-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, EzYLispgkQ7BLBt0tGGqiPOKYtUQ8h1GdlDR+sA3dE1fFMYAfBaOU4o2lh7u+yuU UeovSF5Ljd9R0rXw+pLbbQ== 0000950135-94-000347.txt : 19940524 0000950135-94-000347.hdr.sgml : 19940524 ACCESSION NUMBER: 0000950135-94-000347 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940401 FILED AS OF DATE: 19940513 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TIMBERLAND CO CENTRAL INDEX KEY: 0000814361 STANDARD INDUSTRIAL CLASSIFICATION: 3140 IRS NUMBER: 020312554 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09548 FILM NUMBER: 94528108 BUSINESS ADDRESS: STREET 1: 11 MERRILL INDUSTRIAL DR CITY: HAMPTON STATE: NH ZIP: 03842 BUSINESS PHONE: 6039261600 MAIL ADDRESS: STREET 1: 11 MERRILL INDUSTRIAL DRIVE CITY: HAMPTON STATE: NH ZIP: 03842 10-Q 1 THE TIMBERLAND COMPANY FORM 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES - EXCHANGE ACT OF 1934 For the quarterly period ended April 1, 1994 ------------- 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 1-9548 ------ The Timberland Company - - ------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 02-0312554 - - ------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 11 Merrill Industrial Drive, Hampton, New Hampshire 03843 - - ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (603) 926-1600 ------------------- 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 the filing requirements for the past 90 days. Yes X No ----- ----- On April 29, 1994, 7,619,766 shares of the registrant's Class A Common Stock were outstanding and 3,237,121 shares of the registrant's Class B Common Stock were outstanding. 2 THE TIMBERLAND COMPANY FORM 10-Q TABLE OF CONTENTS
Page(s) ------- Independent Accountants' Review Report 1 Part I Financial Information ---------------------------- Condensed Consolidated Balance Sheets - April 1, 1994 and December 31, 1993 2 - 3 Condensed Consolidated Statements of Operations - For the three months ended April 1, 1994 and April 2, 1993 4 Condensed Consolidated Statements of Cash Flows - For the three months ended April 1, 1994 and April 2, 1993 5 Notes to Condensed Consolidated Financial Statements 6 Management's Discussion and Analysis of Financial Condition and Results of Operations 7 - 8 Part II Other Information 9 -------------------------
3 Form 10-Q Page 1 INDEPENDENT ACCOUNTANTS' REVIEW REPORT -------------------------------------- To the Stockholders and Board of Directors of The Timberland Company: We have reviewed the accompanying condensed consolidated balance sheet of The Timberland Company and subsidiaries as of April 1, 1994, and the related condensed consolidated statements of operations and cash flows for the three-month periods ended April 1, 1994 and April 2, 1993. These condensed consolidated financial statements are the responsibility of the Company's management. We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and of making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, we are not aware of any material modifications that should be made to such condensed consolidated financial statements for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of The Timberland Company and subsidiaries as of December 31, 1993, and the related consolidated statements of income, changes in stockholders' equity, and cash flows for the year then ended (not presented herein), and, in our report dated February 15, 1994, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 1993, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it was derived. Deloitte & Touche Boston, Massachusetts April 26, 1994 (May 4, 1994 as to Note 4) 4 Form 10-Q Page 2 Part I Financial Information - - ---------------------------- THE TIMBERLAND COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS ASSETS (Dollars in Thousands) (Unaudited)
April 1, December 31, 1994 1993 -------- ------------ Current assets Cash and equivalents $ - $ 3,281 Accounts receivable, net 91,429 93,226 Inventories 149,166 111,380 Prepaid expenses 8,632 7,571 Deferred and refundable income taxes 5,625 5,625 -------- -------- Total current assets 254,852 221,083 -------- -------- Property, plant and equipment, at cost 84,012 79,145 Less accumulated depreciation and amortization (36,457) (33,530) -------- -------- Net property, plant and equipment 47,555 45,615 -------- -------- Excess of cost over fair value of net assets acquired, net 17,963 18,157 Other assets, net 6,283 5,756 -------- -------- $326,653 $290,611 ======== ========
