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 a variable interest entity (“VIE”) in which the Company is the primary beneficiary. All intercompany balances and transactions have been eliminated in consolidation. Certain prior period amounts have been reclassified to conform to current year presentation.
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 (the “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 and six
months ended
June 30, 2018
are not necessarily indicative of results to be expected for the full year ending
December 31, 2018
, nor were those of the comparable
2017
period representative of those actually experienced for the full year ended
December 31, 2017
. 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, 2017
included in its Annual Report on Form 10-K filed with the SEC on
March 7, 2018
.
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, liabilities, shareholders’ equity, net sales and expenses, and the disclosure of contingent assets and liabilities in its unaudited condensed consolidated financial statements. Actual results could differ from those 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 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 noncontrolling entities have guaranteed the credit lines of the VIE, for which there were
no
outstanding borrowings as of
June 30, 2018
and
December 31, 2017
. In addition, pursuant to the terms of the agreement governing the VIE, the Company is not required to provide financial support to the VIE.
Cash and Restricted Cash
Cash held in Company checking accounts is included in cash. Book overdrafts not subject to offset with other accounts with the same financial institution are classified as accounts payable. The Company classifies as restricted certain cash that is not available for use in its operations. As of
June 30, 2018
and
December 31, 2017
, the amount of restricted cash included in cash and restricted cash on the balance sheet was
$2.2 million
and
$2.3 million
, respectively.
Accounts Receivable
As of
June 30, 2018
and
December 31, 2017
, the allowance for doubtful accounts was
$9.1 million
and
$10.0 million
, respectively.
Foreign Currency Translation and Transactions
Foreign currency transaction
gains (losses)
included in selling, general and administrative expense were
losses
of
$3.1 million
and
gains
of
$1.0 million
for the
three months ended June 30, 2018
and
2017
, respectively. Foreign currency transaction
gains (losses)
included in selling, general and administrative expense were
losses
of
$1.1 million
and
gains
of
$3.3 million
for the
six months ended June 30,
2018
and
2017
, respectively.
Recently Adopted Accounting Standards
Revenue from Contracts with Customers
On January 1, 2018, the Company adopted the new accounting standard Accounting Standards Codification ("ASC") 606, "
Revenue from Contracts with Customers"
("ASC 606") and all the related amendments (the “new revenue standard”) using the modified retrospective method. The Company recognized the cumulative effect of initially applying the new revenue standard as an adjustment to opening retained earnings (Note
2
). The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods.
Income Statement—Reporting Comprehensive Income
On January 1, 2018, the Company adopted Accounting Standards Update ("ASU") 2018‑02,
“Income Statement—Reporting Comprehensive Income (Topic 220) —Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.”
As a result of the adoption of the amendments in this update, the Company recorded a reclassification from accumulated other comprehensive loss to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017 (Note
10
). The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods.
Financial Instruments - Recognition and Measurement
On January 1, 2018, the Company adopted ASU 2016-01,
"Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities"
("ASU 2016-01"). ASU 2016-01 supersedes the guidance to classify equity securities with readily determinable fair values into different categories (that is, trading or available-for-sale) and requires equity securities to be measured at fair value with changes in the fair value recognized through net income, among other items. As a result of the adoption of the amendments in this update, the Company recorded a reclassification of unrealized gains of
$2.1 million
from accumulated other comprehensive loss to retained earnings. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods.
Compensation—Retirement Benefits
On January 1, 2018, the Company adopted ASU 2017‑07,
“Compensation
—
Retirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Post Retirement Benefit Cost”
("ASU 2017-07"). ASU 2017‑07 requires that an employer report the service cost component of net periodic pension and net periodic post retirement cost in the same line item as other compensation costs arising from services rendered by the employees during the period. It also requires the other components of net periodic pension and net periodic postretirement benefit cost to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations. Additionally, only the service cost component is eligible for capitalization. As a result of the adoption of the amendments in this update, the Company recorded a reclassification of the non-service cost component of net periodic benefit cost of
$0.5 million
and
$0.7 million
from cost of goods sold and operating expenses to other (income) expense, net on the consolidated statement of operations for the
three and six
months ended
June 30, 2017
. The adoption of this standard also resulted in the restatement of the Company's segment operating income for the
three and six
months ended
June 30, 2017
.
The Company also adopted the following standards during 2018, none of which had a material impact to the Company's financial statements or financial statement disclosures:
|
|
|
|
|
|
Standard
|
|
|
|
Effective Date
|
ASU 2017‑09
|
|
Compensation—Stock Compensation: Scope of Modification Accounting
|
|
January 1, 2018
|
ASU 2017‑01
|
|
Business Combinations: Clarifying the Definition of a Business
|
|
January 1, 2018
|
ASU 2016‑16
|
|
Income Taxes: Intra-Entity Transfers of Assets other than Inventory
|
|
January 1, 2018
|
ASU 2016‑15
|
|
Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments
|
|
January 1, 2018
|
Recently Issued Accounting Standards
Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities
In August 2017, the Financial Accounting Standards Board ("FASB") issued ASU 2017‑12,
“Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities
” ("ASU 2017-12"). The amendments in this update expand and refine hedge accounting guidance and align the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. ASU 2017-12 also simplifies the application of hedge accounting guidance, hedge documentation requirements and the assessment of hedge effectiveness. ASU 2017‑12 is effective for annual periods beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted, including adoption in any interim period for which financial statements have not been issued or made available for issuance. The effect of adoption should be reflected as of the beginning of the fiscal year of adoption. The adoption of this standard is not expected to have a material impact on the consolidated financial statements.
