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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, 2023
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 67,363,140 shares of common stock outstanding as
of April 28, 2023.
ACUSHNET HOLDINGS CORP.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023
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. 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:
•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;
•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;
•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;
•the
execution of our share repurchase program 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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ACUSHNET HOLDINGS CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
December 31, |
|
(in thousands, except share and per share amounts) |
|
2023 |
|
2022 |
|
Assets |
|
|
|
|
|
Current assets |
|
|
|
|
|
Cash, cash equivalents and restricted cash ($15,970 and $14,376
attributable to the variable interest entity ("VIE"))
|
|
$ |
57,284 |
|
|
$ |
58,904 |
|
|
Accounts receivable, net |
|
435,385 |
|
|
216,695 |
|
|
Inventories ($8,238 and $17,866 attributable to the
VIE)
|
|
639,123 |
|
|
674,684 |
|
|
Prepaid and other assets |
|
134,455 |
|
|
108,793 |
|
|
Total current assets |
|
1,266,247 |
|
|
1,059,076 |
|
|
Property, plant and equipment, net ($9,848 and $10,089 attributable
to the VIE)
|
|
260,403 |
|
|
254,472 |
|
|
Goodwill ($32,312 and $32,312 attributable to the VIE)
|
|
225,352 |
|
|
224,814 |
|
|
Intangible assets, net |
|
547,859 |
|
|
525,903 |
|
|
Deferred income taxes |
|
34,444 |
|
|
47,551 |
|
|
Other assets ($2,060 and $2,083 attributable to the
VIE)
|
|
118,708 |
|
|
81,991 |
|
|
Total assets |
|
$ |
2,453,013 |
|
|
$ |
2,193,807 |
|
|
Liabilities, Redeemable Noncontrolling Interests and Shareholders'
Equity |
|
|
|
|
|
Current liabilities |
|
|
|
|
|
Short-term debt |
|
$ |
44,555 |
|
|
$ |
40,336 |
|
|
|
|
|
|
|
Accounts payable ($7,888 and $11,914 attributable to the
VIE)
|
|
161,300 |
|
|
166,998 |
|
|
Accrued taxes |
|
72,077 |
|
|
40,922 |
|
|
Accrued compensation and benefits ($857 and $1,651 attributable to
the VIE)
|
|
67,319 |
|
|
98,245 |
|
|
Accrued expenses and other liabilities ($2,385 and $3,380
attributable to the VIE)
|
|
119,076 |
|
|
202,124 |
|
|
Total current liabilities |
|
464,327 |
|
|
548,625 |
|
|
Long-term debt |
|
784,573 |
|
|
527,509 |
|
|
Deferred income taxes |
|
5,746 |
|
|
5,896 |
|
|
Accrued pension and other postretirement benefits |
|
75,298 |
|
|
74,234 |
|
|
Other noncurrent liabilities ($2,147 and $2,145 attributable to the
VIE)
|
|
90,251 |
|
|
54,177 |
|
|
Total liabilities |
|
1,420,195 |
|
|
1,210,441 |
|
|
Commitments and contingencies (Note 15)
|
|
|
|
|
|
Redeemable noncontrolling interests |
|
7,670 |
|
|
6,663 |
|
|
Shareholders' equity |
|
|
|
|
|
Common stock, $0.001 par value, 500,000,000 shares authorized;
76,769,461 and 76,321,523 shares issued
|
|
77 |
|
|
76 |
|
|
Additional paid-in capital |
|
956,834 |
|
|
960,685 |
|
|
Accumulated other comprehensive loss, net of tax |
|
(113,679) |
|
|
(109,668) |
|
|
Retained earnings |
|
552,596 |
|
|
473,130 |
|
|
Treasury stock, at cost; 9,406,503 and 8,892,425 shares (including
2,000,839 of accrued share repurchases as of December 31, 2022)
(Note 10)
|
|
(408,706) |
|
|
(385,167) |
|
|
Total equity attributable to Acushnet Holdings Corp. |
|
987,122 |
|
|
939,056 |
|
|
Noncontrolling interests |
|
38,026 |
|
|
37,647 |
|
|
Total shareholders' equity |
|
1,025,148 |
|
|
976,703 |
|
|
Total liabilities, redeemable noncontrolling interests and
shareholders' equity |
|
$ |
2,453,013 |
|
|
$ |
2,193,807 |
|
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) |
|
|
|
|
|
2023 |
|
2022 |
|
Net sales |
|
|
|
|
|
$ |
686,290 |
|
|
$ |
606,087 |
|
|
Cost of goods sold |
|
|
|
|
|
320,618 |
|
|
289,088 |
|
|
Gross profit |
|
|
|
|
|
365,672 |
|
|
316,999 |
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
|
|
|
222,539 |
|
|
195,691 |
|
|
Research and development |
|
|
|
|
|
14,540 |
|
|
13,976 |
|
|
Intangible amortization |
|
|
|
|
|
3,689 |
|
|
1,963 |
|
|
|
|
|
|
|
|
|
|
|
Income from operations |
|
|
|
|
|
124,904 |
|
|
105,369 |
|
|
Interest expense, net |
|
|
|
|
|
9,896 |
|
|
1,277 |
|
|
Other expense, net |
|
|
|
|
|
664 |
|
|
1,326 |
|
|
Income before income taxes |
|
|
|
|
|
114,344 |
|
|
102,766 |
|
|
Income tax expense |
|
|
|
|
|
20,725 |
|
|
20,919 |
|
|
Net income |
|
|
|
|
|
93,619 |
|
|
81,847 |
|
|
Less: Net income attributable to noncontrolling
interests |
|
|
|
|
|
(344) |
|
|
(802) |
|
|
Net income attributable to Acushnet Holdings Corp. |
|
|
|
|
|
$ |
93,275 |
|
|
$ |
81,045 |
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share attributable to Acushnet Holdings
Corp.: |
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
|
|
$ |
1.37 |
|
|
$ |
1.10 |
|
|
Diluted |
|
|
|
|
|
1.36 |
|
|
1.10 |
|
|
Weighted average number of common shares: |
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
|
|
68,213,068 |
|
|
73,513,109 |
|
|
Diluted |
|
|
|
|
|
68,646,212 |
|
|
73,922,728 |
|
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) |
|
|
|
|
2023 |
|
2022 |
|
Net income |
|
|
|
|
$ |
93,619 |
|
|
$ |
81,847 |
|
|
Other comprehensive loss: |
|
|
|
|
|
|
|
|
Foreign currency translation adjustments |
|
|
|
|
565 |
|
|
(7,570) |
|
|
Cash flow derivative instruments: |
|
|
|
|
|
|
|
|
Unrealized holding (losses) gains arising during period |
|
|
|
|
(833) |
|
|
3,076 |
|
|
Reclassification adjustments included in net income |
|
|
|
|
(5,211) |
|
|
(1,355) |
|
|
Tax benefit (expense) |
|
|
|
|
1,784 |
|
|
(516) |
|
|
Cash flow derivative instruments, net |
|
|
|
|
(4,260) |
|
|
1,205 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension and other postretirement benefits: |
|
|
|
|
|
|
|
|
Pension and other postretirement benefits adjustments |
|
|
|
|
(406) |
|
|
1,863 |
|
|
Tax benefit (expense) |
|
|
|
|
90 |
|
|
(443) |
|
|
Pension and other postretirement benefits adjustments,
net |
|
|
|
|
(316) |
|
|
1,420 |
|
|
Total other comprehensive loss |
|
|
|
|
(4,011) |
|
|
(4,945) |
|
|
Comprehensive income |
|
|
|
|
89,608 |
|
|
76,902 |
|
|
Less: Comprehensive income attributable to noncontrolling
interests |
|
|
|
|
(408) |
|
|
(747) |
|
|
Comprehensive income attributable to Acushnet Holdings
Corp. |
|
|
|
|
$ |
89,200 |
|
|
$ |
76,155 |
|
