Exhibit 99.1
FOR IMMEDIATE RELEASE | CONTACT: | Susan Ostrow | ||
Director, Investor Relations | ||||
(603) 773-1212 |
TIMBERLAND REPORTS THIRD QUARTER RESULTS
STRATHAM, NH, October 27, 2005 — The Timberland Company (NYSE: TBL) today reported third quarter net income of $69.2 million and diluted earnings per share (EPS) of $1.02, compared with third quarter 2004 net income of $68.6 million and diluted EPS of $0.96. Third quarter 2005 results included previously disclosed pre-tax costs of $2.5 million related to the Company’s restructuring of its Caribbean manufacturing facilities. Third quarter 2005 EPS excluding these restructuring charges was $1.05.
• | Third quarter revenue increased 2.4% over strong prior-year results to a record $505.9 million, driven by gains in international markets which offset moderate declines in the U.S. International results (+14.1% or +14.2% in constant dollars) were driven by strong constant dollar sales gains in Europe and Asia in both footwear and apparel. U.S. revenues declined 6.1%, as anticipated decreases in women’s casual footwear and boot sales offset gains in Timberland PRO®series and kids’ footwear. Foreign exchange rate changes reduced third quarter 2005 revenue by $0.3 million or 0.1%. | |
• | Third quarter results were supported by global gains in footwear. Global footwear revenues grew 2.8% to $399.0 million driven by growth in kids’, outdoor performance, men’s casual and Timberland PRO series categories. Apparel and accessories revenue increased 0.1% to $101.5 million, as gains in international markets offset softer U.S. retail sales results. | |
• | Global wholesale revenue expanded 3.1% to $420.2 million, supported by strong gains in international markets. Worldwide consumer direct revenue declined 0.8% to $85.7 million, reflecting a 3.2% decrease in global comparable store sales. | |
• | Operating profit for the quarter was $105.1 million, including restructuring costs related to the consolidation of the Company’s manufacturing operations in the Caribbean. Operating profit excluding restructuring costs was $107.6 million, 1.5% above prior-year levels. Comparable operating margins were slightly lower, |
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reflecting moderate anticipated declines in gross margins versus strong prior-year performance levels. For the quarter, foreign exchange rate changes contributed approximately $6.9 million to operating profit. | ||
• | EPS for the quarter, excluding restructuring cost impacts of $0.03 per share, increased approximately 9% versus prior year levels. EPS gains reflect operating profit gains and benefits from lower levels of shares outstanding. During the quarter, the Company bought back 1.5 million shares at a total cost of $50.3 million. In August, the Company’s Board of Directors approved a new 2.0 million share repurchase authorization. Timberland currently has 3.1 million shares remaining under existing share repurchase authorization programs. | |
• | Timberland ended the quarter with $117.6 million in cash and no debt outstanding. Strong operating margins and disciplined asset management supported a 31.7% annual return on capital. Timberland’s inventory at the end of the third quarter of 2005 was $242.6 million, 32.6% higher than at the end of the 2004 third quarter. As previously disclosed, third 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 third quarter 2004 inventory and accounts payable balances would have increased by approximately $43.5 million if similar arrangements had been in place last year. Adjusting for this impact, inventory increased 7.1% on a comparable basis. | |
• | For the fourth quarter of this year, the Company is targeting flat revenue growth and a high single-digit decline in operating profits, reflecting current trends in the U.S. business, the overall consumer climate and plans to invest in brand building activities for the Holiday season. For the full year, Timberland remains on track to deliver strong financial results. These financial objectives exclude previously disclosed restructuring costs related to the consolidation of manufacturing operations in the Dominican Republic and related closure of Timberland’s manufacturing facility in Puerto Rico, which Timberland estimates will be in the range of $3.0 million in the fourth quarter. |
Jeffrey B. Swartz, Timberland’s President and Chief Executive Officer, stated, “Timberland delivered record revenue and profits in the third quarter as benefits from our global portfolio enabled us to offset pressure in the U.S. with continued strong expansion internationally. While we work through challenges in key businesses, such as U.S. boots, we continue on track towards delivering solid full year financial gains.”
