TBL Timberland Co. (The)

The Timberland Company (NYSE: TBL) today reported fourth-quarter 2010 net income of $42.1 million and diluted earnings per share of $0.82. These results compare to fourth-quarter 2009 net income of $22.3 million and diluted earnings per share of $0.40.

Fourth Quarter 2010 Results Summary:

• Revenue increased 26.7% compared to the prior year period and was up 28.1% on a constant dollar basis, reflecting growth across North America, Europe, and Asia.
• North America revenue increased 16.8% to $252.0 million compared to the prior year period, as a result of improved wholesale sell-in, specifically men’s footwear, and growth in SmartWool® apparel and accessories. Europe revenue increased 32.3% to $169.6 million versus 2009 fourth-quarter levels, and increased 40.1% on a constant dollar basis. European results reflect growth across the region, led by Germany, Scandinavia, and the Benelux region, driven by strong performance in men’s, women’s and kids’ footwear. Asia revenue increased 58.5% to $69.6 million compared to the prior year period, and increased 48.3% on a constant dollar basis, driven by growth across the region, led by Japan, Taiwan, and China, across men’s, women’s and kids’ products.
• Global footwear revenue increased 31.2% to $358.8 million from the fourth quarter of 2009, driven by men’s footwear and supported by strong growth in women’s and kids’ footwear in all three regions. Apparel and accessories revenue increased 16.6% to $125.1 million, reflecting growth in every region, led by strength in Timberland® apparel sales in Asia.
• Global wholesale revenue was up 30.9% to $326.6 million compared to the prior year period, with double-digit growth across all segments. Worldwide consumer direct revenue increased 19.0% to $164.5 million compared to the fourth quarter of 2009, driven by solid comparable store sales growth in each of our global regions and the net addition of ten stores.
• Operating income for the fourth quarter of 2010 was $61.7 million compared to operating income of $37.2 million in the prior year period. The improvement was driven by increased revenue and was partially offset by higher selling and marketing expenses. The gross margin rate declined approximately 200 basis points to 48.6% as benefits from mix and fewer and more profitable close-out sales were offset by pressure from higher input costs and freight expenses.
• In the fourth quarter of 2010, the effective tax rate was 33.1% compared to 39.9% in the fourth quarter of 2009. The tax rate for the full-year 2010 was 31.6% compared to 30.4% in 2009.
• In connection with its stock buyback program, the Company repurchased 402 thousand shares in the fourth quarter of 2010 at a cost of approximately $10 million.
• The Company ended the quarter with $272.2 million in cash and no debt. Accounts receivable increased 26.2% to $188.3 million compared to the prior year period, in line with the revenue increase. Inventory at year end was $180.1 million, an increase of 13.6% compared to prior year levels.

For the full-year 2010, Timberland reported revenue of $1,429.5 million, an increase of 11.2% over the prior year. 2010 net income was $96.6 million, an increase of 70.6% over the prior year. And diluted earnings per share were $1.82, an increase of 80.2% over the full-year 2009 diluted earnings per share of $1.01.

“Our results this quarter are the culmination of disciplined focus on our operating model and targeted investments in our brand,” said Jeffrey B. Swartz, Timberland’s President and Chief Executive Officer. “As our progress in the North America business demonstrates, we have the right strategy and the right team in place to grow Timberland to be the number one outdoor brand on Earth.”

Webcast information

As previously announced, the Company will be hosting a conference call to discuss fourth quarter and full year 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 40250864. Replays of this conference call will be available through the investor relations section of the Company’s website.

About Timberland

Timberland (NYSE: TBL) is a global leader in the design, engineering and marketing of premium-quality footwear, apparel and accessories for consumers who value the outdoors and their time in it. Timberland markets products under the Timberland®, Timberland PRO®, SmartWool®, Timberland Boot Company®, howies®, and Mountain Athletics® 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).

Forward Looking Statements

Certain statements in this press release may be “forward-looking statements”, within the meaning of the federal securities laws, which 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.

