ACUSHNET HOLDINGS CORP., 10-Q filed on 8/5/2020
Quarterly Report
v3.20.2
Cover Page - shares
6 Months Ended
Jun. 30, 2020
Jul. 31, 2020
Cover [Abstract]    
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Jun. 30, 2020  
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 800  
Local Phone Number 225-8500  
Title of 12(b) Security Common Stock - $0.001 par value per share  
Trading Symbol GOLF  
Security Exchange Name NYSE  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Large Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   74,294,130
Entity Central Index Key 0001672013  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Document Fiscal Year Focus 2020  
Document Fiscal Period Focus Q2  
v3.20.2
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Current assets    
Cash and restricted cash ($12,578 and $8,514 attributable to the variable interest entity ("VIE")) $ 111,029 $ 34,184
Accounts receivable, net 271,643 215,428
Inventories ($5,897 and $11,958 attributable to the VIE) 363,785 398,368
Prepaid and other assets 92,283 94,838
Total current assets 838,740 742,818
Property, plant and equipment, net ($10,870 and $11,374 attributable to the VIE) 223,305 231,575
Goodwill ($32,312 and $32,312 attributable to the VIE) 213,112 214,056
Intangible assets, net 476,990 480,794
Deferred income taxes 72,811 70,541
Other assets ($2,479 and $2,517 attributable to the VIE) 72,761 77,265
Total assets 1,897,719 1,817,049
Current liabilities    
Short-term debt 180,619 54,123
Current portion of long-term debt 17,500 17,500
Accounts payable ($3,533 and $8,360 attributable to the VIE) 76,851 102,335
Accrued taxes 34,292 36,032
Accrued compensation and benefits ($2,362 and $3,542 attributable to the VIE) 64,862 72,465
Accrued expenses and other liabilities ($3,577 and $4,468 attributable to the VIE) 91,252 76,663
Total current liabilities 465,376 359,118
Long-term debt 322,427 330,701
Deferred income taxes 4,447 4,837
Accrued pension and other postretirement benefits 122,702 118,852
Other noncurrent liabilities ($5,109 and $5,202 attributable to the VIE) 49,480 51,908
Total liabilities 964,432 865,416
Commitments and contingencies (Note 14)
Redeemable noncontrolling interest 316 807
Shareholders' equity    
Common stock, $0.001 par value, 500,000,000 shares authorized; 75,655,646 and 75,619,587 shares issued 76 76
Additional paid-in capital 916,097 910,507
Accumulated other comprehensive loss, net of tax (111,573) (112,028)
Retained earnings 138,733 151,039
Treasury stock, at cost; 1,671,754 shares and 1,183,966 shares (including 299,894 and 56,000 of accrued share repurchases) (Note 9) (45,106) (31,154)
Total equity attributable to Acushnet Holdings Corp. 898,227 918,440
Noncontrolling interests 34,744 32,386
Total shareholders' equity 932,971 950,826
Total liabilities, redeemable noncontrolling interest and shareholders' equity $ 1,897,719 $ 1,817,049
v3.20.2
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Parenthetical) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Cash and restricted cash $ 111,029 $ 34,184
Inventories 363,785 398,368
Property, plant and equipment, net 223,305 231,575
Goodwill 213,112 214,056
Other assets 72,761 77,265
Accounts payable 76,851 102,335
Accrued compensation and benefits 64,862 72,465
Accrued expenses and other liabilities 91,252 76,663
Other noncurrent liabilities $ 49,480 $ 51,908
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) 75,655,646 75,619,587
Treasury stock, at cost (in shares) 1,671,754 1,183,966
Accrued share repurchase (in shares) 299,894 56,000
VIE    
Cash and restricted cash $ 12,578 $ 8,514
Inventories 5,897 11,958
Property, plant and equipment, net 10,870 11,374
Goodwill 32,312 32,312
Other assets 2,479 2,517
Accounts payable 3,533 8,360
Accrued compensation and benefits 2,362 3,542
Accrued expenses and other liabilities 3,577 4,468
Other noncurrent liabilities $ 5,109 $ 5,202
v3.20.2
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Income Statement [Abstract]        
Net sales $ 300,002 $ 462,218 $ 708,743 $ 895,920
Cost of goods sold 143,545 216,175 351,331 427,720
Gross profit 156,457 246,043 357,412 468,200
Operating expenses:        
Selling, general and administrative 130,535 170,223 283,258 325,649
Research and development 11,132 12,920 24,352 25,671
Intangible amortization 1,955 1,765 3,911 3,518
Restructuring charges 1,104 0 12,732 0
Income from operations 11,731 61,135 33,159 113,362
Interest expense, net 4,402 5,213 8,525 10,096
Other expense (income), net 4,174 781 4,864 (189)
Income before income taxes 3,155 55,141 19,770 103,455
Income tax (benefit) expense (598) 16,239 7,042 28,514
Net income 3,753 38,902 12,728 74,941
Less: Net income attributable to noncontrolling interests (1,440) (414) (1,538) (1,527)
Net income attributable to Acushnet Holdings Corp. $ 2,313 $ 38,488 $ 11,190 $ 73,414
Net income per common share attributable to Acushnet Holdings Corp.:        
Basic (in dollars per share) $ 0.03 $ 0.51 $ 0.15 $ 0.97
Diluted (in dollars per share) $ 0.03 $ 0.51 $ 0.15 $ 0.97
Weighted average number of common shares:        
Basic (in shares) 74,252,981 75,618,717 74,394,967 75,811,780
Diluted (in shares) 74,875,219 75,858,114 74,983,411 76,060,003
v3.20.2
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Statement of Comprehensive Income [Abstract]        
