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PGA CHAMPIONSHIP

August 10, 2010

KOHLER, WISCONSIN

JULIUS MASON: Good morning, I'm The PGA of America's Julius Mason, and I would like to thank you for joining us today as we share information for you about the Wisconsin Golf Economic Impact Study.
It's a pleasure right now to introduce the head table. From Palm Beach Gardens, Florida, a PGA of America, honorary member and the Chief Executive officer of The PGA of America, Mr. Joe Steranka.
From Madison, Wisconsin, the Honorable Jim Doyle, the Governor of the great State of Wisconsin.
And from Kohler, Wisconsin, the chairman and CEO of Kohler, Herb Kohler.
Also joining us today in the audience are some PGA of America national officers including the President of The PGA of America , Mr. Jim Remy, and Vice President Allen Wronowski.
Also joining us, Wisconsin's Secretary of Tourism, Kelly Trumble, Secretary of Commerce; Aaron Olver, Secretary of Transportation, Busalacchi.
From the Wisconsin PGA section, President Ike Bailey; the Director of the The 92nd PGA Championship, Barry Deach; the General Chairman of the The 92nd PGA Championship, Scott Anderson.
And we would also like to give a special welcome to the representatives of the Allied Wisconsin Golf Associations that are with us today.
Now, ladies and gentlemen, Joe Steranka.
JOE STERANKA: Thank you, Julius. Governor Doyle, great to see you, you're a great friend to the sport and industry of golf; and our great friend, Herb Kohler, you have done it again, Herb, this place looks magnificent.
Golf is a huge part of this state's DNA; not only are you seeing it here in a stage that presents the game's greatest players around the world, but it happens week-in, week-out, you have 500 members of the Wisconsin PGA who go to work every day, working hard to put a smile on the faces of governors and company founders and CEOs of The PGA to have us do something that's pretty simple, hit a few better shots, and those are the things that keep us coming back. That recreational aspect of the sport, though, is something that leads to a huge economic impact that we are quite proud of.
In the last several PGA Championships, we have reached out to the secretaries who lead the various departments at the state level, and certainly the Governor's Office to showcase just how vibrant and stable this sport is in relatively uncertain economic times.
We get to highlight it, as I said, with the multi-million impact during the PGA Championship, but to think that Wisconsin's 500-plus golf courses produce a multi-billion dollar impact for the state; and it's that reason that the World Golf Foundation that I just coincidentally chair this year -- it's a rotating chairmanship -- does economic impact studies at the national level that shows that golf is bigger than the motion picture industry or bigger than the newspaper publishing industry, and more importantly, at the state level.
So we began looking and we did a study last year that we released at Hazeltine as part of our PGA Championship in Minnesota and had Governor Tim Pawlenty come out to join us there; the study that did this year again used a company called SRI, Stanford Research International, has put together a template that uses federal and state economic data to compute the job impact, the tourism impact, the charitable impact of our industry in the state.
Here in Wisconsin, that means 38,000 jobs. 38,000 people who are able to put food on the table for their families because of the nation's golf courses. And these are based on 2008 numbers, but some $771 million in wages that go along with that; something that we are not asking for the golf fans in the State of Wisconsin to think about when they are playing the sport, but to remember that golf is a vital part of their communities.
As we mentioned, there's going to be a worldwide audience that follows this, and we think the Secretary of Tourism is very excited, because right now there are about 80 million tourism visits every year and we computed 1.2 million are related to golf and that will generate almost $900 million in impact for the state, many of them here at Whistling Straits and Blackwolf Run.
The Governor and Herb are going to talk about some of the other numbers, but let me just close in saying that we are very proud of the tradition and heritage of The PGA and the sport of golf. We think that the people that play golf turn out to be pretty good folks who are leaders in their communities. It's something that there's a PGA professional often times that is nurturing that young man or woman as they set their life direction, and you're seeing some of those here on this stage and here in the field this week.
Thank you, Julius, and I'll turn it back to you.
JULIUS MASON: Thank you, Joe, and now, ladies and gentlemen, Governor Jim Doyle.
GOVERNOR DOYLE: We have had, as the State of Wisconsin, just a tremendous relationship with The PGA. Local government, county government, state government, we have worked cooperatively with you in every way. And I was asked a question at one point in all of this about whether there has ever been a point of contention between The PGA and the State of Wisconsin, and now in two PGAs, I can't think of one single area that we have ever even had a disagreement.
