Good morning. My name is Carol, and I will be your conference operator today. At this time, I would like to welcome everyone to the Q4 2016 Acushnet Holdings Corp. Earnings Call. [Operator Instructions] At this time, I would like to turn the call over to Tony Takazawa, Vice President, Investor Relations.

Thank you. Good morning and welcome to Acushnet Holdings' call to discuss our financial results for the fourth quarter and full year 2016. This morning, we are joined by Acushnet CEO, Wally Uihlein. Wally will provide a high-level overview of the golf industry and comment a bit on our strategy and the progress we are making. Acushnet's CFO, Bill Burke, will then spend some time discussing our business operations and how we have been executing in the fourth quarter and for the year. Bill will also discuss our review of 2017. After the prepared remarks, Acushnet's COO, David Maher, will join us for the Q&A. We will then open up the lines for your questions. We will be making forward-looking statements on the call today. These forward-looking statements are based on Acushnet's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations. For a list of factors that could cause actual results to differ, please see our filings with the U.S. Securities and Exchange Commission. Throughout this discussion, we will be making reference to non-GAAP financial metrics, including items such as revenues at constant currency and adjusted EBITDA. Explanations of how and why we use these metrics and reconciliations of these items to a GAAP basis can be found in the schedules in today's press release, the slides that accompany this presentation and in our filings with the U.S. Securities and Exchange Commission. With that, it is my pleasure to introduce Acushnet's CEO, Wally Uihlein. Wally?

Thank you, Tony. Good morning, everyone, and thank you for joining us on today's call. The year 2016 was a challenging 12 months for the golf industry but a very exciting and a very busy year for Acushnet Holdings. Our bona fides reflect a history of delivering consistent results, and we are very proud that 2016 was another year of solid performance. Our results confirm the strength of the company, the formidableness of our product category positions and the reliability of our proven operating model. While dealing with the challenged golf industry, we once again outperformed the composite industry results, and we want to thank our 30,000-plus valued trade partners and our 5,000-plus worldwide associate population for helping make Acushnet Holdings one of the leading golf equipment companies in the world. We also successfully completed an initial public offering, reducing our go-forward leverage obligations and better positioning the company to fulfill our long-term total return value proposition. And we are pleased to announce that our Board of Directors today declared our first quarterly cash dividend of $0.12 per share. Our 2016 performance was again produced by a playbook consisting of a broad product category portfolio, a favorable mix of consumables and durables, golf brands that resonate with the game's dedicated golfers and a desirable concentration in the high-margin equipment segments. United States full year net sales of $804 million, while flat year-on-year, nonetheless was a notable performance in a market that faced significant headwinds. Our net sales in Japan of $219 million represented an increase of 20%, an 8% increase on a level FX basis and demonstrated continued ability to grow share against strong home market competition. And our net sales of $176 million in South Korea, the third-largest golf market in the world, represents an increase of 21% reported…

Thanks, Wally [Audio Gap] the results, I want to make you aware of a couple of accounting changes related to immaterial revenue adjustments that we made in the fourth quarter of 2016. These relate to consignment sales at certain retail outlets in Korea and the accounting for trial club sales in the United States. The Q4 and full year results, as reported, reflect these changes. Note that these changes were not made to the corresponding periods in 2015 due to materiality. An explanation of the adjustments is available on the supporting schedules in today's slide presentation, and as I go through Q4 and full year results, I'll highlight the impact where appropriate. Starting with a quick overview. We're very pleased with our performance in the fourth quarter and for the 2016 fiscal year. In 2016, we had solid growth in both sales and adjusted EBITDA in a year of continued industry rightsizing. Annual sales of $1.57 billion were up 4.6% year-over-year and on a constant currency basis, up 4.5%. Excluding the impact of the accounting changes, sales were up 3.5% year-over-year and on a constant currency basis, up 3.4%. Adjusted EBITDA was $228.4 million, up 6.4% over the prior year, and we generated $86 million in free cash flow in 2016, up $17.4 million year-over-year. Looking at Q4 results. Consolidated revenue in the quarter was $329.8 million, up $9.5 million from Q4 of 2015 and up 1.3% in constant currency. Excluding the accounting adjustments, revenue would have been up slightly from last year and down 1.5% in constant currency. This was a challenging quarter, particularly in the United States with the off-course retail disruptions that I'll speak to in a minute. Overall, we feel our consolidated fourth quarter performance was quite strong and further demonstrated key strength of our proven…

Thank you, Bill. Carol, can we open up the lines for questions now?

