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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
☒ QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 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: 001-37935
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Acushnet Holdings Corp. |
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(Exact name of registrant as specified in its charter)
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Delaware |
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45-2644353 |
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(State or other jurisdiction of incorporation or
organization) |
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(I.R.S. Employer Identification No.) |
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333 Bridge Street |
Fairhaven, |
Massachusetts |
02719 |
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(Address of principal executive offices) |
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(Zip Code) |
(800) 225-8500
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Exchange
Act:
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Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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Common Stock - $0.001 par value per share |
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GOLF |
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New 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, a
smaller reporting company, or an emerging growth company. See the
definitions of “large accelerated filer,” “accelerated
filer,” “smaller reporting company,” and “emerging growth
company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer |
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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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 Exchange
Act). Yes ☐ No ☒
The registrant had 72,224,555 shares of common stock outstanding as
of April 29, 2022.
ACUSHNET HOLDINGS CORP.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2022
TABLE OF CONTENTS
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains “forward-looking
statements” within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), which are
subject to the “safe harbor” created by that section. These
forward-looking statements are included throughout this report,
including in the section entitled “Management’s Discussion and
Analysis of Financial Condition and Results of Operations,” and
relate to matters such as our industry, business strategy, goals
and expectations concerning our market position, future operations,
margins, profitability, capital expenditures, liquidity and capital
resources and other financial and operating information. The
forward-looking statements also reflect our current views with
respect to the impact of the novel coronavirus (“COVID-19”)
pandemic on our business, results of operations, financial position
and cash flows. We have used the words “anticipate,” “assume,”
“believe,” “continue,” “could,” “estimate,” “expect,” “intend,”
“may,” “plan,” “potential,” “predict,” “project,” “future,” “will,”
“seek,” “foreseeable” and similar terms and phrases to identify
forward-looking statements in this report, although not all
forward-looking statements use these identifying
words.
The forward-looking statements contained in this report are based
on management’s current expectations and are subject to uncertainty
and changes in circumstances. We cannot assure you that future
developments affecting us will be those that we have anticipated.
Actual results may differ materially from these expectations due to
changes in global, regional or local economic, business,
competitive, market, regulatory and other factors, many of which
are beyond our control. We believe that these factors
include:
•the
duration and impact of the COVID-19 pandemic, which may precipitate
or exacerbate one or more of the following risks and
uncertainties;
•a
reduction in the number of rounds of golf played or in the number
of golf participants;
•unfavorable
weather conditions may impact the number of playable days and
rounds played in a given year;
•consumer
spending habits and macroeconomic factors may affect the number of
rounds of golf played and related spending on golf
products;
•demographic
factors may affect the number of golf participants and related
spending on our products;
•changes
to the Rules of Golf with respect to equipment;
•a
significant disruption in the operations of our manufacturing,
assembly or distribution facilities;
•our
ability to procure raw materials or components of our
products;
•a
disruption in the operations of our suppliers;
•the
cost of raw materials and components;
•currency
transaction and translation risk;
•our
ability to successfully manage the frequent introduction of new
products or satisfy changing consumer preferences, quality and
regulatory standards;
•our
reliance on technical innovation and high-quality
products;
•our
ability to adequately enforce and protect our intellectual property
rights;
•involvement
in lawsuits to protect, defend or enforce our intellectual property
rights;
•our
ability to prevent infringement of intellectual property rights by
others;
•changes
to patent laws;
•intense
competition and our ability to maintain a competitive advantage in
each of our markets;
•limited
opportunities for future growth in sales of certain of our
products, including golf balls, golf shoes and golf
gloves;
•our
customers’ financial condition, their levels of business activity
and their ability to pay trade obligations;
•a
decrease in corporate spending on our custom logo golf
balls;
•our
ability to maintain and further develop our sales
channels;
•consolidation
of retailers or concentration of retail market share;
•our
ability to maintain and enhance our brands;
•seasonal
fluctuations of our business;
•fluctuations
of our business based on the timing of new product
introductions;
•risks
associated with doing business globally;
•compliance
with laws, regulations and policies, including the U.S. Foreign
Corrupt Practices Act or other applicable anti-corruption
legislation, as well as federal, state and local policies and
executive orders regarding the COVID-19 pandemic;
•our
ability to secure professional golfers to endorse or use our
products;
•negative
publicity relating to us or the golfers who use our products or the
golf industry in general;
•our
ability to accurately forecast demand for our
products;
•a
disruption in the service, or a significant increase in the cost,
of our primary delivery and shipping services or a significant
disruption at shipping ports;
•our
ability to maintain our information systems to adequately perform
their functions;
•cybersecurity
risks;
•our
ability to comply with data privacy and security laws;
•the
ability of our eCommerce systems to function
effectively;
•impairment
of goodwill and identifiable intangible assets;
•our
ability to attract and/or retain management and other key employees
and hire qualified management, technical and manufacturing
personnel;
•our
ability to prohibit sales of our products by unauthorized retailers
or distributors;
•our
ability to grow our presence in existing international markets and
expand into additional international markets;
•tax
uncertainties, including potential changes in tax laws,
unanticipated tax liabilities and limitations on utilization of tax
attributes after any change of control;
•adequate
levels of coverage of our insurance policies;
•product
liability, warranty and recall claims;
•litigation
and other regulatory proceedings;
•compliance
with environmental, health and safety laws and
regulations;
•our
ability to secure additional capital at all or on terms acceptable
to us and potential dilution of holders of our common
stock;
•lack
of assurance of positive returns on capital
investments;
•risks
associated with acquisitions and investments;
•our
estimates or judgments relating to our critical accounting
estimates;
•terrorist
activities and international political instability;
•occurrence
of natural disasters or pandemic diseases, including the COVID-19
pandemic;
•a
high degree of leverage, ability to service our indebtedness,
ability to incur more indebtedness and restrictions in the
agreements governing our indebtedness;
•our
use of derivative financial instruments;
•the
ability of our controlling shareholder to control significant
corporate activities, and that our controlling shareholder’s
interests may conflict with yours;
•our
status as a controlled company;
•the
market price of shares of our common stock;
•share
repurchase program execution and effects thereof;
•our
ability to maintain effective internal controls over financial
reporting;
•our
ability to pay dividends;
•our
status as a holding company;
•dilution
from future issuances or sales of our common stock;
•anti-takeover
provisions in our organizational documents and Delaware
law;
•reports
from securities analysts; and
•other
factors discussed under the heading "Risk Factors" in our most
recent Annual Report on Form 10-K and in any other reports we file
with the Securities and Exchange Commission (“SEC”), including this
Quarterly Report on Form 10-Q.
These factors should not be construed as exhaustive and should be
read in conjunction with the other cautionary statements that are
included in this report. Should one or more of these risks or
uncertainties materialize, or should any of our assumptions prove
incorrect, our actual results may vary in material respects from
those projected in these forward-looking statements.
Any forward-looking statement made by us in this report speaks only
as of the date of this report. Factors or events that could cause
our actual results to differ may emerge from time to time, and it
is not possible for us to predict all of them. We may not actually
achieve the plans, intentions or expectations disclosed in our
forward-looking statements and you should not place undue reliance
on our forward-looking statements. Our forward-looking statements
do not reflect the potential impact of any future acquisitions,
mergers, dispositions, joint ventures, investments or other
strategic transactions we may make. We undertake no obligation to
publicly update or review any forward-looking statement, whether as
a result of new information, future developments or otherwise,
except as may be required by any applicable securities
laws.
Website Disclosure
We use our website (www.acushnetholdingscorp.com) as a channel of
distribution of company information. The information we post
through this channel may be material. Accordingly, investors should
monitor this channel, in addition to following our press releases,
SEC filings and public conference calls and webcasts. In addition,
you may automatically receive e-mail alerts and other information
about Acushnet Holdings Corp. when you enroll your e-mail address
by visiting the “Resources” section of our website at
https://www.acushnetholdingscorp.com/investors/resources.
On our website, we post the following filings free of charge as
soon as reasonably practicable after they are electronically filed
with or furnished to the SEC: our annual reports on Form 10-K, our
proxy statements, our quarterly reports on Form 10-Q, our current
reports on Form 8-K, and any amendments to those reports filed or
furnished pursuant to Section 13(a) or 15(d) of the Exchange
Act.
The contents of our website are not, however, a part of this
report.
PART I. FINANCIAL
INFORMATION
ITEM 1. FINANCIAL
STATEMENTS
INDEX TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
|
|
|
|
|
|
|
|
Page(s) |
|
Unaudited Condensed Consolidated Financial Statements |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
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|
|
|
|
ACUSHNET HOLDINGS CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
December 31, |
|
(in thousands, except share and per share amounts) |
|
2022 |
|
2021 |
|
Assets |
|
|
|
|
|
Current assets |
|
|
|
|
|
Cash, cash equivalents and restricted cash ($14,549 and $15,612
attributable to the variable interest entity ("VIE"))
|
|
$ |
114,402 |
|
|
$ |
281,677 |
|
|
Accounts receivable, net |
|
377,252 |
|
|
174,435 |
|
|
Inventories ($18,691 and $19,385 attributable to the
VIE)
|
|
448,780 |
|
|
413,314 |
|
|
Prepaid and other assets |
|
114,508 |
|
|
99,750 |
|
|
Total current assets |
|
1,054,942 |
|
|
969,176 |
|
|
Property, plant and equipment, net ($10,339 and $10,466
attributable to the VIE)
|
|
230,006 |
|
|
231,761 |
|
|
Goodwill ($32,312 and $32,312 attributable to the VIE)
|
|
208,797 |
|
|
210,431 |
|
|
Intangible assets, net |
|
463,267 |
|
|
465,341 |
|
|
Deferred income taxes |
|
55,240 |
|
|
60,814 |
|
|
Other assets ($2,144 and $2,166 attributable to the
VIE)
|
|
73,551 |
|
|
68,313 |
|
|
Total assets |
|
$ |
2,085,803 |
|
|
$ |
2,005,836 |
|
|
Liabilities, Redeemable Noncontrolling Interest and Shareholders'
Equity |
|
|
|
|
|
Current liabilities |
|
|
|
|
|
Short-term debt |
|
$ |
97,318 |
|
|
$ |
116 |
|
|
Current portion of long-term debt |
|
17,500 |
|
|
17,500 |
|
|
Accounts payable ($13,670 and $13,275 attributable to the
