10-Q 1 golf-20220331.htm 10-Q golf-20220331
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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 March 31, 2022
or
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from  to    
Commission file number: 001-37935
Acushnet Holdings Corp.
(Exact name of registrant as specified in its charter)
Delaware45-2644353
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
333 Bridge StreetFairhaven,Massachusetts02719
(Address of principal executive offices)(Zip Code)
 
(800225-8500
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock - $0.001 par value per shareGOLFNew 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 72,224,555 shares of common stock outstanding as of April 29, 2022.

ACUSHNET HOLDINGS CORP.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2022
TABLE OF CONTENTS
 
 
1

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. The forward-looking statements also reflect our current views with respect to the impact of the novel coronavirus (“COVID-19”) pandemic on our business, results of operations, financial position and cash flows. 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:
the duration and impact of the COVID-19 pandemic, which may precipitate or exacerbate one or more of the following risks and uncertainties;
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, as well as federal, state and local policies and executive orders regarding the COVID-19 pandemic;
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;
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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;
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, including the COVID-19 pandemic;
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;
share repurchase program execution 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.
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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

5

ACUSHNET HOLDINGS CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
 
March 31,December 31,
(in thousands, except share and per share amounts)20222021
Assets
Current assets
Cash, cash equivalents and restricted cash ($14,549 and $15,612 attributable to the variable interest entity ("VIE"))
$114,402 $281,677 
Accounts receivable, net377,252 174,435 
Inventories ($18,691 and $19,385 attributable to the VIE)
448,780 413,314 
Prepaid and other assets114,508 99,750 
Total current assets1,054,942 969,176 
Property, plant and equipment, net ($10,339 and $10,466 attributable to the VIE)
230,006 231,761 
Goodwill ($32,312 and $32,312 attributable to the VIE)
208,797 210,431 
Intangible assets, net463,267 465,341 
Deferred income taxes55,240 60,814 
Other assets ($2,144 and $2,166 attributable to the VIE)
73,551 68,313 
Total assets$2,085,803 $2,005,836 
Liabilities, Redeemable Noncontrolling Interest and Shareholders' Equity
Current liabilities
Short-term debt$97,318 $116 
Current portion of long-term debt17,500 17,500 
Accounts payable ($13,670 and $13,275 attributable to the VIE)
187,642 163,607 
Accrued taxes72,819 57,307 
Accrued compensation and benefits ($861 and $1,511 attributable to the VIE)
56,553 113,453 
Accrued expenses and other liabilities ($3,726 and $4,677 attributable to the VIE)
104,072 131,041 
Total current liabilities535,904 483,024 
Long-term debt293,280 297,354 
Deferred income taxes4,986 4,950 
Accrued pension and other postretirement benefits93,821 93,705 
Other noncurrent liabilities ($2,222 and $2,218 attributable to the VIE)
45,887 43,237 
Total liabilities973,878 922,270 
Commitments and contingencies (Note 15)
Redeemable noncontrolling interest3,229 3,299 
Shareholders' equity
Common stock, $0.001 par value, 500,000,000 shares authorized; 76,289,077 and 75,855,036 shares issued
76 76 
Additional paid-in capital943,239 948,423 
Accumulated other comprehensive loss, net of tax(104,527)(99,582)
Retained earnings392,538 324,966 
Treasury stock, at cost; 3,940,522 and 3,314,562 shares (including 537,839 of accrued share repurchases
as of December 31, 2021) (Note 10)
(160,933)(131,039)
Total equity attributable to Acushnet Holdings Corp.1,070,393 1,042,844 
Noncontrolling interests38,303 37,423 
Total shareholders' equity1,108,696 1,080,267 
Total liabilities, redeemable noncontrolling interest and shareholders' equity$2,085,803 $2,005,836 