[Operator Instructions] And your first question today comes from Matthew Boss from JPMorgan.

So I guess higher level, can you just talk about where we stand today with the excess inventory in the channel? And then once we're through the door closures, in a more steady-state backdrop, where would you peg multiyear growth in the golf industry from here?

Matt, David Maher. I'll answer that question. So from a broader inventory standpoint, a couple themes emerge as we think about entering 2017. And really, 2 answers: One, there's the ex U.S. answer, but I think your question more focused on what's happening within the U.S. As Wally and Bill referenced, the market's down about 500 doors versus the year prior. We feel real good that the majority of that inventory has worked its way through the system. There was some liquidation that took place in the second, third quarters last year. So entering 2017, we feel real good about inventory levels. You've seen some early indications that those retailers, and as importantly in our business, green grass partners are off to a pretty good start this year. And I think that's a commentary on the fact that this business is migrating. It's migrating to a variety of channels, first and foremost. In our world, it's migrating on course. It's migrating off course, sporting goods and e-commerce as well. So broad commentary on where the channel stands, I think it's in a pretty good position. And again, from an inventory standpoint, we feel good heading into 2017. Broader commentary about long-term prospects are our position has been that, as Wally mentioned in his opening remarks, we see the global golf opportunity as a 1% to 2% growth opportunity from a broader market standpoint, as we've shared with you and others. We've built an operating model to beat the market. So that's our expectation, but the starting point is market growth in the low single digits.

Got it. And then just more specific to your model, so underlying your EBITDA dollar guide that you provided, is it best to think about gross margin expansion partially offset by continued SG&A investments? Just any color on maybe the gross margin versus SG&A would be helpful.

Yes. This is Bill. As we've said for -- on several different occasions, and we are really targeting and we look to target a 50% margin in this industry, which is, we believe, industry-leading. And we do a lot of things to perpetuate that. Obviously, we look to be premium-priced. We look towards customization to do that, to deliver that promise. And we -- but we're also conscious of the fact that as we grow our top line, we grow our vertically integrated business production, which also leads to improved margins over time. In SG&A, we have a number of fixed elements of SG&A that are -- that really, over time, we don't have to have a lot of investment in. Headquarters, marketing and selling infrastructures are largely in place in all of our major markets. Sales coverage is appropriate where we -- in all major markets right now to service the account base. We feel that we've reached a level of tour spend we're comfortable with. And also, we have the fixed elements of distribution, warehousing space and all in place as we move forward. So aside from G&A where we are going to have some public company costs this year and going forward, we also see some logistical opportunities in gear and FootJoy golf wear, where there are synergies. And we're going to look to pursue those and maybe produce some cost -- yield some cost savings out of that.

Your next question comes from Mike Swartz from SunTrust.

Could we just maybe touch on the topic of geographies? And Wally, it looks like you guys have been doing extremely well outside of the U.S. I think your ex U.S. sales were up high single digits, low double digits in '16. Could you maybe give us a sense of just how you're doing that? Is that distribution? Is that product? And then how we think about that going forward.

Yes, Mike. I think the major thrust over the last 2 decades has been to download to all of the countries outside of the United States the best practices which have been in place in the U.S. market for the last 4 to 5 decades. And those steps require establishing an infrastructure, not just a backroom capability but also a sales force representation in those countries. And it's not to jump -- to get started, it's not as easy as it sounds because it's not as if you can go out and recruit from competitive entities. So what you're seeing now is Acushnet Japan has been in existence for 3 decades. Acushnet Korea is in its second decade, and we're starting to see the benefits of tenure and experience. I would point out though that most of the markets that we've referenced, we would define as mature. And so it remains a zero-sum game. We're only going to grow in those markets, whether it's United States, Japan, South Korea, et al. unless growth only comes from gaining share from very formidable competitors.

