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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994 COMMISSION FILE NUMBER 1-9548
THE TIMBERLAND COMPANY
(Exact name of registrant as specified in its charter)
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DELAWARE 02-0312554
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
200 DOMAIN DRIVE
STRATHAM, NEW HAMPSHIRE 03885
(Address of principal executive office) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE, IS (603) 772-9500
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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Class A Common Stock, par value $.01 per share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant: (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No__
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of Class A Common Stock of the
Registrant held by non-affiliates of the Registrant was approximately
$215,097,724 on March 15, 1995. For purposes of the foregoing sentence
the term "affiliate" includes each director and executive officer of
the Registrant. See Item 12 of this Form 10-K.
8,218,018 shares of Class A Common Stock and 2,735,381 shares of
Class B Common Stock of the Registrant were outstanding on March 15,
1995.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Registrant's Annual Report to security holders for
fiscal year ended December 31, 1994 are incorporated by reference in
Part I, Item 1 regarding foreign and domestic sales and Part II, Items
5, 6, 7 and 8 of this Report. Portions of the Registrant's definitive
Proxy Statement for the 1995 Annual Meeting of Stockholders to be filed
pursuant to Regulation 14A are incorporated by reference in Part III
of this Report.
The List of Exhibits appears on page 16 of this Report.
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PART I
ITEM 1. BUSINESS
OVERVIEW
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The Timberland Company was incorporated in Delaware on December 20,
1978, and is the successor to Abington Shoe Company, which was incorporated in
Massachusetts in 1933 (The Timberland Company, together with its subsidiaries,
is referred to herein as "Timberland" or the "Company," unless the context
requires otherwise). The Company designs, develops, manufactures and markets
men's and women's premium quality footwear, apparel and accessories under the
Timberland [Registered] brand. These products are sold primarily through
better-grade department stores and other retail stores in the United
States and in more than 60 countries worldwide. In addition, the Company
sells its products through specialty stores devoted exclusively to
Timberland [Registered] products which are operated by the Company or its
distributors in the United States, Europe, South America, Mexico and Asia and
through specialty stores in Australia and New Zealand owned by its distributor
in the Asia/Pacific region. Timberland also sells its products through
Company-operated factory stores in the United States, France, Germany and
Italy.
The Company has built its product lines to reflect classic rugged
styles which provide durability and quality. In marketing its products, the
Company has consistently emphasized the workmanship and detailing incorporated
into its products, which are designed to provide lasting protection from the
elements.
In early 1994, the Company continued its strategic decision implemented
in late 1993 to gain market share and to improve the price/value proposition
for the consumer by preemptively reducing prices on certain core footwear
products. Effective June 1, 1994, the Company assumed the distribution of its
own products in Italy and acquired certain assets of its Italian distributor.
In January 1995, the Company appointed Inchcape plc as the exclusive
distributor of Timberland products throughout most of the Asia/Pacific region.
This transaction included the sale to Inchcape plc of the Company's Australian
and New Zealand subsidiaries.
CURRENT PRODUCTS
----------------
The Company's two major product categories are footwear (shoes and
boots) and apparel and accessories. The Company increased its sales to $637.5
million in 1994 from $418.9 million in 1993, an increase of 52.2%. During 1994,
net sales attributable to the footwear category totaled $513.5 million, as
compared to $349.5 million and $242.6 million in 1993 and 1992, respectively.
During 1994, net sales attributable to the apparel and accessories category
totaled $124.0 million, as compared to $69.4 million and $48.8 million in 1993
and 1992, respectively.
FOOTWEAR
In 1973, the first pair of waterproof "minibuck" leather boots under
the Timberland brand were produced. The Company currently offers a variety of
styles of boots for men and women, including classic work and sporting boots,
hiking boots and lightweight trail boots. The Company also offers men's and
women's shoes featuring handsewn construction, premium waterproof leather,
water resistant fabric uppers and selected use of waterproof fabric bootie
construction,
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as well as performance sandals for men and women. The Company's shoes are
based on classic styling and are designed for durability. In 1994, the Company
introduced a variety of new styles in each of its men's and women's lines of
boots and shoes, including its collection of weatherbucks, loafers, handsewn
casuals, boat shoes, bush hikers, performance sandals, weather boots and other
rugged casual styles.
During 1994, the Company also introduced a new line of footwear
products under the Timberland Work Division. These insulated, rugged boots,
some with steel-toed safety construction, are designed to fit the needs of
construction workers, carpenters, assembly-line workers and skilled workers in
other crafts and trades who require durable and comfortable footwear in their
work environments. Timberland [Registered] Work boots are currently sold in
the United States through leading consumer product retailers like J.C. Penney
and Sears.
In January 1995, the Company introduced its Active Comfort
Technology [trademark] (ACT [trademark]), a comfort system that combines
specially selected materials in a proprietary way that is designed to
aggressively wick moisture away from the skin to keep feet warm and dry.
The ACT system has been initially incorporated into the Company's high
performance hunting boots and is expected to be introduced into other
performance and core footwear products starting in the spring of 1996.
APPAREL AND ACCESSORIES
Timberland offers premium quality apparel, consisting of rugged
outerwear, sweaters, shirts, pants, shorts and skirts. Incorporated into such
products are premium waterproof leathers, waterproof fabric, rust-proof
hardware, canvas, denim, high quality specialty cotton, wool and other quality
performance materials. During 1994, the Company expanded its men's line of
rugged apparel to coordinate better with the Company's line of outerwear and
expanded its women's line of apparel to incorporate a broader range of colors,
fabrics and styles.
