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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 October 1, 2022

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
hayw-20221001_g1.jpg
Hayward Holdings, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
1415 Vantage Park Drive
Suite 400
Charlotte, NC
(Address of Principal Executive
Office)
82-2060643
(I.R.S. Employer Identification No.)

28203
(Zip Code)
(704) 285-5445
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 every Interactive Data File required to be submitted 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 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  ☒

The registrant had outstanding 211,276,558 shares of common stock as of October 31, 2022.



SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q of Hayward Holdings, Inc. (“Holdings,” the “Company,” “we” or “us”) contains certain “forward-looking statements” as that term is defined under the Private Securities Litigation Reform Act of 1995. Such forward-looking statements relating to us 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.
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.
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 and manage disruptions to our global supply chain and the availability of raw materials, including as a result of the COVID-19 pandemic;
• 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, adverse weather conditions 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;
• our ability to realize anticipated cost savings from restructuring activities;
• 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, including risks associated with geopolitical conflict;
• 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;
• the impact of product manufacturing disruptions, including as a result of catastrophic and other events beyond our     businesses, including risks associated with geopolitical conflict;
• impacts on our business from the COVID-19 pandemic; and
• other factors set forth in the respective “Risk Factors” section of this Quarterly Report on Form 10-Q and of our Annual Report on Form 10-K for the year ended December 31, 2021.         
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
Page
Note 1 Nature of Operations and Organization
Note 2 Significant Accounting Policies
Note 3 Revenue
Note 4 Inventories
Note 5 Accrued Expenses and Other Liabilities
Note 6 Income Taxes
Note 7 Long-Term Debt
Note 8 Derivatives and Hedging Transactions
Note 9 Fair Value Measurements
Note 10 Segments and Related Information
Note 11 Earnings Per Share
Note 12 Commitments and Contingencies
Note 13 Leases
Note 14 Stockholders’ Equity
Note 15 Stock-based Compensation
Note 16 Acquisitions and Restructuring
Note 17 Related-Party Transactions
Note 18 Subsequent Events
ITEM 2.
Unregistered Sales of Equity Securities and Use of Proceeds
ITEM 6.



PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Hayward Holdings, Inc.
Unaudited Condensed Consolidated Balance Sheets
(Dollars in thousands, except per share data)
October 1, 2022December 31, 2021
Assets
Current assets
Cash and cash equivalents$72,907 $265,796 
Accounts receivable, net of allowances of $2,872 and $2,003, respectively
108,543 208,112 
Inventories, net313,379 233,449 
Prepaid expenses16,051 12,459 
Other current assets51,368 30,705 
Total current assets562,248 750,521 
Property, plant, and equipment, net of accumulated depreciation of $76,600 and $67,366, respectively
148,428 146,754 
Goodwill927,055 924,264 
Trademark736,000 736,000 
Customer relationships, net236,321 242,854 
Other intangibles, net108,983 103,192 
Other non-current assets111,363 74,885 
Total assets$2,830,398 $2,978,470 
Liabilities and Stockholders' Equity
Current liabilities
Current portion of the long-term debt$11,957 $12,155 
Accounts payable65,354 87,445 
Accrued expenses and other liabilities152,011 190,378 
Income taxes payable 13,886 
Total current liabilities229,322 303,864 
Long-term debt, net1,067,002 973,124 
Deferred tax liabilities, net266,290 262,378 
Other non-current liabilities71,523 69,591 
Total liabilities1,634,137 1,608,957 
Commitments and contingencies (Note 12)
Stockholders' equity
Preferred stock, $0.001 par value, 100,000,000 authorized, no shares issued or outstanding as of October 1, 2022 and December 31, 2021
  
Common stock $0.001 par value, 750,000,000 authorized; 239,942,927 issued and 211,276,558 outstanding at October 1, 2022; 238,432,216 issued and 233,056,799 outstanding at December 31, 2021
240 238 
Additional paid-in capital1,067,148 1,058,724 
Common stock in treasury; 28,666,369 and 5,375,417 at October 1, 2022 and December 31, 2021, respectively
(357,408)(14,066)
Retained earnings484,254 320,875 
Accumulated other comprehensive income2,027 3,742 
Total stockholders' equity1,196,261 1,369,513 
Total liabilities, redeemable stock, and stockholders' equity$2,830,398 $2,978,470 



