Acushnet Holdings Corp. - Quarter Report: 2023 September (Form 10-Q)


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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549


Form			10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023

☐ 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			45-2644353
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

333 Bridge Street	Fairhaven,	Massachusetts	02719
(Address of principal executive offices)			(Zip Code)

(800) 225-8500

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock - $0.001 par value per share

GOLF

New York Stock Exchange

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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The registrant had 65,377,739 shares of common stock outstanding as of October 27, 2023.

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ACUSHNET HOLDINGS CORP.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023

TABLE OF CONTENTS


		Page No.

PART I.	FINANCIAL INFORMATION	4
Item 1.	Financial Statements	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36
Item 4.	Controls and Procedures	38
PART II.	OTHER INFORMATION	39
Item 1.	Legal Proceedings	39
Item 1A.	Risk Factors	39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 3.	Defaults Upon Senior Securities	41
Item 4.	Mine Safety Disclosures	41
Item 5.	Other Information	41
Item 6.	Exhibits	42
Signatures		43


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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q 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 section entitled “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:

•a reduction in the number of rounds of golf played or in the number of golf participants;

•unfavorable weather conditions may impact the number of playable days and 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;

•demographic factors may affect the number of golf participants and related spending on our products;

•changes to the Rules of Golf with respect to equipment;

•a significant disruption in the operations of our manufacturing, assembly or distribution facilities;

•our ability to procure raw materials or components of our products;

•a disruption in the operations of our suppliers;

•the cost of raw materials and components;

•currency transaction and translation risk;

•our ability to successfully manage the frequent introduction of new products or satisfy changing consumer preferences, quality and regulatory standards;

•our reliance on technical innovation and high-quality products;

•our ability to adequately enforce and protect our intellectual property rights;

•involvement in lawsuits to protect, defend or enforce our intellectual property rights;

•our ability to prevent infringement of intellectual property rights by others;

•changes to patent laws;

•intense competition and our ability to maintain a competitive advantage in each of our markets;

•limited opportunities for future growth in sales of certain of our products, including golf balls, golf shoes and golf gloves;

•our customers’ financial condition, their levels of business activity and their ability to pay trade obligations;

•a decrease in corporate spending on our custom logo golf balls;

•our ability to maintain and further develop our sales channels;

•consolidation of retailers or concentration of retail market share;

•our ability to maintain and enhance our brands;

•seasonal fluctuations of our business;

•fluctuations of our business based on the timing of new product introductions;

•risks associated with doing business globally;

•compliance with laws, regulations and policies, including the U.S. Foreign Corrupt Practices Act or other applicable anti-corruption legislation;

•our ability to secure professional golfers to endorse or use our products;

•negative publicity relating to us or the golfers who use our products or the golf industry in general;

•our ability to accurately forecast demand for our products;

•a disruption in the service, or a significant increase in the cost, of our primary delivery and shipping services or a significant disruption at shipping ports;

•our ability to maintain our information systems to adequately perform their functions;

•cybersecurity risks;

•our ability to comply with data privacy and security laws;

•the ability of our eCommerce systems to function effectively;

•impairment of goodwill and identifiable intangible assets;


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•our ability to attract and/or retain management and other key employees and hire qualified management, technical and manufacturing personnel;

•our ability to prohibit sales of our products by unauthorized retailers or distributors;

•our ability to grow our presence in existing international markets and expand into additional international markets;

•tax uncertainties, including potential changes in tax laws, unanticipated tax liabilities and limitations on utilization of tax attributes after any change of control;

•adequate levels of coverage of our insurance policies;

•product liability, warranty and recall claims;

•litigation and other regulatory proceedings;

•compliance with environmental, health and safety laws and regulations;

•our ability to secure additional capital at all or on terms acceptable to us and potential dilution of holders of our common stock;

•lack of assurance of positive returns on capital investments;

•risks associated with acquisitions and investments;

•our estimates or judgments relating to our critical accounting estimates;

•terrorist activities and international political instability;

•occurrence of natural disasters or pandemic diseases;

•a high degree of leverage, ability to service our indebtedness, ability to incur more indebtedness and restrictions in the agreements governing our indebtedness;

•our use of derivative financial instruments;

•the ability of our controlling shareholder to control significant corporate activities, and that our controlling shareholder’s interests may conflict with yours;

•our status as a controlled company;

•the market price of shares of our common stock;

•the execution of our share repurchase program and effects thereof;

•our ability to maintain effective internal controls over financial reporting;

•our ability to pay dividends;

•our status as a holding company;

•dilution from future issuances or sales of our common stock;

•anti-takeover provisions in our organizational documents and Delaware law;

•reports from securities analysts; and

•other factors discussed under the heading "Risk Factors" in our most recent Annual Report on Form 10-K and in any other reports we file with the Securities and Exchange Commission (“SEC”), including this Quarterly Report on Form 10-Q.

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.

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, 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. 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.


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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

INDEX TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


			Page(s)
Unaudited Condensed Consolidated Financial Statements

Condensed Consolidated Balance Sheets (unaudited)			5

Condensed Consolidated Statements of Operations (unaudited)			6

Condensed Consolidated Statements of Comprehensive Income (unaudited)			7

Condensed Consolidated Statements of Cash Flows (unaudited)			8

Condensed Consolidated Statements of Shareholders’ Equity (unaudited)			9

Notes to Unaudited Condensed Consolidated Financial Statements			11


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ACUSHNET HOLDINGS CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)


	September 30,		December 31,
(in thousands, except share and per share amounts)	2023		2022
Assets
Current assets
Cash, cash equivalents and restricted cash ($13,748 and $14,376 attributable to the variable interest entity ("VIE"))	$	56,766	$	58,904
Accounts receivable, net	335,821		216,695
Inventories ($8,248 and $17,866 attributable to the VIE)	528,730		674,684
Prepaid and other assets	112,204		108,793
Total current assets	1,033,521		1,059,076
Property, plant and equipment, net ($9,358 and $10,089 attributable to the VIE)	275,007		254,472
Goodwill ($32,312 and $32,312 attributable to the VIE)	222,678		224,814
Intangible assets, net	540,728		525,903
Deferred income taxes	21,440		47,551
Other assets ($2,003 and $2,083 attributable to the VIE)	117,193		81,991
Total assets	$	2,210,567	$	2,193,807
Liabilities, Redeemable Noncontrolling Interests and Shareholders' Equity
Current liabilities
Short-term debt	$	34,121	$	40,336
Current portion of long-term debt	345,065		—
Accounts payable ($4,664 and $11,914 attributable to the VIE)	136,777		166,998
Accrued taxes	43,386		40,922
Accrued compensation and benefits ($1,115 and $1,651 attributable to the VIE)	96,127		98,245
Accrued expenses and other liabilities ($1,592 and $3,380 attributable to the VIE)	200,721		202,124
Total current liabilities	856,197		548,625
Long-term debt	213,623		527,509
Deferred income taxes	6,113		5,896
Accrued pension and other postretirement benefits	76,128		74,234
Other noncurrent liabilities ($52 and $2,145 attributable to the VIE)	84,600		54,177
Total liabilities	1,236,661		1,210,441
Commitments and contingencies (Note 15)
Redeemable noncontrolling interests	7,260		6,663
Shareholders' equity
Common stock, $0.001 par value, 500,000,000 shares authorized; 76,805,736 and 76,321,523 shares issued	77		76
Additional paid-in capital	970,646		960,685
Accumulated other comprehensive loss, net of tax	(122,770)		(109,668)
Retained earnings	657,793		473,130
Treasury stock, at cost; 12,481,803 and 8,892,425 shares (including 1,439,400 and 2,000,839 of accrued share repurchases (Note 10))	(577,380)		(385,167)
Total equity attributable to Acushnet Holdings Corp.	928,366		939,056
Noncontrolling interests	38,280		37,647
Total shareholders' equity	966,646		976,703
Total liabilities, redeemable noncontrolling interests and shareholders' equity	$	2,210,567	$	2,193,807

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


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ACUSHNET HOLDINGS CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)


	Three months ended September 30,				Nine months ended September 30,
(in thousands, except share and per share amounts)	2023		2022		2023		2022
Net sales	$	593,381	$	558,246	$	1,969,034	$	1,822,932
Cost of goods sold	284,859		263,251		926,317		867,332
Gross profit	308,522		294,995		1,042,717		955,600
Operating expenses:
Selling, general and administrative	210,166		202,418		674,720		637,276
Research and development	16,239		14,619		47,286		42,533
Intangible amortization	3,512		1,948		10,712		5,865

Income from operations	78,605		76,010		309,999		269,926
Interest expense, net	9,389		4,534		30,234		7,902
Other expense, net	918		2,355		2,010		5,828
Income before income taxes	68,298		69,121		277,755		256,196
Income tax expense	11,252		15,797		52,726		52,786
Net income	57,046		53,324		225,029		203,410
Less: Net loss (income) attributable to noncontrolling interests	261		(1,487)		208		(4,074)
Net income attributable to Acushnet Holdings Corp.	$	57,307	$	51,837	$	225,237	$	199,336

Net income per common share attributable to Acushnet Holdings Corp.:
Basic	$	0.86	$	0.72	$	3.32	$	2.74
Diluted	0.85		0.72		3.30		2.72
Weighted average number of common shares:
Basic	66,898,142		71,706,824		67,812,790		72,701,647
Diluted	67,343,260		72,334,398		68,208,022		73,209,719

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


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ACUSHNET HOLDINGS CORP.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)


	Three months ended September 30,				Nine months ended September 30,
(in thousands)	2023		2022		2023		2022
Net income	$	57,046	$	53,324	$	225,029	$	203,410
Other comprehensive loss:
Foreign currency translation adjustments	(10,991)		(26,527)		(12,919)		(58,592)
Cash flow derivative instruments:
Unrealized holding gains arising during period	4,090		6,106		8,320		18,155
Reclassification adjustments included in net income	(923)		(2,535)		(7,404)		(5,476)
Tax expense	(807)		(1,099)		(269)		(3,977)
Cash flow derivative instruments, net	2,360		2,472		647		8,702




