ACUSHNET HOLDINGS CORP., 10-Q filed on 11/1/2018
Quarterly Report
v3.10.0.1
Document and Entity Information - shares
9 Months Ended
Sep. 30, 2018
Oct. 26, 2018
Document And Entity Information [Abstract]    
Entity Registrant Name Acushnet Holdings Corp.  
Entity Central Index Key 0001672013  
Document Type 10-Q  
Document Period End Date Sep. 30, 2018  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Entity Current Reporting Status Yes  
Entity Filer Category Accelerated Filer  
Document Fiscal Year Focus 2018  
Document Fiscal Period Focus Q3  
Entity Emerging Growth Company false  
Entity Small Business false  
Entity Common Stock, Shares Outstanding   74,760,062
v3.10.0.1
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) - USD ($)
$ in Thousands
Sep. 30, 2018
Dec. 31, 2017
Current assets    
Cash and restricted cash ($8,801 and $13,086 attributable to the variable interest entity (VIE)) $ 57,992 $ 47,722
Accounts receivable, net 241,488 190,851
Inventories ($9,588 and $13,692 attributable to the VIE) 324,968 363,962
Other assets 85,366 84,541
Total current assets 709,814 687,076
Property, plant and equipment, net ($10,603 and $10,240 attributable to the VIE) 223,852 228,922
Goodwill ($32,312 and $32,312 attributable to the VIE) 184,784 185,941
Intangible assets, net 475,799 481,234
Deferred income taxes 84,879 110,318
Other assets ($2,652 and $2,738 attributable to the VIE) 35,709 33,833
Total assets 1,714,837 1,727,324
Current liabilities    
Short-term debt 14,567 20,364
Current portion of long-term debt 35,625 26,719
Accounts payable ($6,028 and $10,587 attributable to the VIE) 91,063 92,759
Accrued taxes 24,801 34,310
Accrued compensation and benefits 85,403 80,189
Accrued expenses and other liabilities ($2,864 and $2,719 attributable to the VIE) 75,224 52,442
Total current liabilities 326,683 306,783
Long-term debt and capital lease obligations 355,633 416,970
Deferred income taxes 10,110 9,318
Accrued pension and other postretirement benefits ($1,375 and $1,908 attributable to the VIE) 93,057 130,160
Other noncurrent liabilities ($5,350 and $4,689 attributable to the VIE) 15,764 16,701
Total liabilities 801,247 879,932
Commitments and contingencies (Note 16)
Shareholders' equity    
Common stock, $0.001 par value, 500,000,000 shares authorized; 74,760,062 and 74,479,319 shares issued and outstanding 75 74
Additional paid-in capital 906,107 894,727
Accumulated other comprehensive loss, net of tax (86,075) (81,691)
Retained earnings 64,915 1,618
Total equity attributable to Acushnet Holdings Corp. 885,022 814,728
Noncontrolling interests 28,568 32,664
Total shareholders' equity 913,590 847,392
Total liabilities and shareholders' equity $ 1,714,837 $ 1,727,324
v3.10.0.1
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Parentheticals) - USD ($)
$ in Thousands
Sep. 30, 2018
Dec. 31, 2017
Cash and restricted cash $ 57,992 $ 47,722
Inventories 324,968 363,962
Property, plant and equipment, net 223,852 228,922
Goodwill 184,784 185,941
Other assets 35,709 33,833
Accounts payable 91,063 92,759
Accrued expenses and other liabilities 75,224 52,442
Accrued pension and other postretirement benefits 93,057 130,160
Other noncurrent liabilities $ 15,764 $ 16,701
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) 74,760,062 74,479,319
Common stock, shares outstanding (in shares) 74,760,062 74,479,319
VIE    
Cash and restricted cash $ 8,801 $ 13,086
Inventories 9,588 13,692
Property, plant and equipment, net 10,603 10,240
Goodwill 32,312 32,312
Other assets 2,652 2,738
Accounts payable 6,028 10,587
Accrued expenses and other liabilities 2,864 2,719
Accrued pension and other postretirement benefits 1,375 1,908
Other noncurrent liabilities $ 5,350 $ 4,689
v3.10.0.1
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2018
Sep. 30, 2017
Sep. 30, 2018
Sep. 30, 2017
Income Statement [Abstract]        
Net sales $ 370,427 $ 347,263 $ 1,290,366 $ 1,208,866
Cost of goods sold 181,489 174,159 622,944 586,381
Gross profit 188,938 173,104 667,422 622,485
Operating expenses:        
Selling, general and administrative 148,653 141,514 471,706 440,959
Research and development 12,787 10,784 38,095 35,108
Intangible amortization 1,625 1,626 4,885 4,872
Income from operations 25,873 19,180 152,736 141,546
Interest expense, net 4,284 4,040 13,939 11,863
Other (income) expense, net 4,142 1,018 4,252 1,201
Income before income taxes 17,447 14,122 134,545 128,482
Income tax expense 10,098 3,488 43,737 44,180
Net income 7,349 10,634 90,808 84,302
Less: Net income attributable to noncontrolling interests (286) (1,316) (2,354) (3,854)
Net income attributable to Acushnet Holdings Corp. $ 7,063 $ 9,318 $ 88,454 $ 80,448
Net income per common share attributable to Acushnet Holdings Corp.:        
Basic (in dollars per share) $ 0.09 $ 0.13 $ 1.18 $ 1.08
Diluted (in dollars per share) 0.09 0.12 1.18 1.08
Cash dividends declared per common share (in dollars per share) $ 0.13 $ 0.12 $ 0.39 $ 0.36
Weighted average number of common shares:        
Basic (in shares) 74,823,954 74,451,977 74,746,190 74,375,756
Diluted (in shares) 75,867,562 74,702,704 75,230,651 74,507,356
v3.10.0.1
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2018
Sep. 30, 2017
Sep. 30, 2018
Sep. 30, 2017
Statement of Comprehensive Income [Abstract]        
Net income $ 7,349 $ 10,634 $ 90,808 $ 84,302
Other comprehensive income (loss):        
Foreign currency translation adjustments (2,900) 11,173 (9,431) 23,971
Cash flow derivative instruments        
Unrealized holding gains (losses) arising during period 3,421 (4,407) 5,280 (15,727)
Reclassification adjustments included in net income 1,621 1,133 3,551 (1,962)
Tax benefit (expense) (1,345) 497 (2,063) 4,395
Cash flow derivative instruments, net 3,697 (2,777) 6,768 (13,294)
Available-for-sale securities        
Unrealized holding gains arising during period 0 171 0 195
Tax benefit 0 27 0 18
Available-for-sale securities, net 0 198 0 213
Pension and other postretirement benefits        
Pension and other postretirement benefits adjustments 4,520 239 5,516 397
Tax expense (957) (212) (1,105) (170)
Pension and other postretirement benefits adjustments, net 3,563 27 4,411 227
Total other comprehensive income 4,360 8,621 1,748 11,117
Comprehensive income 11,709 19,255 92,556 95,419
Less: Comprehensive income attributable to noncontrolling interests (286) (1,316) (2,354) (3,854)
Comprehensive income attributable to Acushnet Holdings Corp. $ 11,423 $ 17,939 $ 90,202 $ 91,565
v3.10.0.1
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($)
$ in Thousands
9 Months Ended
Sep. 30, 2018
Sep. 30, 2017
Cash flows from operating activities    
Net income $ 90,808 $ 84,302
Adjustments to reconcile net income to cash provided by (used in) operating activities    
Depreciation and amortization 30,057 30,667
Unrealized foreign exchange loss (gain) 3,057 (2,885)
Amortization of debt issuance costs 1,040 990
Share-based compensation 13,780 11,576
Loss on disposals of property, plant and equipment 153 466
Deferred income taxes 23,202 28,415
Changes in operating assets and liabilities    
Accounts receivable (55,798) (21,432)
Inventories 35,602 12,849
Accounts payable (90) 2,236
Accrued taxes (8,987) (22,168)
Other assets and liabilities (2,759) (142,900)
Cash flows provided by (used in) operating activities 130,065 (17,884)