VIE)
|
|
187,642 |
|
|
163,607 |
|
|
Accrued taxes |
|
72,819 |
|
|
57,307 |
|
|
Accrued compensation and benefits ($861 and $1,511 attributable to
the VIE)
|
|
56,553 |
|
|
113,453 |
|
|
Accrued expenses and other liabilities ($3,726 and $4,677
attributable to the VIE)
|
|
104,072 |
|
|
131,041 |
|
|
Total current liabilities |
|
535,904 |
|
|
483,024 |
|
|
Long-term debt |
|
293,280 |
|
|
297,354 |
|
|
Deferred income taxes |
|
4,986 |
|
|
4,950 |
|
|
Accrued pension and other postretirement benefits |
|
93,821 |
|
|
93,705 |
|
|
Other noncurrent liabilities ($2,222 and $2,218 attributable to the
VIE)
|
|
45,887 |
|
|
43,237 |
|
|
Total liabilities |
|
973,878 |
|
|
922,270 |
|
|
Commitments and contingencies (Note 15)
|
|
|
|
|
|
Redeemable noncontrolling interest |
|
3,229 |
|
|
3,299 |
|
|
Shareholders' equity |
|
|
|
|
|
Common stock, $0.001 par value, 500,000,000 shares authorized;
76,289,077 and 75,855,036 shares issued
|
|
76 |
|
|
76 |
|
|
Additional paid-in capital |
|
943,239 |
|
|
948,423 |
|
|
Accumulated other comprehensive loss, net of tax |
|
(104,527) |
|
|
(99,582) |
|
|
Retained earnings |
|
392,538 |
|
|
324,966 |
|
|
Treasury stock, at cost; 3,940,522 and 3,314,562 shares (including
537,839 of accrued share repurchases
as of December 31, 2021) (Note 10)
|
|
(160,933) |
|
|
(131,039) |
|
|
Total equity attributable to Acushnet Holdings Corp. |
|
1,070,393 |
|
|
1,042,844 |
|
|
Noncontrolling interests |
|
38,303 |
|
|
37,423 |
|
|
Total shareholders' equity |
|
1,108,696 |
|
|
1,080,267 |
|
|
Total liabilities, redeemable noncontrolling interest and
shareholders' equity |
|
$ |
2,085,803 |
|
|
$ |
2,005,836 |
|
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
ACUSHNET HOLDINGS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, |
|
(in thousands, except share and per share amounts) |
|
|
|
|
|
2022 |
|
2021 |
|
Net sales |
|
|
|
|
|
$ |
606,087 |
|
|
$ |
580,885 |
|
|
Cost of goods sold |
|
|
|
|
|
289,088 |
|
|
270,146 |
|
|
Gross profit |
|
|
|
|
|
316,999 |
|
|
310,739 |
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
|
|
|
195,691 |
|
|
176,369 |
|
|
Research and development |
|
|
|
|
|
13,976 |
|
|
12,329 |
|
|
Intangible amortization |
|
|
|
|
|
1,963 |
|
|
1,972 |
|
|
|
|
|
|
|
|
|
|
|
Income from operations |
|
|
|
|
|
105,369 |
|
|
120,069 |
|
|
Interest expense, net |
|
|
|
|
|
1,277 |
|
|
3,616 |
|
|
Other expense, net |
|
|
|
|
|
1,326 |
|
|
1,992 |
|
|
Income before income taxes |
|
|
|
|
|
102,766 |
|
|
114,461 |
|
|
Income tax expense |
|
|
|
|
|
20,919 |
|
|
27,834 |
|
|
Net income |
|
|
|
|
|
81,847 |
|
|
86,627 |
|
|
Less: Net income attributable to noncontrolling
interests |
|
|
|
|
|
(802) |
|
|
(1,669) |
|
|
Net income attributable to Acushnet Holdings Corp. |
|
|
|
|
|
$ |
81,045 |
|
|
$ |
84,958 |
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share attributable to Acushnet Holdings
Corp.: |
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
|
|
$ |
1.10 |
|
|
$ |
1.14 |
|
|
Diluted |
|
|
|
|
|
1.10 |
|
|
1.13 |
|
|
Weighted average number of common shares: |
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
|
|
73,513,109 |
|
|
74,778,189 |
|
|
Diluted |
|
|
|
|
|
73,922,728 |
|
|
75,255,312 |
|
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
ACUSHNET HOLDINGS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, |
|
(in thousands) |
|
|
|
|
2022 |
|
2021 |
|
Net income |
|
|
|
|
$ |
81,847 |
|
|
$ |
86,627 |
|
|
Other comprehensive loss: |
|
|
|
|
|
|
|
|
Foreign currency translation adjustments |
|
|
|
|
(7,570) |
|
|
(7,080) |
|
|
Cash flow derivative instruments: |
|
|
|
|
|
|
|
|
Unrealized holding gains arising during period |
|
|
|
|
3,076 |
|
|
4,367 |
|
|
Reclassification adjustments included in net income |
|
|
|
|
(1,355) |
|
|
563 |
|
|
Tax expense |
|
|
|
|
(516) |
|
|
(1,664) |
|
|
Cash flow derivative instruments, net |
|
|
|
|
1,205 |
|
|
3,266 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension and other postretirement benefits: |
|
|
|
|
|
|
|
|
Pension and other postretirement benefits adjustments |
|
|
|
|
1,863 |
|
|
2,575 |
|
|
Tax expense |
|
|
|
|
(443) |
|
|
(739) |
|
|
Pension and other postretirement benefits adjustments,
net |
|
|
|
|
1,420 |
|
|
1,836 |
|
|
Total other comprehensive loss |
|
|
|
|
(4,945) |
|
|
(1,978) |
|
|
Comprehensive income |
|
|
|
|
76,902 |
|
|
84,649 |
|
|
Less: Comprehensive income attributable to noncontrolling
interests |
|
|
|
|
(747) |
|
|
(1,529) |
|
|
Comprehensive income attributable to Acushnet Holdings
Corp. |
|
|
|
|
$ |
76,155 |
|
|
$ |
83,120 |
|
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
ACUSHNET HOLDINGS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, |
|
(in thousands) |
2022 |
|
2021 |
|
Cash flows from operating activities |
|
|
|
|
Net income |
$ |
81,847 |
|
|
$ |
86,627 |
|
|
Adjustments to reconcile net income to cash flows used in operating
activities |
|
|
|
|
Depreciation and amortization |
10,367 |
|
|
10,363 |
|
|
Unrealized foreign exchange loss (gain) |
1,433 |
|
|
(3,593) |
|
|
Amortization of debt issuance costs |
203 |
|
|
917 |
|
|
Share-based compensation |
5,353 |
|
|
5,533 |
|
|
(Gain) loss on disposals of property, plant and
equipment |
(1) |
|
|
155 |
|
|
Deferred income taxes |
4,341 |
|
|
10,265 |
|
|
Changes in operating assets and liabilities |
|
|
|
|
Accounts receivable |
(206,468) |
|
|
(190,019) |
|
|
Inventories |
(39,341) |
|
|
24,987 |
|
|
Accounts payable |
30,079 |
|
|
13,788 |
|
|
Accrued taxes |
17,464 |
|
|
15,039 |
|
|
|
|
|
|
Other assets and liabilities |
(69,325) |
|
|
(4,058) |
|
|
|
|
|
|
Cash flows used in operating activities |
(164,048) |
|
|
(29,996) |
|
|
Cash flows from investing activities |
|
|
|
|
Additions to property, plant and equipment |
(11,686) |
|
|
(6,410) |
|
|
|
|
|
|
Cash flows used in investing activities |
(11,686) |
|
|
(6,410) |
|
|
Cash flows from financing activities |
|
|
|
|
Proceeds from short-term borrowings, net |
97,700 |
|
|
22,178 |
|
|
|
|
|
|
Repayments of term loan facility |
(4,375) |
|
|
(4,375) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of common stock |
(59,108) |
|
|
(2,377) |
|
|
|
|
|
|
Dividends paid on common stock |
(13,984) |
|
|
(12,658) |
|
|
|
|
|
|
Dividends paid to noncontrolling interests |
(101) |
|
|
(48) |
|
|
Payment of employee restricted stock tax withholdings |
(10,661) |
|
|
(3,946) |
|
|
Cash flows provided by (used in) financing activities |
9,471 |
|
|
(1,226) |
|
|
Effect of foreign exchange rate changes on cash, cash equivalents
and restricted cash |
(1,012) |
|
|
(773) |
|
|
Net decrease in cash, cash equivalents and restricted
cash |
(167,275) |
|
|
(38,405) |
|
|
Cash, cash equivalents and restricted cash, beginning of
year |
281,677 |
|
|
151,452 |
|
|
Cash, cash equivalents and restricted cash, end of
period |
$ |
114,402 |
|
|
$ |
113,047 |
|
|
Supplemental information |
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash additions to property, plant and equipment |
$ |
1,744 |
|
|
$ |
1,895 |
|
|
Non-cash additions to right-of-use assets obtained in exchange for
operating lease obligations |
8,065 |
|
|
1,291 |
|
|
Non-cash additions to right-of-use assets obtained in exchange for
finance lease obligations |
335 |
|
|
— |
|
|
|
|
|
|
Dividend equivalents rights ("DERs") declared not paid |
427 |
|
|
477 |
|
|
|
|
|
|
Share repurchase liability (Note 10) |
— |
|
|
2,347 |
|
|
|
|
|
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
ACUSHNET HOLDINGS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock |
|
Additional
Paid-in
Capital |
|
Accumulated
Other
Comprehensive
Loss,
Net of Tax |
|
Retained
Earnings |
|
Treasury Stock |
|
Total
Shareholders'
Equity
Attributable
to Acushnet
Holdings Corp. |
|
Noncontrolling
Interests |
|
Total
Shareholders'
Equity |
|
(in thousands) |
|
|
Shares |
|
Amount |
|
|
|
|
|
|
|
|
Balances as of December 31, 2020 |
|
|
|
75,666 |
|
|
$ |
76 |
|
|
$ |
925,385 |
|
|
$ |
(96,182) |
|
|
$ |
199,776 |
|
|
$ |
(45,106) |
|
|
$ |
983,949 |
|
|
$ |
33,304 |
|
|
$ |
1,017,253 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
84,958 |
|
|
— |
|
|
84,958 |
|
|
1,862 |
|
|
86,820 |
|
|
Other comprehensive loss |
|
|
|
— |
|
|
— |
|
|
— |
|
|
(1,978) |
|
|
— |
|
|
— |
|
|
(1,978) |
|
|
— |
|
|
(1,978) |
|
|
Share-based compensation |
|
|
|
— |
|
|
— |
|
|
5,369 |
|
|
— |
|
|
— |
|
|
— |
|
|
5,369 |
|
|
— |
|
|
5,369 |
|
|
Vesting of restricted common stock, including impact of
DERs,
net of shares withheld for employee taxes (Note 11)
|
|
|
|
181 |
|
|
— |
|
|
(3,945) |
|
|
— |
|
|
— |
|
|
— |
|
|
(3,945) |
|
|
— |
|
|
(3,945) |
|
|
Purchases of common stock (Note 10)
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(2,377) |
|
|
(2,377) |
|
|
— |
|
|
(2,377) |
|
|
Share repurchase liability (Note 10)
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(2,347) |
|
|
(2,347) |
|
|
— |
|
|
(2,347) |
|
|
Dividends and dividend equivalents declared |
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(12,767) |
|
|
— |
|
|
(12,767) |
|
|
— |
|
|
(12,767) |
|
|
Dividends declared to noncontrolling interests
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(48) |
|
|
(48) |
|
|
Balances as of March 31, 2021 |
|
|
|
75,847 |
|
|
$ |
76 |
|
|
$ |
926,809 |
|
|
$ |
(98,160) |
|
|
$ |
271,967 |
|
|
$ |
(49,830) |
|
|
$ |
1,050,862 |
|
|
$ |
35,118 |
|
|
$ |
1,085,980 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances as of December 31, 2021 |
|
|
|
75,855 |
|
|
$ |
76 |
|
|
$ |
948,423 |
|
|
$ |
(99,582) |
|
|
$ |
324,966 |
|
|
$ |
(131,039) |
|
|
$ |
1,042,844 |
|
|
$ |
37,423 |
|
|
$ |
1,080,267 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
81,045 |
|
|
— |
|
|
81,045 |
|
|
981 |
|
|
82,026 |
|
|
Other comprehensive loss |
|
|
|
— |
|
|
— |
|
|
— |
|
|
(4,945) |
|
|
— |
|
|
— |
|
|
(4,945) |
|
|
— |
|
|
(4,945) |
|
|
Share-based compensation |
|
|
|
— |
|
|
— |
|
|
5,189 |
|
|
— |
|
|
— |
|
|
— |
|
|
5,189 |
|
|
— |
|
|
5,189 |
|
|
Vesting of restricted common stock, including impact of
DERs,
net of shares withheld for employee taxes (Note 11)
|
|
|
|
434 |
|
|
— |
|
|
(10,373) |
|
|
— |
|
|
— |
|
|
— |
|
|
(10,373) |
|
|
— |
|
|
(10,373) |
|
|
Purchases of common stock (Note 10)
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(29,894) |
|
|
(29,894) |
|
|
— |
|
|
(29,894) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends and dividend equivalents declared |
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(13,473) |
|
|
— |
|
|
(13,473) |
|
|
— |
|
|
(13,473) |
|
|
Dividends declared to noncontrolling interests
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(101) |
|
|
(101) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances as of March 31, 2022 |
|
|
|
76,289 |
|
|
$ |
76 |
|
|
$ |
943,239 |
|
|
$ |
(104,527) |
|
|
$ |
392,538 |
|
|
$ |
(160,933) |
|
|
$ |
1,070,393 |
|
|
$ |
38,303 |
|
|
$ |
1,108,696 |
|
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
ACUSHNET HOLDINGS CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
1. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial
statements have been prepared in conformity with accounting
principles generally accepted in the United States
(“U.S. GAAP”) and include the accounts of Acushnet Holdings
Corp. (the “Company”), its wholly-owned subsidiaries and less than
wholly-owned subsidiaries, including a variable interest entity
(“VIE”) in which the Company is the primary beneficiary. All
intercompany balances and transactions have been eliminated in
consolidation.
Certain information in footnote disclosures normally included in
annual financial statements has been condensed or omitted for the
interim periods presented in accordance with the rules and
regulations of the Securities and Exchange Commission (“SEC”) and
U.S. GAAP. The year-end balance sheet data was derived from
audited financial statements; however, the accompanying interim
notes to the unaudited condensed consolidated financial statements
do not include all disclosures required by U.S. GAAP. In the
opinion of management, the financial statements contain all normal
and recurring adjustments necessary to state fairly the financial
position and results of operations of the Company. The results
of operations for the three months ended March 31, 2022 are not
necessarily indicative of results to be expected for the full year
ending December 31, 2022, nor were those of the comparable 2021
period representative of those actually experienced for the full
year ended December 31, 2021. These unaudited interim condensed
consolidated financial statements should be read in conjunction
with the Company’s audited consolidated financial statements and
related notes for the fiscal year ended December 31, 2021 included
in its Annual Report on Form 10-K filed with the SEC on
March 1, 2022.
Use of Estimates
The preparation of the Company’s unaudited condensed consolidated
financial statements in accordance with U.S. GAAP requires
management to make estimates and judgments that affect reported
amounts of assets and liabilities and related disclosure of
contingent assets and liabilities as of the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from these
estimates.
