2023 Annual Report
2023 Annual Report Our Mission
Our Vision
Our Values
Enrich the experience of
dedicated golfers through
products and services of
superior performance, quality
and innovation.
Build a family of golf
performance brands that
are unrivaled leaders in
every category in which
we compete.
Passion for Dedicated
Golfers, Performance &
Quality Excellence, Driven
to Innovate, A Spirit of
Leadership, Integrity & Respect,
Bridge Builder Mindset.
Acushnet Holdings Corp. O U R B R A N D S
2023 Annual Report LETTER FROM THE
PRESIDENT AND CEO
Dear Valued Shareholders,
Constancy of purpose is a simple concept. “An unwavering clarity of why the organization
exists, where it is going, and how it will get there enables people to align their actions as
well as to innovate, adapt and take risks with greater confidence.”(1)
While simple in concept, many companies find it challenging to achieve. Acushnet associates,
for more than 90 years, have embraced a constancy of purpose. Our mission, vision and
values serve as a north star and shape our daily work. These also influence our choices
and sometimes the difficult decisions we make for the long-term good of dedicated golfers,
our trade partners and our brands. We focus on doing the right thing for the right reason
with the long view in mind. This is the foundation of how we create shareholder value.
Affirming the merits of the company’s constancy of purpose, in 2023 Acushnet achieved
sales of $2.4 billion, net income of $198 million and adjusted EBITDA of $376 million and
returned $384 million to shareholders through our dividend and share repurchase programs.
CONSISTENCY
One of Acushnet’s greatest strengths is consistency. While it may not be the most exciting of
attributes, we place a high value on consistency. Ask competitive golfers what they need to
play their best, and they will inevitably answer that they need consistency in every aspect of
their game and in the products that they trust. In a game of precision, consistency of product
performance is vital.
Consistency builds trust with golfers and trade partners, yet it is equally critical for our
shareholders. We strive to do what we say we are going to do. Our commitment to
satisfying dedicated golfers and trade partners consistently delivers results and ultimately,
value to you.
PRODUCT INNOVATION AND FITTING
Golf is an aspirational game and dedicated golfers aspire to continuously improve. They invest
the time and energy to play better through practice, instruction, and getting fit for equipment
that helps to optimize their performance. They also expect that innovation and technology
will make new products better, not just different.
We have a golfer centric mindset in all that we do. Our design development process starts
with listening to golfers and ends with validating performance and quality prior to any new
product launch. In 2023, new Titleist Pro V1 and Pro V1x golf balls were exceptionally
well received on the worldwide professional tours, at elite amateur championships and by
(1) Shingo Institute Model
Titleist posted a 73%
ball count on the
worldwide professional
tours, seven times
more than the nearest
competitor.
CEO LETTER
In the U.S., rounds of play
grew 4% in 2023 and are
up over 20% since 2019.
dedicated golfers. We celebrated Titleist’s milestone achievement as the #1 ball played at the
U.S. Open for 75 consecutive years (and still counting). We posted a 73% ball count on the
professional tours, seven times more than the nearest competitor. Our ongoing investment
in golf ball fitting and education optimizes golfer performance with the right Titleist golf ball
model for their game.
Titleist club performance in 2023 was led by the launch of new T-series irons and Scotty
Cameron Super Select putters and reinforced by expanding club fitting capabilities in
global regions. As we enter 2024, new Vokey SM10 wedges and Scotty Cameron Phantom
putters provide energy and momentum throughout the pyramid of influence and in the
market. Our best-in-class fitters clearly demonstrate our products’ performance advantages
to dedicated golfers.
FootJoy is the #1 shoe and #1 glove on the worldwide professional tours. This position,
earned year after year, is fueled by product and service innovation and our commitment to
performance and design excellence. New PRO/SLX and Quantum footwear models, along
with our proprietary new FitLab performance footwear system, highlight just a few of our
2024 initiatives that will enhance golfers’ experience with FJ.
INVESTING IN THE FUTURE
We continue to make significant strategic capital investments in golf ball and club R&D
and operations to enhance product performance and quality. In 2024, we plan to expand our
Pro V1 and Pro V1x capacity and custom club manufacturing capabilities. We have developed
new golf ball fitting and wedge apps that bring a high-level fitting experience to even more
golfers. New distribution and custom embroidery centers in Massachusetts will enhance
Titleist gear and FJ service levels.
ENDURING CULTURE
Golf is a people and product business, and Acushnet’s associates remain the key to
sustaining our success. We strive to create an empowering and inspiring experience for
our associates. This is critical throughout the associate journey, from the recruitment of new
talent to professional development of those in the middle of their careers to the retention of
long tenured associates who mentor and share their institutional knowledge with the next
generation. Our culture fosters committed associates who aspire to build upon Acushnet’s
long running success story.
HEALTH OF INDUSTRY AND 2024 OUTLOOK
As we conclude another rewarding year of performance and look ahead towards continued
growth, we remain optimistic about the structural health of the golf industry, given the positive
trends in both participation and rounds. In the U.S., rounds of play grew 4% in 2023 and are
up over 20% since 2019. Globally, dedicated golfers continue to be resilient while at the same
time the game welcomes new participants at an accelerated rate. We believe our investments
in golfer connections, fitting experiences, digital technologies, increased capacity and supply
chain infrastructure will drive demand for our high performance products and strengthen
support for our trade partners.
2023 Annual Report CEO LETTER
We continue to take a balanced approach to capital allocation, prioritizing organic investment
2023 Sales
that will fuel growth and deliver a positive return on capital, and returning capital to our
shareholders through our dividend and share repurchase programs.
With a constancy of purpose to guide our path forward, our 7,300 worldwide associates are
$2.4B
energized for the year ahead. On behalf of Acushnet’s Board of Directors and our dedicated
Represents a year over year
team of associates, we thank you for your support and will continue to work hard to earn
increase of 4.9%, or 6.2%
your trust.
Best,
David Maher
President and Chief Executive Officer
on a constant currency basis
This letter contains references to Adjusted EBITDA and net sales on a constant currency basis, which are not measures of financial performance prepared in accordance
with generally accepted accounting principles in the United States (“GAAP”) and may not be comparable to similarly titled measures reported by other companies.
These non-GAAP financial measures may exclude items that are significant to understanding and assessing the Company’s financial results. Therefore, these measures
should not be considered in isolation or as an alternative to net sales, net income or other measures of profitability or performance under GAAP. See “Key Performance
Measures” and “Results of Operations” in “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Form 10-K included
in this Annual Report for a description of how we calculate Adjusted EBITDA and net sales on a constant currency basis and for a reconciliation of Adjusted EBITDA
to net income attributable to Acushnet Holdings Corp., the most directly comparable GAAP financial measure.
Acushnet Holdings Corp.
FORWARD-LOOKING STATEMENTS
This Annual Report, including our President and CEO’s letter to shareholders, includes forward-looking statements within the meaning of Section
21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which are subject to the “safe harbor” created by that section. These
forward-looking statements reflect our current views with respect to, among other things, our industry, business strategy, goals and expectations
concerning our market position, future operations, margins, profitability, capital expenditures, liquidity and capital resources and other financial
and operating information. We use words like “anticipate,” “assume,” “believe,” “continue,” “could,” “estimate,” “expect,” “foreseeable,” “future,”
“intend,” “may,” “plan,” “potential,” “predict,” “project,” “seek,” “will,” and similar terms and phrases to identify forward-looking statements, although
not all forward-looking statements use these identifying words. The forward-looking statements contained in this Annual Report are based on
management’s current expectations and are subject to uncertainty and changes in circumstances. We cannot assure you that future developments
affecting us will be those that we have anticipated. Actual results may differ materially from these expectations due to changes in global, regional
or local economic, business, competitive, market, regulatory and other factors, many of which are beyond our control. For additional information,
please see the Special Note Regarding Forward-Looking Statements and the section entitled “Risk Factors” in our Annual Report on Form 10-K
for the year ended December 31, 2023 filed with the SEC on February 29, 2024 (enclosed herein), as it may be updated by our periodic reports
subsequently filed with the SEC. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect,
our actual results may vary in material respects from those projected in these forward-looking statements.
Any forward-looking statement made by us in this Annual Report speaks only as of the date of this Annual Report. Factors or events that could
cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We may not actually achieve
the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-
looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint
ventures, investments or other strategic transactions we may make. We undertake no obligation to publicly update or review any forward-
looking statement, whether as a result of new information, future developments or otherwise, except as may be required by any applicable
securities laws.
2023 Annual Report Following is the company’s annual report on Form 10-K
for the fiscal year ended December 31, 2023.
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-K
☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2023
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-37935
Acushnet Holdings Corp.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or
organization)
45-2644353
(I.R.S. Employer Identification No.)
333 Bridge Street
Fairhaven, Massachusetts
(Address of principal executive offices)
02719
(Zip Code)
Securities registered pursuant to Section 12(b) of the Exchange Act:
(800) 225-8500
(Registrant’s telephone number, including area code)
Title of each class
Common Stock, par value $0.001 per share
Trading Symbol(s)
GOLF
Name of each exchange on which registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth
company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange
Act.
Large accelerated filer
Accelerated filer
☒
☐
Non-accelerated filer
Smaller reporting company
Emerging growth company
☐
☐
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the
correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the
registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b) ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
As of the last business day of the registrant's most recently completed second fiscal quarter June 30, 2023, the aggregate market value of the registrant's common stock held
by non-affiliates was approximately $1.7 billion. The registrant's common stock trades on the New York Stock Exchange under the symbol “GOLF.”
The registrant had 63,494,735 shares of common stock outstanding as of February 23, 2024.
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 3, 2024, 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, 2023.
TABLE OF CONTENTS
Part I
Item 1.
Business
Item 1A.
Risk Factors
Item 1B.
Unresolved Staff Comments
Item 1C.
Cybersecurity
Item 2.
Item 3.
Item 4.
Part II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Reserved
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures about Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements With Accountants on Accounting and Financial Disclosures Controls
Item 9A.
and Procedures
Item 9B.
Item 9C.
Part III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Part IV
Item 15.
Other Information
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
Exhibits and Financial Statement Schedules
Item 16.
Form 10-K Summary
Page
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i
In this Annual Report on Form 10-K ("Annual Report"), the terms “Acushnet,” “we,” “us,” “our” and the “Company”
refer to Acushnet Holdings Corp. and its consolidated subsidiaries.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains “forward-looking statements” within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), which are subject to the “safe harbor” created by that
section. These forward-looking statements are included throughout this report, including in the sections entitled “Risk Factors”
and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and relate to matters such as
our industry, business strategy, goals and expectations concerning our market position, future operations, margins, profitability,
capital expenditures, liquidity and capital resources and other financial and operating information. We have used the words
“anticipate,” “assume,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,”
“project,” “future,” “will,” “seek,” “foreseeable” and similar terms and phrases to identify forward-looking statements in this
report, although not all forward-looking statements use these identifying words.
The forward-looking statements contained in this report are based on management’s current expectations and are
subject to uncertainty and changes in circumstances. We cannot assure you that future developments affecting us will be those
that we have anticipated. Actual results may differ materially from these expectations due to changes in global, regional or local
economic, business, competitive, market, regulatory and other factors, many of which are beyond our control. We believe that
these factors include, but are not limited to, those identified in the section entitled “Risk Factors.”
These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary
statements that are included in this report. Should one or more of these risks or uncertainties materialize, or should any of our
assumptions prove incorrect, our actual results may vary in material respects from those projected in these forward-looking
statements.
Any forward-looking statement made by us in this report speaks only as of the date of this report. Factors or events
that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We
may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not
place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of
any future acquisitions, mergers, dispositions, joint ventures, investments or other strategic transactions we may make. We
undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information,
future developments or otherwise, except as may be required by any applicable securities laws.
INDUSTRY AND MARKET DATA
Within this Annual Report, we reference information and statistics regarding the golf industry and the golf equipment,
wear and gear markets. We have obtained certain of this information and statistics from various independent third-party
sources, including independent industry publications, reports by market research firms and other independent sources for the
most recent available date. We believe that these external sources and estimates are reliable, but have not independently verified
them. Certain of this information and statistics are based on our good faith, reasonable estimates, which are derived from our
review of internal surveys and independent sources. In addition, projections, assumptions and estimates of the future
performance of the golf industry and our future performance are necessarily subject to uncertainty and risk due to a variety of
factors, including those described in the sections entitled “Risk Factors” and “Forward-Looking Statements.” These and other
factors could cause results to differ materially from those expressed in the estimates made by the independent parties and by us.
ii
WEBSITE DISCLOSURE
We use our website (www.acushnetholdingscorp.com) as a channel of distribution of company information. The
information we post through this channel may be material. Accordingly, investors should monitor this channel, in addition to
following our press releases, Securities and Exchange Commission (“SEC”) filings and public conference calls and webcasts. In
addition, you may automatically receive e-mail alerts and other information about Acushnet Holdings Corp. when you enroll
your e-mail address by visiting the “Resources” section of our website at https://www.acushnetholdingscorp.com/investors/
resources. In addition, on our website, we post the following filings free of charge as soon as reasonably practicable after they
are electronically filed with or furnished to the SEC: our annual reports on Form 10-K, our proxy statements, our quarterly
reports on Form 10-Q, our current reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Exchange Act. The contents of our website are not, however, a part of this report or intended to be
incorporated by reference in any other report or document we file with the SEC.
TRADEMARKS, TRADE NAMES AND SERVICE MARKS
This Annual Report includes trademarks, trade names and service marks that we either own or license, such as
“Titleist,” “FootJoy,” “Pro V1,” “Pro V1x,” "AVX," “FJ,” "MyJoys," “Pinnacle,” “Scotty Cameron,” the Circle T Design,
"TSR," "T Series," “Vokey Design,” "MyTPI," "TPI," "Titleist Performance Institute," "Club Glove" and "KJUS" which are
protected under applicable intellectual property laws. Solely for convenience, trademarks, trade names and service marks
referred to in this report may appear without the ®, ™ or SM symbols, but such references are not intended to indicate, in any way,
that we will not assert, to the fullest extent under applicable law, our rights or the right of the applicable licensor to these
trademarks, trade names and service marks. This report may also contain trademarks, trade names and service marks of other
parties, and we do not intend our use or display of other parties’ trademarks, trade names or service marks to imply, and such
use or display should not be construed to imply, a relationship with, or endorsement or sponsorship of us by, these other parties.
iii
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ITEM 1. BUSINESS
Overview
PART I
We are the global leader in the design, development, manufacture and distribution of performance-driven golf
products, and these products are widely recognized for their quality excellence. Our mission—to be the performance and
quality leader in every golf product category in which we compete—has remained consistent since we entered the golf ball
business in 1932. Today, we are the steward of two of the most revered brands in golf—Titleist, one of golf’s leading
performance equipment brands, and FootJoy, one of golf’s leading performance wearable brands. Titleist has been the #1 ball in
professional golf for over 75 years and FootJoy has been the #1 shoe on the PGA Tour for over seven decades.
Our target market is dedicated golfers, who are the cornerstone of the worldwide golf industry. These dedicated golfers
are avid and skill-biased, prioritize performance and commit the time, effort and money to improve their game. We believe our
focus on innovation and process excellence yields golf products that represent superior performance and consistent product
quality, which are the key attributes sought after by dedicated golfers. Many of the game’s professional players, who represent
the most dedicated golfers, prefer our products, thereby validating our performance and quality promise while also driving
brand awareness. We seek to leverage a pyramid of influence product and promotion strategy, whereby our products are the
most played by the world's best players, creating aspirational appeal for a broad range of golfers who want to emulate the
performance of the game’s best players.
Dedicated golfers view premium golf shops, such as on-course golf shops and golf specialty retailers, as preferred
retail channels for golf products of superior performance and product quality. As a result, we have committed to being one of
the preferred and trusted partners to premium golf shops worldwide. We believe this commitment provides us a retail
environment where our product performance and quality advantage can most effectively be communicated to dedicated golfers.
In addition, we service other qualified retailers that sell golf products to consumers worldwide and offer a selection of our
products direct to consumers via our eCommerce websites.
Our vision is to consistently be regarded by industry participants, from dedicated golfers to the golf shops that serve
them, as the best golf company in the world. We have established leadership positions across all major golf equipment and golf
wear categories under our globally recognized brands.
For the year ended December 31, 2023, we recorded net sales of $2,382.0 million, net income attributable to Acushnet
Holdings Corp. of $198.4 million and Adjusted EBITDA of $376.1 million. See “Management’s Discussion and Analysis of
Financial Condition and Results of Operations,” Item 7 of Part II, included elsewhere in this report, for a reconciliation of
Adjusted EBITDA to net income attributable to Acushnet Holdings Corp., the most directly comparable GAAP financial
measure.
Corporate History
Acushnet Company was originally founded as “Acushnet Process Company” in Acushnet, Massachusetts by Phil
“Skipper” Young in 1910, and our golf business was established in 1932. In 1976, Acushnet Company was acquired by
American Brands, Inc. (the predecessor company of Beam Suntory, Inc. (“Beam”)). We acquired FootJoy in 1985. In July
2011, Acushnet Holdings Corp. (at the time known as Alexandria Holdings Corp.), an entity owned by Fila Holdings Corp.
(“Fila”) and certain financial investors, acquired Acushnet Company from Beam. We completed an initial public offering of our
common stock in November 2016.
Our Core Focus
Dedicated Golfers
Our target market is dedicated golfers, who are avid and skill-biased, prioritize performance and commit the time,
effort and money to improve their game. We believe that dedicated golfers are generally the most consistent purchasers of golf
products, as we believe they are the most discerning and most likely to invest in premium performance equipment and golf
wear.
1
Product Platform
Leveraging the success of our golf ball and golf shoe businesses, while maintaining the core values of the Titleist and
FootJoy brands, we have strategically entered into product categories such as golf clubs, wedges, putters, golf gloves, golf gear
and golf wear. Since the dedicated golfer views each performance product category on its own merits, we have approached
each category on its own terms by committing the necessary resources to become a performance and quality leader in each
product category where we participate. As a result, we have built an industry leading platform across all performance product
categories, driving a market-differentiating mix of consumable products, which we consider to be golf balls and golf gloves,
which collectively represented nearly 40% of our net sales in 2023, and more durable products, which we consider to be golf
clubs, golf shoes, golf apparel and golf gear, which collectively represented over 60% of our net sales in 2023.
We operate under the following four reportable segments: Titleist golf balls; Titleist golf clubs; Titleist golf gear and
FootJoy golf wear, which represented approximately 32%, 28%, 9% and 25%, respectively, of net sales in 2023. For further
information surrounding the principal products of each reportable segment, see “Our Products” further below. Financial
information for our segments, including sales by geographic area, is included in “Management’s Discussion and Analysis of
Financial Condition and Results of Operations,” Item 7 of Part II, included elsewhere in this report and in “Notes to
Consolidated Financial Statements – Note 21 – Segment Information,” Item 8 of Part II, included elsewhere in this report.
Pyramid of Influence
The game of golf is learned by observation and imitation, and golfers improve their own performance by attempting to
emulate highly skilled golfers. Golfers are influenced not only by how other golfers swing but also with what they swing and at
what they swing. This is the essence of golf’s pyramid of influence, which is deeply ingrained in the mindset of the dedicated
golfer. At the top of the pyramid is the most dedicated golfer, who attempts to make a living playing the game professionally.
Adoption by most of the best golfers, whose professional success depends on their performance, validates the quality, features
and benefits of using the best performing products. This, in turn, creates aspirational appeal for golfers who want to emulate the
performance of the best players. Our primary marketing strategy is for our products to be the most played by the best players,
including both professional and amateur golfers. We believe this strategy has proven to be enduring and effective in the
long-term and is not dependent on the transient success of a few elite players at any given point in time.
Innovation Leadership
We believe innovation is critical to dedicated golfers, as they depend on the ability of new and innovative products to
drive improved performance. We currently employ a research and development ("R&D") team of approximately 200 scientists,
chemists, engineers and technicians. We also introduce new product innovations at a cadence that we believe best aligns with
the typical dedicated golfer’s replacement cycle within each product category.
Operational Excellence
The requirements of the game lead the dedicated golfer to seek out products of superior performance and consistency.
We own or control the design, sourcing, manufacturing, packaging and distribution of the majority of our products. In doing so,
we are able to exercise control over every step of the manufacturing process and supply chain operations, thereby setting the
standard for quality and consistency. We have developed and refined distinct and independently managed supply chains for
each of our product categories.
Route to Market Leadership
As one of the preferred partners to premium golf shops, we seek to ensure that the performance benefits derived from
using our products are showcased and our products are properly merchandised. As we see our retail partners as a critical
connection to dedicated golfers, we place great emphasis on building strong relationships and trust with them. As such, our
sales associates are expected not simply to be salespeople, but to function as golf experts and enthusiasts in their respective
territories who advise and assist our retail partners to better serve their customers. We help generate golfer demand and
sell-through via in-shop merchandising, promotions and advertising, and also provide product education to club professionals,
coaches and instructors. In addition, we place a strong focus on golfer engagement, starting with fitting and trial initiatives
across our balls, clubs and shoes categories. We offer custom products across several categories to meet the varying needs of
golfers' skill levels, personal styles and preferences. In addition, our expanding eCommerce presence is expected to yield
incremental sales and profitability, as well as to foster a deeper and more real time connection with dedicated golfers.
2
Market Overview and Opportunity
Market Overview
While rounds of play had been relatively stable for years, the game experienced an approximate 8% global increase in
rounds in both 2020 and 2021 as dedicated golfers took full advantage of favorable weather, hybrid work schedules and an
increase in discretionary time due to the circumstances attendant to the COVID-19 pandemic. Golf remained in high demand in
2022 and 2023, with the number of rounds played in the U.S. approximately 16% and 20% higher, respectively, than the
number of rounds played in 2019. We anticipate that rounds of golf played will remain resilient in 2024, driven by golfer
demographics, dedicated golfers, increased participation and economic conditions.
Golfer Demographics. Golf is a recreational activity that requires time and money. The golf industry has been
principally driven by the age cohort of 30 years and above, primarily “gen-xers,” “baby boomers” and, increasingly,
"millennials" who have the time and money to engage in the sport. Since a significant number of baby boomers have yet to
retire, we anticipate growth in spending from this demographic, as it has been demonstrated that rounds of play increase
significantly as those in this cohort reach retirement. Further, we also believe that the percentage of women golfers will
continue to grow, as a higher percentage of new golfers in recent years have been women. Beyond the gen-x and baby boomer
generation, promising developments in golf include the generational shift with millennial golfers making their marks at both
professional and amateur levels, and the increase in the number of juniors (ages 6-17) who play golf in recent years.
Dedicated Golfers. Dedicated golfers are largely older millennials, gen-xers and baby boomers who have
demonstrated the propensity to pay a premium for products that help them perform better. We believe dedicated golfers, who
comprise our target market, will continue to be a key driver for the global golf industry.
Weather Conditions. Weather conditions determine the number of playable days in a year and thus influence the
amount of time people spend on golf. Weather conditions in most parts of the world, including our primary geographic markets,
generally restrict golf from being played year-round, with many of our on-course retail customers closed during the cold
weather months. Therefore, favorable weather conditions generally result in more playable days in a given year and more golf
rounds played, which generally results in increased demand for all golf products.
Economic Conditions. The state of the economy influences the amount of money people spend on golf. Golf
equipment, including clubs, shoes, balls and accessories, is recreational in nature and is therefore a discretionary purchase for
consumers. Consumers are generally more willing to make discretionary purchases of golf products when economic conditions
are favorable and when consumers are feeling confident and prosperous.
Our Growth Strategies
We plan to continue to pursue organic growth initiatives across all product categories, brands, geographies and
marketing channels.
Introduce New Products and Extend Market Share Leadership in Equipment Categories. We expect to sustain our
strong performance in our core categories of golf balls, golf clubs and golf shoes through several targeted strategies:
•
Titleist Golf Balls. We continually invest in design innovation and process technology to deliver the highest
performance and quality golf balls in the game. We strive to strengthen our sell-in and sell-through route to
market capabilities by focusing on enhancing our sales team's skills, supporting trade partners in those channels
where dedicated golfers shop, investing in digital channel opportunities, expanding golf ball fitting networks, and
educating golfers on Titleist golf ball performance and quality excellence. We also offer custom imprinting for
country clubs, tournaments, corporate logos and personalization.
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•
•
Titleist Clubs, Wedges and Putters. We intend to continue to launch innovative, high performance golf clubs by
further leveraging Titleist R&D excellence in all club categories. To enhance the golfer experience, we plan to
continue highly focused consumer connection initiatives, promote and encourage custom fitting and trial, and
offer best-in-class custom manufacturing capabilities. We also intend to continue to develop and offer limited
edition products to showcase advanced technologies and we intend to continue to dedicate the resources necessary
to ensure that Titleist drivers, fairways, hybrids and irons, Vokey Design wedges and Scotty Cameron putters
remain golf's leaders in performance, technology, craftsmanship and selection.
FootJoy Footwear. We continue to invest in design and innovation to bring golf-specific performance
advancements to the footwear category. We launched several new models in 2023, and we plan to continue to
enrich our consumer connection initiatives with digital content, product trial and fit experiences in key global
markets.
Increase Penetration in Golf Gear and Wear Categories. We intend to build on the brand loyalty that the dedicated
golfer has developed for our Titleist ball and club categories and FootJoy shoe and glove categories in order to increase our
penetration in the adjacent categories of golf gear and golf wear. We also evaluate acquisition opportunities that generally
feature premium performance products that appeal to the dedicated golfer and can benefit from our global distribution and
supply chain capabilities. We expect to continue to drive growth across these categories by employing the following initiatives:
•
•
•
•
•
Titleist Golf Gear. We are committed to providing dedicated golfers with golf gear—including golf bags,
headwear, gloves, travel gear and other accessories—of performance and quality excellence that is faithful to the
Titleist brand promise. We continue to make investments in design and engineering resources and leverage
dedicated player insights to drive product excellence in these product categories.
FootJoy Apparel. We remain committed to bringing style, performance, and innovation to the golf apparel
category. In addition to our seasonal apparel collections, we plan to launch new outerwear products to meet the
performance expectations of the most demanding players and "make every day playable." We plan to continue to
work with select players on the worldwide professional golf tours who trust the FootJoy brand to perform at the
highest levels.
Titleist Apparel. Titleist introduced apparel in Korea, Japan and China with a focus on innovative performance
and styling which is specifically designed for these markets using localized go-to-market strategies. We continue
to invest in innovative designs and performance fabrics to bring advancements to the apparel category in the
markets where Titleist apparel is sold.
KJUS Outerwear and Apparel. KJUS designs premium technical golf, ski and lifestyle apparel with distinctive,
clean designs. KJUS entered the golf outerwear and apparel markets less than a decade ago with a focus on
freedom of movement, temperature regulation and all-weather protection to enhance performance. We intend to
continue to invest in design and innovation to deliver advancements in KJUS outerwear and apparel.
Links & Kings. Links & Kings focuses on the design and handcrafted production of luxury leather golf and
lifestyle products. We intend to increase sales of Links & Kings products by increasing production capacity and
leveraging our existing distribution channels.
Strategically Pursue Global Growth. While our brands are global, we believe that near-term growth will be primarily
driven by more established golf markets, such as the United States, Japan, Korea and EMEA. However, less mature golf
markets also represent longer-term growth opportunities. To meet future demand, we are ensuring that local capabilities and
expertise in sales, customer service, merchandising, online presence, golf education and fitting initiatives are in place to support
our operations. We continue to hire local talent across all functions in order to better position Titleist and FootJoy products in
those markets where participation and popularity of the sport are expected to increase.
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Our Products
We design, manufacture and market a broad range of products under the Titleist, FootJoy and KJUS brands. These
brands are recognized as industry leaders in performance, quality, innovation and design. Our products include golf balls, golf
clubs, wedges and putters, golf shoes, golf gloves, golf gear and golf and ski outerwear and apparel.
Titleist
We design, manufacture and sell golf balls, golf clubs, wedges and putters and golf gear under the Titleist brand.
Titleist Golf Balls
Titleist is the #1 ball in golf. The Titleist golf ball was founded with the purpose of designing and manufacturing a golf
ball that was performance superior and quality superior to all other balls available in the market. We believe the golf ball is the
most important piece of equipment in the game, as it is the only piece of equipment used by every player for each shot in the
round. The golf ball category also generates the largest portion of our sales and profits.
Since its introduction in 2000, the Titleist Pro V1 has been the most played ball on the global professional tours and
the best-selling golf ball globally. Launched on the PGA Tour in October 2000 and introduced to the consumer market in
December 2000, the first Pro V1 golf ball represented the coalescence of three of Titleist's industry leading technologies: large
solid core; multi-component construction; and high performance, thermoset cast urethane elastomer covers. In its first four
months, the Pro V1 golf ball became the best-selling golf ball and holds that position to this day. In 2003, the first Pro V1x golf
ball was brought to market and with its four-piece, dual core design, produced higher launch characteristics and a different spin
profile than Pro V1. Both Pro V1 and Pro V1x are designed to provide total performance for golfers at every level of the game
and best demonstrate Titleist's design, innovation and technology leadership.
In early 2023, we launched new Pro V1 and Pro V1x models with advancements in core technology to amplify the
high flex casing layer, soft cast thermoset urethane cover and advanced aerodynamics. The 2023 models maintained their
differences in flight, spin and feel. Pro V1 offers the greatest combination of speed, spin and feel in the game and is the best fit
for the majority of golfers. Pro V1 flies lower than Pro V1x with a more penetrating trajectory and has a softer feel. Pro V1x
has a fast, high flight and delivers spin where and when a golfer wants it. Complementing Pro V1 and Pro V1x is another high
performance golf ball, Pro V1x Left Dash. Introduced in 2019, Pro V1x Left Dash meets the performance needs of a select
group of players seeking high flight with even lower long game spin than both Pro V1 and Pro V1x. Titleist Pro V1 and Pro
V1x models remain the most trusted, best performing and most consistent golf balls in the game. This is validated by the
overwhelming usage and trust of players throughout the pyramid of influence and the marketplace success of these products.
On the 2023 worldwide professional tours, Titleist golf balls account for 73% of all golf balls used, over seven times more than
the nearest competitor.
In November 2021, we introduced Pro V1 and Pro V1x RCT golf balls. RCT stands for "Radar Capture Technology,"
a proprietary, patented technology. In development for over two years, these products showcase the technological capabilities
of the Titleist Ball R&D and Operations teams. Pro V1 and Pro V1x RCT are engineered to deliver the most accurate golf ball
data on indoor radar-based launched monitors and was validated in collaboration with a team of fitting experts. Pro V1 and Pro
V1x RCT golf balls offer the exact same design, quality and performance as any Pro V1 or Pro V1x with the enhanced benefit
of an indoor radar signal that captures actual spin data to deliver a true indoor precision fitting. In September 2022, Pro V1x
Left Dash and AVX were also introduced with RCT, enhancing the opportunity for a precise, premium performance golf ball
fitting indoors.
In January of 2024, we introduced new AVX, Tour Soft, and TruFeel golf balls. AVX complements the Pro V1 family
of golf balls offering a lower flight, lower spin option with even softer feel. The 2024 AVX features improved high gradient
core chemistry, a new high flex casing layer, and a thicker, softer, urethane cover. Tour Soft features our largest two piece
ionomer core, reformulated for more speed and scoring shot performance. Tour Soft is available in white, yellow and gloss
green colors. TruFeel is new for 2024 with improved short game spin and control due to a new, thicker cover and reformulated
core. TruFeel is available in white, yellow and matte red colors. The Titleist golf ball family is completed with the Velocity golf
ball. Built for speed, Velocity is available in white, matte orange and matte green colors. All Titleist golf balls feature unique
aerodynamic dimple patterns and industry leading quality standards.
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The Pinnacle brand completes the Acushnet golf ball portfolio with its two major models, Rush and Soft. Competing
in the price segment, the Pinnacle brand allows the Titleist brand to focus on the premium performance and performance
segments of the market. It also helps to support the thousands of golf shops that choose to exclusively stock Titleist and
Pinnacle golf balls and offer golf balls in each market segment to their golfers.
We are also a leader in custom imprinted golf balls. The available options were expanded in 2023 with Performance
Alignment features on Pro V1 and Pro V1x, providing dedicated golfers with tour validated alignment designs. Custom imprint
capabilities include printing high quality reproductions of country club or resort logos, tournament logos, corporate logos and
personalization on Titleist and Pinnacle golf balls. Our service includes design capabilities, special packaging options and fast
turnaround times. The majority of custom imprinting is done for corporate logos, as there has long been a strong connection
between the business community and golf. We estimate custom golf ball sales represent, on average, between 25 - 30% of our
global net golf ball sales.
Net sales of Titleist golf balls for the years ended December 31, 2023, 2022 and 2021 were $761.7 million, $678.8
million and $667.6 million, respectively, in each case representing approximately 32% of our total net sales.
Titleist Golf Clubs, Wedges and Putters
We design, assemble and sell golf clubs (drivers, fairways, hybrids and irons) under the Titleist brand, wedges under
the Vokey Design brand and putters under the Scotty Cameron brand. The mission of our golf club business is to design and
develop the best performing golf clubs in the world for dedicated golfers. We believe dedicated golfers do not buy brands
across categories but seek out best-in-class products in each category. This is the reason we have partnered with dedicated
engineers and craftsmen such as Bob Vokey and Scotty Cameron, who understand the nuances, subtleties and impact
mechanics of their respective golf club categories. Titleist golf clubs, Vokey Design wedges and Scotty Cameron putters are
widely used by professional and competitive amateur players, which validates the products’ performance and quality
excellence. We are also committed to a leading club fitting and trial platform to maximize dedicated golfers’ performance
experience.
We view and operate the Titleist golf club business in three distinct categories: clubs (which includes drivers, fairways,
hybrids and irons), wedges and putters. Our products are generally priced at or above the premium price points in the
marketplace, driven by higher-end technologies (including design, materials and processes) we employ to generate superior
quality and performance. We have different models within each category to address the distinct performance needs of our
dedicated golfer target audience.
Net sales of Titleist golf clubs, wedges and putters for the years ended December 31, 2023, 2022 and 2021 were
$658.6 million, $609.6 million and $551.5 million, respectively, representing approximately 28% of our total net sales in 2023.
Titleist Clubs
Our current global club line consists of the TSR product line of drivers, fairways and hybrids, and the T Series and 620
product lines of irons. Every product in our club line features premium, tour-proven stock shafts and grips, complemented by a
broad range of custom options.
Titleist TSR drivers, fairways and hybrids are designed to deliver superior performance through tour-proven
technologies that increase ball speed, decrease spin and optimize flight without sacrificing forgiveness. We design our drivers
and fairways to deliver complete performance with tour-preferred looks, sound and feel, and we offer the ability to precisely fit
individual golfers’ needs.
Titleist T Series irons are innovative, technologically advanced products designed to deliver distance, forgiveness,
proper shot control and feel. While we offer stock set configurations for our iron sets, a significant portion of our worldwide
iron sales are custom fit to help deliver a better fit and performance. Our 620 MB and CB irons are classic, fully forged blade
type irons largely preferred by highly skilled golfers.
Vokey Design Wedges
Bob Vokey and his team of design and fitting experts create high performance wedges to meet the demands of
dedicated golfers and the best players in the world. The Vokey Design wedge product offering is a compilation of the most
popular wedges resulting from the Vokey Team’s hands-on work with golf’s best players to develop shapes and soles that
address varying techniques and course conditions. In total, we offer 25 unique loft, sole grind and bounce combinations and
four unique finishes to create golf’s most complete wedge product performance range. In addition, Vokey’s online Wedgeworks
program promotes limited edition models and allows golfers to customize and personalize their wedges. Vokey Design wedges
are the most played wedges by tour professionals.
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Scotty Cameron Putters
Scotty Cameron Fine Milled Putters are developed through a specialized and iterative process that blends art and
science to create high performance putters. The design inspiration for the Scotty Cameron brand begins with studying the best
players in the world and working with them to identify the consistent strengths and attributes of their putting. Scotty Cameron
encourages a selection process that identifies the putter length, toe flow and appearance to deliver proper balance, shaft flex and
feel to golfers and to encourage proper technique. Scotty Cameron putters consist of a range of products for each of these key
selection criteria.
Using the scottycameron.com website as an information and services hub, we offer the opportunity to connect more
closely with the Scotty Cameron brand. Golfers can customize and personalize their putter(s) in the online Scotty Cameron
Custom Shop. Through the popular “Club Cameron” loyalty program and the Scotty Cameron online “Studio Store,” brand fans
can purchase unique Scotty Cameron accessories. We also operate the Scotty Cameron Gallery in Encinitas, California, a
premium retail boutique which offers consumers the ability to experience our tour fitting process as well as purchase unique
accessory items.
Titleist Golf Gear
Titleist Golf Gear is a matrix of distinct categories across golf bags, headwear, golf gloves, travel products and other
golf accessories. We participate in golf product categories where the dedicated player expects us to be and provide dedicated
players with products of performance and quality excellence faithful to the Titleist brand promise.
We started building our golf gear infrastructure in 2015, transitioning away from third-party product creation and
supply chain dependency to enable us to exercise more control over the design, engineering, product specifications and quality
assurance of our finished Titleist golf gear products. Titleist golf gear products are designed and engineered using premium
materials, with a focus on delivering quality and performance excellence with function and style. We seek to provide and
continually evolve our customization and personalization opportunities across the product portfolio of Titleist golf gear in order
to meet the needs of the dedicated players. We believe the golf gear business represents a sizable and highly fragmented
opportunity with numerous competitors in each product category and geographical market.
Net sales of Titleist golf gear for the years ended December 31, 2023, 2022 and 2021 were $216.2 million, $204.9
million and $192.6 million, respectively, in each case representing approximately 9% of our total net sales.
Titleist Golf Bags
Titleist Golf Bags have an array of models across price points with designs ranging from those to be carried to those
designed for golf carts, each with an array of functional differences and a variety of materials and colors. Titleist golf bags are
used on professional tours around the world and are relied upon by players globally to support their game. In 2024, we plan to
introduce new colorways to our recently launched all-new Titleist Players Stand Bag collection, continuing the momentum of
this leading bag franchise sold by leading golf courses across the globe. We also have enjoyed continued success with our
LINKSLEGEND Series of premium golf bags accented by seasonal color drops at leading clubs around the world.
Titleist Golf Headwear
Titleist Golf Headwear is recognized on the professional golf tours globally. Titleist golf headwear provides both
function and fashion appeal across a multitude of models providing rain and sun protection as well as trend designs for the
dedicated player. We have established key product franchises in our headwear assortment with a variety of functions for both
men and women including the Tour Performance, the Performance Ball Marker Hat and the Tour Aussie. We seek to constantly
elevate and innovate the performance and quality of our headwear while keeping the design and colors fresh and appealing to
the dedicated player.
FootJoy
FootJoy is one of golf’s leading performance wearable brands, which consists collectively of golf shoes, gloves and
apparel. Net sales of FootJoy products for the years ended December 31, 2023, 2022 and 2021 were $596.4 million, $618.0
million and $580.6 million, respectively, representing approximately 25% of our total net sales in 2023.
FootJoy Golf Shoes
FootJoy is the #1 shoe in golf and has been the #1 shoe on the PGA Tour for over seven decades (since 1945). With an
exclusive focus on golf, FootJoy shoes are designed, developed and manufactured for all golfers across multiple golf shoe
categories, including modern classics, technical performance, casual and athletic.
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The golf shoe category is one of the most demanding of all wearables, as golf shoes must perform in all weather
conditions, including extreme temperature and moisture exposure; be resistant to pesticides and fungicides; withstand frequent
usage and extensive rounds of play; and provide consistent comfort, support and protection to the golfer in an average of over
five miles in a walked round. Hence, golf shoes require extensive knowledge and expertise in foot morphology, walking and
swing biomechanics, material science and application and sophisticated manufacturing and construction techniques.
Golf shoes are also a style and fashion driven category. FootJoy offers a large assortment of styles to suit the needs and
tastes of all golfers. The breadth and scope of the FootJoy product line is commensurate with its leading sales position. To
maintain and grow this leadership position in the category, new product launches and new styles comprise approximately 50%
of its offerings each year in all significant markets around the world.
In addition to its stock offerings, FootJoy is a leader in the customization of golf shoe styles and designs. FootJoy’s
MyJoys custom golf shoe microsite provides individual choices for style, color, personal IDs and team logos that are produced
to order for golfers around the world. We believe it is the largest choice offering in the golf shoe category and provides a
service and personal expression capability that creates brand loyalty and repeat purchases.
FootJoy Gloves
FootJoy is the #1 glove in golf. FootJoy is the leader in sales for all sub-categories of the glove business, including
leather construction, synthetic, leather/synthetic combinations and all specialty gloves, including rain and winter specific
offerings.
FootJoy Outerwear and Apparel
FootJoy is also a leader in the golf outerwear and men's and women's golf apparel markets. FootJoy’s goal for
outerwear is to “make every day playable” and extend the golf season by providing products for rain, wind and cold conditions.