Net income $ 3,753 $ 38,902 $ 12,728 $ 74,941
Other comprehensive income (loss):        
Foreign currency translation adjustments 18,043 (4,217) (4,740) (375)
Cash flow derivative instruments        
Unrealized holding gains (losses) arising during period (5,794) (1,406) 1,608 (47)
Reclassification adjustments included in net income 881 (2,827) (843) (4,276)
Tax benefit (expense) 1,663 1,026 (185) 956
Cash flow derivative instruments, net (3,250) (3,207) 580 (3,367)
Pension and other postretirement benefits        
Pension and other postretirement benefits adjustments 4,376 1,684 6,066 1,481
Tax expense (1,083) (404) (1,451) (347)
Pension and other postretirement benefits adjustments, net 3,293 1,280 4,615 1,134
Total other comprehensive income (loss) 18,086 (6,144) 455 (2,608)
Comprehensive income 21,839 32,758 13,183 72,333
Less: Comprehensive income attributable to noncontrolling interests (1,537) (414) (1,655) (1,527)
Comprehensive income attributable to Acushnet Holdings Corp. $ 20,302 $ 32,344 $ 11,528 $ 70,806
v3.20.2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($)
$ in Thousands
6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Cash flows from operating activities    
Net income $ 12,728 $ 74,941
Adjustments to reconcile net income to cash (used in) provided by operating activities    
Depreciation and amortization 20,571 19,596
Unrealized foreign exchange losses 2,184 730
Amortization of debt issuance costs 425 738
Share-based compensation 6,403 5,386
(Gain) loss on disposals of property, plant and equipment (53) 2
Deferred income taxes (4,244) 17,355
Changes in operating assets and liabilities    
Accounts receivable (56,640) (120,056)
Inventories 30,066 37,420
Accounts payable (23,187) 9,675
Accrued taxes (1,626) (15,230)
Other assets and liabilities 12,534 9,454
Cash flows (used in) provided by operating activities (839) 40,011
Cash flows from investing activities    
Additions to property, plant and equipment (10,355) (10,595)
Cash flows used in investing activities (10,355) (10,595)
Cash flows from financing activities    
Proceeds from short-term borrowings, net 127,616 41,939
Repayments of term loan facility (8,750) (14,063)
Repayments of delayed draw term loan A facility 0 (3,750)
Purchases of common stock (6,976) (6,178)
Debt issuance costs (14) 0
Dividends paid on common stock (23,034) (22,433)
Dividends paid to noncontrolling interests 0 (1,853)
Payment of employee restricted stock tax withholdings (496) (10,924)
Cash flows provided by (used in) financing activities 88,346 (17,262)
Effect of foreign exchange rate changes on cash and restricted cash (307) (202)
Net increase in cash and restricted cash 76,845 11,952
Cash and restricted cash, beginning of year 34,184 31,014
Cash and restricted cash, end of period 111,029 42,966
Supplemental information    
Non-cash additions to property, plant and equipment 1,014 830
Non-cash additions to right-of-use assets obtained in exchange for operating lease obligations 3,237 3,005
Non-cash additions to right-of-use assets obtained in exchange for finance lease obligations 427 0
Dividend equivalents rights ("DERs") declared not paid 477 387
Share repurchase liability (Note 9) $ 6,976 $ 6,178
v3.20.2
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 (in shares) at Dec. 31, 2018     74,760          
Beginning balance at Dec. 31, 2018 $ 926,984 $ 894,872 $ 75 $ 910,890 $ (89,039) $ 72,946 $ 0 $ 32,112
Changes in stockholders' equity                
Dividends and dividend equivalents declared (10,782)              
Ending balance (in shares) at Mar. 31, 2019     75,604          
Ending balance at Mar. 31, 2019 946,637 913,412 $ 76 901,749 (85,503) 97,090 0 33,225
Beginning balance (in shares) at Dec. 31, 2018     74,760          
Beginning balance at Dec. 31, 2018 926,984 894,872 $ 75 910,890 (89,039) 72,946 0 32,112
Changes in stockholders' equity                
Net income 74,941 73,414       73,414   1,527
Other comprehensive income (loss) (2,608) (2,608)     (2,608)      
Share-based compensation 5,386 5,386   5,386        
Vesting of restricted common stock, including impact of DERs, net of shares withheld for employee taxes (Note 10) (in shares)     854          
Vesting of restricted common stock, including impact of DERs, net of shares withheld for employee taxes (Note 10) (10,924) (10,924) $ 1 (10,925)        
Purchases of common stock (Note 9) (6,178) (6,178)         (6,178)  
Share repurchase liability (Note 9) (6,178) (6,178)         (6,178)  
Dividends and dividend equivalents declared (21,533) (21,533)       (21,533)    
Dividends declared to noncontrolling interests (1,853)             (1,853)
Ending balance (in shares) at Jun. 30, 2019     75,614          
Ending 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 Dec. 31, 2018     74,760          
Beginning balance at Dec. 31, 2018 926,984 894,872 $ 75 910,890 (89,039) 72,946 0 32,112
Changes in stockholders' equity                
Dividends and dividend equivalents declared (42,977)              
Ending balance (in shares) at Dec. 31, 2019     75,620          
Ending balance at Dec. 31, 2019 950,826 918,440 $ 76 910,507 (112,028) 151,039 (31,154) 32,386
Beginning balance (in shares) at Mar. 31, 2019     75,604          
