ACUSHNET HOLDINGS CORP. 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 theSecurities 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 wearable brands. 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 world's best players, creating aspirational appeal for a broad range of golfers who want to emulate the performance of the game's best players.
We believe our differentiated focus on performance and quality excellence, enduring connections with dedicated golfers, and favorable and marketdifferentiating mix of consumable and durable products have been the key drivers of our solid financial performance.
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 , theUnited Kingdom andCanada . We have the following reportable segments: Titleist golf balls; Titleist golf clubs; Titleist golf gear; and FootJoy golf wear. Our financial results and operations continue to be impacted by the macroeconomic environment, including the ongoing COVID-19 pandemic. Global supply chain issues and the impact of inflation have resulted in constrained raw material, component and sourced product availability and increased raw material and other input costs, including higher freight expense. These increased costs negatively impacted cost of sales for the nine months endedSeptember 30, 2022 , resulting in a lower gross margin as compared to the nine months endedSeptember 30, 2021 . Inflation, particularly in the form of higher raw material costs combined with higher shipping costs, is expected to remain an issue for the remainder of 2022.
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 (loss).
Since a significant percentage of our net sales are generated outside ofthe 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 intoU.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 26
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accordance with generally accepted accounting principles in
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 toAcushnet Holdings Corp. plus interest expense, net, income tax expense (benefit), depreciation and amortization and other items defined in the agreement, including: share-based compensation expense; restructuring and transformation costs; certain transaction fees; extraordinary, unusual or non-recurring losses or charges; indemnification expense (income); certain pension settlement costs; certain other non-cash (gains) losses, net and the net income relating to noncontrolling interests. Adjusted EBITDA is not a measurement of financial performance underU.S. GAAP. It should not be considered an alternative to net income (loss) attributable toAcushnet Holdings Corp. as a measure of our operating performance or any other measure of performance derived in accordance withU.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 underU.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 toAcushnet 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 underU.S. GAAP. It should not be considered an alternative to any measure of performance derived in accordance withU.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 either in isolation or as a substitute for analyzing our results as reported underU.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 (loss) to evaluate and assess the performance of each of our reportable segments and to make budgeting decisions. 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 we do not allocate these to the reportable segments. 27
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Results of Operations
The following table sets forth, for the periods indicated, our results of
operations.
Three months ended Nine months ended
September 30, September 30,
(in thousands) 2022 2021 2022 2021
Net sales $ 558,246 $ 521,629 $ 1,822,932 $ 1,727,364
Cost of goods sold 263,251 252,792 867,332 813,362
Gross profit 294,995 268,837 955,600 914,002
Operating expenses:
Selling, general and administrative 202,418 199,787 637,276 586,411
Research and development 14,619 14,597 42,533 39,947
Intangible amortization 1,948 1,967 5,865 5,909
Income from operations 76,010 52,486 269,926 281,735
Interest expense, net 4,534 1,147 7,902 6,611
Other expense, net 2,355 939 5,828 3,170
Income before income taxes 69,121 50,400 256,196 271,954
Income tax expense 15,797 10,475 52,786 62,882
Net income 53,324 39,925 203,410 209,072
Less: Net income attributable to noncontrolling
interests (1,487) (661) (4,074) (3,765)
Net income attributable to Acushnet
Holdings Corp. $ 51,837 $ 39,264 $ 199,336 $ 205,307
Adjusted EBITDA:
Net income attributable to Acushnet
Holdings Corp. $ 51,837 $ 39,264 $ 199,336 $ 205,307
Interest expense, net 4,534 1,147 7,902 6,611
Income tax expense 15,797 10,475 52,786 62,882
Depreciation and amortization 10,229 10,178 30,894 30,816
Share-based compensation 5,837 7,012 18,159 20,822
Other extraordinary, unusual or non-recurring
items, net (3,180) 1,517 (155) 3,099