FootJoy entered the outerwear category in 1996 with innovative designs and materials, became the leader in net sales in the
United States by 2005 and still holds this position today. In 2011, FootJoy entered the apparel market with a full line of
performance golf apparel and has become one of the leading brands in the U.S., Europe, Korea and other major markets
globally.
KJUS
In July 2019, we acquired KJUS, a Swiss-born manufacturer of premium performance ski, golf and lifestyle apparel.
The KJUS brand was born from an uncompromising commitment to performance, following brand namesake Lasse Kjus’s
historic feat at the 1999 World Ski Championships, where he medaled in each of the Championships’ five disciplines. KJUS
was founded with a vision to make the finest and most technologically advanced skiwear and the belief that cutting edge
innovation could lead to improved performance. KJUS has today grown to be a leader in premium technical performance
skiwear. Building upon this reputation, KJUS entered the golf outerwear and lifestyle apparel markets with a focus on freedom
of movement, temperature regulation and all-weather protection to enhance performance. As a result, KJUS has achieved an
enthusiastic following with performance-minded golfers and a premium positioning at many leading golf shops.
Product Launch Cycles
We maintain differentiated and disciplined product launch cycles across our portfolio, which we believe has
contributed to stable and resilient growth over the long-run. This approach gives our R&D teams a period of time we believe is
necessary to develop superior performing products versus prior generation models. As a result, we are able to manage our
product transitions and inventory from one generation to the next more efficiently and effectively, both internally and with our
trade partners.
Product introductions generally stimulate net sales as the golf retail channel takes on inventory of new products.
Reorders of these new products then depend on the rate of sell-through. Announcements of new products can often cause our
customers to defer purchasing additional golf equipment until our new products are available. The varying product introduction
cycles may cause our results of operations to fluctuate as each product line has different volumes, prices and margins.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Key Factors
Affecting our Results of Operations – Product Life Cycles,” Item 7 of Part II to this report, for further information surrounding
our product launch cycles.
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Manufacturing
Our manufacturing processes and management of supply chain operations ensure consistency of product performance
and quality. We own or control the design, sourcing, manufacturing, packaging and distribution of the majority of our products.
Our manufacturing network is comprised of our owned facilities and partners around the globe. Our scale and global
reach are intended to enable us to maximize cost efficiency, reduce lead time, provide regional customization and gain insights
into local markets.
We have three company-owned and operated golf ball manufacturing facilities, two located in the United States and
one in Thailand, encompassing approximately 600,000 total square feet with sufficient production capacity to meet anticipated
growth, including recent capacity expansion capital investments to fuel future growth. We also have seven global custom golf
ball imprinting operations and utilize local vendors for imprinting capabilities in other geographic markets.
We assemble clubs at six global locations, allowing us to provide custom fitted golf clubs with regional customization
with efficient turnaround times. Each of our six custom manufacturing locations is responsible for supply chain execution for
golf clubs and wedges, from forecast generation to component procurement to club assembly and distribution, allowing each
region to respond to market specific needs or trends. Scotty Cameron putters are assembled solely at our Carlsbad, California
manufacturing facility.
We own and operate the largest golf glove manufacturing operation in the world in Chonburi, Thailand, where we
manufacture both FootJoy and Titleist golf gloves. The factory produces over 13 million FootJoy and Titleist gloves annually.
The majority of our FootJoy golf shoes are manufactured in a 525,000 square foot facility in Fuzhou, China, owned by
a joint venture in which we have a 40% interest with the remaining 60% owned by our long-standing Taiwan supply partners.
In our consolidated financial statements, we consolidate the accounts of this joint venture, which is a variable interest entity
("VIE"). The joint venture was established in 1995 and has been in its current facility since 2000. The sole purpose of the joint
venture is to manufacture our golf shoes and as such we are deemed to be the primary beneficiary of the VIE. The multi-floor/
multi-building complex owned by the joint venture is devoted exclusively to FootJoy golf shoes and has production capacity of
nearly five million pairs annually. See “Notes to Consolidated Financial Statements – Note 2 – Summary of Significant
Accounting Policies – Variable Interest Entities,” Item 8 of Part II included elsewhere in this report, for a discussion of our
FootJoy golf shoe joint venture and the material terms of the agreement which governs such joint venture arrangement. We plan
to further diversify our golf shoe supply chain with increased manufacturing efforts in other jurisdictions such as Vietnam,
where a growing number of golf shoes were manufactured in 2023 by our long-standing Taiwan supply partner.
Sales and Distribution
Our accounts consist of premium golf shops, which include on-course golf shops and golf specialty retailers, as well as
other qualified retailers that sell golf products to consumers worldwide. We have a selective sales and distribution strategy,
differentiated by product line and geography, which focuses on effectively serving those accounts that provide best access to
our dedicated golfer target market in each geographic market.
We operate, and have our own field sales representation, in those countries that represent the substantial majority of
golf equipment and wearable sales, including the United States, Japan, Korea, the United Kingdom, Canada, Germany, Sweden,
France, Greater China, Australia, New Zealand, Thailand, Singapore, Malaysia and Switzerland. Exclusive Titleist and FootJoy
brand retail stores have been established within key Asia Pacific markets to elevate brand experiences, presence and product
presentation for dedicated golfers. Primarily focused on Titleist and FootJoy apparel collections unique to Korea, Japan and
mainland China, these upscale brand and product showcase locations capture the undivided attention of dedicated Titleist and
FootJoy brand fans, as well as provide for expanded education, selection and fitting experiences. In other countries in which we
sell our products, we rely on select distributors in order to deepen our reach into those markets. Each country administers its
own in-country channel of distribution strategy given the unique characteristics of each market.
Our sales and distribution takes a “category management” approach that encompasses all aspects of customer service
and fulfillment, including product selection; space and display planning; sales staff training; and inventory control and
replenishment. Each sales representative advises on topics such as shop layout, merchandise display techniques and effective
use of signage and product information and methods of improving inventory turns and sales conversions through
merchandising. Our sales force has been recognized worldwide for its professionalism and service excellence.
We employ approximately 400 sales representatives worldwide, who are compensated through a combination of salary
and a performance bonus, and in some instances, commissions. We currently service over 27,000 direct accounts worldwide. In
both our direct sales and distributor markets, our trade partners are subject to our redistribution policy.
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Supplementing our core field sales partnerships are Internet-based initiatives and eCommerce websites. Titleist,
FootJoy, KJUS, Links & Kings and PG Golf have established eCommerce websites accessible around the globe and we plan to
further expand eCommerce initiatives in the coming years. The eCommerce initiative is expected to yield incremental sales and
profitability and enriched data on golfers' preferences and trends, as well as to foster a deeper and more real time connection
with dedicated golfers.
Marketing
Throughout our history, we believe our commitment to marketing has helped further elevate our brands and strengthen
our reputation for product performance and quality, with a particular focus on the perception of dedicated golfers. Our strategy
is to deliver equipment that is superior in performance and quality, validated by the pyramid of influence. It is best-in-class
performance and quality products that earn and maintain dedicated golfers’ loyalty and trust. Our marketing strategy, developed
and refined over many years, is to reinforce this loyalty and trust, driving connectivity with our brands.
Raw Materials
Where possible, we use multiple suppliers or multiple production facilities, some with geographic separation, to reduce
the risk of raw material shortages but, in some instances, we rely on a sole or limited number of third-party suppliers and
manufacturers for raw materials. Our highest raw material consumption for golf balls, in order, is polybutadiene, ionomers, zinc
diacrylate, urethane and coatings. We source the raw materials for our golf glove and golf shoe businesses, and certain of the
components for our golf shoe business, from third-party suppliers. Our golf club team employs the primary materials of steel,
titanium and aluminum and has six custom manufacturing locations around the globe, with each being responsible for supply
chain execution, allowing each region to respond to market specific needs or trends. For our golf gear and FootJoy, KJUS and
Titleist apparel businesses, we source the finished products from select third-party vendors that have the necessary quality and
technical capabilities.
Seasonality
Weather conditions in most parts of the world, including our primary geographic markets, generally restrict golf from
being played year-round, with many of our on-course customers closed during the cold weather months. In general, during the
first quarter, we begin selling our products into the golf retail channel for the new golf season. This initial sell-in generally
continues into the second quarter. Our second-quarter sales are significantly affected by the amount of sell-through, in
particular the amount of higher value discretionary purchases made by customers, which drives the level of reorders of the
products sold during the first quarter. Our third-quarter sales are generally dependent on reorder business, and are generally
lower than the second quarter, as many retailers begin decreasing their inventory levels in anticipation of the end of the golf
season. Our fourth-quarter sales are generally less than the other quarters due to the end of the golf season in many of our key
markets, but can also be affected by key product launches, particularly golf clubs. This seasonality, and therefore quarter to
quarter fluctuations, can be affected by many factors, including the timing of new product introductions as discussed in
“Management’s Discussion and Analysis of Financial Condition and Results of Operations - Key Factors Affecting our Results
of Operations – Product Life Cycles,” Item 7 of Part II to this report, as well as weather conditions. This seasonality affects
sales in each of our reportable segments differently. In general, however, because of this seasonality, a larger portion of our
sales and profitability generally occurs during the first half of the year.
Research and Product Development
Innovating within a highly regulated environment presents unique challenges and opportunities that require a
significant investment in people, facilities and financial resources, with separate dedicated R&D teams for each product
category. We have six R&D facilities and/or test centers supported by approximately 200 scientists, chemists, engineers and
technicians in aggregate. We are committed to continuous improvement and each R&D team is tasked with developing
technology that will deliver better quality and performance products in each generation.
For the years ended December 31, 2023, 2022 and 2021 we invested $64.8 million, $56.4 million and $55.3 million,
respectively, in R&D.
Patents, Trademarks and Licenses
We consider our patents and trademarks to be among our most valuable assets. We are dedicated to protecting the
innovations created by our R&D teams by developing broad and deep patent and trademark portfolios across all product
categories.
As a result, we have strong patent positions across our product categories and innovation spaces in which we operate,
and have become the leader in obtaining golf ball and golf club patents worldwide. In addition, we believe we have more
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combined golf shoe and golf glove utility patents than all competitors combined. We have over 850 active U.S. utility patents in
golf balls, over 500 active U.S. utility patents in golf clubs, wedges and putters and over 425 worldwide patents in golf shoes
and gloves. In 2023, we filed nearly 250 U.S. patent applications and nearly 400 worldwide.
We own or license a large portfolio of trademarks, including for Titleist, Pro V1, Pro V1x, AVX, Pinnacle, AP1,
AP2, TSR, T Series, CNCPT, Vokey Design, Scotty Cameron, the Circle T Design, FootJoy, FJ, DryJoys, HyperFlex, StaSof,
ProDry, MyJoys, MyTPI, TPI, Titleist Performance Institute, Club Glove and KJUS. We protect our trademarks by obtaining
registrations where appropriate and opposing or cancelling material infringements. We also have rights in several common law
marks.
Competition
There are unique aspects to the competitive dynamic in each of our product categories.
The golf ball business is highly competitive. There are a number of well-established and well-financed competitors,
including Topgolf Callaway Brands ("Callaway"), TaylorMade, SRI Sports Limited (Dunlop and Srixon brands) and
Bridgestone (Bridgestone and Precept brands).
The golf club, wedge and putter markets in which we compete are also highly competitive and are served by a number
of well-established and well-financed companies with recognized brand names, including Callaway, TaylorMade and Ping.
For golf balls and golf clubs, wedges and putters, we generally compete on the basis of technology, quality,
performance, custom fitting and customer service.
In the golf gear market, there are numerous competitors in each product category and geographical market. Titleist golf
bags, headwear, gloves, travel gear and accessories each compete on the basis of quality, performance, styling and customer
service.
FootJoy’s significant worldwide competitors in golf shoes include Nike, Adidas and Ecco. FootJoy’s and Titleist's
primary worldwide competitors in golf gloves include Callaway, Nike, TaylorMade and Adidas and a significant number of
smaller companies with regional offerings and specialized golf glove products. In the golf apparel category, FootJoy has
numerous competitors in each geographical market, including Nike, Adidas, Peter Millar, GFore and Under Armour. FootJoy
products generally compete on the basis of quality, performance, styling and price.
Environmental Matters
Our operations and properties are subject to federal, state and local environmental laws and regulations that impose
limitations on the discharge of pollutants into the environment and establish standards for the handling, generation, emission,
release, discharge, treatment, storage and disposal of certain materials, substances and wastes and the remediation of
environmental contaminants. In the ordinary course of our manufacturing processes, we use paints, chemical solvents and other
materials, and generate waste by-products that are subject to these environmental laws. We have incurred expenses in
connection with environmental compliance.
We are also involved in ongoing investigations with federal and state environmental protection agencies, but do not
expect to incur future material costs for past and current environmental issues. See "Risk Factors - We are subject to
environmental, health and safety laws and regulations, which could subject us to liabilities, increase our costs or restrict our
operations in the future."
Regulation
The Rules of Golf
We seek to have our new golf ball and golf club products conform with the Rules of Golf published by the United
States Golf Association (the "USGA") and The Royal and Ancient Golf Club of St. Andrews (the "R&A" and, together with the
USGA, the "Governing Bodies"), because these rules are generally followed by golfers, both professional and amateur, within
their respective jurisdictions. The USGA publishes rules that are generally followed in the United States and Mexico, and the
R&A publishes rules that are generally followed in most other countries around the world. The Rules of Golf as published by
the Governing Bodies are virtually the same and are intended to be so pursuant to a Joint Statement of Principles issued in
2001.
11
The Rules of Golf set testing standards and establish limitations for the design and performance of golf balls and golf
clubs. Many new regulations on golf balls and golf clubs have been introduced in the past 25 years, which we believe has been
one of the most active periods for golf equipment regulation in the history of golf.
Golf Balls
Historically, the Rules of Golf have regulated golf ball size, weight, spherical symmetry, initial velocity and overall
distance. On December 6, 2023, the Governing Bodies issued a Notice of Decision relating to an “Update to the Conformance
Testing of Golf Balls to the Overall Distance Standard” (the “ODS Notice”). The ODS Notice announced a change (effective in
January 2028) to the Overall Distance Standard (“ODS”) testing method that, if implemented, will reduce the distance that
conforming golf balls will travel when struck by golfers. The Notice provides that recreational players may continue to use golf
balls which conform to the current ODS testing standard until January 1, 2030. The final outcome of the ODS Notice and the
impact of any implementation thereof or any other potential changes to the Rules of Golf are uncertain at this time.
Golf Clubs
The Rules of Golf have also focused on golf club regulations. In 1998, a limitation was placed on the spring-like
effect of driver faces. In 2003, limits were placed on club head dimensions and volume, as well as shaft length. In 2007, club
head moment of inertia was limited. A rule change to allow greater adjustability in golf clubs went into effect on January 1,
2008. In August 2008, the Governing Bodies adopted a rule change further restricting golf club grooves by reducing the groove
volume and limiting the groove edge angle allowable on irons and wedges. This rule change did not apply to most golfers until
January 1, 2024. It was implemented on professional tours beginning in 2010 and was implemented in elite amateur
competitions beginning in 2014. All products manufactured after December 31, 2010 must comply with the new groove
specifications. On October 12, 2021, the Governing Bodies announced that a new Model Local Rule would be available
beginning on January 1, 2022 to provide those running professional or elite amateur golf competitions the option of limiting the
maximum length of a golf club (excluding putters) to 46 inches. On December 6, 2023, the Governing Bodies issued a Notice
proposing to modify the Rules of Golf conformance testing process for drivers, which may result in an enhanced testing
protocol for drivers (the “Driver Notice”). The Driver Notice also states that the Governing Bodies will continue to explore
possible options related to distance and the driver. The outcome of the Driver Notice and the impact of any other potential
changes to the Rules of Golf are uncertain at this time.
Our Position
In response to this active regulatory dynamic, our senior management and R&D teams spend significant time and
effort in developing and maintaining relationships with the Governing Bodies and we are an active participant with them and
other stakeholders in discussions regarding potential new rules and the rule making process. More importantly, our R&D teams
are driven to innovate and continuously improve product technology and performance within the Rules of Golf. The
development and protection of these innovations through aggressive patenting are essential to competing in the current market.
As a long-time industry participant and market leader, we believe we are well-positioned to continue to outperform the market
in a rules constrained environment.
Employees and Human Capital Resources
Acushnet's associates and our enduring culture are two key elements of our success. Guided by our strong corporate
values, Acushnet’s associates are a key source of competitive advantage. As of December 31, 2023, we employed
approximately 7,300 associates worldwide. Reflecting our truly global organization, approximately 3,100 of our associates are
located in the Americas, over 600 are located in EMEA and approximately 3,500 are located in Asia Pacific. Approximately
fifty-six percent (56%) of our associates are in manufacturing roles across our global manufacturing footprint and
approximately fifty percent (50%) of our global associates are women.
We strive to cultivate the skills, knowledge and experiences in our associates that enable Acushnet to continue its
leadership in performance and product quality. To retain talent and recruit new associates, we utilize a dual approach,
leveraging a long-standing “build-from-within” talent development model coupled with recruiting top talent from the external
market. Additionally, partnerships with universities, community organizations and professional groups help us to attract
candidates with diverse backgrounds as we continue our focus on building an inclusive and diverse organization, which in turn
helps in broadening our reach. We conduct annual talent reviews focused on performance, potential and succession. Managers
share open feedback and work closely with associates to create individual, experiential development plans balancing deep
functional expertise with broad leadership capabilities.
Essential to our recruitment and retention of top talent is our commitment to ensuring we benefit from a workplace
built on our core values, including diversity, inclusion, belonging and respect. We seek to foster a culture where all associates
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can bring their complete, authentic self to work and we aspire to increase the diversity of our associate population globally.
Our Diversity, Inclusion and Belonging strategy and initiatives are guided by an associate-led Council, consisting of associates
from all facets of the Company. Engagement with associates at all levels is driven through open discussion, listening and
engagement surveys. Survey results continue to demonstrate that associate engagement is strong, driven by what we believe to
be a strong sense of belonging within the Company and excitement for the future. We expect to continue to enhance our
associates' experiences by investing in learning and development, listening to our associates and incorporating leading ideas and
best practices.
Long-term associate retention starts with a focus on the safety, health and well-being of our associates. Acushnet’s
Safety, Health and Wellness journey began more than 25 years ago and our 6-point safety program is a foundational principle
of our operations across the globe. Acushnet’s HealthWise program, "Wellness For Life," creates a culture to encourage and
support associate safety, health and wellness. Through partnerships with the medical community and Acushnet HealthWise
Coaches, associates gain access to high quality health and wellness services. Associates receive incentives for healthy
behaviors, which include up to a 30% surcharge avoidance for healthcare benefits. HealthWise is based on 4 pillars: prevention,
education, nutrition and fitness, and volunteerism. Acushnet’s role is to encourage behaviors in each pillar through offering on-
site educational programs, fitness center programming, on-site wellness staff to coach associates on meeting personal nutritional
or fitness goals, on-site services (physical therapy, chiropractic care, mental health care, massage therapy, acupuncture and
reflexology) and volunteer activities in our local communities.
Acushnet aspires to be a high achieving workforce by providing a workplace that inspires connection, innovation and
excellence in performance. As a result, we utilize a hybrid flexibility model, designed to balance the needs of the role with the
flexibility associates desire. We believe strongly in deep moments of collaboration and connection that drive our long history of
innovation, and the workplace strategy should support those goals. Our workplace experience will optimize time spent in-office
by ideating, creating and connecting with peers. Local leaders around the world are empowered to determine the best flexibility
approach for their geography based on the type of work and culture they lead.
As a leader in performance and product quality, we drive high performance standards and excellence, including by
continually developing and encouraging our associates to challenge the status quo, and rewarding them with competitive
compensation and benefits packages. The highly cultivated and long-standing associate experience at Acushnet remains a
competitive advantage driving our performance as the leader in performance products in the golf industry.
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ITEM 1A. RISK FACTORS
Summary Risk Factors
Below is a summary of some of the principal risks that could adversely affect our business, operations and financial
results:
Risks Related to Our Business and Industry
•
•
•
•
A reduction in the number of rounds of golf played or in the number of golf participants could materially adversely
affect our business, financial condition and results of operations.
Unfavorable weather conditions may impact the number of playable days and rounds played in a given year.
Changes to the Rules of Golf with respect to equipment could materially adversely affect our business, financial
condition and results of operations.
A significant disruption in the operations of our manufacturing, assembly or distribution facilities could materially
adversely affect our business, financial condition and results of operations.
• Many of our raw materials or components of our products are provided by a sole or limited number of third-party
•
suppliers and manufacturers.
A disruption in the operations of our suppliers could materially adversely affect our business, financial condition and
results of operations.
• We may not successfully manage the frequent introduction of new products or satisfy changing consumer preferences,
•
quality and regulatory standards.
Failure to successfully innovate and offer high-quality products may adversely affect our ability to compete in the
market for our products.
• We may be involved in lawsuits to protect, defend or enforce our intellectual property rights, which could be
•
expensive, time consuming and unsuccessful.
Our products may infringe the intellectual property rights of others, which may cause us to incur unexpected costs or
prevent us from selling our products.
• We face intense competition in each of our markets and if we are unable to maintain a competitive advantage, loss of
•
market share, sales or profitability may result.
A severe or prolonged economic downturn could adversely affect our customers' financial condition, their levels of
business activity and their ability to pay trade obligations.
• We depend on retailers and distributors to market and sell our products, and our failure to maintain and further develop
•
our sales channels could materially adversely affect our business, financial condition and results of operations.
Our business operations are subject to seasonal fluctuations, which could result in fluctuations in our operating results
and stock price.
Our business and results of operations are subject to fluctuations based on the timing of new product introductions.
•
• We have significant international operations and are exposed to risks associated with doing business globally.
• We rely on complex information systems for management of our manufacturing, distribution, sales and other
functions. If our information systems fail to perform these functions adequately or if we experience an interruption in
our operations, including a breach in cybersecurity, our business, financial condition and results of operations could be
materially adversely affected.
Our current senior management team and other key employees are critical to our success and if we are unable to attract
and/or retain key employees and hire qualified management, technical and manufacturing personnel, our ability to
compete could be harmed.
Our business could be materially adversely affected as a result of the risks associated with acquisitions and
investments.
•
•
Risks Related to Our Indebtedness
•
•
A high degree of leverage could adversely affect our ability to raise additional capital to fund our operations, limit our
ability to react to changes in the economy or in our industry, expose us to interest rate risk to the extent of our variable
rate debt, and prevent us from meeting our obligations under our indebtedness.
Servicing our indebtedness requires a significant amount of cash. Our ability to generate sufficient cash depends on
many factors, some of which are not within our control.
• We may be able to incur significant amounts of debt, which could exacerbate the risks associated with current
•
indebtedness.
Our credit agreements and the indentures governing our 7.375% Senior Unsecured Notes Due 2028 (the “Notes”)
contain restrictions that limit our flexibility in operating our business.
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Risks Related to Ownership of Our Common Stock
•
The interests of Magnus Holdings Co., Ltd. ("Magnus"), which is wholly-owned by Fila Holdings Corp. (“Fila”), and
Fila and any of their successors or transferees may conflict with other holders of our common stock.
• We are a “controlled company” within the meaning of the rules of the NYSE. As a result, we will qualify for, and may
rely upon, exemptions from certain corporate governance requirements that would otherwise provide protection to
shareholders of other companies.
If we are unable to maintain effective internal controls over financial reporting, we may not be able to produce timely
and accurate financial statements, which could have a material adverse effect on our business and stock price.
•
For a more complete discussion of the material risk facing our business, see below. You should carefully consider each
of the following risk factors, as well as the other information in this Annual Report, including our consolidated financial
statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of
Operations,” Item 7 of Part II, included elsewhere in this report. If any of the following risks actually occurs, our business,
financial condition and results of operations could be materially adversely affected. In that event, the market price of our
common stock could decline significantly and you could lose all or part of your investment. The risks described below are not
the only risks we face. Additional risks we are not presently aware of or that we currently believe are immaterial could also
materially adversely affect our business, financial condition and results of operations.
Risks Related to Our Business and Industry
A reduction in the number of rounds of golf played or in the number of golf participants could materially adversely affect
our business, financial condition and results of operations.
We generate substantially all of our sales from the sale of golf-related products, including golf balls, golf clubs, golf
shoes, golf gloves, golf gear and golf apparel. The demand for golf-related products in general, and golf balls in particular, is
directly related to the number of golf participants and the number of rounds of golf played by these participants. If golf
participation or the number of rounds of golf played declines, sales of our products may be adversely impacted, which could
materially adversely affect our business, financial condition and results of operations.
Unfavorable weather conditions may impact the number of playable days and rounds played in a given year.
Weather conditions in most parts of the world, including our primary geographic markets, generally restrict golf from
being played year-round, with many of our on-course retail customers closed during the cold weather months and, to a lesser
extent, during the hot weather months. Unfavorable weather conditions in our major markets, such as a particularly long winter,
a cold and wet spring, or an extremely hot summer, would impact the number of playable days and rounds played in a
given year, which would result in a decrease in the amount spent by golfers and golf retailers on our products, particularly with
respect to consumable products such as golf balls and golf gloves. In addition, unfavorable weather conditions and natural
disasters can adversely affect the number of custom club fitting and trial events that we can perform during the key selling
period. Unusual or severe weather conditions throughout the year, such as storms or droughts or other water shortages, can
negatively affect golf rounds played both during the events and afterward, as weather damaged golf courses are repaired and
golfers focus on repairing the damage to their homes, businesses and communities. Consequently, sustained adverse weather
conditions, especially during the warm weather months, could impact our sales, which could materially adversely affect our
business, financial condition and results of operations. Adverse weather conditions may have a greater impact on us than other
golf equipment companies as we have a large percentage of consumable products in our product portfolio, and the purchase of
consumable products is generally more dependent on the number of rounds played in a given year.
Consumer spending habits and macroeconomic factors may affect the number of rounds of golf played and related spending
on golf products.
Our products are recreational in nature and are therefore discretionary purchases for consumers. Consumers are
generally more willing to spend their time and money to play golf and make discretionary purchases of golf products when
economic conditions are favorable and when consumers feel confident and prosperous. Discretionary spending on golf and the
golf products we sell is affected by consumer spending habits as well as by many macroeconomic factors, including general
business conditions, stock market prices and volatility, corporate spending, housing prices, rate of inflation, interest rates, the
availability of consumer credit, taxes and consumer confidence in future economic conditions. Consumers may reduce or
postpone purchases of our products as a result of shifts in consumer spending habits as well as during periods when economic
uncertainty increases, disposable income is lower, or during periods of actual or perceived unfavorable economic conditions. A
future significant or prolonged decline in general economic conditions or uncertainties regarding future economic prospects that
adversely affects consumer discretionary spending, whether in the United States or in our international markets, could result in
reduced sales of our products, which could materially adversely affect our business, financial condition and results of
operations.
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Demographic factors may affect the number of golf participants and related spending on our products.
Golf is a recreational activity that requires time and money and different generations and socioeconomic and ethnic
groups use their leisure time and discretionary funds in different ways. Golf participation among younger generations and
certain socioeconomic and ethnic groups may not prove to be as popular as it is among older "millennials" and the current
“gen-x” and “baby boomer” generations. If golf participation or the number of rounds of golf played declines due to factors
such as demographic changes in the United States and our international markets or lack of interest in the sport among young
people or certain socioeconomic and ethnic groups, sales of our products could be negatively impacted, which could materially
adversely affect our business, financial condition and results of operations.
Changes to the Rules of Golf with respect to equipment could materially adversely affect our business, financial condition
and results of operations.
Golf’s most regulated categories are golf balls and golf clubs. We seek to have our new golf ball and golf club
products conform with the Rules of Golf published by the United States Golf Association (the "USGA") and The Royal and
Ancient Golf Club of St. Andrews (the "R&A" and, together with the USGA, the "Governing Bodies"), because these rules are
generally followed by golfers, both professional and amateur, within their respective jurisdictions. The USGA publishes rules
that are generally followed in the United States and Mexico, and the R&A publishes rules that are generally followed in most
other countries around the world. The Rules of Golf as published by the Governing Bodies are virtually the same and are
intended to be so pursuant to a Joint Statement of Principles issued in 2001. The Rules of Golf set the testing standards and
establish limitations for the design and performance of golf balls and golf clubs.
Many new regulations on golf balls and golf clubs have been introduced in the past 25 years, which we believe has
been one of the most active periods for golf equipment regulation in the history of golf. Historically, the Rules of Golf have
regulated golf ball size, weight, spherical symmetry, initial velocity and overall distance. The Governing Bodies have also
focused on golf club regulations, including limiting wedge and iron groove size, the size and spring-like effect of driver faces
and club head moment of inertia. In the future, existing Rules of Golf may be altered in ways that adversely affect the sales of
our current or future products.
On December 6, 2023, the Governing Bodies issued a Notice of Decision relating to an “Update to the Conformance
Testing of Golf Balls to the Overall Distance Standard” (the “ODS Notice”). The ODS Notice announced a change (effective in
January 2028) to the Overall Distance Standard (“ODS”) testing method that, if implemented, will reduce the distance that
conforming golf balls will travel when struck by golfers. The ODS Notice provides that recreational players may continue to
use golf balls which conform to the current ODS testing standard until January 1, 2030. The final outcome of the ODS Notice
and the impact of any implementation thereof or any other potential changes to the Rules of Golf are uncertain at this time.
On December 6, 2023, the Governing Bodies’ issued a Notice proposing to modify the Rules of Golf conformance
testing process for drivers which may result in an enhanced testing protocol for drivers (the “Driver Notice”). The Driver
Notice also states that the Governing Bodies will continue to explore possible options related to distance and the driver. The
outcome of the Driver Notice and the impact of any other potential changes to the Rules of Golf are uncertain at this time.
If a change in rules was adopted and caused one or more of our current or future products to be nonconforming, sales
of such products would be impacted and we may not be able to adapt our products promptly to such rule change, which could
materially adversely affect our business, financial condition and results of operations. In addition, changes in the Rules of Golf
may result in an increase in the costs of materials that would need to be used to develop new products as well as an increase in
the costs to design new products that conform to such rules.
16
A significant disruption in the operations of our manufacturing, assembly or distribution facilities could materially
adversely affect our business, financial condition and results of operations.
We rely on our manufacturing facilities in the United States, Thailand, Vietnam and China and assembly and
distribution facilities in many of our major markets, certain of which constitute our sole or primary manufacturing facility for a
particular product category, including our joint venture facility in China where the majority of our golf shoes are manufactured
and our facility in Thailand where we manufacture the majority of our golf gloves. Because substantially all of our products are
manufactured and assembled in and distributed from a few locations, our operations could be interrupted by events beyond our
control, including:
•
•
•
•
•
•
•
•
•
•
•
•
power loss or network connectivity or telecommunications failure or downtime;
equipment failure;
human error or accidents;
sabotage or vandalism;
physical or electronic security breaches;
floods, fires, earthquakes, hurricanes, tornadoes, tsunamis or other natural disasters;
political unrest;
labor difficulties, including work stoppages, slowdowns, labor shortages or excessive turnover;
water damage or water shortage;
government orders and regulations;
pandemics and other health and safety issues (including, for example, the COVID-19 pandemic); and
terrorism.
Our manufacturing, assembly and distribution capacity is also dependent on the performance of services by third
parties, including vendors, landlords and logistics and transportation providers. If we encounter problems with our
manufacturing, assembly and distribution facilities, our ability to meet customer expectations, manage inventory, avoid errors,
complete sales and achieve objectives for operating efficiencies could be harmed, which could materially adversely affect our
business, financial condition and results of operations. We maintain business interruption insurance, but it may not adequately
protect us from the adverse effects that could result from significant disruptions to our manufacturing, assembly and distribution
facilities, such as the long-term loss of customers or an erosion of our brand image.
Our manufacturing, assembly and distribution networks include computer processes, software and automated
equipment that may be subject to a number of risks related to cybersecurity, the proper operation of software and hardware,
electronic or power interruptions or other system failures.
Many of our raw materials or components of our products are provided by a sole or limited number of third-party suppliers
and manufacturers.
We rely on a sole or limited number of third-party suppliers and manufacturers for many of our raw materials and the
components in our golf balls, golf clubs, golf gloves and certain of our other products. We also use specialized sources for
certain of the raw materials used to make our golf gloves and other products, and these sources are limited to certain
geographical locations. Many of these materials are customized for us and some of our products require specially developed
manufacturing techniques and processes which make it difficult to identify and utilize alternative suppliers quickly. If we were
to experience any delay or interruption in such supplies, we may not be able to find adequate alternative suppliers at a
reasonable cost or without significant disruption to our business. We continue to be exposed to price increases and availability
risks with respect to certain materials and components used by us, our suppliers and our manufacturers, including
polybutadiene, urethane and ionomers for the manufacturing of our golf balls, titanium and steel for our golf clubs, leather and
synthetic fabrics for our golf shoes, golf gloves, golf gear and golf apparel, and resin and other petroleum-based materials for a
number of our products. Supply chain disruptions or shortages in raw materials could materially adversely affect our business,
financial condition and results of operations.
A disruption in the operations of our suppliers could materially adversely affect our business, financial condition and results
of operations.
Our ability to continue to select reliable suppliers who provide timely deliveries of quality materials and components
will impact our success in meeting customer demand for timely delivery of quality products. If we experience significantly
increased demand, or if, for any reason, we need to replace an existing manufacturer or supplier, there can be no assurance that
additional supplies of raw materials or additional manufacturing capacity will be available when required on terms that are
17
acceptable to us, or at all, or that any new supplier or manufacturer would allocate sufficient capacity to us in order to meet our
requirements. For example, during 2022 we experienced supply chain disruptions causing shortages of various raw materials;
those supply chain disruptions largely resolved during 2023. In addition, should we decide to transition existing manufacturing
between third-party manufacturers or should we decide to transition existing in-house manufacturing to third-party
manufacturers, the risk of such a problem could increase. Even if we are able to expand existing or find new manufacturing
sources, we may encounter delays in production and added costs as a result of the time it takes to train our suppliers and
manufacturers in our methods, products and quality control standards. Any material delays, interruption or increased costs in
the supply of raw materials or components of our products could impact our ability to meet customer demand for our products,
which could materially adversely affect our business, financial condition and results of operations.
In addition, there can be no assurance that our suppliers and manufacturers will continue to provide raw materials and
components that are consistent with our standards and that comply with all applicable laws and regulations. We have
occasionally received, and may in the future receive, shipments of supplies or components that fail to conform to our quality
control standards. In that event, unless we are able to obtain replacement supplies or components in a timely manner, we risk
the loss of sales resulting from the inability to manufacture our products and could incur related increased administrative and
shipping costs, and there also could be a negative impact to our brands, any of which could materially adversely affect our
business, financial condition and results of operations.
While we do not control our suppliers or their labor practices, negative publicity regarding the management of
facilities, production methods of or materials used by any of our suppliers could adversely affect our reputation, which could
materially adversely affect our business, financial condition and results of operations and may force us to locate alternative
suppliers. In addition, our suppliers may not be well capitalized and they may not be able to fulfill their obligations to us or may
go out of business. Furthermore, the ability of third-party suppliers to timely deliver raw materials or components may be
affected by events beyond their control, such as work stoppages or slowdowns, transportation issues, changes in trade or tariff
laws, or significant weather and health conditions.
The cost of raw materials and components could affect our operating results.
The materials and components used by us, our suppliers and our manufacturers involve raw materials, including
polybutadiene, urethane and ionomers for the manufacturing of our golf balls, titanium and steel for the manufacture of our golf
clubs, leather and synthetic fabrics for the manufacturing of our golf shoes, golf gloves, golf gear and golf apparel, and resin
and other petroleum-based materials for a number of our products. Significant price fluctuations or shortages in such raw
materials or components, including the costs to transport such materials or components of our products, the uncertainty of
currency fluctuations against the U.S. dollar, increases in labor rates, trade duties or tariffs, and/or the introduction of new and
expensive raw materials, could materially adversely affect our business, financial condition and results of operations.
Our operations are conducted worldwide and our results of operations are subject to currency transaction risk and currency
translation risk that could materially adversely affect our business, financial condition and results of operations.
For the year ended December 31, 2023, $1,032.0 million of our net sales were generated in regions outside of the
United States. Net sales by region are included in “Management’s Discussion and Analysis of Financial Condition and Results
of Operations,” Item 7 of Part II and “Notes to Consolidated Financial Statements – Note 21 – Segment Information,” Item 8 of
Part II, included elsewhere in this report. Substantially all of these net sales from regions outside of the United States were
generated in the applicable local currency, which include, but are not limited to, the Japanese yen, the Korean won, the British
pound sterling, the euro and the Canadian dollar. In contrast, substantially all of the purchases of inventory, raw materials or
components by entities in these regions are made in U.S. dollars. For the year ended December 31, 2023, approximately 85% of
our cost of goods sold incurred by regions outside the U.S. was denominated in U.S. dollars. Because these subsidiaries incur
substantially all of their cost of goods sold in currencies that are different from the currencies in which they generate
substantially all of their sales, we are exposed to transaction risk attributable to fluctuations in such exchange rates, which can
impact the gross profit of these subsidiaries. If the U.S. dollar strengthens against the applicable local currency, more local
currency will be needed to purchase the same amount of cost of goods sold denominated in U.S. dollars, which could materially
adversely affect our business, financial condition and results of operations.
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We have entered and expect to continue to enter into various foreign exchange forward contracts in an effort to protect
against adverse changes in foreign exchange rates and attempt to minimize foreign currency transaction risk. Our hedging
activities can reduce, but will not eliminate, the effects of foreign currency transaction risk on our financial results. The extent
to which our hedging activities mitigate foreign currency transaction risks varies based upon many factors, including the
amount of transactions being hedged. Other factors that could affect the effectiveness of our hedging activities include accuracy
of sales forecasts, volatility of currency markets, the availability of hedging instruments and limitations on the duration of such
hedging instruments. Since the hedging activities are designed to reduce volatility, they not only reduce the negative impact of a
stronger U.S. dollar but could also reduce the positive impact of a weaker U.S. dollar. We are also exposed to credit risk from
the counterparties to our hedging activities and market conditions could cause such counterparties to experience financial
difficulties. As a result, our efforts to hedge these exposures could prove unsuccessful and, furthermore, our ability to engage in
additional hedging activities may decrease or become more costly.
Because our consolidated accounts are reported in U.S. dollars, we are also exposed to currency translation risk when
we translate the financial results of our consolidated subsidiaries from their local currency into U.S. dollars. In each of the three
years ended December 31, 2023, nearly one-half of our net sales and one-third of our total operating expenses (which amounts
represent substantially all of the operating expenses incurred by subsidiaries in regions outside of the U.S.) were denominated
in foreign currencies. Fluctuations in foreign currency exchange rates may positively or negatively affect our reported financial
results and can significantly affect period-over-period comparisons. A strengthening of the U.S. dollar relative to our foreign
currencies could materially adversely affect our business, financial condition and results of operations.
We may not successfully manage the frequent introduction of new products or satisfy changing consumer preferences,
quality and regulatory standards.
The golf equipment and golf wear industries are subject to constantly and rapidly changing consumer demands based,
in large part, on performance benefits. Our golf ball and golf club products generally have launch cycles of two years, and our
sales in a particular year are affected by when we launch such products. We generally introduce new product offerings and
styles in our golf wear and gear businesses each year and at different times during the year. Factors driving these short product
launch cycles include the rapid introduction of competitive products and consumer demands for the latest technology, style or
fashion. In this marketplace, a substantial portion of our annual sales are generated each year by new products.
These marketplace conditions raise a number of issues that we must successfully manage. For example, we must
properly anticipate consumer preferences and design products that meet those preferences, while also complying with
significant restrictions imposed by the Rules of Golf, or our new products will not achieve sufficient market success to
compensate for the usual decline in sales experienced by products already in the market. Second, our R&D and supply chain
groups face constant pressures to design, develop, source and supply new products—many of which incorporate new or
otherwise untested technology, suppliers or inputs—that perform better than their predecessors while maintaining quality
control and the authenticity of our brands. Third, for new products to generate equivalent or greater sales than their
predecessors, they must either maintain the same or higher sales levels with the same or higher pricing, or exceed the
performance of their predecessors in one or both of those areas. Fourth, the relatively short window of opportunity for
launching and selling new products requires great precision in forecasting demand and ensuring that supplies are ready and
delivered during the critical selling periods. Finally, the rapid changeover in products creates a need to monitor and manage the
closeout of older products both at retail and in our own inventory. If we do not successfully manage the frequent introduction of
new products or satisfy consumer demand, it could adversely affect our business, financial condition and results of operations.
Failure to successfully innovate and offer high-quality products may adversely affect our ability to compete in the market for
our products.
Technical innovation and quality control in the design and manufacturing processes of our products is essential to our
commercial success. R&D plays a key role in technical innovation. We rely upon experts in various fields to develop and test
cutting edge performance products. If we fail to continue technical innovation in our products, consumer demand for our
products could decline, and if we experience problems with the quality of our products, we may incur substantial expense to
remedy the problems, any of which could materially adversely affect our business, financial condition and results of operations.
