UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549 

FORM 10-K

☑ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2016

OR

◻TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF

1934 for the transition period from        to

Commission File Number: 001-37935

Acushnet Holdings Corp.

(Exact name of registrant as specified in its charter)

333 Bridge Street

Fairhaven, Massachusetts 02719

(Address of principal executive offices)

(800) 225-8500

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

 Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ◻ No ☑

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934. Yes ◻ No ☑

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ◻

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☑ No ◻

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ☑

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes  No ☑

As of June 30, 2016, the last day of the registrant’s most recently completed second quarter, the registrant’s common stock was not publicly traded. The registrant's common stock, $0.001 par value per share, began trading on the New York Stock Exchange on October 28, 2016. As of March 24, 2017, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately $623.5 million (based upon the closing sale price of the common stock on that date on the New York Stock Exchange).

The number of shares the Registrant's common stock outstanding on March 24, 2017 was 74,451,977.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A relating to the Registrant’s Annual General Meeting of Shareholders, to be held on June 12, 2017, will be incorporated by reference in this Form 10-K in response to Items 10, 11, 12, 13 and 14 of Part III. The definitive proxy statement will be filed with the SEC not later than 120 days after the registrant’s fiscal year ended December 31, 2016.

TABLE OF CONTENTS

In this Annual Report on Form 10‑K, the terms “Acushnet,” “we,” “us,” “our” and the “Company” refer to Acushnet Holdings Corp. and its consolidated subsidiaries.

FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10‑K contains “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which are subject to the “safe harbor” created by that section. These forward-looking statements are included throughout this report, including in the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and relate to matters such as our industry, business strategy, goals and expectations concerning our market position, future operations, margins, profitability, capital expenditures, liquidity and capital resources and other financial and operating information. We have used the words “anticipate,” “assume,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “future,” “will,” “seek,” “foreseeable” and similar terms and phrases to identify forward-looking statements in this report.

The forward-looking statements contained in this report are based on management’s current expectations and are subject to uncertainty and changes in circumstances. We cannot assure you that future developments affecting us will be those that we have anticipated. Actual results may differ materially from these expectations due to changes in global, regional or local economic, business, competitive, market, regulatory and other factors, many of which are beyond our control. We believe that these factors include, but are not limited to:

These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this report. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, our actual results may vary in material respects from those projected in these forward-looking statements.

Any forward-looking statement made by us in this report speaks only as of the date of this report. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, investments or other strategic transactions we may make. We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by any applicable securities laws.

INDUSTRY AND MARKET DATA

Within this annual report on Form 10‑K, we reference information and statistics regarding the golf industry and the golf equipment, wear and gear markets. We have obtained certain of this information and statistics from various independent third-party sources, including independent industry publications, reports by market research firms and other independent sources for the most recent available date. We believe that these external sources and estimates are reliable, but have not independently verified them. Certain of this information and statistics are based on our good faith, reasonable estimates, which are derived from our review of internal surveys and independent sources. In addition, projections, assumptions and estimates of the future performance of the golf industry and our future performance are necessarily subject to uncertainty and risk due to a variety of factors, including those described in “Risk Factors” and “Forward-Looking Statements.” These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties and by us.

WEBSITE DISCLOSURE

We use our website (www.acushnetholdingscorp.com) as a channel of distribution of company information. The information we post through this channel may be deemed material. Accordingly, investors should monitor this channel, in addition to following our press releases, SEC filings and public conference calls and webcasts. In addition, you may automatically receive e-mail alerts and other information about Acushnet Holdings Corp. when you enroll your e-mail address by visiting the “Resources” section of our website at  https://www.acushnetholdingscorp.com. The contents of our website are not, however, a part of this report.

TRADEMARKS, TRADE NAMES AND SERVICE MARKS

This Annual Report on Form 10‑K includes trademarks, trade names and service marks that we either own or license, such as “Titleist,” “FootJoy,” “Pro V1,” “Pro V1x,” “FJ,” “Pinnacle,” “Scotty Cameron,” and “Vokey Design” which are protected under applicable intellectual property laws. Solely for convenience, trademarks, trade names and service marks referred to in this report may appear without the ®,  TM or SM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the right of the applicable licensor to these trademarks, trade names and service marks. This report may also contain trademarks, trade names and service marks of other parties, and we do not intend our use or display of other parties’ trademarks, trade names or service marks to imply, and such use or display should not be construed to imply, a relationship with, or endorsement or sponsorship of us by, these other parties.

PART I

ITEM 1.            BUSINESS

Overview

We are the global leader in the design, development, manufacture and distribution of performance‑driven golf products, which are widely recognized for their quality excellence. Driven by our focus on dedicated and discerning golfers and the golf shops that serve them, we believe we are the most authentic and enduring company in the golf industry. Our mission—to be the performance and quality leader in every golf product category in which we compete—has remained consistent since we entered the golf ball business in 1932. Today, we are the steward of two of the most revered brands in golf—Titleist, one of golf’s leading performance equipment brands, and FootJoy, one of golf’s leading performance wear brands. Titleist has been the #1 ball in professional golf for 68 years and FootJoy has been the #1 shoe on the PGA Tour for over six decades.

Our target market is dedicated golfers, who are the cornerstone of the worldwide golf industry. These dedicated golfers are avid and skill‑biased, prioritize performance and commit the time, effort and money to improve their game. We believe our focus on innovation and process excellence yields golf products that represent superior performance and consistent product quality, which are the key attributes sought after by dedicated golfers. Many of the game’s professional players, who represent the most dedicated golfers, prefer our products thereby validating our performance and quality promise, while driving brand awareness. We leverage a pyramid of influence product and promotion strategy, whereby our products are the most played by the best players, creating aspirational appeal for a broad range of golfers who want to emulate the performance of the game’s best players.

Dedicated golfers view premium golf shops, such as on‑course golf shops and golf specialty retailers, as preferred retail channels for golf products of superior performance and product quality. As a result, we have committed to being one of the preferred and trusted partners to premium golf shops worldwide. This commitment provides us a retail environment where our product performance and quality advantage can most effectively be communicated to dedicated golfers. In addition, we also service other qualified retailers that sell golf products to consumers worldwide.

Our vision is to consistently be regarded by industry participants, from dedicated golfers to the golf shops that serve them, as the best golf company in the world. We have established leadership positions across all major golf equipment and golf wear categories under our globally recognized brands.

For the year ended December 31, 2016, we recorded net sales of $1,572.3 million, net income attributable to Acushnet Holdings Corp. of $45.0 million and Adjusted EBITDA of $228.4 million. See “Item 6. – Selected Consolidated Financial Data” for a reconciliation of Adjusted EBITDA to net income attributable to Acushnet Holdings Corp., the most directly comparable GAAP financial measure.

Our History and Evolution

Founded in Acushnet, Massachusetts by Phil “Skipper” Young in 1910 and incorporated as the Acushnet Process Company, we manufactured rubber‑based products including water bottles, gas masks and bathing caps. Our golf business was established in 1932 when Young, a dedicated golfer himself, missed a critical putt in a golf match. Believing the putt to be well struck, Young took the ball to be x‑rayed, where it was discovered that the ball’s core was off‑center. Following this seminal discovery that many commercially available golf balls frequently had manufacturing inconsistencies, Young set out with Massachusetts Institute of Technology classmate Fred Bommer to develop a superior golf ball. After three years of development, the Titleist golf ball was introduced.

The objective from the very beginning was to produce a golf ball that would set the standard in performance, quality and consistency, and become the preferred choice of dedicated golfers and the preferred trade partners who would serve them. In the early years, many of these preferred trade partners were also some of the first touring golf professionals. Soon the Titleist golf ball was the golf ball of choice wherever competitive golf was played. The core values of serving the game’s dedicated golfer with a superior product, in terms of both performance and quality, and having that superior product validated by the game’s most dedicated golfers and premium golf retailers, have endured for the past eight decades.

In 1976, Acushnet Company was acquired by American Brands, Inc. (the predecessor company of Beam Suntory, Inc. (“Beam”)). We acquired FootJoy in 1985. On July 29, 2011, Acushnet Holdings Corp. (at the time known as Alexandria Holdings Corp.), an entity owned by Fila Korea and certain financial investors, acquired Acushnet Company from Beam. We completed an initial public offering of our common stock in November 2016. See “Notes to Consolidated Financial Statements– Note 2– Summary of Significant Accounting Policies,” for disclosures related to our initial public offering and other related transactions.

Our Core Focus

Dedicated Golfers

Our target market is dedicated golfers, who are avid and skill‑biased, prioritize performance and commit the time, effort and money to improve their game. We believe that dedicated golfers are the most consistent purchasers of golf products and estimate that while they represented only approximately 15% of all United States golfers, they accounted for more than 40% of total rounds played and approximately 70% of all golf equipment and gear spending in the United States during 2016. We also believe dedicated golfers account for an outsize share of golf equipment and gear spending outside the United States and purchase a significant portion of golf wear products worldwide.

Product Platform

Leveraging the success of our golf ball and golf shoe businesses, while maintaining the core values of the Titleist and FootJoy brands, we have strategically entered into product categories such as golf clubs, wedges, putters, golf gloves, golf gear and golf wear with an objective of being the performance and quality leader.

Since the dedicated golfer views each performance product category on its own merits, we have approached each category on its own terms by committing the necessary resources to become the performance and quality leader in each product category where we participate. As a result, we have built an industry leading platform across all performance product categories, driving a market‑differentiating mix of consumable products, which we consider to be golf balls and golf gloves, which collectively represented 40% of our net sales in 2016, and more durable products, which we consider to be golf clubs, golf shoes, golf apparel and golf gear, which collectively represented 60% of our net sales in 2016.

We operate under the following four reportable segments. Financial information for our segments, including sales by geographic area, is included in “Item 7. – Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in “Notes to Consolidated Financial Statements – Note 20 – Segment Information.”

Titleist Golf Balls (33% of 2016 net sales)

Titleist is the #1 ball in golf. The Titleist golf ball was founded with a purpose of designing and manufacturing a performance oriented, high quality golf ball that was superior to all other products available in the market. We believe the golf ball is the most important piece of equipment in the game, as it is the only piece of equipment used by every player for every shot. The golf ball is also the most important category for us as it generates the largest portion of our sales and profits. Since its introduction in 2000, the Titleist Pro V1 has been the best‑selling golf ball globally and continues to set the bar in terms of product design, quality and performance. We also design, manufacture and sell other golf balls under the Titleist brand, such as NXT Tour, Velocity and DT TruSoft, as well as under the Pinnacle brand. We have continually improved our golf balls through innovation in materials, construction and manufacturing processes, which has enabled us to build the #1 golf ball franchise in the world.

Titleist Golf Clubs (27% of 2016 net sales)

We design, assemble and sell golf clubs (drivers, fairways, hybrids and irons) under the Titleist brand, wedges under the Vokey Design brand and putters under the Scotty Cameron brand. The mission of our golf club business is to design and develop the best performing golf clubs in the world for dedicated golfers. We believe dedicated golfers do not buy brands across categories but seek out best‑in‑class products in each category. This is the reason we have partnered with dedicated engineers and craftsmen such as Bob Vokey and Scotty Cameron, who understand the nuances, subtleties and impact mechanics of their respective golf club categories. Titleist golf clubs, Vokey Design wedges and Scotty Cameron putters are widely used by professional and competitive amateur players, which validates the products’ performance and quality excellence. We are also committed to a leading club fitting and trial platform to maximize dedicated golfers’ performance experience.

Titleist Golf Gear (9% of 2016 net sales)

We offer a diversified portfolio of Titleist‑branded performance golf gear across the golf bags, headwear, gloves, travel gear, head covers and other golf gear categories. Our golf gear is focused on superior performance and quality excellence, which is the mission of any product bearing the Titleist brand name.

FootJoy Golf Wear (28% of 2016 net sales)

We design, manufacture and sell golf shoes and gloves, and we design and sell performance outerwear, apparel and socks under the FootJoy brand. By offering products with premium materials, superior comfort and fit and authentic designs, FootJoy has become the #1 shoe and #1 glove in golf and a leader in the global performance golf outerwear and the U.S. golf apparel markets. We believe FootJoy is seen by golfers around the world as an authentic and definitive golf brand with a consistent, differentiated focus on performance and quality.

Pyramid of Influence

The game of golf is learned by observation and imitation, and golfers improve their own performance by attempting to emulate highly skilled golfers. Golfers are influenced not only by how other golfers swing but also by what they swing with and what they swing at. This is the essence of golf’s pyramid of influence, which is deeply ingrained in the mindset of the dedicated golfer. At the top of the pyramid is the most dedicated golfer, who attempts to make a living playing the game professionally. Adoption by most of the best golfers, whose professional success depends on their performance, validates the quality, features and benefits of using the best performing products. This, in turn, creates aspirational appeal for golfers who want to emulate the performance of the best players. By virtue of the performance and quality excellence of our products, we believe we are best‑positioned to leverage the pyramid of influence since most of the best players trust and use Titleist and FootJoy products. Our primary marketing strategy is for our products to be the most played by the best players, including both professional and amateur golfers. This strategy has proven to be enduring and effective in the long‑term and is not dependent on the transient success of a few elite players at any given point in time.

Innovation Leadership

We believe innovation is critical to dedicated golfers as they depend on the ability of new and innovative products to drive improved performance. Since we entered the golf ball business in 1932, we believe we have been the

design and technology leader in the golf industry with a strategy to develop, implement and protect product and process improvements. We currently employ an R&D team of over 180 scientists, chemists, engineers and technicians. We also introduce new product innovations at a cadence that best aligns with the typical dedicated golfer’s replacement cycle within each product category. We spent $48.8 million, $46.0 million and $44.2 million in 2016, 2015 and 2014, respectively, on R&D.

Operational Excellence

The requirements of the game lead the dedicated golfer to seek out products of maximum performance and consistency. We own or control the design, sourcing, manufacturing, packaging and distribution of our products. In doing so, we are able to exercise control over every step of the manufacturing process and supply chain operations, thereby setting the standard for quality and consistency. Our operational excellence also allows us to continually develop innovative new products, bring those products to market more efficiently and ensure high levels of quality control. We have developed and refined distinct and independently managed supply chains for each of our product categories. Our manufacturing facilities include:

Route to Market Leadership

As one of the preferred partners to premium golf shops, we ensure that the performance benefits derived from using our products are showcased and our products are properly merchandised. We have over 340 sales representatives directly servicing nearly 31,000 accounts in 47 countries and we service over 90 countries in total, directly or through distributors. With an average of almost 20 years of experience, we believe the Titleist U.S. sales team is the largest and most experienced in the industry. Similarly, we believe FootJoy has built the most experienced, highly qualified team in the U.S. golf wear category. As we see our retail partners as a critical connection to dedicated golfers, we place great emphasis on building strong relationships and trust with them. This is the reason our sales associates are expected not simply to be salespeople, but to function as golf experts and enthusiasts in their respective territories, who advise and assist our retail partners to better serve their customers. We help generate golfer demand and sell‑through via in‑shop merchandising, promotions and advertising, and also provide product education to club professionals, coaches and instructors. Lastly, we place a strong focus on consumer engagement, starting with fitting and trial initiatives across our balls, clubs and shoes categories. We offer custom products across categories that we believe are better aligned with golfers’ personal styles, skill levels and preferences.

Market Overview and Opportunity

Market Overview

We estimate that the sport of golf gives rise to a global commercial opportunity of more than $85 billion annually, which captures all spending related to golf. There are over 50 million golfers worldwide playing over 800 million rounds annually on over 32,000 golf courses. Our addressable market comprised of golf equipment, golf wear and golf gear represents approximately $12 billion in retail sales and approximately $8 billion in wholesale sales. The United States accounted for over 40% of our addressable market, followed by Japan and Korea collectively accounting for over 30% of our addressable market, each in 2016.

According to Golf Datatech, LLC, the number of rounds of golf played in the United States has shown modest improvements in both 2015 and 2016. We believe the number of rounds of golf played by our target market of dedicated golfers has remained stable over the past few years.

We view emerging economies, such as the markets in Southeast Asia, as attractive long‑term opportunities based on our assessment through the lens of the five collectively necessary and sufficient conditions for a country to

embrace golf: (1) sizeable middle‑class population; (2) educational infrastructure; (3) places to play and practice; (4) professional success that inspires the local golfers; and (5) corporate support.

We believe the golf industry is mainly driven by golfer demographics, dedicated golfers and weather and economic conditions.

Golfer Demographics. Golf is a recreational activity that requires time and money. The golf industry has been principally driven by the age cohort of 30 and above, currently “gen‑x” (age 30 to 49) and “baby boomers” (age 50 to 69), who have the time and money to engage in the sport. In the United States, there are approximately 8.7 million gen‑x golfers and approximately 6.6 million baby boomer golfers, representing approximately 63% of total golfers in the United States. Households headed by gen‑x and baby boomers also claim an approximately 80% share of the total income dollars in the United States. Since a significant number of baby boomers have yet to retire, we anticipate growth in spending from this demographic as it has been demonstrated that rounds of play increase significantly as those in this cohort reach retirement. On average, golfers in the age range of 18 to 34 play 15 rounds per year, whereas those in the age range of 50 to 64 and 65 and above play 29 rounds and 51 rounds per year, respectively. While golf has historically consisted of mostly male players, women accounted for approximately 24% of golfers in the United States in 2015, up from approximately 20% in 2011. Because nearly 40% of beginner golfers in the United States in 2015 were women, we believe that the percentage of women golfers will continue to grow. Beyond the gen‑x and baby boomer generation, another promising development in golf has been the generational shift with millennial golfers making their marks at both professional and amateur levels. Golfers under the age of 30 represented 36% of the World Rank Top 50 and 78% of Rolex World Rank Top 50 Women as of December 31, 2016. The largest single age group of beginners in the United States in 2015 was millennials (age 18 to 29). Further, the number of junior golfers (age 6 to 17) in the United States has grown from approximately 2.5 million golfers in 2010 to approximately 3.0 million golfers in 2015.

Dedicated Golfers. Dedicated golfers are largely gen‑x and baby boomers who have demonstrated the propensity to pay a premium for products that help them perform better. We believe dedicated golfers, who comprise our target market, will continue to be a key driver for the global golf industry. The National Golf Foundation estimates that there were 6.2 million, 6.5 million and 6.4 million “avid” golfers in the United States in 2015, 2014 and 2013, respectively, with “avid” golfers defined as those who play 25 rounds or more per year. We estimate that approximately 60% of these avid golfers in the United States are dedicated golfers.

Weather Conditions. Weather conditions determine the number of playable days in a year and thus influence the amount of time people spend on golf. Weather conditions in most parts of the world, including our primary geographic markets, generally restrict golf from being played year‑round, with many of our on‑course customers closed during the cold weather months. Therefore, favorable weather conditions generally result in more playable days in a given year and thus more golf rounds played, which generally results in increased demand for all golf products.

Economic Conditions. The state of the economy influences the amount of money people spend on golf. Golf equipment, including clubs, balls and accessories, is recreational in nature and is therefore a discretionary purchase for consumers. Consumers are generally more willing to make discretionary purchases of golf products when economic conditions are favorable and when consumers are feeling confident and prosperous.

Our Opportunity

We have demonstrated sustained, resilient and stable revenue and Adjusted EBITDA growth over the past four years, despite challenges related to demographic, macroeconomic and weather related conditions. Our differentiated focus on performance and quality excellence, enduring connections with dedicated golfers and favorable and market‑differentiating mix of consumable and durable products have been the key drivers of our strong performance. We believe this focus positions us to continue to generate industry‑leading performance.

Strong Financial Performance

Since 2013, we have driven strong financial performance across our product portfolio in the aggregate and in each of our reportable segments of Titleist golf balls, Titleist golf clubs, Titleist golf gear and FootJoy golf wear. From 2013 to 2016:

See “Item 6. – Selected Consolidated Financial Data” for a reconciliation of Adjusted EBITDA to net income (loss) attributable to Acushnet Holdings Corp., the most directly comparable GAAP financial measure. See “Item 7. –Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview—Key  Performance Measures” for a description of how we calculate constant currency information.

Our Competitive Strengths

Steward of Golf’s Most Revered Brands. We have long been the trusted steward of two of golf’s most revered and recognized brands, and have enjoyed the longest running record of market leadership in the golf category. We believe the Titleist and FootJoy brands deliver superior performance and quality excellence in their respective product categories and are widely regarded as the strongest and most identifiable brands among premium golf equipment and golf wear manufacturers. Titleist has been the #1 ball in professional golf for 68 years while FootJoy has been the leading brand on the PGA Tour in golf shoes for over six decades and golf gloves for over three decades. The performance and quality of our brands are validated by the widespread adoption of our products by the world’s best professional and amateur golfers, which generates exceptional brand loyalty among our core customers and drives repeat purchases.

Market‑Leading Portfolio of Products Designed for Dedicated Golfers. The Titleist Pro V1 golf ball was launched in 2000 and in four months became the #1 selling ball on the market, a position it still holds, and is the #1 golf

ball played at every level of competitive golf today. We estimate that we held nearly one‑half of the 2015 global top grade wholesale golf ball market, which we estimate was approximately $1.0 billion, including over two‑thirds of the premium performance market segment. Pro V1 models are the longest running #1 of any golf equipment since Golf Datatech began tracking this metric in 1997. It is rare when a brand’s highest priced product in a particular category is also the industry volume leader. In 2016, the number of Titleist balls played on professional tours was more than five times the number of balls of our nearest competitor. Titleist records even higher ball counts at most amateur championships than on the worldwide professional tours, a further testament to the performance and quality of Titleist. Since amateurs are not allowed to receive compensation for the use or endorsement of any brand’s equipment, they freely choose what golf ball they believe will help them shoot their lowest scores. Faithful to the brand promise of the Titleist ball, we believe our golf clubs are also best‑in‑class in terms of performance and quality. Our Vokey Design wedges and Scotty Cameron putters are recognized worldwide as leaders in their respective categories. Our Vokey Design wedges are the most widely used on the PGA Tour. Under our FootJoy brand, we are the #1 shoe in golf, with the leading usage on all of the world’s major professional golf tours and twice as many stock keeping units, or SKUs, as our nearest competitors. FootJoy gloves also have the leading market share, enjoy the #1 position on all the world’s major professional golf tours, and offer the largest selection of golf gloves in the industry. FootJoy is also a global leader in golf outerwear and has a rapidly growing presence in golf apparel.