See accompanying notes to the unaudited condensed consolidated financial statements.
1

Hayward Holdings, Inc.
Unaudited Condensed Consolidated Statements of Operations
(Dollars in thousands, except per share data)

Three Months Ended Nine Months Ended
October 1, 2022October 2, 2021October 1, 2022October 2, 2021
Net sales$245,267 $350,624 $1,055,169 $1,049,409 
Cost of sales137,483 188,170 567,626 559,033 
Gross profit107,784 162,454 487,543 490,376 
Selling, general, and administrative expense50,493 68,807 188,297 207,129 
Research, development, and engineering expense6,142 6,370 16,411 16,187 
Acquisition and restructuring related expense2,288 783 9,499 2,452 
Amortization of intangible assets8,521 8,700 23,828 26,162 
Operating income40,340 77,794 249,508 238,446 
Interest expense, net13,938 11,050 35,105 42,297 
Loss on debt extinguishment   9,418 
Other (income) expense, net(234)2,087 3,056 4,655 
Total other expense13,704 13,137 38,161 56,370 
Income from operations before income taxes26,636 64,657 211,347 182,076 
Provision for income taxes3,549 14,336 47,968 42,072 
Net income$23,087 $50,321 $163,379 $140,004 
Earnings per share
Basic$0.11 $0.22 $0.74 $0.24 
Diluted$0.10 $0.21 $0.70 $0.23 
Weighted average common shares outstanding
Basic212,905,429231,339,007 222,009,824 172,820,430 
Diluted222,006,615243,783,501 232,131,395 185,673,814 











See accompanying notes to the unaudited condensed consolidated financial statements.

2

Hayward Holdings, Inc.
Unaudited Condensed Consolidated Statements of Comprehensive Income
(In thousands)

Three Months Ended
October 1, 2022October 2, 2021
GrossTaxesNetGrossTaxesNet
Net income$23,087 $50,321 
Other comprehensive income (loss):
Foreign currency translation adjustments(15,589) (15,589)(5,312) (5,312)
Change in fair value of derivatives19,053 (4,763)14,290 1,599 (395)1,204 
Comprehensive income$21,788 $46,213 
Nine Months Ended
October 1, 2022October 2, 2021
GrossTaxesNetGrossTaxesNet
Net income$163,379 $140,004 
Other comprehensive income (loss):
Foreign currency translation adjustments(27,069) (27,069)(549)(763)(1,312)
Change in fair value of derivatives33,805 (8,451)25,354 6,524 (1,620)4,904 
Comprehensive income$161,664 $143,596 











See accompanying notes to the unaudited condensed consolidated financial statements.

3

Hayward Holdings, Inc.
Unaudited Condensed Consolidated Statements of Changes in Redeemable Stock and Stockholders' Equity
(Dollars in thousands)

Common StockAdditional Paid-in CapitalTreasury StockRetained EarningsAccumulated Other Comprehensive Income (Loss)Total Stockholders' Equity
SharesAmount
Balance as of December 31, 2021233,056,799 $238 $1,058,724 $(14,066)$320,875 $3,742 $1,369,513 
Net income— — — — 74,032 — 74,032 
Stock-based compensation— — 1,641 — — — 1,641 
Issuance of Common Stock for compensation plans403,158 1 427 — — — 428 
Repurchase of stock(4,080,000)— — (80,784)— — (80,784)
Treasury stock purchase for tax withholdings on stock exercises— — — (23)— — (23)
Other comprehensive income— — — — — 8,113 8,113 
Balance as of April 2, 2022229,379,957$239 $1,060,792 $(94,873)$394,907 $11,855 $1,372,920 
Net income— — — — 66,260 — 66,260 
Stock-based compensation— — 1,991 — — — 1,991 
Issuance of Common Stock for compensation plans748,247 1 1,330 — — — 1,331 
Repurchase of stock(14,441,118)— — (212,352)— — (212,352)
Other comprehensive income— — — — — (8,529)(8,529)
Balance as of July 2, 2022215,687,086$240 $1,064,113 $(307,225)$461,167 $3,326 $1,221,621 
Net income— — — — 23,087 — 23,087 
Stock-based compensation— — 2,155 — — — 2,155 
Issuance of Common Stock for compensation plans359,306 — 880 — — — 880 
Repurchase of stock(4,769,834)— — (50,183)— — (50,183)
Other comprehensive income— — — — — (1,299)(1,299)
Balance as of October 1, 2022211,276,558$240 $1,067,148 $(357,408)$484,254 $2,027 $1,196,261 


