ACUSHNET HOLDINGS CORP., 10-K filed on 2/25/2021
Annual Report
v3.20.4
Cover - USD ($)
$ in Millions
12 Months Ended
Dec. 31, 2020
Feb. 19, 2021
Jun. 30, 2020
Cover [Abstract]      
Document Type 10-K    
Document Annual Report true    
Document Period End Date Dec. 31, 2020    
Current Fiscal Year End Date --12-31    
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, par value $0.001 per share    
Trading Symbol GOLF    
Security Exchange Name NYSE    
Entity Well-known Seasoned Issuer Yes    
Entity Voluntary Filers No    
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    
ICFR Auditor Attestation Flag true    
Entity Shell Company false    
Entity Public Float     $ 1,170.9
Entity Common Stock, Shares Outstanding   74,294,813  
Documents Incorporated by Reference Portions of the definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A relating to the Registrant’s Annual General Meeting of Shareholders, to be held on June 7, 2021, will be incorporated by reference in this Form 10-K in response to Items 10, 11, 12, 13 and 14 of Part III. The definitive proxy statement will be filed with the SEC not later than 120 days after the registrant’s fiscal year ended December 31, 2020.    
Entity Central Index Key 0001672013    
Document Fiscal Year Focus 2020    
Document Fiscal Period Focus FY    
Amendment Flag false    
v3.20.4
CONSOLIDATED BALANCE SHEETS - USD ($)
$ in Thousands
Dec. 31, 2020
Dec. 31, 2019
Current assets    
Cash, cash equivalents and restricted cash ($6,843 and $8,514 attributable to the variable interest entity ("VIE")) $ 151,452 $ 34,184
Accounts receivable, net 201,518 215,428
Inventories ($13,830 and $11,958 attributable to the VIE) 357,682 398,368
Prepaid and other assets 89,155 94,838
Total current assets 799,807 742,818
Property, plant and equipment, net ($10,538 and $11,374 attributable to the VIE) 222,811 231,575
Goodwill ($32,312 and $32,312 attributable to the VIE) 215,186 214,056
Intangible assets, net 473,533 480,794
Deferred income taxes 80,060 70,541
Other assets ($2,239 and $2,517 attributable to the VIE) 75,158 77,265
Total assets 1,866,555 1,817,049
Current liabilities    
Short-term debt 2,810 54,123
Current portion of long-term debt 17,500 17,500
Accounts payable ($8,702 and $8,360 attributable to the VIE) 112,867 102,335
Accrued taxes 40,952 36,032
Accrued compensation and benefits ($1,454 and $3,542 attributable to the VIE) 82,290 72,465
Accrued expenses and other liabilities ($3,699 and $4,468 attributable to the VIE) 101,260 76,663
Total current liabilities 357,679 359,118
Long-term debt 313,619 330,701
Deferred income taxes 3,821 4,837
Accrued pension and other postretirement benefits 121,929 118,852
Other noncurrent liabilities ($2,261 and $5,202 attributable to the VIE) 52,128 51,908
Total liabilities 849,176 865,416
Commitments and contingencies (Note 22)
Redeemable noncontrolling interest 126 807
Shareholders' equity    
Common stock, $0.001 par value, 500,000,000 shares authorized; 75,666,367 and 75,619,587 shares issued 76 76
Additional paid-in capital 925,385 910,507
Accumulated other comprehensive loss, net of tax (96,182) (112,028)
Retained earnings 199,776 151,039
Treasury stock, at cost; 1,671,754 and 1,183,966 shares (including 299,894 and 56,000 of accrued share repurchase) (Note 15) (45,106) (31,154)
Total equity attributable to Acushnet Holdings Corp. 983,949 918,440
Noncontrolling interests 33,304 32,386
Total shareholders' equity 1,017,253 950,826
Total liabilities, redeemable noncontrolling interest and shareholders' equity $ 1,866,555 $ 1,817,049
v3.20.4
CONSOLIDATED BALANCE SHEETS (Parentheticals) - USD ($)
$ in Thousands
Dec. 31, 2020
Dec. 31, 2019
Cash, cash equivalents and restricted cash ($6,843 and $8,514 attributable to the variable interest entity ("VIE")) $ 151,452 $ 34,184
Inventories ($13,830 and $11,958 attributable to the VIE) 357,682 398,368
Property, plant and equipment, net ($10,538 and $11,374 attributable to the VIE) 222,811 231,575
Goodwill ($32,312 and $32,312 attributable to the VIE) 215,186 214,056
Other assets ($2,239 and $2,517 attributable to the VIE) 75,158 77,265
Accounts payable ($8,702 and $8,360 attributable to the VIE) 112,867 102,335
Accrued compensation and benefits ($1,454 and $3,542 attributable to the VIE) 82,290 72,465
Accrued expenses and other liabilities ($3,699 and $4,468 attributable to the VIE) 101,260 76,663
Other noncurrent liabilities ($2,261 and $5,202 attributable to the VIE) $ 52,128 $ 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) 75,666,367 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, cash equivalents and restricted cash ($6,843 and $8,514 attributable to the variable interest entity ("VIE")) $ 6,843 $ 8,514
Inventories ($13,830 and $11,958 attributable to the VIE) 13,830 11,958
Property, plant and equipment, net ($10,538 and $11,374 attributable to the VIE) 10,538 11,374
Goodwill ($32,312 and $32,312 attributable to the VIE) 32,312 32,312
Other assets ($2,239 and $2,517 attributable to the VIE) 2,239 2,517
Accounts payable ($8,702 and $8,360 attributable to the VIE) 8,702 8,360
Accrued compensation and benefits ($1,454 and $3,542 attributable to the VIE) 1,454 3,542
Accrued expenses and other liabilities ($3,699 and $4,468 attributable to the VIE) 3,699 4,468
Other noncurrent liabilities ($2,261 and $5,202 attributable to the VIE) $ 2,261 $ 5,202
v3.20.4
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2020
Dec. 31, 2019
Dec. 31, 2018
Income Statement [Abstract]      
Net sales $ 1,612,169 $ 1,681,357 $ 1,633,721
Cost of goods sold 782,333 809,122 791,370
Gross profit 829,836 872,235 842,351
Operating expenses:      
Selling, general and administrative 610,603 627,503 611,883
Research and development 48,942 51,601 51,489
Intangible amortization 11,629 7,478 6,644
Restructuring charges 13,207 0 0
Income from operations 145,455 185,653 172,335
Interest expense, net (Note 18) 15,630 19,613 18,402
Other expense, net 16,776 875 3,629
Income before income taxes 113,049 165,165 150,304
Income tax expense 13,038 40,600 47,232
Net income 100,011 124,565 103,072
Less:  Net income attributable to noncontrolling interests (4,005) (3,495) (3,200)
Net income attributable to Acushnet Holdings Corp. $ 96,006 $ 121,070 $ 99,872
Net income per common share attributable to Acushnet Holdings Corp.:      
Basic (in dollars per share) $ 1.29 $ 1.61 $ 1.34
Diluted (in dollars per share) $ 1.28 $ 1.60 $ 1.32
Weighted average number of common shares:      
Basic (in shares) 74,494,310 75,418,204 74,766,176
Diluted (in shares) 75,060,610 75,759,605 75,472,342
v3.20.4
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2020
Dec. 31, 2019
Dec. 31, 2018
Statement of Comprehensive Income [Abstract]      
Net income $ 100,011 $ 124,565 $ 103,072
Other comprehensive income (loss):      
Foreign currency translation adjustments 27,281 666 (11,971)
Cash flow derivative instruments      
Unrealized holding (losses) gains arising during period (6,823) 3,305 6,222
Reclassification adjustments included in net income (2,220) (7,476) 1,886
Tax benefit (expense) 2,495 909 (1,668)
Cash flow derivative instruments, net (6,548) (3,262) 6,440
Pension and other postretirement benefits      
Pension and other postretirement benefits adjustments (6,362) (26,537) 5,690
Tax benefit (expense) 1,475 6,144 (1,375)
Pension and other postretirement benefits adjustments, net (4,887) (20,393) 4,315
Total other comprehensive income (loss) 15,846 (22,989) (1,216)
Comprehensive income 115,857 101,576 101,856
Less: Comprehensive income attributable to noncontrolling interests (4,243) (3,577) (3,114)
Comprehensive income attributable to Acushnet Holdings Corp. $ 111,614 $ 97,999 $ 98,742
