Acushnet Holdings Corp. (GOLF) 8-K Earnings Release

FAIRHAVEN, MA – May 3, 2018 – 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 months ended March 31, 2018.

"As the golf season opens up around the globe, the industry is structurally in a good place and generally optimistic in what has been an exciting start to the season across the worldwide tours," said David Maher, Acushnet's President and Chief Executive Officer. "While weather patterns have been a factor early this year, Acushnet is off to a solid start as we continue to execute on our long-term strategy with good momentum across our various product categories."

"Innovation, the measured introduction of new products, and the breadth and depth of our business are key factors in our on-going success and this quarter our Associates and trade partners continued to deliver," continued Maher. "While the Titleist ball business was comping against the successful 2017 launch of the new Pro V1 and Pro V1x, our recently introduced Tour Soft and Velocity models grew nicely. Club results were driven by continued strength in Titleist 718 irons and the new Vokey SM7 wedges and Cameron Select putters released in March. Titleist gear continued its steady growth and the new FootJoy Tour-S shoe is off to a great start. We have also recently rolled out the new Titleist AVX golf ball in North America and we look forward to fully activating our golf ball and club fitting efforts as the season unfolds."

Summary of First-Quarter 2018 Financial Results




	Three months ended March 31,				Increase/(Decrease)					Constant Currency Increase/(Decrease)
(in millions)	2018		2017		$ change			% change		$ change			% change
Net sales	$	441.8	$	433.6	$	8.2		1.9	%	$	(9.5	)	(2.2	)%
Net income (loss) attributable to Acushnet Holdings Corp	$	41.5	$	38.1	$	3.4		8.9	%
Adjusted EBITDA	$	77.1	$	78.5	$	(1.4	)	(1.8	)%

Consolidated net sales for the quarter increased by 1.9%, down 2.2% on a constant currency basis, primarily as a result of a sales volume decline in Pro V1 and Pro V1x golf balls which were launched in the first quarter of 2017.

On a geographic basis, consolidated net sales in the United States decreased by 1.7% in the quarter. Net sales in regions outside the United States were up 5.7%, down 2.7% on a constant currency basis. On a constant currency basis, EMEA was down 5.2%, Japan down 1.4% and Korea down 2.3%.

Segment specifics:

•

6.9% decrease in net sales (9.8% decrease on a constant currency basis) of Titleist golf balls as a result of a sales volume decline in Pro V1 and Pro V1x golf balls which were in their second year of the two year product life cycle and partially offset by a sales volume increase of our newly introduced performance models. In the U.S., sales volumes were impacted by unfavorable weather conditions.


•	14.7% increase in net sales (10.4% increase on a constant currency basis) of Titleist golf clubs driven by higher sales volumes, primarily due to our wedges launched in the quarter and our iron series introduced in the third quarter of 2017, partially offset by lower sales volumes of drivers and fairways which were in their second year of the two-year product life cycle.


•	4.6% increase in net sales (0.4% increase on a constant currency basis) of Titleist golf gear. This increase was driven primarily by higher average selling prices across all categories of the gear business.


•	1.1% decrease in net sales (5.7% decrease on a constant currency basis) in FootJoy golf wear primarily due to a sales volume decline in footwear as a result of the timing of new product launches compared to prior year and unfavorable weather conditions, partially offset by higher average selling prices across all FootJoy categories and a sales volume increase in apparel.

Net income attributable to Acushnet improved by $3.4 million to $41.5 million, up 8.9% year over year, primarily as a result of lower tax expense, partially offset by higher interest expense and lower income from operations.

Adjusted EBITDA was $77.1 million, down 1.8% year over year. Adjusted EBITDA margin was 17.4% for the first quarter versus 18.1% for the prior year period.

Declares Quarterly Cash Dividend

Acushnet's board of directors today declared a quarterly cash dividend in an amount of $0.13 per share of common stock. The dividend will be payable on June 15, 2018, to stockholders of record on June 1, 2018. The number of shares outstanding as of April 27, 2018 was 74,744,536.

2018 Outlook


•	Consolidated net sales are expected to be approximately $1,590 to 1,620 million.


•	Consolidated net sales on a constant currency basis are expected to be in the range of up 1.3% to 3.2%.


•	Adjusted EBITDA is expected to be approximately $225 to 235 million.

Investor Conference Call

Acushnet will hold a conference call at 8:30 am (Eastern Time) on May 3, 2018 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.

Forward-Looking Statements

This press release includes forward-looking statements that reflect our current views with respect to, among other things, our 2018 outlook, our operations and our financial performance. These forward-looking statements are included throughout this press 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 press release.

