The Timberland Company (NYSE: TBL) today reported third-quarter
2010 net income of $52.2 million and diluted earnings per share of
$1.00. These results compare to third-quarter 2009 net income of
$37.8 million and diluted earnings per share of $0.68.
Third-Quarter 2010 Results Summary:
- Revenue increased 2.5% to $432.3
million compared to the prior year period, reflecting growth across
Europe and Asia, partially offset by a decline in North America.
Foreign exchange rate changes decreased third-quarter 2010 revenue
by approximately $11.4 million, or 2.7%.
- Europe revenue increased 5.0% to $204.1
million versus 2009 third-quarter levels, and increased 12.3% on a
constant dollar basis. Growth in Scandinavia, distributor markets,
and Germany was partially offset by unfavorable foreign exchange
rates as well as declines in the Benelux region and Italy. North
America revenue declined 3.6% to $181.5 million compared to the
prior year period, impacted by decreased sales of wholesale
footwear. Asia revenue increased 19.7% to $46.7 million compared to
the prior year period, and increased 13.3% on a constant dollar
basis. This increase was driven by continued expansion in China and
Taiwan as well as favorable foreign exchange rates compared to the
prior year period.
- Global footwear revenue was essentially
flat at $319.8 million compared to the third quarter of 2009.
Apparel and accessories revenue increased 11.1% to $106.4 million
compared to the prior year period, due to increased sales of
Timberland® brand apparel in Asia and SmartWool® accessories in
North America. Royalty and other revenue declined 9.8% to $6.1
million compared to the prior year period.
- Global wholesale revenue was up 1.9% to
$348.7 million compared to the prior year period, reflecting growth
in Europe and Asia, partially offset by declines in North America.
Worldwide consumer direct revenue increased 5.2% compared to the
prior year period, driven by comparable store sales growth in all
three regions and the net addition of 8 new retail stores since the
third quarter of 2009. Global retail comparable store sales
improved 7.2%. The Company had 225 stores, shops, and outlets
worldwide at the end of the third quarter of 2010 compared to 217
at the end of the third quarter of 2009.
- Operating income for the third quarter
of 2010 increased 13.8% to $66.5 million compared to operating
income of $58.5 million in the prior year period. The improvement
was driven by a significant improvement in gross margin across all
regions due to fewer and more profitable closeout sales as well as
favorable mix.
- In the third quarter of 2010, the
effective tax rate was 27.6% compared to 38.2% in the third quarter
of 2009.
- In connection with its stock buyback
program, the Company repurchased approximately 1.7 million shares
in the third quarter of 2010 at a cost of approximately $30.0
million.
- The Company ended the quarter with
$108.8 million in cash and no debt. Accounts receivable was flat at
$269.0 million compared to the prior year period. Inventory at
quarter end was $239.8 million, up 18.9% versus 2009 third-quarter
levels.
Jeffrey B. Swartz, Timberland’s President and Chief Executive
Officer, stated, “We are pleased to report revenue growth and
significant earnings improvement for the third quarter. Our 2010
financial results to date are a clear indication that our focused
strategic investments to strengthen the Timberland® brand and
business are paying off. We see concrete evidence across our
portfolio from strong retail comps and continued wholesale growth
to significant improvement in the sales of our outdoor and
EarthkeepersTM collections, supported by our largest-ever marketing
campaign, Nature Needs HeroesTM. We continue to position Timberland
as a brand that engages consumers, demonstrates environmental
leadership and delivers superior returns for our shareholders."
As previously announced, the Company will be hosting a
conference call to discuss third-quarter results today at 8:25 AM
Eastern Time. Interested parties may listen to this call through
the investor relations section of the Company’s website,
www.timberland.com, or by calling 706.643.2916 and providing access
code number 65649220. 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. Timberland’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
its reports filed with the Securities and Exchange Commission
(SEC).
Certain statements in this press release may be “forward-looking
statements” within the meaning of the federal securities laws that
are subject to material risks and uncertainties. These
forward-looking statements are not guarantees of future financial
performance or expected benefits. Many factors could affect our
current expectations and our actual results, and could cause
results to differ materially. Such factors 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,
Quarterly Report on Form 10-Q 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 November 4,
2010.