Timberland's accessories collection consists of luggage, briefcases,
handbags, belts, caps, hats, gloves and socks. For 1994, introductions in the
accessories collection included an expanded line of waterproof leather
handbags, travel bags and small leather goods.
TIMBERLAND'S STRATEGY
---------------------
During 1994, the Company pursued its strategy for growth by
capitalizing on its core business and continuing to expand its domestic and
international presence through building increased consumer awareness of the
Timberland [Registered] brand. Timberland believes its integrated
brand approach, which is based on showcasing Timberland brand apparel and
accessories together with its footwear products in specialty stores and concept
shops and corners, contributes to this strategy for growth. Specialty stores,
which are operated by the Company or its distributors, sell only major product
categories of Timberland [Registered] products. Concept shops or corners, which
are operated by third-parties, are areas of stores dedicated exclusively to the
presentation, merchandising and sale of Timberland products.
The Company continued to promote consumer demand for its products in
1994 through advertising campaigns which emphasized the workmanship and
detailing of its footwear, apparel and accessories and the protection these
products offer against the elements. Timberland believes
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that the premium quality, durability, functionality and classic styling of
its products, combined with its reputation for high-performance products and
increased consumer awareness of the Timberland [Registered] brand,
will continue to increase consumer demand for its products.
Advertising through print and television campaigns is used to present
Timberland as an integrated, world-class source of quality footwear, apparel
and accessories for the rugged outdoors. The Company reinforces this
advertising with a variety of in-store promotions, point-of-purchase displays,
a cooperative advertising program with its retailers, as well as retail
sales employee training programs focused on product knowledge, selling skills
and visual merchandising.
In the first half of 1994, the Company continued to reduce prices on
certain core footwear to improve the price/value proposition for the consumer
and to increase market share. The Company is currently evaluating the balance
between manufacturing its own products and utilizing independent manufacturing
alternatives to reduce costs while providing the consumer with premium quality
footwear at the best prices. See "Business--Manufacturing."
The Company intends to continue its growth through a combination of
internal development and the development of business relationships with
independent manufacturers, suppliers, distributors and retailers capable of
reinforcing the Company's image and standards. The Company may, from time to
time, consider the possibility of acquiring other companies which produce or
distribute quality footwear, apparel, accessories or related products which
complement the Company's existing product lines.
DISTRIBUTION
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UNITED STATES OPERATIONS
In 1994, 1993 and 1992, the Company generated 74%, 71% and 63%,
respectively, of its net sales in the United States. The Company's
strategy is to distribute its products through specialty stores and through
retailers who reinforce the Timberland image of quality, performance and
service. The Company's customer accounts within the United States range from
better-grade department stores and retail stores to sporting goods stores,
marinas and specialty retailers. The Company services these accounts through
a combination of field and corporate-based sales teams.
The Company has six showrooms servicing its wholesale customers. The
Company's principal showroom is located on Fifth Avenue in New York City. Its
regional showrooms are located in Atlanta, Chicago, Dallas, Denver and Seattle.
In 1994, the Company's domestic retail operations accounted for 9%
of net sales, compared to 8% in 1993 and 10% in 1992. The Company operates
15 Timberland [Registered] specialty stores located in Atlanta; Boston;
Chestnut Hill, Massachusetts; Chicago; Dallas; Newport, Rhode Island; New
York City; White Plains, New York; Los Angeles; San Francisco; Sausalito,
California; Farmington, Connecticut; St. Louis; Short Hills, New Jersey; and
Washington, D.C. The Company opened the specialty stores in Atlanta, Chestnut
Hill, St. Louis, Farmington, Los Angeles and Short Hills during 1994 and the
specialty store in
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White Plains in early 1995. All of the Company's specialty stores showcase
the Timberland [Registered] brand as an integrated source of footwear,
apparel and accessories. These stores also provide sales and consumer-trend
information which assist the Company in developing its marketing strategies,
including point of purchase materials. In addition, the training and customer
service programs established in the Company's specialty stores serve as a model
which may be adopted by the Company's other retail accounts. The Company also
operates 19 factory stores located in the United States which typically sell
factory-second and close-out product offerings to the public.
The Company carries material amounts of inventory in order to meet
delivery and any other requirement of its customers. At December 31, 1994, the
Company's inventory levels were $218.2 million, compared to $111.4 million at
December 31, 1993. Generally, inventory levels were higher in 1994 than in 1993
to meet a higher level of sales. However, the Company's inventory positions
were higher than anticipated because of sales growing at a slower rate than the
Company had expected and the Company's misforecasting of specific customer
demand at the unit product level. A majority of this inventory consists of
classic Timberland [Registered] models in oversupply that the Company expects
will be sold in the normal course of business.
The Company maintains distribution facilities in Portsmouth and
Hampton, New Hampshire; Wilmington, Massachusetts; and Danville, Kentucky. The
Danville distribution facility was established in 1994. Currently, orders are
filled primarily from the Company's Hampton, Wilmington and Danville
distribution facilities. The Company's distribution strategy is to control its
points of distribution in order to reduce costs and increase responsiveness to
consumer demand in the long-term.