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Failure to adequately enforce and protect our intellectual property rights could materially adversely affect our business,
financial condition and results of operations.
We own numerous patents, trademarks, trade secrets, copyrights and other intellectual property and hold licenses to
intellectual property owned by others, which in the aggregate are important to our business. We rely on a combination of patent,
trademark, copyright and trade secret laws in our core geographic markets and other jurisdictions to protect the innovations,
brands, proprietary trade secrets and know-how related to certain aspects of our business. Certain of our intellectual property
rights, such as patents, are time-limited, and the technology underlying our patents can be used by any third party, including
competitors, once the applicable patent terms expire.
We seek to protect our confidential proprietary information, in part, by entering into confidentiality and invention
assignment agreements with our employees, consultants, contractors, suppliers and others. While these agreements are designed
to protect our proprietary information, we cannot be certain that such agreements have been entered into with all relevant
parties, and we cannot be certain that our trade secrets and other confidential proprietary information will not be disclosed or
that competitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent
information and techniques. We also seek to preserve the integrity and confidentiality of our proprietary information by
maintaining physical security of our premises and physical and electronic security of our information technology systems, but it
is possible that these security measures could be breached. If we are unable to prevent disclosure to third parties of our material
proprietary and confidential know-how and trade secrets, our ability to establish or maintain a competitive advantage in our
markets may be adversely affected.
We selectively and strategically pursue patent and trademark protection in our core geographic markets, but our
strategy has been to not perfect certain patent and trademark rights in some countries. For example, we focus primarily on
securing patent protection in those countries where the majority of our golf ball and golf club industry production takes place.
Accordingly, we may not be able to prevent others, including competitors, from practicing our patented inventions, including
by manufacturing and selling competing products, in those countries where we have not obtained patent protection. Further, the
laws of some foreign countries do not protect proprietary rights to the same extent or in the same manner as the laws of the
United States. As a result, we may encounter significant problems in protecting, enforcing and defending our intellectual
property outside of the United States. In some foreign countries, where intellectual property laws or law enforcement practices
do not protect our intellectual property rights as fully as in the United States, third-party manufacturers may be able to
manufacture and sell imitation products and diminish the value of our brands as well as infringe our rights, despite our efforts to
prevent such activity.
The golf ball and golf club industries, in particular, have been characterized by widespread imitation of popular ball
and club designs. We have an active program of monitoring, investigating and enforcing our proprietary rights against
companies and individuals who market or manufacture counterfeits and “knockoff” products. We assert our rights against
infringers of our patents, trademarks, trade dress and copyrights. However, these efforts may be expensive, time-consuming,
divert management’s attention, and ultimately may not be successful in reducing sales of golf products by these infringers. The
failure to prevent or limit such infringers or imitators could adversely affect our reputation and sales. Additionally, other golf
ball and golf club manufacturers may be able to produce successful golf balls or golf clubs which imitate our designs without
infringing any of our patents, trademarks, trade dress or copyrights, which could limit our ability to maintain a competitive
advantage in our marketplace.
If we fail to obtain enforceable patents, trademarks and trade secrets, fail to maintain our existing patent, trademark
and trade secret rights, or fail to prevent substantial unauthorized use of our patents, trademarks and trade secrets, we risk the
loss of our intellectual property rights and competitive advantages we have developed, which may result in lost sales.
Accordingly, we devote substantial resources to the establishment and protection of our trademarks, patents and trade secrets or
know-how, and we continuously evaluate the utility of our existing intellectual property and the new registration of additional
trademarks and patents, as appropriate. However, we cannot guarantee that we will have adequate resources to continue to
effectively establish, maintain and enforce our intellectual property rights. We also cannot guarantee that any of our pending
applications will be approved by the applicable governmental authorities. Moreover, even if the applications will be registered
during the registration process, third parties may seek to oppose, limit, or otherwise challenge these applications or
registrations.
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We may be involved in lawsuits to protect, defend or enforce our intellectual property rights, which could be expensive, time
consuming and unsuccessful.
Our success depends in part on our ability to protect our trademarks, patents and trade secrets from unauthorized use
by others. To counter infringement or unauthorized use, we may be required to file infringement or misappropriation claims,
which can be expensive and time-consuming and could materially adversely affect our business, financial condition and results
of operations, even if successful. Any claims that we assert against perceived infringers could also provoke these parties to
assert counterclaims against us alleging that we infringe or misappropriate their intellectual property rights or that we have
engaged in anti-competitive conduct. Moreover, our involvement in litigation against third parties asserting infringement of our
intellectual property rights presents some risk that our intellectual property rights could be challenged and invalidated. In
addition, in an infringement proceeding, whether initiated by us or another party, a court may refuse to stop the other party in
such infringement proceeding from using the technology or mark at issue on the grounds that our patents do not cover the
technology in question or misuse our trade secrets or know-how. An adverse result in any litigation or defense proceedings,
including proceedings at the patent and trademark offices, could put one or more of our patents or trademarks at risk of being
invalidated, held unenforceable or interpreted narrowly, and could put any of our patent or trademark applications at risk of not
being issued as a registered patent or trademark, any of which could materially adversely affect our business, financial
condition and results of operations.
Furthermore, because of the substantial amount of discovery required in connection with intellectual property
litigation, there is a risk that some of our confidential proprietary information could be compromised by disclosure during this
type of litigation. In addition, there could be public announcements of the results of hearings, motions or other interim
proceedings or developments. If securities analysts or investors perceive these results to be negative, it could materially
adversely affect the price of our common stock.
Our products may infringe the intellectual property rights of others, which may cause us to incur unexpected costs or
prevent us from selling our products.
From time to time, third parties have challenged our patents, trademark rights and branding practices, or asserted
intellectual property rights that relate to our products and product features. We cannot assure you that our actions taken to
establish and protect our technology and brands will be adequate to prevent others from seeking to block sales of our products
or to obtain monetary damages, based on alleged violation of their patents, trademarks or other proprietary rights. We may be
required to defend such claims in the future, which, whether or not meritorious, could result in substantial costs and diversion of
resources and could materially adversely affect our business, financial condition and results of operations.
If we are found to infringe a third party’s intellectual property rights, we could be forced, including by court order, to
cease developing, manufacturing or commercializing the infringing product. Alternatively, we may be required to obtain a
license from such a third party in order to use the infringing technology and continue developing, manufacturing or marketing
such technology. In such a case, license agreements may require us to pay royalties and other fees that could be significant, or
we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtain a
license, it could be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. A finding of
infringement could prevent us from commercializing our products or force us to cease some of our business operations, or to
redesign or rename some of our products to avoid future infringement liability. In addition, we could be found liable for
monetary damages, including treble damages and attorneys’ fees, if we are found to have willfully infringed a patent. Claims
that we have misappropriated the confidential information or trade secrets of third parties could also materially adversely affect
our business, financial condition and results of operations. See also “—We may be involved in lawsuits to protect, defend or
enforce our intellectual property rights, which could be expensive, time consuming and unsuccessful.” Any of the foregoing
could cause us to incur significant costs and prevent us from manufacturing or selling certain of our products.
Changes to patent laws could adversely affect our ability to protect our intellectual property.
Patent reform legislation may increase the uncertainties and costs surrounding the prosecution of our patent
applications and the enforcement or defense of our issued patents. For example, the Leahy-Smith America Invents Act, which
was adopted in September 2011, includes a number of significant changes to the U.S. patent laws, such as, among other things,
changing from a “first to invent” to a “first inventor to file” system, establishing new procedures for challenging patents and
establishing different methods for invalidating patents. Some of these changes or potential changes may not be advantageous to
us, and it may become more difficult to obtain adequate patent protection, to enforce our patents against third parties, or to
challenge the validity or enforceability of third parties' patents. These changes or potential changes could increase the costs and
uncertainties surrounding the prosecution of our patent applications and adversely affect our ability to protect our intellectual
property which could materially adversely affect our business, financial condition and results of operations. Furthermore, the
U.S. Supreme Court and the U.S. Court of Appeals for the Federal Circuit have made, and may in the future make, changes in
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how the patent laws of the United States are interpreted. Similarly, foreign courts have made, and may in the future make,
changes in how the patent laws in their respective jurisdictions are interpreted. We cannot predict future changes in the
interpretation of patent laws or changes to patent laws that might be enacted into law by United States and foreign legislative
bodies. These changes may materially affect our patents or patent applications and our ability to obtain and enforce or defend
additional patent protection in the future.
We face intense competition in each of our markets and if we are unable to maintain a competitive advantage, loss of market
share, sales or profitability may result.
The markets for golf balls, clubs, gear and wear are highly competitive and there may be low barriers to entry in many
of our markets. Pricing pressures, reduced profit margins or loss of market share or failure to grow in any of our markets, due to
competition or otherwise, could materially adversely affect our business, financial condition and results of operations.
We compete against large-scale global sports equipment and apparel players, Japanese industrials, and more
specialized golf equipment and golf wear players, including Callaway, TaylorMade, Ping, SRI Sports Limited, Bridgestone,
Nike, Adidas and Under Armour. Many of our competitors have significant competitive strengths, including long operating
histories, a large and broad consumer base, established relationships with a broad set of suppliers and customers, an established
regional or local presence, strong brand recognition and greater financial, R&D, marketing, distribution and other resources
than we do. There are unique aspects to the competitive dynamic in each of our product categories and markets. We are not the
market leader with respect to certain categories or in certain markets.
Golf Balls. The golf ball business is highly competitive. There are a number of well-established and well-financed
competitors. We and our competitors continue to incur significant costs in the areas of R&D, advertising, marketing, tour and
other promotional support to be competitive.
Golf Clubs. The golf club markets in which we compete are also highly competitive and are served by a number of
well-established and well-financed companies with recognized brand names. New product introductions, price reductions,
consignment sales, extended payment terms, “closeouts,” including closeouts of products that were recently commercially
successful, and significant tour and advertising spending by competitors continue to generate intense market competition and
create market disruptions. Our competitors in the golf club market have in the past and may continue to introduce their products
on an accelerated cycle which could lead to market disruption and impact sales of our products.
Golf Gear. The golf gear market is fragmented and served by a number of established competitors, as well as a number
of smaller competitors, all of which are pursuing innovative ways to meet consumer needs. We face significant competition in
every region with respect to each of our golf gear product categories.
Golf Wear. In the golf wear markets, we compete with a number of well-established and well-financed companies with
recognized brand names. These competitors may have a large and broad consumer base, established relationships with a broad
set of suppliers and customers, strong brand recognition and significant financial, R&D, marketing, distribution and other
resources which may exceed our own.
Our competitors may be able to create and maintain brand awareness and market share more quickly and effectively
than we can. Our competitors may also be able to increase sales in new and existing markets faster than we do by emphasizing
different distribution channels or through other methods, and many of our competitors have substantial resources to devote
towards increasing sales. If we are unable to grow or maintain our competitive position in any of our product categories, it
could materially adversely affect our business, financial condition and results of operations.
We may have limited opportunities for future growth in sales of certain of our products, including golf balls, golf shoes and
golf gloves.
We already have a significant share of worldwide sales of golf balls, golf shoes and golf gloves and the golf industry is
very competitive. As such, our ability to gain incremental market share quickly or at all may be limited given the competitive
nature of the golf industry and other challenges to the golf industry. In the future, the overall dollar volume of worldwide sales
of golf equipment, wear and gear may not grow or may decline which could materially adversely affect our business, financial
condition and results of operations.
A severe or prolonged economic downturn could adversely affect our customers’ financial condition, their levels of business
activity and their ability to pay trade obligations.
We primarily sell our products to golf equipment retailers, such as on-course golf shops, golf specialty stores and other
qualified retailers, directly and to foreign distributors. We perform ongoing credit evaluations of our customers’ financial
condition and generally require no collateral from these customers. However, a severe or prolonged downturn in the general
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economy could adversely affect the retail golf equipment market, which in turn would negatively impact the liquidity and cash
flows of our customers, including the ability of such customers to obtain credit to finance purchases of our products and to pay
their trade obligations. This could result in increased delinquent or uncollectible accounts from our customers as well as a
decrease in orders for our products by such customers. A failure by our customers to pay a significant portion of outstanding
accounts receivable balances on a timely basis or a decrease in orders from such customers could materially adversely affect our
business, financial condition and results of operations.
A decrease in corporate spending on our custom logo golf balls could materially adversely affect our business, financial
condition and results of operations.
Custom imprinted golf balls, a majority of which are purchased by corporate customers, are estimated to represent, on
average, between 25-30% of our global net golf ball sales. There has long been a strong connection between the business
community and golf, and if corporate spending decreases, it could impact the sales of our custom imprinted golf balls.
We depend on retailers and distributors to market and sell our products, and our failure to maintain and further develop our
sales channels could materially adversely affect our business, financial condition and results of operations.
We primarily sell our products through retailers and distributors and depend on these third parties to market and sell
our products to consumers. Any changes to our current mix of retailers and distributors could adversely affect our sales and
could negatively affect both our brand image and our reputation. Our sales depend, in part, on retailers adequately displaying
our products, including providing attractive space and merchandise displays in their stores, and training their sales personnel to
sell our products. If our retailers and distributors are not successful in selling our products, our sales would decrease. Our
retailers frequently offer products and services of our competitors in their stores. In addition, our success in growing our
presence in existing and expanding into new international markets will depend on our ability to establish relationships with new
retailers and distributors. If we do not maintain our relationship with existing retailers and distributors or develop relationships
with new retailers and distributors, our ability to sell our products would be negatively impacted.
On a consolidated basis, no one customer that sells or distributes our products accounted for more than 10% of our
consolidated net sales in the year ended December 31, 2023. However, our top ten customers accounted for approximately 20%
of our consolidated net sales in the year ended December 31, 2023. Accordingly, the loss of a small number of our large
customers, or the reduction in business with one or more of these customers, could materially adversely affect our business,
financial condition and results of operations. We do not currently have minimum purchase agreements with these large
customers.
Consolidation of retailers or concentration of retail market share among a few retailers may increase and concentrate our
credit risk, put pressure on our margins and impair our ability to sell products.
The sporting goods and off-course golf equipment retail markets in some countries, including the United States, are
dominated by a few large retailers. Certain of these retailers have in the past increased their market share and may continue to
do so in the future by expanding through acquisitions and construction of additional stores. Industry consolidation and
correction has occurred in recent years and additional consolidation and correction is possible. These situations may result in a
concentration of our credit risk with respect to our sales to such retailers, and, if any of these retailers were to experience a
shortage of liquidity or other financial difficulties, or file for bankruptcy or receivership protection, it would increase the risk
that their outstanding payables to us may not be paid. This consolidation may also result in larger retailers gaining increased
leverage which may impact our margins. In addition, increasing market share concentration among one or a few retailers in a
particular country or region increases the risk that if any one of them substantially reduces their purchases of our products, we
may be unable to find a sufficient number of other retail outlets for our products to sustain the same level of sales. Any
reduction in sales by our retailers could materially adversely affect our business, financial condition and results of operations.
Our business depends on strong brands, and if we are not able to maintain and enhance our brands we may be unable to sell
our products.
Our brands have worldwide recognition and our success depends on our ability to maintain and enhance our brand
image and reputation. In particular, we believe that maintaining and enhancing the Titleist, Scotty Cameron, Vokey Design,
FootJoy and KJUS brands is critical to maintaining and expanding our customer base. Maintaining, promoting and enhancing
our brands may require us to make substantial investments in areas such as product innovation, product quality, intellectual
property protection, marketing and employee training, and these investments may not have the desired impact on our brand
image and reputation. Our business could be adversely impacted if we fail to achieve any of these objectives or if the reputation
or image of any of our brands is tarnished or receives negative publicity. In addition, adverse publicity about regulatory or legal
action against us could damage our reputation and brand image, undermine consumer confidence in us and reduce long-term
demand for our products, even if the regulatory or legal action is unfounded or not material to our operations. Also, as we seek
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to grow our presence in existing and expand into new geographic or product markets, consumers in these markets may not
accept our brand image and may not be willing to pay a premium to purchase our products as compared to other brands. We
anticipate that as our business continues to grow our presence in existing and expand into new markets, maintaining and
enhancing our brands may become increasingly difficult and expensive. If we are unable to maintain or enhance the image of
our brands, it could materially adversely affect our business, financial condition and results of operations.
Our business operations are subject to seasonal fluctuations, which could result in fluctuations in our operating results and
stock price.
Our business is subject to seasonal fluctuations because golf is played primarily on a seasonal basis in most of the
regions where we do business. In general, during the first quarter, we begin selling our products into the golf retail channel for
the new golf season. This initial sell-in generally continues into the second quarter. Our second-quarter sales are significantly
affected by the amount of sell-through, in particular the amount of higher value discretionary purchases made by customers,
which drives the level of reorders of our products sold-in during the first quarter. Our third-quarter sales are generally
dependent on reorder business, and are generally less than the second quarter as many retailers begin decreasing their inventory
levels in anticipation of the end of the golf season. Our fourth-quarter sales are generally less than the other quarters due to the
end of the golf season in many of our key markets, but can also be affected by key product launches, particularly golf clubs.
Accordingly, our results of operations are likely to fluctuate significantly from period to period. This seasonality affects sales in
each of our reportable segments differently. In general, however, because of this seasonality, a majority of our sales and most of
our profitability generally occurs during the first half of the year. Results of operations in any period should not be considered
indicative of the results to be expected for any future period. The seasonality of our business could be exacerbated by the
adverse effects of unusual or severe weather conditions as well as by severe weather conditions caused or exacerbated by
climate change.
Our business and results of operations are also subject to fluctuations based on the timing of new product introductions.
Our sales can also be affected by the launch timing of new products. Product introductions generally stimulate sales as
the golf retail channel takes on inventory of new products. Reorders of these new products then depend on the rate of
sell-through. Announcements of new products can often cause our customers to defer purchasing additional golf equipment
until our new products are available. Our varying product introduction cycles, which are described under “Management’s
Discussion and Analysis of Financial Condition and Results of Operations—Key Factors Affecting Our Results of Operations –
Cyclicality,” Item 7 of Part II to this report, may cause our results of operations to fluctuate as each product line has different
volumes, prices and margins.
We have significant international operations and are exposed to risks associated with doing business globally.
We sell and distribute our products directly in many key international markets in Europe, Asia, North America and
elsewhere around the world. These activities have resulted and will continue to result in investments in inventory, accounts
receivable, employees, corporate infrastructure and facilities. In addition, in the United States, there is a limited number of
suppliers of certain raw materials and components for our products as well as finished goods that we sell, and we have
increasingly become more reliant on suppliers and vendors located outside of the United States. The operation of foreign
distribution in our international markets, as well as the management of relationships with international suppliers and vendors,
will continue to require the dedication of management and other resources. We also manufacture certain of our products outside
of the United States, including some of our golf balls and substantially all of our golf gloves in Thailand and the majority of our
golf shoes through our joint venture in China.
The current U.S. presidential administration may support and introduce certain new tax, trade and tariff proposals,
modifications to international trade policy and other changes, which may affect U.S. trade relations with other countries.
Further, any changes in global or national political movements or trade policies could alter the trade environment and consumer
purchasing behavior which, in turn, could have a material effect on our financial condition and results of operations. While the
United Kingdom's exit from the European Union ("Brexit") on December 31, 2020 is now complete, policies and border control
procedures continue to evolve and we continue to monitor the impact from related costs and on product transit times into the
European Union and United Kingdom.
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As a result of our international business operations, we are exposed to increased risks inherent in conducting business
outside of the United States. In addition to the uncertainty and the foreign currency risks discussed previously under “—Our
operations are conducted worldwide and our results of operations are subject to currency transaction risk and currency
translation risk that could materially adversely affect our business, financial condition and results of operations,” these risks
include:
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increased difficulty in protecting our intellectual property rights and trade secrets;
unexpected government action or changes in legal, trade, tax or regulatory requirements;
social, economic or political instability;
the effects of any anti-American sentiments on our brands or sales of our products;
increased difficulty in ensuring compliance by employees, agents and contractors with our policies as well as with
the laws of multiple jurisdictions, including but not limited to the U.S. Foreign Corrupt Practices Act (the
"FCPA"), and similar anti-bribery and anti-corruption laws, local and international environmental, health and
safety laws, and increasingly complex regulations relating to data privacy and the conduct of international
commerce;
increased difficulty in controlling and monitoring foreign operations from the United States, including increased
difficulty in identifying and recruiting qualified personnel for its foreign operations; and
increased exposure to interruptions in air carrier or ship services.
Any violation of our policies or any applicable laws and regulations by our suppliers or manufacturers could interrupt
or otherwise disrupt our sourcing, adversely affect our reputation or damage our brand image. While we do not control these
suppliers or manufacturers or their labor practices, negative publicity regarding the management of facilities by, production
methods of or materials used by any of our suppliers or manufacturers could adversely affect our reputation and sales and force
us to locate alternative suppliers or manufacturing sources, which could materially adversely affect our business, financial
condition and results of operations.
Failure to comply with laws, regulations and policies, including the FCPA or other applicable anti-corruption legislation,
could result in fines and criminal penalties and materially adversely affect our business, financial condition and results of
operations.
A significant risk resulting from our global operations is compliance with a wide variety of U.S. federal and state and
non-U.S. laws, regulations and policies, including laws related to anti-corruption, export and import compliance, anti-trust and
money laundering. The FCPA, the United Kingdom Bribery Act of 2010 and similar anti-bribery laws in other jurisdictions
generally prohibit companies and their intermediaries from making improper payments to government officials or other
persons. There has been an increase in anti-bribery law enforcement activity in recent years, with more frequent and aggressive
investigations and enforcement proceedings by both the U.S. Department of Justice and the SEC, increased enforcement
activity by non-U.S. regulators, and increases in criminal and civil proceedings brought against companies and individuals. We
operate in parts of the world that are recognized as having governmental and commercial corruption and in certain
circumstances, strict compliance with anti-bribery laws may conflict with local customs and practices. We cannot assure you
that our internal control policies and procedures have protected or will always protect us from improper conduct of our
employees or business partners. To the extent that we learn that any of our employees do not adhere to our internal control
policies, we are committed to taking appropriate remedial action. If we believe or have reason to believe that our employees or
agents have or may have violated applicable laws, including anti-corruption laws, we may be required to investigate or have
outside counsel investigate the relevant facts and circumstances, and detecting, investigating and resolving actual or alleged
violations can be expensive and require significant time and attention from senior management. Any violation of U.S. federal
and state and non-U.S. laws, regulations and policies could result in substantial fines, sanctions, civil and/or criminal penalties,
and curtailment of operations in the U.S. or other applicable jurisdictions. In addition, actual or alleged violations could damage
our reputation and ability to do business. Any of the foregoing could materially adversely affect our business, financial
condition and results of operations.
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Our business, financial condition and results of operations could be materially adversely affected if professional golfers do
not endorse or use our products.
We establish relationships with professional golfers in order to use, validate and promote Titleist and FootJoy branded
products. We have entered into endorsement arrangements with members of the various worldwide professional golf tours. We
believe that professional usage of our products validates the performance and quality of our products and contributes to retail
sales. We therefore spend a significant amount of money to secure professional usage of our products. Many other companies,
however, also aggressively seek the patronage of these professionals and offer many inducements, including significant cash
incentives and specially designed products. There is a great deal of competition to secure the representation of tour
professionals. As a result, it is expensive to attract and retain such tour professionals and we may lose the endorsement of these
individuals, even prior to the expiration of the applicable contract term. The inducements offered by other companies could
result in a decrease in usage of our products by professional golfers or limit our ability to attract other tour professionals. A
decline in the level of professional usage of our products, or a significant increase in the cost to attract or retain endorsers, could
materially adversely affect our business, financial condition and results of operations.
The value of our brands and sales of our products could be diminished if we, the golfers who use our products or the golf
industry in general are associated with negative publicity.
We sponsor a variety of golfers and feature those golfers in our advertising and marketing materials. We establish
these relationships to develop, evaluate and promote our products, as well as establish product authenticity with consumers.
Actions taken by golfers or tours associated with our products that harm the reputations of those golfers could also harm our
brand image and impact our sales. We may also select golfers who may not perform at expected levels or who are not
sufficiently marketable. If we are unable in the future to secure prominent golfers and arrange golfer endorsements of our
products on terms we deem to be reasonable, we may be required to modify our marketing platform and to rely more heavily on
other forms of marketing and promotion, which may not prove to be as effective or may result in additional costs.
If we inaccurately forecast demand for our products, we may manufacture insufficient or excess quantities, which could
materially adversely affect our business, financial condition and results of operations.
To reduce purchasing costs and ensure supply, we place orders with our suppliers in advance of the time period we
expect to deliver our products. In addition, we plan our manufacturing capacity based upon the forecasted demand for our
products. Forecasting the demand for our products is very difficult given the number of SKUs we offer and the amount of
specification involved in each of our product categories. For example, in our golf shoe business, we offer a large variety of
models as well as different styles and sizes for each model. The nature of our business makes it difficult to adjust quickly our
manufacturing capacity if actual demand for our products exceeds or is less than forecasted demand. Factors that could affect
our ability to accurately forecast demand for our products include, among others:
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changes in consumer demand for our products or the products of our competitors;
new product introductions by us or our competitors;
failure to accurately forecast consumer acceptance of our products;
failure to anticipate consumer acceptance of new technologies;
inability to realize revenues from booking orders;
negative publicity associated with tours or golfers we endorse;
unanticipated changes in general market conditions or other factors, which may result in cancellations of advance
orders or a reduction or increase in the rate of reorders placed by retailers;
weakening of economic conditions or consumer confidence in future economic conditions, which could reduce
demand for discretionary items, such as our products;
terrorism or acts of war, or the threat thereof, which could adversely affect consumer confidence and spending or
interrupt production and distribution of products and raw materials;
abnormal weather patterns or extreme weather conditions including hurricanes, floods and droughts, among
others, which may disrupt economic activity; and
general economic conditions.
If actual demand for our products exceeds the forecasted demand, we may not be able to produce sufficient quantities
of new products in time to fulfill actual demand, which could limit our sales.
Any inventory levels in excess of consumer demand may result in inventory write-downs and/or the sale of excess
inventory at discounted prices.
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We may experience a disruption in the service, or a significant increase in the cost, of our primary delivery and shipping
services for our products and component parts or a significant disruption at shipping ports.
We use United Parcel Service and FedEx Corporation for substantially all ground shipments of products to our U.S.
customers. We use ocean shipping services and air carriers for most of our international shipments of products and many of the
components we use to manufacture and assemble our products. If there are changes in trade or tariff laws which result in
customs processing delays or any significant interruption in service by such providers or at shipping ports or airports, we may
be unable to engage alternative suppliers or to receive or ship goods through alternate sites in order to deliver our products or
components in a timely and cost-efficient manner. As a result, we could experience manufacturing delays, increased
manufacturing and shipping costs, and lost sales as a result of missed delivery deadlines and product introduction and demand
cycles. Any significant interruption in United Parcel Service or FedEx Corporation services, ship services, at shipping ports or
air carrier services could materially adversely affect our business, financial condition and results of operations. For example,
during 2022, late delivery of inbound products due to West Coast port congestion forced us to upgrade a significant portion of
outbound freight to express parcel services in order to meet customer delivery date requirements. This upgrade resulted in
unbudgeted increases in average cost per pound shipped. More recently, we have experienced difficulties in connection with
shipping certain of our products to certain key markets worldwide due to transportation delays caused by carrier diversions
from the Red Sea as a result of the ongoing Israel-Hamas conflict, and passage limitations imposed by the Panama Canal
Authority in response to the region's prolonged dry season. If these difficulties continue, or if the cost of delivery or shipping
services were to increase significantly and the additional costs could not be covered by product pricing, our business, financial
condition and results of operations could be materially adversely affected.
We rely on complex information systems for management of our manufacturing, distribution, sales, finance, accounting and
other functions. If our information systems fail to perform these functions adequately or if we experience an interruption in
our operations, including a breach in cybersecurity, our business, financial condition and results of operations could be
materially adversely affected.
All of our major operations, including manufacturing, distribution, sales and accounting, are dependent upon complex
information systems. Our information systems are vulnerable to damage or interruption from:
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•
earthquake, fire, flood, hurricane and other natural disasters;
power loss, computer systems failure, Internet and telecommunications or data network failure;
hackers, computer viruses, unauthorized access, software bugs or glitches; and
accidental or unlawful acts by authorized personnel, including our employees, contractors and vendors.
Any damage or significant disruption in the operation of such systems, disruptions, delays or deficiencies in the design
or implementation of new systems, or the failure of our information systems to perform as expected would disrupt our business,
which may result in decreased sales, increased overhead costs, excess inventory or product shortages which could materially
adversely affect our business, financial condition and results of operations.
Cybersecurity risks could disrupt our operations and negatively impact our reputation.
There are growing risks related to the security, confidentiality and integrity of personal and corporate information
stored and transmitted electronically, consumer identity theft and user privacy due to increasingly diverse and sophisticated
threats to network, systems and data security. Potential attacks span a spectrum from attacks by criminal hackers, hacktivists,
and nation-state or state-sponsored actors, to employee malfeasance and human or technological error. Cyberattacks against
companies like ours have increased in frequency and potential harm over time, and the methods used to gain unauthorized
access constantly evolve, making it increasingly difficult to anticipate, prevent, and/or detect incidents successfully in every
instance. We are required to expend significant resources in an effort to protect against security incidents and may be required
or choose to spend additional resources or modify our business activities, particularly where required by applicable data privacy
and security laws or regulations or industry standards.
While we have implemented security measures, our information technology systems, as well as those of our vendors,
contractors, and other third-party partners who process information on our behalf or have access to our systems, may be
susceptible to security incidents, disruptions, cyberattacks, ransomware, electronic or physical break-ins, viruses, phishing
attacks and other forms of social engineering, denial-of-service attacks, third-party or employee theft or misuse and other
negligent actions. Any perceived or actual unauthorized or inadvertent disclosure of personal or other confidential information,
cyberattack or other breach or theft of the information we control, whether through a breach of our network by an unauthorized
party, employee theft, misuse or error or otherwise, could harm our reputation, impair our ability to attract customers, result in
substantial remediation costs, subject us to claims or litigation (including class claims), regulatory enforcement, liability under
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data protection laws, and additional reporting requirements, result in higher insurance premiums and materially adversely affect
our business, financial condition and results of operations.
Failure to comply with data privacy and security laws and regulations could adversely affect our operating results and
business.
Our business involves the receipt, storage, and transmission of confidential information about our customers and
others, including sensitive personal information and account and payment card information. A growing number of federal, state
and international data privacy and security laws and regulations have been enacted that govern the collection, use, disclosure,
transfer, storage, disposal, and protection of personal information. For example, several U.S. territories and all 50 states now
have data breach notification laws that require timely notification to impacted individuals, and at times regulators, if a company
has experienced the unauthorized access or acquisition of personal data. In addition, state comprehensive privacy laws are also
expanding in the U.S. For example, the California Consumer Privacy Act, amended by the California Privacy Rights Act
(together, the “CCPA”), which gives California residents certain privacy rights in the collection and disclosure of their personal
information and requires businesses to make certain disclosures, limit their use of personal information, and take certain other
acts in furtherance of those rights. Failure to comply with the CCPA may result in, among other things, significant civil
penalties and injunctive relief, or potential statutory or actual damages. California has created a data protection agency
authorized to implement and enforce the CCPA, which could result in increased enforcement. Other states have considered and/
or enacted similar privacy laws, including Virginia, Connecticut, Colorado and Utah, which passed privacy laws that went into
operation in 2023. Similar laws have been passed or are being considered in several other states, as well as at the federal and
local levels. The evolving patchwork of differing state and federal privacy and data security laws increases the cost and
complexity of operating our business and increases our exposure to liability. We will continue to monitor and assess the impact
of these state laws, which may impose substantial penalties for violations, impose significant costs for investigations and
compliance, and carry significant potential liability for our business.
Outside of the U.S., data protection laws, including the E.U. General Data Protection Regulation (the “GDPR”), which
also forms part of the law of England and Wales, Scotland and Northern Ireland by virtue of section 3 of the European Union
(Withdrawal) Act 2018 and as amended by the Data Protection, Privacy and Electronic Communications (Amendments etc.)
(EU Exit) Regulations 2019 (SI 2019/419) ("UK GDPR"), also apply to some of our operations. Legal requirements in many
countries relating to the collection, storage, processing and transfer of personal data continue to evolve. The EU and UK GDPR
impose, among other things, data protection requirements that include strict obligations and restrictions on the ability to collect,
analyze and transfer personal data of individuals within the EU and UK, a requirement for prompt notice of data breaches to
data subjects and supervisory authorities in certain circumstances, and possible substantial fines for any violations. Companies
that must comply with the EU and UK GDPR face increased compliance obligations and risk, including more robust regulatory
enforcement of data protection requirements and potential fines for noncompliance of up to €20 million (£17.5 million) or 4%
of the annual global revenues of the noncompliant company, whichever is greater. Other governmental authorities around the
world are considering and, in some cases, have enacted, similar privacy and data security laws. Failure to comply with federal,
state and international data protection laws and regulations could result in government investigations and/or enforcement
actions (which could include substantial civil and/or criminal penalties), private litigation and adverse publicity and could
negatively affect our business, financial condition and results of operations.
Although we work to comply with applicable laws and regulations relating to data privacy and security, these
requirements are evolving and may be modified, interpreted, and applied in an inconsistent manner from one jurisdiction to
another and may conflict with one another or other legal obligations with which we must comply. Monitoring, preparing for and
complying with the array of privacy and security legal regimes to which we are subject also requires us to devote significant
resources, including, without limitation, financial and time-related resources. Moreover, many of the laws and regulations in
this area are relatively new and their interpretations are uncertain and subject to change. Combined with the frequency with
which new privacy and security laws are introduced globally, this means that we may be required to make changes to our
operations or practices in an effort to comply with them. Such changes may increase our costs and reduce our net sales. We may
also face inconsistent legal requirements across the various jurisdictions in which we operate, further raising both costs of
compliance and likelihood that we will fail to satisfy all of our legal requirements. Any failure or perceived failure by us or our
employees, representatives, contractors, consultants, collaborators, or other third parties to comply with such requirements or
adequately address privacy and security concerns, even if unfounded, could result in additional cost and liability to us, damage
our reputation, and adversely affect our business and results of operations.
If the technology-based systems that give consumers the ability to shop with us online do not function effectively, our ability
to grow our eCommerce business globally could be adversely affected.
We are increasingly using websites and social media to interact with consumers and as a means to enhance their
experience with our products. We launched our first such initiatives in the U.S. in 2016. Our eCommerce footprint has grown
since then, and we now have eCommerce operations in the U.S., Canada, Europe and Asia. In our eCommerce services, we
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process, store and transmit customer data, including payment card information. We also collect consumer data through certain
marketing activities. Failure to prevent or mitigate data loss or other security breaches, including breaches of our vendors’
technology and systems, could expose us or consumers to a risk of loss or misuse of such information, result in litigation or
potential liability for us and otherwise adversely affect our business, financial condition and results of operations. We would
also likely suffer indirect harms such as reputational damage and reticence among other companies to do business with us. For
further information, see “We rely on complex information systems for management of our manufacturing, distribution, sales
and other functions. If our information systems fail to perform these functions adequately or if we experience an interruption in
our operations, including a breach in cybersecurity, our business, financial condition and results of operations could be
materially adversely affected.”
Further, our eCommerce business is subject to general business regulations and laws, as well as regulations and laws
specifically governing the Internet, eCommerce and electronic devices. Existing and future laws and regulations, or new
interpretations of these laws, may adversely affect our ability to conduct our eCommerce business. As a merchant that accepts
debit and credit cards for payment, we are also subject to the Payment Card Industry Data Security Standard (“PCI DSS”),
issued by the PCI Council. PCI DSS contains compliance guidelines and standards with regard to our security surrounding the
physical and electronic storage, processing and transmission of individual cardholder data. Our failure to fully comply with PCI
DSS could violate payment card association operating rules, federal and state laws and regulations and the terms of our
contracts with payment processors and merchant banks.
Any failure on our part to provide private, secure, attractive, effective, reliable, user-friendly eCommerce platforms
that offer a wide assortment of merchandise with rapid delivery options and that continually meet the changing expectations of
online shoppers could place us at a competitive disadvantage, result in the loss of eCommerce and other sales, harm our
reputation with consumers, have an adverse impact on the growth of our eCommerce business globally and could materially
adversely affect our business, financial condition and results of operations.
Risks specific to our eCommerce business also include diversion of sales from our trade partners’ brick and mortar
stores, difficulty in recreating the in-store experience through direct channels and liability for online content. Our failure to
successfully respond to these risks might adversely affect sales in our eCommerce business, as well as damage our reputation
and brands.
Goodwill and identifiable intangible assets represent a significant portion of our total assets and any impairment of these
assets could negatively impact our results of operations and shareholders’ equity.
Our goodwill and identifiable intangible assets, which consist of goodwill from acquisitions, trademarks, patents,
completed technology, customer relationships, licensing fees, and other intangible assets, represented 35% of our total assets as
of December 31, 2023.
Accounting rules require the evaluation of our goodwill and intangible assets with indefinite lives for impairment at
least annually or whenever events or changes in circumstances indicate that the carrying value of such assets may not be
recoverable. Such indicators include a significant adverse change in customer demand or business climate that could affect the
value of an asset; general economic conditions, such as increasing Treasury rates or unexpected changes in gross domestic
product growth; a change in our market shares; budget-to-actual performance and consistency of operations margins and capital
expenditures; a product recall or an adverse action or assessment by a regulator; or changes in management or key personnel.
Goodwill and identifiable intangible assets are deemed impaired when their carrying value exceeds their fair value. If
a significant amount of our goodwill and identifiable intangible assets were deemed to be impaired, our business, financial
condition and results of operations could be materially adversely affected.
Our current senior management team and other key employees are critical to our success and if we are unable to attract
and/or retain key employees and hire qualified management, technical and manufacturing personnel, our ability to compete
could be harmed.
Our ability to maintain our competitive position is dependent to a large degree on the efforts and skills of our senior
management team and our other key employees. Our executives are experienced and highly qualified with strong reputations
and relationships in the golf industry, and we believe that our management team enables us to pursue our strategic goals. Our
other key sales, marketing, brand building, R&D, manufacturing, intellectual property protection and support personnel are also
critical to the success of our business. The loss of the services of any of our senior management team or other key employees
could disrupt our operations and delay the development and introduction of our products which could materially adversely
affect our business, financial condition and results of operations. We do not have employment agreements with any of the
members of our senior management team, except for David Maher, our President and CEO, and Sean Sullivan, our Executive
Vice President and CFO. In addition, we do not have “key person” life insurance policies covering any of our officers or other
key employees.
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Our future success depends upon our ability to attract and retain our executive officers and other key sales, marketing,
brand building, R&D, manufacturing, intellectual property protection and support personnel and any failure to do so could
materially adversely affect our business, financial condition and results of operations.
Additionally, we compete with many mature and prosperous companies that have far greater financial resources than
we do and thus can offer current or perspective employees more lucrative compensation packages than we can.
Sales of our products by unauthorized retailers or distributors could adversely affect our authorized distribution channels
and harm our reputation.
Some of our products find their way to unauthorized outlets or distribution channels. This “gray market” for our
products can undermine authorized retailers and foreign wholesale distributors who promote and support our products, and can
injure the image of our company in the minds of our customers and consumers. While we have taken some lawful steps to limit
commerce of our products in the “gray market” in both the United States and abroad, we have not been successful in halting
such commerce.
We may not be successful in our efforts to grow our presence in existing international markets and expand into additional
international markets.
We intend to grow our presence in and continue to expand into select international markets where there are the
necessary and sufficient conditions in place to support such expansion. These growth and expansion plans will require
significant management attention and resources and may be unsuccessful. In addition, to achieve satisfactory performance in
international locations, it may be necessary to locate physical facilities, such as regional offices, in these foreign markets and to
hire employees who are familiar with such foreign markets while also being qualified to market our products. We may not be
successful in growing our presence in or expanding into any such international markets or in generating sales from such foreign
operations.
We have historically grown our business by expanding into additional international markets, but such growth does not
always work out as anticipated and there is no assurance that we will be successful in the existing international markets where
we are currently seeking to grow our presence, including China, or the new international markets we plan to enter. Our
business, financial condition and results of operations could be materially adversely affected if we do not achieve the
international growth that we anticipate.
We are exposed to a number of different tax uncertainties, including potential changes in tax laws, unanticipated tax
liabilities and limitations on utilization of tax attributes after any change of control, which could materially adversely affect
our business, financial condition and results of operations.
