Exhibit 99
Press Release |
FOR IMMEDIATE RELEASE | CONTACT: | Susan Ostrow |
|
| Director, Investor Relations |
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| (603) 773-1212 |
TIMBERLAND REPORTS THIRD QUARTER RESULTS
STRATHAM, NH, October 16, 2003 – The Timberland Company (NYSE: TBL) today reported third quarter net income of $53.3 million, or diluted earnings per share (EPS) of $1.47, compared with third quarter 2002 net income of $49.2 million, or diluted EPS of $1.30.
• Third quarter revenue increased 6.6% to $444.0 million, reflecting strong growth in international markets (22.2% or 12.2% in constant dollars) which offset a modest decline in the U.S. (-1.7%). Overall, Timberland’s international business grew to nearly 40% of Company revenues. Benefits from foreign exchange rate changes added $14.3 million (or 3.4%) to overall revenue growth.
• Revenue growth for the quarter reflected global gains in both footwear and apparel. Footwear revenue expanded 8.4% to $341.8 million, driven by growth in boots and men’s and women’s casual footwear. Global apparel and accessories revenue grew 2.6% to $98.4 million, reflecting gains in the Company’s U.S. Wholesale and Asian businesses.
• Operating profit for the quarter increased 8.5% to $83.5 million, reflecting revenue growth and higher gross margins, which benefited from foreign exchange rate changes and reduced levels of footwear off-price sales and product returns. Timberland’s progress in developing its international business enabled the Company to take advantage of the strengthening of foreign currencies. For the quarter, foreign exchange rate changes contributed approximately $8.7 million to operating profits, which was leveraged to support continued investments against strategic priorities, including international business expansion.
• EPS for the quarter expanded 13.1% to $1.47, reflecting profit gains and continued benefits from share repurchases.
• A disciplined approach to asset management drove strong gains in cash management and return on capital. Timberland ended the quarter with $35.9 million in cash and no debt outstanding while driving improvements in rolling annual inventory turns and receivables management. Timberland’s annual return on capital reached 28.1%.
• Timberland’s share repurchase program continued in the third quarter as the Company bought back 637 thousand shares at a total cost of $29.8 million. The Company also announced today that its Board of Directors has authorized the repurchase of up to an additional four million shares of the Company’s Class A Common Stock. The additional program supplements the Company’s current four million share authorization, of which approximately one million shares remained outstanding at the end of the third quarter.
Jeffrey B. Swartz, Timberland’s President and Chief Executive Officer, stated, “Timberland delivered strong performance in the third quarter, reflecting continued progress against our strategic initiatives. Timberland’s international business, which drove our revenue growth in the quarter, delivered solid gains in both Europe and Asia as we continued to enhance our premium integrated brand positioning in those regions. In the United States, our focus on driving footwear innovation across our portfolio, combined with the expansion of our wholesale apparel business, enabled us to deliver solid results in a competitive retail marketplace.”
“Overall, we are pleased to have delivered solid financial results in the third quarter and believe that we are on track towards achieving our performance goals for the second half of 2003 — and towards delivering strong revenue and earnings gains for the full year. Based on current trends, we believe that mid to high single-digit revenue growth represents an appropriate goal for our business for the balance of 2003. We also continue to target relatively flat operating margins for the second half of 2003 (excluding $6 million of one-time costs associated with last year’s West Coast work stoppage). Looking ahead to 2004, we remain committed to delivering strong financial performance and intend to leverage solid revenue growth and operating margin gains to drive double-digit earnings growth and strong cash flow, consistent with our long-term financial objectives. We believe that the strategies we are pursuing will enable us to continue to deliver strong financial performance while capturing the great potential that we see for the Timberland enterprise.”
Note that comments made by 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 (913) 981-5519. 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. Various factors could cause the results of The Timberland Company to be materially different from any future results expressed or implied by such forward-looking statements. Such factors include, but are not limited to the Company’s ability to: (i) successfully market and sell its products in view of changing consumer trends, consumer acceptance of products, and other factors affecting retail market conditions, including the current U.S. economic environment and the global economic and political uncertainties resulting from the continuing war on terrorism; (ii) manage its foreign exchange rate risks; (iii) obtain adequate raw materials at competitive prices; and (iv) other factors, including those detailed from time to time in The Timberland Company’s SEC reports, including its Annual Report on Form 10-K filed on March 27, 2003. 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 October 16, 2003.
