UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form10-Q


    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 20192020
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: 001‑37935001-37935
Acushnet Holdings Corp.
(Exact name of registrant as specified in its charter)
Delaware45‑264435345-2644353
(State or other jurisdiction of(I.R.S. Employer
incorporation or organization)(I.R.S. Employer Identification No.)
  
333 Bridge StreetFairhaven,
Fairhaven, Massachusetts02719
(Address of principal executive offices)
(Zip Code)
 
(800) (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 
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
The registrant had 75,608,86274,277,181 shares of common stock outstanding as of May 3, 2019.1, 2020.


 
 



ACUSHNET HOLDINGS CORP.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 20192020
TABLE OF CONTENTS
 
 
  Page No.
   


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, but are not limited to: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;
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;
changes to 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;
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 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;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;
our ability to maintain our information systems to adequately perform their functions;

2


cybersecurity risks;
the ability of our eCommerce systems to function effectively;
impairment of goodwill and identifiable intangible assets;

2


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 policies;estimates;
terrorist activities and international political instability;
occurrence of natural disasters or pandemic diseases;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;
a sale, foreclosure, liquidation or other transfer of the shares of our common stock owned by Magnus Holdings Co., Ltd. (“Magnus”) as a result of the loans borrowed by Magnus which are secured by shares of our common stock (the “Magnus Loans”);
the ability of our controlling shareholder to control significant corporate activities, and our controlling shareholder’s interests may conflict with yours;
any pledge by Fila Korea Co., Ltd. of the common stock of Magnus;
the insolvency laws of Korea are different from U.S. bankruptcy laws;
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;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.

10-K and other reports we file with the SEC, including this Quarterly Report on Form 10-Q.
These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this report. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, our actual results may vary in material respects from those projected in these forward-looking statements.

Any forward-looking statement made by us in this report speaks only as of the date of this report. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, investments or other strategic transactions we may make. We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by any applicable securities laws.

Website Disclosure

We use our website (www.acushnetholdingscorp.com) as a channel of distribution of company information. The information we post through this channel may be material. Accordingly, investors should monitor this channel, in addition to following our press releases, Securities and Exchange Commission (“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. In addition, 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.


3



PART I.       FINANCIAL INFORMATION
ITEM 1.FINANCIAL STATEMENTS
INDEX TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 Page(s)
Unaudited Condensed Consolidated Financial Statements 
  
  
  
  
  
  




4



ACUSHNET HOLDINGS CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
 
 March 31, December 31, March 31, December 31,
(in thousands, except share and per share amounts) 2019 2018 2020 2019
Assets        
Current assets        
Cash and restricted cash ($11,168 and $8,436 attributable to the variable interest entity ("VIE")) $44,877
 $31,014
Cash and restricted cash ($15,724 and $8,514 attributable to the variable interest entity ("VIE")) $55,924
 $34,184
Accounts receivable, net 333,929
 186,114
 309,196
 215,428
Inventories ($6,756 and $9,658 attributable to the VIE) 346,399
 361,207
Other assets 87,430
 85,666
Inventories ($8,591 and $11,958 attributable to the VIE) 364,935
 398,368
Prepaid and other assets 99,423
 94,838
Total current assets 812,635

664,001
 829,478
 742,818
Property, plant and equipment, net ($11,335 and $11,615 attributable to the VIE) 223,824
 228,388
Property, plant and equipment, net ($11,096 and $11,374 attributable to the VIE) 226,085
 231,575
Goodwill ($32,312 and $32,312 attributable to the VIE) 210,177
 209,671
 209,920
 214,056
Intangible assets, net 476,556
 478,257
 478,579
 480,794
Deferred income taxes 71,759
 78,028
 68,404
 70,541
Other assets ($2,583 and $2,593 attributable to the VIE) 82,339
 33,276
Other assets ($2,489 and $2,517 attributable to the VIE) 75,233
 77,265
Total assets $1,877,290

$1,691,621
 $1,887,699
 $1,817,049
Liabilities and Shareholders' Equity    
Liabilities, Redeemable Noncontrolling Interest and Shareholders' Equity    
Current liabilities        
Short-term debt $141,604
 $920
 $174,809
 $54,123
Current portion of long-term debt 35,625
 35,625
 17,500
 17,500
Accounts payable ($4,731 and $6,882 attributable to the VIE) 88,730
 86,045
Accounts payable ($9,989 and $8,360 attributable to the VIE) 96,013
 102,335
Accrued taxes 30,275
 38,268
 32,747
 36,032
Accrued compensation and benefits ($1,180 and $1,634 attributable to the VIE) 59,852
 77,181
Accrued expenses and other liabilities ($2,804 and $3,462 attributable to the VIE) 73,917
 56,828
Accrued compensation and benefits ($2,789 and $3,542 attributable to the VIE) 59,335
 72,465
Accrued expenses and other liabilities ($3,591 and $4,468 attributable to the VIE) 85,983
 76,663
Total current liabilities 430,003
 294,867
 466,387
 359,118
Long-term debt and capital lease obligations 338,274
 346,953
Long-term debt 326,674
 330,701
Deferred income taxes 4,611
 4,635
 4,010
 4,837
Accrued pension and other postretirement benefits 104,226
 102,077
 119,705
 118,852
Other noncurrent liabilities ($5,063 and $4,831 attributable to the VIE) 53,539
 16,105
Other noncurrent liabilities ($5,150 and $5,202 attributable to the VIE) 51,813
 51,908
Total liabilities 930,653

764,637
 968,589
 865,416
Commitments and contingencies (Note 15) 
 
Commitments and contingencies (Note 14) 


 

Redeemable noncontrolling interest 546
 807
Shareholders' equity        
Common stock, $0.001 par value, 500,000,000 shares authorized; 75,604,091 and 74,760,062 shares issued and outstanding 76
 75
Common stock, $0.001 par value, 500,000,000 shares authorized; 75,648,553 and 75,619,587 shares issued 76
 76
Additional paid-in capital 901,749
 910,890
 912,162
 910,507
Accumulated other comprehensive loss, net of tax (85,503) (89,039) (129,659) (112,028)
Retained earnings 97,090
 72,946
 148,181
 151,039
Treasury stock, at cost; 1,671,754 shares and 1,183,966 shares (including 299,894 and 56,000 of accrued share repurchases) (Note 9) (45,106) (31,154)
Total equity attributable to Acushnet Holdings Corp. 913,412

894,872
 885,654
 918,440
Noncontrolling interests 33,225
 32,112
 32,910
 32,386
Total shareholders' equity 946,637

926,984
 918,564
 950,826
Total liabilities and shareholders' equity $1,877,290

$1,691,621
Total liabilities, redeemable noncontrolling interest and shareholders' equity $1,887,699
 $1,817,049


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




5

Table of Contents


ACUSHNET HOLDINGS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
 
 Three months ended March 31, Three months ended March 31,
(in thousands, except share and per share amounts) 2019 2018 2020 2019
Net sales $433,702
 $441,801
 $408,741
 $433,702
Cost of goods sold 211,545
 214,127
 207,786
 211,545
Gross profit
222,157

227,674
 200,955
 222,157
Operating expenses:        
Selling, general and administrative 155,426
 151,368
 152,723
 155,426
Research and development 12,751
 12,392
 13,220
 12,751
Intangible amortization 1,753
 1,630
 1,956
 1,753
Restructuring charges 11,628
 
Income from operations
52,227

62,284
 21,428
 52,227
Interest expense, net 4,883
 4,408
 4,123
 4,883
Other income, net (970) (434)
Other expense (income), net 690
 (970)
Income before income taxes
48,314

58,310
 16,615
 48,314
Income tax expense 12,275
 15,220
 7,640
 12,275
Net income
36,039

43,090
 8,975
 36,039
Less: Net income attributable to noncontrolling interests (1,113) (1,606) (98) (1,113)
Net income attributable to Acushnet Holdings Corp.
$34,926

$41,484
 $8,877
 $34,926
        
Net income per common share attributable to Acushnet Holdings Corp.:        
Basic $0.46
 $0.56
 $0.12
 $0.46
Diluted 0.46
 0.55
 0.12
 0.46
Weighted average number of common shares:        
Basic 76,006,989
 74,650,237
 74,545,280
 76,006,989
Diluted 76,264,038
 74,793,823
 75,099,930
 76,264,038


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




6

Table of Contents


ACUSHNET HOLDINGS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
 
 Three months ended March 31,Three months ended March 31,
(in thousands) 2019 20182020 2019
Net income $36,039
 $43,090
$8,975
 $36,039
Other comprehensive income (loss):       
Foreign currency translation adjustments 3,842
 11,913
(22,783) 3,842
Cash flow derivative instruments       
Unrealized holding gains (losses) arising during period 1,359
 (7,081)
Unrealized holding gains arising during period7,402
 1,359
Reclassification adjustments included in net income (1,449) 708
(1,724) (1,449)
Tax (expense) benefit (70) 2,113
Tax expense(1,848) (70)
Cash flow derivative instruments, net (160)
(4,260)3,830

(160)
Pension and other postretirement benefits       
Pension and other postretirement benefits adjustments (203) 34
1,690
 (203)
Tax benefit (expense) 57
 (6)
Tax (expense) income(368) 57
Pension and other postretirement benefits adjustments, net
(146)
28
1,322

(146)
Total other comprehensive income 3,536
 7,681
Comprehensive income 39,575
 50,771
Total other comprehensive (loss) income(17,631) 3,536
Comprehensive (loss) income(8,656) 39,575
Less: Comprehensive income attributable to noncontrolling interests (1,113) (1,606)(118) (1,113)
Comprehensive income attributable to Acushnet Holdings Corp.
$38,462

$49,165
Comprehensive (loss) income attributable to Acushnet Holdings Corp.$(8,774)
$38,462


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




7

Table of Contents


ACUSHNET HOLDINGS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 
Three months ended March 31,Three months ended March 31,
(in thousands)2019 20182020 2019
Cash flows from operating activities      
Net income$36,039
 $43,090
$8,975
 $36,039
Adjustments to reconcile net income to cash used in operating activities      
Depreciation and amortization9,797
 10,325
10,269
 9,797
Unrealized foreign exchange gain(61) (1,681)
Unrealized foreign exchange gains(200) (61)
Amortization of debt issuance costs369
 331
213
 369
Share-based compensation1,785
 4,126
2,187
 1,785
Gain on disposals of property, plant and equipment(2) 
Deferred income taxes5,889
 6,369
(1,194) 5,889
Changes in operating assets and liabilities      
Accounts receivable(146,894) (152,626)(102,181) (146,894)
Inventories17,373
 7,457
19,092
 17,373
Accounts payable4,491
 (765)(2,652) 4,491
Accrued taxes(7,941) 2,084
(2,125) (7,941)
Other assets and liabilities(10,912) (5,542)(4,894) (10,912)
Cash flows used in operating activities(90,065) (86,832)(72,512) (90,065)
Cash flows from investing activities      
Additions to property, plant and equipment(5,462) (5,887)(5,741) (5,462)
Business acquisitions, net of cash acquired
 (2,496)
Cash flows used in investing activities(5,462) (8,383)(5,741) (5,462)
Cash flows from financing activities      
Proceeds from short-term borrowings, net140,778
 113,293
125,133
 140,778
Repayments of term loan facility(4,375) 
Repayments of delayed draw term loan A facility(1,875) (1,250)
 (1,875)
Repayment of term loan facilities(7,031) (4,688)
Repayment of term loan A facility
 (7,031)
Purchases of common stock(6,976) 
Debt issuance costs(14) 
Dividends paid on common stock(11,872) (9,898)(11,521) (11,872)
Payment of employee restricted stock tax withholdings(10,924) (2,634)(380) (10,924)
Cash flows provided by financing activities109,076
 94,823
101,867
 109,076
Effect of foreign exchange rate changes on cash314
 1,040
Net increase in cash13,863
 648
Effect of foreign exchange rate changes on cash and restricted cash(1,874) 314
Net increase in cash and restricted cash21,740
 13,863
Cash and restricted cash, beginning of year31,014
 47,722
34,184
 31,014
Cash and restricted cash, end of period$44,877
 $48,370
$55,924
 $44,877
Supplemental information      
Non-cash additions to property, plant and equipment$222
 $774
$1,161
 $222
Dividends declared to noncontrolling interests but not paid
 2,400
Non-cash additions to right-of-use assets obtained in exchange for operating lease obligations2,020
 1,635
Non-cash additions to right-of-use assets obtained in exchange for finance lease obligations357
 
Dividend equivalents rights ("DERs") declared not paid198
 201
231
 198
Share repurchase liability (Note 9)6,976
 


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




8

Table of Contents


ACUSHNET HOLDINGS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED)

Common Stock 
Additional
Paid-in
Capital
 
Accumulated
Other
Comprehensive
Loss,
Net of Tax
 
Retained
Earnings
 
Total
Shareholders'
Equity
Attributable
to Acushnet
Holdings Corp.
 
Noncontrolling
Interests
 
Total
Shareholders'
Equity
 Common Stock 
Additional
Paid-in
Capital
 
Accumulated
Other
Comprehensive
Loss,
Net of Tax
 
Retained
Earnings
 Treasury Stock 
Total
Shareholders'
Equity
Attributable
to Acushnet
Holdings Corp.
 