We have worked as very, very close partners, and we are very thankful to you. We are also very proud of our professional golfers, the members of The PGA here in Wisconsin who teach us and nurture us and take us out on the courses and show people in Wisconsin a great time. So we really thank The PGA.
And of course, we are excited as a state to have The PGA return to the State of Wisconsin. This year, the four courses on which the four majors will be played are Augusta National, Pebble Beach, St. Andrews, probably the three most storied courses in the world. And now, joining that category, is Whistling Straits. Think of that, four majors, and the four courses, Augusta National, Pebble Beach, St. Andrews and Whistling Straits.
I want to thank Herb Kohler. This simply would not be happening without the vision of Herb Kohler. He is the one who has given Wisconsin this unbelievable asset that is obviously the host of a great national championship, but also a place where people come from all over the country, all over the world to play.
So Herb, to you and the entire Kohler Company, for all that you have done, not only the greatest plumbing fixtures in the world, but the greatest golf courses in the world, and we really thank you for everything that you have done.
The new economic report that Joe has talked about confirms something that I think everybody from Wisconsin knows, which is, we are crazy about golf in Wisconsin. And believe me, I know about the economic impact, because a fairly high percentage of my disposable income goes into the golf business. This is a state where, around the world, I think people know how crazy people are about football, Packers and Badgers. They see us on TV wearing cheese heads on pro football games.
People now see us as a state that is really crazy about golf. The crowds that we will see here over the next four days and the families are that coming to enjoy this incredible tournament, the excitement this has caused and the volunteers that are participating really emphasizes how important golf is in Wisconsin.
The report indicates that the annual overall economic impact of golf in Wisconsin is $2.4 billion and nearly 40,000 jobs. So it is not only a great past time for our state, but it has become a central part of our tourism industry and a major employer in Wisconsin.
Golf does bring tourists from all over the world to Wisconsin to play some of our fabulous courses. The world is going to see in the next few days our true showcase course, but I have played courses from the very, very tip of Bayfield County sticking out into Lake Superior where I would challenge some of you who haven't been there to ever go and see this course. I wouldn't say it's quite up to Pebble Beach standards, but the views of that beach looking out over Lake Superior and the Apostle Islands are really extraordinary.
I just last week played golf at the state-owned course in Door County, and anyone who has ever vacationed there and played golf should go to Peninsula State Park and play golf. We have unique courses that are there for a wide variety of players of all kind of different skills, and it is something very special. If you are a golfer in Wisconsin, you can name three or four holes, the little par 3 on Peninsula, that everybody in the state knows what hole you're talking about. It is a strong part of our culture and a strong part of our economy, as well.
We are very thankful that The PGA has recognized this and that we have formed this partnership. This will be, during my time as Governor, the second PGA played here, and it's been a great experience for me and The PGA has also committed to coming back in 2015 and to bring The Ryder Cup to Whistling Straits in 2020.
More than 94,000 tickets were sold to the 2004 PGA Championship, and even in these difficult economic times in this country, I think we are going to see that exceeded.
More than 30,000 last time came from out of state, and this single tournament brought about $76 million into Wisconsin. As I say, this year, we hope to outdo ourselves.
I thank the Secretaries of Tourism, Commerce and Transportation who are here. They have worked very closely with The PGA every step of the way to help promote this tournament and also to make sure that people get in and out of here safely. I want to thank all of the local law enforcement, as well, that has worked with our state troopers and others to make sure this is a good experience for people.
The PGA is expecting upwards of 200,000 spectators at Whistling Straits over the next few days, and the one part of this that is difficult to calculate in dollar terms, but over the next four days, people all over the world are going to look at one of the most beautiful pieces of real estate on their television sets, and as they hear that that golf course is here in Wisconsin, it helps our state in so many ways; 423 million households from over 268 countries will tune into the PGA Championship, and they will be watching the greatest players in the world.