Pension and other postretirement benefits:
Pension and other postretirement benefits adjustments	190		2,252		(914)		5,788
Tax (expense) benefit	(32)		(576)		216		(1,395)
Pension and other postretirement benefits adjustments, net	158		1,676		(698)		4,393
Total other comprehensive loss	(8,473)		(22,379)		(12,970)		(45,497)
Comprehensive income	48,573		30,945		212,059		157,913
Less: Comprehensive loss (income) attributable to noncontrolling interests	309		(1,446)		76		(3,862)
Comprehensive income attributable to Acushnet Holdings Corp.	$	48,882	$	29,499	$	212,135	$	154,051

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


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ACUSHNET HOLDINGS CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


	Nine months ended September 30,
(in thousands)	2023		2022
Cash flows from operating activities
Net income	$	225,029	$	203,410
Adjustments to reconcile net income to cash flows provided by (used in) operating activities
Depreciation and amortization	38,181		30,894
Unrealized foreign exchange (gain) loss	(2,495)		12,531
Amortization of debt issuance costs	501		1,835
Share-based compensation	21,369		18,159
Gain on disposals of property, plant and equipment	(19)		(3,257)
Deferred income taxes	25,015		6,928
Changes in operating assets and liabilities
Accounts receivable	(125,667)		(176,531)
Inventories	136,828		(156,065)
Accounts payable	(30,030)		21,437
Accrued taxes	5,798		(3,419)
Other assets and liabilities	2,420		(14,964)
Cash flows provided by (used in) operating activities	296,930		(59,042)
Cash flows from investing activities
Additions to property, plant and equipment	(42,432)		(33,638)
Additions to intangible assets (Note 16)	(25,235)		—

Other, net	(887)		4,542
Cash flows used in investing activities	(68,554)		(29,096)
Cash flows from financing activities
(Repayments of) proceeds from short-term borrowings, net (Note 5)	(3,121)		31,056

Proceeds from revolving credit facilities (Note 5)	1,039,443		483,000
Repayments of revolving credit facilities (Note 5)	(1,010,387)		(77,400)
Repayments of term loan facility (Note 5)	—		(315,000)
Purchases of common stock	(204,656)		(138,158)
Payment of debt issuance costs	—		(2,583)
Dividends paid on common stock	(40,099)		(39,672)
Dividends paid to noncontrolling interests	—		(1,601)
Payment of employee restricted stock tax withholdings	(11,460)		(10,661)
Other, net	1,078		(3,600)
Cash flows used in financing activities	(229,202)		(74,619)
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash	(1,312)		(10,463)
Net decrease in cash, cash equivalents and restricted cash	(2,138)		(173,220)
Cash, cash equivalents and restricted cash, beginning of year	58,904		281,677
Cash, cash equivalents and restricted cash, end of period	$	56,766	$	108,457
Supplemental non-cash information


Purchases of property, plant and equipment, accrued not paid	$	6,007	$	6,757
Additions to right-of-use assets obtained in exchange for operating lease obligations	50,813		17,919
Additions to right-of-use assets obtained in exchange for finance lease obligations	711		335

Additions to treasury stock	2,023		1,595
Dividend equivalents rights ("DERs") declared not paid	1,411		1,323
Contingent consideration (Note 16)	—		1,400


Share repurchase liability (Note 10)	79,765		41,577

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


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ACUSHNET HOLDINGS CORP.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED)


		Common Stock				Additional Paid-in Capital		Accumulated Other Comprehensive Loss, Net of Tax		Retained Earnings		Treasury Stock		Total Shareholders' Equity Attributable to Acushnet Holdings Corp.		Noncontrolling Interests		Total Shareholders' Equity
(in thousands)	Shares		Amount
Balances as of June 30, 2022		76,289		$	76	$	949,206	$	(122,700)	$	444,592	$	(200,001)	$	1,071,173	$	34,654	$	1,105,827




Net income		—		—		—		—		51,837		—		51,837		1,594		53,431
Other comprehensive loss		—		—		—		(22,379)		—		—		(22,379)		—		(22,379)
Share-based compensation		—		—		5,673		—		—		—		5,673		—		5,673
Vesting of restricted common stock, including impact of DERs, net of shares withheld for employee taxes (Note 11)		33		—		47		—		—		—		47		—		47
Purchases of common stock (Note 10)		—		—		—		—		—		(41,577)		(41,577)		—		(41,577)
Share repurchase liability (Note 10)		—		—		—		—		—		(41,577)		(41,577)		—		(41,577)
Dividends and dividend equivalents declared		—		—		—		—		(13,192)		—		(13,192)		—		(13,192)


Balances as of September 30, 2022		76,322		$	76	$	954,926	$	(145,079)	$	483,237	$	(283,155)	$	1,010,005	$	36,248	$	1,046,253

Balances as of June 30, 2023		76,782		$	77	$	965,446	$	(114,345)	$	613,584	$	(447,543)	$	1,017,219	$	37,998	$	1,055,217




Net income		—		—		—		—		57,307		—		57,307		282		57,589
Other comprehensive loss		—		—		—		(8,425)		—		—		(8,425)		—		(8,425)
Share-based compensation		—		—		5,141		—		—		—		5,141		—		5,141
Vesting of restricted common stock, including impact of DERs, net of shares withheld for employee taxes (Note 11)		24		—		59		—		—		—		59		—		59
Purchases of common stock (Note 10)		—		—		—		—		—		(64,918)		(64,918)		—		(64,918)
Share repurchase liability (Note 10)		—		—		—		—		—		(64,919)		(64,919)		—		(64,919)
Dividends and dividend equivalents declared		—		—		—		—		(13,098)		—		(13,098)		—		(13,098)


Balances as of September 30, 2023		76,806		$	77	$	970,646	$	(122,770)	$	657,793	$	(577,380)	$	928,366	$	38,280	$	966,646

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


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ACUSHNET HOLDINGS CORP.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED)


		Common Stock				Additional Paid-in Capital		Accumulated Other Comprehensive Loss, Net of Tax		Retained Earnings		Treasury Stock		Total Shareholders' Equity Attributable to Acushnet Holdings Corp.		Noncontrolling Interests		Total Shareholders' Equity
(in thousands)	Shares		Amount
Balances as of December 31, 2021		75,855		$	76	$	948,423	$	(99,582)	$	324,966	$	(131,039)	$	1,042,844	$	37,423	$	1,080,267


Purchase of equity from noncontrolling interest (Note 16)		—		—		(838)		—		—		—		(838)		(3,905)		(4,743)

Net income		—		—		—		—		199,336		—		199,336		4,331		203,667
Other comprehensive loss		—		—		—		(45,497)		—		—		(45,497)		—		(45,497)
Share-based compensation		—		—		17,667		—		—		—		17,667		—		17,667
Vesting of restricted common stock, including impact of DERs, net of shares withheld for employee taxes (Note 11)		467		—		(10,326)		—		—		—		(10,326)		—		(10,326)
Purchases of common stock (Note 10)		—		—		—		—		—		(110,539)		(110,539)		—		(110,539)
Share repurchase liability (Note 10)		—		—		—		—		—		(41,577)		(41,577)		—		(41,577)
Dividends and dividend equivalents declared		—		—		—		—		(40,065)		—		(40,065)		—		(40,065)
Dividends declared to noncontrolling interests		—		—		—		—		—		—		—		(1,601)		(1,601)
Redemption value adjustment (Note 1)		—		—		—		—		(1,000)		—		(1,000)		—		(1,000)
Balances as of September 30, 2022		76,322		$	76	$	954,926	$	(145,079)	$	483,237	$	(283,155)	$	1,010,005	$	36,248	$	1,046,253

Balances as of December 31, 2022		76,322		$	76	$	960,685	$	(109,668)	$	473,130	$	(385,167)	$	939,056	$	37,647	$	976,703



Sale of equity to redeemable noncontrolling interest		—		—		444		—		(180)		—		264		—		264
Net income		—		—		—		—		225,237		—		225,237		633		225,870
Other comprehensive loss		—		—		—		(13,102)		—		—		(13,102)		—		(13,102)
Share-based compensation		—		—		20,877		—		—		—		20,877		—		20,877
Vesting of restricted common stock, including impact of DERs, net of shares withheld for employee taxes (Note 11)		484		1		(11,360)		—		—		—		(11,359)		—		(11,359)
Purchases of common stock (Note 10)		—		—		—		—		—		(112,448)		(112,448)		—		(112,448)
Share repurchase liability (Note 10)		—		—		—		—		—		(79,765)		(79,765)		—		(79,765)
Dividends and dividend equivalents declared		—		—		—		—		(40,394)		—		(40,394)		—		(40,394)


Balances as of September 30, 2023		76,806		$	77	$	970,646	$	(122,770)	$	657,793	$	(577,380)	$	928,366	$	38,280	$	966,646

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


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ACUSHNET HOLDINGS CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) and include the accounts of Acushnet Holdings Corp. (the “Company”), its wholly-owned subsidiaries and less than wholly-owned subsidiaries, including a variable interest entity (“VIE”) in which the Company is the primary beneficiary. All intercompany balances and transactions have been eliminated in consolidation.