Favorable Consumable / Durable Mix. We have developed a product portfolio with a favorable mix of consumables and durables, which we believe differentiates us from other pure golf equipment manufacturers. Consumable purchases are largely driven by the number of rounds played, while durable purchases are subject to technology replacement cycles. We believe our favorable product mix is less economically cyclical and more working capital efficient than that of our peers. Our sales reflect a favorable and market‑differentiating mix of consumable products, which we consider to be golf balls and golf gloves, which collectively represented 40% of our net sales in 2016, and more durable products, which we consider to be golf clubs, golf shoes, golf apparel and golf gear, which collectively represented 60% of our net sales in 2016.

Best‑in‑Class Design Innovation. Driven by our commitment to perpetual innovation, we believe we are the innovation leader in the golf industry. Golf’s most regulated and technically‑driven categories are golf balls and golf clubs, and therefore require strong intellectual property to create differentiated products with superior performance and quality. We hold the largest patent portfolio in the golf industry, with over 1,250 active U.S. utility patents in golf balls, close to 350 active U.S. utility patents in golf clubs, wedges and putters and 296 active patents (including ex‑U.S. and design patents) in golf shoes and gloves. As of December 31, 2016, we had 37% and 15% market shares of active golf ball and club patents, respectively. Over 90% of our current products incorporate technologies or designs developed in the last five years. The Titleist Pro V1 franchise is an example of our innovation leadership. We have sold over 130 million dozen Pro V1 and Pro V1x golf balls, generating over $4.5 billion of revenue, since the introduction of the Pro V1 in 2000. We believe our ability to develop and implement innovation drives superior product performance and our patent portfolio allows us to protect our product and process improvements in an industry where success is driven by product performance and quality improvements.

Operational Excellence. Our differentiated manufacturing processes and connectivity between our manufacturing and R&D teams foster integration throughout the design and manufacturing process. This allows us to continually develop innovative new products that we can bring to market efficiently while ensuring consistency and high levels of quality control. Unlike many other golf companies, we own or control the design, sourcing, manufacturing, packaging and distribution of our products. Our vertically integrated approach delivers a consistent product quality and results in very high customer satisfaction. There are over 90 quality checks for Titleist Pro V1 and 120 quality checks that go into Titleist Pro V1x to ensure every ball is worthy of bearing the Titleist brand name. An example of this is our product quality return percentage—for every 10 million Titleist Pro V1 golf balls produced, only one is returned on average. By controlling key aspects of the design and manufacturing processes, we are better able to protect our intellectual property as well as offer customization capabilities and efficient turn times. Furthermore, we are able to provide custom fitted products to individuals in a short timeframe and facilitate regional market customization.

Unparalleled Route to Market Leadership. The foundation of our go‑to‑market strategy is to continue to be the preferred partner for premium golf shops worldwide and to provide customization and fitting that optimize our customers’ post‑purchase experiences. In doing so, we ensure that the performance benefits derived from using our products are showcased and our products are properly merchandised, while deepening our customers’ connections with the Titleist and FootJoy brands. We believe these initiatives, in turn, increase sales and profitability for our retail partners, leading to a mutually beneficial economic relationship. Today, we deploy over 20,000 displays that are

designed and adapted to local needs, and there are over 3,500 premium golf shops that exclusively stock or display Titleist balls. By virtue of our strong relationship with retail partners, we are able to build the strong connections with and gain deep understanding of dedicated golfers. We are able to closely track the replacement cycles of our customers’ equipment and effectively market our new products in a timely manner.

Deep Stewardship Culture and Experienced Management Team. Behind our exceptional products and organizational infrastructure lies an authentic and enduring organizational culture validated by the longevity of our management team, sales force and associates. Our management team members, many of whom have dedicated their entire careers to our company, average over 19 years of employment with us. They are supported by a deep and talented team of associates across product categories, functions, markets and geographies, who serve as strong brand and cultural ambassadors. Approximately 50% of our U.S. associates have over ten years of employment with us, highlighting the depth of our talent and future leaders. We are the stewards of our brands, and we are committed to maintaining the culture of excellence that defines us and our products.

Our Growth Strategies

We plan to continue to pursue organic growth initiatives across all product categories, brands, geographies and marketing channels.

Introduce New Products and Extend Market Share Leadership in Equipment Categories. We expect to sustain our strong performance in our core categories of golf balls and golf clubs through several targeted strategies:

Increase Penetration in Golf Gear and Wear Categories. We intend to build on the brand loyalty that the dedicated golfer has developed for our Titleist ball and club categories and FootJoy shoe and glove categories in order to increase our penetration in the adjacent categories of golf gear and golf wear. We expect to continue to drive growth across these categories by employing the following initiatives:

Strategically Pursue Global Growth. The Titleist and FootJoy brands are both global brands that are well positioned where golf’s growth is anticipated. While we believe that a majority of the near‑term growth will be driven by the developed economies, emerging economies, such as the markets in Southeast Asia, represent longer‑term growth opportunities. To meet future demand, we are ensuring that local capabilities and expertise in sales, customer service, merchandising, online presence, golf education and fitting initiatives are in place to support our operations. We continue to hire local talent across all functions in order to better position the products of Titleist and FootJoy in those markets where participation and popularity of the sport are expected to increase.

Our Products

We design, manufacture and market a broad range of products under the Titleist and FootJoy brands. Both brands are recognized as industry leaders in performance, quality, innovation and design. Our products include golf balls, golf clubs, wedges and putters, golf shoes, golf gloves, golf gear and golf outerwear and apparel.

Titleist

We design, manufacture and sell golf balls, golf clubs, wedges and putters and golf gear under the Titleist brand. Net sales of Titleist products for the years ended December 31, 2016, 2015 and 2014 were $1,139.2 million, $1,084.1 million, and $1,116.0 million, respectively, in each case approximately 72% of our total net sales.

Titleist Golf Balls

Titleist is the #1 ball in golf. The 2016 Titleist golf ball product line consisted of six major models, each designed to deliver different performance characteristics, such as distance, flight, short game control, feel and durability.

Pro V1 and Pro V1x are designed to be the highest performing and quality golf balls for golfers at every level of the game and best demonstrate Titleist’s design, innovation and technology leadership. The first Pro V1 golf ball was introduced on the PGA Tour in October 2000 and launched to the market in December 2000. It represented the coalescence of three of Titleist’s industry leading technologies: large solid core; multi‑component construction; and high performance, thermoset cast urethane elastomer covers. In its first four months, the Pro V1 golf ball became the best‑selling golf ball and holds that position to this day. During this time, we also set out to create a ball that produced lower driver spin and higher launch characteristics than the Pro V1 while retaining its high performance scoring spin. With its four‑piece, dual core design, the Pro V1x golf ball was introduced in 2003. In 2017, we launched new versions of the Pro V1 and Pro V1x. The New Pro V1 is designed to offer significantly longer distance from faster ball speed and lower long game spin. Advancements in aerodynamics for both Pro V1 and Pro V1x are designed to produce even more consistent flight. We believe these improvements, along with benefits such as our renowned Drop-and-Stop control, soft feel and long lasting durability, make Pro V1 golf balls the best performance choice for all golfers.

We also provide best‑in‑class performance with the NXT Tour, NXT Tour S, Velocity and DT TruSoft models.

By competing at a lower price point, Pinnacle completes a full product offering for us. With two major models, Rush and Soft, Pinnacle golf balls are also available in different optic colors and play numbers. Our Pinnacle Brand competes in the price market segment, which allows the Titleist brand to focus on the premium performance and performance market segments and reduces the need to extend the Titleist brand to the price market segment. This also helps to support the thousands of golf shops that choose to exclusively stock Titleist and Pinnacle golf balls, allowing them to offer golf balls in each market segment which market segments we discussed and defined below.

Titleist and Pinnacle golf balls accounted for $513.9 million, or 33%, $535.5 million, or 36%, and $543.8 million, or 35%, of our total net sales for the years ended December 31, 2016, 2015 and 2014, respectively.

We estimate that we held nearly one‑half of the 2015 global top grade wholesale golf ball market, which we estimate was approximately $1.0 billion, and held leadership positions across the most profitable market segments. The top grade wholesale golf ball market consists of all golf balls sold in the wholesale market excluding range golf balls, practice golf balls or downgraded or repurposed golf balls.

The table below shows the percentage of golfers that used Titleist golf balls as compared to its nearest competitor for specific professional tours and representative amateur championships in 2016.

As shown in the table above, at most amateur championships, Titleist records even higher ball counts than on the worldwide professional tours. Under The Rules of Golf established by the game’s governing bodies, the USGA and R&A, amateurs are not allowed to receive compensation for the use or endorsement of any brand’s equipment. Amateurs freely choose what golf ball they believe will help them shoot their lowest scores. We believe their choice of the Titleist golf ball further validates the superior performance and superior quality of Titleist.

We are also a leader in custom imprinted golf balls. This includes printing high quality reproductions of corporate logos, tournament logos, country club or resort logos, and personalization on Titleist and Pinnacle golf balls. Our service includes design capabilities, special packaging options and fast turnaround times. Custom imprinted golf balls represented over 30% of our global net golf ball sales for the year ended December 31, 2016. The majority of custom imprinting is done for corporate logos as there has long been a strong connection between the business community and golf.

Titleist Golf Clubs, Wedges and Putters

We view and operate the Titleist golf club business in three distinct categories: clubs (which includes drivers, fairways, hybrids and irons), wedges and putters. Our products are generally priced at or above the premium price points in the marketplace, driven by higher‑end technologies (including design, materials and processes) we employ to generate superior quality and performance. We have different models within each category to address the distinct performance needs of our dedicated golfer target audience. Titleist golf clubs, wedges and putters accounted for $431.0 million, or 27%, $388.3 million, or 26%, and $422.4 million, or 27%, of our total net sales for the years ended December 31, 2016, 2015 and 2014, respectively.

The table below shows the usage percentages and ranks of Titleist golf clubs, wedges and putters on the 2016 PGA Tour and representative 2016 championships in the United States.

Titleist Clubs

Our current global club line consists of the 917 product line of drivers and fairways, the 816 product line of hybrids and the 716 product line of irons. Every product in our club line features premium, tour‑proven stock shafts and grips, complemented by a broad range of custom options.

Titleist 917 drivers and fairways are designed to deliver superior performance through tour‑proven technologies that increase ball speed, decrease spin, and optimize flight without sacrificing forgiveness. We design our drivers and fairways to deliver complete performance with tour‑preferred looks, sound and feel, and we offer the ability to precisely fit individual golfers’ needs.

Titleist 816 hybrids generate long game performance through advanced technology. The advanced features of our hybrids aim to facilitate precision fitting and generate high ball speed, low spin and high launch for increased distance and forgiveness.

Titleist 716 irons are innovative, technologically advanced products designed to deliver distance, forgiveness, proper shot control and feel. While we offer stock set configurations for our iron sets, approximately 56% of our worldwide iron sales are custom fit to help deliver a better fit and performance.

We also sell our VG3 line of clubs, which consist of men’s and women’s drivers, fairways, hybrids and irons offered in Japan only. These products feature design and construction specifically targeted to dedicated golfers in Japan.

Vokey Design Wedges

Bob Vokey champions the Titleist wedge effort by creating high performance wedges to meet the demands of dedicated golfers and the best players in the world. The Vokey Design wedge product offering is a compilation of the most popular wedges resulting from Bob Vokey’s hands‑on work with golf’s best players to develop shapes and soles that address varying techniques and course conditions. In total, we offer 21 unique loft, sole grind and bounce combinations and three unique finishes to create golf’s most complete wedge product performance range. In addition, Vokey’s online Wedgeworks program promotes limited edition models and allows golfers to customize and personalize their wedges. Vokey Design wedges are the most played wedges by tour professionals. In 2016, they accounted for over 46% of all wedges in play on the PGA Tour, where they have been #1 every year since 2004.

Scotty Cameron Putters

Scotty Cameron Fine Milled Putters are developed through a specialized and iterative process that blends art and science to create high performance putters. Scotty’s design inspiration begins with studying the best players in the world and working with them to identify the consistent strengths and attributes of their putting. Scotty Cameron encourages a selection process that identifies the putter length, toe flow and appearance to deliver proper balance, shaft flex and feel to golfers and to encourage proper technique. Scotty Cameron putters consist of a range of products for each of these key selection criteria. In 2016, over one‑third of the putters played on the PGA Tour were Scotty Cameron putters, and over the past 21 years, Scotty Cameron putters have helped players win over 1,200 tournaments on the worldwide professional tours.

Using the scottycameron.com website as an information and services hub, we offer loyal brand fans the opportunity to connect more closely with the Scotty Cameron brand. Golfers can customize and personalize their putter(s) in the online Scotty Cameron Custom Shop. Through the popular “Club Cameron” loyalty program and Scotty’s online “Studio Store,” brand fans can purchase unique Scotty Cameron accessories. In 2014, we also opened the Scotty Cameron Gallery in Encinitas, California, and in 2016, we entered into a license agreement whereby a third party opened and operates a similar facility in Tokyo, Japan. Each of these facilities is a premium retail boutique which offers consumers the ability to experience the tour fitting process as well as purchase unique accessory items.

Titleist Golf Gear

Titleist golf gear products are designed and engineered using premium materials, paying particular attention to superior performance, function and style. We focus on the design and development of golf bags, headwear, gloves, travel gear, head covers and other golf gear. We provide personalization and customization within each category of Titleist golf gear, as well as certain licensed products, in order to meet the needs of the dedicated golfer and as part of our service to our accounts. We believe the golf gear business represents a sizable but highly fragmented opportunity with numerous competitors in each product category and geographical market. Titleist golf gear accounted for $136.2 million, or 9%, $129.4 million, or 9%, and $127.9 million, or 8%, of our net sales for the years ended December 31, 2016, 2015 and 2014, respectively.

Titleist golf gear includes:

FootJoy Golf Wear

FootJoy is one of golf’s leading performance wear brands, which consists collectively of golf shoes, gloves and apparel. FootJoy products accounted for $433.1 million, or 28%, $418.9 million, or 28%, and $421.6 million, or 27%, of our total net sales for the years ended December 31, 2016, 2015 and 2014, respectively.

FootJoy Golf Shoes

FootJoy is the #1 shoe in golf and has been the #1 shoe on the PGA Tour for over six decades. With an exclusive focus on golf, FootJoy shoes are designed, developed and manufactured for all golfers in all golf shoe categories, including traditional, casual, athletic and spikeless. We are the global leader in golf shoes with approximately one‑third of the 2016 global wholesale golf shoe market, which we estimate was approximately $575 million.

The golf shoe category is one of the most demanding of all wearables as golf shoes must perform in all weather conditions, including extreme temperature and moisture exposure; be resistant to pesticides and fungicides; withstand frequent usage and extensive rounds of play; and provide consistent comfort, support and protection to the golfer in an average of over five miles in a walked round. Hence, golf shoes require extensive knowledge and expertise in foot morphology, walking and swing biomechanics, material science and application and sophisticated manufacturing and construction techniques.

Golf shoes are also a style and fashion driven category. FootJoy offers a large assortment of styles to suit the needs and tastes of all golfers. Although it has products that cater to all segments of the value chain, 90% of its 118 styles in the United States golf shoe offering as of December 31, 2015 were in the super premium (greater than $150 MSRP) or premium (greater than $100 MSRP) revenue categories. The breadth and scope of the FootJoy product line is commensurate with its leading sales position. To maintain and grow this leadership position in the category, new product launches and new styles comprise over 60% of its offerings each year in all significant markets around the world.

Although FootJoy seeks the greatest use at all levels of the game, it enjoys the leading usage by the most of the best players. The table below shows the percentage of professional golfers that used FootJoy shoes as compared to its nearest competitor for representative professional tours in 2016.

In addition to its stock offerings, FootJoy is a leader in the customization of golf shoe styles and designs. FootJoy’s MyJoys custom golf shoe portal provides individual choices for style, color, personal IDs and team logos that are produced to order for golfers around the world. We believe it is the largest choice offering in the golf shoe category and provides a service and personal expression capability that creates brand loyalty and repeat purchases.

FootJoy Gloves

FootJoy is the #1 glove in golf. We are the global leader in golf gloves with approximately one‑third of the 2015 global wholesale golf glove market, which we estimate was approximately $230 million. FootJoy is over three times larger than Titleist in the category, which is the #2 brand worldwide in sales. FootJoy is the leader in sales for all sub‑categories of the glove business, including leather construction, synthetic, leather/synthetic combinations and all specialty gloves including rain and winter specific offerings.

As in the golf shoe category, FootJoy has a long standing leadership position in the glove business that is the result of a deep understanding of golfer needs and expectations for performance, fit, comfort and quality. FootJoy offers the largest variety of glove designs and specifications to meet the needs of all golfers, including high quality, thin leather construction, advanced synthetics and leather/synthetic combinations, and specialty applications such as the world’s leading rain and winter golf gloves. FootJoy has enjoyed leadership of the category since the mid‑1980s and is the market leader in every significant golf market around the world. The table below shows the percentage of professional golfers that used FootJoy and Titleist gloves as compared to their nearest competitor for representative professional tours in 2016.

FootJoy Outerwear and Apparel

FootJoy’s most recent brand extensions have been the entry into the golf outerwear and golf apparel markets. FootJoy’s goal for outerwear is to “make every day playable” and extend the golf season by providing products for rain, wind and cold conditions. FootJoy entered the outerwear category in 1996 with innovative designs and materials and became the leader in net sales in the United States by 2005 and still holds this position today. According to Golf Datatech, our share of U.S. net sales of golf outerwear from on‑course golf shops and golf specialty retailers was approximately 27% for the year ended December 31, 2016, and our principal competitors in this category include Nike, Zero Restriction and Adidas. The brand’s longer term goal is to establish itself as the #1 golf outerwear product worldwide.

The FootJoy outerwear line is predicated on the FootJoy Layering System with three layers: base layer for moisture management, mid layer for temperature control and an outer layer for weather protection. The layer system allows for easy adjustment on the course with maximum comfort and protection. As in its successful golf shoe and glove categories, FootJoy outerwear built its leadership position in the United States by utilizing premium materials and design know‑how to build a complete offering of specialized products to meet the unique needs of the golfer in all weather extremes.

FootJoy fully entered the adjacent category of general golf apparel in 2012 with a tightly focused offering for men in the U.S. market. The line was extended to markets in Europe and Asia in the following years and now enjoys wide appeal and a growing share in most markets around the world. We believe it is one of the fastest growing brands in the men’s general golf apparel market. According to Golf Datatech, our share of U.S. net sales of men’s general golf apparel and outerwear from on‑course golf shops and golf specialty retailers was approximately 11% for the year ended December 31, 2016. The general golf apparel market represents a sizable but highly fragmented opportunity with numerous competitors in each geographical market, including Nike, Adidas and Under Armour.

FootJoy more broadly entered the U.S. women’s golf apparel market in early 2016 under the trademark Golfleisure. The styling is appropriate for golf and inspired by the current athleisure segment of women’s apparel in other categories and uses. According to Golf Datatech our share of U.S. net sales of women’s golf apparel and outerwear from on‑course golf shops and golf specialty retailers was approximately 3% for the year ended December 31, 2016, and our principal competitors in this category include Nike, EP Pro and Adidas. Plans include expansion of distribution to other markets in Europe and Asia during 2017.

Product Launch Cycles

We maintain differentiated and disciplined product launch cycles across our portfolio, which has contributed to stable and resilient growth over the long‑run. This approach gives our R&D teams a period of time we believe is necessary to develop superior performing products versus the prior generation models. As a result, we are able to manage our product transitions and inventory from one generation to the next more efficiently and effectively, both internally and with our trade partners.

Product introductions generally stimulate net sales as the golf retail channel takes on inventory of new products. Reorders of these new products then depend on the rate of sell‑through. Announcements of new products can often cause our customers to defer purchasing additional golf equipment until our new products are available. The varying product introduction cycles described below may cause our results of operations to fluctuate as each product line has different volumes, prices and margins.

Titleist Golf Balls Segment

We launch new Titleist golf ball models on a two‑year cycle, with new product launches of Pro V1 and Pro V1x, our premium performance models, generally occurring in the first quarter of odd‑numbered years and new product launches of NXT Tour, Velocity and DT, our performance models, generally occurring in the first quarter of even‑numbered years. For new golf ball models, sales occur at a higher rate in the year of the initial launch than in the second year. Given the Pro V1 franchise is our highest volume and our highest priced product, we typically have higher net sales in our Titleist golf ball segment in odd‑numbered years.

Titleist Golf Clubs Segment

We generally launch new Titleist golf club models on a two‑year cycle. Since the fall of 2014, we have generally used the following product launch cycle, and at present we anticipate continuing to use this product launch cycle going forward because we believe it aligns our launches with the purchase habits of dedicated golfers. In general, we launch:

As a result of this product launch cycle, we generally expect to have higher net sales in our Titleist golf club segment in even‑numbered years due to the following factors:

Titleist Golf Gear and FootJoy Golf Wear Segments

Our FootJoy golf wear and Titleist golf gear businesses are not subject to the same degree of cyclical fluctuation as our golf ball and golf club businesses as new product offerings and styles are generally introduced each year and at different times during the year.

Manufacturing Excellence

Our manufacturing processes and management of supply chain operations ensure consistency of product performance and quality. We own or control the design, sourcing, manufacturing, packaging and distribution of our products.

Manufacturing Network

Our manufacturing network is comprised of our owned facilities and select partners around the globe. Our scale and global reach enable us to maximize cost efficiency, reduce lead time, provide regional customization and gain insights into local markets.