Cash flows from investing activities    
Additions to property, plant and equipment (20,662) (12,781)
Other investing activity (2,350) 0
Cash flows used in investing activities (23,012) (12,781)
Cash flows from financing activities    
Repayments of short-term borrowings, net (4,103) (31,719)
Proceeds from delayed draw term loan A facility 0 100,000
Repayments of delayed draw term loan A facility (38,750) (3,750)
Repayment of term loan facilities (14,063) (14,064)
Debt issuance costs (381) 0
Dividends paid on common stock (29,338) (26,802)
Dividends paid to noncontrolling interests (6,450) (2,400)
Payment of employee restricted stock tax withholdings (2,634) (903)
Cash flows (used in) provided by financing activities (95,719) 20,362
Effect of foreign exchange rate changes on cash (1,064) 4,354
Net increase (decrease) in cash 10,270 (5,949)
Cash and restricted cash, beginning of year 47,722 79,140
Cash and restricted cash, end of period 57,992 73,191
Supplemental information    
Non-cash additions to property, plant and equipment 1,648 200
Dividends declared to noncontrolling interests but not paid 0 2,400
Dividend equivalents rights (DERs) declared not paid $ 635 $ 645
v3.10.0.1
CONDENSED CONSOLIDATED STATEMENT 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
Noncontrolling Interest
Changes in stockholders' equity              
Adoption of new accounting standards (Notes 1, 2 & 10) $ (1,501) $ (1,501)     $ (6,132) $ 4,631  
Beginning balance at Dec. 31, 2017 847,392 814,728 $ 74 $ 894,727 (81,691) 1,618 $ 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 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 12) (2,630) (2,630) $ 1 (2,631)      
Vesting of restricted common stock, including impact of DERs, net of shares withheld for employee taxes (Note 12) (in shares)     281        
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 $ 913,590 $ 885,022 $ 75 $ 906,107 $ (86,075) $ 64,915 $ 28,568
Ending balance (in shares) at Sep. 30, 2018     74,760        
v3.10.0.1
Summary of Significant Accounting Policies
9 Months Ended
Sep. 30, 2018
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 a variable interest entity (“VIE”) in which the Company is the primary beneficiary. All intercompany balances and transactions have been eliminated in consolidation. Certain prior period amounts have been reclassified to conform to current year presentation.
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, 2018 are not necessarily indicative of results to be expected for the full year ending December 31, 2018, nor were those of the comparable 2017 period representative of those actually experienced for the full year ended December 31, 2017. 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, 2017 included in its Annual Report on Form 10-K filed with the SEC on March 7, 2018.
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 noncontrolling entities have guaranteed the credit lines of the VIE, for which there were no outstanding borrowings as of September 30, 2018 and December 31, 2017. In addition, pursuant to the terms of the agreement governing the VIE, the Company is not required to provide financial support to the VIE.
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, 2018 and December 31, 2017, the amount of restricted cash included in cash and restricted cash on the balance sheet was $2.1 million and $2.3 million, respectively.
Accounts Receivable
As of September 30, 2018 and December 31, 2017, the allowance for doubtful accounts was $9.4 million and $10.0 million, respectively.
Foreign Currency Translation and Transactions
Foreign currency transaction gains (losses) included in selling, general and administrative expense were losses of $0.1 million and gains of $1.1 million for the three months ended September 30, 2018 and 2017, respectively. Foreign currency transaction gains (losses) included in selling, general and administrative expense were losses of $1.2 million and gains of $4.4 million for the nine months ended September 30, 2018 and 2017, respectively.
Recently Adopted Accounting Standards
Revenue from Contracts with Customers
On January 1, 2018, the Company adopted Accounting Standards Codification ("ASC") 606, "Revenue from Contracts with Customers" ("ASC 606") and all the related amendments (the “new revenue standard”) using the modified retrospective method. The Company recognized the cumulative effect of initially applying the new revenue standard as an adjustment to opening retained earnings (Note 2). The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods.
Income Statement—Reporting Comprehensive Income
On January 1, 2018, the Company adopted Accounting Standards Update ("ASU") 2018‑02, “Income Statement—Reporting Comprehensive Income (Topic 220) —Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” As a result of the adoption of the amendments in this update, the Company recorded a reclassification from accumulated other comprehensive loss, net of tax to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017 (Note 10). The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods.
Financial Instruments—Recognition and Measurement
On January 1, 2018, the Company adopted ASU 2016-01, "Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities" ("ASU 2016-01"). ASU 2016-01 supersedes the guidance to classify equity securities with readily determinable fair values into different categories (that is, trading or available-for-sale) and requires equity securities to be measured at fair value with changes in the fair value recognized through net income, among other items. As a result of the adoption of the amendments in this update, the Company recorded a reclassification of unrealized gains of $2.1 million from accumulated other comprehensive loss, net of tax to retained earnings. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods.
Compensation—Retirement Benefits
On January 1, 2018, the Company adopted ASU 2017‑07, “CompensationRetirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Post Retirement Benefit Cost” ("ASU 2017-07"). ASU 2017‑07 requires that an employer report the service cost component of net periodic pension and net periodic post retirement cost in the same line item as other compensation costs arising from services rendered by the employees during the period. It also requires the other components of net periodic pension and net periodic postretirement benefit cost to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations. Additionally, only the service cost component is eligible for capitalization. As a result of the adoption of the amendments in this update, the Company recorded a reclassification of the non-service cost component of net periodic benefit cost of $0.9 million and $1.6 million from cost of goods sold and operating expenses to other (income) expense, net on the consolidated statement of operations for the three and nine months ended September 30, 2017. The adoption of this standard also resulted in the restatement of the Company's segment operating income (loss) for the three and nine months ended September 30, 2017.
The Company also adopted the following standards during 2018, none of which had a material impact to the Company's financial statements or financial statement disclosures:
Standard
 
