0001834622-21-000002.txt : 20210518 0001834622-21-000002.hdr.sgml : 20210518 20210518145627 ACCESSION NUMBER: 0001834622-21-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 81 CONFORMED PERIOD OF REPORT: 20210403 FILED AS OF DATE: 20210518 DATE AS OF CHANGE: 20210518 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Hayward Holdings, Inc. CENTRAL INDEX KEY: 0001834622 STANDARD INDUSTRIAL CLASSIFICATION: REFRIGERATION & SERVICE INDUSTRY MACHINERY [3580] IRS NUMBER: 822060643 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-40208 FILM NUMBER: 21935657 BUSINESS ADDRESS: STREET 1: 400 CONNELL DRIVE, SUITE 6100 CITY: BERKELEY HEIGHTS STATE: NJ ZIP: 07922 BUSINESS PHONE: 908-354-5400 MAIL ADDRESS: STREET 1: 400 CONNELL DRIVE, SUITE 6100 CITY: BERKELEY HEIGHTS STATE: NJ ZIP: 07922 10-Q 1 hayw-20210403.htm 10-Q hayw-20210403
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 3, 2021

OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from   to

Commission file number 001-40208
Hayward Holdings, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
400 Connell Drive
Suite 6100
Berkeley Heights, NJ
(Address of Principal Executive)
Offices)
82-2060643
(I.R.S. Employer Identification No.)

07922
(Zip Code)
(908) 351-5400
Registrant's telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, $.001 per shareHAYWNew York Stock Exchange
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 and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).     Yes     No   

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller 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 is a shell company (as defined in Rule 12b-2 of the Act).     Yes        No  


APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

    Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
☐  Yes ☐ No
APPLICABLE ONLY TO CORPORATE ISSUERS:

The registrant had outstanding 231,101,257 shares of common stock as of May 17, 2021.



SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains certain forward-looking statements and information relating to us that are based on the beliefs of our management as well as assumptions made by, and information currently available to, us. These 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 Quarterly Report on Form 10-Q 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. These statements reflect our current views with respect to future events, are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. Further, certain forward-looking statements are based upon assumptions as to future events that may not prove to be accurate.

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; growth and expansion opportunities; operating results; and working capital and liquidity. 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. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make.

The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions. 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 the forward-looking statements, including such 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 ability to execute on our growth strategies and expansion opportunities;
• our ability to maintain favorable relationships with suppliers;
• our relationships with and the performance of distributors, builders, buying groups, retailers and servicers who sell our products to pool owners;
• competition from national and global companies, as well as lower cost manufacturers;
• impacts on our business from the sensitivity of our business to seasonality and unfavorable economic and business conditions;
• our ability to identify emerging technological and other trends in our target end markets;
• our ability to develop, manufacture and effectively and profitably market and sell our new planned and future products;
• failure of markets to accept new product introductions and enhancements;
• the ability to successfully identify, finance, complete and integrate acquisitions;
• our ability to attract and retain senior management and other qualified personnel;
• regulatory changes and developments affecting our current and future products;
• volatility in currency exchange rates;
• our ability to service our existing indebtedness and obtain additional capital to finance operations and our growth opportunities;
• impacts on our business from political, regulatory, economic, trade, and other risks associated with operating foreign businesses;
• our ability to establish and maintain 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;
• the impact of changes in laws, regulations and administrative policy, including those that limit U.S. tax benefits or impact trade agreements and tariffs;
• the outcome of litigation and governmental proceedings;
• impacts on our business from the COVID-19 pandemic; and
• other factors set forth in “Risk Factors” in our IPO Prospectus (as defined herein).

These forward-looking statements involve known and unknown risks, inherent uncertainties and other factors, which may cause our actual results, performance, time frames or achievements to be materially different from any future results, performance, time frames or achievements expressed or implied by the forward-looking statements. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. Actual results and the timing of certain events may differ materially from those contained in these forward-looking statements.

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 Quarterly Report on Form 10-Q as anticipated, believed, estimated, expected, intended, planned or projected. The forward-looking statements included in this Quarterly Report on Form 10-Q 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 Quarterly Report on Form 10-Q to conform these statements to actual results or to changes in our expectations.




