ACUSHNET HOLDINGS CORP., 10-Q filed on 10/31/2019
Quarterly Report
v3.19.3
Cover Page - shares
9 Months Ended
Sep. 30, 2019
Oct. 25, 2019
Cover page.    
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Sep. 30, 2019  
Document Transition Report false  
Entity File Number 001-37935  
Entity Registrant Name Acushnet Holdings Corp.  
Entity Incorporation, State or Country Code DE  
Entity Tax Identification Number 45-2644353  
Entity Address, Address Line One 333 Bridge Street  
Entity Address, City or Town Fairhaven,  
Entity Address, State or Province MA  
Entity Address, Postal Zip Code 02719  
City Area Code 508  
Local Phone Number 979‑2000  
Title of 12(b) Security Common Stock - $0.001 par value per share  
Trading Symbol GOLF  
Security Exchange Name NYSE  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Large Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   75,165,104
Entity Central Index Key 0001672013  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Document Fiscal Year Focus 2019  
Document Fiscal Period Focus Q3  
v3.19.3
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) - USD ($)
$ in Thousands
Sep. 30, 2019
Dec. 31, 2018
Current assets    
Cash and restricted cash ($7,732 and $8,436 attributable to the variable interest entity (VIE)) $ 54,207 $ 31,014
Accounts receivable, net 273,877 186,114
Inventories ($8,199 and $9,658 attributable to the VIE) 348,866 361,207
Other assets 88,144 85,666
Total current assets 765,094 664,001
Property, plant and equipment, net ($11,279 and $11,615 attributable to the VIE) 222,499 228,388
Goodwill ($32,312 and $32,312 attributable to the VIE) 210,877 209,671
Intangible assets, net 482,852 478,257
Deferred income taxes 63,316 78,028
Other assets ($2,521 and $2,593 attributable to the VIE) 76,329 33,276
Total assets 1,820,967 1,691,621
Current liabilities    
Short-term debt 59,474 920
Current portion of long-term debt 35,625 35,625
Accounts payable ($5,918 and $6,882 attributable to the VIE) 92,444 86,045
Accrued taxes 28,009 38,268
Accrued compensation and benefits ($1,480 and $1,634 attributable to the VIE) 78,334 77,181
Accrued expenses and other liabilities ($2,651 and $3,462 attributable to the VIE) 99,430 56,828
Total current liabilities 393,316 294,867
Long-term debt 320,914 346,953
Deferred income taxes 4,663 4,635
Accrued pension and other postretirement benefits 83,429 102,077
Other noncurrent liabilities ($5,262 and $4,831 attributable to the VIE) 51,074 16,105
Total liabilities 853,396 764,637
Commitments and contingencies (Note 15)
Redeemable noncontrolling interest 344 0
Shareholders' equity    
Common stock, $0.001 par value, 500,000,000 shares authorized; 75,619,112 and 74,760,062 shares issued 76 75
Additional paid-in capital 907,957 910,890
Accumulated other comprehensive loss, net of tax (94,650) (89,039)
Retained earnings 143,898 72,946
Treasury stock, at cost; 840,714 shares (including 420,357 of accrued share repurchase) and no shares (Note 10) (20,818) 0
Total equity attributable to Acushnet Holdings Corp. 936,463 894,872
Noncontrolling interests 30,764 32,112
Total shareholders' equity 967,227 926,984
Total liabilities, redeemable noncontrolling interest and shareholders' equity $ 1,820,967 $ 1,691,621
v3.19.3
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Parenthetical) - USD ($)
$ in Thousands
Sep. 30, 2019
Dec. 31, 2018
Cash and restricted cash $ 54,207 $ 31,014
Inventories 348,866 361,207
Property, plant and equipment, net 222,499 228,388
Goodwill 210,877 209,671
Other assets 76,329 33,276
Accounts payable 92,444 86,045
Accrued compensation and benefits 78,334 77,181
Accrued expenses and other liabilities 99,430 56,828
Other noncurrent liabilities $ 51,074 $ 16,105
Common stock, par value (in dollars per share) $ 0.001 $ 0.001
Common stock, shares authorized (in shares) 500,000,000 500,000,000
Common stock, shares issued (in shares) 75,619,112 74,760,062
Treasury stock, at cost (in shares) 840,714 0
Accrued share repurchase (in shares) 420,357  
VIE    
Cash and restricted cash $ 7,732 $ 8,436
Inventories 8,199 9,658
Property, plant and equipment, net 11,279 11,615
Goodwill 32,312 32,312
Other assets 2,521 2,593
Accounts payable 5,918 6,882
Accrued compensation and benefits 1,480 1,634
Accrued expenses and other liabilities 2,651 3,462
Other noncurrent liabilities $ 5,262 $ 4,831
v3.19.3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2019
Sep. 30, 2018
Sep. 30, 2019
Sep. 30, 2018
Income Statement [Abstract]        
Net sales $ 417,166 $ 370,427 $ 1,313,086 $ 1,290,366
Cost of goods sold 199,822 181,489 627,542 622,944
Gross profit 217,344 188,938 685,544 667,422
Operating expenses:        
Selling, general and administrative 158,857 148,653 484,506 471,706
Research and development 12,746 12,787 38,417 38,095
Intangible amortization 2,015 1,625 5,533 4,885
Income from operations 43,726 25,873 157,088 152,736
Interest expense, net 4,504 4,284 14,600 13,939
Other expense, net 1,486 4,142 1,297 4,252
Income before income taxes 37,736 17,447 141,191 134,545
Income tax expense 7,730 10,098 36,244 43,737
Net income 30,006 7,349 104,947 90,808
Less: Net income attributable to noncontrolling interests (209) (286) (1,736) (2,354)
Net income attributable to Acushnet Holdings Corp. $ 29,797 $ 7,063 $ 103,211 $ 88,454
Net income per common share attributable to Acushnet Holdings Corp.:        
Basic (in dollars per share) $ 0.40 $ 0.09 $ 1.37 $ 1.18
Diluted (in dollars per share) $ 0.39 $ 0.09 $ 1.36 $ 1.18
Weighted average number of common shares:        
Basic (in shares) 75,192,567 74,823,954 75,603,108 74,746,190
Diluted (in shares) 75,552,440 75,867,562 75,888,548 75,230,651
v3.19.3
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2019
Sep. 30, 2018
Sep. 30, 2019
Sep. 30, 2018
Statement of Comprehensive Income [Abstract]        
Net income $ 30,006 $ 7,349 $ 104,947 $ 90,808
Other comprehensive income (loss):        
Foreign currency translation adjustments (5,995) (2,900) (6,370) (9,431)
Cash flow derivative instruments        
Unrealized holding gains arising during period 2,293   2,246  
Unrealized holding gains arising during period   3,421   5,280
Reclassification adjustments included in net income (1,427)   (5,703)  
Reclassification adjustments included in net income   1,621   3,551
Tax benefit (expense) 106   1,062  
Tax benefit (expense)   (1,345)   (2,063)
Cash flow derivative instruments, net 972   (2,395)  
Cash flow derivative instruments, net   3,697   6,768
Pension and other postretirement benefits        
Pension and other postretirement benefits adjustments 2,384 4,520 3,865 5,516
Tax expense (364) (957) (711) (1,105)
Pension and other postretirement benefits adjustments, net 2,020 3,563 3,154 4,411
Total other comprehensive (loss) income (3,003) 4,360 (5,611) 1,748
Comprehensive income 27,003 11,709 99,336 92,556
Less: Comprehensive income attributable to noncontrolling interests (209) (286) (1,736) (2,354)
Comprehensive income attributable to Acushnet Holdings Corp. $ 26,794 $ 11,423 $ 97,600 $ 90,202
v3.19.3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($)
$ in Thousands
9 Months Ended
Sep. 30, 2019