We are subject to income taxes in the United States (federal and state) and numerous foreign jurisdictions. Tax laws,
regulations, and administrative practices in various jurisdictions may be subject to significant change, with or without notice,
due to economic, political, and other conditions, and significant judgment is required in evaluating and estimating our provision
and accruals for these taxes. Changes to or promulgation of new tax laws, interpretive regulations, other tax or accounting
guidance could significantly impact how we are taxed on both U.S. and foreign earnings. Transactions that we have arranged in
light of current tax rules could have adverse consequences if those tax rules change, and the imposition of any new or increased
tariffs, duties and taxes could materially adversely affect our business, financial condition and results of operations.
Our effective tax rates in the future could be adversely affected by a number of factors, including changes in the
expected geographic mix of earnings in countries with differing statutory tax rates, changes in the valuation and realizability of
deferred tax assets and liabilities, changes to or issuance of new tax laws, interpretive regulations, notices or other
administrative practices, principles, or guidance, changes to or issuance of new accounting guidance, changes in foreign
currency exchange rates, entry into new businesses and geographies, changes to our existing businesses and operations,
acquisitions (including integrations) and investments and how they are financed, changes in our stock price, and the outcome of
income tax audits in various jurisdictions around the world. Finally, foreign governments may enact tax laws in response to the
U.S. Tax Cuts and Jobs Act of 2017 (the “2017 Tax Act”) that could result in further changes to global taxation and materially
affect our financial position and results of operations.
Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the "Code"), if a corporation
undergoes an “ownership change,” the corporation’s ability to use its pre-change net operating loss ("NOL") carryforwards and
other pre-change tax attributes, such as foreign tax credits and research tax credits, to offset its post-change income and taxes
may be limited. In general, an “ownership change” generally occurs if there is a cumulative change in our ownership by
“5-percent shareholders” that exceeds 50 percentage points over a rolling three-year period. Similar rules apply under state tax
laws. We may experience an ownership change from future transactions in our stock, some of which may be outside our
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control. As a result, if we earn net taxable income, our ability to use pre-change NOL carryforwards or other pre-change tax
attributes to offset U.S. federal and state taxable income and taxes may be subject to incremental limitations.
We are engaged in a number of intercompany transactions across multiple tax jurisdictions. Although we believe that
these transactions reflect the accurate economic allocation of profit and that the proper transfer pricing documentation is in
place, the profit allocation and transfer pricing terms and conditions may be scrutinized by local tax authorities during an audit
and any resulting changes may impact our mix of earnings in countries with differing statutory tax rates.
We are also subject to the audit or examination of our tax returns by the IRS and other tax authorities whereby tax
authorities could impose additional tariffs, duties, taxes, penalties and interest on us. The determination of our worldwide
provision for income taxes and other tax liabilities requires complex computations and significant judgments, and there are
many transactions and calculations where the ultimate tax determination is uncertain. Although we believe our estimates are
reasonable and our tax provisions are adequate, the final determination of tax audits and any related disputes could be
materially different from our historical income tax provisions and accruals. The results of audits or related disputes could have
an adverse effect on our financial statements and our financial results for the period or periods for which the applicable final
determinations are made.
Portions of our operations are subject to a reduced tax rate or are free of tax under various tax holidays and rulings that
expire in whole or in part from time to time. These tax holidays and rulings may be extended when certain conditions are met,
or terminated if certain conditions are not met. If the tax holidays and rulings are not extended, or if we fail to satisfy the
conditions of the reduced tax rate, then our effective tax rate would increase in the future.
Changes to the overall international tax environment, as well as changes to some of the tax laws of the foreign
jurisdictions in which we operate, are expected as a result of the Base Erosion and Profit Shifting project (“BEPS”), undertaken
by the Organisation for Economic Co-operation and Development (“OECD”). The OECD, which represents a coalition of
member countries that encompass many of the jurisdictions in which we operate, has promulgated recommended changes to
numerous long standing international tax principles through its BEPS project, including the Pillar II global minimum tax
regime. Certain countries in which we operate have enacted legislation consistent with the OECD Pillar II model rules and have
introduced a 15% global minimum tax rate for large multinational corporations, effective beginning in 2024. We are included in
the consolidated financial statements of a global ultimate parent, are monitoring legislative developments, and are continuing to
evaluate the potential impact of Pillar II on our consolidated financial statements. We do not expect the impact of Pillar II to be
material.
It is expected that jurisdictions in which we do business may continue to react to the BEPS initiative by enacting
further tax legislation, and our business could be materially impacted. Our transfer pricing arrangements and principles are
reviewed annually; changes may need to be incorporated as the BEPS principles are fully implemented on a global basis.
Our insurance policies may not provide adequate levels of coverage against all claims and we may incur losses that are not
covered by our insurance.
We maintain insurance of the type and in amounts that we believe is commercially reasonable and that is available to
businesses in our industry. We carry various types of insurance, including general liability, auto liability, workers’
compensation, cyber and excess umbrella, from highly rated insurance carriers on all of our properties. We believe that the
policy specifications and insured limits are adequate for foreseeable losses with terms and conditions that are reasonable and
customary for similar businesses and are within industry standards. Nevertheless, market forces beyond our control could limit
the scope of the insurance coverage that we can obtain in the future or restrict our ability to buy insurance coverage at
reasonable rates. We cannot predict the level of the premiums that we may be required to pay for subsequent insurance
coverage, the level of any deductible and/or self-insurance retention applicable thereto, the level of aggregate coverage
available or the availability of coverage for specific risks.
In the event of a substantial loss, the insurance coverage that we carry may not be sufficient to compensate us for the
losses we incur or any costs for which we are responsible. In addition, there are types of losses we may incur that cannot be
insured against or that we believe are not commercially reasonable to insure. For example, we maintain business interruption
insurance, but there can be no assurance that the coverage for a severe or prolonged business interruption would be adequate
and the deductibles for such insurance may be high. These losses, if they occur, could materially adversely affect our business,
financial condition and results of operations.
We are subject to product liability, warranty and recall claims, and our insurance coverage may not cover such claims.
Our products expose us to warranty claims and product liability claims if products we manufacture, sell or design
actually or allegedly fail to perform as expected, or the use of those products results, or is alleged to result, in personal injury,
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death or property damage. Further, we or one or more of our suppliers might not adhere to product safety requirements or
quality control standards, and products may be shipped to retail partners before the issue is identified. If this occurs, we may
have to recall our products to address performance, compliance or other safety related issues. The financial costs we may incur
in connection with these recalls typically would include the cost of the product being replaced or repaired and associated labor
and administrative costs and, if applicable, governmental fines and/or penalties.
Product recalls can harm our reputation and cause us to lose customers, particularly if those recalls cause consumers to
question the performance, quality, safety or reliability of our products. Substantial costs incurred or lost sales caused by future
product recalls could materially adversely affect our business, financial condition and results of operations. Conversely, not
issuing a recall or not issuing a recall on a timely basis can harm our reputation and cause us to lose customers for the same
reasons as expressed above. Product recalls, withdrawals, repairs or replacements may also increase the amount of competition
that we face.
There is no assurance that we can successfully defend or settle all product liability cases. Our insurance policies
provide coverage against claims resulting from alleged injuries arising from our products sustained during the respective policy
periods, subject to policy terms and conditions. There can be no assurance that this coverage will be renewed or otherwise
remain available in the future, that our insurers will be financially viable when payment of a claim is required, that the cost of
such insurance will not increase, or that this insurance will ultimately prove to be adequate under our various policies.
Furthermore, future rate increases might make insurance uneconomical for us to maintain. These potential insurance problems
or any adverse outcome in any liability suit could create increased expenses which could harm our business. We are unable to
predict the nature of product liability claims that may be made against us in the future with respect to injuries, diseases or other
illnesses resulting from the use of our products or the materials incorporated in our products.
Our actual product warranty obligations could materially differ from historical rates, which would oblige us to revise
our estimated warranty liability accordingly. Adverse determinations of material product liability and warranty claims made
against us could materially adversely affect our business, financial condition and results of operations and could harm the
reputation of our brands.
We may be subject to litigation and other regulatory proceedings which may result in the expense of time and resources and
could materially adversely affect our business, financial condition and results of operations.
From time to time, we are involved in lawsuits and regulatory actions relating to our business, including those relating
to intellectual property, antitrust, data protection, commercial and employment matters. Due to the inherent uncertainties of
litigation and regulatory proceedings, we cannot accurately predict the likelihood of such lawsuits or regulatory proceedings
occurring or the ultimate outcome of any such proceedings. An unfavorable outcome could materially adversely affect our
business, financial condition and results of operations. In addition, any such proceeding, regardless of its merits, could divert
management’s attention from our operations and result in substantial legal fees.
We are subject to environmental, health and safety laws and regulations, which could subject us to liabilities, increase our
costs or restrict our operations in the future.
Our properties and operations are subject to a number of environmental, health and safety laws and regulations in each
of the jurisdictions in which we operate. These laws and regulations govern, among other things, air emissions, water
discharges, handling and disposal of solid and hazardous substances and wastes, soil and groundwater contamination and
employee health and safety. Our failure to comply with such environmental, health and safety laws and regulations could result
in substantial civil or criminal fines or penalties or enforcement actions, including regulatory or judicial orders enjoining or
curtailing operations or requiring remedial or corrective measures, installation of pollution control equipment or other actions.
We may also be subject to liability for environmental investigations and cleanups, including at properties that we
currently or previously owned or operated, even if such contamination was not caused by us, and we may face claims alleging
harm to health or property or natural resource damages arising out of contamination or exposure to hazardous substances. We
may also be subject to similar liabilities and claims in connection with locations at which hazardous substances or wastes we
have generated have been stored, treated, otherwise managed, or disposed.
We use certain substances and generate certain wastes that may be deemed hazardous or toxic under environmental
laws, and we from time to time have incurred, and in the future may incur, costs related to cleaning up contamination resulting
from historic uses of certain of our current or former properties or our treatment, storage or disposal of wastes at facilities
owned by others. The costs of investigation, remediation or removal of such materials may be substantial, and the presence of
those substances, or the failure to remediate a property properly, may impair our ability to use, transfer or obtain financing
regarding our property. Liability in many situations may be imposed not only without regard to fault, but may also be joint and
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several, so that we may be held responsible for more than our share of the contamination or other damages, or even for the
entire amount.
Environmental conditions at or related to our current or former properties or operations, and/or the costs of complying
with current or future environmental, health and safety requirements (which have become more stringent and complex over
time) could materially adversely affect our business, financial condition and results of operations.
We may require additional capital in the future and we cannot give any assurance that such capital will be available at all or
available on terms acceptable to us and, if it is available, additional capital raised by us may dilute holders of our common
stock.
We may need to raise additional funds through public or private debt (for example, our Notes offering in 2023) or
equity financings in order to:
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fund ongoing operations;
take advantage of opportunities, including expansion of our business or the acquisition of complementary
products, technologies or businesses;
develop new products; or
respond to competitive pressures.
Any additional capital raised through the sale of equity or securities convertible into equity will dilute the percentage
ownership of holders of our common stock. Capital raised through debt financing would require us to make periodic interest
payments and may impose restrictive covenants on the conduct of our business. Furthermore, additional financings may not be
available on terms favorable to us, or at all, especially during periods of adverse economic conditions, which could make it
more difficult or impossible for us to obtain funding for the operation of our business, for making additional investments in
product development and for repaying outstanding indebtedness. Our failure to obtain additional funding could prevent us from
making expenditures that may be required to grow our business or maintain our operations.
Our growth initiatives require significant capital investments and there can be no assurance that we will realize a positive
return on these investments.
Initiatives to upgrade our facilities and business processes and to invest in technological improvements to our
manufacturing and assembly facilities involve many risks, which could result in, among other things, business interruptions and
increased costs, any of which may result in our inability to realize returns on our capital investments. If we have insufficient
sales or are unable to realize the full potential of our capital investments, we may not realize a positive return on our
investment, which could impact our margins and have a significant adverse effect on our results of operations, financial
condition and cash flows.
Our business could be materially adversely affected as a result of the risks associated with acquisitions and investments.
We have made acquisitions and investments in the past and may pursue further acquisitions and investments in the
future. These transactions are accompanied by risks. For instance, an acquisition could have a negative effect on our financial
and strategic position and reputation or the acquired business could fail to further our strategic goals. We may not be able to
successfully integrate acquired businesses into ours, and therefore we may not be able to realize the intended benefits from an
acquisition. We may have a lack of experience in new markets or products brought on by the acquisition and we may have an
initial dependence on unfamiliar supply or distribution partners. All of these and other potential risks may serve as a diversion
of our management's attention from other business concerns, and any of these factors could have a material adverse effect on
our business.
If our estimates or judgments relating to our critical accounting estimates prove to be incorrect, our financial condition and
results of operations could be adversely affected.
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and
assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We base our
estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances,
as discussed under “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” Item 7 of Part
II, included elsewhere in this report. The results of these estimates form the basis for making judgments about the carrying
values of assets, liabilities and equity, and the amount of revenue and expenses that are not readily apparent from other sources.
Significant assumptions and estimates used in preparing our consolidated financial statements include those related to
impairment of goodwill, pension and other post-retirement benefits, provisions for income taxes and valuation allowances for
deferred tax assets. Our financial condition and results of operations may be adversely affected if our assumptions change or if
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actual circumstances differ from those in our assumptions, which could cause our results of operations to fall below the
expectations of securities analysts and investors, resulting in a decline in the price of our common stock.
Terrorist activities and international political instability may decrease demand for our products and disrupt our business.
Terrorist activities and armed conflicts could have an adverse effect upon the United States or worldwide economy and
could cause decreased demand for our products. If such events disrupt domestic or international air, ground or sea shipments, or
the operation of our suppliers or our manufacturing facilities, our ability to obtain the materials necessary to manufacture
products and to deliver customer orders would be harmed, which could materially adversely affect our business, financial
condition and results of operations. Such events can negatively impact tourism, which could adversely affect our sales to
retailers at resorts and other vacation destinations. In addition, the occurrence of political instability and/or terrorist activities
generally restricts travel to and from the affected areas, making it more difficult in general to manage our global operations.
Our business could be harmed by the occurrence of natural disasters or pandemic diseases.
The occurrence of a natural disaster, such as an earthquake, tsunami, fire, flood or hurricane, or the outbreak of a
pandemic disease, such as the COVID-19 pandemic, could materially adversely affect our business, financial condition and
results of operations. A natural disaster or a pandemic disease could adversely affect both the demand for our products as well
as the supply of the raw materials or components used to make our products. Demand for golf products also could be negatively
affected if consumers in the affected regions restrict their recreational activities and discretionary spending and as tourism to
those areas declines. If our suppliers experience a significant disruption in their business as a result of a natural disaster or
pandemic disease, our ability to obtain the necessary raw materials or components to make products could be materially
adversely affected. In addition, the occurrence of a natural disaster or the outbreak of a pandemic disease generally restricts
travel to and from the affected areas, making it more difficult in general to manage our global operations.
Risks Related to Our Indebtedness
A high degree of leverage could adversely affect our ability to raise additional capital to fund our operations, limit our
ability to react to changes in the economy or in our industry, expose us to interest rate risk to the extent of our variable rate
debt, and prevent us from meeting our obligations under our indebtedness.
As of December 31, 2023, we had $707.2 million of indebtedness. As of December 31, 2023, we had available
borrowings under our revolving credit facility of $616.7 million after giving effect to $8.1 million of outstanding letters of
credit and we had available borrowings remaining under our local credit facilities of $35.6 million. As of December 31, 2023,
we had $100.0 million of outstanding interest rate swap contracts to hedge the interest rate risk on our variable rate debt.
A high degree of leverage could have important consequences for us, including:
•
•
•
requiring us to utilize a substantial portion of our cash flows from operations to make payments on our
indebtedness, reducing the availability of our cash flows to fund working capital, capital expenditures, product
development, acquisitions, general corporate and other purposes;
increasing our vulnerability to adverse economic, industry, or competitive developments;
exposing us to the risk of increased interest rates because many of our borrowings are at variable rates of interest;
•
•
• making it more difficult for us to satisfy our obligations with respect to our indebtedness and any failure to
comply with the obligations of any of our debt instruments, including financial maintenance covenants and
restrictive covenants, could result in an event of default under the agreements governing our other indebtedness (if
not cured or waived);
restricting us from making strategic acquisitions or causing us to make non-strategic divestitures;
limiting our ability to obtain additional financing for working capital, capital expenditures, product development,
debt service requirements, acquisitions, and general corporate or other purposes; and
limiting our flexibility in planning for, or reacting to, changes in our business or market conditions and placing us
at a competitive disadvantage compared to our competitors who are less highly leveraged and who, therefore, may
be able to take advantage of opportunities that our leverage prevents us from exploiting.
•
Servicing our indebtedness requires a significant amount of cash. Our ability to generate sufficient cash depends on many
factors, some of which are not within our control.
Our ability to make payments on our indebtedness and to fund planned capital expenditures will depend on our ability
to generate cash in the future. To a certain extent, this is subject to general economic, financial, competitive, legislative,
regulatory, and other factors that are beyond our control. If we are unable to generate sufficient cash flows to service our debt
34
and meet our other commitments, we may need to restructure or refinance all or a portion of our debt, sell material assets or
operations, or raise additional debt or equity capital. We may not be able to effect any of these actions on a timely basis, on
commercially reasonable terms, or at all, and these actions may not be sufficient to meet our capital requirements. In addition,
any refinancing of our indebtedness could be at a higher interest rate, and the terms of our existing or future debt arrangements
may restrict us from effecting any of these alternatives. Any decline in the ratings of our corporate credit or the Notes or any
indications from the rating agencies that their ratings on our corporate credit or the Notes are under surveillance or review with
possible negative implications could increase our cost of financing and limit our ability to access the capital markets to meet
liquidity needs. Our failure to make the required interest and principal payments on our indebtedness could result in an event of
default under the agreements governing our other indebtedness, which may result in the acceleration of some or all of our
outstanding indebtedness. In the absence of sufficient resources to service our debt and meet our other commitments, we could
face substantial liquidity problems and might be required to dispose of material assets or operations to meet our debt service
and other obligations. Our Second Amended Credit Facility and the indenture that governs the Notes will restrict our ability to
dispose of assets and use the proceeds from any such disposition. We may not be able to consummate those dispositions or to
obtain the proceeds that we could realize from such dispositions and these proceeds may not be adequate to meet any debt
service obligations then due. These alternative measures may not be successful and may not permit us to meet our scheduled
debt service obligations.
We and our subsidiaries may be able to incur significant amounts of debt, which could exacerbate the risks associated with
our current indebtedness.
We and our subsidiaries may be able to incur substantial additional indebtedness in the future. Although the credit
agreement governing our Second Amended Credit Facility, the indenture governing the Notes and the agreements governing
our other indebtedness each contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a
number of significant qualifications and exceptions and, under certain circumstances, the amount of indebtedness that could be
incurred in compliance with these restrictions could be substantial.
The Indenture that governs the Notes and the credit agreement governing our Second Amended Credit Facility contain
restrictions that limit our flexibility in operating our business.
The Indenture that governs the Notes and the credit agreement governing our Second Amended Credit Facility each
contain various covenants that limit our ability to engage in specified types of transactions. These covenants limit the ability of
our subsidiaries to, among other things:
•
•
•
•
incur additional indebtedness and guarantee indebtedness;
issue certain preferred stock or similar equity securities;
pay dividends or make other distributions in respect of, or repurchase or redeem, our capital stock;
prepay, redeem or repurchase certain debt;
• make investments and loans;
•
sell assets;
•
•
•
•
incur liens;
enter into transactions with affiliates;
enter into agreements restricting our subsidiaries' ability to pay dividends; and
consolidate, merge or sell all or substantially all of our assets.
As a result of these and other covenants and restrictions, we are and will be limited in how we conduct our business,
and we may be unable to raise additional debt or equity financing to compete effectively or to take advantage of new business
opportunities. In addition, we may be required to maintain specified financial maintenance ratios and satisfy other financial
condition tests. The terms of any future indebtedness we may incur could include more restrictive covenants. We cannot assure
you that we will be able to maintain compliance with these covenants in the future and, if we fail to do so, that we will be able
to obtain waivers from the lenders and/or amend the covenants. A breach of any of these covenants, among others, could result
in a default under one or more of these agreements, including as a result of cross default provisions, which, if not cured or
waived, could result in our being required to repay these borrowings before their maturity. If we are unable to repay outstanding
borrowings when due, the lenders under our Second Amended Credit Facility have the right to proceed against the collateral
granted to them to secure the debt. If lenders under the Second Amended Credit Facility accelerate the debt thereunder, then the
obligations under the Notes could be accelerated. We cannot provide assurance that, if the indebtedness under our Second
Amended Credit Facility and the Notes were to be accelerated, our assets would be sufficient to repay in full that indebtedness
and our other indebtedness. If not cured or waived, such acceleration could have a material adverse effect on our business and
our prospects.
35
We may utilize derivative financial instruments to reduce our exposure to market risks from changes in interest rates on our
variable rate indebtedness and we may be exposed to risks related to counterparty credit worthiness or non-performance of
these instruments.
We may enter into pay-fixed interest rate swaps to limit our exposure to changes in variable interest rates. Such
instruments may result in economic losses should interest rates decline to a point lower than our fixed rate commitments. We
may be exposed to credit-related losses, which could impact the results of operations in the event of fluctuations in the fair
value of the interest rate swaps due to a change in the credit worthiness or non-performance by the counterparties to the interest
rate swaps.
Risks Related to Ownership of Our Common Stock
The interests of Magnus and Fila and any of their successors or transferees may conflict with other holders of our common
stock.
As of December 31, 2023, Magnus, which is wholly-owned by Fila, beneficially owned approximately 52.2% of our
outstanding common stock. Fila is able to control the election and removal of our directors and thereby effectively determine,
among other things, the payment of dividends, our corporate and management policies, including potential mergers or
acquisitions or asset sales, amendment of our amended and restated certificate of incorporation or amended and restated bylaws,
and other significant corporate transactions for so long as Magnus retains significant ownership of us. So long as Fila owns
Magnus and Magnus continues to own a significant amount of our voting power, even if such amount is less than 50%, Fila will
continue to be able to strongly influence or effectively control our decisions. The interests of Fila and Magnus may not coincide
with the interests of other holders of our common stock.
By controlling the election and removal of our directors, Fila is able to effectively determine the payment of dividends
on our common stock. Magnus may cause us to pay dividends on our common stock at times or in amounts that may not be in
the best interest of us or other holders of our common stock. For example, it may be in the interest of Magnus and Fila to cause
the payment of dividends on our common stock in order to satisfy obligations under loan agreements they may enter into from
time to time. See “- We cannot assure you that we will pay dividends on our common stock, and our indebtedness and other
factors could limit our ability to pay dividends on our common stock.”
In the ordinary course of its business activities, Fila and its affiliates may engage in activities where their interests
conflict with our interests or those of our shareholders. Except as may be limited by applicable law, Fila and its affiliates do not
have any duty to refrain from competing directly with us or engaging, directly or indirectly, in the same business activities or
similar business activities or lines of business in which we operate. Fila and its affiliates also may pursue acquisition
opportunities that may be complementary to our business and, as a result, those acquisition opportunities may not be available
to us. In addition, Fila and its affiliates may have an interest in us pursuing acquisitions, divestitures and other transactions that,
in its judgment, could enhance its investment, even though such transactions might involve risks to you.
In addition, the concentration of our ownership held by Magnus may delay, deter or prevent possible changes in
control of the company or a change in the composition of our board of directors and could preclude any unsolicited acquisition
of us, which may reduce the value of an investment in our common stock. Magnus may also transfer a substantial amount of our
common stock, including a controlling interest in Acushnet, to third parties. The interests of any such transferees may not
coincide with the interests of other holders of our common stock.
In the past, Magnus and Fila have entered into loan agreements, some of which have included pledges of our common
stock to their lenders. Magnus and Fila may agree to amend any existing loan agreements or enter into replacement or
additional loan agreements in the future. Although we have been informed by Magnus that the loan agreement that it entered
into in September 2017 has been refinanced such that the shares of our common stock held by Magnus are no longer pledged as
collateral, such agreement and any future loan agreements by Magnus and Fila could provide for pledges of shares of our
common stock or Fila’s interests in Magnus. Magnus has informed us in the past that the shares of our common stock held by it
were its only assets. Any transfer by Fila or Magnus as a result of its obligations to third parties or otherwise could have a
significant impact on our shareholding structure and our corporate governance and could materially decrease the market price of
shares of our common stock. In addition, the perception that such a transfer could occur could materially depress the market
price of shares of our common stock. Such transfers of our common stock may also result in a change of control under certain
agreements that we enter into from time to time, which could result in a default under such agreements. Under our credit
agreement, for example, it is a change of control if any person (other than certain permitted parties, including Fila) becomes the
beneficial owner of 35% or more of our outstanding common stock. As a result, if a third party were to acquire beneficial
ownership of 35% or more of our outstanding common stock, it would result in a change of control under our credit agreement,
which is an event of default under our credit agreement. In addition, a change of control under our outstanding equity award
agreements and other employment arrangements may result in the vesting of outstanding equity awards and the acceleration of
36
benefits or other payments under certain employment arrangements. A change of control may also result in a default or other
negative consequence under our other outstanding agreements or instruments.
We are a “controlled company” within the meaning of the rules of the NYSE. As a result, we will qualify for, and may
rely upon, exemptions from certain corporate governance requirements that would otherwise provide protection to
shareholders of other companies.
Under the corporate governance standards of the NYSE rules, a company of which more than 50% of the voting
power is held by an individual, group, or another company is a “controlled company” and may elect not to comply with certain
corporate governance requirements, including:
•
•
•
•
•
•
the requirement that a majority of our board of directors consist of “independent directors” as defined under the
rules of the NYSE;
the requirement that we have a compensation committee that is composed entirely of independent directors with
a written charter addressing the committee’s purpose and responsibilities;
the requirement that we have a nominating and corporate governance committee that is composed entirely
of independent directors with a written charter addressing the committee’s purpose and responsibilities;
the requirement for an annual performance evaluation of the compensation and nominating and
corporate governance committees;
the compensation committee be explicitly charged with hiring and overseeing compensation
consultants, legal counsel, and other committee advisors; and
the compensation committee be required to consider, when engaging compensation consultants, legal
counsel, or other advisors, certain independence factors, including factors that examine the relationship
between the consultant or advisor’s employer and us.
Magnus, which is wholly-owned by Fila, controls 33,110,486 shares, or approximately 52.2%, of our outstanding
common stock as of December 31, 2023. As a result, we qualify as a “controlled company” within the meaning of the
corporate governance standards of the NYSE. Consequently, we are not required to comply with certain of the NYSE corporate
governance requirements, such as the requirement to have a majority of independent directors on our Board of Directors, or the
requirement to have a compensation committee and nominating and corporate governance committee comprised of independent
directors. We may rely on one or more of the exemptions going forward. Accordingly, you may not have the same protections
afforded to shareholders of companies that are subject to all of the corporate governance requirements of the NYSE.
The market price of shares of our common stock may be volatile, which could cause the value of your investment to decline.
The market price of our common stock may be highly volatile and could be subject to wide fluctuations. Securities
markets worldwide experience significant price and volume fluctuations. This market volatility, as well as general economic,
market or political conditions, could reduce the market price of shares of our common stock in spite of our operating
performance. In addition, our results of operations could be below the expectations of public market analysts and investors due
to a number of potential factors, including variations in our quarterly results of operations, additions or departures of key
management personnel, failure to meet analysts’ earnings estimates, publication of research reports about our industry,
litigation and government investigations, changes or proposed changes in laws or regulations or differing interpretations or
enforcement thereof affecting our business or the golf industry, adverse market reaction to any indebtedness we may incur or
securities we may issue in the future, changes in market valuations of similar companies or speculation in the press or
investment community, announcements by our competitors of significant contracts, acquisitions, dispositions, strategic
partnerships, joint ventures or capital commitments, adverse publicity about our industry in or individual scandals, and in
response the market price of shares of our common stock could decrease significantly.
In the past few years, stock markets have experienced significant price and volume fluctuations. In the past, following
periods of volatility in the overall market and the market price of a company’s securities, securities class action litigation has
often been instituted against these companies. This litigation, if instituted against us, could result in substantial costs and a
diversion of our management’s attention and resources.
37
Our share repurchase program could be suspended or terminated, may not enhance long-term stockholder value, and may
increase the volatility of the price of our stock and diminish our cash reserves.
During 2023, our Board of Directors authorized us to repurchase up to an additional $250.0 million of our issued and
outstanding common stock, bringing the total authorization up to $700.0 million. On February 15, 2024, our Board of Directors
authorized us to repurchase up to an additional $300.0 million of our issued and outstanding common stock, bringing the total
authorization up to $1.0 billion since the share repurchase program was established in 2018. Our repurchase program does not
have an expiration date and does not obligate us to repurchase any specific dollar amount or to acquire any specific number of
shares. Decisions regarding the repurchase of shares will depend on many factors, such as our financial condition, earnings,
capital requirements, debt service obligations, covenants associated with certain of our debt service obligations, associated
taxes, legal requirements and regulatory constraints. Our share repurchase program could affect the price of our stock and
increase volatility and may be suspended or terminated at any time, which may result in a decrease in the trading price of our
stock. We cannot guarantee that we will repurchase shares in the future or conduct share repurchase programs.
If we are unable to maintain effective internal controls over financial reporting, we may not be able to produce timely and
accurate financial statements, which could have a material adverse effect on our business and stock price.
If we fail to maintain effective internal controls over financial reporting or if we identify material weaknesses in our
internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial
statements which could cause the market price of our common stock to decline, and we could become subject to sanctions or
investigations by the stock exchange upon which our common stock is listed, the SEC or other regulatory authorities, and we
could be delayed in delivering financial statements, which could result in a default under the agreements governing our
indebtedness.
We cannot assure you that we will pay dividends on our common stock, and our indebtedness and other factors could limit
our ability to pay dividends on our common stock.
We intend to pay cash dividends on our common stock, subject to the discretion of our board of directors and our
compliance with applicable law, and depending on, among other things, our results of operations, capital requirements,
financial condition, contractual restrictions, restrictions in our debt agreements and in any equity securities, business prospects
and other factors that our board of directors may deem relevant. Because we are a holding company and have no direct
operations, we expect to pay dividends, if any, only from funds we receive from our subsidiaries, which may further restrict our
ability to pay dividends as a result of the laws of their jurisdiction of organization, agreements of our subsidiaries or covenants
under any existing and future outstanding indebtedness we or our subsidiaries incur. Certain of our existing agreements
governing indebtedness, including our credit agreement, restrict our ability to pay dividends on our common stock. We expect
that any future agreements governing indebtedness will contain similar restrictions. For more information, see "Market for
Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities – Dividend Policy”, Item
5 of Part II to this report, and "Management’s Discussion and Analysis of Financial Condition and Results of Operations—
Liquidity and Capital Resources”, Item 7 of Part II to this report.
Our dividend policy entails certain risks and limitations, particularly with respect to our liquidity. By paying cash
dividends rather than investing that cash in our business or repaying debt, we risk, among other things, slowing the pace of our
growth and having insufficient cash to fund our operations or unanticipated capital expenditures or limiting our ability to incur
additional borrowings.
Although we expect to pay dividends according to our dividend policy, we may not pay dividends according to our
policy, or at all, if, among other things, we do not have the cash necessary to pay our intended dividends.
The declaration and payment of dividends will be determined at the discretion of our board of directors, acting in
compliance with applicable law and contractual restrictions. However, the composition of our board of directors is determined
by Magnus, which is wholly-owned by Fila, which controls a majority of the voting power of all outstanding shares of our
common stock. Accordingly, the decision to declare and pay dividends on our common stock in the future, as well as the
amount of each such dividend payment, may also depend on the amounts Magnus needs to fund potential interest payments
under any future equity or debt financing.
38
Acushnet Holdings Corp. is a holding company with no operations of its own and, as such, it depends on its subsidiaries for
cash to fund all of its operations and expenses, including future dividend payments, if any.
Our operations are conducted almost entirely through our subsidiaries and our ability to generate cash to make future
dividend payments, if any, is highly dependent on the earnings and the receipt of funds from our subsidiaries via dividends or
intercompany loans, which may be restricted as a result of the laws of the jurisdiction of organization of our subsidiaries,
agreements of our subsidiaries or covenants under any existing and future outstanding indebtedness we or our subsidiaries
incur.
You may be diluted by the future issuance of additional common stock in connection with our incentive plans, acquisitions
or otherwise.
As of December 31, 2023, we had 436,570,757 shares of common stock authorized but unissued. Our amended and
restated certificate of incorporation authorizes us to issue these shares of common stock and securities convertible into,
exchangeable for, or exercisable into our common stock for the consideration and on the terms and conditions established by
our board of directors in its sole discretion, whether in connection with acquisitions or otherwise. We have 5,476,366 shares
available for issuance under our 2015 Incentive Plan. Any shares of common stock that we issue, under our 2015 Incentive Plan
or other equity incentive plans that we may adopt in the future, dilute the percentage ownership held by our existing
shareholders.
Future sales, or the perception of future sales, by us or our existing shareholders in the public market could cause the
market price for our common stock to decline.
The sale of substantial amounts of shares of our common stock in the public market, or the perception that such sales
could occur, including sales by us or our shareholders, could harm the prevailing market price of shares of our common stock.
These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the
future at a time and at a price that we deem appropriate. These factors could also make it more difficult for us to raise additional
funds through future offerings of our shares of common stock or other securities.
Anti-takeover provisions in our organizational documents and Delaware law might discourage or delay acquisition attempts
for us that you might consider favorable.
Our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that may
make the merger or acquisition of Acushnet more difficult without the approval of our board of directors. Among other things:
•
•
•
•
•
although we do not have a stockholder rights plan, these provisions would allow us to authorize the issuance of
undesignated preferred stock in connection with a stockholder rights plan or otherwise, the terms of which may be
established and the shares of which may be issued without stockholder approval, and which may include super
voting, special approval, dividend, or other rights or preferences superior to the rights of the holders of common
stock;
these provisions require advance notice for nominations of directors by stockholders and for stockholders to
include matters to be considered at our annual meetings;
these provisions prohibit stockholder action by written consent;
these provisions provide for the removal of directors only upon affirmative vote of holders of at least 66⅔% of the
shares of common stock entitled to vote generally in the election of directors if Magnus and its affiliates hold less
than 50% of our outstanding shares of common stock; and
these provisions require the amendment of certain provisions only by the affirmative vote of at least 66⅔% of the
shares of common stock entitled to vote generally in the election of directors if Magnus and its affiliates hold less
than 50% of our outstanding shares of common stock.
Further, as a Delaware corporation, we are also subject to provisions of Delaware law, which may impair a takeover
attempt that our shareholders may find beneficial. These anti-takeover provisions and other provisions under Delaware law
could discourage, delay or prevent a transaction involving a change in control of Acushnet, including actions that our
shareholders may deem advantageous, or negatively affect the trading price of our common stock. These provisions could also
discourage proxy contests and make it more difficult for you and other shareholders to elect directors of your choosing and to
cause us to take other corporate actions you desire.
39
If securities analysts do not publish research or reports about our business or if they downgrade our stock or our sector, our
stock price and trading volume could decline.
The trading market for our common stock relies in part on the research and reports that industry or financial analysts
publish about us or our business or industry. We do not control these analysts. Furthermore, if one or more of the analysts who
do cover us downgrade our stock or our industry, or the stock of any of our competitors, or publish inaccurate or unfavorable
research about our business or industry, the price of our stock could decline. If one or more of these analysts ceases coverage of
us or fails to publish reports on us regularly, we could lose visibility in the market, which in turn could cause our stock price or
trading volume to decline.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None
ITEM 1C. CYBERSECURITY
To more effectively prevent, detect and respond to cyber and information security threats, we maintain a global cyber
security risk management program designed to identify, assess, and manage material risks from cybersecurity threats. Our risk
management program is supervised by a dedicated Senior Director of Cyber & Information Security (the “SDCIS”), who has
more than 30 years of experience in cybersecurity and information technology in both private industry and the United States Air
Force. The SDCIS is responsible for leading an enterprise-wide cyber security strategy, policy, standards, architecture and
processes. The SDCIS reports directly to our Executive Vice President and Chief Technology and Digital Officer (the
“CTDO”). For information regarding the relevant expertise and qualifications of our CTDO, see "Information About Our
Executive Officers" included in Part I of this report. The cyber risk management program is based on a leading cyber risk
controls framework and includes periodic maturity and risk assessments.
Our Board of Directors has established oversight mechanisms to manage risks from cybersecurity threats. The Audit
Committee has responsibility for overseeing our cyber and information security program, which institutes and maintains
controls for our systems, applications, and databases and for our third-party providers. The Audit Committee receives quarterly
updates on the status of the cyber risk management program from the CTDO which include, among other things, a review of a
dynamic and emerging cyber threat landscape, security events of note, updates on cyber risks and threats and the status of
projects to strengthen and mature our cyber and information security program. Additionally, the SDCIS chairs the
Cybersecurity Risk Committee, which seeks to drive awareness, ownership and alignment across broad governance and risk
stakeholder groups for enhanced effectiveness of cybersecurity risk management and reporting. Members of senior
management also discuss cybersecurity developments with the CTDO and SDCIS between meetings. Top identified cyber risks,
metrics and measures of the effectiveness of the cyber risk management program are reviewed quarterly at the Cybersecurity
Risk Committee and Company Risk Management Committee. Our Board also receives periodic updates from the CTDO and
the SDCIS relating to cyber and information security risks.
We annually engage third parties (as well as our own internal audit department) to audit our cyber and information
security programs, processes and controls, and the findings of these parties are reported to the Audit Committee and the full
Board. These audits also include annual penetration testing and web application assessments by third parties to test control
effectiveness against threat actor attack techniques.
Our processes also address cybersecurity risks associated with our use of third-party service providers. We oversee
third-party service providers by conducting vendor diligence upon onboarding and ongoing monitoring. Vendors are assessed
for risk based on the nature of their service, access to data and systems and supply chain risk and, based on that assessment, we
conduct diligence that may include completing security questionnaires, onsite evaluation, penetration test and policy reviews,
and scans or other technical evaluations. We also partner and actively engage with key vendors and industry participants to
share intelligence, best practices and benchmarking data with other member organizations of the Retail and Hospitality
Information Sharing and Analysis Center, which aims to help its members improve their security posture and resilience against
cyber-attacks.
We maintain a Cyber and Data Security Incident Response Plan to more effectively respond to cyber and information
security events. Periodically, we conduct a cybersecurity incident response tabletop exercise to test response actions of the
Security Incident Response Team, to facilitate group discussions regarding the effectiveness of our cybersecurity incident
response strategies and tactics and to update the plan with any lessons learned from the exercise.
Our Security Awareness Program includes training that reinforces cybersecurity risk management policies, standards
and practices, as well as the expectation that employees comply with these policies. The Security Awareness Program also
trains personnel on how to identify potential cybersecurity risks and protect our resources and information. This training is
mandatory for all relevant employees globally on a periodic basis, and it is supplemented by firmwide testing initiatives,
40
including quarterly phishing tests. We provide specialized security training for certain employees such as application
developers, human resources and finance teams. Finally, our Global Privacy Program requires all relevant employees to take
periodic awareness training on data privacy. This privacy-focused training includes information about the relevant laws,
confidentiality and security, as well as how to effectively report and respond to unauthorized access to or use of personal
information.
As of the date of this report, we have not experienced a cybersecurity incident that resulted in a material effect on our
business strategy, results of operations or financial condition. Despite our continuing efforts, we cannot guarantee that our
cybersecurity safeguards will prevent breaches or breakdowns of our or our third-party service providers’ information
technology systems, particularly in the face of continually evolving cybersecurity threats and increasingly sophisticated threat
actors. For more information about the cybersecurity risks we face, see the risk factor in Item 1A entitled "We rely on complex
information systems for management of our manufacturing, distribution, sales and other functions. If our information systems
fail to perform these functions adequately or if we experience an interruption in our operations, including a breach in
cybersecurity, our business, financial condition and results of operations could be materially adversely affected."
41
Sugarland, Texas
Golf ball recycling and distribution center
87,214 Leased
ITEM 2. PROPERTIES
Our material facilities are located worldwide as shown in the table below.
