Exhibit 99.1
Timberland Reports Fourth-Quarter and Full-Year 2008 Results
STRATHAM, N.H.--(BUSINESS WIRE)--February 5, 2009--The Timberland Company (NYSE: TBL) today reported fourth-quarter 2008 net income of $13.1 million and earnings per share of $0.23. These results compare to fourth-quarter 2007 net income of $24.1 million and earnings per share of $0.40. When adjusted to exclude restructuring and related costs, earnings per share were $0.23 and $0.52 in the fourth quarters of 2008 and 2007, respectively.
Fourth-Quarter 2008 Results Summary:
- Revenue declined 11.8% to $390.6 million for the quarter, reflecting the net closure of 28 retail stores globally, the transition to a licensing model for the Company’s North American apparel business and declines in its global Timberland® branded footwear and international apparel businesses, partially offset by continued growth in SmartWool® and Timberland PRO®. Foreign exchange rate changes decreased fourth quarter 2008 revenue by approximately $14 million, or 3.1%, due to the strengthening of the U.S. dollar.
- North America revenue declined 13.4% to $230.6 million, reflecting soft consumer spending in the U.S. Europe revenue decreased 13.8% to $109.6 million but was relatively flat on a constant dollar basis. European results reflect declines in the casual footwear and apparel businesses, partially offset by strong sales of men’s boots. Asia revenue increased 2.3% to $50.4 million, but decreased 7.0% on a constant dollar basis, driven primarily by declines in the apparel business.
- Global footwear revenue decreased 7.6% to $281.2 million due to declines in the casual footwear and women’s boots businesses, which offset strength in the men’s boots business in the European and Asian markets as well as strength in Timberland PRO® series footwear. Apparel and accessories revenue decreased 22.2% to $103.8 million, due in part to anticipated declines in Timberland® brand apparel as a result of the Company’s transition to a licensing model for its North American apparel business.
- Global wholesale revenue decreased 10.9% to $257.3 million. Worldwide consumer direct revenue decreased 13.4% to $133.4 million, reflecting a difficult worldwide retail environment, revenue declines associated with the Company’s decision to close certain underperforming retail locations and the impact of foreign currency translation.
- The Company had restructuring and related credits of $0.1 million in the fourth quarter of 2008, compared to charges of $9.6 million for the fourth quarter of 2007, reflecting the substantial completion of the Company’s 2007 restructuring programs.
- Operating income for the fourth quarter of 2008 was $23.1 million, compared to $32.4 million in the prior year period. The 2008 fourth quarter included approximately $2.6 million related to a favorable legal settlement, a $1.9 million non-cash intangible asset impairment charge and severance costs of approximately $2.3 million related to the Company’s ongoing initiatives to streamline its operations and rationalize its cost structure. In the quarter, foreign exchange rate changes decreased operating income by approximately $5 million due to the strengthening of the U.S. dollar. Operating income for the fourth quarter of 2007 included the reversal of approximately $8 million in accruals, primarily related to incentive compensation as its annual performance fell below minimum requirements.
- In the fourth quarter of 2008, the effective tax rate was 48.9% compared to 24.3% in the fourth quarter of 2007. The tax rate for the fourth quarter of 2008 was impacted by a non-deductible loss from a significant unanticipated decline in the market value of certain company-owned life insurance assets and the impact of the non-cash intangible asset impairment charge. These unanticipated items increased the Company’s fourth quarter 2008 tax expense by approximately $1.8 million. During the fourth quarter of 2007, the Company released approximately $8 million of specific tax reserves related to the closure of certain audits during the quarter.
- Timberland ended the quarter with $217.2 million in cash and no debt. Inventory at quarter end was $179.7 million, down 11.0% versus 2007 fourth-quarter levels, reflecting the Company’s disciplined inventory management in the face of challenging market conditions. Accounts receivable decreased 10.3% to $168.7 million, compared to the prior year.
For the full-year 2008, Timberland reported net income of $42.9 million and diluted EPS of $0.73, or $0.74 when adjusted to exclude restructuring and related costs. These results compare to full-year 2007 net income of $40.0 million and diluted EPS of $0.65, or $0.92 when adjusted to exclude restructuring and related costs.
The Company anticipates that 2009 will continue to be challenging due to uncertainty around consumer spending patterns and the financial health of the retail industry, in general, conditions that make forecasting difficult. Given the volatile nature of current economic conditions, the Company believes there is not sufficient visibility to set expectations for the performance of the business at this time.