Sep. 30, 2018
Cash flows from operating activities    
Net income $ 104,947 $ 90,808
Adjustments to reconcile net income to cash provided by operating activities    
Depreciation and amortization 31,188 30,057
Unrealized foreign exchange losses 2,615 3,057
Amortization of debt issuance costs 1,107 1,040
Share-based compensation 7,991 13,780
Loss on disposals of property, plant and equipment 8 153
Deferred income taxes 14,699 23,202
Changes in operating assets and liabilities    
Accounts receivable (88,036) (55,798)
Inventories 22,887 35,602
Accounts payable 2,277 (90)
Accrued taxes (10,543) (8,987)
Other assets and liabilities 5,791 (2,759)
Cash flows provided by operating activities 94,931 130,065
Cash flows from investing activities    
Additions to property, plant and equipment (18,166) (20,662)
Business acquisitions, net of cash acquired (28,104) (2,350)
Cash flows used in investing activities (46,270) (23,012)
Cash flows from financing activities    
Proceeds from (repayments of) short-term borrowings, net 59,614  
Proceeds from (repayments of) short-term borrowings, net   (4,103)
Repayments of delayed draw term loan A facility (5,625) (38,750)
Repayment of term loan A facility (21,094) (14,063)
Purchases of common stock (10,409) 0
Debt issuance costs 0 (381)
Dividends paid on common stock (32,967) (29,338)
Dividends paid to noncontrolling interests (3,353) (6,450)
Payment of employee restricted stock tax withholdings (10,924) (2,634)
Cash flows used in financing activities (24,758) (95,719)
Effect of foreign exchange rate changes on cash (710) (1,064)
Net increase in cash 23,193 10,270
Cash and restricted cash, beginning of year 31,014 47,722
Cash and restricted cash, end of period 54,207 57,992
Supplemental information    
Non-cash additions to property, plant and equipment 1,962 1,648
Dividend equivalents rights (DERs) declared not paid 580 635
Share repurchase liability (Note 10) 10,409 0
Non-cash loan to noncontrolling interest (Note 16) $ 4,392 $ 0
v3.19.3
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED) - USD ($)
shares in Thousands, $ in Thousands
Total
Total Shareholders' Equity Attributable to Acushnet Holdings Corp.
Common Stock
Additional Paid-in Capital
Accumulated Other Comprehensive Loss, Net of Tax
Retained Earnings
Treasury Stock
Noncontrolling Interests
Beginning balance at Dec. 31, 2017 $ 853,973 $ 821,309 $ 74 $ 894,727 $ (81,691) $ 8,199 $ 0 $ 32,664
Beginning balance (in shares) at Dec. 31, 2017     74,479          
Changes in stockholders' equity                
Net income 90,808 88,454       88,454   2,354
Other comprehensive income (loss) 1,748 1,748     1,748      
Share-based compensation 14,011 14,011   14,011        
Vesting of restricted common stock, including impact of DERs, net of shares withheld for employee taxes (Note 11) (2,630) (2,630) $ 1 (2,631)        
Vesting of restricted common stock, including impact of DERs, net of shares withheld for employee taxes (in shares)     281          
Share repurchase liability (Note 10) 0              
Dividends and dividend equivalents declared (29,788) (29,788)       (29,788)    
Dividends declared to noncontrolling interests (6,450)             (6,450)
Ending balance at Sep. 30, 2018 920,171 891,603 $ 75 906,107 (86,075) 71,496 0 28,568
Ending balance (in shares) at Sep. 30, 2018     74,760          
Beginning balance at Dec. 31, 2017 853,973 821,309 $ 74 894,727 (81,691) 8,199 0 32,664
Beginning balance (in shares) at Dec. 31, 2017     74,479          
Changes in stockholders' equity                
Dividends and dividend equivalents declared (39,756)              
Ending balance at Dec. 31, 2018 926,984 894,872 $ 75 910,890 (89,039) 72,946 0 32,112
Ending balance (in shares) at Dec. 31, 2018     74,760          
Beginning balance at Jun. 30, 2018 913,747 885,465 $ 75 901,438 (90,435) 74,387 0 28,282
Beginning balance (in shares) at Jun. 30, 2018     74,755          
Changes in stockholders' equity                
Net income 7,349 7,063       7,063   286
Other comprehensive income (loss) 4,360 4,360     4,360      
Share-based compensation 4,670 4,670   4,670        
Vesting of restricted common stock, including impact of DERs, net of shares withheld for employee taxes (Note 11) (1) (1)   (1)        
Vesting of restricted common stock, including impact of DERs, net of shares withheld for employee taxes (in shares)     5          
Dividends and dividend equivalents declared (9,954) (9,954)       (9,954)    
Ending balance at Sep. 30, 2018 920,171 891,603 $ 75 906,107 (86,075) 71,496 0 28,568
Ending balance (in shares) at Sep. 30, 2018     74,760          
Changes in stockholders' equity                
Dividends and dividend equivalents declared (9,968)              
Ending balance at Dec. 31, 2018 926,984 894,872 $ 75 910,890 (89,039) 72,946 0 32,112
Ending balance (in shares) at Dec. 31, 2018     74,760          
Changes in stockholders' equity                
Net income 104,947              
Net income 105,216 103,211       103,211   2,005
Other comprehensive income (loss) (5,611) (5,611)     (5,611)      
Share-based compensation 7,991 7,991   7,991        
Vesting of restricted common stock, including impact of DERs, net of shares withheld for employee taxes (Note 11) (10,923) (10,923) $ 1 (10,924)        
Vesting of restricted common stock, including impact of DERs, net of shares withheld for employee taxes (in shares)     859          
Purchases of common stock (Note 10) (10,409) (10,409)         (10,409)  
Share repurchase liability (Note 10) (10,409) (10,409)         (10,409)  
Dividends and dividend equivalents declared (32,259) (32,259)       (32,259)    
Dividends declared to noncontrolling interests (3,353)             (3,353)
Ending balance at Sep. 30, 2019 967,227 936,463 $ 76 907,957 (94,650) 143,898 (20,818) 30,764
Ending balance (in shares) at Sep. 30, 2019     75,619          
Beginning balance at Jun. 30, 2019 958,037 926,251 $ 76 905,351 (91,647) 124,827 (12,356) 31,786
Beginning balance (in shares) at Jun. 30, 2019     75,614          
Changes in stockholders' equity                
Net income 30,006              
Net income 30,275 29,797       29,797   478
Other comprehensive income (loss) (3,003) (3,003)     (3,003)      
Share-based compensation 2,605 2,605   2,605        
Vesting of restricted common stock, including impact of DERs, net of shares withheld for employee taxes (Note 11) 1 1   1        
Vesting of restricted common stock, including impact of DERs, net of shares withheld for employee taxes (in shares)     5          
Purchases of common stock (Note 10) (4,231) (4,231)         (4,231)  
Share repurchase liability (Note 10) (4,231) (4,231)         (4,231)  
Dividends and dividend equivalents declared (10,726) (10,726)       (10,726)    
Dividends declared to noncontrolling interests (1,500)             (1,500)
Ending balance at Sep. 30, 2019 $ 967,227 $ 936,463 $ 76 $ 907,957 $ (94,650) $ 143,898 $ (20,818) $ 30,764
Ending balance (in shares) at Sep. 30, 2019     75,619          
v3.19.3
Summary of Significant Accounting Policies
9 Months Ended
Sep. 30, 2019
