TBL Timberland Co. (The)

The Timberland Company (NYSE: TBL) today reported a second-quarter 2009 net loss of $19.2 million and a loss per share of ($0.34). These results compare to a second-quarter 2008 net loss of $18.9 million and a loss per share of ($0.32).

Second-Quarter 2009 Results Summary:

• Revenue declined 14.4% to $179.7 million for the quarter, reflecting declines in Timberland® brand apparel and casual footwear. Foreign exchange rate changes decreased second-quarter 2009 revenue by approximately $11 million, or 5.3%, due to the strengthening of the U.S. dollar relative to the British Pound and the Euro.
• North America revenue declined 13.3% to $86.3 million, reflecting soft consumer spending in the U.S. Europe revenue decreased 16.6% to $65.7 million but was down only 2.5% on a constant dollar basis. European results reflect declines in the apparel, outdoor performance and casual footwear businesses, partially offset by strong sales of men’s and women’s boots. Asia revenue decreased 12.3% to $27.7 million, and decreased 13.3% on a constant dollar basis, driven by declines in casual footwear and apparel, partially offset by strengthening of the men’s and women’s boots businesses.
• Global footwear revenue decreased 11.2% to $127.0 million, primarily due to declines in the casual footwear business, which offset strength in the boots business in the European and Asian markets. Apparel and accessories revenue decreased 24.6% to $47.2 million, primarily due to softness in the European market.
• Global wholesale revenue decreased 20.3% to $108.4 million, in part reflecting global financial and credit market challenges that have caused customers to reduce inventory levels and to shift from placing future orders to placing at-once orders. Worldwide consumer direct revenue decreased 3.5% to $71.3 million, reflecting the adverse impact of a stronger U.S. dollar and a difficult worldwide retail environment.
• Operating loss for the second quarter of 2009 was $36.4 million, compared to a loss of $30.0 million in the prior year period. In the quarter, there was no material impact from foreign exchange on operating income.
• In the second quarter of 2009, the effective tax rate was 44.3% compared to 36.0% in the second quarter of 2008. For the full-year 2009, the Company anticipates that its effective tax rate will be approximately 33%.
• In connection with its stock buyback program, Timberland repurchased approximately 700 thousand shares in the second quarter of 2009 at a cost of approximately $10 million.
• Timberland ended the quarter with $183.9 million in cash and no debt. Inventory at quarter end was $180.4 million, down 7.5% versus 2008 second-quarter levels, reflecting the Company’s focus on maintaining clean inventory levels in the face of challenging market conditions. Accounts receivable decreased 17.6% to $100.1 million, compared to the prior year.

The Company anticipates that the back half of 2009 will continue to be challenging due to the low levels of consumer confidence and the financial health of the global economy. Given the continued volatile nature of current economic conditions, the Company continues to believe there is not sufficient visibility to set expectations for the remainder of 2009.

Jeffrey B. Swartz, Timberland’s President and Chief Executive Officer, stated, "The first half of 2009 has presented us with unprecedented challenges in the marketplace. We have tackled the challenges by sharpening our efforts to improve the overall efficiency of the organization, while recognizing that we must continue to invest in the long-term health of the brand. The strength of our balance sheet and our overall liquidity are a real strategic advantage in this environment. We will continue to invest in key areas such as product development and marketing that will build the overall health of the Timberland® brand and franchise and leave us well-positioned when the global economy improves.”

Note that comments made by the Company and Mr. Swartz are based on current expectations. These comments may be forward-looking, and actual results may differ materially.

As previously announced, Timberland will be hosting a conference call to discuss second-quarter results today at 8:25 AM Eastern Time. Interested parties may listen to this call through the investor relations section of the Company’s website, www.timberland.com, or by calling 706.643.2916 and providing access code number 80625518. 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®, Mountain Athletics® 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).

