The following discussion contains management's discussion and analysis of our
financial condition and results of operations and should be read together with
"Item 1A - Risk Factors" and our audited consolidated financial statements and
the notes thereto included elsewhere in this Annual Report. This discussion
contains forward­looking statements that reflect our plans, estimates and
beliefs and involve numerous risks and uncertainties, including but not limited
to those described in the "Risk Factors" section of this report. Actual results
may differ materially from those contained in any forward­looking statements.
You should carefully read the "Special Note Regarding Forward­Looking
Statements" section of this report following the Table of Contents.
Overview
We are the global leader in the design, development, manufacture and
distribution of performance­driven 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.
Our target market is dedicated golfers, who are the cornerstone of the worldwide
golf industry. These dedicated golfers are avid and skill­biased, prioritize
performance and commit the time, effort and money to improve their game. 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.
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, despite challenges related to demographic, macroeconomic,
industry disruptions and weather related conditions.
Impact of COVID-19 on our Business
In March 2020, the World Health Organization declared a pandemic related to the
novel coronavirus ("COVID-19"). Through the end of June 2020, our business was
significantly disrupted by the COVID-19 pandemic. In Asia, our operations were
impacted earlier in the year and were at varying stages of recovery at the end
of June, with Korea nearly fully recovered while Japan and other markets
continued to progress. In the United States and Europe, as a result of
government-ordered shutdowns, most on-course retail pro shops and off-course
retail partner locations were closed for some portion of March, most of April
and part of May 2020. Also, as a result of these orders, we were forced to
temporarily close or substantially limit our operations in our manufacturing
facilities and distribution centers in the United States and Europe from the end
of March until mid-May 2020. During this period, we were largely unable to
manufacture or ship products in these regions and took steps to strengthen our
financial position and balance sheet, bolster our liquidity position and provide
additional financial flexibility, including by reducing discretionary spending,
reducing capital expenditures, suspending our share repurchase program and
amending our credit agreement.
Our manufacturing facilities and distribution centers were re-opened in mid-May
2020 with protocols designed to promote the health and safety of our associates
in accordance with state and local government re-opening guidance. The protocols
included reconfiguring our manufacturing and distribution facilities to allow
for social distancing, implementing stringent safety measures in all facilities,
implementing work-from-home policies wherever possible and suspending
non-critical business travel.
By the end of June 2020, substantially all of the golf courses, on-course retail
pro shops and off-course retail partner locations in the United States and
Europe had re-opened. Rounds of play have been strong since golf courses have
reopened, which resulted in increased demand for our products during June 2020
and even greater demand for our products during the second half of 2020 in the
United States and Europe. Rounds of play and demand for golf products in Korea
remained strong through the end of 2020; however, Japan continued to be
negatively impacted by the COVID-19 pandemic with decreased rounds of play and
lower demand for golf-related products. The impact of the COVID-19 pandemic
continues to evolve and remains highly uncertain including the duration and
severity of the pandemic, additional government related shutdowns and a
significant decrease in the current level of rounds of play and the related
demand for golf-related products.
The COVID-19 pandemic materially impacted our results of operations for the year
ended December 31, 2020 as described in more detail under "Results of Operations
for the Year Ended December 31, 2020 Compared to the Year Ended December 31,
2019" below. The impact of the COVID-19 pandemic continues to evolve, and both
the full impact and duration of the COVID-19 pandemic remain highly uncertain.
Accordingly, our business, results of operations, financial position and cash
flows could continue to be materially impacted in ways that we cannot currently
predict.
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Basis of Presentation
The accompanying results 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"), our wholly-owned
subsidiaries and less than wholly-owned subsidiaries, including a variable
interest entity ("VIE") in which we are the primary beneficiary. All
intercompany balances and transactions have been eliminated in consolidation.
We have four reportable segments. These segments include Titleist golf balls,
Titleist golf clubs, Titleist golf gear and FootJoy golf wear. 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.
Key Factors Affecting Our Results of Operations
Rounds of Play
We generate substantially all of our sales from the sale of golf­related
products, including golf balls, golf clubs, golf shoes, golf gloves, golf gear
and golf apparel. The demand for golf­related products in general, and golf
balls in particular, is directly related to the number of golf participants and
the number of rounds of golf being played by these participants. We believe the
number of rounds of golf played by our target market of dedicated golfers has
remained stable over the past few years. Notwithstanding the foregoing, rounds
of play in the U.S. experienced double digit growth (+14%) and global rounds of
play increased by seven percent for the year ended December 31, 2020 as many
dedicated golfers took full advantage of favorable weather, an increase in
discretionary time due to the circumstances attendant to the COVID-19 pandemic,
including limited personal and professional travel and increased flexibility of
schedules due to the remote work policies adopted by many companies, and limited
other entertainment options. In addition, the game of golf was in high demand in
2020 due to its outdoor field of play and ease of social distancing. We
anticipate that rounds of golf played will likely stabilize back to pre-COVID-19
pandemic levels as vaccines become more widely available and businesses and
other entertainment activities resume a more normal cadence.
Weather Conditions
Weather conditions in most parts of the world, including our primary geographic
markets, generally restrict golf from being played year-round, with many of our
on­course retail customers closed during the cold weather months and, to a
lesser extent, during the hot weather months. Unfavorable weather conditions in
our major markets, such as a particularly long winter, a cold and wet spring, or
an extremely hot summer, would reduce the number of playable days and rounds
played in a given year, which would result in a decrease in the amount spent by
golfers and golf retailers on our products, particularly with respect to
consumable products such as golf balls and golf gloves. In addition, unfavorable
weather conditions and natural disasters can adversely affect the number of
custom club fitting and trial events that we can perform during the key selling
period. Unusual or severe weather conditions throughout the year, such as storms
or droughts or other water shortages, can negatively affect golf rounds played
both during the events and afterward, as weather damaged golf courses are
repaired and golfers focus on repairing the damage to their homes, businesses
and communities. Consequently, sustained adverse weather conditions, especially
during the warm weather months, could impact our sales. Adverse weather
conditions may have a greater impact on us than other golf equipment companies
as we have a large percentage of consumable products in our product portfolio,
and the purchase of consumable products are more dependent on the number of
rounds played in a given year.
Economic Conditions
Our products are recreational in nature and are therefore discretionary
purchases for consumers. Consumers are generally more willing to spend their
time and money to play golf and make discretionary purchases of golf products
when economic conditions are favorable and when consumers feel confident and
prosperous. Discretionary spending on golf and the golf products we sell is
affected by consumer spending habits as well as by many macroeconomic factors,
including general business conditions, stock market prices and volatility,
corporate spending, housing prices, interest rates, the availability of consumer
credit, taxes and consumer confidence in future economic conditions. Consumers
may reduce or postpone purchases of our products as a result of shifts in
consumer spending habits as well as during periods when economic uncertainty
increases, disposable income is lower, or during periods of actual or perceived
unfavorable economic conditions.
Demographic Factors
Golf is a recreational activity that requires time and money. The golf industry
has been principally driven by the age cohort of 30 and above, primarily
"gen­x" and "baby boomers", who have the time and money to engage in the sport.
Since a
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significant number of baby boomers have yet to retire, we anticipate growth in
spending from this demographic as it has been demonstrated that rounds of play
increase significantly as those in this cohort reach retirement. Further, we
also believe that the percentage of women golfers will continue to grow, as a
higher percentage of new golfers in recent years have been women. Beyond the
gen­x and baby boomer generation, another promising development in golf has been
the generational shift with millennial golfers making their marks at both
professional and amateur levels and, in 2020, accounting for 25% of golfers
overall in the U.S.
Golf participation among younger generations and certain socioeconomic and
ethnic groups may not prove to be as popular as it is among the current gen­x
and baby boomer generations. In such case, sales of our products could be
negatively impacted.
Seasonality
Weather conditions in most parts of the world, including our primary geographic
markets, generally restrict golf from being played year-round, with many of our
on­course customers closed during the cold weather months. In general, during
the first quarter, we begin selling our products into the golf retail channel
for the new golf season. This initial sell­in generally continues into the
second quarter. Our second­quarter sales are significantly affected by the
amount of sell­through, in particular the amount of higher value discretionary
purchases made by customers, which drives the level of reorders of our products
sold­in during the first quarter. Our third­quarter sales are generally
dependent on reorder business, and are generally lower than the second quarter
as many retailers begin decreasing their inventory levels in anticipation of the
end of the golf season. Our fourth­quarter sales are generally less than the
other quarters due to the end of the golf season in many of our key markets, but
can also be affected by key product launches, particularly golf clubs. This
seasonality, and therefore quarter to quarter fluctuations, can be affected by
many factors, including weather conditions as discussed above under "-Weather
Conditions" and the timing of new product introductions as discussed below under
"-Cyclicality." This seasonality affects sales in each of our reportable
segments differently. In general, however, because of this seasonality, a
majority of our sales and most of our profitability generally occurs during the
first half of the year.
Cyclicality
Our sales can also be affected by the launch timing of new products. Product
introductions generally stimulate sales as the golf retail channel takes on
inventory of new products. Reorders of these new products then depend on the
rate of sell­through. Announcements of new products can often cause our
customers to defer purchasing additional golf equipment until our new products
are available. The varying product introduction cycles described below may cause
our results of operations to fluctuate as each product line has different
volumes, prices and margins.
Product Life Cycles
Titleist Golf Balls Segment
We generally launch new Titleist golf ball models on a two-year cycle. In
general, in odd-numbered years, we launch our premium performance models, Pro V1
and Pro V1x, in the first quarter and our TruFeel performance model in the
fourth quarter. In even-numbered years, we launch our premium performance AVX
model and Velocity performance model in the first quarter and performance models
Tour Speed and Tour Soft in the second quarter. For new golf ball models, sales
occur at a higher rate in the year of the initial launch than in the second
year. Given the Pro V1 franchise is our highest volume and our highest priced
product in this product category, we typically have higher net sales in our
Titleist golf ball segment in odd-numbered years.
Titleist Golf Clubs Segment
We generally launch new Titleist golf club models on a two­year cycle using the
following product launch cycle. At present, we anticipate continuing to use this
product launch cycle going forward because we believe it aligns our launches
with the purchase habits of dedicated golfers. In general, we launch:
•drivers and fairways in the third or fourth quarter of even­numbered years,
which typically results in an increase in sales of drivers and fairways during
such quarters because retailers take on initial supplies of these products as
stock inventory, with increased sales generated by such new products continuing
the following spring and summer of odd­numbered years;
•hybrids in the first or second quarter of odd-numbered years, with the majority
of sales generated by such new products occurring in the spring, summer and fall
of odd­numbered years;