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) and include the accounts of Acushnet Holdings Corp. (the “Company”), its wholly-owned subsidiaries and less than wholly-owned subsidiaries, including a variable interest entity (“VIE”) in which the Company is the primary beneficiary. All intercompany balances and transactions have been eliminated in consolidation.
Certain information in footnote disclosures normally included in annual financial statements has been condensed or omitted for the interim periods presented in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) and U.S. GAAP. The year-end balance sheet data was derived from audited financial statements; however, the accompanying interim notes to the unaudited condensed consolidated financial statements do not include all disclosures required by U.S. GAAP. In the opinion of management, the financial statements contain all normal and recurring adjustments necessary to state fairly the financial position and results of operations of the Company.  The results of operations for the three and nine months ended September 30, 2019 are not necessarily indicative of results to be expected for the full year ending December 31, 2019, nor were those of the comparable 2018 period representative of those actually experienced for the full year ended December 31, 2018. These unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes for the fiscal year ended December 31, 2018 included in its Annual Report on Form 10-K filed with the SEC on February 28, 2019.
Use of Estimates
The preparation of the Company’s unaudited condensed consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and judgments that affect reported amounts of assets, liabilities, shareholders’ equity, net sales and expenses, and the disclosure of contingent assets and liabilities in its unaudited condensed consolidated financial statements. Actual results could differ from those estimates.
Variable Interest Entities
VIEs are entities that, by design, either (i) lack sufficient equity to permit the entity to finance its activities independently, or (ii) have equity holders that do not have the power to direct the activities of the entity that most significantly impact its economic performance, the obligation to absorb the entity’s expected losses, or the right to receive the entity’s expected residual returns. The Company consolidates a VIE when it is the primary beneficiary, which is the party that has both (i) the power to direct the activities that most significantly impact the VIE’s economic performance and (ii) through its interests in the VIE, the obligation to absorb expected losses or the right to receive expected benefits from the VIE that could potentially be significant to the VIE.
The Company consolidates the accounts of Acushnet Lionscore Limited, a VIE, which is 40% owned by the Company. The sole purpose of the VIE is to manufacture the Company’s golf footwear and as such, the Company is deemed to be the primary beneficiary. The Company has presented separately on its consolidated balance sheets, to the extent material, the assets of its consolidated VIE that can only be used to settle specific obligations of its consolidated VIE and the liabilities of its consolidated VIE for which creditors do not have recourse to its general credit. The general creditors of the VIE do not have recourse to the Company. Certain directors of the VIE have guaranteed the credit lines of the VIE, for which there were no outstanding borrowings as of September 30, 2019 and December 31, 2018. In addition, pursuant to the terms of the agreement governing the VIE, the Company is not required to provide financial support to the VIE.
Noncontrolling Interests
The ownership interest held by owners other than the Company in less than wholly-owned subsidiaries are classified as noncontrolling interests. The value attributable to the noncontrolling interests is presented on the unaudited condensed consolidated balance sheets separately from the equity attributable to the Company. Net income (loss) and comprehensive income (loss) attributable to noncontrolling interests are presented separately on the unaudited condensed consolidated statements of operations and unaudited condensed consolidated statements of comprehensive income, respectively.
Cash and Restricted Cash
Cash held in Company checking accounts is included in cash. Book overdrafts not subject to offset with other accounts with the same financial institution are classified as accounts payable. The Company classifies as restricted certain cash that is not available for use in its operations. As of September 30, 2019 and December 31, 2018, the amount of restricted cash included in cash and restricted cash on the balance sheet was $2.1 million and $2.0 million, respectively.
Accounts Receivable
As of September 30, 2019 and December 31, 2018, the allowance for doubtful accounts was $6.1 million and $7.3 million, respectively.
Foreign Currency Translation and Transactions
Foreign currency transaction losses included in selling, general and administrative expense were $0.6 million and $0.1 million for the three months ended September 30, 2019 and 2018, respectively. Foreign currency transaction losses included in selling, general and administrative expense were $0.2 million and $1.2 million for the nine months ended September 30, 2019 and 2018, respectively.
Recently Adopted Accounting Standards
Leases
On January 1, 2019, the Company adopted Accounting Standards Codification ("ASC") Topic 842, Leases ("ASC 842"), which requires the recognition of right-of-use assets and related operating and finance lease liabilities on the consolidated balance sheet. As permitted by ASC 842, the Company adopted ASC 842 using the optional transition approach, which allowed for a cumulative effect adjustment as of January 1, 2019, which is the date of initial application, and did not restate prior periods. As a result, the consolidated balance sheet prior to January 1, 2019 was not restated and continues to be reported under ASC Topic 840, Leases ("ASC 840"), which did not require the recognition of operating lease liabilities on the consolidated balance sheet, and is not comparative.
Under ASC 842, all leases are required to be recorded on the consolidated balance sheet and are classified as either operating or finance leases. A lease is classified as a finance lease if any one of the following criteria are met: the lease transfers ownership of the asset by the end of the lease term, the lease contains an option to purchase the asset that is reasonably certain to be exercised, the lease term is for a major part of the remaining useful life of the asset, the present value of the lease payments equals or exceeds substantially all of the fair value of the asset, or the leased asset is of a highly specialized nature. A lease is classified as an operating lease if it does not meet any one of these criteria.
