Exhibit 99.1
![]() | Press Release |
FOR IMMEDIATE RELEASE | CONTACT: | Karen Blomquist | ||
Senior Manager, Investor Relations | ||||
(603) 773-1212 |
TIMBERLAND REPORTS FIRST-QUARTER RESULTS
STRATHAM, NH, June 27, 2007 —The Timberland Company (NYSE: TBL) today reported first-quarter net income of $9.3 million and diluted earnings per share (EPS) of $0.15. First-quarter diluted EPS was $0.22 when adjusted to exclude restructuring costs related to previously announced decisions to license the Company’s North America wholesale apparel business and globally restructure its organization around key consumer markets. These results compare to first-quarter 2006 net income (as restated) of $26.1 million, and diluted EPS of $0.40 or $0.41 when adjusted to exclude restructuring and related costs.
• | First-quarter revenue was down 3.9% driven primarily by declines in boots and kids’ footwear, which were partially offset by gains in SmartWool and in Timberland PRO. Foreign exchange rate changes increased first-quarter 2007 revenues by approximately $11.8 million, or 3.3% due to the strength of the Euro and the British Pound, and increased operating income by approximately $7 million. | ||
• | International revenue increased 4.1%, but declined 2.1% on a constant dollar basis, driven by weakness in Europe as a result of anticipated declines in boots and kids’ sales which were partially offset by strong growth in Asia. U.S. revenues decreased 13.2%, impacted by unseasonable weather trends which added to anticipated pressures on boots and kids’ sales. | ||
• | First-quarter results reflected declines in global footwear sales which were partially offset by modest global gains in apparel and accessories revenue. Apparel and accessories revenue grew 4.4% to $95.4 million, as gains in SmartWooland the addition of Howiesoffset declines in Timberland®brand apparel. Global footwear revenue fell 7.2% to $235.6 million as declines in boots and kids’ sales as |
-5-
well as modest declines in casual footwear and outdoor performance were partially offset by gains in Timberland PRO®series footwear. | |||
• | Global wholesale revenue decreased 7.3% to $259.0 million reflecting the anticipated declines in boots and kids’ footwear sales. Worldwide consumer direct revenue increased 10.0% to $77.3 million, reflecting comparable store sale gains in the U.S. and Asia, along with the benefit of new store openings globally, which offset a comparable store sales decline in Europe. | ||
• | Operating profit for the quarter was $13.6 million, down from $40.1 million in the prior year period. Operating profit excluding restructuring costs was $20.1 million, down $20.4 million versus comparable prior year levels. Profit declines were driven by anticipated pressures on gross margins and increased costs related to investments in support of growth strategies, including global business expansion and development of Timberland’s brand portfolio. | ||
• | Timberland repurchased approximately 348 thousand shares in the first quarter at a total cost of $10.0 million. It ended the quarter with $119.7 million in cash and no debt. Inventory at quarter end was $183.5 million, up 4.9% versus 2006 first-quarter levels, primarily reflecting increased product costs and inventory associated with new brands such as Howies®and GoLite®. Accounts receivable increased 4.0% to $199.7 million, impacted by later timing of sales in the quarter. | ||
• | The Company remains committed to improving performance in its boots and kids’ businesses, supported by a disciplined product supply and distribution strategy that is aligned with the premium position the Company seeks to maintain with consumers. The Company continues to expect to see significant sales declines in boots and kids’ sales in 2007, likely in the range of $100 million globally and believes that revenue levels will be flat to a low single digit percentage range decline compared to the prior year. Lower boots and kids’ sales and impacts from higher relative product costs will place continued pressure on operating margins, with expectations for full-year declines of approximately 300 to 350 basis points compared to prior year levels excluding restructuring costs. In the second quarter of 2007, the Company anticipates that margin pressures will contribute to a decline in operating profits of approximately $12 million and will result in a net loss in the range of $18 to $20 million excluding restructuring costs. |
Jeffrey B. Swartz, Timberland’s President and Chief Executive Officer, stated,“While near-term hurdles remain, we are committed to our strategy for the long-term growth of the Timberland brand and enterprise. We continue to broaden our portfolio with acquisitions such as SmartWool, GoLite, Howies and IPATH so that we can reach more consumers than ever before; we are more focused than ever on creating authentic and
-6-
relevant product for our targeted consumers; and we are streamlining our business operations in order to drive greater efficiencies. While I am not satisfied with where we stand today, I am encouraged by the strength of our new management structure, our strategic focus and the resolve of our employees and believe that we are positioning ourselves to make important progress in the future.”