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) |
2023 |
|
2022 |
|
Cash flows from operating activities |
|
|
|
|
Net income |
$ |
93,619 |
|
|
$ |
81,847 |
|
|
Adjustments to reconcile net income to cash flows used in operating
activities |
|
|
|
|
Depreciation and amortization |
12,631 |
|
|
10,367 |
|
|
Unrealized foreign exchange (gain) loss |
(2,768) |
|
|
1,433 |
|
|
Amortization of debt issuance costs |
165 |
|
|
203 |
|
|
Share-based compensation |
7,283 |
|
|
5,353 |
|
|
Gain on disposals of property, plant and equipment |
(6) |
|
|
(1) |
|
|
Deferred income taxes |
14,278 |
|
|
4,341 |
|
|
Changes in operating assets and liabilities |
|
|
|
|
Accounts receivable |
(218,544) |
|
|
(206,468) |
|
|
Inventories |
35,126 |
|
|
(39,341) |
|
|
Accounts payable |
(4,833) |
|
|
30,079 |
|
|
Accrued taxes |
31,468 |
|
|
17,464 |
|
|
|
|
|
|
Other assets and liabilities |
(54,837) |
|
|
(69,325) |
|
|
|
|
|
|
Cash flows used in operating activities |
(86,418) |
|
|
(164,048) |
|
|
Cash flows from investing activities |
|
|
|
|
Additions to property, plant and equipment |
(11,698) |
|
|
(11,686) |
|
|
Additions to intangible assets (Note 16)
|
(22,235) |
|
|
— |
|
|
|
|
|
|
Other, net |
(901) |
|
|
— |
|
|
Cash flows used in investing activities |
(34,834) |
|
|
(11,686) |
|
|
Cash flows from financing activities |
|
|
|
|
(Repayments of) proceeds from short-term borrowings, net (Note
5)
|
(3,796) |
|
|
97,700 |
|
|
|
|
|
|
Proceeds from revolving credit facilities (Note 5)
|
539,783 |
|
|
— |
|
|
Repayments of revolving credit facilities (Note 5)
|
(275,873) |
|
|
— |
|
|
Repayments of term loan facility (Note 5)
|
— |
|
|
(4,375) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of common stock |
(116,123) |
|
|
(59,108) |
|
|
|
|
|
|
Dividends paid on common stock |
(14,304) |
|
|
(13,984) |
|
|
|
|
|
|
Dividends paid to noncontrolling interests |
— |
|
|
(101) |
|
|
Payment of employee restricted stock tax withholdings |
(11,455) |
|
|
(10,661) |
|
|
Other, net |
1,078 |
|
|
— |
|
|
Cash flows provided by financing activities |
119,310 |
|
|
9,471 |
|
|
Effect of foreign exchange rate changes on cash, cash equivalents
and restricted cash |
322 |
|
|
(1,012) |
|
|
Net decrease in cash, cash equivalents and restricted
cash |
(1,620) |
|
|
(167,275) |
|
|
Cash, cash equivalents and restricted cash, beginning of
year |
58,904 |
|
|
281,677 |
|
|
Cash, cash equivalents and restricted cash, end of
period |
$ |
57,284 |
|
|
$ |
114,402 |
|
|
Supplemental non-cash information |
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment, accrued not
paid |
$ |
3,595 |
|
|
$ |
1,744 |
|
|
Additions to right-of-use assets obtained in exchange for operating
lease obligations |
41,894 |
|
|
8,065 |
|
|
Additions to right-of-use assets obtained in exchange for finance
lease obligations |
607 |
|
|
335 |
|
|
|
|
|
|
|
|
|
|
Dividend equivalents rights ("DERs") declared not paid |
452 |
|
|
427 |
|
|
Contingent consideration (Note 16)
|
3,000 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, 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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances as of December 31, 2022 |
|
|
|
76,322 |
|
|
$ |
76 |
|
|
$ |
960,685 |
|
|
$ |
(109,668) |
|
|
$ |
473,130 |
|
|
$ |
(385,167) |
|
|
$ |
939,056 |
|
|
$ |
37,647 |
|
|
$ |
976,703 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of equity to noncontrolling interests |
|
|
|
— |
|
|
— |
|
|
444 |
|
|
— |
|
|
(180) |
|
|
— |
|
|
264 |
|
|
— |
|
|
264 |
|
|
Net income |
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
93,275 |
|
|
— |
|
|
93,275 |
|
|
379 |
|
|
93,654 |
|
|
Other comprehensive loss |
|
|
|
— |
|
|
— |
|
|
— |
|
|
(4,011) |
|
|
— |
|
|
— |
|
|
(4,011) |
|
|
— |
|
|
(4,011) |
|
|
Share-based compensation |
|
|
|
— |
|
|
— |
|
|
7,119 |
|
|
— |
|
|
— |
|
|
— |
|
|
7,119 |
|
|
— |
|
|
7,119 |
|
|
Vesting of restricted common stock, including impact of
DERs,
net of shares withheld for employee taxes (Note 11)
|
|
|
|
447 |
|
|
1 |
|
|
(11,414) |
|
|
— |
|
|
— |
|
|
— |
|
|
(11,413) |
|
|
— |
|
|
(11,413) |
|
|
Purchases of common stock (Note 10)
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(23,539) |
|
|
(23,539) |
|
|
— |
|
|
(23,539) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends and dividend equivalents declared |
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(13,629) |
|
|
— |
|
|
(13,629) |
|
|
— |
|
|
(13,629) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances as of March 31, 2023 |
|
|
|
76,769 |
|
|
$ |
77 |
|
|
$ |
956,834 |
|
|
$ |
(113,679) |
|
|
$ |
552,596 |
|
|
$ |
(408,706) |
|
|
$ |
987,122 |
|
|
$ |
38,026 |
|
|
$ |
1,025,148 |
|
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, 2023 are not
necessarily indicative of results to be expected for the full year
ending December 31, 2023, nor were those of the comparable 2022
periods representative of those actually experienced for the full
year ended December 31, 2022. 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, 2022 included
in its Annual Report on Form 10-K filed with the SEC on
March 1, 2023.
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.
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 unaudited condensed
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, 2023 and December 31, 2022.
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
Interests
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 records 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 redeemable noncontrolling interests and any
related loans to minority shareholders, which are recorded as a
reduction to redeemable noncontrolling interests, are 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, 2023 and December 31, 2022.
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 both
March 31, 2023 and December 31, 2022, the amount of restricted cash
included in cash, cash equivalents and restricted cash on the
unaudited condensed consolidated balance sheets was $1.8
million.
Foreign Currency Transactions
Foreign currency transaction losses included in selling, general
and administrative expenses were $1.3 million and $1.8 million for
the three months ended March 31, 2023 and 2022,
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, which could affect the collectability of the
reported amounts. All of these factors have been considered in the
estimate of expected credit losses for the periods
presented.