v3.20.4
CONSOLIDATED STATEMENTS OF CASH FLOWS
$ in Thousands
12 Months Ended
Dec. 31, 2020
USD ($)
Dec. 31, 2019
USD ($)
Dec. 31, 2018
USD ($)
Cash flows from operating activities      
Net income $ 100,011 $ 124,565 $ 103,072
Adjustments to reconcile net income to cash flows provided by operating activities      
Depreciation and amortization 45,429 43,002 40,496
Unrealized foreign exchange (gains) losses (1,893) 215 3,960
Amortization of debt issuance costs 1,218 1,884 1,409
Share-based compensation 16,016 10,975 18,563
(Gain) loss on disposals of property, plant and equipment (38) 13 128
Deferred income taxes (3,984) 8,474 15,541
Changes in operating assets and liabilities      
Accounts receivable 22,744 (27,092) 571
Inventories 49,006 (25,168) 805
Accounts payable 9,952 10,851 (5,789)
Accrued taxes 2,708 2,655 4,311
Other assets and liabilities 23,256 (16,091) (19,334)
Cash flows provided by operating activities 264,425 134,283 163,733
Cash flows from investing activities      
Additions to property, plant and equipment (24,675) (32,956) (32,801)
Business acquisitions, net of cash acquired 0 (28,104) (16,902)
Cash flows used in investing activities (24,675) (61,060) (49,703)
Cash flows from financing activities      
(Repayments of) proceeds from short-term borrowings, net (52,057) 54,115 (17,742)
Proceeds from term loan facility 0 350,000 0
Repayments of term loan facility (17,500) (330,469) (21,094)
Repayments of delayed draw term loan A facility 0 (54,375) (40,625)
Purchases of common stock (6,976) (29,352) 0
Debt issuance costs (1,067) (2,373) (381)
Dividends paid on common stock (46,065) (43,490) (39,057)
Dividends paid to noncontrolling interests (4,426) (3,354) (7,350)
Payment of employee restricted stock tax withholdings (496) (11,030) (2,634)
Cash flows used in financing activities (128,587) (70,328) (128,883)
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash 6,105 275 (1,855)
Net increase (decrease) in cash, cash equivalents and restricted cash 117,268 3,170 (16,708)
Cash, cash equivalents and restricted cash, beginning of year 34,184 31,014 47,722
Cash, cash equivalents and restricted cash, end of year 151,452 34,184 31,014
Supplemental information      
Cash paid for interest to third parties 14,985 18,218 18,344
Cash paid for income taxes 29,794 31,269 27,389
Non-cash additions to property, plant and equipment 1,562 2,820 2,568
Non-cash additions to right-of-use assets obtained in exchange for operating lease obligations 22,675 9,530 0
Non-cash additions to right-of-use assets obtained in exchange for finance lease obligations 427 289 0
Dividend equivalents rights ("DERs") declared not paid 1,221 775 882
Share repurchase liability (Note 15) 6,976 1,802 0
Non-cash loan to noncontrolling interest (Note 21) $ 0 $ 4,392 $ 0
v3.20.4
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - USD ($)
shares in Thousands, $ in Thousands
Total
Cumulative Effect, Period of Adoption, Adjustment
Total Shareholders' Equity Attributable to Acushnet Holdings Corp.
Total Shareholders' Equity Attributable to Acushnet Holdings Corp.
Cumulative Effect, Period of Adoption, Adjustment
Common Stock
Additional Paid-in Capital
Accumulated Other Comprehensive Loss
Accumulated Other Comprehensive Loss
Cumulative Effect, Period of Adoption, Adjustment
Retained Earnings
Retained Earnings
Cumulative Effect, Period of Adoption, Adjustment
Treasury Stock
Noncontrolling Interests
Beginning balance (in shares) at Dec. 31, 2017         74,479              
Beginning balance at Dec. 31, 2017 $ 853,973 $ (1,501) $ 821,309 $ (1,501) $ 74 $ 894,727 $ (81,691) $ (6,132) $ 8,199 $ 4,631 $ 0 $ 32,664
Changes in stockholders' equity                        
Acquisitions (Note 21) 3,598                     3,598
Net income 103,072   99,872           99,872     3,200
Other comprehensive income (loss) (1,216)   (1,216)       (1,216)          
Share-based compensation 18,794   18,794     18,794            
Vesting of restricted common stock, including impact of DERs, net of shares withheld for employee taxes (Note 16) (in shares)         281              
Vesting of restricted common stock, including impact of DERs, net of shares withheld for employee taxes (Note16) (2,630)   (2,630)   $ 1 (2,631)            
Share repurchase liability (Note 15) 0                      
Dividends and dividend equivalents declared (39,756)   (39,756)           (39,756)      
Dividends declared to noncontrolling interests (7,350)                     (7,350)
Ending balance (in shares) at Dec. 31, 2018         74,760              
Ending 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 124,698   121,070           121,070     3,628
Other comprehensive income (loss) (22,989)   (22,989)       (22,989)          
Share-based compensation 10,647   10,647     10,647            
Vesting of restricted common stock, including impact of DERs, net of shares withheld for employee taxes (Note 16) (in shares)         860              
Vesting of restricted common stock, including impact of DERs, net of shares withheld for employee taxes (Note16) (11,029)   (11,029)   $ 1 (11,030)            
Purchases of common stock (Note 15) (29,352)   (29,352)               (29,352)  
Share repurchase liability (Note 15) (1,802)   (1,802)               (1,802)  
Dividends and dividend equivalents declared (42,977)   (42,977)           (42,977)      
Dividends declared to noncontrolling interests (3,354)                     (3,354)
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
Changes in stockholders' equity                        
Net income 101,350   96,006           96,006     5,344
Other comprehensive income (loss) 15,846   15,846       15,846          
Share-based compensation 15,363   15,363     15,363            
Vesting of restricted common stock, including impact of DERs, net of shares withheld for employee taxes (Note 16) (in shares)         46              
Vesting of restricted common stock, including impact of DERs, net of shares withheld for employee taxes (Note16) (485)   (485)     (485)            
Purchases of common stock (Note 15) (6,976)   (6,976)               (6,976)  
Share repurchase liability (Note 15) (6,976)   (6,976)               (6,976)  
Dividends and dividend equivalents declared (47,269)   (47,269)           (47,269)      
Dividends declared to noncontrolling interests (4,426)                     (4,426)
Ending balance (in shares) at Dec. 31, 2020         75,666              
Ending balance at Dec. 31, 2020 $ 1,017,253   $ 983,949   $ 76 $ 925,385 $ (96,182)   $ 199,776   $ (45,106) $ 33,304
v3.20.4
Description of Business
12 Months Ended
Dec. 31, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Description of Business Description of Business
Acushnet Holdings Corp. (the “Company”), headquartered in Fairhaven, Massachusetts, is the global leader in the design, development, manufacture and distribution of performance-driven golf products. The Company has established positions across all major golf equipment and golf wear categories under its globally recognized brands of Titleist, FootJoy, Scotty Cameron and Vokey Design. Acushnet products are sold primarily to on-course golf pro shops and select off-course golf specialty stores, sporting goods stores and other qualified retailers. The Company sells products primarily in the United States, Europe (primarily the United Kingdom, Germany, France, Sweden and Switzerland), Asia (primarily Japan, Korea, China and Singapore), Canada and Australia. Acushnet manufactures and sources its products principally in the United States, China, Thailand, the United Kingdom and Japan.
