Acushnet Holdings Corp. — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021; unaudited. Acushnet sells golf equipment and apparel under brands including Titleist and FootJoy. Comparisons are with 2020, when COVID-related shutdowns affected demand and operations, particularly in the first half.
Financial results
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Net sales | $521.6m | $482.9m | $1,727.4m | $1,191.7m |
| Gross profit / margin | $268.8m / 51.5% | $252.0m / 52.2% | $914.0m / 52.9% | $609.4m / 51.1% |
| Operating income / margin | $52.5m / 10.1% | $85.2m / 17.6% | $281.7m / 16.3% | $118.4m / 9.9% |
| Net income attributable to Acushnet | $39.3m | $63.2m | $205.3m | $74.4m |
| Diluted EPS | $0.52 | $0.84 | $2.73 | $0.99 |
| Adjusted EBITDA / margin | $70.3m / 13.5% | $99.2m / 20.5% | $333.3m / 19.3% | $185.1m / 15.5% |
Cash flow and balance sheet: Nine-month operating cash flow was $280.1m, versus $167.1m; capital expenditures were $19.2m, versus $15.4m. Financing used $87.8m, including $30.1m of share repurchases and $37.1m of common dividends. Cash, cash equivalents and restricted cash were $320.5m at September 30, 2021, including $1.9m restricted. Debt totaled approximately $319.1m, including short-term borrowings. The company reported $385.7m available under its revolving facility and $59.8m under local facilities, and was in compliance with credit covenants.
Material changes and management commentary
- Nine-month sales rose 45.0% (40.9% constant currency), reflecting sustained golf demand, sales growth across product lines and the prior-year shutdown comparison. Q3 sales rose 8.0% (7.0% constant currency).
- For the first nine months, all four reportable segments grew sales: Titleist golf balls $543.1m (+39.8%), clubs $444.3m (+55.1%), gear $164.7m (+37.0%) and FootJoy golf wear $462.0m (+46.8%). In Q3, golf balls fell 1.7%; clubs rose 12.3%, gear 5.2% and FootJoy wear 18.9%.
- Q3 earnings declined despite higher sales: operating income fell to $52.5m from $85.2m and Adjusted EBITDA to $70.3m from $99.2m. Management cited higher SG&A to support demand, increased freight and manufacturing costs, raw-material inflation and supply constraints. Q3 gross margin fell 0.7 percentage points; Adjusted EBITDA margin fell 7.0 points.
- Nine-month profitability improved versus the pandemic-affected 2020 period; gross margin rose 1.8 percentage points. Management cited higher volumes, selling prices and manufacturing overhead absorption, partly offset by freight costs and higher expenses.
- At September 30, $33.5m remained on the then-current $100m repurchase authorization. On October 20, the board authorized an additional $100m, increasing total authorization to $200m. A Q4 dividend of $0.165 per share was declared, payable December 17, 2021.
Outlook, risks and unusual items
- The filing gives no full-year sales or earnings guidance. Management expected 2021 capital expenditures of $40m–$45m, principally for golf-ball operations, precision manufacturing and strategic initiatives.
- Management believed cash, operating cash flow and available credit would cover liquidity needs for at least 12 months, subject to COVID-19 developments and other business risks.
- Demand remained strong, but supply-chain disruptions, shortages of raw materials and components, and higher freight costs constrained product availability and increased costs. Future demand could change as pandemic restrictions ease; the pandemic’s duration and financial impact remain uncertain.
- Other disclosed exposures include variable-rate debt and foreign exchange risk. A hypothetical 1 percentage-point rise in rates would increase annual pretax interest expense by approximately $3.2m. A hypothetical 10% weakening of the U.S. dollar against currencies covered by forward contracts would turn the disclosed $2.8m net settlement asset into a $9.4m liability; this sensitivity excludes offsets from hedged items.
- The company executed a buy-in insurance policy for a non-U.S. defined-benefit plan and said it did not anticipate further material contributions to that plan. Routine-course litigation remains pending; outcomes and potential losses could not be estimated, and no related liability was recorded.
Investor verification priorities
- Assess whether Q3 margin and earnings pressure persists, especially the effect of freight, input costs, operating expenses and supply constraints.
- Separate ongoing growth from the unusually weak 2020 comparison period and review constant-currency sales alongside reported results.
- Monitor working capital, cash conversion, capital spending and actual availability under credit facilities, including covenant compliance.
- Review execution of the expanded repurchase authorization and dividend commitments against liquidity and investment needs.
- Track pandemic-related demand and supply risks, variable-rate debt exposure, foreign exchange effects and unresolved litigation.