Non-GAAP Financial Measures

This press release includes discussion of constant dollar revenue change, which excludes the impact of changes in foreign currency exchange rates, and 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 February 17, 2011.

THE TIMBERLAND COMPANY UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in Thousands)     December 31, 2010 December 31, 2009 Assets Current assets Cash and equivalents $ 272,221 $ 289,839 Accounts receivable, net 188,336 149,178 Inventory 180,068 158,541 Prepaid expense 32,729 32,863 Prepaid income taxes 25,083 11,793 Deferred income taxes 22,562 26,769 Derivative assets   29   1,354 Total current assets   721,028   670,337   Property, plant and equipment, net 68,043 69,820 Deferred income taxes 15,594 14,903 Goodwill and intangible assets, net 73,797 89,885 Other assets, net   13,897   14,962   Total assets $ 892,359 $ 859,907   Liabilities and Stockholders’ Equity Current liabilities Accounts payable $ 91,025 $ 79,911 Accrued expense and other current liabilities 128,051 125,500 Income taxes payable 25,760 21,959 Deferred income taxes - 48 Derivative liabilities   1,690   389 Total current liabilities   246,526   227,807   Other long-term liabilities 34,322 36,483   Stockholders’ equity   611,511   595,617   Total liabilities and stockholders’ equity $ 892,359 $ 859,907 THE TIMBERLAND COMPANY UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Amounts in Thousands, Except Per Share Data)         For the Quarter Ended For the Year Ended December 31, 2010 December 31, 2009 December 31, 2010 December 31, 2009 Revenue $ 491,144 $ 387,760 $ 1,429,484 $ 1,285,876 Cost of goods sold   252,690   191,547     732,970     682,954     Gross profit   238,454   196,213     696,514     602,922     Operating expense Selling 141,910 123,378 427,367 407,987 General and administrative 34,174 35,654 123,912 116,772 Impairment of goodwill - - 5,395 - Impairment of intangible asset 702 - 8,556 925 Gain on termination of licensing agreements - - (3,000 ) - Restructuring   -   (27 )   -     (236 ) Total operating expense   176,786   159,005     562,230     525,448     Operating income   61,668   37,208     134,284     77,474     Other income/(expense), net Interest, net 5 (85 ) (104 ) 405 Other, net   1,341   (123 )   7,080     3,506   Total other income/(expense), net   1,346   (208 )   6,976     3,911     Income before income taxes 63,014 37,000 141,260 81,385   Income tax provision   20,882   14,746     44,638     24,741     Net income $ 42,132 $ 22,254   $ 96,622   $ 56,644     Earnings per share Basic $ 0.83 $ 0.40   $ 1.84   $ 1.01   Diluted $ 0.82 $ 0.40   $ 1.82   $ 1.01   Weighted-average shares outstanding Basic   50,691   54,960     52,498     56,034   Diluted   51,310   55,329     52,990     56,352   THE TIMBERLAND COMPANY UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Thousands)       For the Year Ended December 31, 2010 December 31, 2009 Cash flows from operating activities: Net income $ 96,622 $ 56,644 Adjustments to reconcile net income to net cash provided by operating activities: Deferred income taxes 3,407 450 Share-based compensation 9,287 5,942 Depreciation and amortization 25,500 28,783 Provision for losses on accounts receivable 1,242 3,224 Impairment of goodwill 5,395 - Impairment of intangible assets 8,556 925 Impairment of other long-lived assets 989 3,023 Tax expense from share-based compensation, net of excess benefit (463 ) (2,214 ) Unrealized loss on derivatives 422 333 Other non-cash credits, net (1,567 ) (1,381 )

Increase/(decrease) in cash from changes in operating assets and liabilities,net of the effect of business combinations:

