Significant Accounting Policies | Significant Accounting Policies Principles of Consolidation 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. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Significant items subject to estimates and assumptions include the valuation of allowances for receivables, inventories, the carrying value of goodwill and other intangible assets, fair value measurements, derivative financial instruments, revenue recognition, income taxes, stock-based compensation, self-insurance and warranty obligations and the fair value of acquired assets and liabilities. Actual results may differ significantly from those estimates. Cash and Cash Equivalents Cash equivalents primarily consist of cash on deposit with banks and liquid investments in next day, AAA rated money market, government securities, and treasury funds with an original term of three months or less at date of purchase. The Company’s cash and cash equivalent balances deposited at financial institutions may at times exceed federally insured limits. The Company does not believe that its cash balances are subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships. Periodically throughout the period, the Company’s cash balance exceeded the amount insured by the Federal Deposit Insurance Corporation (“FDIC”). The Company sweeps available cash on hand daily either to reduce any revolver balance outstanding or deposit in an interest bearing account. In the event the Company receives a remittance via wire transmission after the sweep deadline, the cash will remain as on-hand overnight and may, from time to time, exceed the amount insured by the FDIC. In addition, the Company maintains cash balances at banking institutions in Australia, China, Canada, France, and Spain, which are not protected by FDIC insurance. We mitigate potential cash risk by maintaining bank accounts with credit worthy financial institutions. The following table provides supplemental cash flow information and a reconciliation of cash and cash equivalents and restricted cash to amounts reported within the consolidated balance sheets and consolidated statements of cash flows (in thousands): December 31, 2021 2020 Cash and cash equivalents $ 265,796 $ 114,864 Restricted cash (a) — 430 Total $ 265,796 $ 115,294 (a) Included in Other current assets Accounts Receivable, Net Accounts receivable is presented net of an allowance for doubtful accounts. The Company’s allowance for doubtful accounts is an estimate of current expected credit losses that is determined based on a variety of factors that affect the potential collectability of related receivables, including customer history, customer credit ratings, financial stability of customers, specific one-time events and overall economic environment. Activity in the Company’s allowance for doubtful accounts is as follows (in thousands): Balance at beginning of Period Charges (Recoveries) to Costs and Expenses Additions (Deductions) Balance at End of Period 2019 $ 1,450 $ 167 $ (51) $ 1,566 2020 1,566 (287) 80 1,359 2021 1,359 724 (80) 2,003 Inventories Inventories are stated at the lower of cost or net realizable value, net of obsolescence reserves on a first-in, first-out (“FIFO”) basis. Effective November 30, 2020, the Company changed its inventory cost method to FIFO for all U.S. inventories previously carried at last-in, first-out (“LIFO”) basis. Management determined that this change in accounting principle is preferable because the FIFO method improves comparability of the Company’s operating results with its industry peers and provides an increased level of consistency in the measurement of inventories in the Company’s consolidated financial statements. All international inventories were previously, and continue to be, measured using FIFO. The effects of the change in accounting principle from LIFO to FIFO were retrospectively applied to all prior periods presented. The impact of the change was not material. Property, Plant, and Equipment Property, plant and equipment is recorded at cost and depreciated using the straight-line method of depreciation based upon the following estimated useful lives: • Buildings and improvements—10 to 40 years • Machinery, tools and equipment—3 to 20 years Repairs and maintenance are charged to expense as incurred. Upon disposition, the asset and corresponding accumulated depreciation are removed from the related accounts and any gains or losses are reflected in operating income. The Company reviews the recoverability of long-lived assets to be held and used when events or changes in circumstances occur that indicate the carrying value of the asset or asset group may not be recoverable. The assessment of possible impairment is based on its ability to recover the carrying value of the asset or asset group from the expected undiscounted future pre-tax cash flows of the related operations. If these cash flows are less than the carrying value of such asset or asset group, an impairment loss is recognized for the difference between estimated fair value and carrying value. The measurement of impairment requires the Company to estimate future cash flows and the fair value of long-lived assets. The Company recorded no significant long-lived asset impairment charges for property, plant, and equipment for the years ended December 31, 2021 and 2020. Goodwill and Intangible Assets The purchase price in excess of net assets of businesses acquired is classified as goodwill in the accompanying consolidated balance sheets. The Company tests goodwill at the reporting unit level, which is defined as an operating segment or one level below an operating segment that constitutes a business for which financial information is available and is regularly reviewed by the Chief Operating Decision Maker (“CODM”). The Company determined that it has 5 reporting units for this purpose. The Company tests for impairment at least annually or if there is an indication that goodwill may be impaired. The Company has the option to first complete a qualitative assessment (i.e., “Step 0”) to determine whether it is more likely than not that the fair value of the business is less than its carrying amount. If the Company determines that this is