Certain information in footnote disclosures normally included in annual financial statements has been condensed or omitted for the interim periods presented in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) and U.S. GAAP. The year-end balance sheet data was derived from audited financial statements; however, the accompanying interim notes to the unaudited condensed consolidated financial statements do not include all disclosures required by U.S. GAAP. In the opinion of management, the financial statements contain all normal and recurring adjustments necessary to state fairly the financial position and results of operations of the Company. The results of operations for the three and nine months ended September 30, 2023 are not necessarily indicative of results to be expected for the full year ending December 31, 2023, nor were those of the comparable 2022 periods representative of those actually experienced for the full year ended December 31, 2022. These unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes for the fiscal year ended December 31, 2022 included in its Annual Report on Form 10-K filed with the SEC on March 1, 2023.

Use of Estimates

The preparation of the Company’s unaudited condensed consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and judgments that affect reported amounts of assets and liabilities and related disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. 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 unaudited condensed consolidated balance sheets, to the extent material, the assets of its consolidated VIE that can only be used to settle specific obligations of its consolidated VIE and the liabilities of its consolidated VIE for which creditors do not have recourse to its general credit. The general creditors of the VIE do not have recourse to the Company. Certain directors of the VIE have guaranteed the credit lines of the VIE, for which there were no outstanding borrowings as of September 30, 2023 and December 31, 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.


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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 unaudited condensed consolidated financial statements. The value attributable to the noncontrolling interests is presented on the unaudited condensed consolidated balance sheets, separately from the equity attributable to the Company. Net income (loss) and comprehensive income (loss) attributable to noncontrolling interests are presented separately on the unaudited condensed consolidated statements of operations and unaudited condensed consolidated statements of comprehensive income, respectively.

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 nine months ended September 30, 2022, the Company recorded a $1.0 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 unaudited condensed 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 both September 30, 2023 and December 31, 2022.

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 September 30, 2023 and December 31, 2022, the amount of restricted cash included in cash, cash equivalents and restricted cash on the unaudited condensed consolidated balance sheets was $1.7 million and $1.8 million, respectively.

Foreign Currency Transactions

Foreign currency transaction losses included in selling, general and administrative expenses were $0.9 million and $6.2 million for the three months ended September 30, 2023 and 2022, respectively. Foreign currency transaction losses included in selling, general and administrative expenses were $3.4 million and $15.0 million for the nine months ended September 30, 2023 and 2022, respectively.

Recently Adopted Accounting Standards

The Company considers the applicability and impact of all Accounting Standards Updates ("ASUs"). Management determined that recently issued ASUs are not expected to have a material impact on the Company's consolidated financial statements.

2. Allowance for Doubtful Accounts

The Company estimates expected credit losses using a number of factors, including customer credit ratings, age of receivables, historical credit loss information and current and forecasted economic conditions, 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:


	Three months ended September 30,				Nine months ended September 30,
(in thousands)	2023		2022		2023		2022
Balance at beginning of period	$	9,008	$	7,918	$	8,258	$	5,980
Bad debt expense	17		193		814		2,648
Amount of receivables written off	(239)		(203)		(341)		(472)
Foreign currency translation	(124)		(227)		(69)		(475)
Balance at end of period	$	8,662	$	7,681	$	8,662	$	7,681


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3. Inventories

The components of inventories were as follows:


	September 30,		December 31,
(in thousands)	2023		2022
Raw materials and supplies	$	147,705	$	154,881
Work-in-process	23,922		29,689
Finished goods	357,103		490,114
Inventories	$	528,730	$	674,684

4. Product Warranty

The Company has defined warranties generally ranging from one to two years. Products covered by the defined warranty policies primarily include all Titleist golf products, FootJoy golf shoes and FootJoy golf outerwear. These product warranties generally obligate the Company to pay for the cost of replacement products, including the cost of shipping replacement products to its customers. The estimated cost of satisfying future warranty claims is accrued at the time the sale is recorded. In estimating future warranty obligations, the Company considers various factors, including its warranty policies and practices, the historical frequency of claims and the cost to replace or repair products under warranty.

The activity related to the Company’s warranty obligation for accrued warranty expense was as follows:


	Three months ended September 30,				Nine months ended September 30,
(in thousands)	2023		2022		2023		2022
Balance at beginning of period	$	5,049	$	4,077	$	3,951	$	4,177
Provision	1,568		1,286		5,313		3,497
Claims paid/costs incurred	(1,685)		(1,333)		(4,337)		(3,489)
Foreign currency translation	(61)		(150)		(56)		(305)
Balance at end of period	$	4,871	$	3,880	$	4,871	$	3,880

5. Debt and Financing Arrangements

Credit Facility

On August 2, 2022, the Company amended its credit agreement to, among other things, provide a $950.0 million multi-currency revolving credit facility and amend rates per annum at which borrowings in different denominations bear interest (the "Second Amended Credit Facility"). On August 2, 2022, proceeds from borrowings under the multi-currency revolving credit facility were used to, among other things, prepay in full the Company's then-outstanding term loans and refinance its outstanding borrowings under the revolving credit facility. 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. 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 credit agreement contains customary affirmative and restrictive covenants, including, among others, financial covenants based on the Company's leverage and interest coverage ratios. The credit agreement 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 September 30, 2023, the Company was in compliance with all covenants under its credit agreement.

As of September 30, 2023, there were $557.1 million in outstanding borrowings under the Company's multi-currency revolving credit facility with a weighted average interest rate of 6.44%. As of September 30, 2023, the Company had available borrowings under its multi-currency revolving credit facility of $385.1 million after giving effect to $7.8 million of outstanding letters of credit.


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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 when the original maturity exceeds 90 days. There were $34.1 million and $40.3 million in outstanding borrowings under the Company's local credit facilities as of September 30, 2023 and December 31, 2022, respectively. The weighted average interest rate applicable to the outstanding borrowings was 0.53% and 0.85% as of September 30, 2023 and December 31, 2022, respectively. As of September 30, 2023, the Company had available borrowings remaining under these local credit facilities of $27.5 million.

Letters of Credit

As of September 30, 2023 and December 31, 2022, there were outstanding letters of credit related to agreements, including the Company's Second Amended Credit Facility, totaling $10.9 million and $10.0 million, respectively, of which $7.8 million and $7.3 million, respectively, was secured. These agreements provided a maximum commitment for letters of credit of $58.0 million as of September 30, 2023.

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 estimates fees and expenses totaling approximately $6.4 million will be included in long-term debt on the unaudited condensed consolidated balance sheet and will be amortized to interest expense, net over the term of the Notes.

The Notes will bear interest at the rate of 7.375% per year, with interest payable semi-annually on April 15 and October 15 of each year, beginning on April 15, 2024.

The Notes will mature on October 15, 2028, unless earlier repurchased or redeemed in accordance with their terms, and as a result, will be 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	103.688	%
2026	101.844	%
2027 and thereafter	100.000	%


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6. Derivative Financial Instruments

The Company principally uses derivative financial instruments to reduce the impact of foreign currency fluctuations and interest rate variability on the Company's results of operations. The principal derivative financial instruments the Company enters into are foreign exchange forward contracts and interest rate swaps. The Company does not enter into derivative financial instrument contracts for trading or speculative purposes.

Foreign Exchange Derivative Instruments

Foreign exchange forward contracts are foreign exchange derivative instruments primarily used to reduce foreign currency risk related to transactions denominated in a currency other than functional currency. These instruments are designated as cash flow hedges. The periods of the foreign exchange forward contracts correspond to the periods of the hedged forecasted transactions, which do not exceed 24 months subsequent to the latest balance sheet date. The primary foreign exchange forward contracts pertain to the U.S. dollar, the Japanese yen, the British pound sterling, the Canadian dollar, the Korean won and the euro. The gross U.S. dollar equivalent notional amount outstanding of all foreign exchange forward contracts designated under hedge accounting as of September 30, 2023 and December 31, 2022 was $193.2 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 September 30, 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 nine months ended September 30, 2023 and 2022, included gains of $0.1 million and $1.2 million, respectively, related to undesignated foreign exchange forward derivative instruments.

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 September 30, 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 unaudited condensed consolidated balance sheets was as follows:


(in thousands)		September 30,		December 31,
Balance Sheet Location	Hedge Instrument Type	2023		2022
Prepaid and other assets	Foreign exchange forward	$	9,495	$	7,393
	Interest rate swap	997		—
Other assets	Foreign exchange forward	113		1,341
	Interest rate swap	175		—
Accrued expenses and other liabilities	Foreign exchange forward	1,167		4,710

Other noncurrent liabilities	Foreign exchange forward	—		344


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The hedge instrument gain recognized in accumulated other comprehensive loss, net of tax was as follows:


	Three months ended				Nine months ended
	September 30,				September 30,
(in thousands)	2023		2022		2023		2022
Type of hedge
Foreign exchange forward	$	3,658	$	6,106	$	6,719	$	18,155
Interest rate swap	432		—		1,601		—
Total	$	4,090	$	6,106	$	8,320	$	18,155

Gains and losses on derivative instruments designated as cash flow hedges are reclassified from accumulated other comprehensive loss, net of tax at the time the forecasted hedged transaction impacts the statements of operations or at the time the hedge is determined to be ineffective. Based on the current valuation, during the next 12 months the Company expects to reclassify a net gain of $7.7 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 $1.0 million related to interest rate derivative instruments from accumulated other comprehensive loss, net of tax, into interest expense, net. For further information related to amounts recognized in accumulated other comprehensive loss, net of tax, see Note 12.

The hedge instrument gain recognized on the unaudited condensed consolidated statements of operations was as follows:


	Three months ended				Nine months ended
	September 30,				September 30,
(in thousands)	2023		2022		2023		2022
Location of gain in statements of operations
Foreign exchange forward:
Cost of goods sold	$	682	$	2,535	$	6,975	$	5,476
Selling, general and administrative (1)	1,106		1,779		1,463		4,737
Total	$	1,788	$	4,314	$	8,438	$	10,213

Interest Rate Swap:
Interest expense, net	$	241	$	—	$	429	$	—
Total	$	241	$	—	$	429	$	—

_______________________________________________________________________________

(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.


