-----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, fs2pIAnzdfiJTfd9xrTQFH40bB67VQlI7UHGPhE4AnNISY54FGe3zlGbK2h4bqTL z1ieCZRBL2pOw00d9JI9Dg== 0000950135-94-000654.txt : 19941117 0000950135-94-000654.hdr.sgml : 19941117 ACCESSION NUMBER: 0000950135-94-000654 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940930 FILED AS OF DATE: 19941114 SROS: NYSE 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: 94560129 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 September 30, 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 Identification Number) incorporation or organization) 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 such filing requirements for the past 90 days. Yes X No --- --- On October 28, 1994, 7,669,121 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 (unaudited) - - ---------------------------- Condensed Consolidated Balance Sheets - 2-3 September 30, 1994 and December 31, 1993 Condensed Consolidated Statements of Income - 4 For the three and nine months ended September 30, 1994 and October 1, 1993 Condensed Consolidated Statements of Cash Flows - 5 For the nine months ended September 30, 1994 and October 1, 1993 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' 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 September 30, 1994, and the related condensed consolidated statements of income and cash flows for the three-month and nine-month periods ended September 30, 1994 and October 1, 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, LLP Boston, Massachusetts October 25, 1994 4 Form 10-Q Page 2 Part I Financial Information - - ---------------------------- THE TIMBERLAND COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS ASSETS (Dollars in Thousands) (Unaudited)
September 30, December 31, 1994 1993 ------------- ----------- Current assets Cash and equivalents $ 1,183 $ 3,281 Accounts receivable, net 193,315 93,226 Inventories 221,394 111,380 Prepaid expenses 11,856 7,571 Deferred and refundable income taxes 9,075 5,625 -------- -------- Total current assets 436,823 221,083 -------- -------- Property, plant and equipment, at cost 97,278 79,145 Less accumulated depreciation and amortization (42,759) (33,530) -------- -------- Net property, plant and equipment 54,519 45,615 -------- -------- Excess of cost over fair value of net assets acquired, net 24,274 18,157 -------- -------- Other assets, net 5,152 5,756 -------- -------- $520,768 $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)
September 30, December 31, 1994 1993 ------------- ----------- Current liabilities Notes payable $109,125 $ 10,061 Current maturities of long-term obligations 603 682 Accounts payable 48,604 32,526 Accrued expenses Payroll and related 10,240 8,873 Interest and other 30,207 9,609 Income taxes payable 13,616 3,672 -------- -------- Total current liabilities 212,395 65,423 -------- -------- Long-term obligations, less current maturities 155,399 90,809 -------- -------- Deferred income taxes 7,304 6,016 -------- -------- 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; 7,687,178 shares issued at September 30, 1994 and 7,630,556 shares at December 31, 1993 77 76 Class B common stock, $.01 par value (10 votes per share); 15,000,000 shares authorized; 3,237,121 shares issued and outstanding at September 30, 1994 and 3,237,598 shares at December 31, 1993 32 32 Additional paid-in capital 56,819 55,805 Retained earnings 88,961 74,106 Cumulative translation adjustment (99) (1,536) Less treasury stock at cost, 18,369 shares at September 30, 1994 and 18,513 shares at December 31, 1993 (120) (120) -------- -------- 145,670 128,363 -------- -------- $520,768 $290,611 ======== ========
See accompanying notes to condensed consolidated financial statements. 6 Form 10-Q Page 4 THE TIMBERLAND COMPANY CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Amounts in Thousands, Except Per Share Data) (Unaudited)