Certain statements in this press release may be forward looking or “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 Timberland’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 Timberland’s results 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) Timberland’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) Timberland’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 Timberland’s most recent Annual Report on Form 10-K and other filings we make with the SEC. Timberland undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

This press release includes discussion of constant dollar revenue change (which excludes the impact of changes in foreign currency exchange rates), which is a non-GAAP measure. As required by SEC rules, the Company has provided reconciliations of this measure on attached tables that follow its financial statements. Additional required information regarding this non-GAAP measure is located in the Form 8-K furnished to the SEC on July 29, 2009.

THE TIMBERLAND COMPANY UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in Thousands)       July 3, 2009 December 31, 2008 June 27, 2008 Assets Current assets Cash and equivalents $183,919 $217,189 $152,764 Accounts receivable, net 100,126 168,666 121,482 Inventory, net 180,392 179,688 195,015 Prepaid expense 35,121 37,139 44,011 Prepaid income taxes 24,720 16,687 20,776 Deferred income taxes 19,024 23,425 21,822 Derivative assets 2,284 7,109 - Total current assets 545,586 649,903 555,870   Property, plant and equipment, net 74,185 78,526 84,553 Deferred income taxes 17,480 18,528 19,178 Goodwill and intangible assets, net 90,442 91,866 97,655 Other assets, net 14,971 10,576 10,586   Total assets $742,664 $849,399 $767,842   Liabilities and Stockholders’ Equity Current liabilities Accounts payable $71,423 $96,901 $74,734 Accrued expense and other current liabilities 76,659 112,090 81,307 Income taxes payable 533 20,697 2,528 Derivative liabilities 4,565 2,386 6,594 Total current liabilities 153,180 232,074 165,163   Other long-term liabilities 35,809 40,787 41,474   Stockholders’ equity 553,675 576,538 561,205   Total liabilities and stockholders’ equity $742,664 $849,399 $767,842 THE TIMBERLAND COMPANY UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Amounts in Thousands, Except Per Share Data)       For the Quarter Ended For the Six Months Ended July 3, 2009 June 27, 2008 July 3, 2009 June 27, 2008 Revenue $179,702 $209,916 $476,350 $550,318 Cost of goods sold 104,194 117,716 264,153 300,514   Gross profit 75,508 92,200 212,197 249,804   Operating expense Selling 85,027 95,317 177,295 201,439 General and administrative 26,896 26,539 52,313 54,227 Impairment of intangible asset - - 925 - Restructuring and related costs (17) 317 (121) 869 Total operating expense 111,906 122,173 230,412 256,535   Operating loss (36,398) (29,973) (18,215) (6,731)   Other income/(expense) Interest income, net 182 776 501 1,344 Other income/(expense), net 1,666 (379) 1,003 5,383 Total other income, net 1,848 397 1,504 6,727   Loss before provision for income taxes (34,550) (29,576) (16,711) (4)

 

 

 

 

Income tax (benefit)/provision

(15,306)

(10,647)

(13,344)

886

 

 

 

 

Net loss

($19,244)

($18,929)

($3,367)

($890)