 
 
Effective Date
ASU 2017‑09
 
Compensation—Stock Compensation: Scope of Modification Accounting
 
January 1, 2018
ASU 2017‑01
 
Business Combinations: Clarifying the Definition of a Business
 
January 1, 2018
ASU 2016‑16
 
Income Taxes: Intra-Entity Transfers of Assets other than Inventory
 
January 1, 2018
ASU 2016‑15
 
Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments
 
January 1, 2018

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 ending 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.
Changes to the Disclosure Requirements for Fair Value Measurement
In August 2018, the FASB issued 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 improve the effectiveness of fair value measurement disclosures. ASU 2018-13 is effective for fiscal years ending after December 15, 2019. 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.
Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities
In August 2017, the FASB issued 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 simplifies the application of hedge accounting guidance, hedge documentation requirements and the assessment of hedge effectiveness. ASU 2017‑12 is effective for annual periods beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted, including adoption in any interim period for which financial statements have not been issued or made available for issuance. The effect of adoption should be reflected as of the beginning of the fiscal year of adoption. The adoption of this standard is not expected to have a material impact on the consolidated financial statements.
Intangibles—Goodwill and OtherSimplifying the Test for Goodwill Impairment
In January 2017, the FASB issued ASU 2017‑04, “Intangibles—Goodwill and Other: Simplifying the Test for Goodwill Impairment” ("ASU 2017-04"). ASU 2017‑04 removes the second step of the goodwill impairment test. Instead an entity will perform a one-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit’s carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. ASU 2017‑04 is effective for annual periods beginning after December 15, 2019, and interim periods within those fiscal years. The Company will adopt this standard during the fourth quarter of 2018. The adoption of this standard is not expected to have a material impact on the consolidated financial statements.
Leases
In February 2016, the FASB issued ASU 2016‑02, “Leases,” which will require lessees to recognize right-of-use assets and lease liabilities for leases which were formerly classified as operating leases. The guidance is effective for financial statements issued for annual periods beginning after December 15, 2018, including interim periods within those fiscal years. Subsequent to ASU 2016-02, the FASB issued related ASUs, including ASU 2018-11, "Leases (Topic 842): Targeted Improvements", which provides an optional approach to initially apply the new lease guidance upon the adoption date, without adjusting the comparative periods presented. The Company plans to elect the optional transition approach and will adopt the standard beginning January 1, 2019. While the Company is still in the process of completing its analysis on the impact this ASU will have on its consolidated balance sheet and related disclosures, it expects the adoption of this standard to have a material impact on the consolidated balance sheet and result in the recognition of a right-of-use asset and corresponding liability.
v3.10.0.1
Revenue
9 Months Ended
Sep. 30, 2018
Revenue from Contract with Customer [Abstract]  
Revenue
Revenue
On January 1, 2018, the Company adopted ASC 606 using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported in accordance with the Company’s historic accounting under ASC 605, "Revenue Recognition".
The Company recorded a net reduction to opening retained earnings of $1.6 million as of January 1, 2018 due to the cumulative impact of adopting ASC 606, with the impact primarily related to a promotional holiday program. The impact of applying ASC 606 was an increase in net sales of $0.2 million and $4.4 million and an increase in cost of sales of $0.2 million and $1.8 million for the three and nine months ended September 30, 2018, respectively. Additionally, the Company reclassified the refund liability for expected returns from accounts receivable, net to accrued expenses and other liabilities and reclassified the value of inventory expected to be recovered related to sales returns from inventories to other assets as of September 30, 2018. The refund liability for expected returns was $13.8 million and $13.5 million as of September 30, 2018 and December 31, 2017, respectively. The value of inventory expected to be recovered related to sales returns was $7.3 million and $4.3 million as of September 30, 2018 and December 31, 2017, respectively. The adoption of ASC 606 did not have any other material impacts to the financial statements.
Accounting Policies
Revenue is recognized when performance obligations under the terms of a contract with a customer are satisfied. The majority of the Company's contracts have a single performance obligation to transfer products. Accordingly, the Company recognizes revenue when control of the products has been transferred to the customer, generally at the time of shipment or delivery of products, based on the terms of the contract and the jurisdiction of the sale. Revenue is recognized in an amount that reflects the consideration the Company expects to be entitled to in exchange for the products. Revenue is recognized net of allowances for discounts and sales returns. Sales taxes and other similar taxes are excluded from revenue.
Substantially all of the Company’s revenue is recognized at a point in time and made to customers who are not engaged in a long-term supply agreement or any form of contract with the Company. Substantially all of sales are paid for on account with the majority of terms between 30 and 60 days, not to exceed one year.
    Costs associated with shipping and handling activities, such as merchandising, are included in selling, general and administrative expenses as revenue is recognized. The Company has made an accounting policy election to account for shipping and handling activities that occur after control of the related good transfers as fulfillment activities instead of assessing such activities as performance obligations.
The Company reduces revenue by the amount of expected returns and records a corresponding refund liability in accrued expenses and other liabilities. The Company accounts for the right of return as variable consideration and recognizes a refund liability for the amount of consideration that it estimates will be refunded to customers. In addition, the Company recognizes an asset for the right to recover returned products in other assets on the consolidated balance sheets. Sales returns are estimated based upon historical rates of product returns, current economic trends and changes in customer demands as well as specific identification of outstanding returns.
Contract Balances
Accounts receivable, net, include amounts billed and currently due from customers. The amounts due are stated at their net estimated realizable value. The Company maintains an allowance for doubtful accounts to provide for the estimated amount of receivables that will not be collected. The allowance includes amounts for certain customers where a risk of default has been specifically identified as well as a provision for customer defaults when it is determined the risk of some default is probable and estimable, but cannot yet be associated with specific customers. The assessment of the likelihood of customer defaults is based on various factors, including credit risk assessments, length of time the receivables are past due, historical experience, customer specific information available to the Company and existing economic conditions.
Customer Sales Incentives
The Company offers sales-based incentive programs to certain customers in exchange for certain benefits, including prominent product placement and exclusive stocking by participating retailers. These programs typically provide qualifying customers with rebates for achieving certain purchase goals. The rebates can be settled in the form of cash or credits or in the form of free product. The rebates which are expected to be settled in the form of cash or credits are accounted for as variable consideration. The estimate of the variable consideration requires the use of assumptions related to the percentage of customers who will achieve qualifying purchase goals and the level of achievement. These assumptions are based on historical experience, current year program design, current marketplace conditions and sales forecasts, including considerations of the Company's product life cycles.
The rebates which are expected to be settled in the form of product are estimated based upon historical experience and the terms of the customer programs and are accounted for as an additional performance obligation. Revenue will be recognized when control of the free products earned transfers to the customer at the end of the related customer incentive program, which generally occurs within one year. Control of the free products generally transfers to the customer at the time of shipment.
Practical Expedients and Exemptions
The Company expenses sales commissions when incurred because the amortization period is one year or less. These costs are recorded within selling, general and administrative expense on the consolidated statements of operations.
The Company has elected the practical expedient to not disclose information about remaining performance obligations that have original expected durations of one year or less.
Disaggregated Revenue
In general, the Company's business segmentation is aligned according to the nature and economic characteristics of its products and customer relationships and provides meaningful disaggregation of each business segment's results of operations. See Note 15 for the Company's business segment disclosures, as well as a further disaggregation of net sales by geographical area.
v3.10.0.1
Inventories
9 Months Ended
Sep. 30, 2018
Inventory Disclosure [Abstract]  
Inventories
Inventories
The components of inventories were as follows:
 
