EX-99.1 2 a05-13575_2ex99d1.htm EX-99.1

Exhibit 99.1

 

 

P r e s s R e l e a s e

 

FOR IMMEDIATE RELEASE

 

CONTACT:

 

Susan Ostrow

 

 

 

 

Director, Investor Relations

 

 

 

 

(603) 773-1212

 

TIMBERLAND REPORTS SECOND QUARTER RESULTS

 

STRATHAM, NH, July 26, 2005 – The Timberland Company (NYSE: TBL) today reported second quarter net income of $6.3 million and diluted earnings per share (EPS) of $0.09, compared with second quarter 2004 net income of $7.9 million and diluted EPS of $0.11.

 

•                  Second quarter revenue increased 4.4% to a record $240.3 million, driven by gains in international markets which offset moderate declines in the U.S. International results (+14.9% or +10.8% in constant dollars) were driven by strong constant dollar sales gains in Europe and Asia. U.S. revenues declined 2.5%, as anticipated decreases in footwear sales offset double-digit gains in Timberland® apparel. Overall revenue growth benefited from favorable foreign exchange rate changes – which added $3.7 million (or 1.6%) to second quarter 2005 revenue.

 

•                  Second quarter results were supported by global gains in footwear and apparel and accessories. Global footwear revenues expanded 2.4% to $177.6 million, driven by growth in outdoor performance, kids’, Timberland PRO® series and men’s casual footwear. Global apparel and accessories revenue grew 9.0% to $59.6 million, reflecting gains in U.S. and international markets.

 

•                  Revenue growth was balanced by channel. Global wholesale revenue expanded 4.4% to $168.8 million. Worldwide consumer direct revenue also expanded 4.4% to $71.5 million, supported by a 0.7% increase in global retail comparable store sales.

 

•                  Operating profit for the quarter decreased 30.4% to $8.4 million. Moderate gross profit gains were offset by higher growth in operating expenses, in part reflecting investments in international retail infrastructure and global organizational capability over the past year. Operating margin decreased 170 basis points to 3.5%, impacted by higher levels of off-price sales and product mix impacts in the Company’s U.S. business. For the quarter, foreign exchange rate changes contributed approximately $0.5 million to operating profit. EPS

 

1


 

for the quarter decreased $0.02 to $0.09. Despite anticipated pressure on second quarter results, Timberland delivered record profit levels for the first half of 2005 – with operating profits up 18% and diluted EPS up 31% versus the prior-year period.

 

•                  During the quarter, the Company continued to support its share repurchase program, buying back 1.0 million shares at a total cost of $37.2 million. The Company currently has 2.6 million shares remaining under its existing share repurchase program, which was increased in conjunction with its 2-for-1 stock split on May 2, 2005.

 

•                  Timberland ended the quarter with $189.8 million in cash and no debt outstanding. Timberland’s strong recent earnings growth and disciplined approach to asset management supported an increase in annual return on capital from 31.0% to 32.3%. Timberland’s inventory at the end of the second quarter of 2005 was $216.5 million, 26.6% higher than at the end of the 2004 second quarter. As previously disclosed, second quarter 2005 reflected the Company’s conversion to new sourcing arrangements with independent suppliers, resulting in an earlier transfer of title for certain third party shipments. The Company estimates that second quarter 2004 inventory and accounts payable balances would have increased by approximately $32.8 million, or 6.3% and 21.5%, respectively, if similar arrangements had been in place last year.

 

•                  For the balance of the year, the Company continues to target low to mid single-digit revenue growth and is anticipating relatively flat operating profits in its base business. It expects that the third quarter will be the more challenging quarter from a profit perspective, driven by expected pressure on U.S. sales and gross margins that will likely yield an overall decline in Timberland’s third quarter gross margin in the range of 100 basis points. These base business financial objectives exclude restructuring costs related to the previously announced consolidation of manufacturing operations in the Dominican Republic and related closure of Timberland’s manufacturing facility in Puerto Rico. As previously disclosed, Timberland estimates that one-time pre-tax restructuring costs related to its closure of its Puerto Rico manufacturing facility will be in the range of $2.5 million in the third quarter and $3.0 million in the fourth quarter.