TABLE OF CONTENTS
i


PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Hayward Holdings, Inc.
Condensed Consolidated Balance Sheets
(Unaudited, dollars in millions, except per share data)
April 3, 2021December 31, 2020
Assets
Current assets
Cash and cash equivalents$13.8 $114.9 
Accounts receivable, net of allowances of $1.4 and $1.4, respectively
349.1 140.2 
Inventories, net159.4 145.3 
Prepaid expenses10.8 10.3 
Other current assets14.9 13.7 
Total current assets548.0 424.4 
Property, plant, and equipment, net of accumulated depreciation of $56.3 and $51.9, respectively
142.1 142.3 
Goodwill919.4 920.3 
Trademark736.0 736.0 
Customer relationships, net264.0 271.5 
Other intangibles, net103.8 106.7 
Other non-current assets7.0 5.9 
Total assets$2,720.3 $2,607.1 
Liabilities, Redeemable Stock, and Stockholders' Equity
Current liabilities
Current portion of the long-term debt$2.1 $2.8 
Accounts payable75.0 69.6 
Accrued expenses and other liabilities138.0 141.8 
Income taxes payable19.5 4.4 
Total current liabilities234.6 218.6 
Long-term debt, net991.8 1,300.3 
Deferred tax liabilities, net274.9 273.6 
Other non-current liabilities12.3 10.9 
Total liabilities1,513.6 1,803.4 
Commitments and contingencies (Note 12)
Redeemable stock
Class A stock $0.001 par value, no shares authorized, issued, or outstanding at April 3, 2021; 1,500,000 shares authorized, 872,598 issued and 869,823 outstanding at December 31, 2020
 594.5 
Class C stock $0.001 par value, no shares authorized, issued, or outstanding at April 3, 2021; 100 shares authorized, issued, and outstanding at December 31, 2020
  
Stockholders' equity
Common stock $0.001 par value, 750,000,000 authorized; 231,120,757 issued and outstanding at April 3, 2021; 3,846,960 issued and 2,772,900 outstanding at December 31, 2020
0.2  
Additional paid-in capital1,052.7 10.3 
Common stock in treasury; 4,698,584 and 4,340,310 at April 3, 2021 and December 31, 2020, respectively
(3.9)(3.7)
Retained earnings154.4 203.0 
Accumulated other comprehensive income (loss)3.3 (0.4)
Total stockholders' equity1,206.7 209.2 
Total liabilities, redeemable stock, and stockholders' equity$2,720.3 $2,607.1 



See accompanying notes to consolidated financial statements (unaudited).

1

Hayward Holdings, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
(Unaudited, dollars in millions, except per share data)

Three Months Ended
April 3, 2021March 28, 2020
Net sales$334.4 $170.2 
Cost of sales174.5 94.6 
Gross profit159.9 75.6 
Selling, general, and administrative expenses66.5 43.3 
Research, development, and engineering4.8 4.7 
Acquisition and restructuring related expense 5.5 
Amortization of intangible assets8.8 9.5 
Operating income79.8 12.6 
Interest expense, net18.3 19.6 
Loss on extinguishment of debt5.8  
Other expense, net3.6 6.4 
Total other expense27.7 26.0 
Income (loss) from operations before income taxes52.1 (13.4)
Provision (benefit) for income taxes15.2 (3.0)
Net income (loss)$36.9 $(10.4)
Comprehensive income, net of tax
Net income (loss)$36.9 $(10.4)
Foreign currency translation adjustments, net of tax expense of $1.1 million and net of tax benefit of $3.1 million, respectively
1.7 (11.1)
Change in fair value of derivatives, net of tax expense of $0.6 million and net of tax benefit of $2.0 million, respectively
1.8 (7.0)
Comprehensive income (loss)$40.4 $(28.5)
Income (loss) per common share
Basic$(0.85)$(8.80)
Diluted$(0.85)$(8.80)
Weighted average common shares outstanding
Basic57,377,822 1,204,555 
Diluted57,377,822 1,204,555 













See accompanying notes to consolidated financial statements (unaudited).
2

Hayward Holdings, Inc.
Condensed Consolidated Statements of Changes in Redeemable Stock and Stockholders' Equity
(Unaudited, dollars in millions, except per share data)

Redeemable
Class A and C Stock
Common StockAdditional Paid-in CapitalTreasury StockRetained EarningsAccumulated Other Comprehensive Income (Loss)Total Stockholders' Equity
SharesAmountSharesAmount
Balance at January 1, 2021869,923 $594.5 2,772,900 $ $10.3 $(3.7)$203.0 $(0.4)$209.2 
Net income— — — — — — 36.9 — 36.9 
Conversion to common stock upon IPO(870,109)(594.5)206,147,857 0.2 680.0 — (85.5)— 594.7 
Issuance of common stock— — 22,200,000 — 351.6 — — — 351.6 
Issuance of Class A stock186 — — 0.2 — — — 0.2 
Stock-based compensation— — — — 10.6 — — — 10.6 
Repurchase of stock— — — — — (0.2)— — (0.2)
Comprehensive income items— — — — — — — 3.7 3.7 
Balance at April 3, 2021 $ 231,120,757 $0.2 $1,052.7 $(3.9)$154.4 $3.3 $1,206.7 
Redeemable
Class A and C Stock
Common StockAdditional Paid-in CapitalTreasury StockRetained EarningsAccumulated Other Comprehensive Income (Loss)Total Stockholders' Equity
SharesAmountSharesAmount
Balance at January 1, 2020872,397 $869.5 3,114,150 $ $8.0 $(1.2)$159.9 $(2.7)$164.0 
Net income— $— — — $— $— $(10.4)$— $(10.4)
Issuance of Class A stock— $— — — $ $— $— $— $ 
Cash distributions— $— — — $— $— $(0.1)$— $(0.1)
Stock-based compensation— $— — — $0.7 $— $— $— $0.7 
Exercise of stock options(423)$— — — $0.1 $— $— $— $0.1 
Repurchase of stock— $— — — $— $(2.0)$— $— $(2.0)
Comprehensive loss items— $— — — $— $— $— $(18.1)$(18.1)
Balance at March 28, 2020871,974 $869.5 3,114,150 $ $8.8 $(3.2)$149.4 $(20.8)$134.2 
See accompanying notes to consolidated financial statements (unaudited).
3