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“Looking ahead to 2006, we continue to target expansion of Timberland’s brand franchise, building on our positive momentum and growing presence in international markets. We do anticipate continued growth challenges in Timberland’s U.S. business in the first half of 2006, which will contribute to likely pressure on first half 2006 revenue and earnings. We believe our continued focus on increasing our penetration with targeted consumers, delivering innovation and value through purposeful product grounded in Timberland® brand values, actively pursuing opportunities to leverage our enterprise capabilities through new brand platforms, and executing with distinction will enable us to address these near-term challenges and capture our full potential.”
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 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 (617) 213-8838 and providing access code number 54249233. 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.
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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. Such risks, uncertainties and assumptions include, but are not limited to: (i) the Company’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) changes in duty structures in countries of import and export including anti-dumping measures being considered by the European Union with respect to leather footwear imported from China and Vietnam and safety footwear imported from China and India; (iii) Timberland’s ability to procure a majority of its products from independent manufacturers; (iv) changes in foreign exchange rates; and (v) 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 discussion of constant dollar revenue growth and diluted EPS excluding restructuring costs, which are non-GAAP measures. As required by SEC rules, we have provided reconciliations of these measures on attached tables that follow our financial statements. Additional required information is located in the Form 8-K furnished to the SEC on October 27, 2005.
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THE TIMBERLAND COMPANY
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
September 30, | October 1, | December 31, | ||||||||||
2005 | 2004 | 2004 | ||||||||||
Assets | ||||||||||||
Current assets | ||||||||||||
Cash and equivalents | $ | 117,634 | $ | 119,779 | $ | 309,116 | ||||||
Accounts receivable, net | 298,172 | 279,182 | 155,024 | |||||||||
Inventory | 242,622 | 182,979 | 128,311 | |||||||||
Prepaid expense | 31,994 | 21,335 | 27,659 | |||||||||
Deferred income taxes | 23,524 | 22,400 | 28,937 | |||||||||
Derivative assets | 5,122 | — | — | |||||||||
Total current assets | 719,068 | 625,675 | 649,047 | |||||||||
Property, plant and equipment, net | 77,373 | 75,812 | 78,979 | |||||||||
Goodwill | 14,163 | 14,163 | 14,163 | |||||||||
Intangible assets | 4,579 | 3,991 | 5,381 | |||||||||
Other assets, net | 10,007 | 9,496 | 9,940 | |||||||||
Total assets | $ | 825,190 | $ | 729,137 | $ | 757,510 | ||||||
Liabilities and Stockholders’ Equity | ||||||||||||
Current liabilities | ||||||||||||
Accounts payable | $ | 125,670 | $ | 54,379 | $ | 52,370 | ||||||
Accrued expense and other current liabilities | 103,693 | 110,966 | 124,038 | |||||||||
Income taxes payable | 47,844 | 39,976 | 34,737 | |||||||||
Derivative liabilities | — | 4,264 | 15,047 | |||||||||
Total current liabilities | 277,207 | 209,585 | 226,192 | |||||||||
Deferred compensation and other liabilities | 15,274 | 11,081 | 12,543 | |||||||||
Deferred income taxes | 5,051 | 8,086 | 7,268 | |||||||||
Stockholders’ equity | 527,658 | 500,385 | 511,507 | |||||||||
Total liabilities and stockholders’ equity | $ | 825,190 | $ | 729,137 | $ | 757,510 | ||||||