The Company has evaluated and continues to evaluate the potential
impact of the COVID-19 pandemic on its consolidated financial
statements. The impact of the COVID-19 pandemic continues to
evolve, and both the full impact and duration of the COVID-19
pandemic remain highly uncertain. Accordingly, the Company's
business, results of operations, financial position and cash flows
could be materially impacted in ways that the Company cannot
currently predict.
Variable Interest Entities
VIEs are entities that, by design, either (i) lack sufficient
equity to permit the entity to finance its activities
independently, or (ii) have equity holders that do not have
the power to direct the activities of the entity that most
significantly impact its economic performance, the obligation to
absorb the entity’s expected losses, or the right to receive the
entity’s expected residual returns. The Company consolidates a VIE
when it is the primary beneficiary, which is the party that has
both (i) the power to direct the activities that most
significantly impact the VIE’s economic performance and
(ii) through its interests in the VIE, the obligation to
absorb expected losses or the right to receive expected benefits
from the VIE that could potentially be significant to the
VIE.
The Company consolidates the accounts of Acushnet Lionscore
Limited, a VIE which is 40% owned by the Company. The sole purpose
of the VIE is to manufacture the Company’s golf footwear and as
such, the Company is deemed to be the primary beneficiary. The
Company has presented separately on its consolidated balance
sheets, to the extent material, the assets of its consolidated VIE
that can only be used to settle specific obligations of its
consolidated VIE and the liabilities of its consolidated VIE for
which creditors do not have recourse to its general credit. The
general creditors of the VIE do not have recourse to the Company.
Certain directors of the VIE have guaranteed the credit lines of
the VIE, for which there were no outstanding borrowings as of March
31, 2022 and December 31, 2021. In addition, pursuant to the terms
of the agreement governing the VIE, the Company is not required to
provide financial support to the VIE.
Noncontrolling Interests and Redeemable Noncontrolling
Interest
The ownership interests held by owners other than the Company in
less than wholly-owned subsidiaries are classified as
noncontrolling interests. The financial results and position of
noncontrolling interests are included in the Company’s
unaudited condensed consolidated financial statements. The value
attributable to the noncontrolling interests is presented on the
unaudited condensed consolidated balance sheets, separately from
the equity attributable to the Company. Net income (loss) and
comprehensive income (loss) attributable to noncontrolling
interests are presented separately on the unaudited condensed
consolidated statements of operations and unaudited condensed
consolidated statements of comprehensive income,
respectively.
Redeemable noncontrolling interests are those noncontrolling
interests which are or may become redeemable at a fixed or
determinable price on a fixed or determinable date, at the option
of the holder, or upon occurrence of an event. The Company
initially recorded the redeemable noncontrolling interest at its
acquisition date fair value. The carrying amount of the redeemable
noncontrolling interest is subsequently adjusted to the greater
amount of either the initial carrying amount, increased or
decreased for the redeemable noncontrolling interest's share of
comprehensive income (loss) or the redemption value, assuming the
noncontrolling interest is redeemable at the balance sheet date.
This adjustment is recognized through retained earnings and is not
reflected in net income (loss) or comprehensive income (loss). The
value attributable to the redeemable noncontrolling interest and
the related loan to minority shareholders, which is recorded as a
reduction to redeemable noncontrolling interest, is presented in
the unaudited condensed consolidated balance sheets as temporary
equity between liabilities and shareholders’ equity. The amount of
the loan to minority shareholders was $4.4 million as of both March
31, 2022 and December 31, 2021.
Cash, Cash Equivalents and Restricted Cash
Cash held in Company checking accounts is included in cash. Cash
equivalents consist of short-term highly liquid investments with
original maturities of three months or less which are readily
convertible into cash. The Company classifies as restricted certain
cash that is not available for use in its operations. As of March
31, 2022 and December 31, 2021, the amount of restricted cash
included in cash, cash equivalents and restricted cash on the
unaudited condensed consolidated balance sheets was $1.8 million
and $1.9 million, respectively.
Foreign Currency Translation and Transactions
Foreign currency transaction losses included in selling, general
and administrative expense were $1.8 million and $1.0 million for
the three months ended March 31, 2022 and 2021,
respectively.
Recently Adopted Accounting Standards
The Company considers the applicability and impact of all
Accounting Standards Updates ("ASUs"). Management determined that
recently issued ASUs are not expected to have a material impact on
the Company's consolidated financial statements.
2. Allowance for Doubtful Accounts
The Company estimates expected credit losses using a number of
factors, including customer credit ratings, age of receivables,
historical credit loss information and current and forecasted
economic conditions (including the impact of the COVID-19 pandemic)
which could affect the collectability of the reported amounts. All
of these factors have been considered in the estimate of expected
credit losses.
The activity related to the allowance for doubtful accounts was as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, |
|
(in thousands) |
|
|
|
|
|
2022 |
|
2021 |
|
Balance at beginning of period |
|
|
|
|
|
$ |
5,980 |
|
|
$ |
7,698 |
|
|
Bad debt expense (recovery) |
|
|
|
|
|
922 |
|
|
(445) |
|
|
Amount of receivables written off |
|
|
|
|
|
(44) |
|
|
(144) |
|
|
Foreign currency translation and other |
|
|
|
|
|
(72) |
|
|
(32) |
|
|
Balance at end of period |
|
|
|
|
|
$ |
6,786 |
|
|
$ |
7,077 |
|
3. Inventories
The components of inventories were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
December 31, |
|
(in thousands) |
|
2022 |
|
2021 |
|
Raw materials and supplies |
|
$ |
121,474 |
|
|
$ |
105,784 |
|
|
Work-in-process |
|
26,721 |
|
|
21,259 |
|
|
Finished goods |
|
300,585 |
|
|
286,271 |
|
|
Inventories |
|
$ |
448,780 |
|
|
$ |
413,314 |
|
4. Product Warranty
The Company has defined warranties generally ranging from
one to two years. Products covered by the defined warranty
policies primarily include all Titleist golf products, FootJoy golf
shoes and FootJoy golf outerwear. These product warranties
generally obligate the Company to pay for the cost of replacement
products, including the cost of shipping replacement products to
its customers. The estimated cost of satisfying future warranty
claims is accrued at the time the sale is recorded. In estimating
future warranty obligations, the Company considers various factors,
including its warranty policies and practices, the historical
frequency of claims and the cost to replace or repair products
under warranty.
The activity related to the Company’s warranty obligation for
accrued warranty expense was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, |
|
(in thousands) |
|
|
|
|
|
2022 |
|
2021 |
|
Balance at beginning of period |
|
|
|
|
|
$ |
4,177 |
|
|
$ |
3,831 |
|
|
Provision |
|
|
|
|
|
995 |
|
|
1,029 |
|
|
Claims paid/costs incurred |
|
|
|
|
|
(1,045) |
|
|
(918) |
|
|
Foreign currency translation and other |
|
|
|
|
|
(36) |
|
|
(43) |
|
|
Balance at end of period |
|
|
|
|
|
$ |
4,091 |
|
|
$ |
3,899 |
|
5. Debt and Financing Arrangements
Credit Facility
The credit facility includes a revolving credit facility and a term
loan facility. As of March 31, 2022, there were $81.0 million in
outstanding borrowings under the revolving credit facility, with a
weighted average interest rate of 2.61%. There were no outstanding
borrowings under the revolving credit facility as of December 31,
2021. As of March 31, 2022, the Company had available borrowings
under its revolving credit facility of $306.7 million after giving
effect to $12.3 million of outstanding letters of
credit.
The credit agreement contains customary affirmative and restrictive
covenants, including, among others, financial covenants based on
the Company's leverage and interest coverage ratios. The credit
agreement also includes customary events of default, the occurrence
of which, following any applicable cure period, would permit the
lenders to, among other things, declare the principal, accrued
interest and other obligations to be immediately due and payable.
As of March 31, 2022, the Company was in compliance with all
covenants under the credit agreement.
Other Short-Term Borrowings
The Company has certain unsecured local credit facilities available
through its subsidiaries. There were $16.3 million and $0.1 million
in outstanding borrowings under the Company's local credit
facilities as of March 31, 2022 and December 31, 2021,
respectively. The weighted average interest rate applicable to the
outstanding borrowings was 0.27% and 2.57% as of March 31, 2022 and
December 31, 2021, respectively. As of March 31, 2022, the Company
had available borrowings remaining under these local credit
facilities of $38.2 million.
Letters of Credit
As of March 31, 2022 and December 31, 2021, there were outstanding
letters of credit related to agreements, including the Company's
credit facility, totaling $15.7 million and $17.3 million,
respectively, of which $12.8 million and $14.3
million,
respectively, was secured. These agreements provided a maximum
commitment for letters of credit of $57.1 million as of March 31,
2022.
6. Derivative Financial Instruments
The Company principally uses derivative financial instruments to
reduce the impact of foreign currency fluctuations and interest
rate variability on the Company's results of operations. The
principal derivative financial instruments the Company enters into
are foreign exchange forward contracts and interest rate swaps. The
Company does not enter into derivative financial instrument
contracts for trading or speculative purposes.
Foreign Exchange Derivative Instruments
Foreign exchange forward contracts are foreign exchange derivative
instruments primarily used to reduce foreign currency risk related
to transactions denominated in a currency other than functional
currency. These instruments are designated as cash flow hedges. The
periods of the foreign exchange forward contracts correspond to the
periods of the hedged forecasted transactions, which do not exceed
24 months subsequent to the latest balance sheet date. The primary
foreign exchange forward contracts pertain to the U.S. dollar, the
Japanese yen, the British pound sterling, the Canadian dollar, the
Korean won and the euro. The gross U.S. dollar equivalent
notional amount outstanding of all foreign exchange forward
contracts designated under hedge accounting as of March 31, 2022
and December 31, 2021 was $225.9 million and $228.8 million,
respectively.
The Company also enters into foreign exchange forward contracts,
which either do not qualify as hedging instruments or have not been
designated as such, to reduce foreign currency transaction risk
related to certain intercompany assets and liabilities denominated
in a currency other than functional currency. These undesignated
instruments are recorded at fair value as a derivative asset or
liability with the corresponding change in fair value recognized in
selling, general and administrative expense. The gross U.S. dollar
equivalent notional amount outstanding of all foreign exchange
forward contracts not designated under hedge accounting was $19.1
million as of March 31, 2022. There were no outstanding foreign
exchange forward contracts not designated under hedge accounting as
of December 31, 2021.
Interest Rate Derivative Instruments
The Company enters into interest rate swap contracts to reduce
interest rate risk related to floating rate debt. Under the
contracts, the Company pays fixed and receives variable rate
interest, in effect converting a portion of its floating rate debt
to fixed rate debt. Interest rate swap contracts are accounted for
as cash flow hedges. As of March 31, 2022 and December 31, 2021,
there were no interest rate swap contracts
outstanding.
Impact on Financial Statements
The fair value of hedge instruments recognized on the unaudited
condensed consolidated balance sheets was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
|
|
March 31, |
|
December 31, |
|
Balance Sheet Location |
|
Hedge Instrument Type |
|
2022 |
|
2021 |
|
Prepaid and other assets |
|
Foreign exchange forward |
|
$ |
7,814 |
|
|
$ |
6,320 |
|
|
|
|
|
|
|
|
|
Other assets |
|
Foreign exchange forward |
|
1,991 |
|
|
1,491 |
|
|
|
|
|
|
|
|
|
Accrued expenses and other liabilities |
|
Foreign exchange forward |
|
808 |
|
|
488 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The hedge instrument gain (loss) recognized in accumulated other
comprehensive loss, net of tax was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
|
|
March 31, |
|
(in thousands) |
|
|
|
|
|
2022 |
|
2021 |
|
Type of hedge |
|
|
|
|
|
|
|
|
|
Foreign exchange forward |
|
|
|
|
|
$ |
3,076 |
|
|
$ |
4,376 |
|
|
Interest rate swap |
|
|
|
|
|
— |
|
|
(9) |
|
|
Total |
|
|
|
|
|
$ |
3,076 |
|
|
$ |
4,367 |
|
Gains and losses on derivative instruments designated as cash flow
hedges are reclassified from accumulated other comprehensive loss,
net of tax at the time the forecasted hedged transaction impacts
the statements of operations or at the time the hedge is determined
to be ineffective. Based on the current valuation, during the next
12 months the Company expects to reclassify a net gain of $6.7
million related to foreign exchange derivative instruments from
accumulated other comprehensive loss, net of tax, into cost of
goods sold. For further information related to amounts recognized
in accumulated other comprehensive loss, net of tax, see Note
12.