the case, it is required to perform the currently prescribed quantitative impairment test to identify potential goodwill impairment and measure the amount of goodwill impairment loss to be charged for that reporting unit, if any. Under the quantitative assessment, the Company compares the carrying value of goodwill at a reporting unit level to an estimate of the fair value of the respective reporting unit. Fair value of the reporting unit is estimated using a discounted six-year projected cash flow analyses and a terminal value calculation at the end of the six-year period. If the fair value of the reporting unit exceeds its carrying value, the goodwill associated with the reporting unit is not impaired. If the carrying value of the reporting unit exceeds its fair value, an impairment loss is recognized for the amount by which the reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. For the years ended December 31, 2021 and 2020, the Company completed its annual qualitative impairment analysis of goodwill for each of its reporting units at November 30, 2021 and 2020, respectively. The results of the qualitative assessments indicated that it was not more likely than not that the fair values of the reporting units were less than the carrying values. Intangible assets with indefinite lives (i.e., trademarks) are not amortized; rather, they are tested for impairment whenever events or circumstances exist that would make it more likely than not that an impairment exists. The Company first assesses qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired. If adverse qualitative trends are identified that could negatively impact the fair value of the asset, then quantitative impairment tests are performed to compare the carrying value of the asset to its undiscounted expected future cash flows. If this test indicates that there is impairment, the impaired asset is written down to fair value. For the years ended December 31, 2021 and 2020, the Company completed its annual qualitative impairment analysis of indefinite-lived intangible assets at November 30, 2021 and 2020, respectively. The results of the qualitative assessments indicated that it was not more likely than not that the fair values of the indefinite-lived intangible assets were less than the carrying values. Intangible assets with finite lives are amortized based on the estimated useful life of the intangible asset using a method that reflects the pattern in which the economic benefits of the intangible assets are consumed or otherwise used, or, if that pattern cannot be reliably determined using a straight-line amortization method. In the fourth quarter of 2021, the Company discontinued a product line related to an early-stage product business acquired in 2018. As part of the product line discontinuance, the Company reviewed the recoverability of certain definite-lived intangible assets associated with this product line. The assessment of possible impairment was based on the Company’s ability to recover the carrying value of the assets from the expected undiscounted future pre-tax cash flows of the related operations. As a result of the impairment assessment, the Company determined that the cash flows were less than the carrying value of the assets, and an impairment loss of $6.3 million was recognized for the difference between estimated fair value and carrying value. Fair Value Measurements The Company measures certain of its assets and liabilities at fair value, which is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants, in either the principal market or the most advantageous market. The principal market is the market with the greatest level of activity and volume for the asset or liability. The common framework for measuring fair value utilizes a three-level hierarchy to prioritize the inputs used in the valuation techniques to derive fair values. The basis for fair value measurements for each level within the hierarchy is described below with Level 1 having the highest priority and Level 3 having the lowest. Level 1 Quoted prices in active markets for identical assets or liabilities. Level 2 Quoted prices in active markets for similar assets or liabilities; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable in active markets. Level 3 Valuations derived from valuation techniques in which one or more significant inputs are unobservable. Derivatives The Company manages its economic and transaction exposure to certain risks through the use of foreign currency derivative instruments and interest rate swaps. The Company’s objective in holding derivatives is to reduce the volatility of net earnings, cash flows and net asset value associated with changes in foreign currency exchange rates and interest rates. The Company does not hold derivative instruments for trading or speculative purposes. In accordance with Accounting Standards Codification (“ASC”) Topic 815, Derivatives and Hedging, the Company records all derivative instruments on its consolidated balance sheet at fair value and evaluates hedge effectiveness prospectively and retrospectively when electing to apply hedge accounting. The Company formally documents all hedging relationships at inception for derivative hedges and the underlying hedged items, as well as the risk management objectives and strategies for undertaking the hedge transaction. The Company operates in multiple functional currencies. For foreign currency exposures, derivatives are used to limit the effects of foreign exchange rate fluctuations on financial results. In the normal course of business, the Company is exposed to the impact of interest rate changes and foreign currency fluctuations. The Company limits its exposure to these risks by following established risk management policies and procedures, including the use of derivatives. For interest rate exposures, derivatives are used to manage the related cost of debt. As a result of the use of derivative instruments, the Company is exposed to the risk that counterparties to derivative contracts will fail to meet their contractual obligations. To mitigate the counterparty credit risk, the Company has a policy of only entering into contracts with carefully selected AAA rated money