Okay, that's helpful. And then just one housekeeping item. Did I hear the comment that guidance for '17 is based on December exchange rates?

Yes, closely relates to December average exchange rates.

It seems like some of the major currencies that you're talking about have actually eased since December a bit. Now understanding that some of that's going to be locked in on the gross margin side, but is there a way of looking at just sensitivity analysis to what the potential upside, I guess, to the top line could be at current rates?

Yes, yes. I think when you look at that, you can see what happened. That really was a reaction to the Fed's decision to raise interest rates and announce their determination to probably raise them 2 more times this year. And that gave strength to the world markets to feel like the world economy is a little bit more robust than it might be. I would say that we don't look and change currency rates on an ongoing basis. We look for a sustainable level where currency rates are trading before we make any changes, and these changes at 3% and 4% and 5% could easily reverse themselves. As we note today, we saw what the market did yesterday in reaction to the fact that there would not be probably tax reform out there. So that would have an impact on what they -- what potentially everyone thinks U.S. earnings will be and what would happen to FX rates. So you can actually look at these averages and move forward and model them yourself, but we internally do not make changes until we see a sustainable change. And if we do, we'll be updating some of that in our future guidance if there's a major change.

Our next question comes from Simeon Siegel from Nomura/Instinet.

So just any color -- yes, sorry. Any color you guys can give on Q1 trends just as it relates to -- so Matt's question about gross margin. So with the new Pro V1 launches, I assume there should be, at least on the ball segment, maybe some improvement there. So any color you can give there. And then it looks like CapEx came down a bit, so any color on that decline. I don't know if anything was timing, but what would you expect for CapEx and D&A for this year?

Yes. Again, we're targeting that 50% margin level, and we continue to do that on a full year basis. So that is our target, and that is certainly where we intend to be in the short and the long term. When you look at year-on-year, the degradation in currencies does, to some extent, impact gross margin, although we have a very robust hedging program in place that mitigates a lot of that. So I would say that again if -- for purposes of us saying we like to continue to say we are a 50% margin targeted company. In terms of CapEx, we're looking at roughly $26 million or so next year. The timing of that can vary depending on when we start projects, if we start later in the year, they could carry over into the following year, but that's the approximate number right now.

Okay, great. And then R&D has been a great weapon for you guys. It looks like it went up a little bit. Any -- what's the right way to think about the R&D line go forward?

Yes, I think we're going to continue -- the product categories that we're concentrated in, particularly balls and clubs, are very innovation intense. So it's almost by default if you're going to participate in those categories, you've got to maintain a requisite investment in research and development in order to be competitive going forward.

Our next question today comes from Dan Wewer from Raymond James.

The midpoint of the 2017 adjusted EBITDA is $225 million. So that's a reduction from the $228 million earned in 2016, and I get you're guiding revenues to be up approximately 2%. What's contributing to the lower adjusted EBITDA rate in 2017? Is it gross margin dropping back down to 50% compared to 58.5% achieved in 2016? Or is it the accounting change that you alluded to? Or if you can give some clarity on that.

Sure. Let me start by saying both accounting changes had no impact on earnings or net income or adjusted EBITDA. Let's start right there. Secondly, I think we need to again reflect upon the currency rate changes that happen. And still, although they have improved a bit, they are still weaker than they were last year, year-on-year. So when we look at the growth, I think we -- you really need to look at that constant currency as being the driver of what we're -- of what's happening on the top line because although we can hedge our cost of goods sold and maintain and attempt to maintain our 50% margins, you can't really do anything about translation on the top line. So when the translation affects the sales, it will affect gross profit not so much as margin. So in doing so, that -- including the impact of public company costs, they're really the reasons that we're looking to be roughly flat or a little bit down from last year if you look at the midpoint.

