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Acushnet Holdings Corp. (GOLF) SEC Filing 8-K Material Event for the period ending Wednesday, November 8, 2017

Acushnet Holdings Corp.

CIK: 1672013 Ticker: GOLF

Exhibit 99.1

 

Acushnet Holdings Corp. Announces
Third Quarter and Year-to-Date 2017 Financial Results,

Declares Quarterly Cash Dividend

Third Quarter and Year-to-Date 2017 Financial Results

·

Third quarter net sales of $347.3 million, up 2.3% year over year, or up 2.9% in constant currency

·

Year-to-date net sales of $1,208.9 million, down 2.7% year over year, or down 2.0% in constant currency

·

Third quarter net income attributable to Acushnet Holdings Corp. of $9.3 million, up $14.8 million year over year

·

Year-to-date net income attributable to Acushnet Holdings Corp. of $80.4 million, up $35.2 million year over year

·

Third quarter Adjusted EBITDA of $32.2 million, up 15.0% year over year

·

Year-to-date Adjusted EBITDA of $182.5 million, down 4.1% year over year

Quarterly Cash Dividend

·

Declares quarterly cash dividend of $0.12 per share; $8.9 million on an aggregate quarterly basis

FAIRHAVEN, MA – November 8, 2017 –  Acushnet Holdings Corp. (NYSE: GOLF) ("Acushnet"), a global leader in the design, development, manufacture and distribution of performance-driven golf products, today reported financial results for the three and nine months ended September 30, 2017.

Wally Uihlein, Acushnet President and CEO said, "We are encouraged to see that the global golf industry continues to structurally improve through the first nine months of 2017.  While near term, US demand trends have been impacted as the focus shifted to important life priorities in areas hit by the recent hurricanes, it is good to see many areas are recovering well as a sense of normalcy returns. We are confident that our proven strategy, dedicated associates and valued trade partners will enable us to leverage a stronger industry and extend our success over the long term."      

 

David Maher, Acushnet COO said, "Acushnet delivered a solid third quarter with global growth driven by the United States and South Korea. We are particularly pleased with the recent launch of the Titleist 818 hybrids and the 718 irons including the new AP3. Tour adoption was strong at introduction, the global roll-out with our trade partners was well executed, and initial golfer response to these new golf clubs has been terrific. New Titleist DT TruSoft golf balls, and FootJoy's DNA Helix golf shoes were also launched successfully in the quarter. Looking forward, the Acushnet innovation engine is in high gear and we are excited about the many new product offerings coming from Titleist and FootJoy in 2018."

1


 

Summary of Third Quarter 2017 Financial Results

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

 

 

 

 

 

 

Constant Currency

 

 

September 30, 

 

Increase/(Decrease)

 

Increase/(Decrease)

 

    

2017

    

2016

    

$ change

    

% change

 

$ change

    

% change

(in millions)

 

 

  

 

 

  

 

 

  

 

  

 

 

 

  

 

  

 

Net sales

 

$

347.3

 

$

339.3

 

$

8.0

 

2.3

%  

 

$

9.8

 

2.9

%

Net income (loss) attributable to Acushnet Holdings Corp

 

$

9.3

 

$

(5.5)

 

$

14.8

 

269.1

%  

 

 

  

 

  

 

Adjusted EBITDA

 

$

32.2

 

$

28.0

 

$

4.2

 

15.0

%  

 

 

  

 

  

 

 

Consolidated net sales for the quarter increased by 2.3%, or by 2.9% on a constant currency basis, driven primarily by the launch of the Titleist 718 irons and 818 hybrids. 

On a geographic basis, consolidated net sales in the United States increased by 4.6% in the quarter. Net sales in regions outside the United States were down 0.1%, and up 1.1% on a constant currency basis, with Korea up 6.4% and Rest of World up 6.3%, offset by Japan down 6.9%. 

Segment specifics:

·

3.5% decrease in net sales (3.1% decrease on a constant currency basis) of Titleist golf balls driven by sales volume declines in both Pro V1 and performance models.  In the United States, sales volumes were impacted by unfavorable weather conditions as well as increased competitive promotional activity in the marketplace.

·

9.5% increase in net sales (10.3% increase on a constant currency basis) of Titleist golf clubs due to higher sales volumes, primarily due to product launches in our iron series and hybrids.

·

1.3% increase in net sales (2.1% increase on a constant currency basis) of Titleist golf gear.  This increase was primarily due to sales volume growth in our travel gear category.