Net income attributable to noncontrolling
interests 1,487 661 4,074 3,765
Adjusted EBITDA $ 86,541 $ 70,254 $ 312,996 $ 333,302
Adjusted EBITDA margin 15.5 % 13.5 % 17.2 % 19.3 %
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Three Months Ended
Net sales by reportable segment is summarized as follows:
Three months ended Constant Currency
September 30, Increase/(Decrease) Increase/(Decrease)
(in millions) 2022 2021 $ change % change $ change % change
Titleist golf balls $ 181.2 $ 167.2 $ 14.0 8.4 % $ 22.3 13.3 %
Titleist golf clubs 153.9 135.6 18.3 13.5 % 26.9 19.8 %
Titleist golf gear 59.2 46.6 12.6 27.0 % 16.3 35.0 %
FootJoy golf wear 131.7 137.9 (6.2) (4.5) % 3.4 2.5 %
Net sales information by region is summarized as follows:
Three months ended Constant Currency
September 30, Increase/(Decrease) Increase/(Decrease)(in millions) 2022 2021 $ change % change $ change % change United States$ 327.6 $ 282.6 $ 45.0 15.9 % $ 45.0 15.9 % EMEA (1) 70.6 68.9 1.7 2.5 % 12.8 18.6 % Japan 34.4 47.9 (13.5) (28.2) % (4.8) (10.0) % Korea 69.9 75.8 (5.9) (7.8) % 5.0 6.6 % Rest of world 55.7 46.4 9.3 20.0 % 12.3 26.5 % Total net sales$ 558.2 $ 521.6 $ 36.6 7.0 % $ 70.3 13.5 %
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(1)
Segment operating income by reportable segment is summarized as follows:
Three months ended
(in millions) September 30, Increase/(Decrease)
Segment operating income 2022 2021 $ change % change
Titleist golf balls $ 38.3 $ 32.0 $ 6.3 19.7 %
Titleist golf clubs 26.9 13.5 13.4 99.3 %
Titleist golf gear 6.4 0.6 5.8 *
FootJoy golf wear 1.9 4.4 (2.5) (56.8) %
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*Percentage change not meaningful
For the three months ended
The increase in net sales inthe United States was primarily driven by an increase of$20.5 million in Titleist golf clubs,$17.1 million in Titleist golf balls and$9.7 million in Titleist golf gear. The increase in Titleist golf clubs was driven by higher sales volumes of our newly introduced TSR drivers and fairways, Phantom X putters and SM9 wedges. The increase in Titleist golf balls was primarily driven by increased sales volumes of our premium performance models. The increase in Titleist golf gear was driven by higher sales volumes of headwear and golf gloves and higher average selling prices across all categories. These increases were partially offset by a decrease of$3.7 million in FootJoy golf wear primarily as a result of lower sales volumes in footwear. Net sales in regions outsidethe United States decreased 3.5%, or increased 10.6% on a constant currency basis. In EMEA and Rest of world, net sales increased across all reportable segments. InKorea , the increase was primarily due to increases in all reportable segments except FootJoy golf wear. InJapan , net sales decreased primarily due to lower sales volumes in Titleist golf clubs due to lower sales volumes of irons and changes in the launch timing of TSR drivers and fairways in this region. 29
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Gross Profit
Gross profit increased$26.2 million for the three months endedSeptember 30, 2022 compared to the three months endedSeptember 30, 2021 . Gross margin increased to 52.8% for the three months endedSeptember 30, 2022 compared to 51.5% for the three months endedSeptember 30, 2021 . The increase in gross profit primarily resulted from an increase of$13.8 million in Titleist golf clubs and an increase of$6.1 million in Titleist golf balls primarily due to higher sales volumes and an increase of$6.7 million in Titleist golf gear primarily due to higher sales volumes and average selling prices. These increases were partially offset by higher inbound freight costs, primarily in Titleist golf gear and Titleist golf balls.
The increase in gross margin was primarily due to favorable manufacturing costs in Titleist golf clubs and higher average selling prices in Titleist golf gear.
Selling, General and Administrative Expenses
SG&A expenses increased$2.6 million for the three months endedSeptember 30, 2022 compared to the three months endedSeptember 30, 2021 . This increase was primarily as a result of an increase of$3.0 million in administrative expense due to higher expenses related to information technology-related investments, an increase of$2.6 million in selling expense as a result of higher sales volumes and higher third party distribution expenses in FootJoy golf wear and Titleist golf gear. These increases were partially offset by a decrease of$3.0 million in advertising and promotional expenses. Additionally, SG&A includes an increase of$5.5 million in foreign currency transaction losses, offset in part by an increase in gains on foreign exchange forward contracts of$1.3 million . Overall, SG&A included a favorable impact of changes in foreign currency exchange rates of$9.3 million across all expense categories and reportable segments.