Acushnet Holdings Corp. was incorporated in Delaware on May 9, 2011 as Alexandria Holdings Corp., an entity owned by Fila Holdings Corp., formerly known as Fila Korea Co., Ltd., (“Fila”), a leading sport and leisure apparel and footwear company which is a public company listed on the Korea Exchange, and a consortium of investors (the “Financial Investors”). Acushnet Holdings Corp. acquired Acushnet Company, its operating subsidiary, from Beam Suntory, Inc. (at the time known as Fortune Brands, Inc.) (“Beam”) on July 29, 2011. On November 2, 2016, the Company completed an initial public offering at a public offering price of $17.00 per share. Following the pricing of the initial public offering, Magnus Holdings Co., Ltd. (“Magnus”), a wholly-owned subsidiary of Fila, purchased from the Financial Investors shares of the Company’s common stock, resulting in Magnus holding a controlling ownership interest in the Company’s outstanding common stock.
v3.20.4
Summary of Significant Accounting Policies
12 Months Ended
Dec. 31, 2020
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies Summary of Significant Accounting Policies
Basis of Presentation
The accompanying 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 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.
Risks and Uncertainties
In March 2020, the World Health Organization declared a pandemic related to the novel coronavirus (“COVID-19”). Through the end of June 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 were at varying stages of recovery at the end of June, with Korea nearly fully recovered while Japan and other markets continued 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 10). The Company's manufacturing facilities and distribution centers were re-opened in mid-May 2020 with protocols designed to promote the health and safety of its associates in accordance with state and local government re-opening guidance. The protocols included reconfiguring the Company's manufacturing and distribution facilities to allow for social distancing, implementing stringent safety measures in all facilities, implementing work-from-home policies wherever possible and suspending non-critical business travel. By the end of June 2020, substantially all of the golf courses, on-course retail pro shops and off-course retail partner locations in the United States and Europe had re-opened and rounds of play have been strong since golf courses have reopened. The impact of the COVID-19 pandemic continues to evolve and remains highly uncertain including the duration and severity of the pandemic, additional government related shutdowns and a significant decrease in the current level of rounds of play and the related demand for golf-related products.
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 year ended December 31, 2020 include the hedge de-designation of certain foreign exchange forward contracts deemed ineffective (Note 11) and an impairment loss related to goodwill recorded in connection with the KJUS acquisition (Note 8).
The impact of the COVID-19 pandemic continues to evolve, and both the full impact and duration of the COVID-19 pandemic remain highly uncertain. Accordingly, the Company's business, results of operations, financial position and cash flows could continue to be materially impacted in ways that the Company cannot currently predict.
Use of Estimates
The preparation of the Company’s 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 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) through its interests in the VIE, the obligation to absorb expected losses or the right to receive expected benefits from the VIE that could potentially be significant to the VIE.
The Company consolidates the accounts of Acushnet Lionscore Limited, a VIE which is 40% owned by the Company. The sole purpose of the VIE is to manufacture the Company’s golf footwear and as such, the Company is deemed to be the primary beneficiary. The Company has presented separately on its consolidated balance sheets, to the extent material, the assets of its consolidated VIE that can only be used to settle specific obligations of its consolidated VIE and the liabilities of its consolidated VIE for which creditors do not have recourse to its general credit. The general creditors of the VIE do not have recourse to the Company. Certain directors of the VIE have guaranteed the credit lines of the VIE, for which there were no outstanding borrowings as of December 31, 2020 and 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 consolidated financial statements. The value attributable to the noncontrolling interests is presented on the 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 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 consolidated balance sheets was $4.4 million as of both December 31, 2020 and 2019. Net income (loss) and comprehensive income (loss) attributable to noncontrolling interests are presented separately on the consolidated statements of operations and consolidated statements of comprehensive income, respectively.
Cash, Cash Equivalents and Restricted Cash
Cash held in Company checking accounts is included in cash. Cash equivalents consist of short-term highly liquid investments with original maturities of three months or less which are readily convertible into cash. The Company classifies as restricted certain cash that is not available for use in its operations. As of December 31, 2020 and 2019, the amount of restricted cash included in cash, cash equivalents and restricted cash on the consolidated balance sheets was $2.0 million. Book overdrafts not subject to offset with other accounts with the same financial institution are classified as accounts payable. As of December 31, 2020 and 2019, book overdrafts in the amount of $4.4 million and $2.4 million, respectively, were recorded in accounts payable.
Concentration of Credit Risk and of Significant Customers
Financial instruments that potentially expose the Company to concentration of credit risk are cash and accounts receivable. Substantially all of the Company's cash deposits are maintained at large, creditworthy financial institutions. The Company's deposits, at times, may exceed federally insured limits. The Company does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships. As part of its ongoing procedures, the Company monitors its concentration of deposits with various financial institutions in order to avoid any undue exposure. As of December 31, 2020 and 2019, the Company had $83.8 million and $30.0 million, respectively, in banks located outside the United States. The risk with respect to the Company's accounts receivable is managed by the Company through its policy of monitoring the creditworthiness of its customers to which it grants credit terms in the normal course of business.
Inventories
Inventories are valued at the lower of cost and net realizable value. Approximate cost is determined on the first-in, first-out basis. The inventory balance, which includes material, labor and manufacturing overhead costs, is recorded net of an allowance for obsolete or slow moving inventory. The Company's allowance for obsolete or slow moving inventory contains estimates regarding uncertainties. Such estimates are updated each reporting period and require the Company to make assumptions and to apply judgment regarding a number of factors, including market conditions, selling environment, historical results and current inventory trends. See Note 6 for additional information.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost less accumulated depreciation and amortization. Depreciation is recorded on a straight-line basis over the estimated useful lives of the assets. Gains or losses resulting from disposals are included in income from operations. Betterments and renewals, which improve and extend the life of an asset, are capitalized. Maintenance and repair costs are expensed as incurred.
Estimated useful lives of property, plant and equipment asset categories were as follows:
Buildings and improvements15-40 years
Machinery and equipment3-10 years
Furniture, fixtures and computer hardware3-10 years
Computer software1-10 years
 
Leasehold and tenant improvements are amortized over the shorter of the lease term or the estimated useful lives of the assets.
Certain costs incurred in connection with the development of the Company's internal-use software are capitalized. Internal-use software development costs are primarily related to the Company's enterprise resource planning system. Costs incurred in the preliminary stages of development are expensed as incurred. Internal and external costs incurred in the application development phase, if direct and incremental, are capitalized until the software is substantially complete and ready for its intended use. Capitalization ceases upon completion of all substantial testing performed to ensure the product is ready for its intended use. Costs such as maintenance and training are expensed as incurred. The capitalized internal-use software costs are included in property, plant and equipment and once the software is placed into service are amortized over the estimated useful life which ranges from three to ten years. See Note 7 for additional information.
Long-Lived Assets
Long-lived assets are recorded at cost less accumulated depreciation and amortization. Depreciation and amortization are recorded on a straight-line basis, generally over the estimated useful lives of the assets. A long-lived asset (including amortizing intangible assets) or asset group is tested for recoverability whenever events or changes in circumstances indicate
that its carrying amount may not be recoverable. When such events occur, the Company compares the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset or asset group to the carrying amount of the asset or asset group. The cash flows are based on the best estimate of future cash flows derived from the most recent business projections. If the carrying value exceeds the sum of the undiscounted cash flows, an impairment loss is recognized based on the excess of the asset's or asset group's carrying value over its fair value. Fair value is determined based on discounted expected future cash flows on a market participant basis.
The Company continually evaluates whether events and circumstances have occurred that indicate the remaining estimated useful life of long-lived assets may warrant revision or that the remaining balance may not be recoverable. These factors may include a significant deterioration of operating results, changes in business plans, or changes in anticipated cash flows.
Goodwill and Indefinite-Lived Intangible Assets
Goodwill and indefinite-lived intangible assets are not amortized but instead are measured for impairment at least annually, or more frequently when events or changes in circumstances indicate that the carrying amount of the asset may be impaired. The Company performs its annual impairment tests in the fourth quarter of each fiscal year.
Goodwill is assigned to reporting units for purposes of impairment testing. A reporting unit may be the same as an operating segment or one level below an operating segment. For purposes of assessing potential impairment, the Company compares the fair value of the reporting unit to its carrying value. If the fair value of the reporting unit exceeds the carrying value of the net assets assigned to that unit, goodwill is considered not impaired. If the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, then the Company records goodwill impairment in the amount of the excess of a reporting unit’s carrying value over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. The fair value of the reporting units is determined using the income approach. The income approach uses a discounted cash flow analysis which involves applying appropriate discount rates to estimated future cash flows based on forecasts of sales, costs and capital requirements.
