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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form
10-Q

    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021
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 73,629,759 shares of common stock outstanding as of October 29, 2021.

ACUSHNET HOLDINGS CORP.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2021
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;
2

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 at all or on terms acceptable to us and potential dilution of holders of our common stock;
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;
our substantial 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;
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.
3

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)
 
September 30,December 31,
(in thousands, except share and per share amounts)20212020
Assets
Current assets
Cash, cash equivalents and restricted cash ($12,085 and $6,843 attributable to the variable interest entity ("VIE"))
$320,506 $151,452 
Accounts receivable, net300,331 201,518 
Inventories ($12,503 and $13,830 attributable to the VIE)
325,488 357,682 
Prepaid and other assets101,640 89,155 
Total current assets1,047,965 799,807 
Property, plant and equipment, net ($10,402 and $10,538 attributable to the VIE)
217,757 222,811 
Goodwill ($32,312 and $32,312 attributable to the VIE)
211,936 215,186 
Intangible assets, net467,380 473,533 
Deferred income taxes58,586 80,060 
Other assets ($2,198 and $2,239 attributable to the VIE)
71,601 75,158 
Total assets$2,075,225 $1,866,555 
Liabilities, Redeemable Noncontrolling Interest and Shareholders' Equity
Current liabilities
Short-term debt$589 $2,810 
Current portion of long-term debt17,500 17,500 
Accounts payable ($11,416 and $8,702 attributable to the VIE)
138,535 112,867 
Accrued taxes62,868 40,952 
Accrued compensation and benefits ($1,624 and $1,454 attributable to the VIE)
96,434 82,290 
Accrued expenses and other liabilities ($4,146 and $3,699 attributable to the VIE)
126,753 101,260 
Total current liabilities442,679 357,679 
Long-term debt301,038 313,619 
Deferred income taxes4,327 3,821 
Accrued pension and other postretirement benefits102,588 121,929 
Other noncurrent liabilities ($2,209 and $2,261 attributable to the VIE)
48,529 52,128 
Total liabilities899,161 849,176 
Commitments and contingencies (Note 15)
Redeemable noncontrolling interest1,386 126 
Shareholders' equity
Common stock, $0.001 par value, 500,000,000 shares authorized; 75,855,036 and
75,666,367 shares issued
76 76 
Additional paid-in capital941,771 925,385 
Accumulated other comprehensive loss, net of tax(102,365)(96,182)
Retained earnings365,205 199,776 
Treasury stock, at cost; 2,114,277 and 1,671,754 shares (including 299,894 of
accrued share repurchases as of December 31, 2020) (Note 10)
(66,474)(45,106)
Total equity attributable to Acushnet Holdings Corp.1,138,213 983,949 
Noncontrolling interests36,465 33,304 
Total shareholders' equity1,174,678 1,017,253 
Total liabilities, redeemable noncontrolling interest and shareholders' equity$2,075,225 $1,866,555 

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 September 30,Nine months ended September 30,
(in thousands, except share and per share amounts)2021202020212020
Net sales$521,629 $482,932 $1,727,364 $1,191,675 
Cost of goods sold252,792 230,911 813,362 582,242 
Gross profit268,837 252,021 914,002 609,433 
Operating expenses:    
Selling, general and administrative199,787 153,724 586,411 436,982 
Research and development14,597 10,611 39,947 34,963 
Intangible amortization1,967 1,964 5,909 5,875 
Restructuring charges 518  13,250 
Income from operations52,486 85,204 281,735 118,363 
Interest expense, net1,147 3,831 6,611 12,356 
Other expense, net939 3,186 3,170 8,050 
Income before income taxes50,400 78,187 271,954 97,957 
Income tax expense10,475 14,141 62,882 21,183 
Net income39,925 64,046 209,072 76,774 
Less: Net income attributable to noncontrolling interests(661)(830)(3,765)(2,368)
Net income attributable to Acushnet Holdings Corp.$39,264 $63,216 $205,307 $74,406 
Net income per common share attributable to Acushnet Holdings Corp.:    
Basic$0.53 $0.85 $2.75 $1.00 
Diluted0.52 0.84 2.73 0.99 
Weighted average number of common shares:    
Basic74,533,652 74,448,733 74,656,837 74,498,841 
Diluted75,301,431 75,082,805 75,292,647 75,017,229 

