Acushnet Sets Brand Records!

Golfweek's Adam Schupak reports the heartwarming news, which I know will help me sleep better tonight.

For the 12 months ended Dec. 31, Fortune’s golf business – which includes the Titleist, Cobra, FootJoy and Pinnacle brands – generated net sales of $1.41 billion, up 7 percent from $1.31 billion in 2006. Operating income dipped slightly to $165.5 million compared with $166 million the previous year.

For the fourth quarter, Fairhaven, Mass.-based Acushnet reported a 12.6 gain in net sales to $245.1 million, up from $217.6 million in the same period of 2006. It posted an operating loss of $6.7 million; Acushnet had an operating loss of $4.8 million for the fourth quarter of 2006.

Hmmm...attorney bills?

Acushnet does not provide specific financial details for each of its brands. However, Bruce Carbonari, president and chief executive officer of Fortune Brands, cited some of them in a news release about the year-end fiscal results.

Said Carbonari: “Successful innovations helped Titleist, FootJoy and Cobra achieve individual brand records, as we also attained sales records in every product category and in all major markets for the year.”

Golf ball sales increased at a high-single-digit rate, benefiting from a favorable product mix shift to the next generation Titleist Pro V1 and NXT families launched in 2007, said Craig Omtvedt, Fortune’s chief financial officer.

A favorable product mix shift...now that's a work of art.

"You can't grow an avid golfer in a quarter"

A couple of interesting columns have rolled in from the PGA Show and focusing on the rosy economic picture recently painted by some of the game's leaders.

Thanks to reader John for John Paul Newport's look, which included this:

So why the undercurrent of pessimism about the golf industry? Joe Steranka, chief executive of the PGA of America, which sponsors the show, suggests that the industry's outlook became a bit skewed starting in the 1990s. Many well-known golf businesses were gobbled up by investor-owned companies, which focused on short-term earnings.

"You can't grow an avid golfer in a quarter," he said. "For a while there, I think some in the industry lost sight of what the game needed for its long-term good."

And...

The possible looming recession may have only a minor effect on golf, argues Mr. King at TaylorMade. For one thing, more and more baby boomers are entering their prime golf-playing years. "The fact is that when people can't afford bigger vacations or fancier cars, they still make smaller purchases for recreation," he said. "Sometimes it means they even play more golf than they did when times were better."

Brad Klein at Golfweek wasn't quite so keen on the numbers presented...

Macro-economic studies like this serve a useful industry function in that they help generate public attention and set the stage for legislative lobbying efforts and behind-the-scenes policy bargaining. That’s precisely one purpose of this report. It will certainly be part of a widespread golf industry show and tell effort in Washington on April 16, National Golf Day. Similar, state-by-state studies have also been completed for Iowa, Louisiana, Michigan, Minnesota, Ohio and Virginia. They can help steer public policy toward pro-golf, pro-tourism efforts, and they can be powerful tools for impressing legislators and policy-makers when it comes time to decide upon water allocation, land use, tax rates and zoning provisions.  

This was interesting and a point I haven't seen written about before:

Perhaps the biggest issue facing the golf industry, which went unmentioned in the report or in the news conference accompanying its release, is the vast dependence of maintenance crews and clubhouse operations on immigrant labor for staffing. If the golf industry can effectively lobby for immigration reform to assure a steady supply of legal workers, that would be a major legislative achievement.

And it's hard to disagree with this:

But some of the numbers here in this report seem inflated, with suspect counting rules that create an unduly rosy picture. For example, the $28 billion in golf-facility operations includes weddings, banquets and all food and beverage operations. Why all of this should be attributed to golf is a legitimate question, because folks would be having meals and banquets somewhere, and it’s not as if golf created that expenditure.

More questionable is the exaggerated activity attributed to real estate: $14.97 billion in 2005, accounted in terms of 63,840 homes constructed at a cost of $11.6 billion ($181,704 apiece, plus 28 percent premium of additional value ($50,877 per home), which the report explains as “the amount a buyer is willing to pay for a home or property located on a golf course or within a golf course community.”