See accompanying notes to the unaudited condensed consolidated financial statements.

4

Hayward Holdings, Inc.
Unaudited Condensed Consolidated Statements of Changes in Redeemable Stock and Stockholders' Equity
(Dollars in thousands)
Redeemable
Class A and C Stock
Common StockAdditional Paid-in CapitalTreasury StockRetained EarningsAccumulated Other Comprehensive Income (Loss)Total Stockholders' Equity
SharesAmountSharesAmount
Balance as of December 31, 2020869,923 $594,500 2,772,900 $3 $10,297 $(3,686)$202,997 $(350)$209,261 
Net income— — — — — — 36,867 — 36,867 
Conversion to common stock upon IPO(869,923)(594,500)206,147,857 206 680,041 — (85,541)— 594,706 
Issuance of common stock— — 22,200,000 22 351,553 — — — 351,575 
Issuance of Class A stock186 — — — 221 — — — 221 
Stock-based compensation— — — — 10,634 — — — 10,634 
Cash distributions— — — — — — (41)— (41)
Repurchase of stock(186)— — — — (214)— — (214)
Other comprehensive income— — — — — — — 3,650 3,650 
Balance as of April 3, 2021 $ 231,120,757$231 $1,052,746 $(3,900)$154,282 $3,300 $1,206,659 
Net income— — — — — — 52,816 — 52,816 
Finalization for IPO conversion— — — — (397)— (264)— (661)
Stock-based compensation— — — — 1,900 — — — 1,900 
Repurchase of stock— — (19,500)— — (768)— — (768)
Other comprehensive income— — — — — — — 4,050 4,050 
Balance as of July 3, 2021 $ 231,101,257$231 $1,054,249 $(4,668)$206,834 $7,350 $1,263,996 
Net income— — — — — — 50,321 — 50,321 
Stock-based compensation— — — — 774 — — — 774 
Issuance of Common Stock for compensation plans— — 1,323,564 — 863 — — — 863 
Repurchase of stock— — (457,681)— — (9,548)— — (9,548)
Other comprehensive income— — — — — — — (4,108)(4,108)
Balance as of October 2, 2021 $ 231,967,140$231 $1,055,886 $(14,216)$257,155 $3,242 $1,302,298 

See accompanying notes to the unaudited condensed consolidated financial statements.

