1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 28, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-9548
The Timberland Company
(Exact name of registrant as specified in its charter)
Delaware 02-0312554
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
200 Domain Drive, Stratham, New Hampshire 03885
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (603) 772-9500
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
--- ---
On August 2, 1996 8,346,073 shares of the registrant's Class A Common Stock were
outstanding and 2,734,451 shares of the registrant's Class B Common Stock were
outstanding.
2
THE TIMBERLAND COMPANY
FORM 10-Q
TABLE OF CONTENTS
Page(s)
-------
Independent Accountants' Review Report 1
Part I Financial Information (unaudited)
Condensed Consolidated Balance Sheets - 2-3
June 28, 1996 and December 31, 1995
Condensed Consolidated Statements of Operations - 4
For the three and six months ended June 28, 1996
and June 30, 1995
Condensed Consolidated Statements of Cash Flows - 5
For the six months ended June 28, 1996 and
June 30, 1995
Notes to Condensed Consolidated Financial Statements 6-8
Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-12
Part II Other Information 13-14
3
Form 10-Q
Page 1
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
To the Stockholders and Board of Directors of
The Timberland Company:
We have reviewed the accompanying condensed consolidated balance sheet of The
Timberland Company and subsidiaries as of June 28, 1996, and the related
condensed consolidated statements of operations for the three-month and
six-month periods ended June 28, 1996 and June 30, 1995, and the related
Condensed Consolidated Statements of Cash Flows for the six-month periods ended
June 28, 1996 and June 30, 1995. These financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and of making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to such condensed consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of The Timberland Company and
subsidiaries as of December 31, 1995, and the related consolidated statements of
operations, changes in stockholders' equity, and cash flows for the year then
ended (not presented herein); and, in our report dated February 7, 1996, we
expressed an unqualified opinion on those consolidated financial statements. In
our opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of December 31, 1995, is fairly stated, in all
material respects, in relation to the consolidated balance sheet from which it
was derived.
Deloitte & Touche LLP
Boston, Massachusetts
July 17, 1996
4
Form 10-Q
Page 2
Part I Financial Information
THE TIMBERLAND COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
(Dollars in Thousands)
(Unaudited)
June 28, December 31,
1996 1995
--------- ------------
Current assets
Cash and equivalents $ 19,937 $ 38,389
Accounts receivable, net 87,251 95,786
Inventories 209,018 180,636
Prepaid expenses 11,748 12,752
Deferred and refundable income taxes 11,282 10,267
--------- ---------
Total current assets 339,236 337,830
--------- ---------
Property, plant and equipment 99,523 95,937
Less accumulated depreciation and amortization (49,560) (43,533)
--------- ---------
Net property, plant and equipment 49,963 52,404
--------- ---------
Excess of cost over fair value of net assets
acquired, net 23,429 24,271
--------- ---------
Other assets, net 5,445 6,903
--------- ---------
$ 418,073 $ 421,408
========= =========
See accompanying notes to condensed consolidated financial statements.
5
Form 10-Q
Page 3
THE TIMBERLAND COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
(Dollars in Thousands)
(Unaudited)
June 28, December 31,
1996 1995
--------- ------------
Current liabilities
Current maturities of long-term obligations $ 7,755 $ 7,733
Accounts payable 29,718 25,207
Accrued expenses
Payroll and related 9,305 7,882
Interest and other 26,409 28,001
Income taxes payable 1,081 892
--------- ---------
Total current liabilities 74,268 69,715
--------- ---------
Long-term obligations, less current maturities 199,071 199,454
--------- ---------
Deferred income taxes 10,019 10,018
--------- ---------
Stockholders' equity
Preferred stock, $.01 par value; 2,000,000 shares authorized;
none issued -- --
Class A Common Stock, $.01 par value (1 vote per share);
30,000,000 shares authorized; 8,364,457 shares issued
at June 28, 1996 and 8,316,554 shares at
December 31, 1995 84 83
Class B Common Stock, $.01 par value (10 votes per share);
Convertible into Class A shares on a one-for-one basis; 15,000,000 shares
authorized; 2,734,451 shares issued at June 28, 1996 and
2,735,381 shares at December 31, 1995 27 27
Additional paid-in capital 60,341 59,716
Retained earnings 72,326 80,181
Cumulative translation adjustment 2,057 2,334
Less treasury stock at cost, 18,369 shares at June 28,
1996 and December 31, 1995 (120) (120)
134,715 142,221
--------- ---------
$ 418,073 $ 421,408
========= =========
See accompanying notes to condensed consolidated financial statements.