Now, I don't want to add special pressure by having the Governor call on Steve Stricker to win this tournament, but we have Steve Stricker, Jerry Kelly, and others, absolutely wonderful State players who you can bet the State of Wisconsin will be cheering for. But we are good golf fans and we are going to be cheering for whoever is playing good golf and we look forward to a really exciting tournament.
So thank you all very much. Again, Herb, thank you for everything that you have done, and Joe, to you and The PGA, thank you, as well.
JULIUS MASON: Governor, thank you very much. The PGA of America thanks you, and Steve Stricker and Jerry Kelly thank you, as well. And now, our host this week, Herb Kohler.
HERB KOHLER: Thank you. Joe Steranka, Governor Doyle, ladies and gentlemen. When asked to comment on golf's impact on Kohler, and Kohler's impact on the State of Wisconsin, I just scratched my head and wondered where to begin. Mind you, it wasn't until 22 years ago that we actually owned a golf course. We owned one not because I had some compulsive or ego-driven need to own a golf course; rather, the guests of the American Club were clamoring for golf nearby. My job, as CEO in 1983, was to listen, and to respond, and I finally decided that meant building a golf course. Quite a deviation from a fundamental job of making products for the home and the lawn and gardens around the home.
My marketing study was little more than hundreds of suggestion slips. But I felt a golf course could immeasurably add to the dynamic of our new hotel. The American Club, even though its occupancy in the summertime was running some 88 percent. Bob Melbourne, Vice President of Business Development at the time, somehow had the good sense to hire Pete Dye, who turned out to really be the foremost living designer of golf courses in the world today.
It was hard to tell Pete then I wanted a course to lead the edge of design. Instead I simply told him to save our trees and the wildlife sanctuary and to make the golf course worthy of holding a golf major while still remaining playable by resort duffers, even though it might scare the hell out of them.
Pete did that and immediately, beyond all forecast, we had a three-month lead time for a tee time from the day we opened in 1988. For a Five Diamond hotel, that was unacceptable. So we built a third nine and played 27 holes in rotation and it didn't cut the lead time one bit. We built a fourth nine and attached it to the first nine, and then attached the second nine to the third nine, and nothing changed.
The demand for golf was overwhelming, even though Golf Digest wrote a one-page editorial on how Pete Dye and Herb Kohler had committed the greatest crime in golf by tearing apart their best new public course of 1988.
That demand prompted a search for more land and when we found it on Lake Michigan, we wound up building two more courses and finally, finally that reduced the lead time to a week or two and we could satisfy our hotel guests and a number of others.
Were it not for adding golf to the activities of the American Club, we would have been a nice little boutique hotel producing about 25 million a year in revenue. The sheer fact of adding golf has powered us to three extensions of the American Club, an additional mid-priced hotel in Kohler called the Inn at Woodlake and a private club called Riverbend. There's more than 391 rooms we have to fill every night in a village of 1,900 people. But then golf further propelled us even more to add 140 rooms and another golf course in St. Andrews, Scotland and that in total created a $200 million a year hospitality business employing 1,800 people, 1,500 of whom were in Wisconsin.
Now the upshot of all of this is this. As a little innkeeper in Troon, Scotland told Pete Dye, "Herb Kohler must be more than just a plumber." Yes, indeed, I am a plumber. I still am a plumber. But now the world also considers me a hotelier, and they have further expected me to be a good golfer, which clearly I am not.
12 years after we entered the world of golf, Golf Digest on their 50th anniversary, did a ranking of golf destinations around the world. No. 1 was St. Andrews, Scotland. No. 4, the country of Northern Ireland. No. 5, southwest Scotland. No. 6, southwest Ireland. No. 7, Sheboygan County, Wisconsin.
Last year, and again this year, the readers of Golf Magazine, the readers, not the editor, ranked The American Club, the Inn at Woodlake and Riverbend, the premiere golf resort in America.
What has happened to Kohler Company over a 22-year period I attribute to the significance of golf and the power of leading edge design, combined with a consistent level of quality. Golf has focused a bright spotlight on Kohler products and services and they have grown tremendously around the world.
The PGA of America , in turn, has taken our work in golf and used it as a platform for their PGA Championship, which will speak this week to over 420 million households.
I would say it was a damned good thing this CEO actually listened to a few of his clients back in 1983 when they kept asking, why doesn't Kohler have a golf course. Thank you very much.

