EX-99.1 2 a6375448_ex991.htm EXHIBIT 99.1

Exhibit 99.1

Timberland Reports Second-Quarter 2010 Results

STRATHAM, N.H.--(BUSINESS WIRE)--July 28, 2010--The Timberland Company (NYSE: TBL) today reported a second-quarter 2010 net loss of $23.5 million and a diluted loss per share of ($0.44). This includes a $13.2 million non-cash, pre-tax charge for the impairment of certain goodwill and intangible assets. These results compare to a second-quarter 2009 net loss of $19.2 million and diluted earnings per share of ($0.34).

Second-Quarter 2010 Results Summary:

  • Revenue increased 5.1% to $189.0 million compared to the prior year period, reflecting growth across North America, Asia, and Europe.
  • North America revenue increased 6.6% to $92.0 million compared to the prior year period, driven by growth in apparel and accessories. Europe revenue increased 1.4% to $66.8 million versus 2009 second-quarter levels, and increased 5.7% on a constant dollar basis. Double-digit growth in Italy, Germany, and Scandinavia was partially offset by declines in the UK and France as well as the impact from the strengthening of the U.S. Dollar. Asia revenue increased 9.6% to $30.2 million compared to the prior year period, and increased 4.8% on a constant dollar basis. Favorable foreign exchange rates, along with the continuation of significant growth in Taiwan and China compared to the prior year period, were partially offset by declines in the Asia distributor business.
  • Global footwear revenue increased 3.7% to $131.6 million from the second quarter of 2009, driven primarily by increased sales of our Timberland PRO® footwear in North America and a strong performance by the Europe wholesale business, partially offset by weakness in Europe retail stores. Apparel and accessories revenue increased 10.2% to $52.1 million compared to the prior year period, due to increased sales of SmartWool® accessories in North America and Timberland® brand apparel in Asia retail stores, partially offset by softness in Europe. Royalty and other revenue decreased 3.8% to $5.3 million compared to the prior year period primarily due to a decline in licensed kids’ apparel in North America.
  • Global wholesale revenue was up 8.3% to $117.5 million compared to the prior year period, due to double-digit growth in North America and Europe, partially offset by declines in Asia. Worldwide consumer direct revenue was flat compared to the prior year period, as improved comparable store sales in Asia and the net addition of 8 new Asia retail stores since the second quarter of 2009 were offset by declines in Europe and North America. Overall, comparable store sales were flat versus the second quarter of 2009. The Company had 224 stores, shops, and outlets worldwide at the end of the second quarter of 2010 compared to 220 at the end of the second quarter of 2009.
  • Operating loss for the second quarter of 2010 was $33.3 million compared to an operating loss of $36.4 million in the prior year period. A significant improvement in gross margin due primarily to favorable pricing and channel mix as well as lower input costs was partially masked by a non-cash impairment charge of $13.2 million primarily related to certain goodwill and intangible assets of the IPATH® and howies® brands.
  • In the second quarter of 2010, the effective tax rate was 29.0% compared to 44.3% in the second quarter of 2009.
  • In connection with its stock buyback program, the Company repurchased approximately 1.3 million shares in the second quarter of 2010 at a cost of approximately $25.0 million.
  • The Company ended the quarter with $237.8 million in cash and no debt. Accounts receivable decreased 13.3% to $86.8 million compared to the prior year period. Inventory at quarter end was $177.2 million, down 1.8% versus 2009 second-quarter levels, reflecting the Company’s continued focus on working capital.

Jeffrey B. Swartz, Timberland’s President and Chief Executive Officer, stated, “We are pleased to report revenue growth and gross margin improvement in all three regions. These results were achieved by focusing on our core outdoor equities and executing against a consistent strategy to strengthen our brand globally. We are optimistic about the progress that we are making, despite ongoing cost pressures and macroeconomic uncertainty in key markets. While non-cash charges impacted our profitability for the quarter, our core business saw marked improvement, a clear indication that our product and brand initiatives are continuing to gain traction and that Timberland is positioned for long-term success.”

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

As previously announced, the Company 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 706.643.2916 and providing access code number 65648084. 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. Timberland markets products under the Timberland®, Timberland PRO®, SmartWool®, Timberland Boot Company®, howies®, Mountain Athletics® and IPATH® brands, all of which offer quality workmanship and detailing and are built to withstand the elements of nature. Timberland’s products can be found in leading department and specialty stores as well as Timberland® retail stores throughout North America, Europe, Asia, Latin America, Africa and the Middle East. More information about Timberland is available in its reports filed with the Securities and Exchange Commission (SEC).

