Acushnet Holdings Corp., the parent of Titleist, FootJoy and KJUS, reported net income dropped 74.5 percent, adjusted EBITDA slid 17.8 percent and sales were down 5.8 percent in the first quarter.

“As we report our first-quarter earnings, I would like to first recognize the impact that the COVID19 pandemic has had on our associates, their families, our trade partners and our communities. I am greatly appreciative of the entire Acushnet family’s resilience and agility,” stated David Maher, Acushnet’s president and chief executive officer. “Since entering the golf ball business in 1932, Acushnet has confronted and withstood many great challenges thanks to the resolve and spirit of our caring associates. As this global health crisis developed, our teams quickly mobilized to create safe work environments and have been resolute in responding to the sudden business disruptions to preserve the company’s market leadership positions.

“The first quarter of 2020 was off to a promising start across all segments and regions. Asia markets were impacted first by the crisis and are at varying stages of recovery, with Korea nearly fully recovered and other markets working their way towards recovery. North America and Europe were affected in March, and, as one would expect, our businesses there have been significantly impacted over the past six weeks with most golf shops and retail stores temporarily closed. Many of our distribution centers and production facilities remain either closed or are operating at limited capacity due to imposed regulations which are expected to ease over the next month.”

Maher continued, “In recent weeks, we are encouraged that the overwhelming majority of golf courses, both in the US and around the world, are re-opening for play with golf retail shops not far behind. While the golf industry will clearly be disrupted throughout 2020, we are confident that the underlying fundamentals of the game, with its outdoor field of play and ease of social distancing, will position the game of golf on solid ground for the future.”

COVID-19 Update
As its fiscal first quarter 2020 ended on March 31, 2020, Acushnet said it had business disruptions to varying degrees across many regions. Acushnet’s businesses in Asia were adversely impacted earlier in the quarter, with Korea nearly fully recovered and other markets working their way towards recovery. Acushnet’s 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 its products slowed significantly in March, particularly in the United States.

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 and the cancellation of professional golf tour events. Acushnet said it expects business disruptions as a result of the COVID-19 pandemic to continue to have a material impact on business, results of operations, financial position and cash flows.

Summary of First Quarter 2020 Financial Results
Consolidated net sales for the quarter decreased by 5.8 percent. On a constant currency basis, consolidated net sales were down 4.6 percent due to a decrease of $24.1 million in Titleist golf ball sales and a decrease of $9.1 million in FootJoy golf wear, primarily as a result of the negative impact of the COVID-19 pandemic in the first quarter of 2020, as previously described. The remaining change in net sales was primarily due to the acquisition of KJUS during the third quarter of 2019. The results of KJUS have not been allocated to any of our reportable segments.

On a geographic basis, consolidated net sales in the United States decreased by 8.4 percent in the quarter. Overall, sales in the United States were lower as a result of the 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 KJUS during the third quarter of 2019.

Net sales in regions outside of the United States were also negatively impacted by the COVID-19 pandemic. Net sales in regions outside the United States were down 2.8 percent and down 0.2 percent on a constant currency basis. In EMEA, net sales increased primarily due to the acquisition of KJUS, offset by lower sales volumes of Titleist golf balls and FootJoy footwear. In Japan, net sales decreased primarily due to a decrease in sales of Titleist golf balls and FootJoy golf wear. In Korea,
net sales increased due to 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 a decrease in Titleist golf balls and FootJoy golf wear.

Segment Specifics:

  • 18.0 percent decrease in net sales (17.0 percent decrease on a constant currency basis) of Titleist golf balls. 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 its newly-introduced performance models.
  • 2.1 percent increase in net sales (3.0 percent increase on a constant currency basis) of Titleist golf clubs. This increase was due to higher sales volumes of its newly introduced SM8 wedges coupled with Scotty Cameron Special Select putters launched in the first quarter of 2020. This increase was partially offset by the negative impact of the COVID-19 pandemic and lower sales volumes of drivers and fairways, which were in their second model year.
  • 3.8 percent decrease in net sales (1.8 percent decrease on a constant currency basis) of Titleist golf gear. This decrease was primarily due to the negative impact of the COVID-19 pandemic on sales volumes in the United States and EMEA.
  • 7.5 percent decrease in net sales (6.5 percent decrease on a constant currency basis) in FootJoy golf wear primarily due to sales volume decreases across all markets primarily due to the negative impact of the COVID-19 pandemic.

Net income attributable to Acushnet Holdings Corp. decreased by $26.0 million to $8.9 million, down 74.5 percent year over year, primarily as a result of a decrease in income from operations, partially offset by a decrease in income tax expense.

Adjusted EBITDA was $52.8 million, down 17.8 percent year over year. Adjusted EBITDA margin was 12.9 percent for the first quarter versus 14.8 percent for the prior-year period.

Cash Dividend and Share Repurchase
Acushnet’s Board of Directors today declared a quarterly cash dividend in an amount of $0.155 per share of common stock. The dividend will be payable on June 19, 2020 to shareholders of record on June 5, 2020. The number of shares outstanding as of May 1, 2020 was 74,277,181. During the first quarter, the company 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 reported previously, the company has suspended stock repurchases in light of the COVID-19 pandemic. The company has the ability to resume repurchases if it deems circumstances warrant.

2020 Outlook
Given the high degree of uncertainty related to the COVID-19 pandemic, Acushnet said it cannot reasonably estimate the impacts of the COVID-19 pandemic on the Acushnet business in the future. As previously reported, the company has withdrawn all previously issued fiscal 2020 guidance and the company is not providing further guidance at this time.

Photo courtesy Acushnet