And then as a follow-up question, if you go back to 2015, the last time there was a new Pro V1 launch, the company achieved $535 million in golf ball sales that year. Do you think with the new launch in 2017 that you can get back to that 2015 revenue level in golf balls?

I'll -- Dan, I'll comment on that launch in particular. A couple things, as we've said before: One, we're off to a good start in the first quarter, particularly outside the United States, where shipments have been robust and surpassed our 2015 level. In the U.S, as we said, we're dealing with some meaningful store count contraction. So our pipeline is going to be smaller. So in terms of Pro V1 '17 versus Pro V1 '15, we have very high expectations in terms of what's happening on tour, early golfer acceptance, but we are dealing with some pipeline realities that are just different in 2017 than they were in 2015.

Okay. And then the last question, you had called -- I'm sorry. Go ahead.

No, I just would point out that the golf ball market in '16 has been -- was slightly smaller than both '14 and '15 worldwide.

And then the last question I had. You called out the increase in R&D for golf club work. Does that signal that we may see an expansion in your golf club assortment next year?

Not necessarily. We're continuing to invest heavily in golf club R&D. We've got a lot of positive things happening. 917 is certainly top of mind right now. We got a very good run with our AP irons. We're expanding our C16 concept products. But in terms of correlating our investment in R&D to any expanded plans or thoughts about the business, I don't know that I'd make that correlation. We certainly invest heavily and we certainly invest at what we believe is the appropriate amount to drive the business going forward.

I would just add, that too includes an increase in gear. We are doing some R&D work on our own gear work development right now.

Our next question comes from Tim Conder from Wells Fargo Securities.

Just a few here, gentlemen. Any -- from a broad overview perspective, any stat that you have yet on 2016 year-over-year change and millennial participation in the sport or any other things that you can give us from a broad demographic perspective?

Yes. No -- at this point, Tim, no real changes, as we've said in the past. The game has got -- if there are 4 demographic groups, the baby boomers and Gen-Xers are driving a lot of the participation today. The millennials, a bit of latent demand there as they're focused on other things in their lives, but we haven't seen any specific data from millennials. The bright spot, be it behind them, is the junior participation, which at least in the U.S., is at a record high and continues to be fueled by great initiatives like PGA Junior League. We won't say that the game continues to attempt to re-face itself to be friendly to not only today's Gen-Xers and baby boomers but also anticipating the differing needs, wants and expectations of millennials. So that's a broad stroke view of how we see the demographic profile of the game, but in terms of any hard data in '16 versus prior years as to how millennials think about that, about the game, no hard data to report to you.

Okay. Tim, those are kind of more long-term trends I don't think you're going to see manifest in meaningful numbers year-to-year. I think what we've shared in the past, we would expect to continue, and not until 2020 would we expect to see any impact and consequence of some of the initiatives and programs that are out there being brought online by the various golf institutions.

Okay. And then a couple of other items, gentlemen. Any comment that you can make at this point given the Kirkland Signature issue that came up and any quantifications to what -- how that may have or may not have impacted the business in '16? And I would assume that the new version here clearly is improved performance characteristics and that should be -- should not be a concern going forward even though that it appears that -- for now that, that ball's not being sold by Costco?

Yes, I think you know based on past experience, a, we never comment on the competition; and anticipating the next question, as you would expect, we don't comment on any outstanding litigation. But we do respect the fact that you're going to ask questions, a, of a competitive nature; and b, of a litigious nature and hopefully catch us at a weak moment, but we'll take a pass on both those.

Not a problem, Wally. Well, then another one, may get the same answer here. What are management's thoughts at this point? And what type of opportunities potentially do you see, where you stand with the divestiture of a competitor, TaylorMade?