Purchased intangible assets other than goodwill are amortized over their useful lives unless those lives are determined to be indefinite. Certain of the Company's trademarks have been assigned an indefinite life as the Company currently anticipates that these trademarks will contribute to its cash flows indefinitely. Indefinite-lived trademarks are reviewed for impairment annually and may be reviewed more frequently if indicators of impairment are present. Impairment losses are recorded to the extent that the carrying value of the indefinite-lived intangible asset exceeds its fair value. The Company measures the fair value of its trademarks using the relief-from-royalty method, which estimates the present value of royalty income that could be hypothetically earned by licensing the brand name to a third party over the remaining useful life. See Note 8 for additional information.
Debt Issuance Costs
The Company defers costs directly associated with acquiring third-party financing. These debt issuance costs are amortized as interest expense over the term of the related indebtedness. Debt issuance costs associated with the revolving credit facilities are included in other current and noncurrent assets and debt issuance costs associated with all other indebtedness are netted against long-term debt on the consolidated balance sheet. See Note 10 for additional information.
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. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:
Level 1—Quoted prices in active markets for identical assets or liabilities.
Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.
Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.
The Company’s derivative instrument assets and liabilities are carried at fair value determined according to the fair value hierarchy described above (Note 11 and 12). The carrying value of accounts receivable, accounts payable and accrued expenses approximates fair value due to the short-term nature of these assets and liabilities.
See Note 12 for additional information regarding the Company's fair value measurements.
Pension and Other Postretirement Benefit Plans
The Company provides U.S. and foreign defined benefit and defined contribution plans to certain eligible employees and postretirement benefits to certain retirees, including pensions, postretirement healthcare benefits and other postretirement benefits.
Plan assets and obligations are measured using various actuarial assumptions, such as discount rates, rate of compensation increase, mortality rates, turnover rates and health care cost trend rates, as determined at each year end measurement date. The measurement of net periodic benefit cost is based on various actuarial assumptions, including discount rates, expected return on plan assets and rate of compensation increase, which are determined as of the prior year measurement date. The determination of the discount rate is generally based on an index created from a hypothetical bond portfolio consisting of high-quality fixed income securities with durations that match the timing of expected benefit payments. The expected return on plan assets is determined based on several factors, including adjusted historical returns, historical risk premiums for various asset classes and target asset allocations within the portfolio. Adjustments made to the historical returns are based on recent return experience in the equity and fixed income markets and the belief that deviations from historical returns are likely over the relevant investment horizon. Actual cost is also dependent on various other factors related to the employees covered by these plans. The effects of actuarial deviations from assumptions are generally accumulated and, if over a specified corridor, amortized over the remaining service period of the employees. The cost or benefit of plan changes, such as increasing or decreasing benefits for prior employee service (prior service cost), is deferred and included in expense on a straight-line basis over the average remaining service period of the related employees. The Company's actuarial assumptions are reviewed on an annual basis and modified when appropriate.
To calculate the U.S. pension and postretirement benefit plan expense in 2020, 2019 and 2018, the Company applied the individual spot rates along the yield curve that correspond with the timing of each future cash outflow for the benefit payments in order to calculate interest cost and service cost. See Note 13 for additional information.
Income Taxes
The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between consolidated financial statement carrying amounts and tax basis amounts at enacted tax rates expected to be in effect when the temporary differences reverse. A valuation allowance is recorded to reduce deferred income tax assets when it is more-likely-than-not that such assets will not be realized. Potential for recovery of deferred tax assets is evaluated by estimating the future taxable profits expected and considering prudent and feasible tax planning strategies.
The Company records liabilities for uncertain income tax positions based on the two step process. The first step is recognition, where an individual tax position is evaluated as to whether it has a likelihood of greater than 50% of being sustained upon examination based on the technical merits of the position, including resolution of any related appeals or litigation processes. For tax positions that are currently estimated to have a less than 50% likelihood of being sustained, no tax benefit is recorded. For tax positions that have met the recognition threshold in the first step, the Company performs the second step of measuring the benefit to be recorded. The amount of the benefit that may be recognized is the largest amount that has a greater than 50% likelihood of being realized on ultimate settlement. The actual benefits ultimately realized may differ from the estimates. In future periods, changes in facts, circumstances, and new information may require the Company to change the recognition and measurement estimates with regard to individual tax positions. Changes in recognition and measurement estimates are recorded in income tax expense and liability in the period in which such changes occur. The Company recognizes accrued interest and penalties related to unrecognized tax benefits in the provision for income taxes on the consolidated statements of operations.
Beam has indemnified certain tax obligations that relate to periods during which Fortune Brands, Inc. owned Acushnet Company (Note 22). These estimated tax obligations are recorded in accrued taxes and other noncurrent liabilities, and the related indemnification receivable is recorded in other assets on the consolidated balance sheet. Any changes in the value of these specifically identified tax obligations are recorded in the period identified in income tax expense and the related change in the indemnification asset is recorded in other expense, net on the consolidated statements of operations. See Note 14 for additional information.
On December 22, 2017, the U.S. enacted the 2017 Tax Act. The 2017 Tax Act contains a new law that subjects the Company to a tax on Global Intangible Low-Taxed Income (“GILTI”), beginning in 2018. GILTI is a tax on foreign income in excess of a deemed return on tangible assets of related foreign corporations. Companies subject to GILTI have the option to account for the GILTI tax as a period cost if and when incurred, or to recognize deferred taxes for temporary differences, including outside basis differences, expected to reverse as GILTI. The Company has elected to account for GILTI as a period cost.
Cost of Goods Sold
Cost of goods sold includes all costs to make products salable, such as inbound freight, purchasing and receiving costs, inspection costs and transfer costs. In addition, all depreciation expense associated with assets used to manufacture products and make them salable is included in cost of goods sold.
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. See Note 9 for additional information.
Advertising and Promotion
Advertising and promotional costs are included in selling, general and administrative expense on the consolidated statement of operations and include product endorsement arrangements with members of the various professional golf tours, media placement and production costs (television, print and internet), tour support expenses and point-of-sale materials. Advertising production costs are expensed as incurred. Media placement costs are expensed in the month the advertising first appears. Product endorsement arrangements are expensed based upon the specific provisions of player contracts. Advertising and promotional expense was $162.1 million, $193.5 million and $192.2 million for the years ended December 31, 2020, 2019 and 2018, respectively.
Selling
Selling expenses including field sales, sales administration and shipping and handling costs are included in selling, general and administrative expense on the consolidated statements of operations. Shipping and handling costs included in selling expenses were $35.3 million, $36.7 million and $34.1 million for the years ended December 31, 2020, 2019 and 2018, respectively.
Research and Development
Research and development expenses include product development, product improvement, product engineering, and process improvement costs and are expensed as incurred.
Foreign Currency Translation and Transactions
Assets and liabilities denominated in foreign currency are translated into U.S. dollars at the actual rates of exchange at the balance sheet date. Revenues and expenses are translated at the average rates of exchange for the reporting period. The related translation adjustments are recorded as a component of accumulated other comprehensive loss, net of tax. Transactions denominated in a currency other than functional currency are re-measured into functional currency with resulting transaction gains or losses recorded as selling, general and administrative expense on the consolidated statements of operations. Foreign currency transaction gains (losses) included in selling, general and administrative expense was a gain of $3.9 million, a loss of $0.5 million and a loss of $1.9 million for the years ended December 31, 2020, 2019 and 2018, respectively.
Derivative Financial Instruments
All derivative instruments are recognized as either assets or liabilities on the consolidated balance sheet and are measured at fair value. If the derivative instrument is designated as a fair value hedge, the changes in the fair value of the derivative instruments and of the hedged item attributable to the hedged risk are recognized in earnings in the same period. If the derivative is designated as a cash flow hedge, the effective portions of changes in the fair value of the derivative are recorded as a component of accumulated other comprehensive loss and are recognized in the consolidated statement of operations when the hedged item affects earnings. Any portion of the change in fair value that is determined to be ineffective is immediately recognized in the consolidated statement of operations. Cash flows from derivative financial instruments and the related hedged transactions are included in cash flows from operating activities. See Note 11 for additional information.
