Acushnet Holdings Corp. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. The company designs, manufactures and distributes golf products under brands including Titleist and FootJoy. Results are unaudited; management cautions that first-quarter results are not necessarily indicative of full-year results.
Financial performance and liquidity
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Net sales | $707.6 million | $686.3 million | +3.1%; +4.0% at constant currency |
| Gross profit / gross margin | $377.9 million / 53.4% | $365.7 million / 53.3% | Gross profit +$12.3 million |
| Operating income | $121.4 million | $124.9 million | −2.8% |
| Net income attributable to Acushnet | $87.8 million | $93.3 million | −5.9% |
| Diluted EPS | $1.35 | $1.36 | −0.7% |
| Adjusted EBITDA and margin | $153.7 million / 21.7% | $146.8 million / 21.4% | EBITDA +4.7% |
| Operating cash flow | $(109.5) million | $(86.4) million | Greater cash use |
| Capital expenditures | $7.3 million | $11.7 million | Lower spending |
Sales gains were led by Titleist golf clubs (+12.8%) and golf balls (+8.3%); FootJoy golf wear declined 6.3%. U.S. sales grew 13.1%, while sales outside the U.S. fell 8.5% (down 6.5% at constant currency), particularly in Korea, Japan and EMEA. Management attributed club growth mainly to SM10 wedges and T-Series irons, and ball growth to higher volumes across several Titleist models. FootJoy’s decline reflected lower volumes across product categories and unfavorable manufacturing overhead absorption.
SG&A increased $14.1 million, including $7.0 million of restructuring expense, higher advertising and promotional spending, and increased administrative and selling costs. Net interest expense rose $3.2 million, primarily due to higher rates and borrowings. The effective tax rate increased to 21.7% from 18.1%, mainly reflecting the mix of earnings by jurisdiction. Adjusted EBITDA is a non-GAAP measure; the company’s definition and reconciliation are in the filing.
Balance sheet at March 31, 2024: Cash, cash equivalents and restricted cash were $48.7 million, including $47.1 million of unrestricted cash. Accounts receivable were $465.0 million and inventory was $537.4 million. Total debt shown on the balance sheet was approximately $864.5 million, versus approximately $701.2 million at December 31, 2023. Revolver borrowings were $485.2 million at a 6.44% weighted average rate; the company also had $350.0 million of senior notes bearing 7.375% interest and $30.5 million of local short-term borrowings. Revolver availability was $459.8 million after letters of credit, with another $29.4 million available under local facilities. The company reported covenant compliance.
Operating cash use reflected working-capital movements, including a $267.8 million increase in accounts receivable, partly offset by a $69.9 million decrease in inventory. Financing provided $101.6 million, including net credit-facility proceeds; the company repurchased $35.3 million of shares and paid $14.6 million in dividends. Cash declined $16.7 million during the quarter. Management expects operating cash, cash on hand and available borrowing capacity to meet liquidity needs for at least 12 months, subject to risks and customary borrowing conditions.
Outlook, risks and notable items
- Management expects 2024 capital expenditures of approximately $85 million. The filing does not provide a clear full-year revenue or earnings guidance figure.
- During Q1, the footwear manufacturing joint venture approved closure of certain Fujian factory production lines as volume shifts to a third-party supplier. The company recorded $7.0 million in employee termination costs; $2.2 million remained accrued at quarter-end, and no further material costs were expected for this plan.
- The company cites seasonality and working-capital swings, golf participation and weather, consumer demand, competition, new-product execution, supplier and raw-material availability and costs, foreign exchange, inflation, cybersecurity, and leverage and interest-rate exposure as risks. A 100-basis-point increase in rates on the reported variable-rate debt exposure would increase annual pretax interest expense by an estimated $4.2 million, based on the filing’s sensitivity analysis.
- Foreign-exchange hedges had a $200.7 million notional amount. The filing’s scenario analysis estimated that a uniform 10% weakening of the U.S. dollar would turn the reported $4.0 million net settlement asset into a $9.7 million net settlement liability, before considering offsetting changes in hedged items.
- Purchase obligations totaled $277.3 million for the remainder of 2024, excluding amounts already recorded as payables or accrued liabilities. The company is party to ordinary-course litigation, but says it cannot estimate potential aggregate losses or financial impact and has recorded no related liability.
- After quarter-end, the company amended its credit agreement to transition Canadian-dollar loans from CDOR to adjusted term CORRA after June 28, 2024. It also declared a Q2 dividend of $0.215 per share. These are post-quarter events.
Investor verification points
- Track whether receivables and inventory convert to cash as the seasonal selling and collection cycle progresses, and whether operating cash flow improves.
- Monitor debt levels, borrowing costs, covenant headroom and availability under the revolving and local credit facilities.
- Assess whether Titleist club and ball growth can continue and whether FootJoy sales and profitability recover.
- Verify delivery and cost outcomes from the footwear production-line closure and the planned $85 million of capital expenditures.
- Review ongoing repurchases, dividends and remaining authorization—$339.7 million at quarter-end—against liquidity needs and debt restrictions.
- Follow the company’s reported litigation, foreign-exchange and input-cost exposures; potential litigation losses are not quantified in this filing.