TBL Timberland Co. (The)

The Timberland Company (NYSE: TBL) today announced second quarter revenue of $240.1 million, a 27.1% increase compared with revenue of $189.0 million for the same period of 2010. Second quarter net loss was $20.1 million, or $(0.39) per share, compared with a net loss of $23.5 million, or $(0.44) per share, for the same period of 2010.

Second Quarter Results:

• Revenue increased 27.1% compared to the prior year period and was up 20.6% on a constant dollar basis, reflecting strong growth across North America, Europe, and Asia.
• North America revenue increased 15.4% to $106.1 million compared to the prior year period, led by growth from Timberland® footwear and Timberland PRO® footwear, as well as SmartWool® accessories. Europe revenue increased 37.4% to $91.7 million, 24.6% on a constant dollar basis, led by significant growth in the wholesale channel, growth in comparable store sales, and new store openings. Asia revenue increased 40.0% to $42.3 million compared to the prior year period, and increased 28.1% on a constant dollar basis, due to double-digit growth in each of the major markets, strong growth in comparable store sales, and retail expansion.
• Global footwear revenue increased 28.2% to $168.7 million from the second quarter of 2010, led by strong growth in men’s footwear in both wholesale and retail channels across all geographic regions. Apparel and accessories revenue increased 26.8% to $66.0 million, reflecting growth across all regions as well, with Europe wholesale accounts and Asia retail stores driving growth in apparel and SmartWool driving growth in accessories.
• Global wholesale revenue was up 28.7% to $151.1 million compared to the prior year period, driven by double-digit growth in North America, Europe, and Asia. Worldwide consumer direct revenue increased 24.5% to $89.0 million compared to the second quarter of 2010, driven by strong comparable store sales growth and the net addition of sixteen new stores compared to the second quarter of 2010.
• Operating loss for the second quarter of 2011 was $30.9 million, compared to an operating loss of $33.3 million in the prior year period. Gross margin declined 210 basis points to 47.4%, with higher product costs more than offsetting favorable foreign exchange impacts. The Company expects higher product costs to continue through 2011; however, the Company expects a positive impact from strategic price increases in the back half of the year. Operating expense for the second quarter of 2011 was $144.7 million, an increase of 14.1% compared to the prior year period.
• In the second quarter of 2011, the effective tax rate was 32.4% compared to 29.0% in the second quarter of 2010.
• The Company ended the quarter with $233.8 million in cash and no debt. Accounts receivable increased 34.4% to $116.7 million compared to the prior year period, driven by revenue growth and the timing of sales. Inventory at quarter end was $251.7 million, an increase of 42.0%, driven by expected growth for the business in 2011, increased product costs, and efforts to secure product in advance of potential factory capacity constraints.

Webcast Information

As previously announced, the Company will not be hosting a conference call to discuss second quarter results. Replays of previous quarters’ conference calls are 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 August 4, 2011.

    THE TIMBERLAND COMPANY UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in Thousands)                 July 1, 2011 December 31, 2010 July 2, 2010 Assets Current assets Cash and equivalents $ 233,800 $ 272,221 $ 237,798 Accounts receivable, net 116,701 188,336 86,836 Inventory, net 251,720 180,068 177,206 Prepaid expense 32,748 32,729 31,506 Prepaid income taxes 36,245 25,083 27,244 Deferred income taxes 19,343 22,562 27,085 Derivative assets   51   29   7,882 Total current assets   690,608   721,028   595,557   Property, plant and equipment, net 78,411 68,043 64,502 Deferred income taxes 10,148 15,594 18,683 Goodwill and intangible assets, net 72,588 73,797 75,153 Other assets, net   18,264   13,897   12,670   Total assets $ 870,019 $ 892,359 $ 766,565   Liabilities and Stockholders’ Equity Current liabilities Accounts payable $ 110,156 $ 91,025 $ 78,946 Accrued expense and other current liabilities 89,856 128,051 80,555 Income taxes payable 5,172 25,760 15,330 Deferred income taxes - - 388 Derivative liabilities   6,870   1,690   91 Total current liabilities   212,054   246,526   175,310   Other long-term liabilities 38,858 34,322 38,234   Stockholders’ equity   619,107   611,511   553,021   Total liabilities and stockholders’ equity $ 870,019 $ 892,359 $ 766,565     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 1, 2011 July 2, 2010 July 1, 2011 July 2, 2010 Revenue $ 240,127 $ 188,954 $ 589,131 $ 505,996 Cost of goods sold   126,309     95,446     311,999     254,505     Gross profit   113,818     93,508     277,132     251,491     Operating expense Selling 107,664 86,124 210,740 178,820 General and administrative 36,330 28,942 68,683 56,341 Impairment of goodwill - 5,395 - 5,395 Impairment of intangible asset 736 7,854 736 7,854 Gain on termination of licensing agreements   -     (1,500 )   -     (3,000 ) Total operating expense   144,730     126,815     280,159     245,410     Operating income/(loss)   (30,912 )   (33,307 )   (3,027 )   6,081     Other income/(expense), net Interest, net 27 6 (30 ) (60 ) Other, net   1,140     269     2,821     136   Total other income/(expense), net   1,167     275     2,791     76     Income/(loss) before income taxes (29,745 ) (33,032 ) (236 ) 6,157   Income tax provision/(benefit)   (9,639 )   (9,580 )   1,899     3,862     Net income/(loss)

 

($20,106

)

 

($23,452

)

 

($2,135

)