THE TIMBERLAND COMPANY UNAUDITED CONDENSED
CONSOLIDATED BALANCE SHEETS (Dollars in Thousands)
October 1, 2010 December 31, 2009
October 2, 2009 Assets Current assets Cash and
equivalents $108,815 $289,839 $112,851 Accounts receivable, net
268,985 149,178 270,272 Inventory, net 239,805 158,541 201,733
Prepaid expense 30,917 32,863 32,919 Prepaid income taxes 27,822
11,793 18,287 Deferred income taxes 27,551 26,769 23,512 Derivative
assets 120 1,354 839 Total current assets 704,015 670,337 660,413
Property, plant and equipment, net 64,985 69,820 70,664
Deferred income taxes 17,070 14,903 13,825 Goodwill and intangible
assets, net 74,841 89,885 90,301 Other assets, net 13,546 14,962
15,161 Total assets $874,457 $859,907 $850,364
Liabilities and Stockholders’ Equity Current liabilities
Accounts payable $101,874 $79,911 $89,681 Accrued expense and other
current liabilities 130,201 125,500 118,734 Income taxes payable
29,683 21,959 18,224 Deferred income taxes - 48 - Derivative
liabilities 4,308 389 3,994 Total current liabilities 266,066
227,807 230,633 Other long-term liabilities 34,680 36,483
36,146 Stockholders’ equity 573,711 595,617 583,585
Total liabilities and stockholders’ equity $874,457 $859,907
$850,364
THE TIMBERLAND COMPANY UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Amounts in
Thousands, Except Per Share Data)
For the
Quarter Ended For the Nine Months Ended October 1,
2010 October 2, 2009 October 1, 2010 October
2, 2009 Revenue $432,344 $421,766 $938,340 $898,116 Cost of
goods sold 225,775 227,254 480,280 491,407 Gross profit
206,569 194,512 458,060 406,709 Operating expense Selling
106,637 107,314 285,457 284,609 General and administrative 33,397
28,805 89,738 81,118 Impairment of goodwill - - 5,395 - Impairment
of intangible asset - - 7,854 925 Gain on termination of licensing
agreements - - (3,000) - Restructuring - (88) - (209) Total
operating expense 140,034 136,031 385,444 366,443 Operating
income 66,535 58,481 72,616 40,266 Other income/(expense),
net Interest, net (49) (11) (109) 490 Other, net 5,603 2,626 5,739
3,629 Total other income/(expense), net 5,554 2,615 5,630 4,119
Income before income taxes
72,089 61,096 78,246 44,385
Income tax provision
19,894 23,339 23,756 9,995
Net income
$52,195 $37,757 $54,490 $34,390
Earnings per share Basic $1.01 $0.68 $1.03 $0.61 Diluted
$1.00 $0.68 $1.02 $0.61 Weighted-average shares outstanding Basic
51,892 55,744 53,098 56,385 Diluted 52,225 55,908 53,531 56,692
THE TIMBERLAND COMPANY UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Thousands)
For the Nine Months Ended October 1, 2010
October 2, 2009 Cash flows from operating activities: Net
income $54,490 $34,390 Adjustments to reconcile net income to net
cash used by operating activities: Deferred income taxes (2,819)
5,041 Share-based compensation 5,913 4,163 Depreciation and
amortization 19,179 21,582 Provision for losses on accounts
receivable 3,392 4,180 Impairment of goodwill 5,395 - Impairment of
intangible assets 7,854 925 Tax expense from share-based
compensation, net of excess benefit (520) (1,804) Unrealized loss
on derivatives 1,008 554 Other non-cash (credits)/charges, net (55)
930
Increase/(decrease) in cash from changes
in operating assets and liabilities, net of the effect of business
combinations:
Accounts receivable (123,993) (103,264) Inventory (80,146) (18,891)
Prepaid expense and other assets 3,205 1,265 Accounts payable
21,872 (8,099) Accrued expense 1,994 5,263 Prepaid income taxes
(16,028) (1,600) Income taxes payable 5,573 (7,208) Other
liabilities (221) (175) Net cash used by operating activities
(93,907) (62,748) Cash flows from investing activities:
Acquisition of business and purchase price adjustments, net of cash
acquired - (1,554) Additions to property, plant and equipment
(11,318) (11,078) Other (209) (601) Net cash used by investing
activities (11,527) (13,233) Cash flows from financing