Hayward Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited, dollars in millions, except per share data)

Three Months Ended
April 3, 2021March 28, 2020
Cash flows from operating activities
Net income (loss)$36.9 $(10.4)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities
Depreciation4.7 4.6 
Amortization of intangible assets10.4 10.8 
Amortization of deferred debt issuance costs1.4 1.3 
Stock-based compensation10.6 0.7 
Deferred income taxes(0.3)1.3 
Increase (decrease) in allowance for bad debts (0.1)
Loss on debt extinguishment5.8  
Net change in assets and liabilities
Accounts receivable(210.0)(102.5)
Inventories(15.4)(6.5)
Other current and non-current assets(0.3)1.9 
Accounts payable and accrued expenses and other liabilities24.4 1.1 
Net cash (used in) provided by operating activities(131.8)(97.8)
Cash flows from investing activities
Purchases of property, plant, and equipment(4.8)(3.9)
Purchases of intangibles(0.2)(0.4)
Proceeds from settlements of investment currency hedge0.4 0.4 
Net cash (used in) provided by investing activities(4.6)(3.9)
Cash flows from financing activities
Proceeds from issuance of common stock from IPO377.4  
IPO stock issuance costs(25.8) 
Proceeds from issuance of Class A common stock0.3 0.1 
Payments of long-term debt(364.6)(3.5)
Net change in revolving credit facility48.8 152.9 
Payments of capital leases(0.2) 
Purchase of common stock for treasury(0.2)(2.0)
Net cash (used in) provided by financing activities35.7 147.5 
Effect of exchange rate changes on cash and cash equivalents(0.4)(0.6)
Change in cash and cash equivalents and restricted cash(101.1)45.2 
Cash and cash equivalents and restricted cash, beginning of period114.9 47.2 
Cash and cash equivalents and restricted cash, end of period$13.8 $92.4 
Supplemental disclosures of cash flow information
Cash paid-interest$16.9 $12.0 
Cash paid-income taxes$0.1 $0.8 
See accompanying notes to consolidated financial statements (unaudited).
4

Hayward Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)

1. Nature of Operations and Organization

Hayward Holdings, Inc. (“Holdings” or the “Company”) is a global designer, manufacturer, and marketer of a broad portfolio of pool equipment and associated automation systems. The Company has facilities in the United States, Canada, Spain, France, Australia and China. Cash flow is impacted by the seasonality of the swimming pool business. Cash flow is usually higher in the second and third quarters due to terms of sale to our customers.

Prior to March 2, 2021, the Company had three classes of stock designated as Class A, Class B and Class C stock. On March
2, 2021, the Company reclassified its Class B common stock into common stock, par value $0.001 per share ( “Common Stock”), and then effected a 195-for-1 split of its Common Stock. On March 11, 2021, the Company converted each outstanding share of Class A stock into 195 shares of Common Stock plus an additional 42.5671 shares, which amount was determined by dividing (a) the Class A preference amount of such share of Class A stock, or $683.84 per share (the “Class A Preference Amount”), by (b) the initial public offering price of $17.00 per a share of Common Stock in the Company’s initial public offering (“IPO”), net of the per share underwriting discount, and (ii) the Company redeemed each outstanding share of Class C stock for an aggregate price of $1.00.

References to the “Reclassification” refer to (i) the reclassification of the Company’s Class B common stock into Common Stock on March 2, 2021, (ii) the 195-for-1 stock split of the Company’s common stock on March 2, 2021, (iii) the conversion of the Company’s Class A stock into Common Stock, (iv) the redemption of the Company’s Class C stock and (v) the filing and
effectiveness of the Company’s second restated certificate of incorporation and the adoption of its amended and restated bylaws on March 16, 2021.

All share and per share amounts for all periods presented in these condensed consolidated financial statements and related notes have been adjusted retroactively, where applicable, to reflect the Reclassification.

On March 16, 2021, the Company completed its IPO whereby it issued 22,200,000 shares of its Common Stock, and entities affiliated with CCMP Capital Advisors, LP (“CCMP”), MSD Partners, L.P. (“MSD Partners”) and Alberta Investment Management Corporation (“AIMCo” and, together with CCMP and MSD Partners, the “Sponsors”) sold an aggregate of 20,893,665 shares of the Company’s Common Stock, inclusive of 2,815,887 shares sold by entities affiliated with the Sponsors pursuant to the partial exercise of the underwriters’ option to purchase additional shares. The shares began trading on the New York Stock Exchange on March 12, 2021. The aggregate net proceeds received by the Company from the IPO were $356.6 million, after deducting underwriting discounts and commissions and other offering costs. The Company used the net proceeds from the IPO to repay existing indebtedness outstanding under its credit facilities as further described in Note 7.


2. Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). The financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair statement of such information. All such adjustments are of a normal recurring nature. Certain information and note disclosures, including a description of significant accounting policies normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"), have been condensed or omitted pursuant to such rules and regulations.

These interim financial statements should be read in conjunction with the Company’s annual consolidated financial statements and notes thereto for the fiscal year ended December 31, 2020 included in the Company's final prospectus for the IPO filed pursuant to Rule 424(b) under the Securities Act of 1933, as amended, filed with the SEC on March 15, 2021 (the "IPO Prospectus"). The results of operations for the three months ended April 3, 2021 are not necessarily indicative of the results for any subsequent periods or the entire fiscal year ending December 31, 2021.

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.
5

Hayward Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)

Cash and Cash Equivalents

The following table provides supplemental cash flow information and a reconciliation of cash and cash equivalents and restricted cash to amounts reported within the Company's condensed consolidated balance sheets and condensed consolidated statements of cash flows (in millions):
April 3, 2021December 31, 2020
Cash and cash equivalents$13.8 $114.9 
Restricted cash (a)
0.6 0.4 
Total$14.4 $115.3 
(a) included in Other current assets

Recent Accounting Pronouncements Not Yet Adopted

The Company plans to adopt the following recent accounting pronouncements based on accommodations for Emerging Growth Companies.

Accounting for Leases

Accounting Standards Update (the "ASU") 2016-02, Leases, was issued by Financial Accounting Standards Board (the "FASB") in February 2016. This standard requires the Company, as the lessee, to recognize most leases on the balance sheet thereby resulting in the recognition of right of use assets and lease obligations for those leases currently classified as operating leases. The standard will be effective for the Company on January 1, 2022 and it is evaluating whether it will elect the optional transition method as well as the package of practical expedients, upon adoption.

In addition to the recognition of the rights of use assets and lease obligations, the Company anticipates changes in systems, processes and controls. While the requirements of the new guidance represent a material change from existing Generally Accepted Accounting Principles (the "GAAP"), the underlying economics of items in scope and related cash flows are unchanged. The Company plans to focus on gathering data, developing procedures and testing before adoption. Focus areas include, but are not limited to (i) updating procedures to reflect new guidance; (ii) developing, testing, and implementing controls for newly developed procedures, as well as for additional annual reporting requirements.

New Credit Loss Standard

ASU 2016-13, Financial Instruments—Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments, was issued by FASB in June 2016. This standard is effective January 1, 2022, and will impact, at least to some extent, the Company’s accounting and disclosure requirements for its accounts receivable. The Company will continue to identify any other financial assets not excluded from scope. The Company does not currently expect to early adopt this standard and is currently evaluating the impact of this new accounting guidance on its condensed consolidated financial statements.

The Company anticipates an impact on the systems, processes and controls. While the requirements of the new guidance represent a material change from existing GAAP, the underlying economics of items in scope and related cash flows are unchanged. The Company plans to focus on gathering data, developing procedures and testing before adoption. Focus areas include, but are not limited to (i) updating procedures to reflect new guidance requiring establishment of allowance for credit losses on accounts receivable; (ii) establishing procedures to identify and review all remaining financial assets within scope, (iii) developing, testing, and implementing controls for newly developed procedures, as well as for additional annual reporting requirements.

Simplifying the Accounting for Income Taxes

ASU 2019-12, “Simplifying the Accounting for Income Taxes” (Topic 740), was issued by FASB in December 2019. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. ASU 2019-12 is effective for the Company beginning after December 15, 2021 and interim periods beginning after December 15, 2022, with early adoption permitted. Depending on the amendment, adoption may be applied on the retrospective, modified retrospective or prospective basis. The Company is currently evaluating the effect of the standard on its ongoing financial reporting.

6

Hayward Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Reference Rate Reform

ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.”, was issued by FASB in March 2020. In January 2021, the FASB clarified the scope of that guidance with the issuance of ASU 2021-01, Reference Rate Reform: Scope. ASU 2020-04 provides optional expedients and exceptions to account for contracts, hedging relationships and other transactions that reference LIBOR or another reference rate if certain criteria are met. ASU 2020-04 may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. The Company is currently evaluating the potential effects of the adoption of ASU 2020-04.

