Acushnet Holdings Corp.

Ladies and gentlemen, thank you for standing by and welcome to a Krishna Holdings Corp. Fourth Quarter 2020 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Sondra Lennon, VP Invest Relations. Please go ahead.

Good morning, everyone. Thank you for joining us today for Krishna Holdings Fourth Quarter and Full Year 2020 earnings conference call. Joining me this morning are David Marr, our President and Chief Executive Officer, and Tom Pachico, our Chief Financial Officer. Before turning the call over to David, I would like to remind everyone that we will be making forward-looking statements on the call today. These forward-looking statements are based on Krishna'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 today's press release, the slides that accompany our presentation, and 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. Please also note that when referring to -to-date or full-year results or comparisons, we are referring to the 12-month period and to December 31, 2020, and the comparable 12-month period. With that, I'll turn the call over to David.

Thanks, Sandra, and good morning, everyone. I hope you are staying safe and well as we move closer to the end of these difficult times. Key themes running through today's remarks will be the tailwinds of strong golfer participation and demand and headwinds resulting from COVID-related supply chain challenges. As you will hear, the keys to success for Acushnet in 2020 and 2021 involve balancing new product development, demand momentum, supply chain uncertainties, short-term cost increases, and periodic regional shutdowns. Based on our track record, I'm confident that the Acushnet team is up to this task. Acushnet and the entire golf industry are benefiting from the continued commitment from PGA professionals and golf course operators who have worked tirelessly to provide safe and fun experiences since the earliest days of the pandemic. More than 500 million rounds of golf were played in the U.S. in 2020, 60 million rounds more than 2019, and the highest annual total since 2002. I must also acknowledge and thank my teammates for their dedication and great work navigating the highs and lows of 2020 and positioning the company for continued success. Their heightened commitment to associate safety, product quality, and customer care is serving us well in these uncertain times and as we respond to strong demand across the Acushnet portfolio. Now turning to slide four, we will get right into our results for the quarter. Sales of $420 million were up 14% versus last year, with reported growth coming from every segment and in every region. Adjusted EBITDAB of $48 million reflects an 8% increase. Titleist golf ball business grew 3% as our team did good work balancing the opportunity to satisfy strong at-once demand with the latest in the Acushnet team. With the need to convert production to our new Pro V1 models to support their January global launch. Golf club sales were up 21% in the quarter, led by our successful new TSI Metals line. Since its debut, TSI has been the most played driver on the PGA Tour, and we are pleased with the early results from our November launch. Demand for all Titleist club categories is strong, and our supply chain is holding up well, although lead times are running longer than normal, given COVID-related production modifications and tight component availability. Gear was led by our Titleist golf bag business and also delivered a very strong quarter, posting a 25% gain with growth across all categories, as our team did good work keeping pace with the brisk end of the year demand. And foot choice sales of $101 million were up 19% in the quarter, with gains in all product categories and accelerated e-commerce growth. Foot choice brings great brand and product momentum into 2021. Looking at our business by region, as shown on slide five, double digit gains in Korea and the US are highlights for the quarter, and we were pleased to see the Japan market stabilized late in the year. Europe battled starts and stops and inventory shortfalls en route to posting a modest increase for the quarter. Demand for golf in Europe is similar to what we have seen in the US. However, COVID and Brexit related challenges continue to slow the market's momentum. These across the board regional gains in the quarter reflect the resiliency of a Kushnitz global forecasting and supply chain capabilities, capabilities and competencies that have become increasingly critical during these volatile times. And here on slide six, you see our full year results with sales reaching $1.6 billion and adjusted EBITDA coming in at $233 million. And as a final note, on 2020, the Kushnitz direct to golfer e-commerce sites also recovered from early season disruptions and closures and finished up about 50% for the year. As Tom will highlight, the company's financial position entering 2021 is in great shape and we will continue to focus on making targeted investments in our future and expanding our dividend and share repurchase programs. I am pleased to announce that our board of directors has approved a .5% increase to our dividend bringing the annualized payout to 66 cents per share. Since initiating our