$

2,295

    Earnings/(loss) per share Basic   ($0.39 )   ($0.44 )   ($0.04 ) $ 0.04   Diluted   ($0.39 )   ($0.44 )   ($0.04 ) $ 0.04   Weighted-average shares outstanding Basic   51,191     53,225     51,052     53,698   Diluted   51,191     53,225     51,052     54,184       THE TIMBERLAND COMPANY UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Thousands)               For the Six Months Ended July 1, 2011 July 2, 2010 Cash flows from operating activities: Net income/(loss) ($2,135 ) $ 2,295 Adjustments to reconcile net income/(loss) to net cash provided/(used) by operating activities: Deferred income taxes 9,929 (4,811 ) Share-based compensation 6,993 3,647 Depreciation and other amortization 13,033 13,053 Provision for losses on accounts receivable 316 1,584 Impairment of goodwill - 5,395 Impairment of intangible assets 736 7,854 Excess tax benefit from share-based compensation (5,116 ) (303 ) Unrealized (gain)/loss on derivatives 283 (176 ) Other non-cash charges/(credits), net (32 ) 222 Increase/(decrease) in cash from changes in operating assets and liabilities: Accounts receivable 75,438 53,559 Inventory (71,005 ) (20,139 ) Prepaid expense and other assets (1,954 ) 1,429 Accounts payable 19,416 (700 ) Accrued expense (41,607 ) (43,006 ) Prepaid income taxes (11,163 ) (15,451 ) Income taxes payable (15,527 ) (3,611 ) Other liabilities   2,160     205   Net cash provided/(used) by operating activities   (20,235 )   1,046     Cash flows from investing activities: Additions to property, plant and equipment (19,236 ) (7,289 ) Other   (499 )   (116 ) Net cash used by investing activities   (19,735 )   (7,405 )   Cash flows from financing activities: Common stock repurchases (40,939 ) (44,220 ) Issuance of common stock 36,499 2,435 Excess tax benefit from stock option and employee stock purchase plans 5,116 587 Other   (1,195 )   (634 ) Net cash used by financing activities   (519 )   (41,832 )   Effect of exchange rate changes on cash and equivalents   2,068     (3,850 )   Net decrease in cash and equivalents (38,421 ) (52,041 ) Cash and equivalents at beginning of period   272,221     289,839   Cash and equivalents at end of period $ 233,800   $ 237,798       THE TIMBERLAND COMPANY REVENUE ANALYSIS (Amounts in Thousands, Unaudited)                                 For the Quarter Ended For the Six Months Ended July 1, 2011 July 2, 2010 Change July 1, 2011 July 2, 2010 Change   Revenue by Segment: North America $ 106,134 $ 91,995 15.4 % $ 238,117 $ 213,853 11.3 % Europe 91,713 66,750 37.4 % 257,418 218,380 17.9 % Asia   42,280     30,209   40.0 %   93,596     73,763   26.9 % Total Revenue $ 240,127   $ 188,954   27.1 % $ 589,131   $ 505,996   16.4 %   Revenue by Product: Footwear $ 168,697 $ 131,589 28.2 % $ 416,865 $ 357,150 16.7 % Apparel and Accessories 66,027 52,069 26.8 % 160,275 137,758 16.3 % Royalty and Other 5,403 5,296 2.0 % 11,991 11,088 8.1 %   Revenue by Channel: Wholesale $ 151,119 $ 117,465 28.7 % $ 403,132 $ 349,419 15.4 % Consumer Direct 89,008 71,489 24.5 % 185,999 156,577 18.8 %   Comparable Store Sales: U.S. Retail 20.2 % -3.9 % 14.5 % -0.5 % Global Retail 14.3 % -0.5 % 10.9 % 2.1 %

Comparable store sales include revenues from Company-operated stores for which all of the following requirements have been met: the store has been open at least one year, square footage has not changed by more than 25% within the past year, and the store has not been permanently repositioned within the past year. Sales for stores that are closed for renovation or relocation are not included in the comparable store calculation while closed. Prior year foreign exchange rates are applied to both current year and prior year comparable store sales to achieve a consistent basis for comparison.

    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 Six Months Ended July 1, 2011 July 1, 2011

$ Change

% Change

$ Change

% Change Revenue increase (GAAP) $51,173 27.1% $83,135 16.4% Increase due to foreign exchange rate changes 12,360 6.5% 17,478 3.5% Revenue increase in constant dollars $38,813 20.6% $65,657 12.9%     North America Revenue Reconciliation: For the Quarter Ended For the Six Months Ended July 1, 2011 July 1, 2011

$ Change

% Change

$ Change

% Change Revenue increase (GAAP) $14,139 15.4% $24,264 11.3% Increase due to foreign exchange rate changes 221 0.2% 490 0.2% Revenue increase in constant dollars $13,918 15.2% $23,774 11.1%     Europe Revenue Reconciliation: For the Quarter Ended For the Six Months Ended July 1, 2011 July 1, 2011

$ Change

% Change

$ Change

% Change Revenue increase (GAAP) $24,963 37.4% $39,038 17.9% Increase due to foreign exchange rate changes 8,537 12.8% 9,973 4.6% Revenue increase in constant dollars $16,426 24.6% $29,065 13.3%     Asia Revenue Reconciliation: For the Quarter Ended For the Six Months Ended July 1, 2011 July 1, 2011

$ Change

% Change

$ Change

% Change Revenue increase (GAAP) $12,071 40.0% $19,833 26.9% Increase due to foreign exchange rate changes 3,602 11.9% 7,015 9.5% Revenue increase in constant dollars $8,469 28.1% $12,818 17.4%    

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.