We are the largest scope and scale golf ball manufacturer in the world with three company‑owned and operated manufacturing facilities, two located in the United States and one in Thailand, encompassing 600,000 total square feet with sufficient production capacity to meet anticipated growth. We also have local custom golf ball imprinting operations in the United States, Japan, Canada, the U.K. (servicing the U.K., Ireland and continental Europe), Korea and China to deliver superior reproduction quality and service. We utilize qualified local vendors for imprinting capabilities in other geographic markets.

We assemble clubs at six strategic global locations, allowing us to provide custom fitted golf clubs with regional customization with efficient turnaround times. Each of our six custom manufacturing locations is responsible for supply chain execution for golf clubs and wedges, from forecast generation to component procurement to club assembly and distribution, allowing each region to respond to market specific needs or trends. Scotty Cameron putters are assembled solely at our Carlsbad, California manufacturing facility.

We own and operate the largest golf glove manufacturing operation in the world in Chonburi, Thailand which employs nearly 1,500 workers, where we manufacture both FootJoy and Titleist golf gloves. The factory produces over 10 million FootJoy and Titleist gloves annually.

All of our FootJoy golf shoes are manufactured in a 525,000 square foot facility in Fuzhou, China, owned by a joint venture in which we have a 40% interest with the remaining 60% owned by our long‑standing Taiwan supply partners. In our consolidated financial statements, we consolidate the accounts of our FootJoy golf shoe joint venture, which is a variable interest entity, or VIE. The joint venture was established in 1995 and has been in its current facility since 2000. The sole purpose of the joint venture is to manufacture our golf shoes and as such we are deemed to be the primary beneficiary of the VIE as defined by ASC 810. The multi‑floor/multi‑building complex owned by the joint

venture is devoted exclusively to FootJoy golf shoes, has production capacity of nearly five million pairs per annum and is staffed by over 2,700 workers. See “Item 7. – Management’s Discussion and Analysis of Financial Condition and Results of Operations—Components of our Results of Operations—Noncontrolling Interests” for a discussion of our FootJoy golf shoe joint venture and the material terms of the agreement which governs such joint venture arrangement.

Vertical Integration

Our vertically integrated approach to manufacturing is at the core of our consistent product quality and resulting high customer satisfaction. Our golf balls, golf gloves and golf shoes operations enjoy significant vertical integration, whereby we design each product, source the raw materials, and then manufacture, finish and package at our owned facilities. We design our golf clubs, golf wear and golf gear products internally and source the components or finished goods from select vendors that develop and manufacture our designs. We structure our manufacturing and sourcing operations based on the availability of best‑in‑class manufacturers and vendors. We choose to maintain a vertically integrated approach in those product categories where we believe there are no third‑party vendors who meet our high standards and where we are able to achieve economies of scale.

The golf ball supply chain is our most vertically integrated and our golf ball operations team works closely with our R&D teams and key raw material suppliers. We design every Titleist and Pinnacle golf ball, source the raw materials, and then manufacture, finish and package over one million golf balls per production day.

FootJoy has a long standing history of successful vertically integrated manufacturing in its shoe and glove businesses. We design all facets of the shoe, including upper patterns, insoles, outsoles and traction elements. Raw materials for the uppers and insoles and component parts for the outsoles and traction elements are sourced around the world through independent third party suppliers. All of our golf shoes are then manufactured in our joint venture facility in Fuzhou, China. In our golf glove business, we design each product, source all raw materials and then manufacture substantially all of the finished products.

Our Titleist golf club operations team works closely with our R&D teams and key component suppliers to design and produce technologically advanced and high quality clubs, wedges and putters. Their collective efforts continue to identify and employ new materials, new processes and new machinery that are used to improve performance and quality, as well as to reduce lead times and product costs. Lastly, each product is inspected prior to shipment at point of origin by the supplier, and in the case of heads, also by our own quality personnel, and all products are audited at the receiving facility.

A coordinated internal team designs and sources the finished goods for all FootJoy outerwear and apparel products. Over the last twenty years, we have created long‑standing relationships with several independent supply groups that have expertise and quality capabilities consistent with FootJoy’s high standards and specifications. No one source of supply provides more than 50% of our annual needs in these categories.

Raw Materials, Product Components and Finished Goods Supply and Sourcing

We have aligned with a select few industry leaders capable of meeting our quality standards and performance requirements with respect to the supply of our raw materials, product components and finished goods.

For our golf balls business, we carefully select our raw materials as well as our sources based on quality, cost efficiency and risk management. Our highest raw material consumption for golf balls, in order, is polybutadiene, ionomers, zinc diacrylate (ZDA), urethane, and coatings. To mitigate risk of supply disruption of polybutadiene or ionomers, we manage inventory levels and store additional inventory during the traditional hurricane season in the United States because certain significant suppliers have in the past and may in the future be impacted by hurricanes. For polybutadiene, ZDA, urethane and coatings, we use either multiple suppliers or multiple production facilities, some with geographic separation, to reduce the risk of raw material shortages. Additionally, we utilize a cloud‑based global supplier risk monitoring tool which provides alerts in our supply chain in areas such as financial/credit, geographic/climactic, political, organizational changes, transportation and labor/wages.

We source the raw materials for our golf glove and golf shoe businesses, and certain of the components for our golf shoe business, from a select group of third‑party suppliers.

We have excellent long term relationships with our Titleist golf club supplier partners, and they supply the majority of our more than 4,000 component SKUs. These key partnerships have allowed us to reduce lead times by an average of 60% over the past five years, while also reducing component and finished goods inventory, ensuring on‑hand availability, increasing our responsiveness to customer demand and improving supply chain continuity. In addition, the Titleist golf club team employs nine on-site auditors at our Asian suppliers’ production facilities to ensure consistent product quality.

For our golf gear businesses, we source the finished products from select third‑party vendors that have the necessary quality capabilities.

FootJoy operates an apparel and accessory commercial office in Hong Kong that is staffed with eight associates. These individuals are highly trained in all aspects of apparel design and development, production, and quality control functions, directing all commercial sourcing activities among contract factories throughout the region. In addition to the eight associates in Hong Kong, FootJoy also employs two quality control inspectors in China and one in Vietnam for careful monitoring of all FootJoy apparel production.

Sales and Distribution

Our accounts consist of premium golf shops, which include on‑course golf shops and golf specialty retailers, as well as other qualified retailers that sell golf products to consumers worldwide. We have a selective sales and distribution strategy, differentiated by product line and geography, which focuses on effectively serving those accounts that provide best access to our dedicated golfer target market in each geographic market.

We operate, and have our own field sales representation, in those countries that represent the substantial majority of golf equipment and wearable sales, including the United States, Japan, Korea, the United Kingdom, Canada, Germany, Sweden, France, Greater China, Australia, New Zealand, Thailand, Singapore and Malaysia. In other countries in which we sell our products, we rely on select distributors in order to deepen our reach into those markets. Each country administers its own in‑country channel of distribution strategy given the unique characteristics of each market.

As we see our retail partners as a critical connection to dedicated golfers, we place great emphasis on building strong relationships and trust with them. As a result, our sales and distribution takes a “category management” approach that encompasses all aspects of customer service and fulfillment, including product selection; space and display planning; sales staff training; and inventory control and replenishment. Each sales representative is seen as a trusted partner and skilled consultant, including on topics such as shop layout, merchandise display techniques and effective use of signage and product information and methods of improving inventory turns and sales conversions through merchandising. Our sales force has been recognized worldwide for its professionalism and service excellence.

We employ over 340 sales representatives worldwide, who are compensated through a combination of salary and a performance bonus. In the United States, members of our Titleist and FootJoy sales team average almost 20 years of experience. We currently service nearly 31,000 direct accounts worldwide. In both our direct sales and distributor markets, our trade partners are subject to our redistribution policy.

Titleist has developed a global distribution network in which most of the major golf regions have local distribution operations that maintain inventories for exceptional service and fulfillment of stock products. Local custom operations, for both golf balls and golf clubs, provide efficient turnaround time on custom imprinted or custom fitted products. In addition, Titleist promotes its partners as the equipment and fitting experts and encourages golfers to seek their expertise and advice. Together, Titleist and its partners enrich the golfer experience with better products, education, equipment fitting and service.

FootJoy’s trade partners in every region are provided with regular educational seminars in product features and benefits; inventory control methods; proper merchandising and display techniques; and even training in shoe and glove fitting. The seminars are supplemented by online training modules that extend the content to a much wider audience of floor sales associates in all accounts.

Supplementing our core field sales partnerships are certain Internet‑based initiatives. In the U.S. in 2016, we launched an eCommerce website for FootJoy and the MyProV1.com online golf shop.

Marketing

Throughout our history, a commitment to marketing has helped further elevate our brands and strengthen our reputation for product performance and quality, with a particular focus on the perception of dedicated golfers. Our strategy begins with delivering equipment that is superior in performance and quality, validated by the pyramid of influence. It is best‑in‑class performance and quality products that earn and maintain dedicated golfers’ loyalty and trust. Our marketing strategy, developed and refined over many years, helps reinforce this loyalty and trust, driving connectivity with our brands.

The key cornerstones to build and strengthen golfer connections with our brands are: pyramid of influence validation; merchandising; advertising; and education and fitting. We believe that a more educated golfer is more likely to be a Titleist and FootJoy golfer. Our efforts contribute to consistent, responsive and rapid sell‑through of Titleist equipment and FootJoy wear for our trade partners.

Pyramid of Influence Validation

Broad usage and acceptance by the game’s best players, including tour players, club professionals and competitive amateurs, is fundamental to our mission and purpose. We have a global leadership team dedicated to servicing and supporting these golfers throughout the pyramid of influence. At professional and amateur events, the leadership team provides technical fitting expertise, product support and service to effectively represent, exhibit, recommend and communicate our premium performance and quality story. Our associates are trained product experts, many of whom are product category‑specific, whose goal is to arm players with the equipment that will enable them to perform at their highest level.

Communicating the strength and depth of Titleist’s and FootJoy’s pyramid of influence usage to the dedicated golfer is another essential part of our leadership strategy. Within our advertising, merchandising, websites and other digital media content, we share the equipment counts, specific products and specifications and the results of our players. Our products enjoy broad usage and acceptance throughout the pyramid of influence. Dedicated golfers are interested in what products most of the world’s best players trust.

Merchandising

Excellence in merchandising, the retail format in which our products are presented to the consumer, is another sell‑through competency. The role of merchandising varies by product category. We believe Titleist is the golf ball leader in its in‑shop merchandising, and that Titleist golf balls make the first impression, best impression and longest lasting impression in premium golf shops. We also believe that these premium golf shops are where our dedicated golfer target audience is most likely to shop for their golf equipment needs. We have placed over 20,000 golf ball displays globally in order to effectively merchandise Titleist and Pinnacle golf balls.

Titleist golf clubs, wedges and putters also maintain a premium merchandising presence in golf shops. Given that our core strategy is focused on selling custom fit golf clubs and wedges, we utilize displays to promote the product offering and offer demo trial sets, in many cases not in an attempt to generate an immediate sale but rather with the ultimate goal of encouraging golfers to schedule a fitting session.

We are committed to ensuring that Titleist golf gear is prominently merchandised. We continue to invest in both displays and training for each of the golf bag, headwear, glove, travel and head cover product categories.

FootJoy devotes considerable resources to the appearance of its products and displays at point of sale. This includes an extensive offering of fixed and temporary product displays, brand and product signing and graphics and a wide variety of visual tools to create a “shop in shop” environment that conveys the brand’s market leadership image.

Advertising

We drive brand and product awareness with a communication strategy that targets dedicated golfers in all forms of media, including television, print, and a wide variety of digital and social media forums. Our advertising strategy is focused on communicating the launch of new products to generate awareness and highlight our product performance and

quality competitive advantage. Our advertising serves as another educational tool to convey the technology and innovation behind our products and the resulting performance benefits for golfers.

We have developed strong relationships with our media partners in order to secure prominent and effective positioning. We use broader reach golf media vehicles for golf ball, golf shoe and golf glove advertising and a more targeted approach for golf clubs, wedges and putters and apparel.

Titleist.com and FootJoy.com are vital parts of our communication strategy with rich product, technology and fitting content. Our sites also provide locators for golf shops, advanced fitting centers and certified custom club fitters. We develop a significant amount of digital educational content, featuring tour players, club professionals and our R&D associates, that is distributed to dedicated golfers via our social media platforms. Over the last several years we have cultivated a large and growing following on social media platforms including Facebook, Twitter and Instagram as a result of this content. In 2016, Titleist launched the MyProV1.com online golf shop in the United States to develop a stronger link with dedicated Titleist brand fans with plans to expand into additional markets in the future. This microsite allows golfers to create and purchase their own unique, custom imprinted Pro V1 or Pro V1x golf balls with special play numbers, logos or personalization. We believe this tool will increase the likelihood of repurchase and loyalty to Titleist golf balls.

Team Titleist is a growing online community of avid golfers and Titleist fans that has been instrumental in establishing the direct communication link between us and our most loyal customers. Members of Team Titleist are given exclusive access to interact with Titleist associates as well as other Team Titleist members both in person and online. Team Titleist also provides us the platform for directly communicating new product information, tour news, custom fitting education and referrals and event schedules.

The FJ Community is an online group of avid golfers who share a passion for the game of golf and FootJoy golf wear. What began 10 years ago as a method of reaching golfers on a direct basis has evolved into an open community of 50,000 committed golfers who connect with the brand and one another. As engagement levels increase, members earn access to new product introductions and opportunities to participate in unique promotions and events.

Education and Fitting

One of our core strategies and competencies is golf ball and golf club education and fitting. We also have in place several golf shoe fitting initiatives aimed at educating golfers on the importance of proper shoe fitting. We are committed to educating our trade partners and dedicated golfers on our product performance and technology. Playing with properly fit equipment helps golfers shoot lower scores. When golfers play better, they want to play more.

Golf Ball Education and Fitting

We believe performance and quality differences between golf ball brands and models are game changing. In order for golfers to shoot their lowest scores, it is important that they find the best ball suited to their game, as it is the only piece of equipment that they will use on every shot. As the golf ball category leader and a global leader in golf ball fitting and education, we are committed to help golfers understand and appreciate the differentiating and defining characteristics of Titleist golf balls, as well as the differences between the various Titleist golf ball products.

Titleist golf ball education and fitting is performance‑based and focuses on improving scores. Our methodology is green‑to‑tee with an emphasis not on shots hit off of the tee but rather on shots hit into the green as that is where the vast majority of shots per round are made. Prioritizing short game spin performance helps golfers hit more shots closer to the pin to enable them to convert more putts. Our education program also reinforces the importance of golf ball to golf ball consistency. Golfers trust that a Titleist golf ball will perform exactly the way they expect it to if they hit their shot properly.

Our approach to golf ball education and fitting is holistic and includes broad communication messaging in Titleist golf ball advertising, in‑shop merchandising, website and other digital media, trade partner golf ball certification and in‑field golfer education. In‑field golfer education is conducted by dedicated mobile golf ball fitting teams or Titleist tech reps, supplemented by the Titleist sales team. For example, in 2016, we provided over 100,000 golf ball recommendations by connecting in person with golfers at golf courses and golf shops. Over 500,000 additional golfers viewed our ball fitting and education materials through Titleist digital channels.

Custom Club Fitting and Trial

We believe that fundamental to achieving maximum performance from any golf club is the need to custom fit the club to the player’s individual needs and preferences. Augmenting excellent design and construction with customized specifications and components such as lie angle, shaft type, length and flex, as well as grip type and size, provides the player with the ability to maximize the performance potential of the club.

To this end, providing golfers with the ability to try and be expertly fit for their clubs is a core go‑to‑market strategy for Titleist clubs. Over the past 20 years we have developed and improved our comprehensive fitting system and we deploy that system through a global “Good, Better, Best” network of carefully selected, trained, outfitted and certified custom club fitters.

The global Titleist club fitting network includes over 4,000 trade partners. Each is outfitted with a SureFit interchangeable matrix of clubs in popular shaft types, lengths and flexes, along with a broad selection of Vokey Design wedges, thus providing them with the necessary tools to conduct high level fittings. Combined with annual training and certification, these partners are skilled and equipped to custom fit dedicated golfers.

For golfers who want a higher level fitting experience, we have also developed a global network of approximately 185 advanced fitting partners. These fitting specialists are outfitted with a larger matrix of fitting tools. They receive priority referrals when golfers conduct an online search for a Titleist fitting location or contact us directly for referrals. In addition to our global network of fitting partners, we also deploy a global associate team of approximately 220 Titleist fitting technicians who conduct advanced level fittings directly with golfers at fitting and trial events. Collectively, our global network of fitting partners conducted approximately 230,000 fittings, over 100,000 of which were at over 10,000 Titleist fitting events.

Finally, at the peak of the Titleist fitting services network, is the Titleist Performance Institute in Oceanside, California. The mission of the Titleist Performance Institute is to be the world’s most comprehensive and advanced golf performance center. Built in 1997, this approximately 30 acre property comprises three fairways with tour quality greens and bunkers, a state of the art fitness facility and a 3‑dimensional motion capture studio. The facility serves as headquarters for our tour fitting efforts, conducted by a team of elite fitters, and is also our primary club developmental testing site. Golf consumers who want the ultimate, tour‑level custom fitting experience can visit the Titleist Performance Institute for a fee and by appointment only.

Golf Shoe Fitting

We believe that a properly fit golf shoe is the most important element to optimizing comfort and product durability. As a global leader in golf shoe fitting, we hold events and seminars in key markets throughout North America, Europe and Asia. Golfer education is handled by dedicated fitting specialists and members of the FootJoy sales team.

While a shoe that fits a golfer’s foot is essential for comfort, we believe that finding a shoe that fits a golfer’s swing can lead to increased performance and we believe there is a correlation between individual swing biomechanics and golfer performance. We deployed the FootJoy Performance Fitting System in the first quarter of 2017. The FootJoy Performance Fitting System is designed to capture the center‑of‑pressure movement during a golfer’s swing and help recommend the proper shoe construction type that can deliver additional club head speed. The FootJoy Performance Fitting System aims to eliminate the need for visual, anecdotal evidence to determine whether or not a golfer would benefit from a shoe constructed with more flexibility versus more rigidity or structure and instead relies upon a scientific solution. It is expected to be available in every major golf market as a performance supplement to shoe fitting for size and width.

Seasonality

Weather conditions in most parts of the world, including our primary geographic markets, generally restrict golf from being played year‑round, with many of our on‑course customers closed during the cold weather months. In general, during the first quarter, we begin selling our products into the golf retail channel for the new golf season. This initial sell‑in generally continues into the second quarter. Our second‑quarter sales are significantly affected by the amount of sell‑through, in particular the amount of higher value discretionary purchases made by customers, which drives the level

of reorders of the products sold during the first quarter. Our third‑quarter sales are generally dependent on reorder business, and are generally lower than the second quarter as many retailers begin decreasing their inventory levels in anticipation of the end of the golf season. Our fourth‑quarter sales are generally less than the other quarters due to the end of the golf season in many of our key markets, but can also be affected by key product launches, particularly golf clubs. This seasonality, and therefore quarter to quarter fluctuations, can be affected by many factors, including the timing of new product introductions as discussed above under “—Our Products—Product Launch Cycles,” as well as weather conditions. This seasonality affects sales in each of our reportable segments differently. In general, however, because of this seasonality, a majority of our sales and most of our profitability generally occurs during the first half of the year.

Research and Product Development

Innovating within a highly regulated environment presents unique challenges and opportunities that require a significant investment in people, facilities and financial resources. We have six R&D facilities and/or test centers supported by over 180 scientists, chemists, engineers and technicians in aggregate. We are committed to continuous improvement and each R&D team is tasked to develop technology that will deliver better quality and performance products in each generation.

For the years ended December 31, 2016, 2015 and 2014 we invested $48.8 million, $46.0 million and $44.2 million, respectively, in R&D.

We have separate dedicated R&D teams for each product category.

Titleist Golf Balls

Titleist golf ball R&D has a disciplined product development process. The R&D team consists of over 70 scientists, chemists, engineers and technicians. Their role is to innovate in all areas of golf ball design, materials and constructions by incorporating new technologies to widen our performance and quality competitive advantage. A dedicated team also works specifically on new process technologies for our golf ball manufacturing operations. They work closely with raw material suppliers to create standards and specifications. They establish quality systems, protocols and analysis and support Titleist ball operations in new product implementation.

The golf ball R&D team is responsible for:

Titleist has three golf ball dedicated research facilities in the greater New Bedford, Massachusetts area that design, test, implement and support new product development and implementation:

In addition, we conduct additional golf ball product testing at our Oceanside, California test facility. We have dedicated R&D associates who work closely throughout the pyramid of influence, from PGA Tour players all the way to amateur Team Titleist members, to gather feedback on product performance expectations, conduct prototype testing and validate new products prior to market launch. This is a continuous iterative and collaborative process that impacts next generation golf balls as well as long‑term research and product direction.

Titleist Golf Clubs, Wedges and Putters

Our golf club R&D team and processes are structured in a manner that aims to create products which are innovative in design and superior in performance. The performance and quality of our products are a direct result of the commitment to golf clubs, wedges and putters R&D. Significant investment in R&D has led to a team size which has more than doubled since 2007. The department’s technical disciplines include computer‑aided design engineers, industrial designers, product development engineers, research engineers, lab technicians and testing staff. We have 65 associates dedicated to clubs and wedges R&D.

We have distinct teams working on the concept creation and development for drivers, fairways, hybrids, irons, wedges and putters. These products are initially tested and validated at our state‑of‑the‑art testing facility in Oceanside, California.

Scotty Cameron works from the Putter Studio in San Marcos, California which allows him to maximize his creativity and develop designs which are rich in craftsmanship as well as performance. This structure is necessary given there are unique expertise and performance requirements for each of the product categories.