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•irons in the third or fourth quarter of odd­numbered years, with the majority
of sales generated by such new products occurring in the following spring and
summer of even­numbered years because a higher percentage of our new irons as
compared to our drivers and fairways are sold through on a custom fit basis and
the spring and summer is when golfers tend to make such custom fit purchases;
•Vokey Design wedges in the first quarter of even­numbered years, with the
majority of sales generated by such new products occurring in the spring and
summer of such even­numbered years; and
•Scotty Cameron putters in the first quarter, with the Select models launched in
even­numbered years and the Phantom X models launched in odd­numbered years,
with the majority of sales generated by such new products occurring in the
spring and summer of the year in which they are launched.
As a result of this product launch cycle, we generally expect to have higher net
sales in our Titleist golf clubs segment in even­numbered years due to the
following factors:
•the majority of sales generated by new irons launched in the third or fourth
quarter of odd­numbered years is expected to occur in the spring and summer of
the following even­numbered years;
•the majority of sales generated by new Vokey Design wedges launched in the
first quarter of even­numbered years is expected to occur in such
even­numbered years;
•the majority of sales generated by new Scotty Cameron Select line of putters
launched in the first quarter of even­numbered years is expected to occur in
such even­numbered years; and
•the increase in sales of new drivers and fairways launched in the third or
fourth quarter of even­numbered years due to the initial sell­in of these
products during such quarters.
Titleist Golf Gear and FootJoy Golf Wear Segments
Our Titleist golf gear and FootJoy golf wear businesses are not subject to the
same degree of cyclical fluctuation as our golf ball and golf club businesses as
new product offerings and styles are generally introduced each year and at
different times during the year.
Foreign Currency
For the years ended December 31, 2020, 2019 and 2018, 48%, 47% and 49%,
respectively, of our net sales were generated outside of the United States by
our non­U.S. subsidiaries. Substantially all of these net sales generated
outside of the United States were generated in the applicable local currency,
which include, but are not limited to, the Japanese yen, the Korean won, the
British pound sterling, the euro and the Canadian dollar. In contrast,
substantially all of the purchases of inventory, raw materials or components by
our non­U.S. subsidiaries are made in U.S. dollars. For the years ended December
31, 2020, 2019 and 2018 approximately 85% of our cost of goods sold incurred by
our non­U.S. subsidiaries was denominated in U.S. dollars. Because our non­U.S.
subsidiaries incur substantially all of their cost of goods sold in currencies
that are different from the currencies in which they generate substantially all
of their sales, we are exposed to transaction risk attributable to fluctuations
in such exchange rates, which can impact the gross profit of our non­U.S.
subsidiaries.
In an effort to protect against adverse fluctuations in foreign exchange rates
and minimize foreign currency transaction risk, we take an active approach to
currency hedging, which includes among other things, entering into various
foreign currency exchange contracts, with the primary goal of providing earnings
and cash flow stability. As a result of our active approach to currency hedging,
we are able to take a longer term view and more flexible approach towards
pricing our products and making cost­related decisions. In taking this active
approach, we coordinate with the management teams of our key non­U.S.
subsidiaries on an ongoing basis to share our views on anticipated currency
movements and make decisions on securing foreign currency exchange contract
positions that are incorporated into our business planning and forecasting
processes. Because our hedging activities are designed to reduce volatility,
they reduce not only the negative impact of a stronger U.S. dollar but could
also reduce the positive impact of a weaker U.S. dollar.
Because our consolidated accounts are reported in U.S. dollars, we are also
exposed to currency translation risk when we translate the financial results of
our consolidated non­U.S. subsidiaries from their local currency into U.S.
dollars. For the year ended December 31, 2020, 48% of our sales were denominated
in foreign currencies. In addition, for the year ended December 31, 2020,
approximately 34% of our total operating expenses were denominated in foreign
currencies (which amounts represent substantially all of the operating expenses
incurred by our non­U.S. subsidiaries). Fluctuations in foreign currency
exchange rates may positively or negatively affect our reported financial
results and can significantly affect
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period­over­period comparisons. A strengthening of the U.S. dollar relative to
our foreign currencies could materially adversely affect our business, financial
condition and results of operations.
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 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. 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 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 non­recurring items, or
affected by similar non­recurring 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 non­recurring items, or
affected by similar non­recurring 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 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.
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Results of Operations
The following table sets forth, for the periods indicated, our results of
operations.
                                                                                Year ended December 31,
(in thousands)                                                       2020                 2019                 2018
Net sales                                                       $ 1,612,169          $ 1,681,357          $ 1,633,721
Cost of goods sold                                                  782,333              809,122              791,370
Gross profit                                                        829,836              872,235              842,351
Operating expenses:
Selling, general and administrative                                 610,603              627,503              611,883
Research and development                                             48,942               51,601               51,489
Intangible amortization(1)                                           11,629                7,478                6,644
Restructuring charges                                                13,207                    -                    -
Income from operations                                              145,455              185,653              172,335
Interest expense, net                                                15,630               19,613               18,402
Other expense, net                                                   16,776                  875                3,629
Income before income taxes                                          113,049              165,165              150,304
Income tax expense                                                   13,038               40,600               47,232
Net income                                                          100,011              124,565              103,072
Less: Net income attributable to noncontrolling interests            (4,005)              (3,495)              (3,200)
Net income attributable to Acushnet Holdings Corp.              $    96,006          $   121,070          $    99,872
Adjusted EBITDA:
Net income attributable to Acushnet Holdings Corp.              $    96,006          $   121,070          $    99,872
Interest expense, net                                                15,630               19,613               18,402
Income tax expense                                                   13,038               40,600               47,232
Depreciation and amortization (1)                                    45,429               43,002               40,496
Share-based compensation                                             16,016               10,975               18,563