Intangibles—Goodwill and Other
—
Simplifying the Test for Goodwill Impairment
In January 2017, the FASB issued ASU 2017‑04, “
Intangibles—Goodwill and Other: Simplifying the Test for Goodwill Impairment
” ("ASU 2017-04"). ASU 2017‑04 removes the second step of the goodwill impairment test. Instead an entity will perform a one-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit’s carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. ASU 2017‑04 is effective for annual periods beginning after December 15, 2019, and interim periods within those fiscal years. The Company will adopt this standard during the fourth quarter of 2018. The adoption of this standard is not expected to have a material impact on the consolidated financial statements.
Leases
In February 2016, the FASB issued ASU 2016‑02, “
Leases
,” and subsequently in July 2018, the FASB issued codification and other targeted improvements through ASU 2018-10 and ASU 2018-11, which will require lessees to recognize right‑of‑use assets and lease liabilities for leases which were formerly classified as operating leases. The guidance is effective for financial statements issued for annual periods beginning after December 15, 2018, including interim periods within those fiscal years. While the Company is still in the process of completing its analysis on the impact this ASU will have on its consolidated financial statements and related disclosures, it expects the adoption of this standard to have a material impact on the consolidated financial statements and result in the recognition of a right of use asset and corresponding liability on the consolidated balance sheet.
2
. Revenue
On January 1, 2018, the Company adopted ASC 606 using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported in accordance with the Company’s historic accounting under ASC 605,
"Revenue Recognition"
.
The Company recorded a net reduction to opening retained earnings of
$1.6 million
as of January 1, 2018 due to the cumulative impact of adopting ASC 606, with the impact primarily related to a promotional holiday program. The impact of applying ASC 606 was an increase in net sales of
$0.3 million
and
$4.2 million
and an increase in cost of sales of
$0.3 million
and
$1.6 million
for the
three and six
months ended
June 30, 2018
, respectively. Additionally, the Company reclassified the refund liability for expected returns from accounts receivable, net to accrued expenses and other liabilities and reclassified the value of inventory expected to be recovered related to sales returns from inventories to other assets as of
June 30, 2018
. The refund liability for expected returns was
$16.9 million
and
$13.5 million
as of
June 30, 2018
and
December 31, 2017
, respectively. The value of inventory expected to be recovered related to sales returns was
$8.5 million
and
$4.3 million
as of
June 30, 2018
and
December 31, 2017
, respectively. The adoption of ASC 606 did not have any other material impacts to the financial statements.
Accounting Policies
Revenue is recognized when performance obligations under the terms of a contract with a customer are satisfied. The majority of the Company's contracts have a single performance obligation to transfer products. Accordingly, the Company recognizes revenue when control of the products has been transferred to the customer, generally at the time of shipment or delivery of products, based on the terms of the contract and the jurisdiction of the sale. Revenue is recognized in an amount that reflects the consideration the Company expects to be entitled to in exchange for the products. Revenue is recognized net of allowances for discounts and sales returns. Sales taxes and other similar taxes are excluded from revenue.
Substantially all of the Company’s revenue is recognized at a point in time and made to customers who are not engaged in a long-term supply agreement or any form of contract with the Company. Substantially all of sales are paid for on account with the majority of terms between
30
and
60
days, not to exceed
one
year.
Costs associated with shipping and handling activities, such as merchandising, are included in selling, general and administrative expenses as revenue is recognized. The Company has made an accounting policy election to account for shipping and handling activities that occur after control of the related good transfers as fulfillment activities instead of assessing such activities as performance obligations.
The Company reduces revenue by the amount of expected returns and records a corresponding refund liability in accrued expenses and other liabilities. The Company accounts for the right of return as variable consideration and recognizes a refund liability for the amount of consideration that it estimates will be refunded to customers. In addition, the Company recognizes an asset for the right to recover returned products in other assets on the consolidated balance sheets. Sales returns are estimated based upon historical rates of product returns, current economic trends and changes in customer demands as well as specific identification of outstanding returns.
Contract Balances
Accounts receivable, net, include amounts billed and currently due from customers. The amounts due are stated at their net estimated realizable value. The Company maintains an allowance for doubtful accounts to provide for the estimated amount of receivables that will not be collected. The allowance includes amounts for certain customers where a risk of default has been specifically identified as well as a provision for customer defaults when it is determined the risk of some default is probable and estimable, but cannot yet be associated with specific customers. The assessment of the likelihood of customer defaults is based on various factors, including credit risk assessments, length of time the receivables are past due, historical experience, customer specific information available to the Company and existing economic conditions.
Customer Sales Incentives
The Company offers sales-based incentive programs to certain customers in exchange for certain benefits, including prominent product placement and exclusive stocking by participating retailers. These programs typically provide qualifying customers with rebates for achieving certain purchase goals. The rebates can be settled in the form of cash or credits or in the
form of free product. The rebates which are expected to be settled in the form of cash or credits are accounted for as variable consideration. The estimate of the variable consideration requires the use of assumptions related to the percentage of customers who will achieve qualifying purchase goals and the level of achievement. These assumptions are based on historical experience, current year program design, current marketplace conditions and sales forecasts, including considerations of the Company's product life cycles.