The lease classification affects the expense recognition in the consolidated statement of operations. Operating lease expense consists of the lease payments plus any initial direct costs and is recognized on a straight-line basis over the lease term in the consolidated statement of operations. Finance lease charges are split, where amortization of the right-of-use asset is recorded as depreciation and amortization expense and an implied interest component is recorded in interest expense, net. The expense recognition for operating leases and finance leases under ASC 842 is consistent with ASC 840. As a result, there is no impact on the results of operations presented in the Company's unaudited condensed consolidated statements of operations and unaudited condensed consolidated statements of comprehensive income for the periods presented as a result of the adoption of ASC 842.
As permitted under ASC 842, the Company also elected to not reassess prior conclusions related to the identification, classification and accounting for initial direct costs for leases that commenced prior to January 1, 2019. As permitted under ASC 842, the Company elected to not use hindsight to determine lease terms and to not separate non-lease components within its lease portfolio. As permitted under ASC 842, the Company has also elected not to recognize right-of-use assets and lease
liabilities for short-term leases that have a term of 12 months or less. The effect of short-term leases on the Company's operating right-of-use assets and operating lease liabilities was not material.
Upon adoption of ASC 842, the Company recognized operating lease right-of-use assets and operating lease liabilities. The right-of-use asset represents the right to use the leased asset for the lease term. The lease liability represents the present value of the lease payments under the lease. The right-of-use asset is initially measured at cost, which primarily comprises the initial amount of the lease liability, plus any initial direct costs incurred less any lease incentives received. Lease payments included in the measurement of the lease liability comprise the following: the fixed non-cancelable lease payments, payments for optional renewal periods where it is reasonably certain the renewal period will be exercised, and payments for early termination options unless it is reasonably certain the lease will not be terminated early. The discount rate implicit within the Company's leases is generally not determinable and therefore the Company determines the discount rate based on its incremental collateralized borrowing rate applicable to the location where the lease is held. The incremental borrowing rate for each of the Company's leases is determined based on the lease term and currency in which such lease payments are made. Accordingly, upon adoption, the Company recorded an adjustment of $48.1 million to operating lease right-of-use assets and the related lease liabilities.
The Company leases office and warehouse space, machinery and equipment, and vehicles, among other items. Certain leases include one or more options to renew, with renewal terms that can extend the lease term up to 3 years. For contracts entered into on or after the effective date, at the inception of a contract the Company assesses whether the contract is, or contains, a lease. The Company's assessment is based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether the Company obtained the right to substantially all the economic benefit from the use of the asset throughout the period, and (3) whether the Company has the right to direct the use of the asset. See further discussion in Note 2.
Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities
On January 1, 2019, the Company adopted Accounting Standards Update ("ASU") 2017‑12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities” ("ASU 2017-12"). The amendments in this update expand and refine hedge accounting guidance and align the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. ASU 2017-12 also simplified the application of hedge accounting guidance, hedge documentation requirements and the assessment of hedge effectiveness. The adoption of this standard did not have a material impact on the consolidated financial statements.
Changes to the Disclosure Requirements for Fair Value Measurement
On January 1, 2019, the Company adopted ASU 2018-13, "Fair Value Measurement (Topic 820) —Disclosure Framework —Changes to the Disclosure Requirements for Fair Value Measurement" ("ASU 2018-13"). The amendments in this update are meant to provide more relevant information regarding valuation techniques and inputs used to arrive at measures of fair value, uncertainty in the fair value measurements, and how changes in fair value measurements impact an entity's performance and cash flows. The adoption of this standard did not have an impact on the consolidated financial statements or related disclosures.
Recently Issued Accounting Standards
Intangibles —Goodwill and Other —Internal-Use Software
In August 2018, the Financial Accounting Standards Board ("FASB") issued ASU 2018-15, "Intangibles -Goodwill and Other -Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract" ("ASU 2018-15"). The amendments in this update align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). ASU 2018-15 is effective for fiscal years beginning after December 15, 2019. Early adoption is permitted. The adoption of this standard is not expected to have a material impact on the consolidated financial statements.
Defined Benefit Plans—Changes to the Disclosure Requirements for Defined Benefit Plans
In August 2018, the FASB issued ASU 2018-14, "Compensation —Retirement Benefits —Defined Benefit Plans —General (Subtopic 715-20) —Disclosure Framework —Changes to the Disclosure Requirements for Defined Benefit Plans" ("ASU 2018-14"). The amendments in this update remove defined benefit plan disclosures that are no longer considered cost-beneficial, clarify the specific requirements of disclosures, and add disclosure requirements identified as relevant. ASU 2018-14 is effective for fiscal years ending after December 15, 2020. Early adoption is permitted. The adoption of this standard should be applied to all periods presented. The adoption of this standard will not have a material impact on the consolidated financial statements.
Financial Instruments—Credit Losses
In June 2016, the FASB issued ASU 2016-13, "Financial Instruments —Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" ("ASU 2016-13"). ASU 2016-13 is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. ASU 2016-13 requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Additionally, enhanced disclosures will be required to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. ASU 2016-13 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company is currently evaluating the impact this standard will have on its consolidated financial statements.
v3.19.3
Leases
9 Months Ended
Sep. 30, 2019
Leases [Abstract]  
Leases Leases
The Company's operating lease right-of-use assets and operating lease liabilities represent leases for office and warehouse space, machinery and equipment, and vehicles, among other items.
Operating lease costs recognized on the unaudited condensed consolidated statements of operations were as follows:
 