Restructuring and transformation costs(2)                            15,589                    -                    -

Beam indemnification expense (income) (3)                             9,871                 (498)                (258)

Other extraordinary, unusual or non-recurring items, net (4) 17,600

                1,869                3,319

Net income attributable to noncontrolling interests                   4,005                3,495                3,200
Adjusted EBITDA                                                 $   233,184          $   240,126          $   230,826
Adjusted EBITDA margin                                                 14.5  %              14.3  %              14.1  %

___________________________________


(1)   For the year ended December 31, 2020, includes a goodwill impairment loss
of $3.8 million related to KJUS.
(2)  Relates to severance and other costs associated with management's approved
restructuring program and other expenses to refine and transform our business
model and improve operational efficiencies.
(3)  Includes non-cash indemnification expense (income) related to tax audits
for the periods in which we were owned by Beam Suntory, Inc. ("Beam").
(4)  Items recorded during the year ended December 31, 2020 include 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 $13.5 million and pension settlement costs of
$7.2 million related to lump-sum distributions to participants in our defined
benefit plans as a result of the voluntary retirement program as part of
management's approved restructuring program. Items recorded during the year
ended December 31, 2019 include transaction fees of $2.7 million. Items recorded
during the year ended December 31, 2018 include a non-cash settlement expense of
$2.5 million related to benefit payments received by our former CEO in
connection with his retirement. Includes other immaterial unusual or
non-recurring items, net for the years ended December 31, 2020, 2019 and 2018.