dividend program four years ago, the company has returned over $160 million to shareholders and our annual per share dividend has increased by 38%. Additionally, moving to slide seven, I am pleased to outline two significant projects which we believe will enhance the Kushnitz competitive advantages over the long term and deliver positive returns for our shareholders. The first initiative is a five-year $120 million capital investment in our golf ball operations infrastructure and precision manufacturing capabilities. Roughly $35 million of this commitment is normalized, sustaining investment, while the remaining $85 million will be focused on new innovations, technologies and operational enhancements. The majority of this spend will be focused on our new Bedford-based ball ball game. We will also introduce new capital investments to our new golf ball facilities, including new ball ball plans two and three and custom golf ball facility. With these investments, we will upgrade the speed and efficiency of Titleist golf ball operations and align capacity consistent with the ongoing mix shift towards Pro-V1, AVX and new Torspeed urethane covered products. We will also introduce new technologies to stretch our custom ball capabilities and support new and emerging imprinting opportunities. These capital investments will expand our production and testing capabilities and help us to further leverage a Kushnitz industry-leading golf ball patent and intellectual property portfolio, which represent some of the company's most valuable assets. We believe these investments in new technologies and operational excellence will solidify and advance Titleist's position as the golf ball performance and quality leader for many years to come. The second area of investment commenced in late 2020 and relates to our new third-party North American distribution center located in Indianapolis. This project begins with the consolidation of many of our warehousing and distribution functions, starting with Footschoy and then Titleist Gear products, which have historically been warehoused and fulfilled from the East and West Coasts. Over time, we will fulfill most of our e-commerce activities from this new facility and add embroidery capabilities to support custom apparel and gear. Stock golf balls will also be shipped from this new DC in addition to our East and West Coast facilities. This third U.S. distribution point for golf balls will enhance our service capabilities and provide a valuable hedge against unanticipated shutdowns as we experienced last year. This initiative is intended to immediately enhance the end-user experience by reducing lead times and distribution costs for both our trade partners and consumers while generating cost savings for a Kushnitz over the long term. And now turning to slide 8, I will frame some of the key assumptions behind our 2021 planning process. The game and industry are in good shape, golfer engagement is strong and trade inventories are generally healthy and in some cases low. Against this backdrop, each of our businesses brings great momentum into 2021. The Kushnitz product development engines remained in high gear last year and as you will see, new products are the foundation of our outlook and expectations for 2021. Last month, we launched new Pro V1 and Pro V1X models and are enthused by their early adoption across worldwide tours and positive early market response. Titleist golf balls are used by approximately 75% of players across worldwide tours and our new Pro V1 and Pro V1X represent our next chapter of performance, quality and innovation. To meet anticipated high levels of golf ball demand in 2021 and as we catch up from 2020, our golf ball plants are currently operating three shifts and Pro V1 models are on trade allocation which we expect to continue for the coming months. Titleist golf clubs are also well positioned for the new year led by the early success and high expectations around our new TSI drivers and fairways and strong momentum across all club categories. This week, we are launching the complementary TSI 1 and TSI 4 drivers along with new TSI hybrids as we look to build upon the success of the TSI franchise. Our 2021 gear product line has been well received by trade partners and our supply chain is in good shape as we are poised to launch a wide range of new models in the first quarter. We are confident in our ability to satisfy first quarter demand and stock golf shops for the upcoming season while also anticipating that Q2 availability may be challenged by supply chain uncertainties. We expect foot choice momentum to continue into 2021 and are especially excited about new footwear models Stratos, Premier and Hyperflex. FJ Premier was the number one shoe at the Masters and initial tour and consumer feedback has been overwhelmingly positive. The FJ design team is on a great roll and we expect to benefit from their good work as the footwear and apparel categories stabilize over the next 12 to 24 months. And finally, our shoes business was mixed in 2020 with golf and lifestyle posting gains but these were not enough to offset ski which remains negatively impacted by COVID especially in Europe. We expect shoes golf to stay on its growth trajectory