6
Form 10-Q
Page 4
THE TIMBERLAND COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
(Unaudited)
For the For the
Three Months Ended Six Months Ended
---------------------- ----------------------
June 28, June 30, June 28, June 30,
1996 1995 1996 1995
--------- --------- --------- ---------
Revenues $ 113,648 $ 125,143 $ 241,332 $ 266,726
Cost of goods sold 73,567 89,064 155,226 185,675
--------- --------- --------- ---------
Gross profit 40,081 36,079 86,106 81,051
--------- --------- --------- ---------
Operating expenses
Selling 33,753 34,312 66,217 67,803
General and administrative 11,529 12,053 21,587 23,724
Amortization of goodwill 421 421 842 842
Restructuring charge -- 16,000 -- 16,000
--------- --------- --------- ---------
Total operating expenses 45,703 62,786 88,646 108,369
--------- --------- --------- ---------
Operating loss (5,622) (26,707) (2,540) (27,318)
--------- --------- --------- ---------
Other expense (income)
Interest expense 5,489 5,725 10,287 10,841
Other, net (216) 441 (359) (6,769)
--------- --------- --------- ---------
Total other expense 5,273 6,166 9,928 4,072
--------- --------- --------- ---------
Loss before income taxes (10,895) (32,873) (12,468) (31,390)
--------- --------- --------- ---------
Benefit for income taxes (4,015) (12,492) (4,613) (11,928)
--------- --------- --------- ---------
Net loss $ (6,880) $ (20,381) $ (7,855) $ (19,462)
========= ========= ========= =========
Loss per share $ (.61) $ (1.83) $ (.70) $ (1.75)
========= ========= ========= =========
Weighted average shares outstanding and share
equivalents 11,225 11,120 11,194 11,130
========= ========= ========= =========
See accompanying notes to condensed consolidated financial statements.
7
Form 10-Q
Page 5
THE TIMBERLAND COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
For the
Six Months Ended
---------------------
June 28, June 30,
1996 1995
--------- ---------
Cash flows from operating activities:
Net loss $ (7,855) $(19,462)
Adjustments to reconcile net loss
to net cash used in operating activities:
Deferred income taxes 1 250
Depreciation and amortization 10,394 8,629
Gain on distributorship transaction -- (7,358)
Restructuring charge -- 9,914
Gain on sale of equipment -- (127)
Increase (decrease) in cash from changes in working
capital items, net of effects of business
dispositions:
Accounts receivable 8,072 12,700
Inventories (28,521) (52,034)
Prepaid expenses 1,330 2,494
Accounts payable 4,427 (1,554)
Accrued expenses (5) 3,015
Income taxes (829) (19,923)
-------- --------
Net cash used in operating activities (12,986) (63,456)
-------- --------
Cash flows from investing activities:
Proceeds from distributorship transaction 681 24,000
Proceeds from sale of equipment -- 1,756
Additions to property, plant and equipment, net (6,410) (7,903)
Other, net 189 (1,267)
-------- --------
Net cash provided by (used) in investing activities (5,540) 16,586
-------- --------
Cash flows from financing activities:
Net borrowings under short-term credit facilities -- 42,470
Proceeds from long-term obligations -- 525
Payments on long-term debt and capital lease obligations (361) (692)
Issuance of common stock 626 668
-------- --------
Net cash provided by financing activities 265 42,971
-------- --------
Effect of exchange rate changes on cash (191) 364
Net decrease in cash and equivalents (18,452) (3,535)
Cash and equivalents at beginning of period 38,389 6,381
-------- --------
Cash and equivalents at end of period $ 19,937 $ 2,846
======== ========
Supplemental disclosures of cash flow information:
Interest paid $ 9,331 $ 10,518
Income tax (refund) paid (3,788) 7,744
See accompanying notes to condensed consolidated financial statements.