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Table of Contents Year Ended December 31, 2020 Compared to the Year Ended December 31, 2019 Net sales by reportable segment is summarized as follows:


                                               Year ended                                                                               Constant 

Currency


                                              December 31,                           Increase/(Decrease)                               Increase/(Decrease)
(in millions)                             2020             2019                $ change                 % change                  $ change                 % change
Titleist golf balls                    $ 507.8          $ 551.6          $            (43.8)                 (7.9) %       $             (43.9)                 (8.0) %
Titleist golf clubs                      418.4            434.4                       (16.0)                 (3.7) %                     (17.5)                 (4.0) %
Titleist golf gear                       149.4            150.0                        (0.6)                 (0.4) %                         -                     -  %
FootJoy golf wear                        415.3            441.9                       (26.6)                 (6.0) %                     (27.0)                 (6.1) %

Segment operating income by reportable segment is summarized as follows:


                           Year ended
                          December 31,                Increase/(Decrease)
(in millions)           2020         2019            $ change           % change
Titleist golf balls   $  71.8      $ 93.3      $            (21.5)       (23.0) %
Titleist golf clubs      40.0        38.8                     1.2          3.1  %
Titleist golf gear       20.0        17.3                     2.7         15.6  %
FootJoy golf wear        18.3        24.4                    (6.1)       (25.0) %


Net sales information by region is summarized as follows:


                                               Year ended                                                                                 Constant 

Currency


                                              December 31,                             Increase/(Decrease)                               Increase/(Decrease)
(in millions)                            2020               2019                 $ change                 % change                  $ change                 % change
United States                        $   839.4          $   884.8          $            (45.4)                 (5.1) %       $             (45.4)                 (5.1) %
EMEA(1)                                  219.0              230.5                       (11.5)                 (5.0) %                     (12.6)                 (5.5) %
Japan                                    151.8              182.7                       (30.9)                (16.9) %                     (34.3)                (18.8) %
Korea                                    246.2              223.4                        22.8                  10.2  %                      26.4                  11.8  %
Rest of world                            155.8              160.0                        (4.2)                 (2.6) %                      (4.3)                 (2.7) %
Total net sales                      $ 1,612.2          $ 1,681.4          $            (69.2)                 (4.1) %       $             (70.2)                 (4.2) %

_______________________________________________________________________________

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


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Net Sales
Net sales decreased by $69.2 million, or 4.1%, to $1,612.2 million for the year
ended December 31, 2020 compared to $1,681.4 million for the year ended December
31, 2019. On a constant currency basis, net sales decreased by $70.2 million, or
4.2%, to $1,611.2 million. The decrease in net sales on a constant currency
basis was due to decreases across all reportable segments primarily as a result
of the impact of the COVID-19 pandemic and related government-ordered shutdowns
primarily during the first and second quarters of 2020. Partially offsetting
this was higher demand around golf and golf-related products in the third and
fourth quarters as golf courses and on and off-course retail partner locations
re-opened, as well as a full year of sales from KJUS, which we acquired in the
third quarter of 2019.

Net sales in the United States decreased by $45.4 million, or 5.1%, to $839.4
million for the year ended December 31, 2020 compared to $884.8 million for the
year ended December 31, 2019. Overall, sales in the United States were lower as
a result of the impact of the COVID-19 pandemic. The decrease in net sales
primarily resulted from a decrease of $27.3 million in Titleist golf balls, a
decrease of $15.3 million in FootJoy golf wear and a decrease of $10.6 million
in Titleist golf clubs. The decrease in net sales was partially offset by an
increase of $3.0 million in Titleist golf gear and a full year of sales from
KJUS.
Net sales in regions outside of the United States were also impacted by the
COVID-19 pandemic. Net sales in regions outside of the United States decreased
by $23.8 million, or 3.0%, to $772.8 million for the year ended December 31,
2020 compared to $796.6 million for the year ended December 31, 2019. On a
constant currency basis, net sales in such regions decreased by $24.8 million,
or 3.1%, to $771.8 million. This decrease in net sales was due to decreases in
sales volumes across all reportable segments, primarily as a result of the
impact of the COVID-19 pandemic in all regions except Korea, which saw net sales
increases across all reportable segments except Titleist golf clubs. A full year
of sales from KJUS partially offset declines in EMEA.
Gross Profit
Gross profit decreased by $42.4 million to $829.8 million for the year ended
December 31, 2020 compared to $872.2 million for the year ended December 31,
2019. Gross margin decreased to 51.5% for the year ended December 31, 2020
compared to 51.9% for the year ended December 31, 2019. The decrease in gross
profit primarily resulted from a decrease of $37.7 million in Titleist golf
balls, a decrease of $10.5 million in Titleist golf clubs and a decrease of $9.3
million in FootJoy golf wear, each primarily due to the sales volume declines
discussed above. The remaining change in gross profit was primarily due to sales
volume growth of products that are not allocated to one of our reportable
segments.
The decrease in gross margin was primarily driven by lower gross margin in
Titleist golf balls. The Titleist golf balls segment experienced unfavorable
manufacturing overhead absorption related to the temporary closure of our United
States-based golf ball manufacturing facilities during the second quarter of
2020 as a result of the COVID-19 pandemic.