in 2021 and anticipate a broader ski recovery beginning in 2022. In closing, we are enthused about the year ahead and especially by the exciting range of new products we are set to bring to market in the first half of the year. Based on our 2020 experiences, I'm confident that our team has a good handle on the circumstances that are within our control and will continue to excel at adapting to the inevitable uncertainties and operational challenges that we are likely to confront. Thanks for your attention this morning. I will now pass the call over to Tom. Thanks David and good morning everyone. I would also like to thank our associates for the resiliency they have shown in the face of the pandemic, the amazing effort they put forth to get our business back up and running in a safe and healthy manner and their exceptional execution which has resulted in a Kuznets strong second half performance. Starting with our Q4 results on slide 10, consolidated net sales in the quarter were 420 million up 14% year over year and up 12% in constant currency as the strong demand we experienced in Q3 continued through the end of the year. Gross profit for the fourth quarter was 220 million up 34 million or 18% versus last year and gross margin was .4% up 170 basis points. The increases in gross profit and gross margin were primarily from higher sales volumes during the quarter and higher average selling prices. SG&A expense was 174 million up 31 million or 21% compared to 2019 and R&D expense was 14 million up about 1 million or 6% compared to the prior year. SG&A expenses were up with the higher sales volumes during the quarter led by increases in selling costs and higher advertising and promotional costs. Income from operations in the quarter was 27 million down about 1 million or 5%. Our Q4 income tax expense was a benefit of 8 million as the result of discrete items recorded during the quarter including the release of a reserve related to an income tax audit for the period which included the sale of a Kuznet to Fila Korea which was settled during the quarter. The reversal of a corresponding indemnification receivable from BIM, our former parent company related to the audit settlement, is recorded in other expense. Net income attributable to a Kuznet holdings was 22 million and adjusted EBITDA was 48 million up almost 4 million from Q4 2019. There is a reconciliation of net income to adjusted EBITDA for Q4 and the full year in our earnings release as well as in the appendix of the slide presentation. Moving to our full year results for 2020, consolidated net sales were 1.6 billion down 4% from last year both on an as reported and constant currency basis. This is quite a significant improvement given we were down 20% year to date at the end of Q2 compared to 2019. Gross profit for the year was 830 million down 42 million or 5% from 2019 and gross margin was .5% down 40 basis points from the prior year. The decrease in gross margin is primarily attributable to the overall decrease in net sales and the impact of lower production volumes caused by the government mandated shutdowns earlier in the year. SG&A expense for 2020 was 611 million down 17 million or 3% compared to 2019. And R&D expense was 49 million down 3 million compared to the prior year. The decreases were driven by our strict management of operating expense during the height of the pandemic. Restructuring expense for 2020 was 13 million. Income from operations was 145 million which was 40 million less than 2019. Interest expense was 16 million or 4 million lower than last year. Other expense was up 16 million primarily as a result of the reversal of the indemnification receivable from BEAM related to the audit settlement in Q4 and pension settlement charges associated with our restructuring program. And income tax expense was 13 million down almost 28 million as a result of lower income before taxes and the discrete items which I mentioned earlier. Net income attributable to a cushion holdings was 96 million compared to 121 million in 2019 and adjusted EBITDA was 233 million down 7 million compared to 2019. Moving to slide 11, our balance sheet continued to improve during Q4. At the end of 2020 we had 149 million of unrestricted cash on hand. Total debt outstanding was approximately 336 million, a decrease of 68 million from the end of last year. And we had 392 million of available borrowings under our revolving credit facility. Our leverage ratio was 1.6 at the end of 2020 down from 1.8 at the end of 2019. Consolidated accounts receivable at the end of 2020 was 202 million down 14 million or 6% from the end of 2019 on very strong cash collections during the fourth quarter. Our day sales outstanding were 59 days which were down one day compared to 2019. Consolidated inventories were 358 million at the end of the year compared to 398 million last year down 40 million or 10% but were up 40 million from the end of Q3. The year over year decrease was driven by golf balls which was down almost 13%, golf clubs which was down almost 22% and foot joy which was down almost 11% spread evenly across footwear, gloves and apparel. Most of the increase in inventory from the end of Q3 was in golf balls in preparation for the Q1 launch