(in thousands)
 
September 30,
 
December 31,
 
 
2018
 
2017
Raw materials and supplies
 
$
69,702

 
$
72,342

Work-in-process
 
19,060

 
23,956

Finished goods
 
236,206

 
267,664

Inventories
 
$
324,968


$
363,962

v3.10.0.1
Product Warranty
9 Months Ended
Sep. 30, 2018
Product Warranties Disclosures [Abstract]  
Product Warranty
Product Warranty
The Company has defined warranties ranging from one to two years. Products covered by the defined warranty policies include certain 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)
2018
 
2017
 
2018
 
2017
Balance at beginning of period
$
3,938

 
$
3,779

 
$
3,823

 
$
3,526

Provision
520

 
1,525

 
3,276

 
3,845

Claims paid/costs incurred
(838
)
 
(1,499
)
 
(3,417
)
 
(3,626
)
Foreign currency translation
5

 
73

 
(57
)
 
133

Balance at end of period
$
3,625


$
3,878


$
3,625


$
3,878

v3.10.0.1
Related Party Transactions
9 Months Ended
Sep. 30, 2018
Related Party Transactions [Abstract]  
Related Party Transactions
Related Party Transactions
Other current assets include receivables from related parties of $1.0 million and $0.5 million as of September 30, 2018 and December 31, 2017, respectively.
v3.10.0.1
Debt and Financing Arrangements
9 Months Ended
Sep. 30, 2018
Debt Disclosure [Abstract]  
Debt and Financing Arrangements
Debt and Financing Arrangements
Senior Secured Credit Facility
There were outstanding borrowings under the revolving credit facility of $13.1 million and $10.1 million as of September 30, 2018 and December 31, 2017, respectively. The weighted average interest rate applicable to the outstanding borrowings was 4.32% and 4.44% as of September 30, 2018 and December 31, 2017, respectively.
On June 7, 2018, Acushnet Company, Acushnet Canada Inc. and Acushnet Europe Limited, as borrowers, and the Company and certain other subsidiaries of the Company, as guarantors, entered into an amendment with Wells Fargo Bank, National Association and certain other lenders to the Company’s senior secured credit facilities agreement. Pursuant to the amendment, the restrictive covenant governing the payment of dividends, the making of certain other payments and the redemption or repurchase of capital stock was amended to permit an additional $150.0 million of such payments, redemptions and/or repurchases, subject to certain conditions. In connection with amending the facilities, the Company incurred approximately $0.4 million in fees and expenses, which were recorded as debt issuance costs and will be recognized as interest expense over the term of the facilities.
The credit agreement contains a number of covenants that, among other things, restrict the ability of the U.S. Borrower and its restricted subsidiaries to (subject to certain exceptions), incur, assume, or permit to exist additional indebtedness or guarantees; incur liens; make investments and loans; pay dividends, make payments, or redeem or repurchase capital stock or make prepayments, repurchases or redemptions of certain indebtedness; engage in mergers, liquidations, dissolutions, asset sales, and other dispositions (including sale leaseback transactions); amend or otherwise alter terms of certain indebtedness or certain other agreements; enter into agreements limiting subsidiary distributions or containing negative pledge clauses; engage in certain transactions with affiliates; alter the nature of the business that we conduct or change our fiscal year or accounting practices. Certain exceptions to these covenants are determined based on ratios that are calculated in part using the calculation of Adjusted EBITDA. The credit agreement also restricts the ability of Acushnet Holdings Corp. to engage in certain mergers or consolidations or engage in any activities other than permitted activities. The Company’s credit agreement contains certain 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, 2018, the Company was in compliance with all covenants under the credit agreement.
As of September 30, 2018, the Company had available borrowings under its revolving credit facility of $255.1 million after giving effect to $6.8 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 $1.5 million and $10.3 million as of September 30, 2018 and December 31, 2017, respectively. The weighted average interest rate applicable to the outstanding borrowings was 4.40% and 0.73% as of September 30, 2018 and December 31, 2017, respectively. As of September 30, 2018, the Company had available borrowings remaining under these local credit facilities of $61.9 million.
Letters of Credit