Certain statements in this press release including, without limitation, the statement by Mr. Swartz above, may be forward looking or “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 Timberland’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 Timberland’s results to be materially different from any future results or expected benefits expressed or implied by such forward-looking statements. Such risks, uncertainties and assumptions include, but are not limited to: (i) Timberland’s ability to 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) Timberland’s ability to execute key strategic initiatives; (iii) Timberland’s ability to procure a majority of its products from independent manufacturers; (iv) changes in foreign exchange rates; (v) Timberland’s ability to obtain adequate materials at competitive prices; and (vi) other factors, including those detailed from time to time in Timberland’s most recent Annual Report on Form 10-K, Quarterly Report on Form 10-Q and other filings we make with the SEC. Timberland undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

This press release includes discussion of constant dollar revenue change (which excludes the impact of changes in foreign currency exchange rates), which is a non-GAAP measure. As required by SEC rules, the Company has provided reconciliations of this measure on attached tables that follow its financial statements. Additional required information regarding this non-GAAP measure is located in the Form 8-K furnished to the SEC on July 28, 2010.

THE TIMBERLAND COMPANY
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
             
July 2, 2010 December 31, 2009 July 3, 2009
Assets
Current assets
Cash and equivalents $ 237,798 $ 289,839 $ 183,919
Accounts receivable, net 86,836 149,178 100,126
Inventory, net 177,206 158,541 180,392
Prepaid expense 31,506 32,863 35,121
Prepaid income taxes 27,244 11,793 24,720
Deferred income taxes 27,085 26,769 19,024
Derivative assets   7,882   1,354   2,284
Total current assets   595,557   670,337   545,586
 
Property, plant and equipment, net 64,502 69,820 74,185
Deferred income taxes 18,683 14,903 17,480
Goodwill and intangible assets, net 75,153 89,885 90,442
Other assets, net   12,670   14,962   14,971
 
Total assets $ 766,565 $ 859,907 $ 742,664
 
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable $ 78,946 $ 79,911 $ 71,423
Accrued expense and other current liabilities 80,555 125,500 76,659
Income taxes payable 15,330 21,959 533
Deferred income taxes 388 48 0
Derivative liabilities   91   389   4,565
Total current liabilities   175,310   227,807   153,180
 
Other long-term liabilities 38,234 36,483 35,809
 
Stockholders’ equity   553,021   595,617   553,675
 
Total liabilities and stockholders’ equity $ 766,565 $ 859,907 $ 742,664
THE TIMBERLAND COMPANY
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Thousands, Except Per Share Data)
       
For the Quarter Ended For the Six Months Ended
July 2, 2010 July 3, 2009 July 2, 2010 July 3, 2009
Revenue $188,954 $179,702 $505,996 $476,350
Cost of goods sold 95,446   104,194   254,505   264,153  
 
Gross profit 93,508   75,508   251,491   212,197  
 
Operating expense
Selling 86,124 85,027 178,820 177,295
General and administrative 28,942 26,896 56,341 52,313
Impairment of goodwill 5,395 - 5,395 -
Impairment of intangible asset 7,854 - 7,854 925
Gain on termination of licensing agreements (1,500 ) - (3,000 ) -
Restructuring -   (17 ) -   (121 )
Total operating expense 126,815   111,906   245,410   230,412  
 
Operating income/(loss) (33,307 ) (36,398 ) 6,081   (18,215 )
 
Other income/(expense), net
Interest, net 6 182 (60 ) 501
Other, net 269   1,666   136   1,003  
Total other income/(expense), net 275   1,848   76   1,504  
 
Income/(loss) before income taxes (33,032 ) (34,550 ) 6,157 (16,711 )
 

Income tax provision/(benefit)

(9,580 ) (15,306 ) 3,862   (13,344 )

 

Net income/(loss)

($23,452 ) ($19,244 ) $2,295   ($3,367 )
 
Earnings/(loss) per share
Basic ($0.44 ) ($0.34 ) $0.04   ($0.06 )
Diluted ($0.44 ) ($0.34 ) $0.04   ($0.06 )
Weighted-average shares outstanding
Basic 53,225   56,273   53,698   56,695  
Diluted 53,225   56,273   54,184   56,695  
THE TIMBERLAND COMPANY
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
       
For the Six Months Ended
July 2, 2010 July 3, 2009
Cash flows from operating activities:
Net income/(loss) $ 2,295 ($3,367 )
Adjustments to reconcile net income/(loss) to net cash provided/(used) by operating activities:
Deferred income taxes (4,811 ) 5,224
Share-based compensation 3,647 2,580
Depreciation and other amortization 13,053 14,339
Provision for losses on accounts receivable 1,584 1,564
Impairment of goodwill 5,395 -
Impairment of intangible assets 7,854 925
Tax expense from share-based compensation, net of excess benefit (303 ) (444 )
Unrealized (gain)/loss on derivatives (176 ) 289
Other non-cash charges, net 222 514

Increase/(decrease) in cash from changes in operating assets
and liabilities, net of the effect of business combinations:

Accounts receivable 53,559 67,098
Inventory (20,139 ) 1,089
Prepaid expense and other assets 1,429 (1,802 )
Accounts payable (700 ) (25,977 )
Accrued expense (43,006 ) (35,674 )
Prepaid income taxes (15,451 ) (8,032 )
Income taxes payable (3,611 ) (24,678 )
Other liabilities   205     (226 )
Net cash provided/(used) by operating activities   1,046     (6,578 )
 
Cash flows from investing activities:
Acquisition of business and purchase price adjustments, net of cash acquired - (1,554 )
Additions to property, plant and equipment (7,289 ) (7,757 )
Other   (116 )   (380 )
Net cash used by investing activities   (7,405 )   (9,691 )
 