See accompanying notes to condensed consolidated financial statements. 5 Form 10-Q Page 3 THE TIMBERLAND COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS LIABILITIES AND STOCKHOLDERS' EQUITY (Dollars in Thousands) (Unaudited)
April 1, December 31, 1994 1993 -------- ------------ Current liabilities Notes payable $ 47,346 $ 10,061 Current maturities of long-term obligations 700 682 Bank overdraft, net 4,236 - Accounts payable 21,746 32,526 Accrued expenses Payroll and related 8,444 8,873 Interest and other 17,918 9,609 Income taxes payable 2,328 3,672 -------- -------- Total current liabilities 102,718 65,423 -------- -------- Long-term obligations, less current maturities 90,627 90,809 -------- -------- Deferred income taxes 6,176 6,016 -------- -------- Stockholders' equity Preferred Stock, $.01 par value; 2,000,000 shares authorized; none issued - - Class A Common Stock, $.01 par value; 30,000,000 shares authorized; 7,638,092 shares issued at April 1, 1994 and 7,630,556 shares at December 31, 1993 76 76 Class B Common Stock, $.01 par value; 15,000,000 shares authorized; 3,237,121 shares issued and outstanding at April 1, 1994 and 3,237,598 shares at December 31, 1993 32 32 Additional paid-in capital 55,897 55,805 Retained earnings 72,487 74,106 Cumulative translation adjustment (1,240) (1,536) Less treasury stock at cost, 18,513 shares at April 1, 1994 and at December 31, 1993 (120) (120) -------- -------- 127,132 128,363 -------- -------- $326,653 $290,611 ======== ========
See accompanying notes to condensed consolidated financial statements. 6 Form 10-Q Page 4 THE TIMBERLAND COMPANY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Amounts in Thousands, Except Per Share Data) (Unaudited)
For the Three Months Ended April 1, April 2, 1994 1993 -------- -------- Net sales $108,093 $70,606 Cost of goods sold 75,602 43,139 -------- ------- Gross profit 32,491 27,467 -------- ------- Operating expenses Selling 22,577 15,293 General and administrative 10,232 6,791 Amortization of goodwill 194 194 -------- ------- Total operating expenses 33,003 22,278 -------- ------- Operating income (loss) (512) 5,189 -------- ------- Other expense Interest 1,885 1,210 Other, net 215 335 -------- ------- Total other expense 2,100 1,545 -------- ------- Income (loss) before income taxes (2,612) 3,644 Provision (benefit) for income taxes (993) 1,312 -------- -------- Net income (loss) $ (1,619) $ 2,332 ======== ======== Earnings (loss) per share $ (.14) $ .21 ======== ======== Weighted average shares outstanding 11,232 11,081 ======== ========
See accompanying notes to condensed consolidated financial statements. 7 Form 10-Q Page 5 THE TIMBERLAND COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Thousands) (Unaudited)
For the Three Months Ended April 1, April 2, 1994 1993 -------- -------- Cash flows from operating activities: Net income (loss) $ (1,619) $2,332 Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities: Deferred income taxes 160 (415) Depreciation and amortization 3,339 2,199 Increase (decrease) in cash from changes in working capital items: Accounts receivable 1,707 2,823 Inventories (37,471) (9,722) Prepaid expenses (1,028) (1,870) Bank overdraft, net 4,236 - Accounts payable (10,805) 7,647 Accrued expenses 7,802 1,600 Income taxes (1,327) 853 -------- ------ Net cash provided (used) by operating activities (35,006) 5,447 -------- ------ Cash flows from investing activities: Additions to property, plant and equipment, net (4,747) (3,630) Other, net (756) (172) -------- ------ Net cash used in investing activities (5,503) (3,802) -------- ------ Cash flows from financing activities: Net borrowings under short-term credit facilities 37,284 936 Payments on long-term debt and capital lease obligations (164) (1,823) Issuance of common stock 92 38 -------- ------ Net cash provided (used) by financing activities 37,212 (849) -------- ------ Effect of exchange rate changes on cash 16 12 -------- ------ Net increase (decrease) in cash and equivalents (3,281) 808 Cash and equivalents at beginning of period 3,281 1,220 -------- ------ Cash and equivalents at end of period $ - $2,028 ======== ====== Supplemental disclosures of cash flow information: Interest paid $ 720 $ 240 Income taxes paid 191 1,043