INTERNATIONAL OPERATIONS
In 1994, international sales accounted for 26% of Timberland's net
sales, compared to 29% in 1993 and 37% in 1992. Timberland sells its products
internationally through distributors, commission agents and six of its
subsidiaries. The Company's subsidiaries located in England, France, Germany,
Spain and Austria and its domestic subsidiary servicing Italy provide sales,
administrative and, in certain instances, warehousing support for the sale of
Timberland [Registered] products to retailers in their respective
countries and, in certain instances, to distributors and commission agents in
other countries. These subsidiaries also operate seven Timberland [Registered]
specialty stores located in London; Milan; Munich; Dusseldorf; Vienna; Paris;
and Lyon, France and three factory stores in Vallauris, France; Baierbrunn,
Germany; and Pero, Italy. Additionally, the Company grants licenses to
operate specialty stores to certain third parties. Retail distribution of the
Company's products internationally also occurs through better-grade department
stores and other retail stores.
During 1994, the Company entered into a Distributorship Termination
Agreement with its Italian distributor, pursuant to which the Company
terminated the distributor's distribution rights and acquired certain of the
distributor's assets. Timberland assumed the distribution of its own products
in Italy effective June 1, 1994.
On January 26, 1995, the Company appointed Inchcape plc as the
exclusive distributor and retailer of Timberland [Registered] products
throughout most of the Asia/Pacific region for a ten-year term. The
transaction also included Inchcape's acquisition of Timberland's Australian and
New Zealand subsidiaries and future consideration provided to Inchcape for a
total sum of $24 million. The eight Timberland specialty stores and
departments leased in retail stores located in Australia and New Zealand are
owned and operated by Inchcape plc effective January 26, 1995.
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Reference is hereby made to the information set forth in footnote 10,
entitled "Industry Segment and Geographical Area Information," appearing in the
Company's 1994 Annual Report to Stockholders, which information is incorporated
herein by reference.
ADVERTISING AND MARKETING
-------------------------
The Company's advertising campaigns are designed to increase consumer
brand awareness and emphasize that Timberland offers an integrated brand of
footwear, apparel and accessories products that provide lasting protection from
the elements. During 1994, the Company promoted the high quality, classic
rugged style, durability and functionality of its products through national and
regional advertising campaigns. On a national level, advertisements that
featured the ability of the Company's products to perform under extreme
conditions were placed in various active-lifestyle and sports-focused
periodicals. In addition, advertisements designed to motivate consumers'
social conscience and increase brand loyalty were featured in various national
periodicals.
The Company's regional and trade publications advertising campaigns
were built on the foundation of the national advertising campaigns and featured
advertisements in print media that emphasized the value of purchasing authentic
Timberland [Registered] products rather than products that attempt to imitate
Timberland's style and design or products that focus more on fashion trends
than on performance.
Internationally, the Company participates in a variety of direct and
cooperative advertising efforts. This advertising uses and adapts for the
international markets many of the same promotional themes that are used in the
United States.
In September 1994, the Company announced that it would no longer be the
principal sponsor of the Iditarod [Registered] sled dog race due to changing
business priorities. Currently, the Company supports programs dedicated to the
responsible care and humane treatment of dogs, particularly sled dogs.
Timberland continues to test its products in association with the
members of Team Timberland. Team Timberland consists of a select group of
individuals who support the Timberland Mission and--through either their
adventures facing the elements, athletic performance or civic activities--
serve as educational role models for making a positive difference in the
community and improving the environment in which we live.
SEASONALITY
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In 1994, as has traditionally been the case, the Company's sales were
higher in the last two quarters of the year than in the first two quarters.
The Company expects this sales trend to continue in 1995.
BACKLOG
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At December 31, 1994, Timberland's backlog of orders from its customers
was approximately $132 million, compared to $69 million at December 31, 1993.
While all orders in
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the backlog are subject to cancellation by customers, the Company expects that
the majority of such orders will be filled in 1995. The Company does not
believe that its backlog of orders at year end is representative of the orders
which will be filled during 1995 due to the shift towards "at once orders"
being adopted by many retailers.
MANUFACTURING
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During 1994, approximately 60% of the Company's footwear unit
volume was manufactured in the Company's leased facilities in
Tennessee, North Carolina, Puerto Rico and the Dominican Republic,
compared to 70% during 1993. The remainder of the Company's footwear unit
volume and all of its apparel and accessories were sourced from independent
manufacturers in Asia, Central America and the Caribbean, Europe, North America
and South America. The Company believes that utilizing independent
manufacturers provides greater production capacity and flexibility.
During 1994, the Company continued certain cost savings programs
implemented in 1993, such as modular manufacturing, to enhance materials
management and to reduce manufacturing cycle times. The Company believes that
further cost reductions can be obtained through better management of its
raw materials purchasing and with increased utilization of independent
manufacturers. The Company currently plans to retain an internal manufacturing
capability to continue to benefit from the experience and expertise it has
gained with respect to its manufacturing and research, design and development
activities conducted in connection with its manufacturing. The Company is
currently evaluating its manufacturing facilities and independent manufacturing
alternatives to determine the appropriate size and scope of its manufacturing
facilities to be more effective in delivering quality merchandise efficiently.
To the extent the Company manufactures outside the United States or is
dependent upon foreign operations with unaffiliated parties, the Company is
subject to the usual risks of doing business abroad. These risks potentially
include United States import restrictions, anti-dumping investigations,
political or labor disturbances, expropriation, acts of war and other similar
risks.
