Acushnet (US:GOLF)2024-05-07 21:10PART I. FINANCIAL INFORMATION Financial Statements This section presents Acushnet Holdings Corp.'s unaudited condensed consolidated financial statements for the quarter ended March 31, 2024, prepared under U.S. GAAP Condensed Consolidated Balance Sheets Total assets increased to $2.36 billion as of March 31, 2024, driven by accounts receivable, while total liabilities rose to $1.43 billion due to higher debt Balance Sheet Highlights (in thousands) | Account | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Assets | $2,356,959 | $2,196,677 | | Accounts receivable, net | $464,954 | $201,352 | | Inventories | $537,412 | $615,535 | | Total Liabilities | $1,427,916 | $1,283,805 | | Long-term debt | $833,335 | $671,819 | | Total Shareholders' Equity | $919,439 | $903,087 | Condensed Consolidated Statements of Operations Net sales increased to $707.6 million in Q1 2024, but higher expenses led to a decrease in net income to $87.8 million and diluted EPS to $1.35 Q1 2024 vs. Q1 2023 Performance (in thousands, except per share data) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net sales | $707,554 | $686,290 | | Gross profit | $377,939 | $365,672 | | Income from operations | $121,381 | $124,904 | | Net income attributable to Acushnet | $87,762 | $93,275 | | Diluted EPS | $1.35 | $1.36 | Condensed Consolidated Statements of Cash Flows Operating activities resulted in a $109.5 million net cash outflow in Q1 2024, while financing activities provided $101.6 million, leading to a net decrease in cash Cash Flow Summary (in thousands) | Activity | Three months ended March 31, 2024 | Three months ended March 31, 2023 | | :--- | :--- | :--- | | Cash flows used in operating activities | $(109,516) | $(86,418) | | Cash flows used in investing activities | $(7,275) | $(34,834) | | Cash flows provided by financing activities | $101,571 | $119,310 | | Net decrease in cash | $(16,713) | $(1,620) | Notes to Financial Statements Notes detail significant accounting policies, debt arrangements including a $950 million credit facility and $350 million notes, share repurchases, and a restructuring plan - The company has a $950.0 million multi-currency revolving credit facility maturing in August 2027, with $485.2 million outstanding as of March 31, 202448 - In October 2023, a subsidiary issued $350.0 million of 7.375% senior unsecured notes due 202851 - During Q1 2024, the company repurchased 547,233 shares for $35.3 million and declared a quarterly dividend of $0.215 per share7479 - A restructuring plan was approved in Q1 2024 to close certain production lines at the FDL factory, resulting in $7.0 million of involuntary employee termination costs103 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2024 financial results, highlighting a 3.1% net sales increase driven by Titleist golf products, offset by FootJoy declines, and reviews liquidity and capital resources Q1 2024 vs. Q1 2023 Key Metrics (in thousands) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net Sales | $707,554 | $686,290 | | Net Income Attributable to Acushnet | $87,762 | $93,275 | | Adjusted EBITDA | $153,691 | $146,782 | | Adjusted EBITDA Margin | 21.7% | 21.4% | - Net sales in the U.S. grew 13.1% to $418.2 million, while sales outside the U.S. decreased by 8.5% (6.5% in constant currency)121123124 Results of Operations Analysis Net sales increased 3.1% to $707.6 million, but higher SG&A expenses, including $7.0 million in restructuring costs, and increased interest expense led to lower net income - Gross profit increased by $12.2 million, primarily from higher sales volumes in Titleist golf clubs and balls126 - SG&A expenses increased due to higher advertising, administrative costs, and $7.0 million in restructuring charges127 - Interest expense increased by $3.2 million due to higher interest rates and borrowing levels129 Segment Performance Analysis Titleist golf balls and clubs sales grew 8.3% and 12.8% respectively in Q1 2024, driven by new products, while FootJoy golf wear sales decreased by 6.3% Q1 2024 Net Sales Change by Segment | Segment | % Change (Reported) | % Change (Constant Currency) | Key Drivers | | :--- | :--- | :--- | :--- | | Titleist golf balls | +8.3% | +9.4% | Higher volumes of Pro V1/V1x and new AVX models | | Titleist golf clubs | +12.8% | +14.0% | Higher volumes of new SM10 wedges and T-Series irons | | Titleist golf gear | +1.8% | +2.4% | Higher sales in travel gear, gloves, and bags | | FootJoy golf wear | -6.3% | -5.7% | Lower sales volumes across all product categories | Liquidity and Capital Resources The company maintains $47.1 million in cash and $459.8 million in credit facility availability, deeming resources sufficient for future liquidity needs, with $85.0 million projected for 2024 capital expenditures - Primary liquidity sources include cash from operations and borrowings under multi-currency and local credit facilities140 - As of March 31, 2024, $459.8 million was available under the multi-currency revolving credit facility145 - Capital expenditures for full year 2024 are projected to be approximately $85.0 million153 Quantitative and Qualitative Disclosures About Market Risk The company faces market risks from interest rates, foreign exchange, and commodity prices, using derivatives to mitigate these exposures, with sensitivity analyses provided - A hypothetical 1% increase in interest rates on variable-rate debt would increase annual pre-tax interest expense by $4.2 million164 - A hypothetical 10% weakening of the U.S. dollar would decrease the net settlement asset value of outstanding foreign exchange forward contracts by $13.7 million167 - The company is exposed to commodity price risks for materials including polybutadiene, urethane, titanium, steel, and leather170 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2024, with no material changes to internal control over financial reporting during the quarter - The principal executive and financial officers concluded that disclosure controls and procedures were effective as of March 31, 2024172 - No material changes occurred in internal controls over financial reporting during the quarter173 PART II. OTHER INFORMATION Legal Proceedings The company is involved in various lawsuits arising from normal business operations, with unpredictable outcomes that could be unfavorable - The company is party to lawsuits associated with the normal conduct of its business, with unpredictable outcomes175 Risk Factors No material changes have occurred to the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2023 - No material changes to risk factors have occurred since the Annual Report on Form 10-K for the year ended December 31, 2023176 Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 547,233 shares for $35.3 million in Q1 2024, with $339.7 million remaining under the share repurchase authorization Q1 2024 Share Repurchases | Period | Shares Purchased | Average Price Paid | | :--- | :--- | :--- | | Jan 2024 | 136,500 | $63.78 | | Feb 2024 | 130,000 | $66.58 | | Mar 2024 | 280,733 | $63.91 | | Total | 547,233 | $64.51 | - As of March 31, 2024, $339.7 million remained available for share repurchases under the program177 Other Information On May 2, 2024, the company amended its credit agreement to transition from CDOR to Adjusted Term CORRA for Canadian dollar borrowings - The company amended its credit agreement on May 2, 2024, to transition from CDOR to Adjusted Term CORRA for Canadian dollar borrowings, effective after June 28, 2024181 Exhibits This section lists exhibits filed with the Form 10-Q, including the Stock Repurchase Agreement, Third Amendment to Credit Agreement, and CEO/CFO certifications - Key exhibits filed include the Stock Repurchase Agreement dated March 14, 2024, and the Third Amendment to Credit Agreement dated May 2, 2024185