Exhibit 99.1
| Press Release |
FOR IMMEDIATE RELEASE | CONTACT: |
| Susan Ostrow |
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| Director, Investor Relations |
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| (603) 773-1212 |
TIMBERLAND REPORTS SECOND QUARTER REVENUE AND EARNINGS
STRATHAM, NH, July 22, 2004 – The Timberland Company (NYSE: TBL) today reported second quarter net income of $7.9 million and diluted earnings per share (EPS) of $0.22, compared with second quarter 2003 net income of $5.8 million and diluted EPS of $0.16.
• Second quarter revenue increased 8.7% to $230.2 million, driven by solid gains in both U.S. and international markets. U.S. revenues grew 7.6%, reflecting balanced growth from footwear and apparel offerings – which supported strong wholesale results (+8.4%) – and continued gains in Timberland’s consumer direct business (+5.2% on a 1.3% comparable store sales decline). International results (+10.5% or +3.7% in constant dollars) reflected double-digit constant dollar sales gains in Asia, which offset flat constant dollar sales performance in Europe. Overall revenue growth benefited from favorable foreign exchange rate changes — which added $5.6 million (or 2.6%) to second quarter revenue.
• Second quarter results reflected solid global growth in footwear, apparel and accessory sales. Global footwear revenues expanded 6.7% to $173.4 million, driven by strong growth in kids, men’s casual and women’s casual categories. Global apparel and accessories revenue grew 17.1% to $54.7 million, benefiting from double-digit growth in U.S. and Asian apparel and moderate gains in European apparel sales.
• Operating profit for the quarter increased 33.3% to $12.1 million, and operating margin rose 0.9 percentage points to 5.2%. Profit gains reflected solid revenue growth and significant gains in gross margin, which benefited from favorable foreign exchange rate changes and lower product related costs. For the quarter, foreign exchange rate changes contributed approximately $3.7 million to operating profit. Margin improvements were achieved while supporting increased investment behind global brand building efforts and product development capability.
• EPS for the quarter expanded 37.5% to $0.22, reflecting profit gains and continued benefits from share repurchases. The Company did not execute share repurchases in the second quarter, reflecting the timing of
completion of share sales under its shelf registration statement. The Company currently has 4.3 million shares remaining under existing share repurchase programs.
• Timberland ended the quarter with $163.6 million in cash and no debt outstanding. Timberland drove improvement in annual inventory turns, supporting an increase in return on capital from 27.8% to 31.0%.
Jeffrey B. Swartz, Timberland’s President and Chief Executive Officer, stated, “Timberland’s second quarter results reflect the power of the Timberland® brand portfolio – and continued benefits from our efforts to enhance total system execution. We continue to drive solid growth across major product categories and geographies through a consistent focus on delivering against the enduring equities of the Timberland brand – while adapting our go-to-market strategies to better serve the needs of the broad range of Timberland consumers across the globe. We also continue to benefit from our focus on delivering superior customer service, leveraging a strengthened value chain that is supporting stronger growth and improved operating efficiencies. We are also continuing to refine our brand building approach, leveraging innovative vehicles to enhance our communication of Timberland’s brand essence and values – and deepen our relationship with Timberland consumers.
We are pleased to have delivered strong financial results in the second quarter. We believe that we are on track for solid performance in 2004 and are targeting mid to high single-digit revenue growth for the balance of this year. We remain committed to delivering solid revenue growth, double-digit profit gains and strong cash flow in 2004, leveraging strategies focused on capturing the great potential we see for the Timberland brand.”
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 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 (617) 801-9714 and providing access code number 83149272. 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 a highly competitive industry and in view of changing consumer trends, consumer acceptance of products and other factors affecting retail market conditions; (ii) procure a majority of its products from independent manufacturers; (iii) manage its foreign exchange rate risks; and (iv) 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 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 July 22, 2004.