Well, I think as I said in my comments, we think any of the landscape changes, whether it's companies vacating certain sectors and/or changes in control, I think -- my opinion and I think it's the company's position that, that can only contribute to more rational behavior within the industry and particularly retail going forward. I think we've seen that in the last 6 to 8 months, where there has been less unchecked promotional discounting and just greater stability at retail. So I think from a macroeconomic point of view, again, however that plays out can only be a positive to long-term industry stability.

Okay. And no -- and lastly, related to the border tax adjustment. Any thoughts -- again, nothing's passed through Congress and there's talk now of a gradual phase-in, if it happens at all. What's the company's thoughts and what potentially could you do on the manufacturing side should that be implemented? And just any quantification as to potential impact or range of impacts that you all may be looking at.

Well, I think you said it first upfront that we wish we got more to report at present. As you know, the administration has placed tax reform really on the back burner to address health care reform. So we don't have a lot more clarity than we did on our last call, but we're continuing to watch the situation closely. And if something definitive emerges, we can update you on that. But I think it's good -- important to point out that while we import products and a lot of soft goods, like many manufacturers, we also sell products outside the United States and we also operate plants outside the United States that sell into our ex U.S. markets a considerable amount of product. So there's another -- an additional dynamic there that affects the entire equation other than just imports in the United States. And on top of that, there's still an uncertainty among a number of different things, legacy foreign tax credits, repatriation of earnings, the deduction of interest and capital expenditures. So it is a mixing pot right now, Tim, and until we get more clarity, it's difficult for us to comment on that.

Our next question comes from Dave King from Roth Capital.

I guess first on Pro V, curious how the changes in marketing message have resonated with consumers at this point. I understand shipments have been strong internationally, but anything you can share in terms of early sell-through, where that -- those balls are currently distributed?

Yes, so a couple things. And this is a chance for us to speak about some of the rhythms of our 2-year product life cycle. So we enter the year. We had a nice share spike in the fourth quarter as compared to the third quarter on the strength of our holiday program. While the quarter is still underway, we seem to be off to a good start in terms of early share versus the fourth quarter of last year and share versus a year ago. So we're pleased with the trends. We're pleased with what our trade partners are providing in terms of feedback. A couple other elements of the launch, we've seen a shift, an increase on tour usage, and we saw a very early and robust adoption and transition into the new product versus prior generations. So that always -- those are always early positive indicators that we think should play out as the launch progresses. The other side of it is the broader messaging, and we feel real good about the performance story. Pro V1's longer than its predecessor. Pro V1x offers improved in-flight performance versus its predecessor, Pro V1's softer feel, lower flight than Pro V1x. And we've worked very hard with our trade partners to get that message out. We've got a legion of ball fitting teams in the U.S. and around the world interacting with golfers to get the message out and provide them with the knowledge and sampling opportunities to test these products. So from the vantage point of what we think about the launch thus far, we're real pleased. And as you can imagine, a lot of what happens in the early part of the year, certainly the first part of the quarter of the year, is about pipeline and launch. And we're excited about what's going to happen once the broader golf season opens up in a few weeks around the country and around the world and feel our team has put ourselves in a real good position for success.

Okay. That's great color. In terms of on the guidance, how do you see the year progressing versus that full year growth target of 2% to 4%, I think, in constant currency? I understand the first half will be difficult due to Golfsmith, but anything in terms of effective product launch timing that you can share in terms of how to think about that, just high level versus that full year kind of target as the year goes?

No, I would say we're launching our new Pro V1 early in the year. We're going to launch all of our golf footwear and apparel early in the year. We don't -- we had mentioned already we will see some headwinds due to the reduced store count in the first quarter, and some of that will move into -- slightly into the second quarter as you're continuing to do that sell-in. But other than that, I don't -- we don't have any comments on any significant trends happening for the balance of the year that I can point out.

Okay. No, fair enough. And then I guess one last one from me. Decent progress on working capital both in terms of inventory and receivables, any -- how should we be thinking about that as -- you gave us the CapEx guidance, but how should we be thinking about working capital and the potential for further improvement there?