Noncontrolling
Interests
 
Total
Shareholders'
Equity
(in thousands)Shares Amount  Shares Amount 
Balances as of December 31, 201774,479
 $74
 $894,727
 $(81,691) $8,199
 $821,309
 $32,664
 $853,973
Adoption of new accounting standards
 
 
 (6,132) 4,631
 (1,501) 
 (1,501)
Net income
 
 
 
 41,484
 41,484
 1,606
 43,090
Other comprehensive income
 
 
 7,681
 
 7,681
 
 7,681
Share-based compensation
 
 4,357
 
 
 4,357
 
 4,357
Vesting of restricted common stock, including impact of DERs, net of shares withheld for employee taxes (Note 11)265
 1
 (2,634) 
 
 (2,633) 
 (2,633)
Dividends and dividend equivalents declared
 
 
 
 (9,917) (9,917) 
 (9,917)
Dividends declared to noncontrolling interests
 
 
 
 
 
 (2,400) (2,400)
Balances as of March 31, 201874,744
 $75
 $896,450
 $(80,142) $44,397
 $860,780
 $31,870
 $892,650
               
Balances as of December 31, 201874,760
 $75
 $910,890
 $(89,039) $72,946
 $894,872
 $32,112
 $926,984
 74,760
 $75
 $910,890
 $(89,039) $72,946
 $
 $894,872
 $32,112
 $926,984
Net income
 
 
 
 34,926
 34,926
 1,113
 36,039
 
 
 
 
 34,926
 
 34,926
 1,113
 36,039
Other comprehensive income
 
 
 3,536
 
 3,536
 
 3,536
 
 
 
 3,536
 
 
 3,536
 
 3,536
Share-based compensation
 
 1,785
 
 
 1,785
 
 1,785
 
 
 1,785
 
 
 
 1,785
 
 1,785
Vesting of restricted common stock, including impact of DERs, net of shares withheld for employee taxes (Note 11)844
 1
 (10,926) 
 
 (10,925) 
 (10,925)
Vesting of restricted common stock, including impact of DERs, net of shares withheld for employee taxes (Note 10) 844
 1
 (10,926) 
 
 
 (10,925) 
 (10,925)
Dividends and dividend equivalents declared
 
 
 
 (10,782) (10,782) 
 (10,782) 
 
 
 
 (10,782) 
 (10,782) 
 (10,782)
Balances as of March 31, 201975,604
 $76
 $901,749
 $(85,503) $97,090
 $913,412
 $33,225
 $946,637
 75,604
 $76
 $901,749
 $(85,503) $97,090
 $
 $913,412
 $33,225
 $946,637
                  
Balances as of December 31, 2019 75,620
 $76
 $910,507
 $(112,028) $151,039
 $(31,154) $918,440
 $32,386
 $950,826
Net income 
 
 
 
 8,877
 
 8,877
 524
 9,401
Other comprehensive loss 
 
 
 (17,631) 
 
 (17,631) 
 (17,631)
Share-based compensation 
 
 2,023
 
 
 
 2,023
 
 2,023
Vesting of restricted common stock, including impact of DERs, net of shares withheld for employee taxes (Note 10) 29
 
 (368) 
 
 
 (368) 
 (368)
Purchases of common stock (Note 9) 
 
 
 
 
 (6,976) (6,976) 
 (6,976)
Share repurchase liability (Note 9) 
 
 
 
 
 (6,976) (6,976) 
 (6,976)
Dividends and dividend equivalents declared 
 
 
 
 (11,735) 
 (11,735) 
 (11,735)
Balances as of March 31, 2020 75,649
 $76
 $912,162
 $(129,659) $148,181
 $(45,106) $885,654
 $32,910
 $918,564

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 (the “SEC”(“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, 20192020 are not necessarily indicative of results to be expected for the full year ending December 31, 2019,2020, nor were those of the comparable 20182019 period representative of those actually experienced for the full year ended December 31, 2018.2019. 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, 20182019 included in its Annual Report on Form 10-K filed with the SEC on February 28, 2019.27, 2020.
Risks and Uncertainties
In March 2020, the World Health Organization declared a pandemic related to the novel coronavirus (“COVID-19”) resulting in government-ordered shutdowns of non-essential businesses, travel restrictions and restrictions on public gatherings. This has led to reduced consumer demand for golf-related products, the temporary closure of golf courses, including on-course retail pro shops, the temporary closure of off-course retail partner locations and the cancellation of professional golf tour events. In response to the outbreak and to mitigate the spread of the COVID-19 pandemic, the Company has, consistent with related orders from federal, state and local governments, temporarily closed or limited operations in its North American manufacturing facilities, distribution centers and its corporate offices, with associates working remotely where possible. Outside of the U.S., many distribution centers, including those in Europe, are operating on a limited basis. The Company continues to monitor developments, including government requirements and recommendations at the national, state, and local level to evaluate possible extensions to all or part of such closures.
The Company has evaluated and continues to evaluate the potential impact of the COVID-19 pandemic on its consolidated financial statements, including: impairment of goodwill and indefinite-lived intangible assets; impairment of long lived assets, including property, plant and equipment; the fair value and collectability of receivables and other financial assets; the valuation of inventory; the effectiveness of foreign exchange forward contracts designated as cash flow hedges and the credit quality of the financial institutions with which the Company enters into derivative contracts; continuing compliance with debt covenants related to the Company's credit facility; and the probability of achievement of the performance metrics related to the Company's performance stock units (“PSUs”). The primary impacts to the Company’s consolidated financial statements as of March 31, 2020 include the hedge de-designation of certain foreign exchange forward contracts deemed ineffective (Note 5) and a decrease in share-based compensation expense related to the Company's PSUs (Note 10).
In addition, the Company has taken several steps to strengthen its financial position and balance sheet, bolster its liquidity position and to provide additional financial flexibility, including reducing payroll costs through associate furloughs and a temporary reduction in senior management compensation, reducing discretionary spending, reducing capital expenditures, suspending its share repurchase program, temporarily suspending cash retainers of its Board of Directors and drawing down $200.0 million on its revolving credit facility on April 1, 2020 (Note 4).
As the COVID-19 pandemic is complex and continues to evolve, the Company's plans as described above may change. At this point, the Company cannot reasonably estimate the duration and severity of this pandemic, which it expects will have a material impact on its business, results of operations, financial position and cash flows.

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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 shareholders’ equity, net sales and expenses, and therelated disclosure of contingent assets and liabilities inas 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 of the impact of COVID-19 within its unaudited condensed consolidated financial statements.statements and there may be changes to those estimates in future periods. Actual results could differ from thosethese estimates.
Variable Interest Entities
VIEs are entities that, by design, either (i) lack sufficient equity to permit the entity to finance its activities independently, or (ii) have equity holders that do not have the power to direct the activities of the entity that most significantly impact its economic performance, the obligation to absorb the entity’s expected losses, or the right to receive the entity’s expected residual returns. The Company consolidates a VIE when it is the primary beneficiary, which is the party that has both (i) the power to direct the activities that most significantly impact the VIE’s economic performance and (ii) through its interests in the VIE, the obligation to absorb expected losses or the right to receive expected benefits from the VIE that could potentially be significant to the VIE.
The Company consolidates the accounts of Acushnet Lionscore Limited, a VIE, which is 40% owned by the Company. The sole purpose of the VIE is to manufacture the Company’s golf footwear and as such, the Company is deemed to be the primary beneficiary. The Company has presented separately on its 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 no0 outstanding borrowings as of March 31, 20192020 and December 31, 2018.2019. 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 interestinterests held by owners other than the Company in less than wholly-owned subsidiaries are classified as noncontrolling interests. 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 financial results and position of the noncontrolling interests are included in their entirety in the Company’s unaudited condensed consolidated statements of operations and unaudited condensed consolidated balance sheets. The value attributable to the noncontrolling interests is presented on the unaudited condensed consolidated balance sheets, within shareholders' equity, separately from the equity attributable to the Company. 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 sheet was $4.4 million as of both March 31, 2020 and December 31, 2019. Net income (loss) and comprehensive income (loss) attributable to noncontrolling interests are presented separately on the unaudited

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condensed consolidated statements of operations and unaudited condensed consolidated statements of comprehensive income (loss), respectively. The Company's less than wholly-owned subsidiaries include a VIE, as discussed above, and PG Professional Golf, which was acquired on October 1, 2018.
Cash and Restricted Cash
Cash held in Company checking accounts is included in cash. Book overdrafts not subject to offset with other accounts with the same financial institution are classified as accounts payable. The Company classifies as restricted certain cash that is not available for use in its operations. As of both March 31, 20192020 and December 31, 2018,2019, the amount of restricted cash included in cash and restricted cash on the unaudited condensed consolidated balance sheetsheets was $2.0 million.
Accounts Receivable
As of March 31, 2019 and December 31, 2018, the allowance for doubtful accounts was $8.1 million and $7.3 million, respectively.
Foreign Currency Translation and Transactions
Foreign currency transaction gains included in selling, general and administrative expense were $0.5 million and $2.0 million for the three months ended March 31, 2019 and 2018, respectively.
Recently Adopted Accounting Standards
Leases
On January 1, 2019,2020, the Company adopted Accounting Standards Codification ("ASC"Update (“ASU”) Topic 842, Leases ("ASC 842"2016-13, "Financial Instruments -Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" ("ASU 2016-13"), which replaces the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss ("CECL") methodology. The CECL methodology requires the recognitionmeasurement of right-of-useall expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and related operatingreasonable and finance lease liabilities on the consolidated balance sheet. As permitted by ASC 842, the Company adopted ASC 842 using the optional transition approach, which allowed for a cumulative effect adjustment assupportable forecasts. The measurement of January 1, 2019, which is the date of initial application, and did not restate prior periods. As a result, the consolidated balance sheet prior to January 1, 2019 was not restated and continues to be reported under ASC Topic 840, Leases ("ASC 840"), which did not require the recognition of operating lease liabilities on the consolidated balance sheet, and is not comparative.
Under ASC 842, all leases are required to be recorded on the consolidated balance sheet and are classified as either operating or finance leases. A lease is classified as a finance lease if any one of the following criteria are met: the lease transfers ownership of the asset by the end of the lease term, the lease contains an option to purchase the asset that is reasonably certain to be exercised, the lease term is for a major part of the remaining useful life of the asset, the present value of the lease payments equals or exceeds substantially all of the fair value of the asset, or the leased asset is of a highly specialized nature. A lease is classified as an operating lease if it does not meet any one of these criteria.
The lease classification affects the expense recognition in the consolidated statement of operations. Operating lease expense consists of the lease payments plus any initial direct costs and is recognized on a straight-line basis over the lease term in the consolidated statement of operations. Finance lease charges are split, where amortization of the right-of-use asset is recorded as depreciation and amortization expense and an implied interest component is recorded in interest expense, net. The expense recognition for operating leases and finance leases under ASC 842 is consistent with ASC 840. As a result, there is no impact on the results of operations presented in the Company's unaudited condensed consolidated statements of operations and unaudited condensed consolidated statements of comprehensive income for the periods presented as a result of the adoption of ASC 842.
As permitted under ASC 842, the Company also elected to not reassess prior conclusions related to the identification, classification and accounting for initial direct costs for leases that commenced prior to January 1, 2019. As permitted under ASC 842, the Company elected to not use hindsight to determine lease terms and to not separate non-lease components within its lease portfolio. As permitted under ASC 842, the Company has also elected not to recognize right-of-use assets and lease liabilities for short-term leases that have a term of 12 months or less. The effect of short-term leases on the Company's operating right-of-use assets and operating lease liabilities was not material.
Upon adoption of ASC 842, the Company recognized operating lease right-of-use assets and operating lease liabilities. The right-of-use asset represents the right to use the leased asset for the lease term. The lease liability represents the present value of the lease paymentsexpected credit losses under the lease. The right-of-use assetCECL methodology is initiallyapplicable to financial assets measured at amortized cost, which primarily comprises theincluding trade receivables.


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initial amount of the lease liability, plus any initial direct costs incurred less any lease incentives received. Lease payments included in the measurement of the lease liability comprise the following: the fixed non-cancelable lease payments, payments for optional renewal periods where it is reasonably certain the renewal period will be exercised, and payments for early termination options unless it is reasonably certain the lease will not be terminated early. The discount rate implicit within the Company's leases is generally not determinable and thereforeonly financial assets held by the Company determineswhich are subject to evaluation under the discount rate based on its incremental collateralized borrowing rate applicable to the location where the lease is held.CECL model are trade receivables. The incremental borrowing rate for each of the Company's leases is determined based on the lease term and currency in which such lease payments are made. Accordingly, upon adoption, the Company recorded an adjustment of $48.1 million to operating lease right-of-use assets and the related lease liabilities.
The Company leases office and warehouse space, machinery and equipment, and vehicles, among other items. Certain leases include one or more options to renew, with renewal terms that can extend the lease term up to 3 years. For contracts entered into on or after the effective date, at the inception of a contract the Company assesses whether the contract is, or contains, a lease. The Company's assessment is based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether the Company obtained the right to substantially all the economic benefit from the use of the asset throughout the period, and (3) whether the Company has the right to direct the use of the asset. See further discussion in Note 2.
Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities
On January 1, 2019, the Company adopted Accounting Standards Update ("ASU") 2017‑12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities” ("ASU 2017-12"). The amendments in this update expand and refine hedge accounting guidance and align the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. ASU 2017-12 also simplified the application of hedge accounting guidance, hedge documentation requirements and the assessment of hedge effectiveness. The adoption of this standard did not have a material impact on the consolidated financial statements.
Changes to the Disclosure Requirements for Fair Value Measurement
On January 1, 2019, the Company adopted ASU 2018-13, "Fair Value Measurement (Topic 820) —Disclosure Framework —Changes to2016-13 using the Disclosure Requirements for Fair Value Measurement" ("ASU 2018-13"). The amendments in this update are meant to provide more relevant information regarding valuation techniques and inputs used to arrive at measures of fair value, uncertainty in the fair value measurements, and how changes in fair value measurements impact an entity's performance and cash flows. The adoption of this standard should be applied to all periods presented.modified retrospective method. The adoption of this standard did not have an impact on the consolidated financial statements orcarrying value of trade receivables. Results for reporting periods beginning after January 1, 2020 are presented under ASU 2016-13 while prior period amounts continue to be reported in accordance with previously applicable GAAP.
The Company estimates expected credit losses using a number of factors, including customer credit ratings, age of receivables, historical credit loss information and current and forecasted economic conditions which affect the collectability of the reported amounts. The Company continues to monitor the impact of the COVID-19 pandemic on its expected credit losses, which has been considered in the estimate of expected credit losses as of March 31, 2020.
The activity related disclosures.to the allowance for doubtful accounts was as follows:
(in thousands) Three months ended March 31, 2020
Balance at beginning of period $5,338
Bad debt expense 916
Amount of receivables written off (286)
Foreign currency translation and other (186)
Balance at end of period $5,782

Foreign Currency Translation and Transactions
Foreign currency transaction gains (losses) included in selling, general and administrative expense were losses of $1.0 million and gains of $0.5 million for the three months ended March 31, 2020 and 2019, respectively.
Recently IssuedAdopted Accounting Standards
Intangibles —Goodwill and Other —Internal-Use Software
In August 2018,On January 1, 2020, the Financial Accounting Standards Board ("FASB") issuedCompany adopted ASU 2018-15, "Intangibles -Goodwill and Other -Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract" ("ASU 2018-15"). The amendments in this update alignaligned the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The adoption of this standard did not have a material impact on the consolidated financial statements.
Recently Issued Accounting Standards
Income Taxes
In December 2019, the Financial Accounting Standards Board ("FASB") issued ASU 2018-152019-12, "Income Taxes (Topic 740) -Simplifying the Accounting for Income Taxes ("ASU 2019-12"). The amendments in this update simplify the accounting for income taxes by removing certain exceptions to general principles in Topic 740. The amendments also improve consistent application and simplify U.S. GAAP for other areas of Topic 740 by clarifying and amending existing guidance. ASU 2019-12 is effective for fiscal years beginning after December 15, 2019.2020. Early adoption is permitted. The adoption ofCompany is currently evaluating the impact this standard is not expected towill have a material impact on theits consolidated financial statements.
Defined Benefit Plans—Changes to the Disclosure Requirements for Defined Benefit Plans
In August 2018, the FASB issued ASU 2018-14, "Compensation —Retirement Benefits —Defined Benefit Plans —General (Subtopic 715-20) —Disclosure Framework —Changes to the Disclosure Requirements for Defined Benefit Plans" ("ASU 2018-14"). The amendments in this update remove defined benefit plan disclosures that are no longer considered cost-beneficial, clarify the specific requirements of disclosures, and add disclosure requirements identified as relevant. ASU 2018-14 is effective for fiscal years ending after December 15, 2020. Early adoption is permitted. The adoption of this standard should be applied to all periods presented. The adoption of this standard will not have a material impact on the consolidated financial statements.