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

6

ACUSHNET HOLDINGS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
 
 Three months ended March 31,
(in thousands, except share and per share amounts)20222021
Net sales$606,087 $580,885 
Cost of goods sold289,088 270,146 
Gross profit316,999 310,739 
Operating expenses:  
Selling, general and administrative195,691 176,369 
Research and development13,976 12,329 
Intangible amortization1,963 1,972 
Income from operations105,369 120,069 
Interest expense, net1,277 3,616 
Other expense, net1,326 1,992 
Income before income taxes102,766 114,461 
Income tax expense20,919 27,834 
Net income81,847 86,627 
Less: Net income attributable to noncontrolling interests(802)(1,669)
Net income attributable to Acushnet Holdings Corp.$81,045 $84,958 
Net income per common share attributable to Acushnet Holdings Corp.:  
Basic$1.10 $1.14 
Diluted1.10 1.13 
Weighted average number of common shares:  
Basic73,513,109 74,778,189 
Diluted73,922,728 75,255,312 

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

7

ACUSHNET HOLDINGS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
 
 Three months ended March 31,
(in thousands)20222021
Net income$81,847 $86,627 
Other comprehensive loss:
Foreign currency translation adjustments(7,570)(7,080)
Cash flow derivative instruments:
Unrealized holding gains arising during period3,076 4,367 
Reclassification adjustments included in net income(1,355)563 
Tax expense(516)(1,664)
Cash flow derivative instruments, net1,205 3,266 
Pension and other postretirement benefits:  
Pension and other postretirement benefits adjustments1,863 2,575 
Tax expense(443)(739)
Pension and other postretirement benefits adjustments, net1,420 1,836 
Total other comprehensive loss(4,945)(1,978)
Comprehensive income76,902 84,649 
Less: Comprehensive income attributable to noncontrolling interests(747)(1,529)
Comprehensive income attributable to Acushnet Holdings Corp.$76,155 $83,120 

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

8

ACUSHNET HOLDINGS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 
 Three months ended March 31,
(in thousands)20222021
Cash flows from operating activities  
Net income$81,847 $86,627 
Adjustments to reconcile net income to cash flows used in operating activities
Depreciation and amortization10,367 10,363 
Unrealized foreign exchange loss (gain)1,433 (3,593)
Amortization of debt issuance costs203 917 
Share-based compensation5,353 5,533 
(Gain) loss on disposals of property, plant and equipment(1)155 
Deferred income taxes4,341 10,265 
Changes in operating assets and liabilities
Accounts receivable(206,468)(190,019)
Inventories(39,341)24,987 
Accounts payable30,079 13,788 
Accrued taxes17,464 15,039 
Other assets and liabilities(69,325)(4,058)
Cash flows used in operating activities(164,048)(29,996)
Cash flows from investing activities  
Additions to property, plant and equipment(11,686)(6,410)
Cash flows used in investing activities(11,686)(6,410)
Cash flows from financing activities
Proceeds from short-term borrowings, net97,700 22,178 
Repayments of term loan facility(4,375)(4,375)
Purchases of common stock(59,108)(2,377)
Dividends paid on common stock(13,984)(12,658)
Dividends paid to noncontrolling interests(101)(48)
Payment of employee restricted stock tax withholdings(10,661)(3,946)
Cash flows provided by (used in) financing activities9,471 (1,226)
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash(1,012)(773)
Net decrease in cash, cash equivalents and restricted cash(167,275)(38,405)
Cash, cash equivalents and restricted cash, beginning of year281,677 151,452 
Cash, cash equivalents and restricted cash, end of period$114,402 $113,047 
Supplemental information  
Non-cash additions to property, plant and equipment$1,744 $1,895 
Non-cash additions to right-of-use assets obtained in exchange for operating lease obligations8,065 1,291 
Non-cash additions to right-of-use assets obtained in exchange for finance lease obligations335  
Dividend equivalents rights ("DERs") declared not paid427 477 
Share repurchase liability (Note 10) 2,347 