·

3.3% increase in net sales (3.7% increase on a constant currency basis) in FootJoy golf wear primarily due to higher average selling prices and a sales volume increase in our apparel category.

Net income attributable to Acushnet improved by $14.8 million to $9.3 million, primarily as a result of lower interest expense and higher income from operations, partially offset by higher income tax expense.

Adjusted EBITDA was $32.2 million, up 15.0% year over year.  Adjusted EBITDA margin was 9.3% for the third quarter versus 8.3% for the prior year period.

 

2


 

Summary of First Nine Months 2017 Financial Results

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine months ended

 

 

 

 

 

 

 

Constant Currency

 

 

September 30, 

 

Increase/(Decrease)

 

Increase/(Decrease)

 

    

2017

    

2016

    

$ change

    

% change

 

$ change

    

% change

(in millions)

 

 

  

 

 

  

 

 

  

 

  

 

 

 

  

 

  

 

Net sales

 

$

1,208.9

 

$

1,242.5

 

$

(33.6)

 

(2.7)

%

 

$

(24.3)

 

(2.0)

%

Net income attributable to Acushnet Holdings Corp

 

$

80.4

 

$

45.2

 

$

35.2

 

77.9

%

 

 

  

 

  

 

Adjusted EBITDA

 

$

182.5

 

$

190.3

 

$

(7.8)

 

(4.1)

%

 

 

  

 

  

 

 

Consolidated net sales for the first nine months of 2017 decreased by 2.7%, or by 2.0% on a constant currency basis. 

On a geographic basis, consolidated net sales in the United States decreased by 3.0% in the nine month period.  Net sales in the United States were impacted by a reduced store count as a result of the retail channel disruptions in 2016 as well as unfavorable weather conditions which negatively impacted both rounds of play and golf club fitting and trial activities.  Acushnet posted a year-on-year decline in net sales in regions outside the United States of 2.4%, down 0.8% on a constant currency basis, with Korea up 11.9%, offset by Japan down 10.4%.

Segment specifics:

·

2.7% decrease in net sales (2.1% decrease on a constant currency basis) of Titleist golf balls.  This decrease was primarily driven by a sales volume decline of our performance golf ball models which were in their second year of the two-year product life cycle and was partially offset by a sales volume increase of our newly introduced Pro V1 and Pro V1x golf balls.  In the United States, sales volumes were impacted by a reduced store count as a result of the retail channel disruptions in 2016, unfavorable weather conditions which negatively impacted rounds of play, as well as increased competitive promotional activity in the marketplace.

·

10.0% decrease in net sales (9.2% decrease on a constant currency basis) of Titleist golf clubs.  This decrease was primarily driven by lower sales volumes of Vokey Design wedges, which were in their second model year, and prior generation irons.  In the United States, sales volumes were impacted by a reduced store count as a result of the retail channel disruptions in 2016 as well as unfavorable weather conditions which negatively impacted golf club fitting and trial activities.  This decrease was partially offset by an increase in average selling prices, in particular for the new 917 model drivers and fairways.

·

5.0% increase in net sales (5.4% increase on a constant currency basis) of Titleist golf gear.  This increase was primarily due to higher average selling prices in all categories and higher sales volume growth in the travel category.

·

1.7% decrease in net sales (0.5% decrease on a constant currency basis) in FootJoy golf wear primarily due to a sales volume decline in footwear, partially offset by a sales volume increase in apparel. 

Net income attributable to Acushnet improved by $35.2 million to $80.4 million, primarily as a result of lower interest expense and higher income from operations. 

3


 

Adjusted EBITDA was $182.5 million, down 4.1% year over year.  Adjusted EBITDA margin was 15.1% versus 15.3% for the prior year period.

 

Declares Quarterly Cash Dividend

Acushnet Holdings board of directors today declared a quarterly cash dividend in an amount of $0.12 per share of common stock. The dividend will be payable on December 15, 2017, to stockholders of record on December 1, 2017.  The number of shares outstanding as of September 30, 2017 was 74,451,977.

 

Updated 2017 Outlook

·

Consolidated net sales are expected to be approximately $1,545 to 1,555 million in 2017.

·

Consolidated net sales on a constant currency basis are expected to be in the range of a decrease of 1% to a decrease of 0.4% in 2017.

·

Adjusted EBITDA is expected to be approximately $220 to 225 million in 2017.