3. Revenue

The following table disaggregates net sales between product groups and geographic destinations, respectively (in millions):

Three Months Ended
April 3, 2021March 28, 2020
Product groups
Residential pool$316.1 $154.1 
Commercial pool7.0 7.1 
Industrial flow control11.3 9.0 
Total$334.4 $170.2 
Geographic
United States$239.8 $116.9 
Canada31.7 15.5 
Europe49.0 27.3 
Rest of World13.9 10.5 
Total international revenue94.6 53.3 
Total$334.4 $170.2 

4. Inventories

Inventories consist of the following (in millions):
April 3, 2021December 31, 2020
Raw materials$82.2 $67.9 
Work in progress13.9 13.5 
Finished goods63.3 63.9 
Total$159.4 $145.3 

7

Hayward Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
5. Accrued Expenses and Other Liabilities

Accrued expenses and other liabilities consist of the following (in millions):
April 3, 2021December 31, 2020
Selling, promotional and advertising$23.8 $25.4 
Employee compensation and benefits22.9 34.2 
Warranty reserve21.9 16.4 
Inventory purchases22.7 13.7 
Insurance reserve8.8 9.8 
Deferred income10.5 11.7 
Restructuring reserves0.8 1.7 
Derivative liability4.6 9.3 
Professional fees1.2 2.9 
Payroll taxes4.4 3.2 
Other accrued liabilities16.4 13.5 
Total$138.0 $141.8 

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 millions):

Balance at December 31, 2020
$16.4 
Accrual for warranties issued during the period and year ended10.1 
Payments(4.6)
Balance at April 3, 2021
$21.9 

6. Income Taxes

The Company's effective tax rate for the three months ended April 3, 2021 and three months ended March 28, 2020 were 29.1% and 22.5%, respectively.

The increase in the Company’s effective tax rate for the three months ended April 3, 2021 from the three months ended March 28, 2020 was primarily due to a Global Intangible Low Tax Income ("GILTI") inclusion, changes in the relative income between jurisdictions, and a discrete tax charge relating to nondeductible GAAP stock compensation expense in excess of annual IRS compensation expense limitations due to the accelerated vesting of performance based grants due to the IPO.

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. There were no uncertain tax positions at April 3, 2021 and December 31, 2020, respectively.

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 tax projections, and historical financial performance.


8

Hayward Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
7. Long-Term Debt

Long-term debt consists of the following (in millions):
April 3, 2021December 31, 2020
First Lien Term Facility, due August 4, 2024$820.0 $958.0 
Incremental First Lien Term Facility, due August 4, 2026128.4 150.0 
Second Lien Term Facility 205.0 
ABL Revolving Credit Facility48.8  
Capital lease obligations9.5 9.7 
Subtotal1,006.7 1,322.7 
Less: Current portion of the long-term debt(2.1)(2.8)
Less: Unamortized debt issuance costs(12.8)(19.6)
Total$991.8 $1,300.3 

The Company made $8.0 million and $356.6 million of voluntary term loan repayments on February 19, 2021 and March 19, 2021, respectively. The March 19, 2021 repayment was funded with the net proceeds received from the IPO, of which (i) $205.0 million was used to repay in full outstanding borrowings under the Company's Second Lien Term Facility, (ii) $131.1 million was used to repay outstanding borrowings under the Company's First Lien Term Facility and (iii) $20.5 million was used to repay borrowings under the Incremental First Lien Term Facility. The Company recorded a $5.8 million debt extinguishment loss related to the write off of unamortized deferred financing costs as a result of the partial repayment of the First Lien Term Facility and Incremental First Lien Term Facility.

The First Lien Term Facility, Second Lien Term Facility (“Term Loan Facilities”) and ABL Revolving Credit Facility ("ABL Facility") and, together with the Term Loan Facilities (collectively “Credit Facilities”) contain various restrictions, covenants and collateral requirements. As of April 3, 2021 we were in compliance with all covenants under the Credit Facilities.
8. 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 loss, net of tax.

As of April 3, 2021, the Company was a party to two interest rate swap agreements that effectively converts an initial notional amount of $550.0 million of its variable rate debt obligations to a fixed rate debt. The interest rate swap agreements expire in August 2021.

On December 23, 2020, the Company entered into three variable rate collar derivative foreign exchange contracts to hedge US $30 million of intercompany remittances through June 2021.

Net Investment Hedges

The Company uses net investment hedges to minimize its exposure to variability in the foreign currency translation of its net investment in one of its international subsidiaries. The effective portion of changes in the fair value of the hedging instrument is recognized in accumulated other comprehensive loss consistent with the related translation gains and losses of the hedged net investment. For net investment hedges, all critical terms of the hedged item and the hedging instrument are matched at inception and on an ongoing basis to minimize the risk of hedge ineffectiveness.

At December 31, 2017, the Company entered into a four year euro-denominated cross currency swap agreement of €75.0 million to hedge the net investment in one of its foreign subsidiaries designated as a hedge expiring on August 31, 2021. Since both the notional value of the derivative designated as a hedge of a net investment in a foreign subsidiary equals the portion of the net investment designated as being hedged and the derivative relates solely to the foreign exchange rate between the functional
9

Hayward Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
currency of the hedged net investment and the Company’s functional currency, all changes in fair value of the derivative are reported in the cumulative translation adjustment accounts, net of tax within accumulated other comprehensive income (loss) in the Company's condensed consolidated balance sheets.