The activity related to the allowance for doubtful accounts was as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, |
|
(in thousands) |
|
|
|
|
|
2023 |
|
2022 |
|
Balance at beginning of period |
|
|
|
|
|
$ |
8,258 |
|
|
$ |
5,980 |
|
|
Bad debt expense |
|
|
|
|
|
254 |
|
|
922 |
|
|
Amount of receivables written off |
|
|
|
|
|
(52) |
|
|
(44) |
|
|
Foreign currency translation |
|
|
|
|
|
48 |
|
|
(72) |
|
|
Balance at end of period |
|
|
|
|
|
$ |
8,508 |
|
|
$ |
6,786 |
|
3. Inventories
The components of inventories were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
December 31, |
|
(in thousands) |
|
2023 |
|
2022 |
|
Raw materials and supplies |
|
$ |
150,635 |
|
|
$ |
154,881 |
|
|
Work-in-process |
|
28,862 |
|
|
29,689 |
|
|
Finished goods |
|
459,626 |
|
|
490,114 |
|
|
Inventories |
|
$ |
639,123 |
|
|
$ |
674,684 |
|
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) |
|
|
|
|
|
2023 |
|
2022 |
|
Balance at beginning of period |
|
|
|
|
|
$ |
3,951 |
|
|
$ |
4,177 |
|
|
Provision |
|
|
|
|
|
1,675 |
|
|
995 |
|
|
Claims paid/costs incurred |
|
|
|
|
|
(1,229) |
|
|
(1,045) |
|
|
Foreign currency translation |
|
|
|
|
|
(11) |
|
|
(36) |
|
|
Balance at end of period |
|
|
|
|
|
$ |
4,386 |
|
|
$ |
4,091 |
|
5. Debt and Financing Arrangements
Credit Facility
On August 2, 2022, the Company amended its credit agreement to,
among other things, provide a $950.0 million multi-currency
revolving credit facility and amend rates per annum at which
borrowings in different denominations bear interest (the "Second
Amended Credit Facility"). On August 2, 2022, proceeds from
borrowings under the multi-currency revolving credit facility were
used to, among other things, prepay in full the Company's
then-outstanding term loans and refinance its outstanding
borrowings under the revolving credit facility. Immediately prior
to payment, the aggregate amounts outstanding related to the term
loans and revolving credit facility were approximately
$306.3 million and $72.6 million, respectively. The
Second Amended Credit Facility matures on August 2, 2027, and as a
result, the related borrowings have been classified as long-term
debt, with the proceeds and repayments under the revolving credit
facility presented on a gross basis in the consolidated statements
of cash flows.
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, 2023, the Company was in compliance with all
covenants under its credit agreement.
As of March 31, 2023, there were $783.0 million in outstanding
borrowings under the Company's multi-currency revolving credit
facility with a weighted average interest rate of 5.87%. As of
March 31, 2023, the Company had available borrowings under its
multi-currency revolving credit facility of $158.8 million after
giving effect to $8.2 million of outstanding letters of
credit.
Other Short-Term Borrowings
The Company has certain unsecured local credit facilities available
through its subsidiaries. Amounts outstanding under other
short-term borrowings are presented in short-term debt in the
consolidated balance sheets with the proceeds and repayments
presented on a gross basis in the consolidated statements of cash
flows when the original maturity exceeds 90 days. There were $44.6
million and $40.3 million in outstanding borrowings under the
Company's local credit facilities as of March 31, 2023 and December
31, 2022, respectively. The weighted average interest rate
applicable to the outstanding borrowings was 0.82% and 0.85% as of
March 31, 2023 and December 31, 2022, respectively. As of March 31,
2023, the Company had available borrowings remaining under these
local credit facilities of $25.3 million.
Letters of Credit
As of March 31, 2023 and December 31, 2022, there were outstanding
letters of credit related to agreements, including the Company's
Second Amended Credit Facility, totaling $12.0 million and $10.0
million, respectively, of which $8.6 million and $7.3 million,
respectively, was secured. These agreements provided a maximum
commitment for letters of credit of $58.8 million as of March 31,
2023.
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, 2023
and December 31, 2022 was $225.3 million and $242.4 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 expenses. The gross U.S. dollar
equivalent notional amount outstanding of all foreign exchange
forward contracts not designated under hedge accounting as of both
March 31, 2023 and December 31, 2022 was $4.0 million. Selling,
general and administrative expenses during the three months ended
March 31, 2023 and 2022 included a gain of $0.1 million and $0.3
million, respectively, related to undesignated foreign exchange
forward derivative instruments.
Interest Rate Derivative Instruments
From time to time, 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, 2023, the
notional value of the Company's outstanding interest rate swap
contracts was $100.0 million. As of December 31, 2022, 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 |
|
2023 |
|
2022 |
|
Prepaid and other assets |
|
Foreign exchange forward |
|
$ |
6,078 |
|
|
$ |
7,393 |
|
|
|
|
Interest rate swap |
|
344 |
|
|
— |
|
|
Other assets |
|
Foreign exchange forward |
|
87 |
|
|
1,341 |
|
|
|
|
|
|
|
|
|
Accrued expenses and other liabilities |
|
Foreign exchange forward |
|
3,817 |
|
|
4,710 |
|
|
|
|
Interest rate swap |
|
17 |
|
|
— |
|
|
Other noncurrent liabilities |
|
Foreign exchange forward |
|
505 |
|
|
344 |
|
|
|
|
Interest rate swap |
|
699 |
|
|
— |
|
The hedge instrument gain (loss) recognized in accumulated other
comprehensive loss, net of tax was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
|
|
March 31, |
|
(in thousands) |
|
|
|
|
|
2023 |
|
2022 |
|
Type of hedge |
|
|
|
|
|
|
|
|
|
Foreign exchange forward |
|
|
|
|
|
$ |
(477) |
|
|
$ |
3,076 |
|
|
Interest rate swap |
|
|
|
|
|
(356) |
|
|
— |
|
|
Total |
|
|
|
|
|
$ |
(833) |
|
|
$ |
3,076 |
|
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 $2.4
million related to foreign exchange derivative instruments from
accumulated other comprehensive loss, net of tax, into cost of
goods sold and a net gain of $0.3 million related to interest rate
derivative instruments from accumulated other comprehensive loss,
net of tax, into interest expense, net. 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) |
|
|
|
|
|
2023 |
|
2022 |
|
Location of gain (loss) in statements of operations |
|
|
|
|
|
|
|
|
|
Foreign exchange forward: |
|
|
|
|
|
|
|
|
|
Cost of goods sold |
|
|
|
|
|
$ |
5,196 |
|
|
$ |
1,355 |
|
|
Selling, general and administrative
(1)
|
|
|
|
|
|
210 |
|
|
675 |
|
|
Total |
|
|
|
|
|
$ |
5,406 |
|
|
$ |
2,030 |
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Swap: |
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
|
|
|
|
$ |
15 |
|
|
$ |
— |
|
|
Total |
|
|
|
|
|
$ |
15 |
|
|
$ |
— |
|
_______________________________________________________________________________
(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, 2023 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements as of |
|
|
|
|
|
March 31, 2023 using: |
|
|
|
(in thousands) |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Balance Sheet Location |
|
Assets |
|
|
|
|
|
|
|
|
|
Rabbi trust |
|
$ |
4,135 |
|
|
$ |
— |
|
|
$ |
— |
|
|
Prepaid and other assets |
|
Foreign exchange derivative instruments |
|
— |
|
|
6,098 |
|
|
— |
|
|
Prepaid and other assets |
|
Interest rate derivative instruments |
|
— |
|
|
344 |
|
|
— |
|
|
Other current assets |
|
|
|
|
|
|
|
|
|
|
Deferred compensation program assets |
|
670 |
|
|
— |
|
|
— |
|
|
Other assets |