 

Investor Conference Call

Acushnet will hold a conference call at 8:30 am (Eastern Time) on November 8, 2017 to discuss the financial results and host a question and answer session.  A live webcast of the conference call will be accessible at www.AcushnetHoldingsCorp.com/ir.  A replay archive of the webcast will be available shortly after the call concludes.

 

About Acushnet Holdings Corp.

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. Driven by our focus on dedicated and discerning golfers and the golf shops that serve them, we believe we are the most authentic and enduring company in the golf industry. Our mission - to be the performance and quality leader in every golf product category in which we compete - has remained consistent since we entered the golf ball business in 1932.  Today, we are the steward of two of the most revered brands in golf – Titleist, one of golf’s leading performance equipment brands, and FootJoy, one of golf’s leading performance wear brands.  Additional information can be found at www.acushnetholdingscorp.com.

4


 

Forward-Looking Statements

This release includes forward-looking statements that reflect our current views with respect to, among other things, our operations and financial performance. These forward-looking statements are included throughout this release 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 such as our anticipated consolidated net sales, consolidated net sales on a constant currency basis and adjusted EBITDA. We use words like “guidance,” “outlook,” “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 release.

The forward-looking statements contained in this release 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. Certain of these factors and other cautionary statements are included in this release or in the sections entitled “Risk Factors” and “Management’s Discussion and Analysis” in our Annual Report on Form 10-K for the year ended December 31, 2016 filed with the SEC  on March 30, 2017 as updated by our periodic reports subsequently filed with the SEC. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, our actual results may vary in material respects from those projected in these forward-looking statements.

Any forward-looking statement made by us in this release speaks only as of the date of this release. 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.

Media Contact:                     

AcushnetPR@icrinc.com 

Investor Contact:

IR@AcushnetGolf.com 

 

5


 

ACUSHNET HOLDINGS CORP.

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended  September 30, 

 

Nine months ended  September 30, 

(in thousands)

    

2017

    

2016

    

2017

 

2016

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

347,263

 

$

339,318

 

$

1,208,866

 

$

1,242,514

Cost of goods sold

 

 

174,295

 

 

172,416

 

 

586,574

 

 

611,783

Gross profit

 

 

172,968

 

 

166,902

 

 

622,292

 

 

630,731

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

142,017

 

 

142,995

 

 

441,823

 

 

456,434

Research and development

 

 

11,060

 

 

12,473

 

 

35,659

 

 

35,296

Intangible amortization

 

 

1,626

 

 

1,654

 

 

4,872

 

 

4,957

Restructuring charges

 

 

 -

 

 

174

 

 

 -

 

 

816

Income from operations

 

 

18,265

 

 

9,606

 

 

139,938

 

 

133,228

Interest expense, net

 

 

4,040

 

 

15,672

 

 

11,863

 

 

44,076

Other (income) expense, net

 

 

103

 

 

(2,449)

 

 

(407)

 

 

1,389

Income (loss) before income taxes

 

 

14,122

 

 

(3,617)

 

 

128,482

 

 

87,763

Income tax expense

 

 

3,488

 

 

785

 

 

44,180

 

 

39,495

Net income (loss)

 

 

10,634

 

 

(4,402)

 

 

84,302

 

 

48,268

Less:  Net income attributable to noncontrolling interests

 

 

(1,316)

 

 

(1,124)

 

 

(3,854)

 

 

(3,077)

Net income (loss) attributable to Acushnet Holdings Corp.

 

$

9,318

 

$

(5,526)

 

$

80,448

 

$

45,191

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6


 

 

ACUSHNET HOLDINGS CORP.

 

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

 

 

 

 

 

 

 

 

 

 

September 30, 

 

December 31, 

(in thousands, except share and per share amounts)

    

2017

    

2016

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and restricted cash ($15,738 and $13,811 attributable to the FootJoy golf shoe joint venture ("JV"))

 

$

73,191

 

$

79,140

Accounts receivable, net

 

 

209,437

 

 

177,506

Inventories ($12,922 and $14,633 attributable to the FootJoy JV)

 

 

320,974

 

 

323,289

Other assets

 

 

70,064

 

 

84,596

Total current assets

 

 

673,666

 

 

664,531

Property, plant and equipment, net ($10,093 and $10,709 attributable to the FootJoy JV)

 

 

228,381

 

 

239,748

Goodwill ($32,312 and $32,312 attributable to the FootJoy JV)