For the For the Three Months Ended Nine Months Ended --------------------------- ---------------------------- September 30, October 1, September 30, October 1, 1994 1993 1994 1993 ------------ ---------- ------------- ---------- Net sales $222,148 $140,261 $457,185 $295,716 Cost of goods sold 145,668 90,415 308,065 187,817 -------- -------- -------- -------- Gross profit 76,480 49,846 149,120 107,899 -------- -------- -------- -------- Operating expenses Selling 33,676 22,961 83,566 56,234 General and administrative 11,325 7,489 30,949 21,840 Amortization of goodwill 367 194 811 581 -------- -------- -------- -------- Total operating expenses 45,368 30,644 115,326 78,655 -------- -------- -------- -------- Operating income 31,112 19,202 33,794 29,244 -------- -------- -------- -------- Other expense (income) Interest expense 4,504 1,771 9,829 4,369 Other, net 272 (133) 6 679 -------- -------- -------- -------- Total other expense 4,776 1,638 9,835 5,048 -------- -------- -------- -------- Income before income taxes 26,336 17,564 23,959 24,196 -------- -------- -------- -------- Provision for income taxes 10,007 6,323 9,104 8,711 -------- -------- -------- -------- Net income $ 16,329 $ 11,241 $ 14,855 $ 15,485 ======== ======== ======== ======== Earnings per share $ 1.45 $ 1.00 $ 1.32 $ 1.39 ======== ======== ======== ======== Weighted average shares outstanding 11,252 11,261 11,228 11,161 ======== ======== ======== ========
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 Nine Months Ended ----------------- September 30, October 1, 1994 1993 ------------- ------------ Cash flows from operating activities: Net income $ 14,855 $ 15,485 Adjustments to reconcile net income to net cash used in operating activities: Deferred income taxes 1,288 109 Depreciation and amortization 10,674 7,419 Increase (decrease) in cash from changes in working capital items, net of effects of acquisition: Accounts receivable (101,266) (61,399) Inventories (102,060) (26,442) Prepaid expenses (3,681) (5,098) Accounts payable 15,856 12,851 Accrued expenses 21,158 8,066 Income taxes 6,539 4,349 -------- -------- Net cash used in operating activities (136,637) (44,660) -------- -------- Cash flows from investing activities: Additions to property, plant and equipment, net (16,548) (17,010) Acquisition of Italian distributor (14,086) - Other, net 667 (666) -------- -------- Net cash used in investing activities (29,967) (17,676) -------- -------- Cash flows from financing activities: Net borrowings under short-term credit facilities 99,075 43,738 Proceeds from long-term obligations 65,000 20,000 Payments on long-term debt and capital lease obligations (505) (2,441) Issuance of common stock 1,015 336 -------- -------- Net cash provided by financing activities 164,585 61,633 -------- -------- Effect of exchange rate changes on cash (79) 39 -------- -------- Net decrease in cash and equivalents (2,098) (664) Cash and equivalents at beginning of period 3,281 1,220 -------- -------- Cash and equivalents at end of period $ 1,183 $ 556 ======== ======== Supplemental disclosures of cash flow information: Interest paid $ 6,195 $ 3,265 Income taxes paid 1,322 4,250
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 period amounts have been reclassified for consistent presentation with the current period. 2. The results of operations for the nine months ended September 30, 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):
September 30, 1994 December 31, 1993 ------------------ ----------------- Raw materials $ 19,859 $ 11,108 Work-in-process 18,129 13,060 Finished goods 183,406 87,212 -------- -------- $221,394 $111,380 ======== ========
4. Indebtedness On April 15, 1994, the Company finalized a private placement with a group of lenders for $65 million of senior unsecured notes (the "Notes") dated April 1, 1994 and maturing on April 15, 2000. The Notes bear interest at a fixed rate of 7.16% per annum. The proceeds were 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, matures on 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 (5.53% at September 30, 1994). 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. The Company is finalizing a private placement with a group of lenders for $106 million of senior unsecured notes. These notes are expected to bear interest at a fixed rate of 8.94% per annum and mature in seven years. The proceeds are expected to be used to repay existing indebtedness. The transaction is expected to close in the fourth quarter of 1994. 