Beginning balance at Mar. 31, 2019 946,637 913,412 $ 76 901,749 (85,503) 97,090 0 33,225
Changes in stockholders' equity                
Net income 38,902 38,488       38,488   414
Other comprehensive income (loss) (6,144) (6,144)     (6,144)      
Share-based compensation 3,601 3,601   3,601        
Vesting of restricted common stock, including impact of DERs, net of shares withheld for employee taxes (Note 10) (in shares)     10          
Vesting of restricted common stock, including impact of DERs, net of shares withheld for employee taxes (Note 10) 1 1 $ 0 1        
Purchases of common stock (Note 9) (6,178) (6,178)         (6,178)  
Share repurchase liability (Note 9) (6,178) (6,178)         (6,178)  
Dividends and dividend equivalents declared (10,751) (10,751)       (10,751)    
Dividends declared to noncontrolling interests (1,853)             (1,853)
Ending balance (in shares) at Jun. 30, 2019     75,614          
Ending 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 Dec. 31, 2019     75,620          
Beginning balance at Dec. 31, 2019 950,826 918,440 $ 76 910,507 (112,028) 151,039 (31,154) 32,386
Changes in stockholders' equity                
Dividends and dividend equivalents declared (11,735)              
Ending balance (in shares) at Mar. 31, 2020     75,649          
Ending balance at Mar. 31, 2020 918,564 885,654 $ 76 912,162 (129,659) 148,181 (45,106) 32,910
Beginning balance (in shares) at Dec. 31, 2019     75,620          
Beginning balance at Dec. 31, 2019 950,826 918,440 $ 76 910,507 (112,028) 151,039 (31,154) 32,386
Changes in stockholders' equity                
Net income 13,548 11,190       11,190   2,358
Other comprehensive income (loss) 455 455     455      
Share-based compensation 6,075 6,075   6,075        
Vesting of restricted common stock, including impact of DERs, net of shares withheld for employee taxes (Note 10) (in shares)     36          
Vesting of restricted common stock, including impact of DERs, net of shares withheld for employee taxes (Note 10) (485) (485) $ 0 (485)        
Purchases of common stock (Note 9) (6,976) (6,976)         (6,976)  
Share repurchase liability (Note 9) (6,976) (6,976)         (6,976)  
Dividends and dividend equivalents declared (23,496) (23,496)       (23,496)    
Ending balance (in shares) at Jun. 30, 2020     75,656          
Ending balance at Jun. 30, 2020 932,971 898,227 $ 76 916,097 (111,573) 138,733 (45,106) 34,744
Beginning balance (in shares) at Mar. 31, 2020     75,649          
Beginning balance at Mar. 31, 2020 918,564 885,654 $ 76 912,162 (129,659) 148,181 (45,106) 32,910
Changes in stockholders' equity                
Net income 4,147 2,313       2,313   1,834
Other comprehensive income (loss) 18,086 18,086     18,086      
Share-based compensation 4,052 4,052   4,052        
Vesting of restricted common stock, including impact of DERs, net of shares withheld for employee taxes (Note 10) (in shares)     7          
Vesting of restricted common stock, including impact of DERs, net of shares withheld for employee taxes (Note 10) (117) (117) $ 0 (117)        
Dividends and dividend equivalents declared (11,761) (11,761)       (11,761)    
Ending balance (in shares) at Jun. 30, 2020     75,656          
Ending balance at Jun. 30, 2020 $ 932,971 $ 898,227 $ 76 $ 916,097 $ (111,573) $ 138,733 $ (45,106) $ 34,744
v3.20.2
Summary of Significant Accounting Policies
6 Months Ended
Jun. 30, 2020
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 (“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 six months ended June 30, 2020 are not necessarily indicative of results to be expected for the full year ending December 31, 2020, nor were those of the comparable 2019 period representative of those actually experienced for the full year ended December 31, 2019. 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, 2019 included in its Annual Report on Form 10-K filed with the SEC on February 27, 2020.
Risks and Uncertainties
In March 2020, the World Health Organization declared a pandemic related to the novel coronavirus (“COVID-19”). Through the second quarter of 2020, the Company's business was significantly disrupted by the COVID-19 pandemic. In Asia, the Company's operations were impacted earlier in the year and are at varying stages of recovery, with Korea nearly fully recovered and other markets continuing to progress. In the United States and Europe, as a result of government-ordered shutdowns, most on-course retail pro shops and off-course retail partner locations were closed for some portion of March, most of April and part of May 2020. Also, as a result of these orders, the Company was forced to temporarily close or substantially limit its operations in its manufacturing facilities and distribution centers in the United States and Europe from the end of March until mid-May 2020. During this period, the Company was largely unable to manufacture or ship products in these regions and took steps to strengthen its financial position and balance sheet, bolster its liquidity position and provide additional financial flexibility, including by reducing discretionary spending, reducing capital expenditures, suspending its share repurchase program, and amending its credit agreement. See Note 4 for additional discussion of the Company's debt and financing arrangements.