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7. Fair Value Measurements

Certain assets and liabilities are carried at fair value under U.S. GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.

Assets and liabilities measured at fair value on a recurring basis as of September 30, 2023 were as follows:


	Fair Value Measurements as of
	September 30, 2023 using:
(in thousands)	Level 1		Level 2		Level 3		Balance Sheet Location
Assets
Rabbi trust	$	3,954	$	—	$	—	Prepaid and other assets
Foreign exchange derivative instruments	—		9,495		—		Prepaid and other assets
Interest rate derivative instruments	—		997		—		Prepaid and other assets

Deferred compensation program assets	651		—		—		Other assets
Foreign exchange derivative instruments	—		113		—		Other assets
Interest rate derivative instruments	—		175		—		Other assets
Total assets	$	4,605	$	10,780	$	—
Liabilities
Foreign exchange derivative instruments	$	—	$	1,167	$	—	Accrued expenses and other liabilities

Deferred compensation program liabilities	651		—		—		Other noncurrent liabilities


Total liabilities	$	651	$	1,167	$	—

Assets and liabilities measured at fair value on a recurring basis as of December 31, 2022 were as follows:


	Fair Value Measurements as of
	December 31, 2022 using:
(in thousands)	Level 1		Level 2		Level 3		Balance Sheet Location
Assets
Rabbi trust	$	3,940	$	—	$	—	Prepaid and other assets
Foreign exchange derivative instruments	—		7,393		—		Prepaid and other assets

Deferred compensation program assets	631		—		—		Other assets
Foreign exchange derivative instruments	—		1,341		—		Other assets
Total assets	$	4,571	$	8,734	$	—
Liabilities
Foreign exchange derivative instruments	$	—	$	4,758	$	—	Accrued expenses and other liabilities

Deferred compensation program liabilities	631		—		—		Other noncurrent liabilities
Foreign exchange derivative instruments	—		344		—		Other noncurrent liabilities

Total liabilities	$	631	$	5,102	$	—

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 6). The Company uses the mid-price of foreign exchange forward rates as of the close of business on the valuation date to value each foreign exchange forward contract at each reporting period.

Interest rate derivative instruments are interest rate swap contracts used to reduce interest rate risk related to the Company's floating rate debt (Note 6). The valuation for the interest rate swap is calculated as the net of the discounted future cash flows of the pay and receive legs of the swap. Mid-market interest rates on the valuation date are used to create the forward curve for floating legs and discount curve.


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8. Pension and Other Postretirement Benefits

Components of net periodic benefit cost were as follows:


	Pension Benefits				Postretirement Benefits
	Three months ended September 30,
(in thousands)	2023		2022		2023		2022
Components of net periodic benefit cost
Service cost	$	1,411	$	1,954	$	107	$	141
Interest cost	2,832		2,204		166		89
Expected return on plan assets	(1,966)		(1,882)		—		—
Settlements	—		685		—		—

Amortization of net loss (gain)	25		989		(223)		(120)
Amortization of prior service cost (credit)	45		66		(35)		(35)
Net periodic benefit cost	$	2,347	$	4,016	$	15	$	75

Components of net periodic benefit cost were as follows:


	Pension Benefits				Postretirement Benefits
	Nine months ended September 30,
(in thousands)	2023		2022		2023		2022
Components of net periodic benefit cost
Service cost	$	4,261	$	5,953	$	322	$	422
Interest cost	8,491		6,655		497		265
Expected return on plan assets	(5,894)		(5,644)		—		—
Settlements	(27)		685		—		—

Amortization of net loss (gain)	70		2,966		(670)		(351)
Amortization of prior service cost (credit)	137		203		(103)		(103)
Net periodic benefit cost	$	7,038	$	10,818	$	46	$	233

The non-service cost components of net periodic benefit cost are included in other expense, net in the unaudited condensed consolidated statements of operations.

9. Income Taxes

Income tax expense decreased $4.5 million to $11.3 million for the three months ended September 30, 2023 compared to $15.8 million for the three months ended September 30, 2022. The Company’s effective tax rate ("ETR") was 16.5% for the three months ended September 30, 2023 compared to 22.9% for the three months ended September 30, 2022. Income tax expense decreased $0.1 million to $52.7 million for the nine months ended September 30, 2023 compared to $52.8 million for the nine months ended September 30, 2022. The Company’s ETR was 19.0% for the nine months ended September 30, 2023 compared to 20.6% for the nine months ended September 30, 2022.

The ETR for the three and nine months ended September 30, 2023 differed from the U.S. statutory tax rate primarily due to the impact of the U.S. deduction for foreign derived intangible income and federal and state tax credits, partially offset by the U.S. taxation of foreign income and the Company's geographic mix of income. The ETR for the three and nine months ended September 30, 2022 differed from the U.S. statutory tax rate primarily due to the impact of the U.S. deduction for foreign derived intangible income and federal and state tax credits, as well as the U.S. taxation of foreign income and the geographic mix of income earned by the Company's international subsidiaries.


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10. Common Stock

Dividends

The Company declared dividends per common share, including DERs (Note 11), during the periods presented as follows:


	Dividends per Common Share		Amount (in thousands)
2023:

Third Quarter	$	0.195	$	13,098
Second Quarter	0.195		13,667
First Quarter	0.195		13,629
Total dividends declared in 2023	$	0.585	$	40,394

2022:
Fourth Quarter	$	0.180	$	12,986
Third Quarter	0.180		13,192
Second Quarter	0.180		13,400
First Quarter	0.180		13,473
Total dividends declared in 2022	$	0.720	$	53,051

During the fourth quarter of 2023, the Company's Board of Directors declared a dividend of $0.195 per share of common stock to shareholders of record as of December 1, 2023 and payable on December 15, 2023.

Share Repurchase Program

As of September 30, 2023, the Board of Directors had authorized the Company to repurchase up to $700.0 million of its issued and outstanding common stock. Share repurchases may be effected from time to time in open market or privately negotiated transactions, including transactions with affiliates, with the timing of purchases and the amount of stock purchased generally determined at the discretion of the Company consistent with the Company's general working capital needs and within the constraints of the Company’s credit agreement.

On November 8, 2021, the Company entered into an agreement with Magnus Holdings Co., Ltd. (“Magnus”), a wholly-owned subsidiary of Fila Holdings Corp., 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 will 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 this agreement, the Company recorded a share repurchase liability of $79.8 million for 1,439,400 shares of common stock, which was included in accrued expenses and other liabilities and treasury stock on the consolidated balance sheet as of September 30, 2023.


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The Company's share repurchase activity for the periods presented was as follows:


	Three months ended September 30,				Nine months ended September 30,
(in thousands, except share and per share amounts)	2023		2022		2023		2022
Shares repurchased in the open market:
Shares repurchased	1,153,400		869,368		1,982,289		2,283,573
Average price	$	56.28	$	47.82	$	52.98	$	44.78
Aggregate value	$	64,918	$	41,577	$	105,030	$	102,252
Shares repurchased from Magnus:
Shares repurchased	—		—		2,168,528		699,819
Average price (1)	$	—	$	—	$	46.11	$	53.59
Aggregate value	$	—	$	—	$	100,001	$	37,501
Total shares repurchased:
Shares repurchased	1,153,400		869,368		4,150,817		2,983,392
Average price	$	56.28	$	47.82	$	49.40	$	46.84
Aggregate value	$	64,918	$	41,577	$	205,031	$	139,753

___________________________________

(1) 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 September 30, 2023, the Company had $202.4 million remaining under the current share repurchase authorization, including $100.0 million related to the 2023 Agreement. This program will remain in effect until completed or until terminated by the Board of Directors.

Between October 1, 2023 and October 27, 2023, the Company purchased an additional 385,594 shares of its common stock on the open market for an aggregate of $20.2 million, bringing the cumulative total open market purchases since the inception of the 2023 Agreement to $100.0 million. As a result, the Company expects to purchase 1,824,994 shares of its common stock from Magnus for an aggregate of $100.0 million on November 3, 2023, in satisfaction of its obligation under the 2023 Agreement.

11. Equity Incentive Plans

Under the Acushnet Holdings Corp. 2015 Omnibus Incentive Plan (“2015 Plan”), the Company may grant stock options, stock appreciation rights, restricted shares of common stock, restricted stock units ("RSUs"), performance stock units ("PSUs") and other share-based and cash-based awards to members of the Board of Directors, officers, employees, consultants and advisors of the Company. As of September 30, 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.


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A summary of the Company’s RSUs and PSUs as of September 30, 2023 and changes during the nine months then ended is presented below:


		Weighted-			Weighted-
	Number	Average		Number	Average
	of RSUs	Fair Value RSUs		of PSUs (3)	Fair Value PSUs
Outstanding as of December 31, 2022	944,695	$	37.48	529,366	$	36.30
Granted	469,749	47.95		196,572	48.22
Vested (1)(2)	(520,805)	31.66		(231,127)	25.73
Forfeited	(19,337)	47.00		(12,377)	41.78
Outstanding as of September 30, 2023	874,302	$	46.36	482,434	$	46.08

_______________________________________________________________________________

(1) Includes 83,664 shares of common stock related to RSU's that were not delivered as of September 30, 2023.

(2) Based upon the Company’s level of achievement of the applicable performance metrics, the recipients of the 231,127 PSUs that vested during the nine months ended September 30, 2023, were entitled to receive 460,684 shares of common stock. As of September 30, 2023, there were 229,205 shares of common stock that had not been delivered in connection with the vesting of these PSUs.

(3) Number of PSUs reflect 100% of the target level grant and may not be indicative of the performance level expected to be achieved.