Yes, sure. I think you can see that inventory is relatively flat year-on-year, which is not unusual for us. We're building for a Pro V1 launch coming in. So I think you need to look at -- if you're looking at the accounts receivable number, I think this will show some of the anomalies of us having a strong international presence. And if you might indulge me for a second, I don't want you to take that number running forward. If you think -- if you look at Japan, Japan sales in the quarter, on a reported basis, were up 31% or about $15 million in that quarter but that was recorded at average rates. That's how those sales are recorded. And those average rates, where they recorded most of those, were in the $105 million range in the months of October and November. But the balance sheet is recorded at the spot rate at the end of the year when it was $117 million. So that's a bit of an anomaly where the sales look like they're even, but at end of the year, the receivables are down. So I don't want you to look at that. I think the best thing you can look at is a running average of accounts -- average accounts receivable plus average inventory minus accounts payable divided by sales, and we like to be in that 30% range.

Our next question comes from Randy Konik from Jefferies.

So we've gotten some good color on R&D expense but -- and kind of talked a little bit about customization. But I want to kind of further go into that idea of getting closer to the consumer with customization and the My Pro V1, I guess, experience. So as it relates to clubs, can you give us some perspective on just general penetration of customization, but not just in total, how does it look in the U.S. versus Japan versus Korea? And how should we think about that progression over the next 5 years from a penetration standpoint in those 3 markets? And any kind of color on differential on the ASP difference of a set of customized clubs that are being bought on average versus not would be helpful. And then just any kind of update on the My Pro V1 customization experience, what kind of learnings and successes have you had there thus far? And what are your plans to kind of further develop that business moving forward?

Okay. Randy, I'll take the first part of the question, which is custom golf clubs. In the United States, I would say -- and again, we're just going to speak to our numbers. Our golf club franchise, woods is 25% to 30% custom; irons are more than 50% custom. And again, keep in mind that's after 20 years of being committed to a custom-centric golf club business model. In both Japan and South Korea, the idea of custom golf clubs is still relatively recent because the business model in Japan, led by the home market competitors, was very much in store and off the rack. That changed a little bit with the advent of adjustability. But when you look at how golf clubs have been sold in the United States -- and again, they were rooted in an outside -- in a green grass outside fitting environment, that environment heretofore never existed in Japan and South Korea. But our plan is to continue to grow that piece of our business in Japan and South Korea, but you've got to have fitting teams on the ground. You've got to have fitting locations that are amenable and provide you the resource location to do the custom fitting, and that's in place. So we expect, over the next 5 to 10 years, our business in those markets will continue to increase as a percentage of custom that's part of the total.

And Randy, part 2 of your question specific to My Pro V1, My Pro V1's in its sixth month, and it's shown slow and steady progress, which we're very, very pleased about. But most importantly, and I think it's important to call out, the objective and intent of Pro V1 was to provide golfers -- provide dedicated golfers and Pro V1 fans a fantastic experience with the Titleist brand and some customization opportunities that were otherwise not necessarily available in the market. So first and foremost, as we measure the progress and success of My Pro V1, we look to the feedback and experiences we're providing customers, which has been terrific. And again, we're seeing slow and steady growth in that space. As we said all along, we don't see this as a volume play. This is an experience play. We realize that this will be a small, small part of our total golf ball business but nonetheless an important one because it hits right at the heart of our dedicated golfer audience.

Got it. And then I guess to follow up with another kind of area since you've -- obviously, you've got the Titleist brand name, extremely strong, growing that golf ball business further, club business, et cetera. That younger, big-time focus on golf gear, maybe give us some perspective on where are we as it relates to the assortment. How much further does it need to be expanded from a SKU count perspective, if at all? And where are you, from a distribution perspective, with golf gear relative to golf clubs and golf balls? Meaning like, is there additional distribution opportunity for that segment of your business?