The rebates which are expected to be settled in the form of product are estimated based upon historical experience and the terms of the customer programs and are accounted for as an additional performance obligation. Revenue will be recognized when control of the free products earned transfers to the customer at the end of the related customer incentive program, which generally occurs within one year. Control of the free products generally transfers to the customer at the time of shipment.
Practical Expedients and Exemptions
The Company expenses sales commissions when incurred because the amortization period is one year or less. These costs are recorded within selling, general and administrative expense on the consolidated statements of operations.
The Company has elected the practical expedient to not disclose information about remaining performance obligations that have original expected durations of one year or less.
Disaggregated Revenue
In general, the Company's business segmentation is aligned according to the nature and economic characteristics of its products and customer relationships and provides meaningful disaggregation of each business segment's results of operations. See Note
15
for the Company's business segment disclosures, as well as a further disaggregation of net sales by geographical area.
3
. Inventories
The components of inventories were as follows:
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
June 30,
|
|
December 31,
|
|
|
2018
|
|
2017
|
Raw materials and supplies
|
|
$
|
62,627
|
|
|
$
|
72,342
|
|
Work-in-process
|
|
19,479
|
|
|
23,956
|
|
Finished goods
|
|
235,316
|
|
|
267,664
|
|
Inventories
|
|
$
|
317,422
|
|
|
$
|
363,962
|
|
4
. Product Warranty
The Company has defined warranties ranging from
one
to
two
years. Products covered by the defined warranty policies include certain 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 June 30,
|
|
Six months ended June 30,
|
(in thousands)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Balance at beginning of period
|
$
|
4,148
|
|
|
$
|
3,764
|
|
|
$
|
3,823
|
|
|
$
|
3,526
|
|
Provision
|
1,561
|
|
|
1,234
|
|
|
2,756
|
|
|
2,320
|
|
Claims paid/costs incurred
|
(1,666
|
)
|
|
(1,226
|
)
|
|
(2,579
|
)
|
|
(2,127
|
)
|
Foreign currency translation
|
(105
|
)
|
|
7
|
|
|
(62
|
)
|
|
60
|
|
Balance at end of period
|
$
|
3,938
|
|
|
$
|
3,779
|
|
|
$
|
3,938
|
|
|
$
|
3,779
|
|
5
. Related Party Transactions
Other current assets include receivables from related parties of
$1.0 million
and
$0.5 million
as of
June 30, 2018
and
December 31, 2017
, respectively.
6
. Debt and Financing Arrangements
Senior Secured Credit Facility
There were outstanding borrowings under the revolving credit facility of
$37.2 million
and
$10.1 million
as of
June 30, 2018
and
December 31, 2017
, respectively. The weighted average interest rate applicable to the outstanding borrowings was
2.97%
and
4.44%
as of
June 30, 2018
and
December 31, 2017
, respectively.
On June 7, 2018, Acushnet Company, Acushnet Canada Inc. and Acushnet Europe Limited, as borrowers, and the Company and certain other subsidiaries of the Company, as guarantors, entered into an amendment with Wells Fargo Bank, National Association and certain other lenders to the Company’s senior secured credit facilities agreement. Pursuant to the amendment, the restricted covenant governing the payment of dividends, the making of certain other payments and the redemption or repurchase of capital stock was amended to permit an additional
$150.0 million
of such payments, redemptions and/or repurchases, subject to certain conditions. In connection with amending the facilities, the Company incurred approximately
$0.4 million
in fees and expenses, which were recorded as debt issuance costs and will be recognized as interest expense over the term of the facilities.
The credit agreement contains a number of covenants that, among other things, restrict the ability of the U.S. Borrower and its restricted subsidiaries to (subject to certain exceptions), incur, assume, or permit to exist additional indebtedness or guarantees; incur liens; make investments and loans; pay dividends, make payments, or redeem or repurchase capital stock or make prepayments, repurchases or redemptions of certain indebtedness; engage in mergers, liquidations, dissolutions, asset sales, and other dispositions (including sale leaseback transactions); amend or otherwise alter terms of certain indebtedness or certain other agreements; enter into agreements limiting subsidiary distributions or containing negative pledge clauses; engage in certain transactions with affiliates; alter the nature of the business that we conduct or change our fiscal year or accounting practices. Certain exceptions to these covenants are determined based on ratios that are calculated in part using the calculation of Adjusted EBITDA. The credit agreement covenants also restrict the ability of Acushnet Holdings Corp. to engage in certain mergers or consolidations or engage in any activities other than permitted activities. The Company’s credit agreement contains certain customary affirmative and restrictive covenants, including, among others, financial covenants based on the Company’s leverage and interest coverage ratios. The credit agreement 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
June 30, 2018
, the Company was in compliance with all covenants under the credit agreement.
As of
June 30, 2018
, the Company had available borrowings under its revolving credit facility of
$230.6 million
after giving effect to
$7.2 million
of outstanding letters of credit.
Other Short-Term Borrowings
The Company has certain unsecured credit facilities available through its subsidiary locations. There were
no
outstanding borrowings under the Company's local credit facilities as of
June 30, 2018
and there were outstanding borrowings of
$10.3 million
under the Company's local credit facilities as of
December 31, 2017
. The weighted average interest rate applicable to the outstanding borrowings was
0.73%
as of
December 31, 2017
. As of
June 30, 2018
, the Company had available borrowings remaining under these unsecured facilities of
$64.0 million
.