But why does golf get credit for all of those homes? Only 20 percent to 25 percent of homeowners at golf communities buy there for the game and play golf at the facility;

PGA Show Ecclectic

Gary Van Sickle returns from the PGA Show with a succinct overview of the more offbeat and obscure new things in golf gear.

Breaking: Golf Digest Hot List Arrives Just In Time To Spoil Holiday For Manufacturers

I know many of you wondered why GolfDigest.com bloggers Bubala and Goy took two months off from suggesting that St. Andrews and Augusta National are not worth preserving, and here's why: the now-annual Hot List has arrived to the misery of most people in the equipment industry who were trying to enjoy the week between Christmas and New Year's and who must now explain to their bosses why they didn't win a gold medal.

There's a video showing you the top secret location where the testing takes place and where Golf Digest staffers racked up a massive bar bill to get them 14-days of tech talk.

Don't miss the survey that let's you figure out what junk you should buy this year so that it can take a place of honor in your garage sale by March 2009.

Here's where the judges tell you why you should spend $500 to replace last year's noisy, offensive looking driver.

Don't forget to stock up on Gold Medal winning woods, since that's what you'll use when the new driver doesn't work. And for when you can't hit those, there are always the winning hybrids.

The ball report will make you feel better about agonizing over a $45 dozen-ball purchase even though they essentially all working off of the same patent...if you believe those dreadful juries.

Might as well pick up some irons too since we haven't heard a thing about U-grooves in a while. Which reminds me, I need to change my wedges out every two weeks like Vijay and Padraig, so maybe I'll see what the judges are recommending.

And finally, do check out all of the new blades things they say are putters but really look like rejected set pieces from Spaceballs.

"8 out of 9 of Callaway’s patent claims are valid!"

David Dawsey does a superb job breaking down each claim in the Callaway v. Acushnet suit.

Callaway v. Titleist Spin, Round 1

AP's story on Callaway prevailing over Acushnet features quotes from the company flacks:

"We have now established in court that our golf ball patents are valid, and that Titleist Pro V1 golf balls infringe those patents," she said. "We will immediately start the process of requesting an appropriate remedy, including injunctive relief and damages."

And from Fairhaven...

"The jury's mixed decision has created ambiguity that will have to be resolved post-trial," said Joseph Nauman, an Acushnet executive vice president.

Callaway Prevails In Pro V1 Patent Suit

From the wire...

Callaway sued Acushnet last year in a Delaware federal court for patent infringement relating to Callaway's three-layer golf balls. Acushnet acknowledged that its Titleist Pro V1 balls had infringed the Callaway patent, but claimed that those patents were not valid.

Clever!

A jury found that four of Callaway's contested patents were valid, while one was invalid, Bloomberg News reported today. An additional trial is expected to be held to assess damages.

Golf No Longer The Worst Business In Myrtle Beach

Thanks to reader Scott for catching this Alan Blondin story about the end of the course closing trend in Myrtle Beach thanks to overbuilding and now, the housing market meltdown.

Sixteen area courses closed in 2005 and 2006, all with redevelopment plans that included housing developments.

But as the Beachwood and Azalea Sands owners struggled to gain approval of their jointly proposed planned-unit development and annexation into North Myrtle Beach by City Council, the business climate around them changed.

The rash of course closures has remedied a struggling golf market that had been saturated with layouts, and contributed to the flooding of a housing market that has been burdened with increased listings but slower sales over the past two years.

And...

National homebuilders, who swarmed the area seeking large tracts of land and spurred the fire sale of courses, are no longer knocking on clubhouse doors.

"Builders overbuilt in 2006, and they've cut back," said Tom Maeser, president of the Fortune Academy of Real Estate and market analyst for the Coastal Carolinas Association of Realtors. "We're not seeing a lot of land acquisition right now. It's more selling existing inventory. I don't think we'll see the need for these golf courses being converted."