Type
Facility Size(1)
Leased/Owned
Headquarters and golf ball R&D
222,720 Owned
Location
Fairhaven, Massachusetts
Golf Balls
North Dartmouth, Massachusetts
New Bedford, Massachusetts
Golf ball manufacturing
Golf ball manufacturing
Amphur Pluakdaeng Rayong, Thailand
Golf ball manufacturing
New Bedford, Massachusetts
Golf ball customization and distribution
center
Fairhaven, Massachusetts
Golf ball packaging
New Bedford, Massachusetts
Golf ball advanced engineering and ball
cavity manufacturing
Golf Clubs, Wedges and Putters
Carlsbad, California
Carlsbad, California
Oceanside, California
San Marcos, California
Encinitas, California
Tokyo, Japan
Golf club assembly
Tour testing and golf club R&D
Digital media studio
Putter research
Putter fitting and sales
Golf club assembly
FootJoy
Fuzhou, Fujian, China (40% owned joint
venture)
Golf shoe manufacturing and distribution
center
Brockton, Massachusetts
Golf shoe R&D
Sriracha Chonburi, Thailand
Golf glove manufacturing
Sales Offices and Distribution Centers (used by multiple reportable segments)
Fairhaven, Massachusetts
Vista, California
Lakeville, Massachusetts
Cambridgeshire, United Kingdom
East Coast customization and distribution
center
West Coast distribution center and golf
bag embroidery
East Coast customization and distribution
center
Sales office and distribution center, as well
as golf club assembly and golf ball
customization
Helmond, The Netherlands
Sales office and distribution center
Victoria, Australia
Sales office and distribution center, as well
as golf club assembly
Ontario, Canada
Sales office and distribution center
Randburg, South Africa
Yongin-shi, Korea
Sales office and distribution center, as well
as golf club assembly
Distribution center, golf ball customization
and golf club assembly
Product Testing and Fitting Centers (Golf Balls and Golf Clubs)
Acushnet, Massachusetts
East Coast product testing and fitting for
golf balls and golf clubs
Oceanside, California
West Coast product testing and fitting for
golf balls and golf clubs
(Titleist Performance Institute)
(1)
Facility size represents square footage of the building, unless otherwise noted.
179,602 Owned
244,091 Owned
230,003 Owned
438,007 Owned
49,580 Owned
34,000 Leased
165,485 Leased
50,000 Leased
10,433 Leased
19,200 Leased
3,754 Leased
45,274 Leased
525,031 Building Owned/
Land Leased
146,000 Leased
112,847 Building Owned/
Land Leased
185,370 Owned
102,319 Leased
555,695 Leased
156,326 Owned
69,965 Leased
37,027 Leased
102,057 Leased
25,060 Leased
174,982 Leased
22 acres total, including
7,662 square foot building
30 acres total, including
20,539 square foot building
Owned
Owned
We have additional sales offices and facilities in Colorado, Hawaii, Utah, New Zealand, Malaysia, Singapore, Hong
Kong, Taiwan, Japan, Korea, Thailand, Scotland, Sweden, France, Germany and Switzerland. In the opinion of our
management, our properties are adequate and suitable for our business as presently conducted and are adequately maintained.
42
ITEM 3. LEGAL PROCEEDINGS
We are party to lawsuits associated with the normal conduct of our businesses and operations. It is not possible to
predict the outcome of the pending actions, and, as with any litigation, it is possible that some of these actions could be decided
unfavorably.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
Executive Officers
INFORMATION ABOUT OUR EXECUTIVE OFFICERS
Set forth below is information concerning the Company’s executive officers as of February 29, 2024.
Name
David Maher
Sean Sullivan
Mary Lou Bohn
Steven Pelisek
John (Jay) Duke, Jr.
Christopher Lindner
Roland Giroux
Brendan Reidy
Roger Czuchra
Position
Age
56 President and Chief Executive Officer
56 Executive Vice President and Chief Financial Officer
63 President, Titleist Golf Balls
63 President, Titleist Golf Clubs
55 President, Titleist Golf Gear
55 President, FootJoy
63 Executive Vice President, Chief Legal Officer and Corporate Secretary
46 Executive Vice President, Chief People Officer
54 Executive Vice President, Chief Technology and Digital Officer
Nicholas Mohamed
48 Vice President, Corporate Controller and Principal Accounting Officer
David Maher, 56, joined the Company in 1991 and was appointed President and Chief Executive Officer in January
2018. From 2001 through 2017, Mr. Maher held a variety of roles at the Company’s Fairhaven, Massachusetts headquarters,
including Vice President, Titleist U.S. Sales; Senior Vice President, Titleist Worldwide Sales and Global Operations; and Chief
Operating Officer. Prior to that, Mr. Maher spent several years in Northern California as a Titleist Sales Representative and
Northwest Regional Sales Manager, and previously gained valuable experience in the Company’s professional development
program, working at the Company’s golf ball operations in Massachusetts, the FootJoy factory in Brockton, Massachusetts and
in the Company’s Southern California golf club operations. Mr. Maher holds a B.S. in Finance from Babson College.
Sean Sullivan, 56, joined the Company and was appointed Executive Vice President and Chief Financial Officer in
June 2023. Prior to joining the Company, Mr. Sullivan served as the Executive Vice President and Chief Financial Officer of
SiriusXM Holdings, Inc., a position he held since October 2020. Prior to joining SiriusXM Holdings, Inc., Mr. Sullivan served
as Executive Vice President and Chief Financial Officer of AMC Networks, Inc. from 2011 to September 2020, Chief
Corporate Officer of RMH from 2010 to 2011, Chief Financial Officer of HiT Entertainment from 2009 to 2010 and Chief
Financial Officer and President of Commercial Print and Packaging division of Cenveo, Inc. from 2005 to 2008. From October
2016 to June 2023, Mr. Sullivan served on the Company's Board of Directors. Mr. Sullivan holds an M.B.A. from Columbia
Business School and a B.B.A. in Accounting from the University of Notre Dame.
Mary Lou Bohn, 63, joined the Company in 1987 and was appointed President, Titleist Golf Balls in 2016. Prior to
that, Ms. Bohn held positions at the Company of Executive Vice President, Titleist Golf Balls and Communications; Vice
President Golf Ball Marketing and Titleist Communications; Vice President, Advertising & Communications; and Director,
Titleist Advertising. Ms. Bohn holds a B.S. in Business Administration from the University of New Hampshire.
Steven Pelisek, 63, joined the Company in 1993 and was appointed President, Titleist Golf Clubs in 2016. Prior to
that, Mr. Pelisek held positions at the Company of General Manager, Titleist Golf Clubs and Vice President, Club Sales for
both the Titleist and Cobra golf club brands. In addition, Mr. Pelisek has held both Marketing and Field Sales positions with the
Company and with Lynx Golf. Mr. Pelisek holds a B.S. in Engineering and an M.S. in Civil Engineering, both from the
University of Maryland.
John (Jay) Duke, Jr., 55, joined the Company and was appointed President, Titleist Golf Gear in 2014. Prior to
joining the Company, Mr. Duke was Vice President and Global Franchise Leader for Hasbro - Transformers Global Brand from
2012-2014, President of Karhu Holdings BV from 2008-2012, and held senior general management and strategy positions with
43
Converse Inc. (a subsidiary of Nike, Inc.). Mr. Duke also spent time earlier in his career working for Morgan Stanley’s
Investment Banking Division and in general management positions with Reebok International Ltd. Mr. Duke holds a B.A. in
Economics and History from Boston College and an M.B.A. from Duke University.
Christopher Lindner, 55, joined the Company and was appointed President, FootJoy in 2016. Prior to joining the
Company, Mr. Lindner held positions at Wolverine Worldwide Inc. from 2010 to 2016, including as President of Keds, and
Chief Marketing Officer and Senior Vice President of North America Sales for Saucony. Prior to 2010, Mr. Lindner held
various positions with Nike, Inc., including as Vice President of Global Marketing for Converse and Vice President of Global
Marketing for Bauer Hockey, and leadership positions with Electronic Arts. Mr. Lindner graduated from the University of St.
Thomas with a B.A. in Business Administration – Management.
Roland Giroux, 63, joined the Company in 2000 and was appointed Executive Vice President, Chief Legal Officer
and Corporate Secretary in July 2021. Prior to that, Mr. Giroux held a number of positions with the Company, most recently as
Vice President and Associate General Counsel beginning in 2017. Prior to joining the Company, Mr. Giroux was Counsel for
Fortune Brands, Inc. and worked at Chadbourne and Parke LLP in the Corporate and Project Finance practice groups. Mr.
Giroux holds a B.S. in Chemical Engineering from Rensselaer Polytechnic Institute, an M.B.A. from Long Island University
and a J.D. from Pace University.
Brendan Reidy, 46, joined the Company in January 2019 and was appointed Executive Vice President, Chief People
Officer in February 2021. Prior to that, Mr. Reidy was the Company’s Senior Vice President, Chief Human Resources Officer
from January 2019 to February 2021. Prior to joining the Company, he was Vice President Human Resources - Organizational
Effectiveness at Biogen, Inc. from January 2015 to April 2018, where he had responsibility for talent management, global
learning, culture initiatives and people analytics, and also led HR for the global R&D organization and Global Commercial
Operations. Prior to Biogen, Mr. Reidy worked at The Proctor & Gamble Company and Gillette and held a number of positions
in HR including as Country HR Manager for Costa Rica and as a leader of key integration projects for the integration of The
Proctor & Gamble Company and Gillette. Mr. Reidy holds a B.A. in English from Stonehill College.
Roger Czuchra, 54, joined the Company in November 2022 and was appointed Executive Vice President, Chief
Technology and Digital Officer. Prior to joining the Company, Mr. Czuchra was the Chief Information Officer at Centric
Brands from May 2019 to November 2022 and Chief Information Officer, North & Central America at Legrand from July 2015
to May 2019, where he was responsible for developing a global technology foundation and creating a digital-first strategy. Mr.
Czuchra has extensive experience with business analytics and transforming the way diverse, global organizations leverage
technology for long-term success. Prior to Legrand, he worked at Stanley Black & Decker. Mr. Czuchra holds a B.S. in
Business Management from Albertus Magnus College and a Master of Science in Organizational Leadership from Quinnipiac
University School of Business.
Nicholas Mohamed, 48, joined the Company in April 2023 and was appointed Vice President, Controller and
Principal Accounting Officer in June 2023. Prior to joining the Company, Mr. Mohamed served as the Global Controller of
Converse, Inc. from February 2021 to April 2023. From 2016 through February 2021, Mr. Mohamed was Converse, Inc.'s
Global Accounting Director. Prior to that, Mr. Mohamed served as Senior Finance Executive of Media General, Inc. in 2015, as
Vice President, Controller of LIN Media LLC from 2009 to 2014 and as Director, Finance Mergers and Acquisitions at Sensata
Technologies, Inc. from 2007 to 2008. Mr. Mohamed holds a B.S. in Accounting from Georgetown University.
44
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our common stock has been listed on the New York Stock Exchange (the “NYSE”) under the symbol “GOLF” since
October 28, 2016.
On February 23, 2024, the last reported sales price of our common stock on the NYSE was $69.46 per share and there
were ten record holders of our common stock.
Performance Graph
Set forth below is a graph comparing the cumulative total stockholder return on our common stock against the
cumulative total return of the S&P 500 Index and the S&P 500 Consumer Durables & Apparel Index for the period
commencing December 31, 2018 through December 31, 2023. Index data was furnished by FactSet. The graph assumes that
$100 was invested on December 31, 2018 in each of our common stock, the S&P 500 Index, and the S&P 500 Consumer
Durables & Apparel Index and that all dividends were reinvested.
Comparison of Cumulative Total Returns
31-Dec-18
31-Dec-19
31-Dec-20
31-Dec-21
31-Dec-22
31-Dec-23
$100.00
$100.00
$100.00
$157.83
$132.62
$135.42
$200.73
$157.02
$162.76
$266.35
$202.09
$199.15
$216.51
$165.49
$140.69
$326.94
$209.00
$166.87
Acushnet Holdings Corp.
S&P 500
S&P 500 Consumer Durables & Apparel
Recent Sales of Unregistered Securities
None.
Dividend Policy
We paid a total of $52.5 million, $52.2 million and $49.2 million in dividends on our common stock during the years
ended December 31, 2023, 2022 and 2021, respectively. We expect to pay future quarterly cash dividends on our common
stock, subject to the discretion of our Board of Directors and our compliance with applicable law, and depending on, among
other things, our results of operations, capital requirements, financial condition, contractual restrictions, restrictions in our debt
agreements and in any equity securities, business prospects and other factors that our Board of Directors may deem relevant.
Our dividend policy may be changed or terminated in the future at any time without advance notice. For a description of the
restrictions on our ability to pay dividends under our debt agreements, see “Item 7. - Management’s Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital Resources” and “Notes to Consolidated Financial
Statements – Note 11 – Debt and Financing Arrangements.”
45
Issuer Purchases of Equity Securities
On June 7, 2018, our Board of Directors authorized us to repurchase up to an aggregate of $20.0 million of our issued
and outstanding common stock from time to time. On February 14, 2019, our Board of Directors authorized us to repurchase up
to an additional $30.0 million of our issued and outstanding common stock. On February 11, 2020, our Board of Directors
authorized us to repurchase up to an additional $50.0 million of our issued and outstanding common stock. On October 20,
2021, our Board of Directors authorized us to repurchase up to an additional $100.0 million of our issued and outstanding
common stock. On April 28, 2022, our Board of Directors authorized us to repurchase up to an additional $150.0 million of our
issued and outstanding common stock. On July 26, 2022, our Board of Directors authorized us to repurchase up to an additional
$100.0 million of our issued and outstanding common stock. On February 9, 2023, the Board of Directors authorized us to
repurchase up to an additional $250.0 million of our issued and outstanding common stock, bringing the total authorization up
to $700.0 million. The repurchase program will remain in effect until completed or until terminated by the Board of Directors.
The following table provides information relating to the Company’s purchase of common stock for the fourth quarter
of 2023:
Period
Total number of
shares
purchased
Average price
paid per share
Total number of shares
purchased as part of
publicly announced
plans or programs
Approximate dollar value of shares
that may yet be purchased under
the plans or programs (2)
(in thousands)
October 1, 2023 - October 31, 2023
November 1, 2023 - November 30, 2023 (1)
December 1, 2023 - December 31, 2023
Total
393,594 $
1,889,994
52,000
2,335,588 $
52.45
54.83
60.19
54.55
_____________________________________________________________________________
393,594 $
1,889,994
52,000
2,335,588
181,742
78,107
74,977
(1)
In connection with our share repurchase program, we have entered into certain share repurchase agreements with Magnus
Holdings Co., Ltd. ("Magnus"), a wholly-owned subsidiary of Fila Holdings Corp., to purchase from Magnus an equal
amount of our common stock as we purchase on the open market at the same weighted average per share price. In relation
to certain of these agreements, we purchased 1,824,994 shares of our common stock from Magnus for an aggregate of
$100.0 million on November 3, 2023, in satisfaction of our obligations under our share repurchase agreements with
Magnus. See “Notes to Consolidated Financial Statements-Note 16-Common Stock,” Item 8 of Part II, included elsewhere
in this report, for a description of our Magnus share repurchase agreements.
(2) On February 15, 2024, the Board of Directors authorized us to repurchase up to an additional $300.0 million of our issued
and outstanding common stock, bringing the total authorization up to $1.0 billion since the share repurchase program was
established in 2018.
ITEM 6. Reserved
46
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion contains management’s discussion and analysis of our financial condition and results of
operations and should be read together with “Item 1A – Risk Factors” and our audited consolidated financial statements and
the notes thereto included elsewhere in this Annual Report. This discussion contains forward-looking statements that reflect our
plans, estimates and beliefs and involve numerous risks and uncertainties, including but not limited to those described in the
“Risk Factors” section of this report. Actual results may differ materially from those contained in any forward-looking
statements. You should carefully read the “Special Note Regarding Forward-Looking Statements” section of this report
following the Table of Contents.
Overview
We are the global leader in the design, development, manufacture and distribution of performance-driven golf
products, and these products are widely recognized for their quality excellence. Today, we are the steward of two of the most
revered brands in golf—Titleist, one of golf’s leading performance equipment brands, and FootJoy, one of golf’s leading
performance wearable brands.
Our target market is dedicated golfers, who are the cornerstone of the worldwide golf industry. These dedicated golfers
are avid and skill-biased, prioritize performance and commit the time, effort and money to improve their game. We seek to
leverage a pyramid of influence product and promotion strategy, whereby our products are the most played by the world's best
players, creating aspirational appeal for a broad range of golfers who want to emulate the performance of the game’s best
players.
We believe our differentiated focus on performance and quality excellence, enduring connections with dedicated
golfers, and favorable and market-differentiating mix of consumable and durable products have been the key drivers of our
financial performance.
Basis of Presentation
The accompanying results have been prepared in conformity with accounting principles generally accepted in the
United States (“U.S. GAAP”) and include the accounts of Acushnet Holdings Corp. ("the Company"), our wholly-owned
subsidiaries and less than wholly-owned subsidiaries, including a variable interest entity (“VIE”) in which we are the primary
beneficiary. All intercompany balances and transactions have been eliminated in consolidation.
We have four reportable segments. These segments include Titleist golf balls, Titleist golf clubs, Titleist golf gear and
FootJoy golf wear. Segment operating income includes directly attributable expenses and certain shared costs of corporate
administration that are allocated to the reportable segments, but excludes certain other costs, such as interest expense, net;
restructuring costs; the non-service cost component of net periodic benefit cost; transaction fees; as well as other non-operating
gains and losses that are not allocated to the reportable segments.
Key Factors Affecting Our Results of Operations
Rounds of Play
We generate substantially all of our sales from the sale of golf-related products, including golf balls, golf clubs, golf
shoes, golf gloves, golf gear and golf apparel. The demand for golf-related products in general, and golf balls in particular, is
directly related to the number of golf participants and the number of rounds of golf being played by these participants. While
rounds of play had been relatively stable for years, the game experienced an approximate 8% global increase in rounds in both
2020 and 2021 as dedicated golfers took full advantage of favorable weather, hybrid work schedules and an increase in
discretionary time due to the circumstances attendant to the COVID-19 pandemic. Golf remained in high demand in 2022 and
2023, with the number of rounds played in the U.S. approximately 16% and 20% higher, respectively, than the number of
rounds played in 2019. We anticipate that rounds of golf played will remain resilient in 2024, driven by golfer demographics,
dedicated golfers, increased participation and economic conditions.
Economic Conditions
Our products are recreational in nature and are therefore discretionary purchases for consumers. Consumers are
generally more willing to spend their time and money to play golf and make discretionary purchases of golf products when
economic conditions are favorable and when consumers feel confident and prosperous. Discretionary spending on golf and the
golf products we sell is affected by consumer spending habits, as well as by many macroeconomic factors, including general
business conditions, stock market prices and volatility, corporate spending, housing prices, the rate of inflation, interest rates,
47
the availability of consumer credit, taxes and consumer confidence in future economic conditions. Consumers may reduce or
postpone purchases of our products as a result of shifts in consumer spending habits as well as during periods when economic
uncertainty increases, disposable income is lower, or during periods of actual or perceived unfavorable economic conditions.
Demographic Factors
Golf is a recreational activity that requires time and money. The golf industry has been principally driven by the age
cohort of 30 years and above, primarily “gen-xers,” “baby boomers” and, increasingly, "millennials" who have the time and
money to engage in the sport. Since a significant number of baby boomers have yet to retire, we anticipate growth in spending
from this demographic, as it has been demonstrated that rounds of play increase significantly as those in this cohort reach
retirement. Further, we also believe that the percentage of women golfers will continue to grow, as a higher percentage of new
golfers in recent years have been women. Beyond the gen-x and baby boomer generation, promising developments in golf
include the generational shift with millennial golfers making their marks at both professional and amateur levels and the
increase in the number of juniors (ages 6-17) who play golf in recent years.
Golf participation among younger generations and certain socioeconomic and ethnic groups may not prove to be as
popular as it is among older "millennials" and the current gen-x and baby boomer generations. In such case, sales of our
products could be negatively impacted.
Weather Conditions
Weather conditions in most parts of the world, including our primary geographic markets, generally restrict golf from
being played year-round, with many of our on-course retail customers closed during the cold weather months and, to a lesser
extent, during the hot weather months. Unfavorable weather conditions in our major markets, such as a particularly long winter,
a cold and wet spring, or an extremely hot summer, would reduce the number of playable days and rounds played in a
given year, which would result in a decrease in the amount spent by golfers and golf retailers on our products, particularly with
respect to consumable products such as golf balls and golf gloves. In addition, unfavorable weather conditions and natural
disasters can adversely affect the number of custom club fitting and trial events that we can perform during the key selling
period. Unusual or severe weather conditions throughout the year, such as storms or droughts or other water shortages, can
negatively affect golf rounds played both during the events and afterward, as weather damaged golf courses are repaired and
golfers focus on repairing the damage to their homes, businesses and communities. Consequently, sustained adverse weather
conditions, especially during the warm weather months, could impact our sales. Adverse weather conditions may have a greater
impact on us than other golf equipment companies as we have a large percentage of consumable products in our product
portfolio, and the purchase of consumable products are more dependent on the number of rounds played in a given year.
Seasonality
In general, during the first quarter, we begin selling our products into the golf retail channel for the new golf season.
This initial sell-in generally continues into the second quarter. Our second-quarter sales are significantly affected by the amount
of sell-through, in particular the amount of higher value discretionary purchases made by customers, which drives the level of
reorders of the products sold during the first quarter. Our third-quarter sales are generally dependent on reorder business, and
are generally lower than the second quarter as many retailers begin decreasing their inventory levels in anticipation of the end
of the golf season. Our fourth-quarter sales are generally less than the other quarters due to the end of the golf season in many
of our key markets, but can also be affected by key product launches, particularly golf clubs. This seasonality, and therefore
quarter to quarter fluctuations, can be affected by many factors, including weather conditions as discussed previously under “-
Weather Conditions” and the timing of new product introductions as discussed below under “-Cyclicality.” This seasonality
affects sales in each of our reportable segments differently. In general, however, because of this seasonality, a larger portion of
our sales and profitability generally occurs during the first half of the year.
48
Cyclicality
Our sales can also be affected by the launch timing of new products. Product introductions generally stimulate sales as
the golf retail channel takes on inventory of new products. Reorders of these new products then depend on the rate of
sell-through. Announcements of new products can often cause our customers to defer purchasing additional golf equipment
until our new products are available. The varying product introduction cycles described below may cause our results of
operations to fluctuate as each product line has different volumes, prices and margins.
Product Life Cycles
Titleist Golf Balls Segment
We generally launch new Titleist golf ball models on a two-year cycle. In general, in odd-numbered years, we launch
our premium performance models, Pro V1 and Pro V1x, in the first quarter and in even-numbered years, we launch our
premium performance AVX model and most performance models in the first and second quarters. For new golf ball models,
sales occur at a higher rate in the year of the initial launch than in the second year. Given the Pro V1 franchise is our highest
volume and our highest priced product in this product category, we typically have higher net sales in our Titleist golf ball
segment in odd-numbered years.
Titleist Golf Clubs Segment
We generally launch new Titleist golf club models on a two-year cycle using the following product launch cycle. At
present, we anticipate continuing to use this product launch cycle going forward because we believe it aligns our launches with
the purchase habits of dedicated golfers. In general, we launch:
•
•
•
•
•
drivers and fairways in the third or fourth quarter of even-numbered years, which typically results in an increase in
sales of drivers and fairways during such quarters because retailers take on initial supplies of these products as
stock inventory, with increased sales generated by such new products continuing the following spring and summer
of odd-numbered years;
hybrids in the first or second quarter of odd-numbered years, with the majority of sales generated by such new
products occurring in the spring, summer and fall of odd-numbered years;
irons in the third or fourth quarter of odd-numbered years, with the majority of sales generated by such new
products occurring in the following spring and summer of even-numbered years because a higher percentage of
our new irons as compared to our drivers and fairways are sold through on a custom fit basis and the spring and
summer is when golfers tend to make such custom fit purchases;
Vokey Design wedges in the first quarter of even-numbered years, with the majority of sales generated by such
new products occurring in the spring and summer of such even-numbered years; and
Scotty Cameron putters in the first quarter, with Super Select models launched in odd-numbered years and
Phantom X models launched in even-numbered years, with the majority of sales generated by such new products
occurring in the spring and summer of the year in which they are launched.
As a result of this product launch cycle, we generally expect to have higher net sales in our Titleist golf clubs segment
in even-numbered years.
Titleist Golf Gear and FootJoy Golf Wear Segments
Our Titleist golf gear and FootJoy golf wear businesses are not subject to the same degree of cyclical fluctuation as our
golf ball and golf club businesses as new product offerings and styles are generally introduced each year and at different times
during the year.
Foreign Currency
Net sales generated in regions outside of the United States represented nearly half of our net sales in each of the three
years ended December 31, 2023. Substantially all of these net sales were generated in the applicable local currency, which
include, but are not limited to, the Japanese yen, the Korean won, the British pound sterling, the euro and the Canadian dollar.
In contrast, substantially all of the purchases of inventory, raw materials or components by subsidiaries in these regions are
made in U.S. dollars. For each of the three years ended December 31, 2023, approximately 85% of our cost of goods sold
incurred by our subsidiaries in regions outside of the United States were denominated in U.S. dollars. Because these
subsidiaries incur substantially all of their cost of goods sold in currencies that are different from the currencies in which they
49
generate substantially all of their sales, we are exposed to transaction risk attributable to fluctuations in such exchange rates,
which can impact the gross profit of these subsidiaries.
In an effort to protect against adverse fluctuations in foreign exchange rates and minimize foreign currency transaction
risk, we take an active approach to currency hedging, which includes among other things, entering into various foreign
exchange forward contracts, with the primary goal of providing earnings and cash flow stability. As a result of our active
approach to currency hedging, we are able to take a longer term view and more flexible approach towards pricing our products
and making cost-related decisions. In taking this active approach, we coordinate with the management teams of our key
subsidiaries on an ongoing basis to share our views on anticipated currency movements and make decisions on securing foreign
currency exchange contract positions that are incorporated into our business planning and forecasting processes. Because our
hedging activities are designed to reduce volatility, they reduce not only the negative impact of a stronger U.S. dollar but could
also reduce the positive impact of a weaker U.S. dollar.
Because our consolidated accounts are reported in U.S. dollars, we are also exposed to currency translation risk when
we translate the financial results of our consolidated subsidiaries from their local currency into U.S. dollars. In each of the three
years ended December 31, 2023, nearly one-half of our net sales and one-third of our total operating expenses (which amounts
represent substantially all of the operating expenses incurred by our subsidiaries in regions outside of the United States) were
denominated in foreign currencies. Fluctuations in foreign currency exchange rates may positively or negatively affect our
reported financial results and can significantly affect period-over-period comparisons. A strengthening of the U.S. dollar
relative to our foreign currencies could materially adversely affect our business, financial condition and results of operations.
Key Performance Measures
We use various financial metrics to measure and evaluate our business, including, among others: (i) net sales on a
constant currency basis, (ii) Adjusted EBITDA on a consolidated basis, (iii) Adjusted EBITDA margin on a consolidated basis
and (iv) segment operating income (loss).
Since a significant percentage of our net sales are generated outside of the United States, we use net sales on a constant
currency basis to evaluate the sales performance of our business in period over period comparisons and for forecasting our
business going forward. Constant currency information allows us to estimate what our sales performance would have been
without changes in foreign currency exchange rates. This information is calculated by taking the current period local currency
sales and translating them into U.S. dollars based upon the foreign currency exchange rates for the applicable comparable prior
period. This constant currency information should not be considered in isolation or as a substitute for any measure derived in
accordance with U.S. GAAP. Our presentation of constant currency information may not be consistent with the manner in
which similar measures are derived or used by other companies.
We primarily use Adjusted EBITDA on a consolidated basis to evaluate the effectiveness of our business strategies,
assess our consolidated operating performance and make decisions regarding pricing of our products, go to market execution
and costs to incur across our business. We present Adjusted EBITDA as a supplemental measure of our operating performance
because it excludes the impact of certain items that we do not consider indicative of our ongoing operating performance. We
define Adjusted EBITDA in a manner consistent with the term “Consolidated EBITDA” as it is defined in our credit agreement.
Adjusted EBITDA represents net income (loss) attributable to Acushnet Holdings Corp. plus interest expense, net, income tax
expense (benefit), depreciation and amortization and other items defined in our agreement, including: share-based
compensation expense; restructuring and transformation costs; certain transaction fees; extraordinary, unusual or non-recurring
losses or charges; indemnification expense (income); certain pension settlement costs; certain other non-cash (gains) losses, net
and the net income (loss) relating to noncontrolling interests. Adjusted EBITDA is not a measurement of financial performance
under U.S. GAAP. It should not be considered an alternative to net income (loss) attributable to Acushnet Holdings Corp. as a
measure of our operating performance or any other measure of performance derived in accordance with U.S. GAAP. In
addition, Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or
non-recurring items, or affected by similar non-recurring items. Adjusted EBITDA has limitations as an analytical tool, and you
should not consider such measure either in isolation or as a substitute for analyzing our results as reported under U.S. GAAP.
Our definition and calculation of Adjusted EBITDA is not necessarily comparable to other similarly titled measures used by
other companies due to different methods of calculation. For a reconciliation of Adjusted EBITDA to net income (loss)
attributable to Acushnet Holdings Corp., see “—Results of Operations” below.
We also use Adjusted EBITDA margin on a consolidated basis, which measures our Adjusted EBITDA as
a percentage of net sales, because our management uses it to evaluate the effectiveness of our business strategies, assess our
consolidated operating performance and make decisions regarding pricing of our products, go to market execution and costs to
incur across our business. We present Adjusted EBITDA margin as a supplemental measure of our operating performance
because it excludes the impact of certain items that we do not consider indicative of our ongoing operating performance.
50
Adjusted EBITDA margin is not a measurement of financial performance under U.S. GAAP. It should not be considered an
alternative to any measure of performance derived in accordance with U.S. GAAP. In addition, Adjusted EBITDA margin
should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items, or affected
by similar non-recurring items. Adjusted EBITDA margin has limitations as an analytical tool, and you should not consider
such measure either in isolation or as a substitute for analyzing our results as reported under U.S. GAAP. Our definition and
calculation of Adjusted EBITDA margin is not necessarily comparable to other similarly titled measures used by other
companies due to different methods of calculation.
Lastly, we use segment operating income (loss) to evaluate and assess the performance of each of our reportable
segments and to make budgeting decisions.
51
Results of Operations
The following table sets forth, for the periods indicated, our results of operations.
(in thousands)
Net sales
Cost of goods sold
Gross profit
Operating expenses:
Selling, general and administrative
Research and development
Intangible amortization
Income from operations
Interest expense, net
Other expense, net
Income before income taxes
Income tax expense
Net income
Less: Net income attributable to noncontrolling interests
Net income attributable to Acushnet Holdings Corp.
Adjusted EBITDA:
Net income attributable to Acushnet Holdings Corp.
Interest expense, net
Income tax expense
Depreciation and amortization
Share-based compensation
Other extraordinary, unusual or non-recurring items, net (1)(2)
Net income attributable to noncontrolling interests
Adjusted EBITDA
Adjusted EBITDA margin
2023
$ 2,381,995
1,129,484
1,252,511
Year ended December 31,
2022
$ 2,270,336
1,091,103
1,179,233
2021
$ 2,147,930
1,029,493
1,118,437
888,145
64,839
14,222
285,305
41,288
2,417
241,600
42,993
198,607
(178)
$ 198,429
$ 198,429
41,288
42,993
51,356
29,709
12,185
178
$ 376,138
833,422
56,393
7,885
281,533
13,269
8,829
259,435
54,351
205,084
(5,806)
$ 199,278
$ 199,278
13,269
54,351
41,706
24,083
(85)
5,806
$ 338,408
795,422
55,335
7,868
259,812
7,709
4,280
247,823
63,583
184,240
(5,367)
$ 178,873
$ 178,873
7,709
63,583
41,243
27,639
3,923
5,367
$ 328,337
15.8 %
14.9 %
15.3 %
___________________________________
(1) The year ended December 31, 2023 includes costs associated with the optimization of our distribution and custom fulfillment capabilities.
(2) The year ended December 31, 2021 includes pension settlement costs of $2.1 million related to lump-sum distributions to participants in our defined
benefit plans as a result of the voluntary retirement program as part of management’s approved restructuring program, as well as $2.4 million of severance
and other costs associated with management's program to refine our business model and improve operational efficiencies.
52
Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022
Net sales by reportable segment is summarized as follows:
(in millions)
Titleist golf balls
Titleist golf clubs
Titleist golf gear
FootJoy golf wear
Year ended
December 31,
Increase/(Decrease)
Increase/(Decrease)
Constant Currency
2023
2022
$ change
% change
$ change
% change
$
761.7 $
658.6
216.2
596.4
678.8 $
609.6
204.9
618.0
82.9
49.0
11.3
(21.6)
12.2 % $
8.0 %
5.5 %
(3.5) %
91.3
58.2
14.3
(12.7)
13.5 %
9.5 %
7.0 %
(2.1) %
Net sales information by region is summarized as follows:
Year ended
December 31,
Increase/(Decrease)
Constant Currency
Increase/(Decrease)
(in millions)
United States
EMEA(1)
Japan
Korea
Rest of World
Total net sales
2023
1,350.0 $
314.7
149.4
301.8
266.1
2,382.0 $
$
$
2022
1,227.8 $
321.5
161.0
312.7
247.3
2,270.3 $
$ change
% change
$ change
% change
122.2
(6.8)
(11.6)
(10.9)
18.8
111.7
10.0 % $
(2.1) %
(7.2) %
(3.5) %
7.6 %
4.9 % $
122.2
(4.6)
0.2
(5.2)
29.0
141.6
10.0 %
(1.4) %
0.1 %
(1.7) %
11.7 %
6.2 %
_______________________________________________________________________________
(1) Europe, the Middle East and Africa ("EMEA")
Segment operating income by reportable segment is summarized as follows:
(in millions)
Titleist golf balls
Titleist golf clubs
Titleist golf gear
FootJoy golf wear
Year ended
December 31,
Increase/(Decrease)
2023
2022
$ change
% change
$
144.3 $
106.5
21.2
16.1
112.7 $
100.9
11.7
37.0
31.6
5.6
9.5
(20.9)
28.0 %
5.6 %
81.2 %
(56.5) %
53
Net Sales
For the year ended December 31, 2023, net sales increased 4.9%, or 6.2% on a constant currency basis, compared to
the year ended December 31, 2022. This increase was driven primarily by higher sales volumes in Titleist golf balls, Titleist
golf clubs and Titleist golf gear. This increase was partially offset by a sales volume decline in FootJoy golf wear, primarily in
footwear. A decline in sales volume of products that are not allocated to one of our four reportable segments also contributed to
the change in net sales.
The increase in net sales in the United States was primarily as a result of increases of $62.0 million in Titleist golf
balls, $41.0 million in Titleist golf clubs, $7.7 million in FootJoy golf wear and $7.3 million in Titleist golf gear. The increase
in Titleist golf balls was primarily driven by higher sales volumes and higher average selling prices of our latest generation Pro
V1 and Pro V1x golf balls. The increase in Titleist golf clubs was primarily driven by higher sales volumes and higher average
selling prices associated with the launches of our T-Series irons and Scotty Cameron Super Select putters, as well as higher
sales volumes associated with the launch of our TSR hybrids, partially offset by lower sales volumes of second model year
SM9 wedges. The increase in FootJoy golf wear was primarily driven by higher sales volumes of apparel and higher average
selling prices of apparel and footwear, largely offset by lower sales volumes of footwear. The increase in Titleist golf gear was
primarily driven by higher sales volumes of golf bags and higher average selling prices in travel.
Net sales in regions outside of the United States decreased 1.0%, or increased 1.9% on a constant currency basis. Net
sales increased in Rest of World, partially offset by decreases in Korea and EMEA, on a constant currency basis. The increase
in Rest of World was due to net sales increases across all reportable segments, primarily in Titleist golf balls and Titleist golf
clubs. In Korea, the decrease was due to lower sales volumes of products that are not allocated to one of our four reportable
segments and lower sales volumes in FootJoy golf wear, partially offset by net sales increases in all other reportable segments.
In EMEA, the decrease was due to lower sales volumes in FootJoy golf wear and lower sales volumes of products that are not
allocated to one of our four reportable segments, partially offset by increases in all other reportable segments. In Japan, net sales
were flat with increases in Titleist golf balls and Titleist golf gear offset by net sales decreases in Titleist golf clubs and FootJoy
golf wear.
Gross Profit
Gross profit increased $73.3 million for the year ended December 31, 2023 compared to the year ended December 31,
2022. Gross margin increased to 52.6% for the year ended December 31, 2023 compared to 51.9% for the year ended December
31, 2022. The increase in gross profit primarily resulted from increases in Titleist golf balls of $52.7 million, Titleist golf clubs
of $37.8 million, and Titleist golf gear of $13.8 million, partially offset by a decrease in FootJoy golf wear of $20.3 million.
This increase in gross profit was primarily due to the higher sales volumes and higher average selling prices discussed above,
lower inbound freight costs across all reportable segments and lower royalty expense in Titleist golf clubs. These increases were
partially offset by the decline in FootJoy golf wear sales volumes discussed above. The remaining change in gross profit was
due to lower sales volumes of products not allocated to one of our four reportable segments. The increase in gross margin was
primarily due to the lower inbound freight costs.
Selling, General and Administrative Expenses
Selling, general and administrative ("SG&A") expenses increased $54.7 million for the year ended December 31, 2023
compared to the year ended December 31, 2022. This increase was primarily due to an increase of $19.6 million in advertising
and promotional expenses, an increase of $20.0 million in selling expense, $10.4 million of costs related to the optimization of
our distribution and custom fulfillment capabilities, as well as an increase of $4.1 million in administrative expense and
includes the favorable impact of changes in foreign currency exchange rates. The increase in advertising and promotional
expenses was primarily related to new product launches and professional tour expenses. The increase in selling expense was
primarily due to the higher sales volumes as discussed previously and higher employee-related expenses, partially offset by
lower retail commission expense in Korea. The increase in administrative expense was due to increased employee-related
expenses partially offset by lower information technology-related expenses. SG&A also includes a decrease of $7.9 million in
foreign currency transaction losses, offset in part by a decrease in gains on foreign exchange forward contracts of $3.4 million.
Research and Development
R&D expenses increased $8.4 million for the year ended December 31, 2023 compared to the year ended December
31, 2022 primarily as a result of increases to support new product introductions and employee-related expenses.
54
Intangible Amortization
Intangible amortization expense increased $6.3 million for the year ended December 31, 2023 compared to the year
ended December 31, 2022 primarily as a result of the acquisition of trademarks related to our Titleist golf club and Titleist golf
gear businesses in the fourth quarter of 2022 and the first quarter of 2023, respectively.
Interest Expense, net
Interest expense, net increased $28.0 million for the year ended December 31, 2023 compared to the year ended
December 31, 2022. This increase was primarily due to an increase in borrowings, as well as an increase in interest rates for the
year ended December 31, 2023.
Other Expense, net
Other expense, net decreased $6.4 million for the year ended December 31, 2023 compared to the year ended
December 31, 2022 primarily due to a decrease in the non-service cost component of net periodic benefit cost, as well as
changes in the fair value of Rabbi trust assets.
Income Tax Expense
Income tax expense decreased $11.4 million for the year ended December 31, 2023 compared to the year ended
December 31, 2022. Our effective tax rate ("ETR") was 17.8% for the year ended December 31, 2023 compared to 20.9% for
the year ended December 31, 2022. The decrease in ETR was primarily driven by changes in our jurisdictional mix of earnings.
Segment Results
Titleist Golf Balls Segment
Net sales in our Titleist golf balls segment increased 12.2%, or 13.5% on a constant currency basis, for the year ended
December 31, 2023 compared to the year ended December 31, 2022. The increase was primarily driven by higher sales volumes
and higher average selling prices of our latest generation Pro V1 and Pro V1x golf balls launched in the first quarter of 2023.
Operating income in our Titleist golf balls segment increased $31.6 million, or 28.0%, compared to the prior year
period. The increase in operating income resulted from higher gross profit of $52.7 million, partially offset by higher operating
expenses of $20.8 million. The increase in gross profit was primarily driven by higher sales volumes and higher average selling
prices as discussed above and lower inbound freight costs. Operating expenses increased primarily as a result of increases of
$9.3 million, $8.0 million and $3.6 million in selling, advertising and promotional, and research and development expenses,
respectively.
Titleist Golf Clubs Segment
Net sales in our Titleist golf clubs segment increased 8.0%, or 9.5% on a constant currency basis, for the year ended
December 31, 2023 compared to the year ended December 31, 2022. The increase in net sales was largely due to higher sales
volumes and higher average selling prices of our T-Series irons launched in the third quarter of 2023 and Scotty Cameron Super
Select putters launched in the first quarter of 2023, as well as higher sales volumes of our TSR hybrids launched in the first
quarter of 2023, partially offset by lower sales volumes of second model year SM9 wedges.
Operating income in our Titleist golf clubs segment increased $5.6 million, or 5.6%, compared to the prior year period.
The increase in operating income resulted from higher gross profit of $37.8 million, partially offset by higher operating
expenses of $28.5 million and intangible amortization expense of $3.6 million. The increase in gross profit was primarily due to
higher average selling prices, higher sales volumes, lower royalty expense and lower inbound freight costs. Operating expenses
increased primarily as a result of increases of $12.7 million, $8.8 million and $4.7 million in selling, advertising and
promotional, and research and development expenses, respectively. Intangible amortization expense increased due to the
acquisition of trademarks in the fourth quarter of 2022.