RAW MATERIALS
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The Company purchases its raw materials from a number of domestic and
foreign sources. In 1994, the Company increased its utilization of foreign
sources for supply of quality leather to reduce costs and to diversify its raw
materials purchases. Based on its experience, the Company expects to
consolidate its raw materials purchasing to fewer suppliers in 1995 than
in 1994. The Company has no reason to believe that leather will not continue
to be available from existing or alternative sources.
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TRADEMARKS AND TRADE NAMES; PATENTS; RESEARCH & DEVELOPMENT
-----------------------------------------------------------
The Company's principal trade name is The Timberland Company and the
Company's principal trademarks are Timberland and [TREE LOGO], which have been
registered in the United States and in certain foreign countries. Other
Company trademarks or registered trademarks are HydroTech; Weathergear; More
Quality Than You May Ever Need; Where Is Your Outdoors?; Active Comfort
Technology; ACT; Toporelief; Topozoic; Boots, Shoes, Clothing, Wind, Water,
Earth & Sky; Wind, Water, Earth & Sky; Elements; Nothing Can Stop You; [GEAR
LOGO]; TBL 30; Timberland 1049; Trail Grip; and Tims. The Company regards its
trade name and trademarks as valuable assets and believes that they are
important factors in marketing its products, particularly in the case of the
Timberland [Registered] brand, which is essential to the Company's integrated
brand strategy. It is the policy of the Company to protect and defend
vigorously its trade name and trademarks against infringement under the laws of
the United States and other countries. In addition, the Company seeks to
protect and defend vigorously its patents, designs, copyrights and all other
proprietary rights under applicable laws.
The Company conducts research, design and development efforts for its
footwear, apparel and accessories. During 1994, the Company established an
advanced research, design and development team to create and bring new
concepts from the design stage to the marketplace in an expedient manner.
While Timberland considers itself a leader in product innovation, its expenses
relating to research, design and development have not represented a material
expenditure relative to other expenses of the Company.
Timberland tests a number of its products under actual field conditions
to evaluate performance characteristics, including testing by members of Team
Timberland. Through these and other relationships, Timberland is able to
measure the performance of its products in the outdoors and to obtain ideas for
improving its products' performance based upon the experience and
competitive needs of these athletes.
COMPETITION
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The Company does not believe that it has any major competitors who offer
a full complement of footwear, apparel and accessories which provide the same
quality and performance as Timberland's integrated brand. The Company does,
however, have a variety of separate major competitors in sales of its separate
lines of footwear, apparel and accessories.
The Company's footwear lines are marketed in a highly competitive
environment, and the footwear industry is subject to rapid changes in consumer
preference. Although the footwear industry is fragmented to a great degree,
many of the Company's competitors are larger and have substantially greater
resources than the Company, including athletic shoe companies, many of which
compete directly with the Company's products. In addition, the Company faces
competition from retailers that are establishing products under private labels
which compete with the Company's products.
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The Company has at least five major competitors in classic boot sales,
at least four major competitors in sport boot sales and at least six major
competitors in hiking boot and performance sandal sales. Boat shoes
produced by the Company face competition from at least five companies and other
casual shoes produced by the Company face competition from at least eight other
companies. The Company's major competitors for its footwear products
are located principally in the United States. Internationally, the Company
faces competition from many manufacturers of footwear. As in the United
States, some of these manufacturers attempt to imitate the Company's
styles.
The Company's line of men's apparel faces competition from at least
three major apparel companies in the United States and from a variety of major
apparel companies internationally. The Company's line of women's apparel faces
competition from at least four major apparel companies in the United States and
from several major apparel companies internationally.
The Company's men's and women's lines of footwear and apparel also face
competition from at least two direct mail companies in the United States.
The Company's accessories line faces competition from at least seven
major companies in the United States and from several major accessories
companies internationally.
Product performance and quality, including continuing technological
improvements, product identity through marketing and promotion, and product
design, styling and pricing are all important elements of competition in the
footwear, apparel and accessories markets served by the Company. Although
changing fashion trends generally affect demand for particular footwear,
apparel and accessories products, the Company believes that, because
Timberland [Registered] products are designed primarily for functionality and
performance, demand for Timberland products is less sensitive to changing
trends in fashion than is demand for other products that are designed
specifically to meet such trends.
ENVIRONMENTAL MATTERS
---------------------
Compliance with federal, state and local environmental regulations have
not had, nor are they expected to have, any material effect on the capital
expenditures, earnings or competitive position of the Company.
EMPLOYEES
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As of December 31, 1994, the Company had approximately 6,700 employees
worldwide. Management considers its employee relations to be good. None of
the Company's employees is represented by a labor union, and the Company has
never suffered a material interruption of business caused by labor
disputes.
ITEM 2. PROPERTIES
The Company owns a facility in Hampton, New Hampshire which served as the
Company's headquarters until November 1994 and currently is used for
warehousing and distribution of certain of the Company's products. In
connection with the purchase financing for such property, industrial revenue
bonds are outstanding in the principal amount of $5,345,000.
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These bonds are due in 2014 and bear interest at 6.20% through 1999
and thereafter at rates adjusted every five years, through maturity. These
bonds are collateralized by a mortgage on such real estate and by a security
interest on assets located there.
The Company also leases facilities in Danville, Kentucky and
Wilmington, Massachusetts, for the distribution of certain products, under
lease agreements which expire in January 1999 and April 1996, respectively.