 

 

185,092

 

 

179,241

Intangible assets, net

 

 

483,511

 

 

489,988

Deferred income taxes

 

 

104,248

 

 

130,416

Other assets ($2,674 and $2,642 attributable to the FootJoy JV)

 

 

30,662

 

 

32,247

Total assets

 

$

1,705,560

 

$

1,736,171

Liabilities and Equity

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Short-term debt

 

$

14,327

 

$

42,495

Current portion of long-term debt

 

 

23,750

 

 

18,750

Accounts payable ($7,428 and $10,397 attributable to the FootJoy JV)

 

 

91,085

 

 

87,608

Accrued taxes

 

 

21,623

 

 

41,962

Accrued compensation and benefits ($540 and $780 attributable to the FootJoy JV)

 

 

68,434

 

 

224,230

Accrued expenses and other liabilities ($5,980 and $4,121 attributable to the FootJoy JV)

 

 

72,131

 

 

47,063

Total current liabilities

 

 

291,350

 

 

462,108

Long-term debt and capital lease obligations

 

 

425,719

 

 

348,348

Deferred income taxes

 

 

5,893

 

 

7,452

Accrued pension and other postretirement benefits ($1,743 and $1,946 attributable to the FootJoy JV)

 

 

123,401

 

 

135,339

Other noncurrent liabilities ($4,065 and $3,368 attributable to the FootJoy JV)

 

 

16,529

 

 

14,101

Total liabilities

 

 

862,892

 

 

967,348

 

 

 

 

 

 

 

Shareholders' Equity

 

 

 

 

 

 

Common stock, $0.001 par value, 500,000,000 shares authorized; 74,451,977 and 74,093,598 shares issued and outstanding

 

 

74

 

 

74

Additional paid-in capital

 

 

891,249

 

 

880,576

Accumulated other comprehensive loss, net of tax

 

 

(79,717)

 

 

(90,834)

Retained deficit

 

 

(950)

 

 

(53,951)

Total equity attributable to Acushnet Holdings Corp.

 

 

810,656

 

 

735,865

Noncontrolling interests

 

 

32,012

 

 

32,958

Total shareholders' equity

 

 

842,668

 

 

768,823

Total liabilities and shareholders' equity

 

$

1,705,560

 

$

1,736,171

 

7


 

ACUSHNET HOLDINGS CORP.

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

 

 

 

 

 

 

 

 

 

 

Nine months ended  September 30, 

(in thousands)

    

2017

    

2016

Cash flows from operating activities

 

 

 

 

 

 

Net income

 

$

84,302

 

$

48,268

Adjustments to reconcile net income to cash provided by (used in) operating activities

 

 

 -

 

 

 -

Depreciation and amortization

 

 

30,667

 

 

30,553

Unrealized foreign exchange gain

 

 

(2,885)

 

 

(1,069)

Amortization of debt issuance costs

 

 

990

 

 

3,036

Amortization of discount on bonds payable

 

 

 -

 

 

3,963

Change in fair value of common stock warrants

 

 

 -

 

 

6,112

Share-based compensation

 

 

11,576

 

 

7,123

Loss on disposals of property, plant and equipment

 

 

466

 

 

82

Deferred income taxes

 

 

28,415

 

 

25,575

Changes in operating assets and liabilities

 

 

(171,415)

 

 

(1,615)

Cash flows provided by (used in) operating activities

 

 

(17,884)

 

 

122,028

Cash flows from investing activities

 

 

 

 

 

 

Additions to property, plant and equipment

 

 

(12,781)

 

 

(13,502)

Cash flows used in investing activities

 

 

(12,781)

 

 

(13,502)

Cash flows from financing activities

 

 

 

 

 

 

Decrease in short-term borrowings, net

 

 

(31,719)

 

 

(28,163)

Proceeds from delayed draw term loan A facility

 

 

100,000

 

 

 -

Repayment of term loan facilities

 

 

(17,814)

 

 

 -

Repayment of senior term loan facility

 

 

 -

 

 

(30,000)

Proceeds from senior term loan facility

 

 

 -

 

 

375,000

Repayment of secured floating rate notes

 

 

 -

 

 

(375,000)

Proceeds from exercise of common stock warrants

 

 

 -

 

 

34,503

Repayment of bonds

 

 

 -

 

 

(34,503)

Debt issuance costs

 

 

 -

 

 

(6,469)

Dividends paid on common stock

 