As of September 30, 2018 and December 31, 2017, there were outstanding letters of credit related to agreements, including the Company's Senior Secured Credit Facility, totaling $11.0 million and $14.3 million, respectively, of which $7.9 million and $11.2 million was secured. These agreements provided a maximum commitment for letters of credit of $29.2 million as of both September 30, 2018 and December 31, 2017.
v3.10.0.1
Derivative Financial Instruments
9 Months Ended
Sep. 30, 2018
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 instruments contracts for trading or speculative purposes.
Foreign Exchange Derivative Instruments
Foreign exchange forward contracts are primarily used to hedge purchases denominated in select foreign currencies, thereby limiting currency risk that would otherwise result from changes in exchange rates. 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, 2018 and December 31, 2017 was $277.9 million and $278.9 million, respectively.
Interest Rate Derivative Instruments
In May 2018, the Company entered into an interest rate swap contract to reduce the impact of variability in interest rates. Under the contract, the Company pays fixed and receives variable rate interest, in effect converting a portion of its variable rate debt to fixed rate debt. As of September 30, 2018, the notional value of the Company's outstanding interest rate swap contract was $100.0 million. As of December 31, 2017, there were no outstanding interest rate swap contracts. The interest rate swap contract is accounted for as a cash flow hedge.
Impact on Financial Statements
The fair values of hedge instruments on the consolidated balance sheets were as follows:
(in thousands)
 
 
 
September 30,
 
December 31,
Balance Sheet Location
 
Hedge Instrument Type
 
2018
 
2017
Other current assets
 
Foreign exchange forward
 
$
4,631

 
$
4,675

Other noncurrent assets
 
Foreign exchange forward
 
1,237

 
562

 
 
Interest rate swap
 
348

 

Other current liabilities
 
Foreign exchange forward
 
796

 
6,360

 
 
Interest rate swap
 
109

 

Other noncurrent liabilities
 
Foreign exchange forward
 
86

 
276


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)
 
2018
 
2017
 
2018
 
2017
Type of hedge
 
 
 
 
 
 
 
 
Foreign exchange forward
 
$
3,175

 
$
(4,407
)
 
$
5,303

 
$
(15,727
)
Interest rate swap
 
246

 

 
(23
)
 

 
 
$
3,421


$
(4,407
)

$
5,280


$
(15,727
)

Gains and losses on derivative instruments designated as cash flow hedges are reclassified from other comprehensive income (loss) at the time the forecasted transaction impacts the income statement. Based on the current valuation, the Company expects to reclassify a net gain of $4.6 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 $0.1 million related to interest rate derivative instruments from accumulated other comprehensive loss, net of tax into interest expense, net during the next 12 months.
The hedge instrument gain (loss) recognized on the consolidated statements of operations was as follows:
 
 
Three months ended
 
Nine months ended
 
 
September 30,
 
September 30,
(in thousands)
 
2018
 
2017
 
2018
 
2017
Location of gain (loss) in statement of operations
 
 
 
 
 
 
 
 
Cost of goods sold
 
$
(1,461
)
 
$
(1,133
)
 
$
(3,289
)
 
$
1,962

Selling, general and administrative expense
 
277

 
(1,064
)
 
1,293

 
(2,680
)
Interest expense, net
 
(160
)
 

 
(262
)
 

 
 
$
(1,344
)
 
$
(2,197
)

$
(2,258
)
 
$
(718
)

Undesignated Foreign Exchange Derivative Instruments
From time to time, the Company enters into foreign exchange forwards to mitigate the change in fair value of specific assets and liabilities which do not qualify as hedging instruments under U.S. GAAP. Accordingly, 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, together with the re-measurement gain or loss from the hedged asset or liability. The gross U.S. dollar equivalent notional amount of all outstanding foreign exchange forward contracts not designated under hedge accounting was $1.9 million as of September 30, 2018. There were no outstanding foreign exchange forward contracts not designated under hedge accounting as of December 31, 2017.
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.
v3.10.0.1
Fair Value Measurements
9 Months Ended
Sep. 30, 2018
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 were as follows:
 
 
Fair Value Measurements as of
 
 
 
 
September 30, 2018 using:
 
 
(in thousands)
 
Level 1
 
Level 2
 
Level 3
 
Balance Sheet Location
Assets
 
 
 
 
 
 
 
 
Rabbi trust
 
$
8,975

 
$

 
$

 
Other current assets
Foreign exchange derivative instruments
 

 
4,679

 

 
Other current assets
Deferred compensation program assets
 
1,384

 

