<PAGE> 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 April 1, 1994
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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
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The Timberland Company
- - -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 02-0312554
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
11 Merrill Industrial Drive, Hampton, New Hampshire 03843
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (603) 926-1600
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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 the filing requirements for the past 90
days.
Yes X No
----- -----
On April 29, 1994, 7,619,766 shares of the registrant's Class A Common
Stock were outstanding and 3,237,121 shares of the registrant's Class
B Common Stock were outstanding.
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<TABLE>
THE TIMBERLAND COMPANY
FORM 10-Q
TABLE OF CONTENTS
<CAPTION>
Page(s)
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<S> <C>
Independent Accountants' Review Report 1
Part I Financial Information
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Condensed Consolidated Balance Sheets -
April 1, 1994 and December 31, 1993 2 - 3
Condensed Consolidated Statements of Operations -
For the three months ended April 1, 1994 and April 2, 1993 4
Condensed Consolidated Statements of Cash Flows -
For the three months ended April 1, 1994 and April 2, 1993 5
Notes to Condensed Consolidated Financial Statements 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations 7 - 8
Part II Other Information 9
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</TABLE>
<PAGE> 3
Form 10-Q
Page 1
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
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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 April 1, 1994, and
the related condensed consolidated statements of operations and cash
flows for the three-month periods ended April 1, 1994 and April 2,
1993. These condensed consolidated financial statements are the
responsibility of the Company's management.
We conducted our reviews 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 reviews, 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, 1993, and the related
consolidated statements of income, changes in stockholders' equity, and
cash flows for the year then ended (not presented herein), and, in our
report dated February 15, 1994, 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, 1993, is fairly stated, in all
material respects, in relation to the consolidated balance sheet from
which it was derived.
Deloitte & Touche
Boston, Massachusetts
April 26, 1994
(May 4, 1994 as to Note 4)
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Form 10-Q
Page 2
Part I Financial Information
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<TABLE>
THE TIMBERLAND COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
(Dollars in Thousands)
(Unaudited)
<CAPTION>
April 1, December 31,
1994 1993
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<S> <C> <C>
Current assets
Cash and equivalents $ - $ 3,281
Accounts receivable, net 91,429 93,226
Inventories 149,166 111,380
Prepaid expenses 8,632 7,571
Deferred and refundable income taxes 5,625 5,625
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Total current assets 254,852 221,083
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Property, plant and equipment, at cost 84,012 79,145
Less accumulated depreciation and
amortization (36,457) (33,530)
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Net property, plant and
equipment 47,555 45,615
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Excess of cost over fair value of net
assets acquired, net 17,963 18,157
Other assets, net 6,283 5,756
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$326,653 $290,611
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 5
Form 10-Q
Page 3
<TABLE>
THE TIMBERLAND COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
(Dollars in Thousands)
(Unaudited)
<CAPTION>
April 1, December 31,
1994 1993
-------- ------------
<S> <C> <C>
Current liabilities
Notes payable $ 47,346 $ 10,061
Current maturities of long-term obligations 700 682
Bank overdraft, net 4,236 -
Accounts payable 21,746 32,526
Accrued expenses
Payroll and related 8,444 8,873
Interest and other 17,918 9,609
Income taxes payable 2,328 3,672
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Total current liabilities 102,718 65,423
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Long-term obligations, less current maturities 90,627 90,809
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Deferred income taxes 6,176 6,016
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Stockholders' equity
Preferred Stock, $.01 par value; 2,000,000 shares authorized;
none issued - -
Class A Common Stock, $.01 par value; 30,000,000 shares
authorized; 7,638,092 shares issued at April 1, 1994 and
7,630,556 shares at December 31, 1993 76 76
Class B Common Stock, $.01 par value; 15,000,000 shares
authorized; 3,237,121 shares issued and outstanding at
April 1, 1994 and 3,237,598 shares at December 31, 1993 32 32
Additional paid-in capital 55,897 55,805
Retained earnings 72,487 74,106
Cumulative translation adjustment (1,240) (1,536)
Less treasury stock at cost, 18,513 shares at April 1, 1994
and at December 31, 1993 (120) (120)
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127,132 128,363
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$326,653 $290,611
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</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 6
Form 10-Q
Page 4
<TABLE>
THE TIMBERLAND COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Thousands, Except Per Share Data)