The product category teams all work with the following support teams: advanced research, shaft development, industrial design, lab analysis and mechanical testing, player testing and an Asia‑based support team working with our key suppliers.

FootJoy

We have approximately 10 product designers and development engineers in the golf shoe team located in Brockton, Massachusetts, with an additional four product development specialists located in our Taichung, Taiwan office. We have four golf apparel designers located in Fairhaven, Massachusetts and an additional 11 product development specialists in Hong Kong, China and Korea.

Patents, Trademarks and Licenses

We consider our patents and trademarks to be among our most valuable assets. We are dedicated to protecting the innovations created by our R&D teams by developing broad and deep patent and trademark portfolios across all product categories.

As a result, we have strong patent positions across our product categories and innovation spaces that we operate in, and have become the leader in obtaining golf ball and golf club patents worldwide. In addition, we believe we have more combined golf shoe and golf glove utility patents than all competitors combined. We have over 1,250 active U.S. utility patents in golf balls, nearly 350 active U.S. utility patents in golf clubs, wedges and putters and 296 active patents (including ex‑U.S. and design patents) in golf shoes and gloves.

The following charts show our percentage of golf ball and golf club patents obtained in the last five years compared to our peers.

We own or license a large portfolio of trademarks, including for Titleist, Pro V1, Pro V1x, Pinnacle, AP1, AP2, Vokey Design, Scotty Cameron, FootJoy, FJ, DryJoys, StaSof and ProDry. We protect our trademarks by obtaining registrations where appropriate and opposing or cancelling material infringements. We also have rights in several common law marks.

Competition

There are unique aspects to the competitive dynamic in each of our product categories.

The golf ball business is highly competitive. There are a number of well‑established and well‑financed competitors, including Callaway, SRI Sports Limited (Dunlop and Srixon brands) and Bridgestone (Bridgestone and Precept brands).

The golf club, wedge and putters markets in which we compete are also highly competitive and are served by a number of well‑established and well‑financed companies with recognized brand names, including Callaway, TaylorMade and Ping.

For golf balls and golf clubs, wedges and putters, we generally compete on the basis of technology, quality, performance and customer service.

In the golf gear market, there are numerous competitors in each product category and geographical market. Titleist golf gear generally competes on the basis of quality, performance, styling and customer service.

FootJoy’s significant worldwide competitors in golf shoes include Nike, Adidas and Ecco. FootJoy’s primary worldwide competitors in golf gloves include Callaway, Nike and TaylorMade/Adidas and a significant number of smaller companies with regional offerings and specialized golf glove products. In the golf apparel category, FootJoy has numerous competitors in each geographical market, including Nike, Adidas and Under Armour. FootJoy products generally compete on the basis of quality, performance, styling and price.

Environmental Matters

Our operations are subject to federal, state and local environmental laws and regulations that impose limitations on the discharge of pollutants into the environment and establish standards for the handling, generation, emission,

release, discharge, treatment, storage and disposal of certain materials, substances and wastes and the remediation of environmental contaminants. In the ordinary course of our manufacturing processes, we use paints, chemical solvents and other materials, and generate waste by‑products that are subject to these environmental laws.

We estimate incurring future costs for past and current environmental issues relating to ongoing closure activities at the following sites: (i) our former Titleist Ball Plant 1 in Acushnet, Massachusetts, which is subject to ongoing remediation of past contamination under the oversight of the federal Environmental Protection Agency and the Massachusetts Department of Environmental Protection; (ii) our Ball Plant C in New Bedford, Massachusetts, which is subject to an ongoing investigation related to contamination that is evidently migrating from an adjacent third‑party facility; and (iii) investigations and cleanups at four third‑party disposal facilities. We do not expect that any of the future anticipated expenditures at these sites will have a material adverse effect on our business.

We have also incurred expenses in connection with environmental compliance. Historically, the costs of environmental compliance have not had a material adverse effect upon our business. We believe that our operations are in substantial compliance with all applicable environmental laws.

Regulation

The Rules of Golf

The Rules of Golf set forth the rules of play and the rules for equipment used in the game of golf. The first documented rules of golf date to 1744 and the modern Rules of Golf have been in place for over 100 years. Dedicated golfers respect the traditions of the game and play by the Rules of Golf. As a result, premium‑positioned products are designed and manufactured to conform to the Rules of Golf.

The United States Golf Association, or the USGA, is the governing body for golf in the United States and Mexico. The USGA, in conjunction with the Royal and Ancient, or R&A, in St. Andrews, Scotland, writes, interprets and maintains the Rules of Golf. The R&A is the governing body for golf in all jurisdictions outside of the United States and Mexico. The R&A jointly writes, interprets and maintains the Rules of Golf with the USGA.

In addition to their role as rule makers, both the USGA and R&A conduct national championships and are involved in other efforts to maintain the history of golf and promote the health of the game.

The Rules of Golf set the standards and establish limitations for the design and performance of all balls and clubs. Many new regulations on golf balls and golf clubs have been introduced in the past 10 to 15 years, which we believe was one of the most active periods for golf equipment regulation in the history of golf.

Golf Balls

Historically, the USGA and R&A have regulated the size, weight, spherical symmetry, initial velocity and overall distance performance of golf balls. The overall distance standard was then revised in 2004.

Golf Clubs

The USGA and R&A have also focused on golf club regulations. In 1998, a limitation was placed on the spring‑like effect of driver faces. In 2003, limits were placed on club head dimensions and volume, as well as shaft length. In 2007, club head moment of inertia was limited. A rule change to allow greater adjustability in golf clubs went into effect January 1, 2008. In August 2008, the USGA and R&A adopted a rule change further restricting golf club grooves by reducing the groove volume and limiting the groove edge angle allowable on irons and wedges. This rule change will not apply to most golfers until January 1, 2024. It was implemented on professional tours beginning in 2010 and was implemented in elite amateur competitions beginning in 2014. All products manufactured after December 31, 2010 must comply with the new groove specifications.

Our Position

In response to this regulatory dynamic, our senior management and R&D teams spend significant time and effort in developing and maintaining relationships with the USGA and R&A. We are an active participant in discussions

with the ruling bodies regarding potential new rules and the rule making process. More importantly, our R&D teams are driven to innovate and continuously improve product technology and performance within the Rules of Golf. The development and protection of these innovations through aggressive patenting are essential to competing in the current market. As a long‑time industry participant and market leader, we are well‑positioned to continue to outperform the market in a rules constrained environment.

Employees

As of December 31, 2016, we employed 5,208 associates worldwide (5,171 full time and 37 part time). The geographic concentration of associates is as follows: 2,453 in the Americas, 438 in EMEA, and 2,317 employed in Asia Pacific. Associates with over ten years of employment with us account for approximately 50% of our total associate count in the United States. The employment of all associates is at will and none of our associates are represented by a union. We believe that relations with our associates are positive.

ITEM 1A.           RISK FACTORS

You should carefully consider each of the following risk factors, as well as the other information in this report, including our consolidated financial statements and the related notes and “Item 7. – Management’s Discussion and Analysis of Financial Condition and Results of Operations.” If any of the following risks actually occurs, our business, financial condition and results of operations could be materially adversely affected. In that event, the market price of our common stock could decline significantly and you could lose all or part of your investment. The risks described below are not the only risks we face. Additional risks we are not presently aware of or that we currently believe are immaterial could also materially adversely affect our business, financial condition and results of operations.

Risks Related to Our Business and Industry

A reduction in the number of rounds of golf played or in the number of golf participants could materially adversely affect our business, financial condition and results of operations.

We generate substantially all of our sales from the sale of golf‑related products, including golf balls, golf clubs, golf shoes, golf gloves, golf gear and golf apparel. The demand for golf‑related products in general, and golf balls in particular, is directly related to the number of golf participants and the number of rounds of golf being played by these participants. The number of rounds of golf played in the United States declined from 2006 to 2014. If golf participation or the number of rounds of golf played continues to decline, sales of our products may be adversely impacted, which could materially adversely affect our business, financial condition and results of operations.

Unfavorable weather conditions may impact the number of playable days and rounds played in a given year.

Weather conditions in most parts of the world, including our primary geographic markets, generally restrict golf from being played year‑round, with many of our on‑course customers closed during the cold weather months and, to a lesser extent, during the hot weather months. Unfavorable weather conditions in our major markets, such as a particularly long winter, a cold and wet spring, or an extremely hot summer, would impact the number of playable days and rounds played in a given year, which would result in a decrease in the amount spent by golfers and golf retailers on our products, particularly with respect to consumable products such as golf balls and golf gloves, which could materially adversely affect our business, financial condition and results of operations. Our results in 2013 and 2014 were negatively impacted by unfavorable weather conditions in our major markets. Unusual or severe weather conditions throughout the year, such as storms or droughts or other water shortages, can negatively affect golf rounds played both during the events and afterward, as weather damaged golf courses are repaired and golfers focus on repairing the damage to their homes, businesses and communities. Consequently, sustained adverse weather conditions, especially during the warm weather months, could impact our sales, which could materially adversely affect our business, financial condition and results of operations. Adverse weather conditions may have a greater impact on us than other golf equipment companies as we have a large percentage of consumable products in our product portfolio, and the purchase of consumable products is generally more dependent on the number of rounds played in a given year.

Consumer spending habits and macroeconomic factors may affect the number of rounds of golf played and related spending on golf products.

Our products are recreational in nature and are therefore discretionary purchases for consumers. Consumers are generally more willing to spend their time and money to play golf and make discretionary purchases of golf products when economic conditions are favorable and when consumers are feeling confident and prosperous. Discretionary spending on golf and the golf products we sell is affected by consumer spending habits as well as by many macroeconomic factors, including general business conditions, stock market prices and volatility, corporate spending, housing prices, interest rates, the availability of consumer credit, taxes and consumer confidence in future economic conditions. Consumers may reduce or postpone purchases of our products as a result of shifts in consumer spending habits as well as during periods when economic uncertainty increases, disposable income is lower, or during periods of actual or perceived unfavorable economic conditions. For example, the recession related to the U.S. financial crisis beginning in 2007 led to slower economic activity, decreased stock prices and increased volatility, depressed housing prices, increased unemployment, concerns about inflation and energy costs, decreased business and consumer confidence, and adverse business conditions (including reduced corporate profits and capital spending), which adversely affected our business, financial condition and results of operations. The effects of the recession are still being felt today in the golf industry as we believe consumers have become more cautious with their discretionary purchases and this trend may continue. For example, corporate spending on golf equipment has remained at lower levels since the financial crisis as evidenced by the lower volume of balls in our custom logo business being sold to companies as compared to before the crisis. The continuation of these negative macroeconomic conditions or a future significant or prolonged decline in general economic conditions or uncertainties regarding future economic prospects that adversely affects consumer discretionary spending, whether in the United States or in our international markets, could result in reduced sales of our products, which could materially adversely affect our business, financial condition and results of operations.

Demographic factors may affect the number of golf participants and related spending on our products.

Golf is a recreational activity that requires time and money and different generations and socioeconomic and ethnic groups use their leisure time and discretionary funds in different ways. Golf participation among younger generations and certain socioeconomic and ethnic groups may not prove to be as popular as it is among the current “gen‑x” (age 30 – 49) and “baby boomer” (age 50 – 69) generations. The number of rounds of golf being played in the United States declined from 2006 to 2014. If golf participation or the number of rounds of golf played continues to decrease, due to factors such as demographic changes in the United States and our international markets or lack of interest in the sport among young people or certain socioeconomic and ethnic groups, sales of our products could be negatively impacted, which could materially adversely affect our business, financial condition and results of operations.

A significant disruption in the operations of our manufacturing, assembly or distribution facilities could materially adversely affect our business, financial condition and results of operations.

We rely on our manufacturing facilities in the United States, Thailand and China and assembly and distribution facilities in many of our major markets, certain of which constitute our sole manufacturing facility for a particular product category, including our joint venture facility in China where substantially all of our golf shoes are manufactured and our facility in Thailand where we manufacture the majority  of our golf gloves. Because substantially all of our products are manufactured and assembled in and distributed from a few locations, our operations could be interrupted by events beyond our control, including:

Our manufacturing, assembly and distribution capacity is also dependent on the performance of services by third parties, including vendors, landlords and transportation providers. If we encounter problems with our manufacturing, assembly and distribution facilities, our ability to meet customer expectations, manage inventory, complete sales and achieve objectives for operating efficiencies could be harmed, which could materially adversely affect our business, financial condition and results of operations. We maintain business interruption insurance, but it may not adequately protect us from the adverse effects that could result from significant disruptions to our manufacturing, assembly and distribution facilities, such as the long‑term loss of customers or an erosion of our brand image.

Our manufacturing, assembly and distribution networks include computer processes, software and automated equipment that may be subject to a number of risks related to security or computer viruses, the proper operation of software and hardware, electronic or power interruptions or other system failures.

Many of our raw materials or components of our products are provided by a sole or limited number of third‑party suppliers and manufacturers.

We rely on a sole or limited number of third‑party suppliers and manufacturers for many of our raw materials and the components in our golf balls, golf clubs, golf gloves and certain of our other products. We also use specialized sources for certain of the raw materials used to make our golf gloves and other products, and these sources are limited to certain geographical locations. Furthermore, many of these materials are customized for us and some of our products require specially developed manufacturing techniques and processes which make it difficult to identify and utilize alternative suppliers quickly. If we were to experience any delay or interruption in such supplies, we may not be able to find adequate alternative suppliers at a reasonable cost or without significant disruption to our business which could materially adversely affect our business, financial condition and results of operations.

A disruption in the operations of our suppliers could materially adversely affect our business, financial condition and results of operations.

Our ability to continue to select reliable suppliers who provide timely deliveries of quality materials and components will impact our success in meeting customer demand for timely delivery of quality products. If we experience significantly increased demand, or if, for any reason, we need to replace an existing manufacturer or supplier, there can be no assurance that additional supplies of raw materials or additional manufacturing capacity will be available when required on terms that are acceptable to us, or at all, or that any new supplier or manufacturer would allocate sufficient capacity to us in order to meet our requirements. In addition, should we decide to transition existing manufacturing between third‑party manufacturers or should we decide to transition existing in‑house manufacturing to third‑party manufacturers, the risk of such a problem could increase. Even if we are able to expand existing or find new manufacturing sources, we may encounter delays in production and added costs as a result of the time it takes to train our suppliers and manufacturers in our methods, products and quality control standards. Any material delays, interruption or increased costs in the supply of raw materials or components of our products could impact our ability to meet customer demand for our products, which could materially adversely affect our business, financial condition and results of operations.

In addition, there can be no assurance that our suppliers and manufacturers will continue to provide raw materials and components that are consistent with our standards and that comply with all applicable laws and regulations. We have occasionally received, and may in the future receive, shipments of supplies or components that fail

to conform to our quality control standards. In that event, unless we are able to obtain replacement supplies or components in a timely manner, we risk the loss of sales resulting from the inability to manufacture our products and could incur related increased administrative and shipping costs, and there also could be a negative impact to our brands, any of which could materially adversely affect our business, financial condition and results of operations.

While we do not control our suppliers or their labor practices, negative publicity regarding the management of facilities, production methods of or materials used by any of our suppliers could adversely affect our reputation, which could materially adversely affect our business, financial condition and results of operations and may force us to locate alternative suppliers. In addition, our suppliers may not be well capitalized and they may not be able to fulfill their obligations to us or go out of business. Furthermore, the ability of third‑party suppliers to timely deliver raw materials or components may be affected by events beyond their control, such as work stoppages or slowdowns, transportation issues, changes in trade or tariff laws, or significant weather and health conditions.

The cost of raw materials and components could affect our operating results.

The materials and components used by us, our suppliers and our manufacturers involve raw materials, including polybutadiene, urethane and Surlyn for the manufacturing of our golf balls, titanium and steel for the assembly of our golf clubs, leather and synthetic fabrics for the manufacturing of our golf shoes, golf gloves, golf gear and golf apparel, and resin and other petroleum‑based materials for a number of our products. Significant price fluctuations or shortages in such raw materials or components, including the costs to transport such materials or components of our products, the uncertainty of currency fluctuations against the U.S. dollar, increases in labor rates, trade duties or tariffs, and/or the introduction of new and expensive raw materials, could materially adversely affect our business, financial condition and results of operations.

Our operations are conducted worldwide and our results of operations are subject to currency transaction risk and currency translation risk that could materially adversely affect our business, financial condition and results of operations.

For the year ended December 31, 2016, $767.8 million of our net sales were generated outside of the United States by our non‑U.S. subsidiaries. Sales by geographic area are included in “Item 7. – Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in “Notes to Consolidated Financial Statements –Note 20 – Segment Information.” Substantially all of these net sales generated outside of the United States were generated in the applicable local currency, which include, but are not limited to, the Japanese yen, the Korean won, the British pound sterling, the euro and the Canadian dollar. In contrast, substantially all of the purchases of inventory, raw materials or components by our non‑U.S. subsidiaries are made in U.S. dollars. For the year ended December 31, 2016, approximately 86% of our cost of goods sold incurred by our non‑U.S. subsidiaries were denominated in U.S. dollars. Because our non‑U.S. subsidiaries incur substantially all of their cost of goods sold in currencies that are different from the currencies in which they generate substantially all of their sales, we are exposed to transaction risk attributable to fluctuations in such exchange rates, which can impact the gross profit of our non‑U.S. subsidiaries. If the U.S. dollar strengthens against the applicable local currency, more local currency will be needed to purchase the same amount of cost of goods sold denominated in U.S. dollars, which could materially adversely affect our business, financial condition and results of operations.

We have entered and expect to continue to enter into various foreign currency exchange contracts in an effort to protect against adverse changes in foreign exchange rates and attempt to minimize foreign currency transaction risk. Our hedging activities can reduce, but will not eliminate, the effects of foreign currency transaction risk on our financial results. The extent to which our hedging activities mitigate foreign currency transaction risks varies based upon many factors, including the amount of transactions being hedged. Other factors that could affect the effectiveness of our hedging activities include accuracy of sales forecasts, volatility of currency markets, the availability of hedging instruments and limitations on the duration of such hedging instruments. Since the hedging activities are designed to reduce volatility, they not only reduce the negative impact of a stronger U.S. dollar but could also reduce the positive impact of a weaker U.S. dollar. We are also exposed to credit risk from the counterparties to our hedging activities and market conditions could cause such counterparties to experience financial difficulties. As a result, our efforts to hedge these exposures could prove unsuccessful and, furthermore, our ability to engage in additional hedging activities may decrease or become more costly.

Because our consolidated accounts are reported in U.S. dollars, we are also exposed to currency translation risk when we translate the financial results of our consolidated non‑U.S. subsidiaries from their local currency into U.S. dollars. For the year ended December 31, 2016, 49% of our sales were denominated in foreign currencies. In addition, for the year ended December 31, 2016, 30% of our operating expenses were denominated in foreign currencies (which amounts represent substantially all of the operating expenses incurred by our non‑U.S. subsidiaries). Fluctuations in foreign currency exchange rates may positively or negatively affect our reported financial results and can significantly affect period‑over‑period comparisons. A strengthening of the U.S. dollar relative to our foreign currencies could materially adversely affect our business, financial condition and results of operations.  For example, our reported net sales for the 2015 fiscal year were negatively effected by a strengthening U.S. dollar in 2015.

We may not successfully manage the frequent introduction of new products that satisfy changing consumer preferences, quality and regulatory standards.

The golf equipment and golf wear industries are subject to constantly and rapidly changing consumer demands based, in large part, on performance benefits. Our golf ball and golf club products generally have launch cycles of two years, and our sales in a particular year are affected by when we launch such products. We generally introduce new product offerings and styles in our golf wear and gear businesses each year and at different times during the year. Factors driving these short product launch cycles include the rapid introduction of competitive products and consumer demands for the latest technology, style or fashion. In this marketplace, a substantial portion of our annual sales are generated each year by new products.

These marketplace conditions raise a number of issues that we must successfully manage. For example, we must properly anticipate consumer preferences and design products that meet those preferences, while also complying with significant restrictions imposed by the Rules of Golf (see further discussion of the Rules of Golf below under “—Changes to the Rules of Golf with respect to equipment could materially adversely affect our business, financial condition and results of operations”), or our new products will not achieve sufficient market success to compensate for the usual decline in sales experienced by products already in the market. Second, our R&D and supply chain groups face constant pressures to design, develop, source and supply new products—many of which incorporate new or otherwise untested technology, suppliers or inputs—that perform better than their predecessors while maintaining quality control and the authenticity of our brands. Third, for new products to generate equivalent or greater sales than their predecessors, they must either maintain the same or higher sales levels with the same or higher pricing, or exceed the performance of their predecessors in one or both of those areas. Fourth, the relatively short window of opportunity for launching and selling new products requires great precision in forecasting demand and assuring that supplies are ready and delivered during the critical selling periods. Finally, the rapid changeover in products creates a need to monitor and manage the closeout of older products both at retail and in our own inventory. Should we not successfully manage the frequent introduction of new products that satisfy consumer demand, it could adversely affect our business, financial condition and results of operations.

We rely on technical innovation and high‑quality products to compete in the market for our products.

Technical innovation and quality control in the design and manufacturing process of our products is essential to our commercial success. R&D plays a key role in technical innovation. We rely upon experts in various fields to develop and test cutting edge performance products. While we strive to produce products that help to enhance performance and maximize comfort, if we fail to introduce technical innovation in our products, consumer demand for our products could decline, and if we experience problems with the quality of our products, we may incur substantial expense to remedy the problems, any of which could materially adversely affect our business, financial condition and results of operations.

Changes to the Rules of Golf with respect to equipment could materially adversely affect our business, financial condition and results of operations.