See accompanying notes to condensed consolidated financial statements. 8 Form 10-Q Page 6 THE TIMBERLAND COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain the adjustments necessary to present fairly the Company's financial position, results of operations and changes in cash flows for the interim periods presented. Such adjustments consisted of normal recurring items. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 1993. Certain prior year amounts have been reclassified for consistent presentation with the current period. 2. The results of operations for the three months ended April 1, 1994 are not necessarily indicative of the results to be expected for the full year. Historically, the Company's revenues have been more heavily weighted to the second half of the year. 3. Inventories consist of the following (in thousands):
April 1, 1994 December 31, 1993 ------------- ----------------- Raw materials $ 16,517 $ 11,108 Work-in-process 11,017 13,060 Finished goods 121,632 87,212 -------- -------- $149,166 $111,380 ======== ========
4. Indebtedness In April 1994, the Company finalized a private placement with a group of lenders for $65 million of senior unsecured notes (the "Notes") maturing on April 15, 2000. The Notes bear interest at a fixed rate of 7.16% per annum. The proceeds will be used to repay existing short-term debt and for general corporate purposes. On May 4, 1994, the Company entered into a new unsecured committed revolving credit agreement (the "Agreement"), with a group of banks. The Agreement, which replaced the Company's existing revolving credit facility, extends through May 30, 1996 and provides for revolving credit loans of up to $125 million, subject to a borrowing base formula. Under the terms of the Agreement, the Company may borrow at interest rates based upon the lender's cost of funds. The Agreement provides for a facility fee of 3/8% per annum on the full commitment and places limitations on the payment of dividends and the incurrence of additional debt, and also contains certain other financial and operating covenants. 5. Distributorship Termination Agreement In April 1994, the Company entered into a Distributorship Termination Agreement (the "Agreement") with its Italian distributor, which terminates all distribution rights of the distributor on May 31, 1994. In accordance with the Agreement, the Company will also acquire certain assets of the distributor. Net sales to this distributor represented 5% and 4%, respectively, of the Company's consolidated revenues for the first quarter and full year of 1993. The Company recognized no revenue in the first quarter of 1994 related to its Italian distributor. Effective on the termination date, Timberland intends to assume the distribution of its own products in Italy. 9 Form 10-Q Page 7 THE TIMBERLAND COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Unaudited) RESULTS OF OPERATIONS The following table sets forth selected items in the Company's condensed consolidated statements of operations as percentages of net sales for the periods indicated.
For the Three Months Ended April 1, April 2, 1994 1993 -------- -------- Net sales 100.0% 100.0% Cost of goods sold 69.9 61.1 ----- ----- Gross profit 30.1 38.9 ----- ----- Operating expenses Selling 20.9 21.6 General and administrative 9.5 9.6 Amortization of goodwill .2 .3 ----- ----- Total operating expenses 30.5 31.6 ----- ----- Operating income (loss) (.5) 7.4 ----- ----- Other expense Interest 1.7 1.7 Other, net .2 .5 ----- ----- Total other expense 1.9 2.2 ----- ----- Income (loss) before income taxes (2.4) 5.2 Provision (benefit) for income taxes (.9) 1.9 ----- ----- Net income (loss) (1.5)% 3.3% ===== ===== Note: Percentages may not add due to rounding.
