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 those described in “Part II, Item 1A. Risk Factors” and elsewhere in this Quarterly Report on Form 10‑Q10-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.
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 wear brands. We own or control the design, sourcing, manufacturing, packaging and distribution of our products. In doing so, we are able to exercise control over every step of the manufacturing process.
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 best players, creating aspirational appeal for a broad range of golfers who want to emulate the performance of the game's best players.
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.
In March 2020, the World Health Organization declared a pandemic related to the novel coronavirus (“COVID-19”). To date, the COVID-19 pandemic has spread across multiple countries and resulted in, which led to government-ordered shutdowns of non-essential businesses, travel restrictions and restrictions on public gatherings. This has led to reduced consumer demand for golf-related products, the temporary closure of golf courses, including on-course retail pro shops, the temporary closure of off-course retail partner locations and the cancellation of professional golf tour events. In response to the outbreak and to mitigate the spreadAs a result of the COVID-19 pandemic,government-ordered shutdowns we have, consistent with related orders from federal, state and local governments,were forced to temporarily closedclose or limitedsubstantially limit our operations in our North American manufacturing facilities and distribution centers in the United States and corporate offices, with associates working remotely where possible. Outside ofEurope from the U.S., many distribution centers, including those in Europe, are operating on a limited basis. Asmid-March 2020 through mid-May 2020 which disrupted our fiscal first quarter 2020 ended on March 31, 2020, we had business disruptions to varying degrees across many regions. Our businesses in Asia were adversely impacted earlier in the quarter and are at varying stages of recovery, with Korea nearly fully recovered and other markets working their way towards recovery. Our businesses in the United States, Europe, Canada and Australia began to see the impacts of the COVID-19 pandemic later in the quarter and continue to be adversely impacted. Coinciding with the government-ordered shutdown of non-essential businesses and restrictions on public gatherings, consumer demand for our products slowed significantly in March, particularly in the United States. As a result, the COVID-19 pandemic has materially impacted our results of operations for the first half of 2020.
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.
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. adjusted forplus interest expense, net, income tax expense (benefit), depreciation and amortization and other items defined in the agreement, including: share-based compensation expense; restructuring charges;and transformation costs; certain transaction fees; extraordinary, unusual or non-recurring losses or charges; indemnification expense (income); executivecertain pension settlement;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 to evaluate and assess the performance of each of our reportable segments and to make budgeting decisions. 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; 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.
The following table sets forth, for the periods indicated, our results of operations.
Three Months Ended March 31, 20202021 Compared to the Three Months Ended March 31, 2019
2020
Net sales by reportable segment is summarized as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended | | | | | | Constant Currency |
| | March 31, | | Increase/(Decrease) | | Increase/(Decrease) |
(in millions) | | 2021 | | 2020 | | $ change | | % change | | $ change | | % change |
Titleist golf balls | | $ | 173.6 | | | $ | 116.2 | | | $ | 57.4 | | | 49.4 | % | | $ | 53.1 | | | 45.7 | % |
Titleist golf clubs | | 155.8 | | | 93.2 | | | 62.6 | | | 67.2 | % | | 58.7 | | | 63.0 | % |
Titleist golf gear | | 53.1 | | | 43.5 | | | 9.6 | | | 22.1 | % | | 7.6 | | | 17.5 | % |
FootJoy golf wear | | 159.4 | | | 130.4 | | | 29.0 | | | 22.2 | % | | 23.5 | | | 18.0 | % |
|
| | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended | | | | | | Constant Currency |
| | March 31, | | Increase/(Decrease) | | Increase/(Decrease) |
(in millions) | | 2020 | | 2019 | | $ change | | % change | | $ change | | % change |
Titleist golf balls | | $ | 116.2 |
|
| $ | 141.7 |
|
| $ | (25.5 | ) |
| (18.0 | )% |
| $ | (24.1 | ) |
| (17.0 | )% |
Titleist golf clubs | | 93.2 |
|
| 91.3 |
|
| 1.9 |
|
| 2.1 | % |
| 2.7 |
|
| 3.0 | % |
Titleist golf gear | | 43.5 |
|
| 45.2 |
|
| (1.7 | ) |
| (3.8 | )% |
| (0.8 | ) |
| (1.8 | )% |
FootJoy golf wear | | 130.4 |
|
| 141.0 |
|
| (10.6 | ) |
| (7.5 | )% |
| (9.1 | ) |
| (6.5 | )% |
Segment operating income (loss) by reportable segment is summarized as follows:
|
| | | | | | | | | | | | | | | |
| | Three months ended | | | | |
(in millions) | | March 31, | | Increase/(Decrease) |
Segment operating income (loss) | | 2020 | | 2019 | | $ change | | % change |
Titleist golf balls | | $ | 3.2 |
| | $ | 19.7 |
| | $ | (16.5 | ) | | (83.8 | )% |
Titleist golf clubs | | 4.5 |
| | (0.4 | ) | | 4.9 |
| | 1,225.0 | % |
Titleist golf gear | | 8.9 |
| | 9.2 |
| | (0.3 | ) | | (3.3 | )% |
FootJoy golf wear | | 14.3 |
| | 20.1 |
| | (5.8 | ) | | (28.9 | )% |