|
Foreign exchange derivative instruments |
|
— |
|
|
87 |
|
|
— |
|
|
Other assets |
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
4,805 |
|
|
$ |
6,529 |
|
|
$ |
— |
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
Foreign exchange derivative instruments |
|
$ |
— |
|
|
$ |
3,817 |
|
|
$ |
— |
|
|
Accrued expenses and other liabilities |
|
Interest rate derivative instruments |
|
— |
|
|
17 |
|
|
— |
|
|
Accrued expenses and other liabilities |
|
Deferred compensation program liabilities |
|
670 |
|
|
— |
|
|
— |
|
|
Other noncurrent liabilities |
|
Foreign exchange derivative instruments |
|
— |
|
|
505 |
|
|
— |
|
|
Other noncurrent liabilities |
|
Interest rate derivative instruments |
|
— |
|
|
699 |
|
|
— |
|
|
Other noncurrent liabilities |
|
Total liabilities |
|
$ |
670 |
|
|
$ |
5,038 |
|
|
$ |
— |
|
|
|
Assets and liabilities measured at fair value on a recurring basis
as of December 31, 2022 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements as of |
|
|
|
|
|
December 31, 2022 using: |
|
|
|
(in thousands) |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Balance Sheet Location |
|
Assets |
|
|
|
|
|
|
|
|
|
Rabbi trust |
|
$ |
3,940 |
|
|
$ |
— |
|
|
$ |
— |
|
|
Prepaid and other assets |
|
Foreign exchange derivative instruments |
|
— |
|
|
7,393 |
|
|
— |
|
|
Prepaid and other assets |
|
|
|
|
|
|
|
|
|
|
Deferred compensation program assets |
|
631 |
|
|
— |
|
|
— |
|
|
Other assets |
|
Foreign exchange derivative instruments |
|
— |
|
|
1,341 |
|
|
— |
|
|
Other assets |
|
Total assets |
|
$ |
4,571 |
|
|
$ |
8,734 |
|
|
$ |
— |
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
Foreign exchange derivative instruments |
|
$ |
— |
|
|
$ |
4,758 |
|
|
$ |
— |
|
|
Accrued expenses and other liabilities |
|
|
|
|
|
|
|
|
|
|
Deferred compensation program liabilities |
|
631 |
|
|
— |
|
|
— |
|
|
Other noncurrent liabilities |
|
Foreign exchange derivative instruments |
|
— |
|
|
344 |
|
|
— |
|
|
Other noncurrent liabilities |
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
$ |
631 |
|
|
$ |
5,102 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
Interest rate derivative instruments are interest rate swap
contracts used to reduce interest rate risk related to the
Company's floating rate debt (Note 6). The valuation for the
interest rate swap is calculated as the net of the discounted
future
cash flows of the pay and receive legs of the swap. Mid-market
interest rates on the valuation date are used to create the forward
curve for floating legs and discount curve.
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) |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
Components of net periodic benefit cost |
|
|
|
|
|
|
|
|
|
Service cost |
|
$ |
1,434 |
|
|
$ |
2,007 |
|
|
$ |
119 |
|
|
$ |
160 |
|
|
Interest cost |
|
2,943 |
|
|
2,234 |
|
|
172 |
|
|
84 |
|
|
Expected return on plan assets |
|
(1,962) |
|
|
(1,871) |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of net loss (gain) |
|
21 |
|
|
935 |
|
|
(201) |
|
|
(152) |
|
|
Amortization of prior service cost (credit) |
|
46 |
|
|
69 |
|
|
(34) |
|
|
(34) |
|
|
Net periodic benefit cost |
|
$ |
2,482 |
|
|
$ |
3,374 |
|
|
$ |
56 |
|
|
$ |
58 |
|
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 $0.2 million to $20.7 million for
the three months ended March 31, 2023 compared to $20.9 million for
the three months ended March 31, 2022. The Company’s effective
income tax rate ("ETR") was 18.1% for the three months ended March
31, 2023 compared to 20.4% for the three months ended March 31,
2022.
The ETR for the three months ended March 31, 2023 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, state income taxes and the Company's geographic mix of
income earned by the Company's international subsidiaries. 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 earned by its
international subsidiaries.
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)
|
|
2023: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter |
|
$ |
0.195 |
|
|
$ |
13,629 |
|
|
Total dividends declared in 2023 |
|
$ |
0.195 |
|
|
$ |
13,629 |
|
|
|
|
|
|
|
|
2022: |
|
|
|
|
|
Fourth Quarter |
|
$ |
0.180 |
|
|
$ |
12,986 |
|
|
Third Quarter |
|
0.180 |
|
|
13,192 |
|
|
Second Quarter |
|
0.180 |
|
|
13,400 |
|
|
First Quarter |
|
0.180 |
|
|
13,473 |
|
|
Total dividends declared in 2022 |
|
$ |
0.720 |
|
|
$ |
53,051 |
|
During the second quarter of 2023, the Company's Board of Directors
declared a dividend of $0.195 per share of common stock to
shareholders of record as of June 2, 2023 and payable on
June 16, 2023.
Share Repurchase Program
As of March 31, 2023, the Board of Directors had authorized the
Company to repurchase up to $700.0 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.
On November 8, 2021, 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 $37.5 million, at the same weighted average per share price
(the "2021 Agreement"). In relation to the 2021 Agreement, on
January 24, 2022, the Company purchased 699,819 shares of its
common stock for an aggregate of $37.5 million from Magnus, in
satisfaction of its obligations under the 2021
Agreement.
On June 16, 2022, the Company entered into an agreement with
Magnus to purchase from Magnus an equal amount of its common stock
as it purchases on the open market over the period of time from
July 1, 2022 through January 13, 2023, up to an aggregate of
$75.0 million, at the same weighted average per share price
(the "2022 Agreement"). On August 30, 2022, the Company
amended and restated the 2022 Agreement to increase the aggregate
dollar amount of shares of its common stock that it will purchase
from Magnus from $75.0 million to $100.0 million, (the
"Amended and Restated 2022 Agreement"). In relation to this
agreement, the Company recorded a share repurchase liability of
$92.6 million for 2,000,839 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, 2022.
Between January 1, 2023 and January 13, 2023, the Company purchased
an additional 167,689 shares of its common stock on the open market
for an aggregate of $7.4 million, bringing the cumulative total
open market purchases since the inception of the 2022 Agreement to
$100.0 million. As a result, on January 23, 2023, the Company
purchased 2,168,528 shares of its common stock from Magnus for an
aggregate of $100.0 million, in satisfaction of its obligation
under the Amended and Restated 2022 Agreement.
The Company's share repurchase activity for the periods presented
was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, |
|
(in thousands, except share and per share amounts) |
|
|
|
|
|
2023 |
|
2022 |
|
Shares repurchased in the open market: |
|
|
|
|
|
|
|
|
|
Shares repurchased |
|
|
|
|
|
346,389 |
|
|
463,980 |
|
|
Average price |
|
|
|
|
|
$ |
46.54 |
|
|
$ |
46.57 |
|
|
Aggregate value |
|
|
|
|
|
$ |
16,122 |
|
|
$ |
21,607 |
|
|
Shares repurchased from Magnus: |
|
|
|
|
|
|
|
|
|
Shares repurchased |
|
|
|
|
|
2,168,528 |
|
|
699,819 |
|
|
Average price
(1)
|
|
|
|
|
|
$ |
46.11 |
|
|
$ |
53.59 |
|
|
Aggregate value |
|
|
|
|
|
$ |
100,001 |
|
|
$ |
37,501 |
|
|
Total shares repurchased: |
|
|
|
|
|
|
|
|
|
Shares repurchased |
|
|
|
|
|
2,514,917 |
|
|
1,163,799 |
|
|
Average price |
|
|
|
|
|
$ |
46.17 |
|
|
$ |
50.79 |
|
|
Aggregate value |
|
|
|
|
|
$ |
116,123 |
|
|
$ |
59,108 |
|
___________________________________
(1) In
accordance with the share repurchase agreements, 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 will differ from open market
repurchases 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
agreements.