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2. Leases
The Company's operating lease right-of-use assets and operating lease liabilities represent leases for office and warehouse space, machinery and equipment, and vehicles, among other items.
Operating lease costs recognized on the unaudited condensed consolidated statements of operations were as follows:
  Three months ended
(in thousands) March 31, 2019
Cost of goods sold $821
Selling, general and administrative 2,882
Research and development 199
  $3,902
Supplemental balance sheet information related to the Company's operating leases is as follows:
    March 31,
(in thousands) Balance Sheet Location 2019
     
Right-of-use assets Other noncurrent assets $48,054
     
Current lease liabilities Accrued expenses and other liabilities $11,649
Noncurrent lease liabilities Other noncurrent liabilities 36,405
  Total liabilities $48,054
The weighted average remaining lease term and the weighted average discount rate for operating leases as of March 31, 2019 was:
Operating Leases
Weighted average remaining lease term (years)5.9
Weighted average discount rate3.42%
The following table reconciles the undiscounted cash flows for operating leases as of March 31, 2019 to operating lease liabilities recorded on the unaudited condensed consolidated balance sheet:
  Operating
(in thousands) Leases
Remainder of 2019 $10,306
2020 11,720
2021 8,635
2022 5,845
2023 3,265
Thereafter 14,228
Total future lease payments 53,999
Less: Interest (5,945)
Present value of lease liabilities $48,054
   
Accrued expenses and other liabilities $11,649
Other noncurrent liabilities 36,405
Total lease liabilities $48,054

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Future minimum rental payments under noncancelable operating leases as of December 31, 2018 were as follows:
(in thousands)  
Year ending December 31,  
2019 $13,119
2020 11,053
2021 7,984
2022 5,345
2023 3,133
Thereafter 13,852
Total minimum rental payments $54,486
Supplemental cash flow information and non-cash activity related to the Company's operating leases are as follows:
  Three months ended
(in thousands) March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:  
Operating cash flows from operating leases $3,604
Non-cash right-of-use assets obtained in exchange for lease obligations:  
Operating leases 1,635
3. Inventories
The components of inventories were as follows:
  March 31, December 31,
(in thousands) 2020 2019
Raw materials and supplies $73,642
 $87,675
Work-in-process 27,848
 22,024
Finished goods 263,445
 288,669
Inventories $364,935

$398,368
  March 31, December 31,
(in thousands) 2019 2018
Raw materials and supplies $62,937
 $71,068
Work-in-process 26,161
 21,763
Finished goods 257,301
 268,376
Inventories $346,399

$361,207


4.3. 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) 2020 2019
Balance at beginning of period $4,048
 $3,331
Provision 1,209
 1,074
Claims paid/costs incurred (944) (876)
Foreign currency translation and other (164) 19
Balance at end of period $4,149

$3,548

  Three months ended March 31,
(in thousands) 2019 2018
Balance at beginning of period $3,331
 $3,823
Provision 1,074
 1,195
Claims paid/costs incurred (876) (913)
Foreign currency translation 19
 43
Balance at end of period
$3,548

$4,148


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5.4. Debt and Financing Arrangements
Senior Secured Credit Facility
The credit facility includes a revolving credit facility and a term loan facility. There were outstanding borrowings under the revolving credit facility of $129.0$165.0 million and $50.3 million as of March 31, 2019.2020 and December 31, 2019, respectively. The weighted average interest rate applicable to thethese outstanding borrowings was 3.71%2.25% and 3.54% as of March 31, 2019. There were no outstanding borrowings under the revolving credit facility as of2020 and December 31, 2018.2019, respectively.
The credit agreement contains a number of covenants that, among other things, restrict the ability of the U.S. borrower and its restricted subsidiaries to (subject to certain exceptions), incur, assume, or permit to exist additional indebtedness or guarantees; incur liens; make investments and loans; pay dividends, make payments, or redeem or repurchase capital stock or make prepayments, repurchases or redemptions of certain indebtedness; engage in mergers, liquidations, dissolutions, asset sales, and other dispositions (including sale leaseback transactions); amend or otherwise alter terms of certain indebtedness or certain other agreements; enter into agreements limiting subsidiary distributions or containing negative pledge clauses; engage in certain transactions with affiliates; alter the nature of the business that they conduct or change their fiscal year or accounting practices. Certain exceptions to these covenants are determined based on ratios that are calculated in part using the calculation of Adjusted EBITDA. The credit agreement also restricts the ability of Acushnet Holdings Corp. to engage in certain mergers or consolidations or engage in any activities other than permitted activities. The Company’s credit agreement contains certain customary affirmative and restrictive covenants, including, among others, financial covenants based on the Company’sCompany's leverage and interest coverage ratios. The credit agreement 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, 2019,2020, the Company was in compliance with all covenants under the credit agreement.
As of March 31, 2019,2020, the Company had available borrowings under its revolving credit facility of $135.3$225.3 million after giving effect to $10.7$9.7 million of outstanding letters of credit.
On April 1, 2020, the Company drew down $200.0 million under its revolving credit facility. Following the draw down, on April 1, 2020, the Company had approximately $367.5 million outstanding and $22.4 million of available borrowings under its revolving credit facility, after giving effect to $10.1 million of outstanding letters of credit. See Note 1 for further discussion on the Company's evaluation and response to the COVID-19 pandemic.

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Other Short-Term Borrowings
The Company has certain unsecured local credit facilities available through its subsidiaries. There were outstanding borrowings under the Company's local credit facilities of $12.6$9.8 million and $0.9$3.8 million as of March 31, 20192020 and December 31, 2018,2019, respectively. The weighted average interest rate applicable to the outstanding borrowings was 0.97%2.09% and 3.25%2.29% as of March 31, 20192020 and December 31, 2018,2019, respectively. As of March 31, 2019,2020, the Company had available borrowings remaining under these local credit facilities of $51.3$52.8 million.
Letters of Credit
As of March 31, 20192020 and December 31, 2018,2019, there were outstanding letters of credit related to agreements, including the Company's senior secured credit facility, totaling $14.9$13.3 million and $15.5$14.8 million, respectively, of which $11.8$10.2 million and $12.4$11.6 million, respectively, was secured. These agreements provided a maximum commitment for letters of credit of $29.2$59.7 million and $59.8 million as of both March 31, 20192020 and December 31, 2018.2019, respectively.
6.5. Derivative Financial Instruments
The Company principally uses derivative financial instruments to reduce the impact of changes in foreign currency exchange ratesfluctuations and interest rate fluctuations.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 instrumentsinstrument contracts for trading or speculative purposes.
Foreign Exchange Derivative Instruments
Foreign exchange derivative instrumentsforward contracts are foreign exchange forward contractsderivative instruments primarily used to hedgereduce foreign currency fluctuationsrisk related to inventory purchases nottransactions denominated in thea currency other than functional currency of the non-U.S. subsidiary, thereby limiting currency risk that would otherwise result from changes in exchange rates.currency. These instruments are considereddesignated 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, 20192020 and December 31, 20182019 was $318.3$276.4 million and $312.8$287.9 million, respectively.

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the impact of the COVID-19 pandemic, the Company de-designated certain foreign exchange cash flow hedges deemed ineffective. The gross outstanding U.S. dollar equivalent notional amount of these foreign exchange forward contracts as of March 31, 2020 was $17.2 million, which is not included in the amounts above. See Note 1 for further discussion on the Company's evaluation and response to the COVID-19 pandemic.
The Company also enters into foreign exchange forward contracts, to mitigate the change in fair value of specific assets and liabilities which do not qualify as hedging instruments under U.S. GAAP.GAAP, 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. There were no0 outstanding foreign exchange forward contracts not designated under hedge accounting as of March 31, 20192020 and December 31, 2018.2019.
Interest Rate Derivative Instruments
The Company enters into interest rate swap contracts to reduce the impact of variability in interest rates.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 variablefloating rate debt to fixed rate debt. The interest rate swap contracts are accounted for as cash flow hedges. As of both March 31, 20192020 and December 31, 2018,2019, the notional value of the Company's outstanding interest rate swap contracts was $185.0$160.0 million.

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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 Location Hedge Instrument Type 2020 2019
Prepaid and other assets (1)
 Foreign exchange forward $11,772
 $4,549
Other assets Foreign exchange forward 3,443
 1,109
Accrued expenses and other liabilities (2)
 Foreign exchange forward 2,670
 2,561
  Interest rate swap 3,630
 1,862
Other noncurrent liabilities Foreign exchange forward 406
 115
  Interest rate swap 611
 789

(in thousands)   March 31, December 31,
Balance Sheet Location Hedge Instrument Type 2019 2018
Other current assets Foreign exchange forward $5,880
 $6,116
Other noncurrent assets Foreign exchange forward 1,119
 1,015
Accrued expenses and other liabilities Foreign exchange forward 691
 578
  Interest rate swap 773
 526
Other noncurrent liabilities Foreign exchange forward 132
 161
  Interest rate swap 1,254
 925
(1) Excludes $0.7 million related to hedges deemed ineffective as of March 31, 2020.
(2) Excludes $0.1 million related to hedges deemed ineffective as of March 31, 2020.
The hedge instrument gain (loss) recognized in accumulated other comprehensive loss, net of tax was as follows:
  Three months ended
  March 31,
(in thousands) 2020 2019
Type of hedge    
Foreign exchange forward $9,467
 $2,087
Interest rate swap (2,065) (728)
 Total
$7,402
 $1,359
  Three months ended
  March 31,
(in thousands) 2019 2018
Type of hedge    
Foreign exchange forward $2,087
 $(7,081)
Interest rate swap (728) 
 
$1,359
 $(7,081)

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 statement of operations.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 $6.2$7.2 million related to foreign exchange derivative instruments from accumulated other comprehensive loss, net of tax, into cost of goods sold and a net loss of $0.8$3.6 million related to interest rate derivative instruments from accumulated other comprehensive loss, net of tax into interest expense, net during the next 12 months.net. For further information related to amounts recognized in accumulated other comprehensive loss, net of tax, see Note 12.

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11.
The hedge instrument gain (loss) recognized on the unaudited condensed consolidated statements of operations was as follows:
  Three months ended
  March 31,
(in thousands) 2020 2019
Location of gain (loss) in statement of operations    
Foreign exchange forward:    
Cost of goods sold $1,542
 $1,606
Selling, general and administrative (1)(2)
 1,534
 (314)
Total $3,076
 $1,292
     
Interest Rate Swap:    
Interest expense, net $(478) $(157)
Total
$(478) $(157)
  Three months ended
  March 31,
(in thousands) 2019 2018
Location of gain (loss) in statement of operations    
Foreign exchange forward:    
Cost of goods sold $1,606
 $(708)
Selling, general and administrative (1)
 (314) (668)
Total $1,292
 $(1,376)
     
Interest Rate Swap:    
Interest expense, net $(157) $
Total
$(157) $

(1) Relates to losses
(1)Relates to net gains (losses) on foreign exchange forward contracts derived from previously designated cash flow hedges.
(2)Excludes net gains of $0.7 million reclassified out of accumulated other comprehensive loss, net of tax related to hedges deemed ineffective during the three months ended March 31, 2020.


15


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.
7.6. 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, 20192020 were as follows:
 Fair Value Measurements as of   Fair Value Measurements as of  
 March 31, 2019 using:   March 31, 2020 using:  
(in thousands) Level 1 Level 2 Level 3 Balance Sheet Location Level 1 Level 2 Level 3 Balance Sheet Location
Assets                
Rabbi trust $8,931
 $
 $
 Other current assets $5,620
 $
 $
 Prepaid and other assets
Foreign exchange derivative instruments 
 5,880
 
 Other current assets 
 12,521
 
 Prepaid and other assets
Deferred compensation program assets 1,183
 
 
 Other noncurrent assets 700
 
 
 Other assets
Foreign exchange derivative instruments 
 1,119
 
 Other noncurrent assets 
 3,443
 
 Other assets
Total assets $10,114
 $6,999
 $
   $6,320
 $15,964
 $
  
Liabilities                
Foreign exchange derivative instruments $
 $691
 $
 Accrued expenses and other liabilities $
 $2,819
 $
 Accrued expenses and other liabilities
Interest rate derivative instruments 
 773
 
 Accrued expenses and other liabilities 
 3,630
 
 Accrued expenses and other liabilities
Deferred compensation program liabilities 1,183
 
 
 Other noncurrent liabilities 700
 
 
 Other noncurrent liabilities
Foreign exchange derivative instruments 
 132
 
 Other noncurrent liabilities 
 406
 
 Other noncurrent liabilities
Interest rate derivative instruments 
 1,254
 
 Other noncurrent liabilities 
 611
 
 Other noncurrent liabilities
Total liabilities $1,183
 $2,850
 $
   $700
 $7,466
 $
  
 


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Assets and liabilities measured at fair value on a recurring basis as of December 31, 20182019 were as follows:
  Fair Value Measurements as of  
  December 31, 2019 using:  
(in thousands) Level 1 Level 2 Level 3 Balance Sheet Location
Assets        
Rabbi trust $6,070
 $
 $
 Prepaid and other assets
Foreign exchange derivative instruments 
 4,549
 
 Prepaid and other assets
Deferred compensation program assets 870
 
 
 Other assets
Foreign exchange derivative instruments 
 1,109
 
 Other assets
Total assets $6,940
 $5,658
 $
  
Liabilities        
Foreign exchange derivative instruments $
 $2,561
 $
 Accrued expenses and other liabilities
Interest rate derivative instruments 
 1,862
 
 Accrued expenses and other liabilities
Deferred compensation program liabilities 870
 
 
 Other noncurrent liabilities
Foreign exchange derivative instruments 
 115
 
 Other noncurrent liabilities
Interest rate derivative instruments 
 789
 
 Other noncurrent liabilities
Total liabilities $870
 $5,327
 $
  
  Fair Value Measurements as of  
  December 31, 2018 using:  
(in thousands) Level 1 Level 2 Level 3 Balance Sheet Location
Assets        
Rabbi trust $8,415
 $
 $
 Other current assets
Foreign exchange derivative instruments 
 6,116
 
 Other current assets
Deferred compensation program assets 1,222
 
 
 Other noncurrent assets
Foreign exchange derivative instruments 
 1,015
 
 Other noncurrent assets
Total assets $9,637
 $7,131
 $
  
Liabilities        
Foreign exchange derivative instruments $
 $578
 $
 Accrued expenses and other liabilities
Interest rate derivative instruments 
 526
 
 Accrued expenses and other liabilities
Deferred compensation program liabilities 1,222
 
 
 Other noncurrent liabilities
Foreign exchange derivative instruments 
 161
 
 Other noncurrent liabilities
Interest rate derivative instruments 
 925
 
 Other noncurrent liabilities
Total liabilities $1,222
 $2,190
 $
  
During the three months ended March 31, 2019 and the year ended December 31, 2018, there were no transfers between Level 1, Level 2 and Level 3 assets and liabilities.
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 cancould 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)5). The Company uses the mid‑price of foreign