Jeffrey B. Swartz, Timberland’s President and Chief Executive Officer, stated, "To say that the fourth quarter of 2008 was challenging would grossly understate the conditions that global consumer product companies were and are facing. And yet at Timberland, I feel like the current market conditions offer us opportunity. We have strategies in place to reinvigorate our brand and strengthen our position in the global market and a strong balance sheet with $217 million in cash and no debt. The strength of our balance sheet gives us the financial capability to continue to invest behind our strategies and positions us to capitalize on the opportunities that will develop for powerful brands as consumer markets begin to stabilize and improve."
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 fourth-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 706.643.2916 and providing access code number 80627182. 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™, 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, 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 trends, consumer acceptance of products and other factors affecting retail market conditions; (ii) the Company’s ability to execute key strategic initiatives; (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 most recent Annual Report on Form 10-K and other filings we make 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 (which exclude the impact of changes in foreign currency exchange rates), and diluted earnings per share 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 regarding these non-GAAP measures is located in the Form 8-K furnished to the SEC on February 5, 2009.
THE TIMBERLAND COMPANY | ||||
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS | ||||
(Dollars in Thousands) | ||||
December 31, 2008 | December 31, 2007 | |||
Assets | ||||
Current assets | ||||
Cash and equivalents | $217,189 | $143,274 | ||
Accounts receivable, net | 168,666 | 188,091 | ||
Inventory, net | 179,688 | 201,932 | ||
Prepaid expense | 37,139 | 41,572 | ||
Prepaid income taxes | 16,687 | 17,361 | ||
Deferred income taxes | 23,425 | 24,927 | ||
Derivative assets | 7,109 | - | ||
Total current assets | 649,903 | 617,157 | ||
Property, plant and equipment, net | 78,526 | 87,919 | ||
Deferred income taxes | 18,528 | 19,451 | ||
Goodwill and intangible assets, net | 91,866 | 99,222 | ||
Other assets, net | 10,576 | 12,596 | ||
Total assets | $849,399 | $836,345 | ||
Liabilities and Stockholders’ Equity | ||||
Current liabilities | ||||
Notes payable | $0 | $0 | ||
Accounts payable | 96,901 | 86,101 | ||
Accrued expense and other current liabilities | 112,090 | 108,903 | ||
Income taxes payable | 20,697 | 19,215 | ||
Derivative liabilities | 2,386 | 3,816 | ||
Total current liabilities | 232,074 | 218,035 | ||
Other long-term liabilities | 40,787 | 41,150 | ||
Stockholders’ equity | 576,538 | 577,160 | ||
Total liabilities and stockholders’ equity | $849,399 | $836,345 |
THE TIMBERLAND COMPANY | ||||||||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||
(Amounts in Thousands, Except Per Share Data) | ||||||||
For the Quarter Ended | For the Year Ended | |||||||
December 31, 2008 | December 31, 2007 | December 31, 2008 | December 31, 2007 | |||||
Revenue | $390,626 | $442,702 | $1,364,550 | $1,436,451 | ||||
Cost of goods sold | 216,708 | 242,123 | 743,817 | 771,723 | ||||
Gross profit | 173,918 | 200,579 | 620,733 | 664,728 | ||||
Operating expense | ||||||||
Selling | 122,191 | 132,799 | 437,730 | 464,689 | ||||
General and administrative | 29,475 | 25,816 | 113,011 | 116,201 | ||||
Litigation settlement | (2,630) | - | (2,630) | - | ||||
Impairment of intangible asset | 1,884 | - | 2,061 | - | ||||
Restructuring and related costs | (129) | 9,600 | 925 | 24,659 | ||||
Total operating expense | 150,791 | 168,215 | 551,097 | 605,549 | ||||
Operating income | 23,127 | 32,364 | 69,636 | 59,179 | ||||