As of March 31, 2023, the Company had $291.3 million remaining
under the current share repurchase authorization. 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, 2023, 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, 2023 and
changes during the three months then ended is presented
below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted- |
|
|
|
Weighted- |
|
|
|
Number |
|
Average |
|
Number |
|
Average |
|
|
|
of RSUs |
|
Fair Value RSUs |
|
of PSUs
(3)
|
|
Fair Value PSUs |
|
Outstanding as of December 31, 2022 |
|
944,695 |
|
|
$ |
37.48 |
|
|
529,366 |
|
|
$ |
36.30 |
|
|
Granted |
|
337,567 |
|
|
48.58 |
|
|
168,251 |
|
|
48.58 |
|
|
Vested
(1)(2)
|
|
(499,896) |
|
|
31.04 |
|
|
(231,127) |
|
|
25.73 |
|
|
Forfeited |
|
(4,179) |
|
|
43.87 |
|
|
(12,377) |
|
|
41.78 |
|
|
Outstanding as of March 31, 2023 |
|
778,187 |
|
|
$ |
46.40 |
|
|
454,113 |
|
|
$ |
46.08 |
|
_______________________________________________________________________________
(1) Includes 75,157 shares of common stock
related to RSU's that were not delivered as of March 31,
2023.
(2) Based
upon the Company’s level of achievement of the applicable
performance metrics, the recipients of the 231,127
PSUs that vested during the three months ended March 31, 2023, were
entitled to receive 460,684 shares of common stock. As of March 31,
2023, there were 229,205 shares of common stock that had not been
delivered in connection with the vesting of these
PSUs.
(3) Number of PSUs assume that 100% of the
target level of performance was achieved
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) |
|
|
|
|
|
2023 |
|
2022 |
|
RSUs |
|
|
|
|
|
$ |
4,154 |
|
|
$ |
2,770 |
|
|
PSUs |
|
|
|
|
|
2,965 |
|
|
2,419 |
|
The remaining unrecognized compensation expense related to unvested
RSUs and unvested PSUs was $27.7 million and $15.0 million,
respectively, as of March 31, 2023, and is expected to be
recognized over the related weighted average period of 1.6 years
and 2.2 years, respectively.
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, 2023 |
|
March 31, 2022 |
|
|
RSUs |
|
PSUs |
|
RSUs |
|
PSUs |
|
Shares of common stock issued |
|
436,491 |
|
|
231,580 |
|
|
492,580 |
|
|
188,527 |
|
|
Shares of common stock withheld by the Company as payment by
employees in lieu of cash to satisfy tax withholding
obligations
|
|
(128,291) |
|
|
(91,842) |
|
|
(159,851) |
|
|
(87,215) |
|
|
Net shares of common stock issued |
|
308,200 |
|
|
139,738 |
|
|
332,729 |
|
|
101,312 |
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative undelivered shares of common stock |
|
471,306 |
|
|
420,447 |
|
|
414,866 |
|
|
191,242 |
|
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) |
|
|
|
|
|
2023 |
|
2022 |
|
Cost of goods sold |
|
|
|
|
|
$ |
373 |
|
|
$ |
300 |
|
|
Selling, general and administrative |
|
|
|
|
|
6,223 |
|
|
4,698 |
|
|
Research and development |
|
|
|
|
|
687 |
|
|
355 |
|
|
Total compensation expense before income tax |
|
|
|
|
|
7,283 |
|
|
5,353 |
|
|
Income tax benefit |
|
|
|
|
|
1,492 |
|
|
1,176 |
|
|
Total compensation expense, net of income tax |
|
|
|
|
|
$ |
5,791 |
|
|
$ |
4,177 |
|
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 |
|
Interest |
|
|
|
|
|
Accumulated |
|
|
|
Foreign |
|
Exchange |
|
Rate Swap |
|
Pension and |
|
|
|
Other |
|
|
Currency |
|
Derivative |
|
Derivative |
|
Other |
|
|
|
Comprehensive |
|
(in thousands) |
|
Translation |
|
Instruments |
|
Instruments |
|
Postretirement |
|
|
|
Loss, Net of Tax |
|
Balance as of December 31, 2022 |
|
$ |
(97,855) |
|
|
$ |
5,598 |
|
|
$ |
— |
|
|
$ |
(17,411) |
|
|
|
|
$ |
(109,668) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive (loss) income before
reclassifications |
|
565 |
|
|
(477) |
|
|
(356) |
|
|
(238) |
|
|
|
|
(506) |
|
|
Amounts reclassified from accumulated other comprehensive loss, net
of tax |
|
— |
|
|
(5,196) |
|
|
(15) |
|
|
(168) |
|
|
|
|
(5,379) |
|
|
Tax expense |
|
— |
|
|
1,694 |
|
|
90 |
|
|
90 |
|
|
|
|
1,874 |
|
|
Balance as of March 31, 2023 |
|
$ |
(97,290) |
|
|
$ |
1,619 |
|
|
$ |
(281) |
|
|
$ |
(17,727) |
|
|
|
|
$ |
(113,679) |
|
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) |
|
|
|
|
|
2023 |
|
2022 |
|
|
|
|
|
|
|
|
|
|
Net income attributable to Acushnet Holdings Corp. |
|
|
|
|
|
$ |
93,275 |
|
|
$ |
81,045 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares: |
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
|
|
68,213,068 |
|
|
73,513,109 |
|
|
RSUs |
|
|
|
|
|
340,101 |
|
|
325,550 |
|
|
PSUs |
|
|
|
|
|
93,043 |
|
|
84,069 |
|
|
Diluted |
|
|
|
|
|
68,646,212 |
|
|
73,922,728 |
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share attributable to Acushnet Holdings
Corp.: |
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
|
|
$ |
1.37 |
|
|
$ |
1.10 |
|
|
Diluted |
|
|
|
|
|
$ |
1.36 |
|
|
$ |
1.10 |
|
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, 2023 and 2022 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. During both the first quarter of 2023 and 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, 2023 and
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, |
|
|
|
|
|
|
|
2023 |
|
2022 |
|
RSUs |
|
|
|
|
|
259,496 |
|
|
66,405 |
|
|
|
|
|
|
|
|
|
|
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, 2023 and 2022
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) |
|
|
|
|
|
2023 |
|
2022 |
|
Net sales |
|
|
|
|
|
|
|
|
|
Titleist golf balls |
|
|
|
|
|
$ |
192,001 |
|
|
$ |
163,838 |
|
|
Titleist golf clubs |
|
|
|
|
|
180,781 |
|
|
160,815 |
|
|
Titleist golf gear |
|
|
|
|
|
67,043 |
|
|
44,146 |
|
|
FootJoy golf wear |
|
|
|
|
|
205,274 |
|
|
197,553 |
|
|
Other |
|
|
|
|
|
41,191 |
|
|
39,735 |
|
|
Total net sales |
|
|
|
|
|
$ |
686,290 |
|
|
$ |
606,087 |
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating income |
|
|
|
|
|
|
|
|
|
Titleist golf balls |
|
|
|
|
|
$ |
38,621 |
|
|
$ |
33,373 |
|
|
Titleist golf clubs |
|
|
|
|
|
40,545 |
|
|
32,228 |
|
|
Titleist golf gear |
|
|
|
|
|
12,190 |
|
|
2,194 |
|
|
FootJoy golf wear |
|
|
|
|
|
30,801 |
|
|
31,315 |
|
|
Other |
|
|
|
|
|
6,564 |
|
|
7,427 |
|
|
Total segment operating income |
|
|
|
|
|
128,721 |
|
|
106,537 |
|
|
Reconciling items: |
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
|
|
|
|
(9,896) |
|
|
(1,277) |
|
|
|
|
|
|
|
|
|
|
|
Non-service cost component of net periodic benefit cost |
|
|
|
|
|
(985) |
|
|
(1,265) |
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
(3,496) |
|
|
(1,229) |
|
|
Total income before income tax |
|
|
|
|
|
$ |
114,344 |
|
|
$ |
102,766 |
|
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) |
|
|
|
|
|
2023 |
|
2022 |
|
United States |
|
|
|
|
|
$ |
369,931 |
|
|
$ |
295,126 |
|
|
EMEA
(1)
|
|
|
|
|
|
104,760 |
|
|
112,357 |
|
|
Japan |
|
|
|
|
|
46,375 |
|
|
45,795 |
|
|
Korea |
|
|
|
|
|
88,984 |
|
|
85,717 |
|
|
Rest of World |
|
|
|
|
|
76,240 |
|
|
67,092 |
|
|
Total net sales |
|
|
|
|
|
$ |
686,290 |
|
|
$ |
606,087 |
|
_______________________________________________________________________________
(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, 2023 were as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period |
|
|
|
Remainder of |
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
2023 |
|
2024 |
|
2025 |
|
2026 |
|
2027 |
|
Thereafter |
|
Purchase obligations
(1)
|
|
$ |
245,899 |
|
|
$ |
27,389 |
|
|
$ |
7,133 |
|
|
$ |
2,722 |
|
|
$ |
2,430 |
|
|
$ |
9,653 |
|
_______________________________________________________________________________
(1) The reported amounts exclude those
liabilities included on the unaudited condensed consolidated
balance sheet as of March 31, 2023.
