Acushnet Holdings Corp. — FY 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023; comparisons are primarily with FY 2022. Acushnet designs, manufactures and distributes golf products under brands including Titleist and FootJoy. Its four reportable segments are Titleist golf balls, golf clubs, golf gear and FootJoy golf wear.
Financial performance
| Metric | FY 2023 | FY 2022 | Change |
|---|---|---|---|
| Net sales | $2,382.0 million | $2,270.3 million | +4.9%; +6.2% at constant currency |
| Gross profit / margin | $1,252.5 million / 52.6% | $1,179.2 million / 51.9% | Margin +0.7 percentage points |
| Income from operations | $285.3 million | $281.5 million | +1.3% |
| Net income attributable to Acushnet | $198.4 million | $199.3 million | -0.4% |
| Diluted EPS | $2.94 | $2.75 | +6.9% |
| Adjusted EBITDA and margin | $376.1 million / 15.8% | $338.4 million / 14.9% | EBITDA +11.1% |
| Operating cash flow | $371.8 million | $(67.8) million | Improved by $439.6 million |
| Capital expenditures | $75.4 million | $61.4 million | Increased |
Sales growth was led by Titleist golf balls (+12.2%), clubs (+8.0%) and gear (+5.5%); FootJoy golf wear declined 3.5%, mainly due to lower footwear volume. U.S. sales increased 10.0%, while sales outside the U.S. decreased 1.0% as reported and rose 1.9% at constant currency. Lower inbound freight costs helped lift gross margin. SG&A rose $54.7 million, including higher advertising, selling expenses and $10.4 million for distribution and custom-fulfillment optimization. R&D expense increased to $64.8 million.
Net income was nearly flat despite higher operating income: net interest expense rose $28.0 million to $41.3 million, principally due to higher borrowings and interest rates. The effective tax rate declined to 17.8% from 20.9%, mainly reflecting the mix of earnings by jurisdiction. Diluted EPS benefited from a lower weighted-average share count following repurchases.
Cash, debt and capital allocation
- Unrestricted cash and cash equivalents were $63.7 million at year-end; 97.3% was held by subsidiaries outside the U.S. Total balance-sheet cash, cash equivalents and restricted cash was $65.4 million.
- FY 2023 operating cash flow of $371.8 million reflected, in part, a $58.9 million inventory-related cash benefit as supply conditions improved. Investing cash outflow was $101.5 million; financing cash outflow was $264.7 million.
- Year-end debt and finance lease obligations were $701.2 million on the debt note presentation, including $350.0 million of 7.375% senior unsecured notes due 2028 and $325.2 million outstanding on the revolving facility. The filing’s risk-factor discussion separately cites $707.2 million of indebtedness; investors should reconcile this figure with the debt note and any differing definition.
- The revolving facility had $616.7 million of availability after letters of credit; local facilities had a further $35.6 million available. The company reported covenant compliance at year-end. The revolving facility matures in 2027 and is secured by specified assets; the notes mature in 2028.
- Cash dividends paid were $52.5 million. The company repurchased 6.49 million shares for $332.4 million during 2023, including purchases from controlling shareholder affiliate Magnus. A further $300 million repurchase authorization was approved in February 2024. The 2023 dividend was $0.78 per share; a $0.215-per-share dividend was declared for payment in March 2024.
Outlook, commentary and risks
- Management expects golf rounds to remain resilient in 2024, citing participation and demographic trends, but provides no specific 2024 revenue, earnings or margin guidance in the supplied filing text. Planned 2024 capital expenditures are approximately $85 million.
- Management highlights ongoing product investment and launches, global growth opportunities, expansion of eCommerce and investment in manufacturing capacity. U.S. rounds in 2023 were approximately 20% above 2019 levels, according to the filing.
- The golf governing bodies announced a change to golf-ball distance testing effective January 2028; recreational players may use balls conforming to current standards until January 2030. A proposed driver testing change is also under consideration. Effects on products and demand remain uncertain.
- Key exposures include discretionary consumer spending, weather and seasonality, competition, product-launch execution, retailer and supplier concentration, foreign exchange, raw-material and freight costs, and international operations. The company reported transportation delays associated with Red Sea carrier diversions and Panama Canal passage limitations.
- Acushnet issued $350 million of 7.375% notes in October 2023, using most proceeds to repay revolving borrowings. Variable-rate debt remains exposed to interest-rate changes; a $100 million interest-rate swap was outstanding at year-end.
- Ongoing lawsuits arise in the ordinary course of business; outcomes and aggregate losses could not be estimated, and no liability for potential losses was recorded. Management reported no expected material future costs for identified past and current environmental issues.
- No goodwill or indefinite-lived intangible impairment was recorded in 2023. PwC issued unqualified opinions on the financial statements and internal control over financial reporting; management also concluded controls were effective. The auditor identified accounting for income taxes as a critical audit matter.
Most important facts for investors to verify
- Reconcile the $707.2 million indebtedness figure in the risk disclosure with the $701.2 million debt-and-finance-lease total in the debt note; review maturities, interest rates and covenant headroom.
- Assess whether Titleist growth can continue and whether FootJoy footwear volume and segment profitability recover after the 2023 decline.
- Monitor cash conversion and inventory levels, given the large working-capital contribution to the year-over-year operating cash flow improvement.
- Evaluate the sustainability of substantial share repurchases and dividends alongside debt service, planned capital spending and the controlling shareholder’s influence.
- Track the final equipment-rule changes and their potential effects on product demand, innovation costs and launch plans.