Selling, General and Administrative Expenses
Selling, general and administrative ("SG&A") expenses decreased by $16.9 million
to $610.6 million for the year ended December 31, 2020 compared to $627.5
million for the year ended December 31, 2019. SG&A decreased primarily as a
result of expense reduction measures taken across all segments in the first and
second quarters of 2020 as a result of the COVID-19 pandemic, partially offset
by increased spending in the fourth quarter related to higher net sales as
described above and increased employee related expenses. The decrease in SG&A
primarily resulted from a decrease of $31.4 million in advertising and
promotional costs, partially offset by an increase of $10.1 million in
administrative expense primarily due to employee related expenses and an
increase of $6.6 million in selling expense primarily related to a full year of
KJUS.

Research and Development
Research and development ("R&D") expenses decreased by $2.7 million to $48.9
million for the year ended December 31, 2020 compared to $51.6 million for the
year ended December 31, 2019 primarily resulting from expense reduction measures
taken in response to the COVID-19 pandemic and a reduction in experimental
material expense.
Intangible Amortization
Intangible amortization expense increased $4.1 million to $11.6 million for the
year ended December 31, 2020, compared to $7.5 million for the year ended
December 31, 2019, primarily related to a goodwill impairment loss of $3.8
million related to KJUS.
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Restructuring Charges
During the year ended December 31, 2020, we recorded $11.2 million in severance
and other benefits expense related to our voluntary retirement program, as well
as $2.0 million in severance and other benefits related to involuntary headcount
reductions both associated with our restructuring program approved in the first
quarter of 2020.
Interest Expense, net
Interest expense, net decreased by $4.0 million to $15.6 million for the year
ended December 31, 2020 compared to $19.6 million for the year ended December
31, 2019. This decrease was primarily due to a decrease in interest rates and a
decrease in borrowings during the year ended December 31, 2020, offset in part
by an increase in interest rate swap loss.
Other Expense, net
Other expense, net increased by $15.9 million to $16.8 million for the year
ended December 31, 2020 compared to $0.9 million for the year ended December 31,
2019. This increase was primarily due to expense resulting from the reversal of
an indemnification receivable of $10.4 million related to income taxes
indemnified by Beam, for which there was a corresponding tax benefit recognized
during the year ended December 31, 2020, and a $7.5 million increase in the
non-service cost component of net periodic benefit costs related to both an
increase in the amortization of actuarial losses and an increase in settlement
costs as a result of our voluntary retirement program.
Income Tax Expense
Income tax expense decreased by $27.6 million to $13.0 million for the year
ended December 31, 2020 compared to $40.6 million for the year ended December
31, 2019. Our effective tax rate ("ETR") was 11.5% for the year ended December
31, 2020, compared to 24.6% for the year ended December 31, 2019. The decrease
in ETR was primarily driven by the impact of the COVID-19 pandemic on our
geographic mix of earnings as well as the reduction of tax expense associated
with the U.S. tax of foreign earnings and the income tax benefit pertaining to
our change in unrecognized tax benefits resulting from an audit settlement for
the periods in which we were owned by Beam.
Net Income Attributable to Acushnet Holdings Corp.
Net income attributable to Acushnet Holdings Corp. decreased by $25.1 million to
$96.0 million for the year ended December 31, 2020 compared to $121.1 million
for the year ended December 31, 2019, primarily as a result of the factors
discussed above.
Adjusted EBITDA
Adjusted EBITDA decreased by $6.9 million to $233.2 million for the year ended
December 31, 2020 compared to $240.1 million for the year ended December 31,
2019 due to a decrease in income from operations partially offset by adjustments
to net income attributable to Acushnet Holdings Corp. related to restructuring
and transformation costs and other extraordinary, unusual or non-recurring
items, net (see Results of Operations table). Adjusted EBITDA margin increased
to 14.5% for the year ended December 31, 2020 compared to 14.3% for the year
ended December 31, 2019.
Segment Results
Titleist Golf Balls Segment
Net sales in our Titleist golf balls segment decreased by $43.8 million, or
7.9%, to $507.8 million for the year ended December 31, 2020 compared to $551.6
million for the year ended December 31, 2019. On a constant currency basis, net
sales in our Titleist golf balls segment decreased by $43.9 million, or 8.0%, to
$507.7 million. This decrease resulted from the impact of the COVID-19 pandemic
on sales volumes as discussed above across all models and regions, with the
exception of Korea.
Operating income in our Titleist golf balls segment decreased by $21.5 million,
or 23.0%, to $71.8 million for the year ended December 31, 2020 compared to
$93.3 million for the year ended December 31, 2019. The decrease in operating
income was due to a decrease of $37.7 million in gross profit partially offset
by a decrease in operating expenses. The decrease in gross profit was primarily
due to the sales decline discussed above and unfavorable manufacturing overhead
absorption due to the closure of our United States-based golf ball manufacturing
facilities during the second quarter of 2020 as a result of the COVID-19
pandemic. Operating expenses decreased primarily due to a decrease of $14.4
million in advertising and promotional costs and a decrease of $3.1 million in
R&D costs primarily as a result of the expense reduction measures taken in
response to the COVID-19 pandemic, partially offset by an increase of $3.0
million in allocated administration expense primarily due to employee related
expenses.
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Titleist Golf Clubs Segment
Net sales in our Titleist golf clubs segment decreased by $16.0 million, or
3.7%, to $418.4 million for the year ended December 31, 2020 compared to $434.4
million for the year ended December 31, 2019. On a constant currency basis, net
sales in our Titleist golf clubs segment decreased by $17.5 million, or 4.0%, to
$416.9 million. This decrease resulted from the impact of the COVID-19 pandemic
on sales volumes as discussed above across all models, partially offset by our
SM8 wedges introduced in the first quarter of 2020 and our TSi metals introduced
in the fourth quarter of 2020.
Operating income in our Titleist golf clubs segment increased by $1.2 million,
or 3.1%, to $40.0 million for the year ended December 31, 2020 compared to $38.8
million for the year ended December 31, 2019. The increase in operating income
resulted from lower operating expenses, largely offset by lower gross profit.
Operating expenses decreased primarily due to a decrease of $10.0 million in
advertising and promotional costs and a decrease of $3.6 million in selling
expense primarily as a result of the expense reduction measures taken in
response to the COVID-19 pandemic, partially offset by an increase of $2.1
million in allocated administration expense primarily due to employee related
expenses. Gross profit was $10.5 million lower primarily as a result of the
sales volume decrease discussed above.
Titleist Golf Gear Segment
Net sales in our Titleist golf gear segment decreased by $0.6 million, or 0.4%,
to $149.4 million for the year ended December 31, 2020 compared to $150.0
