Exhibit 99
Press Release |
FOR IMMEDIATE RELEASE | CONTACT: | Susan Ostrow |
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| Director, Investor Relations |
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| (603) 773-1212 |
TIMBERLAND REPORTS RECORD THIRD QUARTER REVENUE AND EARNINGS
STRATHAM, NH, October 21, 2004 – The Timberland Company (NYSE: TBL) today reported record third quarter net income of $68.6 million and diluted earnings per share (EPS) of $1.92, compared with third quarter 2003 net income of $53.3 million and diluted EPS of $1.47. Timberland’s record results reflected strong global revenue gains and continued benefits from gross margin expansion, which enabled delivery of strong profit growth while supporting increased investment against global brand building initiatives.
• Third quarter revenue increased 11.3% to $493.9 million, driven by gains in both U.S. and international markets. U.S. revenues grew 6.0%, reflecting balanced growth from footwear and apparel offerings – and across wholesale (+6.0%) and retail channels (+6.0% on a 1.3% comparable store sales gain). International results (+19.3% or +10.6% in constant dollars) reflected double-digit constant dollar sales growth in Asia and strong constant dollar gains in Europe. Overall revenue growth benefited from favorable foreign exchange rate changes – which added $15.3 million (or 3.4%) to third quarter revenue.
• Third quarter results were supported by strong global footwear sales. Global footwear revenues expanded 13.6% to $388.2 million, driven by strong growth in men’s and women’s casual and kids’ categories. Global apparel and accessories revenue grew 3.1% to $101.4 million, as gains in Timberland® brand apparel in the U.S. and Asia offset constant dollar declines in Europe and lower levels of Timberland PRO® series apparel sales.
• Operating profit for the quarter increased 26.9% to $106.0 million, and operating margin rose 2.7 percentage points to 21.5%. Profit gains reflected strong revenue growth and significant gains in gross margin, which benefited from foreign exchange rate changes, lower product-related costs, lower markdowns and favorable business mix. For the quarter, foreign exchange rate changes contributed approximately $11.4 million to operating profit.
• EPS for the quarter expanded 30.6% to $1.92, reflecting profit gains and continued benefits from share repurchases. During the quarter, the Company repurchased 978 thousand shares at a total cost of $54.8
million. For the year to date, Timberland has repurchased 1.3 million shares at a total cost of $75.0 million. The Company currently has 3.3 million shares remaining under its existing share repurchase program.
• Timberland ended the quarter with $119.8 million in cash and no debt outstanding. Timberland drove improvement in annual inventory turns and days sales outstanding, supporting an increase in return on capital from 28.1% to 32.5%.
Jeffrey B. Swartz, Timberland’s President and Chief Executive Officer, stated, “Timberland delivered record third quarter results, reflecting continued progress in developing 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 further refining our brand building approach through our Make it Better™ marketing campaign which powerfully communicates Timberland’s brand essence and values – and deepens our relationship with Timberland consumers.
We are pleased to have delivered strong financial results in the third quarter. We are targeting mid single-digit revenue growth for the balance of this year and believe that we are on track towards delivering strong revenue growth and double-digit profit gains in 2004. Looking ahead to 2005, we intend to drive solid revenue gains and continued strong earnings growth, 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 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) 786-2963 and providing access code number 54715597. 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® 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 October 21, 2004.