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exchange forward rates as of the close of business on the valuation date to value each foreign exchange forward contract at each reporting period.
Interest rate derivative instruments are interest rate swap contracts used to hedge the interest rate fluctuations of the Company's variablefloating rate debt (Note 6)5). The valuation for the interest rate swap is calculated as the net of the discounted future cash flows of the pay and receive legs of the swap. Mid-market interest rates on the valuation date are used to create the forward curve for floating legs and discount curve.
8.7. Pension and Other Postretirement Benefits
Components of net periodic benefit cost (income) were as follows: 
  Pension Benefits Postretirement Benefits
  Three months ended March 31,
(in thousands) 2020 2019 2020 2019
Components of net periodic benefit cost (income)        
Service cost $2,316
 $2,242
 $171
 $161
Interest cost 2,512
 2,980
 112
 138
Expected return on plan assets (2,903) (3,299) 
 
Amortization of net loss (gain) 964
 272
 (214) (363)
Amortization of prior service cost (credit) 70
 44
 (34) (34)
Net periodic benefit cost (income) $2,959
 $2,239
 $35
 $(98)
  Pension Benefits Postretirement Benefits
  Three months ended March 31,
(in thousands) 2019 2018 2019 2018
Components of net periodic benefit cost (income)        
Service cost $2,242
 $2,443
 $161
 $175
Interest cost 2,980
 2,958
 138
 127
Expected return on plan assets (3,299) (3,279) 
 
Settlement expense 
 8
 
 
Amortization of net loss (gain) 272
 520
 (363) (351)
Amortization of prior service cost (credit) 44
 44
 (34) (34)
Net periodic benefit cost (income) $2,239
 $2,694
 $(98) $(83)


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

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9.8. Income Taxes
Income tax expense decreased by $2.9$4.7 million to $7.6 million for the three months ended March 31, 2020 compared to $12.3 million for the three months ended March 31, 2019 compared to $15.2 million2019. The Company’s effective tax rate ("ETR") was 46.0% for the three months ended March 31, 2018. The Company’s Effective Tax Rate ("ETR") was2020 compared to 25.4% for the three months ended March 31, 2019 compared to 26.1% for2019. The increase in the three months ended March 31, 2018.  The decrease in ETR was primarily driven by the impact of the COVID-19 pandemic on the Company's jurisdictional mix of earnings and the effect of foreign currency losses incurred in the quarter that cannot be benefited, as well as, a reduction in discrete tax benefit realized in the first quarter of 2019benefits related to share basedshare-based compensation expense, offset by amounts related to the U.S. Tax Cuts and Jobs Act of 2017 and changes to the Company's geographic mix of earnings.expense.
10.9. Common Stock
Dividends
The Company declared dividends per common share, including DERs (Note 11)10), during the periods presented as follows:

 Dividends per Common Share 
Amount
(in thousands)
2020:    
First Quarter $0.155
 $11,735
Total dividends declared in 2020 $0.155
 $11,735
     
2019:    
Fourth Quarter $0.14
 $10,718
Third Quarter 0.14
 10,726
Second Quarter 0.14
 10,751
First Quarter 0.14
 10,782
Total dividends declared in 2019 $0.56
 $42,977
(in thousands, except per share amounts) Dividends per Common Share Amount
2019:    
First Quarter $0.14
 $10,782
Total dividends declared in 2019 $0.14
 $10,782
     
2018:    
Fourth Quarter $0.13
 $9,968
Third Quarter 0.13
 9,954
Second Quarter 0.13
 9,917
First Quarter 0.13
 9,917
Total dividends declared in 2018 $0.52
 $39,756

During the second quarter of 2019,2020, the Company's Board of Directors ("Board of Directors") declared a dividend of $0.14$0.155 per common share to shareholders onof record as of May 31, 2019June 5, 2020 and payable on June 14, 2019.19, 2020.
The
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Share Repurchase Program
As of March 31, 2020, the Board of Directors hashad authorized the Company to repurchase up to an aggregate of $50.0$100.0 million of its issued and outstanding common stock from time to time. stock.
Share repurchases may be effected from time to time in open market or privately negotiated transactions, including transactions with affiliates, with the timing of purchases and the amount of stock purchased generally determined at the discretion of the Company consistent with the Company's general working capital needs and within the constraints of the Company’s credit agreement. As previously disclosed, in connection with this share repurchase program, the Company entered into an agreement with Magnus to purchase from Magnus an equal amount of its common stock as it purchases on the open market, up to an aggregate of $24.9 million, at the same weighted average per share price.
The Company's share repurchase activity was as follows:
  Three Months Ended March 31,
(in thousands, except share and per share amounts) 2020 2019
Shares repurchased (1)
 243,894
 
Average price $28.60
 $
Aggregate value $6,976
 $

(1) There were no shares repurchased from Magnus during the three months ended March 31, 2020 related to the Magnus share repurchase agreement.
In relation to the Magnus share repurchase agreement, the Company recorded a liability to repurchase additional shares of common stock from Magnus of $8.8 million (299,894 shares) and $1.8 million (56,000 shares), which was included in accrued expenses and other liabilities and treasury stock on the Company’s general working capital needs. Asunaudited condensed consolidated balance sheets as of March 31, 2020 and December 31, 2019, there were norespectively. Excluding the impact of the share repurchase liability, as of March 31, 2020 the Company had $63.7 million remaining under the current share repurchase authorization, including $11.1 million related to the Magnus share repurchase agreement.
In April 2020, the Company announced that it was suspending stock repurchases made under this program.in light of the COVID-19 pandemic. The Company has the ability to resume repurchases if it deems circumstances warrant. See Note 1 for further discussion on the Company's evaluation and response to the COVID-19 pandemic.
11.10. 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”)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, 2019,2020, 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 employeesadvisors of the Company vest ratably and in accordance with the terms of the grant,grants, generally over one to fourthree years, subject to the recipient’s continued service to the Company. PSUs vest, subject to the recipient's continued employment with the Company, based upon achievementthe Company's performance against specified metrics which are generally over a three year performance period. At the end of the applicable performance metrics, generally over three years and as defined inperiod, the award agreements.number of shares of common stock that could be issued is fixed based upon the level of performance against these metrics. The number of shares that could be issued can range from 0% to 200% of the recipient's target award. Recipients of the awards granted under the 2015 Plan may elect to defer receipt of all or any portion of any shares of common stock issuable upon vesting to a future date elected by the recipient.
All RSUs and PSUs granted under the 2015 Plan have DERs, which entitle holders of RSUs and PSUs to the same dividend value per share as holders of common stock and can be paid in either cash or common stock. DERs are subject to the same vesting and other terms and conditions as the corresponding unvested RSUs and PSUs. DERs are paid when the underlying shares of common stock are delivered.


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Restricted Stock and Performance Stock Units
A summary of the Company’s RSUs and PSUs as of March 31, 20192020 and changes during the three months then ended is presented below: 
    Weighted-   Weighted-
  Number Average Number Average
  of RSUs Fair Value RSUs of PSUs Fair Value PSUs
Outstanding as of December 31, 2019 947,243
 $23.49
 207,077
 $23.47
Granted 492,975
 25.45
 252,031
 25.45
Vested (1)
 (62,259) 21.38
 
 
Outstanding as of March 31, 2020 1,377,959
 $24.28
 459,108
 $24.55

    Weighted-   Weighted-
  Number Average Number Average
  of RSUs Fair Value RSUs of PSUs Fair Value PSUs
Outstanding as of December 31, 2018 881,832
 $21.75
 
 $
Granted 609,245
 23.47
 207,077
 23.47
Vested (475,823) 20.25
 
 
Forfeited (1,933) 24.57
 
 
Outstanding as of March 31, 2019 1,013,321
 $23.48
 207,077
 $23.47
         
Undelivered (1)
 83,761
   
  


(1) SharesIncluded 52,386 shares of common stock related to vestings occurring in 2019RSUs and 0 shares of common stock related to PSUs that were not delivered as of March 31, 2019.2020.
A summary of shares of common stock issued related to the 2015 Plan, including the impact of any DERs issued in common stock, is presented below:
 Three months ended Three months ended Three months ended Three months ended
 March 31, 2019 March 31, 2018 March 31, 2020 March 31, 2019
 RSUs PSUs RSUs PSUs RSUs PSUs RSUs PSUs
Shares of common stock issued (1)
 392,062
 900,226
 388,012
 
 42,797
 
 392,062
 900,226
Shares of common stock withheld by the Company as payment by employees in lieu of cash to satisfy tax withholding obligations (123,013)
 (325,246)
 (122,795)
 
 (13,831) 
 (123,013)
 (325,246)
Net shares of common stock issued 269,049
 574,980
 265,217
 
 28,966
 
 269,049
 574,980
                
Cumulative undelivered shares of common stock 147,251
 
 
 
 240,512
 
 147,251
 

(1) Shares of common stock issued related to PSUs represents PSUs that vested in 2018 but were delivered in common stock during the three months ended March 31, 2019.
Compensation expense recorded related to RSUs and PSUs in the consolidated statement of operations was as follows:
  Three months ended
  March 31,
(in thousands) 2020 2019
RSUs $2,478
 $1,570
PSUs (455) 215

The remaining unrecognized compensation expense related to non-vestedunvested RSUs and non-vestedunvested PSUs granted was $20.3$23.5 million and $4.6 million, respectively, as of March 31, 20192020 and is expected to be recognized over the related weighted average period of 2.2 years and 2.5 years.years, respectively.
Compensation Expense
The allocation of share-based compensation expense related to equity incentive plans in the unaudited condensed consolidated statements of operations was as follows:
 Three months ended Three months ended
 March 31, March 31,
(in thousands) 2019 2018 2020 2019
Cost of goods sold $167
 $94
 $225
 $167
Selling, general and administrative 1,467
 3,733
 1,714
 1,467
Research and development 151
 299
 248
 151
Total compensation expense before income tax 1,785
 4,126
 2,187
 1,785
Income tax benefit 390
 853
 463
 390
Total compensation expense, net of income tax $1,395
 $3,273
 $1,724
 $1,395



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12.11. Accumulated Other Comprehensive Loss, Net of Tax
Accumulated other comprehensive loss, net of tax consists of foreign currency translation adjustments, unrealized gains and losses from derivative instruments designated as cash flow hedges (Note 6)5) and pension and other postretirement adjustments (Note 8)7).
The components of and changes in accumulated other comprehensive loss, net of tax, were as follows:
  Foreign Gains (Losses) on Gains (Losses) on Pension and Accumulated
  Currency Foreign Exchange Interest Rate Other Other
  Translation Derivative Swap Derivative Postretirement Comprehensive
(in thousands) Adjustments Instruments Instruments Adjustments Loss, Net of Tax
Balance as of December 31, 2019 $(71,187) $2,901
 $(2,003) $(41,739) $(112,028)
Other comprehensive income (loss) before reclassifications (22,783) 9,467
 (2,065) 904
 (14,477)
Amounts reclassified from accumulated other comprehensive loss, net of tax 
 (2,202) 478
 786
 (938)
Tax benefit (expense) 
 (2,233) 385
 (368) (2,216)
Balance as of March 31, 2020 $(93,970) $7,933
 $(3,205) $(40,417) $(129,659)

  Foreign Gains (Losses) on Gains (Losses) on Pension and Accumulated
  Currency Foreign Exchange Interest Rate Other Other
  Translation Derivative Swap Derivative Postretirement Comprehensive
(in thousands) Adjustments Instruments Instruments Adjustments Loss, Net of Tax
Balance as of December 31, 2018 $(71,853) $5,258
 $(1,098) $(21,346) $(89,039)
Other comprehensive income (loss) before reclassifications 3,842
 2,087
 (728) (122) 5,079
Amounts reclassified from accumulated other comprehensive loss, net of tax 
 (1,606) 157
 (81) (1,530)
Tax benefit (expense) 
 (209) 139
 57
 (13)
Balance as of March 31, 2019 $(68,011) $5,530
 $(1,530) $(21,492) $(85,503)


13.12. Net Income per Common Share
The following is a computation of basic and diluted net income per common share attributable to Acushnet Holdings Corp.:
  Three months ended
  March 31,
(in thousands, except share and per share amounts) 2020 2019
     
Net income attributable to Acushnet Holdings Corp. $8,877
 $34,926
     
Weighted average number of common shares:    
Basic 74,545,280
 76,006,989
Diluted 75,099,930
 76,264,038
     
Net income per common share attributable to Acushnet Holdings Corp.:    
Basic $0.12
 $0.46
Diluted $0.12
 $0.46

  Three months ended
  March 31,
(in thousands, except share and per share amounts) 2019 2018
     
Net income attributable to Acushnet Holdings Corp. $34,926
 $41,484
     
Weighted average number of common shares:    
Basic 76,006,989
 74,650,237
Diluted 76,264,038
 74,793,823
     
Net income per common share attributable to Acushnet Holdings Corp.:    
Basic $0.46
 $0.56
Diluted $0.46
 $0.55
Net income per common share attributable to Acushnet Holdings Corp. for the three months ended March 31, 20192020 and 20182019 was calculated using the treasury stock method.method.
The Company’s potential dilutive securities for the three months ended March 31, 20192020 and 20182019 include RSUs and PSUs. PSUs vest based upon achievement of performance targets and are excluded from the diluted shares outstanding unless the performance targets have been met as of the end of the applicable reporting period regardless of whether such performance targets are probable of achievement.
For the three months ended March 31, 20192020 and 2018,2019, the following securities have been excluded from the calculation of diluted weighted‑average common shares outstanding as their impact was determined to be anti‑dilutive:
  Three months ended
  March 31,
  2020 2019
RSUs 
 4,050

  Three months ended
  March 31,
  2019 2018
RSUs 4,050
 


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14.13. Segment Information
The Company’s operating segments are based on how the Chief Operating Decision Maker (“CODM”) makes decisions about assessing performance and allocating resources. The Company has four4 reportable segments that are organized on the basis of product categories. These segments include Titleist golf balls, Titleist golf clubs, Titleist golf gear and FootJoy golf wear.
The CODM primarily evaluates performance using segment operating income (loss). Segment operating income (loss) includes directly attributable expenses and certain shared costs of corporate administration that are allocated to the reportable segments, but excludes interest expense, net, restructuring charges, the non-service cost component of net periodic benefit cost, transaction fees and other non‑operating gains and losses as the Company does not allocate these to the reportable segments. The CODM does not evaluate a measure of assets when assessing performance.
Results shown for the three months ended March 31, 20192020 and 20182019 are not necessarily those which would be achieved if each segment was an unaffiliated business enterprise. There are no intersegment transactions.
Information by reportable segment and a reconciliation to reported amounts are as follows:
  Three months ended March 31,
(in thousands) 2020 2019
Net sales    
Titleist golf balls $116,239
 $141,667
Titleist golf clubs 93,214
 91,318
Titleist golf gear 43,525
 45,181
FootJoy golf wear 130,387
 140,981
Other 25,376
 14,555
Total net sales
$408,741
 $433,702
     