Titleist Golf Gear Segment
Net sales in our Titleist golf gear segment increased 5.5%, or 7.0% on a constant currency basis, for the year ended
December 31, 2023 compared to the year ended December 31, 2022. The increase was primarily driven by higher sales volumes
across all product categories, except gloves, and higher average selling prices across all product categories.
Operating income in our Titleist golf gear segment increased $9.5 million, or 81.2%, compared to the prior year
period. The increase in operating income resulted from higher gross profit of $13.8 million, partially offset by higher operating
55
expenses of $1.9 million and higher intangible amortization expense of $2.3 million. Gross profit increased primarily due to
lower inbound freight costs, higher sales volumes and higher average selling prices. Operating expenses increased primarily due
to an increase of $2.1 million in selling expense. Intangible amortization expense increased due to the acquisition of trademarks
in the first quarter of 2023.
FootJoy Golf Wear Segment
Net sales in our FootJoy golf wear segment decreased 3.5%, or 2.1% on a constant currency basis, for the year ended
December 31, 2023 compared to the year ended December 31, 2022. The decrease was primarily due to a sales volume decrease
in footwear partially offset by sales volume increase in apparel.
Operating income in our FootJoy golf wear segment decreased $20.9 million, or 56.5% compared to the prior year
period. The decrease in operating income resulted from lower gross profit of $20.3 million. Gross profit decreased primarily as
a result of the sales volume decrease and unfavorable manufacturing absorption and increased promotional activity in footwear,
partially offset by increased sales volumes in apparel and lower inbound freight costs. Operating expenses were largely flat as
increased advertising and promotional expenses were offset by lower selling expenses.
Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021
A detailed review of our results of operations for the year ended December 31, 2022 as compared to the year ended
December 31, 2021 can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations"
in Part II, Item 7 of the Annual Report for the year ended December 31, 2022, which was filed with the SEC on March 1, 2023,
and is incorporated herein by reference.
Liquidity and Capital Resources
Our primary cash needs relate to working capital, capital expenditures, servicing our debt, paying dividends,
repurchasing shares of our common stock and pension contributions. Additionally, from time to time, we may make strategic
acquisitions and investments to complement our products, technologies or businesses, which could impact our liquidity needs.
We expect to rely on cash flows from operations and borrowings under our revolving credit facility and local credit facilities as
our primary sources of liquidity.
Our liquidity is impacted by our level of working capital, which is cyclical as a result of the general seasonality of our
business. Our accounts receivable balance is generally at its highest starting at the end of the first quarter and continuing
through the second quarter, and declines during the third and fourth quarters as a result of both an increase in cash collections
and lower sales. Our inventory balance also fluctuates as a result of the seasonality of our business. Generally, our buildup of
inventory starts during the fourth quarter and continues through the first quarter and into the beginning of the second quarter in
order to meet demand for our initial sell-in during the first quarter and reorders in the second quarter. Both accounts receivable
and inventory balances are impacted by the timing of new product launches.
As of December 31, 2023, we had $63.7 million of unrestricted cash and cash equivalents (including $11.8 million
attributable to our FootJoy golf shoe variable interest entity). As of December 31, 2023, 97.3% of our total unrestricted cash
and cash equivalents was held by subsidiaries in regions outside of the United States, including our FootJoy golf shoe variable
interest entity. We manage our worldwide cash requirements by monitoring the funds available among our subsidiaries and
determining the extent to which we can access those funds on a cost effective basis. We are not aware of any restrictions on
repatriation of these funds and, subject to foreign withholding taxes, those funds could be repatriated, if necessary. We have
repatriated, and intend to repatriate, funds to the United States from time to time to satisfy domestic liquidity needs arising in
the ordinary course of business.
Macroeconomic factors could impact our results of operations in ways we cannot currently predict. Nonetheless, we
believe that cash expected to be provided by operating activities, together with our cash on hand and the availability of
borrowings under our revolving credit facility and our local credit facilities (subject to customary borrowing conditions) will be
sufficient to meet our liquidity requirements for at least the next 12 months. Our ability to generate sufficient cash flows from
operations is, however, subject to many risks and uncertainties, including current and future economic trends and conditions,
demand for our products, availability and cost of our raw materials and components, foreign currency exchange rates and other
risks and uncertainties applicable to our business, as described in "Risk Factors," Item 1A of Part I included elsewhere in this
report.
56
Debt and Financing Arrangements
As of December 31, 2023, we had $616.7 million of availability under our multi-currency revolving credit facility after
giving effect to $8.1 million of outstanding letters of credit. Additionally, we had $35.6 million available under certain local
credit facilities of our subsidiaries.
Pursuant to an indenture dated October 3, 2023 (the "Indenture"), Acushnet Company (the "Issuer"), a wholly owned
subsidiary of the Company, completed the issuance and sale of $350.0 million in gross proceeds of the Issuer's 7.375% senior
unsecured notes due 2028 (the “Notes”). The proceeds from the Notes offering were used to repay $345.6 million of the
outstanding borrowings under the Company's multi-currency revolving credit facility, as well as to pay fees and expenses
related to the Notes offering.
Our credit agreements contain customary affirmative and restrictive covenants, including, among others, financial
covenants based on our leverage and interest coverage ratios. Our credit agreements also include 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, 2023, we were in
compliance with all covenants under our credit agreements.
The Indenture contains customary affirmative and restrictive covenants. The Indenture also includes customary events
of default, the occurrence of which could result in each holder of the Notes having the right to require the Issuer to purchase all
or a portion of such holder's Notes at a purchase price equal to 101% of the principal amount of the Notes, plus accrued and
unpaid interest. As of December 31, 2023, we were in compliance with all covenants under the Indenture.
See "Notes to Consolidated Financial Statements- Note 11- Debt and Financing Arrangements," Item 8 of Part II
included elsewhere in this report, for a description of our debt and financing arrangements. Additionally, see "Risk Factors -
Risks Related to Our Indebtedness", Item 1A of Part I included elsewhere in this report, for further discussion surrounding the
risks and uncertainties related to our debt and financing arrangements.
Dividends and Share Repurchase Program
During the year ended December 31, 2023, we paid dividends on our common stock of $52.5 million to our
shareholders. During the first quarter of 2024, our Board of Directors declared a dividend of $0.215 per share of common stock
to shareholders of record as of March 8, 2024, which is payable on March 22, 2024.
As of December 31, 2023, our Board of Directors had authorized us to repurchase up to an aggregate of $700.0 million
of our issued and outstanding common stock.
On June 9, 2023, we entered into a new agreement with Magnus Holdings Co., Ltd. (“Magnus”), a wholly-owned
subsidiary of Fila Holdings Corp., to purchase from Magnus an equal amount of our common stock as we purchase on the open
market, over the period of time from June 12, 2023 through October 27, 2023, up to an aggregate of $100.0 million at the same
weighted average per share price (the "2023 Agreement").
During 2023, we repurchased 6,486,405 shares of common stock at an average price of $51.25 for an aggregate of
$332.4 million. Included in this amount were 3,993,522 shares of common stock repurchased from Magnus for an aggregate of
$200.0 million, in satisfaction of our obligations pursuant to the 2023 Agreement, as well as our previously disclosed Magnus
share repurchase agreement.
As of December 31, 2023, we had $75.0 million remaining under the current share repurchase authorization. On
February 15, 2024, our Board of Directors authorized us to repurchase up to an additional $300.0 million of our issued and
outstanding common stock, bringing the total authorization up to $1.0 billion since the share repurchase program was
established in 2018.
See “Notes to Consolidated Financial Statements-Note 16-Common Stock,” Item 8 of Part II, included elsewhere in
this report, for a description of our share repurchase program and Magnus share repurchase agreements.
Other Business Developments
In January 2023, we acquired certain trademarks from West Coast Trends, Inc., an industry leader specializing in Club
Glove premium performance golf travel products, for $25.2 million. See “Notes to Consolidated Financial Statements-Note 9-
Goodwill and Intangible Assets,” Item 8 of Part II, included elsewhere in this report, for additional information.
57
Capital Expenditures
We made $75.4 million of capital expenditures during the year ended December 31, 2023. Capital expenditures in
2024 are expected to be approximately $85.0 million, although the actual amount may vary depending upon a variety of factors,
including the timing of certain capital project implementations and receipt of capital purchases due to supply chain challenges.
Capital expenditures generally relate to investments to support the manufacturing and distribution of products, our go to market
activities and continued investments in information technology and facilities to support our global strategic initiatives.
Cash Flows
The following table presents the major components of net cash flows from operating, investing and financing activities
for the periods indicated:
(in thousands)
Cash flows from:
Operating activities
Investing activities
Financing activities
Effect of foreign exchange rate changes on cash, cash equivalents and restricted
cash
Year ended December 31,
2023
2022
2021
$
371,827 $
(101,486)
(67,787) $ 314,122
(37,597)
(140,222)
(264,725)
(8,584) (140,326)
915
(6,180)
(5,974)
Net increase (decrease) in cash, cash equivalents and restricted cash
$
6,531 $
(222,773) $ 130,225
Cash Flows from Operating Activities
The increase in cash provided by operating activities for the year ended December 31, 2023 as compared to the year
ended December 31, 2022 was primarily related to changes in working capital, largely driven by inventory. These inventory
changes were driven by improvements in our supply chain and overall year-end inventory position. Working capital at any
specific point in time is subject to many variables, including seasonality and inventory management, the timing of cash receipts
and payments, vendor payment terms and fluctuations in foreign exchange rates.
Cash Flows from Investing Activities
The decrease in cash used in investing activities for the year ended December 31, 2023 as compared to the year ended
December 31, 2022 was primarily driven by cash paid during the year ended December 31, 2022 for the acquisitions of
trademarks related to our putter business, as well as cash paid for business acquisitions during the same period. This was offset
in part by cash paid for the acquisition of trademarks related to our gear business during the year ended December 31, 2023 and
an increase in capital expenditures for the same period, driven by investments in our manufacturing capacity, as well as
investments in our office, fitting and testing facilities.
Cash Flows from Financing Activities
The increase in cash used in financing activities for the year ended December 31, 2023 as compared to the year ended
December 31, 2022 was primarily driven by an increase in purchases of common stock, as well as a decrease in net proceeds
from borrowings.
Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021
A review of our cash flow activities for the year ended December 31, 2022 as compared to the year ended December
31, 2021 can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II,
Item 7 of the Annual Report for the year ended December 31, 2022, which was filed with the SEC on March 1, 2023, and is
incorporated herein by reference.
Contractual Obligations
Our principal contractual obligations and commitments consist of long term debt obligations, interest on debt
obligations (including unused commitment fees related to our revolving credit facility), operating and finance lease obligations,
purchase obligations and pension and other postretirement benefit obligations.
See "Notes to Consolidated Financial Statements-Note 11-Debt and Financing Arrangements", "Note 4-Leases", "Note
22-Commitments and Contingencies" and "Note 14-Pension and Other Postretirement Benefits" in Item 8 of Part II of this
58
Annual Report for more information on the nature and timing of obligations for debt, leases, purchase obligations and pension
and postretirement benefit plans, respectively. The future amount of interest expense payments are expected to vary as
discussed in "Interest Rate Risk," Item 7A of Part II, included elsewhere in this Annual Report.
Off-Balance Sheet Arrangements
As of December 31, 2023, other than as discussed above, we did not have any off-balance sheet arrangements that
have, or are reasonably likely to have, a current or future effect on our financial condition, results of operations, liquidity,
capital expenditures or capital resources.
Critical Accounting Estimates
The preparation of financial statements requires management to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities.
Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable under
the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from these estimates.
A summary of significant accounting policies is included in Note 2, "Summary of Significant Accounting Policies," to
the Consolidated Financial Statements in Item 8 of Part II, which is incorporated herein by reference. An accounting policy is
deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly
uncertain at the time the estimate is made, if different estimates reasonably could have been used, or if changes in the estimate
that are reasonably possible could materially impact the financial statements. We believe the following judgments and estimates
are critical in the preparation of our consolidated financial statements.
Goodwill
We evaluate goodwill for impairment annually and whenever events or circumstances indicate that the carrying
amount of this asset may not be recoverable. We test goodwill for impairment by comparing the fair value of the reporting unit
to its carrying value. The fair value of our reporting units is determined using the income approach. Under the income
approach, we estimate the fair value of a reporting unit based on the present value of estimated future cash flows. Cash flow
projections are based on management’s estimates of revenue growth rates, taking into consideration industry and market
conditions. The discount rate is the weighted-average cost of capital adjusted for the relevant risk associated with business-
specific characteristics and the uncertainty related to the reporting unit’s ability to execute on the projected cash flows. This
analysis contains uncertainties related to estimating revenue growth as it requires us to make assumptions and apply judgments
to estimate industry economic factors and the profitability of future business strategies. If actual results are not consistent with
our estimates and assumptions, we may be exposed to future impairment losses that could be material.
If the fair value of a reporting unit exceeds the carrying value of the net assets assigned to that reporting unit, goodwill is
not impaired. If the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit,
then we would record an impairment loss equal to the difference, not to exceed the total amount of goodwill allocated to the
reporting unit.
We perform our annual impairment test of goodwill during the fourth quarter of our fiscal year. There were no impairment
losses recorded for the years ended December 31, 2023, 2022 and 2021.
Pension and Other Postretirement Benefit Plans
We provide various post-employment plans including defined benefit plans (or "pension plans") and postretirement
benefit plans which provide benefits to certain eligible U.S. and foreign employees. Projected benefit obligations are measured
using various actuarial assumptions, such as discount rate, rate of compensation increase, mortality rate, turnover rate 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 rate, expected return on plan assets and rate of compensation
increase, which are determined as of the prior year measurement date. Our actuarial assumptions are reviewed on an annual
basis and modified when appropriate.
Our projected benefit obligations related to our pension and other postretirement benefit plans are valued using a
weighted-average discount rates of 4.93% and 4.92%, respectively, for the year ended December 31, 2023. Decreasing the
discount rates by 100 basis points would have increased the projected benefit obligations of our pension and other
postretirement benefit plan by approximately $32.6 million and $1.0 million, respectively, for the year ended December 31,
2023.
59
Our net periodic benefit cost related to our pension and other postretirement benefit plans is calculated using a
weighted average discount rate of 5.16% and 5.10%, respectively, for the year ended December 31, 2023. Decreasing the
discount rate by 100 basis points would increase net periodic pension cost by less than $0.1 million and increase other
postretirement benefit cost by approximately $0.3 million for the year ended December 31, 2023. Additionally, our net periodic
benefit cost related to our pension plans is calculated using an expected return on plan assets of 3.91% for the year ended
December 31, 2023. Decreasing the expected return on plan assets by 100 basis points would increase net periodic pension
benefit cost by approximately $2.0 million for the year ended December 31, 2023.
Income Taxes
Deferred tax assets represent amounts available to reduce income taxes payable on taxable income in future years.
Such assets arise because of temporary differences between the financial reporting and tax basis of assets and liabilities, as well
as from net operating losses and tax credit carryforwards. We evaluate the recoverability of these future tax deductions and
credits by assessing the adequacy of future expected taxable income from all sources, including reversal of temporary
differences, forecasted operating earnings and available tax planning strategies. These sources of income rely heavily on
estimates that are based on a number of factors, including historical experience and short-range and long-range business
forecasts. As of December 31, 2023, we had a valuation allowance on certain net operating loss and tax credit carryforwards
based on our assessment that it is more likely than not that the deferred tax assets will not be recognized. As of December 31,
2023 and 2022, the cumulative valuation allowance against deferred tax assets was $34.0 million and $34.1 million,
respectively.
We are subject to income taxes in the U.S. and foreign jurisdictions. We account for uncertain tax positions using a
more likely than not threshold for recognizing and resolving uncertain tax matters. Significant judgment is required in
evaluating our uncertain tax positions and determining our provision for income taxes. Although we believe we have adequately
reserved for our uncertain tax positions, no assurance can be given that the outcome of these matters will not be different. We
adjust these reserves in light of changing facts and circumstances, such as the closing of tax audits or refinement of an estimate.
To the extent the outcome of these matters is different than the amounts recorded, such differences will affect the provision for
income taxes and the effective tax rate in the period in which the determination is made.
Recently Issued Accounting Standards
We have reviewed all recently issued accounting standards and have determined that, other than as disclosed in “Notes
to Consolidated Financial Statements – Note 2 – Summary of Significant Accounting Policies”, Item 8 of Part II, included
elsewhere in this report, such accounting standards will not have a significant impact on our consolidated financial statements
or otherwise do not apply to our operations.
60
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to various market risks, which may result in potential losses arising from adverse changes in market
rates, such as interest rates, foreign exchange rates and commodity prices and availability, as well as inflation risk. We do not
enter into derivatives or other financial instruments for trading or speculative purposes and do not believe we are exposed to
material market risk with respect to our cash and cash equivalents.
Interest Rate Risk
We are exposed to interest rate risk under our various credit facilities which accrue interest at variable rates, as
described in “Notes to Consolidated Financial Statements – Note 11 - Debt and Financing Arrangements,” Item 8 of Part II,
included elsewhere in this report. Interest rate risk is highly sensitive due to many factors, including U.S. monetary and tax
policies, U.S. and international economic factors and other factors beyond our control. We are exposed to changes in the level
of interest rates and to changes in the relationship or spread between interest rates for our floating rate debt. Our floating rate
debt requires payments based on a variable interest rate index. Increases in interest rates may reduce our net income by
increasing the cost of our debt.
From time to time we enter into interest rate swap contracts to reduce our interest rate risk. Under these contracts, we
pay fixed and receive variable rate interest, in effect converting a portion of our floating rate debt to fixed rate debt. As of
December 31, 2023, the notional value of our outstanding interest rate swap contracts was $100.0 million. As of December 31,
2022, there were no interest rate swap contracts outstanding. See "Notes to Consolidated Financial Statement – Note 12 -
Derivative Financial Instruments," Item 8 of Part II, included elsewhere in this report, for further discussion of our interest rate
swap contracts.
We performed a sensitivity analysis to assess the potential effect of a hypothetical movement in interest rates on our
annual pre-tax interest expense. This sensitivity analysis disregards fluctuations in balances of our outstanding variable rate
indebtedness due to borrowings and repayments throughout the year.
As of December 31, 2023, we had $255.6 million of outstanding indebtedness at variable interest rates after giving
effect to $100.0 million of hedged floating rate indebtedness. The sensitivity analysis, while not predictive in nature, indicated
that a one percentage point increase in the interest rate applied to these borrowings as of December 31, 2023 would have
resulted in an increase of $2.6 million in our annual pre-tax interest expense.
As of December 31, 2022, we had $566.6 million of outstanding indebtedness at variable interest rates. The same
sensitivity analysis for movement in variable interest rates as of December 31, 2022, indicated that a one percentage point
increase in the interest rate applied to these borrowings as of December 31, 2022 would have resulted in an increase of $5.7
million in our annual pre-tax interest expense.
Foreign Exchange Risk
We are exposed to foreign currency transaction risk related to transactions denominated in a currency other than
functional currency. In addition, we are exposed to currency translation risk resulting from the translation of the financial
results of our consolidated subsidiaries from their functional currency into U.S. dollars for financial reporting purposes.
We use financial instruments to reduce the earnings and shareholders' equity volatility relating to transaction risk. The
principal financial instruments we enter into on a routine basis are foreign exchange forward contracts, primarily pertaining to
the U.S. dollar, the Japanese yen, the British pound sterling, the Canadian dollar, the Korean won and the euro. The periods of
the foreign exchange forward contracts designated as hedges correspond to the periods of the forecasted hedged transactions,
which do not exceed 24 months subsequent to the latest balance sheet date. We do not enter into derivative financial instrument
contracts for trading or speculative purposes.
61
We performed a sensitivity analysis to assess potential changes in the fair value of our foreign exchange forward
contracts relating to a hypothetical movement in foreign currency exchange rates. The gross U.S. dollar equivalent notional
amount of all foreign exchange forward contracts outstanding at December 31, 2023 was $209.6 million, representing a net
settlement asset of $2.4 million. The sensitivity analysis of changes in the fair value of our foreign exchange forward contracts
outstanding as of December 31, 2023, while not predictive in nature, indicated that the net settlement asset of $2.4 million
would decrease by $15.2 million resulting in a net settlement liability of $12.8 million if the U.S. dollar uniformly weakened by
10% against all currencies covered by our contracts.
The gross U.S. dollar equivalent notional amount of all foreign exchange forward contracts outstanding at December
31, 2022 was $246.4 million, representing a net settlement asset of $3.6 million. The same sensitivity analysis for changes in
the fair value of our foreign exchange forward contracts as of December 31, 2022, indicated that if the U.S. dollar uniformly
weakened by 10% against all currencies covered by our contracts, the net settlement asset of $3.6 million would decrease by
$17.9 million resulting in a net settlement liability of $14.3 million.
The sensitivity analysis described above recalculates the fair value of the foreign exchange forward contracts
outstanding by replacing the actual foreign currency exchange rates and current month forward rates with foreign currency
exchange rates and forward rates that reflect a 10% weakening of the U.S. dollar against all currencies covered by our
contracts. All other factors are held constant. The sensitivity analysis disregards the possibility that foreign currency exchange
rates can move in opposite directions and that gains from one currency may or may not be offset by losses from another
currency. The analysis also disregards the offsetting change in value of the underlying hedged transactions and balances.
The financial markets and currency volatility may limit our ability to cost-effectively hedge these exposures. The
counterparties to derivative contracts are major financial institutions with investment grade credit ratings. We monitor the credit
quality of these financial institutions on an ongoing basis.
Commodity Risk
We are exposed to commodity price and availability risks with respect to certain materials and components used by us,
our suppliers and our manufacturers, including polybutadiene, urethane and ionomers for the manufacturing of our golf balls,
titanium and steel for our golf clubs, leather and synthetic fabrics for our golf shoes, golf gloves, golf gear and golf apparel, and
resin and other petroleum-based materials for a number of our products.
Impact of Inflation
Our results of operations and financial condition are presented based on historical cost, and inflation in the cost of our
products, overhead costs or wage rates may adversely affect our operating results. While it is difficult to accurately measure the
impact of inflation due to the imprecise nature of the estimates required, we believe that inflation in the form of increased raw
materials and other input costs, including inbound freight and wage rates, has impacted our business, results of operations,
financial position and cash flows during the year ended December 31, 2023 and 2022. Sustained and higher inflationary
environments, including increased raw material and other input costs, could materially impact our business, results of
operations, financial position and cash flows in the future.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See the Index to Consolidated Financial Statements and financial statements commencing on page F-1, which are
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURES
There were no changes in or disagreements with our accountants on accounting and financial disclosure matters.
ITEM 9A. CONTROLS AND PROCEDURES
The required certifications of our chief executive officer and our principal financial officer are included as Exhibit 31.1
and 31.2 to this Annual Report. The disclosures set forth in this Item 9A contain information concerning the evaluation of our
disclosure controls and procedures, management's report on internal control over financial reporting and changes in internal
control over financial reporting referred to in those certifications. These certifications should be read in conjunction with this
Item 9A for a more complete understanding of the matters covered by the certifications.
62
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act,
that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under
the Securities Exchange Act of 1934, as amended, (the “ Exchange Act”) is recorded, processed, summarized and reported,
within the time periods specified in the SEC’s rules and forms; and that such information is accumulated and communicated to
management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions
regarding required disclosure. Our management, with the participation of our principal executive officer and principal financial
officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2023, the last day of the
period covered by this Annual Report. Based on this evaluation, our principal executive officer and principal financial officer
have concluded that our disclosure controls and procedures were effective as of December 31, 2023.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal
control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) promulgated under the Exchange Act as a process
designed by, or under the supervision of, our principal executive and principal financial officers and effected by our board of
directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and
includes those policies and procedures that:
•
•
•
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and
dispositions of the assets of the company;
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of management and directors of the company;
and
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2023.
In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO) in “Internal Control – Integrated Framework (2013)”.
Based on our assessment, our management determined that, as of December 31, 2023, our internal control over
financial reporting is effective.
PricewaterhouseCoopers LLP, an independent registered public accounting firm, has audited the effectiveness of our
internal control over financial reporting as stated in their report which appears on page F-2 of this Annual Report.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act) that occurred during the quarter ended December 31, 2023 that have materially affected, or
are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
None.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
63
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The Information about our executive officers is contained in the discussion entitled “Information About Our Executive
Officers” in Part I of this Form 10-K. The remaining information required by this Item will be included in our Proxy Statement
and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item will be included in our Proxy Statement and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The information required by this Item will be included in our Proxy Statement and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
The information required by this Item will be included in our Proxy Statement and is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this Item will be included in our Proxy Statement and is incorporated herein by reference.
64
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
PART IV
(a)
The following documents are filed as a part of this report:
(1)
Financial Statements. See Index to Consolidated Financial Statements on page F-1 hereof.
(2)
(3)
Financial statement schedules are omitted because they are not applicable or the required information is
shown in the Consolidated Financial Statements or notes thereto.
Exhibits Index:
Exhibit
Number
Description
3.1 Amended and Restated Certificate of Incorporation of Acushnet Holdings Corp. (incorporated by reference to Exhibit 3.1 to the
Registrant’s Current Report on Form 8-K filed on November 2, 2016 (No. 001-37935)).
3.2 Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Acushnet Holdings Corp. (incorporated by
reference to Exhibit 3.2 to the Registrant's Annual Report on Form 10-K filed on February 28, 2019 (No. 001-37935)).
3.3 Second Amended and Restated Bylaws of Acushnet Holdings Corp. (incorporated by reference to Exhibit 3.1 to the Registrant's
Current Report on Form 8-K filed on July 27, 2023 (no. 001-37935)).
4.1 Description of Securities (incorporated by reference to Exhibit 4.1 to the Registrant's Annual Report on Form 10-K filed on
February 27, 2020 (No. 001-37935)).
Indenture, dated October 3, 2023, among Acushnet Company, U.S. Bank Trust Company, National Association, as trustee of the
Notes, and Acushnet Holdings Corp. and certain subsidiaries of Acushnet Company as guarantors (incorporated by reference to
Exhibit 4.1 to the Registrant's Current Report on Form 8-K filed on October 3, 2023 (No. 001-37935)).
4.2
10.1† Form of Restricted Stock Unit Grant Notice and Restricted Stock Unit Agreement under the Acushnet Holdings Corp. 2015
Omnibus Incentive Plan (incorporated by reference to Exhibit 10.1 to the Registrant's Annual Report on Form 10-K filed on March
1, 2022 (No. 001-37935)).
10.2† Form of Performance Stock Unit Grant Notice and Performance Stock Unit Agreement under the Acushnet Holdings Corp. 2015
Omnibus Incentive Plan (incorporated by reference to Exhibit 10.2 to the Registrant's Annual Report on Form 10-K filed on March
1, 2022 (No. 001-37935)).
10.3† Acushnet Executive Severance Plan (as amended and restated effective January 1, 2019) (incorporated by reference to Exhibit 10.3
to the Registrant's Annual Report on Form 10-K filed on February 28, 2019 (No. 001-37935)).
10.4† Acushnet Company Supplemental Retirement Plan (as amended and restated effective December 31, 2015) (incorporated by
reference to Exhibit 10.10 to the Registrant’s Registration Statement on Form S-1 (No. 333-212116)).
10.5† Acushnet Company Amended and Restated Trust Agreement, dated as of August 31, 2016 (incorporated by reference to
Exhibit 10.11 to the Registrant’s Registration Statement on Form S-1 (No. 333-212116)).
10.6† Amended and Restated Acushnet Company Excess Deferral Plan II (effective July 29, 2011) (incorporated by reference to
Exhibit 10.16 to the Registrant’s Registration Statement on Form S-1 (No. 333-212116)).
10.7 Second Amendment and Agency Resignation, Appointment and Assumption, dated as of August 2, 2022, by and among Acushnet
Holdings Corp., Acushnet Company, Acushnet Canada Inc., Acushnet Europe Limited, certain subsidiaries of Acushnet Company,
the lenders party thereto, Wells Fargo Bank, National Association, as the resigning administrative agent, and JPMorgan Chase
Bank, N.A., as the successor administrative agent (incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report
on Form 10-Q filed on August 4, 2022 (No. 001-37935)).
10.8 Joint Venture Agreement between Acushnet Cayman Limited and Myre Overseas Corporation, dated as of June 1, 1995
(incorporated by reference to Exhibit 10.18 to the Registrant’s Registration Statement on Form S-1 (No. 333-212116)).
10.9 Registration Rights Agreement, dated October 26, 2016, among the Company and the Holders (as defined therein) (incorporated by
reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on November 1, 2016 (No. 001-37935)).
10.10† Form of Restricted Stock Unit Grant Notice and Restricted Stock Unit Agreement for Directors under the Acushnet Holdings Corp.
2015 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.12 to the Registrant's Annual Report on Form 10-K filed on
February 28, 2019 (No. 001-37935)).
10.11† Acushnet Holdings Corp. Independent Directors Deferral Plan (incorporated by reference to Exhibit 10.21 to the Registrant’s
Registration Statement on Form S-1 (No. 333-212116)).
10.12† Acushnet Holdings Corp. 2015 Omnibus Incentive Plan, as amended on February 16, 2017 (incorporated by reference to Exhibit
10.12 to the Registrant's Annual Report on Form 10-K filed on March 1, 2023 (No. 001-37935)).
10.13† Employment Agreement between Acushnet Holdings Corp. and David E. Maher, dated as of December 22, 2017 (incorporated by
reference to Exhibit 10.17 to the Registrant's Annual Report on Form 10-K filed on March 7, 2018 (No. 001-37935 ).
10.14† Letter Agreement by and between Acushnet Company and Sean Sullivan, entered into April 3, 2023 (incorporated by reference to
Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed on April 5, 2023 (No. 001-37935 )).
10.15† Acushnet Holdings Corp. Employee Deferral Plan (incorporated by reference to Exhibit 10.18 to the Registrant’s Annual Report on
Form 10-K filed on March 7, 2018 (No. 001-37935)).
10.16† Letter Agreement, dated March 20, 2023, by and between Acushnet Company and Thomas Pacheco (incorporated by reference to
Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed on March 24, 2023 (No. 001-37935)).
65
21.1 List of Subsidiaries (filed herewith).
23.1 Consent of PricewaterhouseCoopers LLP (filed herewith).
24.1 Power of Attorney (filed herewith).
31.1 Certification of Periodic Report by Chief Executive Officer Pursuant to Rule 13a–14(a) or 15d–14(a) of the Securities Exchange
Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
31.2 Certification of Periodic Report by Chief Financial Officer Pursuant to Rule 13a–14(a) or 15d–14(a) of the Securities Exchange
Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
32.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002 (filed herewith).
32.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002 (filed herewith).
97.1 Acushnet Holdings Corp. Policy for Recoupment of Incentive Compensation (filed herewith).
101.INS
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are
embedded within the Inline XBRL document.
101.SCH XBRL Taxonomy Extension Schema (filed herewith).
101.CAL XBRL Taxonomy Extension Calculation Linkbase (filed herewith).
101.DEF XBRL Taxonomy Extension Definition Linkbase (filed herewith).
101.LAB XBRL Taxonomy Extension Label Linkbase (filed herewith).
101.PRE XBRL Taxonomy Extension Presentation Linkbase (filed herewith).
104 Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101).
___________________________________
† Identifies exhibits that consist of a management contract or compensatory plan or arrangement.
ITEM 16. FORM 10-K SUMMARY
None.
66
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant
has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Date: February 29, 2024
ACUSHNET HOLDINGS CORP.
By:
/s/ David Maher
Name: David Maher
Title:
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Capacity
Date
/s/ David Maher
David Maher
/s/ Sean Sullivan
Sean Sullivan
President and Chief Executive Officer (Principal Executive Officer)
Executive Vice President, Chief Financial Officer (Principal Financial
Officer)
/s/ Nick Mohamed
Vice President, Controller (Principal Accounting Officer)
Nick Mohamed
*
Chairman
Yoon Soo Yoon
*
Director
Leanne Cunningham
*
Director
Gregory Hewett
*
Director
Ho Yeon Lee
*
Jan Singer
Director
*
Steven Tishman
Director
*
Keun Chang Yoon
Director
*By:
/s/ Roland Giroux
Name: Roland Giroux
Title: Attorney In Fact
67
February 29, 2024
February 29, 2024
February 29, 2024
February 29, 2024
February 29, 2024
February 29, 2024
February 29, 2024
February 29, 2024
February 29, 2024
February 29, 2024
[This page intentionally left blank]
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Audited Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm (PCAOB ID 238)
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Income
Consolidated Statements of Cash Flows
Consolidated Statements of Shareholders' Equity
Notes to Consolidated Financial Statements
Page(s)
F-2
F-4
F-5
F-6
F-7
F-8
F-9
F-1
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Acushnet Holdings Corp.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Acushnet Holdings Corp. and its subsidiaries (the
“Company”) as of December 31, 2023 and 2022, and the related consolidated statements of operations, comprehensive income,
shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2023, including the related
notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control
over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United
States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013)
issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included
in Management's Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express
opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting
based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United
States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement,
whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material
respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement
of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.
Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated
financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal
control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the
risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based
on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
F-2
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial
statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or
disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or
complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated
financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate
opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Accounting for Income Taxes
As described in Note 15 to the consolidated financial statements, the Company recorded income tax expense of $43.0 million
for the year ended December 31, 2023 and has net deferred tax assets of $24.4 million, inclusive of a valuation allowance of
$34.0 million, and total gross unrecognized tax benefits, excluding related interest and penalties, of $10.8 million as of
December 31, 2023. As disclosed by management, the Company is subject to income tax in the U.S. and foreign jurisdictions.
The use of significant judgments and estimates, as well as the interpretation and application of complex tax laws is required by
management to determine its provision for income taxes.
The principal considerations for our determination that performing procedures relating to accounting for income taxes is a
critical audit matter are the significant judgments by management when interpreting and applying complex tax laws and
regulations in determining the provision for income taxes; this in turn led to a high degree of auditor judgment, subjectivity, and
effort in performing procedures and evaluating audit evidence related to the provision for income taxes.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall
opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the
provision for income taxes. These procedures also included, among others, testing the income tax provision, including
permanent and temporary differences, the effective tax rate reconciliation, considering the Company’s compliance with tax
laws, and evaluating management's assessment of whether certain tax positions are more-likely-than-not of being sustained.
/s/PricewaterhouseCoopers LLP
Boston, Massachusetts
February 29, 2024
We have served as the Company’s, or its predecessors’, auditor since at least 1976, which includes periods before the Company
became subject to SEC reporting requirements. We have not been able to determine the specific year we began serving as
auditor of the Company or its predecessors.
F-3
ACUSHNET HOLDINGS CORP.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
Assets
Current assets
Cash, cash equivalents and restricted cash ($12,532 and $14,376 attributable to the variable interest entity ("VIE"))
Accounts receivable, net
Inventories ($9,621 and $17,866 attributable to the VIE)
Prepaid and other assets
Total current assets
Property, plant and equipment, net ($9,044 and $10,089 attributable to the VIE)
Goodwill ($32,312 and $32,312 attributable to the VIE)
Intangible assets, net
Deferred income taxes
Other assets ($1,972 and $2,083 attributable to the VIE)
Total assets
Liabilities, Redeemable Noncontrolling Interests and Shareholders' Equity
Current liabilities
Short-term debt
Current portion of long-term debt
Accounts payable ($6,059 and $11,914 attributable to the VIE)
Accrued taxes
Accrued compensation and benefits ($1,233 and $1,651 attributable to the VIE)
Accrued expenses and other liabilities ($1,687 and $3,380 attributable to the VIE)
Total current liabilities
Long-term debt
Deferred income taxes
Accrued pension and other postretirement benefits
Other noncurrent liabilities ($0 and $2,145 attributable to the VIE)
Total liabilities
Commitments and contingencies (Note 22)
Redeemable noncontrolling interests
Shareholders' equity
Common stock, $0.001 par value, 500,000,000 shares authorized; 63,429,243 and 76,321,523 shares issued
Additional paid-in capital
Accumulated other comprehensive loss, net of tax
Retained earnings
Treasury stock, at cost; 8,892,425 shares as of December 31, 2022 (including 2,000,839 of accrued share
repurchases) (Note 16)
Total equity attributable to Acushnet Holdings Corp.
Noncontrolling interests
December 31,
2023
December 31,
2022
$
65,435 $
$
$
201,352
615,535
114,370
996,692
295,343
225,302
537,407
31,454
110,479
2,196,677 $
28,997 $
351
150,514
46,398
111,136
113,739
451,135
671,819
7,080
69,634
84,137
1,283,805
58,904
216,695
674,684
108,793
1,059,076
254,472
224,814
525,903
47,551
81,991
2,193,807
40,336
—
166,998
40,922
98,245
202,124
548,625
527,509
5,896
74,234
54,177
1,210,441
9,785
6,663
63
808,615
(104,349)
159,906
—
864,235
38,852
76
960,685
(109,668)
473,130
(385,167)
939,056
37,647
Total shareholders' equity
Total liabilities, redeemable noncontrolling interests and shareholders' equity
903,087
2,196,677 $
976,703
2,193,807
$
The accompanying notes are an integral part of these consolidated financial statements.
F-4
ACUSHNET HOLDINGS CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
Net sales
Cost of goods sold
Gross profit
Operating expenses:
Selling, general and administrative
Research and development
Intangible amortization
Income from operations
Interest expense, net (Note 19)
Other expense, net
Income before income taxes
Income tax expense
Net income
Less: Net income attributable to noncontrolling interests
Net income attributable to Acushnet Holdings Corp.
Net income per common share attributable to Acushnet Holdings Corp.:
Basic
Diluted
Weighted average number of common shares:
Basic
Diluted
$
$
Year ended December 31,
$
2023
2,381,995 $
1,129,484
1,252,511
2022
2,270,336 $
1,091,103
1,179,233
2021
2,147,930
1,029,493
1,118,437
888,145
64,839
14,222
285,305
41,288
2,417
241,600
42,993
198,607
(178)
198,429 $
833,422
56,393
7,885
281,533
13,269
8,829
259,435
54,351
205,084
(5,806)
199,278 $
795,422
55,335
7,868
259,812
7,709
4,280
247,823
63,583
184,240
(5,367)
178,873
2.96 $
2.94
2.77 $
2.75
2.40
2.38
67,063,933
67,517,105
71,958,879
72,560,098
74,536,637
75,265,074
The accompanying notes are an integral part of these consolidated financial statements.
F-5
ACUSHNET HOLDINGS CORP.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
Net income
Other comprehensive income (loss):
Foreign currency translation adjustments
Cash flow derivative instruments
Unrealized holding gains arising during period
Reclassification adjustments included in net income
Tax benefit (expense)
Cash flow derivative instruments, net
Pension and other postretirement benefits
Pension and other postretirement benefits adjustments
Tax expense
Pension and other postretirement benefits adjustments, net
Total other comprehensive income (loss)
Comprehensive income
Less: Comprehensive income attributable to noncontrolling interests
Comprehensive income attributable to Acushnet Holdings Corp.
$
Year ended December 31,
2023
2022
2021
$
198,607 $
205,084 $
184,240
2,916
(30,940)
(23,009)
5,871
(7,672)
359
(1,442)
5,629
(1,306)
4,323
5,797
10,856
(9,840)
(585)
431
25,473
(5,050)
20,423
(10,086)
204,404
(656)
203,748 $
194,998
(5,775)
189,223 $
10,049
4,991
(4,223)
10,817
13,332
(4,540)
8,792
(3,400)
180,840
(5,310)
175,530
The accompanying notes are an integral part of these consolidated financial statements.