# # #
THE TIMBERLAND COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
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| July 2, |
| June 27, |
| Dec. 31, |
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ASSETS |
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Current assets |
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Cash and equivalents |
| $ | 163,631 |
| $ | 82,578 |
| $ | 241,803 |
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Accounts receivable, net |
| 131,926 |
| 121,995 |
| 125,088 |
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Inventory |
| 170,931 |
| 173,047 |
| 119,581 |
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Prepaid expense |
| 25,618 |
| 21,448 |
| 25,906 |
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Deferred income taxes |
| 19,236 |
| 18,919 |
| 27,182 |
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Total current assets |
| 511,342 |
| 417,987 |
| 539,560 |
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Net property, plant and equipment |
| 75,947 |
| 69,728 |
| 76,360 |
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Goodwill |
| 14,163 |
| 14,163 |
| 14,163 |
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Intangible assets |
| 3,809 |
| 3,516 |
| 3,807 |
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Other assets, net |
| 9,768 |
| 7,234 |
| 7,826 |
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Total assets |
| $ | 615,029 |
| $ | 512,628 |
| $ | 641,716 |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current liabilities |
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Accounts payable |
| $ | 40,657 |
| $ | 45,618 |
| $ | 38,026 |
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Accrued expense |
| 65,511 |
| 72,619 |
| 115,425 |
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Income taxes payable |
| 2,422 |
| 4,739 |
| 27,482 |
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Derivative liabilities |
| 9,212 |
| 11,428 |
| 16,058 |
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Total current liabilities |
| 117,802 |
| 134,404 |
| 196,991 |
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Other liabilities |
| 11,299 |
| 5,002 |
| 9,318 |
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Deferred income taxes |
| 8,419 |
| 6,573 |
| 6,944 |
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Stockholders’ equity |
| 477,509 |
| 366,649 |
| 428,463 |
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Total liabilities and stockholders’ equity |
| $ | 615,029 |
| $ | 512,628 |
| $ | 641,716 |
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THE TIMBERLAND COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except per share data)
(Unaudited)
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| For the |
| For the |
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| July 2, |
| June 27, |
| July 2, |
| June 27, |
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Revenue |
| $ | 230,210 |
| $ | 211,733 |
| $ | 551,987 |
| $ | 482,730 |
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Cost of goods sold |
| 115,713 |
| 112,957 |
| 271,039 |
| 257,726 |
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Gross profit |
| 114,497 |
| 98,776 |
| 280,948 |
| 225,004 |
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Operating expense |
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Selling |
| 81,316 |
| 70,449 |
| 176,668 |
| 148,001 |
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General and administrative |
| 21,101 |
| 19,266 |
| 44,442 |
| 38,415 |
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Total operating expense |
| 102,417 |
| 89,715 |
| 221,110 |
| 186,416 |
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Operating income |
| 12,080 |
| 9,061 |
| 59,838 |
| 38,588 |
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Other expense (income) |
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Interest expense |
| 167 |
| 222 |
| 400 |
| 439 |
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Other, net |
| (286 | ) | (103 | ) | (1,046 | ) | (531 | ) | ||||
Total other expense (income) |
| (119 | ) | 119 |
| (646 | ) | (92 | ) | ||||
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Income before income taxes |
| 12,199 |
| 8,942 |
| 60,484 |
| 38,680 |
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Provision for income taxes |
| 4,331 |
| 3,130 |
| 21,472 |
| 13,538 |
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Net income |
| $ | 7,868 |
| $ | 5,812 |
| $ | 39,012 |
| $ | 25,142 |
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Earnings per share |
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Basic |
| $ | .22 |
| $ | .16 |
| $ | 1.11 |
| $ | .70 |
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Diluted |
| $ | .22 |
| $ | .16 |
| $ | 1.09 |
| $ | .69 |
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Weighted-average shares outstanding |
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Basic |
| 35,098 |
| 35,678 |
| 34,996 |
| 35,841 |
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Diluted |
| 36,051 |
| 36,633 |
| 35,946 |
| 36,670 |
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THE TIMBERLAND COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
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| For the |
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| July 2, |
| June 27, |
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Cash flows from operating activities: |
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Net income |