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 StockAdditional
Paid-in
Capital
Accumulated
Other
Comprehensive
Loss,
Net of Tax
Retained
Earnings
Treasury StockTotal
Shareholders'
Equity
Attributable
to Acushnet
Holdings Corp.
Noncontrolling
Interests
Total
Shareholders'
Equity
(in thousands)SharesAmount
Balances as of December 31, 202075,666 $76 $925,385 $(96,182)$199,776 $(45,106)$983,949 $33,304 $1,017,253 
Net income— — — — 84,958 — 84,958 1,862 86,820 
Other comprehensive loss— — — (1,978)— — (1,978)— (1,978)
Share-based compensation — — 5,369 — — — 5,369 — 5,369 
Vesting of restricted common stock, including impact of DERs,
net of shares withheld for employee taxes (Note 11)
181 — (3,945)— — — (3,945)— (3,945)
Purchases of common stock (Note 10)
— — — — — (2,377)(2,377)— (2,377)
Share repurchase liability (Note 10)
— — — — — (2,347)(2,347)— (2,347)
Dividends and dividend equivalents declared— — — — (12,767)— (12,767)— (12,767)
Dividends declared to noncontrolling interests
— — — — — — — (48)(48)
Balances as of March 31, 202175,847 $76 $926,809 $(98,160)$271,967 $(49,830)$1,050,862 $35,118 $1,085,980 
Balances as of December 31, 202175,855 $76 $948,423 $(99,582)$324,966 $(131,039)$1,042,844 $37,423 $1,080,267 
Net income— — — — 81,045 — 81,045 981 82,026 
Other comprehensive loss— — — (4,945)— — (4,945)— (4,945)
Share-based compensation — — 5,189 — — — 5,189 — 5,189 
Vesting of restricted common stock, including impact of DERs,
net of shares withheld for employee taxes (Note 11)
434 — (10,373)— — — (10,373)— (10,373)
Purchases of common stock (Note 10)
— — — — — (29,894)(29,894)— (29,894)
Dividends and dividend equivalents declared— — — — (13,473)— (13,473)— (13,473)
Dividends declared to noncontrolling interests
— — — — — — — (101)(101)
Balances as of March 31, 202276,289 $76 $943,239 $(104,527)$392,538 $(160,933)$1,070,393 $38,303 $1,108,696 

