TIMBERLAND CO - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - November 4, 2010

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Exhibit 99.1

Timberland Reports Third-Quarter 2010 Results

  • Revenue $432.3 million, up 2.5% versus prior year or 5.2% excluding currency changes
  • Diluted earnings per share $1.00, up 47% from prior year
  • Global retail comparable store sales up 7.2% versus prior year

STRATHAM, N.H.--(BUSINESS WIRE)--November 4, 2010--The Timberland Company (NYSE: TBL) today reported third-quarter 2010 net income of $52.2 million and diluted earnings per share of $1.00. These results compare to third-quarter 2009 net income of $37.8 million and diluted earnings per share of $0.68.

Third-Quarter 2010 Results Summary:

  • Revenue increased 2.5% to $432.3 million compared to the prior year period, reflecting growth across Europe and Asia, partially offset by a decline in North America. Foreign exchange rate changes decreased third-quarter 2010 revenue by approximately $11.4 million, or 2.7%.
  • Europe revenue increased 5.0% to $204.1 million versus 2009 third-quarter levels, and increased 12.3% on a constant dollar basis. Growth in Scandinavia, distributor markets, and Germany was partially offset by unfavorable foreign exchange rates as well as declines in the Benelux region and Italy. North America revenue declined 3.6% to $181.5 million compared to the prior year period, impacted by decreased sales of wholesale footwear. Asia revenue increased 19.7% to $46.7 million compared to the prior year period, and increased 13.3% on a constant dollar basis. This increase was driven by continued expansion in China and Taiwan as well as favorable foreign exchange rates compared to the prior year period.
  • Global footwear revenue was essentially flat at $319.8 million compared to the third quarter of 2009. Apparel and accessories revenue increased 11.1% to $106.4 million compared to the prior year period, due to increased sales of Timberland® brand apparel in Asia and SmartWool® accessories in North America. Royalty and other revenue declined 9.8% to $6.1 million compared to the prior year period.
  • Global wholesale revenue was up 1.9% to $348.7 million compared to the prior year period, reflecting growth in Europe and Asia, partially offset by declines in North America. Worldwide consumer direct revenue increased 5.2% compared to the prior year period, driven by comparable store sales growth in all three regions and the net addition of 8 new retail stores since the third quarter of 2009. Global retail comparable store sales improved 7.2%. The Company had 225 stores, shops, and outlets worldwide at the end of the third quarter of 2010 compared to 217 at the end of the third quarter of 2009.
  • Operating income for the third quarter of 2010 increased 13.8% to $66.5 million compared to operating income of $58.5 million in the prior year period. The improvement was driven by a significant improvement in gross margin across all regions due to fewer and more profitable closeout sales as well as favorable mix.
  • In the third quarter of 2010, the effective tax rate was 27.6% compared to 38.2% in the third quarter of 2009.
  • In connection with its stock buyback program, the Company repurchased approximately 1.7 million shares in the third quarter of 2010 at a cost of approximately $30.0 million.
  • The Company ended the quarter with $108.8 million in cash and no debt. Accounts receivable was flat at $269.0 million compared to the prior year period. Inventory at quarter end was $239.8 million, up 18.9% versus 2009 third-quarter levels.

Jeffrey B. Swartz, Timberland’s President and Chief Executive Officer, stated, “We are pleased to report revenue growth and significant earnings improvement for the third quarter. Our 2010 financial results to date are a clear indication that our focused strategic investments to strengthen the Timberland® brand and business are paying off. We see concrete evidence across our portfolio from strong retail comps and continued wholesale growth to significant improvement in the sales of our outdoor and EarthkeepersTM collections, supported by our largest-ever marketing campaign, Nature Needs HeroesTM. We continue to position Timberland as a brand that engages consumers, demonstrates environmental leadership and delivers superior returns for our shareholders."