Golf’s most regulated categories are golf balls and golf clubs. We seek to have our new golf ball and golf club products conform with the Rules of Golf published by the United States Golf Association, or the USGA, and The Royal and Ancient Golf Club of St. Andrews, or The R&A, because these rules are generally followed by golfers, both professional and amateur, within their respective jurisdictions. The USGA publishes rules that are generally followed in the United States and Mexico, and The R&A publishes rules that are generally followed in most other countries throughout the world. However, the Rules of Golf as published by The R&A and the USGA are virtually the same and

are intended to be so pursuant to a Joint Statement of Principles issued in 2001. The Rules of Golf set the guidelines and establish limitations for the design and performance of all golf balls and golf clubs.

Many new regulations on golf balls and golf clubs have been introduced in the past 10 to 15 years, which we believe was one of the most active periods for golf equipment regulation in the history of golf. The USGA and R&A have historically regulated the size, weight, and initial velocity of golf balls. More recently, the USGA and R&A have specifically focused on regulating the overall distance of a golf ball. The USGA and R&A have also focused on golf club regulations, including limiting the size and spring‑like effect of driver faces and club head moment of inertia. In the future, existing USGA and/or R&A rules may be altered in ways that adversely affect the sales of our current or future products. If a change in rules was adopted and caused one or more of our current or future products to be nonconforming, sales of such products would be impacted and we may not be able to adapt our products promptly to such rule change, which could materially adversely affect our business, financial condition and results of operations. In addition, changes in the Rules of Golf may result in an increase in the costs of materials that would need to be used to develop new products as well as an increase in the costs to design new products that conform to such rules.

Failure to adequately enforce and protect our intellectual property rights could materially adversely affect our business, financial condition and results of operations.

We own numerous patents, trademarks, trade secrets, copyrights and other intellectual property and hold licenses to intellectual property owned by others, which in the aggregate are important to our business. We rely on a combination of patent, trademark, copyright and trade secret laws in our core geographic markets and other jurisdictions, to protect the innovations, brands, proprietary trade secrets and know‑how related to certain aspects of our business. Certain of our intellectual property rights, such as patents, are time‑limited, and the technology underlying our patents can be used by any third party, including competitors, once the applicable patent terms expire.

We seek to protect our confidential proprietary information, in part, by entering into confidentiality and invention assignment agreements with our employees, consultants, contractors, suppliers and others. While these agreements are designed to protect our proprietary information, we cannot be certain that such agreements have been entered into with all relevant parties, and we cannot be certain that our trade secrets and other confidential proprietary information will not be disclosed or that competitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques. We also seek to preserve the integrity and confidentiality of our proprietary information by maintaining physical security of our premises and physical and electronic security of our information technology systems, but it is possible that these security measures could be breached. If we are unable to prevent disclosure to third parties of our material proprietary and confidential know‑how and trade secrets, our ability to establish or maintain a competitive advantage in our markets may be adversely affected.

We selectively and strategically pursue patent and trademark protection in our core geographic markets, but our strategy has been to not perfect certain patent and trademark rights in some countries. For example, we focus primarily on securing patent protection in those countries where the majority of our golf ball and golf club industry production takes place. Accordingly, we may not be able to prevent others, including competitors, from practicing our patented inventions, including by manufacturing and selling competing products, in those countries where we have not obtained patent protection. Further, the laws of some foreign countries do not protect proprietary rights to the same extent or in the same manner as the laws of the United States. As a result, we may encounter significant problems in protecting, enforcing and defending our intellectual property outside of the United States. In some foreign countries, where intellectual property laws or law enforcement practices do not protect our intellectual property rights as fully as in the United States, third‑party manufacturers may be able to manufacture and sell imitation products and diminish the value of our brands as well as infringe our rights, despite our efforts to prevent such activity.

The golf ball and golf club industries, in particular, have been characterized by widespread imitation of popular ball and club designs. We have an active program of monitoring, investigating and enforcing our proprietary rights against companies and individuals who market or manufacture counterfeits and “knockoff” products. We assert our rights against infringers of our patents, trademarks, trade dress and copyrights. However, these efforts may be expensive, time‑consuming, divert management’s attention, and ultimately may not be successful in reducing sales of golf products by these infringers. The failure to prevent or limit such infringers or imitators could adversely affect our reputation and sales. Additionally, other golf ball and golf club manufacturers may be able to produce successful golf balls or golf clubs which imitate our designs without infringing any of our patents, trademarks, trade dress or copyrights, which could limit our ability to maintain a competitive advantage in our marketplace.

If we fail to obtain enforceable patents, trademarks and trade secrets, fail to maintain our existing patent, trademark and trade secret rights, or fail to prevent substantial unauthorized use of our patents, trademarks and trade secrets, we risk the loss of our intellectual property rights and competitive advantages we have developed, which may result in lost sales. Accordingly, we devote substantial resources to the establishment and protection of our trademarks, patents and trade secrets or know‑how, and we continuously evaluate the utility of our existing intellectual property and the new registration of additional trademarks and patents, as appropriate. However, we cannot guarantee that we will have adequate resources to continue to effectively establish, maintain and enforce our intellectual property rights. We also cannot guarantee that any of our pending applications will be approved by the applicable governmental authorities. Moreover, even if the applications will be registered during the registration process, third parties may seek to oppose, limit, or otherwise challenge these applications or registrations.

We may be involved in lawsuits to protect, defend or enforce our intellectual property rights, which could be expensive, time consuming and unsuccessful.

Our success depends in part on our ability to protect our trademarks, patents and trade secrets from unauthorized use by others. To counter infringement or unauthorized use, we may be required to file infringement or misappropriation claims, which can be expensive and time‑consuming and could materially adversely affect our business, financial condition and results of operations, even if successful. Any claims that we assert against perceived infringers could also provoke these parties to assert counterclaims against us alleging that we infringe or misappropriate their intellectual property rights or that we have engaged in anti‑competitive conduct. Moreover, our involvement in litigation against third parties asserting infringement of our intellectual property rights presents some risk that our intellectual property rights could be challenged and invalidated. In addition, in an infringement proceeding, whether initiated by us or another party, a court may refuse to stop the other party in such infringement proceeding from using the technology or mark at issue on the grounds that our patents do not cover the technology in question or misuse our trade secrets or know‑how. An adverse result in any litigation or defense proceedings, including proceedings at the patent and trademark offices, could put one or more of our patents or trademarks at risk of being invalidated, held unenforceable or interpreted narrowly, and could put any of our patent or trademark applications at risk of not being issued as a registered patent or trademark, any of which could materially adversely affect our business, financial condition and results of operations.

Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential proprietary information could be compromised by disclosure during this type of litigation. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could materially adversely affect the price of our common stock.

Our products may infringe the intellectual property rights of others, which may cause us to incur unexpected costs or prevent us from selling our products.

From time to time, third parties have challenged our patents, trademark rights and branding practices, or asserted intellectual property rights that relate to our products and product features. We cannot assure you that our actions taken to establish and protect our technology and brands will be adequate to prevent others from seeking to block sales of our products or to obtain monetary damages, based on alleged violation of their patents, trademarks or other proprietary rights. We may be required to defend such claims in the future, which, whether or not meritorious, could result in substantial costs and diversion of resources and could materially adversely affect our business, financial condition and results of operations.

If we are found to infringe a third party’s intellectual property rights, we could be forced, including by court order, to cease developing, manufacturing or commercializing the infringing product. Alternatively, we may be required to obtain a license from such a third party in order to use the infringing technology and continue developing, manufacturing or marketing such technology. In such a case, license agreements may require us to pay royalties and other fees that could be significant, or we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtain a license, it could be non‑exclusive, thereby giving our competitors access to the same technologies licensed to us. A finding of infringement could prevent us from commercializing our products or force us to cease some of our business operations, or to redesign or rename some of our products to avoid future infringement liability. In addition, we could be found liable for monetary damages, including treble damages and attorneys’ fees if we are found to have willfully infringed a patent. Claims that we have misappropriated the confidential

information or trade secrets of third parties could also materially adversely affect our business, financial condition and results of operations. See also “—We may be involved in lawsuits to protect, defend or enforce our intellectual property rights, which could be expensive, time consuming and unsuccessful.” Any of the foregoing could cause us to incur significant costs and prevent us from manufacturing or selling certain of our products.

Recent changes to U.S. patent laws and proposed changes to the rules of the U.S. Patent and Trademark Office could adversely affect our ability to protect our intellectual property.

The Leahy‑Smith America Invents Act, or the Leahy‑Smith Act, which was adopted in September 2011, includes a number of significant changes to the U.S. patent laws, such as, among other things, changing from a “first to invent” to a “first inventor to file” system, establishing new procedures for challenging patents and establishing different methods for invalidating patents. The U.S. Patent and Trademark Office has recently implemented regulations relating to these changes, and the courts have yet to address many of the new provisions of the Leahy‑Smith Act. Some of these changes or potential changes may not be advantageous to us, and it may become more difficult to obtain adequate patent protection or to enforce our patents against third parties. While we cannot predict the impact of the Leahy‑Smith Act at this time, these changes or potential changes could increase the costs and uncertainties surrounding the prosecution of our patent applications and adversely affect our ability to protect our intellectual property which could materially adversely affect our business, financial condition and results of operations.

We face intense competition in each of our markets and if we are unable to maintain a competitive advantage, loss of market share, sales or profitability may result.

The markets for golf balls, clubs, gear and wear are highly competitive and there may be low barriers to entry in many of our markets. Pricing pressures, reduced profit margins or loss of market share or failure to grow in any of our markets, due to competition or otherwise, could materially adversely affect our business, financial condition and results of operations.

We compete against large‑scale global sports equipment and apparel players, Japanese industrials, as well as more specialized golf equipment and golf wear players, including Callaway, TaylorMade, Ping, Bridgestone, Nike, Adidas and Under Armour. Many of our competitors have significant competitive strengths, including long operating histories, a large and broad consumer base, established relationships with a broad set of suppliers and customers, an established regional or local presence, strong brand recognition and greater financial, R&D, marketing, distribution and other resources than we do. There are unique aspects to the competitive dynamic in each of our product categories and markets. We are not the market leader with respect to certain categories or in certain markets.

Golf Balls. The golf ball business is highly competitive. There are a number of well‑established and well‑financed competitors. We and our competitors continue to incur significant costs in the areas of R&D, advertising, marketing, tour and other promotional support to be competitive.

Golf Clubs. The golf club markets in which we compete are also highly competitive and are served by a number of well‑established and well‑financed companies with recognized brand names. New product introductions, price reductions, consignment sales, extended payment terms, “closeouts,” including closeouts of products that were recently commercially successful, and significant tour and advertising spending by competitors continue to generate intense market competition and create market disruptions. Our competitors in the golf club market have in the past and may continue to introduce their products on an accelerated cycle which could lead to market disruption and impact sales of our products.

Golf Gear. The golf gear market is fragmented and served by a number of well‑established and well‑financed competitors as well as a number of smaller competitors. We face significant competition in every region with respect to each of our golf gear product categories.

Golf Wear. In the golf wear markets, we compete with a number of well‑established and well‑financed companies with recognized brand names. These competitors may have a large and broad consumer base, established relationships with a broad set of suppliers and customers, strong brand recognition and significant financial, R&D, marketing, distribution and other resources which may exceed our own.

Our competitors may be able to create and maintain brand awareness and market share more quickly and effectively than we can. Our competitors may also be able to increase sales in new and existing markets faster than we do by emphasizing different distribution channels or through other methods, and many of our competitors have substantial resources to devote towards increasing sales. If we are unable to grow or maintain our competitive position in any of our product categories, it could materially adversely affect our business, financial condition and results of operations.

We may have limited opportunities for future growth in sales of golf balls, golf shoes and golf gloves.

We already have a significant share of worldwide sales of golf balls, golf shoes and golf gloves and the golf industry is very competitive. As such, gaining incremental market share quickly or at all may be limited given the competitive nature of the golf industry and other challenges to the golf industry. In the future, the overall dollar volume of worldwide sales of golf equipment, wear and gear may not grow or may decline which could materially adversely affect our business, financial condition and results of operations.

A severe or prolonged economic downturn could adversely affect our customers’ financial condition, their levels of business activity and their ability to pay trade obligations.

We primarily sell our products to golf equipment retailers, such as on‑course golf shops, golf specialty stores and other qualified retailers, directly and to foreign distributors. We perform ongoing credit evaluations of our customers’ financial condition and generally require no collateral from these customers. However, a severe or prolonged downturn in the general economy could adversely affect the retail golf equipment market which in turn would negatively impact the liquidity and cash flows of our customers, including the ability of such customers to obtain credit to finance purchases of our products and to pay their trade obligations. This could result in increased delinquent or uncollectible accounts for our customers as well as a decrease in orders for our products by such customers. A failure by our customers to pay on a timely basis a significant portion of outstanding accounts receivable balances or a decrease in orders from such customers could materially adversely affect our business, financial condition and results of operations.

A decrease in corporate spending on our custom logo golf balls could materially adversely affect our business, financial condition and results of operations.

Custom imprinted golf balls, a majority of which are purchased by corporate customers, represented over 30% of our global net golf ball sales for the year ended December 31, 2016. There has long been a strong connection between the business community and golf but corporate spending on custom logoed balls has remained at lower levels since the financial crisis. If such corporate spending decreases further, it could impact the sales of our custom imprinted golf balls.

We depend on retailers and distributors to market and sell our products, and our failure to maintain and further develop our sales channels could materially adversely affect our business, financial condition and results of operations.

We primarily sell our products through retailers and distributors and depend on these third parties to market and sell our products to consumers. Any changes to our current mix of retailers and distributors could adversely affect our sales and could negatively affect both our brand image and our reputation. Our sales depend, in part, on retailers adequately displaying our products, including providing attractive space and merchandise displays in their stores, and training their sales personnel to sell our products. If our retailers and distributors are not successful in selling our products, our sales would decrease. Our retailers frequently offer products and services of our competitors in their stores. In addition, our success in growing our presence in existing and expanding into new international markets will depend on our ability to establish relationships with new retailers and distributors. If we do not maintain our relationship with existing retailers and distributors or develop relationships with new retailers and distributors our ability to sell our products would be negatively impacted.

On a consolidated basis, no one customer that sells or distributes our products accounted for more than 10% of our consolidated net sales in the year ended December 31, 2016. However, our top ten customers accounted 21% of our consolidated net sales in the year ended December 31, 2016. Accordingly, the loss of a small number of our large customers, or the reduction in business with one or more of these customers, could materially adversely affect our business, financial condition and results of operations. We do not currently have minimum purchase agreements with these large customers.

On September 14, 2016, Golfsmith International Holdings LP, a specialty golf retailer and one of our largest customers in recent years announced that (i) its U.S.‑based business, Golfsmith International Holdings, Inc., or Golfsmith, which reportedly operated 109 stores in the United States at that time, commenced a Chapter 11 case under Title 11 of the United States Code in the United States Bankruptcy Court for the District of Delaware, or the Chapter 11 proceedings, and (ii) its Canada‑based business, Golf Town Canada Inc., or Golf Town, which reportedly operated 55 stores in Canada at that time, commenced creditor protection proceedings under the Companies’ Creditors Arrangement Act in the Ontario Superior Court of Justice (Commercial List).

In connection with the Chapter 11 proceedings, Golfsmith sold substantially all of its US assets to two groups of purchasers: (i) Dick’s Sporting Goods, Inc. and (ii) a joint venture consisting of Hilco Merchant Resources, LLC; Tiger Capital Group, LLC; and Gordon Brothers Retail Partners, LLC, or the Joint Venture Purchaser. Golfsmith’s U.S. sale transaction was approved by the Bankruptcy Court on or about October 31, 2016. Dick’s Sporting Goods, Inc. continues to operate fewer than 40 Golfsmith locations and the Joint Venture Purchaser has liquidated, or is liquidating, the remaining locations. Accordingly, the number of U.S. Golfsmith locations to which we formerly sold our product has been substantially reduced.

Golfsmith International Holdings LP also announced that, in addition to commencing creditor protection proceedings in Canada, it entered into a definitive asset purchase agreement for the sale of its Golf Town business to an entity controlled by a purchaser group led by Fairfax Financial Holdings Limited and certain investment funds managed by Signature Global Asset Management, a division of CI Investments Inc., which sale was approved by the Ontario Superior Court of Justice (Commercial List) on or about September 30, 2016. Forty-eight of Golf Town’s locations remain operating after the sale.

We grant credit, generally without collateral, to our retailers and distributors, formerly including Golfsmith and Golf Town. As a result of the Golfsmith and Golf Town insolvency proceedings, the receivables we had outstanding with Golfsmith International Holdings LP, which totaled $7.2 million as of the date of the bankruptcy filings, were compromised and, at least with regard to the Golfsmith U.S. bankruptcy case, more likely than not will result in no payment at all. As such, our outstanding receivable of $7.2 million at the time of the bankruptcy filing has either been written off or reserved for in full. In addition, we may be the subject of avoidance actions with respect to payments received from Golfsmith International Holdings LP within a statutory period prior to the bankruptcy petition date; however, the terms of the sale to Dick’s Sporting Goods, Inc. have made such avoidance actions, at least as they pertain to the U.S. Golfsmith proceeding, less likely. No such avoidance action has been filed to date, and may never be filed. We would vigorously defend any such avoidance actions, although the outcome of any such actions would be uncertain.

The Golfsmith bankruptcy resulted in a significant disruption to our business in the third and fourth quarters of 2016, with the reorganization activities and store closures resulting in less product sell-in to retail. In addition, we anticipate that 2017 sales will also be impacted as a result of liquidation activities still underway and lower retail sell-in resulting from the reduced store count.

We cannot predict the impact that the foregoing will have on us or the golf industry in general, and these matters may materially adversely affect our business, financial condition and results of operations, particularly during calendar year 2017.

Consolidation of retailers or concentration of retail market share among a few retailers may increase and concentrate our credit risk, put pressure on our margins and impair our ability to sell products.

The sporting goods and off‑course golf equipment retail markets in some countries, including the United States, are dominated by a few large retailers. Certain of these retailers have in the past increased their market share and may continue to do so in the future by expanding through acquisitions and construction of additional stores. Industry consolidation and correction has occurred in recent years and additional consolidation and correction is possible. These situations may result in a concentration of our credit risk with respect to our sales to such retailers, and, if any of these retailers were to experience a shortage of liquidity or other financial difficulties, or file for bankruptcy or receivership protection, it would increase the risk that their outstanding payables to us may not be paid. This consolidation may also result in larger retailers gaining increased leverage which may impact our margins. In addition, increasing market share concentration among one or a few retailers in a particular country or region increases the risk that if any one of them substantially reduces their purchases of our products, we may be unable to find a sufficient number of other retail outlets

for our products to sustain the same level of sales. Any reduction in sales by our retailers could materially adversely affect our business, financial condition and results of operations.

Our business depends on strong brands, and if we are not able to maintain and enhance our brands we may be unable to sell our products.

Our brands have worldwide recognition and our success depends on our ability to maintain and enhance our brand image and reputation. In particular, we believe that maintaining and enhancing the Titleist and FootJoy brands is critical to maintaining and expanding our customer base. Maintaining, promoting and enhancing our brands may require us to make substantial investments in areas such as product innovation, product quality, intellectual property protection, marketing and employee training, and these investments may not have the desired impact on our brand image and reputation. Our business could be adversely impacted if we fail to achieve any of these objectives or if the reputation or image of any of our brands is tarnished or receives negative publicity. In addition, adverse publicity about regulatory or legal action against us could damage our reputation and brand image, undermine consumer confidence in us and reduce long‑term demand for our products, even if the regulatory or legal action is unfounded or not material to our operations. Also, as we seek to grow our presence in existing, and expand into new, geographic or product markets, consumers in these markets may not accept our brand image and may not be willing to pay a premium to purchase our products as compared to other brands. We anticipate that as our business continues to grow our presence in existing, and expand into new, markets maintaining and enhancing our brands may become increasingly difficult and expensive. If we are unable to maintain or enhance the image of our brands, it could materially adversely affect our business, financial condition and results of operations.

Our business and results of operations are subject to seasonal fluctuations, which could result in fluctuations in our operating results and stock price.

Our business is subject to seasonal fluctuations because golf is played primarily on a seasonal basis in most of the regions where we do business. In general, during the first quarter, we begin selling our products into the golf retail channel for the new golf season. This initial sell‑in generally continues into the second quarter. Our second‑quarter sales are significantly affected by the amount of sell‑through, in particular the amount of higher value discretionary purchases made by customers, which drives the level of reorders of our products sold‑in during the first quarter. Our third‑quarter sales are generally dependent on reorder business, and are generally less than the second quarter as many retailers begin decreasing their inventory levels in anticipation of the end of the golf season. Our fourth‑quarter sales are generally less than the other quarters due to the end of the golf season in many of our key markets, but can also be affected by key product launches, particularly golf clubs. Accordingly, our results of operations are likely to fluctuate significantly from period to period. This seasonality affects sales in each of our reportable segments differently. In general, however, because of this seasonality, a majority of our sales and most of our profitability generally occurs during the first half of the year. Results of operations in any period should not be considered indicative of the results to be expected for any future period. The seasonality of our business could be exacerbated by the adverse effects of unusual or severe weather conditions as well as by severe weather conditions caused or exacerbated by climate change.

Our business and results of operations are also subject to fluctuations based on the timing of new product introductions.

Our sales can also be affected by the launch timing of new products. Product introductions generally stimulate sales as the golf retail channel takes on inventory of new products. Reorders of these new products then depend on the rate of sell‑through. Announcements of new products can often cause our customers to defer purchasing additional golf equipment until our new products are available. Our varying product introduction cycles, which are described under “Item 7. – Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Factors Affecting Our Results of Operations—Cyclicality,” may cause our results of operations to fluctuate as each product line has different volumes, prices and margins.

We have significant international operations and are exposed to risks associated with doing business globally.