activities: Common stock repurchases (73,734) (29,285) Issuance of
common stock 2,621 1,373 Excess tax benefit from stock option and
employee stock purchase plans 609 136 Other (909) (1,248) Net cash
used by financing activities (71,413) (29,024) Effect of
exchange rate changes on cash and equivalents (4,177) 667
Net decrease in cash and equivalents (181,024) (104,338) Cash and
equivalents at beginning of period 289,839 217,189 Cash and
equivalents at end of period $108,815 $112,851
THE
TIMBERLAND COMPANY REVENUE ANALYSIS (Amounts in
Thousands, Unaudited)
For the
Quarter Ended For the Nine Months Ended October 1,
2010 October 2, 2009 Change October 1,
2010 October 2, 2009 Change Revenue by
Segment: North America $181,501 $188,247 -3.6% $395,354
$394,419 0.2% Europe 204,154 194,511 5.0% 422,534 399,869 5.7% Asia
46,689 39,008 19.7% 120,452 103,828 16.0% Total Revenue $432,344
$421,766 2.5% $938,340 $898,116 4.5%
Revenue by
Product: Footwear $319,766 $319,145 0.2% $676,916 $657,739 2.9%
Apparel and Accessories 106,450 95,824 11.1% 244,208 221,729 10.1%
Royalty and Other 6,128 6,797 -9.8% 17,216 18,648 -7.7%
Revenue by Channel: Wholesale $348,678 $342,231 1.9%
$698,097 $669,273 4.3% Consumer Direct 83,666 79,535 5.2% 240,243
228,843 5.0%
Comparable Store Sales: U.S. Retail 3.7%
-14.6% 1.0% -11.1% Global Retail 7.2% -6.6% 3.8% -3.6%
THE TIMBERLAND COMPANY RECONCILIATION OF TOTAL
COMPANY, NORTH AMERICA, EUROPE AND ASIA REVENUE CHANGES
TO CONSTANT DOLLAR REVENUE CHANGES (Amounts in Thousands,
Unaudited)
Total Company Revenue
Reconciliation: For the Quarter Ended For the Nine
Months Ended October 1, 2010 October 1, 2010 $
Change % Change $ Change % Change Revenue increase (GAAP) $10,578
2.5% $40,224 4.5% Decrease due to foreign exchange rate changes
(11,397) -2.7% (1,731) -0.2% Revenue increase in constant dollars
$21,975 5.2% $41,955 4.7%
North America Revenue
Reconciliation: For the Quarter Ended For the Nine
Months Ended October 1, 2010 October 1, 2010 $
Change % Change $ Change % Change Revenue (decrease)/increase
(GAAP) ($6,746) -3.6% $935 0.2% Increase due to foreign exchange
rate changes 426 0.2% 1,606 0.4% Revenue decrease in constant
dollars ($7,172) -3.8% ($671) -0.2%
Europe Revenue
Reconciliation: For the Quarter Ended For the Nine
Months Ended October 1, 2010 October 1, 2010 $
Change % Change $ Change % Change Revenue increase (GAAP) $9,643
5.0% $22,665 5.7% Decrease due to foreign exchange rate changes
(14,315) -7.3% (8,751) -2.2% Revenue increase in constant dollars
$23,958 12.3% $31,416 7.9%
Asia Revenue
Reconciliation: For the Quarter Ended For the Nine
Months Ended October 1, 2010 October 1, 2010 $
Change % Change $ Change % Change Revenue increase (GAAP) $7,681
19.7% $16,624 16.0% Increase due to foreign exchange rate changes
2,492 6.4% 5,412 5.2% Revenue increase in constant dollars $5,189
13.3% $11,212 10.8%
Constant dollar revenue changes, which exclude the impact of
changes in foreign exchange rates, are not Generally Accepted
Accounting Principle (“GAAP”) performance measures. We calculate
constant dollar revenue changes by recalculating current year
revenue using the prior year’s exchange rates and comparing it to
prior year revenue reported on a GAAP basis. We provide constant
dollar revenue changes for Total Company, North America, Europe,
and Asia revenues because we use the measures to understand the
underlying results and trends of the business segments excluding
the impact of exchange rate changes that are not under management’s
direct control. We have a foreign exchange rate risk management
program intended to minimize both the positive and negative effects
of currency fluctuations on our reported consolidated results of
operations, financial position and cash flows. The actions taken by
us to mitigate foreign exchange risk are reflected in cost of goods
sold and other, net.
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