Compensation expense recorded related to RSUs and PSUs in the unaudited condensed consolidated statements of operations was as follows:


	Three months ended				Nine months ended
	September 30,				September 30,
(in thousands)	2023		2022		2023		2022
RSUs	$	4,012	$	3,149	$	12,966	$	10,101
PSUs	1,129		2,524		7,911		7,566

The remaining unrecognized compensation expense related to unvested RSUs and unvested PSUs was $24.1 million and $12.0 million, respectively, as of September 30, 2023, and is expected to be recognized over the related weighted average period of 1.4 years and 1.9 years, respectively.

A summary of shares of common stock issued related to the 2015 Plan, including the impact of any DERs issued in common stock, is presented below:


	Nine months ended		Nine months ended
	September 30, 2023		September 30, 2022
	RSUs	PSUs	RSUs	PSUs
Shares of common stock issued	472,766	231,580	525,029	188,527
Shares of common stock withheld by the Company as payment by employees in lieu of cash to satisfy tax withholding obligations	(128,291)	(91,842)	(159,854)	(87,215)
Net shares of common stock issued	344,475	139,738	365,175	101,312

Cumulative undelivered shares of common stock	457,703	420,447	407,173	191,242

Compensation Expense

The allocation of share-based compensation expense in the unaudited condensed consolidated statements of operations was as follows:


	Three months ended				Nine months ended
	September 30,				September 30,
(in thousands)	2023		2022		2023		2022
Cost of goods sold	$	340	$	342	$	1,095	$	984
Selling, general and administrative	4,629		5,085		18,875		15,998
Research and development	336		410		1,399		1,177
Total compensation expense before income tax	5,305		5,837		21,369		18,159
Income tax benefit	945		1,219		4,304		3,744
Total compensation expense, net of income tax	$	4,360	$	4,618	$	17,065	$	14,415


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12. Accumulated Other Comprehensive Loss, Net of Tax

Accumulated other comprehensive loss, net of tax consists of foreign currency translation adjustments, unrealized gains and losses from derivative instruments designated as cash flow hedges (Note 6) and pension and other postretirement adjustments (Note 8).

The components of and adjustments to accumulated other comprehensive loss, net of tax, were as follows:


			Foreign		Interest				Accumulated
	Foreign		Exchange		Rate Swap		Pension and		Other
	Currency		Derivative		Derivative		Other		Comprehensive
(in thousands)	Translation		Instruments		Instruments		Postretirement		Loss, Net of Tax
Balance as of December 31, 2022	$	(97,855)	$	5,598	$	—	$	(17,411)	$	(109,668)

Other comprehensive (loss) income before reclassifications	(13,053)		6,719		1,601		(319)		(5,052)
Amounts reclassified from accumulated other comprehensive loss, net of tax	—		(6,975)		(429)		(593)		(7,997)
Tax benefit (expense)	—		17		(286)		216		(53)
Balance as of September 30, 2023	$	(110,908)	$	5,359	$	886	$	(18,107)	$	(122,770)

13. Net Income per Common Share

The following is a computation of basic and diluted net income per common share attributable to Acushnet Holdings Corp.:


	Three months ended				Nine months ended
	September 30,				September 30,
(in thousands, except share and per share amounts)	2023		2022		2023		2022

Net income attributable to Acushnet Holdings Corp.	$	57,307	$	51,837	$	225,237	$	199,336







Weighted average number of common shares:
Basic	66,898,142		71,706,824		67,812,790		72,701,647
RSUs	328,411		390,826		290,274		336,486
PSUs	116,707		236,748		104,958		171,586
Diluted	67,343,260		72,334,398		68,208,022		73,209,719

Net income per common share attributable to Acushnet Holdings Corp.:
Basic	$	0.86	$	0.72	$	3.32	$	2.74
Diluted	$	0.85	$	0.72	$	3.30	$	2.72

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 three and nine months ended September 30, 2023 and 2022 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:


	Three months ended		Nine months ended
	September 30,		September 30,
	2023	2022	2023	2022
RSUs	—	852	86,499	126,262


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14. Segment Information

The Company’s operating segments are based on how the Chief Operating Decision Maker (“CODM”) makes decisions about assessing performance and allocating resources. The Company has four reportable segments that are organized on the basis of product categories. These segments include Titleist golf balls, Titleist golf clubs, Titleist golf gear and FootJoy golf wear.

The CODM primarily evaluates performance using segment operating income (loss). Segment operating income (loss) includes directly attributable expenses and certain shared costs of corporate administration that are allocated to the reportable segments, but excludes interest expense, net, restructuring charges, the non-service cost component of net periodic benefit cost, transaction fees and other non-operating gains and losses as the Company does not allocate these to the reportable segments. The CODM does not evaluate a measure of assets when assessing performance.

Results shown for the three and nine months ended September 30, 2023 and 2022 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:


	Three months ended September 30,				Nine months ended September 30,
(in thousands)	2023		2022		2023		2022
Net sales
Titleist golf balls	$	192,557	$	181,243	$	622,125	$	546,374
Titleist golf clubs	181,045		153,877		549,846		478,880
Titleist golf gear	47,657		59,194		184,571		172,473
FootJoy golf wear	136,669		131,694		500,174		507,133
Other	35,453		32,238		112,318		118,072
Total net sales	$	593,381	$	558,246	$	1,969,034	$	1,822,932

Segment operating income (loss)
Titleist golf balls	$	43,770	$	38,281	$	131,591	$	100,920
Titleist golf clubs	36,509		26,949		118,455		88,236
Titleist golf gear	788		6,430		26,657		20,276
FootJoy golf wear	(1,469)		1,919		32,927		45,256
Other	1,693		3,618		12,606		21,212
Total segment operating income	81,291		77,197		322,236		275,900
Reconciling items:
Interest expense, net	(9,389)		(4,534)		(30,234)		(7,902)

Non-service cost component of net periodic benefit cost	(844)		(1,996)		(2,501)		(4,676)

Other	(2,760)		(1,546)		(11,746)		(7,126)
Total income before income tax	$	68,298	$	69,121	$	277,755	$	256,196

Information as to the Company’s operations in different geographical areas is presented below. Net sales are categorized based on the location in which the sale originates.


	Three months ended September 30,				Nine months ended September 30,
(in thousands)	2023		2022		2023		2022
United States	$	352,463	$	327,639	$	1,123,766	$	974,187
EMEA (1)	75,643		70,614		266,502		274,840
Japan	39,035		34,364		118,183		118,554
Korea	65,652		69,919		241,267		254,089
Rest of World	60,588		55,710		219,316		201,262
Total net sales	$	593,381	$	558,246	$	1,969,034	$	1,822,932

_______________________________________________________________________________

(1) Europe, the Middle East and Africa ("EMEA")


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15. 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 September 30, 2023 were as follows:


	Payments Due by Period
	Remainder of
(in thousands)	2023		2024		2025		2026		2027		Thereafter
Purchase obligations (1)	$	231,314	$	64,231	$	9,383	$	2,482	$	2,417	$	9,650

_______________________________________________________________________________

(1) The reported amounts exclude those liabilities included on the unaudited condensed consolidated balance sheet as of September 30, 2023.

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.

16. Other Business Developments

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 including cash consideration of $22.2 million and contingent consideration of $3.0 million, which was subsequently paid in 2023. 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 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 1). 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 clubs reporting segment since the date of acquisition (Note 14).

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 unaudited condensed consolidated balance sheet as of September 30, 2023 and December 31, 2022.


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ITEM 2. 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 our unaudited condensed consolidated financial statements and the notes thereto included elsewhere in this 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 “Part II, Item 1A. Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q and in our other filings with the Securities and Exchange Commission (“SEC”). Actual results may differ materially from those contained in any forward-looking statements. You should carefully read “Special Note Regarding Forward-Looking Statements” following the Table of Contents. Unless otherwise noted, the figures in the following discussion are unaudited.

Overview

We are the global leader in the design, development, manufacture and distribution of performance-driven golf products, which 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 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.

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 solid financial performance.

Our net sales are diversified by both product category and mix, as well as geography. Our product categories include golf balls, golf clubs, wedges and putters, golf shoes, golf gloves, golf gear and golf outerwear and apparel. Our product portfolio contains a favorable mix of consumable products, which we consider to be golf balls and golf gloves, and more durable products, which we consider to be golf clubs, golf shoes, golf gear and golf outerwear and apparel. Our net sales are also diversified by geography with a substantial majority of our net sales generated in five countries: the United States, Japan, Korea, the United Kingdom and Canada. We have the following reportable segments: Titleist golf balls; Titleist golf clubs; Titleist golf gear; and FootJoy golf wear.

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 net 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 generally accepted accounting principles in the United States (“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.


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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 the 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 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. 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. Segment operating income (loss) includes directly attributable expenses and certain shared costs of corporate administration that are allocated to the reportable segments, but excludes interest expense, net; restructuring charges; the non-service cost component of net periodic benefit cost; transaction fees and other non-operating gains and losses as we do not allocate these to the reportable segments.


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Results of Operations

The following table sets forth, for the periods indicated, our results of operations.