Yes, the objective with gear when we, a couple years ago, made a deeper commitment into this category was a couple fold. First off was to shore up and really strengthen and produce the leading supply chain in its space. So a lot of our efforts thus far have been centered around fine-tuning the supply chain, which is very important, we think long term is going to yield a competitive advantage for us. Part 2 is we beefed up our design efforts. And again, a lot of these, whether it's supply chain, design efforts, sourcing, a lot of that was third-party sourced. So we're taking a lot greater control of the gear business, number one; and we're bringing a lot of expertise and resources to it, number two. In terms of where we go with the business, our distribution is robust. We don't look at the business and see we lack distribution. So I wouldn't think of it in terms of dramatic increases or expansion to distribution, but we do understand that as the product line gets better and better, there may be some incremental distribution opportunities out there for us. But again, primarily, it's design improvement, supply chain efficiencies, better route-to-market execution. And one of the payoffs of that will allow us to continue to make -- continue to improve the product line, but one of the payoffs, longer term, will be the ability to continue to move business towards customization. And that's part of the supply chain enhancement we're looking towards. So as we think about the future, sure, we think about growth and how to grow at a quicker clip than we have in the past. One of the drivers will be an increased migration towards customization. And again, back to that dedicated golfer, we think that, that yields a better experience for them.

Great, and last -- sorry.

Randy, just to follow up. It remains an $800 million opportunity worldwide, and there really is no clear-cut leader in the segment.

Yes, that's what I thought -- yes.

We have time for one more question, and then we'll have a few concluding comments from Wally.

And our final question today comes from Kimberly Greenberger from Morgan Stanley.

I'm wondering if you can talk about the -- how the Golfsmith situation played out in the fourth quarter relative to your expectations and what's your assessment of how inventory looks in the retail channel at this point. And then secondarily, it looks like there's been a recent increase in butadiene prices. I think you've got some hedging programs around that. Maybe you can just talk about how you're viewing golf ball input costs in 2017 and what sort of hedging activity do you have around that?

Kimberly, I'll touch on the first couple, and Bill will speak about polybutadiene. In terms of Golfsmith in the fourth quarter, as Wally mentioned in his opening remarks, I think we feel as though we weathered a bit of a storm in 2016. If nothing else from a planning standpoint, it was a very challenging year to plan and forecast the business because there were just a lot of uncertainties in terms of how that was going to play out. We took, I think, a conservative approach to those expectations in the fourth quarter, and in hindsight, those proved to be spot on. So in terms of what played out in the fourth quarter with Golfsmith, we had very conservative expectations. We may have come in slightly ahead of those conservative expectations. The second part of your question about inventory, we historically pay very close attention to our trade inventories, and we also pay very close attention to broader trade inventories because we understand supply-demand imbalance from some of our competitors can cause problems as well. But in terms of our specific inventories, we entered 2017 in a real healthy position. Again, you just -- you simply take the totals associated with the – what amounted to 500 doors, 400 TSAs and near 100 Golfsmiths, and you take that inventory out of the equation, you're down from where you were in the start of 2016. And by and large, the sell-off of those inventories as those stores closed was complete by the end of the year, was near complete by the end of the year. So that covers really question 1 and 2, I think, and I'll pass the baton to Bill for your third question.

Yes, Kim, obviously, we've seen some rise in polybutadiene prices. We're coming off of extreme, like almost 10-year lows or 8-year lows we saw here. So we expected that all along, that it would rebound to some extent when the energy stocks started rebounding. But [indiscernible] so we've seen some increases that are built into our forecast. They're not something that we're concerned right now at this point and where we're seeing them go, but they can certainly increase over time. But again, we built that into our forecast before we started the year. In terms of hedging, this is a commodity. It cannot be hedged. If we could, we would do it. We can lock in some short positions going forward or lock into some brief several month out positions depending on what kind of supply is out there, but it's not something we can be hedged -- that can be hedged.

Thank you, Kimberly. Wally?

Okay, everyone. Thank you, everyone, for joining us on today's call. And until we talk again, which will be sometime in May, to review our first quarter performance, please join us in respecting the golf gods and pray for good weather. Thank you.

This concludes today's conference. You may now disconnect.