Net sales information by region is summarized as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended | | | | | | Constant Currency |
| | March 31, | | Increase/(Decrease) | | Increase/(Decrease) |
(in millions) | | 2021 | | 2020 | | $ change | | % change | | $ change | | % change |
United States | | $ | 308.6 | | | $ | 211.0 | | | $ | 97.6 | | | 46.3 | % | | $ | 97.6 | | | 46.3 | % |
EMEA | | 80.6 | | | 74.7 | | | 5.9 | | | 7.9 | % | | (0.8) | | | (1.1) | % |
Japan | | 56.4 | | | 37.6 | | | 18.8 | | | 50.0 | % | | 17.4 | | | 46.3 | % |
Korea | | 79.1 | | | 50.4 | | | 28.7 | | | 56.9 | % | | 23.5 | | | 46.6 | % |
Rest of world | | 56.2 | | | 35.0 | | | 21.2 | | | 60.6 | % | | 16.7 | | | 47.7 | % |
Total net sales | | $ | 580.9 | | | $ | 408.7 | | | $ | 172.2 | | | 42.1 | % | | $ | 154.4 | | | 37.8 | % |
Segment operating income by reportable segment is summarized as follows: |
| | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended | | | | | | Constant Currency |
| | March 31, | | Increase/(Decrease) | | Increase/(Decrease) |
(in millions) | | 2020 | | 2019 | | $ change | | % change | | $ change | | % change |
United States | | $ | 211.0 |
|
| $ | 230.4 |
|
| $ | (19.4 | ) |
| (8.4 | )% |
| $ | (19.4 | ) |
| (8.4 | )% |
EMEA | | 74.7 |
|
| 71.1 |
|
| 3.6 |
|
| 5.1 | % |
| 5.3 |
|
| 7.5 | % |
Japan | | 37.6 |
|
| 40.7 |
|
| (3.1 | ) |
| (7.6 | )% |
| (3.8 | ) |
| (9.3 | )% |
Korea | | 50.4 |
|
| 49.0 |
|
| 1.4 |
|
| 2.9 | % |
| 4.5 |
|
| 9.2 | % |
Rest of world | | 35.0 |
|
| 42.5 |
|
| (7.5 | ) |
| (17.6 | )% |
| (6.4 | ) |
| (15.1 | )% |
Total net sales | | $ | 408.7 |
|
| $ | 433.7 |
|
| $ | (25.0 | ) |
| (5.8 | )% |
| $ | (19.8 | ) |
| (4.6 | )% |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended | | | | |
(in millions) | | March 31, | | Increase/(Decrease) |
Segment operating income | | 2021 | | 2020 | | $ change | | % change |
Titleist golf balls | | $ | 34.3 | | | $ | 3.2 | | | $ | 31.1 | | | * |
Titleist golf clubs | | 41.8 | | | 4.5 | | | 37.3 | | | * |
Titleist golf gear | | 9.7 | | | 8.9 | | | 0.8 | | | 9.0 | % |
FootJoy golf wear | | 28.1 | | | 14.3 | | | 13.8 | | | 96.5 | % |
*Net SalesPercentage change not meaningful
Net Sales
Net sales decreasedincreased by $25.0$172.2 million, or 5.8%42.1%, to $580.9 million for the three months ended March 31, 2021 compared to $408.7 million for the three months ended March 31, 2020 compared to $433.7 million for the three months ended March 31, 2019.2020. On a constant currency basis, net sales decreasedincreased by $19.8$154.4 million, or 4.6%37.8%, to $413.9$563.1 million. The decreaseincrease in net sales on a constant currency basis was due to sales volume increases across all reportable segments, as rounds of play and consumer demand for golf-related products remained at a decreasehigh level during the first quarter of $24.12021. In addition, as discussed above, the first quarter of 2020 was unfavorably impacted by government-ordered shutdowns. Sales volume growth of products that are not allocated to one of our four reportable segments also contributed to the increase in net sales.
The increase in net sales in the United States was primarily driven by an increase of $41.7 million in Titleist golf ball sales and a decreaseballs, an increase of $9.1$37.2 million in Titleist golf clubs, an increase of $13.4 million in FootJoy golf wear primarily as a resultand an increase of the negative impact of the COVID-19 pandemic$5.2 million in the first quarter of 2020, as previously described. The remaining change in net sales was primarily due to the acquisition of KJUS during the third quarter of 2019. The results of KJUS have not been allocated to any of our reportable segments.
Net sales in the United States decreased by $19.4 million, or 8.4%, to $211.0 million for the three months ended March 31, 2020 compared to $230.4 million for the three months ended March 31, 2019. Overall, sales in the United States were lower as a result of the negative impact of the COVID-19 pandemic. Net sales were lower across all reportable segments, with Titleist golf balls sales down $17.3 million, FootJoy golf wear sales down $2.5 million and Titleist golf gear, sales down $1.9 million. The remaining change in net sales was primarily due toall driven by the acquisition of KJUS during the third quarter of 2019.same factors discussed above.
Net sales in regions outside of the United States were also negatively impactedincreased by the COVID-19 pandemic. Net sales in regions outside of the United States decreased by $5.6$74.6 million, or 2.8%37.7%, to $272.3 million for the three months ended March 31, 2021 compared to $197.7 million for the three months ended
March 31, 2020 compared to $203.3 million for the three months ended March 31, 2019.2020. On a constant currency basis, net sales in such regions decreasedincreased by $0.4$56.8 million, or 0.2%28.7%, to $202.9$254.5 million. In EMEA,Korea, Japan and Rest of world, the increase in net sales was primarily due to the acquisition of KJUS, offset by lower sales volumes of Titleist golf balls and FootJoy footwear. In Japan, the decrease in net sales was primarily due to a decrease in sales of Titleist golf balls and FootJoy golf wear. In Korea, the increase in net sales was driven by increased sales across all categories withreportable segments. In EMEA, the exception of FootJoy golf wear. Sales in the rest of the world were lower as a result of a decrease in Titleist golf balls and FootJoy golf wear.net sales primarily resulted from the government-ordered shutdowns in this region during the first quarter of 2021 as discussed above.