8
Form 10-Q
Page 6
THE TIMBERLAND COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands except per share data)
1. In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain the adjustments necessary to
present fairly the Company's financial position, results of operations
and changes in cash flows for the interim periods presented. Such
adjustments consisted of normal recurring items. The unaudited
condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1995.
Certain prior period amounts have been reclassified for consistent
presentation with the current period presentation.
2. The results of operations for the six months ended June 28, 1996 are
not necessarily indicative of the results to be expected for the full
year. Historically, the Company's revenues have been more heavily
weighted to the second half of the year.
3. Inventories consist of the following
June 28, 1996 December 31, 1995
------------- -----------------
Raw materials $ 12,714 $ 10,374
Work-in-process 5,321 5,494
Finished goods 190,983 164,768
-------- --------
$209,018 $180,636
======== ========
4. Indebtedness
On June 21, 1996, the Company entered into a new unsecured committed
revolving credit agreement (the "Agreement"), with a group of banks.
The Agreement, which replaced the Company's existing revolving credit
facility, provides for up to $80,000 in letters of credit under an
overall $100,000 committed facility expiring on June 21, 1998. Under
the terms of the Agreement, the Company may borrow at interest rates
based upon the lenders' cost of funds. The Agreement provides for a
facility fee of 3/8% per annum on the full commitment, places
limitations on the payment of dividends and the incurrence of
additional debt, and also contains certain other financial and
operating covenants.
5. New Accounting Pronouncements
The Company has adopted the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment
of Long-lived Assets and for Long-lived Assets to Be Disposed Of",
effective January 1, 1996. SFAS No. 121 requires that long-lived assets
and certain identifiable intangibles held and used by an entity be
reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
Adopting SFAS No. 121 had no material effect on the Company's
consolidated financial statements.
9
Form 10-Q
Page 7
THE TIMBERLAND COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
In October 1995, the Financial Accounting Standards Board issued SFAS
No. 123, "Accounting for Stock-Based Compensation", which was adopted
by the Company effective January 1, 1996. SFAS No. 123 requires
expanded disclosures of stock-based compensation arrangements with
employees and encourages (but does not require) compensation cost to
be measured based on the fair value of the equity instrument awarded.
Companies are permitted to continue to apply APB Opinion No. 25, which
recognizes compensation cost based on the intrinsic value of the
equity instrument awarded. The Company will continue to apply APB
Opinion No. 25 to its stock-based compensation awards to employees and
will disclose the required pro forma effect on net income and earnings
per share in the 1996 annual consolidated financial statements.
6. Restructuring Charge
During the second quarter of 1995, the Company closed its manufacturing
facilities in Boone, North Carolina and Mountain City, Tennessee,
reduced its manufacturing operations in the Dominican Republic and
downsized its corporate office work force due to a reorganized
management structure. These actions resulted in a one-time pre-tax
charge of $16,000. The Company has two remaining manufacturing
facilities: one in Puerto Rico and one in the Dominican Republic. All
other product is sourced by the Company from third-party contract
manufacturers.
Of the total charge for restructuring, $9,914 related to anticipated
losses associated with the disposal of assets and is a non-cash item,
$3,891 related to payments for contractual lease obligations and
expenditures to close idle facilities, and $2,195 relates to payments
for severance and other employee liabilities.
The Company has substantially completed these restructuring actions,
with the exception of the sale of certain manufacturing equipment which
is expected to occur by the end of 1996. At June 28, 1996, these assets
amounted to $1,414 and are included in property, plant and equipment.
Cash expenditures related to the restructuring plan of $5,400 have been
incurred as of June 28, 1996. The Company has funded the restructuring
plan from internal sources and available borrowing capacity.
7. Other Income
The first half results of 1995 include a pre-tax gain of $7,358 from
the Company's appointment in January 1995 of Inchcape plc as exclusive
distributor of Timberland(R) products in the Asia/Pacific region, and
the related sale of Timberland's Australian and New Zealand
subsidiaries.
10
Form 10-Q
Page 8
THE TIMBERLAND COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
8. Legal Proceedings
The Company is involved in various litigation and legal matters 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 consolidated financial
statements.