First Quarter 1994 Compared to First Quarter 1993 - - ------------------------------------------------- Net sales for the first quarter of 1994 were $108.1 million, an increase of 53% over the $70.6 million reported in the same quarter of 1993. This increase was attributable to an overall increase in the number of footwear, apparel and accessory units sold. Net sales in 1994 reflect a price reduction on certain products designed to improve the price/value proposition for the consumer. 10 Form 10-Q Page 8 First Quarter 1994 Compared to First Quarter 1993 (continued) ------------------------------------------------- Gross profit as a percentage of net sales was 30.1% in 1994 as compared to 38.9% in 1993. This decline is primarily attributed to the effect of a price reduction for certain footwear and apparel lines, not fully offset by anticipated product cost reductions. While overall operating expenses increased to $33.0 million in the first quarter of 1994 from $22.3 million in the first quarter of 1993, total operating expenses as a percentage of net sales in 1994 decreased to 30.5% from 31.6% in 1993. The comparative dollar increase in spending was principally attributable to increased sales and marketing expenditures and the Company's investment in worldwide infrastructure to support sales growth. Interest expense in the first quarter of 1994 increased by $.7 million over the comparable period in 1993, primarily as a result of increased borrowings in support of sales growth. LIQUIDITY AND CAPITAL RESOURCES ------------------------------- The Company uses unsecured revolving and committed lines of credit as the primary sources of financing for its seasonal and other working capital requirements. In anticipation of increased financing requirements to support planned near-term growth, the Company completed a private placement in April 1994 for $65 million of senior unsecured notes and entered into a new revolving credit agreement on May 4, 1994, which provides for revolving credit loans of up to $125 million. (See notes to condensed consolidated financial statements.) Management believes that such facilities, and the ability to obtain additional financing, together with cash flow from operations, will provide the funds necessary to support the Company's business. At April 1, 1994, the Company had working capital of $152.1 million versus $155.7 million at December 31, 1993 and $94.8 million at April 2, 1993. As a result of increased sales, accounts receivable have grown to $91.4 million at April 1, 1994 compared to $51.0 million at April 2, 1993. Days sales outstanding at April 1, 1994 were 79 days compared to 70 days at April 2, 1993. Inventories have increased by $37.8 million and $68.8 million since year end 1993 and April 2, 1993, respectively, in support of anticipated sales. Inventory turns were 2.2 times for the three months ended April 1, 1994 and April 2, 1993. Short-term borrowings have increased by $37.3 million since December 31, 1993, due primarily to the inventory level at quarter end. As a result of the increase in overall borrowings, the Company's debt to capital ratio rose to 52% at April 1, 1994 compared to 44% and 32% at December 31, 1993 and April 2, 1993, respectively. The Company's short-term financing requirements have historically reached a peak during the third quarter in response to the seasonal pattern of demand. In April 1994, the Company entered into a Distributorship Termination Agreement (the "Agreement") with its Italian distributor, which terminates all distribution rights of the distributor on May 31, 1994. In accordance with the Agreement, the Company will also acquire certain assets of the distributor. Net sales to this distributor represented 5% and 4%, respectively, of the Company's consolidated revenues for the first quarter and full year of 1993. The Company recognized no revenue in the first quarter of 1994 related to its Italian distributor. Effective on the termination date, Timberland intends to assume the distribution of its own products in Italy. Capital expenditures were $4.7 million and $3.6 million for the three months ended April 1, 1994 and April 2, 1993, respectively. 11 Form 10-Q Page 9 Part II Other Information ------------------------- Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits -- None (b) Reports on Form 8-K -- None Signatures ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. The Timberland Company ------------------------------ (Registrant) Date: May 12,1994 Jeffrey B. Swartz ----------- ------------------------------ Jeffrey B. Swartz Executive Vice President, Chief Operating Officer and Director Date: May 12, 1994 Edward J. Suleski, Jr. ----------- ------------------------------ Edward J. Suleski, Jr. Corporate Controller and Chief Accounting Officer (Principal Accounting Officer) -----END PRIVACY-ENHANCED MESSAGE-----