Letters of Credit
As of
June 30, 2018
and
December 31, 2017
, there were outstanding letters of credit totaling
$11.4 million
and
$14.3 million
, respectively, of which
$8.3 million
and
$11.2 million
was secured, respectively, related to agreements, including the Company's Senior Secured Credit Facility, which provided a maximum commitment for letters of credit of
$29.2 million
as of both
June 30, 2018
and
December 31, 2017
.
7
. Derivative Financial Instruments
The Company principally uses derivative financial instruments to reduce the impact of changes in foreign currency exchange rates and interest rate fluctuations. 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 instruments contracts for trading or speculative purposes.
Foreign Exchange Derivative Instruments
Foreign exchange forward contracts are primarily used to hedge purchases denominated in select foreign currencies, thereby limiting currency risk that would otherwise result from changes in exchange rates. The periods of the foreign exchange forward contracts correspond to the periods of the 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
June 30, 2018
and
December 31, 2017
was
$273.8 million
and
$278.9 million
, respectively.
Interest Rate Derivative Instruments
In May 2018, the Company entered into an interest rate swap contract to reduce the impact of variability in interest rates. Under the contract, the Company pays fixed and receives variable rate interest, in effect converting a portion of its variable rate debt to fixed rate debt. As of
June 30, 2018
, the notional value of the Company's outstanding interest rate swap contract was
$100.0 million
. As of
December 31, 2017
, there were
no
outstanding interest rate swap contracts. The interest rate swap contract is accounted for as a cash flow hedge.
Impact on Financial Statements
The fair values of hedge instruments on the consolidated balance sheets were as follows:
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
June 30,
|
|
December 31,
|
Balance Sheet Location
|
Hedge Instrument Type
|
|
2018
|
|
2017
|
Other current assets
|
Foreign exchange forward
|
|
$
|
4,937
|
|
|
$
|
4,675
|
|
Other noncurrent assets
|
Foreign exchange forward
|
|
643
|
|
|
562
|
|
|
Interest rate swap
|
|
158
|
|
|
—
|
|
Other current liabilities
|
Foreign exchange forward
|
|
1,441
|
|
|
6,360
|
|
|
Interest rate swap
|
|
324
|
|
|
—
|
|
Other noncurrent liabilities
|
Foreign exchange forward
|
|
316
|
|
|
276
|
|
The hedge instrument gain (loss) recognized in accumulated other comprehensive income (loss) was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Six months ended
|
|
|
June 30,
|
|
June 30,
|
(in thousands)
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Type of hedge
|
|
|
|
|
|
|
|
|
Foreign exchange forward
|
|
$
|
9,209
|
|
|
$
|
425
|
|
|
$
|
2,128
|
|
|
$
|
(11,320
|
)
|
Interest rate swap
|
|
(269
|
)
|
|
—
|
|
|
(269
|
)
|
|
—
|
|
|
|
$
|
8,940
|
|
|
$
|
425
|
|
|
$
|
1,859
|
|
|
$
|
(11,320
|
)
|
Gains and losses on derivative instruments designated as cash flow hedges are reclassified from other comprehensive income (loss) at the time the forecasted transaction impacts the income statement. Based on the current valuation, the Company expects to reclassify a net
gain
of
$1.1 million
related to foreign exchange derivative instruments from accumulated other comprehensive income (loss) into cost of goods sold and a net
loss
of
$0.3 million
related to interest rate derivative instruments from accumulated other comprehensive income (loss) into interest expense, net during the next 12 months.
The hedge instrument gain (loss) recognized on the consolidated statements of operations was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Six months ended
|
|
|
June 30,
|
|
June 30,
|
(in thousands)
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Location of gain (loss) in statement of operations
|
|
|
|
|
|
|
|
|
Cost of goods sold
|
|
$
|
(1,120
|
)
|
|
$
|
1,284
|
|
|
$
|
(1,828
|
)
|
|
$
|
3,095
|
|
Selling, general and administrative expense
|
|
1,684
|
|
|
(30
|
)
|
|
1,016
|
|
|
(1,616
|
)
|
Interest expense, net
|
|
(102
|
)
|
|
—
|
|
|
(102
|
)
|
|
—
|
|
|
|
$
|
462
|
|
|
$
|
1,254
|
|
|
$
|
(914
|
)
|
|
$
|
1,479
|
|
Undesignated Foreign Exchange Derivative Instruments
From time to time, the Company enters into foreign exchange forwards to mitigate the change in fair value of specific assets and liabilities which do not qualify as hedging instruments under U.S. GAAP. Accordingly, these undesignated instruments are recorded at fair value as a derivative asset or liability with the corresponding change in fair value recognized in selling, general and administrative expense, together with the re-measurement gain or loss from the hedged asset or liability. The gross U.S. dollar equivalent notional amount of all outstanding foreign exchange forward contracts not designated under hedge accounting was
$1.9 million
as of
June 30, 2018
. There were
no
outstanding foreign exchange forward contracts not designated under hedge accounting as of
December 31, 2017
.
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 and considers the risk of counterparty default to be minimal.