The hedge instrument gain (loss) recognized on the unaudited
condensed consolidated statements of operations was as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
|
|
March 31, |
|
(in thousands) |
|
|
|
|
|
2022 |
|
2021 |
|
Location of gain (loss) in statements of operations |
|
|
|
|
|
|
|
|
|
Foreign exchange forward: |
|
|
|
|
|
|
|
|
|
Cost of goods sold |
|
|
|
|
|
$ |
1,355 |
|
|
$ |
396 |
|
|
Selling, general and administrative
(1)
|
|
|
|
|
|
675 |
|
|
640 |
|
|
Total |
|
|
|
|
|
$ |
2,030 |
|
|
$ |
1,036 |
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Swap: |
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
|
|
|
|
$ |
— |
|
|
$ |
(959) |
|
|
Total |
|
|
|
|
|
$ |
— |
|
|
$ |
(959) |
|
_______________________________________________________________________________
(1) Relates to net gains (losses) on foreign
exchange forward contracts derived from previously designated cash
flow hedges.
Credit Risk
The Company enters into derivative contracts with major financial
institutions with investment grade credit ratings and is exposed to
credit losses in the event of non-performance by these financial
institutions. This credit risk is generally limited to the
unrealized gains in the derivative contracts. However, the Company
monitors the credit quality of these financial institutions, as
well as its own credit quality, and considers the risk of
counterparty default to be minimal.
7. Fair Value Measurements
Certain assets and liabilities are carried at fair value under
U.S. GAAP. Fair value is defined as the exchange price that
would be received for an asset or paid to transfer a liability (an
exit price) in the principal or most advantageous market for the
asset or liability in an orderly transaction between market
participants on the measurement date. Valuation techniques used to
measure fair value must maximize the use of observable inputs and
minimize the use of unobservable inputs.
Assets and liabilities measured at fair value on a recurring basis
as of March 31, 2022 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements as of |
|
|
|
|
|
March 31, 2022 using: |
|
|
|
(in thousands) |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Balance Sheet Location |
|
Assets |
|
|
|
|
|
|
|
|
|
Rabbi trust |
|
$ |
5,127 |
|
|
$ |
— |
|
|
$ |
— |
|
|
Prepaid and other assets |
|
Foreign exchange derivative instruments |
|
— |
|
|
8,116 |
|
|
— |
|
|
Prepaid and other assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred compensation program assets |
|
779 |
|
|
— |
|
|
— |
|
|
Other assets |
|
Foreign exchange derivative instruments |
|
— |
|
|
1,991 |
|
|
— |
|
|
Other assets |
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
5,906 |
|
|
$ |
10,107 |
|
|
$ |
— |
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
Foreign exchange derivative instruments |
|
$ |
— |
|
|
$ |
808 |
|
|
$ |
— |
|
|
Accrued expenses and other liabilities |
|
|
|
|
|
|
|
|
|
|
Deferred compensation program liabilities |
|
779 |
|
|
— |
|
|
— |
|
|
Other noncurrent liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
$ |
779 |
|
|
$ |
808 |
|
|
$ |
— |
|
|
|
Assets and liabilities measured at fair value on a recurring basis
as of December 31, 2021 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements as of |
|
|
|
|
|
December 31, 2021 using: |
|
|
|
(in thousands) |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Balance Sheet Location |
|
Assets |
|
|
|
|
|
|
|
|
|
Rabbi trust |
|
$ |
5,364 |
|
|
$ |
— |
|
|
$ |
— |
|
|
Prepaid and other assets |
|
Foreign exchange derivative instruments |
|
— |
|
|
6,320 |
|
|
— |
|
|
Prepaid and other assets |
|
|
|
|
|
|
|
|
|
|
Deferred compensation program assets |
|
842 |
|
|
— |
|
|
— |
|
|
Other assets |
|
Foreign exchange derivative instruments |
|
— |
|
|
1,491 |
|
|
— |
|
|
Other assets |
|
Total assets |
|
$ |
6,206 |
|
|
$ |
7,811 |
|
|
$ |
— |
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
Foreign exchange derivative instruments |
|
$ |
— |
|
|
$ |
488 |
|
|
$ |
— |
|
|
Accrued expenses and other liabilities |
|
|
|
|
|
|
|
|
|
|
Deferred compensation program liabilities |
|
842 |
|
|
— |
|
|
— |
|
|
Other noncurrent liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
$ |
842 |
|
|
$ |
488 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rabbi trust assets are used to fund certain retirement obligations
of the Company. The assets underlying the Rabbi trust are equity
and fixed income exchange-traded funds.
Deferred compensation program assets and liabilities represent a
program where select employees could defer compensation until
termination of employment. Effective July 29, 2011, this
program was amended to cease all employee compensation deferrals
and provided for the distribution of all previously deferred
employee compensation. The program remains in effect with respect
to the value attributable to the employer match contributed prior
to July 29, 2011.
Foreign exchange derivative instruments are foreign exchange
forward contracts primarily used to limit currency risk that would
otherwise result from changes in foreign exchange rates (Note 6).
The Company uses the mid-price of foreign exchange forward rates as
of the close of business on the valuation date to value each
foreign exchange forward contract at each reporting
period.
8. Pension and Other Postretirement Benefits
Components of net periodic benefit cost were as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits |
|
Postretirement Benefits |
|
|
|
Three months ended March 31, |
|
(in thousands) |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
Components of net periodic benefit cost |
|
|
|
|
|
|
|
|
|
Service cost |
|
$ |
2,007 |
|
|
$ |
2,135 |
|
|
$ |
160 |
|
|
$ |
162 |
|
|
Interest cost |
|
2,234 |
|
|
1,951 |
|
|
84 |
|
|
75 |
|
|
Expected return on plan assets |
|
(1,871) |
|
|
(2,547) |
|
|
— |
|
|
— |
|
|
Settlement expense |
|
— |
|
|
1,419 |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
Amortization of net loss (gain) |
|
935 |
|
|
1,421 |
|
|
(152) |
|
|
(65) |
|
|
Amortization of prior service cost (credit) |
|
69 |
|
|
71 |
|
|
(34) |
|
|
(34) |
|
|
Net periodic benefit cost |
|
$ |
3,374 |
|
|
$ |
4,450 |
|
|
$ |
58 |
|
|
$ |
138 |
|
The non-service cost components of net periodic benefit cost are
included in other expense, net in the unaudited condensed
consolidated statements of operations.
9. Income Taxes
Income tax expense decreased by $6.9 million to $20.9 million for
the three months ended March 31, 2022 compared to $27.8 million for
the three months ended March 31, 2021. The Company’s effective
income tax rate ("ETR") was 20.4% for the three months ended March
31, 2022 compared to 24.3% for the three months ended March 31,
2021.
The ETR for the three months ended March 31, 2022 differed from the
U.S. statutory tax rate primarily due to the impact of the U.S.
deduction for foreign derived intangible income and federal and
state tax credits, partially offset by the U.S. taxation of foreign
income and the Company's geographic mix of income. The ETR for the
three months ended March 31, 2021 differed from the U.S. statutory
tax rate primarily due to the U.S. taxation of foreign income and
the Company's geographic mix of income, partially offset by the
impact of the U.S. deduction for foreign derived intangible income
and federal and state tax credits.
10. Common Stock
Dividends
The Company declared dividends per common share, including DERs
(Note 11), during the periods presented as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends per Common Share |
|
Amount
(in
thousands)
|
|
2022: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter |
|
$ |
0.180 |
|
|
$ |
13,473 |
|
|
Total dividends declared in 2022 |
|
$ |
0.180 |
|
|
$ |
13,473 |
|
|
|
|
|
|
|
|
2021: |
|
|
|
|
|
Fourth Quarter |
|
$ |
0.165 |
|
|
$ |
12,619 |
|
|
Third Quarter |
|
0.165 |
|
|
12,692 |
|
|
Second Quarter |
|
0.165 |
|
|
12,768 |
|
|
First Quarter |
|
0.165 |
|
|
12,767 |
|
|
Total dividends declared in 2021 |
|
$ |
0.660 |
|
|
$ |
50,846 |
|
During the second quarter of 2022, the Company's Board of Directors
declared a dividend of $0.180 per share of common stock to
shareholders of record as of June 3, 2022 and payable on
June 17, 2022.
Share Repurchase Program
As of March 31, 2022, the Board of Directors had authorized the
Company to repurchase up to an aggregate of $200.0 million of its
issued and outstanding common stock.
Share repurchases may be effected from time to time in open market
or privately negotiated transactions, including transactions with
affiliates, with the timing of purchases and the amount of stock
purchased generally determined at the discretion of the Company
consistent with the Company's general working capital needs and
within the constraints of the Company’s credit
agreement.
As previously disclosed, in connection with this share repurchase
program, the Company entered into an agreement with Magnus Holdings
Co., Ltd. (“Magnus”), a wholly-owned subsidiary of Fila Holdings
Corp., to purchase from Magnus an equal amount of its common stock
as it purchases on the open market, up to an aggregate of $24.9
million at the same weighted average per share price (the "2019
Agreement"). As the Company repurchased a cumulative total of
$24.9 million of common stock through open market purchases,
the determination date, as defined in the 2019 Agreement, was
automatically triggered on March 18, 2021. As a result, on April 2,
2021, the Company repurchased 355,341 shares of common stock for an
aggregate of $11.1 million from Magnus, in satisfaction of its
obligations under the 2019 Agreement.
On November 8, 2021, the Company entered into a new agreement with
Magnus to purchase from Magnus an equal amount of its common stock
as it purchases on the open market, up to an aggregate of
$37.5 million at the same weighted average per share price
(the "2021 Agreement"). In relation to the 2021 Agreement, the
Company recorded a share repurchase liability of $29.2 million for
537,839 shares of common stock, which was included in accrued
expenses and other liabilities and treasury stock on the
consolidated balance sheet as of December 31, 2021. Between January
1, 2022 and January 14, 2022, the Company repurchased an additional
161,980 shares of its common stock on the open market for an
aggregate of $8.3 million, bringing the cumulative total open
market purchases to $37.5 million. As a result, on January 24,
2022, the Company repurchased 699,819 shares of common stock for an
aggregate of $37.5 million from Magnus, in satisfaction of its
obligations under the 2021 Agreement.
The Company's share repurchase activity was as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, |
|
(in thousands, except share and per share amounts) |
|
|
|
|
|
2022 |
|
2021 |
|
Shares repurchased in the open market: |
|
|
|
|
|
|
|
|
|
Shares repurchased |
|
|
|
|
|
463,980 |
|
|
56,156 |
|
|
Average price |
|
|
|
|
|
$ |
46.57 |
|
|
$ |
42.34 |
|
|
Aggregate value |
|
|
|
|
|
$ |
21,607 |
|
|
$ |
2,377 |
|
|
Shares repurchased from Magnus: |
|
|
|
|
|
|
|
|
|
Shares repurchased |
|
|
|
|
|
699,819 |
|
|
— |
|
|
Average price
(1)
|
|
|
|
|
|
$ |
53.59 |
|
|
$ |
— |
|
|
Aggregate value |
|
|
|
|
|
$ |
37,501 |
|
|
$ |
— |
|
|
Total shares repurchased: |
|
|
|
|
|
|
|
|
|
Shares repurchased |
|
|
|
|
|
1,163,799 |
|
|
56,156 |
|
|
Average price |
|
|
|
|
|
$ |
50.79 |
|
|
$ |
42.34 |
|
|
Aggregate value |
|
|
|
|
|
$ |
59,108 |
|
|
$ |
2,377 |
|
___________________________________
(1) In
accordance with the share repurchase agreement, shares purchased
from Magnus are accrued for at the same weighted average price as
those purchased on the open market as if the purchase from Magnus
had occurred on the same day. As such, the average price of Magnus
repurchases during the current period may differ from open market
purchases due to the settlement of the previously recorded share
repurchase liability, as well as, open market purchases made after
the completion of the Magnus Share repurchase
agreement.
As of March 31, 2022, the Company had $39.1 million remaining under
the current share repurchase authorization. On April 28, 2022,
the Board of Directors authorized the Company to repurchase up to
an additional $150.0 million of its issued and outstanding common
stock, bringing the total authorization up to $350.0 million. This
program will remain in effect until completed or until terminated
by the Board of Directors.
11. Equity Incentive Plans
Under the Acushnet Holdings Corp. 2015 Omnibus Incentive Plan
(“2015 Plan”), the Company may grant stock options, stock
appreciation rights, restricted shares of common stock, restricted
stock units ("RSUs"), performance stock units ("PSUs") and other
share-based and cash-based awards to members of the Board of
Directors, officers, employees, consultants and advisors of the
Company. As of March 31, 2022, the only awards granted under the
2015 Plan were RSUs and PSUs.
Restricted Stock and Performance Stock Units
RSUs granted to members of the Board of Directors vest immediately
into shares of common stock. RSUs granted to Company officers
generally vest over three years, with one-third of each grant
vesting annually, subject to the recipient's continued employment
with the Company. RSUs granted to other employees, consultants and
advisors of the Company vest in accordance with the terms of the
grants, generally either over three years or, beginning in 2022,
with one-third of each grant vesting annually, subject to the
recipient’s continued service to the Company. PSUs granted to
Company officers and other employees vest based upon the Company's
performance against specified metrics, generally over a three-year
performance period, subject to the recipient's continued service to
the Company. At the end of the performance period, the number of
shares of common stock that could be issued is determined based
upon the Company's performance against these metrics. The number of
shares that could be issued can range
from 0% to 200% of the recipient's target
award. Recipients of the awards granted under the 2015 Plan may
elect to defer receipt of all or any portion of any shares of
common stock issuable upon vesting to a future date elected by the
recipient.