 

(26,802)

 

 

 -

Dividends paid on Series A redeemable convertible preferred stock

 

 

 -

 

 

(13,861)

Dividends paid to noncontrolling interests

 

 

(2,400)

 

 

(3,000)

Payment of employee restricted stock tax withholdings

 

 

(903)

 

 

 -

Cash flows provided by (used in) financing activities

 

 

20,362

 

 

(81,493)

Effect of foreign exchange rate changes on cash

 

 

4,354

 

 

2,701

Net increase (decrease) in cash

 

 

(5,949)

 

 

29,734

Cash and restricted cash, beginning of year

 

 

79,140

 

 

59,134

Cash and restricted cash, end of period

 

$

73,191

 

$

88,868

 

8


 

ACUSHNET HOLDINGS CORP.

Supplemental Net Sales Information (Unaudited)

Third Quarter Net Sales by Segment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

 

 

 

 

 

 

Constant Currency

 

 

 

September 30, 

 

Increase/(Decrease)

 

Increase/(Decrease)

 

    

2017

    

2016

    

$ change

    

% change

 

$ change

    

% change

(in thousands)

 

 

 

Titleist golf balls

 

$

114,950

 

$

119,079

 

$

(4,129)

 

(3.5)

%

 

$

(3,723)

 

(3.1)

%

Titleist golf clubs

 

 

84,676

 

 

77,316

 

 

7,360

 

9.5

%

 

 

7,949

 

10.3

%

Titleist golf gear

 

 

30,895

 

 

30,499

 

 

396

 

1.3

%

 

 

626

 

2.1

%

FootJoy golf wear

 

 

101,010

 

 

97,758

 

 

3,252

 

3.3

%

 

 

3,618

 

3.7

%

 

 

Third Quarter Net Sales by Region

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

 

 

Constant Currency

 

 

September 30, 

 

Increase/(Decrease)

 

Increase/(Decrease)

 

    

2017

    

2016

    

$ change

    

% change

 

$ change

    

% change

(in thousands)

 

 

 

United States

 

$

183,495

 

$

175,448

 

$

8,047

 

4.6

%

 

$

8,047

 

4.6

%

EMEA

 

 

40,646

 

 

39,565

 

 

1,081

 

2.7

%

 

 

186

 

0.5

%

Japan

 

 

41,130

 

 

47,659

 

 

(6,529)

 

(13.7)

%

 

 

(3,288)

 

(6.9)

%

Korea

 

 

47,502

 

 

44,846

 

 

2,656

 

5.9

%

 

 

2,871

 

6.4

%

Rest of world

 

 

34,490

 

 

31,800

 

 

2,690

 

8.5

%

 

 

2,009

 

6.3

%

Total sales

 

$

347,263

 

$

339,318

 

$

7,945

 

2.3

%

 

$

9,825

 

2.9

%

 

 

Nine Months Net Sales by Segment 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine months ended

 

 

 

 

 

 

 

Constant Currency

 

 

 

September 30, 

 

Increase/(Decrease)

 

Increase/(Decrease)

 

    

2017

    

2016

    

$ change

    

% change

 

$ change

    

% change

(in thousands)

 

 

 

Titleist golf balls

 

$

404,101

 

$

415,328

 

$

(11,227)

 

(2.7)

%

 

$

(8,865)

 

(2.1)

%

Titleist golf clubs

 

 

279,955

 

 

311,145

 

 

(31,190)

 

(10.0)

%

 

 

(28,590)

 

(9.2)

%

Titleist golf gear

 

 

120,585

 

 

114,833

 

 

5,752

 

5.0

%

 

 

6,241

 

5.4

%

FootJoy golf wear

 

 

355,750

 

 

361,788

 

 

(6,038)

 

(1.7)

%

 

 

(1,740)

 

(0.5)

%

 

 

Nine Months Net Sales by Region 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine months ended

 

 

 

Constant Currency

 

 

September 30, 

 

Increase/(Decrease)

 

Increase/(Decrease)

 

    

2017

 

2016

    

$ change

 

% change

 

$ change

 

% change

(in thousands)

 

 

 

United States

 

$

630,784

 

$

650,394

 

$

(19,610)

 

(3.0)

%

 

$

(19,610)

 

(3.0)

%

EMEA

 

 

166,533

 

 

177,221

 

 

(10,688)

 

(6.0)

%

 

 

(1,431)

 

(0.8)

%

Japan

 

 

135,607

 

 

155,233

 

 

(19,626)

 

(12.6)

%

 

 

(16,182)

 

(10.4)

%

Korea

 

 

153,354

 

 

133,958

 

 

19,396

 

14.5

%

 

 

15,963

 

11.9

%

Rest of world

 

 

122,588

 

 

125,708

 

 

(3,120)

 

(2.5)

%

 

 

(3,082)

 

(2.5)

%

Total sales

 

$

1,208,866

 

$

1,242,514

 

$

(33,648)

 

(2.7)

%

 

$

(24,342)

 

(2.0)

%

 

9


 

ACUSHNET HOLDINGS CORP.