The forward-looking statements contained in this press 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. Important factors that could cause or contribute to such differences 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; 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; 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; cost of raw materials and components; currency transaction and translation risk; our ability to successfully manage the frequent introduction of new products; our reliance on technical innovation and high-quality products; changes of the Rules of Golf with respect to equipment; 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; recent changes to U.S. patent laws and proposed changes to the rules of the U.S. Patent and Trademark Office; intense competition and our ability to maintain a competitive advantage in each of our markets; limited opportunities for future growth in sales of 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 increase in 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; the ability of our eCommerce systems to function effectively; impairment of goodwill and

identifiable intangible assets; 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 on terms acceptable to us; our estimates or judgments relating to our critical accounting policies; our substantial leverage, ability to service our indebtedness, ability to incur more indebtedness and restrictions in the agreements governing our indebtedness; our exposure to market risks from changes in interest rates on our variable rate indebtedness and risks related to counterparty credit worthiness or non-performance of derivative financial instruments; our ability to pay dividends; and the other factors set forth in the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2017 filed with the SEC on March 7, 2018 as it may be updated by our periodic reports subsequently filed with the SEC. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, our actual results may vary in material respects from those projected in these forward-looking statements.

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

ACUSHNET HOLDINGS CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)



	Three months ended March 31,
(in thousands)	2018			2017
Net sales	$	441,801		$	433,615
Cost of goods sold	214,127			207,200
Gross profit	227,674			226,415
Operating expenses:
Selling, general and administrative	151,368			147,812
Research and development	12,392			12,507
Intangible amortization	1,630			1,622
Income from operations	62,284			64,474
Interest expense, net	4,408			2,922
Other (income) expense, net	(434		)	(563		)
Income before income taxes	58,310			62,115
Income tax expense	15,220			22,485
Net income	43,090			39,630
Less: Net income attributable to noncontrolling interests	(1,606		)	(1,516		)
Net income attributable to Acushnet Holdings Corp.	$	41,484		$	38,114

ACUSHNET HOLDINGS CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)



	March 31,			December 31,
(in thousands, except share and per share amounts)	2018			2017
Assets
Current assets
Cash and restricted cash ($16,031 and $13,086 attributable to the FootJoy golf shoe joint venture ("JV"))	$	48,370		$	47,722
Accounts receivable, net	348,516			190,851
Inventories ($10,841 and $13,692 attributable to the FootJoy JV)	363,328			363,962
Other assets	86,922			84,541
Total current assets	847,136			687,076
Property, plant and equipment, net ($10,010 and $10,240 attributable to the FootJoy JV)	225,257			228,922
Goodwill ($32,312 and $32,312 attributable to the FootJoy JV)	188,750			185,941
Intangible assets, net	480,043			481,234
Deferred income taxes	106,573			110,318
Other assets ($2,740 and $2,738 attributable to the FootJoy JV)	35,129			33,833
Total assets	$	1,882,888		$	1,727,324
Liabilities and Shareholders' Equity
Current liabilities
Short-term debt	$	135,249		$	20,364
Current portion of long-term debt	29,688			26,719
Accounts payable ($7,276 and $10,587 attributable to the FootJoy JV)	91,447			92,759
Accrued income taxes	37,291			34,310
Accrued compensation and benefits	65,389			80,189
Accrued expenses and other liabilities ($4,925 and $2,719 attributable to the FootJoy JV)	71,105			52,442
Total current liabilities	430,169			306,783
Long-term debt and capital lease obligations	408,259			416,970
Deferred income taxes	9,288			9,318
Accrued pension and other postretirement benefits ($1,691 and $1,908 attributable to the FootJoy JV)	130,660			130,160
Other noncurrent liabilities ($4,903 and $4,689 attributable to the FootJoy JV)	18,443			16,701
Total liabilities	996,819			879,932
Shareholders' equity
Common stock, $0.001 par value, 500,000,000 shares authorized; 74,744,536 and 74,479,319 shares issued and outstanding	75			74
Additional paid-in capital	896,450			894,727
Accumulated other comprehensive loss, net of tax	(80,142		)	(81,691		)
Retained earnings	37,816			1,618
Total equity attributable to Acushnet Holdings Corp.	854,199			814,728
Noncontrolling interests	31,870			32,664
Total shareholders' equity	886,069			847,392
Total liabilities and shareholders' equity	$	1,882,888		$	1,727,324

ACUSHNET HOLDINGS CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)