8
. 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 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements as of
|
|
|
|
|
June 30, 2018 using:
|
|
|
(in thousands)
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Balance Sheet Location
|
Assets
|
|
|
|
|
|
|
|
|
Rabbi trust
|
|
$
|
10,175
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Other current assets
|
Foreign exchange derivative instruments
|
|
—
|
|
|
5,023
|
|
|
—
|
|
|
Other current assets
|
Deferred compensation program assets
|
|
1,880
|
|
|
—
|
|
|
—
|
|
|
Other noncurrent assets
|
Foreign exchange derivative instruments
|
|
—
|
|
|
643
|
|
|
—
|
|
|
Other noncurrent assets
|
Interest rate derivative instruments
|
|
—
|
|
|
158
|
|
|
—
|
|
|
Other noncurrent assets
|
Total assets
|
|
$
|
12,055
|
|
|
$
|
5,824
|
|
|
$
|
—
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Foreign exchange derivative instruments
|
|
$
|
—
|
|
|
$
|
1,441
|
|
|
$
|
—
|
|
|
Other current liabilities
|
Interest rate derivative instruments
|
|
—
|
|
|
324
|
|
|
—
|
|
|
Other current liabilities
|
Deferred compensation program liabilities
|
|
1,880
|
|
|
—
|
|
|
—
|
|
|
Other noncurrent liabilities
|
Foreign exchange derivative instruments
|
|
—
|
|
|
316
|
|
|
—
|
|
|
Other noncurrent liabilities
|
Total liabilities
|
|
$
|
1,880
|
|
|
$
|
2,081
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements as of
|
|
|
|
|
December 31, 2017 using:
|
|
|
(in thousands)
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Balance Sheet Location
|
Assets
|
|
|
|
|
|
|
|
|
Rabbi trust
|
|
$
|
10,637
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Other current assets
|
Foreign exchange derivative instruments
|
|
—
|
|
|
4,675
|
|
|
—
|
|
|
Other current assets
|
Deferred compensation program assets
|
|
1,866
|
|
|
—
|
|
|
—
|
|
|
Other noncurrent assets
|
Foreign exchange derivative instruments
|
|
—
|
|
|
562
|
|
|
—
|
|
|
Other noncurrent assets
|
Total assets
|
|
$
|
12,503
|
|
|
$
|
5,237
|
|
|
$
|
—
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Foreign exchange derivative instruments
|
|
$
|
—
|
|
|
$
|
6,360
|
|
|
$
|
—
|
|
|
Other current liabilities
|
Deferred compensation program liabilities
|
|
1,866
|
|
|
—
|
|
|
—
|
|
|
Other noncurrent liabilities
|
Foreign exchange derivative instruments
|
|
—
|
|
|
276
|
|
|
—
|
|
|
Other noncurrent liabilities
|
Total liabilities
|
|
$
|
1,866
|
|
|
$
|
6,636
|
|
|
$
|
—
|
|
|
|
During the
six
months ended
June 30, 2018
and the year ended
December 31, 2017
, there were no transfers between Level 1, Level 2 and Level 3 assets and liabilities.
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 can 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 hedge currency fluctuations for transactions denominated in a foreign currency (Note
7
). 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 contracts used to hedge the interest rate fluctuations of the Company's variable rate debt (Note
7
). 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.
9
. Pension and Other Postretirement Benefits
Components of net periodic benefit cost were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
Postretirement Benefits
|
|
|
Three months ended June 30,
|
(in thousands)
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Components of net periodic benefit cost
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
2,259
|
|
|
$
|
2,184
|
|
|
$
|
154
|
|
|
$
|
243
|
|
Interest cost
|
|
2,989
|
|
|
2,934
|
|
|
118
|
|
|
183
|
|
Expected return on plan assets
|
|
(3,198
|
)
|
|
(2,934
|
)
|
|
—
|
|
|
—
|
|
Settlement expense
|
|
464
|
|
|
185
|
|
|
—
|
|
|
—
|
|
Amortization of net (gain) loss
|
|
732
|
|
|
258
|
|
|
(419
|
)
|
|
(135
|
)
|
Amortization of prior service cost (credit)
|
|
43
|
|
|
43
|
|
|
(34
|
)
|
|
(27
|
)
|
Net periodic benefit cost (income)
|
|
$
|
3,289
|
|
|
$
|
2,670
|
|
|
$
|
(181
|
)
|
|
$
|
264
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
Postretirement Benefits
|
|
|
Six months ended June 30,
|
(in thousands)
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Components of net periodic benefit cost
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
4,702
|
|
|
$
|
4,521
|
|
|
$
|
329
|
|
|
$
|
478
|
|
Interest cost
|
|
5,947
|
|
|
5,952
|
|
|
245
|
|
|
357
|
|
Expected return on plan assets
|
|
(6,477
|
)
|
|
(5,947
|
)
|
|
—
|
|
|
—
|
|
Settlement expense
|
|
472
|
|
|
316
|
|
|
—
|
|
|
—
|
|
Amortization of net (gain) loss
|
|
1,252
|
|
|
297
|
|
|
(770
|
)
|
|
(301
|
)
|
Amortization of prior service cost (credit)
|
|
87
|
|
|
87
|
|
|
(68
|
)
|
|
(68
|
)
|
Net periodic benefit cost (income)
|
|
$
|
5,983
|
|
|
$
|
5,226
|
|
|
$
|
(264
|
)
|
|
$
|
466
|
|
The non-service cost components of net periodic benefit cost are included in other (income) expense, net in the unaudited condensed consolidated statement of operations.