# # #
THE TIMBERLAND COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
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| Oct. 1, |
| Sept. 26, |
| Dec. 31, |
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ASSETS |
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Current assets |
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Cash and equivalents |
| $ | 119,779 |
| $ | 35,902 |
| $ | 241,803 |
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Accounts receivable, net |
| 279,182 |
| 264,036 |
| 125,088 |
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Inventory |
| 182,979 |
| 175,490 |
| 119,581 |
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Prepaid expense |
| 21,335 |
| 21,925 |
| 25,906 |
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Deferred income taxes |
| 22,400 |
| 21,256 |
| 27,182 |
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Total current assets |
| 625,675 |
| 518,609 |
| 539,560 |
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Net property, plant and equipment |
| 75,812 |
| 68,939 |
| 76,360 |
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Goodwill |
| 14,163 |
| 14,163 |
| 14,163 |
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Intangible assets |
| 3,991 |
| 3,515 |
| 3,807 |
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Other assets, net |
| 9,496 |
| 7,103 |
| 7,826 |
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Total assets |
| $ | 729,137 |
| $ | 612,329 |
| $ | 641,716 |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current liabilities |
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Accounts payable |
| $ | 54,379 |
| $ | 50,236 |
| $ | 38,026 |
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Accrued expense |
| 110,966 |
| 108,996 |
| 115,425 |
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Income taxes payable |
| 39,976 |
| 34,358 |
| 27,482 |
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Derivative liabilities |
| 4,264 |
| 6,334 |
| 16,058 |
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Total current liabilities |
| 209,585 |
| 199,924 |
| 196,991 |
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Other liabilities |
| 11,081 |
| 5,231 |
| 9,318 |
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Deferred income taxes |
| 8,086 |
| 6,689 |
| 6,944 |
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Stockholders’ equity |
| 500,385 |
| 400,485 |
| 428,463 |
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Total liabilities and stockholders’ equity |
| $ | 729,137 |
| $ | 612,329 |
| $ | 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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| Oct. 1, |
| Sept. 26, |
| Oct. 1, |
| Sept. 26, |
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Revenue |
| $ | 493,933 |
| $ | 443,960 |
| $ | 1,045,920 |
| $ | 926,690 |
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Cost of goods sold |
| 250,161 |
| 241,160 |
| 521,200 |
| 498,886 |
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Gross profit |
| 243,772 |
| 202,800 |
| 524,720 |
| 427,804 |
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Operating expense |
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Selling |
| 110,761 |
| 98,202 |
| 287,429 |
| 246,203 |
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General and administrative |
| 26,994 |
| 21,072 |
| 71,436 |
| 59,487 |
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Total operating expense |
| 137,755 |
| 119,274 |
| 358,865 |
| 305,690 |
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Operating income |
| 106,017 |
| 83,526 |
| 165,855 |
| 122,114 |
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Other expense (income) |
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Interest expense |
| 147 |
| 328 |
| 547 |
| 767 |
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Other, net |
| (548 | ) | 305 |
| (1,594 | ) | (226 | ) | ||||
Total other expense (income) |
| (401 | ) | 633 |
| (1,047 | ) | 541 |
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Income before income taxes |
| 106,418 |
| 82,893 |
| 166,902 |
| 121,573 |
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Provision for income taxes |
| 37,778 |
| 29,620 |
| 59,250 |
| 43,158 |
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Net income |
| 68,640 |
| $ | 53,273 |
| $ | 107,652 |
| $ | 78,415 |
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Earnings per share |
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Basic |
| $ | 1.96 |
| $ | 1.51 |
| $ | 3.08 |
| $ | 2.20 |
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Diluted |
| $ | 1.92 |
| $ | 1.47 |
| $ | 3.00 |
| $ | 2.15 |
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Weighted-average shares outstanding |
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Basic |
| 34,962 |
| 35,378 |
| 34,985 |
| 35,684 |
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Diluted |
| 35,712 |
| 36,189 |
| 35,868 |
| 36,512 |
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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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| Oct. 1, |
| Sept. 26, |
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Cash flows from operating activities: |
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Net income |
| $ | 107,652 |
| $ | 78,415 |
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Adjustments to reconcile net income to net cash provided/(used) by operating activities: |
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Deferred income taxes |
| 1,323 |
| 532 |