Cash flows from financing activities:
Common stock repurchases (44,220 ) (19,388 )
Issuance of common stock 2,435 1,373
Excess tax benefit from stock option and employee stock purchase plans 587 133
Other   (634 )   (177 )
Net cash used by financing activities   (41,832 )   (18,059 )
 
Effect of exchange rate changes on cash and equivalents   (3,850 )   1,058  
 
Net decrease in cash and equivalents (52,041 ) (33,270 )
Cash and equivalents at beginning of period   289,839     217,189  
Cash and equivalents at end of period $ 237,798   $ 183,919  
THE TIMBERLAND COMPANY
REVENUE ANALYSIS
(Amounts in Thousands, Unaudited)
                         
For the Quarter Ended For the Six Months Ended
July 2, 2010 July 3, 2009 Change July 2, 2010 July 3, 2009 Change
 
Revenue by Segment:
North America $ 91,995 $ 86,314 6.6 % $ 213,853 $ 206,172 3.7 %
Europe 66,750 65,828 1.4 % 218,380 205,358 6.3 %
Asia   30,209     27,560   9.6 %   73,763     64,820   13.8 %
Total Revenue $ 188,954   $ 179,702   5.1 % $ 505,996   $ 476,350   6.2 %
 
Revenue by Product:
Footwear $ 131,589 $ 126,954 3.7 % $ 357,150 $ 338,595 5.5 %
Apparel and Accessories 52,069 47,241 10.2 % 137,758 125,905 9.4 %
Royalty and Other 5,296 5,507 -3.8 % 11,088 11,850 -6.4 %
 
Revenue by Channel:
Wholesale $ 117,465 $ 108,417 8.3 % $ 349,419 $ 327,042 6.8 %
Consumer Direct 71,489 71,285 0.3 % 156,577 149,308 4.9 %
 
Comparable Store Sales:
U.S. Retail -3.9 % -8.2 % -0.5 % -9.0 %
Global Retail -0.5 % -2.5 % 2.1 % -2.1 %
THE TIMBERLAND COMPANY
RECONCILIATION OF TOTAL COMPANY,
NORTH AMERICA, EUROPE AND ASIA REVENUE CHANGES
TO CONSTANT DOLLAR REVENUE CHANGES
(Amounts in Thousands, Unaudited)
             
Total Company Revenue Reconciliation:
For the Quarter Ended

For the Six Months Ended

July 2, 2010 July 2, 2010
$ Change % Change $ Change % Change
Revenue increase (GAAP) $ 9,252 5.1 % $ 29,646 6.2 %
(Decrease)/increase due to foreign exchange rate changes   (1,147 ) -0.7 %   9,666 2.0 %
Revenue increase in constant dollars $ 10,399 5.8 % $ 19,980 4.2 %
 
North America Revenue Reconciliation:
For the Quarter Ended

For the Six Months Ended

July 2, 2010 July 2, 2010
$ Change % Change $ Change % Change
Revenue increase (GAAP) $ 5,681 6.6 % $ 7,681 3.7 %
Increase due to foreign exchange rate changes   395   0.5 %   1,182 0.5 %
Revenue increase in constant dollars $ 5,286 6.1 % $ 6,499 3.2 %
 
Europe Revenue Reconciliation:
For the Quarter Ended

For the Six Months Ended

July 2, 2010 July 2, 2010
$ Change % Change $ Change % Change
Revenue increase (GAAP) $ 922 1.4 % $ 13,022 6.3 %
(Decrease)/increase due to foreign exchange rate changes   (2,856 ) -4.3 %   5,564 2.7 %
Revenue increase in constant dollars $ 3,778 5.7 % $ 7,458 3.6 %
 
Asia Revenue Reconciliation:
For the Quarter Ended

For the Six Months Ended

July 2, 2010 July 2, 2010
$ Change % Change $ Change % Change
Revenue increase (GAAP) $ 2,649 9.6 % $ 8,943 13.8 %
Increase due to foreign exchange rate changes   1,314   4.8 %   2,920 4.5 %
Revenue increase in constant dollars $ 1,335 4.8 % $ 6,023 9.3 %
 
Constant dollar revenue changes, which exclude the impact of changes in foreign exchange rates, are not Generally Accepted Accounting Principle (“GAAP”) performance measures. We calculate constant dollar revenue changes by recalculating current year revenue using the prior year’s exchange rates and comparing it to prior year revenue reported on a GAAP basis. We provide constant dollar revenue changes for Total Company, North America, Europe, and Asia revenues because we use the measures to understand the underlying results and trends of the business segments excluding the impact of exchange rate changes that are not under management’s direct control. We have a foreign exchange rate risk management program intended to minimize both the positive and negative effects of currency fluctuations on our reported consolidated results of operations, financial position and cash flows. The actions taken by us to mitigate foreign exchange risk are reflected in cost of goods sold and other, net.

CONTACT:
The Timberland Company
Kaitlyn Bruder, 603-773-1655
Investor Relations