Gross Profit
Gross profit decreasedincreased by $21.2$109.7 million to $310.7 million for the three months ended March 31, 2021 compared to $201.0 million for the three months ended March 31, 2020 compared2020. Gross margin increased to $222.2 million53.5% for the three months ended March 31, 2019. Gross margin decreased2021 compared to 49.2% for the three months ended March 31, 2020 compared to 51.2% for the three months ended March 31, 2019.2020. The decreaseincrease in gross profit primarily resulted from a decreasean increase of $41.0 million in Titleist golf clubs, an increase of $35.4 million in Titleist golf balls, an increase of $20.1 million in gross profitFootJoy golf wear and an increase of $4.9 million in Titleist golf balls and a decrease of $8.1 million in gross profit in FootJoy golf wear,gear, each primarily due to the sales volume declinesincreases discussed above. The remaining change in gross profit was primarily due to the acquisition of KJUS, acquired in the third quarter of 2019.above, partially offset by increased inbound freight costs.
The decreaseincrease in gross margin was primarily driven by lowerhigher gross margins in Titleist golf clubs, Titleist golf balls and FootJoy golf wear. The increase in Titleist golf clubs was primarily driven by a favorable product mix shift and higher average selling prices. The increase in the Titleist golf ball segment was primarily driven by favorable manufacturing overhead absorption primarily driven by sales volume increases and a favorable product mix shift. The increase in FootJoy golf wear segments. The Titleist golf ball segment experienced unfavorable manufacturing overhead absorption related towas primarily driven by a higher percentage of global eCommerce sales and retail sales in Korea. Increased inbound freight costs partially offset the temporary closure of our U.S. based golf ball manufacturing facilities and FootJoy experienced lower footwear production volume at our footwear manufacturing facility, both as a result of the negative impact of the COVID-19 pandemic.gross margin increases across all reportable segments.
Selling, General and Administrative Expenses
SG&A expenses decreasedincreased by $2.7$23.7 million to $176.4 million for the three months ended March 31, 2021 compared to $152.7 million for the three months ended March 31, 2020 compared to $155.42020. This increase primarily resulted from an increase of $17.8 million for the three months ended March 31, 2019. This decrease wasin selling expense primarily due to a decreasehigher sales volumes described above and an increase of $3.6$7.2 million in advertising and promotional costs and $3.1 million in loweradministrative expense primarily due to employee related expenses, partially offset by an increasea decrease of $3.4$2.7 million in selling expenses primarily related to our acquisition of KJUS.advertising and promotional expenses. Overall, SG&A included a $1.3$3.8 million favorableunfavorable impact of changes in foreign currency exchange rates across all expense categories and segments.
Research and Development
R&D expenses increased by $0.4 million to $13.2 million forRestructuring Charges
During the three months ended March 31, 2020, compared to $12.8 million for the three months ended March 31, 2019. R&D expenses increased as a result of the acquisition of KJUS.
Intangible Amortization
Intangible amortization expense increased $0.2 million to $2.0 million for the three months ended March 31, 2020 compared to $1.8 million for the three months ended March 31, 2019, primarily due to an increase in amortizing intangible assets related to the acquisition of KJUS.
Restructuring Charges
During the first quarter of 2020, management approved a restructuring program to refine our business model and improve operational efficiencies. This program included both a voluntary retirement program and involuntary headcount reductions. As part of this program we recorded $11.2 million in severance and other benefits expense related to theour voluntary retirement program, as well as $0.4 million in severance and other benefits related to involuntary headcount reductions both associated with our involuntaryrestructuring program approved in the first quarter of 2020. There were no additional charges related to these programs recorded during the three months ended March 31, 2020.2021.
InterestOther Expense, net
InterestOther expense, net decreasedincreased by $0.8$1.3 million to $4.1$2.0 million for the three months ended March 31, 20202021 compared to $4.9 million for the three months ended March 31, 2019.
Other Expense (Income), net
Other expense (income), net increased by $1.7 million to other expense of $0.7 million for the three months ended March 31, 2020 compared2020. This increase was primarily due to other incomepension settlement costs of $1.0$1.4 million recorded during the three months ended March 31, 2021 related to lump-sum distributions to participants in our defined benefit plans as a result of the voluntary retirement program associated with management’s approved restructuring program.
Income Tax Expense
Income tax expense increased by $20.2 million to $27.8 million for the three months ended March 31, 2019. This increase was primarily due to an increase in non-service related pension costs.
Income Tax Expense
Income tax expense decreased by $4.7 million2021 compared to $7.6 million for the three months ended March 31, 2020 compared to $12.3 million2020. Our effective tax rate ("ETR") was 24.3% for the three months ended March 31, 2019. Our effective tax rate ("ETR") was2021 compared to 46.0% for the three months ended March 31, 2020 compared to 25.4% for the three months ended March 31, 2019.2020. The increasechange in the ETR was primarily driven by the negative impact of the COVID-19 pandemic on our jurisdictional mix of earnings and the effect of foreign currency losses incurred in the quarter that cannot be benefited, as well as, a reduction in discrete tax benefits related to share-based compensation expense.
Net Income Attributable to Acushnet Holdings Corp.
Net income attributable to Acushnet Holdings Corp. decreased by $26.0 million to $8.9 million for the three months ended March 31, 2020 compared to $34.9 million for the three months ended March 31, 2019, primarily as a result of a decrease in income from operations as discussed above, partially offset by a decrease in income tax expense.
Adjusted EBITDA
Adjusted EBITDA decreased by $11.4 million to $52.8 million for the three months ended March 31, 2020 compared to $64.2 million for the three months ended March 31, 2019, primarily due to a decrease in income from operations. Adjusted EBITDA margin decreased to 12.9% for the three months ended March 31, 2020 compared to 14.8% for the three months ended March 31, 2019.earnings.