All RSUs and PSUs granted under the 2015 Plan have DERs, which
entitle holders of RSUs and PSUs to the same dividend value per
share as holders of common stock and can be paid in either cash or
common stock. DERs are subject to the same vesting and other terms
and conditions as the corresponding unvested RSUs and PSUs. DERs
are paid when the underlying shares of common stock are
delivered.
A summary of the Company’s RSUs and PSUs as of March 31, 2022 and
changes during the three months then ended is presented
below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted- |
|
|
|
Weighted- |
|
|
|
Number |
|
Average |
|
Number |
|
Average |
|
|
|
of RSUs |
|
Fair Value RSUs |
|
of PSUs |
|
Fair Value PSUs |
|
Outstanding as of December 31, 2021 |
|
691,373 |
|
|
$ |
33.66 |
|
|
367,067 |
|
|
$ |
32.84 |
|
|
Granted |
|
345,230 |
|
|
43.96 |
|
|
167,587 |
|
|
43.96 |
|
|
Vested
(1)
|
|
(68,189) |
|
|
32.72 |
|
|
— |
|
|
— |
|
|
Forfeited |
|
(5,617) |
|
|
31.26 |
|
|
— |
|
|
— |
|
|
Outstanding as of March 31, 2022 |
|
962,797 |
|
|
$ |
37.43 |
|
|
534,654 |
|
|
$ |
36.32 |
|
_______________________________________________________________________________
(1) Includes 41,173 shares of common stock related to RSUs that
were not delivered as of March 31, 2022.
A summary of shares of common stock issued related to the 2015
Plan, including the impact of any DERs issued in common stock, is
presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
Three months ended |
|
|
|
March 31, 2022 |
|
March 31, 2021 |
|
|
RSUs |
|
PSUs |
|
RSUs |
|
PSUs |
|
Shares of common stock issued |
|
492,580 |
|
|
188,527 |
|
|
270,779 |
|
|
— |
|
|
Shares of common stock withheld by the Company as payment by
employees in lieu of cash to satisfy tax withholding
obligations
|
|
(159,851) |
|
|
(87,215) |
|
|
(89,938) |
|
|
— |
|
|
Net shares of common stock issued |
|
332,729 |
|
|
101,312 |
|
|
180,841 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative undelivered shares of common stock |
|
414,866 |
|
|
191,242 |
|
|
395,670 |
|
|
— |
|
Compensation expense recorded related to RSUs and PSUs in the
unaudited condensed consolidated statements of operations was as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
|
March 31, |
|
(in thousands) |
|
|
|
|
|
2022 |
|
2021 |
|
RSUs |
|
|
|
|
|
$ |
2,770 |
|
|
$ |
2,359 |
|
|
PSUs |
|
|
|
|
|
2,419 |
|
|
3,010 |
|
The remaining unrecognized compensation expense related to unvested
RSUs and unvested PSUs was $25.8 million and $18.3 million,
respectively, as of March 31, 2022 and are expected to be
recognized over the related weighted average period of 1.7 years
and 2.1 years, respectively.
Compensation Expense
The allocation of share-based compensation expense in the unaudited
condensed consolidated statements of operations was as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
|
March 31, |
|
(in thousands) |
|
|
|
|
|
2022 |
|
2021 |
|
Cost of goods sold |
|
|
|
|
|
$ |
300 |
|
|
$ |
(7) |
|
|
Selling, general and administrative |
|
|
|
|
|
4,698 |
|
|
5,381 |
|
|
Research and development |
|
|
|
|
|
355 |
|
|
159 |
|
|
Total compensation expense before income tax |
|
|
|
|
|
5,353 |
|
|
5,533 |
|
|
Income tax benefit |
|
|
|
|
|
1,176 |
|
|
1,267 |
|
|
Total compensation expense, net of income tax |
|
|
|
|
|
$ |
4,177 |
|
|
$ |
4,266 |
|
12. Accumulated Other Comprehensive Loss, Net of Tax
Accumulated other comprehensive loss, net of tax consists of
foreign currency translation adjustments, unrealized gains and
losses from derivative instruments designated as cash flow hedges
(Note 6) and pension and other postretirement adjustments (Note
8).
The components of and adjustments to accumulated other
comprehensive loss, net of tax, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign |
|
|
|
|
|
|
|
Accumulated |
|
|
|
Foreign |
|
Exchange |
|
|
|
Pension and |
|
|
|
Other |
|
|
Currency |
|
Derivative |
|
|
|
Other |
|
|
|
Comprehensive |
|
(in thousands) |
|
Translation |
|
Instruments |
|
|
|
Postretirement |
|
|
|
Loss, Net of Tax |
|
Balance as of December 31, 2021 |
|
$ |
(66,915) |
|
|
$ |
5,167 |
|
|
|
|
$ |
(37,834) |
|
|
|
|
$ |
(99,582) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive (loss) income before
reclassifications |
|
(7,570) |
|
|
3,076 |
|
|
|
|
1,045 |
|
|
|
|
(3,449) |
|
|
Amounts reclassified from accumulated other comprehensive loss, net
of tax |
|
— |
|
|
(1,355) |
|
|
|
|
818 |
|
|
|
|
(537) |
|
|
Tax expense |
|
— |
|
|
(516) |
|
|
|
|
(443) |
|
|
|
|
(959) |
|
|
Balance as of March 31, 2022 |
|
$ |
(74,485) |
|
|
$ |
6,372 |
|
|
|
|
$ |
(36,414) |
|
|
|
|
$ |
(104,527) |
|
13. Net Income per Common Share
The following is a computation of basic and diluted net income per
common share attributable to Acushnet Holdings Corp.:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
|
|
March 31, |
|
(in thousands, except share and per share amounts) |
|
|
|
|
|
2022 |
|
2021 |
|
|
|
|
|
|
|
|
|
|
Net income attributable to Acushnet Holdings Corp. |
|
|
|
|
|
$ |
81,045 |
|
|
$ |
84,958 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares: |
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
|
|
73,513,109 |
|
|
74,778,189 |
|
|
RSUs |
|
|
|
|
|
325,550 |
|
|
477,123 |
|
|
PSUs |
|
|
|
|
|
84,069 |
|
|
— |
|
|
Diluted |
|
|
|
|
|
73,922,728 |
|
|
75,255,312 |
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share attributable to Acushnet Holdings
Corp.: |
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
|
|
$ |
1.10 |
|
|
$ |
1.14 |
|
|
Diluted |
|
|
|
|
|
$ |
1.10 |
|
|
$ |
1.13 |
|
Net income per common share attributable to Acushnet Holdings Corp.
was calculated using the treasury stock method.
The Company’s potential dilutive securities for the three months
ended March 31, 2022 and 2021 include RSUs and PSUs. PSUs vest
based upon achievement of performance targets and are excluded from
the diluted shares outstanding unless the performance targets have
been met as of the end of the applicable reporting period
regardless of whether such performance targets are probable of
achievement. As of March 31, 2022, the minimum performance target
was achieved relating to certain PSUs and as a result, these PSUs
have been included in diluted shares outstanding for the three
months ended March 31, 2022.
The following securities have been excluded from the calculation of
diluted weighted-average common shares outstanding as their impact
was determined to be anti-dilutive:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
|
|
March 31, |
|
|
|
|
|
|
|
2022 |
|
2021 |
|
RSUs |
|
|
|
|
|
66,405 |
|
|
291,484 |
|
|
|
|
|
|
|
|
|
|
14. Segment Information
The Company’s operating segments are based on how the Chief
Operating Decision Maker (“CODM”) makes decisions about assessing
performance and allocating resources. The Company has four
reportable segments that are organized on the basis of product
categories. These segments include Titleist golf balls, Titleist
golf clubs, Titleist golf gear and FootJoy golf wear.
The CODM primarily evaluates performance using segment operating
income (loss). Segment operating income (loss) includes directly
attributable expenses and certain shared costs of corporate
administration that are allocated to the reportable segments, but
excludes interest expense, net, restructuring charges, the
non-service cost component of net periodic benefit cost,
transaction fees and other non-operating gains and losses as the
Company does not allocate these to the reportable segments. The
CODM does not evaluate a measure of assets when assessing
performance.
Results shown for the three months ended March 31, 2022 and 2021
are not necessarily those which would be achieved if each segment
was an unaffiliated business enterprise. There are no intersegment
transactions.
Information by reportable segment and a reconciliation to reported
amounts are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, |
|
(in thousands) |
|
|
|
|
|
2022 |
|
2021 |
|
Net sales |
|
|
|
|
|
|
|
|
|
Titleist golf balls |
|
|
|
|
|
$ |
163,838 |
|
|
$ |
173,637 |
|
|
Titleist golf clubs |
|
|
|
|
|
160,815 |
|
|
155,827 |
|
|
Titleist golf gear |
|
|
|
|
|
44,146 |
|
|
53,120 |
|
|
FootJoy golf wear |
|
|
|
|
|
197,553 |
|
|
159,434 |
|
|
Other |
|
|
|
|
|
39,735 |
|
|
38,867 |
|
|
Total net sales |
|
|
|
|
|
$ |
606,087 |
|
|
$ |
580,885 |
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating income |
|
|
|
|
|
|
|
|
|
Titleist golf balls |
|
|
|
|
|
$ |
33,373 |
|
|
$ |
34,317 |
|
|
Titleist golf clubs |
|
|
|
|
|
32,228 |
|
|
41,799 |
|
|
Titleist golf gear |
|
|
|
|
|
2,194 |
|
|
9,728 |
|
|
FootJoy golf wear |
|
|
|
|
|
31,315 |
|
|
28,117 |
|
|
Other |
|
|
|
|
|
7,427 |
|
|
6,471 |
|
|
Total segment operating income |
|
|
|
|
|
106,537 |
|
|
120,432 |
|
|
Reconciling items: |
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
|
|
|
|
(1,277) |
|
|
(3,616) |
|
|
|
|
|
|
|
|
|
|
|
Non-service cost component of net periodic benefit cost |
|
|
|
|
|
(1,265) |
|
|
(2,291) |
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
(1,229) |
|
|
(64) |
|
|
Total income before income tax |
|
|
|
|
|
$ |
102,766 |
|
|
$ |
114,461 |
|
Information as to the Company’s operations in different
geographical areas is presented below. Net sales are categorized
based on the location in which the sale originates.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, |
|
(in thousands) |
|
|
|
|
|
2022 |
|
2021 |
|
United States |
|
|
|
|
|
$ |
295,126 |
|
|
$ |
308,636 |
|
|
EMEA
(1)
|
|
|
|
|
|
112,357 |
|
|
80,575 |
|
|
Japan |
|
|
|
|
|
45,795 |
|
|
56,377 |
|
|
Korea |
|
|
|
|
|
85,717 |
|
|
79,097 |
|
|
Rest of world |
|
|
|
|
|
67,092 |
|
|
56,200 |
|
|
Total net sales |
|
|
|
|
|
$ |
606,087 |
|
|
$ |
580,885 |
|
_______________________________________________________________________________
(1) Europe, the Middle East and Africa ("EMEA")
15. Commitments and Contingencies
Purchase Obligations
During the normal course of its business, the Company enters into
agreements to purchase goods and services, including purchase
commitments for advertising (including media placement and
production costs), finished goods inventory, capital expenditures
and endorsement arrangements with professional
golfers.
The Company's purchase obligations as of March 31, 2022 were as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period |
|
|
|
Remainder of |
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
2022 |
|
2023 |
|
2024 |
|
2025 |
|
2026 |
|
Thereafter |
|
Purchase obligations
(1)
|
|
$ |
286,896 |
|
|
$ |
30,476 |
|
|
$ |
12,415 |
|
|
$ |
7,485 |
|
|
$ |
2,424 |
|
|
$ |
34,791 |
|
_______________________________________________________________________________
(1) The reported amounts exclude those
liabilities included on the unaudited condensed consolidated
balance sheet as of March 31, 2022.
Litigation
The Company and its subsidiaries are party to lawsuits associated
with the normal conduct of their businesses and operations. It is
not possible to predict the outcome of the pending actions, and, as
with any litigation, it is possible that some of these actions
could be decided unfavorably. Consequently, the Company is unable
to estimate the ultimate aggregate amount of monetary loss, amounts
covered by insurance or the financial impact that will result from
such matters and has not recorded a liability related to potential
losses.