The Company has evaluated and continues to evaluate the potential impact of the COVID-19 pandemic on its consolidated financial statements, including: impairment of goodwill and indefinite-lived intangible assets; impairment of long-lived assets, including property, plant and equipment; the fair value and collectability of receivables and other financial assets; the valuation of inventory; the effectiveness of foreign exchange forward contracts designated as cash flow hedges and the credit quality of the financial institutions with which the Company enters into derivative contracts; continuing compliance with debt covenants related to the Company's credit facility; and the probability of achievement of the performance metrics related to the Company's performance stock units (“PSUs”). The primary impacts to the Company’s consolidated financial statements as of the three and six months ended June 30, 2020 include the hedge de-designation of certain foreign exchange forward contracts deemed ineffective (Note 5) and a decrease in share-based compensation expense related to the Company's PSUs.
The impact of the COVID-19 pandemic continues to evolve and, as such, the Company cannot predict the full extent of the impact to its business, results of operations, financial position and cash flows. However, the business disruptions as a result of the COVID-19 pandemic could continue to have a material impact on its business, results of operations, financial position and cash flows.
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 and liabilities and related disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company has also made estimates related to the impact of the COVID-19 pandemic within its unaudited condensed consolidated financial statements and there may be changes to those estimates in future periods. Actual results could differ from these 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) the obligation, through its interests in the VIE, 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 June 30, 2020 and December 31, 2019. 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 and Redeemable Noncontrolling Interest
The ownership interests held by owners other than the Company in less than wholly-owned subsidiaries are classified as noncontrolling interests. Redeemable noncontrolling interests are those noncontrolling interests which are or may become redeemable at a fixed or determinable price on a fixed or determinable date, at the option of the holder, or upon occurrence of an event. The financial results and position of the noncontrolling interests are included in their entirety in the Company’s unaudited condensed consolidated financial statements. The value attributable to the noncontrolling interests is presented on the unaudited condensed consolidated balance sheets, separately from the equity attributable to the Company. The value attributable to the redeemable noncontrolling interest and the related loan to the minority shareholders, which is recorded as a reduction to redeemable noncontrolling interest, is presented in the unaudited condensed consolidated balance sheets as temporary equity between liabilities and shareholders’ equity. The amount of the loan to minority shareholders included in temporary equity on the unaudited condensed consolidated balance sheets was $4.4 million as of both June 30, 2020 and December 31, 2019. 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 June 30, 2020 and December 31, 2019, the amount of restricted cash included in cash and restricted cash on the unaudited condensed consolidated balance sheets was $2.1 million and $2.0 million, respectively.
Accounts Receivable
On January 1, 2020, the Company adopted Accounting Standards Update (“ASU”) 2016-13, "Financial Instruments -Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" ("ASU 2016-13"), which replaces the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss ("CECL") methodology. The CECL methodology 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. The measurement of
expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including trade receivables.
The only financial assets held by the Company that are subject to evaluation under the CECL model are trade receivables. The Company adopted ASU 2016-13 using the modified retrospective method. The adoption of this standard did not have an impact on the carrying value of trade receivables. Results for reporting periods beginning after January 1, 2020 are presented under ASU 2016-13 while prior period amounts continue to be reported in accordance with previously applicable U.S. GAAP.
The Company estimates expected credit losses using a number of factors, including customer credit ratings, age of receivables, historical credit loss information and current and forecasted economic conditions (including the impact of the COVID-19 pandemic) which could affect the collectability of the reported amounts. All of these factors have been considered in the estimate of expected credit losses as of June 30, 2020.
The activity related to the allowance for doubtful accounts for the periods presented was as follows:
Three months endedSix months ended
(in thousands)June 30, 2020June 30, 2020
Balance at beginning of period$5,782  $5,338  
Bad debt expense1,792  2,708  
Amount of receivables recovered (written off)12  (274) 
Foreign currency translation and other157  (29) 
Balance at end of period$7,743  $7,743  
Foreign Currency Translation and Transactions
Foreign currency transaction gains (losses) included in selling, general and administrative expense were gains of $2.6 million and losses of $0.1 million for the three months ended June 30, 2020 and 2019, respectively. Foreign currency transaction gains included in selling, general and administrative expense were $1.6 million and $0.4 million for the six months ended June 30, 2020 and 2019, respectively.
Recently Adopted Accounting Standards
Intangibles —Goodwill and Other —Internal-Use Software
On January 1, 2020, the Company adopted 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 aligned 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). The adoption of this standard did not have a material impact on the consolidated financial statements.