10
. Income Taxes
In December 2017, the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) was signed into law making broad and complex changes to the Internal Revenue Code. The Company recorded a provisional net income tax expense of
$14.0 million
for the year ended December 31, 2017. This amount was comprised of
$10.2 million
expense related to the remeasurement of the Company’s deferred tax asset balances, offset by the reversal of
$4.8 million
expense for the deferred tax liability previously provided on unremitted foreign earnings, and an
$8.6 million
expense for the one-time transition tax liability.
The Tax Act also established new tax laws that affect 2018, including, but not limited to: (i) the reduction of the U.S. federal corporate tax rate from 35% to 21% for the periods beginning on or after January 1, 2018; (ii) a general elimination of U.S. federal income taxes on dividends from foreign subsidiaries; (iii) a new provision designed to tax global intangible low-taxed income (“GILTI”); (iv) limitations on the deductibility of certain executive compensation; (v) limitations on the use of foreign tax credits to reduce the U.S. income tax liability; and (vi) a new provision that allows a domestic corporation an immediate deduction for a portion of its foreign derived intangible income (“FDII”).
Income tax expense
increased
by
$0.2 million
to
$18.4 million
for the three months ended
June 30, 2018
compared to
$18.2 million
for the three months ended
June 30, 2017
. The Company’s effective tax rate (“ETR”) was
31.3%
for the three months ended
June 30, 2018
compared to
34.8%
for the three months ended
June 30, 2017
. The decrease in ETR was primarily driven by the net impact of changes resulting from the Tax Act, including incremental guidance issued in 2018, and changes to the Company's geographic mix of earnings.
Income tax expense
decreased
by
$7.1 million
to
$33.6 million
for the
six
months ended
June 30, 2018
compared to
$40.7 million
for the
six
months ended
June 30, 2017
. The Company’s ETR was
28.7%
for the
six
months ended
June 30, 2018
compared to
35.6%
for the
six
months ended
June 30, 2017
. The decrease in ETR was primarily driven by the net impact of changes resulting from the Tax Act, including incremental guidance issued in 2018, and changes to the Company's geographic mix of earnings.
In accordance with relevant SEC guidance (“SAB 118”), the effects of the Tax Act may be adjusted within a one-year measurement period from the enactment date for items that were previously reported as provisional, or where a provisional estimate could not be made. The income tax expense for the
three and six
months ended
June 30, 2018
reflected a favorable discrete adjustment of
$1.5 million
to the provisional amounts previously provided for the one-time transition tax, in accordance with IRS Notice 2018-26. The Company continues to analyze the different aspects of the Tax Act which could potentially affect the provisional estimates that were recorded at December 31, 2017.
The Company early adopted ASU 2018-02 on January 1, 2018, and as a result, recorded a net increase to beginning retained earnings and a decrease to accumulated other comprehensive income (loss) of
$4.1 million
. This entry reclassified the stranded tax effects resulting from the Tax Act on the Company’s U.S. pension plans, available-for-sale securities and certain foreign currency losses. The Company's accounting policy on accounting for income tax effects in accumulated other comprehensive income (loss) with respect to available-for-sale securities, pension, postretirement benefit plan obligations and currency translation matters is to apply the impact in the aggregate.
11
. Common Stock
The Company declared dividends per common share, including dividend equivalent rights (Note
12
), during the periods presented as follows:
|
|
|
|
|
|
|
|
|
|
(in thousands, except per share amounts)
|
|
Dividends per Common Share
|
|
Amount
|
2018:
|
|
|
|
|
Second Quarter
|
|
$
|
0.13
|
|
|
$
|
9,917
|
|
First Quarter
|
|
0.13
|
|
|
9,917
|
|
Total dividends declared in 2018
|
|
$
|
0.26
|
|
|
$
|
19,834
|
|
|
|
|
|
|
2017:
|
|
|
|
|
Fourth Quarter
|
|
$
|
0.12
|
|
|
$
|
9,098
|
|
Third Quarter
|
|
0.12
|
|
|
9,146
|
|
Second Quarter
|
|
0.12
|
|
|
9,149
|
|
First Quarter
|
|
0.12
|
|
|
9,152
|
|
Total dividends declared in 2017
|
|
$
|
0.48
|
|
|
$
|
36,545
|
|
During the third quarter of
2018
, the Board of Directors declared a dividend of
$0.13
per common share to shareholders on record as of
August 31, 2018
and payable on
September 14, 2018
.
On
June 7, 2018
, the Company’s Board of Directors authorized the Company to repurchase up to an aggregate of
$20.0 million
of its issued and outstanding common stock from time to time. The share repurchase program is intended to, among other things, offset share dilution resulting from equity issuances in connection with the Company's management and director compensation programs. Share repurchases may be effected 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 within the constraints of the Company’s credit agreement and the Company’s general working capital needs. During the
three months ended June 30, 2018
, there were
no
share repurchases made under this program.
12
. 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
June 30, 2018
, the only awards outstanding are RSUs and PSUs. 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 are delivered.