We sell and distribute our products directly in many key international markets in Europe, Asia, North America and elsewhere around the world. These activities have resulted and will continue to result in investments in inventory, accounts receivable, employees, corporate infrastructure and facilities. In addition, in the United States there are a limited number of suppliers of certain raw materials and components for our products as well as finished goods that we

sell, and we have increasingly become more reliant on suppliers and vendors located outside of the United States. The operation of foreign distribution in our international markets, as well as the management of relationships with international suppliers and vendors, will continue to require the dedication of management and other resources. We also manufacture certain of our products outside of the United States, including some of our golf balls and substantially all of our golf gloves in Thailand and substantially all of our golf shoes through our joint venture in China.

The new U.S. administration has publicly supported certain potential tax and trade proposals, modifications to international trade policy and other changes which may affect U.S. trade relations with other countries. In addition, economic and political uncertainty arose out of the June 23, 2016 vote in the United Kingdom that resulted in the decision to leave the European Union.  It is possible that these or other changes, if enacted, may impact or require us to modify our current business practices. At the present time, it is unclear as to the ultimate impact of these changes, policies or proposals and, as such, we are unable to determine the effect, if any, that such changes, policies or proposals would have on our business.

As a result of the aforementioned international business, we are exposed to increased risks inherent in conducting business outside of the United States.  In addition to the uncertainty and the foreign currency risks discussed above under “—Our operations are conducted worldwide and our results of operations are subject to currency transaction risk and currency translation risk that could materially adversely affect our business, financial condition and results of operations,” these risks include:

Any violation of our policies or any applicable laws and regulations by our suppliers or manufacturers could interrupt or otherwise disrupt our sourcing, adversely affect our reputation or damage our brand image. While we do not control these suppliers or manufacturers or their labor practices, negative publicity regarding the management of facilities by, production methods of or materials used by any of our suppliers or manufacturers could adversely affect our reputation and sales and force us to locate alternative suppliers or manufacturing sources, which could materially adversely affect our business, financial condition and results of operations.

Failure to comply with laws, regulations and policies, including the FCPA or other applicable anti‑corruption legislation, could result in fines, criminal penalties and materially adversely affect our business, financial condition and results of operations.

A significant risk resulting from our global operations is compliance with a wide variety of U.S. federal and state and non‑U.S. laws, regulations and policies, including laws related to anti‑corruption, export and import compliance, anti‑trust and money laundering. The FCPA, the U.K. Bribery Act of 2010 and similar anti‑bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to government officials or other persons. There has been an increase in anti‑bribery law enforcement activity in recent years, with more frequent and aggressive investigations and enforcement proceedings by both the U.S. Department of Justice and the

SEC, increased enforcement activity by non‑U.S. regulators, and increases in criminal and civil proceedings brought against companies and individuals. We operate in parts of the world that are recognized as having governmental and commercial corruption and in certain circumstances, strict compliance with anti‑bribery laws may conflict with local customs and practices. We cannot assure you that our internal control policies and procedures have protected or will always protect us from improper conduct of our employees or business partners. To the extent that we learn that any of our employees do not adhere to our internal control policies, we are committed to taking appropriate remedial action. In the event that we believe or have reason to believe that our employees or agents have or may have violated applicable laws, including anti‑corruption laws, we may be required to investigate or have outside counsel investigate the relevant facts and circumstances, and detecting, investigating and resolving actual or alleged violations can be expensive and require significant time and attention from senior management. Any violation of U.S. federal and state and non‑U.S. laws, regulations and policies could result in substantial fines, sanctions, civil and/or criminal penalties, and curtailment of operations in the U.S. or other applicable jurisdictions. In addition, actual or alleged violations could damage our reputation and ability to do business. Any of the foregoing could materially adversely affect our business, financial condition and results of operations.

Our business, financial condition and results of operations could be materially adversely affected if professional golfers do not endorse or use our products.

We establish relationships with professional golfers in order to use, validate and promote Titleist and FootJoy branded products. We have entered into endorsement arrangements with members of the various professional tours, including the PGA Tour, the Champions Tour, the LPGA Tour, the European PGA Tour, the Japan Tour and the Korean Tour. We believe that professional usage of our products validates the performance and quality of our products and contributes to retail sales. We therefore spend a significant amount of money to secure professional usage of our products. Many other companies, however, also aggressively seek the patronage of these professionals and offer many inducements, including significant cash incentives and specially designed products. There is a great deal of competition to secure the representation of tour professionals. As a result, it is expensive to attract and retain such tour professionals and we may lose the endorsement of these individuals, even prior to the expiration of the applicable contract term. The inducements offered by other companies could result in a decrease in usage of our products by professional golfers or limit our ability to attract other tour professionals. A decline in the level of professional usage of our products, or a significant increase in the cost to attract or retain endorsers, could materially adversely affect our business, financial condition and results of operations.

The value of our brands and sales of our products could be diminished if we, the golfers who use our products or the golf industry in general are associated with negative publicity.

We sponsor a variety of golfers and feature those golfers in our advertising and marketing materials. We establish these relationships to develop, evaluate and promote our products, as well as establish product authenticity with consumers. Actions taken by golfers or tours associated with our products that harm the reputations of those golfers could also harm our brand image and impact our sales. We may also select golfers who may not perform at expected levels or who are not sufficiently marketable. If we are unable in the future to secure prominent golfers and arrange golfer endorsements of our products on terms we deem to be reasonable, we may be required to modify our marketing platform and to rely more heavily on other forms of marketing and promotion, which may not prove to be as effective or may result in additional costs.

If we inaccurately forecast demand for our products, we may manufacture insufficient quantities, which could materially adversely affect our business, financial condition and results of operations.

To reduce purchasing costs and ensure supply, we place orders with our suppliers in advance of the time period we expect to deliver our products. In addition, we plan our manufacturing capacity based upon the forecasted demand for our products. Forecasting the demand for our products is very difficult given the number of SKUs we offer and the amount of specification involved in each of our product categories. For example, in our golf shoe business, we offer a large variety of models as well as different styles and sizes for each model, including over 2,400 SKUs available for men in the United States alone. The nature of our business makes it difficult to adjust quickly our manufacturing capacity if actual demand for our products exceeds or is less than forecasted demand. Factors that could affect our ability to accurately forecast demand for our products include, among others:

If actual demand for our products exceeds the forecasted demand, we may not be able to produce sufficient quantities of new products in time to fulfill actual demand, which could limit our sales.

Any inventory levels in excess of consumer demand may result in inventory write‑downs and/or the sale of excess inventory at discounted prices.

We may experience a disruption in the service, or a significant increase in the cost, of our primary delivery and shipping services for our products and component parts or a significant disruption at shipping ports.

We use FedEx Corporation, or FedEx, for substantially all ground shipments of products to our U.S. customers. We use ocean shipping services and air carriers for most of our international shipments of products. Furthermore, many of the components we use to manufacture and assemble our products are shipped to us via ocean shipping and air carrier. If there are changes in trade or tariff laws which result in customs processing delays or any significant interruption in service by such providers or at shipping ports or airports, we may be unable to engage alternative suppliers or to receive or ship goods through alternate sites in order to deliver our products or components in a timely and cost‑efficient manner. As a result, we could experience manufacturing delays, increased manufacturing and shipping costs, and lost sales as a result of missed delivery deadlines and product introduction and demand cycles. Any significant interruption in FedEx services, ship services, at shipping ports or air carrier services could materially adversely affect our business, financial condition and results of operations. Furthermore, if the cost of delivery or shipping services were to increase significantly and the additional costs could not be covered by product pricing it could materially adversely affect our business, financial condition and results of operations.

We rely on complex information systems for management of our manufacturing, distribution, sales and other functions. If our information systems fail to perform these functions adequately or if we experience an interruption in our operations, including a breach in cybersecurity, our business, financial condition and results of operations could be materially adversely affected.

All of our major operations, including manufacturing, distribution, sales and accounting, are dependent upon our complex information systems. Our information systems are vulnerable to damage or interruption from:

Any damage or significant disruption in the operation of such systems or the failure of our information systems to perform as expected would disrupt our business, which may result in decreased sales, increased overhead costs, excess inventory or product shortages which could materially adversely affect our business, financial condition and results of operations.

Cybersecurity risks could disrupt our operations and negatively impact our reputation.

There is growing concern over the security of personal and corporate information transmitted over the Internet, consumer identity theft and user privacy due to increasingly diverse and sophisticated threats to network, systems and data security. While we have implemented security measures, our computer systems may be susceptible to electronic or physical computer break‑ins, viruses and other disruptions and security breaches. Any perceived or actual unauthorized or inadvertent disclosure of personally‑identifiable information regarding visitors to our websites or otherwise or other breach or theft of the information we control, whether through a breach of our network by an unauthorized party, employee theft, misuse or error or otherwise, could harm our reputation, impair our ability to attract website visitors, or subject us to claims or litigation and require us to repair damages suffered by consumers, and materially adversely affect our business, financial condition and results of operations.

If the technology‑based systems that give consumers the ability to shop with us online do not function effectively, our ability to grow our eCommerce business globally could be adversely affected.

We are increasingly using websites and social media to interact with consumers and as a means to enhance their experience with our products, including through Vokey.com and ScottyCameron.com. In addition, we launched our FootJoy eCommerce initiative in the first quarter of 2016. In our eCommerce services, we process, store and transmit customer data. We also collect consumer data through certain marketing activities. Failure to prevent or mitigate data loss or other security breaches, including breaches of our vendors’ technology and systems, could expose us or consumers to a risk of loss or misuse of such information, result in litigation or potential liability for us and otherwise materially adversely affect our business, financial condition and results of operations. Further, our eCommerce business is subject to general business regulations and laws, as well as regulations and laws specifically governing the Internet, eCommerce and electronic devices. Existing and future laws and regulations, or new interpretations of these laws, may adversely affect our ability to conduct our eCommerce business.

Any failure on our part to provide private, secure, attractive, effective, reliable, user‑friendly eCommerce platforms that offer a wide assortment of merchandise with rapid delivery options and that continually meet the changing expectations of online shoppers could place us at a competitive disadvantage, result in the loss of eCommerce and other sales, harm our reputation with consumers, have an adverse impact on the growth of our eCommerce business globally and could materially adversely affect our business, financial condition and results of operations.

Risks specific to our eCommerce business also include diversion of sales from our trade partners’ brick and mortar stores, difficulty in recreating the in‑store experience through direct channels and liability for online content. Our failure to successfully respond to these risks might adversely affect sales in our eCommerce business, as well as damage our reputation and brands.

Our business could be harmed by the occurrence of natural disasters or pandemic diseases.

The occurrence of a natural disaster, such as an earthquake, tsunami, fire, flood or hurricane, or the outbreak of a pandemic disease, could materially adversely affect our business, financial condition and results of operations. A natural disaster or a pandemic disease could adversely affect both the demand for our products as well as the supply of the raw materials or components used to make our products. Demand for golf products also could be negatively affected if consumers in the affected regions restrict their recreational activities and discretionary spending and as tourism to those areas declines. If our suppliers experience a significant disruption in their business as a result of a natural disaster or pandemic disease, our ability to obtain the necessary raw materials or components to make products could be materially adversely affected. In addition, the occurrence of a natural disaster or the outbreak of a pandemic disease

generally restricts travel to and from the affected areas, making it more difficult in general to manage our global operations.

Goodwill and identifiable intangible assets represent a significant portion of our total assets and any impairment of these assets could negatively impact our results of operations and shareholders’ equity.

Our goodwill and identifiable intangible assets, which consist of goodwill from acquisitions, trademarks, patents, completed technology, customer relationships, licensing fees, and other intangible assets, represented 38.5% of our total assets as of December 31, 2016.

Accounting rules require the evaluation of our goodwill and intangible assets with indefinite lives for impairment at least annually or whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. Such indicators include a significant adverse change in customer demand or business climate that could affect the value of an asset; general economic conditions, such as increasing Treasury rates or unexpected changes in gross domestic product growth; a change in our market shares; budget‑to‑actual performance and consistency of operations margins and capital expenditures; a product recall or an adverse action or assessment by a regulator; or changes in management or key personnel.

To test goodwill for impairment, we perform a two‑step test. The first step is a comparison of each reporting unit’s fair value to its carrying value. We estimate the reporting unit’s fair value by estimating the future cash flows of the reporting units to which the goodwill relates, and then discount the future cash flows at a market‑participant‑derived weighted average cost of capital. The estimates of fair value of reporting units are based on the best information available as of the date of the assessment. If the carrying value of a reporting unit exceeds its estimated fair value in the first step, a second step is performed, which requires us to allocate the fair value of the reporting unit derived in the first step to the fair value of the reporting unit’s net assets, with any fair value in excess of amounts allocated to such net assets representing the implied fair value of goodwill for that reporting unit. If the implied fair value of the goodwill is less than the book value, goodwill is impaired and is written down to the implied fair value amount.

To test our other indefinite‑lived assets for impairment, which consist of our trade names, we determine the fair value of our trade names using the relief‑from‑royalty method, which estimates the present value of royalty income that could be hypothetically earned by licensing the brand name to a third party over the remaining useful life. If in conducting an impairment evaluation we determine that the carrying value of an asset exceeded its fair value, we would be required to record a non‑cash impairment charge for the difference between the carrying value and the fair value of the asset. If a significant amount of our goodwill and identifiable intangible assets were deemed to be impaired, our business, financial condition and results of operations could be materially adversely affected.

Our current senior management team and other key employees are critical to our success and if we are unable to attract and/or retain key employees and hire qualified management, technical and manufacturing personnel, our ability to compete could be harmed.

Our ability to maintain our competitive position is dependent to a large degree on the efforts and skills of our senior management team, which averages over 20 years with us, and our other key employees. Our executives are experienced and highly qualified with strong reputations and relationships in the golf industry, and we believe that our management team enables us to pursue our strategic goals. Our other key sales, marketing, R&D, manufacturing, intellectual property protection and support personnel are also critical to the success of our business. The loss of the services of any of our senior management team or other key employees could disrupt our operations and delay the development and introduction of our products which could materially adversely affect our business, financial condition and results of operations. We do not have employment agreements with any of the members of our senior management team. In addition, we do not have “key person” life insurance policies covering any of our officers or other key employees.

Our former President of Titleist Golf Balls retired effective February 29, 2016. This role has been assumed by a new President of Titleist Golf Balls who has worked at Acushnet Company since 1987. Our former President of Titleist Golf Clubs retired effective April 30, 2016. This role has been assumed by a new President of Titleist Golf Clubs who has worked at Acushnet Company since 1993. Our former President of FootJoy retired effective December 31, 2016. This role was assumed by a new President of FootJoy beginning on August 1, 2016. See “Executive Officers of the Registrant.”

Our future success depends upon our ability to attract and retain our executive officers and other key sales, marketing, R&D, manufacturing, intellectual property protection and support personnel and any failure to do so could materially adversely affect our business, financial condition and results of operations.

Additionally, we compete with many mature and prosperous companies that have far greater financial resources than we do and thus can offer current or perspective employees more lucrative compensation packages than we can.

Sales of our products by unauthorized retailers or distributors could adversely affect our authorized distribution channels and harm our reputation.

Some of our products find their way to unauthorized outlets or distribution channels. This “gray market” for our products can undermine authorized retailers and foreign wholesale distributors who promote and support our products, and can injure the image of our company in the minds of our customers and consumers. While we have taken some lawful steps to limit commerce of our products in the “gray market” in both the United States and abroad, we have not been successful in halting such commerce.

Terrorist activities and international political instability may decrease demand for our products and disrupt our business.

Terrorist activities and armed conflicts could have an adverse effect upon the United States or worldwide economy and could cause decreased demand for our products. If such events disrupt domestic or international air, ground or sea shipments, or the operation of our suppliers or our manufacturing facilities, our ability to obtain the materials necessary to manufacture products and to deliver customer orders would be harmed, which could materially adversely affect our business, financial condition and results of operations. Such events can negatively impact tourism, which could adversely affect our sales to retailers at resorts and other vacation destinations. In addition, the occurrence of political instability and/or terrorist activities generally restricts travel to and from the affected areas, making it more difficult in general to manage our global operations.

We may not be successful in our efforts to grow our presence in existing international markets and expand into additional international markets.

We intend to grow our presence in and continue to expand into select international markets where there are the necessary and sufficient conditions in place to support such expansion. These growth and expansion plans will require significant management attention and resources and may be unsuccessful. In addition, to achieve satisfactory performance in international locations, it may be necessary to locate physical facilities, such as regional offices, in the foreign market and to hire employees who are familiar with such foreign markets while also being qualified to market our products. We may not be successful in growing our presence in or expanding into any such international markets or in generating sales from such foreign operations.

We have historically grown our business by expanding into additional international markets, but such growth does not always work out as anticipated and there is no assurance that we will be successful in the existing international markets where we are currently seeking to grow our presence, including China, or the new international markets we plan to enter. Our business, financial condition and results of operations could be materially adversely affected if we do not achieve the international growth that we are anticipating.

We are exposed to a number of different tax uncertainties, including potential changes in tax laws, unanticipated tax liabilities and limitations on utilization of tax attributes after any change of control, which could materially adversely affect our business, financial condition and results of operations.

We earn a substantial portion of our net sales in foreign countries, and are subject to the tax laws of those jurisdictions as well as U.S. tax laws. Tax laws affecting international operations are complex and current economic and political conditions make tax rules in any jurisdiction, including the U.S., subject to significant change. The new U.S. administration and leaders in Congress have indicated their desire to pursue comprehensive tax reform and there are currently various proposals for U.S. tax reform being contemplated, as well as changes to, and introductions of, new tax laws in various foreign countries in which we do business. Any of these proposals, changes or new tax laws could significantly impact how we are taxed on both U.S. and foreign earnings. Although we cannot predict whether or in what form these proposals, changes or new tax laws will pass and ultimately be enacted into law, such changes could have an

adverse impact on our income tax expense and cash flows. Transactions that we have arranged in light of current tax rules could have adverse consequences if those tax rules change, and the imposition of any new or increased tariffs, duties and taxes could materially adversely affect our business, financial condition and results of operations.

Our effective income tax rate in the future could be adversely affected by a number of factors, including changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, changes in tax laws, the outcome of income tax audits in various jurisdictions around the world and any repatriation of non‑U.S. earnings for which we have not previously provided for U.S. taxes.

Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, or the Code, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre‑change net operating loss carryforwards and other pre‑change tax attributes, such as foreign tax credits and research tax credits, to offset its post‑change income and taxes may be limited. In general, an “ownership change” generally occurs if there is a cumulative change in the Company’s ownership by “5‑percent shareholders” that exceeds 50 percentage points over a rolling three‑year period. Similar rules may apply under state tax laws. We may experience an ownership change from future transactions in our stock, some of which may be outside our control. As a result, if we earn net taxable income, our ability to use pre‑change net operating loss carryforwards or other pre‑change tax attributes to offset U.S. federal and state taxable income and taxes may be subject to limitations.

We are engaged in a number of intercompany transactions across multiple tax jurisdictions. Although we believe that these transactions reflect the accurate economic allocation of profit and that the proper transfer pricing documentation is in place, the profit allocation and transfer pricing terms and conditions may be scrutinized by local tax authorities during an audit and any resulting changes may impact our mix of earnings in countries with differing statutory tax rates.

We are also subject to the audit or examination of our tax returns by the Internal Revenue Service and other tax authorities whereby tax authorities could impose additional tariffs, duties, taxes, penalties and interest on us. The determination of our worldwide provision for income taxes and other tax liabilities requires significant judgment, and there are many transactions and calculations where the ultimate tax determination is uncertain. Although we believe our estimates are reasonable and our tax provisions are adequate, the final determination of tax audits and any related disputes could be materially different from our historical income tax provisions and accruals. The results of audits or related disputes could have an adverse effect on our financial statements and our financial results for the period or periods for which the applicable final determinations are made.

Portions of our operations are subject to a reduced tax rate or are free of tax under various tax holidays and rulings that expire in whole or in part from time to time. These tax holidays and rulings may be extended when certain conditions are met, or terminated if certain conditions are not met. If the tax holidays and rulings are not extended, or if we fail to satisfy the conditions of the reduced tax rate, then our effective tax rate would increase in the future.

Changes to the overall international tax environment, as well as changes to some of the tax laws of the foreign jurisdictions in which we operate, are expected as a result of the Base Erosion and Profit Shifting project, or BEPS, being undertaken by the Organisation for Economic Co‑operation and Development, or OECD. The OECD, which represents a coalition of member countries that encompass many of the jurisdictions in which we operate, has promulgated recommended changes to numerous long standing international tax principles through its BEPS project. It is expected that jurisdictions in which we do business will react to the BEPS initiative by enacting tax legislation, and our business could be materially impacted. It is also expected that our existing transfer pricing arrangements need to be reviewed and possibly adjusted to reflect the principles enumerated in the BEPS project.

Our insurance policies may not provide adequate levels of coverage against all claims and we may incur losses that are not covered by our insurance.

We maintain insurance of the type and in amounts that we believe is commercially reasonable and that is available to businesses in our industry. We carry various types of insurance, including general liability, auto liability, workers’ compensation and excess umbrella, from highly rated insurance carriers on all of our properties. We believe that the policy specifications and insured limits are adequate for foreseeable losses with terms and conditions that are reasonable and customary for similar businesses and are within industry standards. Nevertheless, market forces beyond our control could limit the scope of the insurance coverage that we can obtain in the future or restrict our ability to buy

insurance coverage at reasonable rates. We cannot predict the level of the premiums that we may be required to pay for subsequent insurance coverage, the level of any deductible and/or self‑insurance retention applicable thereto, the level of aggregate coverage available or the availability of coverage for specific risks.

In the event of a substantial loss, the insurance coverage that we carry may not be sufficient to compensate us for the losses we incur or any costs we are responsible for. In addition, there are types of losses we may incur that cannot be insured against or that we believe are not commercially reasonable to insure. For example, we maintain business interruption insurance, but there can be no assurance that the coverage for a severe or prolonged business interruption would be adequate and the deductibles for such insurance may be high. These losses, if they occur, could materially adversely affect our business, financial condition and results of operations.

We are subject to product liability, warranty and recall claims, and our insurance coverage may not cover such claims.