Share-based Compensation
The Company has a share-based compensation plan for members of the Board of Directors, officers, employees, consultants and advisors of the Company. All awards granted under the plan are measured at fair value at the date of the grant. The estimated fair value is determined based on the closing price of the Company's common stock, generally on the award date, multiplied by the number of shares per the stock award. The Company issues share-based awards with service-based vesting conditions and performance-based vesting conditions. Awards with service-based vesting conditions are amortized as expense over the requisite service period of the award, which is generally the vesting period of the respective award. For awards with performance-based vesting conditions, the measurement of the expense is based on the Company’s performance against specified metrics as defined in the applicable award agreements. The Company accounts for forfeitures in compensation expense when they occur. See Note 16 for additional information.
Recently Adopted Accounting Standards
Defined Benefit Plans—Changes to the Disclosure Requirements for Defined Benefit Plans
On December 31, 2020, the Company adopted Accounting Standards Update ("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. The adoption of this standard did not have a material impact on the consolidated financial statements.
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.
Financial Instruments —Credit Losses
On January 1, 2020, the Company adopted 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.
Leases
On January 1, 2019, the Company adopted Accounting Standards Codification ("ASC") Topic 842, Leases ("ASC 842"), which requires the recognition of right-of-use assets and related operating and finance lease liabilities on the consolidated balance sheet. The Company adopted ASC 842 using the optional transition approach, which allowed for a cumulative effect adjustment as of January 1, 2019, which is the date of initial application, and did not restate prior periods.
Under ASC 842, all leases are required to be recorded on the consolidated balance sheet and are classified as either operating or finance leases. A lease is classified as a finance lease if any one of the following criteria are met: the lease transfers ownership of the asset by the end of the lease term, the lease contains an option to purchase the asset that is reasonably certain to be exercised, the lease term is for a major part of the remaining useful life of the asset, the present value of the lease payments equals or exceeds substantially all of the fair value of the asset, or the leased asset is of a highly specialized nature. A lease is classified as an operating lease if it does not meet any one of these criteria.
The lease classification affects the expense recognition in the consolidated statement of operations. Operating lease expense consists of the lease payments plus any initial direct costs and is recognized on a straight-line basis over the lease term in the consolidated statement of operations. Finance lease charges are split, where amortization of the right-of-use asset is recorded as depreciation and amortization expense and an implied interest component is recorded in interest expense, net. Variable lease costs are expensed as incurred and include maintenance costs, real estate taxes and property insurance. The expense recognition for operating leases and finance leases under ASC 842 is consistent with previous guidance. As a result, there is no impact on the results of operations presented in the Company's consolidated statements of operations and consolidated statements of comprehensive income for the periods presented as a result of the adoption of ASC 842.
As permitted under ASC 842, the Company also elected to not reassess prior conclusions related to the identification, classification and accounting for initial direct costs for leases that commenced prior to January 1, 2019. As permitted under ASC 842, the Company elected to not use hindsight to determine lease terms. As permitted under ASC 842, the Company has elected to not separate non-lease components within its lease portfolio. As permitted under ASC 842, the Company has also elected not to recognize right-of-use assets and lease liabilities for short-term leases that have a term of 12 months or less. The effect of short-term leases on the Company's operating right-of-use assets and operating lease liabilities was not material.
Upon adoption of ASC 842, the Company recognized operating lease right-of-use assets and operating lease liabilities. The right-of-use asset represents the right to use the leased asset for the lease term. The lease liability represents the present value of the lease payments under the lease. The right-of-use asset is initially measured at cost, which primarily comprises the initial amount of the lease liability, plus any initial direct costs incurred less any lease incentives received. Lease payments included in the measurement of the lease liability comprise the following: the fixed non-cancelable lease payments, payments for optional renewal periods where it is reasonably certain the renewal period will be exercised, and payments for early termination options unless it is reasonably certain the lease will not be terminated early. The discount rate implicit within the Company's leases is generally not determinable and therefore the Company determines the discount rate based on its incremental collateralized borrowing rate applicable to the location where the lease is held. The incremental borrowing rate for each of the Company's leases is determined based on the lease term and currency in which such lease payments are made. On January 1, 2019, the Company recorded an adjustment to operating lease right-of-use assets and the related lease liabilities of $49.8 million.
The Company leases office and warehouse space, machinery and equipment, and vehicles, among other items. Certain leases include one or more options to renew, with renewal terms that can extend the lease term up to three years. For contracts entered into on or after the effective date, at the inception of a contract the Company assesses whether the contract is, or contains, a lease. The Company's assessment is based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether the Company obtained the right to substantially all the economic benefit from the use of the asset throughout the period, and (3) whether the Company has the right to direct the use of the asset.
Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities
    On January 1, 2019, the Company adopted Accounting Standards Update ("ASU") 2017‑12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities” ("ASU 2017-12"). The amendments in this update expand and refine hedge accounting guidance and align the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. ASU 2017-12 also simplified the application of hedge accounting guidance, hedge documentation requirements and the assessment of hedge effectiveness. The adoption of this standard did not have a material impact on the consolidated financial statements.
Changes to the Disclosure Requirements for Fair Value Measurement
On January 1, 2019, the Company adopted ASU 2018-13, "Fair Value Measurement (Topic 820) —Disclosure Framework —Changes to the Disclosure Requirements for Fair Value Measurement" ("ASU 2018-13"). The amendments in this update are meant to provide more relevant information regarding valuation techniques and inputs used to arrive at measures of fair value, uncertainty in the fair value measurements, and how changes in fair value measurements impact an entity's performance and cash flows. The adoption of this standard did not have an impact on the consolidated financial statements or related disclosures.
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 superseded the guidance to classify equity securities with readily determinable fair values into different categories (that is, trading or available-for-sale) and required equity securities to be measured at fair value with changes in the fair value recognized through net income, among other items (Note 17). 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.
Revenue
On January 1, 2018, the Company adopted ASC Topic 606, Revenue ("ASC 606") using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. 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 adoption of ASC 606 did not have any other material impacts to the financial statements.
Comprehensive Income
During 2018, the Company early adopted ASU 2018-02, “Income Statement—Reporting Comprehensive Income (Topic 220)” ("ASU 2018-02") under the aggregate portfolio approach. ASU 2018-02 allows for reclassification of stranded tax effects on items resulting from the 2017 Tax Act from accumulated other comprehensive loss, net of tax to retained earnings. Certain tax effects become stranded in accumulated other comprehensive income when deferred tax balances originally recorded at the historical income tax rate are adjusted in income from continuing operations based on a lower newly enacted income tax rate. As a result of the adoption, the Company reclassified the stranded income tax effects resulting from the 2017 Tax Act, decreasing accumulated other comprehensive loss, net of tax by $4.1 million with a corresponding increase to retained earnings. The reclassification was primarily comprised of amounts relating to available-for-sale securities, pension, postretirement benefit plan obligations and currency translation matters.
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.
v3.20.4
Revenue
12 Months Ended
Dec. 31, 2020
Revenue from Contract with Customer [Abstract]  
Revenue Revenue
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 relates to customers who are not engaged in a long-term supply agreement or any form of contract with the Company. Substantially all 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 prepaid and 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. The refund liability for expected returns was $11.5 million and $10.2 million as of December 31, 2020 and 2019, respectively. The value of inventory expected to be recovered related to sales returns was $6.3 million and $6.1 million as of December 31, 2020 and 2019, respectively.
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, all of which are subject to change.
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 20 for the Company's business segment disclosures, as well as a further disaggregation of net sales by geographical area.
v3.20.4
Leases
12 Months Ended
Dec. 31, 2020
Leases [Abstract]  
Leases Leases
The Company's operating lease right-of-use assets and operating lease liabilities represent leases for office and warehouse space, machinery and equipment, and vehicles, among other items. The Company's finance lease right-of-use assets and finance lease liabilities represent leases for vehicles.