market investments. Changes in the fair value of derivative instruments designated as “cash flow” hedges, to the extent the hedges are highly effective, are recorded in other comprehensive loss, net of tax effects. Ineffective portions of cash flow hedges, if any, are recognized in current period income. Other comprehensive income or loss is reclassified into current period income when the hedged transaction affects earnings. Changes in the fair value of derivative instruments designated as “fair value” hedges, along with corresponding changes in the fair values of the hedged assets or liabilities, are recorded in current period income. Ineffective portions of fair value hedges are recognized in current period income. Changes in the fair value and realized gains or losses of derivative instruments designated as “net investment hedges” are recorded in cumulative translation adjustment until the hedged net investment is sold or liquidated. Redeemable Stock The Company accounts for its common stock subject to possible redemption in accordance with the guidance in ASC Topic 480, Distinguishing Liabilities from Equity. Conditionally redeemable stock (including stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. The Company’s Class A stock included conversion features triggered upon an initial public offering and did not meet the definition of permanent equity. The Company’s Class C stock featured certain redemption rights that were considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, stock subject to possible redemption is presented outside of the stockholders’ equity section of the Company’s consolidated balance sheet. The Company’s Class A and Class C stock were redeemed in connection with the IPO and no longer exist as of December 31, 2021. Revenue Recognition Revenue is recognized by the Company, net of sales taxes, when goods or services obligated in a contract with a customer have been transferred, and no further performance obligation on such transfer is required, in an amount that reflects the consideration expected to be received. For the sale of the Company’s products, revenue is typically recognized upon shipment. Customers are offered volume discounts and other promotional benefits. The Company estimates volume discounts, promotional benefits, and returns based upon the terms of the customer contracts and actual historical experience and records such amounts as a reduction of gross sales with an offsetting adjustment to accounts receivable. The Company regularly monitors the adequacy of these offsets by comparing to actual results. The Company considers shipping and handling activities as a fulfillment activity. Net sales include outbound shipping and handling charges billed to customers. Cost of sales includes all costs incurred in connection with inbound and outbound shipping and handling. Income Taxes The Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes. Under ASC Topic 740, deferred tax assets and deferred tax liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted rates in effect for the year in which the differences are expected to reverse. A valuation allowance is recorded if it is more likely than not that a deferred tax asset will not be realized. The Company follows the guidance in ASC Topic 740-10 in assessing uncertain tax positions. The standard applies to all tax positions and clarifies the recognition of tax benefits in the financial statements by providing for a two-step approach of recognition and measurement. The first step involves assessing whether the tax position is more-likely-than-not to be sustained upon examination based upon its technical merits. The second step involves measurement of the amount to be recognized. Tax positions that meet the more-likely-than-not threshold are measured at the amount of tax benefit that is greater than 50% likely of being realized upon ultimate agreement with the taxing authority. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences impact income tax expense in the period in which such determination is made. Interest and penalties, if any, related to accrued liabilities for potential tax assessments are included in income tax expense. See Note 8 . Income Taxes. The Company’s policy is to record estimated interest and penalties related to uncertain tax positions in income tax expense of which there was no expense for the years ended December 31, 2021 and 2020. Concentration of Credit Risks One customer, Pool Corporation, accounted for approximately 36% and 30% of consolidated sales for the years ended December 31, 2021 and 2020, respectively and represented 42% and 35% of total accounts receivable at December 31, 2021 and 2020, respectively. No other customer accounted for sales or accounts receivable of greater than 10% of the relative total amounts. The Company has adequate availability of suppliers. The loss of any one supplier would not have a long-term material effect on the Company’s operations. Research, Development, and Engineering The Company conducts research, development and engineering (“RD&E”) activities in its own facilities which consist primarily of the development of new products, enhanced product applications, improved manufacturing and packaging processes. Costs of RD&E are primarily expensed as incurred. RD&E costs applicable to the development of software used in Company products are expensed as incurred until the software is determined to be technologically feasible and the RD&E activities for the other related components of the product have been completed. Once the software is determined to be technologically feasible, costs incurred are capitalized and amortized over the expected life of the product. Advertising Costs Advertising costs are typically expensed as incurred; however, certain costs are deferred and included within other current assets on the Company’s consolidated balance sheets. These deferred costs are expensed as the events occur or as the materials are distributed. Advertising costs expensed were $7.2 million, $9.1 million, and $11.6 million for the years ended December 31, 2021, 2020, and 2019 respectively. Stock-Based Compensation The Company uses its common stock for various forms of share-based compensation