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 September 30,Nine months ended September 30,
(in thousands)2021202020212020
Net income$39,925 $64,046 $209,072 $76,774 
Other comprehensive (loss) income:
Foreign currency translation adjustments(8,768)9,480 (16,810)4,740 
Cash flow derivative instruments:
Unrealized holding (losses) gains arising during period(144)(2,708)4,900 (1,100)
Reclassification adjustments included in net income1,877 (1,295)4,960 (2,138)
Tax (expense) benefit(298)1,152 (2,879)967 
Cash flow derivative instruments, net1,435 (2,851)6,981 (2,271)
Pension and other postretirement benefits:    
Pension and other postretirement benefits adjustments1,581 2,300 4,937 8,366 
Tax expense(368)(583)(1,291)(2,034)
Pension and other postretirement benefits adjustments, net1,213 1,717 3,646 6,332 
Total other comprehensive (loss) income (6,120)8,346 (6,183)8,801 
Comprehensive income33,805 72,392 202,889 85,575 
Less: Comprehensive income attributable to noncontrolling interests(641)(889)(3,637)(2,544)
Comprehensive income attributable to Acushnet Holdings Corp.$33,164 $71,503 $199,252 $83,031 

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)
 
 Nine months ended September 30,
(in thousands)20212020
Cash flows from operating activities  
Net income$209,072 $76,774 
Adjustments to reconcile net income to cash flows provided by operating activities
Depreciation and amortization30,816 31,058 
Unrealized foreign exchange gains(1,721)(518)
Amortization of debt issuance costs1,337 961 
Share-based compensation20,822 10,077 
Loss on disposals of property, plant and equipment146 2 
Deferred income taxes16,633 1,739 
Changes in operating assets and liabilities
Accounts receivable(105,707)(49,494)
Inventories26,242 79,751 
Accounts payable26,627 (5,197)
Accrued taxes24,366 (5,453)
Other assets and liabilities31,458 27,411 
Cash flows provided by operating activities280,091 167,111 
Cash flows from investing activities  
Additions to property, plant and equipment(19,210)(15,387)
Cash flows used in investing activities(19,210)(15,387)
Cash flows from financing activities
Repayments of short-term borrowings, net(2,177)(14,232)
Repayments of term loan facility(13,125)(13,125)
Purchases of common stock(30,146)(6,976)
Debt issuance costs (966)
Dividends paid on common stock(37,058)(34,550)
Dividends paid to noncontrolling interests(1,360)(4,302)
Payment of employee restricted stock tax withholdings(3,946)(496)
Cash flows used in financing activities(87,812)(74,647)
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash(4,015)1,342 
Net increase in cash, cash equivalents and restricted cash169,054 78,419 
Cash, cash equivalents and restricted cash, beginning of year151,452 34,184 
Cash, cash equivalents and restricted cash, end of period$320,506 $112,603 
Supplemental information  
Non-cash additions to property, plant and equipment$3,105 $446 
Non-cash additions to right-of-use assets obtained in exchange for operating lease obligations7,341 7,107 
Non-cash additions to right-of-use assets obtained in exchange for finance lease obligations150 427 
Dividend equivalents rights ("DERs") declared not paid1,537 750 
Share repurchase liability (Note 10) 6,976 

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

9

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 June 30, 202075,656 $76 $916,097 $(111,573)$138,733 $(45,106)$898,227 $34,744 $932,971 
Net income— — — — 63,216 — 63,216 835 64,051 
Other comprehensive income— — — 8,346 — — 8,346 — 8,346 
Share-based compensation — — 3,510 — — — 3,510 — 3,510 
Vesting of restricted common stock, including impact of DERs,
net of shares withheld for employee taxes (Note 11)
10 — — — — — — — — 
Dividends and dividend equivalents declared— — — — (11,790)— (11,790)— (11,790)
Dividends declared to noncontrolling interests
— — — — — — — (4,302)(4,302)
Balances as of September 30, 202075,666 $76 $919,607 $(103,227)$190,159 $(45,106)$961,509 $31,277 $992,786 
Balances as of June 30, 202175,855 $76 $934,919 $(96,245)$338,633 $(54,213)$1,123,170 $36,882 $1,160,052 
Net income— — — — 39,264 — 39,264 832 40,096 
Other comprehensive loss— — — (6,120)— — (6,120)— (6,120)
Share-based compensation — — 6,852 — — — 6,852 — 6,852 
Purchases of common stock (Note 10)— — — — — (12,261)(12,261)— (12,261)
Dividends and dividend equivalents declared— — — — (12,692)— (12,692)— (12,692)
Dividends declared to noncontrolling interests
— — — — — — — (1,249)(1,249)
Balances as of September 30, 202175,855 $76 $941,771 $(102,365)$365,205 $(66,474)$1,138,213 $36,465 $1,174,678 