Interest Expense, net
Interest expense, net increased$3.4 million for the three months endedSeptember 30, 2022 compared to the three months endedSeptember 30, 2021 . This increase was primarily due to an increase in interest rates for the three months endedSeptember 30, 2022 , as well as costs associated with amending our credit agreement inAugust 2022 . Other Expense, net Other expense, net increased$1.5 million for the three months endedSeptember 30, 2022 compared to the three months endedSeptember 30, 2021 primarily due to an increase in the non-service cost component of net periodic benefit expense.
Income Tax Expense
Income tax expense increased$5.3 million for the three months endedSeptember 30, 2022 compared to the three months endedSeptember 30, 2021 . Our effective tax rate ("ETR") was 22.9% for the three months endedSeptember 30, 2022 compared to 20.8% for the three months endedSeptember 30, 2021 . The change in the ETR was primarily driven by changes in our jurisdictional mix of earnings.
Segment Results
Titleist Golf Balls Segment
Net sales in our Titleist golf balls segment increased 8.4%, or 13.3% on a constant currency basis, for the three months endedSeptember 30, 2022 compared to the three months endedSeptember 30, 2021 . The increase was primarily due to increased sales volumes of our premium performance models reflecting improvement in certain raw material availability. Operating income in our Titleist golf balls segment increased$6.3 million , or 19.7%, compared to the prior year period. The increase in operating income primarily resulted from an increase of$6.1 million in gross profit primarily due to higher sales volumes, partially offset by higher manufacturing costs and higher inbound freight costs.
Titleist Golf Clubs Segment
Net sales in our Titleist golf clubs segment increased 13.5%, or 19.8% on a constant currency basis, for the three months endedSeptember 30, 2022 compared to the three months endedSeptember 30, 2021 . The increase was largely due to higher sales volumes of our newly introduced TSR drivers and fairways launched in the third quarter of 2022, Phantom X putters launched in the second quarter of 2022 and SM9 wedges launched in the first quarter of 2022. This increase was partially offset by lower sales volumes of second model year irons and hybrids. 30
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Operating income in our Titleist golf clubs segment increased
Titleist Golf Gear Segment
Net sales in our Titleist golf gear segment increased 27.0%, or 35.0% on a constant currency basis, for the three months endedSeptember 30, 2022 compared to the three months endedSeptember 30, 2021 . The increase was driven by higher sales volumes in headwear, golf bag and golf glove product categories and higher average selling prices across all product categories. Operating income in our Titleist golf gear segment increased$5.8 million compared to the prior year period. The increase in operating income primarily resulted from an increase of$6.7 million in gross profit due to higher sales volumes in headwear, golf bags and golf glove product categories and higher average selling prices across all product categories, partially offset by higher inbound freight costs. FootJoy Golf Wear Segment Net sales in our FootJoy golf wear segment decreased 4.5%, or increased 2.5% on a constant currency basis, for the three months endedSeptember 30, 2022 compared to the three months endedSeptember 30, 2021 . The increase in constant currency was primarily due to higher sales volumes in the apparel product category, partially offset by decreases in footwear. Operating income in our FootJoy golf wear segment decreased$2.5 million , or 56.8% compared to the prior year period. The decrease in operating income primarily resulted from higher operating expenses as a result of an increase in third party distribution expenses. 31
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Nine Months Ended
Net sales by reportable segment is summarized as follows:
Nine months ended Constant Currency
September 30, Increase/(Decrease) Increase/(Decrease)(in millions) 2022 2021 $ change % change $ change % change Titleist golf balls$ 546.4 $ 543.1 $ 3.3 0.6 % $ 22.8 4.2 % Titleist golf clubs 478.9 444.3 34.6 7.8 % 55.3 12.4 % Titleist golf gear 172.5 164.7 7.8 4.7 % 16.8 10.2 % FootJoy golf wear 507.1 462.0 45.1 9.8 % 70.9 15.3 %
Net sales information by region is summarized as follows:
Nine months ended Constant Currency
September 30, Increase/(Decrease) Increase/(Decrease)(in millions) 2022 2021 $ change % change $ change % change United States$ 974.2 $ 906.6 $ 67.6 7.5 % $ 67.6 7.5 % EMEA 274.8 246.9 27.9 11.3 % 56.2 22.8 % Japan 118.6 149.9 (31.3) (20.9) % (11.9) (7.9) % Korea 254.1 251.8 2.3 0.9 % 31.9 12.7 % Rest of world 201.2 172.2 29.0 16.8 % 36.8 21.4 % Total net sales$ 1,822.9 $ 1,727.4 $ 95.5 5.5 % $ 180.6 10.5 %