As previously announced, the Company will be hosting a conference call to discuss third-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 65649220. 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 may be “forward-looking statements” within the meaning of the federal securities laws that are subject to material risks and uncertainties. These forward-looking statements are not guarantees of future financial performance or expected benefits. Many factors could affect our current expectations and our actual results, and could cause results to differ materially. Such factors 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 November 4, 2010.

 
THE TIMBERLAND COMPANY
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
     
October 1, 2010 December 31, 2009 October 2, 2009
Assets
Current assets
Cash and equivalents $108,815 $289,839 $112,851
Accounts receivable, net 268,985 149,178 270,272
Inventory, net 239,805 158,541 201,733
Prepaid expense 30,917 32,863 32,919
Prepaid income taxes 27,822 11,793 18,287
Deferred income taxes 27,551 26,769 23,512
Derivative assets 120 1,354 839
Total current assets 704,015 670,337 660,413
 
Property, plant and equipment, net 64,985 69,820 70,664
Deferred income taxes 17,070 14,903 13,825
Goodwill and intangible assets, net 74,841 89,885 90,301
Other assets, net 13,546 14,962 15,161
 
Total assets $874,457 $859,907 $850,364
 
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable $101,874 $79,911 $89,681
Accrued expense and other current liabilities 130,201 125,500 118,734
Income taxes payable 29,683 21,959 18,224
Deferred income taxes - 48 -
Derivative liabilities 4,308 389 3,994
Total current liabilities 266,066 227,807 230,633
 
Other long-term liabilities 34,680 36,483 36,146
 
Stockholders’ equity 573,711 595,617 583,585
 
Total liabilities and stockholders’ equity $874,457 $859,907 $850,364
 
THE TIMBERLAND COMPANY
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Thousands, Except Per Share Data)
     
For the Quarter Ended For the Nine Months Ended
October 1, 2010 October 2, 2009 October 1, 2010 October 2, 2009
Revenue $432,344 $421,766 $938,340 $898,116
Cost of goods sold 225,775 227,254 480,280 491,407
 
Gross profit 206,569 194,512 458,060 406,709
 
Operating expense
Selling 106,637 107,314 285,457 284,609
General and administrative 33,397 28,805 89,738 81,118
Impairment of goodwill - - 5,395 -
Impairment of intangible asset - - 7,854 925
Gain on termination of licensing agreements - - (3,000) -
Restructuring - (88) - (209)
Total operating expense 140,034 136,031 385,444 366,443
 
Operating income 66,535 58,481 72,616 40,266
 
Other income/(expense), net
Interest, net (49) (11) (109) 490
Other, net 5,603 2,626 5,739 3,629
Total other income/(expense), net 5,554 2,615 5,630 4,119
 

Income before income taxes

72,089 61,096 78,246 44,385
 

Income tax provision

19,894 23,339 23,756 9,995

 

Net income

$52,195 $37,757 $54,490 $34,390

 

 
Earnings per share
Basic $1.01 $0.68 $1.03 $0.61
Diluted $1.00 $0.68 $1.02 $0.61
Weighted-average shares outstanding
Basic 51,892 55,744 53,098 56,385
Diluted 52,225 55,908 53,531 56,692
 
THE TIMBERLAND COMPANY
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
 
For the Nine Months Ended
October 1, 2010 October 2, 2009
Cash flows from operating activities:
Net income $54,490 $34,390
Adjustments to reconcile net income to net cash used by operating activities:
Deferred income taxes (2,819) 5,041
Share-based compensation 5,913 4,163
Depreciation and amortization 19,179 21,582
Provision for losses on accounts receivable 3,392 4,180
Impairment of goodwill 5,395 -
Impairment of intangible assets 7,854 925
Tax expense from share-based compensation, net of excess benefit (520) (1,804)
Unrealized loss on derivatives 1,008 554
Other non-cash (credits)/charges, net (55) 930