arrangements entered into with its employees and directors. Share-based compensation arrangements are accounted for at fair value on the date of grant. The fair value of stock options is determined using a Black-Scholes valuation model. The fair value of other share-based awards is based on the valuation of the common stock on the date of grant. The fair value of time-based awards that are ultimately expected to vest is recognized as an expense on a straight-line basis over the requisite service period. The fair value of performance-based awards is recognized in the period the performance condition is probable of occurring. The Company recognizes forfeitures as they occur. Stock-based compensation costs are recorded in selling, general and administrative expenses in the consolidated statements of operations and comprehensive income. See Note 17 . Stock-based Compensation. Earnings per Share The two-class method is an earnings allocation formula that determines earnings per share (“EPS”) for common stock and participating securities, according to rights to dividends declared and participation rights in undistributed earnings. Under this method, net earnings is reduced by the amount of dividends declared in the current period for each class of common stockholders and participating security holders. The remaining earnings or “undistributed earnings” are allocated between the classes of common stock and participating securities to the extent that each security may share in earnings as if all of the earnings for the period had been distributed. Once calculated, the earnings per common share is computed by dividing the net earnings attributable to each class of common stockholders by the weighted average number of common shares outstanding during each year presented. Diluted earnings attributable to common stockholders per common share has been computed by dividing the net earnings attributable to common stockholders by the weighted average number of common shares outstanding plus the dilutive effect of options and restricted shares outstanding during the applicable periods computed using the more dilutive of the two- class method, if-converted method or treasury method. In cases where the Company has a net loss, no dilutive effect is shown as options and restricted stock become anti-dilutive, and basic and diluted EPS are computed in the same manner. The Company calculates basic earnings per share (“Basic EPS”) using the two-class method, which is required for the year-ended 2021 as the Company had multiple classes of common stock prior to the IPO. Under the two-class method, earnings for the period are allocated on a pro-rata basis to the Class A and common stockholders. The weighted-average number of Class A and common shares outstanding during the period is then used to calculate basic EPS for each class of shares. The Class C stock does not have substantive economic rights, including distribution upon liquidation, and is therefore not a participating security. As such, separate presentation of basic and diluted earnings per share of Class C stock under the two-class method has not been presented. Stock options and other potential common shares are included in the calculation of diluted earnings per share (“Diluted EPS”), since they are assumed to be exercised or converted, except when their effect would be anti- dilutive. Insurance The Company obtains standard corporate insurance policies with an insured position subject to retention (deductible) for risks including but not limited to fire, flood, cyber, directors and officers, business interruption, ocean cargo, workers’ compensation in the United States, automobile, property and casualty, general liability, and product liability. The Company offers employee medical benefits in the United States under a self funded plan combined with stop-loss coverage to limit its exposure to large claims. Insurance claims filed and claims incurred but not reported are accrued based upon estimates of the ultimate costs to be incurred using historical experience. Foreign Currency Translation The Company predominantly uses the U.S. dollar as its functional currency. The Company has international subsidiaries whose local currency has been determined to be their functional currency. For these subsidiaries, the assets and liabilities are translated using period-end exchange rates, and the revenues and expenses are translated at the average rates of exchange prevailing during the period. The adjustments resulting from translation are recorded separately in stockholders’ equity as a component of accumulated other comprehensive loss. The effect of exchange rate changes on intercompany transactions of a long term and permanent nature are credited or charged directly to a separate component of stockholders’ equity. Foreign currency transaction gains and losses, including the translation of monetary assets or liabilities denominated in a currency other than the functional currency, are reported in other income or expense. Acquisitions The Company accounts for business combinations by applying the acquisition method. The Company’s consolidated financial statements include the operating results of acquired entities from the respective dates of acquisition. The Company recognizes and measures the identifiable assets acquired, liabilities assumed, and any non-controlling interest as of the acquisition date at fair value. The excess, if any, of total consideration transferred in a business combination over the fair value of identifiable assets acquired, liabilities assumed, and any non-controlling interest is recognized as goodwill in the accompanying consolidated balance sheets. Costs incurred by the Company to effect a business combination other than costs related to the issuance of debt or equity securities are included in the accompanying consolidated statements of operations in the period the costs are incurred. See Note 19 for additional details regarding the Company’s acquisitions. Asset acquisitions are accounted for using a cost accumulation and allocation model and the cost of the acquisition is allocated to the assets acquired and liabilities assumed. In an acquisition of assets, acquisition-related