Initial Public OfferingBusiness Update
Market conditions continue to evolve. Macroeconomic uncertainty is affecting consumer spending and softening demand for consumer durables, resulting in declines in U.S. new in-ground pool installations in 2022. We anticipate further net sales declines in our in-ground swimming pool product line in 2023. We continue to see destocking of packaged pool inventory at the wholesale distribution-level, and we expect normalization of inventory levels to remain a headwind. We believe continued progress on fiberglass conversion efforts, especially from concrete, will be a modest tailwind as we continue to work to drive homeowner and dealer awareness and adoption. We continue to take a disciplined approach to capital investments, with the focus on the completion of previously announced projects. This includes the completion of our Kingston, Ontario facility as well as our acquired fiberglass manufacturing assets in Seminole, Oklahoma. The Kingston and Seminole facilities for production will give us the opportunity to reduce freight costs, tighten our lead times, and tap into large markets with strong fiberglass conversion opportunities.
We have responded to economic uncertainty with immediate actions to reduce our costs. On November 8, 2022, we approved a cost reduction plan to optimize our production and shift schedules, implement a workforce reduction, and streamline our cover and liner manufacturing footprint with the closure of our Bossier City, Louisiana facility in the first quarter of 2023.
During the year ended December 31, 2022, we recognized costs related to the plan totaling $1.1 million, comprised primarily of $1.0 million for severance and related costs and $0.1 million of fixed asset and facility related expenses. The remaining costs under the plan of approximately $0.5 million are expected to be incurred and recognized in 2023. We expect to generate annual operating expense savings of approximately $12.0 million in fiscal 2023 as a result of our cost reduction plan.
Leadership Transition
On April 27, 2021,January 19, 2023, we completedannounced that Robert L. Masson II will step down as our initial public offeringChief Financial Officer for family reasons, effective March 17, 2023. J. Mark Borseth, who previously served as Latham’s Chief Financial Officer from February 2020 to July 2022, rejoined Latham as a strategic advisor effective February 13, 2023. On March 18, 2023, Mr. Borseth will become the Interim Chief Financial Officer. A search for a permanent Chief Financial Officer is underway.
Share Repurchase Program
On May 10, 2022, we approved a stock repurchase program (the “IPO”“Repurchase Program”) in, which we sold 23,000,000authorized us to repurchase up to $100 million of our shares of common stock inclusiveover the next three years. We may effect these repurchases in open market transactions, privately negotiated purchases, or other acquisitions. We are not obligated to repurchase any of 3,000,000our outstanding shares sold by us pursuant tounder the full exerciseRepurchase Program and the timing and amount of any repurchases will depend on market conditions, our stock price, alternative uses of capital, the underwriters’ option to purchase additional shares. The aggregate net proceeds received by us from the IPO were $399.3 million, after deducting underwriting discounts and commissionsterms of our debt instruments, and other offering costs. We usedfactors. During the net proceeds to (i) pay down $152.7 million of the Amended Term Loan (as defined below) under the Credit Agreement (as defined below), (ii) repay the $16.0 million outstanding on the Revolving Credit Facility (as defined below), (iii) repurchase 12,264,438 shares of common stock from certain existing shareholders for $216.7 million and (iv) fund general corporate requirements, including working capital, for $13.9 million.
Contemporaneously with the pricing of the IPO, on April 22, 2021, we put in place our Omnibus Incentive Plan, pursuant to which we granted to certain of our employees restricted stock awards, restricted stock units and option awards (the “Omnibus Plan”).
Secondary Offering
On January 11,year ended December 31, 2022, we completed an offering of 13,800,000 shares of common stock, including the exercise in full by the underwriters of their option to purchase up to 1,800,000 additional shares of common stock, at a public offering price of $19.50 per share. All of the net proceeds from this offering were used to purchase 13,800,000repurchased and concurrently retired 4,483,620 shares of our common stock from certainfor an aggregate amount of our stockholders. In connection with the offering we incurred approximately $12.9$23.0 million, in expenses, including underwriter fees.
Reorganization
Priorpursuant to the closingRepurchase Program. As of the IPO,December 31, 2022, approximately $77.0 million remained available for share repurchases pursuant to our parent entity, Latham Investment Holdings, LP (“Parent”) merged with and into Latham Group, Inc., with Latham Group, Inc. surviving the merger (the “Reorganization”). The purpose of the Reorganization was to reorganize our structure so that our existing investors would own only common stock rather than limited partnership interests in our Parent. In connection with the Reorganization, 194,207,115 Class A units of our Parent (“Class A units”) were converted into 97,187,596 shares of our common stock and 26,158,894 Class B units of our Parent were converted into 4,145,987 shares of common stock and 8,340,126 shares of restricted stock. The Reorganization was accounted for as a transaction between entities under common control and retrospectively applied.
Stock Split
On April 13, 2021, our Board of Directors approved a 109,673.709-for-one stock split of our common stock, par value $0.0001. Accordingly, all share and per share data for all periods presented have been adjusted retroactively to reflect the impact of the amended certificate of incorporation and the stock split.
Charter Amendment
On April 13, 2021, our certificate of incorporation was amended, which amended and restated certain terms of the certificate of incorporation. Under the amended certificate of incorporation, we had the authority to issue 500,000,000 shares of common stock, par value $0.0001 per share.
On April 22, 2021, as part of the Reorganization, our certificate of incorporation was further amended and restated to, among other things, increase the authorized shares to 1,000,000,000, of which 900,000,000 are shares of common stock, par value $0.0001 per share and 100,000,000 are shares of preferred stock, par value 0.0001 per share.Repurchase Program.
Key Factors Affecting our Performance
Our results of operations and financial condition are affected by the following factors, which reflect our operating philosophy and focus on designing, manufacturing, and marketing high quality and innovative pools and pool covers for the in-ground swimming pool market.