Segment operating income (loss)    
Titleist golf balls $3,243
 $19,728
Titleist golf clubs 4,503
 (405)
Titleist golf gear 8,865
 9,151
FootJoy golf wear 14,297
 20,144
Other 1,080
 3,440
Total segment operating income
31,988
 52,058
Reconciling items:    
Interest expense, net (4,123) (4,883)
Restructuring charges (11,628) 
Non-service cost component of net periodic benefit cost (507) 262
Other 885
 877
Total income before income tax
$16,615
 $48,314
  Three months ended March 31,
(in thousands) 2019 2018
Net sales    
Titleist golf balls $141,667
 $124,906
Titleist golf clubs 91,318
 116,893
Titleist golf gear 45,181
 44,345
FootJoy golf wear 140,981
 140,706
Other 14,555
 14,951
Total net sales
$433,702
 $441,801
     
Segment operating income (loss)    
Titleist golf balls $19,728
 $13,980
Titleist golf clubs (405) 16,383
Titleist golf gear 9,151
 7,784
FootJoy golf wear 20,144
 20,255
Other 3,440
 2,547
Total segment operating income
52,058
 60,949
Reconciling items:    
Interest expense, net (4,883) (4,408)
Non-service cost component of net periodic benefit cost 262
 7
Other 877
 1,762
Total income before income tax
$48,314
 $58,310

Information as to the Company’s operations in different geographical areas is presented below. Net sales are categorized based on the location in which the sale originates.
  Three months ended March 31,
(in thousands) 2020 2019
United States $211,008
 $230,383
EMEA (1)
 74,671
 71,078
Japan 37,556
 40,735
Korea 50,449
 49,042
Rest of world 35,057
 42,464
Total net sales $408,741
 $433,702
  Three months ended March 31,
(in thousands) 2019 2018
United States $230,383
 $219,289
EMEA (1)
 71,078
 73,042
Japan 40,735
 52,129
Korea 49,042
 52,675
Rest of world 42,464
 44,666
Total net sales $433,702
 $441,801

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


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15.14. Commitments and Contingencies
Purchase Obligations
During the normal course of its business, the Company enters into agreements to purchase goods and services, including purchase commitments for production materials, finished goods inventory, capital expenditures and endorsement arrangements with professional golfers.
The reported amounts exclude those liabilities included in accounts payable or accrued liabilities on the consolidated balance sheetCompany's purchase obligations as of March 31, 2019.
Purchase obligations by the Company as of March 31, 20192020 were as follows:
  Payments Due by Period
  Remainder of          
(in thousands) 2020 2021 2022 2023 2024 Thereafter
Purchase obligations (1)
 $139,355
 $17,955
 $4,065
 $649
 $467
 $1,603

  Payments Due by Period
  Remainder of          
(in thousands) 2019 2020 2021 2022 2023 Thereafter
Purchase obligations $177,549
 $22,964
 $6,732
 $1,971
 $1,525
 $4,806

(1)The reported amounts exclude those liabilities included in accounts payable or accrued liabilities on the unaudited condensed consolidated balance sheet as of March 31, 2020.
Contingencies
In connection with the Company’s acquisition of Acushnet Company, Beam Suntory, IncInc. indemnified the Company for certain tax related obligations that relate to periods during which Fortune Brands, Inc. owned Acushnet Company. As of March 31, 20192020 and December 31, 2018,2019, the Company’s estimate of its receivable for these indemnifications was $9.1$9.6 million and $8.9$9.5 million, respectively, which was recorded in other noncurrent assets on the unaudited condensed consolidated balance sheet.sheets.
Litigation
The Company and its subsidiaries are defendants in lawsuits associated with the normal conduct of their businesses and operations. It is not possible to predict the outcome of the pending actions, and, as with any litigation, it is possible that some of these actions could be decided unfavorably. Consequently, the Company is unable to estimate the ultimate aggregate amount of monetary loss, amounts covered by insurance or the financial impact that will result from such matters and has not recorded a liability related to potential losses.

15. Restructuring Charges
During the first quarter of 2020, management approved a restructuring program to refine its business model and improve operational efficiencies. This program included both a voluntary retirement program and involuntary headcount reductions, which are discussed further below.
During the three months ended March 31, 2020, the Company announced a voluntary bridge to retirement ("VBR") program for certain eligible employees. The program is part of the Company's long-term strategic planning process and is designed to bridge eligible employees to retirement. As part of this program, employees were offered severance in the form of salary continuation, including benefits, as well as accrued bonus incentives. During the three months ended March 31, 2020, the Company recorded $11.2 million in severance and other benefits related to the VBR program, of which $7.5 million was included in accrued compensation and benefits and $3.7 million was included in other noncurrent liabilities on the unaudited condensed consolidated balance sheet as of March 31, 2020. There are no further costs expected to be incurred with this voluntary program.
During the three months ended March 31, 2020, the Company began involuntary headcount reductions and recorded $0.4 million in severance and other benefits.
Subject to the length and severity of the COVID-19 pandemic, the Company may implement additional restructuring programs in the future.

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ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion contains management’s discussion and analysis of our financial condition and results of operations and should be read together with our unaudited condensed consolidated financial statements and the notes thereto included elsewhere in this report. This discussion contains forward-looking statements that reflect our plans, estimates and beliefs and involve numerous risks and uncertainties, including but not limited to those described in “Part II, Item 1A. Risk Factors” and elsewhere in this Quarterly Report on Form 10‑Q and in our other filings with the Securities and Exchange Commission (“SEC”). Actual results may differ materially from those contained in any forward-looking statements. You should carefully read “Special Note Regarding Forward-Looking Statements” following the Table of Contents. Unless otherwise noted, the figures in the following discussion are unaudited.
Overview
We are the global leader in the design, development, manufacture and distribution of performance-driven golf products, which are widely recognized for their quality excellence. Today, we are the steward of two of the most revered brands in golf—Titleist, one of golf’s leading performance equipment brands, and FootJoy, one of golf’s leading performance wear brands. We own or control the design, sourcing, manufacturing, packaging and distribution of our products. In doing so, we are able to exercise control over every step of the manufacturing process.
Our target market is dedicated golfers, who are the cornerstone of the worldwide golf industry. These dedicated golfers are avid and skill-biased, prioritize performance and commit the time, effort and money to improve their game. We believe our focus on innovation and process excellence yields golf products that represent superior performance and consistent product quality, which are the key attributes sought after by dedicated golfers. Many of the game's professional players, who represent the most dedicated golfers, prefer our products thereby validating our performance and quality promise, while also driving brand awareness. We seek to leverage a pyramid of influence product and promotion strategy, whereby our products are the most played by the best players, creating aspirational appeal for a broad range of golfers who want to emulate the performance of the game's best players.
Our net sales are diversified by both product category and mix as well as geography. Our product categories include golf balls, golf clubs, wedges and putters, golf shoes, golf gloves, golf gear and golf outerwear and apparel. Our product portfolio contains a favorable mix of consumable products, which we consider to be golf balls and golf gloves, and more durable products, which we consider to be golf clubs, golf shoes, golf gear and golf outerwear and apparel. Our net sales are also diversified by geography with a substantial majority of our net sales generated in five countries: the United States, Japan, Korea, the United Kingdom and Canada. We have the following reportable segments: Titleist golf balls; Titleist golf clubs; Titleist golf gear; and FootJoy golf wear.
Impact of COVID-19 on our Business
In March 2020, the World Health Organization declared a pandemic related to the novel coronavirus (“COVID-19”). To date, the COVID-19 pandemic has spread across multiple countries and resulted in government-ordered shutdowns of non-essential businesses, travel restrictions and restrictions on public gatherings. This has led to reduced consumer demand for golf-related products, the temporary closure of golf courses, including on-course retail pro shops, the temporary closure of off-course retail partner locations and the cancellation of professional golf tour events. In response to the outbreak and to mitigate the spread of the COVID-19 pandemic, we have, consistent with related orders from federal, state and local governments, temporarily closed or limited operations in our North American manufacturing facilities, distribution centers and corporate offices, with associates working remotely where possible. Outside of the U.S., many distribution centers, including those in Europe, are operating on a limited basis. As our fiscal first quarter 2020 ended on March 31, 2020, we had business disruptions to varying degrees across many regions. Our businesses in Asia were adversely impacted earlier in the quarter and are at varying stages of recovery, with Korea nearly fully recovered and other markets working their way towards recovery. Our businesses in the United States, Europe, Canada and Australia began to see the impacts of the COVID-19 pandemic later in the quarter and continue to be adversely impacted. Coinciding with the government-ordered shutdown of non-essential businesses and restrictions on public gatherings, consumer demand for our products slowed significantly in March, particularly in the United States. As a result, the COVID-19 pandemic has materially impacted our results of operations for the first quarter of 2020 as described in more detail under “Results of Operations for the Three Months Ended March 31, 2020 Compared to the Three Months Ended March 31, 2019” below. While it is impossible to quantify the impact of the COVID-19 pandemic, we expect business disruptions as a result of the COVID-19 pandemic to continue to have a material impact on our business, results of operations, financial position and cash flows.

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We have taken several steps to strengthen our financial position and balance sheet, bolster our liquidity position and provide additional financial flexibility, including reducing payroll costs through associate furloughs and a temporary reduction in senior management compensation, reducing discretionary spending, reducing capital expenditures, suspending our share repurchase program, temporarily suspending cash retainers of our Board of Directors and drawing down $200.0 million on our revolving credit facility on April 1, 2020.
Given the uncertainty of the COVID-19 pandemic situation, we cannot reasonably estimate the impacts of the COVID-19 pandemic on our business, results of operations, financial position and cash flows in the future. However, we do expect that it will materially impact our operations going forward due to:
the impact of governmental orders and regulations that have been and may be imposed in response to the pandemic;
potential changes in consumer behavior, including consumer confidence, spending habits and rounds of golf played; and
a slowdown in the U.S. and global economy.
Key Performance Measures
We use various financial metrics to measure and evaluate our business, including, among others: (i) net sales on a constant currency basis, (ii) Adjusted EBITDA on a consolidated basis, (iii) Adjusted EBITDA margin on a consolidated basis and (iv) segment operating income.
Since a significant percentage of our net sales are generated outside of the United States, we use net sales on a constant currency basis to evaluate the sales performance of our business in period over period comparisons and for forecasting our business going forward. Constant currency information allows us to estimate what our sales performance would have been without changes in foreign currency exchange rates. This information is calculated by taking the current period local currency sales and translating them into U.S. dollars based upon the foreign currency exchange rates for the applicable comparable prior period. This constant currency information should not be considered in isolation or as a substitute for any measure derived in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). Our presentation of constant currency information may not be consistent with the manner in which similar measures are derived or used by other companies.
We primarily use Adjusted EBITDA on a consolidated basis to evaluate the effectiveness of our business strategies, assess our consolidated operating performance and make decisions regarding pricing of our products, go to market execution and costs to incur across our business. We present Adjusted EBITDA as a supplemental measure of our operating performance because it excludes the impact of certain items that we do not consider indicative of our ongoing operating performance. We define Adjusted EBITDA in a manner consistent with the term “Consolidated EBITDA” as it is defined in our credit agreement. Adjusted EBITDA represents net income (loss) attributable to Acushnet Holdings Corp. plusadjusted for interest expense, net, income tax

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expense, depreciation and amortization and other items defined in the agreement, including: share-based compensation expense,expense; restructuring charges; certain transaction fees,fees; extraordinary, unusual or non-recurring losses or charges; indemnification expense (income) from Beam Suntory, Inc ("Beam"),; executive pension settlement,settlement; certain other non-cash (gains) losses, net and the net income relating to noncontrolling interests. Adjusted EBITDA is not a measurement of financial performance under U.S. GAAP. It should not be considered an alternative to net income (loss) attributable to Acushnet Holdings Corp., as a measure of our operating performance or any other measure of performance derived in accordance with U.S. GAAP. In addition, Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items, or affected by similar non-recurring items. Adjusted EBITDA has limitations as an analytical tool, and you should not consider such measure either in isolation or as a substitute for analyzing our results as reported under U.S. GAAP. Our definition and calculation of Adjusted EBITDA is not necessarily comparable to other similarly titled measures used by other companies due to different methods of calculation. For a reconciliation of Adjusted EBITDA to net income (loss) attributable to Acushnet Holdings Corp., see “—Results of Operations” below.
We also use Adjusted EBITDA margin on a consolidated basis, which measures our Adjusted EBITDA as a percentage of net sales, because our management uses it to evaluate the effectiveness of our business strategies, assess our consolidated operating performance and make decisions regarding pricing of our products, go to market execution and costs to incur across our business. We present Adjusted EBITDA margin as a supplemental measure of our operating performance because it excludes the impact of certain items that we do not consider indicative of our ongoing operating performance. Adjusted EBITDA margin is not a measurement of financial performance under U.S. GAAP. It should not be considered an alternative to any measure of performance derived in accordance with U.S. GAAP. In addition, Adjusted EBITDA margin should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items, or affected by similar non-recurring items. Adjusted EBITDA margin has limitations as an analytical tool, and you should not consider such measure

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either in isolation or as a substitute for analyzing our results as reported under U.S. GAAP. Our definition and calculation of Adjusted EBITDA margin is not necessarily comparable to other similarly titled measures used by other companies due to different methods of calculation.
Lastly, we use segment operating income to evaluate and assess the performance of each of our reportable segments and to make budgeting decisions. Segment operating income includes directly attributable expenses and certain shared costs of corporate administration that are allocated to the reportable segments, but excludes interest expense, net; restructuring charges; the non-service cost component of net periodic benefit cost; transaction fees and other non-operating gains and losses as we do not allocate these to the reportable segments.

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Results of Operations
The following table sets forth, for the periods indicated, our results of operations.
 
 Three months ended Three months ended
 March 31, March 31,
(in thousands) 2019 2018 2020 2019
Net sales $433,702
 $441,801
 $408,741
 $433,702
Cost of goods sold 211,545
 214,127
 207,786
 211,545
Gross profit 222,157
 227,674
 200,955
 222,157
Operating expenses:   
   
   
   
Selling, general and administrative 155,426
 151,368
 152,723
 155,426
Research and development 12,751
 12,392
 13,220
 12,751
Intangible amortization 1,753
 1,630
 1,956
 1,753
Restructuring charges 11,628
 
Income from operations 52,227
 62,284
 21,428
 52,227
Interest expense, net 4,883
 4,408
 4,123
 4,883
Other income, net (970) (434)
Other expense (income), net 690
 (970)
Income before income taxes 48,314
 58,310
 16,615
 48,314
Income tax expense 12,275
 15,220
 7,640
 12,275
Net income 36,039
 43,090
 8,975
 36,039
Less: Net income attributable to noncontrolling interests (1,113) (1,606) (98) (1,113)
Net income attributable to Acushnet Holdings Corp. $34,926
 $41,484
 $8,877
 $34,926
Adjusted EBITDA:   
   
   
   
Net income attributable to Acushnet Holdings Corp. $34,926

$41,484
 $8,877

$34,926
Interest expense, net 4,883
 4,408
 4,123
 4,883
Income tax expense 12,275

15,220
 7,640

12,275
Depreciation and amortization 9,797

10,325
 10,269

9,797
Share-based compensation 1,785

4,126
 2,187

1,785
Other non-cash income, net (a)
 (554)
(97)
Restructuring charges (1)
 11,628


Other extraordinary, unusual or non-recurring items, net (2)
 7,986

(554)
Net income attributable to noncontrolling interests 1,113

1,606
 98

1,113
Adjusted EBITDA $64,225
 $77,072
 $52,808
 $64,225
Adjusted EBITDA margin 14.8%
17.4% 12.9%
14.8%



(a)(1)Relates to severance and other charges associated with management's approved restructuring program to refine its business model and improve operational efficiencies.
(2)Includes salaries and benefits paid for associates who could not work due to government mandated shutdowns, fringe benefits paid for furloughed associates, spoiled raw materials, incremental costs to support remote work and the cost of additional health and safety equipment of $7.5 million during the three months ended March 31, 2020 and $0.5 million and $(0.6) million of non-cash chargesindemnification expense (income) related to the indemnification obligations owed to us by Beam, transaction fees and other non-cash (gains) losses, net that are included when calculating net income attributable to Acushnet Holdings Corp. during the three months ended March 31, 2020 and 2019, respectively.