Segment Results
Titleist Golf Balls Segment
Net sales in our Titleist golf balls segment decreasedincreased by $25.5$57.4 million, or 18.0%49.4%, to $173.6 million for the three months ended March 31, 2021 compared to $116.2 million for the three months ended March 31, 2020 compared to $141.7 million for the three months ended March 31, 2019.2020. On a constant currency basis, net sales in our Titleist golf balls segment decreasedincreased by $24.1$53.1 million, or 17.0%45.7%, to $117.6$169.3 million. This decreaseincrease was as a result of lower sales volumes primarily due to the negative impact of the COVID-19 pandemic in the United States along with lowerdriven by higher sales volumes of our latest generation Pro V1 and Pro V1x golf balls which were expected as these werelaunched in their second model year, partially offset by a sales volume increasethe first quarter of 2021.
Operating income in our newly-introduced performance models.
Titleist golf balls segment operating income decreasedincreased by $16.5$31.1 million or 83.8%,to $34.3 million for the three months ended March 31, 2021 compared to $3.2 million for the three months ended March 31, 2020 compared to $19.7 million for the three months ended March 31, 2019. This decrease was primarily due to a decrease2020. The increase in operating income resulted from higher gross profit of $20.1$35.4 million, partially offset by lowerhigher operating expenses. The decreaseincrease in gross profit was primarily due todriven by the sales declinevolume increase discussed above and unfavorablefavorable manufacturing overhead absorption due to the closureprimarily driven by higher production volumes, partially offset by increased inbound freight costs. Operating expenses increased
primarily as a result of the COVID-19 pandemic. Operatingincreases of $2.9 million and $2.5 million in administrative and selling expenses, decreasedrespectively, as a result of a $2.4 million decrease in advertising and promotional costs and lower employee related costs.discussed above.
Titleist Golf Clubs Segment
Net sales in our Titleist golf clubs segment increased by $1.9$62.6 million, or 2.1%67.2%, to $155.8 million for the three months ended March 31, 2021 compared to $93.2 million for the three months ended March 31, 2020 compared to $91.3 million for the three months ended March 31, 2019.2020. On a constant currency basis, net sales in our Titleist golf clubs segment increased by $2.7$58.7 million, or 3.0%63.0%, to $94.0$151.9 million. TheThis increase in net sales was due toprimarily driven by higher sales volumes of our newly introduced SM8 wedges coupled withTSi drivers and TSi fairways launched in the fourth quarter of 2020, our Scotty Cameron Special SelectTSi hybrids and Phantom X putters each launched in the first quarter of 2020. This increase was2021 and higher average selling prices across all categories, partially offset by the negative impact of the COVID-19 pandemic and lower sales volumes of drivers and fairways, which wereour previous generation wedges.
Operating income in their second model year.
our Titleist golf clubs segment operating income increased by $4.9$37.3 million to operating income of$41.8 million for the three months ended March 31, 2021 compared to $4.5 million for the three months ended March 31, 2020 compared to an operating loss of $0.4 million for the three months ended March 31, 2019.2020. The increase in operating income was primarily driven byresulted from higher gross profit of $2.8$41.0 million and lower operating expenses. Thedriven by the sales volume increase in gross profit primarily resulted from increased sales volumes discussed above and favorable manufacturing overhead absorption. Operatinghigher average selling prices, partially offset by increased inbound freight costs and higher operating expenses. Higher operating expenses decreasedwere primarily as a result of lower promotional costsincreases of $2.3 million and lower employee related costs.$2.1 million in selling and administrative expenses, respectively, as discussed above.
Titleist Golf Gear Segment
Net sales in our Titleist golf gear segment decreasedincreased by $1.7$9.6 million, or 3.8%22.1%, to $53.1 million for the three months ended March 31, 2021 compared to $43.5 million for the three months ended March 31, 2020 compared to $45.2 million for the three months ended March 31, 2019.2020. On a constant currency basis, net sales in our Titleist golf gear segment decreasedincreased by $7.6 million, or 17.5%, to $51.1 million. This increase was due to sales volume increases across all categories of the gear business.
Operating income in our Titleist golf gear segment increased by $0.8 million, or 1.8%9.0%, to $44.4 million. This decrease was primarily due to$9.7 million for the negative impact of the COVID-19 pandemic on sales volumes in the United States and EMEA.
Titleist golf gear segment operating income decreased by $0.3 million, or 3.3%,three months ended March 31, 2021 compared to $8.9 million for the three months ended March 31, 2020 compared to $9.2 million for the three months ended March 31, 2019.2020. The decreaseincrease in operating income was primarilyresulted from higher gross profit of $4.9 million driven by lower gross profit as a result of the sales volume decreaseincrease discussed above, partially offset by lowerincreased inbound freight costs and higher operating expenses. Operating expenses increased primarily as a result of lower promotional costs and lower employee related costs.an increase of $2.8 million in selling expense, as discussed above.
FootJoy Golf Wear Segment
Net sales in our FootJoy golf wear segment decreasedincreased by $10.6$29.0 million, or 7.5%22.2%, to $159.4 million for the three months ended March 31, 2021 compared to $130.4 million for the three months ended March 31, 2020 compared to $141.0 million for the three months ended March 31, 2019.2020. On a constant currency basis, net sales in our FootJoy golf wear segment decreasedincreased by $9.1$23.5 million, or 6.5%18.0%, to $131.9$153.9 million. This decreaseincrease was primarily due todriven by sales volume decreasesincreases in footwear and golf gloves and higher average selling prices across all markets primarily due to the negative impact of the COVID-19 pandemic.product categories.