Reconciliation of GAAP to Non-GAAP Measures

(Unaudited)

 

Use of Non-GAAP Financial Measures

The Company reports its financial results in accordance with generally accepted accounting principles in the United States (“GAAP”).  However, this release includes the non-GAAP financial measures of net sales in constant currency and Adjusted EBITDA. These non-GAAP financial measures are not measures of financial performance in accordance with GAAP and may exclude items that are significant to understanding and assessing the Company’s financial results. Therefore, these measures should not be considered in isolation or as an alternative to net sales, net income or other measures of profitability or performance under GAAP. You should be aware that the Company’s presentation of these measures may not be comparable to similarly-titled measures used by other companies.

We use net sales on a constant currency basis to evaluate the sales performance of our business in period over period comparisons and for forecasting our business going forward. Constant currency information allows us to estimate what our sales performance would have been without changes in foreign currency exchange rates. This information is calculated by taking the current period local currency sales and translating them into U.S. dollars based upon the foreign currency exchange rates for the applicable comparable prior period. This constant currency information should not be considered in isolation or as a substitute for any measure derived in accordance with 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.

Adjusted EBITDA represents net income attributable to Acushnet Holdings Corp. adjusted for income tax expense, interest expense, depreciation and amortization, the expenses relating to the Acushnet Company Equity Appreciation Rights Plan, as amended (the “EAR Plan”), share-based compensation expense, a one-time executive bonus, restructuring charges, certain transaction fees, indemnification expense (income) from our former owner Beam Suntory, Inc. (formerly known as Fortune Brands, Inc.) (“Beam”), gains (losses) on the fair value of our common stock warrants, certain other non-cash (gains) losses, net and the net income relating to non-controlling interests in our FootJoy golf shoe joint venture. We define Adjusted EBITDA in a manner consistent with the term “Consolidated EBITDA” as it is defined in our credit agreement. Consolidated EBITDA is used in our credit agreement at the Acushnet Company level for purposes of certain material terms, including (i) determining the applicable margin used to determine the interest rate per annum of outstanding borrowings and commitment fees for revolving commitments, (ii) calculating certain financial ratios used in financial maintenance covenants that require compliance on a quarterly basis, (iii) determining our ability to incur additional term loans or increases to our new revolving credit facility and (iv) determining the availability of certain baskets and the ability to enter into certain transactions.

We present Adjusted EBITDA as a supplemental measure because it excludes the impact of certain items that (i) we do not consider indicative of our ongoing operating performance, (ii) that relate to our acquisition of Acushnet Company, our operating subsidiary, from Beam on July 29, 2011 (the “Acquisition”) or (iii) that relate to our historical capital structure that are no longer relevant after the closing of our initial public offering. Management uses Adjusted EBITDA to evaluate the

10


 

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. Adjusted EBITDA is also used as a financial performance measure for purposes of determining the vesting of equity awards that were granted under our Acushnet Holdings Corp. 2015 Omnibus Incentive Plan.

We believe Adjusted EBITDA provides useful information to investors regarding our consolidated operating performance. By presenting Adjusted EBITDA, we provide a basis for comparison of our business operations between different periods by excluding items that we do not believe are indicative of our core operating performance.

Adjusted EBITDA is not a measurement of financial performance under GAAP. It should not be considered an alternative to net income attributable to Acushnet Holdings Corp. as a measure of our operating performance or any other measure of performance derived in accordance with 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 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.

The following table presents reconciliations of net income (loss) attributable to Acushnet Holdings Corp. to Adjusted EBITDA for the periods presented (dollars in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

 

Nine months ended

 

 

 

September 30, 

 

 

September 30, 

 

 

    

2017

    

2016

 

    

2017

 

2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to Acushnet Holdings Corp.