Q. For any one of you three, you mentioned that golf was responsible for approximately 40,000 jobs in the state. I was just curious how many of those are considered permanent jobs as opposed to part-time?
JOE STERANKA: About half are full-time jobs and half are part-time jobs, and we have a further breakdown of that in the full economic report we'll give you afterwards.

Q. You talked a lot about how The PGA professionals filter down all of their knowledge and all of their grace to the fans and the players. Can you talk a little about why the fans and general populous of Wisconsin love golf so much and how they are going to show their love and all of their devotion, not only this week, but every week of the year, so you come back time and again.
GOVERNOR DOYLE: Well, there are several things about Wisconsin that I hope are apparent to visitors that I think all of us who live here know. One is we are generally a sports-crazy state. So we just like sports: Football, baseball, basketball, you name it. This is a state that the Packers have -- there's no more professional team that has a greater following than the Green Bay Packers. So we are a state that cares a lot about sports.
Golf is obviously a great participatory sport and part of it in my view is we are locked in our houses for five or six months a year. So getting outside and being outside between April and increasingly now October and November is something very, very special. So people really, truly enjoy that time.
It's also deeply embedded in our culture, as well as hunting and fishing, I'm typical, some of my greatest memories as a boy were playing golf with my dad. I can remember once -- he was a federal judge and very distinguished man, he carded a 79 and did a backwards cartwheel on the 18th green when he did it. This is our culture and part of who we are.
Couple that with a beautiful state with great geography with courses like lakeshore courses like Whistling Straits to Blackwolf Run, those beautiful courses, so we have great geography, and we do have great professionals.
It's true of our hospitality business, but when you are greeted at a hotel or restaurant in Wisconsin or a golf course, you're going to be greeted by a friendly person who is really thankful for your business and who is going to look out for you as a true guest.
So you put all of that together, and golf is really just a great natural for us. It's hospitality, it's being outdoors, it's beautiful, beautiful geography, and there's a little bit of competition we all like, as well.

Q. Is it hard to reconcile the positive participation and economic impact data with the fact that Wisconsin doesn't have a regular PGA TOUR stop anymore and is there any optimism that that might come back sometime soon?
GOVERNOR DOYLE: We would like to have a regular stop. As you all know, getting a date has been a great challenge for us in Wisconsin. We had a great tournament played at a great course, we just over the years couldn't get a date that really worked for us.
I think we will prove with these majors that are coming here that we will have great fans and we can put on a great tournament. So we are going to continue to work on this. I think it's all of our desire to bring a regular, annual stop back. And believe me, I've been deeply in those talks over the years. I know how hard it is to find a date, given what the competition is out there, a date that works, and we obviously would love to find one.
HERB KOHLER: Just a minute, I need to answer. You as writers, would you rather have a major every two or three years, which this state will have for the next 20 years, a major every two or three years, for the next 20 years, or would you like a Tour stop every year? Answer that question yourself. I think Wisconsin is taking the right course.
GOVERNOR DOYLE: If I could add, I didn't want my comment at all to suggest -- I agree with Herb completely -- the majors are incredible, and obviously with the news out of the USGA, as well, if I could mention it, is great news for Wisconsin; the PGA, the Ryder Cup. I guess I would like to have them both. But the majors are what really, really give the big impact for golf in Wisconsin.