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 months ended March 31, 2022 are not necessarily indicative of results to be expected for the full year ending December 31, 2022, nor were those of the comparable 2021 period representative of those actually experienced for the full year ended December 31, 2021. 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, 2021 included in its Annual Report on Form 10-K filed with the SEC on March 1, 2022.
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.
The Company has evaluated and continues to evaluate the potential impact of the COVID-19 pandemic on its consolidated financial statements. The impact of the COVID-19 pandemic continues to evolve, and both the full impact and duration of the COVID-19 pandemic remain highly uncertain. Accordingly, the Company's business, results of operations, financial position and cash flows could be materially impacted in ways that the Company cannot currently predict.
Variable Interest Entities
VIEs are entities that, by design, either (i) lack sufficient equity to permit the entity to finance its activities independently, or (ii) have equity holders that do not have the power to direct the activities of the entity that most significantly impact its economic performance, the obligation to absorb the entity’s expected losses, or the right to receive the entity’s expected residual returns. The Company consolidates a VIE when it is the primary beneficiary, which is the party that has both (i) the power to direct the activities that most significantly impact the VIE’s economic performance and (ii) through its interests in the VIE, the obligation to absorb expected losses or the right to receive expected benefits from the VIE that could potentially be significant to the VIE.
The Company consolidates the accounts of Acushnet Lionscore Limited, a VIE which is 40% owned by the Company. The sole purpose of the VIE is to manufacture the Company’s golf footwear and as such, the Company is deemed to be the primary beneficiary. The Company has presented separately on its consolidated balance sheets, to the extent material, the assets of its consolidated VIE that can only be used to settle specific obligations of its consolidated VIE and the liabilities of its consolidated VIE for which creditors do not have recourse to its general credit. The general creditors of the VIE do not have recourse to the Company. Certain directors of the VIE have guaranteed the credit lines of the VIE, for which there were no outstanding borrowings as of March 31, 2022 and December 31, 2021. In addition, pursuant to the terms of the agreement governing the VIE, the Company is not required to provide financial support to the VIE.
Noncontrolling Interests and Redeemable Noncontrolling Interest
The ownership interests held by owners other than the Company in less than wholly-owned subsidiaries are classified as noncontrolling interests. The financial results and position of noncontrolling interests are included in the Company’s
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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 recorded 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). The value attributable to the redeemable noncontrolling interest and the related loan to minority shareholders, which is recorded as a reduction to redeemable noncontrolling interest, is 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 March 31, 2022 and December 31, 2021.
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 March 31, 2022 and December 31, 2021, the amount of restricted cash included in cash, cash equivalents and restricted cash on the unaudited condensed consolidated balance sheets was $1.8 million and $1.9 million, respectively.
Foreign Currency Translation and Transactions
Foreign currency transaction losses included in selling, general and administrative expense were $1.8 million and $1.0 million for the three months ended March 31, 2022 and 2021, 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 (including the impact of the COVID-19 pandemic) which could affect the collectability of the reported amounts. All of these factors have been considered in the estimate of expected credit losses.
The activity related to the allowance for doubtful accounts was as follows:
Three months ended March 31,
(in thousands)20222021
Balance at beginning of period$5,980 $7,698 
Bad debt expense (recovery)922 (445)
Amount of receivables written off(44)(144)
Foreign currency translation and other(72)(32)
Balance at end of period$6,786 $7,077 
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3. Inventories
The components of inventories were as follows: 
March 31,December 31,
(in thousands)20222021
Raw materials and supplies$121,474 $105,784 
Work-in-process26,721 21,259 
Finished goods300,585 286,271 
Inventories$448,780 $413,314 
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 March 31,
(in thousands)20222021
Balance at beginning of period$4,177 $3,831 
Provision995 1,029 
Claims paid/costs incurred(1,045)(918)
Foreign currency translation and other(36)(43)
Balance at end of period$4,091 $3,899 
5. Debt and Financing Arrangements
Credit Facility
The credit facility includes a revolving credit facility and a term loan facility. As of March 31, 2022, there were $81.0 million in outstanding borrowings under the revolving credit facility, with a weighted average interest rate of 2.61%. There were no outstanding borrowings under the revolving credit facility as of December 31, 2021. As of March 31, 2022, the Company had available borrowings under its revolving credit facility of $306.7 million after giving effect to $12.3 million of outstanding letters of credit.
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 March 31, 2022, the Company was in compliance with all covenants under the credit agreement.
Other Short-Term Borrowings
The Company has certain unsecured local credit facilities available through its subsidiaries. There were $16.3 million and $0.1 million in outstanding borrowings under the Company's local credit facilities as of March 31, 2022 and December 31, 2021, respectively. The weighted average interest rate applicable to the outstanding borrowings was 0.27% and 2.57% as of March 31, 2022 and December 31, 2021, respectively. As of March 31, 2022, the Company had available borrowings remaining under these local credit facilities of $38.2 million.
Letters of Credit
As of March 31, 2022 and December 31, 2021, there were outstanding letters of credit related to agreements, including the Company's credit facility, totaling $15.7 million and $17.3 million, respectively, of which $12.8 million and $14.3 million,
13