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. On April 24, 1995, the District court granted plaintiffs' motion,
assented to by defendants, to consolidate the two actions. On June 23,
1995, plaintiffs filed a consolidated amended complaint (the "Amended
Complaint") with the District Court. The Amended Complaint alleges that
defendants violated federal securities laws by making material
misstatements and omissions in certain of the Company's public filings
and statements in 1994. Specifically, the Amended Complaint alleges
that such statements and omissions had the effect of artificially
inflating the market price for the Company's Class A 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. Damages are unspecified. On March 18, 1996, the
District Court denied defendants' motion to dismiss the Amended
Complaint. On March 19, 1996, the District Court granted plaintiffs'
motion for class certification for all purchasers of the Company's
Class A Common Stock between May 12, 1994 and December 9, 1994.
Management believes this action is without merit and intends to defend
it vigorously. Accordingly, at this time, management does not expect
the outcome of such litigation to have a material adverse effect on the
Company's consolidated financial statements.
11
Form 10-Q
Page 9
THE TIMBERLAND COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Unaudited)
RESULTS OF OPERATIONS
The following table sets forth selected items in the Company's consolidated
statements of operations as percentages of revenues for the periods indicated.
For the For the
Three Months Ended Six Months Ended
------------------------------------ ---------------------------
June 28, June 30, June 28, June 30,
1996 1995 1996 1995
---------------- ---------------- ---------- -------------
Revenues 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 64.7 71.2 64.3 69.6
----- ----- ----- -----
Gross profit 35.3 28.8 35.7 30.4
----- ----- ----- -----
Operating expenses
Selling 29.7 27.4 27.4 25.4
General and administrative 10.1 9.6 8.9 8.9
Amortization of goodwill .4 .3 .3 .3
Restructuring charge -- 12.8 -- 6.0
----- ----- ----- -----
Total operating expenses 40.2 50.2 36.7 40.6
----- ----- ----- -----
Operating loss (4.9) (21.3) (1.1) (10.2)
----- ----- ----- -----
Other expense (income)
Interest expense 4.8 4.6 4.3 4.1
Other, net (.2) .4 (.1) (2.5)
----- ----- ----- -----
Total other expense 4.6 4.9 4.1 1.5
----- ----- ----- -----
Loss before income taxes (9.6) (26.3) (5.2) (11.8)
Benefit for income taxes (3.5) (10.0) (1.9) (4.5)
----- ----- ----- -----
Net loss (6.1)% (16.3)% (3.3)% (7.3)%
===== ===== ===== =====
Note: Percentages may not add due to rounding.
12
Form 10-Q
Page 10
Second Quarter 1996 Compared with Second Quarter 1995
Revenues for the second quarter of 1996 were $113.6 million, a decrease of 9.2%
compared to the $125.1 million reported in the second quarter of 1995.
Domestic revenues for the second quarter of 1996 were $79.9 million, a decline
of $14.7 million, or 15.5%, from the same period in 1995. Most of the decline
is a result of demand softening in the Company's domestic wholesale footwear
business, where unit sales of performance sandals and women's footwear were
down, and an insufficient number of successful new products were introduced. In
addition, $4.2 million of the decline is attributable to a non-recurring
licensing fee received in the second quarter of last year.
International revenues for the second quarter of 1996 were $33.7 million, an
increase of $3.2 million, or 10.5%, over the comparable prior year period.
International revenues comprised 29.7% of total second quarter 1996 revenues,
up from 24.4% in the second quarter of 1995. Most of the growth occurred in
Italy, where revenues nearly doubled as compared to the second quarter of last
year, due in part to the addition of 12 franchised stores which opened in the
second half of 1995 and during 1996. Revenues also increased in the U.K.
Footwear revenues decreased $5.0 million, or 5.4%, in the second quarter of
1996, compared to the same period in 1995 primarily as a result of fewer unit
sales. Revenues attributable to apparel and accessories decreased $3.8 million,
or 13.2%, in the second quarter of 1996 compared to the same period in 1995,
due primarily to fewer unit sales. Retail revenues for the second quarter of
1996 were $27.1 million, representing 23.9% of total revenues in the second
quarter of 1996 compared to 18.6% in the second quarter of 1995. At June 28,
1996, there were 30 specialty stores and 35 factory outlet stores owned and
operated by Timberland compared to 26 specialty stores and 27 factory outlet
stores at June 30, 1995.