Recently Issued Accounting Standards
Income Taxes
In December 2019, the Financial Accounting Standards Board ("FASB") issued ASU 2019-12, "Income Taxes (Topic 740) -Simplifying the Accounting for Income Taxes ("ASU 2019-12"). The amendments in this update simplify the accounting for income taxes by removing certain exceptions to general principles in Topic 740. The amendments also improve consistent application and simplify U.S. GAAP for other areas of Topic 740 by clarifying and amending existing guidance. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020. Early adoption is permitted. The Company is currently evaluating the impact this standard will have on its 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.
v3.20.2
Inventories
6 Months Ended
Jun. 30, 2020
Inventory Disclosure [Abstract]  
Inventories Inventories
The components of inventories were as follows: 
June 30,December 31,
(in thousands)20202019
Raw materials and supplies$77,509  $87,675  
Work-in-process19,080  22,024  
Finished goods267,196  288,669  
Inventories$363,785  $398,368  
v3.20.2
Product Warranty
6 Months Ended
Jun. 30, 2020
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 June 30,Six months ended June 30,
(in thousands)2020201920202019
Balance at beginning of period$4,149  $3,548  $4,048  $3,331  
Provision121  2,014  1,330  3,088  
Claims paid/costs incurred(786) (1,949) (1,730) (2,825) 
Foreign currency translation and other110  (33) (54) (14) 
Balance at end of period$3,594  $3,580  $3,594  $3,580  
v3.20.2
Debt and Financing Arrangements
6 Months Ended
Jun. 30, 2020
Debt Disclosure [Abstract]  
Debt and Financing Arrangements Debt and Financing Arrangements
Credit Facility
The credit facility includes a revolving credit facility and a term loan facility. There were outstanding borrowings under the revolving credit facility of $173.8 million and $50.3 million as of June 30, 2020 and December 31, 2019, respectively. The weighted average interest rate applicable to these outstanding borrowings was 1.46% and 3.54% as of June 30, 2020 and December 31, 2019, respectively.
The credit agreement contains customary affirmative and restrictive covenants, including, among others, financial covenants based on the Company's leverage and interest coverage ratios. See further discussion below regarding the Company's credit agreement and subsequent amendments to its leverage and interest coverage ratios. The credit agreement also 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 June 30, 2020, the Company was in compliance with all covenants under the credit agreement.
On April 1, 2020, the Company drew down $200.0 million under its revolving credit facility which it subsequently repaid on June 30, 2020.
As of June 30, 2020, the Company had available borrowings under its revolving credit facility of $219.6 million after giving effect to $6.6 million of outstanding letters of credit.
On July 3, 2020, the Company amended its credit agreement dated December 23, 2019 (the “First Amendment”). The First Amendment amends the credit agreement to, among other things, modify the maximum net average total leverage ratio for each of the fiscal quarters ending after June 30, 2020 and on or before September 30, 2021 (for such period of time, the “Covenant Relief Period”). During the Covenant Relief Period, in lieu of complying with a maximum net average total leverage ratio of 3.50 to 1.00, the Company will be required to comply with maximum net average total leverage ratios of 5.50 to 1.00 for the fiscal quarter ending September 30, 2020, 6.50 to 1.00 for the fiscal quarters ending December 31, 2020 and March 31, 2021, 4.50 to 1.00 for the fiscal quarter ending June 30, 2021 and 4.00 to 1.00 for the fiscal quarter ending September 30, 2021. Beginning with the fiscal quarter ending December 31, 2021, the Company will be required to comply with its previous maximum net average total leverage ratio of 3.50 to 1.00.
The First Amendment also modified the interest rate applicable to borrowings under the credit agreement during the Covenant Relief Period from a range of 1.00% - 1.75% over the Eurodollar Rate (as defined in the credit agreement, which includes a 0.75% floor during the Covenant Relief Period) or 0.00% - 0.75% over the Base Rate (as defined in the credit agreement) to a range of 1.00% - 2.50% over the Eurodollar Rate or 0.00% - 1.50% over the Base Rate. The First Amendment modified the commitment fee rate payable during the Covenant Relief Period in respect of unused portions of the revolving credit facility from a range of 0.15%-0.30% to a range of 0.15%-0.45%.
During the Covenant Relief Period, the Company has the right under the amended credit agreement, to establish a new revolving credit facility (a “364-Day Revolving Credit Facility”) providing for up to $150.0 million of revolving commitments of a new class maturing no later than the earlier of (x) 364 days from establishment of such facility and (y) the latest maturity applicable to then-outstanding term loans and existing revolving credit loans under the credit facility. The lenders under the credit facility will not be under any obligation to provide commitments under a 364-Day Revolving Credit Facility, and the establishment of a 364-Day Revolving Credit Facility is subject to customary conditions precedent.
The First Amendment amends the incremental facilities provision in the credit agreement by permitting the Company to request additional term loans and/or increases to the existing revolving credit facility in an aggregate principal amount not to exceed (i) $225.0 million (the “Free and Clear Incremental Amount”) plus (ii) an unlimited amount so long as the net average secured leverage ratio (as defined in the credit agreement) does not exceed 2.25 to 1.00 on a pro forma basis (the “Incremental Provision”). Under the amended credit agreement, the Incremental Provision is unavailable during the Covenant Relief Period. In addition, at any time that a 364-Day Revolving Credit Facility is in effect, outstanding commitments and loans under such 364-Day Revolving Credit Facility will reduce the Free and Clear Incremental Amount.
See Note 1 for further discussion on the Company's evaluation and response to the COVID-19 pandemic.