F-6
ACUSHNET HOLDINGS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Cash flows from operating activities
Net income
Adjustments to reconcile net income to cash flows provided by (used in) operating activities
Year ended December 31,
2022
2021
2023
$
198,607 $
205,084 $
184,240
Depreciation and amortization
Unrealized foreign exchange loss (gain)
Amortization of debt issuance costs
Share-based compensation
Loss (gain) on disposals of property, plant and equipment
Deferred income taxes
Changes in operating assets and liabilities
Accounts receivable
Inventories
Accounts payable
Accrued taxes
Other assets and liabilities
Cash flows provided by (used in) operating activities
Cash flows from investing activities
Additions to property, plant and equipment
Additions to intangible assets (Note 9)
Business acquisitions
Other, net
Cash flows used in investing activities
Cash flows from financing activities
Proceeds from (repayments of) short-term borrowings, net (Note 11)
Proceeds from credit facilities (Note 11)
Repayments of credit facilities (Note 11)
Proceeds from senior unsecured notes (Note 11)
Repayments of term loan facility (Note 11)
Purchases of common stock
Payment of debt issuance costs
Dividends paid on common stock
Dividends paid to noncontrolling interests
Payment of employee restricted stock tax withholdings
Other, net
Cash flows used in financing activities
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash
Net increase (decrease) in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash, beginning of year
Cash, cash equivalents and restricted cash, end of year
Supplemental information
Cash paid for interest
Cash paid for income taxes
Supplemental non-cash information
Purchases of property, plant and equipment, accrued not paid
Additions to right-of-use assets obtained in exchange for operating lease obligations
Additions to right-of-use assets obtained in exchange for finance lease obligations
Additions to treasury stock
Dividend equivalents rights ("DERs") declared not paid
Contingent considerations (Note 8)
Additions to redeemable noncontrolling interests (Note 8)
Share repurchase liability (Note 16)
$
$
51,356
1,507
927
29,709
99
15,413
13,785
58,897
(12,105)
6,221
7,411
371,827
(75,364)
(25,235)
—
(887)
(101,486)
—
1,527,896
(1,739,308)
350,000
—
(334,088)
(6,328)
(52,480)
—
(11,495)
1,078
(264,725)
915
6,531
58,904
65,435 $
41,706
13,568
2,000
24,083
(3,294)
9,060
(58,893)
(275,973)
8,840
(11,427)
(22,541)
(67,787)
(61,364)
(65,000)
(18,400)
4,542
(140,222)
3,362
976,953
(414,104)
—
(315,000)
(189,111)
(2,583)
(52,239)
(1,601)
(10,661)
(3,600)
(8,584)
(6,180)
(222,773)
281,677
58,904 $
36,391 $
33,619
11,632 $
56,413
2,145
51,825
944
1,092
1,971
—
—
—
4,308
28,038
525
1,648
1,742
1,400
4,600
92,583
41,243
(168)
1,540
27,639
156
12,020
16,679
(64,238)
48,784
20,339
25,888
314,122
(37,597)
—
—
—
(37,597)
(2,704)
—
—
—
(17,500)
(65,497)
—
(49,167)
(1,512)
(3,946)
—
(140,326)
(5,974)
130,225
151,452
281,677
6,890
28,919
6,567
8,691
950
—
2,046
—
—
29,214
The accompanying notes are an integral part of these consolidated financial statements.
F-7
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N
ACUSHNET HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. 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.) 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.
2. 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.
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. 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, 2023 and 2022. In addition, pursuant to the terms of the agreement governing the
VIE, the Company is not required to provide financial support to the VIE.
F-9
Noncontrolling Interests and Redeemable Noncontrolling Interests
The ownership interests held by owners other than the Company in less than wholly-owned subsidiaries are classified
as noncontrolling interests. The financial results and position of noncontrolling interests are included 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. 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.
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 Company
initially records the redeemable noncontrolling interest at its acquisition date fair value. The carrying amount of the redeemable
noncontrolling interest is subsequently adjusted to the greater amount of either the initial carrying amount, increased or
decreased for the redeemable noncontrolling interest's share of comprehensive income (loss) or the redemption value, assuming
the noncontrolling interest is redeemable at the balance sheet date. This adjustment is recognized through retained earnings and
is not reflected in net income (loss) or comprehensive income (loss). During the year ended December 31, 2023, the Company
recorded a $2.2 million redemption value adjustment to increase the carrying amount of redeemable noncontrolling interests.
During the year ended December 31, 2022, the Company recorded a $1.9 million redemption value adjustment to decrease the
carrying value of redeemable noncontrolling interests. During the year ended December 31, 2021, the Company recorded a
$2.8 million redemption value adjustment to increase the carrying value of redeemable noncontrolling interests. The value
attributable to redeemable noncontrolling interests and any related loans to minority shareholders, which are recorded as a
reduction to redeemable noncontrolling interests, are presented in the consolidated balance sheets as temporary equity between
liabilities and shareholders’ equity. The amount of the loan to minority shareholders was $4.4 million as of December 31, 2023,
2022 and 2021.
See Note 8 for additional information regarding other business developments impacting noncontrolling interests.
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, 2023 and 2022, the amount of restricted
cash included in cash, cash equivalents and restricted cash on the consolidated balance sheets was $1.7 million and $1.8
million, respectively. Book overdrafts not subject to offset with other accounts with the same financial institution are classified
as accounts payable. As of December 31, 2023 and 2022, book overdrafts in the amount of $4.2 million and $4.4 million,
respectively, were recorded in accounts payable.
Concentration of Credit Risk
Financial instruments that potentially expose the Company to concentration of credit risk are cash and cash equivalents
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, 2023 and 2022, the Company had unrestricted cash and cash equivalents of $62.0 million
and $54.9 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. See Note 5 for additional information.
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.
F-10
Long-Lived Assets
Long-lived assets, including property, plant and equipment and amortizing intangible assets, are recorded at cost less
accumulated depreciation and amortization, respectively. Depreciation and amortization are recorded on a straight-line basis
over the estimated useful lives of the assets, except for leasehold and tenant improvements which are amortized over the shorter
of the lease term or 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 improvements
Machinery and equipment
Furniture, fixtures and computer hardware
Computer software
15 - 40 years
3 - 10 years
3 - 10 years
1 - 10 years
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.
Impairment
A long-lived asset (including right of use 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 a goodwill impairment loss 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
F-11
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
9 for additional information.
Leases
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 of 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.
All leases are accounted for under Accounting Standards Codification ("ASC") 842 and are classified as either
operating or finance leases. A lease is classified as a finance lease if any one of the following criteria is 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 Company recognizes operating lease right-of-use assets and operating lease liabilities on its consolidated balance
sheets. Right-of-use assets represent the right to use the leased asset for the lease term. Lease liabilities represent the present
value of the lease payments under the lease. Right-of-use assets are 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.
The lease classification affects the expense recognition in the consolidated statements 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 statements of operations. Finance lease charges are split, where amortization of the right-of-use asset is
recorded as depreciation 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 Company has elected to not separate non-lease components within its lease portfolio and 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.
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 assets and debt issuance costs associated with all other indebtedness are netted against long-term
debt on the consolidated balance sheets. See Note 11 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.
F-12
•
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 financial instruments are carried at fair value determined according to the fair value hierarchy
described above. The Company’s financial instruments that are not recorded at fair value include cash and cash equivalents,
accounts receivable, accounts payable, borrowings under revolving credit agreements and other debt. The carrying amount of
these financial instruments, except for debt, is historical cost which approximates fair value due to the short-term nature of these
assets and liabilities. The carrying value of the Company's variable interest rate debt approximates fair value due to the variable
nature of the interest rate (Note 11). The Company’s senior unsecured notes are recorded at face value, less unamortized debt
issuance cost (Note 11).
See Note 13 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 2023, 2022 and 2021, 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 14 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.
F-13
The 2017 Tax Act subjects the Company to a tax on Global Intangible Low-Taxed Income (“GILTI”). 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 10 for
additional information.
Advertising and Promotion
Advertising and promotional costs are included in selling, general and administrative expense on the consolidated
statements 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 $231.4 million, $211.9 million and $216.4 million for the years ended December 31, 2023, 2022
and 2021, respectively.
Selling
Selling expenses including field sales, sales administration, shipping and handling costs and commissions paid on
certain retail sales are included in selling, general and administrative expense on the consolidated statements of operations.
Shipping and handling costs included in selling expenses were $59.4 million, $56.0 million and $52.4 million for the years
ended December 31, 2023, 2022 and 2021, respectively.
Research and Development
Research and development is expensed as incurred and includes product development costs, product improvement
costs, product engineering costs and process improvement costs.
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 the resulting
transaction gain or loss recorded as selling, general and administrative expense on the consolidated statements of operations.
Foreign currency transaction gain (loss) included in selling, general and administrative expense was a loss of $4.0 million, a
loss of $11.9 million and a loss of $3.4 million for the years ended December 31, 2023, 2022 and 2021, respectively.
F-14
Derivative Financial Instruments
All derivative instruments are measured at fair value and recognized as either assets or liabilities on the consolidated
balance sheets. If the derivative instrument is designated as a fair value hedge, the gain or loss resulting from changes in the fair
value of the derivative instruments and of the hedged item are immediately recognized in the statements of operations. If the
derivative instrument is designated as a cash flow hedge, the gain or loss is initially recorded as a component of accumulated
other comprehensive income (loss), net of tax. The gain or loss is subsequently reclassified into the statements of operations at
the time the forecasted transaction impacts the statements of operations or at the time the hedge is deemed to be ineffective.
Cash flows from derivative financial instruments and the related hedged transactions are included in cash flows from operating
activities. See Note 12 for additional information.
Share-based Compensation
The Company has an equity incentive 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 share based
compensation expense when they occur. See Note 17 for additional information.
Recently Adopted Accounting Standards
Income Taxes
On January 1, 2021, the Company adopted Accounting Standards Update ("ASU") 2019-12, "Income Taxes (Topic
740) - Simplifying the Accounting for Income Taxes". The amendments in this update simplified the accounting for income
taxes by removing certain exceptions to general principles in Topic 740. The amendments also improved consistent application
and simplified U.S. GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The adoption of this
standard did not have a material impact on the consolidated financial statements.
Recently Issued Accounting Standards
In November 2023, the Financial Accounting Standards Board ("FASB") issued ASU 2023-07, "Segment Reporting
(Topic 280) - Improvements to Reportable Segment Disclosures". The amendments in this update improve reportable segment
disclosure requirements, primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 is effective
for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024.
Early adoption is permitted. The Company is currently evaluating the impact this standard will have on its consolidated
financial statements and related disclosures.
In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740) - Improvements to Income Tax
Disclosures". The amendments in this update provide more transparency about income tax information through improvements
to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. ASU 2023-09 is
effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The Company is currently
evaluating the impact this standard will have on its consolidated financial statements and related disclosures.
3. 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.
F-15
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 $14.7 million and
$11.3 million as of December 31, 2023 and 2022, respectively. The value of inventory expected to be recovered related to sales
returns was $7.2 million and $5.0 million as of December 31, 2023 and 2022, respectively.
Contract Balances
Accounts receivable, net, includes 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 current and forecasted 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 is 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 21 for the Company's business segment disclosures, as well as a further disaggregation of net sales by geographical
area.
F-16
4. 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. Certain leases include one or more options to renew, with renewal
terms that can extend the lease term up to three years.
Lease costs recognized on the consolidated statements of operations were as follows:
1,888
14,305
763
178
32
333
1,463
18,962
(in thousands)
Lease costs
Operating
Finance
Location in Statement of Operations
2023
2022
2021
Year ended December 31,
Cost of goods sold
$
2,450 $
2,364 $
Selling, general and administrative
Research and development
19,777
1,099
13,337
763
Amortization of lease assets
Selling, general and administrative
Interest on lease liabilities
Interest expense, net
Short-term and low value lease cost
Variable lease cost
Total lease cost
475
86
1,472
2,486
335
60
623
2,827
$
27,845 $
20,309 $
Supplemental balance sheet information related to the Company's leases is as follows:
(in thousands)
Right-of-use assets
Finance
Operating
Lease liabilities
Finance
Operating
Finance
Operating
Balance Sheet Location
Property, plant and equipment, net
Other assets
Total lease assets
Accrued expenses and other liabilities
Accrued expenses and other liabilities
Long-term debt
Other noncurrent liabilities
Total lease liabilities
Year ended December 31,
2023
2022
2,031 $
88,820
90,851 $
527 $
19,045
1,505
73,348
94,425 $
1,562
57,586
59,148
364
14,821
1,201
44,830
61,216
$
$
$
$
The weighted average remaining lease term and the weighted average discount rate for leases is as follows:
Weighted average remaining lease term (years):
Operating
Finance
Weighted average discount rate:
Operating
Finance
Year ended December 31,
2023
2022
2021
6.2
4.3
4.01 %
4.52 %
4.9
4.5
2.72 %
4.23 %
5.7
5.1
2.82 %
3.70 %
F-17
The following table reconciles the undiscounted cash flows for leases as of December 31, 2023 to lease liabilities
recorded on the consolidated balance sheet:
(in thousands)
2024
2025
2026
2027
2028
Thereafter
Total future lease payments
Less: Interest
Present value of lease liabilities
Accrued expenses and other liabilities
Long-term debt
Other noncurrent liabilities
Total lease liabilities
Operating
Leases
Finance
Leases
Total
$
$
$
$
22,430 $
20,058
15,020
13,953
10,747
24,029
106,237
(13,844)
92,393 $
19,045 $
—
73,348
92,393 $
607 $
576
453
363
190
48
2,237
(205)
2,032 $
527 $
1,505
—
2,032 $
23,037
20,634
15,473
14,316
10,937
24,077
108,474
(14,049)
94,425
19,572
1,505
73,348
94,425
Supplemental cash flow information related to the Company's leases are as follows:
(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases
Operating cash flows for finance leases
Financing cash flows for finance leases
5. Allowance for Doubtful Accounts
Year ended December 31,
2022
2021
2023
$
21,623 $
86
478
16,333 $
60
334
16,457
32
177
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, which could affect the
collectability of the reported amounts. All of these factors have been considered in the estimate of expected credit losses for the
periods presented.
The activity related to the allowance for doubtful accounts was as follows:
(in thousands)
Balance at beginning of year
Bad debt expense (recovery)
Amount of receivables written off
Foreign currency translation
Balance at end of year
6. Inventories
The components of inventories were as follows:
(in thousands)
Raw materials and supplies
Work-in-process
Finished goods
Inventories
Year ended December 31,
2023
2022
2021
$
$
8,258 $
1,120
(689)
151
8,840 $
5,980 $
3,199
(704)
(217)
8,258 $
7,698
(975)
(463)
(280)
5,980
December 31,
2023
157,455 $
$
24,949
433,131
615,535 $
December 31,
2022
154,881
29,689
490,114
674,684
$
F-18
7. Property, Plant and Equipment, Net
The components of property, plant and equipment, net were as follows:
(in thousands)
Land
Buildings and improvements
Machinery and equipment
Furniture, computers and equipment
Computer software
Construction in progress
Property, plant and equipment, gross
Accumulated depreciation and amortization
Property, plant and equipment, net
December 31,
2023
December 31,
2022
$
$
14,329 $
194,585
242,007
56,032
90,264
53,921
651,138
(355,795)
295,343 $
14,238
169,855
212,916
52,282
87,512
42,940
579,743
(325,271)
254,472
During the years ended December 31, 2023, 2022 and 2021, software development costs of $3.9 million, $7.2 million
and $7.5 million were capitalized. Capitalized software development costs as of December 31, 2023, 2022 and 2021 consisted
of software placed into service of $3.6 million, $6.1 million and $5.2 million, respectively, and amounts recorded in
construction in progress of $0.3 million, $1.1 million and $2.3 million, respectively. Amortization expense on capitalized
software development costs was $9.6 million, $9.0 million and $8.1 million for the years ended December 31, 2023, 2022 and
2021, respectively.
Total depreciation and amortization expense related to property, plant and equipment was $37.2 million, $33.8 million
and $33.3 million for the years ended December 31, 2023, 2022 and 2021, respectively.
8. Other Business Developments
On November 4, 2022, the Company completed the acquisition of an 80% interest in certain assets and liabilities of
TPI EDU, LLC, Onbase University, LP and Racquetfit, LP (together known as "TPI") for cash consideration of $18.4 million.
As part of the acquisition, the Company recorded a redeemable noncontrolling interest of $4.6 million (Note 2). TPI is a leading
supplier of online courses, certifications, educational programs, live seminars and other educational services in the golf,
baseball and tennis industries. The results of TPI have been included in the Company's Titleist golf club reporting segment
since the date of acquisition (Note 21).
On April 1, 2022, the Company acquired the outstanding equity interest in PG Golf LLC for $5.0 million, including
cash consideration of $3.6 million and contingent consideration of $1.4 million, which was included in other noncurrent
liabilities on the consolidated balance sheet as of December 31, 2023 and 2022.
9. 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)
December 31, 2021
Additions (Note 8)
Foreign currency translation
December 31, 2022
Additions
Foreign currency translation
December 31, 2023
Titleist
Golf Balls
Titleist
Golf Clubs
Titleist
Golf Gear
FootJoy
Golf Wear
Other
Total
$
$
125,949 $
—
(3,391)
122,558
—
(176)
122,382 $
57,033 $
20,148
(1,647)
75,534
235
(86)
75,683 $
13,838 $
—
(399)
13,439
—
(21)
13,418 $
3,608 $
—
(73)
3,535
—
(4)
3,531 $
10,003 $
—
(255)
9,748
514
26
10,288 $
210,431
20,148
(5,765)
224,814
749
(261)
225,302
There were no impairment losses recorded to goodwill during the years ended December 31, 2023, 2022 and 2021. As
of December 31, 2023, 2022 and 2021, the cumulative balance of goodwill impairment recorded was $3.8 million, all of which
was included in the carrying amount of the goodwill allocated to Other.
F-19
The net carrying value by class of identifiable intangible assets was as follows:
(in thousands)
Indefinite-lived:
Trademarks
Amortizing:
Trademarks
Completed technology
Customer relationships
Licensing fees and other
Total intangible assets
December 31, 2023
December 31, 2022
Gross
Accumulated
Amortization
Net Book
Value
Gross
Accumulated
Amortization
Net Book
Value
$ 429,051 $
— $
429,051 $ 429,051 $
— $
429,051
96,512
76,943
28,146
32,640
$ 663,292 $
(8,836)
(66,939)
(17,491)
(32,619)
(125,885) $
87,676
10,004
10,655
21
71,277
76,943
27,490
32,597
537,407 $ 637,358 $
(2,534)
(61,656)
(14,729)
(32,536)
(111,455) $
68,743
15,287
12,761
61
525,903
In January 2023, the Company acquired certain trademarks from West Coast Trends, Inc., an industry leader
specializing in Club Glove premium performance golf travel products, for $25.2 million. The trademarks acquired were
included in the Company's Titleist golf gear reporting segment and will be amortized over a weighted average life of 10 years.
On December 31, 2022, the Company separately acquired trademarks related to its putter business of $65.0 million
with a weighted average life of 20 years. In November 2022, the Company acquired trademarks of $0.7 million with a weighted
average life of 11 years, $2.2 million of completed technology with a weighted average life of 11 years, and $0.9 million of
customer relationships with a weighted average life of 5 years (Note 8).
Identifiable intangible asset amortization expense was $14.2 million, $7.9 million and $7.9 million for the years ended
December 31, 2023, 2022 and 2021, respectively.
There were no impairment losses recorded to indefinite-lived intangible assets during the years ended December 31,
2023, 2022 and 2021.
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,
2024
2025
2026
2027
2028
Thereafter
Total
10. Product Warranty
$
$
14,068
11,928
8,439
7,460
6,968
59,493
108,356
The activity related to the Company’s warranty obligation for accrued warranty expense was as follows:
(in thousands)
Balance at beginning of year
Provision
Claims paid/costs incurred
Foreign currency translation
Balance at end of year
Year ended December 31,
2023
2022
2021
$
$
3,951 $
6,995
(5,966)
17
4,997 $
4,177 $
4,911
(4,986)
(151)
3,951 $
3,831
5,315
(4,846)
(123)
4,177
F-20
11. Debt and Financing Arrangements
The Company’s debt and finance lease obligations were as follows:
(in thousands)
Multi-currency revolving credit facility
Senior unsecured notes
Other short-term borrowings
Other long-term borrowings
Finance lease obligations
Debt issuance costs (1)
Total
Less: short-term debt and current portion of long-term debt
Total long-term debt and finance lease obligations
_________________________________
(1) Debt issuance costs of $6.1 million as of December 31, 2023 relates to the senior unsecured notes.
Second Amended Credit Facility
December 31,
2023
December 31,
2022
$
$
325,175 $
350,000
28,997
1,557
1,505
(6,067)
701,167
29,348
671,819 $
526,308
—
40,336
—
1,201
—
567,845
40,336
527,509
On August 2, 2022, the Company entered into a second amendment and agency resignation, appointment and
assumption (the “Second Amendment”) to its Amended and Restated Credit Agreement, dated as of December 23, 2019 (as
subsequently amended on July 3, 2020 (the “First Amended Credit Agreement”), and the First Amended Credit Agreement, as
amended pursuant to the Second Amendment (the “Second Amended Credit Agreement”), with Acushnet Company, Acushnet
Canada Inc. and Acushnet Europe Limited, as borrowers, certain subsidiaries of Acushnet Company, together with the
Company, as guarantors, the lenders party thereto, Wells Fargo Bank, National Association, as resigning administrative agent,
and JPMorgan Chase Bank, N.A., as successor administrative agent (the “Administrative Agent”). The Second Amended Credit
Agreement, together with related security, guarantee and other agreements, is referred to as the “Second Amended Credit
Facility.” The First Amended Credit Agreement, together with related security, guarantee and other agreements, is referred to as
the “First Amended Credit Facility.”
The Second Amended Credit Facility provides a $950.0 million multi-currency revolving credit facility, including a
$50.0 million letter of credit sublimit, a $75.0 million swing line sublimit, a C$50.0 million sublimit for borrowings by
Acushnet Canada, Inc., a £45.0 million sublimit for borrowings by Acushnet Europe Limited and an alternative currency
sublimit of $200.0 million for borrowings in Canadian dollars, euros, pounds sterling, Japanese yen and other currencies agreed
to by the lenders and the Administrative Agent. The Second Amended Credit Facility matures on August 2, 2027, and as a
result, the related borrowings have been classified as long term debt, with the proceeds and repayments under the revolving
credit facility presented on a gross basis in the consolidated statements of cash flows. The Second Amended Credit Facility is
collateralized by certain assets, including inventory, accounts receivable, fixed assets and intangible assets of the Company.
On August 2, 2022, borrowings under the Second Amended Credit Facility, were used to prepay in full the outstanding
term loans under the First Amended Credit Facility, refinance outstanding revolving credit facility borrowings under the First
Amended Credit Facility and pay accrued interest and closing fees. Immediately prior to payment, the aggregate amounts
outstanding related to the term loans and revolving credit facility were approximately $306.3 million and $72.6 million,
respectively. In connection with amending its credit facility, the Company incurred debt issuance costs of approximately
$2.6 million, which were included in other assets on the consolidated balance sheet and will be amortized to interest expense,
net over the term of the Second Amended Credit Facility. In addition, the prepayment of the First Amended Credit Facility
resulted in additional interest expense of approximately $1.3 million for the twelve months ended December 31, 2022.
Acushnet Company has the right under the Second Amended Credit Facility to request term loans and/or increases in
the revolving commitments in an aggregate principal amount not to exceed (i) the greater of $325.0 million and 100% of the
last four quarters' EBITDA plus (ii) an unlimited amount, so long as the Net Average Secured Leverage Ratio (as defined in the
Second Amended Credit Agreement) does not exceed 2.50:1.00 on a pro forma basis. The lenders under the Second Amended
Credit Facility will not be under any obligation to provide any such term loans or increases to the revolving commitments, and
the incurrence of any term loans or increases to the revolving credit commitments is subject to customary conditions precedent.
Borrowings under the Second Amended Credit Facility bear interest at a rate per annum equal to, at the applicable
Borrower’s option, (i) for loans denominated in U.S. dollars, either (A) a base rate, which is the greatest of (1) the prime rate
last published in the Wall Street Journal, (2) the greater of the federal funds effective rate as determined by the Federal Reserve
Bank of New York and the overnight bank funding rate as determined by the Federal Reserve Bank of New York, in either
case, plus 0.50% and (3) the one-month Term SOFR Rate, plus 0.10% per annum, plus 1.00%, or (B) the greater of the Term
F-21
SOFR Rate for the applicable interest period, plus 0.10% per annum, and zero; (ii) for loans denominated in Sterling, the
greater of an Adjusted Daily Simple RFR determined based on SONIA and zero; (iii) for loans denominated in Euros, the
greater of an Adjusted EURIBOR Rate for the applicable interest period and zero; (iv) for loans denominated in Canadian
Dollars, the greater of an Adjusted Canadian Dollar Offered Rate for the applicable interest period and zero; and (v) for loans
denominated in Japanese Yen, the greater of an Adjusted TIBOR Rate for the applicable interest period and zero, in the case of
sub-clauses (i) through (v) above, plus an applicable margin. Under the Second Amended Credit Agreement, the applicable
margin is 0.00% to 0.75% for base rate borrowings and 1.00% to 1.75% for Adjusted Term SOFR borrowings, Adjusted Daily
Simple RFR borrowings, Adjusted EURIBOR Rate borrowings, Adjusted Canadian Dollar Offered Rate borrowings and
Adjusted TIBOR Rate borrowings, in each case, depending on the Net Average Total Leverage Ratio (as defined in the Second
Amended Credit Agreement). In addition, the Second Amended Credit Facility requires a commitment fee rate payable in
respect of unused portions of the revolving credit facility of 0.125% to 0.275% per annum, depending on the Net Average Total
Leverage Ratio.
The Second Amended Credit Agreement contains customary affirmative and restrictive covenants, including, among
others, financial covenants based on the Company's leverage and interest coverage ratios. The quarterly-tested maximum Net
Average Total Leverage Ratio covenant in the Second Amended Credit Agreement is 3.75:1.00, which is subject to increase to
4.25:1.00 for the four fiscal quarters immediately following certain acquisitions. The quarterly-tested Consolidated Interest
Coverage Ratio covenant in the Second Amended Credit Agreement shall be less than 3.00:1.00. It also includes customary
events of default, the occurrence of which, following any applicable cure period, would permit the lenders to, among other
things, declare the principal, accrued interest and other obligations to be immediately due and payable. As of December 31,
2023, the Company was in compliance with all covenants under the Second Amended Credit Agreement.
The weighted average interest rate applicable to the Company's multi-currency revolving credit facility as of December
31, 2023 and 2022 was 6.57% and 5.40%, respectively. As of December 31, 2023, the Company had available borrowings
under its revolving credit facility of $616.7 million after giving effect to $8.1 million of outstanding letters of credit.
Under the Second Amended Credit Agreement, a change of control is an event of default which could result in the
acceleration of all outstanding indebtedness and the termination of all commitments under the Second Amended Credit
Agreement and would allow the lenders under the Second Amended 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.
First Amended Credit Facility
The First Amended Credit Facility provided 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.
Borrowings under the credit facility bore 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 First Amended Credit Agreement, the applicable margin was 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 First Amended Credit Agreement). In addition, the Company was required to pay a
commitment fee on any unutilized commitments under the revolving credit facility. Under the First Amended Credit
Agreement, the commitment fee rate payable in respect of unused portions of the revolving credit facility was 0.15% to 0.30%
per annum, depending on the net average total leverage ratio. The initial commitment fee rate was 0.20% per annum. The
Company was also required to pay customary letter of credit fees.
The Company was 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%.
F-22
Senior Unsecured Notes
On October 3, 2023, Acushnet Company (the "Issuer"), a wholly owned subsidiary of the Company, completed the
issuance and sale of $350.0 million in gross proceeds of the Issuer's 7.375% senior unsecured notes due 2028 (the “Notes”).
The Notes were issued pursuant to an Indenture, dated October 3, 2023 (the “Indenture”), among the Issuer, U.S. Bank Trust
Company, National Association, as trustee of the Notes, and the Company and certain subsidiaries of the Issuer as guarantors.
The proceeds from the Notes offering were used to repay $345.6 million of the outstanding borrowings under the
Company's multi-currency revolving credit facility, as well as to pay fees and expenses related to the Notes offering. In
connection with the Notes offering, the Company incurred fees and expenses of approximately $6.4 million, of which
approximately $6.3 million was capitalized as debt issuance costs within long-term debt on the audited consolidated balance
sheet and is being amortized to interest expense, net over the term of the Notes using the effective interest rate method. The fair
value of the Notes, based on third-party quotes (Level 2), as of December 31, 2023 was $365.1 million.
The Notes bear interest at a stated interest rate of 7.375% (an effective interest rate of 7.813%) per year, with interest
payable semi-annually on April 15 and October 15 of each year, beginning on April 15, 2024. Accrued interest related to the
Notes of $6.5 million was included within accrued expenses and other liabilities on the consolidated balance sheet as of
December 31, 2023.
The Notes will mature on October 15, 2028, unless earlier repurchased or redeemed in accordance with their terms,
and as a result, were classified as long-term debt. The Issuer may redeem all or part of the Notes at any time prior to October
15, 2025 at 100.0% of the principal amount redeemed plus a “make-whole” premium. The make-whole premium is the greater
of (i) 1.0% of the then outstanding principal amount of the Notes being redeemed and (ii) the excess, if any, of: (1) the present
value at such redemption date of the sum of (A) 103.688% of the principal amount of Notes being redeemed plus (B) all
required interest payments due on the Notes through October 15, 2025 (excluding accrued but unpaid interest) and (2) the then
outstanding principal amount of the Notes being redeemed.
Thereafter, the Issuer may redeem all or part of the Notes at the redemption prices (expressed as percentages of
principal amount of the Notes to be redeemed) set forth below, together with any accrued and unpaid interest, if redeemed
during the 12-month period beginning on October 15 of the years indicated below:
Year
Redemption Price
2025
2026
2027 and thereafter
103.688 %
101.844 %
100.000 %
The Notes are senior unsecured obligations of the Issuer and rank equal in right of payment with all of the Issuer’s
existing and future senior unsecured debt and senior in right of payment to all of the Issuer’s future subordinated debt. The
Notes are jointly and severally, fully and unconditionally, guaranteed on a senior unsecured basis by each of the Issuer’s
existing wholly-owned restricted domestic subsidiaries that guarantee the Issuer’s obligations under the Second Amended
Credit Agreement. The Notes are also fully and unconditionally guaranteed on a senior unsecured basis by the Company. The
Notes are effectively subordinated to the Company's existing and future secured debt, to the extent of the value of the assets
securing that debt, and are structurally subordinated to the liabilities of any non-guarantor subsidiaries.
The Indenture contains covenants that, among other things, limit the ability of the Company and its restricted
subsidiaries to incur additional debt or issue certain preferred stock; pay dividends or repurchase or redeem capital stock;
prepay, redeem or repurchase certain debt; make loans and investments; sell assets; incur liens; enter into certain types of
transactions with the Company’s affiliates; and consolidate or merge with or into other companies. As of December 31, 2023,
the Company was in compliance with all covenants under the Indenture.
A change of control under the Notes results in each holder of Notes having the right to require the Issuer to purchase
all or a portion of such holder’s Notes at a purchase price equal to 101% of the principal amount of the Notes, plus accrued and
unpaid interest, if any, to, but excluding, the date of purchase. A change in control occurs at such time as either: (1) the
consummation of any transaction as a result of which any Person or any Persons (as defined in the Indenture) acting together
that would constitute a “group” for purposes of Section 13(d) of the Exchange Act, subject to certain exceptions, becoming the
beneficial owner of at least 50% of the aggregate voting power of all classes of voting stock of the Company; (2) the sale,
assignment, conveyance, transfer, lease or other disposition, in one or a series of related transactions, of all or substantially all
of the assets of the Company and its restricted subsidiaries; (3) the adoption by the stockholders of the Company or the Issuer of
a plan or proposal for the liquidation or dissolution of the Company or the Issuer; or (4) the Issuer ceases to be a directly or
indirectly wholly owned subsidiary of the Company.
F-23
Other Short-Term Borrowings
The Company has certain unsecured local credit facilities available through its subsidiaries. Amounts outstanding
under other short-term borrowings are presented in short-term debt in the consolidated balance sheets with the proceeds and
repayments presented on a gross basis in the consolidated statements of cash flows. The weighted average interest rate
applicable to the outstanding borrowings was 0.45% and 0.85% as of December 31, 2023 and 2022, respectively. As of
December 31, 2023, the Company had available borrowings remaining under these local credit facilities of $35.6 million.
Letters of Credit
As of December 31, 2023, there were outstanding letters of credit related to agreements, including the Company's
Second Amended Credit Facility, totaling $11.3 million of which $8.1 million was secured. As of December 31, 2022, there
were outstanding letters of credit related to agreements, including the Company's Second Amended Credit Facility, totaling
$10.0 million, of which $7.3 million was secured. These agreements provided a maximum commitment for letters of credit of
$58.5 million as of December 31, 2023.
Payments of Debt Obligations due by Period
As of December 31, 2023, principal payments due on outstanding long-term debt obligations were as follows:
(in thousands)
Year ending December 31,
2024
2025
2026
2027
2028
Thereafter
Total
12. Derivative Financial Instruments
$
$
351
338
301
325,459
350,283
—
676,732
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, 2023 and 2022 was $209.6 million and $242.4 million, respectively.
The Company also enters into foreign exchange forward contracts, which either do not qualify as hedging instruments
or have not been designated as such, 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
expenses. There were no outstanding foreign exchange forward contracts not designated under hedge accounting as of
December 31, 2023. The gross U.S. dollar equivalent notional amount outstanding of all foreign exchange forward contracts not
designated under hedge accounting as of December 31, 2022 was $4.0 million. Selling, general and administrative expenses
during the years ended December 31, 2023 and 2022 included a gain of $0.1 million and a gain of $1.2 million, respectively,
related to undesignated foreign exchange forward derivative instruments.
F-24
Interest Rate Derivative Instruments
From time to time, 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. Interest rate swap contracts are accounted for as cash flow hedges. As of December 31,
2023, the notional value of the Company's outstanding interest rate swap contracts was $100.0 million. As of December 31,
2022, there were no interest rate swap contracts outstanding.
Impact on Financial Statements
The fair value of hedge instruments recognized on the consolidated balance sheets was as follows:
(in thousands)
Balance Sheet Location
Hedge Instrument Type
Prepaid and other assets
Foreign exchange forward
Other assets
Accrued expenses and other liabilities
Foreign exchange forward
Foreign exchange forward
Interest rate swap
Other noncurrent liabilities
Interest rate swap
Foreign exchange forward
Interest rate swap
December 31,
2023
December 31,
2022
$
4,378 $
7,393
452
—
1,931
63
—
88
—
1,341
4,710
—
344
—
The hedge instrument gain (loss) recognized in accumulated other comprehensive loss, net of tax was as follows:
(in thousands)
Type of hedge
Foreign exchange forward
Interest rate swap
Total
Year ended December 31,
2022
2021
2023
$
$
4,880 $
991
5,871 $
10,856 $
—
10,856 $
10,057
(8)
10,049
Based on the current valuation, during the next 12 months the Company expects to reclassify a net gain of $6.5 million
related to foreign exchange derivative instruments from accumulated other comprehensive loss, net of tax into cost of goods
sold and a net gain of $0.4 million related to interest rate derivative instruments from accumulated other comprehensive loss,
net of tax, into interest expense, net. For further information related to amounts recognized in accumulated other comprehensive
loss, net of tax, see Note 18.
F-25
The hedge instrument gain (loss) recognized on the consolidated statements of operations was as follows:
(in thousands)
Location of gain (loss) in consolidated statements of operations
Foreign exchange forward:
Cost of goods sold
Selling, general and administrative (1)
Total
Interest Rate Swap:
Interest expense, net
Total
_________________________________
Year ended December 31,
2022
2021
2023
$
$
$
$
6,982 $
9,840 $
(3,422)
665
7,647 $
2,991
12,831 $
1,686
(1,736)
690 $
690 $
— $
— $
(1,569)
(1,569)
(1) Relates to net gains on foreign exchange forward contracts derived from previously designated cash flow hedges.
Credit Risk
The Company enters into derivative contracts with major financial institutions with investment grade credit ratings and
is exposed to credit losses in the event of non-performance by these financial institutions. This credit risk is generally limited to
the unrealized gains in the derivative contracts. However, the Company monitors the credit quality of these financial
institutions, as well as its own credit quality, and considers the risk of counterparty default to be minimal.
13. Fair Value Measurements
Assets and liabilities measured at fair value on a recurring basis as of December 31, 2023 were as follows:
(in thousands)
Assets
Rabbi trust
Foreign exchange derivative instruments
Interest rate derivative instruments
Deferred compensation program assets
Total assets
Liabilities
Foreign exchange derivative instruments
Interest rate derivative instruments
Deferred compensation program liabilities
Interest rate derivative instruments
Total liabilities
Fair Value Measurements as of
December 31, 2023 using:
Level 1
Level 2
Level 3
Balance Sheet Location
$
$
$
$
4,334 $
—
—
725
5,059 $
— $
—
725
—
725 $
— $
4,378
452
—
4,830 $
1,931 $
63
—
88
2,082 $
—
—
—
—
—
—
—
—
—
—
Prepaid and other assets
Prepaid and other assets
Prepaid and other assets
Other assets
Accrued expenses and other liabilities
Accrued expenses and other liabilities
Other noncurrent liabilities
Other noncurrent liabilities
F-26
Assets and liabilities measured at fair value on a recurring basis as of December 31, 2022 were as follows:
(in thousands)
Assets
Rabbi trust
Foreign exchange derivative instruments
Deferred compensation program assets
Foreign exchange derivative instruments
Total assets
Liabilities
Foreign exchange derivative instruments
Deferred compensation program liabilities
Foreign exchange derivative instruments
Total liabilities
Fair Value Measurements as of
December 31, 2022 using:
Level 1
Level 2
Level 3
Balance Sheet Location
$
3,940 $
— $
—
631
—
7,393
—
1,341
4,571 $
8,734 $
— $
4,758 $
631
—
—
344
631 $
5,102 $
$
$
$
—
—
—
—
—
—
—
—
—
Prepaid and other assets
Prepaid and other assets
Other assets
Other assets
Accrued expenses and other liabilities
Other noncurrent liabilities
Other noncurrent liabilities
Rabbi trust assets are used to fund certain retirement obligations of the Company. The assets underlying the Rabbi trust
are equity and fixed income exchange-traded funds.
Deferred compensation program assets and liabilities represent a program where select employees could defer
compensation until termination of employment. Effective July 29, 2011, this program was amended to cease all employee
compensation deferrals and provided for the distribution of all previously deferred employee compensation. The program
remains in effect with respect to the value attributable to the employer match contributed prior to July 29, 2011.
Foreign exchange derivative instruments are foreign exchange forward contracts primarily used to limit currency risk
that would otherwise result from changes in foreign exchange rates (Note 12). The Company uses the mid-price of foreign
exchange forward rates as of the close of business on the valuation date to value each foreign exchange forward contract at each
reporting period.
Interest rate derivative instruments are interest rate swap contracts used to reduce interest rate risk related to the
Company's floating rate debt (Note 12). The valuation for the interest rate swap is calculated as the net of the discounted future
cash flows of the pay and receive legs of the swap. Mid-market interest rates on the valuation date are used to create the
forward curve for floating legs and discount curve.
14. Pension and Other Postretirement Benefits
The Company has various pension and post-employment plans which provide for payment of benefits to certain
eligible employees, mainly commencing between the ages of 50 and 65, and for payment of certain disability benefits. After
meeting certain qualifications, eligible employees acquire a vested right to future benefits. The benefits payable under the plans
are generally determined on the basis of an employee's length of service and/or earnings. Employer contributions to the plans
are made, as necessary, to ensure legal funding requirements are satisfied. The Company may make contributions in excess of
the legal funding requirements.
The Company provides postretirement healthcare benefits to certain retirees. Many employees and retirees outside of
the United States are covered by government sponsored healthcare programs.
F-27
The following table presents the change in benefit obligation, change in plan assets and funded status for the
Company's defined benefit and postretirement benefit plans for the year ended December 31, 2023:
(in thousands)
Change in projected benefit obligation ("PBO")
Benefit obligation at December 31, 2022
Service cost
Interest cost
Actuarial (gain) loss
Settlements
Participants’ contributions
Benefit payments
Foreign currency translation
Projected benefit obligation at December 31, 2023
Accumulated benefit obligation at December 31, 2023
Change in plan assets
Fair value of plan assets at December 31, 2022
Return on plan assets
Employer contributions
Participants’ contributions
Settlements
Benefit payments
Foreign currency translation
Fair value of plan assets at December 31, 2023
Funded status (fair value of plan assets less PBO)
Pension
Benefits
(Underfunded)
Pension
Benefits
(Overfunded)
Postretirement
Benefits
$
$
216,810 $
5,679
10,354
(1,438)
(7,142)
—
(4,333)
(288)
219,642
201,856
150,229
11,493
4,048
—
(7,142)
(4,333)
(79)
154,216
(65,426) $
19,208 $
—
962
274
—
—
(987)
1,102
20,559
20,325
26,181
(104)
—
—
—
(987)
1,467
26,557
5,998 $
14,264
429
662
(2,403)
—
762
(2,286)
—
11,428
11,428
—
—
1,524
762
—
(2,286)
—
—
(11,428)
The following table presents the change in benefit obligation, change in plan assets and funded status for the
Company's defined benefit and postretirement benefit plans for the year ended December 31, 2022:
(in thousands)
Change in projected benefit obligation
Benefit obligation at December 31, 2021
Service cost
Interest cost
Actuarial gain
Settlements
Participants’ contributions
Benefit payments
Foreign currency translation
Projected benefit obligation at December 31, 2022
Accumulated benefit obligation at December 31, 2022
Change in plan assets
Fair value of plan assets at December 31, 2021
Return on plan assets
Employer contributions
Participants’ contributions
Settlements
Benefit payments
Foreign currency translation
Fair value of plan assets at December 31, 2022
Funded status (fair value of plan assets less PBO)
F-28
Pension
Benefits
(Underfunded)
Pension
Benefits
(Overfunded)
Postretirement
Benefits
$
$
311,155 $
7,844
8,300
(79,231)
(26,469)
—
(3,637)
(1,152)
216,810
196,785
228,232
(51,939)
4,260
—
(26,469)
(3,637)
(218)
150,229
(66,581) $
33,782 $
—
555
(10,387)
—
—
(1,581)
(3,161)
19,208
18,987
45,705
(13,661)
—
—
—
(1,581)
(4,282)
26,181
6,973 $
16,453
563
353
(1,527)
—
787
(2,365)
—
14,264
14,264
—
—
1,578
787
—
(2,365)
—
—
(14,264)
The change in the underfunded defined benefit PBO for the years ended December 31, 2023 and 2022 is primarily
driven by changes in the U.S. defined benefit plans. The change in the U.S. defined benefit plans' PBO for the year ended
December 31, 2023 includes a $2.7 million actuarial loss attributable to the change in discount rates, a $5.9 million gain
attributable to the change in the lump sum conversion rates and the associated IRS mortality assumptions update; and a
$1.2 million loss attributable to plan experience being different than anticipated, primarily related to differences in expected
future salaries and lump sums paid during 2023. The change in the U.S. defined benefit plan PBO for the year ended December
31, 2022 includes a $41.0 million actuarial gain attributable to the change in discount rates, a $44.6 million gain attributable to
the change in the lump sum conversion rates and a $8.2 million loss attributable to plan experience being different than
anticipated, primarily related to higher salary increases than expected and lump sums paid during 2022.