 
Three months ended
 
Nine months ended
(in thousands)
 
September 30, 2019
 
September 30, 2019
Cost of goods sold
 
$
696

 
$
2,304

Selling, general and administrative
 
2,962

 
8,742

Research and development
 
98

 
473

 
 
$
3,756

 
$
11,519


Supplemental balance sheet information related to the Company's operating leases is as follows:
 
 
 
 
September 30,
(in thousands)
 
Balance Sheet Location
 
2019
 
 
 
 
 
Right-of-use assets
 
Other noncurrent assets
 
$
43,307

 
 
 
 
 
Current lease liabilities
 
Accrued expenses and other liabilities
 
$
11,560

Noncurrent lease liabilities
 
Other noncurrent liabilities
 
32,876

 
 
Total liabilities
 
$
44,436


The weighted average remaining lease term and the weighted average discount rate for operating leases as of September 30, 2019 was:
 
 
Operating Leases
Weighted average remaining lease term (years)
 
5.6
Weighted average discount rate
 
3.45%

The following table reconciles the undiscounted cash flows for operating leases as of September 30, 2019 to operating lease liabilities recorded on the unaudited condensed consolidated balance sheet:
 
 
Operating
(in thousands)
 
Leases
Remainder of 2019
 
$
3,578

2020
 
13,063

2021
 
9,343

2022
 
6,186

2023
 
3,560

Thereafter
 
13,866

Total future lease payments
 
49,596

Less: Interest
 
(5,160
)
Present value of lease liabilities
 
$
44,436

 
 
 
Accrued expenses and other liabilities
 
$
11,560

Other noncurrent liabilities
 
32,876

Total lease liabilities
 
$
44,436


Future minimum rental payments under noncancelable operating leases as of December 31, 2018 were as follows:
(in thousands)
 
 
Year ending December 31,
 
 
2019
 
$
13,119

2020
 
11,053

2021
 
7,984

2022
 
5,345

2023
 
3,133

Thereafter
 
13,852

Total minimum rental payments
 
$
54,486


Supplemental cash flow information and non-cash activity related to the Company's operating leases are as follows:
 
 
Nine months ended
(in thousands)
 
September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
 
 
Operating cash flows for operating leases
 
$
10,877

Non-cash right-of-use assets obtained in exchange for lease obligations:
 
 
Operating leases
 
5,351


v3.19.3
Inventories
9 Months Ended
Sep. 30, 2019
Inventory Disclosure [Abstract]  
Inventories Inventories
The components of inventories were as follows:
 
 
 
September 30,
 
December 31,
(in thousands)
 
2019
 
2018
Raw materials and supplies
 
$
80,037

 
$
71,068

Work-in-process
 
19,304

 
21,763

Finished goods
 
249,525

 
268,376

Inventories
 
$
348,866


$
361,207


v3.19.3
Product Warranty
9 Months Ended
Sep. 30, 2019
Product Warranties Disclosures [Abstract]  
Product Warranty Product Warranty
The Company has defined warranties generally ranging from one to two years. Products covered by the defined warranty policies primarily include all Titleist golf products, FootJoy golf shoes and FootJoy golf outerwear. These product warranties generally obligate the Company to pay for the cost of replacement products, including the cost of shipping replacement products to its customers. The estimated cost of satisfying future warranty claims is accrued at the time the sale is recorded. In estimating future warranty obligations, the Company considers various factors, including its warranty policies and practices, the historical frequency of claims and the cost to replace or repair products under warranty.
The activity related to the Company’s warranty obligation for accrued warranty expense was as follows:
 
 
Three months ended September 30,
 
Nine months ended September 30,
(in thousands)
 
2019
 
2018
 
2019
 
2018
Balance at beginning of period
 
$
3,580

 
$
3,938

 
$
3,331

 
$
3,823

Provision
 
1,650

 
520

 
4,738

 
3,276

Claims paid/costs incurred
 
(1,592
)
 
(838
)
 
(4,417
)
 
(3,417
)
Foreign currency translation and other
 
295

 
5

 
281

 
(57
)
Balance at end of period
 
$
3,933


$
3,625


$
3,933


$
3,625


v3.19.3
Debt and Financing Arrangements
9 Months Ended
Sep. 30, 2019
Debt Disclosure [Abstract]  
Debt and Financing Arrangements Debt and Financing Arrangements
Senior Secured Credit Facility
The senior secured credit facility includes the revolving credit facility, the term loan A facility and the delayed draw term loan A facility. There were outstanding borrowings under the revolving credit facility of $50.7 million as of September 30, 2019. The weighted average interest rate applicable to the outstanding borrowings was 4.01% as of September 30, 2019. There were no outstanding borrowings under the revolving credit facility as of December 31, 2018.
The credit agreement contains customary affirmative and restrictive covenants, including, among others, financial covenants based on the Company's leverage and interest coverage ratios. The credit agreement 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 September 30, 2019, the Company was in compliance with all covenants under the credit agreement.
As previously noted in the "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, 2018, loans held by Magnus Holdings Co., Ltd. (“Magnus”), which is wholly‑owned by Fila Korea Co., Ltd., were secured by a pledge on all of the Company's common stock owned by Magnus. During the third quarter of 2019, Magnus informed the Company that they had refinanced their loan agreements and that the pledge on all of the Company's common stock owned by Magnus had been released.

As of September 30, 2019, the Company had available borrowings under its revolving credit facility of $216.6 million after giving effect to $7.7 million of outstanding letters of credit.
Other Short-Term Borrowings
The Company has certain unsecured local credit facilities available through its subsidiaries. There were outstanding borrowings under the Company's local credit facilities of $8.8 million and $0.9 million as of September 30, 2019 and December 31, 2018, respectively. The weighted average interest rate applicable to the outstanding borrowings was 2.42% and 3.25% as of September 30, 2019 and December 31, 2018, respectively. As of September 30, 2019, the Company had available borrowings remaining under these local credit facilities of $65.4 million.
Letters of Credit
As of September 30, 2019 and December 31, 2018, there were outstanding letters of credit related to agreements, including the Company's senior secured credit facility, totaling $11.4 million and $15.5 million, respectively, of which $8.2 million and $12.4 million, respectively, was secured. These agreements provided a maximum commitment for letters of credit of $34.7 million and $29.2 million as of September 30, 2019 and December 31, 2018, respectively.
v3.19.3
Derivative Financial Instruments
9 Months Ended
Sep. 30, 2019
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Financial Instruments Derivative Financial Instruments
The Company principally uses derivative financial instruments to reduce the impact of changes in foreign currency exchange rates and interest rate fluctuations. The principal derivative financial instruments the Company enters into are foreign exchange forward contracts and interest rate swaps. The Company does not enter into derivative financial instrument contracts for trading or speculative purposes.
Foreign Exchange Derivative Instruments
Foreign exchange derivative instruments are foreign exchange forward contracts primarily used to hedge currency fluctuations related to inventory purchases not denominated in the functional currency of the non-U.S. subsidiary, thereby limiting currency risk that would otherwise result from changes in exchange rates. These instruments are considered cash flow hedges. The periods of the foreign exchange forward contracts correspond to the periods of the forecasted transactions, which do not exceed 24 months subsequent to the latest balance sheet date. The primary foreign exchange forward contracts pertain to the U.S. dollar, the Japanese yen, the British pound sterling, the Canadian dollar, the Korean won and the euro. The gross U.S. dollar equivalent notional amount outstanding of all foreign exchange forward contracts designated under hedge accounting as of September 30, 2019 and December 31, 2018 was $292.6 million and $312.8 million, respectively.
The Company also enters into foreign exchange forward contracts to mitigate the change in fair value of specific assets and liabilities which do not qualify as hedging instruments under U.S. GAAP. These undesignated instruments are recorded at fair value as a derivative asset or liability with the corresponding change in fair value recognized in selling, general and administrative expense. The gross U.S. dollar equivalent notional amount of all outstanding foreign exchange forward contracts not designated under hedge accounting was $1.5 million as of September 30, 2019. There were no outstanding foreign exchange forward contracts not designated under hedge accounting as of December 31, 2018.
Interest Rate Derivative Instruments
The Company enters into interest rate swap contracts to reduce the impact of variability in interest rates. Under the contracts, the Company pays fixed and receives variable rate interest, in effect converting a portion of its variable rate debt to fixed rate debt. The interest rate swap contracts are accounted for as cash flow hedges. As of September 30, 2019 and December 31, 2018, the notional value of the Company's outstanding interest rate swap contracts was $160.0 million and $185.0 million, respectively.
Impact on Financial Statements
The fair value of hedge instruments recognized on the unaudited condensed consolidated balance sheets was as follows:
(in thousands)
 