(Unaudited)
<CAPTION>
For the
Three Months Ended
April 1, April 2,
1994 1993
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<S> <C> <C>
Net sales $108,093 $70,606
Cost of goods sold 75,602 43,139
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Gross profit 32,491 27,467
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Operating expenses
Selling 22,577 15,293
General and administrative 10,232 6,791
Amortization of goodwill 194 194
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Total operating expenses 33,003 22,278
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Operating income (loss) (512) 5,189
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Other expense
Interest 1,885 1,210
Other, net 215 335
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Total other expense 2,100 1,545
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Income (loss) before income
taxes (2,612) 3,644
Provision (benefit) for income taxes (993) 1,312
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Net income (loss) $ (1,619) $ 2,332
======== ========
Earnings (loss) per share $ (.14) $ .21
======== ========
Weighted average shares outstanding 11,232 11,081
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 7
Form 10-Q
Page 5
<TABLE>
THE TIMBERLAND COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
<CAPTION>
For the
Three Months Ended
April 1, April 2,
1994 1993
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<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (1,619) $2,332
Adjustments to reconcile net income (loss)
to net cash provided (used) by
operating activities:
Deferred income taxes 160 (415)
Depreciation and amortization 3,339 2,199
Increase (decrease) in cash from
changes in working capital items:
Accounts receivable 1,707 2,823
Inventories (37,471) (9,722)
Prepaid expenses (1,028) (1,870)
Bank overdraft, net 4,236 -
Accounts payable (10,805) 7,647
Accrued expenses 7,802 1,600
Income taxes (1,327) 853
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Net cash provided (used)
by operating activities (35,006) 5,447
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Cash flows from investing activities:
Additions to property, plant and
equipment, net (4,747) (3,630)
Other, net (756) (172)
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Net cash used in investing
activities (5,503) (3,802)
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Cash flows from financing activities:
Net borrowings under short-term credit
facilities 37,284 936
Payments on long-term debt and
capital lease obligations (164) (1,823)
Issuance of common stock 92 38
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Net cash provided (used) by
financing activities 37,212 (849)
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Effect of exchange rate changes on cash 16 12
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Net increase (decrease) in cash and equivalents (3,281) 808
Cash and equivalents at beginning of period 3,281 1,220
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Cash and equivalents at end of period $ - $2,028
======== ======
Supplemental disclosures of cash flow
information:
Interest paid $ 720 $ 240
Income taxes paid 191 1,043
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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Form 10-Q
Page 6
THE TIMBERLAND COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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, 1993.
Certain prior year amounts have been reclassified for consistent
presentation with the current period.
2. The results of operations for the three months ended April 1,
1994 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.
<TABLE>
3. Inventories consist of the following (in thousands):
<CAPTION>
April 1, 1994 December 31, 1993
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<S> <C> <C>
Raw materials $ 16,517 $ 11,108
Work-in-process 11,017 13,060
Finished goods 121,632 87,212
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$149,166 $111,380
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</TABLE>
4. Indebtedness
In April 1994, the Company finalized a private placement with a
group of lenders for $65 million of senior unsecured notes (the
"Notes") maturing on April 15, 2000. The Notes bear interest at a
fixed rate of 7.16% per annum. The proceeds will be used to repay
existing short-term debt and for general corporate purposes.
On May 4, 1994, 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, extends through May 30, 1996
and provides for revolving credit loans of up to $125 million,
subject to a borrowing base formula. 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 and places
limitations on the payment of dividends and the incurrence of
additional debt, and also contains certain other financial and
operating covenants.
5. Distributorship Termination Agreement
In April 1994, the Company entered into a Distributorship
Termination Agreement (the "Agreement") with its Italian
distributor, which terminates all distribution rights of the
distributor on May 31, 1994. In accordance with the Agreement, the
Company will also acquire certain assets of the distributor. Net
sales to this distributor represented 5% and 4%, respectively, of
the Company's consolidated revenues for the first quarter and full
year of 1993. The Company recognized no revenue in the first
quarter of 1994 related to its Italian distributor. Effective on
the termination date, Timberland intends to assume the distribution
of its own products in Italy.
<PAGE> 9
Form 10-Q
Page 7
<TABLE>
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 condensed
consolidated statements of operations as percentages of net sales for the
periods indicated.