Operating income in our FootJoy golf wear segment operating income decreasedincreased by $5.8$13.8 million, or 28.9%96.5%, to $28.1 million for the three months ended March 31, 2021 compared to $14.3 million for the three months ended March 31, 2020 compared to $20.1 million for the three months ended March 31, 2019. This decrease was primarily due to lower2020. The increase in operating income resulted from higher gross profit of $8.1$20.1 million partially offset by lower operating expenses. The decrease in gross profit was primarily driven by lower sales volume as discussed above and unfavorable manufacturing costs partially offset by lower operating expenses as a result of lower promotionalthe sales volume increase discussed above, a higher percentage of global eCommerce sales and retail sales in Korea, partially offset by increased inbound freight costs and lower employee related costs.higher operating expenses. Operating expenses increased primarily as a result of increases of $6.6 million and $1.4 million in selling and administrative expenses, respectively, as discussed above, partially offset by a decrease of $1.5 million in advertising and promotion expenses.
Liquidity and Capital Resources
Our primary cash needs relate to working capital, capital expenditures, servicing of our debt, paying dividends, pension contributions and repurchasing shares of our common stock. We expect to rely on cash flows from operations and borrowings under our revolving credit facility and local credit facilities as our primary sources of liquidity.
Our liquidity is impacted by our level of working capital, which is cyclical as a result of the general seasonality of our business. Our accounts receivable balance is generally at its highest starting at the end of the first quarter and continuing through the second quarter, and declines during the third and fourth quarters as a result of both an increase in cash collections and lower sales. Our inventory balance also fluctuates as a result of the seasonality of our business. Generally, our buildup of inventory starts during the fourth quarter and continues through the first quarter and into the beginning of the second quarter in order to meet demand for our initial sell‑insell-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, 2020,2021, we had $53.9$111.1 million of unrestricted cash and cash equivalents (including $14.9$7.9 million attributable to our FootJoy golf shoe joint venture)variable interest entity). On April 1, 2020, we drew down $200.0 million under our revolving credit facility, thereby increasing our unrestricted cash by such amount. As of March 31, 2020, 94.1%2021, 56.5% of our total unrestricted cash and cash equivalents was held at our non‑U.S.non-U.S. subsidiaries. We manage our worldwide cash requirements by monitoring the funds available among our subsidiaries and determining the extent to which we can access those funds on a cost effective basis. We are not aware of any restrictions on repatriation of these funds and, subject to foreign withholding taxes, those funds could be repatriated, if necessary. We have repatriated, and intend to repatriate, funds to the United States from time to time to satisfy domestic liquidity needs arising in the ordinary course of business, including liquidity needs related to debt service requirements.
As noted previously, the COVID-19 pandemic has adversely impactedcould impact our results of operations for the first quarter of 2020 andin ways we expect the related business disruptions to continue to have a material impact on our business, results of operations, financial position and cash flows. We have taken several steps to preserve our liquidity position and to manage cash flows on an ongoing basis.cannot currently predict. Subject to the length and severity of the COVID-19 pandemic, we believe that cash expected to be provided by operating activities, together with our cash on hand and the availability of borrowings under our revolving credit facility and our local credit facilities (subject to customary borrowing conditions) will be sufficient to meet our liquidity requirements for at least the next 12 months. Our ability to generate sufficient cash flows from operations is, however, subject to many risks and uncertainties, including future economic trends and conditions, including the current COVID-19 pandemic, demand for our products, 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, 2019 and further updated in "Risk Factors," Item 1A of Part II included elsewhere in this report.2020.
Debt and Financing ArrangementsArrangement
As of March 31, 2020,2021, we had $225.3$376.0 million of availability under our revolving credit facility after giving effect to $9.7$8.1 million of outstanding letters of credit. Additionally, we had $52.8$50.3 million available under our local credit facilities. As part of the actions we have taken relating to the COVID-19 pandemic, we drew down $200.0 million under our revolving credit facility on April 1, 2020. Following the draw down, we had approximately $367.5 million outstanding and $22.4 million of available borrowings under our revolving credit facility, after giving effect to $10.1 million of outstanding letters of credit.
Our credit agreement contains customary affirmative and restrictive covenants, including, among others, financial covenants based on our leverage and interest coverage ratios. On March 5, 2021, we issued a notice exercising our right to an early termination of the covenant relief period under our amended credit agreement and as such are required to comply with the previous maximum net average total leverage ratio, and the interest rate margins, commitment fee and covenant baskets in effect prior to the amendment. See “Notes to Consolidated Financial Statements-Note-5-Debt and Financing Arrangements,” Item 1 of Part I included elsewhere in this report for a description of our credit agreement. 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, 2020,2021, we were in compliance with all covenants under the credit agreement.
See “Notes to Consolidated Financial Statements-Note-10-Debt and Financing Arrangements” in our Annual Report on Form 10-K for the year ended December 31, 20192020 for a further description of our credit facilities. 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, 2019 and "Risk Factors," Item 1A of Part II included elsewhere in this report for further discussion surrounding the risks and uncertainties of our credit facilities.2020.
Capital Expenditures
We made $5.7$6.4 million of capital expenditures during the three months ended March 31, 2020. We plan2021. Capital expenditures for the full year are expected to significantly reducebe in the range of $45 to $50 million, although the actual amount may vary depending upon a variety of factors, including the timing of implementation of certain capital projects. 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. The increase in projected capital expenditures until therein 2021 is more clarity on the lengthprimarily related to key strategic investments in our golf ball operations and severity of the COVID-19 pandemic.
precision manufacturing capabilities.