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 first-quarter results tomorrow 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 617.786.2904 and providing access code number 93823555. 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™, Miōn®, GoLite® Howies® and IPATH® brands, all of which 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. 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
-7-
trends, consumer acceptance of products and other factors affecting retail market conditions; (ii) the Company’s ability to profitably sell certain footwear products in European Member States in light of anti-dumping duties and measures imposed by the European Commission with respect to leather footwear imported from China and Vietnam; (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 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 changes and operating profit and diluted EPS excluding restructuring and related costs, which are non-GAAP measures. As required by SEC rules, the Company has provided reconciliations of these measures on attached tables that follow its financial statements. Additional required information is located in the Form 8-K furnished to the SEC on June 27, 2007.
# # #
-8-
THE TIMBERLAND COMPANY
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
December 31, | ||||||||||||
March 30, 2007 | 2006 | March 31, 2006 | ||||||||||
(As Restated) | (As Restated) | |||||||||||
Assets | ||||||||||||
Current assets | ||||||||||||
Cash and equivalents | $ | 119,695 | $ | 181,698 | $ | 125,284 | ||||||
Accounts receivable, net | 199,695 | 204,016 | 192,087 | |||||||||
Inventory | 183,500 | 186,765 | 174,945 | |||||||||
Prepaid expense | 48,785 | 42,130 | 37,424 | |||||||||
Prepaid income taxes | 16,363 | 12,353 | — | |||||||||
Deferred income taxes | 15,286 | 21,633 | 19,918 | |||||||||
Derivative assets | 83 | 176 | 2,099 | |||||||||
Total current assets | 583,407 | 648,771 | 551,757 | |||||||||
Property, plant and equipment, net | 92,955 | 94,640 | 81,998 | |||||||||
Deferred income taxes | 23,613 | 18,553 | 3,365 | |||||||||
Goodwill and intangible assets, net | 87,147 | 87,582 | 79,749 | |||||||||
Other assets, net | 12,457 | 10,831 | 10,579 | |||||||||
Total assets | $ | 799,579 | $ | 860,377 | $ | 727,448 | ||||||
Liabilities and Stockholders’ Equity | ||||||||||||
Current liabilities | ||||||||||||
Accounts payable | $ | 77,445 | $ | 110,031 | $ | 70,025 | ||||||
Accrued expense and other current liabilities | 102,806 | 122,734 | 82,852 | |||||||||
Income taxes payable | 5,115 | 49,938 | 20,781 | |||||||||
Derivative liabilities | 2,600 | 2,925 | — | |||||||||
Total current liabilities | 187,966 | 285,628 | 173,658 | |||||||||
Other long-term liabilities | 39,690 | 13,064 | 15,633 | |||||||||
Stockholders’ equity | 571,923 | 561,685 | 538,157 | |||||||||
Total liabilities and stockholders’ equity | $ | 799,579 | $ | 860,377 | $ | 727,448 | ||||||
-9-
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 | ||||||||
March 30, | March 31, | |||||||
2007 | 2006 | |||||||
(As Restated) | ||||||||
Revenue | $ | 336,329 | $ | 349,811 | ||||
Cost of goods sold | 174,750 | 175,881 | ||||||
Gross profit | 161,579 | 173,930 | ||||||
Operating expense | ||||||||
Selling | 110,083 | 104,749 | ||||||
General and administrative | 31,351 | 28,634 | ||||||