costs are capitalized and goodwill is not assigned. Contingent consideration obligations incurred in connection with an asset acquisition are recorded when it is probable that they will occur and they can be reasonably estimated. Recently Adopted Accounting Standards Accounting for Leases In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02, Leases (“Topic 842” or the “new standard”), and issued subsequent amendments to the initial guidance thereafter. This ASU requires an entity to recognize a right-of-use (“ROU”) asset and lease liability for all leases with terms of more than 12 months. Recognition, measurement and presentation of expenses will depend on classification of the underlying lease as either finance or operating. The amendments also require certain quantitative and qualitative disclosures about leasing arrangements. Leases are classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement. The standard became effective for the Company on December 31, 2021 because the Company ceased to be an Emerging Growth Company ("EGC") under applicable rules of the Securities and Exchange Commission as of December 31, 2021, and the Company adopted the standard as of January 1, 2021. The Company’s lease liabilities are recognized at the applicable lease commencement date based on the present value of the lease payments required to be paid over the lease term. When the rate implicit in the lease is not readily determinable, we use the incremental borrowing rate to discount the lease payments to present value. The estimated incremental borrowing rate is derived from information available at the lease commencement date and factors in a hypothetical interest rate on a collateralized basis with similar terms, payments and economic environments. Our ROU assets are also recognized at the applicable lease commencement date. The ROU asset equals the carrying amount of the related lease liability, adjusted for any lease payments made prior to lease commencement, minus any lease incentives received, and any direct costs incurred by the lessee. Effective January 1, 2021, the Company adopted the new standard using the modified retrospective method at the adoption date. The new standard provides several optional practical expedients in transition. The Company elected the “package of practical expedients,” which permits it to not reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs. As a result, the Company is utilizing the historical lease classification. Financial positions for reporting periods beginning on or after January 1, 2021 are presented under the new guidance, while prior periods are not adjusted and continue to be reported in accordance with previous guidance. The Company did not elect the use-of-hindsight or the practical expedient pertaining to land easements; the latter not being applicable to it. The new standard also provides practical expedients for an entity’s ongoing accounting. The Company elected the short-term lease recognition exemption for all leases that qualify. For those leases that qualify, the Company will not recognize ROU assets or lease liabilities, and this includes not recognizing ROU assets or lease liabilities for existing short-term leases of those assets in transition. The Company also elected the practical expedient not to separate lease and non-lease components for all of its leases, which means all consideration that is fixed, or in-substance fixed, relating to the non-lease components will be captured as part of its lease components for balance sheet purposes. The impact upon adoption as of January 1, 2021 resulted in the initial recognition of lease liabilities based on the present value of the remaining minimum rental payments for existing operating leases of approximately $48.6 million and corresponding ROU assets of approximately $43.9 million on the consolidated balance sheets. The ROU assets are net of $4.7 million of liabilities for deferred rent and unamortized landlord lease incentives that were previously recorded as other non-current liabilities. See Note 15 . Leases. New Credit Loss Standard In June 2016, the FASB issued accounting standard ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments, that requires companies to utilize an impairment model (current expected credit loss, or CECL) for most financial assets measured at amortized cost and certain other financial instruments, which include, but are not limited to, trade and other receivables. This accounting standard replaced the incurred loss model under prior GAAP with a model that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to estimate those losses. Effective January 1, 2021, the Company adopted this standard. The adoption of this standard did not have a material impact on the consolidated financial statements. Simplifying the Accounting for Income Taxes In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes” (Topic 740) to simplify the accounting for income taxes. The standard’s amendments include changes in various subtopics of accounting for income taxes including, but not limited to, accounting for “hybrid” tax regimes, tax basis step-up in goodwill obtained in a transaction that is not a business combination, intraperiod tax allocation exception to incremental approach, ownership changes in investments, interim-period accounting for enacted changes in tax law, and year-to-date loss limitation in interim-period tax accounting. Effective January 1, 2021, the Company adopted this standard. The adoption of this standard did not have a material impact on the Company's consolidated financial statements. Simplifying the Test for Goodwill Impairment In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, to simplify the test for goodwill impairment. The standard eliminated the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge (commonly referred to as Step 2 under the previous guidance). Rather, the measurement of a goodwill impairment charge is based on the excess of a reporting unit’s carrying value over its fair value (Step 1 under the previous guidance). The impact of the new standard is dependent on the specific facts and circumstances of individual impairments, if any. The adoption of this guidance |