respectively, was secured. These agreements provided a maximum commitment for letters of credit of $57.1 million as of March 31, 2022.
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 March 31, 2022 and December 31, 2021 was $225.9 million and $228.8 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 expense. The gross U.S. dollar equivalent notional amount outstanding of all foreign exchange forward contracts not designated under hedge accounting was $19.1 million as of March 31, 2022. There were no outstanding foreign exchange forward contracts not designated under hedge accounting as of December 31, 2021.
Interest Rate Derivative Instruments
The Company enters into interest rate swap contracts to reduce interest rate risk related to floating rate debt. Under the contracts, the Company pays fixed and receives variable rate interest, in effect converting a portion of its floating rate debt to fixed rate debt. Interest rate swap contracts are accounted for as cash flow hedges. As of March 31, 2022 and December 31, 2021, 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)March 31,December 31,
Balance Sheet LocationHedge Instrument Type20222021
Prepaid and other assetsForeign exchange forward$7,814 $6,320 
Other assetsForeign exchange forward1,991 1,491 
Accrued expenses and other liabilitiesForeign exchange forward808 488 

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The hedge instrument gain (loss) recognized in accumulated other comprehensive loss, net of tax was as follows:
 Three months ended
 March 31,
(in thousands)20222021
Type of hedge  
Foreign exchange forward$3,076 $4,376 
Interest rate swap  (9)
 Total$3,076 $4,367 
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 $6.7 million related to foreign exchange derivative instruments from accumulated other comprehensive loss, net of tax, into cost of goods sold. For further information related to amounts recognized in accumulated other comprehensive loss, net of tax, see Note 12.
The hedge instrument gain (loss) recognized on the unaudited condensed consolidated statements of operations was as follows:
 Three months ended
 March 31,
(in thousands)20222021
Location of gain (loss) in statements of operations  
Foreign exchange forward:
Cost of goods sold$1,355 $396 
Selling, general and administrative (1)
675 640 
Total $2,030 $1,036 
Interest Rate Swap:
Interest expense, net$ $(959)
Total$ $(959)
_______________________________________________________________________________
(1)    Relates to net gains (losses) 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 March 31, 2022 were as follows:
 Fair Value Measurements as of 
 March 31, 2022 using: 
(in thousands)Level 1Level 2Level 3Balance Sheet Location
Assets    
Rabbi trust$5,127 $ $ Prepaid and other assets
Foreign exchange derivative instruments 8,116  Prepaid and other assets
Deferred compensation program assets779   Other assets
Foreign exchange derivative instruments 1,991  Other assets
Total assets$5,906 $10,107 $  
Liabilities    
Foreign exchange derivative instruments$ $808 $ Accrued expenses and other liabilities
Deferred compensation program liabilities779   Other noncurrent liabilities
Total liabilities$779 $808 $  
Assets and liabilities measured at fair value on a recurring basis as of December 31, 2021 were as follows:
 Fair Value Measurements as of 
 December 31, 2021 using: 
(in thousands)Level 1Level 2Level 3Balance Sheet Location
Assets    
Rabbi trust$5,364 $ $ Prepaid and other assets
Foreign exchange derivative instruments 6,320  Prepaid and other assets
Deferred compensation program assets842   Other assets
Foreign exchange derivative instruments 1,491  Other assets
Total assets$6,206 $7,811 $  
Liabilities    
Foreign exchange derivative instruments$ $488 $ Accrued expenses and other liabilities
Deferred compensation program liabilities842   Other noncurrent liabilities
Total liabilities$842 $488 $  
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.
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8. Pension and Other Postretirement Benefits
Components of net periodic benefit cost were as follows: 
 Pension BenefitsPostretirement Benefits
 Three months ended March 31,
(in thousands)2022202120222021
Components of net periodic benefit cost    
Service cost$2,007 $2,135 $160 $162 
Interest cost2,234 1,951 84 75 
Expected return on plan assets(1,871)(2,547)  
Settlement expense 1,419   
Amortization of net loss (gain)935 1,421 (152)(65)
Amortization of prior service cost (credit)69 71 (34)(34)
Net periodic benefit cost$3,374 $4,450 $58 $138 
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 by $6.9 million to $20.9 million for the three months ended March 31, 2022 compared to $27.8 million for the three months ended March 31, 2021. The Company’s effective income tax rate ("ETR") was 20.4% for the three months ended March 31, 2022 compared to 24.3% for the three months ended March 31, 2021.