Restricted Stock and Performance Stock Units
A summary of the Company’s RSUs and PSUs as of
June 30, 2018
and changes during the
six
months then ended is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
Number
|
|
Average
|
|
|
of
|
|
Fair
|
|
|
RSUs and PSUs
|
|
Value
|
Outstanding at December 31, 2017
|
|
2,060,854
|
|
|
$
|
20.23
|
|
Granted
|
|
473,724
|
|
|
23.49
|
|
Vested (1)
|
|
(466,834
|
)
|
|
20.52
|
|
Forfeited
|
|
—
|
|
|
—
|
|
Outstanding at June 30, 2018
|
|
2,067,744
|
|
|
$
|
20.91
|
|
_______________________________________________________________________________
(1) Includes
68,400
shares of common stock that were undelivered as of June 30, 2018.
During
2018
, RSU vestings, including the impact of DERs issued in common stock, resulted in the issuance of
398,628
shares of common stock, of which
122,795
shares of common stock were delivered to the Company as payment by employees in lieu of cash to satisfy tax withholding obligations. As of
June 30, 2018
,
no
PSUs have vested.
The remaining unrecognized compensation expense related to non‑vested RSUs and non‑vested PSUs granted was
$13.9 million
and
$3.1 million
, respectively, as of
June 30, 2018
and is expected to be recognized over the related weighted average period of
1.69 years
.
The allocation of compensation expense related to equity incentive plans in the consolidated statements of operations was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Six months ended
|
|
|
June 30,
|
|
June 30,
|
(in thousands)
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Cost of goods sold
|
|
$
|
113
|
|
|
$
|
114
|
|
|
$
|
207
|
|
|
$
|
227
|
|
Selling, general and administrative expense
|
|
4,559
|
|
|
3,610
|
|
|
8,292
|
|
|
7,016
|
|
Research and development
|
|
312
|
|
|
330
|
|
|
611
|
|
|
658
|
|
Total compensation expense before income tax
|
|
4,984
|
|
|
4,054
|
|
|
9,110
|
|
|
7,901
|
|
Income tax benefit
|
|
1,029
|
|
|
1,396
|
|
|
1,882
|
|
|
2,719
|
|
Total compensation expense, net of income tax
|
|
$
|
3,955
|
|
|
$
|
2,658
|
|
|
$
|
7,228
|
|
|
$
|
5,182
|
|
13
. Accumulated Other Comprehensive Income (Loss), Net of Tax
Accumulated other comprehensive income (loss), net of tax consists of foreign currency translation adjustments, unrealized gains and losses from derivative instruments designated as cash flow hedges (Note
7
) and pension and other postretirement adjustments (Note
9
). Prior to the adoption of ASU 2016-01 on January 1, 2018, accumulated other comprehensive income (loss), net of tax included unrealized gains and losses from available-for-sale securities (Note
1
).
The components of and changes in accumulated other comprehensive income (loss), net of tax, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
|
|
Gains (Losses) on
|
|
Gains (Losses)
|
|
Pension and
|
|
Accumulated
|
|
|
Currency
|
|
Cash Flow
|
|
on Available-
|
|
Other
|
|
Other
|
|
|
Translation
|
|
Derivative
|
|
for-Sale
|
|
Postretirement
|
|
Comprehensive
|
(in thousands)
|
|
Adjustments
|
|
Instruments
|
|
Securities
|
|
Adjustments
|
|
Income (Loss)
|
Balance at December 31, 2017
|
|
$
|
(57,711
|
)
|
|
$
|
(2,280
|
)
|
|
$
|
1,721
|
|
|
$
|
(23,421
|
)
|
|
$
|
(81,691
|
)
|
Adoption of new accounting standards (Note 1 & 10)
|
|
(2,171
|
)
|
|
—
|
|
|
(1,721
|
)
|
|
(2,240
|
)
|
|
(6,132
|
)
|
Other comprehensive income (loss) before reclassifications
|
|
(6,531
|
)
|
|
1,859
|
|
|
—
|
|
|
23
|
|
|
(4,649
|
)
|
Amounts reclassified from accumulated other comprehensive income (loss)
|
|
—
|
|
|
1,930
|
|
|
—
|
|
|
973
|
|
|
2,903
|
|
Tax expense
|
|
—
|
|
|
(718
|
)
|
|
—
|
|
|
(148
|
)
|
|
(866
|
)
|
Balance at June 30, 2018
|
|
$
|
(66,413
|
)
|
|
$
|
791
|
|
|
$
|
—
|
|
|
$
|
(24,813
|
)
|
|
$
|
(90,435
|
)
|
14
. 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
|
|
Six months ended
|
|
|
June 30,
|
|
June 30,
|
(in thousands, except share and per share amounts)
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
Net income attributable to Acushnet Holdings Corp.
|
|
$
|
39,907
|
|
|
$
|
33,016
|
|
|
$
|
81,391
|
|
|
$
|
71,130
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares:
|
|
|
|
|
|
|
|
|
Basic
|
|
74,762,469
|
|
|
74,451,977
|
|
|
74,706,663
|
|
|
74,337,013
|
|
Diluted
|
|
75,028,658
|
|
|
74,581,269
|
|
|
74,911,551
|
|
|
74,409,050
|
|
|
|
|
|
|
|
|
|
|
Net income per common share attributable to Acushnet Holdings Corp.:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.53
|
|
|
$
|
0.44
|
|
|
$
|
1.09
|
|
|
$
|
0.96
|
|
Diluted
|
|
$
|
0.53
|
|
|
$
|
0.44
|
|
|
$
|
1.09
|
|
|
$
|
0.96
|
|
Net income per common share attributable to Acushnet Holdings Corp. for the
three and six
months ended
June 30,
2018
and
2017
was calculated using the treasury stock method
.