 
 
September 30,
 
December 31,
Balance Sheet Location
 
Hedge Instrument Type
 
2019
 
2018
Other current assets
 
Foreign exchange forward
 
$
4,940

 
$
6,116

Other noncurrent assets
 
Foreign exchange forward
 
396

 
1,015

Accrued expenses and other liabilities
 
Foreign exchange forward
 
657

 
578

 
 
Interest rate swap
 
1,357

 
526

Other noncurrent liabilities
 
Foreign exchange forward
 
374

 
161

 
 
Interest rate swap
 
1,912

 
925


The hedge instrument gain (loss) recognized in accumulated other comprehensive loss, net of tax was as follows:
 
 
Three months ended
 
Nine months ended
 
 
September 30,
 
September 30,
(in thousands)
 
2019
 
2018
 
2019
 
2018
Type of hedge
 
 
 
 
 
 
 
 
Foreign exchange forward
 
$
2,440

 
$
3,175

 
$
4,634

 
$
5,303

Interest rate swap
 
(147
)
 
246

 
(2,388
)
 
(23
)
 
 
$
2,293


$
3,421


$
2,246

 
$
5,280


Gains and losses on derivative instruments designated as cash flow hedges are reclassified from accumulated other comprehensive loss, net of tax at the time the forecasted transaction impacts the statement of operations. Based on the current valuation, during the next 12 months the Company expects to reclassify a net gain of $5.2 million related to foreign exchange derivative instruments from accumulated other comprehensive loss, net of tax, into cost of goods sold and a net loss of $1.4 million related to interest rate derivative instruments from accumulated other comprehensive loss, net of tax into interest expense, net. For further information related to amounts recognized in accumulated other comprehensive loss, net of tax, see Note 12.
The hedge instrument gain (loss) recognized on the unaudited condensed consolidated statements of operations was as follows:
 
 
Three months ended
 
Nine months ended
 
 
September 30,
 
September 30,
(in thousands)
 
2019
 
2018
 
2019
 
2018
Location of gain (loss) in statement of operations
 
 
 
 
 
 
 
 
Foreign exchange forward:
 
 
 
 
 
 
 
 
Cost of goods sold
 
$
1,677

 
$
(1,461
)
 
$
6,276

 
$
(3,289
)
Selling, general and administrative (1)
 
625

 
277

 
442

 
1,293

Total
 
$
2,302

 
$
(1,184
)
 
$
6,718

 
$
(1,996
)
 
 
 
 
 
 
 
 
 
Interest Rate Swap:
 
 
 
 
 
 
 
 
Interest expense, net
 
$
(250
)
 
$
(160
)
 
$
(573
)
 
$
(262
)
Total
 
$
(250
)
 
$
(160
)

$
(573
)
 
$
(262
)

_______________________________________________________________________________
(1) Relates to gains on foreign exchange forward contracts derived from previously designated cash flow hedges.
Credit Risk
The Company enters into derivative contracts with major financial institutions with investment grade credit ratings and is exposed to credit losses in the event of non-performance by these financial institutions. This credit risk is generally limited to the unrealized gains in the derivative contracts. However, the Company monitors the credit quality of these financial institutions and considers the risk of counterparty default to be minimal.
v3.19.3
Fair Value Measurements
9 Months Ended
Sep. 30, 2019
Fair Value Disclosures [Abstract]  
Fair Value Measurements Fair Value Measurements
Certain assets and liabilities are carried at fair value under U.S. GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.
Assets and liabilities measured at fair value on a recurring basis as of September 30, 2019 were as follows:
 
 
Fair Value Measurements as of
 
 
 
 
September 30, 2019 using:
 
 
(in thousands)
 
Level 1
 
Level 2
 
Level 3
 
Balance Sheet Location
Assets
 
 
 
 
 
 
 
 
Rabbi trust
 
$
5,920

 
$

 
$

 
Other current assets
Foreign exchange derivative instruments
 

 
4,940

 

 
Other current assets
Deferred compensation program assets
 
813

 

 

 
Other noncurrent assets
Foreign exchange derivative instruments
 

 
396

 

 
Other noncurrent assets
Total assets
 
$
6,733

 
$
5,336

 
$

 
 
Liabilities
 
 
 
 
 
 
 
 
Foreign exchange derivative instruments
 
$

 
$
701

 
$

 
Accrued expenses and other liabilities
Interest rate derivative instruments
 

 
1,357

 

 
Accrued expenses and other liabilities
Deferred compensation program liabilities
 
813

 

 

 
Other noncurrent liabilities
Foreign exchange derivative instruments
 

 
374

 

 
Other noncurrent liabilities
Interest rate derivative instruments
 

 
1,912

 

 
Other noncurrent liabilities
Total liabilities
 
$
813

 
$
4,344

 
$

 
 
 

Assets and liabilities measured at fair value on a recurring basis as of December 31, 2018 were as follows:
 
 
Fair Value Measurements as of
 
 
 
 
December 31, 2018 using:
 
 
(in thousands)
 
Level 1
 
Level 2
 
Level 3
 
Balance Sheet Location
Assets
 
 
 
 
 
 
 
 
Rabbi trust
 
$
8,415

 
$

 
$

 
Other current assets
Foreign exchange derivative instruments
 

 
6,116

 

 
Other current assets
Deferred compensation program assets
 
1,222

 

 

 
Other noncurrent assets
Foreign exchange derivative instruments
 

 
1,015

 

 
Other noncurrent assets
Total assets
 
$
9,637

 
$
7,131

 
$

 
 
Liabilities
 
 
 
 
 
 
 
 
Foreign exchange derivative instruments
 
$

 
$
578

 
$

 
Accrued expenses and other liabilities
Interest rate derivative instruments
 

 
526

 

 
Accrued expenses and other liabilities
Deferred compensation program liabilities
 
1,222

 

 

 
Other noncurrent liabilities
Foreign exchange derivative instruments
 

 
161

 

 
Other noncurrent liabilities
Interest rate derivative instruments
 

 
925

 

 
Other noncurrent liabilities
Total liabilities
 
$
1,222

 
$
2,190

 
$

 
 