Where there were going to be up to 2,500 residential units, a town center featuring a regional shopping center, a resort hotel, offices and marina at Beachwood and Azalea Sands, there are now increased golf rounds and profits.

Though paid rounds on the Strand are down 215,000 through the first three quarters of the year compared to 2006 - to 2.69 million rounds according to statistics compiled for marketing cooperative Myrtle Beach Golf Holiday - paid rounds per course are at 31,551, which is the highest since 1999.

Demand has increased and Strand course operators have raised rates nearly across the board in the past two years to further increase profitability.

"We're up like we're accustomed to being in years gone by," Elliott said. "Indications are for the courses that remain in play, the profitability factor is much better."

Angry About Bandon

Golf Digest's anonymous "Angry Golfer" isn't very pleased with the service at Bandon Dunes these days.

"The judge marveled at how "crowded" the art of golf ball manufacturing is -- that is, how subtle the differences often are from one patent to the next."

Thanks to reader John for John Paul Newport's Saturday Wall Street Journal column on the recently settled Bridgestone-Titleist suit. I'm sure our Fairhaven readers were tickled by this:

The public filings in these cases, although carefully stripped of trade secrets, are filled with fascinating tidbits, including testy exchanges between lawyers ("Bridgestone is asking for a Mulligan here"). Who knew, for instance, that Titleist got its start when an avid amateur in Massachusetts missed a 3-foot putt to lose a match in 1932? Convinced that his ball had wobbled, he X-rayed it afterward at a friend's dental office and discovered that indeed the core was off-center, and immediately set out to build a better ball.

In one exchange in the Bridgestone suit, the judge marveled at how "crowded" the art of golf ball manufacturing is -- that is, how subtle the differences often are from one patent to the next.

This strikes me as good news for golfers, and helps explain why golf balls, especially at the high end, are virtually indistinguishable for everyone except the very best players.

Which is even better reason that a little rollback won't hurt anyone, right?

Not that this will stop us from wanting to play the Pro V1s of the world. In golf, what you believe about a product is at least as important as what you know.

Bridgestone and Acushnet Settle; World Peace Next?

Susan Decker of Bloomberg reports what sounds like a victory of sorts for Bridgestone:

Acushnet, which makes the Titleist and Pinnacle golf balls, will pay unspecified royalties to Bridgestone, and the companies agreed to cross-license other patents, the companies said in separate statements. The agreement doesn't cover a related suit pending in Japan.

Bridgestone Sports, based in Tokyo, and its Bridgestone Golf unit sued Acushnet in 2005 in federal court in Wilmington, Delaware. The company's patented technology relates to ways of making balls so they fly farther, spin better and last longer. One patent is designed to increase a ball's distance when struck by a No. 5 iron or sand wedge.

``We are very pleased to have reached a settlement agreement with Acushnet and to bring the U.S. litigation to an end,'' Bridgestone Sports President Hisashi Kawano said in that company's statement. ``This agreement demonstrates the value of our technology and our intellectual property.''

Acushnet Golf, based in Fairhaven, Massachusetts, confirmed reaching a settlement. ``Acushnet considers this matter to be closed and will have no further comment,'' the company said in a statement. Fortune Brands, based in Deerfield, Illinois, also makes Jim Beam bourbon and Moen faucets.

"Choking freaking dogs!"

From a reader, one of six rising up early enough to catch The Golf Channel's Solheim Cup morning play.

The first morning match sees the Europeans get back to all square at the 18th when Sherrie Steinhauer, with the U.S. dormie, misses from inside three feet. Europe makes the putt and gets the half point. Golf Channel goes to commercial and the music rolls but the commercial doesn't kick in. And in that moment of silence Dottie screams "Choking freaking dogs!"

Our observant reader also noted that at the next commercial break, "they cut out so fast that Brian Hammond almost didn't complete his sentence!"