Other income | ||||||||
Interest income/(expense), net | 39 | (541) | 1,719 | 835 | ||||
Other income/(expense), net | 2,526 | 21 | 5,455 | (289) | ||||
Total other income/(expense), net | 2,565 | (520) | 7,174 | 546 | ||||
Income before provision for income taxes | 25,692 | 31,844 | 76,810 | 59,725 | ||||
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Provision for income taxes | 12,554 | 7,737 | 33,904 | 19,726 | ||||
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Net income | $13,138 | $24,107 | $42,906 | $39,999 | ||||
Earnings per share | ||||||||
Basic | $0.23 | $0.40 | $0.73 | $0.65 | ||||
Diluted | $0.23 | $0.40 | $0.73 | $0.65 | ||||
Weighted-average shares outstanding | ||||||||
Basic | 57,244 | 60,445 | 58,442 | 61,087 | ||||
Diluted | 57,598 | 60,866 | 58,786 | 61,659 |
THE TIMBERLAND COMPANY | ||||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||
(Dollars in Thousands) | ||||
For the Year Ended | ||||
December 31, 2008 | December 31, 2007 | |||
Cash flows from operating activities: | ||||
Net income | $42,906 | $39,999 | ||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||
Deferred income taxes | 2,784 | 1,007 | ||
Share-based compensation | 8,518 | 9,051 | ||
Depreciation and other amortization | 33,498 | 31,307 | ||
Provision for losses on accounts receivable | 7,575 | 7,406 | ||
Provision for asset impairment | 2,061 | 5,817 | ||
Litigation settlement | (2,630) | - | ||
Tax expense from share-based compensation, net of excess benefit | (1,254) | (1,095) | ||
Unrealized (gain)/loss on derivatives | (131) | (2,749) | ||
Other non-cash charges/(credits), net | 1,354 | 3,798 | ||
Increase/(decrease) in cash from changes in working capital: | ||||
Accounts receivable | 3,847 | 17,247 | ||
Inventory | 20,789 | (12,010) | ||
Prepaid expense | 5,377 | 154 | ||
Accounts payable | 11,534 | (26,155) | ||
Accrued expense | 3,396 | (16,496) | ||
Income taxes prepaid and payable, net | 7,944 | (23,135) | ||
Other liabilities | (3,305) | 4,462 | ||
Net cash provided by operating activities | 144,263 | 38,608 | ||
Cash flows from investing activities: | ||||
Acquisition of business, net of cash acquired | 970 | (12,843) | ||
Additions to property, plant and equipment | (22,316) | (30,479) | ||
Other | 3,598 | (1,073) | ||
Net cash used by investing activities | (17,748) | (44,395) | ||
Cash flows from financing activities: | ||||
Common stock repurchases | (46,261) | (47,748) | ||
Issuance of common stock | 1,875 | 12,574 | ||
Excess tax benefit from stock option and employee stock purchase plans | 183 | 1,101 | ||
Net cash used by financing activities | (44,203) | (34,073) | ||
Effect of exchange rate changes on cash and equivalents | (8,397) | 1,436 | ||
Net increase/(decrease) in cash and equivalents | 73,915 | (38,424) | ||
Cash and equivalents at beginning of period | 143,274 | 181,698 | ||
Cash and equivalents at end of period | $217,189 | $143,274 |
THE TIMBERLAND COMPANY | |||||||||||
REVENUE ANALYSIS | |||||||||||
(Amounts in Thousands, Unaudited) | |||||||||||
For the Quarter Ended | For the Year Ended | ||||||||||
December 31, 2008 | December 31, 2007 | December 31, 2008 | December 31, 2007 | ||||||||
Revenue by Segment: | |||||||||||
North America | $230,628 | $266,251 | -13.4% | $652,435 | $728,187 | -10.4% | |||||
Europe | 109,638 | 127,212 | -13.8% | 553,044 | 552,725 | 0.1% | |||||
Asia | 50,360 | 49,239 | 2.3% | 159,071 | 155,539 | 2.3% | |||||
Total Revenue | $390,626 | $442,702 | -11.8% | $1,364,550 | $1,436,451 | -5.0% | |||||
Revenue by Product: | |||||||||||
Footwear | $281,232 | $304,360 | -7.6% | $974,326 | $1,004,808 | -3.0% | |||||
Apparel and Accessories | 103,788 | 133,474 | -22.2% | 367,032 | 411,620 | -10.8% | |||||
Royalty and Other | 5,606 | 4,868 | 15.2% | 23,192 | 20,023 | 15.8% | |||||
Revenue by Channel: | |||||||||||