Dividends and Share Repurchase Program
The Board of Directors has authorized us to repurchase up to an aggregate of $100.0 million of our 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 our discretion consistent with our general working capital needs and within the constraints of our credit agreement. This program will remain in effect until completed or until terminated by the Board of Directors. In connection with this share repurchase program, we entered into an agreement with Magnus Holdings Co., Ltd. (“Magnus”), a wholly owned subsidiary of Fila Holdings Co.Corp., to purchase from Magnus an equal amount of our common stock as we purchase on the open market, up to an aggregate of $24.9 million, at the same weighted average per share price.
In March of 2021, we resumed share repurchases under our share repurchase program. During the three months ended March 31, 2020,2021, we repurchased 243,89456,156 shares of common stock on the open market at an average price of $28.60$42.34 for an aggregate of $7.0$2.4 million. As a result of these purchases, we recorded an additional liability to repurchase additional shares of common stock from Magnus of $7.0$2.3 million (243,894(55,447 shares of common stock) bringing the total liability to $8.8$11.1 million (299,894(355,341 shares of common stock) as of March 31, 2020.2021. Excluding the impact of the share repurchase liability, as of March 31, 2020,2021, we had $63.7$61.3 million remaining under the current share repurchase program, including the $11.1 million related to the Magnus share repurchase agreement. In relation to the Magnus share repurchase agreement, on April 2, 2021, the Company repurchased from Magnus 355,341 shares of common stock for an aggregate of $11.1 million. See “Notes to Unaudited Condensed Consolidated Financial Statements-Note 9-CommonStatements-Note-10-Common Stock,” Item 1 of Part I included elsewhere in this report for disclosures related to thea description of our Magnus share repurchase liability.
In April 2020, we announced that we were suspending stock repurchases in light of the COVID-19 pandemic. We have the ability to resume repurchases if we deem circumstances warrant.agreement.
During the first quarter of 2020,three months ended March 31, 2021, we paid dividends on our common stock of $11.5$12.7 million to our shareholders. During the second quarter of 2020,2021, our Board of Directors declared a dividend of $0.155$0.165 per share of common sharestock to shareholders of record as of June 5, 20204, 2021 and payable on June 19, 2020.18, 2021.
Cash Flows
The following table presents the major components of net cash flows provided by (used in) operating, investing and financing activities for the periods indicated:
| | | | Three months ended | | | Three months ended |
| | March 31, | | | March 31, |
(in thousands) | | 2020 | | 2019 | (in thousands) | | 2021 | | 2020 |
Cash flows provided by (used in): | | |
| | |
| Cash flows provided by (used in): | | | | |
Operating activities | | $ | (72,512 | ) | | $ | (90,065 | ) | Operating activities | | $ | (29,996) | | | $ | (72,512) | |
Investing activities | | (5,741 | ) | | (5,462 | ) | Investing activities | | (6,410) | | | (5,741) | |
Financing activities | | 101,867 |
| | 109,076 |
| Financing activities | | (1,226) | | | 101,867 | |
Effect of foreign exchange rate changes on cash and restricted cash | | (1,874 | ) | | 314 |
| |
Net increase in cash and restricted cash | | $ | 21,740 |
| | $ | 13,863 |
| |
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash | | Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash | | (773) | | | (1,874) | |
Net (decrease) increase in cash, cash equivalents and restricted cash | | Net (decrease) increase in cash, cash equivalents and restricted cash | | $ | (38,405) | | | $ | 21,740 | |
Cash Flows from Operating Activities
Net cash used in operating activities was $30.0 million for the three months ended March 31, 2021 compared to $72.5 million for the three months ended March 31, 2020, compared to $90.1 million for the three months ended March 31, 2019, a decrease in cash used in operating activities of $17.6$42.5 million. CashThe decrease in cash used in operating activities is impactedwas primarily driven by an increase in net income offset in part by changes in our working capital.capital, both as a result of a significant increase in rounds of play and related consumer demand for golf-related products. Working capital at any specific point in time is subject to many variables including seasonality and inventory management, the timing of cash receipts and payments, vendor payment terms, and fluctuations in foreign exchange rates.
Cash Flows from Investing Activities
Net cash used in investing activities was $6.4 million for the three months ended March 31, 2021 compared to $5.7 million for the three months ended March 31, 2020, compared to $5.5 million for the three months ended March 31, 2019, an increase in cash used in investing activities of $0.2 million. This increase relates to an increase$0.7 million driven by changes in capital expenditures.
Cash Flows from Financing Activities
Net cash used in financing activities was $1.2 million for the three months ended March 31, 2021 compared to net cash provided by financing activities wasof $101.9 million for the three months ended March 31, 2020, compared to $109.1 million for the three months ended March 31, 2019, a decreasean increase in cash provided byused in financing activities of $7.2$103.1 million.
This decreaseincrease was primarily due to a decrease in net proceeds from borrowings and an increase in payments related to purchases of common stock, offset in part by a decrease in payments for employee restricted stock tax withholdings.borrowings.
Off-Balance Sheet Arrangements
As of March 31, 2020,2021, 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, 2019.2020.
Recently Issued Accounting PronouncementsStandards
See Note 1 to our unaudited condensed consolidated financial statements included elsewhere in this report for recently issued accounting standards, if any, including the dates of adoption and estimated effects on our consolidated financial statements.
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, 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.
COVID-19 Pandemic
The uncertainty that existsUncertainty with respect to the economic impact of the COVID-19 pandemic has introduced significant volatility which we expect will continue to have a material impact on our future results of operations,in the financial positionmarkets and cash flows, as well as, impact ourhas impacted interest rates, foreign exchange rates and commodity prices. The COVID-19 pandemic continues to be fluid and uncertain, making it difficult to forecast the ultimate impact it could have on our future operations.