	Three months ended						Nine months ended
	September 30,						September 30,
(in thousands)	2023			2022			2023			2022
Net sales	$	593,381		$	558,246		$	1,969,034		$	1,822,932
Cost of goods sold	284,859			263,251			926,317			867,332
Gross profit	308,522			294,995			1,042,717			955,600
Operating expenses:
Selling, general and administrative	210,166			202,418			674,720			637,276
Research and development	16,239			14,619			47,286			42,533
Intangible amortization	3,512			1,948			10,712			5,865

Income from operations	78,605			76,010			309,999			269,926
Interest expense, net	9,389			4,534			30,234			7,902
Other expense, net	918			2,355			2,010			5,828
Income before income taxes	68,298			69,121			277,755			256,196
Income tax expense	11,252			15,797			52,726			52,786
Net income	57,046			53,324			225,029			203,410
Less: Net loss (income) attributable to noncontrolling interests	261			(1,487)			208			(4,074)
Net income attributable to Acushnet Holdings Corp.	$	57,307		$	51,837		$	225,237		$	199,336
Adjusted EBITDA:
Net income attributable to Acushnet Holdings Corp.	$	57,307		$	51,837		$	225,237		$	199,336
Interest expense, net	9,389			4,534			30,234			7,902
Income tax expense	11,252			15,797			52,726			52,786
Depreciation and amortization	12,807			10,229			38,181			30,894
Share-based compensation	5,305			5,837			21,369			18,159





Other extraordinary, unusual or non-recurring items, net (1)	2,991			(3,180)			10,098			(155)

Net (loss) income attributable to noncontrolling interests	(261)			1,487			(208)			4,074
Adjusted EBITDA	$	98,790		$	86,541		$	377,637		$	312,996
Adjusted EBITDA margin	16.6		%	15.5		%	19.2		%	17.2		%

________________________

(1) For the three and nine months ended September 30, 2023, includes costs associated with the optimization of our distribution and custom fulfillment capabilities.


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Three Months Ended September 30, 2023 Compared to the Three Months Ended September 30, 2022

Net sales by reportable segment is summarized as follows:


	Three months ended								Constant Currency
	September 30,				Increase/(Decrease)				Increase/(Decrease)
(in millions)	2023		2022		$ change		% change		$ change		% change
Titleist golf balls	$	192.6	$	181.2	$	11.4	6.3	%	$	11.2	6.2	%
Titleist golf clubs	181.0		153.9		27.1		17.6	%	27.6		17.9	%
Titleist golf gear	47.7		59.2		(11.5)		(19.4)	%	(11.8)		(19.9)	%
FootJoy golf wear	136.7		131.7		5.0		3.8	%	4.5		3.4	%

Net sales information by region is summarized as follows:


	Three months ended								Constant Currency
	September 30,				Increase/(Decrease)				Increase/(Decrease)
(in millions)	2023		2022		$ change		% change		$ change		% change
United States	$	352.5	$	327.6	$	24.9	7.6	%	$	24.9	7.6	%
EMEA (1)	75.6		70.6		5.0		7.1	%	1.1		1.6	%
Japan	39.0		34.4		4.6		13.4	%	6.6		19.2	%
Korea	65.7		69.9		(4.2)		(6.0)	%	(5.5)		(7.9)	%
Rest of world	60.6		55.7		4.9		8.8	%	6.6		11.8	%
Total net sales	$	593.4	$	558.2	$	35.2	6.3	%	$	33.7	6.0	%

_______________________________________________________________________________

(1) Europe, the Middle East and Africa ("EMEA")

Segment operating income (loss) by reportable segment is summarized as follows:


	Three months ended
(in millions)	September 30,				Increase/(Decrease)
Segment operating income (loss)	2023		2022		$ change		% change
Titleist golf balls	$	43.8	$	38.3	$	5.5	14.4	%
Titleist golf clubs	36.5		26.9		9.6		35.7	%
Titleist golf gear	0.8		6.4		(5.6)		(87.5)	%
FootJoy golf wear	(1.5)		1.9		(3.4)		(178.9)	%

For the three months ended September 30, 2023, net sales increased 6.3%, or 6.0% on a constant currency basis, as compared to the three months ended September 30, 2022. This increase was driven primarily by higher sales volumes in Titleist golf clubs and higher average selling prices in Titleist golf balls and FootJoy golf wear, mainly apparel, partially offset by lower sales volumes in Titleist golf gear.

The increase in net sales in the United States was primarily driven by increases of $13.3 million in Titleist golf clubs, $9.7 million in Titleist golf balls and $8.4 million in FootJoy golf wear, partially offset by a decrease of $6.9 million in Titleist golf gear. The increase in Titleist golf clubs was driven by higher sales volumes associated with the launches of our T-Series irons, TSR hybrids and Scotty Cameron Super Select putters, partially offset by lower sales volumes of drivers, fairways and wedges. The increase in Titleist golf balls was primarily driven by higher average selling prices of our latest generation Pro V1 and Pro V1x golf balls. The increase in FootJoy golf wear was primarily a result of higher average selling prices of apparel and footwear. The decrease in Titleist golf gear primarily resulted from lower sales volumes of headwear and golf bags due to strong sales volume in the third quarter of 2022 as supply chain and fulfillment constraints recovered from the first quarter of 2022.

Net sales in regions outside the United States increased 4.5%, or 3.8% on a constant currency basis. In Japan and Rest of World, the increase in net sales was primarily due to higher sales volumes in Titleist golf clubs. In EMEA, the increase in net sales was primarily due to higher sales volumes of products that are not allocated to one of our four reportable segments and higher sales volumes in Titleist golf clubs. This increase in EMEA was partially offset by lower net sales in FootJoy golf wear and Titleist golf gear, mainly in footwear and golf bags, respectively. In Korea, the decrease in net sales was primarily due to lower sales volumes of Titleist golf gear, products that are not allocated to one of our four reportable segments and FootJoy golf wear, partially offset by net sales increases in Titleist golf clubs and Titleist golf balls.


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Gross Profit

Gross profit increased $13.5 million for the three months ended September 30, 2023 compared to the three months ended September 30, 2022. Gross margin decreased to 52.0% for the three months ended September 30, 2023 compared to 52.8% for the three months ended September 30, 2022. The increase in gross profit primarily resulted from an increase of $16.8 million in Titleist golf clubs primarily due to higher sales volumes and lower royalty expense, an increase of $8.7 million in Titleist golf balls primarily due to higher average selling prices and lower inbound freight across all reportable segments. The increase in gross profit was partially offset by a decrease of $5.2 million in Titleist golf gear due to the lower sales volumes discussed previously and a decrease of $4.9 million in FootJoy golf wear primarily due to unfavorable manufacturing overhead absorption and increased promotional activity in footwear. The decrease in gross margin was primarily due to the FootJoy golf wear factors discussed above, offset primarily by lower inbound freight costs across all reportable segments.

Selling, General and Administrative Expenses

SG&A expenses increased $7.8 million for the three months ended September 30, 2023 compared to the three months ended September 30, 2022. This increase was primarily a result of an increase of $5.9 million in advertising and promotional expenses, $3.0 million in selling expense and $2.8 million of costs related to the optimization of our distribution and custom fulfillment capabilities, partially offset by a decrease of $2.6 million in administrative expense. The increase in advertising and promotional expenses was primarily in Titleist golf clubs and Titleist golf balls. The increase in selling expense was primarily due to employee-related expenses, partially offset by lower retail commission expense in Korea. The decrease in administrative expense was primarily due to lower information technology-related expenses, partially offset by an increase in employee-related expenses. Additionally, SG&A includes a decrease of $5.3 million in foreign currency transaction losses.

Research and Development

R&D expenses increased $1.6 million for the three months ended September 30, 2023 compared to the three months ended September 30, 2022, primarily as a result of an increase in employee-related expenses.

Intangible Amortization

Intangible amortization expense increased $1.6 million for the three months ended September 30, 2023 compared to the three months ended September 30, 2022, primarily as a result of the acquisition of trademarks related to our Titleist golf clubs 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 $4.9 million for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 primarily due to an increase in borrowings and interest rates.

Other Expense, net

Other expense, net decreased $1.5 million for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 primarily due to a decrease in the non-service cost component of net periodic benefit expense.

Income Tax Expense

Income tax expense decreased $4.5 million for the three months ended September 30, 2023 compared to the three months ended September 30, 2022. Our effective tax rate (“ETR”) was 16.5% for the three months ended September 30, 2023 compared to 22.9% for the three months ended September 30, 2022. The change in the 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 6.3%, or 6.2% on a constant currency basis, for the three months ended September 30, 2023 compared to the three months ended September 30, 2022, primarily driven by higher average selling prices of our latest generation Pro V1 and Pro V1x golf balls launched in the first quarter of 2023.


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Operating income in our Titleist golf balls segment increased $5.5 million, or 14.4%, compared to the prior year period. The increase in operating income primarily resulted from an increase of $8.7 million in gross profit, partially offset by higher operating expenses of $3.3 million. The increase in gross profit was primarily driven by higher average selling prices and lower inbound freight costs. Operating expenses increased primarily as a result of increases of $2.7 million in advertising and promotional expenses and $1.6 million in selling expense, partially offset by a decrease of $1.6 million in administrative expenses.

Titleist Golf Clubs Segment

Net sales in our Titleist golf clubs segment increased 17.6%, or 17.9% on a constant currency basis, for the three months ended September 30, 2023 compared to the three months ended September 30, 2022. The increase was largely due to higher sales volumes of our T-Series irons launched in the third quarter of 2023 and our TSR hybrids and Scotty Cameron Super Select putters, each launched in the first quarter of 2023. This increase was partially offset by lower sales volumes of drivers, fairways and wedges.

Operating income in our Titleist golf clubs segment increased $9.6 million, or 35.7% compared to the prior year period. The increase in operating income primarily resulted from an increase of $16.8 million in gross profit, partially offset by higher operating expenses of $6.3 million and intangible amortization expense of $0.9 million. The increase in gross profit was primarily driven by higher sales volumes, lower royalty expense and lower inbound freight costs. Operating expenses increased primarily due to increases of $3.1 million, $2.4 million and $1.0 million in advertising and promotional, selling and research and development expenses, respectively, largely due to increased employee-related and new product launch expenses. 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 decreased 19.4%, or 19.9% on a constant currency basis, for the three months ended September 30, 2023 compared to the three months ended September 30, 2022. The decrease primarily resulted from lower sales volumes of golf bags and headwear due to strong sales volume in the third quarter of 2022 as supply chain and fulfillment constraints recovered from the first quarter of 2022.