Our products expose us to warranty claims and product liability claims in the event that products manufactured, sold or designed by us actually or allegedly fail to perform as expected, or the use of those products results, or is alleged to result, in personal injury, death or property damage. Further, we or one or more of our suppliers might not adhere to product safety requirements or quality control standards, and products may be shipped to retail partners before the issue is identified. In the event that this occurs, we may have to recall our products to address performance, compliance, or other safety related issues. The financial costs we may incur in connection with these recalls typically would include the cost of the product being replaced or repaired and associated labor and administrative costs and, if applicable, governmental fines and/or penalties.

Product recalls can harm our reputation and cause us to lose customers, particularly if those recalls cause consumers to question the performance, quality, safety or reliability of our products. Substantial costs incurred or lost sales caused by future product recalls could materially adversely affect our business, financial condition and results of operations. Conversely, not issuing a recall or not issuing a recall on a timely basis can harm our reputation and cause us to lose customers for the same reasons as expressed above. Product recalls, withdrawals, repairs or replacements may also increase the amount of competition that we face.

We vigorously defend or attempt to settle all product liability cases brought against us. However, there is no assurance that we can successfully defend or settle all such cases. We believe that we are not currently subject to any material product liability claims not covered by insurance or vendor indemnity, although the ultimate outcome of these and future claims cannot presently be determined. Because product liability claims are part of the ordinary course of our business, we maintain product liability insurance which we currently believe is adequate. Our insurance policies provide coverage against claims resulting from alleged injuries arising from our products sustained during the respective policy periods, subject to policy terms and conditions. We believe the insurance will be renewed on substantially similar terms upon its expiry but there can be no assurance that this coverage will be renewed or otherwise remain available in the future, that our insurers will be financially viable when payment of a claim is required, that the cost of such insurance will not increase, or that this insurance will ultimately prove to be adequate under our various policies. Furthermore, future rate increases might make insurance uneconomical for us to maintain. These potential insurance problems or any adverse outcome in any liability suit could create increased expenses which could harm our business. We are unable to predict the nature of product liability claims that may be made against us in the future with respect to injuries, diseases or other illnesses resulting from the use of our products or the materials incorporated in our products.

With regard to warranty claims, our actual product warranty obligations could materially differ from historical rates which would oblige us to revise our estimated warranty liability accordingly. Adverse determinations of material product liability and warranty claims made against us could materially adversely affect our business, financial condition and results of operations and could harm the reputation of our brands.

We may be subject to litigation and other regulatory proceedings which may result in the expense of time and resources and could materially adversely affect our business, financial condition and results of operations.

We may be involved in lawsuits and regulatory actions relating to our business, including those relating to intellectual property, antitrust, commercial and employment matters. Due to the inherent uncertainties of litigation and regulatory proceedings, we cannot accurately predict the likelihood of such lawsuits or regulatory proceedings occurring or the ultimate outcome of any such proceedings. An unfavorable outcome could materially adversely affect our

business, financial condition and results of operations. In addition, any such proceeding, regardless of its merits, could divert management’s attention from our operations and result in substantial legal fees.

We are subject to environmental, health and safety laws and regulations, which could subject us to liabilities, increase our costs or restrict our operations in the future.

Our properties and operations are subject to a number of environmental, health and safety laws and regulations in each of the jurisdictions in which we operate. These laws and regulations govern, among other things, air emissions, water discharges, handling and disposal of solid and hazardous substances and wastes, soil and groundwater contamination and employee health and safety. Our failure to comply with such environmental, health and safety laws and regulations could result in substantial civil or criminal fines or penalties or enforcement actions, including regulatory or judicial orders enjoining or curtailing operations or requiring remedial or corrective measures, installation of pollution control equipment or other actions.

We may also be subject to liability for environmental investigations and cleanups, including at properties that we currently or previously owned or operated, even if such contamination was not caused by us, and we may face claims alleging harm to health or property or natural resource damages arising out of contamination or exposure to hazardous substances. We may also be subject to similar liabilities and claims in connection with locations at which hazardous substances or wastes we have generated have been stored, treated, otherwise managed, or disposed.

We use certain substances and generate certain wastes that may be deemed hazardous or toxic under environmental laws, and we from time to time have incurred, and in the future may incur, costs related to cleaning up contamination resulting from historic uses of certain of our current or former properties or our treatment, storage or disposal of wastes at facilities owned by others. The costs of investigation, remediation or removal of such materials may be substantial, and the presence of those substances, or the failure to remediate a property properly, may impair our ability to use, transfer or obtain financing regarding our property. Liability in many situations may be imposed not only without regard to fault, but may also be joint and several, so that we may be held responsible for more than our share of the contamination or other damages, or even for the entire amount.

Environmental conditions at or related to our current or former properties or operations, and/or the costs of complying with current or future environmental, health and safety requirements (which have become more stringent and complex over time) could materially adversely affect our business, financial condition and results of operations.

We may require additional capital in the future and we cannot give any assurance that such capital will be available at all or available on terms acceptable to us and, if it is available, additional capital raised by us may dilute holders of our common stock.

We may need to raise additional funds through public or private debt or equity financings in order to:

Any additional capital raised through the sale of equity or securities convertible into equity will dilute the percentage ownership of holders of our common stock. Capital raised through debt financing would require us to make periodic interest payments and may impose restrictive covenants on the conduct of our business. Furthermore, additional financings may not be available on terms favorable to us, or at all, especially during periods of adverse economic conditions, which could make it more difficult or impossible for us to obtain funding for the operation of our business, for making additional investments in product development and for repaying outstanding indebtedness. Our failure to obtain additional funding could prevent us from making expenditures that may be required to grow our business or maintain our operations.

If our estimates or judgments relating to our critical accounting policies prove to be incorrect, our financial condition and results of operations could be adversely affected.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as discussed under “Item 7. – Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included elsewhere in this report and in our consolidated financial statements included herein. The results of these estimates form the basis for making judgments about the carrying values of assets, liabilities and equity, and the amount of revenue and expenses that are not readily apparent from other sources. Significant assumptions and estimates used in preparing our consolidated financial statements include those related to revenue recognition, allowance for doubtful accounts, inventory reserves, impairment of goodwill, indefinite‑lived and long‑lived assets, pension and other post‑retirement benefits, product warranty, valuation allowances for deferred tax assets, valuation of common stock warrants, and share‑based compensation. Our financial condition and results of operations may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our results of operations to fall below the expectations of securities analysts and investors, resulting in a decline in the price of our common stock.

Risks Related to Our Indebtedness

Our substantial leverage could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or in our industry, expose us to interest rate risk to the extent of our variable rate debt, and prevent us from meeting our obligations under our indebtedness.

As of December 31, 2016, we had $412.8 million of indebtedness. In addition, as of December 31, 2016, we had $224.9 million of availability under our revolving credit facility after giving effect to $7.6 million of outstanding letters of credit and we had $60.2 million available under our local credit facilities. During the first quarter of 2017, we borrowed under our delayed draw term loan A facility and under our revolving credit facility to make payments in connection with the final payout of the outstanding EARs under the EAR Plan. Our high degree of leverage could have important consequences for us, including:

Our total interest expense, net was $49.9 million, $60.3 million and $63.5 million for the years ended December 31, 2016 and 2015 and 2014, respectively. Substantially all of our indebtedness is floating rate debt therefore our interest expense would increase along with rising interest rates.

Servicing our indebtedness will require a significant amount of cash. Our ability to generate sufficient cash depends on many factors, some of which are not within our control.

Our ability to make payments on our indebtedness and to fund planned capital expenditures will depend on our ability to generate cash in the future. To a certain extent, this is subject to general economic, financial, competitive, legislative, regulatory, and other factors that are beyond our control. If we are unable to generate sufficient cash flows to service our debt and meet our other commitments, we may need to restructure or refinance all or a portion of our debt, sell material assets or operations, or raise additional debt or equity capital. We may not be able to affect any of these actions on a timely basis, on commercially reasonable terms, or at all, and these actions may not be sufficient to meet our capital requirements. In addition, any refinancing of our indebtedness could be at a higher interest rate, and the terms of our existing or future debt arrangements may restrict us from affecting any of these alternatives. Our failure to make the required interest and principal payments on our indebtedness would result in an event of default under the agreement governing such indebtedness, which may result in the acceleration of some or all of our outstanding indebtedness.

Despite our high indebtedness level, we and our subsidiaries will still be able to incur significant additional amounts of debt, which could further exacerbate the risks associated with our substantial indebtedness.

We and our subsidiaries may be able to incur substantial additional indebtedness in the future. Although the agreements governing our indebtedness contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of significant qualifications and exceptions and, under certain circumstances, the amount of indebtedness that could be incurred in compliance with these restrictions could be substantial.

Our credit agreements contain restrictions that limit our flexibility in operating our business.

The agreements governing our outstanding indebtedness contain various covenants that limit our ability to engage in specified types of transactions. These covenants limit the ability of our subsidiaries to, among other things:

The covenants contained in the credit agreement governing our senior secured credit facilities (which we refer to in this report as “our credit agreement”) also restrict the ability of Acushnet Holdings Corp. to engage in certain

mergers or consolidations or engage in any activities other than permitted activities. A breach of any of these covenants, among others, could result in a default under one or more of these agreements, including as a result of cross default provisions, and, in the case of our secured credit facility, following any applicable cure period, would permit the lenders thereunder to, among other things, declare the principal, accrued interest and other obligations thereunder to be immediately due and payable and declare the commitment of each lender thereunder to make loans and issue letters of credit to be terminated.

We may utilize derivative financial instruments to reduce our exposure to market risks from changes in interest rates on our variable rate indebtedness and we will be exposed to risks related to counterparty credit worthiness or non‑performance of these instruments.

We may enter into pay‑fixed interest rate swaps to limit our exposure to changes in variable interest rates. Such instruments may result in economic losses should interest rates decline to a point lower than our fixed rate commitments. We will be exposed to credit‑related losses, which could impact the results of operations in the event of fluctuations in the fair value of the interest rate swaps due to a change in the credit worthiness or non‑performance by the counterparties to the interest rate swaps.

Risks Related to the Magnus Term Loan

Fila KoreaCo., Ltd. (“Fila Korea”) and its wholly-owned subsidiary, Magnus Holdings Co., Ltd. (“Magnus”) have obligations under the Magnus Term Loan, and Fila Korea and/or Magnus may have obligations under any equity or debt used to refinance the Magnus Term Loan, that may be satisfied by a sale, foreclosure, liquidation or other transfer of our common stock, which could materially decrease the market value of our common stock and may result in a change of control of our company.

On October 28, 2016, Magnus purchased 14,818,720 shares of our common stock from certain other pre-IPO shareholders, which purchase was financed by Magnus entering into a term loan (the “Magnus Term Loan”) with certain Korean financial institutions (the “Magnus Lenders”) for Korean Won 309.1 billion (equivalent to approximately $256.9 million, using the exchange rate of $1.00 = Korean Won 1,203.08 as of December 31, 2016). Shares of our common stock are the only assets owned by Magnus. Unless refinanced on or prior to maturity, the Magnus Term Loan will mature on October 28, 2017. There are currently no arrangements or agreements in place with respect to any potential financing that may be necessary in connection with the payment of amounts due on the Magnus Term Loan at maturity. The Magnus Term Loan is secured by a pledge on all of our common stock owned by Magnus, except for 5% of our outstanding common stock owned by Magnus that is subject to a negative pledge under Fila Korea’s credit facility, which equals 48.1% of our outstanding common stock. Following the repayment of the Magnus Term Loan, Magnus may pledge all or a portion of our common stock that Magnus owns to secure any debt incurred in connection with the refinancing of the Magnus Term Loan or otherwise. If Fila Korea or Magnus are unable to raise the funds to pay the amounts due on the Magnus Term Loan at maturity (or an earlier date if subject to acceleration) on acceptable terms or at all, or if Fila Korea or Magnus are unable to meet their obligations under any debt used to refinance the Magnus Term Loan, the Magnus Lenders, or lenders of such debt, can foreclose on the pledged shares of our common stock.

In addition, it is expected that a portion of the interest payments on the Magnus Term Loan, and potential future dividend or interest obligations under any equity or debt used to refinance the Magnus Term Loan, will be funded using proceeds from dividends, if any, received on our common stock. See “Item 5. – Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities – Dividend Policy.” There can be no assurance that we will be able to make such dividend payments on our common stock. See “Item 1A. – Risk Factors – Risks Related to Ownership of Our Common Stock—We cannot assure you that we will pay dividends on our common stock, and our indebtedness and other factors could limit our ability to pay dividends on our common stock.” There can be no assurance that Magnus will be able to make the interest payments on the Magnus Term Loan, or any potential future dividend or interest obligations under any equity or debt used to refinance the Magnus Term Loan. If Magnus is unable to pay interest on the Magnus Term Loan on an interest payment date, the principal and accrued interest on the Magnus Term Loan becomes automatically due and payable. At maturity (or an earlier date if subject to acceleration), Magnus will be required to raise additional funds to pay the additional amounts of interest incurred, which it may be unable to do. There may be similar obligations under any financing used to refinance the Magnus Term Loan.

If Fila Korea or Magnus are unable to raise the funds necessary to pay the amount owed on the Magnus Term Loan at maturity (or an earlier date if subject to acceleration) and the Magnus Lenders foreclose on the pledged shares of

our common stock pursuant to the terms of the Magnus Term Loan, any such foreclosure may be undertaken in accordance with Korean law and may result, under certain circumstances, in the sale or other transfer of 48.1% of our common stock, which equals all of the shares pledged by Magnus to the Magnus Lenders. See “—The creditor and insolvency laws of Korea are different from U.S. laws and the outcome of any foreclosure, liquidation, bankruptcy or other restructuring proceeding may be unpredictable.” Any such sale could have a significant impact on our shareholding structure and our corporate governance and could materially decrease the market price of shares of our common stock. In addition, the perception that such a sale could occur could materially depress the market price of shares of our common stock. See “Item 1A. – Risk Factors – Risks Related to Ownership of Our Common Stock—Future sales, or the perception of future sales, by us or our existing shareholders in the public market could cause the market price for our common stock to decline.” Any such sale would be subject to certain lock‑up restrictions. There may be similar obligations under any financing used to refinance the Magnus Term Loan and failure to satisfy such obligations could result in the same consequences as discussed above.

In addition, prior to any foreclosure, Fila Korea may decide to sell or otherwise transfer all, or a significant portion, of our common stock owned by Magnus in order to meet the obligations of Magnus under the Magnus Term Loan or any future financing. Any such sale, or the perception that such a sale could occur, could have a significant impact on our shareholding structure and our corporate governance and could materially decrease the market price of shares of our common stock. In connection with our initial public offering, we entered into a registration rights agreement with Magnus and the Financial Investors. The Magnus Lenders will assume Magnus’ rights under the registration rights agreement in the event of a foreclosure or other transfer of the pledged shares of our common stock pursuant to the Magnus Term Loan.

Any of the potential sales, foreclosures, liquidations or other transfers of our common stock discussed above may result in a change of control under certain outstanding agreements, including as a result of the acquisition of a significant portion of our common stock by any individual, entity or group, which could result in a default under such agreements. Under the credit agreement, it is a change of control if any person (other than certain permitted parties, including Fila) becomes the beneficial owner of 35% or more of our outstanding common stock. In the event of a foreclosure on the pledged shares of our common stock under the Magnus Term Loan, if, in the reasonable opinion of the Magnus Lenders, foreclosure of 35% of our outstanding common stock less one share of our common stock, or the Foreclosure Threshold Amount, will be sufficient to fully satisfy the principal and interest of the Magnus Loan, only the Foreclosure Threshold Amount will be permitted for such foreclosure. If the Foreclosure Threshold Amount is insufficient to fully satisfy the principal and interest of the Magnus Loan, there will be no limitation on the amount of our pledged shares of common stock that may be foreclosed. As a result, if the Magnus Lenders or a third party were to acquire beneficial ownership of 35% or more of our outstanding common stock pursuant to an event of default under the Magnus Term Loan, it would result in a change of control under the credit agreement, which is an event of default that could result in the acceleration of all outstanding indebtedness and the termination of all commitments under the credit agreement and would allow the lenders under the credit agreement to enforce their rights with respect to the collateral granted by us, including the stock of our subsidiary, Acushnet Company. Upon the exercise of such rights, it is uncertain whether we and our subsidiary, Acushnet Company, would be able to refinance the indebtedness and replace the commitments under the credit agreement on comparable terms or at all. If we are unable to refinance the credit agreement, we may need to dispose of assets or operations or issue equity to obtain necessary funds to repay the outstanding indebtedness under the credit agreement. The resulting impairment of our liquidity position could also materially depress our stock price. In addition, a change of control under our outstanding equity award agreements and other employment arrangements may result in the vesting of outstanding equity awards and the acceleration of benefits or other payments under certain employment arrangements. A change of control may also result in a default or other negative consequence under our other outstanding agreements or instruments. See “Item 7. – Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources— Indebtedness.”

Magnus’ ability to pay the amount owed on, or to refinance, the Magnus Term Loan prior to maturity may be affected by general economic, financial, competitive, legislative, regulatory, business and other factors beyond its control. We cannot assure you that future borrowings or equity financing will be available for the payment or refinancing of the Magnus Term Loan by Magnus. If Magnus is unable to pay the amount owed on, or to refinance, the Magnus Term Loan prior to maturity, it could have a material adverse effect on our business, financial condition, results of operations and the market price of our common stock. In addition, any inability by Magnus to take affirmative steps to refinance the Magnus Term Loan as the maturity date nears could also have a material adverse effect on our business, financial condition, results of operations and the market price of our common stock.

Magnus, which is wholly‑owned by Fila Korea, owns a majority of the equity interests in us, and the interests of the Magnus Lenders, may conflict with yours in the future.

Magnus, which is wholly‑owned by Fila Korea, beneficially owns approximately 53.1% of our common stock. Fila Korea will be able to control the election and removal of our directors and thereby determine, among other things, the payment of dividends, our corporate and management policies, including potential mergers or acquisitions or asset sales, amendment of our amended and restated certificate of incorporation or amended and restated bylaws, and other significant corporate transactions for so long as Magnus retains significant ownership of us. So long as Magnus continues to own a significant amount of our voting power, even if such amount is less than 50%, Fila Korea will continue to be able to strongly influence or effectively control our decisions. The interests of Fila Korea may not coincide with the interests of other holders of our common stock.

By controlling the election and removal of our directors, Fila Korea will also be able to determine the payment of dividends on our common stock. In light of its interest obligations under the Magnus Term Loan, and potential future dividend or interest obligations under any equity or debt used to refinance the Magnus Term Loan, Magnus may cause us to pay dividends on our common stock at times or in amounts that may not be in the best interest of us or other holders of our common stock. See “Item 1A. – Risk Factors – Risks Related to Ownership of our Common Stock—We cannot assure you that we will pay dividends on our common stock, and our indebtedness and other factors could limit our ability to pay dividends on our common stock.”

In the ordinary course of its business activities, Fila Korea and its affiliates may engage in activities where their interests conflict with our interests or those of our shareholders. Except as may be limited by applicable law, Fila Korea and its affiliates will not have any duty to refrain from competing directly with us or engaging, directly or indirectly, in the same business activities or similar business activities or lines of business in which we operate. Fila Korea and its affiliates also may pursue acquisition opportunities that may be complementary to our business and, as a result, those acquisition opportunities may not be available to us. In addition, Fila Korea and its affiliates may have an interest in us pursuing acquisitions, divestitures and other transactions that, in its judgment, could enhance its investment, even though such transactions might involve risks to you.

In addition, the concentration of our ownership held by Magnus may delay, deter or prevent possible changes in control of the company or a change in the composition of our board of directors and could preclude any unsolicited acquisition of us, which may reduce the value of an investment in our common stock.

Furthermore, the Magnus Lenders, as lenders under the Magnus Term Loan, and any potential future lenders of debt used to refinance the Magnus Term Loan, may also become direct owners of our common stock as a result of their exercise of remedies or otherwise. The interests of the Magnus Lenders, or such potential future lenders, may not coincide with the interests of other holders of our common stock.

We and our board of directors will have no power to direct or influence the affairs of Magnus. In particular, we will have no power with respect to the disposition of shares of our common stock by Fila Korea, Magnus or the Magnus Lenders (whether in connection with any exercise of remedies by the Magnus Lenders or otherwise).

Fila Korea has pledged the common stock of Magnus to the lenders under its credit facility. In addition, Fila Korea may pledge or borrow against additional shares of the common stock of Magnus. It is also possible that our other shareholders may in the future pledge shares of our common stock.

In the past, in order to fund the operations of or otherwise provide financing for its own business, Fila Korea and its affiliates pledged all of its interest in our common stock. Currently, Fila Korea has granted a security interest in 14.4% of the common stock of Magnus to the lenders under its credit facility. The shares of our common stock owned by Magnus are Magnus’ only assets. If Fila Korea defaults under its credit facility and the lenders foreclose on the pledged shares of Magnus common stock, they may seek to sell the pledged shares of Magnus common stock, or seek to acquire and to sell a portion of our common stock owned by Magnus. Any such sale, or the perception that such a sale could occur, could alter the voting power of Magnus directly and of us indirectly, and/or decrease the market price of shares of our common stock. The interests of the secured parties who exercise foreclosure may differ from those of other holders of our common stock.

In addition, it is possible that Fila Korea may in the future pledge additional shares of the common stock of Magnus, whether to help raise the proceeds necessary to pay amounts due on the Magnus Term Loan at maturity (or an earlier date if subject to acceleration) or for other purposes. Any such additional pledge could exacerbate the risks discussed above.

Certain of our other pre-IPO shareholders have in the past pledged, hypothecated or granted security interests in shares of our common stock that are issuable thereunder, as collateral for foreign currency hedges. Although these security interests were released prior to the closing of our initial public offering, it is possible that our pre-IPO shareholders may in the future pledge shares of our common stock. Any such pledge may relate to a significant amount of our common stock and if the secured party forecloses on such pledged shares, they may seek to sell the pledged shares. Any such sale, or the perception that such a sale could occur, could decrease the market price of shares of our common stock.