# # #
THE TIMBERLAND COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
|
| Sept. 26, |
| Sept. 27, |
| Dec. 31, |
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|
| (Unaudited) |
| (Unaudited) |
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ASSETS |
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Current assets |
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Cash and equivalents |
| $ | 35,902 |
| $ | 20,003 |
| $ | 141,195 |
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Accounts receivable, net |
| 264,036 |
| 251,803 |
| 132,110 |
| |||
Inventory |
| 175,490 |
| 171,167 |
| 122,417 |
| |||
Prepaid expense |
| 21,925 |
| 18,374 |
| 21,493 |
| |||
Deferred income taxes |
| 21,256 |
| 21,962 |
| 24,568 |
| |||
Total current assets |
| 518,609 |
| 483,309 |
| 441,783 |
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Net property, plant and equipment |
| 68,939 |
| 73,800 |
| 73,370 |
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Goodwill |
| 14,163 |
| 14,163 |
| 14,163 |
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Other assets, net |
| 10,618 |
| 8,883 |
| 9,355 |
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Total assets |
| $ | 612,329 |
| $ | 580,155 |
| $ | 538,671 |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current liabilities |
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Accounts payable |
| $ | 50,236 |
| $ | 61,824 |
| $ | 33,678 |
|
Accrued expense |
| 108,996 |
| 99,241 |
| 89,430 |
| |||
Income taxes payable |
| 34,358 |
| 29,615 |
| 20,134 |
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Derivative liabilities |
| 6,334 |
| 5,486 |
| 12,514 |
| |||
Total current liabilities |
| 199,924 |
| 196,166 |
| 155,756 |
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Other liabilities |
| 5,231 |
| 2,812 |
| 3,072 |
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Deferred income taxes |
| 6,689 |
| 11,268 |
| 7,058 |
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Stockholders’ equity |
| 400,485 |
| 369,909 |
| 372,785 |
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Total liabilities and stockholders’ equity |
| $ | 612,329 |
| $ | 580,155 |
| $ | 538,671 |
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THE TIMBERLAND COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except per share data)
(Unaudited)
|
| For the |
| For the |
| ||||||||
|
| Sept. 26, |
| Sept. 27, |
| Sept. 26, |
| Sept. 27, |
| ||||
Revenue |
| $ | 443,960 |
| $ | 416,641 |
| $ | 926,690 |
| $ | 833,868 |
|
Cost of goods sold |
| 241,160 |
| 233,801 |
| 498,886 |
| 465,256 |
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Gross profit |
| 202,800 |
| 182,840 |
| 427,804 |
| 368,612 |
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Operating expense |
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Selling |
| 98,202 |
| 86,099 |
| 246,203 |
| 218,883 |
| ||||
General and administrative |
| 21,072 |
| 19,761 |
| 59,487 |
| 52,880 |
| ||||
Total operating expense |
| 119,274 |
| 105,860 |
| 305,690 |
| 271,763 |
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Operating income |
| 83,526 |
| 76,980 |
| 122,114 |
| 96,849 |
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Other expense (income) |
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Interest expense |
| 328 |
| 263 |
| 767 |
| 633 |
| ||||
Other, net |
| 305 |
| 491 |
| (226 | ) | (1,565 | ) | ||||
Total other expense (income) |
| 633 |
| 754 |
| 541 |
| (932 | ) | ||||
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Income before income taxes |
| 82,893 |
| 76,226 |
| 121,573 |
| 97,781 |
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Provision for income taxes |
| 29,620 |
| 27,060 |
| 43,158 |
| 34,712 |
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Income before cumulative effect of change in accounting principle |
| $ | 53,273 |
| $ | 49,166 |
| $ | 78,415 |
| $ | 63,069 |
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Cumulative effect of change in accounting principle |
| — |
| — |
| — |
| 4,913 |
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Net income |
| $ | 53,273 |
| $ | 49,166 |
| $ | 78,415 |
| $ | 67,982 |
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Earnings per share before cumulative effect of change in accounting principle |
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Basic |
| $ | 1.51 |
| $ | 1.33 |
| $ | 2.20 |
| $ | 1.68 |
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Diluted |
| $ | 1.47 |
| $ | 1.30 |
| $ | 2.15 |
| $ | 1.64 |
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Earnings per share after cumulative effect of change in accounting principle |
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Basic |
| $ | 1.51 |
| $ | 1.33 |
| $ | 2.20 |
| $ | 1.81 |
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Diluted |
| $ | 1.47 |
| $ | 1.30 |
| $ | 2.15 |
| $ | 1.77 |
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Weighted-average shares outstanding |
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Basic |
| 35,378 |
| 37,099 |
| 35,684 |
| 37,600 |