The amounts recorded in accumulated other comprehensive income (loss) will be reclassified to earnings only upon the sale or liquidation of the Company’s investment in one of its international subsidiaries or on maturity of the underlying agreements.

The following table summarizes the gross fair values and location of the derivative instruments within Company's condensed consolidated balance sheets (in millions):
April 3, 2021December 31, 2020
Other Current AssetsAccrued Expenses and Other LiabilitiesOther Current AssetsAccrued Expenses and Other Liabilities
Interest rate swaps$ $4.0 $ $6.5 
Net investment hedge0.7   2.8 
Total$0.7 $4.0 $ $9.3 

The following tables present the effects of derivative instruments by contract type in accumulated other comprehensive income in the Company's condensed consolidated statements of operations and comprehensive income (loss) (in millions):

Unrealized Gain (Loss) Recognized in AOCIGain (Loss) Reclassified From AOCI to EarningsLocation of Gain (loss) Reclassified from AOCI into Earnings
April 3, 2021March 28, 2020April 3, 2021March 28, 2020
Interest rate swaps$1.8 $(7.0)$2.1 $ Interest Expense
Net investment hedge2.5 1.6   N/A
Total$4.3 $(5.4)$2.1 $ 


9. 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.

The Company’s interest rate swaps and the net investment hedge are measured in the financial statements at fair value on a recurring basis. Please refer to Footnote 8 for fair value disclosures. The fair values of the interest rate swaps are estimated using industry standard valuation models using market-based observable inputs, including interest rate curves. The fair value of the net investment hedge is estimated using readily observable market inputs, such as quotations on forward foreign exchange points and foreign interest rates. 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 the net investment hedge are categorized as Level 2.

As of April 3, 2021, the Company’s long-term debt instruments with a carrying value of $997.2 million (excludes capital leases) had a fair value of approximately $996.9 million. As of December 31, 2020, the Company’s long-term debt instruments with a carrying value of $1,313.0 million had a fair value of approximately $1,304.6 million. The estimated fair value of the long-term 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 revolving credit facility approximates its carrying value due to its short term nature.

10

Hayward Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
10. Segments and Related Information

The Company's operational and management structure is aligned to its key geographies and go-to market strategy resulting in two reportable segments: North America and Europe & Rest of World. Operating segments have not been aggregated to form the reportable segments. The Company determined its reportable segments based on how the Company's Chief Operating Decision Maker ("CODM") reviews the Company’s operating results in assessing performance and allocating resources. The CODM reviews net sales, gross profit and segment income for each of the reportable segments. Gross profit is defined as net sales less cost of sales incurred by the segment. The CODM does not evaluate reportable segments using asset information as these are managed on an enterprise wide basis. Segment income is defined as segment gross profit less sales, general, and administrative expenses ("SG&A") and research, development, and engineering ("RD&E").

The North America segment manufactures and sells residential and commercial swimming pool equipment and supplies as well as equipment that controls the flow of fluids. This segment is composed of three reporting units.

The Europe & Rest of World segment manufactures and sells residential and commercial swimming pool equipment and supplies. This segment is composed of two reporting units.

The Company sells its products primarily through distributors and retailers. Financial information by reportable segment, net of intercompany transactions, is included in the following summary (in millions):

Three Months Ended April 3, 2021Three Months Ended March 28, 2020
North AmericaEurope & Rest of WorldTotalNorth AmericaEurope & Rest of WorldTotal
Net sales$271.5 $62.9 $334.4 $132.4 $37.8 $170.2 
Gross profit$134.7 $25.2 $159.9 $61.1 $14.4 $75.5 
Segment income$85.8 $14.9 $100.7 $22.6 $5.6 $28.2 
Capital expenditures$4.7 $0.1 $4.8 $3.7 $0.2 $3.9 
Depreciation$4.3 $0.4 $4.7 $4.1 $0.3 $4.4 

The following table presents a reconciliation of segment income to income (loss) from operations before income taxes (in millions):

Three Months Ended
April 3, 2021March 28, 2020
Total segment income$100.7 $28.2 
Corporate expense, net12.1 0.6 
Acquisition and restructuring related expense 5.5 
Amortization of intangible assets8.8 9.5 
Operating income79.8 12.6 
Interest expense, net18.3 19.6 
Loss on extinguishment of debt5.8  
Other expense, net3.6 6.4 
Total other expense27.7 26.0 
Income (loss) from operations before income taxes$52.1 $(13.4)

11

Hayward Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
11. Earnings Per Share

The following table sets forth the computation of basic and diluted net income (loss) per share attributable to common stockholders (in millions, except share and per share amounts):
Three months ended
April 3, 2021March 28, 2020
Net income (loss)$36.9 $(10.4)
Deemed Dividend - Class A stock redemption (a)
(85.5) 
Dividends paid to Class C stockholders(0.2)(0.2)
Net income (loss) attributable to common stockholders, basic(48.8)(10.6)
Dilutive net income (loss) adjustments  
Net income (loss) attributable to common stockholders, diluted$(48.8)$(10.6)
Weighted average number of common shares outstanding, basic57,377,822 1,204,555 
Earnings per share attributable to common stockholders, basic$(0.85)$(8.80)
Earnings per share attributable to common shareholders, diluted$(0.85)$(8.80)
Excluded potential common shares (b)
8,636,942 7,119,041 
(a) represents the beneficial conversion feature related to the redemption of Class A shares for common shares as a consequence of the IPO
(b) excluded from the computation of diluted EPS as the inclusion of such shares would have been anti-dilutive