Accounts receivable (43,559 ) 18,206 Inventory (20,285 ) 24,178 Prepaid expense and other assets 1,539 1,479 Accounts payable 9,013 (17,762 ) Accrued expense 2,590 11,846 Prepaid income taxes (13,290 ) 4,894 Income taxes payable 2,120 (2,093 ) Other liabilities   332     (626 ) Net cash provided by operating activities   87,850     135,851     Cash flows from investing activities: Acquisition of business and purchase price adjustments, net of cash acquired - (1,554 ) Additions to property, plant and equipment (19,917 ) (17,677 ) Other   (707 )   (849 ) Net cash used by investing activities   (20,624 )   (20,080 )   Cash flows from financing activities: Common stock repurchases (85,233 ) (43,905 ) Issuance of common stock 4,406 1,962 Excess tax benefit from stock option and employee stock purchase plans 761 151 Other   (971 )   (1,284 ) Net cash used by financing activities   (81,037 )   (43,076 )   Effect of exchange rate changes on cash and equivalents   (3,807 )   (45 )   Net increase/(decrease) in cash and equivalents (17,618 ) 72,650 Cash and equivalents at beginning of period   289,839     217,189   Cash and equivalents at end of period $ 272,221   $ 289,839   THE TIMBERLAND COMPANY REVENUE ANALYSIS (Amounts in Thousands, Unaudited)           For the Quarter Ended For the Year Ended December 31, 2010 December 31, 2009 Change December 31, 2010 December 31, 2009 Change   Revenue by Segment: North America $ 251,983 $ 215,745 16.8 % $ 647,337 $ 610,164 6.1 % Europe 169,552 128,110 32.3 % 592,086 527,979 12.1 % Asia

 

69,609     43,905   58.5 %   190,061     147,733   28.7 % Total Revenue $ 491,144   $ 387,760   26.7 % $ 1,429,484   $ 1,285,876   11.2 %   Revenue by Product: Footwear $ 358,765 $ 273,440 31.2 % $ 1,035,681 $ 931,179 11.2 % Apparel and Accessories 125,117 107,342 16.6 % 368,825 329,071 12.1 % Royalty and Other 7,262 6,978 4.1 % 24,978 25,626 -2.5 %   Revenue by Channel: Wholesale $ 326,597 $ 249,523 30.9 % $ 1,024,694 $ 918,796 11.5 % Consumer Direct 164,547 138,237 19.0 % 404,790 367,080 10.3 %   Comparable Store Sales: U.S. Retail 6.2 % -4.7 % 3.1 % -8.7 % Global Retail 17.6 % -0.3 % 8.8 % -2.4 % 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 Year Ended December 31, 2010 December 31, 2010

$ Change

  % Change

$ Change

  % Change Revenue increase (GAAP) $ 103,384 26.7 % $ 143,608 11.2 % Decrease due to foreign exchange rate changes   (5,286 )   -1.4 %   (7,017 )   -0.5 % Revenue increase in constant dollars $ 108,670 28.1 % $ 150,625 11.7 %   North America Revenue Reconciliation:   For the Quarter Ended For the Year Ended December 31, 2010 December 31, 2010

$ Change

 

% Change

$ Change

  % Change Revenue increase (GAAP) $ 36,238 16.8 % $ 37,173 6.1 % Increase due to foreign exchange rate changes   260     0.1 %   1,868     0.3 % Revenue increase in constant dollars $ 35,978 16.7 % $ 35,305 5.8 %   Europe Revenue Reconciliation:   For the Quarter Ended For the Year Ended December 31, 2010 December 31, 2010

$ Change

  % Change

$ Change

  % Change Revenue increase (GAAP) $ 41,442 32.3 % $ 64,107 12.1 % Decrease due to foreign exchange rate changes   (10,009 ) -7.8 %   (18,760 ) -3.6 % Revenue increase in constant dollars $ 51,451 40.1 % $ 82,867 15.7 %   Asia Revenue Reconciliation:   For the Quarter Ended For the Year Ended December 31, 2010 December 31, 2010

$ Change

  % Change $ Change   % Change Revenue increase (GAAP) $ 25,704 58.5 % $ 42,328 28.7 % Increase due to foreign exchange rate changes   4,463     10.2 %   9,875     6.7 % Revenue increase in constant dollars $ 21,241 48.3 % $ 32,453 22.0 %   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.