 

$

9,318

 

$

(5,526)

 

$

80,448

 

$

45,191

 

Income tax expense

 

 

3,488

 

 

785

 

 

44,180

 

 

39,495

 

Interest expense, net

 

 

4,040

 

 

15,672

 

 

11,863

 

 

44,076

 

Depreciation and amortization

 

 

10,214

 

 

10,003

 

 

30,667

 

 

30,553

 

EAR Plan(a)

 

 

 —

 

 

(940)

 

 

 —

 

 

(940)

 

Shared-based compensation(b)

 

 

3,674

 

 

6,159

 

 

11,576

 

 

7,123

 

One-time executive bonus(c)

 

 

 —

 

 

 —

 

 

 —

 

 

7,500

 

Restructuring charges(d)

 

 

 —

 

 

174

 

 

 —

 

 

816

 

Transaction fees(e)

 

 

 —

 

 

2,947

 

 

146

 

 

11,912

 

Beam indemnification expense (income)(f)

 

 

145

 

 

(2,156)

 

 

342

 

 

(2,641)

 

Losses on the fair value of our common stock warrants(g)

 

 

 —

 

 

 —

 

 

 —

 

 

6,112

 

Other non-cash gains, net

 

 

(17)

 

 

(236)

 

 

(613)

 

 

(531)

 

Nonrecurring  income(h)

 

 

 —

 

 

 —

 

 

 —

 

 

(1,467)

 

Net income attributable to noncontrolling interests(i)

 

 

1,316

 

 

1,124

 

 

3,854

 

 

3,077

 

Adjusted EBITDA

 

$

32,178

 

$

28,006

 

$

182,463

 

$

190,276

 

Adjusted EBITDA margin

 

 

9.3%

 

 

8.3%

 

 

15.1%

 

 

15.3%

 

 


(a)

Reflects expenses related to the Equity Appreciation Rights (“EARs”) granted under our EAR Plan and the remeasurement of the liability at each reporting period based on the then-current projection of our common stock equivalent value (as defined in the EAR Plan). See “—Critical Accounting Policies and Estimates—Share-Based Compensation” in our Annual Report on Form 10-K for the year ended December 31, 2016.  The EAR Plan expired on December 31, 2016.

11


 

(b)

Reflects compensation expense with respect to equity-based grants under the Acushnet Holdings Corp. 2015 Omnibus Incentive Plan.

(c)

In the first quarter of 2016, our President and Chief Executive Officer was awarded a cash bonus in the amount of $7.5 million as consideration for past performance.

(d)

Reflects restructuring charges incurred in connection with the reorganization of certain of our operations in 2016.

(e)

For the nine months ended September 30, 2017, reflects legal fees incurred relating to a dispute arising from the indemnification obligations owed to us by Beam in connection with the Acquisition.  For the three and nine months ended September 30, 2016, reflects certain fees and expenses we incurred in connection with our initial public offering as well as legal fees incurred relating to a dispute arising from the indemnification obligations owed to us by Beam in connection with the Acquisition.

(f)

Reflects the non-cash charges related to the indemnification obligations owed to us by Beam that are included when calculating net income (loss) attributable to the Company.

(g)

Fila Korea exercised all of our outstanding common stock warrants in July 2016 and we used the proceeds from such exercise to redeem all of our outstanding 7.5% bonds due 2021.

(h)

Reflects legal judgment in favor of us associated with the Beam value-added tax dispute in other (income) expense.

(i)

Reflects the net income attributable to the interest that we do not own in our FootJoy golf shoe joint venture.

A reconciliation of non-GAAP Adjusted EBITDA, as forecasted for 2017, to the closest corresponding GAAP measure, net income (loss), is not available without unreasonable efforts on a forward-looking basis due to the high variability and low visibility of certain charges that may impact our GAAP results on a forward-looking basis, such as the measures and effects of share- based compensation and adjustments related to the indemnification obligations owed to us by Beam.

 

12


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Acushnet Holdings Corp. provided additional information to their SEC Filing as exhibits

Ticker: GOLF
CIK: 1672013
Form Type: 8-K Corporate News
Accession Number: 0001558370-17-008474
Submitted to the SEC: Wed Nov 08 2017 6:30:35 AM EST
Accepted by the SEC: Wed Nov 08 2017
Period: Wednesday, November 8, 2017
Industry: Sporting And Athletic Goods
Events:
  1. Earnings Release
  2. Financial Exhibit

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