Segment operating income by reportable segment is summarized as follows:
Nine months ended
(in millions) September 30 , Increase/(Decrease)
Segment operating income 2022 2021 $ change % change Titleist golf balls$ 100.9 $ 106.8 $ (5.9) (5.5) % Titleist golf clubs 88.2 84.7 3.5 4.1 % Titleist golf gear 20.3 22.7 (2.4) (10.6) % FootJoy golf wear 45.3 53.6 (8.3) (15.5) % Net Sales For the nine months endedSeptember 30, 2022 , net sales increased 5.5%, or 10.5% on a constant currency basis, compared to the nine months endedSeptember 30, 2021 . The increase was driven by growth across all reportable segments primarily as a result of higher sales volumes and higher average selling prices. The increase in net sales inthe United States was primarily as a result of an increase of$33.7 million in Titleist golf clubs, an increase of$11.9 million in FootJoy golf wear, an increase of$9.2 million in Titleist golf balls and an increase of$7.8 million in Titleist golf gear. The increase in Titleist golf clubs was primarily driven by higher sales volumes of SM9 wedges, T-Series irons and Phantom X putters. The increase in FootJoy golf wear was primarily driven by higher average selling prices across all product categories except apparel. The increase in Titleist golf balls was primarily due to higher average selling prices. The increase in Titleist golf gear was primarily driven by higher average selling prices across all product categories. Net sales in regions outsidethe United States increased 3.4%, or 13.8% on a constant currency basis. In EMEA, net sales increased across all reportable segments, primarily due to the adverse impact of government-ordered shutdowns in this region in the first quarter of 2021. InKorea and Rest of world, net sales increased across all reportable segments. InJapan , net sales decreased primarily due to lower sales volumes in Titleist golf clubs due to changes in the launch timing of TSR drivers and fairways in this region. 32
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Gross Profit
Gross profit increased$41.6 million for the nine months endedSeptember 30, 2022 compared to the nine months endedSeptember 30, 2021 . Gross margin decreased to 52.4% for the nine months endedSeptember 30, 2022 compared to 52.9% for the nine months endedSeptember 30, 2021 . The increase in gross profit primarily resulted from an increase of$16.4 million in Titleist golf clubs and an increase of$15.6 million in FootJoy golf wear, both primarily due to sales volume increases. These increases were partially offset by increased inbound freight costs across all reportable segments.
The decrease in gross margin was primarily due to increased inbound freight costs across all reportable segments.
Selling, General and Administrative Expenses
SG&A expenses increased$50.9 million for the nine months endedSeptember 30, 2022 compared to the nine months endedSeptember 30, 2021 . This increase was primarily due to an increase of$28.7 million in selling expense due to higher sales volumes across all reportable segments and higher third party distribution expenses in FootJoy golf wear and Titleist golf gear, as well as an increase of$16.3 million in administrative expense primarily due to higher expenses related to information technology-related investments. Additionally, SG&A includes an increase of$13.1 million in foreign currency transaction losses, offset in part by an increase in gains on foreign exchange forward contracts of$4.9 million . Overall, SG&A included a favorable impact of changes in foreign currency exchange rates of$21.5 million across all expense categories and reportable segments. Research and Development R&D expenses increased$2.6 million for the nine months endedSeptember 30, 2022 compared to the nine months endedSeptember 30, 2021 and was primarily related to an increase in employee-related costs.
Interest Expense, net
Interest expense, net increased$1.3 million for the nine months endedSeptember 30, 2022 compared to the nine months endedSeptember 30, 2021 . This increase was primarily due to an increase in interest rates for the nine months endedSeptember 30, 2022 , as well as costs associated with amending our credit agreement inAugust 2022 offset, in part, by a decrease in losses from interest rate swaps. Other Expense, net Other expense, net increased$2.6 million for the nine months endedSeptember 30, 2022 compared to the nine months endedSeptember 30, 2021 primarily due to changes in the fair value of Rabbi trust assets, as well as an increase in the non-service cost component of net periodic benefit expense.