Net income (loss) attributable to common stockholders, used as the numerator in our EPS computation, was reduced by a non-cash charge due to a beneficial conversion feature related to the redemption of Class A shares for common shares. Such non-cash charge is treated as a deemed dividend. It is a one-time accounting reclassification within the condensed consolidated statements of changes in redeemable stock and stockholders' equity and does not have any current or future income statement impact.

12. Commitments and Contingencies

Litigation

The Company is involved in litigation arising in the normal course of business. 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. Although the Company can give no assurances about the resolution of pending claims, litigation or other disputes and the effect such outcomes may have on the Company, in the opinion of management, it is remote that such litigation will have a material adverse effect on the financial position, results of operations or cash flows of the Company.

Pentair Litigation

The Company is presently a defendant in a set of consolidated patent infringement actions brought by Pentair Water Pool and
Spa, Inc. and Danfoss Drives A/S(Civil Nos. 5:11-cv-459-D and 5:12-cv-251-D), pending in the United States District Court for the Eastern District of North Carolina. Collectively, the plaintiffs in these actions have asserted that certain of our variable speed pump and controller products infringe claims in seven United States patents: U.S. Patent Nos. 7,854,597; 7,815,420; 7,857,600;
7,686,587; 7,704,051; 8,019,479; and 8,043,070. The Company initiated related USPTO proceedings against certain of the asserted patents, including inter partes reexamination nos. 95/002005, 95/002006, 95/002007, and 95/002008 and inter partes review nos. IPR2013-00285 and IPR2013-00287. The Company has also raised non-infringement and invalidity defenses against each of the patents asserted against us in the district court actions, which are currently stayed. Additionally, the Company is aware of patents related to the asserted patents, including continuing, foreign and/or other related issued patents and pending patent applications, that could be asserted against us in the future. If defenses raised by the Company are not upheld, or if Pentair and/or Danfoss were to prevail in these proceedings and/or otherwise, then we may owe money damages and/or be subject to an injunction for any unexpired patent that would require the cessation of any infringing activity, which could have a negative impact on our supply chain or other business, including the ability of us, our vendor(s), and/or our customer(s) to make, use, sell, offer for sale and/or import variable speed drives or pumps, and/or the automation controllers therefor, any of which including the component(s), feature(s) and/or functionalit(ies) accused of infringement.

12

Hayward Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
13. Stockholders’ Equity

Prior to the Reclassification, the outstanding capital stock of the Company consisted of three classes of stock: Class A stock, par value of $0.001 per share of which 1,500,000 shares were authorized; Class B common stock par value of $0.001 per share of which 150,000 shares were authorized; and Class C stock, par value $0.001 per share of which 100 shares were authorized.

In October 2020, the Board of Directors approved a distribution of $275.0 million, or $316.16 per share of Class A stock of the Company.

On March 2, 2021 the Company filed a Certificate of Amendment of Amended and Restated Certificate Incorporation pursuant to which all shares of Class B common stock were reclassified into an equal number of fully paid and non-assessable Common Stock and the Company then effected a 195-for-1 split of its Common Stock. The outstanding capital stock of the Company now consists of a single class of Common Stock.

Prior to the IPO, each share of Class A stock was converted into a number of shares of Common Stock equal to 237.57 which is the sum of 195.00 plus the quotient of 42.57 obtained by dividing the then outstanding preference amount of 683.84 for such share by the IPO offering price of 17.00, net of any underwriting discount or a net conversion factor of 16.07.

Prior to the IPO all 100 shares of Class C stock were redeemed for $100 dollars in total.

On March 16, 2021, the Company filed its Second Restated Certificate of Incorporation.

Preferred Stock

As of April 3, 2021, the Company’s Second Restated Certificate of Incorporation authorized 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

As of April 3, 2021, the Company’s Second Restated Certificate of Incorporation authorized 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. Through April 3, 2021, no dividends had been declared or paid.


13

Hayward Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
14. Stock-based Compensation


The Company has established two equity incentive plans as described below.

The total stock-based compensation for the three months ended April 3, 2021 and the three months ended March 28, 2020 was $10.6 million and $0.7 million, respectively.

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 April 3, 2021 there were 12,361,929 shares available for future issuance under the 2021 Plan.

Options granted under the 2021 Plan expire no later than 10 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.