of the new Pro V1. Cash flow from operations was 97 million for Q4 and 264 million for the full year of 2020. This compares to 39 million and 134 million for the comparable periods in 2019. The increase in cash flow from operations comes mainly from the strong cash collections and lower inventory levels I just discussed. We expect accounts receivable inventory and cash flow from operations will return to more normal levels in 2021. Looking to capital expenditures we spent 9 million during Q4 and 25 million for the full year which is down significantly from 2019 as we reduced our capital expenditures as we managed through the disruptions caused by the pandemic. For 2021 we expect our capital expenditures to increase to about 50 million driven by the key strategic investments in golf ball operations and precision manufacturing capabilities that David discussed earlier. We expect our capex to remain at approximately this level for the next several years in support of this five-year initiative. Turning to slide 12, while we were more conservative with our capital allocation actions during 2020, our priorities have not changed. We fully expect to continue to make investments in the business with a focus on product innovation, golfer connection and operational excellence and to continue to be opportunistic with acquisitions that align with our focus on premium performance products that appeal to dedicated golfers. We believe that these investments advance our long-term strategies and will drive growth at a favorable return. We will also remain focused on generating strong free cash flow and returning capital to shareholders. We paid a 15.5 cent per share dividend during the fourth quarter of 2020 for a total cash outflow of 11.5 million. For the full year total dividends paid were 46 million up 6 percent compared to 2019. And as David mentioned our board of directors today declared a cash dividend of 16.5 cents per share payable on March 26th to shareholders of record on March 12th 2021. This represents a six and a half percent increase in our dividend and an expected Q1 cash outflow of approximately 12 million. As you know we suspended our share repurchase program in Q2. Prior to that we had repurchased approximately 244,000 shares for a total of approximately 7 million in 2020. We do expect to resume our share repurchase activities and to buy up to 40 million dollars worth of shares in 2021. This would include open market purchases to offset dilution and the completion of our share repurchase agreement that we entered into with Thiela in 2019. Our capital allocation strategy is a foundational element of a Cushman's Value proposition which we continue to believe creates a compelling long-term total return for our shareholders. Moving to our outlook on slide 13 we will not be providing guidance for 2021 net sales or adjusted EBITDA due to the continued uncertainties caused by COVID-19. As David discussed demand for golf and golf related products continues to be strong. Trade inventories are healthy and we will be launching several exciting new products in the first half of 2021. However we are also managing through the COVID related disruptions in the global supply chain, temporary operational cost increases and periodic market closures all of which add a high degree of variability and unpredictability in forecasting our business. We anticipate golf's momentum in our business to remain strong throughout 2021. However our sales profile will likely have a very different cadence as a result of the unusual comparisons to 2020, the global product availability outlook and the decisions we have made around product launch timing. As a result we project healthy first half -over-year sales gains as compared to both 2020 and 2019 and that second half sales will be lower than both 2020 and 2019. Additionally at this point almost two months into the quarter we expect first quarter sales to increase in the range of 20 to 25 percent compared to 2020. We expect first half 2021 gross margin to be negatively impacted by 8 to 10 million from higher freight expense driven by the recent increases in global air and container costs. For OPEX it is better to compare 2021 to 2019 as our OPEX was significantly lower in 2020 than in recent years due to our tight management of operating expenses during the year. We currently expect 2021 OPEX to be higher compared to 2019 primarily from increased expenses associated with our North American distribution center and other strategic investments, a full year of Schuess operating expenses compared to only six months in 2019, higher stock-based compensation expense and higher commissions on our retail sales in Korea. In conclusion 2020 was an unprecedented year and our associates and trade partners did an amazing job managing through the shutdowns and delivering an exceptional second half. While we will continue to be cautious with the uncertainties and challenges we face, we are confident in our ability to meet our full year 2021 financial goals and we believe we will continue to be well positioned to execute our long-term strategies and to deliver a solid long-term total return for our shareholders. With that I will now turn the call over to Sandra for Q&A.