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Three Months Ended March 31, 20192020 Compared to the Three Months Ended March 31, 20182019


Net sales by reportable segment is summarized as follows:
 
 Three months ended     Constant Currency Three months ended     Constant Currency
 March 31, Increase/(Decrease) Increase/(Decrease) March 31, Increase/(Decrease) Increase/(Decrease)
 2019 2018 $ change % change $ change % change
 (in thousands)
(in millions) 2020 2019 $ change % change $ change % change
Titleist golf balls $141,667

$124,906

$16,761

13.4 %
$19,936

16.0 % $116.2

$141.7

$(25.5)
(18.0)%
$(24.1)
(17.0)%
Titleist golf clubs 91,318

116,893

(25,575)
(21.9)%
(23,501)
(20.1)% 93.2

91.3

1.9

2.1 %
2.7

3.0 %
Titleist golf gear 45,181

44,345

836

1.9 %
2,112

4.8 % 43.5

45.2

(1.7)
(3.8)%
(0.8)
(1.8)%
FootJoy golf wear 140,981

140,706

275

0.2 %
4,477

3.2 % 130.4

141.0

(10.6)
(7.5)%
(9.1)
(6.5)%
 
Segment operating income (loss) by reportable segment is summarized as follows:
 
 Three months ended     Three months ended    
 March 31, Increase/(Decrease)
 2019 2018 $ change % change
(in millions) March 31, Increase/(Decrease)
Segment operating income (loss) (in thousands) 2020 2019 $ change % change
Titleist golf balls $19,728
 $13,980
 $5,748
 41.1 % $3.2
 $19.7
 $(16.5) (83.8)%
Titleist golf clubs (405) 16,383
 (16,788) (102.5)% 4.5
 (0.4) 4.9
 1,225.0 %
Titleist golf gear 9,151
 7,784
 1,367
 17.6 % 8.9
 9.2
 (0.3) (3.3)%
FootJoy golf wear 20,144
 20,255
 (111) (0.5)% 14.3
 20.1
 (5.8) (28.9)%


Net sales information by region is summarized as follows:
 
 Three months ended     Constant Currency Three months ended     Constant Currency
 March 31, Increase/(Decrease) Increase/(Decrease) March 31, Increase/(Decrease) Increase/(Decrease)
 2019 2018 $ change % change $ change % change
 (in thousands)
(in millions) 2020 2019 $ change % change $ change % change
United States $230,383

$219,289

$11,094

5.1 %
$11,094

5.1 % $211.0

$230.4

$(19.4)
(8.4)%
$(19.4)
(8.4)%
EMEA 71,078

73,042

(1,964)
(2.7)%
3,988

5.5 % 74.7

71.1

3.6

5.1 %
5.3

7.5 %
Japan 40,735

52,129

(11,394)
(21.9)%
(10,467)
(20.1)% 37.6

40.7

(3.1)
(7.6)%
(3.8)
(9.3)%
Korea 49,042

52,675

(3,633)
(6.9)%
(1,251)
(2.4)% 50.4

49.0

1.4

2.9 %
4.5

9.2 %
Rest of world 42,464

44,666

(2,202)
(4.9)%
(92)
(0.2)% 35.0

42.5

(7.5)
(17.6)%
(6.4)
(15.1)%
Total net sales $433,702

$441,801

$(8,099)
(1.8)%
$3,272

0.7 % $408.7

$433.7

$(25.0)
(5.8)%
$(19.8)
(4.6)%
 
Net Sales

Net sales decreased by $8.1$25.0 million, or 1.8%5.8%, to $408.7 million for the three months ended March 31, 2020 compared to $433.7 million for the three months ended March 31, 2019 compared to $441.8 million for the three months ended March 31, 2018.2019. On a constant currency basis, net sales increaseddecreased by $3.3$19.8 million, or 0.7%4.6%, to $445.1$413.9 million. The increasedecrease in net sales on a constant currency basis was due to an increasea decrease of $19.9 million in net sales of Titleist golf balls driven by the introduction of the new Pro V1 and Pro V1x models, an increase of $4.5 million in net sales of FootJoy golf wear driven by sales volume increases in our FootJoy footwear and apparel categories and an increase of $2.1$24.1 million in Titleist golf gear driven byball sales volume increasesand a decrease of $9.1 million in our travel gear andFootJoy golf bag categories, partially offset bywear, primarily as a $23.5 million decrease in Titleist golf clubs. The decrease in Titleist golf clubs was primarily related to lower sales volumesresult of wedges, Select model putters and irons, partially offset by higher sales volumesthe negative impact of our TS drivers and TS fairways. Titleist golf club sales were also negatively impacted by our spring putter launch which generally occursthe COVID-19 pandemic in the first quarter of an odd-numbered year, however our new Phantom X family2020, as previously described. The remaining change in net sales was primarily due to the acquisition of putters was launched inKJUS during the secondthird quarter of 2019.


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KJUS have not been allocated to any of our reportable segments.
Net sales in the United States increaseddecreased by $11.1$19.4 million, or 5.1%8.4%, to $211.0 million for the three months ended March 31, 2020 compared to $230.4 million for the three months ended March 31, 2019 compared to $219.3 million for the three months ended March 31, 2018. This increase in net2019. Overall, sales in the United States was primarily driven by an increasewere lower as a result of $10.4the negative impact of the COVID-19 pandemic. Net sales were lower across all reportable segments, with Titleist golf balls sales down $17.3 million, FootJoy golf wear sales down $2.5 million and Titleist golf gear sales down $1.9 million. The remaining change in net sales was primarily due to the acquisition of Titleist golf balls and an increaseKJUS during the third quarter of $6.2 million2019.
Net sales in net salesregions outside of FootJoy golf wear, partially offsetthe United States were also negatively impacted by a decrease of $6.0 million in Titleist golf clubs.

Ourthe COVID-19 pandemic. Net sales in regions outside of the United States decreased by $19.2$5.6 million, or 8.6%2.8%, to $197.7 million for the three months ended

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March 31, 2020 compared to $203.3 million for the three months ended March 31, 2019 compared to $222.5 million for the three months ended March 31, 2018.2019. On a constant currency basis, net sales in such regions decreased by $7.8$0.4 million, or 3.5%0.2%, to $214.7$202.9 million. ThisIn EMEA, the increase in net sales was primarily due to the acquisition of KJUS, offset by lower sales volumes of Titleist golf balls and FootJoy footwear. In Japan, the decrease in net sales was primarily resulted fromdue to a decrease of $17.5 million in net sales of Titleist golf clubsballs and FootJoy golf wear. In Korea, the increase in net sales was driven by increased sales across all categories with the exception of FootJoy golf wear. Sales in the rest of the world were lower as a result of the lower sales volumes discussed above that include a decrease in sales volumes of our Japan-specific VG3 irons which were introduced in the first quarter of 2018, partially offset by an increase of $9.6 million in net sales of Titleist golf balls.

balls and FootJoy golf wear.
Gross Profit

Gross profit decreased by $5.5$21.2 million to $201.0 million for the three months ended March 31, 2020 compared to $222.2 million for the three months ended March 31, 2019 compared2019. Gross margin decreased to $227.7 million49.2% for the three months ended March 31, 2018. Gross margin decreased2020 compared to 51.2% for the three months ended March 31, 2019 compared to 51.5% for the three months ended March 31, 2018, primarily due to a lower gross margin in Titleist golf clubs.2019. The decrease in gross profit resulted from a $16.2decrease of $20.1 million decrease in gross profit in Titleist golf clubsballs and a decrease of $8.1 million in gross profit in FootJoy golf wear, each primarily due to a sales volume declines discussed above. The remaining change in gross profit was primarily due to the acquisition of KJUS, acquired in the third quarter of 2019.
The decrease in irons and wedges, partially offsetgross margin was primarily driven by an increase of $8.8 millionlower gross margins in the Titleist golf balls driven by higher sales volumesball and FootJoy golf wear segments. The Titleist golf ball segment experienced unfavorable manufacturing overhead absorption related to the temporary closure of our U.S. based golf ball manufacturing facilities and FootJoy experienced lower footwear production volume at our footwear manufacturing facility, both as a result of the Pro V1 and Pro V1x franchise.
negative impact of the COVID-19 pandemic.
Selling, General and Administrative Expenses

SG&A expenses increaseddecreased by $4.0$2.7 million to $152.7 million for the three months ended March 31, 2020 compared to $155.4 million for the three months ended March 31, 2019 compared to $151.4 million for the three months ended March 31, 2018.2019. This increasedecrease was primarily due to a decrease of $3.6 million in advertising and promotional costs and $3.1 million in lower employee related expenses, partially offset by an increase of $2.9$3.4 million in selling expenses across all segments, an increase of $2.1 million in advertising and promotion expenses primarily related to the Pro V1 and Pro V1x launch in the first quarterour acquisition of 2019 and higher professional tour costs, partially offset by a decrease of $2.3 million in share-based compensation.KJUS. Overall SG&A included a $2.6$1.3 million favorable impact of changes in foreign currency exchange rates across all expense categories and segments.

Research and Development

R&D expenses increased by $0.4 million to $13.2 million for the three months ended March 31, 2020 compared to $12.8 million for the three months ended March 31, 2019 compared2019. R&D expenses increased as a result of the acquisition of KJUS.
Intangible Amortization
Intangible amortization expense increased $0.2 million to $12.4$2.0 million for the three months ended March 31, 2018. As a percentage of consolidated net sales, R&D expenses were 2.9%, up from 2.8% for the three months ended March 31, 2018.

Intangible Amortization

Intangible amortization expenses were2020 compared to $1.8 million and $1.6 million for the three months ended March 31, 2019, primarily due to an increase in amortizing intangible assets related to the acquisition of KJUS.
Restructuring Charges
During the first quarter of 2020, management approved a restructuring program to refine our business model and 2018, respectively.

improve operational efficiencies. This program included both a voluntary retirement program and involuntary headcount reductions. As part of this program we recorded $11.2 million in severance and other benefits expense related to the voluntary retirement program, as well as, $0.4 million in severance and other benefits related to our involuntary program during the three months ended March 31, 2020.
Interest Expense, net

Interest expense, net increaseddecreased by $0.5$0.8 million to $4.1 million for the three months ended March 31, 2020 compared to $4.9 million for the three months ended March 31, 2019 compared2019.
Other Expense (Income), net
Other expense (income), net increased by $1.7 million to $4.4other expense of $0.7 million for the three months ended March 31, 2018.

Other Income, Net

Other2020 compared to other income net increased by $0.6 million toof $1.0 million for the three months ended March 31, 2019 compared2019. This increase was primarily due to $0.4an increase in non-service related pension costs.

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Income Tax Expense
Income tax expense decreased by $4.7 million to $7.6 million for the three months ended March 31, 2018.

Income Tax Expense

Income tax expense decreased by $2.9 million2020 compared to $12.3 million for the three months ended March 31, 20192019. Our effective tax rate ("ETR") was 46.0% for the three months ended March 31, 2020 compared to $15.225.4% for the three months ended March 31, 2019. The increase in the ETR was primarily driven by the negative impact of the COVID-19 pandemic on our jurisdictional mix of earnings and the effect of foreign currency losses incurred in the quarter that cannot be benefited, as well as, a reduction in discrete tax benefits related to share-based compensation expense.
Net Income Attributable to Acushnet Holdings Corp.
Net income attributable to Acushnet Holdings Corp. decreased by $26.0 million to $8.9 million for the three months ended March 31, 2018. Our Effective Tax Rate ("ETR") was 25.4%2020 compared to $34.9 million for the three months ended March 31, 2019, comparedprimarily as a result of a decrease in income from operations as discussed above, partially offset by a decrease in income tax expense.
Adjusted EBITDA
Adjusted EBITDA decreased by $11.4 million to 26.1%$52.8 million for the three months ended March 31, 2018.2020 compared to $64.2 million for the three months ended March 31, 2019, primarily due to a decrease in income from operations. Adjusted EBITDA margin decreased to 12.9% for the three months ended March 31, 2020 compared to 14.8% for the three months ended March 31, 2019.
Segment Results
Titleist Golf Balls Segment
Net sales in our Titleist golf balls segment decreased by $25.5 million, or 18.0%, to $116.2 million for the three months ended March 31, 2020 compared to $141.7 million for the three months ended March 31, 2019. On a constant currency basis, net sales in our Titleist golf balls segment decreased by $24.1 million, or 17.0%, to $117.6 million. This decrease was as a result of lower sales volumes primarily due to the negative impact of the COVID-19 pandemic in the United States along with lower sales volumes of Pro V1 and Pro V1x golf balls, which were expected as these were in their second model year, partially offset by a sales volume increase of our newly-introduced performance models.
Titleist golf balls segment operating income decreased by $16.5 million, or 83.8%, to $3.2 million for the three months ended March 31, 2020 compared to $19.7 million for the three months ended March 31, 2019. This decrease was primarily due to a decrease in gross profit of $20.1 million, partially offset by lower operating expenses. The decrease in ETRgross profit was primarily drivendue to the sales decline discussed above and unfavorable manufacturing overhead absorption due to the closure of our United States based golf ball manufacturing facility as a result of the COVID-19 pandemic. Operating expenses decreased as a result of a $2.4 million decrease in advertising and promotional costs and lower employee related costs.
Titleist Golf Clubs Segment
Net sales in our Titleist golf clubs segment increased by $1.9 million, or 2.1%, to $93.2 million for the discrete tax benefit realizedthree months ended March 31, 2020 compared to $91.3 million for the three months ended March 31, 2019. On a constant currency basis, net sales in our Titleist golf clubs segment increased by $2.7 million, or 3.0%, to $94.0 million. The increase in net sales was due to higher sales volumes of our newly introduced SM8 wedges coupled with our Scotty Cameron Special Select putters launched in the first quarter of 2019 related to share based compensation expense,2020. This increase was partially offset by amountsthe negative impact of the COVID-19 pandemic and lower sales volumes of drivers and fairways, which were in their second model year.
Titleist golf clubs segment operating income increased by $4.9 million to operating income of $4.5 million for the three months ended March 31, 2020 compared to an operating loss of $0.4 million for the three months ended March 31, 2019. The increase in operating income was primarily driven by higher gross profit of $2.8 million and lower operating expenses. The increase in gross profit primarily resulted from increased sales volumes discussed above and favorable manufacturing overhead absorption. Operating expenses decreased as a result of lower promotional costs and lower employee related costs.
Titleist Golf Gear Segment
Net sales in our Titleist golf gear segment decreased by $1.7 million, or 3.8%, to $43.5 million for the three months ended March 31, 2020 compared to $45.2 million for the three months ended March 31, 2019. On a constant currency basis, net sales in our Titleist golf gear segment decreased by $0.8 million, or 1.8%, to $44.4 million. This decrease was primarily due to the U.S. Tax Cutsnegative impact of the COVID-19 pandemic on sales volumes in the United States and Jobs Act of 2017 and changes to our geographic mix of earnings.EMEA.