million for the year ended December 31, 2019. On a constant currency basis, net
sales in our Titleist golf gear segment was unchanged. Sales volumes were
impacted by the COVID-19 pandemic as discussed above primarily in our headwear
and travel product categories, offset by higher average selling prices across
all product categories.
Operating income in our Titleist golf gear segment increased by $2.7 million, or
15.6%, to $20.0 million for the year ended December 31, 2020 compared to $17.3
million for the year ended December 31, 2019. The increase in operating income
resulted from lower operating expenses and higher gross profit. Operating
expenses decreased primarily due to a decrease of $1.9 million in advertising
and promotional costs primarily as a result of the expense reduction measures
taken in response to the COVID-19 pandemic. Gross profit increased $1.3 million
primarily due to higher average selling prices across all product categories.
FootJoy Golf Wear Segment
Net sales in our FootJoy golf wear segment decreased by $26.6 million, or 6.0%,
to $415.3 million for the year ended December 31, 2020 compared to $441.9
million for the year ended December 31, 2019. On a constant currency basis, net
sales in our FootJoy golf wear segment decreased by $27.0 million, or 6.1%, to
$414.9 million. This decrease resulted from the impact of the COVID-19 pandemic
on sales volumes as discussed above primarily in our footwear and apparel
product categories and all regions, with the exception of Korea.
Operating income in our FootJoy golf wear segment decreased by $6.1 million, or
25.0%, to $18.3 million for the year ended December 31, 2020 compared to $24.4
million for the year ended December 31, 2019. The decrease in operating income
resulted from a decrease of $9.3 million in gross profit primarily as a result
of the sales volume decrease discussed above, partially offset by lower
operating expenses. Operating expenses decreased primarily due to a decrease of
$6.3 million in advertising and promotional costs primarily as a result of the
expense reduction measures taken in response to the COVID-19 pandemic, partially
offset by an increase of $2.6 million in selling expense.
Year Ended December 31, 2019 Compared to the Year Ended December 31, 2018
A detailed review of our results of operations for the year ended December 31,
2019 as compared to the year ended December 31, 2018 can be found in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in Part II, Item 7 of the   Company's     Form 10-K   for the year
ended December 31, 2019, which was filed with the SEC on February 27, 2020, and
is incorporated herein by reference.
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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 sell­in 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 of December 31, 2020, we had $149.4 million of unrestricted cash (including
cash equivalents) (including $6.1 million attributable to our FootJoy golf shoe
variable interest entity). As of December 31, 2020, 56.1% of our total
unrestricted cash (including cash equivalents) was held at our non­U.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
operations for the year ended December 31, 2020. At the onset of the pandemic,
we took 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 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
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 "Risk Factors," Item
1A of Part I included elsewhere in this report.
Debt and Financing Arrangements
As of December 31, 2020, we had $392.2 million of availability under our
revolving credit facility after giving effect to $7.8 million of outstanding
letters of credit. Additionally, we had $58.7 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. On July 3, 2020, we amended our credit agreement to, among
other things, provide debt covenant relief for each of the fiscal quarters
ending between September 30, 2020 and September 30, 2021. See "Notes to
Consolidated Financial Statements- Note 10- Debt and Financing Arrangements,"
Item 8 of Part II included elsewhere in this report, for a description of our
amended credit agreement. The credit agreement also includes customary events of
default, the occurrence of which, following any applicable cure period, would
permit the lenders to, among other things, declare the principal, accrued
interest and other obligations to be immediately due and payable. As of December
31, 2020, we were in compliance with all covenants under the credit agreement.
See "Notes to Consolidated Financial Statements- Note 10- Debt and Financing
Arrangements," Item 8 of Part II included elsewhere in this report, for a
further description of our credit facilities. Additionally, see "Risk Factors -
Risks Related to Our Indebtedness" Item 1A of Part I included elsewhere in this
report for further discussion surrounding the risks and uncertainties of our
credit facilities.
Capital Expenditures
We made $24.7 million of capital expenditures during the year ended December 31,
2020. We reduced our capital expenditures in response to the COVID-19 pandemic
resulting in lower full year capital expenditures in 2020 than in 2019. Capital
expenditures in 2021 are expected to be approximately $50.0 million, although
the actual amount may vary depending upon a variety of factors, including the
timing of implementation of certain capital projects. 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. The increase in
anticipated capital
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expenditures in 2021 is primarily related to key strategic investments in our
golf ball operations and precision manufacturing capabilities.
Dividends and Share Repurchase Program
The Board of Directors has authorized us to repurchase up to an aggregate of
$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 Corp., 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 April 2020, we temporarily suspended stock repurchases under our share
repurchase program in light of the COVID-19 pandemic. Prior to this, 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 during 2020. 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 December 31, 2020. Excluding the impact of the share repurchase
liability, as of December 31, 2020, we had $63.7 million remaining under the
current share repurchase program, including $11.1 million related to the Magnus
share repurchase agreement. We have the ability to resume repurchases in our
discretion. See "Notes to Consolidated Financial Statements-Note 15-Common
Stock," Item 8 of Part II, included elsewhere in this report, for disclosures
related to the Magnus share repurchase liability.
During the year ended December 31, 2020, we paid dividends on our common stock
of $46.1 million to our shareholders. During the first quarter of 2021, our
Board of Directors declared a dividend of $0.165 per share of common stock to
shareholders of record as of March 12, 2021 and payable on March 26, 2021.
Cash Flows
The following table presents the major components of net cash flows provided by
and used in operating, investing and financing activities for the periods
indicated:
                                                                                 Year ended December 31,
(in thousands)                                                          2020               2019               2018
Cash flows provided by (used in):
Operating activities                                                $ 264,425          $ 134,283          $ 163,733
Investing activities                                                  (24,675)           (61,060)           (49,703)
Financing activities                                                 (128,587)           (70,328)          (128,883)

Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash

                                                     6,105                275             (1,855)

Net increase (decrease) in cash, cash equivalents and restricted cash

                                                                $ 

117,268 $ 3,170 $ (16,708)




Cash Flows From Operating Activities
Net cash provided by operating activities was $264.4 million for the year ended
December 31, 2020 compared to $134.3 million for the year ended December 31,
2019, an increase in cash provided by operating activities of $130.1 million.
The increase in cash provided by operating activities was primarily driven by
higher cash collections, lower inventory levels due to government-ordered
shutdowns and the subsequent increase in demand for golf and golf-related
products, and other changes in working capital, partially offset by lower net
income. 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.
Net cash provided by operating activities was $134.3 million for the year ended
December 31, 2019 compared to $163.7 million for the year ended December 31,
2018, a decrease in cash provided by operating activities of $29.4 million. The
decrease in cash provided by operating activities was primarily driven by
changes in working capital.
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Cash Flows From Investing Activities
Net cash used in investing activities was $24.7 million for the year ended
December 31, 2020 compared to $61.1 million for the year ended December 31,
2019, a decrease of $36.4 million, primarily related to a decrease in cash used
for business acquisitions, as well as a decrease in capital expenditures.
Net cash used in investing activities was $61.1 million for the year ended
December 31, 2019 compared to $49.7 million for the year ended December 31,
2018, an increase of $11.4 million, related to an increase in cash used for
business acquisitions.
Cash Flows From Financing Activities
Net cash used in financing activities was $128.6 million for the year ended
December 31, 2020 compared to $70.3 million for the year ended December 31,
2019, an increase in cash used in financing activities of $58.3 million. This
increase was primarily due to an increase in borrowing repayments, offset in
part by a decrease in purchases of common stock and payments for employee
restricted stock tax withholdings.
Net cash used in financing activities was $70.3 million for the year ended
December 31, 2019 compared to $128.9 million for the year ended December 31,
2018, a decrease in cash used in financing activities of $58.6 million. This
decrease was primarily due to an increase in net proceeds from borrowings,
partially offset by an increase in payments related to purchases of common stock
and employee restricted stock tax withholdings during the year ended December
31, 2019.
Contractual Obligations
The following table summarizes our outstanding contractual obligations as of
December 31, 2020:
                                                                                              Payments Due by Period
                                                                        Less than             1-3                4-5               After
(in thousands)                                         Total              1 Year             Years              Years             5 Years
Long-term debt obligations (1)                      $ 332,500          $  

17,500 $ 35,000 $ 280,000 $ - Interest payments related to debt obligations (2) 27,065

              7,324             13,588              6,153                  -
Pension and other postretirement benefit
obligations                                           276,744             23,701             51,659             59,198            142,186
Purchase obligations (3)                              175,261            162,839             10,310                913              1,199
Lease obligations (4)                                  61,298             15,402             19,154             12,759             13,983
Total                                               $ 872,868          $ 226,766          $ 129,711          $ 359,023          $ 157,368