Thank you Tom. Operator could we please open up the line for questions?

Thank you. At this time we will be conducting our question and answer session. In order to ask a question please press star and the number one on your telephone keypad. Your first question comes from line of Daniel Imbrow with Stephen Zink. Daniel your line is open.

Hey thanks good morning everybody and thanks for taking our questions. David I want to start on the multi-year golf ball capacity investment. You mentioned some of the capabilities it's going provide. Can you expand a little bit more on is this driven by maybe a little bit of current production being at capacity? Is this to increase your competitive advantage over peers maybe as they've made investments in their capabilities? Can you just expand a little bit on why right now is the right time for this investment and the capital? I think Tom you mentioned should be capex remains elevated for the next five years but did we hear that right?

So I said the next several years but yeah you could you could infer it's five because of the length of the of the golf ball capital investment program. Yeah Daniel so running you know as you know we run three ball plants two here in Massachusetts a third in Thailand and then we've got a comprehensive custom ball operation here in New Bedford as well and as I look back at the sort of the cadence of investment we make in the business you would imagine these businesses require ongoing and sustaining investment. In the 90s we built ball plant two and in the 2000s we built ball plant three and in 2010 or so we built ball plant four so we have a history of from time to time making significant investment in our operations and while we won't get into specifics of where the investment is to be targeted it reflects for us a generational step forward that again we when we look back over time this is something that's been that's been very consistent with how we've always thought about about the ball business. It's the right time from an allocation standpoint given the investments we've made in other areas of our business and other areas of golf ball operations and hey it's also incredibly exciting as we as we continually look around for new technologies and advancements to introduce in our business. Some we do on an ongoing basis to stay ahead of the pack and some like this one just when you when you when you bundle them together become far more comprehensive and significant so I would say it fits into the long-term strategy of how we think about the ball business and again the time is right for us to to to earmark capital for as I said in my earlier remarks for what is an incredibly important part of our business and I don't want to lose the value of of of allowing us to further leverage our patent portfolio and intellectual properties.

That's really helpful I appreciate that color and they're maybe taking a step back you know what do you view as the biggest risks to golf participation this year you know we finally saw a nice growth in golfers Browns played were up it seems like that's continuing but what do you view as the biggest risks this year and I think your slides and you mentioned in the prepared remarks back half sales would be beneath 2019 levels can you expand a little bit on why it'd be down on a like for like product cycle versus 2019 just given these participation tailwinds we see today?

Yeah so I'll I'll I'll take the first part of that Daniel and then Tom can can jump on the second part so so as we think about you know what happened in 2020 we saw we saw an extra 60 million rounds for the year really 75 million of those rounds happened in in the back half of the year it'll surprise no one we look out on 21 we expect rounds gains in the first half healthy rounds gains in the first half and we we don't expect to comp against that that frankly historic second half but net net we like the trajectory and energy of of the momentum that that golfer participation engagement brings to the game I've you know we've all looked at the the external data out there I think it's you know has a good a good projection of hey if you if you if you if you take half the the incremental rounds and they stick that results in about a 78 percent increase in 21 as compared to 2019 too early to make too early to make projections but but I think that's the right way that to frame this we would view rounds of play momentum continuing but but I think frankly it would be unlikely that that we maintain the clip or pace that we saw in the second half rounds were up 40 percent the U.S. in the fourth quarter now again I think we're going to be living in an environment that's healthier in 21 than it is in 2019 but we're also trying to be realistic with how folks allocate their time and how life's going to change as we become a vaccinated country and then you apply that same logic around the world as as to as to timing of things I'll make a couple points and I'll turn it off to Tom you know the real change here is that is that we're just seeing an overall shift in our business from second half to first half as a result of of what played out in 2020 some product decisions we've made inventory availability and so on and so on I'll get a little more prescriptive in terms of our cadence but balls will be on their normal cadence no real change there same with gear and foot show there are a couple of moving parts within clubs that I are worth noting I've mentioned TSI one in four drivers hybrids are launching in the first half that that was a that was a second half 2019 event we've got some limited edition putters from the second half of 19 that that that won't repeat they will but at a time to be determined then we've got some other miscellaneous club volume that occurred in 19 that'll that'll perhaps move to round numbers Daniel I'd say you're looking at about 50 to 60 million in club volume maybe half's going to come into the first half of 21 maybe a quarter is going to bump into into the early part of 22 and then another quarter is TBD some of the limited edition stuff which is not on a on a strict timeline so that's that's how we're framing the the the the first half second half journey I'll I'll kick it over to Tom for any more more color yeah the only the only two things I would add is it is it is mainly driven by as David said the the change in in some of the timing of our launch cadences compared to 2019 the only other piece I would add is in 2019 we owned Schuess in the second half of the year the second half of the year for them has historically been the bigger half of the year because of their because of the impact of the ski business on their full year and obviously the ski business has been significantly challenged as a result of COVID and and so we're going to see some decreases there as it relates to Schuess