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.
16. Other Business Developments
In January 2023, the Company acquired certain trademarks from Club
Glove, an industry leader specializing in premium performance golf
travel products, for $25.2 million including cash
consideration of $22.2 million and contingent consideration of
$3.0 million, which was included in accrued expenses and other
liabilities on the unaudited condensed consolidated balance sheet
as of March 31, 2023. The trademarks acquired were included in the
Company's Titleist golf gear reporting segment and will be
amortized over a weighted average life of 10 years.
On November 4, 2022, the Company completed the acquisition of an
80% interest in certain assets and liabilities of TPI EDU, LLC,
Onbase University, LP and Racquetfit, LP, (together known as "TPI")
for cash consideration of $18.4 million. As part of the
acquisition, the Company recorded a redeemable noncontrolling
interest of $4.6 million (Note 1). TPI is a leading supplier
of online courses, certifications, educational programs, live
seminars, and other educational services in the golf, baseball and
tennis industries. The results of TPI have been included in the
Company's Titleist golf clubs reporting segment since the date of
acquisition (Note 14).
On April 1, 2022, the Company acquired the outstanding equity
interest in PG Golf LLC for $5.0 million, including cash
consideration of $3.6 million and contingent consideration of
$1.4 million, which was included in other noncurrent
liabilities on the unaudited condensed consolidated balance sheet
as of March 31, 2023 and December 31, 2022.
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.
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) |
|
|
|
|
|
2023 |
|
2022 |
|
Net sales |
|
|
|
|
|
$ |
686,290 |
|
|
$ |
606,087 |
|
|
Cost of goods sold |
|
|
|
|
|
320,618 |
|
|
289,088 |
|
|
Gross profit |
|
|
|
|
|
365,672 |
|
|
316,999 |
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
|
|
|
222,539 |
|
|
195,691 |
|
|
Research and development |
|
|
|
|
|
14,540 |
|
|
13,976 |
|
|
Intangible amortization |
|
|
|
|
|
3,689 |
|
|
1,963 |
|
|
|
|
|
|
|
|
|
|
|
Income from operations |
|
|
|
|
|
124,904 |
|
|
105,369 |
|
|
Interest expense, net |
|
|
|
|
|
9,896 |
|
|
1,277 |
|
|
Other expense, net |
|
|
|
|
|
664 |
|
|
1,326 |
|
|
Income before income taxes |
|
|
|
|
|
114,344 |
|
|
102,766 |
|
|
Income tax expense |
|
|
|
|
|
20,725 |
|
|
20,919 |
|
|
Net income |
|
|
|
|
|
93,619 |
|
|
81,847 |
|
|
Less: Net income attributable to noncontrolling
interests |
|
|
|
|
|
(344) |
|
|
(802) |
|
|
Net income attributable to Acushnet Holdings Corp. |
|
|
|
|
|
$ |
93,275 |
|
|
$ |
81,045 |
|
|
Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
Net income attributable to Acushnet Holdings Corp. |
|
|
|
|
|
$ |
93,275 |
|
|
$ |
81,045 |
|
|
Interest expense, net |
|
|
|
|
|
9,896 |
|
|
1,277 |
|
|
Income tax expense |
|
|
|
|
|
20,725 |
|
|
20,919 |
|
|
Depreciation and amortization |
|
|
|
|
|
12,631 |
|
|
10,367 |
|
|
Share-based compensation |
|
|
|
|
|
7,283 |
|
|
5,353 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other extraordinary, unusual or non-recurring items, net
(1)
|
|
|
|
|
|
2,628 |
|
|
235 |
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to noncontrolling interests |
|
|
|
|
|
344 |
|
|
802 |
|
|
Adjusted EBITDA |
|
|
|
|
|
$ |
146,782 |
|
|
$ |
119,998 |
|
|
Adjusted EBITDA margin |
|
|
|
|
|
21.4 |
% |
|
19.8 |
% |
________________________
(1)
For the three months ended March 31, 2023, includes costs
associated with the optimization of our distribution and custom
fulfillment capabilities.