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, 201975,620 $76 $910,507 $(112,028)$151,039 $(31,154)$918,440 $32,386 $950,826 
Net income— — — — 74,406 — 74,406 3,193 77,599 
Other comprehensive income— — — 8,801 — — 8,801 — 8,801 
Share-based compensation — — 9,585 — — — 9,585 — 9,585 
Vesting of restricted common stock, including impact of DERs,
net of shares withheld for employee taxes (Note 11)
46 — (485)— — — (485)— (485)
Purchases of common stock (Note 10)
— — — — — (6,976)(6,976)— (6,976)
Share repurchase liability (Note 10)
— — — — — (6,976)(6,976)— (6,976)
Dividends and dividend equivalents declared— — — — (35,286)— (35,286)— (35,286)
Dividends declared to noncontrolling interests
— — — — — — — (4,302)(4,302)
Balances as of September 30, 202075,666 $76 $919,607 $(103,227)$190,159 $(45,106)$961,509 $31,277 $992,786 
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— — — — 205,307 — 205,307 4,521 209,828 
Other comprehensive loss— — — (6,183)— — (6,183)— (6,183)
Share-based compensation — — 20,331 — — — 20,331 — 20,331 
Vesting of restricted common stock, including impact of DERs,
net of shares withheld for employee taxes (Note 11)
189 — (3,945)— — — (3,945)— (3,945)
Purchases of common stock (Note 10)
— — — — — (21,368)(21,368)— (21,368)
Dividends and dividend equivalents declared— — — — (38,227)— (38,227)— (38,227)
Dividends declared to noncontrolling interests
— — — — — — — (1,360)(1,360)
Redemption value adjustment (Note 1)— — — — (1,651)— (1,651)— (1,651)
Balances as of September 30, 202175,855 $76 $941,771 $(102,365)$365,205 $(66,474)$1,138,213 $36,465 $1,174,678 

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

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ACUSHNET HOLDINGS CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) and include the accounts of Acushnet Holdings Corp. (the “Company”), its wholly-owned subsidiaries and less than wholly-owned subsidiaries, including a variable interest entity (“VIE”) in which the Company is the primary beneficiary. All intercompany balances and transactions have been eliminated in consolidation.
Certain information in footnote disclosures normally included in annual financial statements has been condensed or omitted for the interim periods presented in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) and U.S. GAAP. The year-end balance sheet data was derived from audited financial statements; however, the accompanying interim notes to the unaudited condensed consolidated financial statements do not include all disclosures required by U.S. GAAP. In the opinion of management, the financial statements contain all normal and recurring adjustments necessary to state fairly the financial position and results of operations of the Company. The results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of results to be expected for the full year ending December 31, 2021, nor were those of the comparable 2020 period representative of those actually experienced for the full year ended December 31, 2020. 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, 2020 included in its Annual Report on Form 10-K filed with the SEC on February 25, 2021.
Risks and Uncertainties
In March 2020, the World Health Organization declared a pandemic related to the novel coronavirus (“COVID-19”), which led to government-ordered shutdowns of non-essential businesses, travel restrictions and restrictions on public gatherings. As restrictions were eased, the game of golf experienced a surge in rounds of play around the world, which resulted in increased demand for the Company's products. The Company quickly began to experience demand pressures across all brands and product categories, which challenged, and continue to challenge, the Company's supply chain and its ability to service its trade partners and golfers.
While government-ordered shutdowns and restrictions have eased in most regions and mass vaccination programs are underway, the emergence of virus variants and resurgences of positive cases has led to an increase in restrictions in some regions and could prompt increased restrictions in other regions, which could further disrupt the Company's supply chain. Although the Company has seen increased rounds of play and demand for golf-related products over the course of the pandemic, this could change as mass vaccination programs continue to advance and restrictions are further eased on other activities.
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.
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. The Company has also made estimates related to the impact of the COVID-19 pandemic within its unaudited condensed consolidated financial statements and there may be changes to those estimates in future periods. Actual results could differ from these estimates.
Variable Interest Entities
VIEs are entities that, by design, either (i) lack sufficient equity to permit the entity to finance its activities independently, or (ii) have equity holders that do not have the power to direct the activities of the entity that most significantly
12