In April 1994, the Company entered into a lease for property in Stratham,
New Hampshire, that has served, since November 1994, as its principal
executive offices. This lease expires in July 1999, with options to
extend the expiration. The Company considers its current headquarters
facilities adequate and suitable for its present needs. The Company leases
its production facilities, which are located in Mountain City, Tennessee;
Boone, North Carolina; Isabela, Puerto Rico; and Santiago, Dominican Republic.
These production facilities are occupied under 13 leasing arrangements which
expire at various times from November 1995 to February 1998. The Company is
currently evaluating the suitability of its production facilities for its
present and future needs. See "Business--Manufacturing."
The Company leases 15 domestic specialty stores, seven international
specialty stores, six domestic showrooms, 19 domestic factory stores, and
three international factory stores. See "Business--Distribution."
The Company's subsidiaries also lease office and warehouse spaces to meet
their individual requirements.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in various litigation and legal matters, including
United States customs claims, which have arisen in the ordinary course of
business. Management believes that the ultimate resolution of any existing
matter will not have a material adverse effect on the Company's financial
statements.
On June 21, 1994, the plaintiff in the stockholder lawsuit filed on
February 15, 1994, against the Company and one of its officers, agreed
voluntarily to withdraw the action, and the case was dismissed.
The Company and two of its officers and directors have been named as
defendants in two actions filed in the United States District Court for the
District of New Hampshire, one filed by Jerrold Schaffer on December 12, 1994,
and the other filed by Gershon Kreuser on January 4, 1995. The suits, which
are each brought by purchasers of the Company's Class A Common Stock ("Common
Stock"), allege that the defendants violated the federal securities laws by
making material misstatements and omissions in the Company's public filings and
statements in 1994. Specifically, the complaints allege that such statements
and omissions had the effect of artificially inflating the market price for the
Company's Common Stock until the disclosure by the Company on December 9, 1994,
of its expectation that results for the fourth quarter were not likely to meet
analysts' anticipated levels. The suits seek class action status, with the
SCHAFFER complaint embracing all purchasers of the Company's Common Stock
between October 25, 1994 and December 9, 1994, and the KREUSER
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complaint including such purchasers between February 15, 1994 and December 9,
1994. Damages are unspecified. The plaintiffs have filed a motion, assented
to by the defendants, to consolidate the two suits. The motion is pending
before the District Court.
While each action is in its preliminary stages, based on an initial
review, and after consultation with counsel, management believes the
allegations are without merit. Accordingly, management does not expect the
outcome of such litigation to have a material adverse effect on the financial
statements. The Company intends to defend these proceedings vigorously.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of the fiscal year covered by this report, no
matter was submitted to a vote of security holders through the solicitation of
proxies or otherwise.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
The following information is submitted as to the executive officers of the
Company:
NAME AGE POSITION
---- --- --------
Sidney W. Swartz 59 Chairman of the Board, President, Chief Executive
Officer and Director
Jeffrey B. Swartz 35 Executive Vice President, Chief Operating Officer and Director
Keith D. Monda 48 Senior Vice President-Finance and Administration and Chief Financial Officer
Edmund J. Feeley 34 Senior Vice President-General Manager Footwear
Don S. Maurer 40 Senior Vice President-Worldwide Marketing
Gregory W. VanWormer 39 Senior Vice President-General Manager Apparel
Kenneth A. Snyder 47 Senior Vice President-Footwear Sales
Dennis W. Hagele 51 Vice President-Finance and Corporate Controller
(Chief Accounting Officer)
Jane E. Owens 41 Vice President and General Counsel
All executive officers serve at the discretion of the Board of Directors.
Sidney W. Swartz has served the Company as Chairman of the Board, Chief
Executive Officer and President since June 1986 when he and his family trust
became the then sole
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stockholders of the Company. During the prior 20 years, Mr. Swartz, as the
owner of 50% of the Company, was responsible for the manufacturing, marketing,
distribution and financial aspects of the Company.
Jeffrey B. Swartz has served the Company as Executive Vice President since
March 1990 and Chief Operating Officer since May 1991. From June 1986 to
February 1990, Mr. Swartz served the Company in a variety of positions,
including Senior Vice President of International Operations, Vice
President-Operations/Manufacturing, Vice President-International and General
Manager of International Business. Jeffrey Swartz is the son of Sidney W.
Swartz.
Keith D. Monda joined the Company in December 1993 as Senior Vice
President-Finance and Administration and Chief Financial Officer. From May
1990 to December 1993, Mr. Monda was Executive Vice President of Finance and
Administration of J. Crew Group, Inc.; from July 1989 to May 1990, he was
Senior Vice President and Chief Financial Officer of Bunge Corporation (an
integrated food company); and from April 1986 to July 1989, he was Vice
President of Finance and Chief Financial Officer of the Chemical Division of
Pfizer, Inc.
Edmund J. Feeley joined the Company in February 1993 as Senior Vice
President-Manufacturing and Operations. Effective January 1, 1995, Mr. Feeley
became Senior Vice President-General Manager Footwear. From May 1990 to
January 1993, Mr. Feeley was a Principal of Booz, Allen and Hamilton, a general
management and consulting firm, where he had also been a Senior Associate
from May 1987 to April 1990.
Don S. Maurer joined the Company in June 1994 as Senior Vice
President-Worldwide Marketing. From July 1991 to May 1994, Mr. Maurer was
Senior Vice President and Director of Account Management of Mullen Advertising,
which has been Timberland's advertising and public relations agency since 1988.
