Acushnet (GOLF) - 2019 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements Presents Acushnet Holdings Corp.'s unaudited condensed consolidated financial statements, detailing balance sheets, operations, cash flows, and key accounting policies Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Total Current Assets | $812,635 | $664,001 | | Total Assets | $1,877,290 | $1,691,621 | | Total Current Liabilities | $430,003 | $294,867 | | Total Liabilities | $930,653 | $764,637 | | Total Shareholders' Equity | $946,637 | $926,984 | Condensed Consolidated Statement of Operations Highlights (in thousands, except per share data) | Account | Three months ended Mar 31, 2019 | Three months ended Mar 31, 2018 | | :--- | :--- | :--- | | Net Sales | $433,702 | $441,801 | | Gross Profit | $222,157 | $227,674 | | Income from Operations | $52,227 | $62,284 | | Net Income Attributable to Acushnet | $34,926 | $41,484 | | Diluted EPS | $0.46 | $0.55 | Condensed Consolidated Statement of Cash Flows Highlights (in thousands) | Cash Flow Activity | Three months ended Mar 31, 2019 | Three months ended Mar 31, 2018 | | :--- | :--- | :--- | | Cash flows used in operating activities | $(90,065) | $(86,832) | | Cash flows used in investing activities | $(5,462) | $(8,383) | | Cash flows provided by financing activities | $109,076 | $94,823 | | Net increase in cash | $13,863 | $648 | - The company adopted the new lease accounting standard, ASC 842, on January 1, 2019, using the optional transition approach, resulting in the recognition of $48.1 million in operating lease right-of-use assets and related lease liabilities upon adoption[45][50] Net Sales by Reportable Segment (in thousands) | Segment | Three months ended Mar 31, 2019 | Three months ended Mar 31, 2018 | | :--- | :--- | :--- | | Titleist golf balls | $141,667 | $124,906 | | Titleist golf clubs | $91,318 | $116,893 | | Titleist golf gear | $45,181 | $44,345 | | FootJoy golf wear | $140,981 | $140,706 | | Total Net Sales | $433,702 | $441,801 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2019 financial performance, highlighting a net sales decrease, segment variations, and liquidity position Q1 2019 vs Q1 2018 Performance Summary | Metric | Q1 2019 | Q1 2018 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $433.7M | $441.8M | (1.8)% | | Net Sales (Constant Currency) | $445.1M | $441.8M | +0.7% | | Gross Profit | $222.2M | $227.7M | (2.4)% | | Gross Margin | 51.2% | 51.5% | (0.3) p.p. | | Adjusted EBITDA | $64.2M | $77.1M | (16.7)% | | Adjusted EBITDA Margin | 14.8% | 17.4% | (2.6) p.p. | - Net sales performance varied significantly by segment: Titleist Golf Balls sales increased 13.4% (16.0% constant currency) to $141.7 million, driven by new Pro V1 and Pro V1x models; Titleist Golf Clubs sales decreased 21.9% (20.1% constant currency) to $91.3 million; and FootJoy Golf Wear sales were flat at $141.0 million but grew 3.2% in constant currency[137][139][143] - Geographically, U.S. sales grew 5.1% to $230.4 million, while sales outside the U.S. decreased 8.6% (3.5% constant currency), primarily due to a $17.5 million decline in Titleist golf club sales in international markets[126][127] - The company had $135.3 million available under its revolving credit facility and $51.3 million under local credit facilities as of March 31, 2019, with management believing current liquidity is sufficient for the next 12 months[149][152] Quantitative and Qualitative Disclosures About Market Risk The company manages market risks from interest rates, foreign currency, and commodity prices using derivative instruments, with sensitivity analysis provided - Interest Rate Risk: The company uses interest rate swaps with a notional value of $185.0 million to mitigate risk on its variable-rate debt, where a hypothetical 1 percentage point increase in variable rates would increase annual pre-tax interest expense by $3.3 million[162][163][164] - Foreign Exchange Risk: The company uses foreign exchange forward contracts with a notional amount of $318.3 million to hedge currency fluctuations, primarily for the Japanese yen, Korean won, British pound, euro, and Canadian dollar[165][166][167] - Commodity Price Risk: The company faces risk from price fluctuations in key raw materials, including polybutadiene, urethane, titanium, steel, leather, and synthetic fabrics[172] Controls and Procedures Management concluded the company's disclosure controls were effective, with internal control changes made for ASC 842 adoption - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[174] - Changes were made to internal controls over financial reporting due to the implementation of new accounting processes for the adoption of ASC 842, Leases[175] PART II. OTHER INFORMATION Legal Proceedings The company is involved in various lawsuits arising from normal business operations, with unpredictable outcomes - The company is a defendant in lawsuits associated with the normal conduct of its business and operations, but the outcome is not predictable[177] Risk Factors No material changes to risk factors previously disclosed in the Annual Report on Form 10-K for 2018 - No material changes have occurred to the risk factors as described in the Annual Report on Form 10-K for the year ended December 31, 2018[178] Unregistered Sales of Equity Securities and Use of Proceeds The company did not repurchase any shares under its authorized $50.0 million share repurchase program during Q1 2019 - The company did not repurchase any shares under its authorized $50.0 million share repurchase program during the first quarter of 2019[179] Defaults Upon Senior Securities The company reported no defaults upon senior securities during the period - None[180] Mine Safety Disclosures The company reported no mine safety disclosures - None[181] Other Information The company reported no other information for the period - None[182] Exhibits This section lists exhibits filed with Form 10-Q, including CEO/CFO certifications and XBRL data files - Exhibits filed include certifications by the CEO and CFO as required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[184]