 
Rabbi trust assets are used to fund certain retirement obligations of the Company. The assets underlying the Rabbi trust are equity and fixed income exchange‑traded funds.
Deferred compensation program assets and liabilities represent a program where select employees could defer compensation until termination of employment. Effective July 29, 2011, this program was amended to cease all employee compensation deferrals and provided for the distribution of all previously deferred employee compensation. The program remains in effect with respect to the value attributable to the employer match contributed prior to July 29, 2011.
Foreign exchange derivative instruments are foreign exchange forward contracts primarily used to limit currency risk that would otherwise result from changes in exchange rates (Note 6). The Company uses the mid‑price of foreign exchange forward rates as of the close of business on the valuation date to value each foreign exchange forward contract at each reporting period.
Interest rate derivative instruments are contracts used to hedge the interest rate fluctuations of the Company's variable rate debt (Note 6). The valuation for the interest rate swap is calculated as the net of the discounted future cash flows of the pay and receive legs of the swap. Mid-market interest rates on the valuation date are used to create the forward curve for floating legs and discount curve.
v3.19.3
Pension and Other Postretirement Benefits
9 Months Ended
Sep. 30, 2019
Retirement Benefits [Abstract]  
Pension and Other Postretirement Benefits Pension and Other Postretirement Benefits
Components of net periodic benefit cost (income) were as follows: 
 
 
Pension Benefits
 
Postretirement Benefits
 
 
Three months ended September 30,
(in thousands)
 
2019
 
2018
 
2019
 
2018
Components of net periodic benefit cost (income)
 
 
 
 
 
 
 
 
Service cost
 
$
2,262

 
$
2,217

 
$
143

 
$
164

Interest cost
 
2,644

 
2,950

 
140

 
123

Expected return on plan assets
 
(3,123
)
 
(3,006
)
 

 

Settlement expense
 
2,122

 
4,611

 

 

Curtailment income
 

 
(40
)
 

 

Amortization of net loss (gain)
 
513

 
329

 
(359
)
 
(385
)
Amortization of prior service cost (credit)
 
94

 
44

 
(35
)
 
(35
)
Net periodic benefit cost (income)
 
$
4,512

 
$
7,105

 
$
(111
)
 
$
(133
)

 
 
Pension Benefits
 
Postretirement Benefits
 
 
Nine months ended September 30,
(in thousands)
 
2019
 
2018
 
2019
 
2018
Components of net periodic benefit cost (income)
 
 
 
 
 
 
 
 
Service cost
 
$
6,384

 
$
6,919

 
$
430

 
$
493

Interest cost
 
8,432

 
8,897

 
418

 
368

Expected return on plan assets
 
(9,679
)
 
(9,483
)
 

 

Settlement expense
 
3,897

 
5,083

 

 

Curtailment income
 

 
(40
)
 

 

Amortization of net loss (gain)
 
914

 
1,581

 
(1,077
)
 
(1,155
)
Amortization of prior service cost (credit)
 
186

 
131

 
(103
)
 
(103
)
Net periodic benefit cost (income)
 
$
10,134

 
$
13,088

 
$
(332
)
 
$
(397
)


The non-service cost components of net periodic benefit cost (income) are included in other expense, net in the unaudited condensed consolidated statements of operations.
v3.19.3
Income Taxes
9 Months Ended
Sep. 30, 2019
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Income tax expense decreased by $2.4 million to $7.7 million for the three months ended September 30, 2019 compared to $10.1 million for the three months ended September 30, 2018. The Company’s Effective Tax Rate ("ETR") was 20.5% for the three months ended September 30, 2019 compared to 57.9% for the three months ended September 30, 2018. The decrease in ETR was primarily driven by the impact of a change made in the third quarter of 2018 to the U.S. Tax Cuts and Jobs Act of 2017 ("Tax Act") and the impact of changes in the Company's geographic mix of earnings.
Income tax expense decreased by $7.5 million to $36.2 million for the nine months ended September 30, 2019 compared to $43.7 million for the nine months ended September 30, 2018. The Company’s ETR was 25.7% for the nine months ended September 30, 2019 compared to 32.5% for the nine months ended September 30, 2018. The decrease in ETR was primarily driven by the impact of a change made in the third quarter of 2018 to the Tax Act, the impact of changes in the Company's geographic mix of earnings and the discrete tax benefit for share based compensation expense.
v3.19.3
Common Stock
9 Months Ended
Sep. 30, 2019
Equity [Abstract]  
Common Stock Common Stock
Dividends
The Company declared dividends per common share, including DERs (Note 11), during the periods presented as follows:
(in thousands, except per share amounts)
 
Dividends per Common Share
 
Amount
2019:
 
 
 
 
Third Quarter
 
$
0.14

 
$
10,726

Second Quarter
 
0.14

 
10,751

First Quarter
 
0.14

 
10,782

Total dividends declared in 2019
 
$
0.42

 
$
32,259

 
 
 
 
 
2018:
 
 
 
 
Fourth Quarter
 
$
0.13

 
$
9,968

Third Quarter
 
0.13

 
9,954

Second Quarter
 
0.13

 
9,917

First Quarter
 
0.13

 
9,917

Total dividends declared in 2018
 
$
0.52

 
$
39,756


During the fourth quarter of 2019, the Company's Board of Directors declared a dividend of $0.14 per common share to shareholders on record as of November 29, 2019 and payable on December 13, 2019.
Share Repurchase Program
The Board of Directors has authorized the Company to repurchase up to an aggregate $50.0 million of its issued and outstanding common stock from time to time. Share repurchases may be effected 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 the discretion of the Company within the constraints of the Company’s credit agreement and general working capital needs. In connection with this share repurchase program, the Company entered into an agreement with Magnus to purchase from Magnus an equal amount of its common stock as it purchases on the open market at the same weighted average per share price. The shares will be purchased from Magnus when the Company has purchased an aggregate $24.9 million of shares in the open market, or at an earlier date as agreed to by the parties. See the Company's current report on Form 8-K filed on May 10, 2019 for additional information related to the Company's agreement with Magnus.
The Company's open market share repurchase activity during the periods presented was as follows:
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
(in thousands, except share and per share amounts)
 