Gross profit as a percentage of revenue for the second quarter of 1996 was
35.3%, up 6.5 points compared to 28.8% for the second quarter of 1995. The
improvement was achieved in all business units, particularly in domestic
footwear, which benefited from cost reductions, lower levels of returns and
allowances, and a better sales mix.
Operating expenses were $45.7 million in the second quarter of 1996, down 2.3%
from the $46.8 million reported in the second quarter of 1995 (exclusive of a
one-time $16.0 million pre-tax manufacturing restructuring charge). The $1.1
million decrease compared to the prior year period was primarily attributable to
reductions in selling expense, due to fewer unit sales, and in general and
administrative expenses.
During the second quarter of 1995, the Company closed its manufacturing
facilities in Boone, North Carolina and Mountain City, Tennessee, reduced
its manufacturing operations in the Dominican Republic and downsized its
corporate office workforce due to a reorganized management structure. These
actions resulted in a one-time pre-tax charge of $16.0 million and the
elimination of approximately 1,800 positions. The Company has two remaining
manufacturing facilities: one in Puerto Rico and one in the Dominican Republic.
All other product is sourced by the Company from third-party manufacturers.
Of the total charge for restructuring in 1995, $9.9 million related to
anticipated losses associated with the disposal of assets and is a non-cash
item, $3.9 million related to payments for contractual lease obligations and
expenditures to close idle facilities, and $2.2 million relates to payments for
severance and other employee liabilities.
13
Form 10-Q
Page 11
The Company has substantially completed these restructuring actions with the
exception of the sale of certain manufacturing equipment which is expected to
occur by the end of 1996. Cash expenditures related to the restructuring plan of
$5.4 million have been incurred as of June 28, 1996. The Company has funded the
cost of the restructuring plan from internal sources and available borrowing
capacity.
Interest expense for the second quarter of 1996 decreased by $.2 million to $5.5
million from the comparable period in 1995. The decrease is due to a reduction
in long-term debt and the absence of short-term borrowings during the second
quarter of 1996.
Six Months ended June 28, 1996 Compared with Six Months ended June 30, 1995
Revenues for the first six months of 1996 were $241.3 million, a decrease of
9.5% from the $266.7 million for the comparable period in 1995. Revenues for the
first six months of 1995 include a $4.2 million non-recurring licensing fee
received in connection with a licensing agreement.
Gross profit as a percentage of revenues for the first six months of 1996 was
35.7%, compared to 30.4% for the comparable period in 1995. The improvement is
attributable to the same factors cited for the percentage increase in the second
quarter of 1996 compared to the second quarter of 1995.
Operating expenses for the first half of 1996 decreased $3.8 million to $88.6
million from $92.4 million (exclusive of a one-time pre-tax manufacturing
restructuring charge) for the comparable period in 1995. The dollar decrease
compared to prior year was primarily attributable to a reduction in selling
expense, due to fewer unit sales, and in general and administrative expenses.
Interest expense for the first six months of 1996 was $10.3 million, a decrease
of $.5 million from the comparable period in 1995, due to a reduction in
long-term debt and the absence of short-term borrowings during the first half of
1996.
For the first six months of 1995, other expense (income) includes a
non-recurring pre-tax gain of $7.4 million, or $0.41 per share, resulting from
the Company's appointment on January 26, 1995 of Inchcape plc as the exclusive
distributor of Timberland(R) products throughout most of the Asia/Pacific
region. The agreement included Inchcape's acquisition of the Company's
Australian and New Zealand subsidiaries and future consideration provided to
Inchcape for a total sum of $24 million.
The effective tax rate for the first six months of 1996 was 37%, compared to a
rate of 38% for the same period last year.
LIQUIDITY AND CAPITAL RESOURCES
Cash used by operations during the first six months of 1996 amounted to $13.0
million, compared to $63.5 million used during the same period in 1995.
Accounts receivable declined $8.5 million from year end 1995, and wholesale
days sales outstanding decreased to 84 days at June 28, 1996 from 93 days at
June 30,1995. Inventories were $209.0 million at June 28, 1996, a $55.9
million, or 21.1% decline from June 30, 1995. Inventory turns were 1.5 times
for the second quarter of 1996, compared to 1.4 times for the second quarter of
1995.