Lease costs recognized on the consolidated statements of operations were as follows:
(in thousands)Year ended December 31,
Lease costsLocation in Statement of Operations20202019
OperatingCost of goods sold$2,640 $2,361 
Selling, general and administrative12,057 11,775 
Research and development854 773 
Finance
     Amortization of lease assetsSelling, general and administrative108 
     Interest on lease liabilitiesInterest expense, net22 
 Short-term and low value lease cost1,148 1,011 
 Variable lease cost1,496 1,327 
Total lease cost$18,325 $17,257 
Total rental expense for all operating leases amounted to $15.7 million for the year ended December 31, 2018.
Supplemental balance sheet information related to the Company's leases is as follows:
(in thousands)Balance Sheet LocationDecember 31, 2020December 31, 2019
Right-of-use assets
FinanceProperty, plant and equipment, net$601 $281 
OperatingOther assets53,891 44,407 
Total lease assets$54,492 $44,688 
Lease liabilities
FinanceAccrued expenses and other liabilities$119 $
OperatingAccrued expenses and other liabilities14,316 11,336 
FinanceLong-term debt482 273 
OperatingOther noncurrent liabilities40,992 34,137 
Total lease liabilities$55,909 $45,754 
The weighted average remaining lease term and the weighted average discount rate for leases is as follows:
December 31, 2020December 31, 2019
Weighted average remaining lease term (years):
Operating5.95.8
Finance5.05.9
Weighted average discount rate:
Operating2.94 %3.42 %
Finance3.66 %4.18 %
The following table reconciles the undiscounted cash flows for leases as of December 31, 2020 to lease liabilities recorded on the consolidated balance sheet:
Operating Finance
(in thousands)LeasesLeasesTotal
2021$15,263 $139 $15,402 
202211,273 135 11,408 
20237,615 131 7,746 
20246,636 127 6,763 
20255,882 114 5,996 
Thereafter13,972 11 13,983 
Total future lease payments60,641 657 61,298 
Less: Interest(5,333)(56)(5,389)
Present value of lease liabilities$55,308 $601 $55,909 
Accrued expenses and other liabilities$14,316 $119 $14,435 
Long-term debt— 482 482 
Other noncurrent liabilities40,992 — 40,992 
Total lease liabilities$55,308 $601 $55,909 
Supplemental cash flow information related to the Company's leases are as follows:
Year ended December 31,
(in thousands)20202019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases$15,402 $14,804 
Operating cash flows for finance leases22 
Financing cash flows for finance leases107 
Leases Leases
The Company's operating lease right-of-use assets and operating lease liabilities represent leases for office and warehouse space, machinery and equipment, and vehicles, among other items. The Company's finance lease right-of-use assets and finance lease liabilities represent leases for vehicles.
Lease costs recognized on the consolidated statements of operations were as follows:
(in thousands)Year ended December 31,
Lease costsLocation in Statement of Operations20202019
OperatingCost of goods sold$2,640 $2,361 
Selling, general and administrative12,057 11,775 
Research and development854 773 
Finance
     Amortization of lease assetsSelling, general and administrative108 
     Interest on lease liabilitiesInterest expense, net22 
 Short-term and low value lease cost1,148 1,011 
 Variable lease cost1,496 1,327 
Total lease cost$18,325 $17,257 
Total rental expense for all operating leases amounted to $15.7 million for the year ended December 31, 2018.
Supplemental balance sheet information related to the Company's leases is as follows:
(in thousands)Balance Sheet LocationDecember 31, 2020December 31, 2019
Right-of-use assets
FinanceProperty, plant and equipment, net$601 $281 
OperatingOther assets53,891 44,407 
Total lease assets$54,492 $44,688 
Lease liabilities
FinanceAccrued expenses and other liabilities$119 $
OperatingAccrued expenses and other liabilities14,316 11,336 
FinanceLong-term debt482 273 
OperatingOther noncurrent liabilities40,992 34,137 
Total lease liabilities$55,909 $45,754 
The weighted average remaining lease term and the weighted average discount rate for leases is as follows:
December 31, 2020December 31, 2019
Weighted average remaining lease term (years):
Operating5.95.8
Finance5.05.9
Weighted average discount rate:
Operating2.94 %3.42 %
Finance3.66 %4.18 %
The following table reconciles the undiscounted cash flows for leases as of December 31, 2020 to lease liabilities recorded on the consolidated balance sheet:
Operating Finance
(in thousands)LeasesLeasesTotal
2021$15,263 $139 $15,402 
202211,273 135 11,408 
20237,615 131 7,746 
20246,636 127 6,763 
20255,882 114 5,996 
Thereafter13,972 11 13,983 
Total future lease payments60,641 657 61,298 
Less: Interest(5,333)(56)(5,389)
Present value of lease liabilities$55,308 $601 $55,909 
Accrued expenses and other liabilities$14,316 $119 $14,435 
Long-term debt— 482 482 
Other noncurrent liabilities40,992 — 40,992 
Total lease liabilities$55,308 $601 $55,909 
Supplemental cash flow information related to the Company's leases are as follows:
Year ended December 31,
(in thousands)20202019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases$15,402 $14,804 
Operating cash flows for finance leases22 
Financing cash flows for finance leases107 
v3.20.4
Allowance for Doubtful Accounts
12 Months Ended
Dec. 31, 2020
Receivables [Abstract]  
Allowance for Doubtful Accounts Allowance for Doubtful Accounts
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 December 31, 2020.
The activity related to the allowance for doubtful accounts was as follows:
Year ended December 31,
(in thousands)202020192018
Balance at beginning of year$5,338 $7,272 $9,975 
Bad debt expense2,556 573 (583)
Amount of receivables written off(572)(2,706)(1,873)
Foreign currency translation and other376 199 (247)
Balance at end of year$7,698 $5,338 $7,272 
v3.20.4
Inventories
12 Months Ended
Dec. 31, 2020
Inventory Disclosure [Abstract]  
Inventories Inventories
The components of inventories were as follows:
(in thousands)December 31, 2020December 31, 2019
Raw materials and supplies$74,302 $87,675 
Work-in-process22,913 22,024 
Finished goods260,467 288,669 
Inventories$357,682 $398,368 
v3.20.4
Property, Plant and Equipment, Net
12 Months Ended
Dec. 31, 2020
Property, Plant and Equipment [Abstract]  
Property, Plant and Equipment, Net Property, Plant and Equipment, Net
The components of property, plant and equipment, net were as follows:
(in thousands)December 31, 2020December 31, 2019
Land$14,622 $14,551 
Buildings and improvements151,453 146,727 
Machinery and equipment181,955 171,230 
Furniture, computers and equipment45,070 40,143 
Computer software77,791 70,458 
Construction in progress19,844 25,044 
Property, plant and equipment, gross490,735 468,153 
Accumulated depreciation and amortization(267,924)(236,578)
Property, plant and equipment, net$222,811 $231,575 
During the years ended December 31, 2020, 2019 and 2018, software development costs of $8.9 million, $11.8 million and $4.1 million were capitalized. Capitalized software development costs as of December 31, 2020, 2019 and 2018 consisted of software placed into service of $7.2 million, $7.2 million and $1.7 million, respectively, and amounts recorded in construction in progress of $1.7 million, $4.6 million and $2.4 million, respectively. Amortization expense on capitalized software development costs was $7.1 million, $6.6 million and $6.3 million for the years ended December 31, 2020, 2019 and 2018, respectively.
Total depreciation and amortization expense related to property, plant and equipment was $33.8 million, $32.4 million and $32.2 million for the years ended December 31, 2020, 2019 and 2018, respectively.
v3.20.4
Goodwill and Identifiable Intangible Assets, Net
12 Months Ended
Dec. 31, 2020
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Identifiable Intangible Assets, Net Goodwill and Identifiable Intangible Assets, Net
Goodwill allocated to the Company's reportable segments and changes in the carrying amount of goodwill were as follows:
(in thousands)Titleist
Golf Balls
Titleist
Golf Clubs
Titleist
Golf Gear
FootJoy
Golf Wear
OtherTotal
Balances at December 31, 2018$126,195 $57,152 $13,866 $3,613 $8,845 $209,671 
Acquisitions (Note 21)— — — — 4,749 4,749 
Foreign currency translation(214)(104)(25)(5)(16)(364)
Balances at December 31, 2019125,981 57,048 13,841 3,608 13,578 214,056 
Impairment— — — — (3,800)(3,800)
Foreign currency translation2,766 1,343 326 60 435 4,930 
Balances at December 31, 2020$128,747 $58,391 $14,167 $3,668 $10,213 $215,186 
 
During the fourth quarter of 2020, the Company recognized a goodwill impairment loss of $3.8 million related to KJUS. This impairment loss was included in intangible amortization on the consolidated statements of operations and depreciation and amortization on the consolidated statements of cash flows. There were no other impairment losses recorded to goodwill during the years ended December 31, 2020, 2019 and 2018.