Restructuring and related costs | 6,526 | 481 | ||||||
Total operating expense | 147,960 | 133,864 | ||||||
Operating income | 13,619 | 40,066 | ||||||
Other income | ||||||||
Interest income, net | 1,130 | 1,105 | ||||||
Other, net | (623 | ) | (571 | ) | ||||
Total other income | 507 | 534 | ||||||
Income before provision for income taxes | 14,126 | 40,600 | ||||||
Provision for income taxes | 4,873 | 14,535 | ||||||
Net income | $ | 9,253 | $ | 26,065 | ||||
Earnings per share: | ||||||||
Basic | $ | .15 | $ | .41 | ||||
Diluted | $ | .15 | $ | .40 | ||||
Weighted-average shares outstanding | ||||||||
Basic | 61,099 | 63,583 | ||||||
�� | ||||||||
Diluted | 61,995 | 64,996 | ||||||
-10-
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 Three Months Ended | ||||||||
March 30, | March 31, | |||||||
2007 | 2006 | |||||||
(As Restated) | ||||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 9,253 | $ | 26,065 | ||||
Adjustments to reconcile net income to net cash used by operating activities: | ||||||||
Deferred income taxes | 1,287 | 5,696 | ||||||
Share-based compensation | 1,704 | 5,271 | ||||||
Depreciation and other amortization | 7,656 | 6,500 | ||||||
Tax benefit from share-based compensation, net of excess benefit | 653 | 1,405 | ||||||
Unrealized (gain)/loss on derivatives | (232 | ) | 3,945 | |||||
Other non-cash charges/(credits), net | 689 | (275 | ) | |||||
Increase/(decrease) in cash from changes in working capital: | ||||||||
Accounts receivable | 5,519 | (21,676 | ) | |||||
Inventory | 3,532 | (7,521 | ) | |||||
Prepaid expense | (6,355 | ) | (3,670 | ) | ||||
Accounts payable | (33,306 | ) | (28,079 | ) | ||||
Accrued expense | (19,454 | ) | (20,530 | ) | ||||
Income taxes prepaid and payable, net | (27,040 | ) | (26,869 | ) | ||||
Net cash used by operating activities | (56,094 | ) | (59,738 | ) | ||||
Cash flows from investing activities: | ||||||||
Additions to property, plant and equipment | (5,220 | ) | (5,528 | ) | ||||
Other | (667 | ) | (238 | ) | ||||
Net cash used by investing activities | (5,887 | ) | (5,766 | ) | ||||
Cash flows from financing activities: | ||||||||
Common stock repurchases | (11,002 | ) | (35,902 | ) | ||||
Issuance of common stock | 9,922 | 10,454 | ||||||
Excess tax benefit from stock option and employee stock purchase plans | 915 | 2,270 | ||||||
Net cash used by financing activities | (165 | ) | (23,178 | ) | ||||
Effect of exchange rate changes on cash and equivalents | 143 | 803 | ||||||
Net decrease in cash and equivalents | (62,003 | ) | (87,879 | ) | ||||
Cash and equivalents at beginning of period | 181,698 | 213,163 | ||||||
Cash and equivalents at end of period | $ | 119,695 | $ | 125,284 | ||||
-11-
THE TIMBERLAND COMPANY
REVENUE ANALYSIS
(Amounts in Thousands, Unaudited)
REVENUE ANALYSIS
(Amounts in Thousands, Unaudited)
For the Three Months Ended | ||||||||||||
March 30, | March 31, | |||||||||||
2007 | 2006 | Change | ||||||||||
Revenue by Segment: | ||||||||||||
U.S. Wholesale | $ | 105,215 | $ | 127,356 | (17.4 | %) | ||||||
U.S. Consumer Direct | 33,991 | 33,060 | 2.8 | % | ||||||||
Total U.S. | 139,206 | 160,416 | (13.2 | %) | ||||||||
Europe | 151,338 | 149,583 | 1.2 | % | ||||||||
Asia | 37,655 | 31,432 | 19.8 | % | ||||||||
Other Foreign | 8,130 | 8,380 | (3.0 | %) | ||||||||