Three Months Ended March 31, 2023 Compared to the Three Months
Ended March 31, 2022
Net sales by reportable segment is summarized as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
|
|
Constant Currency |
|
|
|
March 31, |
|
Increase/(Decrease) |
|
Increase/(Decrease) |
|
(in millions) |
|
2023 |
|
2022 |
|
$ change |
|
% change |
|
$ change |
|
% change |
|
Titleist golf balls |
|
$ |
192.0 |
|
|
$ |
163.8 |
|
|
$ |
28.2 |
|
|
17.2 |
% |
|
$ |
33.8 |
|
|
20.6 |
% |
|
Titleist golf clubs |
|
180.8 |
|
|
160.8 |
|
|
20.0 |
|
|
12.4 |
% |
|
26.2 |
|
|
16.3 |
% |
|
Titleist golf gear |
|
67.0 |
|
|
44.1 |
|
|
22.9 |
|
|
51.9 |
% |
|
25.3 |
|
|
57.4 |
% |
|
FootJoy golf wear |
|
205.3 |
|
|
197.6 |
|
|
7.7 |
|
|
3.9 |
% |
|
15.5 |
|
|
7.8 |
% |
Net sales information by region is summarized as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
|
|
Constant Currency |
|
|
|
March 31, |
|
Increase/(Decrease) |
|
Increase/(Decrease) |
|
(in millions) |
|
2023 |
|
2022 |
|
$ change |
|
% change |
|
$ change |
|
% change |
|
United States |
|
$ |
369.9 |
|
|
$ |
295.1 |
|
|
$ |
74.8 |
|
|
25.3 |
% |
|
$ |
74.8 |
|
|
25.3 |
% |
|
EMEA |
|
104.8 |
|
|
112.4 |
|
|
(7.6) |
|
|
(6.8) |
% |
|
0.2 |
|
|
0.2 |
% |
|
Japan |
|
46.4 |
|
|
45.8 |
|
|
0.6 |
|
|
1.3 |
% |
|
7.3 |
|
|
15.9 |
% |
|
Korea |
|
89.0 |
|
|
85.7 |
|
|
3.3 |
|
|
3.9 |
% |
|
8.5 |
|
|
9.9 |
% |
|
Rest of world |
|
76.2 |
|
|
67.1 |
|
|
9.1 |
|
|
13.6 |
% |
|
13.3 |
|
|
19.8 |
% |
|
Total net sales |
|
$ |
686.3 |
|
|
$ |
606.1 |
|
|
$ |
80.2 |
|
|
13.2 |
% |
|
$ |
104.1 |
|
|
17.2 |
% |
Segment operating income by reportable segment is summarized as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three months ended |
|
|
|
|
|
(in millions) |
|
March 31, |
|
Increase/(Decrease) |
|
Segment operating income |
|
2023 |
|
2022 |
|
$ change |
|
% change |
|
Titleist golf balls |
|
$ |
38.6 |
|
|
$ |
33.4 |
|
|
$ |
5.2 |
|
|
15.6 |
% |
|
Titleist golf clubs |
|
40.5 |
|
|
32.2 |
|
|
8.3 |
|
|
25.8 |
% |
|
Titleist golf gear |
|
12.2 |
|
|
2.2 |
|
|
10.0 |
|
|
* |
|
FootJoy golf wear |
|
30.8 |
|
|
31.3 |
|
|
(0.5) |
|
|
(1.6) |
% |
________________________
*Percentage
change not meaningful
Net Sales
For the three months ended March 31, 2023 net sales increased
13.2%, or 17.2% on a constant currency basis, compared to the three
months ended March 31, 2022. The increase was driven by growth
across all reportable segments primarily as a result of higher
sales volumes.
The increase in net sales in the United States was primarily the
result of increases in Titleist golf balls of $22.7 million,
FootJoy golf wear of $17.9 million, Titlist golf clubs of $17.3
million and Titleist golf gear of $13.9 million. The increase in
Titleist golf balls was primarily driven by higher sales volumes of
our latest generation Pro V1 and Pro V1x golf balls. The increase
in FootJoy golf wear was primarily driven by higher sales volumes
across all product categories, led by apparel. The increase in
Titleist golf clubs was primarily driven by higher sales volumes of
our TSR drivers, fairways and hybrids, partially offset by lower
sales volumes of wedges which are in their second model year. The
increase in Titleist golf gear was primarily driven by higher sales
volumes across all product categories reflecting improvements in
supply chain and fulfillment constraints versus their impact in the
first quarter of 2022.
Net sales in regions outside the United States increased 1.7%, or
9.4% on a constant currency basis. In Korea and Rest of World, net
sales increased across all reportable segments. In Japan, net sales
increased in all reportable segments except Titleist golf clubs
which were flat. In EMEA, net sales increased across all reportable
segments except FootJoy golf wear.
Gross Profit
Gross profit increased $48.7 million for the three months ended
March 31, 2023 compared to the three months ended March 31, 2022.
Gross margin increased to 53.3% for the three months ended March
31, 2023 compared to 52.3% for the three months ended March 31,
2022. The increase in gross profit was primarily the result of
increases in Titleist golf clubs of $17.2 million, Titleist golf
balls of $13.3 million, Titleist golf gear of $12.5 million and
FootJoy golf wear of $6.5 million. These increases in gross profit
were primarily due to the sales volume increases discussed above
and lower inbound freight costs, partially offset by the
unfavorable impact of changes in foreign currency exchange rates.
The increase in gross margin was primarily due to lower inbound
freight costs across all reportable segments.
Selling, General and Administrative Expenses
SG&A expenses increased $26.8 million for the three months
ended March 31, 2023 compared to the three months ended March 31,
2022. This increase was primarily due to an increase of $11.5
million in selling expense due to higher sales volumes as discussed
previously and higher employee related expenses, an increase of
$7.6 million in advertising and promotional expenses primarily
related to new product launches, as well as an increase of $5.1
million in administrative expense primarily due to employee related
expenses. Overall, SG&A included a favorable impact of changes
in foreign currency exchange rates of $5.2 million across all
expense categories and reportable segments.
Intangible Amortization
Intangible amortization expense increased $1.7 million for the
three months ended March 31, 2023 compared to the three months
ended March 31, 2022, primarily as a result of the acquisition of
trademarks related to our putter and gear businesses in late 2022
and early 2023, respectively.
Interest Expense, net
Interest expense, net increased $8.6 million for the three months
ended March 31, 2023 compared to the three months ended March 31,
2022. This increase was primarily due to an increase in borrowings
and interest rates for the three months ended March 31,
2023.
Income Tax Expense
Income tax expense decreased $0.2 million for the three months
ended March 31, 2023 compared to the three months ended March 31,
2022. Our effective tax rate ("ETR") was 18.1% for the three months
ended March 31, 2023 compared to 20.4% for the three months ended
March 31, 2022. 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 increased 17.2%, or
20.6% on a constant currency basis, for the three months ended
March 31, 2023 compared to the three months ended March 31, 2022.
The increase was primarily driven by higher sales volumes of our
latest generation Pro V1 and Pro V1x golf balls launched in the
first quarter of 2023.
Operating income in our Titleist golf balls segment increased $5.2
million, or 15.6% compared to the prior year period. The increase
in operating income resulted from higher gross profit of $13.3
million, partially offset by higher operating expenses of $7.6
million. The increase in gross profit was primarily driven by
higher sales volumes and lower inbound freight costs. Operating
expenses increased primarily as a result of increases of $3.4
million, $2.5 million and $1.3 million in selling, advertising and
promotional and administrative expenses, respectively.
Titleist Golf Clubs Segment
Net sales in our Titleist golf clubs segment increased 12.4%, or
16.3% on a constant currency basis, for the three months ended
March 31, 2023 compared to the three months ended March 31, 2022.
The increase was largely due to higher sales volumes of our TSR
drivers and fairways launched in the third quarter of 2022 and TSR
hybrids launched in the first quarter of 2023. This increase was
partially offset by lower sales volumes of second model year
wedges.
Operating income in our Titleist golf clubs segment increased $8.3
million, or 25.8% compared to the prior year period. The increase
in operating income resulted from higher gross profit of $17.2
million, partially offset by higher operating
expenses of $7.9 million. The increase in gross profit was
primarily due to higher sales volumes, lower inbound freight costs
and lower royalty expense. Operating expenses increased primarily
as a result of increases of $4.4 million, $2.0 million and $1.4
million in selling, administrative and advertising and promotional
expenses, respectively.
Titleist Golf Gear Segment
Net sales in our Titleist golf gear segment increased 51.9%, or
57.4% on a constant currency basis, for the three months ended
March 31, 2023 compared to the three months ended March 31, 2022.
The increase was primarily due to higher sales volumes across all
product categories reflecting improvements in supply chain and
fulfillment constraints versus their impact in the first quarter of
2022.
Operating income in our Titleist golf gear segment increased $10.0
million compared to the prior year period. The increase in
operating income resulted from higher gross profit of $12.5
million, partially offset by higher operating expenses of $2.1
million. Gross profit increased due to higher sales volumes and
lower inbound freight costs. Operating expenses increased primarily
as a result of an increase of $1.6 million in selling
expense.