14
Form 10-Q
Page 12
During the first six months of 1996, $5.5 million of cash was used in investing
activities compared to $16.6 million being provided in the same period in 1995,
due primarily to $24 million of cash proceeds received from the agreement with
Inchcape plc. Capital expenditures for the first six months of 1996 were $5.7
million, compared to $7.9 million for the same period in 1995. During the first
six months of 1996, $.3 million of cash was provided by financing activities
compared to $43.0 million of cash provided in the second quarter of 1995. Short-
term borrowings accounted for $42.5 million of the cash provided by financing
activities for the first six months of 1995.
The Company uses unsecured revolving and committed lines of credit as the
primary sources of financing for its seasonal and other working capital
requirements. The Company did not draw on its seasonal bank lines of credit
during the first six months of 1996. The Company expects to utilize its short-
term bank lines in the third quarter for seasonal working capital requirements.
On June 21, 1996, the Company entered into a new unsecured committed revolving
credit agreement (the "Agreement"), with a group of banks. The Agreement, which
replaced the Company's existing revolving credit facility, provides for up to
$80 million in letters of credit under an overall $100 million committed
facility expiring on June 21, 1998. Under the terms of the Agreement, the
Company may borrow at interest rates based upon the lender's cost of funds. The
Agreement provides for a facility fee of 3/8% per annum on the full commitment,
places limitations on the payment of dividends and the incurrence of additional
debt, and also contains certain other financial and operating covenants. The
Company's debt to capital ratio was 60.6% at June 28, 1996, compared to 59.3%
at December 31, 1995 and 67.8% at June 30, 1995.
Management believes that the Company's capital needs for 1996 will be met
through its existing credit facilities and cash flows from operations without
the need for additional permanent financing. However, as discussed in an exhibit
to the Company's Form 10-K for the year ended December 31, 1995, entitled
"Cautionary Statements for Purposes of the Safe Harbor Provisions of the Private
Securities Litigation Reform Act of 1995", several risks and uncertainties could
cause the Company to need to raise additional capital through equity and/or debt
financing. The availability and terms of any such financing would be subject to
prevailing market conditions and other factors at that time.
15
Form 10-Q
Page 13
Part II Other Information
Item 4. Submission of Matters to a Vote of Security Holders.
(a) The Company held its Annual Meeting of Stockholders on May 16,
1996.
(b) At such Annual Meeting proxies were solicited pursuant to
Regulation 14A of the Securities Exchange Act of 1934 and all
nominees for director were elected as indicated by the following
schedule of votes cast for each director. The holders of Class A
Common Stock elected the following directors:
Total Votes for Each Total Votes Withheld
Nominee Director from Each Director
------- -------------------- --------------------
John F. Brennan 7,168,271 42,637
Abraham Zaleznik 6,698,952 511,956
The holders of Class A Common Stock and the holders of Class B
Common Stock voting together as a single class elected the
following directors;
Total Votes for Each Total Votes Withheld
Nominee Director from Each Director
------- -------------------- --------------------
Robert M. Agate 34,511,831 43,587
Ian W. Diery 34,511,231 44,187
John A. Fitzsimmons 34,511,931 43,487
Jeffrey B. Swartz 34,508,649 46,769
Sidney W. Swartz 34,510,631 44,787
There were no abstentions or broker non-votes with respect to the
election of the director nominees.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit Description
------- -----------
10.10(d) Amendment No. 3 dated as of June 21, 1996 to
Note Agreements
10.12(d) Amendment No. 3 dated as of June 21, 1996 to
Note Agreements
10.13(a) Credit Agreement dated as of June 21, 1996
among The Timberland Company, certain banks
listed therein and Morgan Guaranty Trust
Company of New York, as Agent
10.14(d) Amendment No. 3 dated as of June 21, 1996 to
Note Agreements
27 Financial Data Schedule
(b) Reports on Form 8-K -- There were no reports on Form 8-K filed
during the period covered by this report.
16
Form 10-Q
Page 14
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
The Timberland Company
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(Registrant)
Date: August 12, 1996 /s/ Keith D. Monda
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Keith D. Monda
Senior Vice President -
Finance and Administration
and Chief Financial Officer
Date: August 12, 1996 /s/ Dennis W. Hagele
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Dennis W. Hagele
Vice President Finance
and Corporate Controller
(Chief Accounting Officer)