 

Jeffrey B. Swartz, Timberland’s President and Chief Executive Officer, stated, “Timberland’s second quarter results capped a solid start to 2005 – reflected in record first half revenues and profits. These gains were driven by continued global expansion of our brand franchise, reflecting successful efforts to develop our brand portfolio through an enhanced focus on consumer segment development.”

 

2


 

“We are pleased with our progress to date and believe we are on track towards delivering strong full year financial gains. We will continue to leverage strategies focused on delivering innovative and purposeful products, expanding Timberland’s global presence and executing with distinction to capture the full potential we see for the Timberland® brand. In addition, we plan to extend our brand building and operational capabilities to capture growth opportunities related to new brand growth platforms, such as Timberland Boot Company and Mion™, to enable us to expand our potential as an enterprise.”

 

Note that comments made by the Company and Mr. Swartz are Timberland’s performance targets, based on current expectations. These comments are forward-looking, and actual results may differ materially.

 

As previously announced, Timberland will be hosting a conference call to discuss second quarter results today at 8:25 AM Eastern Time. Interested parties may listen to this call through the investor relations section of the Company’s website, www.timberland.com, or by calling (617) 614-4907 and providing access code number 79043932. Replays of this conference call will be available through the investor relations section of the Company’s website.

 

Timberland (NYSE: TBL) is a global leader in the design, engineering and marketing of premium-quality footwear, apparel and accessories for consumers who value the outdoors and their time in it. TimberlandÒ products offer quality workmanship and detailing and are built to withstand the elements of nature. The Company’s products can be found in leading department and specialty stores as well as Timberland® retail stores throughout North America, Europe, Asia, Latin America, South Africa and the Middle East. More information about Timberland is available in the Company’s reports filed with the Securities and Exchange Commission (SEC).

 

This press release contains certain forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements, which include statements regarding The Timberland Company’s future financial results, are subject to risks, uncertainties and assumptions and are not guarantees of future financial performance or expected benefits. These risks, uncertainties and assumptions could cause the results of The Timberland Company to be materially different from any future results or expected benefits expressed or implied by such forward-looking statements.

 

3


 

Such risks, uncertainties and assumptions include, but are not limited to the Company’s ability to:  (i) successfully market and sell its products in a highly competitive industry and in view of changing consumer trends, consumer acceptance of products and other factors affecting retail market conditions; (ii) procure a majority of its products from independent manufacturers; (iii) manage its foreign exchange rate risks; and (iv) other factors, including those detailed from time to time in The Timberland Company’s filings made with the SEC. The Timberland Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.

 

This press release also includes a discussion of constant dollar revenue growth, a non-GAAP measure. As required by SEC rules, we have provided a reconciliation of this measure on an attached table that follows our financial statements. Additional required information is located in the Form 8-K furnished to the SEC on July 26, 2005.

 

# # #

 

4


 

THE TIMBERLAND COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

(Unaudited)

 

 

 

July 1,
2005

 

July 2,
2004

 

Dec. 31,
2004

 

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

Cash and equivalents

 

$

189,831

 

$

163,631

 

$

309,116

 

Accounts receivable, net

 

130,638

 

131,926

 

155,024

 

Inventory

 

216,483

 

170,931

 

128,311

 

Prepaid expense

 

29,075

 

25,618

 

27,659

 

Deferred income taxes

 

14,545

 

19,236

 

28,937

 

Derivative assets

 

6,360

 

—

 

—

 

Total current assets

 

586,932

 

511,342

 

649,047

 

 

 

 

 

 

 

 

 

Net property, plant and equipment

 

76,718

 

75,947

 

78,979

 

 

 

 

 

 

 

 

 

Goodwill

 

14,163

 

14,163

 

14,163

 

 

 

 

 

 

 

 

 

Intangible assets

 

5,122

 

3,809

 

5,381

 

 

 

 

 

 

 

 

 

Other assets, net

 

10,061

 

9,768

 

9,940

 

 

 

 

 

 

 

 

 

Total assets

 

$

692,996

 

