-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HRHuIkrH/88duCMnejGfPK5QzMfoHcleXanTYzhgH+i1766of8sXVIcATm/Ltow0 lXxg9rqfg9Tw0LsND9/vJQ== 0000950135-96-002022.txt : 19960514 0000950135-96-002022.hdr.sgml : 19960514 ACCESSION NUMBER: 0000950135-96-002022 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960329 FILED AS OF DATE: 19960513 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TIMBERLAND CO CENTRAL INDEX KEY: 0000814361 STANDARD INDUSTRIAL CLASSIFICATION: FOOTWEAR, (NO RUBBER) [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: 96561761 BUSINESS ADDRESS: STREET 1: 200 DOMAIN DR CITY: STRATHAM STATE: NH ZIP: 03885 BUSINESS PHONE: 6037729500 MAIL ADDRESS: STREET 1: 200 DOMAIN DR CITY: STRATHAM STATE: NH ZIP: 03885 10-Q 1 THE TIMBERLAND COMPANY 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 March 29, 1996 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 Identification Number) incorporation or organization) 200 DOMAIN DRIVE, STRATHAM, NEW HAMPSHIRE 03885 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (603) 772-9500 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 X No --- --- On May 3, 1996, 8,339,871 shares of the registrant's Class A Common Stock were outstanding and 2,735,381 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' Report 1 Part I Financial Information (unaudited) Condensed Consolidated Balance Sheets - 2-3 March 29, 1996 and December 31, 1995 Condensed Consolidated Statements of Operations - 4 For the three months ended March 29, 1996 and March 31, 1995 Condensed Consolidated Statements of Cash Flows - 5 For the three months ended March 29, 1996 and March 31, 1995 Notes to Condensed Consolidated Financial Statements 6-7 Management's Discussion and Analysis of Financial Condition and Results of Operations 8-10 Part II Other Information 11 3 Form 10-Q Page 1 INDEPENDENT ACCOUNTANTS' 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 March 29, 1996, and the related condensed consolidated statements of operations and cash flows for the three-month periods ended March 29, 1996 and March 31, 1995. These financial statements are the responsibility of the Company's management. We conducted our review 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 review, 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, 1995, and the related consolidated statements of operations, changes in stockholders' equity, and cash flows for the year then ended (not presented herein); and, in our report dated February 7, 1996, 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, 1995, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. Deloitte & Touche LLP Boston, Massachusetts April 17, 1996 4 Form 10-Q Page 2 Part I Financial Information THE TIMBERLAND COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS ASSETS (Dollars in Thousands) (Unaudited)
March 29, December 31, 1996 1995 --------- ------------ Current assets Cash and equivalents $ 32,811 $ 38,389 Accounts receivable, net 96,429 95,786 Inventories 183,067 180,636 Prepaid expenses 12,654 12,752 Deferred and refundable income taxes 11,421 10,267 -------- -------- Total current assets 336,382 337,830 -------- -------- Property, plant and equipment 99,207 95,937 Less accumulated depreciation and amortization (47,181) (43,533) -------- -------- Net property, plant and equipment 52,026 52,404 -------- -------- Excess of cost over fair value of net assets acquired, net 23,851 24,271 -------- -------- Other assets, net 6,327 6,903 -------- -------- $418,586 $421,408 ======== ========
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)
March 29, December 31, 1996 1995 --------- ------------ Current liabilities Current maturities of long-term obligations $ 7,744 $ 7,733 Accounts payable 19,006 25,207 Accrued expenses Payroll and related 8,689 7,882 Interest and other 31,567 28,001 Income taxes payable 1,202 892 -------- -------- Total current liabilities 68,208 69,715 -------- -------- Long-term obligations, less current maturities 199,264 199,454 -------- -------- Deferred income taxes 10,019 10,018 -------- -------- Stockholders' equity Preferred stock, $.01 par value; 2,000,000 shares authorized; none issued - - Class A Common Stock, $.01 par value (1 vote per share); 30,000,000 shares authorized; 8,329,456 shares issued at March 29, 1996 and 8,316,554 shares at December 31, 1995 83 83 Class B Common Stock, $.01 par value (10 votes per share) convertible into Class A shares on a one-for-one basis: 15,000,000 shares authorized; 2,735,381 shares issued at March 29, 1996 and December 31, 1995 27 27 Additional paid-in capital 59,819 59,716 Retained earnings 79,206 80,181 Cumulative translation adjustment 2,080 2,334 Less treasury stock at cost, 18,369 shares at March 29, 1996 and December 31, 1995 (120) (120) -------- -------- 141,095 142,221 -------- -------- $418,586 $421,408 ======== ========