FootJoy Golf Wear Segment
Net sales in our FootJoy golf wear segment increased 3.9%, or 7.8%
on a constant currency basis, for the three months ended March 31,
2023 compared to the three months ended March 31, 2022. The
increase was primarily due to increased sales volumes in apparel
reflecting improvements in supply chain constraints.
Operating income in our FootJoy golf wear segment decreased $0.5
million, or 1.6% compared to the prior year period. The decrease in
operating income resulted from higher operating expenses of $7.0
million, partially offset by higher gross profit of $6.5 million.
Gross profit increased primarily as a result of sales volume
increases in apparel and lower inbound freight costs. Operating
expenses increased primarily as a result of an increase of $3.1
million in selling expense due to higher sales volumes partially
offset by lower retail commission expense in Korea, as well as
increases of $2.9 million and $1.0 million in advertising and
promotional and administrative expenses, respectively.
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.
Additionally, from time to time, we may make strategic acquisitions
and investments to complement our products, technologies or
businesses, which could impact our liquidity needs. 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, 2023, we had $55.5 million of unrestricted
cash and cash equivalents (including $15.3 million
attributable to our FootJoy golf shoe variable interest entity). As
of March 31, 2023, 97.5% 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.
As noted previously, the macroeconomic environment 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 current and future economic trends and
conditions, 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, 2022.
Debt and Financing Arrangements
As of March 31, 2023, we had $158.8 million of availability under
our multi-currency revolving credit facility after giving effect to
$8.2 million of outstanding letters of credit. Additionally, we had
$25.3 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, 2023, we were in compliance with all covenants under our credit
agreement.
See “Notes to Unaudited Condensed Consolidated Financial Statements
– Note 5 – Debt and Financing Arrangements,” Item 1 of Part I
included elsewhere in this report and “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, 2022
for a description of our credit facilities and related credit
agreements. 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, 2022 for further discussion surrounding
the risks and uncertainties related to our credit
facilities.
Dividends and Share Repurchase Program
During the three months ended March 31, 2023, we paid dividends on
our common stock of $14.3 million to our shareholders. During the
second quarter of 2023, our Board of Directors declared a dividend
of $0.195 per share of common stock to shareholders of record as of
June 2, 2023 and payable on June 16, 2023.
As of March 31, 2023, our Board of Directors had authorized us to
repurchase up to an aggregate of $700.0 million of our issued and
outstanding common stock. During the three months ended March 31,
2023, we repurchased 2,514,917 shares of common stock at an average
price of $46.17 for an aggregate of $116.1 million. Included in
this amount were 2,168,528 shares of common stock repurchased from
Magnus Holdings Co., Ltd. (“Magnus”), a wholly-owned subsidiary of
Fila Holdings Corp., on January 23, 2023, for an aggregate of
$100.0 million in satisfaction of our obligations pursuant to our
previously disclosed Magnus share repurchase
agreement.
As of March 31, 2023, we had $291.3 million remaining under the
current share repurchase authorization. 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.
Business Developments
In January 2023, we acquired certain trademarks from Club Glove, an
industry leader specializing in premium performance golf travel
products, for $25.2 million including cash consideration of
$22.2 million and contingent consideration of
$3.0 million. See “Notes to Unaudited Condensed Consolidated
Financial Statements-Note-16 - Other Business Developments,” Item 1
of Part I included elsewhere in this report for additional
information regarding our acquisition during the first quarter
ended March 31, 2023.
Capital Expenditures
We made $11.7 million of capital expenditures during the three
months ended March 31, 2023. Capital expenditures for the full year
are expected to be approximately $75.0 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.
Cash Flows
The following table presents the major components of net cash flows
from operating, investing and financing activities for the periods
indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
March 31, |
|
(in thousands) |
|
2023 |
|
2022 |
|
Cash flows from: |
|
|
|
|
|
Operating activities |
|
$ |
(86,418) |
|
|
$ |
(164,048) |
|
|
Investing activities |
|
(34,834) |
|
|
(11,686) |
|
|
Financing activities |
|
119,310 |
|
|
9,471 |
|
|
Effect of foreign exchange rate changes on cash, cash equivalents
and restricted cash |
|
322 |
|
|
(1,012) |
|
|
Net decrease in cash, cash equivalents and restricted
cash |
|
$ |
(1,620) |
|
|
$ |
(167,275) |
|
Cash Flows from Operating Activities
The decrease in cash used in operating operating activities was
primarily related to changes in working capital, largely driven by
inventory. These inventory changes relate to an increase in demand
for our products and improvements in our inventory position and
supply chain. At any specific point in time, working capital 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
The increase in cash used in investing activities was primarily
driven by cash paid for trademark acquisitions during the three
months ended March 31, 2023.
Cash Flows from Financing Activities
The increase in cash provided by financing activities was primarily
due to an increase in proceeds from borrowings offset in part by an
increase in purchases of our common stock.
Off-Balance Sheet Arrangements
As of March 31, 2023, 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, 2022.
Recently Issued Accounting Standards
We have reviewed all recently issued accounting 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 accounting 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.
From time to time, we enter into interest rate swap contracts to
reduce our interest rate risk. Under these contracts, we pay fixed
and receive variable rate interest, in effect converting a portion
of our floating rate debt to fixed rate debt. As of March 31, 2023,
the notional value of our outstanding interest rate swap contract
was $100.0 million. See "Notes to Unaudited Condensed Consolidated
Financial Statement-Note-6-Derivative Financial Instruments" for
further discussion of our interest rate swap contract.
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, 2023, we had $727.6 million of
outstanding indebtedness at variable interest rates after giving
effect to $100.0 million of hedged floating rate indebtedness. 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, 2023 would have resulted in an
increase of $7.3 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, 2023 was $229.3
million, representing a net settlement asset of $1.9 million. The
sensitivity analysis of changes in the fair value of our foreign
exchange forward contracts outstanding as of March 31, 2023, while
not predictive in nature, indicated that the net settlement asset
of $1.9 million would decrease by $17.5 million resulting in a net
settlement liability of $15.6 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 foreign 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. While it is difficult to accurately measure the
impact of inflation due to the imprecise nature of the estimates
required, we believe that inflation in the form of increased raw
materials and other input costs, including inbound freight and wage
rates, have impacted our business, results of operations, financial
position and cash flows during the three months ended March 31,
2023 and 2022. 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, 2023. 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, 2023 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, 2022, 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, 2022.
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
2023:
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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, 2023 - January 31, 2023
(2)
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2,396,717 |
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$ |
45.99 |
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2,396,717 |
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$ |
47,192 |
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February 1, 2023 - February 28, 2023 |
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104,500 |
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49.55 |
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104,500 |
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292,014 |
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March 1, 2023 - March 31, 2023 |
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13,700 |
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52.61 |
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13,700 |
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291,294 |
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Total |
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2,514,917 |
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$ |
46.17 |
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2,514,917 |
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$ |
291,294 |
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_______________________________________________________________________________
(1) On February 9, 2023, our Board of
Directors authorized us to repurchase up to an additional $250.0
million of our issued and outstanding common stock, bringing the
total authorization as of March 31, 2023 up to $700.0
million.
(2) Includes 2,168,528 shares of common
stock purchased from Magnus Holdings Co., Ltd. (“Magnus”), a
wholly-owned subsidiary of Fila Holdings Corp., for an aggregate of
$100.0 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 a description of our
share repurchase program and Magnus share repurchase
agreements.
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 4, 2023 |
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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