2021 Options
Intrinsic value in millions
Number of SharesWeighted-Average Exercise PriceWeighted-Average Remaining Contractual Life (years)Aggregate Intrinsic Value
Outstanding as of January 1, 2021$ $ 
Granted1,219,028$17.00 $ 
Exercised$ $ 
Forfeited$ $ 
Outstanding as of April 3, 20211,219,028$17.00 9.95$ 
Options exercisable as of April 3, 2021$ $ 
Options expected to vest as of April 3, 20211,219,028$17.00 9.95$ 

April 3, 2021
The weighted average grant date fair value of options granted in 2021 was
$6.30 
At April 3, 2021, the total unrecognized compensation cost (in millions) related to stock options was$7.5 
Total compensation expense (in millions) recognized for the three months ended April 3, 2021 was$0.15 
This unrecognized compensation cost is expected to be recognized over a weighted average period of2.94 years
The closing price of our common stock on April 3, 2021 was$16.95 

There were no exercises or vesting of these options in the three months ended April 3, 2021.

The Company determined the fair value of these stock options at the date of grant using the Black-Scholes option-pricing model. The principal assumptions used in the Black-Scholes option-pricing model for these stock options granted were as follows:

April 3, 2021
Risk-free interest rate1.08 %
Expected life6 years
Expected dividend yield %
Expected volatility37.00 %

14

Hayward Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
2021 Restricted Stock Units
Number of SharesWeighted Average Grant Date Fair Value
Outstanding as of January 1, 2021
Granted156,543$17.00 
Redeemed
Outstanding as of April 3, 2021156,543$17.00 
April 3, 2021
Total compensation expense (in millions) recognized for the three months ended April 3, 2021 was$0.08 
Number of years that expense related to these restricted stock unit will be recognized 2.9 years
As of April 3, 2021, the total unrecognized compensation cost (in millions) related to these Restricted Stock Units was$2.6 

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 10 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. All performance-vesting conditions were satisfied on March 26, 2021 following our IPO on March 12, 2021 and subsequent stock price performance.

For presentation purposes in this document we have recast the figures reported as of December 31, 2020 to recognize the 195-for-1 stock split that occurred on March 2, 2021 as if it had been effective on January 1, 2021.

As of April 3, 2021 there were 7,224,906 outstanding options and 1,505,751 outstanding restricted stock awards under the 2017 Plan. No future awards will be made under the 2017 Plan following our 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 will be available for future awards under the 2021 Plan (as described above).

Time-Based Stock Options

The following table summarizes activity for time-based stock option under the 2017 Plan:

Intrinsic value in millionsNumber of SharesWeighted-Average Exercise PriceWeighted-Average Remaining Contractual Life (years)Aggregate Intrinsic Value
Outstanding as of January 1, 20216,770,400 $1.08 7.50$16.17 
Granted 524,063 $3.61 9.79
Exercised(42,647)0.50 — 
Forfeited(26,910)$1.80 — 
Outstanding as April 3, 20217,224,906 $1.26 8.00$15.69 
Options exercisable as of April 3, 20212,394,678$0.88 7.41
Options expected to vest as of April 3, 20214,830,228 $1.46 8.29

Number of SharesWeighted-Average Grant-Date Fair Value
Options granted during the three months ended April 3, 2021524,063 $2.14 
Options vested during the three months ended April 3, 2021100,718 $1.40 
Options forfeited during the three months ended April 3, 202126,910$1.13 
15

Hayward Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)

At April 3, 2021, the total unrecognized compensation cost related to time-based stock options was $5.6 million. This cost is expected to be recognized over a weighted average period of 3.20 years.

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 principal assumptions used in the Black-Scholes option-pricing model for these stock options granted were as follows:
April 3, 2021March 28, 2020
Risk-free interest rate1.08 %0.13 %
Expected life (years)6.01.5
Expected dividend yield % %
Expected volatility37.00 %58.00 %

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 a comparable public company’s historical volatility.

Market and Performance Condition Stock Options

The following table summarizes activity for stock options with market and performance conditions under our 2017 Plan:


Intrinsic value in millionsNumber of SharesWeighted-Average Exercise PriceWeighted-Average Remaining Contractual Life (years)Aggregate Intrinsic Value
Outstanding as of January 1, 20216,479,655 $1.05 7.69$16.17 
Granted 524,063 $3.61 9.79
Forfeited(26,910)$1.80 — 
Outstanding as of April 3, 20216,976,808 $1.24 7.91$15.71 
Options exercisable as of April 3, 20216,976,808  7.91

The performance criteria was met on March 26, 2021.
Number of SharesWeighted-Average
Grant-Date Fair Value
Options granted during the three months ended April 3, 2021
524,063 $2.07 
Options forfeited during the three months ended April 3, 2021
26,910 $1.13 


As of April 3, 2021, there was no unrecognized compensation costs related to performance-based stock options.

The Company determined the fair value of these performance-based stock options at the date of grant using the Black-Scholes option pricing model. The principal assumptions used in the Black-Scholes option-pricing model for these stock options granted were as follows:
April 3, 2021March 28, 2020
Risk-free interest rate1.08 %0.13 %
Expected life (years)1.51.5
Expected dividend yield %