 

 
Other noncurrent assets
Foreign exchange derivative instruments
 

 
1,237

 

 
Other noncurrent assets
Interest rate derivative instruments
 

 
348

 

 
Other noncurrent assets
Total assets
 
$
10,359


$
6,264


$

 
 
Liabilities
 
 
 
 
 
 
 
 
Foreign exchange derivative instruments
 
$

 
$
796

 
$

 
Other current liabilities
Interest rate derivative instruments
 

 
109

 

 
Other current liabilities
Deferred compensation program liabilities
 
1,384

 

 

 
Other noncurrent liabilities
Foreign exchange derivative instruments
 

 
86

 

 
Other noncurrent liabilities
Total liabilities
 
$
1,384


$
991


$

 
 
 
 
 
Fair Value Measurements as of
 
 
 
 
December 31, 2017 using:
 
 
(in thousands)
 
Level 1
 
Level 2
 
Level 3
 
Balance Sheet Location
Assets
 
 
 
 
 
 
 
 
Rabbi trust
 
$
10,637

 
$

 
$

 
Other current assets
Foreign exchange derivative instruments
 

 
4,675

 

 
Other current assets
Deferred compensation program assets
 
1,866

 

 

 
Other noncurrent assets
Foreign exchange derivative instruments
 

 
562

 

 
Other noncurrent assets
Total assets
 
$
12,503


$
5,237


$

 
 
Liabilities
 
 
 
 
 
 
 
 
Foreign exchange derivative instruments
 
$

 
$
6,360

 
$

 
Other current liabilities
Deferred compensation program liabilities
 
1,866

 

 

 
Other noncurrent liabilities
Foreign exchange derivative instruments
 

 
276

 

 
Other noncurrent liabilities
Total liabilities
 
$
1,866


$
6,636


$

 
 

 
During the nine months ended September 30, 2018 and the year ended December 31, 2017, there were no transfers between Level 1, Level 2 and Level 3 assets and liabilities.
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 can 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 hedge currency fluctuations for transactions denominated in a foreign currency (Note 7). 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 7). 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.
v3.10.0.1
Pension and Other Postretirement Benefits
9 Months Ended
Sep. 30, 2018
Retirement Benefits [Abstract]  
Pension and Other Postretirement Benefits
Pension and Other Postretirement Benefits
Components of net periodic benefit cost were as follows:
 
 
 
Pension Benefits
 
Postretirement Benefits
 
 
Three months ended September 30,
(in thousands)
 
2018
 
2017
 
2018
 
2017
Components of net periodic benefit cost
 
 
 
 
 
 
 
 
Service cost
 
$
2,217

 
$
2,300

 
$
164

 
$
239

Interest cost
 
2,950

 
2,934

 
123

 
178

Expected return on plan assets
 
(3,006
)
 
(3,059
)
 

 

Settlement expense
 
4,611

 
754

 

 

Curtailment income
 
(40
)
 

 

 

Amortization of net (gain) loss
 
329

 
249

 
(385
)
 
(150
)
Amortization of prior service cost (credit)
 
44

 
44

 
(35
)
 
(35
)
Net periodic benefit cost (income)
 
$
7,105


$
3,222


$
(133
)

$
232


 
 
Pension Benefits
 
Postretirement Benefits
 
 
Nine months ended September 30,
(in thousands)
 
2018
 
2017
 
2018
 
2017
Components of net periodic benefit cost
 
 
 
 
 
 
 
 
Service cost
 
$
6,919

 
$
6,821

 
$
493

 
$
717

Interest cost
 
8,897

 
8,886

 
368

 
535

Expected return on plan assets
 
(9,483
)
 
(9,006
)
 

 

Settlement expense
 
5,083

 
1,070

 

 

Curtailment income
 
(40
)
 

 

 

Amortization of net (gain) loss
 
1,581

 
546

 
(1,155
)
 
(451
)
Amortization of prior service cost (credit)
 
131

 
131

 
(103
)
 
(103
)
Net periodic benefit cost (income)
 
$
13,088

 
$
8,448

 
$
(397
)
 
$
698



The non-service cost components of net periodic benefit cost are included in other (income) expense, net in the unaudited condensed consolidated statement of operations.
v3.10.0.1
Income Taxes
9 Months Ended
Sep. 30, 2018
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes
In December 2017, the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) was signed into law making broad and complex changes to the Internal Revenue Code. The Company recorded a provisional net income tax expense of $14.0 million for the year ended December 31, 2017. This amount was comprised of $10.2 million expense related to the remeasurement of the Company’s deferred tax asset balances, offset by the reversal of $4.8 million expense for the deferred tax liability previously provided on unremitted foreign earnings, and an $8.6 million expense for the one-time transition tax liability.
The Tax Act also established new tax laws that affect 2018, including, but not limited to: (i) the reduction of the U.S. federal corporate tax rate from 35% to 21% for the periods beginning on or after January 1, 2018; (ii) a general elimination of U.S. federal income taxes on dividends from foreign subsidiaries; (iii) a new provision designed to tax global intangible low-taxed income (“GILTI”); (iv) limitations on the deductibility of certain executive compensation; (v) limitations on the use of foreign tax credits to reduce the U.S. income tax liability; and (vi) a new provision that allows a domestic corporation an immediate deduction for a portion of its foreign derived intangible income (“FDII”).
In accordance with relevant SEC guidance (“SAB 118”), the effects of the Tax Act may be adjusted within a one-year measurement period from the enactment date for items that were previously reported as provisional, or where a provisional estimate could not be made. The income tax expense for the three and nine months ended September 30, 2018 reflected an unfavorable discrete, non-cash, tax adjustment of $5.1 million and an unfavorable discrete, non-cash, tax adjustment of $3.6 million, respectively, to the provisional amounts originally recorded for the one-time transition tax in 2017. The Company continues to analyze the different aspects of the Tax Act which could potentially affect the provisional estimates that were recorded in 2017.
Income tax expense increased by $6.6 million to $10.1 million for the three months ended September 30, 2018 compared to $3.5 million for the three months ended September 30, 2017. The Company’s effective tax rate (“ETR”) was 57.9% for the three months ended September 30, 2018 compared to 24.7% for the three months ended September 30, 2017.  The increase in ETR was primarily driven by the net impact of changes resulting from the Tax Act, including incremental guidance issued in 2018, as noted above, and changes to the Company's geographic mix of earnings.
Income tax expense decreased by $0.5 million to $43.7 million for the nine months ended September 30, 2018 compared to $44.2 million for the nine months ended September 30, 2017. The Company’s ETR was 32.5% for the nine months ended September 30, 2018 compared to 34.4% for the nine months ended September 30, 2017.  The decrease in ETR was primarily driven by the net impact of changes resulting from the Tax Act, including incremental guidance issued in 2018, as noted above, and changes to the Company's geographic mix of earnings.
The Company early adopted ASU 2018-02 on January 1, 2018, and as a result, recorded a net increase to beginning retained earnings and a decrease to accumulated other comprehensive loss, net of tax of $4.1 million. This entry reclassified the stranded tax effects resulting from the Tax Act on the Company’s U.S. pension plans, available-for-sale securities and certain foreign currency losses. The Company's accounting policy on accounting for income tax effects in accumulated other comprehensive income (loss) with respect to available-for-sale securities, pension, postretirement benefit plan obligations and currency translation matters is to apply the impact in the aggregate.
v3.10.0.1
Common Stock
9 Months Ended
Sep. 30, 2018
Equity [Abstract]  
Common Stock
Common Stock
The Company declared dividends per common share, including dividend equivalent rights (Note 12), during the periods presented as follows:
(in thousands, except per share amounts)
 