From October 1989 to July 1991, Mr. Maurer was the Senior Vice President,
Director of Client Services for Margeotes, Fertitta and Weiss, New York.
Gregory W. VanWormer joined the Company in May 1994 as Senior Vice
President-Retail. Effective January 1, 1995, Mr. VanWormer became Senior
Vice President-General Manager Apparel. From August 1991 to April 1994, Mr.
VanWormer was the Vice President-General Merchandise Manager of G.H. Bass &
Co.; and from June 1988 to June 1991, he held the following positions with
C.M.L. Inc.: Vice President-General Merchandise Manager of Carroll Reed (a
retail company); and President of The Gokey Company (a retail, catalog and
manufacturing company).
Kenneth A. Snyder joined the Company in June 1990 as Divisional Vice
President of Domestic Sales. In February 1991, Mr. Snyder assumed the office
of Senior Vice President-Domestic Sales. Effective January 1, 1995, Mr. Snyder
became Senior Vice President-Footwear Sales. From October 1989 to May 1990,
Mr. Snyder was Vice President of Sales of New Balance Athletic Company; and
from November 1988 to September 1989, he was Vice President of Sales of Stride
Rite Corporation.
Dennis W. Hagele joined the Company in October 1994 as Vice President-
Finance and Corporate Controller (Chief Accounting Officer). From July 1993
to September 1994, Mr. Hagele was an independent financial consultant; and
from August 1981 to June 1993, he was Assistant Controller of Sara Lee
Corporation.
13
Jane E. Owens joined the Company in September 1992 as Vice President and
General Counsel. From June 1990 to August 1992, Ms. Owens was Counsel for
Reebok International Ltd.; and from March 1988 to June 1990, she was a partner
in the law firm of Gaston & Snow.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The information required by this item is included in the Registrant's
1994 Annual Report to Stockholders under the caption "Quarterly Market
Information and Related Matters" and is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item is included in the Registrant's
1994 Annual Report to Stockholders under the caption "Five Year Summary of
Selected Financial Data" and is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by this item is included in the Registrant's
1994 Annual Report to Stockholders under the caption "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and is
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is included in the Registrant's
1994 Annual Report to Stockholders and is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Reference is made to the information set forth under the caption,
"Executive Officers of the Registrant," in Item 4A of Part I of this report and
to information under the caption, "Information with Respect to Nominees" in the
Registrant's definitive proxy statement (the "Registrant's 1995 Proxy
Statement") relating to its 1995 Annual Meeting of Stockholders, to be filed
with the Commission within 120 days after the close of the Registrant's
fiscal year ended
14
December 31, 1994, which information is incorporated herein by reference.
Reference is also made to the information set forth in the Registrant's 1995
Proxy Statement with respect to compliance with Section 16(a) of the Exchange
Act, which information is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Reference is made to the information set forth under the caption
"Executive Compensation," in the Registrant's 1995 Proxy Statement, which
information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Reference is made to the information set forth under the caption,
"Security Ownership of Certain Beneficial Owners and Management," in the
Registrant's 1995 Proxy Statement, which information is incorporated herein by
reference. For purposes of calculating the aggregate market value of the Class
A Common Stock on March 15, 1995, the shares owned by The Sidney W. Swartz 1982
Family Trust, The Swartz Foundation and The Sidney and Judith Swartz Charitable
Remainder Unitrust have not been considered to have been owned by an affiliate.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Reference is made to the information set forth under the caption,
"Certain Relationships and Related Transactions," in the Registrant's 1995
Proxy Statement, which information is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
List of Financial Statements and Financial Statement Schedules.
(a)(1) Financial Statements. The following financial statements
appearing in the Company's Annual Report to Stockholders for the year ended
December 31, 1994, are incorporated by reference in this Form 10-K:
ANNUAL REPORT
PAGE
----
Independent Auditors' Report 16
Consolidated Balance Sheets as of December 31, 1994, 17
and December 31, 1993
15
For the years ended December 31, 1994, 1993 and 1992:
Consolidated Statements of Income 18
Consolidated Statements of Changes in Stockholders' Equity 19
Consolidated Statements of Cash Flows 20
Notes to Consolidated Financial Statements 21
<FN>
(a)(2) Financial Statement Schedules. The following additional financial
data should be read in conjunction with the Consolidated Financial Statements in
the Registrant's 1994 Annual Report to Stockholders:
FORM 10-K
PAGE
----
Report of Independent Public Accountants on Schedule F-1
Schedule VIII - Valuation and Qualifying Accounts F-2
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable, and have
therefore been omitted.
(b) No reports on Form 8-K were filed by the Company during the fourth
quarter of 1994.
(c) Listed below are all the Exhibits filed as part of this Report, some
of which are incorporated by reference from documents previously filed by
the Company with the Securities and Exchange Commission in accordance with
the provisions of Rule 12b-32 of the Securities Exchange Act of 1934, as
amended.