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 ------------------ March 29, March 31, 1996 1995 --------- --------- Revenues $127,684 $141,583 Cost of goods sold 81,659 96,611 -------- -------- Gross profit 46,025 44,972 -------- -------- Operating expenses Selling 32,464 33,491 General and administrative 10,058 11,671 Amortization of goodwill 421 421 -------- -------- Total operating expenses 42,943 45,583 -------- -------- Operating income (loss) 3,082 (611) -------- -------- Other expense (income) Interest expense 4,798 5,116 Other, net (143) (7,210) -------- -------- Total other expense (income) 4,655 (2,094) -------- -------- Income (loss) before income taxes (1,573) 1,483 -------- -------- Provision (benefit) for income taxes (598) 564 -------- -------- Net income (loss) $ (975) $ 919 ======== ======== Earnings (loss) per share $ (.09) $ .08 ======== ======== Weighted average shares outstanding and share equivalents 11,163 11,139 ======== ========
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 ----------------------- March 29, March 31, 1996 1995 -------- --------- Cash flows from operating activities: Net income (loss) $ (975) $ 919 Adjustments to reconcile net income (loss) to net cash used by operating activities: Deferred income taxes 1 250 Depreciation and amortization 4,866 4,536 Gain on distributorship transaction - (7,358) Increase (decrease) in cash from changes in working capital items, net of effects of business dispositions: Accounts receivable (866) 3,830 Inventories (2,671) (15,921) Prepaid expenses 84 1,844 Accounts payable (6,216) (13,002) Accrued expenses 4,494 3,326 Income taxes (831) (7,268) ------- -------- Net cash used by operating activities (2,114) (28,844) ------- -------- Cash flows from investing activities: Proceeds from distributorship transaction - 24,000 Additions to property, plant and equipment, net (3,491) (3,939) Other, net (125) (574) ------- -------- Net cash provided (used) by investing activities (3,366) 19,487 ------- -------- Cash flows from financing activities: Net borrowings under short-term credit facilities - 4,371 Proceeds from long-term obligations - 525 Payments on long-term debt and capital lease obligations (179) (322) Issuance of common stock 103 146 ------- -------- Net cash provided (used) by financing activities (76) 4,720 ------- -------- Effect of exchange rate changes on cash (22) 293 ------- -------- Net decrease in cash and equivalents (5,578) (4,344) Cash and equivalents at beginning of period 38,389 6,381 ------- -------- Cash and equivalents at end of period $32,811 $ 2,037 ======= ======== Supplemental disclosures of cash flow information: Interest paid $ 304 $ 792 Income taxes paid 245 7,582
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, 1995. Certain prior period amounts have been reclassified for consistent presentation with the current period presentation. 2. The results of operations for the three months ended March 29, 1996 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. The 1995 first quarter results include a pre-tax gain of $7.4 million, or $0.41 per share, from the Company's appointment in January 1995 of Inchape plc as exclusive distributor of Timberland[Registered trademark] products in the Asia/Pacific region, and the related sale of Timberland's Australian and New Zealand subsidiaries. 4. Inventories consist of the following (in thousands):
March 29, 1996 December 31, 1995 -------------- ----------------- Raw materials $ 10,564 $ 10,374 Work-in-process 4,433 5,494 Finished goods 168,070 164,768 -------- -------- $183,067 $180,636 ======== ========
5. New Accounting Pronouncements The Company has adopted the provisions of Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-lived assets and for Long-lived Assets to Be Disposed Of", effective January 1, 1996. SFAS No. 121 requires that long-lived assets and certain identifiable intangibles held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Adopting SFAS No. 121 had no material effect on the Company's consolidated financial statements. In October 1995, the Financial Accounting Standards Board issued SFAS No. 123, "Accounting for Stock-Based Compensation", which was adopted by the Company effective January 1, 1996. SFAS No. 123 requires expanded disclosures of stock-based compensation arrangements with employees and encourages (but does not require) compensation cost to be measured based on the fair value of the equity instrument awarded. Companies are permitted to continue to apply APB Opinion No. 25, which recognizes compensation cost based on the intrinsic value of the equity instrument awarded. The Company will continue to apply APB Opinion No. 25 to its stock-based compensation awards to employees and will disclose the required pro forma effect on net income and earnings per share in the 1996 annual consolidated financial statements. 