that's really helpful color I appreciate it guys and best of luck thanks thanks Daniel

thank you Daniel operator next question please your next question comes from the line of Joe Altobello with Raymond James Joe your line is open

thanks hey guys good morning so first question I was curious do you have any sense for how much of an increase we saw in the number of on course golfers last year in the U.S. obviously but you know the 60 million entries around played is clearly encouraging but is that largely existing golfers playing more golf or do you get a sense there was more participation last year

you know we're we're there are a couple of groups out there the NGF and a few others who track and model this and and I won't point to any one but I'll point to our roll up of of of all the reports we look at and give you somewhat of a summary view one interesting piece of data I saw and they tried to they tried to capture the 60 million rounds right and they said okay 20 million of of the AVIDs played an extra couple that counted for 40 million of the rounds four to five million lapsed golfers golfers who had moved away from the game came back in contributed to a to a portion and then another four to five million new golfers contributed to a portion so that that's that's how we think about it I will add as well some good work really led by led by PGA of America PGA Tour LPGA Tour focused on this particular area okay we brought in new golfers we brought back lapsed golfers what can the industry do to maintain and preserve them and keep them active and engaged in the game so we're encouraged by that but but Joe hopefully that gives you a bit of a framework for some of the numbers and metrics behind what we saw play out in in 2020

no it certainly does I guess it's my next question was how you're thinking about 21 and obviously we all hope yeah with with a vaccine that things start to go back to normal this summer and I certainly understand why you wouldn't expect to comp that second half round plate number but in terms of the new and lapsed golfers would you look is this a new plateau and we grow off of this in 22 what do you expect to lose some of those this year

yeah you know as I said earlier we're still in a massive transition right 2020 was a massive transition year 2021 will be a massive transition year when the dust settles hopefully sooner versus later I tend to look at it okay what what's the world going to look like 2022 versus 2019 and and I think the golf landscape is going to have more energy more momentum more golfers again do I think we sustain and maintain the levels we saw in the back half of of 2020 that would be extraordinary for the simple reason that so many other life events are going to come back come back online but but hey the game the game shined in in 2020 a lot of folks had very good experiences with the game I keep pointing back to the great work of golf course operators and pga professionals really driving a lot of that energy and momentum so we're not going to we're not going to pinpoint where this thing's going to go but we tend to look in in in longer term views and see a general a general positive energy around the game with with the expectation and understanding as I said earlier you're going to see momentum in the first half you're going to see energy in the second half but but hard press to keep up with the levels we we saw in 2020 from a rounds of play standpoint

got it okay thanks David yep

thanks so operator next question please yes our final question comes from the line of George Kelly with Roth Capital Partners George your line is open