ITEM 2. MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion contains management’s discussion and
analysis of our financial condition and results of operations and
should be read together with our unaudited condensed consolidated
financial statements and the notes thereto included elsewhere in
this report. This discussion contains forward-looking statements
that reflect our plans, estimates and beliefs and involve numerous
risks and uncertainties, including but not limited to those
described in “Part II, Item 1A. Risk Factors” and
elsewhere in this Quarterly Report on Form 10-Q and in our
other filings with the Securities and Exchange Commission (“SEC”).
Actual results may differ materially from those contained in any
forward-looking statements. You should carefully read “Special
Note Regarding Forward-Looking Statements” following the Table
of Contents. Unless otherwise noted, the figures in the following
discussion are unaudited.
Overview
We are the global leader in the design, development, manufacture
and distribution of performance-driven golf products, which are
widely recognized for their quality excellence. Today, we are the
steward of two of the most revered brands in golf - Titleist, one
of golf’s leading performance equipment brands, and FootJoy, one of
golf’s leading performance wearable brands.
Our target market is dedicated golfers, who are the cornerstone of
the worldwide golf industry. These dedicated golfers are avid and
skill-biased, prioritize performance and commit the time, effort
and money to improve their game. We believe our focus on innovation
and process excellence yields golf products that represent superior
performance and consistent product quality, which are the key
attributes sought after by dedicated golfers. Many of the game's
professional players, who represent the most dedicated golfers,
prefer our products, thereby validating our performance and quality
promise, while also driving brand awareness. We seek to leverage a
pyramid of influence product and promotion strategy, whereby our
products are the most played by the world's best players, creating
aspirational appeal for a broad range of golfers who want to
emulate the performance of the game's best players.
We believe our differentiated focus on performance and quality
excellence, enduring connections with dedicated golfers, and
favorable and market‑differentiating mix of consumable and durable
products have been the key drivers of our solid financial
performance.
Our net sales are diversified by both product category and mix, as
well as geography. Our product categories include golf balls, golf
clubs, wedges and putters, golf shoes, golf gloves, golf gear and
golf outerwear and apparel. Our product portfolio contains a
favorable mix of consumable products, which we consider to be golf
balls and golf gloves, and more durable products, which we consider
to be golf clubs, golf shoes, golf gear and golf outerwear and
apparel. Our net sales are also diversified by geography with
a substantial majority of our net sales generated in five
countries: the United States, Japan, Korea, the United Kingdom and
Canada. We have the following reportable segments: Titleist
golf balls; Titleist golf clubs; Titleist golf gear; and FootJoy
golf wear.
Our financial results and operations continue to be impacted by the
macroeconomic environment, including the ongoing COVID-19 pandemic.
Global supply chain issues and the impact of inflation have
resulted in constrained raw material, component and sourced product
availability and increased raw material and other input costs,
including higher freight expense. These increased costs negatively
impacted cost of sales for the three months ended March 31, 2022,
resulting in a lower gross margin as compared to the three months
ended March 31, 2021. Inflation, particularly in the form of higher
raw material costs combined with higher shipping costs, is expected
to remain an issue for the remainder of 2022.
Key Performance Measures
We use various financial metrics to measure and evaluate our
business, including, among others: (i) net sales on a constant
currency basis, (ii) Adjusted EBITDA on a consolidated basis,
(iii) Adjusted EBITDA margin on a consolidated basis and
(iv) segment operating income (loss).
Since a significant percentage of our net sales are generated
outside of the United States, we use net sales on a constant
currency basis to evaluate the sales performance of our business in
period over period comparisons and for forecasting our business
going forward. Constant currency information allows us to estimate
what our sales performance would have been without changes in
foreign currency exchange rates. This information is calculated by
taking the current period local currency sales and translating them
into U.S. dollars based upon the foreign currency exchange rates
for the applicable comparable prior period. This constant currency
information should not be considered in isolation or as a
substitute for any measure derived in
accordance with generally accepted accounting principles in the
United States (“U.S. GAAP”). Our presentation of constant
currency information may not be consistent with the manner in which
similar measures are derived or used by other
companies.
We primarily use Adjusted EBITDA on a consolidated basis to
evaluate the effectiveness of our business strategies, assess our
consolidated operating performance and make decisions regarding
pricing of our products, go to market execution and costs to incur
across our business. We present Adjusted EBITDA as a supplemental
measure of our operating performance because it excludes the impact
of certain items that we do not consider indicative of our ongoing
operating performance. We define Adjusted EBITDA in a manner
consistent with the term “Consolidated EBITDA” as it is defined in
our credit agreement. Adjusted EBITDA represents net income (loss)
attributable to Acushnet Holdings Corp. plus interest expense, net,
income tax expense (benefit), depreciation and amortization and
other items defined in the agreement, including: share-based
compensation expense; restructuring and transformation costs;
certain transaction fees; extraordinary, unusual or non-recurring
losses or charges; indemnification expense (income); certain
pension settlement costs; certain other non-cash (gains) losses,
net and the net income relating to noncontrolling interests.
Adjusted EBITDA is not a measurement of financial performance under
U.S. GAAP. It should not be considered an alternative to net income
(loss) attributable to Acushnet Holdings Corp. as a measure of our
operating performance or any other measure of performance derived
in accordance with U.S. GAAP. In addition, Adjusted EBITDA should
not be construed as an inference that our future results will be
unaffected by unusual or non-recurring items, or affected by
similar non-recurring items. Adjusted EBITDA has limitations as an
analytical tool, and you should not consider such measure either in
isolation or as a substitute for analyzing our results as reported
under U.S. GAAP. Our definition and calculation of Adjusted EBITDA
is not necessarily comparable to other similarly titled measures
used by other companies due to different methods of calculation.
For a reconciliation of Adjusted EBITDA to net income (loss)
attributable to Acushnet Holdings Corp., see “—Results of
Operations” below.
We also use Adjusted EBITDA margin on a consolidated basis, which
measures our Adjusted EBITDA as a percentage of net sales,
because our management uses it to evaluate the effectiveness of our
business strategies, assess our consolidated operating performance
and make decisions regarding pricing of our products, go to market
execution and costs to incur across our business. We present
Adjusted EBITDA margin as a supplemental measure of our operating
performance because it excludes the impact of certain items that we
do not consider indicative of our ongoing operating performance.
Adjusted EBITDA margin is not a measurement of financial
performance under U.S. GAAP. It should not be considered an
alternative to any measure of performance derived in accordance
with U.S. GAAP. In addition, Adjusted EBITDA margin should not be
construed as an inference that our future results will be
unaffected by unusual or non-recurring items, or affected by
similar non-recurring items. Adjusted EBITDA margin has limitations
as an analytical tool, and you should not consider such measure
either in isolation or as a substitute for analyzing our results as
reported under U.S. GAAP. Our definition and calculation of
Adjusted EBITDA margin is not necessarily comparable to other
similarly titled measures used by other companies due to different
methods of calculation.
Lastly, we use segment operating income (loss) to evaluate and
assess the performance of each of our reportable segments and to
make budgeting decisions. Segment operating income (loss) includes
directly attributable expenses and certain shared costs of
corporate administration that are allocated to the reportable
segments, but excludes interest expense, net; restructuring
charges; the non-service cost component of net periodic benefit
cost; transaction fees and other non-operating gains and losses as
we do not allocate these to the reportable segments.
Results of Operations
The following table sets forth, for the periods indicated, our
results of operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
|
|
March 31, |
|
(in thousands) |
|
|
|
|
|
2022 |
|
2021 |
|
Net sales |
|
|
|
|
|
$ |
606,087 |
|
|
$ |
580,885 |
|
|
Cost of goods sold |
|
|
|
|
|
289,088 |
|
|
270,146 |
|
|
Gross profit |
|
|
|
|
|
316,999 |
|
|
310,739 |
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
|
|
|
195,691 |
|
|
176,369 |
|
|
Research and development |
|
|
|
|
|
13,976 |
|
|
12,329 |
|
|
Intangible amortization |
|
|
|
|
|
1,963 |
|
|
1,972 |
|
|
|
|
|
|
|
|
|
|
|
Income from operations |
|
|
|
|
|
105,369 |
|
|
120,069 |
|
|
Interest expense, net |
|
|
|
|
|
1,277 |
|
|
3,616 |
|
|
Other expense, net |
|
|
|
|
|
1,326 |
|
|
1,992 |
|
|
Income before income taxes |
|
|
|
|
|
102,766 |
|
|
114,461 |
|
|
Income tax expense |
|
|
|
|
|
20,919 |
|
|
27,834 |
|
|
Net income |
|
|
|
|
|
81,847 |
|
|
86,627 |
|
|
Less: Net income attributable to noncontrolling
interests |
|
|
|
|
|
(802) |
|
|
(1,669) |
|
|
Net income attributable to Acushnet Holdings Corp. |
|
|
|
|
|
$ |
81,045 |
|
|
$ |
84,958 |
|
|
Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
Net income attributable to Acushnet Holdings Corp. |
|
|
|
|
|
$ |
81,045 |
|
|
$ |
84,958 |
|
|
Interest expense, net |
|
|
|
|
|
1,277 |
|
|
3,616 |
|
|
Income tax expense |
|
|
|
|
|
20,919 |
|
|
27,834 |
|
|
Depreciation and amortization |
|
|
|
|
|
10,367 |
|
|
10,363 |
|
|
Share-based compensation |
|
|
|
|
|
5,353 |
|
|
5,533 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other extraordinary, unusual or non-recurring items, net
(1)
|
|
|
|
|
|
235 |
|
|
1,311 |
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to noncontrolling interests |
|
|
|
|
|
802 |
|
|
1,669 |
|
|
Adjusted EBITDA |
|
|
|
|
|
$ |
119,998 |
|
|
$ |
135,284 |
|
|
Adjusted EBITDA margin |
|
|
|
|
|
19.8 |
% |
|
23.3 |
% |
_______________________________________________________________________________________
(1)The
three months ended March 31, 2022 and 2021 include other
immaterial, unusual or non-recurring items, net. The three months
ended March 31, 2021 also includes pension settlement costs of $1.4
million related to lump-sum distributions to participants in our
defined benefit plans as a result of the voluntary retirement
program as part of management’s approved restructuring
program.
Three Months Ended March 31, 2022 Compared to the Three Months
Ended March 31, 2021
Net sales by reportable segment is summarized as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
|
|
Constant Currency |
|
|
|
March 31, |
|
Increase/(Decrease) |
|
Increase/(Decrease) |
|
(in millions) |
|
2022 |
|
2021 |
|
$ change |
|
% change |
|
$ change |
|
% change |
|
Titleist golf balls |
|
$ |
163.8 |
|
|
$ |
173.6 |
|
|
$ |
(9.8) |
|
|
(5.6) |
% |
|
$ |
(6.1) |
|
|
(3.5) |
% |
|
Titleist golf clubs |
|
160.8 |
|
|
155.8 |
|
|
5.0 |
|
|
3.2 |
% |
|
9.5 |
|
|
6.1 |
% |
|
Titleist golf gear |
|
44.1 |
|
|
53.1 |
|
|
(9.0) |
|
|
(16.9) |
% |
|
(7.5) |
|
|
(14.1) |
% |
|
FootJoy golf wear |
|
197.6 |
|
|
159.4 |
|
|
38.2 |
|
|
24.0 |
% |
|
45.0 |
|
|
28.2 |
% |
Net sales information by region is summarized as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
|
|
Constant Currency |
|
|
|
March 31, |
|
Increase/(Decrease) |
|
Increase/(Decrease) |
|
(in millions) |
|
2022 |
|
2021 |
|
$ change |
|
% change |
|
$ change |
|
% change |
|
United States |
|
$ |
295.1 |
|
|
$ |
308.6 |
|
|
$ |
(13.5) |
|
|
(4.4) |
% |
|
$ |
(13.5) |
|
|
(4.4) |
% |
|
EMEA |
|
112.4 |
|
|
80.6 |
|
|
31.8 |
|
|
39.5 |
% |
|
38.3 |
|
|
47.5 |
% |
|
Japan |
|
45.8 |
|
|
56.4 |
|
|
(10.6) |
|
|
(18.8) |
% |
|
(6.4) |
|
|
(11.3) |
% |
|
Korea |
|
85.7 |
|
|
79.1 |
|
|
6.6 |
|
|
8.3 |
% |
|
13.6 |
|
|
17.2 |
% |
|
Rest of world |
|
67.1 |
|
|
56.2 |
|
|
10.9 |
|
|
19.4 |
% |
|
12.3 |
|
|
21.9 |
% |
|
Total net sales |
|
$ |
606.1 |
|
|
$ |
580.9 |
|
|
$ |
25.2 |
|
|
4.3 |
% |
|
$ |
44.3 |
|
|
7.6 |
% |
Segment operating income by reportable segment is summarized as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
|
|
(in millions) |
|
March 31, |
|
Increase/(Decrease) |
|
Segment operating income |
|
2022 |
|
2021 |
|
$ change |
|
% change |
|
Titleist golf balls |
|
$ |
33.4 |
|
|
$ |
34.3 |
|
|
$ |
(0.9) |
|
|
(2.6) |
% |
|
Titleist golf clubs |
|
32.2 |
|
|
41.8 |
|
|
(9.6) |
|
|
(23.0) |
% |
|
Titleist golf gear |
|
2.2 |
|
|
9.7 |
|
|
(7.5) |
|
|
(77.3) |
% |
|
FootJoy golf wear |
|
31.3 |
|
|
28.1 |
|
|
3.2 |
|
|
11.4 |
% |
Net Sales
Net sales increased $25.2 million, or 4.3%, to $606.1 million for
the three months ended March 31, 2022 compared to $580.9 million
for the three months ended March 31, 2021. On a constant currency
basis, net sales increased $44.3 million, or 7.6%, to $625.2
million. The increase in net sales on a constant currency basis
resulted from an increase of $45.0 million in FootJoy golf wear and
an increase of $9.5 million in Titleist golf clubs. The increase in
FootJoy net sales was driven by higher sales volumes in EMEA
primarily due to the adverse impact of government-ordered shutdowns
in this region in the first quarter of 2021. The increase in
Titleist golf club sales was driven by higher sales volumes of our
newly introduced SM9 wedges and T-Series irons. These increases
were partially offset by decreases of $7.5 million in Titleist golf
gear largely due to supply chain and fulfillment constraints and
$6.1 million in Titleist golf balls primarily as a result of
limited availability of certain raw materials. Sales volume growth
of products that are not allocated to one of our four reportable
segments also contributed to the increase in net
sales.