Wholesale | $257,272 | $288,718 | -10.9% | $989,478 | $1,043,416 | -5.2% | |||||
Consumer Direct | 133,354 | 153,984 | -13.4% | 375,072 | 393,035 | -4.6% | |||||
Comparable Store Sales: | |||||||||||
Domestic Retail | -16.4% | -9.3% | -11.1% | -5.5% | |||||||
Global Retail | -8.4% | -5.5% | -3.7% | -4.8% |
THE TIMBERLAND COMPANY | ||||||||
RECONCILIATION OF TOTAL AND INTERNATIONAL REVENUE CHANGES | ||||||||
TO CONSTANT DOLLAR REVENUE CHANGES | ||||||||
(Amounts in Thousands, Unaudited) | ||||||||
Total Company Revenue Reconciliation: | ||||||||
For the Quarter Ended | For the Year Ended | |||||||
December 31, 2008 | December 31, 2008 | |||||||
$ Change | % Change | $ Change | % Change | |||||
Revenue decrease (GAAP) | ($52,076) | -11.8% | ($71,901) | -5.0% | ||||
(Decrease)/increase due to foreign exchange rate changes | (13,876) | -3.1% | 20,869 | 1.5% | ||||
Revenue decrease in constant dollars | ($38,200) | -8.7% | ($92,770) | -6.5% | ||||
North America Revenue Reconciliation: | ||||||||
For the Quarter Ended | For the Year Ended | |||||||
December 31, 2008 | December 31, 2008 | |||||||
$ Change | % Change | $ Change | % Change | |||||
Revenue decrease (GAAP) | ($35,623) | -13.4% | ($75,752) | -10.4% | ||||
Decrease due to foreign exchange rate changes | (1,332) | -0.5% | (499) | -0.1% | ||||
Revenue decrease in constant dollars | ($34,291) | -12.9% | ($75,253) | -10.3% | ||||
Europe Revenue Reconciliation: | ||||||||
For the Quarter Ended | For the Year Ended | |||||||
December 31, 2008 | December 31, 2008 | |||||||
$ Change | % Change | $ Change | % Change | |||||
Revenue (decrease)/increase (GAAP) | ($17,574) | -13.8% | $319 | 0.1% | ||||
(Decrease)/increase due to foreign exchange rate changes | (17,126) | -13.5% | 9,276 | 1.7% | ||||
Revenue decrease in constant dollars | ($448) | -0.3% | ($8,957) | -1.6% | ||||
Asia Revenue Reconciliation: | ||||||||
For the Quarter Ended | For the Year Ended | |||||||
December 31, 2008 | December 31, 2008 | |||||||
$ Change | % Change | $ Change | % Change | |||||
Revenue increase (GAAP) | $1,121 | 2.3% | $3,532 | 2.3% | ||||
Increase due to foreign exchange rate changes | 4,582 | 9.3% | 12,093 | 7.8% | ||||
Revenue decrease in constant dollars | ($3,461) | -7.0% | ($8,561) | -5.5% | ||||
Constant dollar revenue changes, which exclude the impact of changes in foreign exchange rates, are not Generally Accepted Accounting Principle (“GAAP”) performance measures. We provide constant dollar revenue changes for total Company, North America, Europe, and Asia revenues because we use the measures to understand the underlying growth rate of revenue excluding the impact of items that are not under management’s direct control, such as changes in foreign exchange rates. |
THE TIMBERLAND COMPANY | ||||
RECONCILIATION OF DILUTED EPS TO DILUTED EPS EXCLUDING RESTRUCTURING AND RELATED COSTS | ||||
(Unaudited) | ||||
For the Quarter Ended | For the Quarter Ended | |||
December 31, 2008 | December 31, 2007 | |||
Diluted EPS (GAAP) | $0.23 | $0.40 | ||
Per share impact of restructuring and related costs | - | 0.12 | ||
Diluted EPS excluding restructuring and related costs | $0.23 | $0.52 | ||
For the Year Ended | For the Year Ended | |||
December 31, 2008 | December 31, 2007 | |||
Diluted EPS (GAAP) | $0.73 | $0.65 | ||
Per share impact of restructuring and related costs | 0.01 | 0.27 | ||
Diluted EPS excluding restructuring and related costs | $0.74 | $0.92 | ||
Diluted EPS excluding restructuring and related costs is not a Generally Accepted Accounting Principle (“GAAP”) performance measure. We provide diluted EPS excluding restructuring and related costs because it is used to analyze the earnings of the Company. Management believes this measure is a reasonable reflection of the earnings levels and trends from core business activities. |
CONTACT:
The Timberland Company
Karen Blomquist, 603-773-1655
Senior Manager, Investor Relations