Operating income in our Titleist golf gear segment decreased $5.6 million, or 87.5% compared to the prior year period. The decrease in operating income primarily resulted from a decrease of $5.2 million in gross profit. The decrease in gross profit was primarily due to lower sales volumes, partially offset by a decrease in inbound freight costs.

FootJoy Golf Wear Segment

Net sales in our FootJoy golf wear segment increased 3.8%, or 3.4% on a constant currency basis, for the three months ended September 30, 2023 compared to the three months ended September 30, 2022. The increase was primarily due to higher average selling prices in apparel.

Operating income in our FootJoy golf wear segment decreased $3.4 million, or 178.9% compared to the prior year period. The decrease in operating income primarily resulted from lower gross profit of $4.9 million, partially offset by lower operating expenses of $1.5 million. The decrease in gross profit was primarily due to unfavorable manufacturing overhead absorption and increased promotional activity in footwear, partially offset by lower inbound freight costs. Operating expenses decreased primarily as a result of a decrease of $1.3 million in selling expense largely due to lower retail commission expense in Korea and lower third party distribution expense.


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Nine Months Ended September 30, 2023 Compared to the Nine Months Ended September 30, 2022

Net sales by reportable segment is summarized as follows:


	Nine months ended								Constant Currency
	September 30,				Increase/(Decrease)				Increase/(Decrease)
(in millions)	2023		2022		$ change		% change		$ change		% change
Titleist golf balls	$	622.1	$	546.4	$	75.7	13.9	%	$	84.8	15.5	%
Titleist golf clubs	549.8		478.9		70.9		14.8	%	80.6		16.8	%
Titleist golf gear	184.6		172.5		12.1		7.0	%	15.5		9.0	%
FootJoy golf wear	500.2		507.1		(6.9)		(1.4)	%	3.1		0.6	%

Net sales information by region is summarized as follows:


	Nine months ended								Constant Currency
	September 30,				Increase/(Decrease)				Increase/(Decrease)
(in millions)	2023		2022		$ change		% change		$ change		% change
United States	$	1,123.8	$	974.2	$	149.6	15.4	%	$	149.6	15.4	%
EMEA	266.5		274.8		(8.3)		(3.0)	%	(3.4)		(1.2)	%
Japan	118.2		118.6		(0.4)		(0.3)	%	10.3		8.7	%
Korea	241.3		254.1		(12.8)		(5.0)	%	(4.7)		(1.8)	%
Rest of world	219.2		201.2		18.0		8.9	%	28.2		14.0	%
Total net sales	$	1,969.0	$	1,822.9	$	146.1	8.0	%	$	180.0	9.9	%

Segment operating income by reportable segment is summarized as follows:


	Nine months ended
(in millions)	September 30,				Increase/(Decrease)
Segment operating income	2023		2022		$ change		% change
Titleist golf balls	$	131.6	$	100.9	$	30.7	30.4	%
Titleist golf clubs	118.5		88.2		30.3		34.4	%
Titleist golf gear	26.7		20.3		6.4		31.5	%
FootJoy golf wear	32.9		45.3		(12.4)		(27.4)	%

Net Sales

For the nine months ended September 30, 2023 net sales increased 8.0%, or 9.9% on a constant currency basis, compared to the nine months ended September 30, 2022. This increase was driven primarily by higher sales volumes in Titleist golf balls, Titleist golf clubs and Titleist golf gear. 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 the result of increases in Titleist golf balls of $61.5 million, Titleist golf clubs of $54.6 million, FootJoy golf wear of $21.8 million and Titleist golf gear of $8.3 million. 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 associated with the launches of our T-Series irons, TSR hybrids, drivers and fairways and Scotty Cameron Super Select putters, partially offset by lower sales volumes of second model year 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, partially 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 our travel and headwear product categories.

Net sales in regions outside the United States decreased 0.4%, or increased 3.6% on a constant currency basis. Net sales increased in Rest of World and Japan, partially offset by a decrease in Korea and EMEA, on a constant currency basis. The increase in Rest of World was due to sales increases across all reportable segments. In Japan, net sales increased across all reportable segments except FootJoy golf wear. In EMEA, the decrease was due to lower sales volumes in FootJoy golf wear, partially offset by increases in all other reportable segments. In Korea, the decrease was primarily due to lower sales volumes of


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products that are not allocated to one of our four reportable segments and lower sales volumes in FootJoy golf wear, partially offset by increases in all other reportable segments.

Gross Profit

Gross profit increased $87.1 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. Gross margin increased to 53.0% for the nine months ended September 30, 2023 compared to 52.4% for the nine months ended September 30, 2022. The increase in gross profit was primarily the result of increases in Titleist golf clubs of $53.1 million, Titleist golf balls of $45.6 million, and Titleist golf gear of $8.3 million, partially offset by a decrease in FootJoy golf wear of $10.4 million. This increase in gross profit was primarily due to the sales volume changes discussed above, lower inbound freight costs across all reportable segments and lower royalty expense in Titleist golf clubs. 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

SG&A expenses increased $37.4 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. This increase was primarily due to an increase of $17.4 million in advertising and promotional expenses, an increase of $13.7 million in selling expense, $7.9 million of costs related to the optimization of our distribution and custom fulfillment capabilities 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. 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. Administrative expense was largely flat as increased employee-related expenses were mostly offset by lower information technology-related expenses. Additionally, SG&A includes a decrease of $11.5 million in foreign currency transaction losses, partially offset by a decrease in gains on foreign exchange forward contracts of $4.4 million.

Research and Development

R&D expenses increased $4.8 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 primarily as a result of an increase in employee-related expenses.

Intangible Amortization

Intangible amortization expense increased $4.8 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 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 $22.3 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 primarily due to an increase in borrowings and interest rates.

Other Expense, net

Other expense, net decreased $3.8 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 primarily due to a decrease in the non-service cost component of net periodic benefit expense, as well as changes in the fair value of Rabbi trust assets.

Income Tax Expense

Income tax expense decreased $0.1 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. Our ETR was 19.0% for the nine months ended September 30, 2023 compared to 20.6% for the nine months ended September 30, 2022. The change in ETR was primarily driven by changes in our jurisdictional mix of earnings.


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Segment Results

Titleist Golf Balls Segment

Net sales in our Titleist golf balls segment increased 13.9%, or 15.5% on a constant currency basis, for the nine months ended September 30, 2023 compared to the nine months ended September 30, 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 $30.7 million, or 30.4% compared to the prior year period. The increase in operating income resulted from higher gross profit of $45.6 million, partially offset by higher operating expenses of $14.5 million. The increase in gross profit was primarily driven by higher sales volumes and lower inbound freight costs. Operating expenses increased primarily as a result of increases of $7.4 million and $6.2 million in selling and advertising and promotional expenses, respectively.

Titleist Golf Clubs Segment

Net sales in our Titleist golf clubs segment increased 14.8%, or 16.8% on a constant currency basis, for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. The increase was largely due to higher sales volumes of our T-Series irons launched in the third quarter of 2023, TSR drivers and fairways launched in the third quarter of 2022 and TSR hybrids and Scotty Cameron Super Select putters, each launched in the first quarter of 2023. This increase was partially offset by lower sales volumes of second model year wedges.

Operating income in our Titleist golf clubs segment increased $30.3 million, or 34.4% compared to the prior year period. The increase in operating income resulted from higher gross profit of $53.1 million, partially offset by higher operating expenses of $20.1 million and intangible amortization expense of $2.8 million. The increase in gross profit was primarily due to higher sales volumes, lower royalty expense and lower inbound freight costs. Operating expenses increased primarily as a result of increases of $10.0 million and $6.8 million in selling and advertising and promotional 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 7.0%, or 9.0% on a constant currency basis, for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. The increase was primarily driven by higher sales volumes and higher average selling prices across all product categories.

Operating income in our Titleist golf gear segment increased $6.4 million, or 31.5% compared to the prior year period. The increase in operating income resulted from higher gross profit of $8.3 million, partially offset by higher intangible amortization expense of $1.7 million. Gross profit increased primarily due to lower inbound freight costs, higher sales volumes and higher average selling prices. 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 1.4%, or increased 0.6% on a constant currency basis, for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. The increase in constant currency was primarily due to a sales volume increase in apparel, largely offset by a sales volume decrease in footwear.

Operating income in our FootJoy golf wear segment decreased $12.4 million, or 27.4% compared to the prior year period. The decrease in operating income resulted from lower gross profit of $10.4 million and higher operating expenses of $1.9 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 increased primarily as a result of an increase of $3.4 million in advertising and promotional expenses, partially offset by a $1.3 million decrease in selling expense largely due to lower retail commission expense in Korea.


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Liquidity and Capital Resources

Our primary cash needs relate to working capital, capital expenditures, servicing our debt, paying dividends, pension contributions and repurchasing shares of our common stock. 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 September 30, 2023, we had $55.1 million of unrestricted cash and cash equivalents (including $13.0 million attributable to our FootJoy golf shoe variable interest entity). As of September 30, 2023, 96.4% of our total unrestricted cash and cash equivalents was held at our non-U.S. subsidiaries, 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 our Annual Report on Form 10-K for the year ended December 31, 2022.

Debt and Financing Arrangements

As of September 30, 2023, we had $385.1 million of availability under our multi-currency revolving credit facility after giving effect to $7.8 million of outstanding letters of credit. Additionally, we had $27.5 million of availability under certain local credit facilities of our subsidiaries.

Our credit agreement contains customary affirmative and restrictive covenants, including, among others, financial covenants based on our leverage and interest coverage ratios. The credit agreement also includes customary events of default, the occurrence of which, following any applicable cure period, would permit the lenders to, among other things, declare the principal, accrued interest and other obligations to be immediately due and payable. As of September 30, 2023, we were in compliance with all covenants under our credit agreement.

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 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.