9 Form 10-Q Page 7 THE TIMBERLAND COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 6. Legal Proceedings The Company is involved in various litigation and legal matters which have arisen in the ordinary course of business. Management believes that the ultimate resolution of any existing matter will not have a material adverse effect on the Company's consolidated financial statements. The Company and two of its officers and directors have been named as defendants in two actions filed in the United States District Court for the District of New Hampshire, one filed by Jerrold Schaffer on December 12, 1994, and the other filed by Gershon Kreuser on January 4, 1995. On April 24, 1995, the District Court granted plaintiffs' motion, assented to by defendants, to consolidate the two actions. On June 23, 1995, plaintiffs filed a consolidated amended complaint (the "Amended Complaint") with the District Court. The Amended Complaint alleges that defendants violated federal securities laws by making material misstatements and omissions in certain of the Company's public filings and statements in 1994. Specifically, the Amended Complaint alleges that such statements and omissions had the effect of artificially inflating the market price for the Company's Class A Common Stock until the disclosure by the Company on December 9, 1994 of its expectation that results for the fourth quarter were not likely to meet analysts' anticipated levels. Damages are unspecified. On March 18, 1996, the Court denied defendants' motion to dismiss the Amended Complaint. On March 19, 1996, the Court granted plaintiffs' motion for class certification for all purchasers of the Company's Class A Common Stock between May 12, 1994 and December 9, 1994. Management believes this action is without merit and intends to defend it vigorously. Accordingly, at this time, management does not expect the outcome of such litigation to have a material adverse effect on the Company's consolidated financial statements. 10 Form 10-Q Page 8 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 March 29, March 31, 1996 1995 --------- --------- Revenues 100.0 % 100.0 % Cost of goods sold 64.0 68.2 ----- ----- Gross profit 36.0 31.8 ----- ----- Operating expenses Selling 25.4 23.7 General and administrative 7.9 8.2 Amortization of goodwill .3 .3 ----- ----- Total operating expenses 33.6 32.2 ----- ----- Operating income (loss) 2.4 (.4) ----- ----- Other expense (income) Interest expense 3.8 3.6 Other, net (.1) (5.1) ----- ----- Total other expense (income) 3.7 (1.5) ----- ----- Income (loss) before income taxes (1.3) 1.0 Provision (benefit) for income taxes (.5) .4 ----- ----- Net income (loss) (.8)% .7 % ===== =====
Note: Percentages may not add due to rounding. 11 Form 10-Q Page 9 First Quarter 1996 Compared with First Quarter 1995 Revenues for the first quarter of 1996 were $127.7 million, a decrease of 9.8% compared to the $141.6 million reported in first quarter of 1995. The revenue decrease reflected a decline of 24.7% in domestic revenue, primarily as a result of fewer wholesale footwear unit sales, compared to the first quarter of 1995. The revenue decline was primarily attributable to a continued difficult retail environment and insufficient new product introductions for the current season. A substantial portion of the footwear unit sales decline was in performance sandal sales volume, in line with the rest of the industry, and in women's footwear sales volume, as styles have become more femine compared to the first quarter of 1995. The performance sandal decline and women's footwear decline accounted for approximately 50% and 30% of the total unit sales decline, respectively. The third factor behind the unit sales differential is that last year the Company initiated programs to encourage accounts to take boots in the first quarter rather than later in the year; no such programs were undertaken in 1996. The absence of these programs in the first quarter of 1996 accounted for almost 20% of the decline in the domestic footwear unit sales over last year's first quarter. International revenues for the first quarter of 1996 were $56.4 million, an increase of $9.5 million, or 20.2%, over the comparable prior year period, and comprised 44.2% of total first quarter 1996 revenues, up from 33.2% in the first quarter of 1995. The majority of the revenue increase was driven by our operations in Italy and the U.K., and by sales to international distributors. Footwear revenues decreased $11.9 million, or 11.3%, in the first quarter of 1996, compared to the same period in 1995 primarily as a result of fewer unit sales. Revenues attributable to apparel and accessories decreased $2.7 million, or 10.4% in the first quarter of 1996 compared to the same period in 1995 due to fewer unit sales. Retail revenues for the first quarter of 1996 were $23.3 million, representing 18.3% of total revenues in the current quarter, compared to 12.0% in the first quarter of 1995. Gross profit as a percentage of revenues for the first quarter of 1996 was 36.0%, compared to 31.8% for the first quarter of 1995. The improvement in gross margin is due primarily to sales mix, with higher margin retail and international revenues representing a larger portion