Q. You mentioned about 2015 coming back here for the PGA, but down in Washington County, they have a couple of big tournaments coming up, the U.S. Amateur, the 2017 U.S. Open; for the next decade, it's a big thing for golf in this state; how exciting is that for the long-term future of golf and the economy?
GOVERNOR DOYLE: When you think out now over the next ten years, we will have, counting this one, two PGAs, we will have a Ryder Cup, we will have a U.S. Amateur, we will have a U.S. Open Championship. That's --
HERB KOHLER: And a U.S. Women's Open Championship. Don't forget the women.
GOVERNOR DOYLE: That's a phenomenal list of tournaments, and I again, want to really thank The PGA and Herb Kohler, because there was a lot at stake in our first PGA. If that had not gone well, we wouldn't be having more PGAs or the U.S. Open coming to this state. It's because of the kind of cooperation, the help we had in putting on that first major that really set the stage here.
JOE STERANKA: And I can tell you as someone who travels around the country and looks at the ingredients that are necessary for success; that Wisconsin's assets of the varied geography and the natural vistas, the work ethic of the people, the participation rate in all sports, the fact that the Women's Open is here.
Right now, only one in four golfers is female. We are only in the second generation of Title IX young women in this country. We believe that the work of the Wisconsin PGA, some of the work they do with the municipal golf courses in the state and big events like the Women's U.S. Open, is going to inspire a generation of young girls that is going to increase the participation rate for women in this country, which, as a business, we would like to see, but we also think that the health benefits, the economic benefits, and the fun of being outdoors in the fresh air is very appealing to women, as well.
I think you'll see Wisconsin as a model state for that over the next ten years.

Q. Could you answer how the 2.4 billion affects the average family, maybe how that's distributed state wide? And for Mr. Kohler, I would imagine there's tens and millions of dollars spent on concessions, merchandise, etc, is there anyway a portion of that goes back to the local economy? How does the State of Wisconsin see benefit for those numbers?
GOVERNOR DOYLE: I'll defer to Joe for the specifics on the study. I will say this, though. Our golf is really spread out through the entire state. Obviously the championship courses are located in the Sheboygan area and now in the suburban Milwaukee area, but we have golf courses spread throughout this state, so if you were to look at a map, you would see that happening everywhere.
So the economic effect really spreads throughout the entire state. You can play great north woods courses cut right out of the woods in the north country of Wisconsin and you can play links golf, as well. So you can play it all, and I think it's very evenly distributed.
JOE STERANKA: Just to follow up on that, at the core of it are those 38,000 jobs and 770,000,000 in wages. Another big segment of it is those 1.2 million golf visits every year that are $900 million of money coming in from out of state because of Wisconsin's golf assets. There's another $46 million that's generated on those 500 Wisconsin golf courses every year for charity that reaches into the community.
We'll provide you the full report, and it has some very rich data that, often times when people are out here playing golf, we are not asking them to get tied up in all those numbers, but for the leaders of this state and community leaders, city councilmen and women, it's important to look at golf as a real asset for their communities and for the state.

Q. We remember in 2004 that the wind unfortunately died to a whisper for most of the event, and I wonder, if you could order the weather on Thursday, what you would want to throw at these guys.
HERB KOHLER: The winds are -- it's part of the normal character of this particular site. They are prevailing westerlies, but they also come from the northeast and the southeast, and they may even change up to four times a day from a different direction. I would like to see that. I'd like to see that (chuckling) wind, not extreme, but I would love to see it keep them off-balance and have to adjust, to adjust and readjust. That makes an exciting game for all of us.
JULIUS MASON: Ladies and gentlemen thank you for joining us today.

End of FastScripts

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