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 Consolidated Financial Statements-Note-10-Debt and Financing Arrangements” in our Annual Report on Form 10-K for the year ended December 31, 2019.rates. 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 such as LIBOR. The LIBOR rate, on which the Eurodollar Rate is based, is expected to be discontinued by the end of 2021. The restated credit agreement permits us to agree with the administrative agent for the restated credit facility on a replacement benchmark rate subject to certain conditions (including that a majority of the lenders do not object to such replacement rate within a specified period of time following notice thereof from the administrative agent). Increases in interest rates may reduce our net income by increasing the cost of our debt.
During 2018, we entered 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, 2020,2021, the notional value of our outstanding interest rate swap contracts was $160.0$140.0 million. See "Notes to Unaudited Condensed Consolidated Financial Statement-Note-5-DerivativeStatement-Note-6-Derivative Financial Instruments" for further discussion of our interest rate swap contracts.
We performed a sensitivity analysis to assess the potential effect of a hypothetical movement in interest rates on our pre-tax interest expense. As of March 31, 2020,2021, we had $356.3$212.8 million of outstanding indebtedness at variable interest rates (excluding unamortized debt issuance costs) after giving effect to $160.0$140.0 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, 20202021 would have resulted in an increase of $3.6$2.1 million in our annual pre-tax interest expense.
Foreign Exchange Risk
We are exposed to foreign currency transaction risk related to transactions denominated in a currency other than functional currency. In addition, we are exposed to currency translation risk resulting from the translation of the financial results of our consolidated subsidiaries from their functional currency into U.S. dollars for financial reporting purposes.
We use financial instruments to reduce the earnings and shareholders' equity volatility relating to transaction risk. The principal financial instruments we enter into on a routine basis are foreign exchange forward contracts, primarily pertaining to the U.S. dollar, the Japanese yen, the British pound sterling, the Canadian dollar, the Korean won and the euro. The periods of the foreign exchange forward contracts designated as hedges correspond to the periods of the forecasted hedged transactions, which do not exceed 24 months subsequent to the latest balance sheet date. See "Notes to Unaudited Condensed Consolidated Financial Statements-Note-5-DerivativeStatements-Note-6-Derivative Financial Instruments" for further discussion of our foreign currency derivative instruments.
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, 20202021 was $293.6$219.0 million, representing a net settlement asset of $12.7$0.7 million. The sensitivity analysis of changes in the fair value of our foreign exchange forward contracts outstanding as of March 31, 2020,2021, while not predictive in nature, indicated that the net settlement asset of $12.7$0.7 million would decrease by $21.5$17.6 million resulting in a net settlement liability of $8.8$16.9 million, if the U.S. dollar uniformly weakened by 10% against all currencies covered by our contracts.
The sensitivity analysis described above recalculates the fair value of the foreign exchange forward contracts outstanding by replacing the actual foreign currency exchange rates and current month forward rates with foreign currency exchange rates and forward rates that reflect a 10% weakening of the U.S. dollar against all currencies covered by our contracts. All other factors are held constant. The sensitivity analysis disregards the possibility that currency exchange rates can move in opposite directions and that gains from one currency may or may not be offset by losses from another currency. The analysis also disregards the offsetting change in value of the underlying hedged transactions and balances.
The financial markets and currency volatility may limit our ability to cost-effectively hedge these exposures. The counterparties to derivative contracts are major financial institutions.institutions with investment grade credit ratings. We assessmonitor the credit riskquality of the counterpartiesthese financial institutions on an ongoing basis.
Commodity Price Risk
We are exposed to commodity price risk 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. While it is difficult to accurately measure the impact of inflation due to the imprecise nature of the estimates required, we believe the effects of inflation, if any, on our results of operations and financial condition have traditionally been immaterial. However, due to the uncertainty that exists with respect to the economic impact of the COVID-19 pandemic, our business, results of operations, financial position and cash flows could be materially impacted.
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, 2020.2021. 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, 20202021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. As a result of the COVID-19 pandemic, many of our employees began working remotely in March 2020.2020 and continue to do so. This change to our working environment did not have a material effect on our internal controls over financial reporting during the most recent quarter. We will continue to monitor and assess any impacts from the COVID-19 pandemic on our internal controls over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
We are defendants in 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
The following is an update toYou 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, 2019.
Our business, financial position, results of operations and cash flows2020, as well as the other information set forth in this report. There have been and we expect will continueno material changes to be, negatively impacted by the COVID-19 pandemic.
The COVID-19 pandemic, and the various governmental, industry and consumer actions related thereto, are having and will continue to have negative impacts on our business. These impacts include significant decreases in demand for our products; temporary closure of golf courses, including on-course retail pro shops; the temporary closure of off-course retail partner locations; cancellation of professional golf tour events; changes in consumer behavior in affected regions that restrict recreational activities and discretionary spending; significant disruptions in or closures of our manufacturing operations or those of our suppliers; disruptions within our supply chain restricting our ability to import products or obtain the necessary raw materials or components to make products; limitations on our employees’ and consumers’ ability to work and travel; restrictions on public gatherings; potential financial difficulties of customers and suppliers; significant changes in economic or political conditions; and related volatility in financial and market conditions.