The decrease in net sales in the United States was primarily as a
result of a decrease of $10.6 million in Titleist golf balls,
primarily due to limited availability of certain raw materials and
a decrease of $4.6 million in Titleist golf gear, largely due to
supply chain and fulfillment constraints.
Net sales in regions outside the United States increased $38.7
million, or 14.2%, to $311.0 million for the three months ended
March 31, 2022 compared to $272.3 million for the three months
ended March 31, 2021. On a constant currency basis, net sales in
such regions increased $57.8 million, or 21.2%, to $330.1 million.
In EMEA, net sales increased across all reportable segments,
primarily due to the adverse impact of government-ordered shutdowns
in this region in the first quarter of 2021. In Korea, net sales
increased in all reportable segments except Titleist golf gear
which was impacted by supply chain
constraints. In Japan, net sales decreased in all reportable
segments except FootJoy golf wear due to supply chain and
fulfillment constraints. In Rest of World, net sales increased
across all reportable segments.
Gross Profit
Gross profit increased $6.3 million to $317.0 million for the three
months ended March 31, 2022 compared to $310.7 million for the
three months ended March 31, 2021. Gross margin decreased to 52.3%
for the three months ended March 31, 2022 compared to 53.5% for the
three months ended March 31, 2021. The increase in gross profit
primarily resulted from an increase of $11.8 million in FootJoy
golf wear primarily due to the sales volume increases discussed
previously. This increase was partially offset by a decrease of
$6.4 million in Titleist golf gear primarily due to lower net sales
as discussed previously, a decrease of $3.2 million in Titleist
golf clubs primarily due to higher component costs and higher
inbound freight costs across all reportable segments.
The decrease in gross margin was primarily driven by lower gross
margins in FootJoy golf wear, Titleist golf clubs and Titleist golf
gear and was partially offset by higher gross margins in Titleist
golf balls. The decrease in Titleist golf clubs was primarily due
to higher component costs. Higher gross margins in Titleist golf
balls were primarily due to favorable manufacturing costs. Higher
inbound freight costs unfavorably impacted gross margin across all
reportable segments.
Selling, General and Administrative Expenses
SG&A expenses increased $19.3 million to $195.7 million for the
three months ended March 31, 2022 compared to $176.4 million for
the three months ended March 31, 2021. This increase was primarily
due to an increase of $11.0 million in selling expense due to
higher sales volumes as discussed previously including higher
retail commission expense in Korea and higher distribution
expenses, an increase of $5.4 million in administrative expense
primarily due to information technology related consulting
expenses, and an increase of $2.1 million in advertising and
promotional expenses, primarily in Titleist golf clubs. Overall,
SG&A included a $4.0 million favorable impact of changes in
foreign currency exchange rates across all expense categories and
reportable segments.
Research and Development
R&D expenses increased $1.7 million to $14.0 million for the
three months ended March 31, 2022 compared to $12.3 million for the
three months ended March 31, 2021, primarily related to an increase
in employee-related costs.
Interest Expense, net
Interest expense, net decreased $2.3 million to $1.3 million for
the three months ended March 31, 2022 compared to $3.6 million for
the three months ended March 31, 2021. This decrease was primarily
due to a decrease in losses from interest rate swaps, lower
interest rates and a decrease in the amortization for debt issuance
costs.
Income Tax Expense
Income tax expense decreased $6.9 million to $20.9 million for the
three months ended March 31, 2022 compared to $27.8 million for the
three months ended March 31, 2021. Our effective income tax rate
("ETR") was 20.4% for the three months ended March 31, 2022
compared to 24.3% for the three months ended March 31, 2021. The
decrease in the ETR was primarily driven by changes in our
jurisdictional mix of earnings.
Segment Results
Titleist Golf Balls Segment
Net sales in our Titleist golf balls segment decreased $9.8
million, or 5.6%, to $163.8 million for the three months ended
March 31, 2022 compared to $173.6 million for the three months
ended March 31, 2021. On a constant currency basis, net sales in
our Titleist golf balls segment decreased $6.1 million, or 3.5%, to
$167.5 million. This decrease was due to lower sales volumes across
all models as a result of limited availability of certain raw
materials.
Operating income in our Titleist golf balls segment decreased $0.9
million, or 2.6%, to $33.4 million for the three months ended March
31, 2022 compared to $34.3 million for the three months ended March
31, 2021. Higher gross profit of $1.5 million was offset by higher
operating expenses, resulting in a decrease in operating income.
The higher gross profit was driven by an improvement in
manufacturing costs, as prior year production was more unfavorably
impacted by raw material availability, and higher average selling
prices and was partially offset by higher inbound freight costs.
Operating expenses increased primarily as a result of an increase
of $1.8 million in administrative expenses, as discussed
previously.
Titleist Golf Clubs Segment
Net sales in our Titleist golf clubs segment increased $5.0
million, or 3.2%, to $160.8 million for the three months ended
March 31, 2022 compared to $155.8 million for the three months
ended March 31, 2021. On a constant currency basis, net sales in
our Titleist golf clubs segment increased $9.5 million, or 6.1%, to
$165.3 million. This increase was largely due to higher sales
volumes of our newly introduced SM9 wedges launched in the first
quarter of 2022 and T-Series irons launched in the fourth quarter
of 2021. This increase was partially offset by lower sales volumes
of drivers, hybrids and fairways which were all in their second
model year and were also impacted by component shortages and
delays.
Operating income in our Titleist golf clubs segment decreased $9.6
million to $32.2 million for the three months ended March 31, 2022
compared to $41.8 million for the three months ended March 31,
2021. The decrease in operating income resulted from lower gross
profit of $3.2 million and higher operating expenses. The decrease
in gross profit was due to higher inbound freight and component
costs. Higher operating expenses were primarily as a result of an
increase of $2.4 million in selling expense primarily due to higher
distribution expenses and an increase of $1.9 million in
advertising and promotional expense.
Titleist Golf Gear Segment
Net sales in our Titleist golf gear segment decreased $9.0 million,
or 16.9%, to $44.1 million for the three months ended March 31,
2022 compared to $53.1 million for the three months ended March 31,
2021. On a constant currency basis, net sales in our Titleist golf
gear segment decreased $7.5 million, or 14.1%, to $45.6 million.
This decrease was primarily due to sales volume decreases in golf
bags and headwear product categories due to supply chain and
fulfillment constraints, partially offset by higher average selling
prices across all product categories.
Operating income in our Titleist golf gear segment decreased $7.5
million, or 77.3%, to $2.2 million for the three months ended March
31, 2022 compared to $9.7 million for the three months ended March
31, 2021. The decrease in operating income was primarily as a
result of lower gross profit of $6.4 million due to the sales
volume decrease discussed previously and increased inbound freight
costs.
FootJoy Golf Wear Segment
Net sales in our FootJoy golf wear segment increased $38.2 million,
or 24.0%, to $197.6 million for the three months ended March 31,
2022 compared to $159.4 million for the three months ended March
31, 2021. On a constant currency basis, net sales in our FootJoy
golf wear segment increased $45.0 million, or 28.2%, to $204.4
million. This increase was primarily due to increased sales volumes
and higher average selling prices across all product categories
primarily driven by EMEA.
Operating income in our FootJoy golf wear segment increased $3.2
million, or 11.4%, to $31.3 million for the three months ended
March 31, 2022 compared to $28.1 million for the three months ended
March 31, 2021. The increase in operating income resulted from
higher gross profit of $11.8 million primarily as a result of the
sales volume increase and higher average selling prices discussed
previously, partially offset by increased inbound freight costs and
higher operating expenses. Operating expenses increased primarily
as a result of an increase of $6.5 million in selling expense due
to higher sales volumes as discussed previously including higher
retail commission expense in Korea and higher distribution
expenses, as well as an increase of $1.6 million in administrative
expense, as discussed previously.
Liquidity and Capital Resources
Our primary cash needs relate to working capital, capital
expenditures, servicing our debt, paying dividends, pension
contributions and repurchasing shares of our common stock. We
expect to rely on cash flows from operations and borrowings under
our revolving credit facility and local credit facilities as our
primary sources of liquidity.
Our liquidity is impacted by our level of working capital, which is
cyclical as a result of the general seasonality of our business.
Our accounts receivable balance is generally at its highest
starting at the end of the first quarter and continuing through the
second quarter, and declines during the third and fourth quarters
as a result of both an increase in cash collections and lower
sales. Our inventory balance also fluctuates as a result of the
seasonality of our business. Generally, our buildup of inventory
starts during the fourth quarter and continues through the first
quarter and into the beginning of the second quarter in order to
meet demand for our initial sell-in during the first quarter and
reorders in the second quarter. Both accounts receivable and
inventory balances are impacted by the timing of new product
launches.
As of March 31, 2022, we had $112.6 million of unrestricted
cash and cash equivalents (including $13.8 million
attributable to our FootJoy golf shoe variable interest entity). As
of March 31, 2022, 73.4% of our total unrestricted cash
and
cash equivalents was held at our non-U.S. subsidiaries, including
our FootJoy golf shoe variable interest entity. We manage our
worldwide cash requirements by monitoring the funds available among
our subsidiaries and determining the extent to which we can access
those funds on a cost effective basis. We are not aware of any
restrictions on repatriation of these funds and, subject to foreign
withholding taxes, those funds could be repatriated, if necessary.
We have repatriated, and intend to repatriate, funds to the United
States from time to time to satisfy domestic liquidity needs
arising in the ordinary course of business, including liquidity
needs related to debt service requirements.
As noted previously, the COVID-19 pandemic could impact our results
of operations in ways we cannot currently predict. Nonetheless, we
believe that cash expected to be provided by operating activities,
together with our cash on hand and the availability of borrowings
under our revolving credit facility and our local credit facilities
(subject to customary borrowing conditions) will be sufficient to
meet our liquidity requirements for at least the next 12 months.
Our ability to generate sufficient cash flows from operations is,
however, subject to many risks and uncertainties, including future
economic trends and conditions (such as the COVID-19 pandemic),
demand for our products, availability and cost of our raw materials
and components, foreign currency exchange rates and other risks and
uncertainties applicable to our business, as described in our
Annual Report on Form 10-K for the year ended December 31,
2021.
Debt and Financing Arrangements
As of March 31, 2022, we had $306.7 million of availability under
our revolving credit facility after giving effect to $12.3 million
of outstanding letters of credit. Additionally, we had $38.2
million available under our local credit facilities.
Our credit agreement contains customary affirmative and restrictive
covenants, including, among others, financial covenants based on
our leverage and interest coverage ratios. The credit agreement
also includes customary events of default, the occurrence of which,
following any applicable cure period, would permit the lenders to,
among other things, declare the principal, accrued interest and
other obligations to be immediately due and payable. As of March
31, 2022, we were in compliance with all covenants under the credit
agreement.
See “Notes to Consolidated Financial Statements-Note-10-Debt and
Financing Arrangements” in our Annual Report on Form 10-K for the
year ended December 31, 2021 for a description of our credit
facilities and related credit agreement. Additionally, see "Risk
Factors - Risks Related to Our Indebtedness" as described in our
Annual Report on Form 10-K for the year ended December 31, 2021 for
further discussion surrounding the risks and uncertainties related
to our credit facilities.
Capital Expenditures
We made $11.7 million of capital expenditures during the three
months ended March 31, 2022. Capital expenditures for the full year
are expected to be approximately $60 million, although the actual
amount may vary depending upon a variety of factors, including the
timing of certain capital project implementations and receipt of
capital purchases due to supply chain challenges. Capital
expenditures generally relate to investments to support the
manufacturing and distribution of products, our go-to-market
activities and continued investments in information technology to
support our global strategic initiatives.