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Net Income Attributable to Acushnet Holdings Corp.

NetTitleist golf gear segment operating income attributable to Acushnet Holdings Corp. decreased by $6.6$0.3 million, or 3.3%, to $34.9$8.9 million for the three months ended March 31, 20192020 compared to net income of $41.5 million for the three months ended March 31, 2018, primarily as a result of a decrease in income from operations, partially offset by a decrease in income tax expense, as discussed in more detail above.

Adjusted EBITDA

Adjusted EBITDA decreased by $12.9 million to $64.2 million for the three months ended March 31, 2019 compared to $77.1 million for the three months ended March 31, 2018, primarily due to a decrease in income from operations. Adjusted EBITDA margin decreased to 14.8% for the three months ended March 31, 2019 compared to 17.4% for the three months ended March 31, 2018.

Segment Results

Titleist Golf Balls Segment

Net sales in our Titleist golf balls segment increased by $16.8 million, or 13.4%, to $141.7 million for the three months ended March 31, 2019 compared to $124.9 million for the three months ended March 31, 2018. On a constant currency basis, net sales in our Titleist golf balls segment increased by $19.9 million, or 16.0%, to $144.8 million. This increase was primarily driven by higher sales volumes of our latest generation Pro V1 and Pro V1x golf balls launched in the first quarter of 2019 and our AVX premium performance golf balls introduced in the second quarter of 2018, partially offset by a sales volume decline in our performance golf balls which were in their second model year.

Titleist golf balls segment operating income increased by $5.7 million, or 41.1%, to $19.7 million for the three months ended March 31, 2019 compared to $14.0 million for the three months ended March 31, 2018. This increase was primarily due to an increase in gross profit of $8.8 million which was partially offset by higher operating expenses. The increase in gross profit was primarily driven by higher sales volume as discussed above.  Operating expenses increased primarily due to a $2.6 million increase in advertising and promotion expenses related to new product launches and professional tour costs.

Titleist Golf Clubs Segment

Net sales in our Titleist golf clubs segment decreased by $25.6 million, or 21.9%, to $91.3 million for the three months ended March 31, 2019 compared to $116.9 million for the three months ended March 31, 2018. On a constant currency basis, net sales in our Titleist golf clubs segment decreased by $23.5 million, or 20.1%, to $93.4 million. This decrease primarily resulted from lower sales volumes of our wedges, Select model putters and Japan-specific VG3 irons which were all introduced in the first quarter of 2018 and our iron series which was in its second model year. The decrease was offset by higher sales volumes of our TS drivers and TS fairways which were launched in the third quarter of 2018. Titleist golf club sales were also negatively impacted by our spring putter launch which generally occurs in the first quarter of an odd-numbered year, however our new Phantom X family of putters was launched in the second quarter of 2019.

Titleist golf clubs segment operating income decreased by $16.8 million, or 102.5%, to a loss of $0.4 million for the three months ended March 31, 2019 compared to income of $16.4 million for the three months ended March 31, 2018. The decrease in operating income primarily resulted from lower gross profit of $16.2 million as a result of the sales volume decrease discussed above. Gross margin decreased primarily as a result of unfavorable manufacturing overhead absorption due to lower golf club production volume.

Titleist Golf Gear Segment

Net sales in our Titleist golf gear segment increased by $0.9 million, or 1.9%, to $45.2 million for the three months ended March 31, 2019 compared to $44.3 million for the three months ended March 31, 2018. On a constant currency basis, net sales in our Titleist golf gear segment increased by $2.1 million, or 4.8%, to $46.4 million. This increase was primarily due to a sales volume increase in our travel gear and golf bag categories.

Titleist golf gear segment operating income increased by $1.4 million, or 17.6%, to $9.2 million for the three months ended March 31, 2019 compared2019. The decrease in operating income was primarily driven by lower gross profit as a result of the sales volume decrease discussed above partially offset by lower operating expenses as a result of lower promotional costs and lower employee related costs.
FootJoy Golf Wear Segment
Net sales in our FootJoy golf wear segment decreased by $10.6 million, or 7.5%, to $7.8$130.4 million for the three months ended March 31, 2018.2020 compared to $141.0 million for the three months ended March 31, 2019. On a constant currency basis, net sales in our FootJoy golf wear segment decreased by $9.1 million, or 6.5%, to $131.9 million. This decrease was primarily due to sales volume decreases across all markets primarily due to the negative impact of the COVID-19 pandemic.
FootJoy golf wear segment operating income decreased by $5.8 million, or 28.9%, to $14.3 million for the three months ended March 31, 2020 compared to $20.1 million for the three months ended March 31, 2019. This decrease was primarily due to lower gross profit of $8.1 million, partially offset by lower operating expenses. The increasedecrease in operating incomegross profit was primarily driven by higherlower sales volume as discussed above and unfavorable manufacturing costs partially offset by lower inbound freightoperating expenses as a result of lower promotional costs and lower employee related costs.





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FootJoy Golf Wear Segment

Net sales in our FootJoy golf wear segment increased by $0.3 million, or 0.2%, to $141.0 million for the three months ended March 31, 2019 compared to $140.7 million for the three months ended March 31, 2018. On a constant currency basis, net sales in our FootJoy golf wear segment increased by $4.5 million, or 3.2%, to $145.2 million. This increase was primarily driven by a sales volume increase in footwear and higher average selling prices in apparel.

FootJoy golf wear segment operating income decreased slightly by $0.2 million, or 0.5%, to $20.1 million for the three months ended March 31, 2019 compared to $20.3 million for the three months ended March 31, 2018. The decrease in operating income was primarily due to slightly lower gross margin.


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Liquidity and Capital Resources

Our primary cash needs relate to working capital, capital expenditures, servicing of our debt, paying dividends, pension contributions and repurchasing shares of our common stock. We expect to rely on cash flows from operations and borrowings under our revolving credit facility and local credit facilities as our primary sources of liquidity.

Our liquidity is impacted by our level of working capital, which is cyclical as a result of the general seasonality of our business. Our accounts receivable balance is generally at its highest starting at the end of the first quarter and continuing through the second quarter, and declines during the third and fourth quarters as a result of both an increase in cash collections and lower sales. Our inventory balance also fluctuates as a result of the seasonality of our business. Generally, our buildup of inventory starts during the fourth quarter and continues through the first quarter and into the beginning of the second quarter in order to meet demand for our initial sell‑in induring the first quarter and reorders in the second quarter. Both accounts receivable and inventory balances are impacted by the timing of new product launches.

As of March 31, 2019,2020, we had $42.9$53.9 million of unrestricted cash (including $10.3$14.9 million attributable to our FootJoy golf shoe joint venture). On April 1, 2020, we drew down $200.0 million under our revolving credit facility, thereby increasing our unrestricted cash by such amount. As of March 31, 2019, 95.7%2020, 94.1% of our total unrestricted cash was held at our non‑U.S. subsidiaries. We manage our worldwide cash requirements by monitoring the funds available among our subsidiaries and determining the extent to which we can access those funds on a cost effective basis. We are not aware of any restrictions on repatriation of these funds and, subject to foreign withholding taxes, those funds could be repatriated, if necessary. We have repatriated, and intend to repatriate, funds to the United States from time to time to satisfy domestic liquidity needs arising in the ordinary course of business, including liquidity needs related to debt service requirements.

As noted previously, the COVID-19 pandemic has adversely impacted our results of March 31, 2019,operations for the first quarter of 2020 and we had $135.3 millionexpect the related business disruptions to continue to have a material impact on our business, results of operations, financial position and cash flows. We have taken several steps to preserve our liquidity position and to manage cash flows on an ongoing basis. Subject to the length and severity of the COVID-19 pandemic, we believe that cash expected to be provided by operating activities, together with our cash on hand and the availability of borrowings under our revolving credit facility after giving effect to $10.7 million of outstanding letters of credit and we had $51.3 million available under our local credit facilities. See “Notesfacilities (subject to Consolidated Financial Statements-Note 10-Debtcustomary borrowing conditions) will be sufficient to meet our liquidity requirements for at least the next 12 months. Our ability to generate sufficient cash flows from operations is, however, subject to many risks and Financing Arrangements”uncertainties, including future economic trends and conditions, including the current COVID-19 pandemic, demand for our products, foreign currency exchange rates and other risks and uncertainties applicable to our business, as described in our Annual Report on Form 10-K for the year ended December 31, 2018 for a description2019 and further updated in "Risk Factors," Item 1A of Part II included elsewhere in this report.
Debt and Financing Arrangements
As of March 31, 2020, we had $225.3 million of availability under our revolving credit facility after giving effect to $9.7 million of outstanding letters of credit. Additionally, we had $52.8 million available under our local credit facilities. As part of the actions we have taken relating to the COVID-19 pandemic, we drew down $200.0 million under our revolving credit facility on April 1, 2020. Following the draw down, we had approximately $367.5 million outstanding and $22.4 million of available borrowings under our revolving credit facility, after giving effect to $10.1 million of outstanding letters of credit.
Our credit agreement contains customary affirmative and restrictive covenants, including, among others, financial covenants based on our leverage and interest coverage ratios. The credit agreement 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, 2019,2020, we were in compliance with all covenants under the credit agreement.
See "Notes“Notes to Unaudited Condensed Consolidated Financial Statements-Note 5-DebtStatements-Note-10-Debt and Financing Arrangements"Arrangements” in our Annual Report on Form 10-K for the year ended December 31, 2019 for a description of our covenants.
We made $5.5 million of capital expenditures in the three months ended March 31, 2019 and plancredit facilities. Additionally, see "Risk Factors - Risks Related to make capital expenditures of approximately $30.5 million during the remainder of 2019, although the actual amount of capital expenditures may vary depending upon a variety of factors, including the timing of implementation of certain capital projects. We expect the majority of these capital expenditures in the remainder of 2019 will be primarily related to investments to support the manufacturing and distribution of products, our go to market activities and continued investments in information technology to support our global strategic initiatives.

We believe that cash expected to be provided by operating activities, together with our cash on hand and the availability of borrowings under our revolving credit facility and our local credit facilities will be sufficient to meet our liquidity requirements for at least the next 12 months, subject to customary borrowing conditions. Our ability to generate sufficient cash flows from operations is, however, subject to many risks and uncertainties, including future economic trends and conditions, demand for our products, foreign currency exchange rates and other risks and uncertainties applicable to our business,Indebtedness" as described in our Annual Report on Form 10-K for the year ended December 31, 2018.2019 and "Risk Factors," Item 1A of Part II included elsewhere in this report for further discussion surrounding the risks and uncertainties of our credit facilities.

Capital Expenditures
We made $5.7 million of capital expenditures during the three months ended March 31, 2020. We plan to significantly reduce our capital expenditures until there is more clarity on the length and severity of the COVID-19 pandemic.

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Dividends and Share Repurchase Program
The Board of Directors has authorized us to repurchase up to an aggregate $100.0 million of our issued and outstanding common stock. Share repurchases may be effected from time to time in open market or privately negotiated transactions, including transactions with affiliates, with the timing of purchases and the amount of stock purchased generally determined at our discretion consistent with our general working capital needs and within the constraints of our credit agreement. This program will remain in effect until completed or until terminated by the Board of Directors. In connection with this share repurchase program, we entered into an agreement with Magnus Holdings Co., Ltd. (“Magnus”), a wholly owned subsidiary of Fila Holdings Co., to purchase from Magnus an equal amount of our common stock as we purchase on the open market, up to an aggregate of $24.9 million, at the same weighted average per share price.
During the three months ended March 31, 2020, we repurchased 243,894 shares of common stock on the open market at an average price of $28.60 for an aggregate of $7.0 million. As a result of these purchases, we recorded an additional liability to repurchase additional shares of common stock from Magnus of $7.0 million (243,894 shares of common stock) bringing the total liability to $8.8 million (299,894 shares of common stock) as of March 31, 2020. Excluding the impact of the share repurchase liability, as of March 31, 2020, we had $63.7 million remaining under the current share repurchase program, including the $11.1 million related to the Magnus share repurchase agreement. See “Notes to Unaudited Condensed Consolidated Financial Statements-Note 9-Common Stock,” Item 1 of Part I, included elsewhere in this report, for disclosures related to the Magnus share repurchase liability.
In April 2020, we announced that we were suspending stock repurchases in light of the COVID-19 pandemic. We have the ability to resume repurchases if we deem circumstances warrant.
During the first quarter of 2020, we paid dividends on our common stock of $11.5 million to our shareholders. During the second quarter of 2020, our Board of Directors declared a dividend of $0.155 per common share to shareholders of record as of June 5, 2020 and payable on June 19, 2020.
Cash Flows

The following table presents the major components of net cash flows used in and provided by (used in) operating, investing and financing activities for the periods indicated:
 Three months ended Three months ended
 March 31, March 31,
(in thousands) 2019 2018 2020 2019
Cash flows provided by (used in):   
   
   
   
Operating activities $(90,065) $(86,832) $(72,512) $(90,065)
Investing activities (5,462) (8,383) (5,741) (5,462)
Financing activities 109,076
 94,823
 101,867
 109,076
Effect of foreign exchange rate changes on cash 314
 1,040
Net increase in cash $13,863
 $648
Effect of foreign exchange rate changes on cash and restricted cash (1,874) 314
Net increase in cash and restricted cash $21,740
 $13,863
Cash Flows from Operating Activities

Net cash used in operating activities was $72.5 million for the three months ended March 31, 2020 compared to $90.1 million for the three months ended March 31, 2019, compared to $86.8 million for the three months ended March 31, 2018, an increasea decrease in cash used in operating activities of $3.3$17.6 million. Cash used in operating activities is subject toimpacted by changes in our working capital. Working capital at any specific point in time is subject to many variables including seasonality and inventory management, the timing of cash receipts and payments, vendor payment terms, and fluctuations in foreign exchange rates.

Cash Flows from Investing Activities
Net cash used in investing activities was $5.7 million for the three months ended March 31, 2020 compared to $5.5 million for the three months ended March 31, 2019, comparedan increase in cash used in investing activities of $0.2 million. This increase relates to $8.4an increase in capital expenditures.
Cash Flows from Financing Activities
Net cash provided by financing activities was $101.9 million for the three months ended March 31, 2018, a decrease in cash used in investing activities of $2.9 million. The decrease was primarily due2020 compared to cash used for business acquisitions during the three months ended March 31, 2018.