As of December 31, 2020, the cumulative balance of goodwill impairment recorded was $3.8 million, all of which was recognized during the year ended December 31, 2020 and is included in the carrying amount of the goodwill allocated to Other.
The net carrying value by class of identifiable intangible assets was as follows:
 December 31, 2020December 31, 2019
(in thousands)GrossAccumulated
Amortization
Net Book
Value
GrossAccumulated
Amortization
Net Book
Value
Indefinite-lived:      
Trademarks$429,051 $— $429,051 $429,051 $— $429,051 
Amortizing:
Trademarks5,577 (1,174)4,403 5,503 (492)5,011 
Completed technology74,743 (51,455)23,288 74,715 (46,370)28,345 
Customer relationships27,892 (11,242)16,650 27,127 (8,923)18,204 
Licensing fees and other32,702 (32,561)141 32,666 (32,483)183 
Total intangible assets$569,965 $(96,432)$473,533 $569,062 $(88,268)$480,794 
    As a result of an acquisition completed during the year ended December 31, 2019, the Company recorded additions to identifiable intangible assets including amortizing trademarks, completed technology, customer relationships and other intangible assets of $3.9 million, $0.8 million, $5.1 million and $0.2 million, respectively (Note 21). The Company expects to amortize the acquired amortizing trademarks, completed technology, customer relationships and other intangible assets over an eight, six, seven and five year period, respectively.
As a result of acquisitions completed during the year ended December 31, 2018, the Company recorded additions to identifiable intangible assets including indefinite-lived trademarks, amortizing trademarks and customer relationships of $1.0 million, $1.6 million and $2.7 million, respectively (Note 21). The Company expects to amortize the acquired amortizing trademarks and customer relationships over an eight year period.
Identifiable intangible asset amortization expense was $7.8 million, $7.5 million and $8.0 million for the years ended December 31, 2020, 2019 and 2018, respectively, of which $1.4 million associated with certain licensing fees was included in cost of goods sold for the year ended December 31, 2018.
There were no impairment losses recorded to indefinite-lived intangible assets during the years ended December 31, 2020, 2019 and 2018.
Identifiable intangible asset amortization expense for each of the next five fiscal years and beyond is expected to be as follows:
(in thousands) 
Year ending December 31, 
2021$7,907 
20227,907 
20237,907 
20247,887 
20255,761 
Thereafter7,113 
Total$44,482 
v3.20.4
Product Warranty
12 Months Ended
Dec. 31, 2020
Product Warranties Disclosures [Abstract]  
Product Warranty Product Warranty
The activity related to the Company’s warranty obligation for accrued warranty expense was as follows:
 Year ended December 31, 
(in thousands)202020192018
Balance at beginning of year$4,048 $3,331 $3,823 
Provision4,199 6,863 5,909 
Claims paid/costs incurred(4,589)(6,481)(6,315)
Foreign currency translation and other173 335 (86)
Balance at end of year$3,831 $4,048 $3,331 
v3.20.4
Debt and Financing Arrangements
12 Months Ended
Dec. 31, 2020
Debt Disclosure [Abstract]  
Debt and Financing Arrangements Debt and Financing Arrangements
The Company’s debt and finance lease obligations were as follows:
(in thousands)December 31, 2020December 31, 2019
Term loan facility$332,500 $350,000 
Revolving credit facility— 50,321 
Other short-term borrowings2,810 3,802 
Finance lease obligations482 273 
Debt issuance costs(1,863)(2,072)
Total333,929 402,324 
Less: short-term debt and current portion of long-term debt20,310 71,623 
Total long-term debt and finance lease obligations$313,619 $330,701 
The debt issuance costs of $1.9 million and $2.1 million as of December 31, 2020 and 2019 relates to the term loan facility.
Credit Agreement
On December 23, 2019, the Company entered into an amended and restated credit agreement (the “credit agreement”) arranged by Wells Fargo Bank, National Association (“Wells Fargo”) to amend various terms of the Company’s credit agreement dated as of April 27, 2016, as amended, for its senior secured credit facilities with Wells Fargo, as administrative agent, and the other lenders and agents party thereto (the “senior secured credit facility”). The credit agreement, together with related security, guarantee and other agreements, is referred to as the “credit facility.”
The credit facility provides for (x) a $350.0 million term loan facility maturing December 23, 2024 and (y) a $400.0 million revolving credit facility maturing December 23, 2024, including a $50.0 million letter of credit sublimit, a $50.0 million swing line sublimit, a C$50.0 million sublimit available for revolving credit borrowings by Acushnet Canada Inc., a £45.0 million sublimit available for revolving credit borrowings by Acushnet Europe Ltd. and a $200.0 million sublimit for borrowings in Canadian dollars, euros, pounds sterling, Japanese yen and other currencies agreed to by the lenders under the revolving credit facility. The revolving credit facility and term loan facility are collateralized by certain assets, including inventory, accounts receivable, fixed assets and intangible assets of the Company.
The Company has the right under the credit facility to request additional term loans and/or increases to the revolving credit facility in an aggregate principal amount not to exceed (i) $225.0 million plus (ii) an unlimited amount so long as the Net Average Secured Leverage Ratio (as defined in the credit agreement) does not exceed 2.25:1.00 on a pro forma basis. The lenders under the credit facility will not be under any obligation to provide any such additional term loans or increases to the revolving credit facility, and the incurrence of any additional term loans or increases to the revolving credit facility is subject to customary conditions precedent.
Borrowings under the credit facility bear interest at a rate per annum equal to, at the applicable Borrower’s option, either (a) a base rate determined by reference to the highest of (1) the prime rate of Wells Fargo, (2) the federal funds effective rate plus 0.50% and (3) a Eurodollar Rate, subject to certain adjustments, plus 1.00% or (b) a Eurodollar Rate (or, in the case of Canadian borrowings, a Canadian Dollar Offered Rate), subject to certain adjustments, in each case, plus an applicable margin. Under the credit agreement, the applicable margin is 0.00% to 0.75% for base rate borrowings and 1.00% to 1.75% for Eurodollar rate or Canadian Dollar Offered Rate borrowings, in each case, depending on the net average total leverage ratio (as defined in the credit agreement). In addition, the Company is required to pay a commitment fee on any unutilized commitments under the revolving credit facility. Under the credit agreement, the commitment fee rate payable in respect of unused portions of the revolving credit facility is 0.15% to 0.30% per annum, depending on the net average total leverage ratio. The initial commitment fee rate is 0.20% per annum. The Company is also required to pay customary letter of credit fees.
Interest on borrowings under the credit agreement is payable (1) on the last day of any interest period with respect to Eurodollar borrowings with an applicable interest period of three months or less, (2) every three months with respect to Eurodollar borrowings with an interest period of greater than three months or (3) on the last business day of each March, June, September and December with respect to base rate borrowings and swing line borrowings.
The Company is required to make principal payments on the loans under the term loan facility in quarterly installments in an aggregate annual amount equal to 5.00%.
    The credit agreement requires the Company to prepay outstanding term loans, subject to certain exceptions, with:
100% of the net cash proceeds of all non‑ordinary course asset sales or other dispositions of property by the Company and its restricted subsidiaries (including insurance and condemnation proceeds, subject to de minimis thresholds), (1) if the Company does not reinvest those net cash proceeds in assets to be used in its business or to make certain other permitted investments, within 12 months of the receipt of such net cash proceeds or (2) if the Company commits to reinvest such net cash proceeds within 12 months of the receipt thereof, but does not reinvest such net cash proceeds within 18 months of the receipt thereof; and
100% of the net proceeds of any issuance or incurrence of debt by the Company or any of its restricted subsidiaries, other than debt permitted under the credit agreement.
