Acushnet Holdings Corp. — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. This is an annual filing; the supplied filing text does not provide standalone fourth-quarter results. Acushnet designs, manufactures and distributes golf equipment and apparel under brands including Titleist and FootJoy.
Financial performance
| Metric | FY2022 | FY2021 |
|---|---|---|
| Net sales | $2,270.3 million | $2,147.9 million |
| Gross profit / margin | $1,179.2 million / 51.9% | $1,118.4 million / 52.1% |
| Income from operations | $281.5 million | $259.8 million |
| Net income attributable to Acushnet | $199.3 million | $178.9 million |
| Diluted EPS | $2.75 | $2.38 |
| Adjusted EBITDA and margin | $338.4 million / 14.9% | $328.3 million / 15.3% |
| Cash from operating activities | $(67.8) million | $314.1 million |
| Capital expenditures | $61.4 million | $37.6 million |
Sales increased 5.7% as reported and 11.2% at constant currency, driven by higher volumes and average selling prices across segments. Gross profit rose, but gross margin slipped 0.2 percentage point, primarily from higher inbound freight costs and unfavorable currency effects. Operating income increased 8.4%; net income attributable to Acushnet increased 11.4%. Adjusted EBITDA grew 3.1%, while its margin declined 0.4 percentage point. The effective tax rate fell to 20.9% from 25.7%, mainly due to the jurisdictional mix of earnings.
Segments and geographic performance
- Titleist golf balls: Sales $678.8 million, up 1.7% reported and 5.7% constant currency; operating income $112.7 million, up 6.1%. Raw-material availability constrained volume.
- Titleist golf clubs: Sales $609.6 million, up 10.5% reported and 16.3% constant currency; operating income $100.9 million, up 33.8%, supported by wedges, putters, irons and TSR launches.
- Titleist golf gear: Sales $204.9 million, up 6.4% reported and 12.5% constant currency; operating income $11.7 million, down 20.4% as expenses outpaced gross profit growth.
- FootJoy golf wear: Sales $618.0 million, up 6.4% reported and 12.2% constant currency; operating income $37.0 million, down 16.3%, reflecting higher selling, distribution and administrative expenses.
- U.S. sales rose 9.1%; sales outside the U.S. rose 1.9% reported and 13.5% constant currency. Japan declined 14.4% reported, largely reflecting foreign exchange; constant-currency sales there increased 2.2%.
Cash, debt and capital allocation
- Operating cash flow was negative $67.8 million, versus positive $314.1 million in 2021. The company attributed the decline mainly to working capital, especially a $276.0 million inventory increase, reflecting demand, inventory preparation for 2023 launches and improved supply availability.
- Year-end cash, cash equivalents and restricted cash were $58.9 million; management reported $57.1 million of unrestricted cash. Approximately 96.1% of unrestricted cash was held at non-U.S. subsidiaries.
- Total debt was $567.8 million, predominantly variable-rate. The company had $416.8 million available on its revolving facility and $25.6 million available under local facilities. The $950 million revolving credit facility matures in August 2027; year-end weighted-average interest on revolver borrowings was 5.40%. No interest-rate swaps were outstanding, and the company was in compliance with its debt covenants.
- Management estimated that a one-percentage-point increase in rates would add approximately $5.7 million to annual pretax interest expense, based on year-end variable-rate debt.
- FY2022 capital expenditures were $61.4 million; 2023 capital expenditures were expected to be approximately $75 million. The company paid $52.2 million in common-stock dividends and repurchased 4.1 million shares for $190.8 million during 2022.
Outlook, risks and notable items
- Management expected golf rounds to remain resilient in 2023, citing golfer demographics and continued interest in the game. It expected inflation and foreign-exchange pressures to persist, but at a lesser level than in 2022, and supply-chain issues to continue to a lesser extent.
- In 2022, inflation, constrained materials and sourced-product availability, freight costs, and distribution and warehouse labor costs pressured expenses. The company also reported port congestion that led to expedited outbound shipping.
- Principal business risks include weaker golf participation or rounds, weather and seasonality, discretionary consumer spending, intense competition, product-launch execution, supply concentration and disruption, changing equipment rules, international currency exposure, and cybersecurity and privacy risks. Potential golf-equipment rule changes remained uncertain.
- Nearly half of sales were generated outside the U.S.; local-currency sales combined with substantial U.S.-dollar costs expose the business to exchange-rate movements. Foreign-exchange forwards are used to manage some exposure.
- Acushnet refinanced its prior credit arrangements in August 2022. It acquired PG Golf and an 80% interest in TPI-related businesses, and purchased putter-related trademarks for $65 million on December 31, 2022. In January 2023, it acquired golf-travel-related assets for $25 million.
- The Board expanded the repurchase authorization by $250 million in February 2023, bringing cumulative authorization to $700 million. A further $100 million repurchase from controlling shareholder Magnus was completed in January 2023 under a matching arrangement.
- The company disclosed ordinary-course litigation but said outcomes could not be predicted and potential losses could not be estimated; it recorded no liability for those matters. Management said it did not expect future material costs for identified environmental issues.
- Fila-controlled Magnus held approximately 53.4% at year-end 2022; Acushnet bought shares from Magnus in January 2023, reducing Fila’s ownership to approximately 52.1%. Acushnet remains a NYSE “controlled company” and may rely on governance exemptions.
Important facts for investors to verify
- Whether inventory levels and working-capital cash use normalize as 2023 products reach the market, and whether sell-through supports current demand.
- Whether pricing and volumes can offset freight, input, labor and currency pressures without further margin erosion.
- Current variable-rate debt, borrowing availability, covenant headroom and the sensitivity of earnings and cash flow to interest rates.
- Execution and returns from the TPI, trademark and golf-travel acquisitions, as well as planned capital expenditures and share repurchases.
- Developments in proposed golf-equipment rules, supply-chain resilience, and the controlling shareholder’s influence and related-party repurchase arrangements.
Adjusted EBITDA is a non-GAAP measure; the company cautions that it should not be viewed as a substitute for GAAP results or as necessarily comparable with similarly titled measures at other companies.