16
Exhibit Description
------- -----------
(3) Articles of incorporation and by-laws
3.1 Restated Certificate of Incorporation (1)
3.2 By-Laws, as amended February 19, 1993 (5)
(4) Instruments defining the rights of security holders, including indentures
(See also Exhibits 3.1 and 3.2)
4.1 Specimen stock certificate for shares of the Company's Class
A Common Stock (3)
(10) Material contracts
10.1 Agreement dated as of August 29, 1979
between The Timberland Company and
Sidney W. Swartz (1)
10.2 The Company's 1987 Stock Option Plan, as
amended September 10, 1993 (5)
10.3 The Company's 1991 Employee Stock
Purchase Plan (2)
10.4 The Company's 1991 Stock Option Plan
for Non-Employee Directors (3)
10.5 (a) The Timberland Company Long Term Incentive
Plan for Senior Management (5)
(b) The Timberland Company Long Term Incentive
Guidelines, filed herewith
10.6 The Timberland Company Annual Bonus Plan
for Exempt Employees (5)
10.7 The Timberland Retirement Earnings 401(k)
Plan and Trust Agreements, dated as of
February 1, 1991 (3)
10.8 The Timberland Company Profit Sharing Plan
and Trust Agreements, dated as of
January 1, 1991 (3)
17
EXHIBIT DESCRIPTION
------- -----------
10.9 (a) Lease dated March 23, 1987 between
The Outdoor Footwear Company and
Corporation Sublistatica, S.A. (1)
(b) Lease dated January 11, 1993 between
Thomas M. Moulton, Trustee of the
Fairview Nominee Trust, and The
Timberland Company (4)
(c) Lease dated January 11, 1993 between
Thomas M. Moulton, Trustee of the
Fairview Nominee Trust, and The
Timberland Company (4)
(d) Lease dated November 21, 1988 between
745 Associates and The Timberland
Company (4)
(e) (i) Lease dated July 20, 1992 among Louise
Minges, Mitchell Minges and
The Timberland Company (4)
(ii) Amendment dated July 16, 1993 to lease
dated July 20, 1992 among Louise Minges,
Mitchell Minges and The Timberland Company (5)
(f) Lease dated January 3, 1984 between the
Industrial Development Board of the County
of Johnson, Tennessee and The Timberland
Company, and subsequent amendments (4)
(g) Lease dated March 31, 1981 between the
Puerto Rico Industrial Development Company
and The Timberland Company (4)
(h) Lease dated September 7, 1992 between
Corporacion Zona Franca Industrial
De Santiago, Inc. and The Recreational
Footwear Company (4)
(i) Lease dated December 2, 1992 between
Corporacion Zona Franca Industrial
De Santiago, Inc. and The Recreational
Footwear Company (4)
(j) Lease dated as of February 1, 1994 between
Melville Corporation and The Timberland
Company (5)
18
EXHIBIT DESCRIPTION
------- -----------
(k) Lease dated as of June 29, 1993 between
Timberland Dominicana, S.A. and Santiago
Norte, S.A. (Pisano) Industrial Park (5)
(l) Lease dated as of November 30, 1993 between
Timberland Dominicana, S.A. and Santiago
Norte, S.A. (Pisano) Industrial Park (5)
(m) Lease dated as of December 16, 1993 between
Timberland Dominicana, S.A. and Santiago
Norte, S.A. (Pisano) Industrial Park (5)
(n) Lease dated March 8, 1993 between Watauga
Committee of 100, Inc. and The Timberland
Company (5)
(o) Lease dated as of March 31, 1993 between
Talbot Operations, Inc. and The Timberland
Company (5)
(p) (i) Sublease dated March 31, 1994 between
Hewlett-Packard Company and The Timberland
Company (6)
(ii) First Amendment, dated July 15, 1994,
of Sublease dated March 31, 1994, filed herewith
10.10 Amended and Restated Note Agreements dated
as of April 1, 1994 regarding $35,000,000 9.70%
Senior Notes due December 1, 1999 (6)
10.11 Termination of Credit Agreement among The
Timberland Company, certain banks and
Chase Manhattan Bank, N.A. as Agent, dated as of
December 15, 1994, filed herewith
10.12 Note Agreements dated as of April 1, 1994 regarding
$65,000,000 7.16% Senior Notes due April 15, 2000 (6)
10.13 (a) Credit Agreement dated as of May 4, 1994 among
The Timberland Company, certain banks listed
therein and Morgan Guaranty Trust Company of
New York, as Agent (6)
19
EXHIBIT DESCRIPTION
------- -----------
(b) Amendment No. 1 to Credit Agreement dated
December 15, 1994, filed herewith
10.14 Note Agreement dated as of December 15, 1994
regarding $106,000,000 8.94% Senior Notes
due December 15, 2001, filed herewith
(13) Annual Report to security holders
13. Portions of 1994 Annual Report to Stockholders as
incorporated herein by reference, filed herewith
(21) Subsidiaries
21. List of subsidiaries of the Registrant, filed herewith
(23) Consent of experts and counsel
23. The Consent of Deloitte & Touche LLP to the
incorporation by reference of their report included in
Registrant's 1994 Annual Report to Stockholders,
filed herewith
(27) Financial Data Schedule
27. Financial Data Schedule, filed herewith
20
------------------------
(1) Filed as an exhibit to Registration Statement on Form S-1, numbered
33-14319, and incorporated herein by reference.
(2) Filed on July 9, 1991, as an exhibit to Registration Statement on
Form S-8, numbered 33-41660, and incorporated herein by reference.
(3) Filed as an exhibit to the Annual Report on Form 10-K for the fiscal
year-ended December 31, 1991, and incorporated herein by reference.
(4) Filed as an exhibit to the Annual Report on Form 10-K for the fiscal
year-ended December 31, 1992, and incorporated herein by reference.