5

Hayward Holdings, Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
(In thousands)
Nine Months Ended
October 1, 2022October 2, 2021
Cash flows from operating activities
Net income$163,379 $140,004 
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation13,931 14,096 
Amortization of intangible assets28,437 30,903 
Amortization of deferred debt issuance fees2,312 2,771 
Stock-based compensation5,787 13,308 
Deferred income taxes(4,221)(3,014)
Allowance for bad debts869 584 
Loss on debt extinguishment 9,418 
Loss on disposal of property, plant and equipment5,550 3,743 
Changes in operating assets and liabilities
Accounts receivable96,874 (9,115)
Inventories(70,469)(66,027)
Other current and non-current assets(16,902)(10,699)
Accounts payable(24,472)9,671 
Accrued expenses and other liabilities(57,411)63,520 
Net cash provided by operating activities143,664 199,163 
Cash flows from investing activities
Purchases of property, plant, and equipment(23,533)(19,098)
Purchases of intangibles (818)
Acquisitions, net of cash acquired(61,337) 
Proceeds from sale of property, plant, and equipment4 25 
Proceeds from settlements of investment currency hedge 719 
Net cash used in investing activities(84,866)(19,172)
Cash flows from financing activities
Proceeds from issuance of common stock - Initial Public Offering 377,400 
Costs associated with Initial Public Offering (26,124)
Purchase of common stock for treasury(343,319)(10,530)
Cash paid for taxes from share withholdings(871)(10,174)
Proceeds from issuance of long-term debt 51,659 
Debt issuance costs (12,422)
Payments of long-term debt(7,500)(367,144)
Proceeds from revolving credit facility150,000 68,000 
Payments on revolving credit facility(50,000)(68,000)
Proceeds from issuance of short term debt8,119  
Payments of short term debt(2,849) 
Other, net473 522 
Net cash (used in) provided by financing activities(245,947)3,187 
Effect of exchange rate changes on cash and cash equivalents and restricted cash(5,740)(1,505)
Change in cash and cash equivalents and restricted cash(192,889)181,673 
Cash and cash equivalents and restricted cash, beginning of period265,796 115,294 
Cash and cash equivalents and restricted cash, end of period$72,907 $296,967 

See accompanying notes to the unaudited condensed consolidated financial statements.

6

Hayward Holdings, Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
(In thousands)
Supplemental disclosures of cash flow information
Cash paid-interest$32,725 $53,686 
Cash paid-income taxes93,503 39,242 
Equipment financed under finance leases1,603  

See accompanying notes to the unaudited condensed consolidated financial statements.

7

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



1. Nature of Operations and Organization
Hayward Holdings, Inc. (“Holdings,” the “Company,” “we” or “us”) is a global designer, manufacturer, and marketer of a broad portfolio of pool equipment and associated automation systems. The Company has nine manufacturing facilities worldwide, which are located in North Carolina, Tennessee, Rhode Island, Florida, California, Spain (three) and China, and other facilities in the United States, Canada, France and Australia. 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.
We establish actual interim closing dates using a fiscal calendar in which our fiscal quarters end on the Saturday closest to the calendar quarter end, with the exception of year-end which ends on December 31 of each fiscal year. The interim closing dates for the first, second and third quarters of 2022 are April 2, July 2, and October 1, compared to the respective April 3, July 3, and October 2, 2021 dates. We had one fewer working day in the nine months ended October 1, 2022 than in the respective 2021 period.

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 (“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, 2021. The results of operations for the three and nine months ended October 1, 2022 are not necessarily indicative of the results for any subsequent periods or the entire fiscal year ending December 31, 2022.
The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. Certain prior-period amounts have been reclassified for comparative purposes to conform to the current presentation.
Recent Accounting Pronouncements Not Yet Adopted
Reference Rate Reform
In March 2020, the Financial Accounting Standards Board (“FASB”) issued guidance that provides optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by the transition away from reference rates expected to be discontinued to alternative reference rates. The guidance was effective upon issuance and may be applied prospectively to contract modifications made and hedging relationships entered into on or before December 31, 2022. The Company is currently evaluating the potential effects of the adoption of this guidance and has begun to transition some debt instruments to an alternative reference rate (see Note 18. Subsequent Events).
Recently Adopted Accounting Standards
Accounting for Leases
In February 2016, the FASB issued ASU 2016-02, Leases (“Topic 842” or the “new standard”), and issued subsequent amendments to the initial guidance thereafter. 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 SEC as of December 31, 2021, and the Company retrospectively adopted the standard as of January 1, 2021. 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 right-of-use (“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 noncurrent liabilities. The adoption did not have a material impact on the unaudited condensed consolidated statements of operations and comprehensive income or unaudited condensed consolidated statements of cash flows.
8