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THE TIMBERLAND COMPANY
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Amounts in Thousands, Except Per Share Data)
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Amounts in Thousands, Except Per Share Data)
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
September 30, | October 1, | September 30, | October 1, | |||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||
Revenue | $ | 505,913 | $ | 493,933 | $ | 1,100,393 | $ | 1,045,920 | ||||||||
Cost of goods sold | 258,555 | 250,161 | 547,894 | 521,200 | ||||||||||||
Gross profit | 247,358 | 243,772 | 552,499 | 524,720 | ||||||||||||
Operating expense | ||||||||||||||||
Selling | 111,259 | 110,761 | 297,236 | 287,429 | ||||||||||||
General and administrative | 28,462 | 26,994 | 77,304 | 71,436 | ||||||||||||
Restructuring | 2,531 | — | 2,531 | — | ||||||||||||
Total operating expense | 142,252 | 137,755 | 377,071 | 358,865 | ||||||||||||
Operating income | 105,106 | 106,017 | 175,428 | 165,855 | ||||||||||||
Other income/(expense) | ||||||||||||||||
Interest income, net | 570 | 196 | 2,734 | 636 | ||||||||||||
Other, net | (900 | ) | 205 | 238 | 411 | |||||||||||
Total other income/(expense) | (330 | ) | 401 | 2,972 | 1,047 | |||||||||||
Income before provision for income taxes | 104,776 | 106,418 | 178,400 | 166,902 | ||||||||||||
Provision for income taxes | 35,624 | 37,778 | 60,656 | 59,250 | ||||||||||||
Net income | $ | 69,152 | $ | 68,640 | $ | 117,744 | $ | 107,652 | ||||||||
Earnings per share | ||||||||||||||||
Basic | $ | 1.04 | $ | 0.98 | $ | 1.76 | $ | 1.54 | ||||||||
Diluted | $ | 1.02 | $ | 0.96 | $ | 1.72 | $ | 1.50 | ||||||||
Weighted-average shares outstanding | ||||||||||||||||
Basic | 66,175 | 69,924 | 66,892 | 69,970 | ||||||||||||
Diluted | 67,697 | 71,423 | 68,359 | 71,735 | ||||||||||||
Earnings per share and weighted-average shares have been restated to reflect the 2-for-1 stock split in May 2005.
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THE TIMBERLAND COMPANY
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
For the Nine Months Ended | ||||||||
September 30, | October 1, | |||||||
2005 | 2004 | |||||||
Cash flows from operating activities: | ||||||||
Net income | 117,744 | $ | 107,652 | |||||
Adjustments to reconcile net income to net cash used by operating activities: | ||||||||
Deferred income taxes | (3,488 | ) | 1,323 | |||||
Amortization of deferred compensation | 3,791 | 2,357 | ||||||
Depreciation and other amortization | 18,190 | 16,585 | ||||||
Loss on disposal of property, plant and equipment | 212 | 86 | ||||||
Tax benefit from stock option plans | 6,490 | 11,579 | ||||||
Increase/(decrease) in cash from changes in working capital: | ||||||||
Accounts receivable | (154,003 | ) | (154,386 | ) | ||||
Inventory | (116,360 | ) | (63,469 | ) | ||||
Prepaid expense | (5,881 | ) | 4,471 | |||||
Accounts payable | 79,693 | 16,733 | ||||||
Accrued expense | (18,837 | ) | (4,354 | ) | ||||
Income taxes payable | 13,157 | (12,523 | ) | |||||
Other liabilities | 1,754 | — | ||||||
Net cash used by operating activities | (57,538 | ) | (48,900 | ) | ||||
Cash flows from investing activities: | ||||||||
Additions to property, plant and equipment | (15,704 | ) | (15,577 | ) | ||||
Other, net | 147 | (1,561 | ) | |||||
Net cash used by investing activities | (15,557 | ) | (17,138 | ) | ||||
Cash flows from financing activities: | ||||||||
Common stock repurchases | (128,906 | ) | (74,985 | ) | ||||
Issuance of common stock | 17,668 | 19,172 | ||||||
Net cash used by financing activities | (111,238 | ) | (55,813 | ) | ||||
Effect of exchange rate changes on cash and equivalents | (7,149 | ) | (173 | ) | ||||