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Diluted |
| 36,189 |
| 37,838 |
| 36,512 |
| 38,349 |
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THE TIMBERLAND COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
|
| For the |
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|
| Sept. 26, |
| Sept. 27, |
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Cash flows from operating activities: |
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Net income |
| $ | 78,415 |
| $ | 67,982 |
|
Adjustments to reconcile net income to net cash provided/(used) by operating activities: |
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Deferred income taxes |
| 532 |
| 3,067 |
| ||
Depreciation and amortization |
| 17,446 |
| 16,499 |
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Cumulative effect of change in accounting principle |
| — |
| (4,913 | ) | ||
Tax benefit from stock option plans |
| 8,098 |
| 4,585 |
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Increase/(decrease) in cash from changes in working capital items: |
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|
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Accounts receivable |
| (125,869 | ) | (112,652 | ) | ||
Inventory |
| (51,917 | ) | (42,967 | ) | ||
Prepaid expense |
| 353 |
| (690 | ) | ||
Accounts payable |
| 12,238 |
| 16,941 |
| ||
Accrued expense |
| 18,004 |
| 31,024 |
| ||
Income taxes |
| 14,262 |
| 8,198 |
| ||
Net cash used by operating activities |
| (28,438 | ) | (12,926 | ) | ||
Cash flows from investing activities: |
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Additions to property, plant and equipment, net |
| (10,646 | ) | (11,704 | ) | ||
Other, net |
| 847 |
| 324 |
| ||
Net cash used by investing activities |
| (9,799 | ) | (11,380 | ) | ||
Cash flows from financing activities: |
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Common stock repurchases |
| (84,153 | ) | (72,400 | ) | ||
Issuance of common stock |
| 14,665 |
| 9,464 |
| ||
Net cash used by financing activities |
| (69,488 | ) | (62,936 | ) | ||
Effect of exchange rate changes on cash |
| 2,432 |
| 1,587 |
| ||
Net decrease in cash and equivalents |
| (105,293 | ) | (85,655 | ) | ||
Cash and equivalents at beginning of period |
| 141,195 |
| 105,658 |
| ||
Cash and equivalents at end of period |
| $ | 35,902 |
| $ | 20,003 |
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THE TIMBERLAND COMPANY
REVENUE ANALYSIS
(Amounts in Thousands)
|
| For the Three Months Ended |
| For the Nine Months Ended |
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|
| Sept. 26, |
| Sept. 27, |
| % |
| Sept. 26, |
| Sept. 27, |
| % |
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Revenue by Segment: |
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US Wholesale |
| $ | 221,011 |
| $ | 227,695 |
| (2.9 | ) | $ | 421,319 |
| $ | 411,226 |
| 2.5 |
|
US Consumer Direct |
| 47,588 |
| 45,419 |
| 4.8 |
| 113,289 |
| 112,418 |
| 0.8 |
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Total US |
| 268,599 |
| 273,114 |
| (1.7 | ) | 534,608 |
| 523,644 |
| 2.1 |
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International |
| 175,361 |
| 143,527 |
| 22.2 |
| 392,082 |
| 310,224 |
| 26.4 |
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Revenue by Product |
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Footwear |
| 341,806 |
| 315,312 |
| 8.4 |
| 698,019 |
| 623,324 |
| 12.0 |
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Apparel and Accessories |
| 98,388 |
| 95,914 |
| 2.6 |
| 218,799 |
| 198,938 |
| 10.0 |
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Royalty and Other |
| 3,766 |
| 5,415 |
| (30.5 | ) | 9,872 |
| 11,606 |
| (14.9 | ) | ||||
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Revenue by Channel |
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Wholesale |
| 364,857 |
| 343,688 |
| 6.2 |
| 724,034 |
| 647,035 |
| 11.9 |
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Consumer Direct |
| 79,103 |
| 72,953 |
| 8.4 |
| 202,656 |
| 186,833 |
| 8.5 |
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Note: Domestic Retail Comparable Store Sales |
| 1.1 | % | (12.3 | )% |
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| (1.4 | )% | (10.2 | )% |
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THE TIMBERLAND COMPANY
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 |
| ||||||
|
| $ Change |
| % Change |
| $ Change |
| % Change |
| ||
Revenue increase (GAAP) |
| $ | 27.3 |
| 6.6 | % | $ | 92.8 |
| 11.1 | % |
Increase due to foreign exchange rate changes |
| 14.3 |
| 3.4 | % | 43.2 |
| 5.2 | % | ||
Revenue increase in constant dollars |
| 13.0 |
| 3.1 | % | 49.7 |
| 6.0 | % | ||
International Revenue Reconciliation:
|
| For the Three Months |
| For the Nine Months |
| ||||||
|
| $ Change |
| % Change |
| $ Change |
| % Change |
| ||
Revenue increase (GAAP) |
| $ | 31.8 |
| 22.2 | % | $ | 81.9 |
| 26.4 | % |
Increase due to foreign exchange rate changes |
| 14.3 |
| 10.0 | % | 43.2 |
| 13.9 | % | ||
Revenue increase in constant dollars |
| 17.5 |
| 12.2 | % | 38.7 |
| 12.5 | % | ||