$

615,029

 

$

757,510

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

Accounts payable

 

$

89,242

 

$

40,657

 

$

52,370

 

Accrued expense and other current liabilities

 

72,862

 

65,511

 

124,038

 

Income taxes payable

 

8,158

 

2,422

 

34,737

 

Derivative liabilities

 

—

 

9,212

 

15,047

 

Total current liabilities

 

170,262

 

117,802

 

226,192

 

 

 

 

 

 

 

 

 

Other liabilities

 

14,394

 

11,299

 

12,543

 

 

 

 

 

 

 

 

 

Deferred income taxes

 

5,814

 

8,419

 

7,268

 

 

 

 

 

 

 

 

 

Stockholders’ equity

 

502,526

 

477,509

 

511,507

 

 

 

 

 

 

 

 

 

Total liabilities and stockholders’ equity

 

$

692,996

 

$

615,029

 

$

757,510

 

 

5


 

THE TIMBERLAND COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Amounts in thousands, except per share data)

(Unaudited)

 

 

 

For the
Three Months Ended

 

For the
Six Months Ended

 

 

 

July 1,
2005

 

July 2,
2004

 

July 1,
2005

 

July 2,
2004

 

Revenue

 

$

240,269

 

$

230,210

 

$

594,480

 

$

551,987

 

Cost of goods sold

 

122,289

 

115,713

 

289,339

 

271,039

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

117,980

 

114,497

 

305,141

 

280,948

 

 

 

 

 

 

 

 

 

 

 

Operating expense

 

 

 

 

 

 

 

 

 

Selling

 

85,238

 

81,316

 

185,977

 

176,668

 

General and administrative

 

24,340

 

21,101

 

48,842

 

44,442

 

Total operating expense

 

109,578

 

102,417

 

234,819

 

221,110

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

8,402

 

12,080

 

70,322

 

59,838

 

 

 

 

 

 

 

 

 

 

 

Other income

 

 

 

 

 

 

 

 

 

Interest income, net

 

1,063

 

206

 

2,164

 

440

 

Other, net

 

148

 

(87

)

1,138

 

206

 

Total other income

 

1,211

 

119

 

3,302

 

646

 

 

 

 

 

 

 

 

 

 

 

Income before provision for income taxes

 

9,613

 

12,199

 

73,624

 

60,484

 

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

3,268

 

4,331

 

25,032

 

21,472

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

6,345

 

$

7,868

 

$

48,592

 

$

39,012

 

 

 

 

 

 

 

 

 

 

 

Earnings per share

 

 

 

 

 

 

 

 

 

Basic

 

$

0.09

 

$

0.11

 

$

0.72

 

$

0.56

 

Diluted

 

$

0.09

 

$

0.11

 

$

0.71

 

$

0.54

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares outstanding

 

 

 

 

 

 

 

 

 

Basic

 

66,913

 

70,197

 

67,250

 

69,992

 

Diluted

 

68,376

 

72,102

 

68,698

 

71,892

 

 

Earnings per share and weighted-average shares have been restated to reflect the 2-for-1 stock split in May 2005.

 

6


 

THE TIMBERLAND COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

(Unaudited)

 

 

 

For the
Six Months Ended

 

 

 

July 1,
2005

 

July 2,
2004

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

48,592

 

$

39,012

 

Adjustments to reconcile net income to net cash provided/(used) by operating activities:

 

 

 

 

 

Deferred income taxes

 

6,265

 

6,752

 

Amortization of deferred compensation

 

1,323

 

1,493

 

Depreciation and amortization

 

12,451

 

11,237

 

Loss on disposal of property, plant & equipment

 

71

 

60

 

Tax benefit from stock option plans

 

4,880

 

9,174

 

Increase/(decrease) in cash from changes in working capital items:

 

 

 

 

 

Accounts receivable

 

17,110

 

(7,581

)

Inventory

 

(89,945

)

(51,451

)

Prepaid expense

 

(2,993

)

251

 

Accounts payable

 

38,809

 

3,631

 

Accrued expense

 

(48,649

)

(49,893

)

Income taxes

 

(26,602

)