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Amortization of deferred compensation |
| 2,357 |
| 1,308 |
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Depreciation and other amortization |
| 16,585 |
| 16,138 |
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Loss on disposal of property, plant & equipment |
| 86 |
| — |
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Tax benefit from stock option plans |
| 11,579 |
| 8,098 |
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Increase/(decrease) in cash from changes in working capital items: |
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Accounts receivable |
| (154,386 | ) | (125,869 | ) | ||
Inventory |
| (63,469 | ) | (51,917 | ) | ||
Prepaid expense |
| 4,471 |
| 353 |
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Accounts payable |
| 16,733 |
| 12,238 |
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Accrued expense |
| (4,354 | ) | 18,004 |
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Income taxes |
| 12,523 |
| 14,262 |
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Net cash used by operating activities |
| (48,900 | ) | (28,438 | ) | ||
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Cash flows from investing activities: |
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Additions to property, plant and equipment, net |
| (15,577 | ) | (10,646 | ) | ||
Other, net |
| (1,561 | ) | 847 |
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Net cash used by investing activities |
| (17,138 | ) | (9,799 | ) | ||
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Cash flows from financing activities: |
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Common stock repurchases |
| (74,985 | ) | (84,153 | ) | ||
Issuance of common stock |
| 19,172 |
| 14,665 |
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Net cash used by financing activities |
| (55,813 | ) | (69,488 | ) | ||
Effect of exchange rate changes on cash |
| (173 | ) | 2,432 |
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Net decrease in cash and equivalents |
| (122,024 | ) | (105,293 | ) | ||
Cash and equivalents at beginning of period |
| 241,803 |
| 141,195 |
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Cash and equivalents at end of period |
| $ | 119,779 |
| $ | 35,902 |
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THE TIMBERLAND COMPANY
REVENUE ANALYSIS
(Amounts in Thousands)
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| For the Three Months Ended |
| For the Nine Months Ended |
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| Oct. 1, |
| Sept. 26, |
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| Oct. 1, |
| Sept. 26, |
| % |
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Revenue by Segment: |
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US Wholesale |
| $ | 234,286 |
| $ | 221,011 |
| 6.0 |
| $ | 450,066 |
| $ | 421,319 |
| 6.8 |
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US Consumer Direct |
| 50,457 |
| 47,588 |
| 6.0 |
| 122,824 |
| 113,289 |
| 8.4 |
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Total US |
| 284,743 |
| 268,599 |
| 6.0 |
| 572,890 |
| 534,608 |
| 7.2 |
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International |
| 209,190 |
| 175,361 |
| 19.3 |
| 473,030 |
| 392,082 |
| 20.6 |
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Revenue by Product |
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Footwear |
| 388,154 |
| 341,806 |
| 13.6 |
| 800,895 |
| 698,019 |
| 14.7 |
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Apparel and Accessories |
| 101,407 |
| 98,388 |
| 3.1 |
| 235,435 |
| 218,799 |
| 7.6 |
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Royalty and Other |
| 4,372 |
| 3,766 |
| 16.1 |
| 9,590 |
| 9,872 |
| (2.9 | ) | ||||
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Revenue by Channel |
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Wholesale |
| 407,528 |
| 364,857 |
| 11.7 |
| 816,256 |
| 724,034 |
| 12.7 |
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Consumer Direct |
| 86,405 |
| 79,103 |
| 9.2 |
| 229,664 |
| 202,656 |
| 13.3 |
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Note: Domestic Retail Comparable Store Sales |
| 1.3 | % | 1.1 | % |
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| 1.9 | % | (1.4 | )% |
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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 Nine Months |
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| $ Change |
| % Change |
| $ Change |
| % Change |
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Revenue increase (GAAP) |
| $ | 50.0 |
| 11.3 |
| $ | 119.2 |
| 12.9 |
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Increase due to foreign exchange rate changes |
| 15.3 |
| 3.4 |
| 39.8 |
| 4.3 |
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Revenue increase in constant dollars |
| 34.7 |
| 7.9 |
| 79.4 |
| 8.6 |
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International Revenue Reconciliation:
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| For the Three Months |
| For the Nine Months |
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| $ Change |
| % Change |
| $ Change |
| % Change |
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Revenue increase (GAAP) |
| $ | 33.8 |
| 19.3 |
| $ | 80.9 |
| 20.6 |
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Increase due to foreign exchange rate changes |
| 15.3 |
| 8.7 |
| 39.8 |
| 10.1 |
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Revenue increase in constant dollars |
| 18.5 |
| 10.6 |
| 41.1 |
| 10.5 |
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