It is not yet certain what the impact of this pandemic and actions being taken worldwide to address it will have on the economy, trade, our business and the businesses of our customers and suppliers. While it is impossible to quantify the impact of the COVID-19 pandemic, we expect business disruptions as a result of the COVID-19 pandemic to continue to have a material impact on our business, our results of operations, financial position and cash flows. The degree to which the COVID-19 pandemic and related actions ultimately impact our business, financial position, results of operations and cash flows will depend on factors beyond our control, including the spread, severity and duration of the pandemic; the actions taken to contain the spread of COVID-19; the pandemic's impact on the global economy and demand for our products; and to what extent and how quickly normal economic and operating conditions resume. Even in those regions where we are beginning to experience business recovery, such as certain areas in Asia, if those regions fail to fully contain the COVID-19 pandemic or suffer a relapse, those markets may not recover as quickly or at all. A prolonged decline in general economic conditions or uncertainties regarding future economic prospects as a result of the pandemic could adversely affect consumer confidence and discretionary spending, which in turn could result in further reduced sales of our products and could materially adversely affect our business, financial condition and results of operations.
Furthermore, you should carefully consider each of the risk factors as described in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2019, one or more of which may be precipitated or exacerbated by the impact of the COVID-19 pandemic, including risks relating to changes in consumer spending habits, our level of indebtedness, our need to generate sufficient cash flows to service our indebtedness, our ability to comply with the covenants contained in the agreements that govern our indebtedness, availability of adequate capital and our ability to pay dividends on our common stock.2020.
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 2020:2021:
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Period | | Total number of shares purchased | | Average price paid per share | | Total number of shares purchased as part of publicly announced plans or programs | | Approximate dollar value of shares that may yet be purchased under the plans or programs (1)(2) (in thousands) |
January 1, 2021 - January 31, 2021 | | — | | | $ | — | | | — | | | $ | 63,672 | |
February 1, 2021 - February 28, 2021 | | — | | | — | | | — | | | 63,672 | |
March 1, 2021 - March 31, 2021 | | 56,156 | | | 42.34 | | | 56,156 | | | 61,295 | |
Total | | 56,156 | | | $ | 42.34 | | | 56,156 | | | $ | 61,295 | |
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Period | | Total number of shares purchased | | Average price paid per share | | Total number of shares purchased as part of publicly announced plans or programs | | Approximate dollar value of shares that may yet be purchased under the plans or programs (1)(2)(3) (in thousands) |
January 1, 2020 - January 31, 2020 | | 73,500 |
| | $ | 32.14 |
| | 73,500 |
| | $ | 18,286 |
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February 1, 2020 - February 29, 2020 | | 102,376 |
| | 28.28 |
| | 102,376 |
| | 65,390 |
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March 1, 2020 - March 31, 2020 | | 68,018 |
| | 25.26 |
| | 68,018 |
| | 63,672 |
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Total | | 243,894 |
| | $ | 28.60 |
| | 243,894 |
| | $ | 63,672 |
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(1) | On February 11, 2020, our Board of Directors authorized us to repurchase up to an additional $50.0 million of our issued and outstanding common stock bringing the total authorization to an aggregate $100.0 million of our issued and outstanding common stock. In connection with this share repurchase program, we entered into an agreement with Magnus Holdings Co., Ltd. (“Magnus”), a wholly owned subsidiary of Fila Holdings Co., to purchase from Magnus an equal amount of our common stock as we purchase on the open market up to an aggregate of $24.9 million at the same weighted average per share price. In relation to the Magnus share repurchase agreement, during the three months ended March 31, 2020 we recorded an additional $7.0 million liability for 243,894 shares of common stock to be repurchased from Magnus, which are not included in the above table. All of the shares purchased during the three months ended March 31, 2020 related to purchases on the open market. The repurchase program will remain in effect until completed or until terminated by the Board of Directors. |
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(2) | Includes $11.1 million related to the Magnus share repurchase agreement. See “Notes to Unaudited Condensed Consolidated Financial Statements-Note 9-Common Stock,” Item 1 of Part I, included elsewhere in this report, for disclosures related to the Magnus share repurchase agreement. |
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(3) | In April 2020, we announced that we were suspending stock repurchases in light of the COVID-19 pandemic. We have the ability to resume repurchases if we deem circumstances warrant. |
(1) Our Board of Directors has authorized us to repurchase up to an aggregate of $100.0 million of our issued and outstanding common stock. In connection with this share repurchase program, we 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 our common stock as we purchase on the open market up to an aggregate of $24.9 million at the same weighted average per share price. In relation to the Magnus share repurchase agreement, during the three months ended March 31, 2021 we recorded an additional $2.3 million liability for an additional 55,447 shares of common stock to be repurchased from Magnus, which are not included in the above table. The share repurchase program will remain in effect until completed or until terminated by the Board of Directors. (2) Includes $11.1 million related to the Magnus share repurchase agreement. See “Notes to Unaudited Condensed Consolidated Financial Statements-Note 10-Common Stock,” Item 1 of Part I, included elsewhere in this report, for disclosures related to the Magnus share repurchase agreement.
(3) On April 2, 2021, the Company repurchased from Magnus 355,341 shares of common stock for an aggregate of $11.1 million. At the completion of this transaction, the Company no longer had an obligation to repurchase shares of common stock from Magnus.
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. | | Description |
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101.SCH | | Taxonomy Extension Schema Document |
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101.CAL | | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
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101.LAB | | Inline XBRL Taxonomy Extension Labels Linkbase Document |
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101.PRE | | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
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101.DEF | | Inline XBRL Taxonomy Extension Definition Linkbase Document |
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104 | | 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 7, 20206, 2021 | By: | /s/ David Maher |
| | David Maher |
| | President and Chief Executive Officer |
| | (Principal Executive Officer) |
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Dated: May 7, 20206, 2021 | By: | /s/ Thomas Pacheco |
| | Thomas Pacheco |
| | Executive Vice President, Chief Financial Officer and Chief Accounting Officer |
| | (Principal Financial Officer and Principal Accounting Officer) |