9 Form 10-Q Page 7 THE TIMBERLAND COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 5. Acquisition of Italian Distributor In April 1994, the Company entered into a Distributorship Termination Agreement (the "Agreement") with its Italian distributor, which terminated all distribution rights of the distributor on May 31, 1994. In accordance with the Agreement, the Company also acquired certain assets of the distributor. Effective on the termination date, Timberland assumed the distribution of its own products in Italy. This transaction has been accounted for as a purchase and, accordingly, the results of operations of the Company's Italian business have been included in the consolidated statements of income from the termination date. The results of the Italian operations are not significant to the consolidated results of operations, and accordingly, pro forma data has been omitted. The total purchase price of $14.1 million exceeds the fair value of net assets acquired by $6.8 million. This excess is being amortized on a straight-line basis over 10 years. 6. Commitment Effective March 31, 1994, the Company entered into an operating lease for a 246,000 square feet facility in Stratham, New Hampshire, which will become its new corporate headquarters during the fourth quarter of 1994. The lease expires in July 1999 and has a fixed annual rental rate of $.7 million. The Company's existing headquarters facility is also a major distribution center which will continue to be operational. 7. Litigation On June 21, 1994, the plaintiff in the stockholder lawsuit filed on February 15, 1994 against the Company and one of its officers agreed voluntarily to withdraw the action, and the case was dismissed. 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 income as percentages of net sales for the periods indicated.
For the For the Three Months Ended Nine Months Ended --------------------------- -------------------------- September 30, October 1, September 30, October 1, 1994 1993 1994 1993 ------------- ---------- ------------- ---------- Net sales 100.0% 100.0% 100.0% 100.0% Cost of goods sold 65.6 64.5 67.4 63.5 ----- ----- ----- ----- Gross profit 34.4 35.5 32.6 36.5 ----- ----- ----- ----- Operating expenses Selling 15.2 16.4 18.3 19.0 General and administrative 5.1 5.3 6.8 7.4 Amortization of goodwill .1 .1 .1 .2 ----- ----- ----- ----- Total operating expenses 20.4 21.8 25.2 26.6 ----- ----- ----- ----- Operating income 14.0 13.7 7.4 9.9 ----- ----- ----- ----- Other (income) expense Interest 2.0 1.3 2.1 1.5 Other, net .1 (.1) .1 .2 ----- ----- ----- ----- Total other expenses 2.1 1.2 2.2 1.7 ----- ----- ----- ----- Income before income taxes 11.9 12.5 5.2 8.2 Provision for income taxes 4.5 4.5 1.9 3.0 ----- ----- ----- ----- Net income 7.4% 8.0% 3.3% 5.2% ===== ===== ===== =====
Third Quarter 1994 Compared with Third Quarter 1993 - - --------------------------------------------------- Net sales for the third quarter of 1994 were $222.1 million, an increase of 58.4% over the $140.3 million reported in the same quarter of 1993. This increase was primarily attributable to an overall increase in the number of footwear, apparel and accessory units sold offset by a price reduction, instituted subsequent to the third quarter of 1993, on certain products designed to improve the price/ value proposition for the consumer. 11 Form 10-Q Page 9 Third Quarter 1994 Compared with Third Quarter 1993 (continued) - - --------------------------------------------------- Gross profit as a percentage of net sales for the quarter ended September 30, 1994 was 34.4% as compared to 35.5% for the comparable period in 1993. The change resulted principally from a price reduction for certain footwear and apparel products offset in part by product cost reductions. While overall operating expenses increased to $45.4 million in the third quarter of 1994 from $30.6 million in the third quarter of 1993, total operating expenses as a percentage of net sales in 1994 decreased to 20.4% versus 21.8% 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 for the third quarter of 1994 increased by $2.7 million over the comparable period in 1993, primarily as a result of increased borrowings and higher interest rates. Nine Months 1994 Compared with Nine Months 1993 - - ----------------------------------------------- Net sales for the nine months of 1994 were $457.2 million, an increase of 54.6% over the $295.7 million reported in the comparable period in 1993. This increase in net sales was attributable primarily to an overall increase in the number of footwear, apparel and accessory units sold. Gross profit as a