of revenues, and to better utilization of factory outlets in selling excess, out of season, and factory defect products. Operating expenses were $42.9 million in the first quarter of 1996, down 5.8% from the $45.6 million reported in the first quarter of 1995. Operating expenses as a percentage of revenues in the first quarter of 1996 were 33.6%, compared with 32.2% in the first quarter of 1995. The dollar decrease compared to the prior year period was primarily attributable to reductions in general and administrative expense and in selling expense due to fewer unit sales. Interest expense for the first quarter of 1996 decreased by $.3 million to $4.8 million from the comparable period in 1995, due to a reduction in long-term debt and the absence of short-term borrowings during the first quarter of 1996. For the first quarter of 1995, other expense (income) included a non-recurring pre-tax gain of $7.4 million, or $0.41 per share, resulting from the Company's appointment on January 26, 1995 of Inchcape plc as the exclusive distributor of Timberland products throughout most of the Asia/Pacific region. The agreement included Inchcape's acquisition of the Company's Australian and New Zealand subsidiaries and future consideration provided to Inchcape for a total sum of $24 million. LIQUIDITY AND CAPITAL RESOURCES Cash used by operations during the first quarter of 1996 amounted to $2.1 million, compared to $28.8 million used during the same period in 1995. The improvement in net cash used by operations was primarily due to managing inventories to a lower level than last year. Although accounts receivable have increased $.6 million from year end 1995, days sales outstanding decreased to 68 days at March 29, 1996 days from 78 days at March 31, 1995. Inventories increased $2.4 million from December 31, 1995 and decline $46.2 million, or 20.2% from March 31, 1995. Inventory turns were 1.7 times for the first quarter of 1996, the same as in the first quarter of 1995. 12 Form 10-Q Page 10 During the first three months of 1996, $3.4 million of cash was used in investing activities compared to $19.5 million being provided in the same period in 1995, due primarily to $24 million of cash proceeds received from the agreement with Inchcape plc. Capital expenditures for the first quarter of 1996 of $3.5 million, compared to $3.9 million for the same period in 1995. During the first quarter of 1996, $.1 million of cash was used by financing activities compared to $4.7 million of cash provided in the first quarter of 1995. Short term borrowings accounted for $4.4 million of the cash provided by financing activities in 1995. The Company uses unsecured revolving and committed lines of credit as the primary sources of financing for its seasonal and other working capital requirements. The Company did not draw on its seasonal bank lines of credit during the first quarter of 1996 and does not expect to utilize its available bank lines of credit until well into the second quarter of 1996, when the Company intends to build inventory for the fall season. The Company's debt to capital ratio was 59.5% at March 29, 1996, compared to 59.3% at December 31, 1995 and 61.4% at March 31, 1995. Management believes that the Company's capital needs for 1996 will be met through its existing credit facilities and cash flows from operations without the need for additional permanent financing. However, as discussed in an exhibit to the Company's Form 10-K for the year ended December 31, 1995, entitled "Cautionary Statements for Purposes of the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995", several risks and uncertainties could cause the Company to need to raise additional capital through equity and/or debt financing. The availibility and terms of any such financing would be subject to prevailing market conditions and other factors at that time. 13 Form 10-Q Page 11 Part II Other Information Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits
Exhibit Description ------- ----------- 27 Financial Data Schedule
(b) Reports on Form 8-K -- There were no reports on Form 8-K filed during the period covered by this report. 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 13, 1996 Keith D. Monda --------------------------- Keith D. Monda Senior Vice President - Finance and Administration and Chief Financial Officer Date: May 13, 1996 Dennis W. Hagele --------------------------- Dennis W. Hagele Vice President Finance and Corporate Controller (Chief Accounting Officer) EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S CONDENSED CONSOLIDATED BALANCE SHEET AS OF MARCH 29, 1996 AND THE CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 29, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1996 JAN-01-1996 MAR-29-1996 32,811 0 99,495 3,066 183,067 336,382 99,207 47,181 418,586 68,208 199,264 0 0 110 140,985 418,586 127,684 127,684 81,659 81,659 421 281 4,798 (1,573) (598) (975) 0 0 0 (975) (.09) 0
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