Cash Flows from Financing Activities

Net cash provided by financing activities was $109.1 million for the three months ended March 31, 2019, compared to $94.8 million for the three months ended March 31, 2018, an increasea decrease in cash provided by financing activities of $14.3$7.2 million.

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This increasedecrease was primarily due to an increasea decrease in net proceeds from borrowings partially offset byand an increase in paymentpayments related to purchases of common stock, offset in part by a decrease in payments for employee restricted stock tax withholdings during the three months ended March 31, 2019.
withholdings.
Off-Balance Sheet Arrangements

As of March 31, 2019,2020, other than as discussed above, we did not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources.

Critical Accounting Policies and Estimates

There have been no material changes to our critical accounting policies and estimates from the information provided in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in our Form 10-K for the year ended December 31, 2018.

2019.
Recently Issued Accounting Pronouncements

See NotesNote 1 and 2 to our unaudited condensed consolidated financial statements included elsewhere in this report for recently issued accounting standards, including the dates of adoption and estimated effects on our consolidated financial statements.

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ITEM 3.Quantitative and Qualitative Disclosures About Market Risk

We are exposed to various market risks, which may result in potential losses arising from adverse changes in market rates, such as interest rates, foreign exchange rates and commodity prices.prices as well as inflation risk. We do not enter into derivatives or other financial instruments for trading or speculative purposes and do not believe we are exposed to material market risk with respect to our cash and cash equivalents.

COVID-19 Pandemic
The uncertainty that exists with respect to the economic impact of the COVID-19 pandemic has introduced significant volatility, which we expect will continue to have a material impact on our future results of operations, financial position and cash flows, as well as, impact our interest rates, foreign exchange rates and commodity prices. The COVID-19 pandemic continues to be fluid and uncertain, making it difficult to forecast the ultimate impact it could have on our future operations.
Interest Rate Risk

We are exposed to interest rate risk under our various credit facilities which accrue interest at variable rates, as described under “Management’s Discussionin “Notes to Consolidated Financial Statements-Note-10-Debt and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources”Financing Arrangements” in our Annual Report on Form 10-K for the year ended December 31, 2018 and in “Notes to Unaudited Condensed Consolidated Financial Statements-Note 5-Debt and Financing Arrangements” to our unaudited condensed consolidated financial statements in this report.2019. Interest rate risk is highly sensitive due to many factors, including U.S. monetary and tax policies, U.S. and international economic factors and other factors beyond our control. We are exposed to changes in the level of interest rates and to changes in the relationship or spread between interest rates for our floating rate debt. Our floating rate debt requires payments based on a variable interest rate index such as LIBOR. Therefore, increasesThe LIBOR rate, on which the Eurodollar Rate is based, is expected to be discontinued by the end of 2021. The restated credit agreement permits us to agree with the administrative agent for the restated credit facility on a replacement benchmark rate subject to certain conditions (including that a majority of the lenders do not object to such replacement rate within a specified period of time following notice thereof from the administrative agent). Increases in interest rates may reduce our net income by increasing the cost of our debt.
During 2018, we entered into interest rate swap contracts to reduce the impact of variability inour interest rates.rate risk. Under thethese contracts, we pay fixed and receive variable rate interest, in effect converting a portion of our variablefloating rate debt to fixed rate debt. As of March 31, 2019,2020, the notional value of our outstanding interest rate swap contracts was $185.0$160.0 million. See "Notes to Unaudited Condensed Consolidated Financial Statement-Note-6-DerivativeStatement-Note-5-Derivative Financial Instruments" for further discussion of our interest rate swap contracts.
We performed a sensitivity analysis to assess the potential effect of a hypothetical movement in variable interest rates on our pre-tax interest expense. As of March 31, 2019,2020, we had $332.5$356.3 million of outstanding indebtedness at variable interest rates (excluding unamortized debt issuance cost)costs) after giving effect to $185.0$160.0 million of hedged variablefloating rate indebtedness. The sensitivity analysis, while not predictive in nature, indicated that a one percentage point increase in the interest rate applied to these borrowings as of March 31, 20192020 would have resulted in an increase of $3.3$3.6 million in our annual pre-tax interest expense.


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Foreign Exchange Risk

In the normal course of business, weWe are exposed to gains and losses resulting from fluctuations in foreign currency exchange rates relatingtransaction risk related to transactions outside the United States denominated in foreign currencies, which include, but are not limited to, the Japanese yen, the Korean won, the British pound sterling, the euro and the Canadian dollar.a currency other than functional currency. In addition, we are exposed to gains and lossescurrency translation risk resulting from the translation of the operatingfinancial results of our non-U.S.consolidated subsidiaries from their functional currency into U.S. dollars for financial reporting purposes.

We use financial instruments to reduce the impact of changes in foreign currency exchange rates.earnings and shareholders' equity volatility relating to transaction risk. The principal financial instruments we enter into on a routine basis are foreign exchange forward contracts. The primary foreign exchange forward contracts, pertainprimarily pertaining to the U.S. dollar, the Japanese yen, the Korean won, the British pound sterling, the euroCanadian dollar, the Korean won and the Canadian dollar. Foreign exchange forward contracts are primarily used to hedge purchases denominated in select currencies.euro. The periods of the foreign exchange forward contracts designated as hedges correspond to the periods of the forecasted hedged transactions, which do not exceed 24 months subsequent to the latest balance sheet date. We do not enter into foreign exchange forward contracts for trading or speculative purposes. See "Notes to Unaudited Condensed Consolidated Financial Statements-Note-6-DerivativeStatements-Note-5-Derivative Financial Instruments" for further discussion of our foreign currency derivative instruments.

The gross U.S. dollar equivalent notional amount of all foreign exchange forward contracts outstanding as of March 31, 2019 was $318.3 million, representing a net settlement asset of $6.2 million. Gains and losses on the foreign exchange forward contracts that we account for as hedges offset losses and gains on these foreign currency purchases and reduce the earnings and shareholders’ equity volatility relating to foreign exchange.

We performed a sensitivity analysis to assess potential changes in the fair value of our foreign exchange forward contracts relating to a hypothetical movement in foreign currency exchange rates. The gross U.S. dollar equivalent notional amount of all foreign exchange forward contracts outstanding at March 31, 2020 was $293.6 million, representing a net settlement asset of $12.7 million. The sensitivity analysis of changes in the fair value of our foreign exchange forward contracts outstanding as of March 31, 2019,2020, while not predictive in nature, indicated that

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$12.7 million would decrease by $21.5 million resulting in a net settlement liability of $8.8 million, if the U.S. dollar uniformly weakened by 10% against all currencies covered by our contracts, the net settlement asset of $6.2 million would decrease by $25.1 million resulting in a net settlement liability of $18.9 million.

contracts.
The sensitivity analysis described above recalculates the fair value of the foreign exchange forward contracts outstanding by replacing the actual foreign currency exchange rates and current month forward rates with foreign currency exchange rates and forward rates that reflect a 10% weakening of the U.S. dollar against all currencies covered by our contracts. All other factors are held constant. The sensitivity analysis disregards the possibility that currency exchange rates can move in opposite directions and that gains from one currency may or may not be offset by losses from another currency. The analysis also disregards the offsetting change in value of the underlying hedged transactions and balances.

The financial markets and currency volatility may limit our ability to cost-effectively hedge these exposures. The counterparties to derivative contracts are major financial institutions. We assess credit risk of the counterparties on an ongoing basis.

Commodity Price Risk

We are exposed to commodity price risk with respect to certain materials and components used by us, our suppliers and our manufacturers, including polybutadiene, urethane and Surlyn for the manufacturing of our golf balls, titanium and steel for the assembly of our golf clubs, leather and synthetic fabrics for our golf shoes, golf gloves, golf gear and golf apparel, and resin and other petroleum-based materials for a number of our products.

Impact of Inflation

Our results of operations and financial condition are presented based on historical cost. While it is difficult to accurately measure the impact of inflation due to the imprecise nature of the estimates required, we believe the effects of inflation, if any, on our results of operations and financial condition have traditionally been immaterial. However, due to the uncertainty that exists with respect to the economic impact of the COVID-19 pandemic, our business, results of operations, financial position and cash flows could be materially impacted.


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ITEM 4.Controls and Procedures


Evaluation of Disclosure Controls and Procedures. Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the period covered by this Quarterly Report on Form 10-Q.fiscal quarter ended March 31, 2020. Based on such evaluation, our principal executive officer and principal financial officer have concluded that as of such date, our disclosure controls and procedures were effective.


Changes in Internal Control Over Financial Reporting. Except for the implementation of certain new accounting processes and business applications which changed internal controls related to the adoption of Accounting Standards Codification 842, Leasing (“Topic 842”), there There were no changes in our internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the period covered by this Quarterly Report on Form 10-Qfiscal quarter ended March 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. As a result of the COVID-19 pandemic, many of our employees began working remotely in March 2020. This change to our working environment did not have a material effect on our internal controls over financial reporting during the most recent quarter. We will continue to monitor and assess any impacts from the COVID-19 pandemic on our internal controls over financial reporting.







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PART II.OTHER INFORMATION


ITEM 1.Legal Proceedings


We are defendants in lawsuits associated with the normal conduct of our businesses and operations. It is not possible to predict the outcome of the pending actions, and, as with any litigation, it is possible that some of these actions could be decided unfavorably.


Item 1A.Risk Factors


YouThe following is an update to the risk factors included in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2019.
Our business, financial position, results of operations and cash flows have been, and we expect will continue to be, negatively impacted by the COVID-19 pandemic.
The COVID-19 pandemic, and the various governmental, industry and consumer actions related thereto, are having and will continue to have negative impacts on our business. These impacts include significant decreases in demand for our products; temporary closure of golf courses, including on-course retail pro shops; the temporary closure of off-course retail partner locations; cancellation of professional golf tour events; changes in consumer behavior in affected regions that restrict recreational activities and discretionary spending; significant disruptions in or closures of our manufacturing operations or those of our suppliers; disruptions within our supply chain restricting our ability to import products or obtain the necessary raw materials or components to make products; limitations on our employees’ and consumers’ ability to work and travel; restrictions on public gatherings; potential financial difficulties of customers and suppliers; significant changes in economic or political conditions; and related volatility in financial and market conditions.
It is not yet certain what the impact of this pandemic and actions being taken worldwide to address it will have on the economy, trade, our business and the businesses of our customers and suppliers. While it is impossible to quantify the impact of the COVID-19 pandemic, we expect business disruptions as a result of the COVID-19 pandemic to continue to have a material impact on our business, our results of operations, financial position and cash flows. The degree to which the COVID-19 pandemic and related actions ultimately impact our business, financial position, results of operations and cash flows will depend on factors beyond our control, including the spread, severity and duration of the pandemic; the actions taken to contain the spread of COVID-19; the pandemic's impact on the global economy and demand for our products; and to what extent and how quickly normal economic and operating conditions resume. Even in those regions where we are beginning to experience business recovery, such as certain areas in Asia, if those regions fail to fully contain the COVID-19 pandemic or suffer a relapse, those markets may not recover as quickly or at all. A prolonged decline in general economic conditions or uncertainties regarding future economic prospects as a result of the pandemic could adversely affect consumer confidence and discretionary spending, which in turn could result in further reduced sales of our products and could materially adversely affect our business, financial condition and results of operations.
Furthermore, you should carefully consider each of the risk factors as described in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2018, as well as2019, one or more of which may be precipitated or exacerbated by the other information set forthimpact of the COVID-19 pandemic, including risks relating to changes in this report.  There have been no material changesconsumer spending habits, our level of indebtedness, our need to generate sufficient cash flows to service our indebtedness, our ability to comply with the risk factors as describedcovenants contained in the agreements that govern our Annual Reportindebtedness, availability of adequate capital and our ability to pay dividends on Form 10-K for the year ended December 31, 2018.our common stock.


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

During 2018, our BoardThe following table provides information relating to the Company’s purchase of Directors authorized a $50.0 million share repurchase program under which we are authorized to repurchase shares of our issued and outstanding common stock infor the open market or in private transactions, including transactions with affiliates. The repurchase program will remain in effect until completed or until terminated by the Boardfirst quarter of Directors. During the three months ended March 31, 2019, there were no share repurchases made under this program.2020:

Period Total number of shares purchased Average price paid per share Total number of shares purchased as part of publicly announced plans or programs 
Approximate dollar value of shares that may yet be purchased under the plans or programs (1)(2)(3)
 (in thousands)
January 1, 2020 - January 31, 2020 73,500
 $32.14
 73,500
 $18,286
February 1, 2020 - February 29, 2020 102,376
 28.28
 102,376
 65,390
March 1, 2020 - March 31, 2020 68,018
 25.26
 68,018
 63,672
Total 243,894
 $28.60
 243,894
 $63,672

(1)On February 11, 2020, our Board of Directors authorized us to repurchase up to an additional $50.0 million of our issued and outstanding common stock bringing the total authorization to an aggregate $100.0 million of our issued and outstanding common stock. In connection with this share repurchase program, we entered into an agreement with Magnus Holdings Co., Ltd. (“Magnus”), a wholly owned subsidiary of Fila Holdings Co., to purchase from Magnus an equal amount of our common stock as we purchase on the open market up to an aggregate of $24.9 million at the same weighted average per share price. In relation to the Magnus share repurchase agreement, during the three months ended March 31, 2020 we recorded an additional $7.0 million liability for 243,894 shares of common stock to be repurchased from Magnus, which are not included in the above table. All of the shares purchased during the three months ended March 31, 2020 related to purchases on the open market. The repurchase program will remain in effect until completed or until terminated by the Board of Directors.
(2)Includes $11.1 million related to the Magnus share repurchase agreement. See “Notes to Unaudited Condensed Consolidated Financial Statements-Note 9-Common Stock,” Item 1 of Part I, included elsewhere in this report, for disclosures related to the Magnus share repurchase agreement.
(3)In April 2020, we announced that we were suspending stock repurchases in light of the COVID-19 pandemic. We have the ability to resume repurchases if we deem circumstances warrant.
ITEM 3.Defaults Upon Senior Securities


None.


ITEM 4.Mine Safety Disclosures


None.


ITEM 5.      Other Information


  None.


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ITEM 6.Exhibits
Exhibit No.    Description
   
 
   
 
   
 
   
 
101.INSXBRL Instance Document
   
101.SCH Taxonomy Extension Schema Document
   
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document
   
101.LAB Inline XBRL Taxonomy Extension Labels Linkbase Document
   
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document
   
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document
104Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)


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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 ACUSHNET HOLDINGS CORP.
  
Dated: May 8, 20197, 2020By:/s/ David Maher
  David Maher
  President and Chief Executive Officer
  (Principal Executive Officer)
   
   
Dated: May 8, 20197, 2020By:/s/ Thomas Pacheco
  Thomas Pacheco
  Executive Vice President, Chief Financial Officer and Chief Accounting Officer
  (Principal Financial Officer and Principal Accounting Officer)


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