Total International | 197,123 | 189,395 | 4.1 | % | ||||||||
Revenue by Product: | ||||||||||||
Footwear | 235,637 | 253,948 | (7.2 | %) | ||||||||
Apparel and Accessories | 95,406 | 91,400 | 4.4 | % | ||||||||
Royalty and Other | 5,286 | 4,463 | 18.4 | % | ||||||||
Revenue by Channel: | ||||||||||||
Wholesale | 259,037 | 279,562 | (7.3 | %) | ||||||||
Consumer Direct | 77,292 | 70,249 | 10.0 | % | ||||||||
Comparable Store Sales: | ||||||||||||
Domestic Retail | 1.9 | % | (12.8 | %) | ||||||||
Global Retail | (1.2 | %) | (10.8 | %) |
-12-
THE TIMBERLAND COMPANY
RECONCILIATION OF TOTAL AND INTERNATIONAL REVENUE CHANGES
TO CONSTANT DOLLAR REVENUE CHANGES
(Amounts in Thousands, Unaudited)
RECONCILIATION OF TOTAL AND INTERNATIONAL REVENUE CHANGES
TO CONSTANT DOLLAR REVENUE CHANGES
(Amounts in Thousands, Unaudited)
Total Company Revenue Reconciliation:
For the Three Months Ended | ||||||||
March 30, 2007 | ||||||||
$ Change | % Change | |||||||
Revenue decrease (GAAP) | $ | (13,482 | ) | (3.9 | %) | |||
Increase due to foreign exchange rate changes | 11,790 | 3.3 | % | |||||
Revenue decrease in constant dollars | $ | (25,272 | ) | (7.2 | %) |
Total International Revenue Reconciliation:
For the Three Months Ended | ||||||||
March 30, 2007 | ||||||||
$ Change | % Change | |||||||
Revenue increase (GAAP) | $ | 7,728 | 4.1 | % | ||||
Increase due to foreign exchange rate changes | 11,790 | 6.2 | % | |||||
Revenue decrease in constant dollars | $ | (4,062 | ) | (2.1 | %) |
Europe Revenue Reconciliation:
For the Three Months Ended | ||||||||
March 30, 2007 | ||||||||
$ Change | % Change | |||||||
Revenue increase (GAAP) | $ | 1,755 | 1.2 | % | ||||
Increase due to foreign exchange rate changes | 11,877 | 7.9 | % | |||||
Revenue decrease in constant dollars | $ | (10,122 | ) | (6.7 | %) |
Asia Revenue Reconciliation:
For the Three Months Ended | ||||||||
March 30, 2007 | ||||||||
$ Change | % Change | |||||||
Revenue increase (GAAP) | $ | 6,223 | 19.8 | % | ||||
Decrease due to foreign exchange rate changes | (19 | ) | (0.1 | %) | ||||
Revenue increase in constant dollars | $ | 6,242 | 19.9 | % |
-13-
THE TIMBERLAND COMPANY
RECONCILIATION OF OPERATING PROFIT AND DILUTED EPS TO OPERATING PROFIT AND
DILUTED EPS EXCLUDING RESTRUCTURING AND RELATED COSTS
(Unaudited)
RECONCILIATION OF OPERATING PROFIT AND DILUTED EPS TO OPERATING PROFIT AND
DILUTED EPS EXCLUDING RESTRUCTURING AND RELATED COSTS
(Unaudited)
RECONCILIATION OF OPERATING PROFIT TO OPERATING PROFIT EXCLUDING RESTRUCTURING AND RELATED COSTS
(Dollars in Thousands, Unaudited)
(Dollars in Thousands, Unaudited)
For the Three Months | For the Three Months | |||||||
Ended March 30, 2007 | Ended March 31, 2006 | |||||||
(As Restated) | ||||||||
Operating profit (GAAP) | $ | 13,619 | $ | 40,066 | ||||
Restructuring and related costs | 6,526 | 481 | ||||||
Operating profit excluding restructuring and related costs | $ | 20,145 | $ | 40,547 | ||||
RECONCILIATION OF DILUTED EPS TO DILUTED EPS EXCLUDING RESTRUCTURING AND RELATED COSTS
For the Three Months | For the Three Months | |||||||
Ended March 30, 2007 | Ended March 31, 2006 | |||||||
(As Restated) | ||||||||
Diluted EPS (GAAP) | $ | 0.15 | $ | 0.40 | ||||
Per share impact of restructuring and related costs | 0.07 | 0.01 | ||||||
Diluted EPS excluding restructuring and related costs | $ | 0.22 | $ | 0.41 | ||||
-14-