The foregoing mandatory prepayments are used to reduce the installments of principal in such order: first, to prepay outstanding loans under the term loan facility and any incremental term loans on a pro rata basis in direct order of maturity and second, to prepay outstanding loans under the revolving credit facility.
The Company may voluntarily repay outstanding loans under the credit agreement at any time without premium or penalty, other than customary “breakage” costs with respect to Eurodollar loans.
The maximum net average total leverage ratio under the credit facility is 3.50 to 1.00, which is subject to increase to 3.75 to 1.00 in connection with certain acquisitions, and the minimum consolidated interest coverage ratio (as defined in the credit agreement) is 3.00 to 1.00.
    The initial net proceeds from the credit facility were used to repay all of the outstanding debt under the Company's previously existing senior secured credit facility, as well as payments of accrued interest and closing fees. Immediately prior to repayment, the aggregate amounts outstanding were approximately $309.4 million, $48.8 million and $44.0 million related to the term loan A facility, delayed draw term loan A facility and revolving credit facility, respectively. In connection with amending its credit agreement, the Company incurred fees and expenses of approximately $2.7 million, of which approximately $2.3 million was capitalized as debt issuance costs included in other assets and long-term debt on the consolidated balance sheet. The remaining $0.4 million was included in interest expense, net for the year ended December 31, 2019. In addition, the redemption of the previously existing senior secured credit facility resulted in interest expense, net of approximately $0.4 million for the year ended December 31, 2019.
On July 3, 2020, the Company amended its credit agreement dated December 23, 2019 (the “First Amendment”). The First Amendment amended 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 is 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% to 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% to 0.75% over the Base Rate (as defined in the credit agreement) to a range of 1.00% to 2.50% over the Eurodollar Rate or 0.00% to 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% to 0.30% to a range of 0.15% to 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 amended 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.
In connection with amending its credit agreement, the Company incurred fees and expenses of approximately $1.1 million, of which approximately $0.8 million was capitalized as debt issuance costs included in other assets and long-term debt on the consolidated balance sheet. The remaining $0.3 million was included in interest expense, net on the consolidated statement of operations.
    The interest rate applicable to the term loan facility as of December 31, 2020 and 2019 was 2.00% and 3.04%, respectively. There were no outstanding borrowings under the revolving credit facility as of December 31, 2020. The weighted average interest rate applicable to the outstanding borrowings under the revolving credit facility was 3.54% as of December 31, 2019.
As of December 31, 2020, the Company had available borrowings under its revolving credit facility of $392.2 million after giving effect to $7.8 million of outstanding letters of credit.
Debt Covenants
The credit agreement contains a number of covenants that, among other things, restrict the ability of the Company, subject to certain exceptions, to incur, assume, or permit to exist additional indebtedness or guarantees; incur liens; make investments and loans; pay dividends, make payments on, or redeem or repurchase capital stock or make prepayments, repurchases or redemptions of certain indebtedness; engage in mergers, liquidations, dissolutions, asset sales, and other non-ordinary course 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 it conducts or change its 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 December 31, 2020, the Company was in compliance with all covenants under the credit agreement.
Change of Control
    A change of control is an event of default under the credit agreement which could result in the acceleration of all outstanding indebtedness and the termination of all commitments under the credit agreement and would allow the lenders under the credit agreement to enforce their rights with respect to the collateral granted. A change of control occurs if any person (other than certain permitted parties, including Fila) becomes the beneficial owner of 35% or more of the outstanding common stock of the Company. 
Other Short-Term Borrowings
The Company has certain unsecured local credit facilities available through its subsidiaries. The weighted average interest rate applicable to the outstanding borrowings was 2.00% and 2.29% as of December 31, 2020 and 2019, respectively. As of December 31, 2020, the Company had available borrowings remaining under these local credit facilities of $58.7 million.
Letters of Credit
As of December 31, 2020, there were outstanding letters of credit related to agreements, including the Company's credit facility, totaling $11.7 million of which $8.3 million was secured. As of December 31, 2019, there were outstanding letters of credit related to agreements, including the Company's credit facility, totaling $14.8 million of which $11.6 million was secured. These agreements provided a maximum commitment for letters of credit of $53.9 million and $59.8 million as of December 31, 2020 and 2019, respectively.
Payments of Debt Obligations due by Period
As of December 31, 2020, principal payments due on outstanding long-term debt obligations were as follows:
(in thousands) 
Year ending December 31, 
2021$17,500 
202217,500 
202317,500 
2024280,000 
Total$332,500 
v3.20.4
Derivative Financial Instruments
12 Months Ended
Dec. 31, 2020
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 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 December 31, 2020 and 2019 was $248.1 million and $287.9 million, respectively.
As a result of the impact of the COVID-19 pandemic, during the year ended December 31, 2020 , the Company de-designated certain foreign exchange cash flow hedges deemed ineffective, none of which were outstanding as of December 31, 2020. See Note 2 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, 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 December 31, 2020 and 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 December 31, 2020 and 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 consolidated balance sheets was as follows:
(in thousands)December 31, 2020December 31, 2019
Balance Sheet LocationHedge Instrument Type
Prepaid and other assetsForeign exchange forward$1,166 $4,549 
Other assetsForeign exchange forward30 1,109 
Accrued expenses and other liabilitiesForeign exchange forward6,400 2,561 
Interest rate swap1,571 1,862 
Other noncurrent liabilitiesForeign exchange forward985 115 
Interest rate swap— 789 
The hedge instrument gain (loss) recognized in accumulated other comprehensive loss, net of tax was as follows:
 Year ended December 31,
(in thousands)202020192018
Type of hedge
Foreign exchange forward$(4,591)$5,490 $8,148 
Interest rate swap (2,232)(2,185)(1,926)
 $(6,823)$3,305 $6,222 
Based on the current valuation, during the next 12 months the Company expects to reclassify a net loss of $4.5 million related to foreign exchange derivative instruments from accumulated other comprehensive loss, net of tax into cost of goods sold and a net loss of $1.6 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 17.
    The hedge instrument gain (loss) recognized on the consolidated statements of operations was as follows:
 Year ended December 31,
(in thousands)202020192018
Location of gain (loss) in statement of operations
Foreign exchange forward:
Cost of goods sold$5,044 $8,465 $(1,410)
Selling, general and administrative (1)(2)
(2,205)204 1,665 
Total $2,839 $8,669 $255 
Interest Rate Swap:
Interest expense, net$(3,318)$(989)$(476)
Total$(3,318)$(989)$(476)
_________________________________
(1)    Relates to gains (losses) on foreign exchange forward contracts derived from previously designated cash flow hedges.
(2)    Selling, general and administrative expense for the year ended December 31, 2020 excludes net gains of $0.5 million reclassified out of accumulated other comprehensive loss, net of tax related to hedges deemed ineffective.
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.
v3.20.4
Fair Value Measurements
12 Months Ended
Dec. 31, 2020
Fair Value Disclosures [Abstract]  
Fair Value Measurements Fair Value Measurements
Assets and liabilities measured at fair value on a recurring basis as of December 31, 2020 were as follows:
 Fair Value Measurements as of 
 December 31, 2020 using: 
(in thousands)Level 1Level 2Level 3Balance Sheet Location
Assets    
Rabbi trust$5,160 $— $— Prepaid and other assets
Foreign exchange derivative instruments— 1,166 — Prepaid and other assets
Deferred compensation program assets802 — — Other assets
Foreign exchange derivative instruments— 30 — Other assets
Total assets$5,962 $1,196 $— 
Liabilities
Foreign exchange derivative instruments$— $6,400 $— Accrued expenses and other liabilities
Interest rate derivative instrument— 1,571 — Accrued expenses and other liabilities
Deferred compensation program liabilities802 — — Other noncurrent liabilities
Foreign exchange derivative instruments— 985 — Other noncurrent liabilities
Total liabilities$802 $8,956 $— 
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