	Three months ended March 31,
(in thousands)	2018			2017
Cash flows from operating activities
Net income	$	43,090		$	39,630
Adjustments to reconcile net income to cash provided by (used in) operating activities
Depreciation and amortization	10,325			10,161
Unrealized foreign exchange (gain) loss	(1,681		)	37
Amortization of debt issuance costs	331			330
Share-based compensation	4,126			3,847
Loss on disposals of property, plant and equipment	—			319
Deferred income taxes	6,369			13,499
Changes in operating assets and liabilities	(149,392		)	(291,311		)
Cash flows used in operating activities	(86,832		)	(223,488		)
Cash flows from investing activities
Additions to property, plant and equipment	(5,887		)	(3,676		)
Other investing activity	(2,496		)	—
Cash flows used in investing activities	(8,383		)	(3,676		)
Cash flows from financing activities
Proceeds from short-term borrowings, net	113,293			125,982
Proceeds from delayed draw term loan A facility	—			100,000
Repayments of delayed draw term loan A facility	(1,250		)	(1,250		)
Repayment of term loan facilities	(4,688		)	(4,688		)
Dividends paid on common stock	(9,898		)	—
Payment of employee restricted stock tax withholdings	(2,634		)	(903		)
Cash flows provided by financing activities	94,823			219,141
Effect of foreign exchange rate changes on cash	1,040			1,621
Net increase (decrease) in cash	648			(6,402		)
Cash and restricted cash, beginning of year	47,722			79,140
Cash and restricted cash, end of period	$	48,370		$	72,738

ACUSHNET HOLDINGS CORP.

Supplemental Net Sales Information (Unaudited)

First Quarter Net Sales by Segment



	Three months ended									Constant Currency
	March 31,				Increase/(Decrease)					Increase/(Decrease)
(in thousands)	2018		2017		$ change			% change		$ change			% change
Titleist golf balls	$	124,906	$	134,192	$	(9,286	)	(6.9	)%	$	(13,213	)	(9.8	)%
Titleist golf clubs	116,893		101,942		14,951			14.7	%	10,627			10.4	%
Titleist golf gear	44,345		42,390		1,955			4.6	%	170			0.4	%
FootJoy golf wear	140,706		142,241		(1,535		)	(1.1	)%	(8,077		)	(5.7	)%

First Quarter Net Sales by Region



	Three months ended March 31,				Increase/(Decrease)					Constant Currency Increase/(Decrease)
(in thousands)	2018		2017		$ change			% change		$ change			% change
United States	$	219,289	$	223,115	$	(3,826	)	(1.7	)%	$	(3,826	)	(1.7	)%
EMEA	73,042		68,009		5,033			7.4	%	(3,527		)	(5.2	)%
Japan	52,129		50,053		2,076			4.1	%	(717		)	(1.4	)%
Korea	52,675		49,882		2,793			5.6	%	(1,165		)	(2.3	)%
Rest of world	44,666		42,556		2,110			5.0	%	(227		)	(0.5	)%
Total net sales	$	441,801	$	433,615	$	8,186		1.9	%	$	(9,462	)	(2.2	)%

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, Adjusted EBITDA and Adjusted EBITDA margin. 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, share-based compensation expense, certain transaction fees, indemnification expense (income) from our former owner Beam Suntory, Inc. (formerly known as Fortune Brands, Inc.) (“Beam”), 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 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.

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 GAAP. It should not be considered an alternative to any measure of performance derived in accordance with GAAP.

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



	Three months ended March 31,
	2018			2017
Net income attributable to Acushnet Holdings Corp.	$	41,484		$	38,114
Income tax expense	15,220			22,485
Interest expense, net	4,408			2,922
Depreciation and amortization	10,325			10,161
Shared-based compensation(a)	4,126			3,847
Transaction fees(b)	—			94
Beam indemnification expense (income)(c)	54			(93		)
Other non-cash gains, net	(151		)	(584		)
Net income attributable to noncontrolling interests(d)	1,606			1,516
Adjusted EBITDA	$	77,072		$	78,462
Adjusted EBITDA margin	17.4		%	18.1		%

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

(b) Reflects legal fees incurred relating to a dispute arising from the indemnification obligations owed to us by Beam Suntory, Inc ("Beam").

(c) 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 Acushnet Holdings Corp.

(d) 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 2018, 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.

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

Exhibit 99.1: Additional Exhibits

Ticker: GOLF
CIK: 1672013
Form Type: 8-K Corporate News
Accession Number: 0001672013-18-000017
Submitted to the SEC: Thu May 03 2018 6:42:13 AM EST
Accepted by the SEC: Thu May 03 2018
Period: Thursday, May 3, 2018
Industry: Sporting And Athletic Goods

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Acushnet Holdings Corp. (GOLF) SEC Filing 8-K Material Event for the period ending Thursday, May 3, 2018

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