hey everyone thanks for taking my questions so just a few for you first back

to the guidance you gave I just want to make sure I understand the cost side of what you set up so in the first half there will be I think you said eight to ten million of incremental kind of cost of goods sold charges in the first half just related to shipping did you say anything about the second your expectations in the second half of the year did I did I hear you right you did hear me right so we said eight to ten million dollars of of headwinds primarily in the first half we we currently do expect that the challenges we're seeing in in some of the the air freight and container freight will will begin to normalize in you know late second quarter into the second half okay okay great and then as far as op-ex I think you said you expect them to be positive higher than than 2019 levels all in that is and what we said there was there's three or four factors the first is you know some of the increased expenses associated with the North American distribution center initiative and some other strategic initiatives that we have ongoing a full year of schuess operating expenses so in 2019 we only owned them for half a year so there's only six months worth of op-ex in 19 versus a full year in 21 and then we said higher stock based compensation expense as a result of some changes we've made in our grant structures and finally higher commissions on our retail sales in Korea if if you recall under US gap we have to report those as selling expenses and so as the sales levels increase continue to increase in Korea those expenses continue to go

okay great that's helpful and then

next question for me is just I'm still a little unclear on the the 120 million dollar investment in the ball plants so is this something that excuse me maybe every 10 years or 15 years this is just sort of how how it works there's things that you need to catch up on and and you know processes etc that really require this is this just kind of a normal cost of doing business or something more unique yeah we don't we don't see this as a as a catch-up in any stretch we're confident that we we invest regularly in the business to keep us at the front of the pack so we're very comfortable and confident with with where we are I do think I do think you're right in the sense that this this this this is how you this is how you run a leading precision golf ball manufacturing facility in custom ball operations again we we we make ongoing investment and then from time to time it makes it makes good sense both from a from a competitive and strategic standpoint and an ROI standpoint to make more meaningful investments and as I as I said a while back if you look back over over our 30-plus years that's that's how it worked that's how it's worked around here and it's worked really well I also acknowledge too that hey there's there's there's forever a shift in evolution of type of balls you make whether it's sirlin or cast urethane or thermo set or or or tpu thermoplastic urethane whether it's two-piece multi-layer three-piece four-piece etc so that requires some capital investment to stay ahead of that process which is which is part of this journey as well so again I just reiterate George I don't I don't see this as a catch-up by any stretch I think this is a leap forward that fits into how we've always thought about golf ball manufacturing at the acoustic company okay George I was just going to add you know of the of the 120 million dollar investment over five years I would call 35 of it or so just normal recurring capex so we normally spend six to seven million dollars a year in golf ball capex in our you know last couple of years we spent 30 to 33 million dollars so six or seven of that is golf ball so the 85 the remaining 85 of the 120 is is really that incremental investment okay

gotcha and then last question for me around the second the the distribution facility that you talked about are did this represent any

kind of change of stress I if I heard you write it it's mostly about your e-commerce business or that's a heavy that's a big part of it it will this allow you to do anything in e-commerce that you really haven't been able to do or does it represent any kind of change of strategy regarding your your e-commerce yeah I would say this I wouldn't characterize this as a as a investment focused or pointed at e-commerce it really starts with the reality that we distribute today foot joy out of fairhaven Massachusetts and we we distribute our gear business out of Carlsbad California there's a better way to do that and and we bring in most of those products from overseas to the east and west coast and then we fulfill really the country and in some cases north america from the east and west coast there's a better way to do that part one part two is it gives us an added advantage with regards to golf balls we ship golf balls out of the east and west coast today many years ago we had a central us distribution center we moved away from that so this gives us a third point of distribution shortened lead time shortens costs for our customers and ourselves and and hey we we experienced this year shutdowns in California and Massachusetts and had we had this center operational we wouldn't have incurred the shutdown ramifications that we did in 2020 it does it does as well allow us to consolidate e-commerce fulfillment over time and that's an advantage and and and provide better service levels quicker lead times etc but I wouldn't I wouldn't point to this project as a e-commerce centric event it's going to really touch many parts of our business e-commerce being being one of them okay that's helpful thank you and congrats on the on our wonderful quarter thank you thank you george thanks uh and everybody as always we appreciate your your time and interest stay safe and well we look forward to speaking to you in a few months after the close of our first quarter

ladies and gentlemen this concludes today's conference call thank you participating you may now disconnect