See “Notes to Unaudited Condensed Consolidated Financial Statements – Note 5 – Debt and Financing Arrangements,” Item 1 of Part I included elsewhere in this report and “Notes to Consolidated Financial Statements-Note-11-Debt and Financing Arrangements” in our Annual Report on Form 10-K for the year ended December 31, 2022 for a description of our debt and financing arrangements. Additionally, see “Risk Factors,” Item 1A of Part II included elsewhere in this report and “Risk Factors - Risks Related to Our Indebtedness” as described in our Annual Report on Form 10-K for the year ended December 31, 2022 for further discussion surrounding the risks and uncertainties related to our debt and financing arrangements.


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Dividends and Share Repurchase Program

During the nine months ended September 30, 2023, we paid dividends on our common stock of $40.1 million to our shareholders. During the fourth quarter of 2023, our Board of Directors declared a dividend of $0.195 per share of common stock to shareholders of record as of December 1, 2023 and payable on December 15, 2023.

As of September 30, 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. During the nine months ended September 30, 2023, we repurchased 4,150,817 shares of common stock at an average price of $49.40 for an aggregate of $205.0 million. Included in this amount were 2,168,528 shares of common stock repurchased from Magnus Holdings Co., Ltd. (“Magnus”), a wholly-owned subsidiary of Fila Holdings Corp., on January 23, 2023, for an aggregate of $100.0 million in satisfaction of our obligations pursuant to our previously disclosed Magnus share repurchase agreement.

On June 9, 2023, we entered into a new agreement with Magnus 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"). In relation to this agreement, we recorded a liability of $79.8 million to purchase an additional 1,439,400 shares of common stock from Magnus as of September 30, 2023.

As of September 30, 2023, we had $202.4 million remaining under the current share repurchase authorization, including $100.0 million related to the 2023 Agreement. Between October 1, 2023 and October 27, 2023, we purchased an additional 385,594 shares of our common stock on the open market for an aggregate of $20.2 million, bringing the cumulative total open market purchases since the inception of the 2023 Agreement to $100.0 million. As a result, we expect to purchase 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 obligation under the 2023 Agreement.

See “Notes to Unaudited Condensed Consolidated Financial Statements-Note-10-Common Stock,” Item 1 of Part I included elsewhere in this report for a description of our share repurchase program and Magnus share repurchase agreements.

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 Unaudited Condensed Consolidated Financial Statements-Note-16 - Other Business Developments,” Item 1 of Part I included elsewhere in this report for additional information.

Capital Expenditures

We made $42.4 million of capital expenditures during the nine months ended September 30, 2023. Capital expenditures for the full year are expected to be approximately $75.0 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 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:


	Nine months ended
	September 30,
(in thousands)	2023		2022
Cash flows from:
Operating activities	$	296,930	$	(59,042)
Investing activities	(68,554)		(29,096)
Financing activities	(229,202)		(74,619)
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash	(1,312)		(10,463)
Net decrease in cash, cash equivalents and restricted cash	$	(2,138)	$	(173,220)


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Cash Flows from Operating Activities

The increase in cash provided by operating activities was primarily related to changes in working capital, largely driven by inventory. These inventory changes relate to an increase in demand for certain of our products and improvements in our inventory position and supply chain. At any specific point in time, working capital 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 increase in cash used in investing activities was primarily driven by cash paid for trademark acquisitions during the nine months ended September 30, 2023, as well as an increase in capital expenditures.

Cash Flows from Financing Activities

The increase in cash used in financing activities was primarily due to a decrease in net proceeds from borrowings, as well as an increase in purchases of our common stock.

Off-Balance Sheet Arrangements

As of September 30, 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

There have been no material changes to our critical accounting estimates from the information provided in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in our Annual Report on Form 10-K for the year ended December 31, 2022.

Recently Issued Accounting Standards

We have reviewed all recently issued accounting standards and have determined that, other than as disclosed in "Notes to Unaudited Condensed Consolidated Financial Statements-Note-1-Summary of Significant Accounting Policies," Item 1 of Part I 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.

ITEM 3. 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 Unaudited Condensed Consolidated Financial Statements-Note-5- Debt and Financing Arrangements,” Item 1 of Part I, 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 September 30, 2023, the notional value of our outstanding interest rate swap contract was $100.0 million. See "Notes to Unaudited Condensed Consolidated Financial Statements-Note-6-Derivative Financial Instruments" for further discussion of our interest rate swap contract.

We performed a sensitivity analysis to assess the potential effect of a hypothetical movement in interest rates on our annual pre-tax interest expense. As of September 30, 2023, we had $491.2 million of outstanding indebtedness at variable


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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 September 30, 2023 would have resulted in an increase of $4.9 million in 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.

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.

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 September 30, 2023 was $193.2 million, representing a net settlement asset of $8.4 million. The sensitivity analysis of changes in the fair value of our foreign exchange forward contracts outstanding as of September 30, 2023, while not predictive in nature, indicated that the net settlement asset of $8.4 million would decrease by $13.0 million resulting in a net settlement liability of $4.6 million, if the U.S. dollar uniformly weakened by 10% against all currencies covered by our contracts.

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 Surlyn for the manufacturing of our golf balls, titanium and steel for the assembly of 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, have impacted our business, results of operations, financial position and cash flows during the nine months ended September 30, 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.


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ITEM 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures. Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the fiscal quarter ended September 30, 2023. Based on such evaluation, our principal executive officer and principal financial officer have concluded that as of such date, our disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting. There were no changes in our internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended September 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


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PART II. OTHER INFORMATION

ITEM 1. 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 1A. Risk Factors

You should carefully consider each of the risk factors included in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022, as well as the other information set forth in this report. There have been no material changes to the risk factors as described in our Annual Report on Form 10-K for the year ended December 31, 2022, other than the risk factors included below.

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 September 30, 2023, we had $592.8 million of indebtedness. As of September 30, 2023, we had available borrowings under our multi-currency revolving credit facility of $385.1 million after giving effect to $7.8 million of outstanding letters of credit and we had available borrowings remaining under our local credit facilities of $27.5 million. As of September 30, 2023, the notional value of our outstanding interest rate swap contracts was $100.0 million. In addition, on October 3, 2023, Acushnet Company, our wholly-owned subsidiary, issued $350 million in gross proceeds of 7.375% senior unsecured notes due 2028 (the “Notes”), which proceeds were used in part to repay $345.6 million of borrowings under our multi-currency revolving credit facility.

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, including the Notes, 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 indenture governing the Notes, if not cured or waived, and the agreements governing our other indebtedness;

•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, including the Notes, will require 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, including the Notes, 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 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 and the indenture governing the Notes may restrict us from effecting any of these alternatives. Our failure to make the required interest and principal payments on our indebtedness could result in an event of default under the


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indenture governing the Notes and 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 multi-currency revolving credit facility and the indenture governing the Notes will restrict our ability to dispose of assets and use the proceeds from the disposition. We may not be able to consummate those dispositions or to obtain the proceeds that we could realize from them 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 indenture governing the Notes and the agreements governing our other indebtedness 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. If we incur additional debt, the risks associated with our substantial existing debt, including our ability to service our debt, could intensify.

The indenture governing the Notes contains, and the credit agreement governing our multi-currency revolving credit facility contains, restrictions that limit our flexibility in operating our business.

The indenture governing the Notes contains, and the credit agreement governing our multi-currency revolving credit facility contains, 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 loans and investments;

•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 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 multi-currency revolving credit facility have the right to proceed against the collateral granted to them to secure the debt. If lenders under the multi-currency revolving 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 multi-currency revolving 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.

Any decline in the ratings of our corporate credit or the ratings of the Notes could impact our ability to access capital.

Any decline in the ratings of our corporate credit or the Notes could increase our cost of financing and limit our ability to refinance maturing liabilities or access the capital markets to meet liquidity needs.


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ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table provides information relating to the Company’s purchase of common stock for the third 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 (1)(2) (in thousands)








July 1, 2023 - July 31, 2023	368,313	$	55.93	368,313	$	246,704
August 1, 2023 - August 31, 2023	419,047	57.06		419,047	222,794
September 1, 2023- September 30, 2023	366,040	55.76		366,040	202,385
Total	1,153,400	$	56.28	1,153,400	$	202,385

_______________________________________________________________________________

(1) On June 9, 2023, in connection with our share repurchase program, 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"). See “Notes to Unaudited Condensed Consolidated Financial Statements-Note-10-Common Stock,” Item 1 of Part I included elsewhere in this report for a description of our share repurchase program and Magnus share repurchase agreements.

(2) Between October 1, 2023 and October 27, 2023, we purchased an additional 385,594 shares of our common stock on the open market for an aggregate of $20.2 million, bringing the cumulative total open market purchases since the inception of the 2023 Agreement to $100.0 million. As a result, we expect to purchase 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 obligation under the 2023 Agreement.

ITEM 3. Defaults Upon Senior Securities

None.

ITEM 4. Mine Safety Disclosures

None.

ITEM 5. Other Information

During the three months ended September 30, 2023, none of our directors or officers adopted, modified as to the amount, price or timing of trades, or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.


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ITEM 6. Exhibits


Exhibit No.						Description
4.1						Indenture, dated October 3, 2023, am ong Acushnet Company , U.S. Bank T rust 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)).

31.1						Certification of Periodic Report by Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

31.2						Certification of Periodic Report by Chief Financial Officer under 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 (furnished 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 (furnished 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						Taxonomy Extension Schema Document

101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB						Inline XBRL Taxonomy Extension Labels Linkbase Document

101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document

104						Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)


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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	ACUSHNET HOLDINGS CORP.

Dated: November 2, 2023	By:	/s/ David Maher
		David Maher
		President and Chief Executive Officer
		(Principal Executive Officer)


Dated: November 2, 2023	By:	/s/ Sean Sullivan
		Sean Sullivan
		Executive Vice President and Chief Financial Officer
		(Principal Financial Officer)


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