(5) Filed as an exhibit to the Annual Report on Form 10-K for the fiscal
year-ended December 31, 1993, and incorporated herein by reference.
(6) Filed as an exhibit to the Quarterly Report on Form 10-Q for the fiscal
period ended July 1, 1994, and incorporated herein by reference.
21
Pursuant to paragraph 4(iii) of Item 601, Regulation S-K, the Registrant has
filed as Exhibits only the instruments defining the rights of holders of
long-term debt of the Registrant and its consolidated subsidiaries with respect
to which the total amount of securities authorized thereunder exceeds 10% of
the total assets of the Registrant and its subsidiaries on a consolidated
basis. The Registrant agrees to furnish to the Commission upon its request
copies of other instruments defining the rights of holders of long-term debt of
the Registrant and its subsidiaries, with respect to which the total amount
does not exceed 10% of such assets. The Registrant also agrees to furnish to
the Commission upon its request copies of any omitted schedule or exhibit to
any Exhibit filed herewith.
22
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
THE TIMBERLAND COMPANY
March 29, 1995 By: /S/ Sidney W. Swartz
----------------------------
Sidney W. Swartz, President
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.
Signature Title Date
-------------------------------------------------------------------------------------
Chairman of the Board, President,
/S/ Sidney W. Swartz Chief Executive Officer and Director March 29, 1995
------------------------ (Principal Executive Officer)
(Sidney W. Swartz)
Executive Vice President, Chief
/S/ Jeffrey B. Swartz Operating Officer and Director March 29, 1995
------------------------
(Jeffrey B. Swartz)
Senior Vice President-Finance
and Administration and Chief
/S/ Keith D. Monda Financial Officer March 29, 1995
------------------------
(Keith D. Monda)
Vice President and Corporate Controller
/S/ Dennis W. Hagele (Chief Accounting Officer) March 29, 1995
------------------------
(Dennis W. Hagele)
/S/ Robert M. Agate Director March 29, 1995
------------------------
(Robert M. Agate)
/S/ John F. Brennan Director March 29, 1995
------------------------
(John F. Brennan)
/S/ Abraham Zaleznik Director March 29, 1995
------------------------
(Abraham Zaleznik)
23
Item 14(d)
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of The Timberland Company:
We have audited the consolidated financial statements of The Timberland
Company as of December 31, 1994 and 1993, and for the three years in the period
ended December 31, 1994, and have issued our report thereon dated February 9,
1995; such consolidated financial statements and report are included in your
1994 Annual Report to Stockholders and are incorporated herein by reference.
Our audits also included the consolidated financial statements schedule of
The Timberland Company, listed in Item 14. This financial schedule is the
responsibility of the Company's management. Our responsibility is to express
an opinion based on our audits. In our opinion, such consolidated financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
/S/ DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 9, 1995
F-1
24
SCHEDULE VIII
THE TIMBERLAND COMPANY
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
Additions
Balance at ----------------------------------- Deductions Balance at
Beginning Charged to Costs Charged to Net End
of Period and Expenses Other Accounts Write-Offs of Period
--------- ---------------- -------------- ----------- ----------
Description
-----------
Allowance for
doubtful accounts:
Year ended
December 31, 1994 $1,014 $1,938 - $248 $2,704
December 31, 1993 1,821 1,131 - 1,938 1,014
December 31, 1992 1,675 1,374 - 1,228 1,821
Group insurance
reserve:
Year ended
December 31, 1994 $1,319 $7,983 - $7,492 $1,810
December 31, 1993 1,401 5,752 - 5,834 1,319
December 31, 1992 1,127 3,946 - 3,672 1,401
-------------------------------------------------------
F-2
25
Timberland;[Tree Logo]; HydroTech; Weathergear; More Quality Than You May Ever
Need; Where Is Your Outdoors?; Active Comfort Technology; ACT; Toporelief;
Topozoic; Boots, Shoes, Clothing, Wind, Water, Earth & Sky; Wind, Water, Earth
& Sky; Elements; Nothing Can Stop You;[Gear Logo]; TBL 30; Timberland 1049;
Trail Grip; and Tims are trademarks or registered trademarks of The Timberland
Company.
Iditarod is a registered trademark of the Iditarod Trail Committee, Inc.
[Copyright]The Timberland Company 1995
All Rights Reserved.
26
EXHIBIT INDEX
(10) Material contracts
10.5 (b) The Timberland Company Long Term Incentive
Guidelines, filed herewith
10.9 (p) (ii) First Amendment, dated July 15, 1994, of
Sublease dated March 31, 1994, filed herewith
10.11 Termination of Credit Agreement among The
Timberland Company, certain banks and
Chase Manhattan Bank, N.A. as Agent, dated as of
December 15, 1994, filed herewith
10.13 (b) Amendment No. 1 to Credit Agreement dated
December 15, 1994, filed herewith
10.14 Note Agreement dated as of December 15, 1994
regarding $106,000,000 8.94% Senior Notes
due December 15, 2001, filed herewith
(13) Annual Report to security holders
13. Portions of 1994 Annual Report to Stockholders as
incorporated herein by reference, filed herewith
(21) Subsidiaries
21. List of subsidiaries of the Registrant, filed herewith
(23) Consent of experts and counsel
23. The Consent of Deloitte & Touche LLP to the
incorporation by reference of their report included in
Registrant's 1994 Annual Report to Stockholders, filed
herewith
(27) Financial Data Schedule
27. Financial Data Schedule, filed herewith