The Company’s potential dilutive securities for the
three and six
months ended
June 30, 2018
and
2017
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.
For the
three and six
months ended
June 30, 2018
and
2017
, 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
|
|
Six months ended
|
|
|
June 30,
|
|
June 30,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
RSUs
|
|
—
|
|
|
341,203
|
|
|
—
|
|
|
372,676
|
|
15
. 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. Segment operating income includes directly attributable expenses and certain shared costs of corporate administration that are allocated to the reportable segments, but excludes interest expense, net, 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 and six
months ended
June 30, 2018
and
2017
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Net sales
|
|
|
|
|
|
|
|
|
Titleist golf balls
|
|
$
|
172,211
|
|
|
$
|
154,959
|
|
|
$
|
297,117
|
|
|
$
|
289,151
|
|
Titleist golf clubs
|
|
117,839
|
|
|
93,337
|
|
|
234,732
|
|
|
195,279
|
|
Titleist golf gear
|
|
45,822
|
|
|
47,300
|
|
|
90,167
|
|
|
89,690
|
|
FootJoy golf wear
|
|
119,496
|
|
|
112,499
|
|
|
260,202
|
|
|
254,740
|
|
Other
|
|
22,770
|
|
|
19,893
|
|
|
37,721
|
|
|
32,743
|
|
Total net sales
|
|
$
|
478,138
|
|
|
$
|
427,988
|
|
|
$
|
919,939
|
|
|
$
|
861,603
|
|
|
|
|
|
|
|
|
|
|
Segment operating income
|
|
|
|
|
|
|
|
|
Titleist golf balls
|
|
$
|
36,848
|
|
|
$
|
31,180
|
|
|
$
|
50,828
|
|
|
$
|
52,342
|
|
Titleist golf clubs
|
|
10,521
|
|
|
4,785
|
|
|
26,904
|
|
|
16,206
|
|
Titleist golf gear
|
|
8,254
|
|
|
10,310
|
|
|
16,038
|
|
|
17,614
|
|
FootJoy golf wear
|
|
5,387
|
|
|
5,639
|
|
|
25,642
|
|
|
26,776
|
|
Other
|
|
4,866
|
|
|
5,122
|
|
|
7,413
|
|
|
7,950
|
|
Total segment operating income
|
|
65,876
|
|
|
57,036
|
|
|
126,825
|
|
|
120,888
|
|
Reconciling items:
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
(5,247
|
)
|
|
(4,901
|
)
|
|
(9,655
|
)
|
|
(7,823
|
)
|
Transaction fees
|
|
—
|
|
|
(52
|
)
|
|
—
|
|
|
(146
|
)
|
Other
|
|
(1,841
|
)
|
|
162
|
|
|
(72
|
)
|
|
1,441
|
|
Total income before income tax
|
|
$
|
58,788
|
|
|
$
|
52,245
|
|
|
$
|
117,098
|
|
|
$
|
114,360
|
|
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 June 30,
|
|
Six months ended June 30,
|
(in thousands)
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
United States
|
|
$
|
252,740
|
|
|
$
|
224,175
|
|
|
$
|
472,029
|
|
|
$
|
447,289
|
|
EMEA (1)
|
|
67,674
|
|
|
57,878
|
|
|
140,716
|
|
|
125,887
|
|
Japan
|
|
45,487
|
|
|
44,424
|
|
|
97,616
|
|
|
94,477
|
|
Korea
|
|
61,974
|
|
|
55,970
|
|
|
114,649
|
|
|
105,852
|
|
Rest of world
|
|
50,263
|
|
|
45,541
|
|
|
94,929
|
|
|
88,098
|
|
Total net sales
|
|
$
|
478,138
|
|
|
$
|
427,988
|
|
|
$
|
919,939
|
|
|
$
|
861,603
|
|
_______________________________________________________________________________
(1) Europe, the Middle East and Africa ("EMEA")
16
. 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 production materials, finished goods inventory, capital expenditures and endorsement arrangements with professional golfers. The reported amounts exclude those liabilities included in accounts payable or accrued liabilities on the consolidated balance sheet as of
June 30, 2018
.
Purchase obligations by the Company as of
June 30, 2018
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period
|
|
|
Remainder of
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
2018
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
Thereafter
|
Purchase obligations
|
|
$
|
145,127
|
|
|
$
|
17,889
|
|
|
$
|
6,319
|
|
|
$
|
2,675
|
|
|
$
|
919
|
|
|
$
|
2,418
|
|
Contingencies
In connection with the Company’s acquisition of Acushnet Company, Beam Suntory, Inc indemnified the Company for certain tax related obligations that relate to periods during which Fortune Brands, Inc. owned Acushnet Company. As of
June 30, 2018
and
December 31, 2017
, the Company’s estimate of its receivable for these indemnifications was
$8.8 million
and
$8.7 million
, respectively, which was recorded in other noncurrent assets on the consolidated balance sheet.
Litigation
The Company and its subsidiaries are defendants in 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.