2019
 
2019
Shares repurchased
 
166,972

 
420,357

Average price
 
$
25.34

 
$
24.76

Aggregate value
 
$
4,231

 
$
10,409


In relation to the Magnus share repurchase agreement, the Company recorded a $10.4 million liability for an additional 420,357 shares of common stock to be repurchased from Magnus, which was included in accrued expenses and other liabilities and treasury stock on the unaudited condensed consolidated balance sheet as of September 30, 2019. Excluding the impact of the share repurchase liability, as of September 30, 2019 the Company had $39.6 million remaining under the current share repurchase program, including the $24.9 million related to the Magnus share repurchase agreement.
v3.19.3
Equity Incentive Plans
9 Months Ended
Sep. 30, 2019
Share-based Payment Arrangement [Abstract]  
Equity Incentive Plans Equity Incentive Plans
Under the Acushnet Holdings Corp. 2015 Omnibus Incentive Plan (“2015 Plan”), the Company may grant stock options, stock appreciation rights, restricted shares of common stock, restricted stock units ("RSUs"), performance stock units (“PSUs”) and other share-based and cash-based awards to members of the Board of Directors, officers, employees, consultants and advisors of the Company. As of September 30, 2019, the only awards granted under the 2015 Plan were RSUs and PSUs.
RSUs granted to members of the Board of Directors vest immediately into shares of common stock. RSUs granted to Company officers and employees vest ratably and in accordance with the terms of the grant, generally over one to four years subject to the recipient’s continued service to the Company. PSUs vest, subject to the recipient's continued employment with the Company, based upon achievement of the applicable performance metrics, generally over three years and as defined in the award agreements. Recipients of the awards granted under the 2015 Plan may elect to defer receipt of all or any portion of any shares of common stock issuable upon vesting to a future date elected by the recipient.
All RSUs and PSUs granted under the 2015 Plan have DERs, which entitle holders of RSUs and PSUs to the same dividend value per share as holders of common stock and can be paid in either cash or common stock. DERs are subject to the same vesting and other terms and conditions as the corresponding unvested RSUs and PSUs. DERs are paid when the underlying shares of common stock are delivered.
Restricted Stock and Performance Stock Units
A summary of the Company’s RSUs and PSUs as of September 30, 2019 and changes during the nine months then ended is presented below: 
 
 
 
 
Weighted-
 
 
 
Weighted-
 
 
Number
 
Average
 
Number
 
Average
 
 
of RSUs
 
Fair Value RSUs
 
of PSUs
 
Fair Value PSUs
Outstanding as of December 31, 2018
 
881,832

 
$
21.75

 

 
$

Granted
 
655,135

 
23.51

 
207,077

 
23.47

Vested
 
(516,176
)
 
20.53

 

 

Forfeited
 
(22,275
)
 
23.92

 

 

Outstanding as of September 30, 2019
 
998,516

 
$
23.48

 
207,077

 
$
23.47

 
 
 
 
 
 
 
 
 
Undelivered (1)
 
113,209

 
 
 

 
 


_______________________________________________________________________________
(1) Shares of common stock related to vestings occurring in 2019 that were not delivered as of September 30, 2019.
A summary of shares of common stock issued related to the 2015 Plan, including the impact of any DERs issued in common stock, is presented below:
 
 
Nine months ended
 
Nine months ended
 
 
September 30, 2019
 
September 30, 2018
 
 
RSUs
 
PSUs
 
RSUs
 
PSUs
Shares of common stock issued (1)
 
407,083

 
900,226

 
403,538

 

Shares of common stock withheld by the Company as payment by employees in lieu of cash to satisfy tax withholding obligations
 
(123,013
)
 
(325,246
)
 
(122,795)

 

Net shares of common stock issued
 
284,070

 
574,980

 
280,743

 

 
 
 
 
 
 
 
 
 
Cumulative undelivered shares of common stock
 
172,627

 

 

 

______________________________________________________________________________
(1) Shares of common stock issued related to PSUs represents PSUs that vested in 2018 but were delivered in common stock during the nine months ended September 30, 2019.
The remaining unrecognized compensation expense related to non-vested RSUs and non-vested PSUs granted was $15.7 million and $3.8 million, respectively, as of September 30, 2019 and is expected to be recognized over the related weighted average period of 2.0 years.
The allocation of compensation expense related to equity incentive plans in the unaudited condensed consolidated statements of operations was as follows:
 
 
Three months ended
 
Nine months ended
 
 
September 30,
 
September 30,
(in thousands)
 
2019
 
2018
 
2019
 
2018
Cost of goods sold
 
$
218

 
$
217

 
$
579

 
$
424

Selling, general and administrative
 
2,153

 
4,073

 
6,794

 
12,365

Research and development
 
234

 
380

 
618

 
991

Total compensation expense before income tax
 
2,605

 
4,670

 
7,991

 
13,780

Income tax benefit
 
580

 
938

 
1,716

 
2,820

Total compensation expense, net of income tax
 
$
2,025

 
$
3,732

 
$
6,275

 
$
10,960


v3.19.3
Accumulated Other Comprehensive Loss, Net of Tax
9 Months Ended
Sep. 30, 2019
Equity [Abstract]  
Accumulated Other Comprehensive Loss, Net of Tax Accumulated Other Comprehensive Loss, Net of Tax
Accumulated other comprehensive loss, net of tax consists of foreign currency translation adjustments, unrealized gains and losses from derivative instruments designated as cash flow hedges (Note 6) and pension and other postretirement adjustments (Note 8).
The components of and changes in accumulated other comprehensive loss, net of tax, were as follows:
 
 
 
Foreign
 
Gains (Losses) on
 
Gains (Losses) on
 
Pension and
 
Accumulated
 
 
Currency
 
Foreign Exchange
 
Interest Rate
 
Other
 
Other
 
 
Translation
 
Derivative
 
Swap Derivative
 
Postretirement
 
Comprehensive
(in thousands)
 
Adjustments
 
Instruments
 
Instruments
 
Adjustments
 
Loss, Net of Tax
Balance as of December 31, 2018
 
$
(71,853
)
 
$
5,258

 
$
(1,098
)
 
$
(21,346
)
 
$
(89,039
)
Other comprehensive income (loss) before reclassifications
 
(6,370
)
 
4,634

 
(2,388
)
 
48

 
(4,076
)
Amounts reclassified from accumulated other comprehensive loss, net of tax
 

 
(6,276
)
 
573

 
3,817

 
(1,886
)
Tax benefit (expense)
 

 
621

 
441

 
(711
)
 
351

Balance as of September 30, 2019
 
$
(78,223
)
 
$
4,237

 
$
(2,472
)
 
$
(18,192
)
 
$
(94,650
)

v3.19.3
Net Income per Common Share
9 Months Ended
Sep. 30, 2019
Earnings Per Share [Abstract]  
Net Income per Common Share Net Income per Common Share
The following is a computation of basic and diluted net income per common share attributable to Acushnet Holdings Corp.:
 
 
Three months ended
 
Nine months ended
 
 
September 30,
 
September 30,
(in thousands, except share and per share amounts)
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
 
Net income attributable to Acushnet Holdings Corp.
 
$
29,797

 
$
7,063

 
$
103,211

 
$
88,454

 
 
 
 
 
 
 
 
 
Weighted average number of common shares:
 
 
 
 
 
 
 
 
Basic
 
75,192,567

 
74,823,954

 
75,603,108

 
74,746,190

Diluted
 
75,552,440