fiscal Year 2023 from $51.4 million in Fiscal Year 2022, an increase of $22.2 million or 43.2%. The increase was primarily due to variable rate increases on the Company’s First Lien Term Facility, partially offset by net interest income on the interest rate swaps and interest income on cash investment balances.
Current wording
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.
Previous wording
Interest expense in Fiscal Year 2023 consisted of $76.0 million of interest on the outstanding debt, net of the impact from the interest rate swaps, and $4.7 million of amortization of deferred financing fees, partially offset by $7.1 million of interest income. Interest expense in Fiscal Year 2022 consisted of $48.5 million on the outstanding debt and $3.3 million of amortization of deferred financing fees, partially offset by $0.4 million of interest income.
Current wording
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.
Previous wording
We incurred income tax expense of $20.4 million for Fiscal Year 2023 and $54.9 million for Fiscal Year 2022, a decrease of $34.5 million or 62.8%. This decrease in tax expense was primarily due to decreased income from operations.
Current wording
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.
Previous wording
Our effective income tax rate decreased to 20.2% for Fiscal Year 2023 from 23.4% for Fiscal Year 2022 primarily due to the reversal of a valuation allowance, favorable prior year tax return adjustments, and an increase in excess tax benefit from stock compensation, partially offset by withholding tax related to a change in the indefinite reinvestment assertion for one jurisdiction.
Current wording
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.
Previous wording
As a result of the foregoing, net income decreased to $80.7 million in Fiscal Year 2023 compared to net income of $179.3 million in Fiscal Year 2022, a decrease of $98.6 million or 55.0%.
Current wording
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%.
Previous wording
Adjusted EBITDA decreased to $247.3 million in Fiscal Year 2023 from $367.6 million in Fiscal Year 2022, a decrease of $120.3 million or 32.7% driven primarily by lower net sales and operating leverage resulting in a decrease in gross profit of $120.1 million, partially offset by a decrease in SG&A expenses of $15.2 million.
Current wording
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.
Previous wording
We evaluate performance based on net sales, gross profit, segment income and adjusted segment income, and use gross profit margin, segment income margin and adjusted segment income margin as comparable performance measures for our reporting segments.
Current wording
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.
Previous wording
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. A reconciliation of segment income to our operating income is detailed below. 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:
Current wording
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.
Previous wording
Year-over-year net sales decrease was driven by the following:
Current wording
Year-over-year net sales increase was driven by the following:
Previous wording
This decrease was primarily the result of a decline in volume, partially offset by increases in price and the favorable impact of acquisitions. The decline in volume was primarily the result of the moderation of end market demand trends due to macroeconomic factors and distribution channel destocking. The increase in the net price was due to price increases enacted to offset inflation.
Current wording
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.
Previous wording
Segment income margin decreased to 26.2% in Fiscal Year 2023 from 27.8% in Fiscal Year 2022, a decrease of 160 basis points primarily resulting from the decline in sales as discussed above and higher SG&A expense as a percentage of segment net sales.
Current wording
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.
Previous wording
Adjusted segment income decreased to $237.7 million in Fiscal Year 2023 from $340.8 million in Fiscal Year 2022, a decrease of $103.1 million or 30.3%. This was driven by the lower segment income as discussed above, adjusted for additional non-cash or non-recurring charges.
Current wording
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.
Previous wording
The decrease in net sales was primarily due to a decline in volume as a result of distribution channel destocking and geopolitical factors and macroeconomic uncertainty, partially offset by the favorable impact of price increases and the favorable impact of foreign currency translation.
Current wording
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.
Previous wording
Gross profit margin decreased to 39.2% in Fiscal Year 2023 compared to 40.0% in Fiscal Year 2022, a decrease of 80 basis points, primarily driven by lower operating leverage and an increase in obsolescence reserves, partially offset by the net price increases discussed above.
Current wording
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.
Previous wording
Segment income decreased to $33.5 million in Fiscal Year 2023 from $47.4 million in Fiscal Year 2022, a decrease of $13.9 million or 29.3%. This was primarily driven by a decrease in sales and gross profit as discussed above, partially offset by lower SG&A expense. As a percentage of segment net sales, SG&A and RD&E expenses increased from 17.0% in the Fiscal Year 2022 to 19.4% as a result of lower net sales as discussed above.
Current wording
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.
Previous wording
Segment income margin decreased to 19.8% in Fiscal Year 2023 from 23.1% in Fiscal Year 2022, a decrease of 330 basis points. The decline was primarily attributable to the decreased sales and operating leverage.
Current wording
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.
Previous wording
Adjusted segment income decreased to $34.5 million in Fiscal Year 2023 from $48.4 million in Fiscal Year 2022, a decrease of $13.9 million or 28.7%. This was primarily driven by the decreased sales and operating leverage adjusted for additional non-cash or non-recurring charges.
Current wording
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.
Previous wording
The Company uses EBITDA, adjusted EBITDA, adjusted EBITDA margin, total segment income, 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.
Current wording
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.
Previous wording
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. Total segment income represents net sales less cost of sales, segment SG&A and RD&E, excluding acquisition and restructuring related expense as well as amortization of intangible assets. 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.
Current wording
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.
Previous wording
EBITDA, adjusted EBITDA, adjusted EBITDA margin, total segment income, 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.
Current wording
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.
Previous wording
Use of the terms EBITDA, adjusted EBITDA, adjusted EBITDA margin, total segment income, adjusted segment income and adjusted segment income margin may differ from similar measures reported by other companies. EBITDA, adjusted EBITDA, adjusted EBITDA margin, total segment income, 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, total segment income 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), operating income and segment income, which are prepared in accordance with GAAP. We have presented EBITDA, adjusted EBITDA, adjusted EBITDA margin, total segment income, 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.
Current wording
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.
Previous wording
Unrestricted cash and cash equivalents totaled$178.1 million as of December 31, 2023, which is an increase of $121.9 million from $56.2 million at December 31, 2022. As of December 31, 2023, the Company had invested $25 million in certificates of deposit, which is included in short-term investments on the consolidated balance sheets.
Current wording
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.
Previous wording
The Organisation for Economic Co-operation and Development introduced an international tax framework under Pillar Two which includes a global minimum tax of 15%. Various countries have implemented Pillar Two with effect from January 1, 2024, and many other jurisdictions are in the process of implementing it. The Company is continuing to evaluate the potential impact on future periods of Pillar Two.
Current wording
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.
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Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted segment income, Adjusted segment income margin
Current report — wording carried from elsewhere
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.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
Adjusted EBITDA and adjusted EBITDA margin