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

Accounts receivable (123,993) (103,264)
Inventory (80,146) (18,891)
Prepaid expense and other assets 3,205 1,265
Accounts payable 21,872 (8,099)
Accrued expense 1,994 5,263
Prepaid income taxes (16,028) (1,600)
Income taxes payable 5,573 (7,208)
Other liabilities (221) (175)
Net cash used by operating activities (93,907) (62,748)
 
Cash flows from investing activities:
Acquisition of business and purchase price adjustments, net of cash acquired - (1,554)
Additions to property, plant and equipment (11,318) (11,078)
Other (209) (601)
Net cash used by investing activities (11,527) (13,233)
 
Cash flows from financing activities:
Common stock repurchases (73,734) (29,285)
Issuance of common stock 2,621 1,373
Excess tax benefit from stock option and employee stock purchase plans 609 136
Other (909) (1,248)
Net cash used by financing activities (71,413) (29,024)
 
Effect of exchange rate changes on cash and equivalents (4,177) 667
 
Net decrease in cash and equivalents (181,024) (104,338)
Cash and equivalents at beginning of period 289,839 217,189
Cash and equivalents at end of period $108,815 $112,851
 
THE TIMBERLAND COMPANY
REVENUE ANALYSIS
(Amounts in Thousands, Unaudited)
         
For the Quarter Ended For the Nine Months Ended
October 1, 2010 October 2, 2009 Change October 1, 2010 October 2, 2009 Change
 
Revenue by Segment:
North America $181,501 $188,247 -3.6% $395,354 $394,419 0.2%
Europe 204,154 194,511 5.0% 422,534 399,869 5.7%
Asia 46,689 39,008 19.7% 120,452 103,828 16.0%
Total Revenue $432,344 $421,766 2.5% $938,340 $898,116 4.5%
 
Revenue by Product:
Footwear $319,766 $319,145 0.2% $676,916 $657,739 2.9%
Apparel and Accessories 106,450 95,824 11.1% 244,208 221,729 10.1%
Royalty and Other 6,128 6,797 -9.8% 17,216 18,648 -7.7%
 
Revenue by Channel:
Wholesale $348,678 $342,231 1.9% $698,097 $669,273 4.3%
Consumer Direct 83,666 79,535 5.2% 240,243 228,843 5.0%
 
Comparable Store Sales:
U.S. Retail 3.7% -14.6% 1.0% -11.1%
Global Retail 7.2% -6.6% 3.8% -3.6%
 
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 Nine Months Ended
October 1, 2010 October 1, 2010
$ Change % Change $ Change % Change
Revenue increase (GAAP) $10,578 2.5% $40,224 4.5%
Decrease due to foreign exchange rate changes (11,397) -2.7% (1,731) -0.2%
Revenue increase in constant dollars $21,975 5.2% $41,955 4.7%
 
North America Revenue Reconciliation:
For the Quarter Ended For the Nine Months Ended
October 1, 2010 October 1, 2010
$ Change % Change $ Change % Change
Revenue (decrease)/increase (GAAP) ($6,746) -3.6% $935 0.2%
Increase due to foreign exchange rate changes 426 0.2% 1,606 0.4%
Revenue decrease in constant dollars ($7,172) -3.8% ($671) -0.2%
 
Europe Revenue Reconciliation:
For the Quarter Ended For the Nine Months Ended
October 1, 2010 October 1, 2010
$ Change % Change $ Change % Change
Revenue increase (GAAP) $9,643 5.0% $22,665 5.7%
Decrease due to foreign exchange rate changes (14,315) -7.3% (8,751) -2.2%
Revenue increase in constant dollars $23,958 12.3% $31,416 7.9%
 
Asia Revenue Reconciliation:
For the Quarter Ended For the Nine Months Ended
October 1, 2010 October 1, 2010
$ Change % Change $ Change % Change
Revenue increase (GAAP) $7,681 19.7% $16,624 16.0%
Increase due to foreign exchange rate changes 2,492 6.4% 5,412 5.2%
Revenue increase in constant dollars $5,189 13.3% $11,212 10.8%

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

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