Nearly makes me want to rise early tomorrow just to watch. Nearly. 

So Nice To See John Cleese Working...

When the script resorts to gently spoofing the CEO, I suppose that's refreshing. Or a signal that it's time to pull the plug on John Cleese's steadiest check in decades.

Stupples Ditched For Pursuing Radical Heterosexual Lifestyle

Remember the good old days when sponsors would love to have a pregnant LPGA golfer on staff? Not anymore, reports Lewine Mair:

Karen Stupples, the former British Women's Open champion, claims that she was ditched by two sponsors because she became pregnant.

Stupples, 34, whose son, Logan, was born in April, says she is still owed £20,000 by Hi-Tec, the sports shoe manufacturer.

According to Stupples, Hi-Tec were meant to give her a cheque for £10,000 in January and another cheque for £10,000 this month but have not done so.

Stupples also claims that another of her sponsors, the Dalhousie Golf Club in Cape Girdeau, Missouri, wanted to cut her annual fee of $40,000 in half, on the grounds that she would be playing less than in a normal year.

"I felt so hurt because I considered these people to be friends," said Stupples, who claims she turned down more lucrative deals to stay loyal to her sponsorship partners after she became British champion in 2004.

No one at Hi-Tec was available for comment yesterday but they have told her managers, IMG, that they are concentrating their resources on Padraig Harrington and Ian Woosnam.

Ian Woosnam? He still plays?

"It's one of the most irrelevant rules ever proposed in golf."

Thanks to reader Sean for catching John Davis's excellent story on the U-groove rule change proposed by the USGA.

In a joint proposal with the Royal & Ancient Golf Club of St. Andrews, U-grooves wouldn't be banned, but clubs would have specifications so they performed like V-shaped grooves, which were the standard before U-grooves were approved.

"Does that mean I would have to buy new clubs?" Kevin Largent of Scottsdale said before a golf round last week. "I just got these."

The answer is yes, although not right away. If adopted, the rules would take effect for high-level competition in 2009 and for all new equipment in 2010. Recreational golfers would have a 10-year grace period in which they can use clubs that currently conform.

I wonder how many golfers actually know this?

Tour pros have had mixed reaction to the proposal, but most club manufacturers are strongly opposed, saying it not only would cost them millions of dollars to meet the specifications but also would be costly for golfers.

Oh come on.

"More than 100 million clubs that are being played around the world would be non-conforming. That's a lot of clubs," said John A. Solheim, president and CEO of Ping. "I'm totally opposed to this thing."

An open comment period runs through Aug. 1, during which anyone can send comments to the USGA about the proposal. In recent years, equipment proposals have been "tweaked," but the end result has been a new rule in each case.

If approved, it would mark the first rollback in equipment since the move to a lighter ball in 1931.

And why is it again the ball can't be rolled back? That's easier to replace than a set of irons.

Benoit Vincent, chief technical officer for TaylorMade, thinks the proposal is "disconnected."

"Their point is that golfers aren't concerned about driving accuracy," Vincent said. "How do they control that? By regulating the spin of the ball on shots out of the rough?

"The probability that this rule is going to solve the problem is very low."

Vincent thinks it unfair that clubmakers and regular golfers would pay a steep price simply because of shots being executed by highly skilled tour pros. He estimates that golfers would pay 10 percent more for the new clubs.

"In order to meet those specifications would cost millions of dollars," he said. "This rule is insignificant to the vast majority of golfers in the world except that they would have to change their equipment. It's one of the most irrelevant rules ever proposed in golf."

This argument looks particularly silly after Oakmont:

Rugge doubts that the proposed changes would have much change on the tour's money list. "Tiger Woods is still going to be the best," he said. "We would expect to see some changes, but these guys are so good, they would adapt their games perhaps to focus more on staying in the fairway."

Right, because they are aiming at the rough. Kind of hard not to when the fairways are 22 yards wide.