  Loss per share Basic ($0.34) ($0.32) ($0.06) ($0.02) Diluted ($0.34) ($0.32) ($0.06) ($0.02) Weighted-average shares outstanding Basic 56,273 58,932 56,695 59,269 Diluted 56,273 58,932 56,695 59,269 THE TIMBERLAND COMPANY UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Thousands)     For the Six Months Ended July 3, 2009 June 27, 2008 Cash flows from operating activities: Net loss ($3,367) ($890) Adjustments to reconcile net loss to net cash (used)/provided by operating activities: Deferred income taxes 5,224 3,377 Share-based compensation 2,580 4,218 Depreciation and other amortization 14,339 16,124 Provision for losses on accounts receivable 1,564 1,974 Provision for intangible asset impairment 925 - Tax expense from share-based compensation, net of excess benefit (444) (335) Unrealized loss on derivatives 289 16 Other non-cash charges, net 514 1,992 Increase/(decrease) in cash from changes in working capital: Accounts receivable 67,098 69,457 Inventory 1,089 8,420 Prepaid expense (1,802) 72 Accounts payable (25,977) (12,007) Accrued expense (35,674) (32,056) Prepaid income taxes (8,032) (3,415) Income taxes payable (24,678) (15,068) Other liabilities (226) (1,973) Net cash (used)/provided by operating activities (6,578) 39,906   Cash flows from investing activities: Acquisition of business, net of cash acquired (1,554) - Additions to property, plant and equipment (7,757) (10,332) Other (380) 2,909 Net cash used by investing activities (9,691) (7,423)   Cash flows from financing activities: Common stock repurchases (19,388) (24,983) Issuance of common stock 1,373 823 Excess tax benefit from stock option and employee stock purchase plans 133 179 Other (177) - Net cash used by financing activities (18,059) (23,981)   Effect of exchange rate changes on cash and equivalents 1,058 988   Net (decrease)/increase in cash and equivalents (33,270) 9,490 Cash and equivalents at beginning of period 217,189 143,274 Cash and equivalents at end of period $183,919 $152,764 THE TIMBERLAND COMPANY REVENUE ANALYSIS (Amounts in Thousands, Unaudited)           For the Quarter Ended     For the Six Months Ended     July 3, 2009 June 27, 2008 % Change July 3, 2009 June 27, 2008 % Change   Revenue by Segment: North America $86,314 $99,556 -13.3% $206,172 $237,286 -13.1% Europe 65,681 78,760 -16.6% 205,669 243,511 -15.5% Asia 27,707 31,600 -12.3% 64,509 69,521 -7.2% Total Revenue $179,702 $209,916 -14.4% $476,350 $550,318 -13.4%   Revenue by Product: Footwear $126,954 $142,935 -11.2% $338,595 $379,551 -10.8% Apparel and Accessories 47,241 62,635 -24.6% 125,905 160,558 -21.6% Royalty and Other 5,507 4,346 26.7% 11,850 10,209 16.1%   Revenue by Channel: Wholesale $108,417 $136,077 -20.3% $327,042 $391,598 -16.5% Consumer Direct 71,285 73,839 -3.5% 149,308 158,720 -5.9%   Comparable Store Sales: Domestic Retail -8.2% -8.0% -9.0% -3.0% Global Retail -2.5% -1.1% -2.1% 2.4% 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 Six Months Ended July 3, 2009 July 3, 2009 $ Change   % Change $ Change   % Change Revenue decrease (GAAP) ($30,214) -14.4% ($73,968) -13.4% Decrease due to foreign exchange rate changes (11,173)   -5.3% (32,772)   -5.9% Revenue decrease in constant dollars ($19,041) -9.1% ($41,196) -7.5%   North America Revenue Reconciliation:   For the Quarter Ended For the Six Months Ended July 3, 2009 July 3, 2009 $ Change   % Change $ Change   % Change Revenue decrease (GAAP) ($13,242) -13.3% ($31,114) -13.1% Decrease due to foreign exchange rate changes (416)   -0.4% (1,343)   -0.6% Revenue decrease in constant dollars ($12,826) -12.9% ($29,771) -12.5%   Europe Revenue Reconciliation:   For the Quarter Ended For the Six Months Ended July 3, 2009 July 3, 2009 $ Change   % Change $ Change   % Change Revenue decrease (GAAP) ($13,079) -16.6% ($37,842) -15.5% Decrease due to foreign exchange rate changes (11,084)   -14.1% (33,007)   -13.5% Revenue decrease in constant dollars ($1,995) -2.5% ($4,835) -2.0%   Asia Revenue Reconciliation:   For the Quarter Ended For the Six Months Ended July 3, 2009 July 3, 2009 $ Change   % Change $ Change   % Change Revenue decrease (GAAP) ($3,893) -12.3% ($5,012) -7.2% Increase due to foreign exchange rate changes 327   1.0% 1,578   2.3% Revenue decrease in constant dollars ($4,220) -13.3% ($6,590) -9.5%      

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.