___________________________________


(1)Long­term debt obligations consist of the outstanding principal of our term
loan facility.
(2)Interest payments related to debt obligations assumes that all debt
outstanding as of December 31, 2020 remains outstanding until maturity and is
calculated based on interest rates in effect as of December 31, 2020. Unused
commitment fees related to our revolving credit facility have also been included
in this calculation.
(3)During the normal course of our business, we enter 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 amounts reported in the table above
exclude those liabilities included in accounts payable or accrued liabilities on
the consolidated balance sheet as of December 31, 2020.
(4)We lease certain warehouses, distribution and office facilities, vehicles and
equipment under finance and operating leases. Lease obligations represent the
future undiscounted cash flows on these leases. Certain leases include one or
more options to renew, with renewal terms that can extend the lease term up to
three years. The future lease obligations would change if we were to exercise
these options or if we were to enter into additional leases. See "Notes to
Consolidated Financial Statements-Note 4-Leases," Item 8 of Part II, included
elsewhere in this report, for disclosures related to these lease obligations.
Off­Balance Sheet Arrangements
As of December 31, 2020, 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.
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Critical Accounting Estimates
The preparation of financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities, revenue
and expenses, and related disclosure of contingent assets and liabilities.
Management bases its estimates on historical experience and on various
assumptions that are believed to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying values
of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates.
  A summary of significant accounting policies is included in Note 2, "Summary
of Significant Accounting Policies," to the Consolidated Financial Statements in
Item 8 of Part II, which is incorporated herein by reference. An accounting
policy is deemed to be critical if it requires an accounting estimate to be made
based on assumptions about matters that are highly uncertain at the time the
estimate is made, if different estimates reasonably could have been used, or if
changes in the estimate that are reasonably possible could materially impact the
financial statements. We believe the following judgments and estimates are
critical in the preparation of our consolidated financial statements.
Goodwill
We evaluate goodwill for impairment annually and whenever events or
circumstances indicate that the carrying amount of this asset may not be
recoverable. We test goodwill for impairment by comparing the fair value of the
reporting unit to its carrying value. The fair value of our reporting units is
determined using the income approach. Under the income approach, we estimate the
fair value of a reporting unit based on the present value of estimated future
cash flows. Cash flow projections are based on management's estimates of revenue
growth rates, taking into consideration industry and market conditions. The
discount rate is the weighted-average cost of capital adjusted for the relevant
risk associated with business-specific characteristics and the uncertainty
related to the reporting unit's ability to execute on the projected cash flows.
This analysis contains uncertainties related to estimating revenue growth as it
requires us to make assumptions and apply judgments to estimate industry
economic factors and the profitability of future business strategies. If actual
results are not consistent with our estimates and assumptions, we may be exposed
to future impairment losses that could be material.
If the fair value of a reporting unit exceeds the carrying value of the net
assets assigned to that reporting unit, goodwill is not impaired. If the
carrying value of the net assets assigned to the reporting unit exceeds the fair
value of the reporting unit, then we would record an impairment loss equal to
the difference, not to exceed the total amount of goodwill allocated to the
reporting unit.
We perform our annual impairment test of goodwill during the fourth quarter of
our fiscal year. We recorded a goodwill impairment loss of $3.8 million for
the year ended December 31, 2020 related to KJUS. There were no other impairment
losses recorded for the years ended December 31, 2020, 2019 and 2018.
Pension and Other Postretirement Benefit Plans
We provide various post-employment plans including defined benefit plans (or
"pension plans") and postretirement benefit plans which provide benefits to
certain eligible U.S. and foreign employees. Projected benefit obligations are
measured using various actuarial assumptions, such as discount rate, rate of
compensation increase, mortality rate, turnover rate and health care cost trend
rates, as determined at each year end measurement date. The measurement of net
periodic benefit cost is based on various actuarial assumptions, including
discount rate, expected return on plan assets and rate of compensation increase,
which are determined as of the prior year measurement date. Our actuarial
assumptions are reviewed on an annual basis and modified when appropriate.
Our projected benefit obligations related to our pension and other
postretirement benefit plans are valued using a weighted­average discount rate
of 2.66% and 2.34%, respectively, for the year ended December 31, 2020.
Decreasing the discount rate by 100 basis points would have increased the
projected benefit obligations of our pension and other postretirement benefit
plan by approximately $61.5 million and $2.0 million, respectively, for the year
ended December 31, 2020.
  Our net periodic benefit cost related to our pension and other postretirement
benefit plans is calculated using a weighted average discount rate of 3.24% and
3.12%, respectively, for the year ended December 31, 2020. Decreasing the
discount rate by 100 basis points would increase net periodic pension and other
postretirement benefit cost by approximately $4.9 million and $0.2 million,
respectively, for the year ended December 31, 2020. Additionally, our net
periodic benefit cost related to our pension plans is calculated using an
expected return on plan assets of 5.01% for the year ended December 31, 2020.
Decreasing the expected return on plan assets by 100 basis points would increase
net periodic pension benefit cost by approximately $2.4 million for the year
ended December 31, 2020.

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Income Taxes
Deferred tax assets represent amounts available to reduce income taxes payable
on taxable income in future years. Such assets arise because of temporary
differences between the financial reporting and tax basis of assets and
liabilities, as well as from net operating losses and tax credit carryforwards.
We evaluate the recoverability of these future tax deductions and credits by
assessing the adequacy of future expected taxable income from all sources,
including reversal of temporary differences, forecasted operating earnings and
available tax planning strategies. These sources of income rely heavily on
estimates that are based on a number of factors, including historical experience
and short-range and long-range business forecasts. As of December 31, 2020, we
had a valuation allowance on certain net operating loss and tax credit
carryforwards based on our assessment that it is more likely than not that the
deferred tax assets will not be recognized. As of December 31, 2020 and 2019,
the cumulative valuation allowance against deferred tax assets was $20.4 million
and $18.4 million, respectively.
We are subject to income taxes in the U.S. and foreign jurisdictions. We account
for uncertain tax positions using a more likely than not threshold for
recognizing and resolving uncertain tax matters. Significant judgment is
required in evaluating our uncertain tax positions and determining our provision
for income taxes. Although we believe we have adequately reserved for our
uncertain tax positions, no assurance can be given that the outcome of these
matters will not be different. We adjust these reserves in light of changing
facts and circumstances, such as the closing of tax audits or refinement of an
estimate. To the extent the outcome of these matters is different than the
amounts recorded, such differences will affect the provision for income taxes
and the effective tax rate in the period in which the determination is made.
The 2017 Tax Act was signed into law on December 22, 2017 and significantly
changed how corporations are taxed. The U.S. Tax Act requires complex
computations to be performed that were not previously required U.S. tax law,
significant judgments to be made in interpretation of the provisions of the U.S.
Tax Act, significant estimates in calculations, and the preparation and analysis
of information not previously relevant or regularly produced. The U.S. Treasury
Department, the IRS, and other standard-setting bodies will continue to
interpret or issue guidance on how provisions of the U.S. Tax Act will be
applied or otherwise administered. As future guidance is issued, we may adjust
amounts that we have previously recorded that may materially impact our
provision for income taxes in the period in which the adjustments are made.
Recently Issued Accounting Pronouncements
We have reviewed all recently issued standards and have determined that, other
than as disclosed in "Notes to Consolidated Financial Statements - Note 2 -
Summary of Significant Accounting Policies", Item 8 of Part II, included
elsewhere in this report, such standards will not have a significant impact on
our consolidated financial statements or do not otherwise apply to our
operations.
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