Income Tax Expense
Income tax expense decreased$10.1 million for the nine months endedSeptember 30, 2022 compared to the nine months endedSeptember 30, 2021 . Our ETR was 20.6% for the nine months endedSeptember 30, 2022 compared to 23.1% for the nine months endedSeptember 30, 2021 . The decrease in the ETR was primarily driven by changes in our jurisdictional mix of earnings.
Segment Results
Titleist Golf Balls Segment
Net sales in our Titleist golf balls segment increased 0.6%, or 4.2% on a constant currency basis, for the nine months endedSeptember 30, 2022 compared to the nine months endedSeptember 30, 2021 . The increase was primarily driven by higher average selling prices. Operating income in our Titleist golf balls segment decreased$5.9 million , or 5.5% compared to the prior year period. The decrease in operating income resulted from higher operating expenses of$7.1 million , partially offset by higher gross profit of$1.3 million . The increase in gross profit was primarily driven by higher sales volumes, partially offset by higher manufacturing costs and higher inbound freight costs. Operating expenses increased primarily as a result of increases of$4.6 million and$2.2 million in administrative and selling expenses, respectively. 33
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Titleist Golf Clubs Segment
Net sales in our Titleist golf clubs segment increased 7.8%, or 12.4% on a constant currency basis, for the nine months endedSeptember 30, 2022 compared to the nine months endedSeptember 30, 2021 . The increase was largely due to higher sales volumes of our SM9 wedges launched in the first quarter of 2022, T-Series irons launched in the third quarter of 2021 and Phantom X putters launched in the second quarter of 2022. This increase was partially offset by lower sales volumes of second model year drivers, fairways and hybrids. Operating income in our Titleist golf clubs segment increased$3.5 million , or 4.1% compared to the prior year period. The increase in operating income resulted from higher gross profit of$16.4 million , partially offset by higher operating expenses of$12.8 million . The increase in gross profit was primarily due to higher sales volumes, partially offset by increased inbound freight and component costs. Higher operating expenses were primarily as a result of an increase of$6.1 million in selling expense primarily due to higher distribution expenses and an increase of$4.8 million in administrative expenses.
Titleist Golf Gear Segment
Net sales in our Titleist golf gear segment increased 4.7%, or 10.2% on a constant currency basis, for the nine months endedSeptember 30, 2022 compared to the nine months endedSeptember 30, 2021 . The increase was primarily due to higher average selling prices across all product categories, partially offset by a sales volume decrease in golf bags due to supply chain and fulfillment constraints. Operating income in our Titleist golf gear segment decreased$2.4 million , or 10.6% compared to the prior year period. The decrease in operating income resulted from higher operating expenses of$4.9 million , partially offset by higher gross profit of$2.5 million . Gross profit increased due to higher average selling prices, partially offset by increased inbound freight costs. Operating expenses increased primarily as a result of an increase of$2.9 million in selling expense due to higher third party distribution expenses.
FootJoy Golf Wear Segment
Net sales in our FootJoy golf wear segment increased 9.8%, or 15.3% on a constant currency basis, for the nine months endedSeptember 30, 2022 compared to the nine months endedSeptember 30, 2021 . The increase was primarily due to increased sales volumes across all product categories and higher average selling prices in footwear. Operating income in our FootJoy golf wear segment decreased$8.3 million , or 15.5% compared to the prior year period. The decrease in operating income resulted from higher operating expenses of$23.9 million , partially offset by higher gross profit of$15.6 million . Gross profit increased primarily as a result of sales volume increases and higher average selling prices, partially offset by increased inbound freight costs. Operating expenses increased primarily as a result of an increase of$17.2 million in selling expense due to higher sales volumes, higher third party distribution expenses and higher retail commission expense inKorea , as well as an increase of$4.5 million in administrative expense.