<CAPTION>
For the
Three Months Ended
April 1, April 2,
1994 1993
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<S> <C> <C>
Net sales 100.0% 100.0%
Cost of goods sold 69.9 61.1
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Gross profit 30.1 38.9
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Operating expenses
Selling 20.9 21.6
General and administrative 9.5 9.6
Amortization of goodwill .2 .3
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Total operating expenses 30.5 31.6
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Operating income (loss) (.5) 7.4
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Other expense
Interest 1.7 1.7
Other, net .2 .5
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Total other expense 1.9 2.2
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Income (loss) before income taxes (2.4) 5.2
Provision (benefit) for income taxes (.9) 1.9
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Net income (loss) (1.5)% 3.3%
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Note: Percentages may not add due to rounding.
</TABLE>
First Quarter 1994 Compared to First Quarter 1993
- - -------------------------------------------------
Net sales for the first quarter of 1994 were $108.1 million, an increase of 53%
over the $70.6 million reported in the same quarter of 1993. This increase was
attributable to an overall increase in the number of footwear, apparel and
accessory units sold. Net sales in 1994 reflect a price reduction on certain
products designed to improve the price/value proposition for the consumer.
<PAGE> 10
Form 10-Q
Page 8
First Quarter 1994 Compared to First Quarter 1993 (continued)
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Gross profit as a percentage of net sales was 30.1% in 1994 as
compared to 38.9% in 1993. This decline is primarily attributed to
the effect of a price reduction for certain footwear and apparel
lines, not fully offset by anticipated product cost reductions.
While overall operating expenses increased to $33.0 million in the
first quarter of 1994 from $22.3 million in the first quarter of 1993,
total operating expenses as a percentage of net sales in 1994
decreased to 30.5% from 31.6% in 1993. The comparative dollar
increase in spending was principally attributable to increased sales and
marketing expenditures and the Company's investment in worldwide
infrastructure to support sales growth.
Interest expense in the first quarter of 1994 increased by $.7 million
over the comparable period in 1993, primarily as a result of increased
borrowings in support of sales growth.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
The Company uses unsecured revolving and committed lines of credit as
the primary sources of financing for its seasonal and other working
capital requirements. In anticipation of increased financing
requirements to support planned near-term growth, the Company completed
a private placement in April 1994 for $65 million of senior unsecured
notes and entered into a new revolving credit agreement on May 4, 1994,
which provides for revolving credit loans of up to $125 million. (See
notes to condensed consolidated financial statements.) Management
believes that such facilities, and the ability to obtain additional
financing, together with cash flow from operations, will provide the
funds necessary to support the Company's business.
At April 1, 1994, the Company had working capital of $152.1 million
versus $155.7 million at December 31, 1993 and $94.8 million at April 2,
1993. As a result of increased sales, accounts receivable have grown to
$91.4 million at April 1, 1994 compared to $51.0 million at April 2,
1993. Days sales outstanding at April 1, 1994 were 79 days compared to 70
days at April 2, 1993. Inventories have increased by $37.8 million and
$68.8 million since year end 1993 and April 2, 1993, respectively, in
support of anticipated sales. Inventory turns were 2.2 times for the
three months ended April 1, 1994 and April 2, 1993. Short-term
borrowings have increased by $37.3 million since December 31, 1993, due
primarily to the inventory level at quarter end. As a result of the
increase in overall borrowings, the Company's debt to capital ratio
rose to 52% at April 1, 1994 compared to 44% and 32% at December 31,
1993 and April 2, 1993, respectively. The Company's short-term
financing requirements have historically reached a peak during the
third quarter in response to the seasonal pattern of demand.
In April 1994, the Company entered into a Distributorship Termination
Agreement (the "Agreement") with its Italian distributor, which
terminates all distribution rights of the distributor on May 31, 1994.
In accordance with the Agreement, the Company will also acquire certain
assets of the distributor. Net sales to this distributor represented 5%
and 4%, respectively, of the Company's consolidated revenues for the
first quarter and full year of 1993. The Company recognized no revenue
in the first quarter of 1994 related to its Italian distributor.
Effective on the termination date, Timberland intends to assume the
distribution of its own products in Italy.
Capital expenditures were $4.7 million and $3.6 million for the three
months ended April 1, 1994 and April 2, 1993, respectively.
<PAGE> 11
Form 10-Q
Page 9
Part II Other Information
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Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits -- None
(b) Reports on Form 8-K -- None
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: May 12,1994 Jeffrey B. Swartz
----------- ------------------------------
Jeffrey B. Swartz
Executive Vice President,
Chief Operating Officer
and Director
Date: May 12, 1994 Edward J. Suleski, Jr.
----------- ------------------------------
Edward J. Suleski, Jr.
Corporate Controller and
Chief Accounting Officer
(Principal Accounting Officer)