Net decrease in cash and equivalents | (191,482 | ) | (122,024 | ) | ||||
Cash and equivalents at beginning of period | 309,116 | 241,803 | ||||||
Cash and equivalents at end of period | 117,634 | $ | 119,779 | |||||
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THE TIMBERLAND COMPANY
UNAUDITED REVENUE ANALYSIS
(Amounts in Thousands)
UNAUDITED REVENUE ANALYSIS
(Amounts in Thousands)
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||||||||||
September 30, | October 1, | September 30, | October 1, | |||||||||||||||||||||
2005 | 2004 | Change | 2005 | 2004 | Change | |||||||||||||||||||
Revenue by Segment: | �� | |||||||||||||||||||||||
U.S. Wholesale | 220,694 | $ | 234,287 | (5.8 | %) | 438,036 | $ | 450,067 | (2.7 | %) | ||||||||||||||
U.S. Consumer Direct | 46,595 | 50,456 | (7.7 | %) | 119,899 | 122,823 | (2.4 | %) | ||||||||||||||||
Total U.S. | 267,289 | 284,743 | (6.1 | %) | 557,935 | 572,890 | (2.6 | %) | ||||||||||||||||
International | 238,624 | 209,190 | 14.1 | % | 542,458 | 473,030 | 14.7 | % | ||||||||||||||||
Revenue by Product: | ||||||||||||||||||||||||
Footwear | 399,006 | 388,154 | 2.8 | % | 842,638 | 800,895 | 5.2 | % | ||||||||||||||||
Apparel and Accessories | 101,497 | 101,407 | 0.1 | % | 245,710 | 235,435 | 4.4 | % | ||||||||||||||||
Royalty and Other | 5,410 | 4,372 | 23.7 | % | 12,045 | 9,590 | 25.6 | % | ||||||||||||||||
Revenue by Channel: | ||||||||||||||||||||||||
Wholesale | 420,208 | 407,528 | 3.1 | % | 864,620 | 816,256 | 5.9 | % | ||||||||||||||||
Consumer Direct | 85,705 | 86,405 | (0.8 | %) | 235,773 | 229,664 | 2.7 | % | ||||||||||||||||
Comparable Store Sales: | ||||||||||||||||||||||||
Domestic Retail | (7.1 | %) | 1.3 | % | (1.4 | %) | 1.9 | % | ||||||||||||||||
Global Retail | (3.2 | %) | 0.5 | % | 0.7 | % | 1.9 | % |
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THE TIMBERLAND COMPANY
UNAUDITED RECONCILIATION OF TOTAL AND INTERNATIONAL REVENUE INCREASES
TO CONSTANT DOLLAR REVENUE INCREASES
(Amounts in Millions)
UNAUDITED RECONCILIATION OF TOTAL AND INTERNATIONAL REVENUE INCREASES
TO CONSTANT DOLLAR REVENUE INCREASES
(Amounts in Millions)
Total Company Revenue Reconciliation:
For the Three Months | For the Nine Months | |||||||||||||||
Ended September 30, 2005 | Ended September 30, 2005 | |||||||||||||||
$ Change | % Change | $ Change | % Change | |||||||||||||
Revenue increase (GAAP) | $ | 12.0 | 2.4 | % | $ | 54.5 | 5.2 | % | ||||||||
(Decrease)/increase due to foreign exchange rate changes | (0.3 | ) | (0.1 | %) | 10.8 | 1.0 | % | |||||||||
Revenue increase in constant dollars | $ | 12.3 | 2.5 | % | $ | 43.7 | 4.2 | % |
International Revenue Reconciliation:
For the Three Months | For the Nine Months Ended | |||||||||||||||
Ended September 30, 2005 | September 30, 2005 | |||||||||||||||
$ Change | % Change | $ Change | % Change | |||||||||||||
Revenue increase (GAAP) | $ | 29.4 | 14.1 | % | $ | 69.4 | 14.7 | % | ||||||||
(Decrease)/increase due to foreign exchange rate changes | (0.3 | ) | (0.1 | %) | 10.8 | 2.3 | % | |||||||||
Revenue increase in constant dollars | $ | 29.7 | 14.2 | % | $ | 58.6 | 12.4 | % |
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THE TIMBERLAND COMPANY
UNAUDITED RECONCILIATION OF DILUTED EPS TO
DILUTED EPS EXCLUDING RESTRUCTURING COSTS
UNAUDITED RECONCILIATION OF DILUTED EPS TO
DILUTED EPS EXCLUDING RESTRUCTURING COSTS
For the Three | For the Nine Months | |||||||
Months Ended | Ended September 30, | |||||||
September 30, 2005 | 2005 | |||||||
Diluted EPS (GAAP) | $ | 1.02 | $ | 1.72 | ||||
Per share impact of restructuring costs | (0.03 | ) | (0.03 | ) | ||||
Diluted EPS excluding restructuring costs | $ | 1.05 | $ | 1.75 |
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