The ETR for the three months ended March 31, 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, partially offset by the U.S. taxation of foreign income and the Company's geographic mix of income. The ETR for the three months ended March 31, 2021 differed from the U.S. statutory tax rate primarily due to the U.S. taxation of foreign income and the Company's geographic mix of income, partially offset by the impact of the U.S. deduction for foreign derived intangible income and federal and state tax credits.
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)
2022:
First Quarter$0.180 $13,473 
Total dividends declared in 2022$0.180 $13,473 
2021:
Fourth Quarter$0.165 $12,619 
Third Quarter0.165 12,692 
Second Quarter0.165 12,768 
First Quarter0.165 12,767 
Total dividends declared in 2021$0.660 $50,846 
During the second quarter of 2022, the Company's Board of Directors declared a dividend of $0.180 per share of common stock to shareholders of record as of June 3, 2022 and payable on June 17, 2022.
Share Repurchase Program
As of March 31, 2022, the Board of Directors had authorized the Company to repurchase up to an aggregate of $200.0 million of its issued and outstanding common stock.
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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.
As previously disclosed, in connection with this share repurchase program, 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 $24.9 million at the same weighted average per share price (the "2019 Agreement"). As the Company repurchased a cumulative total of $24.9 million of common stock through open market purchases, the determination date, as defined in the 2019 Agreement, was automatically triggered on March 18, 2021. As a result, on April 2, 2021, the Company repurchased 355,341 shares of common stock for an aggregate of $11.1 million from Magnus, in satisfaction of its obligations under the 2019 Agreement.
On November 8, 2021, 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, 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, the Company recorded a share repurchase liability of $29.2 million for 537,839 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, 2021. Between January 1, 2022 and January 14, 2022, the Company repurchased an additional 161,980 shares of its common stock on the open market for an aggregate of $8.3 million, bringing the cumulative total open market purchases to $37.5 million. As a result, on January 24, 2022, the Company repurchased 699,819 shares of common stock for an aggregate of $37.5 million from Magnus, in satisfaction of its obligations under the 2021 Agreement.
The Company's share repurchase activity was as follows:
Three months ended March 31,
(in thousands, except share and per share amounts)20222021
Shares repurchased in the open market:
Shares repurchased 463,980 56,156 
Average price$46.57 $42.34 
Aggregate value $21,607 $2,377 
Shares repurchased from Magnus:
Shares repurchased699,819  
Average price (1)
$53.59 $ 
Aggregate value$37,501 $ 
Total shares repurchased:
Shares repurchased1,163,799 56,156 
Average price$50.79 $42.34 
Aggregate value$59,108 $2,377 
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(1)    In accordance with the share repurchase agreement, 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 the current period may differ from open market purchases 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 agreement.
As of March 31, 2022, the Company had $39.1 million remaining under the current share repurchase authorization. On April 28, 2022, the Board of Directors authorized the Company to repurchase up to an additional $150.0 million of its issued and outstanding common stock, bringing the total authorization up to $350.0 million. This program will remain in effect until completed or until terminated by the Board of Directors.
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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 March 31, 2022, 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.
A summary of the Company’s RSUs and PSUs as of March 31, 2022 and changes during the three months then ended is presented below: 
 Weighted-Weighted-
 NumberAverageNumberAverage
 of RSUsFair Value RSUsof PSUsFair Value PSUs
Outstanding as of December 31, 2021691,373 $33.66 367,067 $32.84 
Granted345,230 43.96 167,587 43.96 
Vested (1)
(68,189)32.72   
Forfeited(5,617)31.26   
Outstanding as of March 31, 2022962,797 $37.43 534,654 $36.32 

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(1) Includes 41,173 shares of common stock related to RSUs that were not delivered as of March 31, 2022.