Dividends and Share Repurchase Program
As of March 31, 2022, our Board of Directors has authorized us to
repurchase up to an aggregate of $200.0 million of our issued and
outstanding common stock. During the three months ended March 31,
2022, we repurchased 1,163,799 shares of common stock at an average
price of $50.79 for an aggregate of $59.1 million. Included in this
amount were 699,819 shares of common stock repurchased from Magnus
for an aggregate of $37.5 million on January 24, 2022, in
satisfaction of our obligations pursuant to our previously
disclosed Magnus share repurchase agreement.
As of March 31, 2022, we had $39.1 million remaining under the
current share repurchase authorization. On April 28, 2022, the
Board of Directors authorized us to repurchase up to an additional
$150.0 million of our issued and outstanding common stock, bringing
the total authorization up to $350.0 million. See “Notes to
Unaudited Condensed Consolidated Financial
Statements-Note-10-Common Stock,” Item 1 of Part I included
elsewhere in this report for a description of our share repurchase
program and Magnus share repurchase agreements.
During the three months ended March 31, 2022, we paid dividends on
our common stock of $14.0 million to our shareholders. During the
second quarter of 2022, our Board of Directors declared a dividend
of $0.180 per share of common stock to shareholders of record as of
June 3, 2022 and payable on June 17, 2022.
Cash Flows
The following table presents the major components of net cash flows
provided by (used in) operating, investing and financing activities
for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
March 31, |
|
(in thousands) |
|
2022 |
|
2021 |
|
Cash flows provided by (used in): |
|
|
|
|
|
Operating activities |
|
$ |
(164,048) |
|
|
$ |
(29,996) |
|
|
Investing activities |
|
(11,686) |
|
|
(6,410) |
|
|
Financing activities |
|
9,471 |
|
|
(1,226) |
|
|
Effect of foreign exchange rate changes on cash, cash equivalents
and restricted cash |
|
(1,012) |
|
|
(773) |
|
|
Net decrease in cash, cash equivalents and restricted
cash |
|
$ |
(167,275) |
|
|
$ |
(38,405) |
|
Cash Flows from Operating Activities
Net cash used in operating activities increased $134.0 million to
$164.0 million for the three months ended March 31, 2022 compared
to $30.0 million for the three months ended March 31, 2021. The
increase in cash used in operating activities was primarily driven
by changes in working capital. Working capital at any specific
point in time is subject to many variables, including seasonality
and inventory management, the timing of cash receipts and payments,
vendor payment terms and fluctuations in foreign exchange
rates.
Cash Flows from Investing Activities
Net cash used in investing activities increased $5.3 million to
$11.7 million for the three months ended March 31, 2022 compared to
$6.4 million for the three months ended March 31, 2021, driven
by changes in capital expenditures.
Cash Flows from Financing Activities
Net cash provided by financing activities increased $10.7 million
to $9.5 million for the three months ended March 31, 2022 compared
to net cash used in financing activities of $1.2 million for the
three months ended March 31, 2021. This increase was primarily
due to an increase in proceeds from borrowings, offset in part by
an increase in purchases of common stock.
Off-Balance Sheet Arrangements
As of March 31, 2022, other than as discussed above, we did not
have any off-balance sheet arrangements that have, or are
reasonably likely to have, a current or future effect on our
financial condition, results of operations, liquidity, capital
expenditures or capital resources.
Critical Accounting Estimates
There have been no material changes to our critical accounting
estimates from the information provided in Part II, Item 7,
“Management’s Discussion and Analysis of Financial Condition and
Results of Operations,” included in our Annual Report on Form 10-K
for the year ended December 31, 2021.
Recently Issued Accounting Standards
We have reviewed all recently issued standards and have determined
that, other than as disclosed in "Notes to Unaudited Condensed
Consolidated Financial Statements-Note-1-Summary of Significant
Accounting Policies," Item 1 of Part I included elsewhere in this
report, such standards will not have a significant impact on our
consolidated financial statements or otherwise do not apply to our
operations.
ITEM 3. Quantitative
and Qualitative Disclosures About Market Risk
We are exposed to various market risks, which may result in
potential losses arising from adverse changes in market rates, such
as interest rates, foreign exchange rates and commodity prices and
availability, as well as inflation risk. We do not enter into
derivatives or other financial instruments for trading or
speculative purposes and do not believe we are exposed to material
market risk with respect to our cash and cash
equivalents.
Interest Rate Risk
We are exposed to interest rate risk under our various credit
facilities which accrue interest at variable rates, as described in
"Notes to Unaudited Condensed Consolidated Financial
Statements-Note-5- Debt and Financing Arrangements,” Item1 of Part
I, included elsewhere in this report. Interest rate risk is highly
sensitive due to many factors, including U.S. monetary and tax
policies, U.S. and international economic factors and other factors
beyond our control. We are exposed to changes in the level of
interest rates and to changes in the relationship or spread between
interest rates for our floating rate debt. Our floating rate debt
requires payments based on a variable interest rate index.
Increases in interest rates may reduce our net income by increasing
the cost of our debt.
We performed a sensitivity analysis to assess the potential effect
of a hypothetical movement in interest rates on our annual pre-tax
interest expense. As of March 31, 2022, we had $407.9 million of
outstanding indebtedness at variable interest rates (excluding
unamortized debt issuance costs). The sensitivity analysis, while
not predictive in nature, indicated that a one percentage point
increase in the interest rate applied to these borrowings as of
March 31, 2022 would have resulted in an increase of $4.1 million
in our annual pre-tax interest expense.
Foreign Exchange Risk
We are exposed to foreign currency transaction risk related to
transactions denominated in a currency other than functional
currency. In addition, we are exposed to currency translation risk
resulting from the translation of the financial results of our
consolidated subsidiaries from their functional currency into U.S.
dollars for financial reporting purposes.
We use financial instruments to reduce the earnings and
shareholders' equity volatility relating to transaction risk. The
principal financial instruments we enter into on a routine basis
are foreign exchange forward contracts, primarily pertaining to the
U.S. dollar, the Japanese yen, the British pound sterling, the
Canadian dollar, the Korean won and the euro. The periods of the
foreign exchange forward contracts designated as hedges correspond
to the periods of the forecasted hedged transactions, which do not
exceed 24 months subsequent to the latest balance sheet date.
We do not enter into derivative financial instrument contracts for
trading or speculative purposes.
We performed a sensitivity analysis to assess potential changes in
the fair value of our foreign exchange forward contracts relating
to a hypothetical movement in foreign currency exchange rates. The
gross U.S. dollar equivalent notional amount of all foreign
exchange forward contracts outstanding at March 31, 2022 was $245.0
million, representing a net settlement asset of $9.3 million. The
sensitivity analysis of changes in the fair value of our foreign
exchange forward contracts outstanding as of March 31, 2022, while
not predictive in nature, indicated that the net settlement asset
of $9.3 million would decrease by $13.9 million resulting in a net
settlement liability of $4.6 million, if the U.S. dollar uniformly
weakened by 10% against all currencies covered by our
contracts.
The sensitivity analysis described above recalculates the fair
value of the foreign exchange forward contracts outstanding by
replacing the actual foreign currency exchange rates and current
month forward rates with foreign currency exchange rates and
forward rates that reflect a 10% weakening of the U.S. dollar
against all currencies covered by our contracts. All other factors
are held constant. The sensitivity analysis disregards the
possibility that currency exchange rates can move in opposite
directions and that gains from one currency may or may not be
offset by losses from another currency. The analysis also
disregards the offsetting change in value of the underlying hedged
transactions and balances.
The financial markets and currency volatility may limit our ability
to cost-effectively hedge these exposures. The counterparties to
derivative contracts are major financial institutions with
investment grade credit ratings. We monitor the credit quality of
these financial institutions on an ongoing basis.
Commodity Risk
We are exposed to commodity price and availability risks with
respect to certain materials and components used by us, our
suppliers and our manufacturers, including polybutadiene, urethane
and Surlyn for the manufacturing of our golf balls, titanium and
steel for the assembly of our golf clubs, leather and synthetic
fabrics for our golf shoes, golf gloves, golf gear and golf
apparel, and resin and other petroleum-based materials for a number
of our products.
Impact of Inflation
Our results of operations and financial condition are presented
based on historical cost, and inflation in the cost of our
products, overhead costs or wage rates may adversely affect our
operating results. During the three months ended March 31, 2022,
the impact of inflation resulted in increased raw material and
other input costs as compared to the three months ended March 31,
2021. Should the current higher inflationary environment continue,
including increased raw material and other input costs, our
business, results of operations, financial position and cash flows
could be materially impacted in the future.
ITEM 4. Controls
and Procedures
Evaluation of Disclosure Controls and Procedures.
Our management, with the participation of our principal executive
officer and principal financial officer, has evaluated the
effectiveness of our disclosure controls and procedures (as defined
in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act
of 1934, as amended (the “Exchange Act”)), as of the end of the
fiscal quarter ended March 31, 2022. Based on such evaluation, our
principal executive officer and principal financial officer have
concluded that as of such date, our disclosure controls and
procedures were effective.
Changes in Internal Control over Financial Reporting.
There were no changes in our internal controls over financial
reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act) during the fiscal quarter ended March 31, 2022 that
have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
PART II. OTHER
INFORMATION
ITEM 1. Legal
Proceedings
We are party to lawsuits associated with the normal conduct of our
businesses and operations. It is not possible to predict the
outcome of the pending actions, and, as with any litigation, it is
possible that some of these actions could be decided
unfavorably.
Item 1A. Risk
Factors
You should carefully consider each of the risk factors included in
Part I, Item 1A of our Annual Report on Form 10-K for the year
ended December 31, 2021, as well as the other information set forth
in this report. There have been no material changes to the risk
factors as described in our Annual Report on Form 10-K for the year
ended December 31, 2021.
ITEM 2. Unregistered
Sales of Equity Securities and Use of Proceeds
The following table provides information relating to the Company’s
purchase of common stock for the first quarter of
2022:
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Period |
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Total number of shares purchased |
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Average price paid per share |
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Total number of shares purchased as part of publicly announced
plans or programs |
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Approximate dollar value of shares that may yet be purchased under
the plans or programs
(1)
(in thousands)
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January 1, 2022 - January 31, 2022
(2)
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914,799 |
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$ |
52.76 |
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914,799 |
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$ |
49,909 |
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February 1, 2022 - February 28, 2022 |
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111,000 |
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44.52 |
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111,000 |
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44,967 |
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March 1, 2022 - March 31, 2022 |
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138,000 |
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42.75 |
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138,000 |
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39,067 |
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Total |
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1,163,799 |
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$ |
50.79 |
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1,163,799 |
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$ |
39,067 |
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_______________________________________________________________________________
(1) As of March 31, 2022, the Board of
Directors had authorized us to repurchase up to an aggregate of
$200.0 million of our issued and outstanding common stock. On
April 28, 2022, the Board of Directors authorized us to
repurchase up to an additional $150.0 million of our issued and
outstanding common stock, bringing the total authorization up to
$350.0 million.
(2) Includes 699,819 shares of common stock
repurchased from Magnus for an aggregate of $37.5 million, in
satisfaction of our previously disclosed share repurchase
obligations. See “Notes to Unaudited Condensed Consolidated
Financial Statements-Note 10-Common Stock,” Item 1 of Part I,
included elsewhere in this report, for disclosures related to the
Magnus share repurchase agreement.
ITEM 3. Defaults
Upon Senior Securities
None.
ITEM 4. Mine
Safety Disclosures
None.
ITEM 5. Other
Information
None.
ITEM 6. Exhibits
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Exhibit No. |
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Description |
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101.INS |
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Inline XBRL Instance Document - the instance document does not
appear in the Interactive Data File because its XBRL tags are
embedded within the Inline XBRL document. |
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101.SCH |
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Taxonomy Extension Schema Document |
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101.CAL |
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Inline XBRL Taxonomy Extension Calculation Linkbase
Document |
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101.DEF |
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Inline XBRL Taxonomy Extension Definition Linkbase
Document |
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101.LAB |
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Inline XBRL Taxonomy Extension Labels Linkbase Document |
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101.PRE |
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Inline XBRL Taxonomy Extension Presentation Linkbase
Document |
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104 |
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Cover Page Interactive Data File (formatted in Inline XBRL and
contained in Exhibit 101) |
SIGNATURES
Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
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ACUSHNET HOLDINGS CORP. |
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Dated: May 5, 2022 |
By: |
/s/ David Maher |
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David Maher |
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President and Chief Executive Officer |
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(Principal Executive Officer) |
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Dated: May 5, 2022 |
By: |
/s/ Thomas Pacheco |
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Thomas Pacheco |
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Executive Vice President, Chief Financial Officer and Chief
Accounting Officer |
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(Principal Financial Officer and Principal Accounting
Officer) |
Acushnet (NYSE:GOLF)
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