The Company had one overfunded defined benefit plan for the years ended December 31, 2023 and 2022. Significant
changes in the overfunded defined benefit PBO for the year ended December 31, 2023 include a $0.4 million actuarial loss
attributable to the change in discount rates and a $0.1 million actuarial loss due to census data updates, offset by an actuarial
gain of $0.4 million attributable to an update in morality assumption. Significant changes in the overfunded defined benefit
PBO for the year ended December 31, 2022 include a $12.3 million actuarial gain attributable to the change in discount rates,
offset in part by an actuarial loss of $2.0 million due to census data updates.
The change in the postretirement benefit plan PBO for the year ended December 31, 2023 includes a $2.7 million
actuarial gain attributable to plan experience, primarily related to the gain from the net expected claims, offset in part by a
$0.2 million loss due to the change in the discount rate and a $0.1 million loss due to updated health care trend rates. The
change in the postretirement benefit plan PBO for the year ended December 31, 2022 includes a $3.2 million gain due to the
change in the discount rate, offset in part by a $1.4 million actuarial loss attributable to plan experience, primarily related to
claims losses, and a $0.3 million loss due to updated health care trend rates.
The amount of pension and postretirement assets and liabilities recognized on the consolidated balance sheets was as
follows:
(in thousands)
Other assets
Accrued compensation and benefits
Accrued pension and other postretirement benefits
Net liability recognized
Pension Benefits
December 31,
Postretirement Benefits
December 31,
2023
2022
2023
2022
$
$
5,998 $
(6,295)
(59,131)
(59,428) $
6,973 $
(5,422)
(61,159)
(59,608) $
— $
(925)
(10,503)
(11,428) $
—
(1,189)
(13,075)
(14,264)
The amounts in accumulated other comprehensive loss on the consolidated balance sheets that have not yet been
recognized as components of net periodic benefit cost were as follows:
Pension Benefits
Postretirement Benefits
Year ended December 31,
Year ended December 31,
(in thousands)
Net actuarial (loss) gain at beginning of year
2023
2022
$ (28,208) $ (52,739) $
2021
(64,349) $
Actuarial gain
Settlement impact
Amortization of actuarial loss (gain)
Amortization of prior service cost (credit)
Foreign currency translation
Net actuarial (loss) gain at end of year
4,695
(39)
94
182
(668)
16,455
2,733
3,952
270
1,121
4,131
3,087
3,943
279
170
2023
2022
2021
7,283 $
6,362 $
2,403
—
(893)
(137)
—
1,527
—
(469)
(137)
—
4,640
2,179
—
(320)
(137)
—
$ (23,944) $ (28,208) $
(52,739) $
8,656 $
7,283 $
6,362
F-29
Components of net periodic benefit cost were as follows:
(in thousands)
Components of net periodic benefit cost
Service cost
Interest cost
Expected return on plan assets
Settlements
Amortization of net loss (gain)
Amortization of prior service cost (credit)
Net periodic benefit cost
Pension Benefits
Year ended December 31,
Postretirement Benefits
Year ended December 31,
2023
2022
2021
2023
2022
2021
$
5,679 $
7,844 $
8,189 $
429 $
563 $
11,316
(7,858)
(39)
94
182
8,855
(7,563)
2,733
3,952
270
8,226
(9,683)
3,087
3,943
279
662
—
—
(893)
(137)
353
—
—
(469)
(137)
$
9,374 $ 16,091 $
14,041 $
61 $
310 $
670
302
—
—
(320)
(137)
515
The non-service cost components of net periodic benefit cost are included in other expense, net in the consolidated
statements of operations (Note 19).
The weighted average assumptions used to determine benefit obligations at December 31, 2023 and 2022 were as
follows:
Discount rate
Rate of compensation increase
Pension Benefits
2022
2023
Postretirement Benefits
2023
2022
4.93 %
3.80 %
5.16 %
3.81 %
4.92 %
N/A
5.10 %
N/A
The weighted average assumptions used to determine net periodic benefit cost for the years ended December 31, 2023,
2022 and 2021 were as follows:
Discount rate
Expected long-term rate of return on plan assets
Rate of compensation increase
Pension Benefits
2022
2023
5.16 %
3.91 %
3.81 %
2.93 %
3.44 %
3.81 %
2021
2.66 %
4.28 %
3.56 %
Postretirement Benefits
2022
2021
2023
5.10 %
2.71 %
2.34 %
N/A
N/A
N/A
N/A
N/A
N/A
The assumed healthcare cost trend rates used to determine benefit obligations and net periodic benefit cost for
postretirement benefits as of and for the years ended December 31, 2023, 2022 and 2021 were as follows:
Healthcare cost trend rate assumed for next year
Rate that the cost trend rate is assumed to decline
(the ultimate trend rate)
Year that the rate reaches the ultimate trend rate
Plan Assets
2023
2022
2021
7.00%/8.50%
6.75%/8.00%
5.80%/7.31%
4.50 %
2033
4.50 %
2031
4.50 %
2030
Pension assets by major category of plan assets and the type of fair value measurement as of December 31, 2023 were
as follows:
(in thousands)
Asset category
Cash
Fixed income
Commingled funds
Measured at net asset value
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
$
$
397 $
26,950
153,426
180,773 $
397 $
—
—
— $
26,950
—
397 $
26,950 $
—
—
—
—
F-30
Pension assets by major category of plan assets and the type of fair value measurement as of December 31, 2022 were
as follows:
(in thousands)
Asset category
Insurance Contracts / Individual securities
Fixed income
Commingled funds
Measured at net asset value
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
$
$
26,540 $
— $
26,540 $
149,870
176,410 $
—
— $
—
26,540 $
—
—
—
Pension assets include fixed income securities and commingled funds. Fixed income securities are valued at daily
closing prices or institutional mid-evaluation prices provided by independent industry-recognized pricing sources. Commingled
funds are not traded in active markets with quoted prices and as a result, are valued using the net asset values provided by the
administrator of the fund. The investments underlying the net asset values are based on quoted prices traded in active markets.
In accordance with ASU 2015-7, Fair Value Measurement: Disclosures for Investments in Certain Entities that Calculate Net
Asset Value per Share (or Its Equivalent), the Company has elected the practical expedient to exclude assets measured at net
asset value from the fair value hierarchy.
The Company's investment strategy seeks to reduce asset-liability risk as the funded ratio of the plan improves. The
mix of return seeking and liability hedging assets is determined by taking into account factors such as the funded status level of
the plan, the characteristics of the plan’s liabilities, asset volatility and local regulations. All retirement asset allocations are
reviewed periodically to ensure the allocation meets the needs of the liability structure.
Master trusts were established to hold the assets of the Company's U.S. defined benefit plan. During the year ended
December 31, 2023, the U.S. defined benefit plan asset allocation of these trusts targeted a return-seeking investment allocation
of 32% to 41% and a liability-hedging investment allocation of 59% to 68%. During the year ended December 31, 2022, the
U.S. defined benefit plan asset allocation of these trusts targeted a return-seeking investment allocation of 26% to 32% and a
liability-hedging investment allocation of 68% to 74%. Return-seeking investments include equities, real estate, high yield
bonds and other instruments. Liability-hedging investments include assets such as corporate and government fixed income
securities.
The Company's future expected blended long-term rate of return on plan assets of 3.75% is determined based on long-
term historical performance of plan assets, current asset allocation and projected long-term rates of return.
Estimated Contributions
The Company expects to make pension contributions of approximately $6.4 million during 2024 based on current
assumptions as of December 31, 2023.
Estimated Future Retirement Benefit Payments
The following retirement benefit payments, which reflect expected future service, are expected to be paid as follows:
(in thousands)
Year ending December 31,
2024
2025
2026
2027
2028
Thereafter
Pension
Benefits
Postretirement
Benefits
$
$
28,355 $
23,738
23,943
24,024
23,735
104,505
228,300 $
926
1,005
993
1,087
1,089
5,343
10,443
The estimated future retirement benefit payments noted above are estimates and could change significantly based on
differences between actuarial assumptions and actual events and decisions related to lump sum distribution options that are
available to participants in certain plans.
F-31
International Plans
Pension coverage for certain eligible employees of the Company's international subsidiaries is provided, to the extent
deemed appropriate, through separate defined benefit pension plans. The international defined benefit pension plans are
included in the tables above. As of December 31, 2023 and 2022, the international pension plans had total projected benefit
obligations of $37.9 million and $35.4 million, respectively, and fair values of plan assets of $28.0 million and $27.8 million,
respectively. The majority of the plan assets are invested in equity securities and insured pension assets. The net periodic
benefit cost related to international plans was $2.8 million, $3.3 million and $2.1 million for the years ended December 31,
2023, 2022 and 2021, respectively.
In the third quarter of 2021, the Company executed a buy-in policy contract with an insurance company which fully
insures the benefits of one of its defined benefit pension plans outside the United States. The initial value of the insurance asset
was equal to the premium paid to secure the policy (i.e., the fair value of the plan assets plus additional funding to execute the
buy-in contract). As a result, the Company does not anticipate any further material contributions to the plan.
Defined Contribution Plans
The Company sponsors a number of defined contribution plans and company contributions related to these plans are
determined under various formulas. Company contributions to defined contribution plans amounted to $21.3 million, $20.0
million and $14.8 million for the years ended December 31, 2023, 2022 and 2021, respectively.
15. Income Taxes
The components of income before income taxes were as follows:
(in thousands)
Domestic operations
Foreign operations
Income before income taxes
Income tax expense (benefit) was as follows:
(in thousands)
Current expense
United States
Foreign
Current income tax expense
Deferred expense (benefit)
United States
Foreign
Deferred income tax expense
Total income tax expense
Year ended December 31,
2023
158,999 $
82,601
241,600 $
2022
130,568 $
128,867
259,435 $
2021
122,724
125,099
247,823
Year ended December 31,
2022
2021
2023
9,704 $
17,876
27,580
2,755 $
42,536
45,291
6,626
8,787
15,413
42,993 $
10,122
(1,062)
9,060
54,351 $
2,820
48,743
51,563
17,297
(5,277)
12,020
63,583
$
$
$
$
F-32
The following table represents a reconciliation of income taxes computed at the federal statutory income tax rate of
21% to income tax expense as reported:
(in thousands)
Income tax expense computed at federal statutory income tax rate
Foreign taxes, net of credits
Net adjustments for uncertain tax positions
State and local taxes
Nondeductible expenses
Valuation allowance
Tax credits
Miscellaneous other, net
Income tax expense as reported
Effective income tax rate
The components of net deferred tax assets (liabilities) were as follows:
Year ended December 31,
2023
50,736
(11,859)
1,010
6,160
2,250
(110)
(5,214)
20
42,993
$
$
2022
54,481
(6,063)
768
3,430
1,413
4,079
(3,418)
(339)
54,351
$
$
2021
52,043
(2,029)
793
4,184
2,347
9,626
(3,322)
(59)
63,583
$
$
17.8 %
20.9 %
25.7 %
(in thousands)
Deferred tax assets
Compensation and benefits
Share-based compensation
Pension and other postretirement benefits
Inventories
R&D capitalization
Lease liability
Transaction costs
Nondeductible accruals and reserves
Miscellaneous
Net operating loss and other tax carryforwards
Gross deferred tax assets
Valuation allowance
Total deferred tax assets
Deferred tax liabilities
Property, plant and equipment
Identifiable intangible assets
Right-of-use assets
Tax on unremitted earnings
Foreign exchange derivative instruments
Miscellaneous
Total deferred tax liabilities
Net deferred tax asset
December 31,
2023
2022
$
17,867 $
9,890
11,892
22,258
48,949
25,161
807
12,805
1,126
40,371
191,126
(33,999)
157,127
(6,413)
(87,616)
(23,817)
(10,674)
(2,723)
(1,510)
(132,753)
$
24,374 $
15,453
9,234
12,787
25,223
36,426
16,248
1,026
12,240
254
58,741
187,632
(34,109)
153,523
(4,874)
(80,235)
(15,380)
(7,354)
(2,158)
(1,867)
(111,868)
41,655
Under U.S. tax law and regulations, certain changes in the ownership of the Company’s shares can limit the annual
utilization of tax attributes (tax loss and tax credit carryforwards) that were generated prior to such ownership changes. The
annual limitation could affect the realizability of the Company’s deferred tax assets recorded in the financial statement for its
tax credit carryforwards because the carryforward periods have a finite duration. The 2016 initial public offering, and associated
share transfers, resulted in significant changes in the composition of the ownership of the Company’s shares. Based on its
analysis of the change of ownership tax rules in conjunction with the estimated amount and source of its future earnings and
related tax profile, the Company believes its existing U.S. tax attributes will be utilized prior to their expiration, with the
exception of certain tax attributes for which the Company has established a valuation allowance.
As of December 31, 2023 and 2022, the Company had state net operating loss (“NOL”) carryforwards of $50.6 million
and $74.8 million, respectively. These NOL carryforwards will begin to expire in 2024. As of December 31, 2023 and 2022, the
Company had foreign tax credit carryforwards of $27.7 million and $31.9 million, respectively. These foreign tax credits will
begin to expire in 2028. As of December 31, 2023 and 2022, the Company had U.S. general business credit carryforwards of
F-33
$11.1 million and $24.9 million, respectively. These credits will begin to expire in 2031. As of December 31, 2023 and 2022,
the Company had state income tax credits of $9.0 million and $8.7 million, respectively. These credits will begin to expire in
2031.
Changes in the valuation allowance for deferred tax assets were as follows:
(in thousands)
Valuation allowance at beginning of year
(Decreases) increases recorded to income tax provision
Valuation allowance at end of year
Year ended December 31,
2022
2021
2023
$
$
34,109 $
(110)
33,999 $
30,030 $
4,079
34,109 $
20,404
9,626
30,030
The Company evaluates the realizability of its deferred tax assets based upon the weight of available positive and
negative evidence. In assessing the realizability of these assets, the Company considered numerous factors including historical
profitability, the character and estimated future taxable income, prudent and feasible tax planning strategies, and the industry in
which it operates. The Company’s conclusion was primarily driven by cumulative income in its respective tax jurisdictions as
well as projections of future income driven by sustained profitability.
In 2023, the change in the valuation allowance of $0.1 million is principally due to excess U.S. foreign tax credits
arising from the Company's Japan branch operations and state tax attributes that it expects to expire unutilized. In 2022 and
2021, the change in valuation allowance was principally due to excess U.S. foreign tax credits arising from its Japan branch
operations and state tax attributes that it expects to expire unutilized.
The Company has determined that its undistributed earnings for most of its foreign subsidiaries are not permanently
reinvested. The Company has provided for withholding taxes on all unremitted earnings that are not permanently reinvested, as
required.
The Company's unrecognized tax benefits represent tax positions for which reserves have been established. The
following table represents a reconciliation of the activity related to the unrecognized tax benefits, excluding accrued interest and
penalties:
(in thousands)
Unrecognized tax benefits at beginning of year
Gross additions - prior year tax positions
Gross additions - current year tax positions
Gross reductions - prior year tax positions
Unrecognized tax benefits at end of year
Year ended December 31,
2023
2022
2021
$
$
9,538 $
191
1,229
(176)
10,782 $
8,658 $
—
1,054
(174)
9,538 $
7,822
—
1,004
(168)
8,658
As of December 31, 2023, 2022 and 2021, the unrecognized tax benefits of $10.8 million, $9.5 million and $8.7
million, respectively, would affect the Company's future effective tax rate if recognized. The Company does not anticipate a
material change in unrecognized tax benefits within the next 12 months.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits in the provision for
income taxes on the consolidated statements of operations. As of December 31, 2023, the Company recognized a de minimis
liability for interest and penalties. As of December 31, 2022 and 2021, the Company recognized a liability of $0.2 million for
interest and penalties. During the year ended December 31, 2023, the Company recognized an income tax benefit of
$0.2 million related to interest and penalties as a component of income tax expense. During the year ended December 31, 2022,
the Company recognized de minimis interest and penalties as a component of income tax expense.
The Company and certain subsidiaries have tax years that remain open and are subject to examination by tax
authorities in the following major taxing jurisdictions: United States for years after July 29, 2011, Japan for years after 2015,
Korea for years after 2020 and the United Kingdom for years after 2016. The Company files income tax returns on a combined,
unitary, or stand-alone basis in multiple state and local jurisdictions, which generally have statute of limitations from three to
four years. Various state and local income tax returns, as well as certain international jurisdictions, are currently in the process
of examination. These examinations are unlikely to result in any significant changes to the amounts of unrecognized tax
benefits on the consolidated balance sheet as of December 31, 2023.
F-34
16. Common Stock
As of December 31, 2023 and 2022, the Company's certificate of incorporation, as amended and restated, authorized
the Company to issue 500,000,000 shares of $0.001 par value common stock. Each share of common stock entitles the holder to
one vote on all matters submitted to a vote of the Company's shareholders. Common shareholders are entitled to receive
dividends whenever funds are legally available and when declared by the Board of Directors, subject to the prior rights of
holders of all classes of stock outstanding.
Dividends
The Company declared dividends per common share, including DERs (Note 17), during the periods presented as
follows:
2023:
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
Total dividends declared in 2023
2022:
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
Total dividends declared in 2022
2021:
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
Total dividends declared in 2021
Dividends
per Common Share
Amount
(in thousands)
$
$
$
$
$
$
0.195 $
0.195
0.195
0.195
0.780 $
0.180 $
0.180
0.180
0.180
0.720 $
0.165 $
0.165
0.165
0.165
0.660 $
12,941
13,098
13,667
13,629
53,335
12,986
13,192
13,400
13,473
53,051
12,619
12,692
12,768
12,767
50,846
During the first quarter of 2024, the Company's Board of Directors declared a dividend of $0.215 per share of common
stock to shareholders of record as of March 8, 2024, which is payable on March 22, 2024.
Share Repurchase Program
During the year ended December 31, 2023, the Board of Directors authorized the Company to repurchase up to an
additional $250.0 million of its issued and outstanding common stock, bringing the total authorization under its existing share
repurchase program up to $700.0 million as of December 31, 2023. Share repurchases may be effected from time to time in
open market or privately negotiated transactions, including transactions with affiliates, with the timing of purchases and the
amount of stock purchased generally determined at the discretion of the Company consistent with the Company's general
working capital needs and within the constraints of the Company’s credit agreement.
On May 10, 2019, in connection with this share repurchase program, the Company entered into an agreement with
Magnus to purchase from Magnus an equal amount of its common stock as it purchases on the open market, up to an aggregate
of $24.9 million, at the same weighted average per share price (the "2019 Agreement"). As the Company purchased a
cumulative total of $24.9 million of its common stock through open market purchases, the determination date, as defined in the
2019 Agreement, was automatically triggered on March 18, 2021. As a result, on April 2, 2021, the Company purchased
355,341 shares of its common stock for an aggregate of $11.1 million from Magnus, in satisfaction of its obligations under the
2019 Agreement.
F-35
On November 8, 2021, the Company entered into an agreement with Magnus to purchase from Magnus an equal
amount of its common stock as it purchases on the open market, up to an aggregate of $37.5 million, at the same weighted
average per share price (the "2021 Agreement"). In relation to the 2021 Agreement, on January 24, 2022, the Company
purchased 699,819 shares of its common stock for an aggregate of $37.5 million from Magnus, in satisfaction of its obligations
under the 2021 Agreement.
On June 16, 2022, the Company entered into an agreement with Magnus to purchase from Magnus an equal amount of
its common stock as it purchases on the open market over the period of time from July 1, 2022 through January 13, 2023, up to
an aggregate of $75.0 million, at the same weighted average per share price (the "2022 Agreement"). On August 30, 2022, the
Company amended and restated the 2022 Agreement to increase the aggregate dollar amount of shares of its common stock that
it would purchase from Magnus from $75.0 million to $100.0 million (the "Amended and Restated 2022 Agreement"). In
relation to this agreement, the Company recorded a share repurchase liability of $92.6 million for 2,000,839 shares of common
stock, which was included in accrued expenses and other liabilities and treasury stock on the consolidated balance sheet as of
December 31, 2022. Between January 1, 2023 and January 13, 2023, the Company purchased an additional 167,689 shares of
its common stock on the open market for an aggregate of $7.4 million, bringing the cumulative total open market purchases
since the inception of the 2022 Agreement to $100.0 million. As a result, on January 23, 2023, the Company purchased
2,168,528 shares of its common stock from Magnus for an aggregate of $100.0 million, in satisfaction of its obligation under
the Amended and Restated 2022 Agreement.
On June 9, 2023, the Company entered into a new agreement with Magnus to purchase from Magnus an equal amount
of its common stock as it purchases on the open market over the period of time from June 12, 2023 through October 27, 2023,
up to an aggregate of $100.0 million, at the same weighted average per share price (the "2023 Agreement"). In relation to the
2023 Agreement, on November 3, 2023, the Company purchased 1,824,994 shares of its common stock from Magnus for an
aggregate of $100.0 million in satisfaction of its obligation under the 2023 Agreement.
The Company's share repurchase activity for the periods presented was as follows:
(in thousands, except share and per share amounts)
Shares purchased in the open market (1):
Shares purchased
Average price
Aggregate value
Shares purchased from Magnus:
Shares purchased
Average price (2)
Aggregate value
Total shares purchased:
Shares purchased
Average price
Aggregate value
Year ended December 31,
2023
2022
2021
$
$
$
$
$
$
2,492,883
53.13 $
132,437 $
3,993,522
50.08 $
200,002 $
6,486,405
51.25 $
332,439 $
3,415,044
44.88 $
153,258 $
699,819
53.59 $
37,501 $
4,114,863
46.36 $
190,759 $
1,049,522
51.81
54,372
355,341
31.31
11,125
1,404,863
46.62
65,497
___________________________________
(1) Excludes $1.1 million of excise tax on share repurchases made during the year ended December 31, 2023, in accordance with the Inflation
Reduction Act of 2022, which were included in the cost basis of treasury stock acquired during the year ended December 31, 2023.
(2) In accordance with the share repurchase agreements, shares purchased from Magnus are accrued for at the same weighted average price as
those purchased on the open market, as if the purchase from Magnus had occurred on the same day. As such, the average price of Magnus
repurchases during any given period will differ from open market repurchases due to the settlement of the previously recorded share
repurchase liability, as well as, open market purchases made after the completion of the Magnus Share repurchase agreements.
As of December 31, 2023, the Company had $75.0 million remaining under the current share repurchase authorization.
On February 15, 2024, the Company's Board of Directors authorized the Company to repurchase up to an additional
$300.0 million of its issued and outstanding common stock, bringing the total authorization up to $1.0 billion since the share
repurchase program was established in 2018. This program will remain in effect until completed or until terminated by the
Board of Directors.
F-36
Common Stock Retirement
During the year ended December 31, 2023, the Company retired 13,377,991 shares of its previously repurchased
common stock with an aggregate repurchase price of $626.1 million. The Company records retirements of treasury stock at cost
and allocates the excess of the repurchase price over the par value of shares acquired to both retained earnings and additional
paid-in capital. The portion allocated to additional paid-in capital is calculated on a pro rata basis of the shares to be retired and
the total shares issued and outstanding as of the date of retirement.
17. Equity Incentive Plans
Under the Acushnet Holdings Corp. 2015 Omnibus Incentive Plan (“2015 Plan”), the Company may grant stock
options, stock appreciation rights, restricted shares of common stock, restricted stock units ("RSUs"), performance stock units
("PSUs") and other share-based and cash-based awards to members of the Board of Directors, officers, employees, consultants
and advisors of the Company. The 2015 Plan is administered by the compensation committee (the “Administrator”). The
Administrator has the authority to establish the terms and conditions of any award issued or granted under the 2015 Plan. As
of December 31, 2023, the only awards granted under the 2015 Plan were RSUs and PSUs.
Restricted Stock and Performance Stock Units
RSUs granted to members of the Board of Directors vest immediately into shares of common stock. RSUs granted to
Company officers generally vest over three years, with one-third of each grant vesting annually, subject to the recipient's
continued employment with the Company. RSUs granted to other employees, consultants and advisors of the Company vest in
accordance with the terms of the grants, generally either over three years or, beginning in 2022, with one-third of each grant
vesting annually, subject to the recipient’s continued service to the Company. PSUs granted to Company officers and other
employees vest based upon the Company's performance against specified metrics, generally over a three year performance
period, subject to the recipient's continued service to the Company. At the end of the performance period, the number of shares
of common stock that could be issued is determined based upon the Company's performance against these metrics. The number
of shares that could be issued can range from 0% to 200% of the recipient's target award. Recipients of the awards granted
under the 2015 Plan may elect to defer receipt of all or any portion of any shares of common stock issuable upon vesting to a
future date elected by the recipient.
All RSUs and PSUs granted under the 2015 Plan have DERs, which entitle holders of RSUs and PSUs to the same
dividend value per share as holders of common stock and can be paid in either cash or common stock. DERs are subject to the
same vesting and other terms and conditions as the corresponding unvested RSUs and PSUs. DERs are paid when the
underlying shares of common stock are delivered.
Each share issued with respect to RSUs and PSUs granted under the 2015 Plan reduces the number of shares available
for grant. RSUs and PSUs forfeited and shares withheld to satisfy tax withholding obligations increase the number of shares
available for grant. As of December 31, 2023, there were 5,476,366 remaining shares of common stock reserved for issuance
under the 2015 Plan of which 2,677,900 remain available for future grants.
F-37
A summary of the Company’s RSUs and PSUs as of December 31, 2023, 2022 and 2021 and changes during the years
then ended is presented below:
Outstanding as of December 31, 2020
Granted
Vested (1)(2)
Forfeited
Outstanding as of December 31, 2021
Granted
Vested (3)
Forfeited
Outstanding as of December 31, 2022
Granted
Vested (4)(5)
Forfeited
Outstanding as of December 31, 2023
_______________________________________________________________________________
Number
of
RSUs
Weighted-
Average
Fair
Value RSUs
Number
of
PSUs(6)
Weighted-
Average
Fair
Value PSUs
1,253,173 $
314,060
(806,645)
(69,215)
691,373 $
379,895
(91,641)
(34,932)
944,695 $
476,614
(528,020)
(25,226)
868,063 $
24.33
45.81
24.43
27.46
33.66
43.97
35.39
37.88
37.48
48.10
31.87
46.85
46.45
457,576 $
145,882
(189,181)
(47,210)
367,067 $
167,611
—
(5,312)
529,366 $
196,572
(231,809)
(13,875)
480,254 $
24.55
45.36
23.47
28.74
32.84
43.96
—
38.86
36.30
48.22
25.80
42.33
46.07
(1) Included 546,726 shares of common stock related to RSUs that were not delivered as of December 31, 2021. The aggregate fair value of
RSUs vested was $38.4 million.
(2) Based upon the Company’s level of achievement of the applicable performance metrics, the recipients of the 189,181 PSUs vested during
the year ended December 31, 2021, were entitled to receive 378,362 shares of common stock. As of December 31, 2021, no shares of
common stock had been delivered in connection with the vesting of these PSUs. The aggregate fair value of PSUs vested during the year
ended December 31, 2021, as adjusted for the Company's achievement of the applicable performance metrics, was $20.1 million.
(3) Included 52,849 shares of common stock related to RSUs that were not delivered as of December 31, 2022. The aggregate fair value of
RSUs vested was $4.0 million.
(4) Included 88,760 shares of common stock related to RSUs that were not delivered as of December 31, 2023. The aggregate fair value of
RSUs vested was $25.6 million.
(5) Based upon the Company’s level of achievement of the applicable performance metrics, the recipients of the 231,809 PSUs vested during
the year ended December 31, 2023, were entitled to receive 461,568 shares of common stock. As of December 31, 2023, there were
230,089 shares of common stock that had not been delivered in connection with the vesting of these PSUs. The aggregate fair value of
PSUs vested during the year ended December 31, 2023, as adjusted for the Company's achievement of the applicable performance metrics,
was $22.5 million.
(6) Number of PSUs assume that 100% of the target level of performance was achieved.
Compensation expense recorded related to RSUs and PSUs in the consolidated statements of operations was as
follows:
(in thousands)
RSU
PSU
Year ended December 31,
2022
2021
2023
$
17,055 $
11,989
13,269 $
10,157
12,113
14,871
The remaining unrecognized compensation expense related to unvested RSUs and unvested PSUs granted was $20.4
million and $12.0 million, respectively, as of December 31, 2023 and is expected to be recognized over the related weighted
average period of 1.3 years and 1.8 years, respectively.
F-38
A summary of shares of common stock issued related to the 2015 Plan, including the impact of any DERs issued in
common stock, is presented below:
Shares of common stock issued
Shares of common stock withheld by the Company as
payment by employees in lieu of cash to satisfy tax
withholding obligations
Net shares of common stock issued
Cumulative undelivered shares of common stock
Compensation Expense
Year ended
December 31, 2023
Year ended
December 31, 2022
RSUs
474,886
PSUs
231,580
RSUs
525,029
PSUs
188,527
(128,912)
345,974
462,799
(91,843)
139,737
421,331
(159,854)
365,175
407,173
(87,215)
101,312
191,242
The allocation of share-based compensation expense in the consolidated statement of operations was as follows:
(in thousands)
Cost of goods sold
Selling, general and administrative
Research and development
Total compensation expense before income tax
Income tax benefit
Total compensation expense, net of income tax
Year ended December 31,
2022
2021
2023
$
$
1,615 $
26,291
1,803
29,709
5,126
24,583 $
1,316 $
21,183
1,584
24,083
4,174
19,909 $
874
25,388
1,377
27,639
4,631
23,008
18. Accumulated Other Comprehensive Loss, Net of Tax
Accumulated other comprehensive loss, net of tax consists of foreign currency translation adjustments (Note 2),
unrealized gains and losses from derivative instruments designated as cash flow hedges (Note 12) and pension and other
postretirement adjustments (Note 14).
The components of and changes in accumulated other comprehensive loss, net of tax, were as follows:
(in thousands)
Foreign
Currency
Translation
Foreign Exchange
Derivative
Instruments
Interest Rate
Swap
Derivative
Instruments
Pension and
Other
Postretirement
Accumulated
Other
Comprehensive
Loss, Net of Tax
Balances as of December 31, 2021
$
(66,915) $
5,167 $
— $
(37,834) $
(99,582)
Other comprehensive (loss) income
before reclassifications
Amounts reclassified from accumulated
other comprehensive loss, net of tax
Tax expense
(30,940)
10,856
—
—
(9,840)
(585)
—
—
—
19,124
6,349
(5,050)
(960)
(3,491)
(5,635)
Balances as of December 31, 2022
$
(97,855) $
5,598 $
— $
(17,411) $
(109,668)
Other comprehensive income before
reclassifications
Amounts reclassified from accumulated
other comprehensive loss, net of tax
Tax benefit (expense)
2,430
—
—
4,880
(6,982)
433
991
(690)
(74)
6,430
(793)
(1,306)
14,731
(8,465)
(947)
Balances as of December 31, 2023
$
(95,425) $
3,929 $
227 $
(13,080) $
(104,349)
F-39
19. Interest Expense, Net and Other Expense, Net
The components of interest expense, net were as follows:
(in thousands)
Interest expense
(Gain) loss on interest rate swap
Interest income
Total interest expense, net
The components of other expense, net were as follows:
(in thousands)
Non-service cost component of net periodic benefit cost
Other (income) expense
Total other expense, net
20. Net Income per Common Share
Year ended December 31,
2022
2021
2023
43,630 $
(690)
(1,652)
41,288 $
14,012 $
—
(743)
13,269 $
6,730
1,569
(590)
7,709
Year ended December 31,
2022
2021
2023
3,327 $
(910)
2,417 $
7,994 $
835
8,829 $
5,697
(1,417)
4,280
$
$
$
$
The following is a computation of basic and diluted net income per common share attributable to Acushnet Holdings
Corp.:
(in thousands, except share and per share amounts)
Year ended December 31,
2023
2022
2021
Net income attributable to Acushnet Holdings Corp.
$
198,429 $
199,278 $
178,873
Weighted average number of common shares:
Basic
RSUs
PSUs
Diluted
Net income per common share attributable to Acushnet Holdings Corp.:
Basic
Diluted
67,063,933
71,958,879
74,536,637
311,992
141,180
354,960
246,259
560,449
167,988
67,517,105
72,560,098
75,265,074
$
$
2.96 $
2.94 $
2.77 $
2.75 $
2.40
2.38
Net income per common share attributable to Acushnet Holdings Corp. was calculated using the treasury stock
method.
The Company’s potential dilutive securities for the years ended December 31, 2023, 2022 and 2021 include RSUs and
PSUs. PSUs vest based upon achievement of performance targets and are excluded from the diluted shares outstanding unless
the performance targets have been met as of the end of the applicable reporting period regardless of whether such performance
targets are probable of achievement.
The following securities have been excluded from the calculation of diluted weighted-average common shares
outstanding as their impact was determined to be anti-dilutive:
RSUs
Year ended December 31,
2022
2021
2023
66,590
107,497
72,871
F-40
21. Segment Information
The Company’s operating segments are based on how the Chief Operating Decision Maker (“CODM”) makes
decisions about assessing performance and allocating resources. The Company has four reportable segments that are organized
on the basis of product categories. These segments include Titleist golf balls, Titleist golf clubs, Titleist golf gear and FootJoy
golf wear.
The CODM primarily evaluates performance using segment operating income (loss). Segment operating income (loss)
includes directly attributable expenses and certain shared costs of corporate administration that are allocated to the reportable
segments, but excludes certain other costs, such as interest expense, net; restructuring costs; the non-service cost component of
net periodic benefit cost; transaction fees; as well as other non-operating gains and losses that the Company does not allocate to
the reportable segments. The CODM does not evaluate a measure of assets when assessing performance.
Results shown for the years ended December 31, 2023, 2022 and 2021 are not necessarily those which would be
achieved if each segment was an unaffiliated business enterprise. There are no intersegment transactions.
Information by reportable segment and a reconciliation to reported amounts are as follows:
(in thousands)
Net sales
Titleist golf balls
Titleist golf clubs
Titleist golf gear
FootJoy golf wear
Other
Total net sales
Segment operating income
Titleist golf balls
Titleist golf clubs
Titleist golf gear
FootJoy golf wear
Other
Total segment operating income
Reconciling items:
Interest expense, net
Non-service cost component of net periodic benefit cost
Other
Total income before income tax
Year ended December 31,
2022
2021
2023
$
761,724 $
658,645
216,161
596,444
149,021
667,552
551,532
192,613
580,550
155,683
$ 2,381,995 $ 2,270,336 $ 2,147,930
678,844 $
609,573
204,946
617,951
159,022
$
$
144,266 $
106,542
21,246
16,079
13,204
301,337
112,738 $
100,926
11,652
36,982
24,252
286,550
106,202
75,397
14,696
44,210
23,437
263,942
(41,288)
(3,327)
(15,122)
241,600 $
(13,269)
(7,994)
(5,852)
259,435 $
(7,709)
(5,697)
(2,713)
247,823
F-41
Depreciation and amortization expense by reportable segment are as follows:
(in thousands)
Depreciation and amortization
Titleist golf balls
Titleist golf clubs
Titleist golf gear
FootJoy golf wear
Other
Total depreciation and amortization
Year ended December 31,
2022
2021
2023
$
$
23,228 $
13,321
4,410
7,613
2,784
51,356 $
21,644 $
8,672
1,843
6,677
2,870
41,706 $
22,248
8,136
1,715
6,293
2,851
41,243
Information as to the Company’s operations in different geographical areas is presented below. Net sales are
categorized based on the location in which the sale originates.
(in thousands)
Net sales
United States
EMEA (1)
Japan
Korea
Rest of World
Total net sales
___________________________________
(1) Europe, the Middle East and Africa (“EMEA”)
Year ended December 31,
2023
2022
2021
$ 1,350,006 $ 1,227,801 $ 1,125,006
296,003
187,985
322,609
216,327
$ 2,381,995 $ 2,270,336 $ 2,147,930
321,545
161,027
312,655
247,308
314,655
149,425
301,815
266,094
Long-lived assets (property, plant and equipment, net) categorized based on their location of domicile are as follows:
(in thousands)
Long-lived assets
United States
EMEA
Japan
Korea
Rest of World (1)
Total long-lived assets
Year ended December 31,
2023
2022
$
$
213,827 $
12,926
5,613
8,286
54,691
295,343 $
178,375
10,949
2,529
6,495
56,124
254,472
___________________________________
(1) Includes manufacturing facilities in Thailand with long lived assets of $43.7 million and $44.2 million as of December 31, 2023 and 2022,
respectively.
22. Commitments and Contingencies
Purchase Obligations
During the normal course of its business, the Company enters into agreements to purchase goods and services,
including purchase commitments for advertising (including media placement and production costs), finished goods inventory,
capital expenditures and endorsement arrangements with professional golfers.
The Company's purchase obligations as of December 31, 2023 were as follows:
(in thousands)
Purchase obligations(1)
2024
2025
2026
2027
2028
Payments Due by Period
$ 287,422 $ 52,444 $ 2,619 $ 2,467 $ 2,416 $
Thereafter
7,239
(1) The reported amounts exclude those liabilities included in accounts payable or accrued liabilities on the consolidated balance sheet as of
December 31, 2023.
F-42
Litigation
The Company and its subsidiaries are party to lawsuits associated with the normal conduct of their businesses and
operations. It is not possible to predict the outcome of the pending actions, and, as with any litigation, it is possible that some of
these actions could be decided unfavorably. Consequently, the Company is unable to estimate the ultimate aggregate amount of
monetary loss, amounts covered by insurance or the financial impact that will result from such matters and has not recorded a
liability related to potential losses.
F-43
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DIRECTORS AND OFFICERS
Board of Directors
Yoon Soo (Gene) Yoon, Chairman
Chairman,
Fila Holdings Corp.
Gregory Hewett
Principal,
GH Consulting LLC
Jan Singer
Former Chief Executive Officer,
J. Crew Group, Inc.
Leanne Cunningham
Executive Vice President,
Chief Financial Officer,
Brown-Forman Corporation
Ho Yeon (Aaron) Lee
Chief Financial Officer,
Fila Holdings Corp.
Steven Tishman
Managing Director,
Houlihan Lokey
David Maher
President and Chief Executive Officer,
Acushnet Holdings Corp.
Keun Chang (Kevin) Yoon
President and Chief Executive Officer,
Fila Holdings Corp.
Senior Corporate Officers
David Maher
President and
Chief Executive Officer
Mary Lou Bohn
President,
Titleist Golf Balls
Steven Pelisek
President,
Titleist Golf Clubs
John Duke, Jr.
President,
Titleist Golf Gear
Christopher Lindner
President,
FootJoy
Sean Sullivan
Executive Vice President,
Chief Financial Officer
Roland Giroux
Executive Vice President, Chief Legal
Officer and Corporate Secretary
Brendan Reidy
Executive Vice President,
Chief People Officer
Roger Czuchra
Executive Vice President,
Chief Technology and
Digital Officer
Nicholas Mohamed
Vice President, Corporate Controller
and Principal Accounting Officer
CORPORATE INFORMATION
Corporate Headquarters
333 Bridge Street
Fairhaven, MA 02719
Tel: 508-979-2000
www.acushnetholdingscorp.com
Stock Exchange Information
NYSE Ticker Symbol: GOLF
Transfer Agent
Computershare Trust Company, N.A.
P.O. Box 505000
Louisville, KY 40233
Annual Meeting
The Annual Meeting of Shareholders
will be held on June 3, 2024.
Investor Information
Individual shareholders, security
analysts, portfolio managers and
other institutional investors seeking
information about the Company
should contact Acushnet Holdings
Corp. Investor Relations by email
at IR@acushnetgolf.com.
333 Bridge St.
Fairhaven, MA 02719