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


3. Revenue
The following table disaggregates net sales between product groups and geographic regions, respectively (in thousands):
Three Months Ended Nine Months Ended
October 1, 2022October 2, 2021October 1, 2022October 2, 2021
Product groups
Residential pool$223,661 $330,898 $990,693 $990,977 
Commercial pool8,370 7,360 27,262 23,297 
Industrial flow control13,236 12,366 37,214 35,135 
Total$245,267 $350,624 $1,055,169 $1,049,409 
Geographic
United States$190,849 $261,223 $795,781 $748,726 
Canada12,825 37,013 96,269 114,550 
Europe18,674 32,726 100,062 137,642 
Rest of World22,919 19,662 63,057 48,491 
Total international revenue54,418 89,401 259,388 300,683 
Total$245,267 $350,624 $1,055,169 $1,049,409 

4. Inventories
Inventories, net, consist of the following (in thousands):
October 1, 2022December 31, 2021
Raw materials$134,413 $124,545 
Work in progress18,688 22,669 
Finished goods160,278 86,235 
Total$313,379 $233,449 

5. Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities consist of the following (in thousands):
October 1, 2022December 31, 2021
Selling, promotional and advertising$46,538 $41,975 
Employee compensation and benefits18,768 49,552 
Warranty reserve20,524 24,174 
Inventory purchases12,135 18,606 
Insurance reserve10,656 8,842 
Deferred income8,854 8,074 
Operating lease liability - short term8,980 7,546 
Business restructuring costs1,619 1,397 
Professional fees1,657 2,027 
Payroll taxes3,238 4,522 
Short-term notes payable5,270  
Other accrued liabilities13,772 23,663 
Total$152,011 $190,378 

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.
9

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


The following table summarizes the warranty reserve activities (in thousands):

Balance at December 31, 2021
$24,174 
Accrual for warranties issued during the period 9,413 
Payments(6,399)
Balance at April 2, 2022
27,188 
Accrual for warranties issued during the period 8,784 
Payments(9,053)
Balance at July 2, 2022
26,919 
Accrual for warranties issued during the period6,199 
Payments(12,594)
Balance at October 1, 2022
$20,524 

Balance at December 31, 2020
$16,412 
Accrual for warranties issued during the period 10,109 
Payments(4,644)
Balance at April 3, 2021
21,877 
Accrual for warranties issued during the period9,850 
Payments(7,030)
Balance at July 3, 2021
24,697 
Accrual for warranties issued during the period7,796 
Payments(8,825)
Balance at October 2, 2021
$23,668 

Warranty expenses for the three and nine months ended October 1, 2022 were $6.2 million and $24.4 million, respectively, and $7.8 million and $27.8 million, respectively, for the three and nine months ended October 2, 2021.

6. Income Taxes
The Company’s effective tax rate for the three months ended October 1, 2022 and three months ended October 2, 2021 was 13.3% and 22.2%, respectively. The change in the Company’s effective tax rate was primarily due to discrete items resulting from the revaluation of deferred tax liabilities as a result of state tax law changes and the tax benefit resulting from the exercise of stock options.
The Company’s effective tax rate for the nine months ended October 1, 2022 and nine months ended October 2, 2021 was 22.7% and 23.1%, respectively. The change in the Company’s effective tax rate was primarily due to discrete items resulting from the state tax law changes and the tax benefit resulting from the exercise of stock options. In addition, the Company's effective tax rate for the nine months ended October 2, 2021 included a benefit for the release of the valuation allowance on the deferred tax assets of the France subsidiary.
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 October 1, 2022 or October 2, 2021.
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,
10

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

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.

7. Long-Term Debt, Net
Long-term debt, net, consists of the following (in thousands):
October 1, 2022December 31, 2021
First Lien Term Facility, due May 28, 2028$987,500 $995,000 
ABL Revolving Credit Facility100,000  
Finance lease obligations7,050 7,780 
Subtotal1,094,550 1,002,780 
Less: Current portion of the long-term debt(11,957)(12,155)
Less: Unamortized debt issuance costs(15,591)(17,501)
Total$1,067,002 $