| $ | 39,012 |
| $ | 25,142 |
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Adjustments to reconcile net income to net cash provided/(used) by operating activities: |
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Deferred income taxes |
| 6,752 |
| 4,740 |
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Depreciation and amortization |
| 12,730 |
| 12,036 |
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Loss on disposal of property, plant & equipment |
| 60 |
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Tax benefit from stock option plans |
| 9,174 |
| 6,262 |
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Increase/(decrease) in cash from changes in working capital items: |
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Accounts receivable |
| (7,581 | ) | 13,534 |
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Inventory |
| (51,451 | ) | (50,059 | ) | ||
Prepaid expense |
| 251 |
| 596 |
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Accounts payable |
| 3,631 |
| 9,944 |
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Accrued expense |
| (49,893 | ) | (17,619 | ) | ||
Income taxes |
| (25,047 | ) | (15,354 | ) | ||
Net cash used by operating activities |
| (62,362 | ) | (10,778 | ) | ||
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Cash flows from investing activities: |
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Additions to property, plant and equipment, net |
| (10,696 | ) | (6,572 | ) | ||
Other, net |
| (1,110 | ) | 734 |
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Net cash used by investing activities |
| (11,806 | ) | (5,838 | ) | ||
Cash flows from financing activities: |
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Common stock repurchases |
| (20,145 | ) | (54,318 | ) | ||
Issuance of common stock |
| 16,285 |
| 10,851 |
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Net cash used by financing activities |
| (3,860 | ) | (43,467 | ) | ||
Effect of exchange rate changes on cash |
| (144 | ) | 1,466 |
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Net decrease in cash and equivalents |
| (78,172 | ) | (58,617 | ) | ||
Cash and equivalents at beginning of period |
| 241,803 |
| 141,195 |
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Cash and equivalents at end of period |
| $ | 163,631 |
| $ | 82,578 |
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THE TIMBERLAND COMPANY
REVENUE ANALYSIS
(Amounts in Thousands)
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| For the Three Months Ended |
| For the Six Months Ended |
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| July 2, |
| June 27, |
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| July 2, |
| June 27, |
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Revenue by Segment: |
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US Wholesale |
| $ | 104,432 |
| $ | 96,306 |
| 8.4 | % | $ | 215,780 |
| $ | 200,308 |
| 7.7 | % |
US Consumer Direct |
| 34,590 |
| 32,870 |
| 5.2 | % | 72,367 |
| 65,701 |
| 10.1 | % | ||||
Total US |
| 139,022 |
| 129,176 |
| 7.6 | % | 288,147 |
| 266,009 |
| 8.3 | % | ||||
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International |
| 91,188 |
| 82,557 |
| 10.5 | % | 263,840 |
| 216,721 |
| 21.7 | % | ||||
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Revenue by Product |
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Footwear |
| 173,360 |
| 162,486 |
| 6.7 | % | 412,741 |
| 356,213 |
| 15.9 | % | ||||
Apparel and Accessories |
| 54,701 |
| 46,700 |
| 17.1 | % | 134,028 |
| 120,411 |
| 11.3 | % | ||||
Royalty and Other |
| 2,149 |
| 2,547 |
| (15.6 | )% | 5,218 |
| 6,106 |
| (14.5 | )% | ||||
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Revenue by Channel |
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Wholesale |
| 161,756 |
| 149,355 |
| 8.3 | % | 408,728 |
| 359,177 |
| 13.8 | % | ||||
Consumer Direct |
| 68,454 |
| 62,378 |
| 9.7 | % | 143,259 |
| 123,553 |
| 15.9 | % | ||||
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Note: Domestic Retail Comparable Store Sales |
| (1.3 | )% | (1.9 | )% |
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| 2.4 | % | (3.1 | )% |
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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:
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| For the Three Months |
| For the Six Months |
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| $ Change |
| % Change |
| $ Change |
| % Change |
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Revenue increase (GAAP) |
| $ | 18.5 |
| 8.7 |
| $ | 69.3 |
| 14.3 |
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Increase due to foreign exchange rate changes |
| 5.6 |
| 2.6 |
| 24.5 |
| 5.1 |
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Revenue increase in constant dollars |
| 12.9 |
| 6.1 |
| 44.8 |
| 9.2 |
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International Revenue Reconciliation:
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| For the Three Months |
| For the Six Months |
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| $ Change |
| % Change |
| $ Change |
| % Change |
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Revenue increase (GAAP) |
| $ | 8.6 |
| 10.5 |
| $ | 47.1 |
| 21.7 |
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Increase due to foreign exchange rate changes |
| 5.6 |
| 6.8 |
| 24.5 |
| 11.3 |
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Revenue increase in constant dollars |
| 3.0 |
| 3.7 |
| 22.6 |
| 10.4 |
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