Liquidity and Capital Resources
Our primary cash needs relate to working capital, capital expenditures, servicing 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 during 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 ofSeptember 30, 2022 , we had$106.8 million of unrestricted cash and cash equivalents (including$19.9 million attributable to our FootJoy golf shoe variable interest entity). As ofSeptember 30, 2022 , 83.3% of our total unrestricted cash and cash equivalents was held at our non-U.S. subsidiaries, including our FootJoy golf shoe variable interest entity. 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 34
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repatriate, funds tothe 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 macroeconomic environment, including the ongoing COVID-19 pandemic, could impact our results of operations in ways we cannot currently predict. Nonetheless, 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 (subject to customary 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 uncertainties, including current and future economic trends and conditions, demand for our products, availability and cost of our raw materials and components, 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 endedDecember 31, 2021 .
Debt and Financing Arrangements
OnAugust 2, 2022 , we amended our credit facility to, among other things, provide a$950.0 million multi-currency revolving credit facility and amend rates per annum at which borrowings in different denominations bear interest. OnAugust 2, 2022 , proceeds from borrowings under the multi-currency revolving credit facility were used to, among other things, prepay in full our outstanding term loans and refinance our outstanding borrowings under the revolving credit facility. Immediately prior to payment, the aggregate amounts outstanding related to the term loans and revolving credit facility were approximately$306.3 million and$72.6 million , respectively. As ofSeptember 30, 2022 , we had$537.3 million of availability under our revolving credit facility after giving effect to$7.1 million of outstanding letters of credit. Additionally, we had$32.1 million available under our local credit facilities. 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 also includes customary events of default, the occurrence of which, following any applicable cure period, would permit the lenders to, among other things, declare the principal, accrued interest and other obligations to be immediately due and payable. As ofSeptember 30, 2022 , we were in compliance with all covenants under our credit agreement. See "Notes to Unaudited Condensed Consolidated Financial Statements - Note 5 - Debt and Financing Arrangements," Item 1 of Part I included elsewhere in this report and "Notes to Consolidated Financial Statements-Note-10-Debt and Financing Arrangements" in our Annual Report on Form 10-K for the year endedDecember 31, 2021 for a description of our credit facilities and related credit agreements. Additionally, see "Risk Factors - Risks Related to Our Indebtedness" as described in our Annual Report on Form 10-K for the year endedDecember 31, 2021 for further discussion surrounding the risks and uncertainties related to our credit facilities.
Dividends and Share Repurchase Program
During the nine months endedSeptember 30, 2022 , we paid dividends on our common stock of$39.7 million to our shareholders. During the fourth quarter of 2022, our Board of Directors declared a dividend of$0.18 per share of common stock to shareholders of record as ofDecember 2, 2022 and payable onDecember 16, 2022 . As ofSeptember 30, 2022 , our Board of Directors had authorized us to repurchase up to an aggregate of$450.0 million of our issued and outstanding common stock. During the nine months endedSeptember 30, 2022 , we repurchased 2,983,392 shares of common stock at an average price of$46.84 for an aggregate of$139.8 million . Included in this amount were 699,819 shares of common stock repurchased fromMagnus Holdings Co., Ltd. ("Magnus"), a wholly-owned subsidiary ofFila Holdings Corp. , for an aggregate of$37.5 million onJanuary 24, 2022 , in satisfaction of our obligations pursuant to our previously disclosed Magnus share repurchase agreement. OnJune 16, 2022 , we entered into a new agreement with Magnus to purchase from Magnus an equal amount of our common stock as we purchase on the open market, up to an aggregate of$75.0 million at the same weighted average per share price (the "2022 Agreement"). OnAugust 30, 2022 , we amended and restated the 2022 Agreement to increase the aggregate dollar amount of shares of our common stock that we will purchase from Magnus from$75.0 million to$100.0 million , (the "Amended and Restated 2022 Agreement"). As a result of purchases made on the open market subsequent to entering into the 2022 Agreement, we recorded a liability of$41.6 million to repurchase an additional 869,368 shares of common stock from Magnus as ofSeptember 30, 2022 .
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Consolidated Financial Statements-Note-10-Common Stock," Item 1 of Part I included elsewhere in this report for a description of our share repurchase program and Magnus share repurchase agreements.
Capital Expenditures
We made$33.6 million of capital expenditures during the nine months endedSeptember 30, 2022 . Capital expenditures for the full year are expected to be approximately$50 million to$55 million , although the actual amount may vary depending upon a variety of factors, including the timing of certain capital project implementations and receipt of capital purchases due to supply chain challenges. Capital expenditures generally relate 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.
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