Dividends per Common Share
 
Amount
2018:
 
 
 
 
Third Quarter
 
$
0.13

 
$
9,954

Second Quarter
 
0.13

 
9,917

First Quarter
 
0.13

 
9,917

Total dividends declared in 2018
 
$
0.39

 
$
29,788

 
 
 
 
 
2017:
 
 
 
 
Fourth Quarter
 
$
0.12

 
$
9,098

Third Quarter
 
0.12

 
9,146

Second Quarter
 
0.12

 
9,149

First Quarter
 
0.12

 
9,152

Total dividends declared in 2017
 
$
0.48

 
$
36,545


During the fourth quarter of 2018, the Company's Board of Directors ("Board of Directors") declared a dividend of $0.13 per common share to shareholders on record as of November 30, 2018 and payable on December 14, 2018.
On June 7, 2018, the Board of Directors authorized the Company to repurchase up to an aggregate of $20.0 million of its issued and outstanding common stock from time to time. The share repurchase program is intended to, among other things, offset share dilution resulting from equity issuances in connection with the Company's management and director compensation programs. 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 the Company’s general working capital needs. As of September 30, 2018, there were no share repurchases made under this program.
v3.10.0.1
Equity Incentive Plans
9 Months Ended
Sep. 30, 2018
Disclosure of Compensation Related Costs, Share-based Payments [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, 2018, the only awards outstanding are RSUs and PSUs. 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 are delivered.
Restricted Stock and Performance Stock Units
A summary of the Company’s RSUs and PSUs as of September 30, 2018 and changes during the nine months then ended is presented below: 
 
 
 
 
Weighted-
 
 
Number
 
Average
 
 
of
 
Fair
 
 
RSUs and PSUs
 
Value
Outstanding at December 31, 2017
 
2,060,854

 
$
20.23

Granted
 
473,724

 
23.49

Vested (1)
 
(466,834
)
 
20.52

Forfeited
 

 

Outstanding at September 30, 2018
 
2,067,744

 
$
20.91


______________________________________________________________________________
(1) Includes 63,490 shares of common stock that were not delivered as of September 30, 2018.
During 2018, RSU vestings, including the impact of DERs issued in common stock, resulted in the issuance of 403,538 shares of common stock, of which 122,795 shares of common stock were withheld by the Company as payment by employees in lieu of cash to satisfy tax withholding obligations. As of September 30, 2018, no PSUs have vested.
The remaining unrecognized compensation expense related to non-vested RSUs and non-vested PSUs granted was $10.8 million and $1.5 million, respectively, as of September 30, 2018 and is expected to be recognized over the related weighted average period of 1.71 years.
The allocation of compensation expense related to equity incentive plans in the consolidated statements of operations was as follows:
 
 
Three months ended
 
Nine months ended
 
 
September 30,
 
September 30,
(in thousands)
 
2018
 
2017
 
2018
 
2017
Cost of goods sold
 
$
217

 
$
100

 
$
424

 
$
327

Selling, general and administrative expense
 
4,073

 
3,302

 
12,365

 
10,318

Research and development
 
380

 
273

 
991

 
931

Total compensation expense before income tax
 
4,670

 
3,675

 
13,780

 
11,576

Income tax benefit
 
938

 
1,266

 
2,820

 
3,985

Total compensation expense, net of income tax
 
$
3,732

 
$
2,409

 
$
10,960

 
$
7,591

v3.10.0.1
Accumulated Other Comprehensive Loss, Net of Tax
9 Months Ended
Sep. 30, 2018
Comprehensive Income (Loss), Net of Tax, Attributable to Parent [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 7) and pension and other postretirement adjustments (Note 9). Prior to the adoption of ASU 2016-01 on January 1, 2018, accumulated other comprehensive loss, net of tax included unrealized gains and losses from available-for-sale securities (Note 1).
The components of and changes in accumulated other comprehensive loss, net of tax, were as follows:
 
 
 
Foreign
 
Gains (Losses) on
 
Gains (Losses)
 
Pension and
 
Accumulated
 
 
Currency
 
Cash Flow
 
on Available-
 
Other
 
Other
 
 
Translation
 
Derivative
 
for-Sale
 
Postretirement
 
Comprehensive
(in thousands)
 
Adjustments
 
Instruments
 
Securities
 
Adjustments
 
Loss, Net of Tax
Balance at December 31, 2017
 
$
(57,711
)
 