The creditor and insolvency laws of Korea are different from U.S. bankruptcy laws and the outcome of any foreclosure, liquidation, bankruptcy or other restructuring proceeding may be unpredictable.

Fila Korea and Magnus are organized under the laws of Korea. The creditor, bankruptcy, insolvency and other relevant laws of Korea are materially different from those of the United States. Any foreclosure, liquidation, bankruptcy or other restructuring proceeding involving Fila Korea or Magnus may be unpredictable and would not involve the same timing or procedures, and may not result in the same outcome, as a proceeding under U.S. law.

We are a “controlled company” within the meaning of the rules of the NYSE. As a result, we will qualify for exemptions from certain corporate governance requirements that would otherwise provide protection to shareholders of other companies.

Under the corporate governance standards of the NYSE rules, a company of which more than 50% of the voting power is held by an individual, group, or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements, including:

Magnus, which is wholly‑owned by Fila Korea, controls 39,345,151 shares, or approximately 52.8%, of our common stock. As a result, we qualify as a “controlled company” within the meaning of the corporate governance standards of the NYSE. Although we do not currently avail ourselves of exemptions available to controlled companies and do not currently expect to avail ourselves of these exemptions, we may utilize one or more of these exemptions in the future. As a result, we may not have a majority of independent directors, our nominating/corporate governance committee and compensation committee may not consist entirely of independent directors, and such committees will not be subject to annual performance evaluations. Accordingly, you may not have the same protections afforded to shareholders of companies that are subject to all of the corporate governance requirements of the NYSE.

In addition, the NYSE adopted listing standards, which were approved by the SEC in 2013, that impose additional requirements pertaining to compensation committee independence and the role and disclosure of compensation consultants and other advisers to the compensation committee that require, among other things, that:

Although we do not currently avail ourselves of the exemptions from these compensation committee requirements or intend to do so, as a “controlled company,” we are not subject to these compensation committee independence requirements.

Risks Related to Ownership of Our Common Stock

We have incurred and will continue to incur increased costs as a result of operating as a public company, and our management is required to devote substantial time to new compliance matters, which could lower our profits or make it more difficult to run our business.

As a newly public company, we have and will continue to incur significant legal, accounting and other expenses that we have not incurred as a private company, including costs associated with public company reporting requirements and costs of recruiting and retaining non‑executive directors. We also have incurred and will incur costs associated with the Sarbanes‑Oxley Act and related rules implemented by the SEC and the NYSE. The expenses incurred by public companies generally for reporting and corporate governance purposes have been increasing. We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities more time‑consuming and costly, although we are currently unable to estimate these costs with any degree of certainty. Our management will need to devote a substantial amount of time to ensure that we comply with all of these requirements. These laws and regulations also could make it more difficult or costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. These laws and regulations could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as our executive officers. Furthermore, if we are unable to satisfy our obligations as a public company, we could be subject to delisting of our common stock, fines, sanctions and other regulatory action and potentially civil litigation.

The market price of shares of our common stock may be volatile, which could cause the value of your investment to decline.

The market price of our common stock may be highly volatile and could be subject to wide fluctuations. Securities markets worldwide experience significant price and volume fluctuations. This market volatility, as well as general economic, market or political conditions, could reduce the market price of shares of our common stock in spite of our operating performance. In addition, our results of operations could be below the expectations of public market analysts and investors due to a number of potential factors, including variations in our quarterly results of operations, additions or departures of key management personnel, failure to meet analysts’ earnings estimates, publication of research reports about our industry, litigation and government investigations, changes or proposed changes in laws or regulations or differing interpretations or enforcement thereof affecting our business or the golf industry, adverse market reaction to any indebtedness we may incur or securities we may issue in the future, changes in market valuations of similar companies or speculation in the press or investment community, announcements by our competitors of significant contracts, acquisitions, dispositions, strategic partnerships, joint ventures or capital commitments, adverse publicity about our industry in or individual scandals, and in response the market price of shares of our common stock could decrease significantly.

In the past few years, stock markets have experienced significant price and volume fluctuations. In the past, following periods of volatility in the overall market and the market price of a company’s securities, securities class action litigation has often been instituted against these companies. This litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources.

We have identified material weaknesses in our internal control over financial reporting, and if we are unable to maintain effective internal controls, we may not be able to produce timely and accurate financial statements, which could have a material adverse effect on our business and stock price.

In connection with the audit of our consolidated financial statements for the years ended December 31, 2016, 2015 and 2014, we and our independent registered public accounting firm identified material weaknesses in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim consolidated financial statements will not be prevented or detected on a timely basis. We did not have in place an effective control environment with a sufficient number of accounting personnel with the appropriate technical training in, and experience with, GAAP to allow for a detailed review of complex accounting transactions that would identify errors in a timely manner. Further, we did not design effective control activities relating to formally documented and implemented accounting processes and procedures across business cycles, including income taxes, derivatives, certain compensation and benefits, certain revenue transactions, and functional currency, and internal communication protocols related to matters impacting income tax and benefit accounts. We also did not maintain effective segregation of duties in our internal controls over financial reporting. The lack of adequate accounting personnel and formal processes and procedures resulted in several audit adjustments to our consolidated financial statements for the years ended December 31, 2016, 2015 and 2014 and the interim periods in 2016.

We are currently in the process of remediating these material weaknesses and are taking steps that we believe will address the underlying causes of the material weaknesses. We have enlisted the help of external advisors to provide assistance in the areas of financial accounting and tax accounting in the short term, and are evaluating the longer term resource needs of our various financial functions. In addition, we have engaged an accounting firm to evaluate and document the design and operating effectiveness of our internal controls and assist with the remediation and implementation of our internal controls as required. These remediation measures may be time consuming, costly, and might place significant demands on our financial and operational resources.

In addition, we have begun performing system and process evaluations and testing of our internal control over financial reporting to allow management and our independent registered public accounting firm to report on the effectiveness of our internal control over financial reporting, as required by Section 404 of the Sarbanes‑Oxley Act, with auditor attestation of the effectiveness of our internal controls, beginning with our annual report on Form 10‑K for the year ended December 31, 2017. Our testing, or the subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal controls over financial reporting that are deemed to be additional material weaknesses, in addition to the material weaknesses described above. Each of the material weaknesses described above or any newly identified material weakness could result in a misstatement of our consolidated financial statements or disclosures that would result in a material misstatement of our annual or quarterly consolidated financial statements that would not be prevented or detected.

If (i) we fail to effectively remediate deficiencies in internal control over financial reporting, (ii) we identify additional material weaknesses in our internal control over financial reporting, (iii) we are unable to comply with the requirements of Section 404 in a timely manner or assert that our internal control over financial reporting is effective, or (iv) our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting or expresses an opinion that is qualified or adverse, investors may lose confidence in the accuracy and completeness of our financial statements which could cause the market price of our common stock to decline, and we could become subject to sanctions or investigations by the stock exchange upon which our common stock is listed, the SEC or other regulatory authorities, and we could be delayed in delivering financial statements, which could result in a default under the agreements governing our indebtedness.

We cannot assure you that we will pay dividends on our common stock, and our indebtedness and other factors could limit our ability to pay dividends on our common stock.

We intend to pay cash dividends on our common stock, subject to the discretion of our board of directors and our compliance with applicable law, and depending on, among other things, our results of operations, capital requirements, financial condition, contractual restrictions, restrictions in our debt agreements and in any equity securities, business prospects and other factors that our board of directors may deem relevant. Because we are a holding company and have no direct operations, we expect to pay dividends, if any, only from funds we receive from our subsidiaries, which may further restrict our ability to pay dividends as a result of the laws of their jurisdiction of

organization, agreements of our subsidiaries or covenants under any existing and future outstanding indebtedness we or our subsidiaries incur. Certain of our existing agreements governing indebtedness, including our credit agreement, restrict our ability to pay dividends on our common stock. We expect that any future agreements governing indebtedness will contain similar restrictions. For more information, see “Item 5. – Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities – Dividend Policy.”

Our dividend policy entails certain risks and limitations, particularly with respect to our liquidity. By paying cash dividends rather than investing that cash in our business or repaying debt, we risk, among other things, slowing the pace of our growth and having insufficient cash to fund our operations or unanticipated capital expenditures or limiting our ability to incur additional borrowings.

Although we expect to pay dividends according to our dividend policy, we may not pay dividends according to our policy, or at all, if, among other things, we do not have the cash necessary to pay our intended dividends.

The declaration and payment of dividends will be determined at the discretion of our board of directors, acting in compliance with applicable law and contractual restrictions. However, our board of directors is determined by Magnus, which is wholly‑owned by Fila Korea, which controls a majority of the voting power of all outstanding shares of our common stock. Accordingly, the decision to declare and pay dividends on our common stock in the future, as well as the amount of each such dividend payment, may also depend on the amounts Magnus needs to fund the interest payments on the Magnus Term Loan, other amounts due in connection with the Magnus Term Loan or any potential future dividend or interest obligations under any equity or debt used to refinance the Magnus Term Loan.

Acushnet Holdings Corp. is a holding company with no operations of its own and, as such, it depends on its subsidiaries for cash to fund all of its operations and expenses, including future dividend payments, if any.

Our operations are conducted almost entirely through our subsidiaries and our ability to generate cash to make future dividend payments, if any, is highly dependent on the earnings and the receipt of funds from our subsidiaries via dividends or intercompany loans, which may be restricted as a result of the laws of the jurisdiction of organization of our subsidiaries, agreements of our subsidiaries or covenants under any existing and future outstanding indebtedness we or our subsidiaries incur.

You may be diluted by the future issuance of additional common stock in connection with our incentive plans, acquisitions or otherwise.

As of December 31, 2016, we had 425,906,402 shares of common stock authorized but unissued. Our amended and restated certificate of incorporation authorizes us to issue these shares of common stock and securities convertible into, exchangeable for, or exercisable into our common stock for the consideration and on the terms and conditions established by our board of directors in its sole discretion, whether in connection with acquisitions or otherwise. We have reserved 8,190,000 shares for issuance under our 2015 Incentive Plan. Any shares of common stock that we issue, including to settle our EARs or under our 2015 Incentive Plan or other equity incentive plans that we may adopt in the future, would dilute the percentage ownership held by our existing shareholders.

Future sales, or the perception of future sales, by us or our existing shareholders in the public market could cause the market price for our common stock to decline.

The sale of substantial amounts of shares of our common stock in the public market, or the perception that such sales could occur, including sales by our existing shareholders, could harm the prevailing market price of shares of our common stock. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. As of December 31, 2016, a total of 74,093,598 shares of our common stock were outstanding. Of the outstanding shares, 22,233,332 shares of common stock are tradable without restriction or further registration under the Securities Act, except that any shares held by our affiliates, as that term is defined under Rule 144 of the Securities Act, may be sold only in compliance with the applicable limitations under the federal securities laws.

The remaining outstanding 51,860,266 shares of common stock held by certain shareholders are subject to certain restrictions on resale. We, our executive officers, directors, and all of our pre-IPO shareholders have signed lock‑up agreements with the underwriters in connection with our initial public offering that, subject to certain customary

exceptions, restrict the sale of the shares of our common stock and certain other securities held by them for 180 days following October 27, 2016.

Upon the expiration of the lock‑up agreements described above, all of such 51,860,266 shares of common stock will be eligible for resale in a public market, subject, in the case of shares held by our affiliates, to volume, manner of sale and other limitations under Rule 144.

We have filed an effective registration statement on Form S‑8 under the Securities Act to register shares of our common stock or securities convertible into or exchangeable for shares of our common stock issued pursuant to our 2015 Incentive Plan. Accordingly, shares registered under such registration statement will be available for sale in the open market. Our current registration statement on Form S‑8 covers 8,190,000 shares of our common stock issuable pursuant to our 2015 Incentive Plan.

As restrictions on resale end, the market price of our shares of common stock could drop significantly if the holders of these restricted shares sell them or are perceived by the market as intending to sell them. These factors could also make it more difficult for us to raise additional funds through future offerings of our shares of common stock or other securities.

Anti‑takeover provisions in our organizational documents and Delaware law might discourage or delay acquisition attempts for us that you might consider favorable.

Our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that may make the merger or acquisition of the Company more difficult without the approval of our board of directors. Among other things:

Further, as a Delaware corporation, we are also subject to provisions of Delaware law, which may impair a takeover attempt that our shareholders may find beneficial. These anti‑takeover provisions and other provisions under Delaware law could discourage, delay or prevent a transaction involving a change in control of the Company, including actions that our shareholders may deem advantageous, or negatively affect the trading price of our common stock. These provisions could also discourage proxy contests and make it more difficult for you and other shareholders to elect directors of your choosing and to cause us to take other corporate actions you desire.

If securities analysts do not publish research or reports about our business or if they downgrade our stock or our sector, our stock price and trading volume could decline.

The trading market for our common stock relies in part on the research and reports that industry or financial analysts publish about us or our business or industry. We do not control these analysts. Furthermore, if one or more of the analysts who do cover us downgrade our stock or our industry, or the stock of any of our competitors, or publish inaccurate or unfavorable research about our business or industry, the price of our stock could decline. If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, we could lose visibility in the market, which in turn could cause our stock price or trading volume to decline.

ITEM 1B.           UNRESOLVED STAFF COMMENTS

None

ITEM 2.          PROPERTIES

Our facilities are located worldwide as shown in the table below.

We have additional sales offices and facilities in Hawaii, New Zealand, Malaysia, Singapore, Hong Kong, Taiwan, Japan, Korea, Thailand, Sweden, France, Germany and Switzerland. In the opinion of the Company’s management, the Company’s properties are adequate and suitable for its business as presently conducted and are adequately maintained.

ITEM 3.            LEGAL PROCEEDINGS

We are defendants in lawsuits associated with the normal conduct of our businesses and operations. It is not possible to predict the outcome of the pending actions, and, as with any litigation, it is possible that some of these actions could be decided unfavorably. We believe that there are meritorious defenses to these actions and that these actions will not have a material adverse effect upon our results of operations, cash flows, or financial condition. These actions are being vigorously contested.

ITEM 4.           MINE SAFETY DISCLOSURES

Not applicable.

EXECUTIVE OFFICERS OF THE REGISTRANT

Executive Officers

Set forth below is information concerning the Company’s executive officers as of March 30, 2017.

Walter (Wally) Uihlein, 67, joined the company in 1976 and was appointed President and Chief Executive Officer of Acushnet Company in 1995 and was appointed President and Chief Executive Officer of Acushnet Holdings Corp. in May 2016. Mr. Uihlein has served as a member of the board of directors of Acushnet Company, our operating subsidiary, since 1984, and has been a member of our Board of Directors from the date of our initial public offering. In 2005, Mr. Uihlein received the PGA of America’s Distinguished Service Award, the organization’s highest honor. Mr. Uihlein was selected to serve as a director because he is our President and Chief Executive Officer and has extensive

experience as an executive in the golf industry, as well as due to his experience as a director of Acushnet Company since 2011.

David Maher, 49, joined the company in 1991 and was appointed Chief Operating Officer in June 2016. Prior to that, Mr. Maher was Senior Vice President, Titleist Worldwide Sales and Global Operations from February 2016 to June 2016 and Vice President, Titleist U.S. Sales from 2001 to January 2016.

Mary Lou Bohn, 56, joined the company in 1987 and was appointed President, Titleist Golf Balls in June 2016. Prior to that, Ms. Bohn was Executive Vice President, Titleist Golf Balls and Titleist Communications from February 2016 to June 2016, Vice President, Golf Ball Marketing and Titleist Communications from 2010 to January 2016 and Vice President, Advertising and Communications from 2000 to 2010.

Steven Pelisek, 56, joined the company in 1993 and was appointed President, Titleist Golf Clubs in March 2016. From 2008 to March 2016, he was General Manager, Titleist Golf Clubs. Prior to that, Mr. Pelisek served as Vice President, Club Sales for both the Titleist and Cobra Club brands.

John (Jay) Duke, Jr., 48, joined the company in 2014 and was appointed President, Titleist Golf Gear in 2014. Prior to that, Mr. Duke worked at Hasbro, Inc., a multinational toy and board game company, from 2012 to 2014 where he was Vice President and Global Franchise Leader for Transformers Global Brand. Prior to Hasbro, Mr. Duke was President of Karhu Holdings BV from 2008 to 2012 and prior to that he held various general management positions with Converse Inc. (a subsidiary of NIKE, Inc.). Mr. Duke also spent time earlier in his career working for Morgan Stanley and Reebok.

Christopher Lindner, 48, joined the company in August 2016 as President of FootJoy. Prior to that, Mr. Lindner worked at Wolverine World Wide Inc., an American footwear manufacturer, from 2010 to August 2016 where he was President of Keds from 2014 to August 2016, Chief Marketing Officer and Senior Vice President of Business Development for Sperry in 2014 and Chief Marketing Officer and Senior Vice President of North America Sales for Saucony from 2010 to 2014. Prior to 2010, Mr. Lindner held various positions with NIKE, including as Vice President of Global Marketing for Converse and Vice President of Global Marketing for Bauer Hockey (both NIKE subsidiaries), and leadership roles with 800.com, Electronic Arts and Rollerblade.

William Burke, 58, joined the company in 1997 and was appointed Executive Vice President, Chief Financial Officer and Treasurer in April 2016 after serving as Senior Vice President and Chief Financial Officer of Acushnet Company since 2003. Prior to that, he served as Vice President and Controller of Acushnet Company. Before joining the company, Mr. Burke held various finance positions at predecessor parent companies Fortune Brands Inc. and American Brands Inc.

Dennis Doherty, 59, joined the company in 1994 and was appointed Executive Vice President, Chief Human Resources Officer in June 2016 after serving as Senior Vice President, Human Resources since 2000. Before joining Acushnet Company, Mr. Doherty held human resource positions at American Brands Inc. and Revlon Health Care Group.

Joseph Nauman, 64,  joined the company in 2000 and was appointed Executive Vice President, Chief Legal and Administrative Officer in June 2016. Prior to that, Mr. Nauman was Executive Vice President, Corporate and Legal from 2005 to June 2016. Prior to 2000, Mr. Nauman held legal positions at Fortune Brands Inc. and Chadbourne & Parke LLP.

PART II

ITEM 5.              MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our common stock has been listed on the New York Stock Exchange (the “NYSE”) under the symbol “GOLF” since October 28, 2016. Prior to that date, there was no public trading market for our common stock. Our initial public offering was priced at $17.00 per share on October 27, 2016.

The following table sets forth for the periods indicated the high and low sales prices of our common stock as reported on the NYSE:

On March 24, 2017, the last reported sales price of our common stock on the NYSE was $17.76 per share and there were approximately nine record holders of our common stock.

Performance Graph

Recent Sales of Unregistered Securities

None.

Dividend Policy

We declared our first quarterly dividend of $0.12 per share in March 2017 with both dividend record and payment dates in April 2017. We expect to pay future quarterly cash dividends on our common stock, subject to the discretion of our board of directors and our compliance with applicable law, and depending on, among other things, our results of operations, capital requirements, financial condition, contractual restrictions, restrictions in our debt agreements and in any equity securities, business prospects and other factors that our board of directors may deem relevant. Our dividend policy may be changed or terminated in the future at any time without advance notice.

We are a holding company and substantially all of our operations are carried out by our operating subsidiary, Acushnet Company, and its subsidiaries. Because we are a holding company, our ability to pay dividends depends on our receipt of cash dividends from our operating subsidiary, Acushnet Company, and its subsidiaries, which may further restrict our ability to pay dividends as a result of the laws of their jurisdiction of organization, agreements of our subsidiaries or covenants under any existing and future outstanding indebtedness we or our subsidiaries incur.

Certain of our agreements governing indebtedness, including our credit agreement, restrict our ability to pay dividends on our common stock. We expect that any future agreements governing indebtedness will contain similar restrictions. See “See Item 7. — Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” and “– Indebtedness.”

Our dividend policy entails certain risks and limitations, particularly with respect to our liquidity. By paying cash dividends rather than investing that cash or repaying debt, we risk, among other things, slowing the pace of our growth and having insufficient cash to fund our operations or unanticipated capital expenditures or limiting our ability to incur additional borrowings.

Although we expect to pay dividends according to our dividend policy, we may not pay dividends according to our policy, or at all, if, among other things, we do not have the cash necessary to pay our intended dividends.

The declaration and payment of dividends will be determined at the discretion of our board of directors, acting in compliance with applicable law and contractual restrictions. However, our board of directors is determined by Magnus, which is wholly‑owned by Fila Korea, which controls a majority of the voting power of all outstanding shares of our common stock. Accordingly, the decision to declare and pay dividends on our common stock in the future, as well as the amount of each such dividend payment, may also depend on the amounts Magnus needs to fund the interest payments on the Magnus Term Loan, other amounts due in connection with the Magnus Term Loan or any potential future dividend or interest obligations under any equity or debt used to refinance the Magnus Term Loan.

We did not declare or pay any dividends on our common stock in 2016, 2015 or 2014.

Issuer Purchases of Equity Securities

None.

ITEM 6.            SELECTED CONSOLIDATED FINANCIAL DATA

You should read the selected consolidated financial data below together with the consolidated financial statements and related notes thereto appearing elsewhere in this report, as well as “Item 7. – Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the other financial information included elsewhere in this report.

We have derived the consolidated statement of operations data for the years ended December 31, 2016, 2015 and 2014 and the consolidated balance sheet data as of December 31, 2016 and 2015 presented below from our audited consolidated financial statements included elsewhere in this report. We have derived the consolidated statement of operations data for the years ended December 31, 2013 and 2012 and our consolidated balance sheet data as of December 31, 2014, 2013 and 2012 presented below from our audited consolidated financial statements which are not included in this report. Our historical audited results are not necessarily indicative of the results that should be expected in any future period.