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 $6.8 million and $3.8 million as of June 30, 2020 and December 31, 2019, respectively. The weighted average interest rate applicable to the outstanding borrowings was 2.37% and 2.29% as of June 30, 2020 and December 31, 2019, respectively. As of June 30, 2020, the Company had available borrowings remaining under these local credit facilities of $59.3 million.
Letters of Credit
As of June 30, 2020 and December 31, 2019, there were outstanding letters of credit related to agreements, including the Company's credit facility, totaling $10.3 million and $14.8 million, respectively, of which $7.1 million and $11.6 million, respectively, was secured. These agreements provided a maximum commitment for letters of credit of $60.1 million and $59.8 million as of June 30, 2020 and December 31, 2019, respectively.
v3.20.2
Derivative Financial Instruments
6 Months Ended
Jun. 30, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Financial Instruments Derivative Financial InstrumentsThe Company principally uses derivative financial instruments to reduce the impact of foreign currency fluctuations and interest rate variability on the Company's results of operations. 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 forward contracts are foreign exchange derivative instruments primarily used to reduce foreign currency risk related to transactions denominated in a currency other than functional currency. These instruments are designated as cash flow hedges. The periods of the foreign exchange forward contracts correspond to the periods of the hedged 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 June 30, 2020 and December 31, 2019 was $256.1 million and $287.9 million, respectively.
As a result of the impact of the COVID-19 pandemic, the Company de-designated certain foreign exchange cash flow hedges deemed ineffective. The gross outstanding U.S. dollar equivalent notional amount of these foreign exchange forward contracts as of June 30, 2020 was $1.8 million, which is not included in the amounts above. See Note 1 for further discussion on the Company's evaluation and response to the COVID-19 pandemic.
The Company also enters into foreign exchange forward contracts, which do not qualify as hedging instruments under U.S. GAAP, to reduce foreign currency transaction risk related to certain intercompany assets and liabilities denominated in a currency other than functional currency. 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. There were no outstanding foreign exchange forward contracts not designated under hedge accounting as of June 30, 2020 and December 31, 2019.
Interest Rate Derivative Instruments
The Company enters into interest rate swap contracts to reduce interest rate risk related to floating rate debt. Under the contracts, the Company pays fixed and receives variable rate interest, in effect converting a portion of its floating rate debt to fixed rate debt. The interest rate swap contracts are accounted for as cash flow hedges. As of June 30, 2020 and December 31, 2019, the notional value of the Company's outstanding interest rate swap contracts was $140.0 million and $160.0 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)June 30,December 31,
Balance Sheet LocationHedge Instrument Type20202019
Prepaid and other assets (1)
Foreign exchange forward$3,800  $4,549  
Other assetsForeign exchange forward924  1,109  
Accrued expenses and other liabilities (1)
Foreign exchange forward1,553  2,561  
Interest rate swap3,498  1,862  
Other noncurrent liabilitiesForeign exchange forward297  115  
Interest rate swap—  789  
(1) Excludes less than $0.1 million related to hedges deemed ineffective as of June 30, 2020.
The hedge instrument gain (loss) recognized in accumulated other comprehensive loss, net of tax was as follows:
 Three months endedSix months ended
 June 30,June 30,
(in thousands)2020201920202019
Type of hedge    
Foreign exchange forward$(5,637) $107  $3,830  $2,194  
Interest rate swap (157) (1,513) (2,222) (2,241) 
 Total$(5,794) $(1,406) $1,608  $(47) 
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 hedged transaction impacts the statement of operations or at the time the hedge is determined to be ineffective. Based on the current valuation, during the next 12 months the Company expects to reclassify a net gain of $4.8 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 $3.5 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 11.
The hedge instrument gain (loss) recognized on the unaudited condensed consolidated statements of operations was as follows:
 Three months endedSix months ended
 June 30,June 30,
(in thousands)2020201920202019
Location of gain (loss) in statement of operations    
Foreign exchange forward:
Cost of goods sold$232  $2,993  $1,774  $4,599  
Selling, general and administrative (1)(2)
(2,063) 131  (529) (183) 
Total $(1,831) $3,124  $1,245  $4,416  
Interest Rate Swap:
Interest expense, net$(902) $(166) $(1,380) $(323) 
Total$(902) $(166) $(1,380) $(323) 
_______________________________________________________________________________
(1) Relates to net gains (losses) on foreign exchange forward contracts derived from previously designated cash flow hedges.
(2) Excludes net losses of $0.2 million and net gains of $0.4 million reclassified out of accumulated other comprehensive loss, net of tax related to hedges deemed ineffective during the three and six months ended June 30, 2020, respectively.