$
(2,280
)
 
$
1,721

 
$
(23,421
)
 
$
(81,691
)
Adoption of new accounting standards (Note 1 & 10)
 
(2,171
)
 

 
(1,721
)
 
(2,240
)
 
(6,132
)
Other comprehensive income (loss) before reclassifications
 
(9,431
)
 
5,280

 

 
19

 
(4,132
)
Amounts reclassified from accumulated other comprehensive loss, net of tax
 

 
3,551

 

 
5,497

 
9,048

Tax expense
 

 
(2,063
)
 

 
(1,105
)
 
(3,168
)
Balance at September 30, 2018
 
$
(69,313
)
 
$
4,488

 
$

 
$
(21,250
)
 
$
(86,075
)
v3.10.0.1
Net Income per Common Share
9 Months Ended
Sep. 30, 2018
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)
 
2018
 
2017
 
2018
 
2017
 
 
 
 
 
 
 
 
 
Net income attributable to Acushnet Holdings Corp.
 
$
7,063

 
$
9,318

 
$
88,454

 
$
80,448

 
 
 
 
 
 
 
 
 
Weighted average number of common shares:
 
 
 
 
 
 
 
 
Basic
 
74,823,954

 
74,451,977

 
74,746,190

 
74,375,756

Diluted
 
75,867,562

 
74,702,704

 
75,230,651

 
74,507,356

 
 
 
 
 
 
 
 
 
Net income per common share attributable to Acushnet Holdings Corp.:
 
 
 
 
 
 
 
 
Basic
 
$
0.09

 
$
0.13

 
$
1.18

 
$
1.08

Diluted
 
$
0.09

 
$
0.12

 
$
1.18

 
$
1.08


Net income per common share attributable to Acushnet Holdings Corp. for the three and nine months ended September 30, 2018 and 2017 was calculated using the treasury stock method.
The Company’s potential dilutive securities for the three and nine months ended September 30, 2018 and 2017 include RSUs and PSUs. PSUs vest based upon achievement of performance targets and are excluded from the diluted shares outstanding unless the performance targets have been met as of the end of the applicable reporting period regardless of whether such performance targets are probable of achievement. As of September 30, 2018, the minimum performance target was achieved relating to the PSUs and as a result, the PSUs have been included in diluted shares outstanding for the three and nine months ended September 30, 2018.
For the three and nine months ended September 30, 2018 and 2017, the following securities have been excluded from the calculation of diluted weighted‑average common shares outstanding as their impact was determined to be anti‑dilutive:
 
 
Three months ended
 
Nine months ended
 
 
September 30,
 
September 30,
 
 
2018
 
2017
 
2018
 
2017
RSUs
 

 
356,083

 

 
367,145

v3.10.0.1
Segment Information
9 Months Ended
Sep. 30, 2018
Segment Reporting [Abstract]  
Segment Information
Segment Information
The Company’s operating segments are based on how the Chief Operating Decision Maker (“CODM”) makes decisions about assessing performance and allocating resources. The Company has four reportable segments that are organized on the basis of product categories. These segments include Titleist golf balls, Titleist golf clubs, Titleist golf gear and FootJoy golf wear.
The CODM primarily evaluates performance using segment operating income (loss). Segment operating income (loss) includes directly attributable expenses and certain shared costs of corporate administration that are allocated to the reportable segments, but excludes interest expense, net, transaction fees and other non‑operating gains and losses as the Company does not allocate these to the reportable segments. The CODM does not evaluate a measure of assets when assessing performance.
Results shown for the three and nine months ended September 30, 2018 and 2017 are not necessarily those which would be achieved if each segment was an unaffiliated business enterprise. There are no intersegment transactions.
Information by reportable segment and a reconciliation to reported amounts are as follows:
(in thousands)
 
Three months ended September 30,
 
Nine months ended September 30,
 
 
2018
 
2017
 
2018
 
2017
Net sales
 
 
 
 
 
 
 
 
Titleist golf balls
 
$
121,794

 
$
114,950

 
$
418,911

 
$
404,101

Titleist golf clubs
 
99,018

 
84,676

 
333,750

 
279,955

Titleist golf gear
 
30,497

 
30,895

 
120,664

 
120,585

FootJoy golf wear
 
100,165

 
101,010

 
360,367

 
355,750

Other
 
18,953

 
15,732

 
56,674

 
48,475

Total net sales
 
$
370,427


$
347,263


$
1,290,366


$
1,208,866

 
 
 
 
 
 
 
 
 
Segment operating income (loss)
 
 
 
 
 
 
 
 
Titleist golf balls
 
$
20,865

 
$
12,169

 
$
71,693

 
$
64,511

Titleist golf clubs
 
2,908

 
(2,553
)
 
29,812

 
13,653

Titleist golf gear
 
223

 
1,462

 
16,261

 
19,076

FootJoy golf wear
 
(1,521
)
 
5,107

 
24,121

 
31,883

Other
 
3,788

 
3,032

 
11,201

 
10,982

Total segment operating income
 
26,263


19,217


153,088


140,105

Reconciling items:
 
 
 
 
 
 
 
 
Interest expense, net
 
(4,284
)
 
(4,040
)
 
(13,939
)
 
(11,863
)
Transaction fees
 
(470
)
 

 
(470
)
 
(146
)
Other
 
(4,062
)
 
(1,055
)
 
(4,134
)
 
386

Total income before income tax
 
$
17,447


$
14,122


$
134,545


$
128,482


Information as to the Company’s operations in different geographical areas is presented below. Net sales are categorized based on the location in which the sale originates.
 
 
Three months ended September 30,
 
Nine months ended September 30,
(in thousands)
 
2018
 
2017
 
2018
 
2017
United States
 
$
203,194

 
$
183,495

 
$
675,223

 
$
630,784

EMEA (1)
 
41,659

 
40,646

 
182,375

 
166,533

Japan
 
41,683

 
41,130

 
139,299

 
135,607

Korea
 
50,030

 
47,502

 
164,679

 
153,354

Rest of world
 
33,861