(25,047

)

Other liability

 

1,170

 

—

 

Net cash used by operating activities

 

(37,518

)

(62,362

)

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Additions to property, plant and equipment, net

 

(9,528

)

(10,696

)

Other, net

 

(458

)

(1,110

)

Net cash used by investing activities

 

(9,986

)

(11,806

)

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Common stock repurchases

 

(80,349

)

(20,145

)

Issuance of common stock

 

13,546

 

16,285

 

Net cash used by financing activities

 

(66,803

)

(3,860

)

 

 

 

 

 

 

Effect of exchange rate changes on cash

 

(4,978

)

(144

)

Net decrease in cash and equivalents

 

(119,285

)

(78,172

)

Cash and equivalents at beginning of period

 

309,116

 

241,803

 

Cash and equivalents at end of period

 

$

189,831

 

$

163,631

 

 

7


 

THE TIMBERLAND COMPANY

REVENUE ANALYSIS

(Amounts in Thousands)

(Unaudited)

 

 

 

For the Three Months Ended

 

For the Six Months Ended

 

 

 

July 1,
2005

 

July 2,
2004

 

%
Change

 

July 1,
2005

 

July 2,
2004

 

%
Change

 

Revenue by Segment:

 

 

 

 

 

 

 

 

 

 

 

 

 

US Wholesale

 

$

100,524

 

$

104,432

 

(3.7

)

$

217,342

 

$

215,780

 

0.7

 

US Consumer Direct

 

34,985

 

34,590

 

1.1

 

73,304

 

72,367

 

1.3

 

Total US

 

135,509

 

139,022

 

(2.5

)

290,646

 

288,147

 

0.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

International

 

104,760

 

91,188

 

14.9

 

303,834

 

263,840

 

15.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue by Product

 

 

 

 

 

 

 

 

 

 

 

 

 

Footwear

 

177,598

 

173,360

 

2.4

 

443,632

 

412,741

 

7.5

 

Apparel and accessories

 

59,604

 

54,701

 

9.0

 

144,213

 

134,028

 

7.6

 

Royalty and other

 

3,067

 

2,149

 

42.7

 

6,635

 

5,218

 

27.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue by Channel

 

 

 

 

 

 

 

 

 

 

 

 

 

Wholesale

 

168,799

 

161,756

 

4.4

 

444,412

 

408,728

 

8.7

 

Consumer Direct

 

71,470

 

68,454

 

4.4

 

150,068

 

143,259

 

4.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comparable Store Sales

 

 

 

 

 

 

 

 

 

 

 

 

 

Domestic Retail

 

1.3

%

(1.3

)%

 

 

2.6

%

2.4

%

 

 

Global Retail

 

0.7

%

0.2

%

 

 

3.1

%

2.9

%

 

 

 

8


 

THE TIMBERLAND COMPANY

RECONCILIATION OF TOTAL AND INTERNATIONAL REVENUE INCREASES

TO CONSTANT DOLLAR REVENUE INCREASES

(Amounts in Millions)

(Unaudited)

 

Total Company Revenue Reconciliation:

 

 

 

For the Three Months
Ended July 1, 2005

 

For the Six Months
Ended July 1, 2005

 

 

 

$ Change

 

% Change

 

$ Change

 

% Change

 

Revenue increase (GAAP)

 

10.1

 

4.4

 

42.5

 

7.7

 

Increase due to foreign exchange rate changes

 

3.7

 

1.6

 

11.1

 

2.0

 

Revenue increase in constant dollars

 

6.4

 

2.8

 

31.4

 

5.7

 

 

International Revenue Reconciliation:

 

 

 

For the Three Months
Ended July 1, 2005

 

For the Six Months
Ended July 1, 2005

 

 

 

$ Change

 

% Change

 

$ Change

 

% Change

 

Revenue increase (GAAP)

 

13.6

 

14.9

 

40.0

 

15.2

 

Increase due to foreign exchange rate changes

 

3.7

 

4.1

 

11.1

 

4.3

 

Revenue increase in constant dollars

 

9.9

 

10.8

 

28.9

 

10.9

 

 

9