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, as well as its own credit quality, and considers the risk of counterparty default to be minimal.
v3.20.2
Fair Value Measurements
6 Months Ended
Jun. 30, 2020
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 June 30, 2020 were as follows:
 Fair Value Measurements as of 
 June 30, 2020 using: 
(in thousands)Level 1Level 2Level 3Balance Sheet Location
Assets    
Rabbi trust$6,100  $—  $—  Prepaid and other assets
Foreign exchange derivative instruments—  3,812  —  Prepaid and other assets
Deferred compensation program assets825  —  —  Other assets
Foreign exchange derivative instruments—  924  —  Other assets
Total assets$6,925  $4,736  $—   
Liabilities    
Foreign exchange derivative instruments$—  $1,555  $—  Accrued expenses and other liabilities
Interest rate derivative instruments—  3,498  —  Accrued expenses and other liabilities
Deferred compensation program liabilities825  —  —  Other noncurrent liabilities
Foreign exchange derivative instruments—  297  —  Other noncurrent liabilities
Total liabilities$825  $5,350  $—   
 Assets and liabilities measured at fair value on a recurring basis as of December 31, 2019 were as follows:
 Fair Value Measurements as of 
 December 31, 2019 using: 
(in thousands)Level 1Level 2Level 3Balance Sheet Location
Assets    
Rabbi trust$6,070  $—  $—  Prepaid and other assets
Foreign exchange derivative instruments—  4,549  —  Prepaid and other assets
Deferred compensation program assets870  —  —  Other assets
Foreign exchange derivative instruments—  1,109  —  Other assets
Total assets$6,940  $5,658  $—   
Liabilities    
Foreign exchange derivative instruments$—  $2,561  $—  Accrued expenses and other liabilities
Interest rate derivative instruments—  1,862  —  Accrued expenses and other liabilities
Deferred compensation program liabilities870  —  —  Other noncurrent liabilities
Foreign exchange derivative instruments—  115  —  Other noncurrent liabilities
Interest rate derivative instruments—  789  —  Other noncurrent liabilities
Total liabilities$870  $5,327  $—   
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 foreign exchange rates (Note 5). 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 interest rate swap contracts used to reduce interest rate risk related to the Company's floating rate debt (Note 5). 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.
v3.20.2
Pension and Other Postretirement Benefits
6 Months Ended
Jun. 30, 2020
Retirement Benefits [Abstract]  
Pension and Other Postretirement Benefits Pension and Other Postretirement Benefits
Components of net periodic benefit cost (income) were as follows: 
Pension BenefitsPostretirement Benefits
Three months ended June 30,
(in thousands)2020201920202019
Components of net periodic benefit cost (income)
Service cost$2,462  $1,880  $129  $126  
Interest cost2,538  2,808  104  140  
Expected return on plan assets(2,902) (3,257) —  —  
Settlement expense3,850  1,775  —  —  
Amortization of net loss (gain)1,343  129  (270) (355) 
Amortization of prior service cost (credit)69  48  (34) (34) 
Net periodic benefit cost (income)$7,360  $3,383  $(71) $(123) 
Components of net periodic benefit cost (income) were as follows: 
 Pension BenefitsPostretirement Benefits
 Six months ended June 30,
(in thousands)2020201920202019
Components of net periodic benefit cost (income)    
Service cost$4,778  $4,122  $300  $287  
Interest cost5,050  5,788  216  278  
Expected return on plan assets(5,805) (6,556) —  —  
Settlement expense3,850  1,775  —  —  
Amortization of net loss (gain)2,307  401  (484) (718) 
Amortization of prior service cost (credit)139  92  (68) (68) 
Net periodic benefit cost (income)$10,319  $5,622  $(36) $(221) 
The non-service cost components of net periodic benefit cost (income) are included in other expense (income), net in the unaudited condensed consolidated statements of operations.
v3.20.2
Income Taxes
6 Months Ended
Jun. 30, 2020
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Income tax expense decreased by $16.8 million to an income tax benefit of $0.6 million for the three months ended June 30, 2020 compared to income tax expense of $16.2 million for the three months ended June 30, 2019. The Company’s effective tax rate ("ETR") was (19.0)% for the three months ended June 30, 2020 compared to 29.4% for the three months ended June 30, 2019. The change in the ETR was primarily driven by the impact of the COVID-19 pandemic on the Company's jurisdictional mix of earnings, as well as a discrete tax benefit related to a reduction of foreign withholding taxes.
Income tax expense decreased by $21.5 million to $7.0 million for the six months ended June 30, 2020 compared to $28.5 million for the six months ended June 30, 2019. The Company’s ETR was 35.6% for the six months ended June 30, 2020 compared to 27.6% for the six months ended June 30, 2019. The increase in the ETR was primarily driven by the impact of the COVID-19 pandemic on the Company's jurisdictional mix of earnings, as well as discrete tax benefits related to both a reduction of foreign withholding taxes and a reduction in tax benefits related to share-based compensation expense.
v3.20.2
Common Stock
6 Months Ended
Jun. 30, 2020
Equity [Abstract]  
Common Stock Common Stock
Dividends
The Company declared dividends per common share, including DERs (Note 10), during the periods presented as follows:
Dividends per Common Share
Amount
(in thousands)
2020:
Second Quarter$0.155  $11,761  
First Quarter0.155  11,735  
Total dividends declared in 2020$0.31  $23,496  
2019:
Fourth Quarter$0.14  $10,718  
Third Quarter0.14  10,726  
Second Quarter0.14  10,751  
First Quarter0.14  10,782  
Total dividends declared in 2019$0.56  $42,977  
During the third quarter of 2020, the Company's Board of Directors declared a dividend of $0.155 per share of common stock to shareholders of record as of September 4, 2020 and payable on September 18, 2020.
Share Repurchase Program
As of June 30, 2020, the Board of Directors had authorized the Company to repurchase up to an aggregate of $100.0 million of its issued and outstanding common stock.