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 September 30, 2021 and December 31, 2020. 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 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. During the nine months ended September 30, 2021, the Company recorded a redemption value adjustment of $1.7 million. This adjustment was recognized through retained earnings and was not reflected in net income (loss) or comprehensive income (loss). The value attributable to the redeemable noncontrolling interest and the related loan to the 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 included in temporary equity on the unaudited condensed consolidated balance sheets was $4.4 million as of both September 30, 2021 and December 31, 2020.
Cash, Cash Equivalents and Restricted Cash
Cash held in Company checking accounts is included in cash. Cash equivalents consist of short-term highly liquid investments with original maturities of three months or less which are readily convertible into cash. The Company classifies as restricted certain cash that is not available for use in its operations. As of September 30, 2021 and December 31, 2020, the amount of restricted cash included in cash, cash equivalents and restricted cash on the unaudited condensed consolidated balance sheets was $1.9 million and $2.0 million, respectively.
Foreign Currency Translation and Transactions
Foreign currency transaction gains (losses) included in selling, general and administrative expense were losses of $0.7 million and gains of $1.0 million for the three months ended September 30, 2021 and 2020, respectively. Foreign currency transaction gains (losses) included in selling, general and administrative expense were losses of $1.9 million and gains of $2.6 million for the nine months ended September 30, 2021 and 2020, respectively.
Recently Adopted Accounting Standards
Income Taxes
On January 1, 2021, the Company adopted Accounting Standards Update ("ASU") 2019-12, "Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes" ("ASU 2019-12"). The amendments in this update simplified the accounting for income taxes by removing certain exceptions to general principles in Topic 740. The amendments also improved consistent application and simplified U.S. GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The adoption of this standard did not have a material impact on the consolidated financial statements.
13

2. Accounts Receivable
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 for the periods presented was as follows:
Three months ended September 30,Nine months ended September 30,
(in thousands)2021202020212020
Balance at beginning of period$7,334 $7,743 $7,698 $5,338 
Bad debt expense626 113 324 2,821 
Amount of receivables written off(224)(61)(268)(335)
Foreign currency translation and other(74)139 (92)110 
Balance at end of period$7,662 $7,934 $7,662 $7,934 
3. Inventories
The components of inventories were as follows: 
September 30,December 31,
(in thousands)20212020
Raw materials and supplies$91,229 $74,302 
Work-in-process24,440 22,913 
Finished goods209,819 260,467 
Inventories$325,488 $357,682 
4. Product Warranty
The Company has defined warranties generally ranging from one to two years. Products covered by the defined warranty policies primarily include all Titleist golf products, FootJoy golf shoes and FootJoy golf outerwear. These product warranties generally obligate the Company to pay for the cost of replacement products, including the cost of shipping replacement products to its customers. The estimated cost of satisfying future warranty claims is accrued at the time the sale is recorded. In estimating future warranty obligations, the Company considers various factors, including its warranty policies and practices, the historical frequency of claims and the cost to replace or repair products under warranty.
The activity related to the Company’s warranty obligation for accrued warranty expense was as follows:
 Three months ended September 30,Nine months ended September 30,
(in thousands)2021202020212020
Balance at beginning of period$4,333 $3,594 $3,831 $4,048 
Provision1,414 1,555 4,099 2,885 
Claims paid/costs incurred(1,406)(1,432)(3,553)(3,162)
Foreign currency translation and other(65)56 (101)2 
Balance at end of period$4,276 $3,773 $4,276 $3,773 
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5. Debt and Financing Arrangements
Credit Facility
The credit facility includes a revolving credit facility and a term loan facility. As of both September 30, 2021 and December 31, 2020, there were no outstanding borrowings under the revolving credit facility. As of September 30, 2021, the Company had available borrowings under its revolving credit facility of $385.7 million after giving effect to $14.3 million of outstanding letters of credit.
On July 3, 2020, the Company amended its credit agreement dated December 23, 2019 (the “First Amendment”) to, among other things, modify the maximum net average total leverage ratio, the interest rate margins, commitment fee and covenant baskets for each of the fiscal quarters ending after June 30, 2020 and on or before September 30, 2021 (the “Covenant Relief Period”). On March 5, 2021, the Company issued a notice exercising its right to an early termination of the Covenant Relief Period and as such is now required to comply with the previous maximum net average total leverage ratio, and the interest rate margins, commitment fee and covenant baskets reverted to the levels in effect prior to the First Amendment as discussed below. As a result, the Company recorded additional interest expense of approximately $0.7 million during the three months ended March 31, 2021 related to the acceleration of unamortized debt issuance costs in connection with terminating the Covenant Relief Period.
Borrowings under the credit facility bear interest at a rate per annum equal to, at the applicable Borrower’s option, either (a) a base rate determined by reference to the highest of (1) the prime rate of Wells Fargo, (2) the federal funds effective rate plus 0.50% and (3) a Eurodollar Rate, subject to certain adjustments, plus 1.00% or (b) a Eurodollar Rate (or, in the case of Canadian borrowings, a Canadian Dollar Offered Rate), subject to certain adjustments, in each case, plus an applicable margin. Under the credit agreement, the applicable margin is 0% to 0.75% for base rate borrowings and