percentage of net sales for the nine months of 1994 was 32.6%, as compared to 36.5% for the comparable period in 1993. The decrease is attributable primarily to price reductions instituted subsequent to the third quarter of last year. Total operating expenses for the nine months of 1994 increased to $115.3 million from $78.7 million for the comparable period in 1993, principally as a result of increased sales and marketing expenditures and the Company's investment in worldwide infrastructure to support sales growth. As a percentage of net sales, total operating expenses decreased to 25.2% in 1994 from 26.6% in 1993. Interest expense for the first nine months of 1994 increased by $5.5 million over the comparable period in 1993, primarily as a result of increased borrowings and higher interest rates. 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 on April 15, 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, subject to a borrowing base formula. (see notes to condensed consolidated financial statements.) In addition, the Company is finalizing a private placement with a group of lenders for $106 million of senior unsecured notes (the "Notes"). The Notes are expected to bear interest at a fixed rate of 8.94% per annum and mature in seven years. The proceeds are expected to be used to repay existing indebtedness. The transaction is expected to close in the fourth quarter of 1994. Management believes that such facilities, and the ability to obtain additional financing, together with cash from operations, will provide the funds necessary to support the Company's business in the foreseeable future. 12 Form 10-Q Page 10 LIQUIDITY AND CAPITAL RESOURCES (continued) - - ------------------------------- At September 30, 1994, the Company had working capital of $224.4 million versus $155.7 million at December 31, 1993 and $119.7 million at October 1, 1993. As a result of increased sales, accounts receivable have grown to $193.3 million at September 30, 1994 compared to $115.3 million at October 1, 1993. Days sales outstanding at September 30, 1994 were 78 days compared to 79 days at October 1, 1993. Inventories have increased by $110.0 million and $124.6 million since year end 1993 and October 1, 1993, respectively, in support of anticipated sales. Sales for the third quarter of 1994 grew at a slower rate than the Company had anticipated causing inventory to be higher than planned. A majority of this inventory consists of classic Timberland models in oversupply that Management expects will be sold in the normal course of business. The increase in the level of total borrowings since December 31, 1993 is due primarily to the higher inventory and receivables levels. The Company's short-term financing requirements have historically reached a peak during the third quarter in response to the seasonal pattern of demand. As a result of the increase in overall borrowings, the Company's debt to capital ratio rose to 65% at September 30, 1994 compared to 44% and 48% at December 31, 1993 and October 1, 1993, respectively. 13 Form 10-Q Page 11 Part II Other Information - - ------------------------- Item 1. Legal Proceedings. In GERMANO v. THE TIMBERLAND COMPANY et al, the plaitiff alleged material misstatements and omissions in public filings and statements made by the Company in 1993. On June 21, 1994, the plaintiff agreed voluntarily to withdraw the action, and the case was dismissed. 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: November 14, 1994 Keith D. Monda ----------------- ------------------------- Keith D. Monda Senior Vice President - Finance and Administration and Chief Financial Officer Date: November 14, 1994 Dennis W. Hagele ----------------- ------------------------- Dennis W. Hagele Vice President Finance and Corporate Controller (Chief Accounting Officer) EX-27 2 ARTICLE 5 FINANCIAL DATA SCHEDULES
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S CONDENSED CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1994 AND THE CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000814361 THE TIMBERLAND COMPANY 1,000 9-MOS DEC-31-1994 SEP-30-1994 1,183 0 193,315 0 221,394 436,823 97,278 42,759 520,768 212,395 0 109 0 0 145,561 520,768 457,185 457,185 308,065 308,065 115,332 0 9,829 23,959 9,104 14,855 0 0 0 14,855 1.32 1.32
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