Share repurchases may be effected from time to time 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 consistent with the Company's general working capital needs and within the constraints of the Company’s credit agreement. As previously disclosed, in connection with this share repurchase program, the Company entered into an agreement with Magnus Holdings Co., Ltd. (“Magnus”), a wholly owned subsidiary of Fila Holdings Co., to purchase from Magnus an equal amount of its common stock as it purchases on the open market, up to an aggregate of $24.9 million, at the same weighted average per share price.
In April 2020, the Company temporarily suspended stock repurchases under its share repurchase program in light of the COVID-19 pandemic. The Company has the ability to resume repurchases in its discretion. See Note 1 for further discussion on the Company's evaluation and response to the COVID-19 pandemic.
The Company's share repurchase activity was as follows:
Three months ended June 30,Six months ended June 30,
(in thousands, except share and per share amounts)2020201920202019
Shares repurchased (1)
—  253,385  243,894  253,385  
Average price$—  $24.38  $28.60  $24.38  
Aggregate value $—  $6,178  $6,976  $6,178  
_______________________________________________________________________________
(1) There were no shares repurchased from Magnus during the three and six months ended June 30, 2020 related to the Magnus share repurchase agreement.
In relation to the Magnus share repurchase agreement, the Company has recorded a liability to repurchase additional shares of common stock from Magnus of $8.8 million (299,894 shares) and $1.8 million (56,000 shares), which was included in accrued expenses and other liabilities and treasury stock on the unaudited condensed consolidated balance sheets as of June 30, 2020 and December 31, 2019, respectively. Excluding the impact of the share repurchase liability, as of June 30, 2020 the Company had $63.7 million remaining under the current share repurchase authorization, including $11.1 million related to the Magnus share repurchase agreement.
v3.20.2
Equity Incentive Plans
6 Months Ended
Jun. 30, 2020
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"), 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 June 30, 2020, the only awards granted under the 2015 Plan were RSUs and PSUs.
Restricted Stock and Performance Stock Units
RSUs granted to members of the Board of Directors vest immediately into shares of common stock. RSUs granted to Company officers generally vest over three years, with one-third of each grant vesting annually, subject to the recipient's continued employment with the Company. RSUs granted to other employees, consultants and advisors of the Company vest in accordance with the terms of the grants, generally over three 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 the Company's performance against specified metrics which are generally over a three year performance period. At the end of the performance period, the number of shares of common stock that could be issued is fixed based upon the Company's performance against these metrics. The number of shares that could be issued can range from 0% to 200% of the recipient's target award. 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.
A summary of the Company’s RSUs and PSUs as of June 30, 2020 and changes during the six months then ended is presented below: 
 Weighted-Weighted-
 NumberAverageNumberAverage
 of RSUsFair Value RSUsof PSUsFair Value PSUs
Outstanding as of December 31, 2019947,243  $23.49  207,077  $23.47  
Granted518,831  25.91  252,031  25.45  
Vested (1)
(94,029) 25.19  (789) 25.45  
Forfeited(39,979) 24.09  —  —  
Outstanding as of June 30, 20201,332,066  $24.29  458,319  $24.55  

_______________________________________________________________________________
(1) Included 74,442 shares of common stock related to RSUs and no shares of common stock related to PSUs that were not delivered as of June 30, 2020.
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:
Six months endedSix months ended
 June 30, 2020June 30, 2019
RSUsPSUsRSUsPSUs
Shares of common stock issued (1)
52,512  789  401,986  900,226  
Shares of common stock withheld by the Company as payment by employees in lieu of cash to satisfy tax withholding obligations
(16,973) (269) (123,013) (325,246) 
Net shares of common stock issued35,539  520  278,973  574,980  
Cumulative undelivered shares of common stock262,568  —  177,249  —  
______________________________________________________________________________
(1) Shares of common stock issued in 2019 related to PSUs represents PSUs that vested in 2018 but were delivered in common stock during the six months ended June 30, 2019.
Compensation expense recorded related to RSUs and PSUs in the consolidated statement of operations was as follows:
 Three months endedSix months ended
June 30,June 30,
(in thousands)2020201920202019
RSUs$3,787  $3,170  $6,265  $4,740  
PSUs265  431  (190) 646  
The remaining unrecognized compensation expense related to unvested RSUs and unvested PSUs was $19.6 million and $6.3 million, respectively, as of June 30, 2020 and is expected to be recognized over the related weighted average period of 2.1 years and 2.6 years, respectively.
Compensation Expense
The allocation of share-based compensation expense in the unaudited condensed consolidated statements of operations was as follows:
 Three months endedSix months ended
June 30,June 30,
(in thousands)2020201920202019
Cost of goods sold$403  $194  $628  $361  
Selling, general and administrative3,575  3,174  5,289  4,641  
Research and development238  233  486  384  
Total compensation expense before income tax4,216  3,601  6,403  5,386  
Income tax benefit849  746  1,312  1,136  
Total compensation expense, net of income tax$3,367  $2,855  $5,091  $4,250  
v3.20.2
Accumulated Other Comprehensive Loss, Net of Tax
6 Months Ended
Jun. 30, 2020
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 5) and pension and other postretirement adjustments (Note 7).
The components of and changes in accumulated other comprehensive loss, net of tax, were as follows:
 ForeignGains (Losses) onGains (Losses) onPension andAccumulated