<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 September 29, 1995
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
------
The Timberland Company
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 02-0312554
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
200 Domain Drive, Stratham, New Hampshire 03885
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (603) 772-9500
--------------------------
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 such
filing requirements for the past 90 days.
Yes X No
----- -----
On November 3, 1995, 8,298,767 shares of the registrant's Class A Common Stock
were outstanding and 2,735,381 shares of the registrant's Class B Common Stock
were outstanding.
<PAGE> 2
<TABLE>
THE TIMBERLAND COMPANY
FORM 10-Q
TABLE OF CONTENTS
<CAPTION>
Page(s)
-------
<S> <C>
Independent Accountants' Review Report 1
Part I Financial Information (unaudited)
- ----------------------------
Condensed Consolidated Balance Sheets - 2-3
September 29, 1995 and December 31, 1994
Condensed Consolidated Statements of Operations - 4
For the three and nine months ended September 29, 1995
and September 30, 1994
Condensed Consolidated Statements of Cash Flows - 5
For the nine months ended September 29, 1995 and
September 30, 1994
Notes to Condensed Consolidated Financial Statements 6-8
Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-12
Part II Other Information 13-14
- -------------------------
</TABLE>
<PAGE> 3
Form 10-Q
Page 1
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
- --------------------------------------
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 September 29, 1995, and the related
condensed consolidated statements of operations and cash flows for the three-
month and nine-month periods ended September 29, 1995 and September 30,
1994. These financial statements are the responsibility of the Company's
management.
We conducted our review 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 review, 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, 1994, 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 9, 1995, 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, 1994, is fairly
stated, in all material respects, in relation to the consolidated balance sheet
from which it has been derived.
Deloitte & Touche LLP
Boston, Massachusetts
October 27, 1995
<PAGE> 4
Form 10-Q
Page 2
Part I Financial Information
- ----------------------------
<TABLE>
THE TIMBERLAND COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
(Dollars in Thousands)
(Unaudited)
<CAPTION>
September 29, December 31,
1995 1994
------------- ------------
<S> <C> <C>
Current assets
Cash and equivalents $ 3,710 $ 6,381
Accounts receivable, net 162,443 128,435
Inventories 221,202 218,219
Prepaid expenses 9,094 13,504
Deferred and refundable income taxes 14,707 7,112
---------- ----------
Total current assets 411,156 373,651
---------- ----------
Property, plant and equipment, at cost 92,106 110,650
Less accumulated depreciation and amortization (40,148) (42,417)
---------- ----------
Net property, plant and equipment 51,958 68,233
---------- ----------
Assets held for sale 5,441 -
Excess of cost over fair value of net assets
acquired, net 24,693 25,956
Other assets, net 7,702 5,424
---------- ----------
$ 500,950 $ 473,264
========== ==========
</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>
September 29, December 31,
1995 1994
---- ----
<S> <C> <C>
Current liabilities
Notes payable $ 58,000 $ 22,513
Current maturities of long-term obligations 7,761 8,048
Accounts payable 26,390 37,035
Accrued expenses
Payroll and related 10,304 6,038
Interest and other 40,032 24,459
Income taxes payable 748 9,029
-------- --------
Total current liabilities 143,235 107,122
-------- --------
Long-term obligations, less current maturities 206,642 206,767
-------- --------
Deferred income taxes 10,535 10,285
-------- --------
Stockholders' equity
Preferred stock, $.01 par value; 2,000,000 shares authorized;
none issued - -
Class A Common Stock, $.01 par value (1 vote per share);
30,000,000 shares authorized; 8,298,634 shares issued
at September 29, 1995 and 8,221,615 shares at
December 31, 1994 83 82
Class B Common Stock, $.01 par value (10 votes per share);
15,000,000 shares authorized; 2,735,381 shares issued
at September 29, 1995 and 2,737,121 shares at
December 31, 1994 27 27
Additional paid-in capital 58,965 57,756
Retained earnings 79,422 91,816
Cumulative translation adjustment 2,161 (471)
Less treasury stock at cost, 18,369 shares at September 29,
1995 and December 31, 1994 (120) (120)
-------- --------
140,538 149,090
-------- --------
$500,950 $473,264
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 6
<TABLE>
Form 10-Q
Page 4
THE TIMBERLAND COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
(Unaudited)
<CAPTION>
For the For the
Three Months Ended Nine Months Ended
------------------ -----------------
Sept. 29, Sept. 30, Sept.29, Sept. 30,
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $ 212,597 $ 222,188 $ 479,323 $ 457,760
Cost of goods sold 149,041 145,668 334,716 308,065
------------ ----------- ------------ -----------
Gross profit 63,556 76,520 144,607 149,695
------------ ----------- ------------ -----------
Operating expenses
Selling 38,251 33,676 106,054 83,566
General and administrative 11,266 11,325 34,990 30,949
Amortization of goodwill 422 367 1,264 811
Restructuring charge - - 16,000 -
------------ ----------- ------------ -----------
Total operating expenses 49,939 45,368 158,308 115,326
------------ ----------- ------------ -----------
Operating income (loss) 13,617 31,152 (13,701) 34,369
------------ ----------- ------------ -----------
Other expense (income)
Interest expense 6,459 4,504 17,300 9,829
Other, net (4,243) 312 (11,012) 581
------------ ----------- ------------ -----------
Total other expense 2,216 4,816 6,288 10,410
------------ ----------- ------------ -----------
Income (loss) before income taxes 11,401 26,336 (19,989) 23,959
------------ ----------- ------------ -----------
Provision (benefit) for income taxes 4,333 10,007 (7,595) 9,104
------------ ----------- ------------ -----------
Net income (loss) $ 7,068 $ 16,329 $ (12,394) $ 14,855
============ =========== ============ ===========
Earnings (loss) per share $ .63 $ 1.45 $ (1.11) $ 1.32
============ =========== ============ ===========
Weighted average shares outstanding and share
equivalents 11,259 11,252 11,172 11,228
============ =========== ============ ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
.
<PAGE> 7
<TABLE>
THE TIMBERLAND COMPANY Form 10-Q
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Page 5
(Dollars in Thousands)
(Unaudited)
For the Nine Months Ended
-------------------------------------
Sept. 29, Sept. 30,
1995 1994
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $(12,394) $14,855
Adjustments to reconcile net loss
to net cash used in operating activities:
Deferred income taxes 250 1,288
Depreciation and amortization 14,113 10,674
Gain on distributorship transaction (12,107) -
Restructuring charge 10,350 -
Loss on disposition of equipment 468 -
Increase (decrease) in cash from changes in working
capital items, net of effects of distributorship
transaction:
Accounts receivable (37,227) (101,266)
Inventories (9,782) (102,060)
Prepaid expenses 4,504 (3,681)
Accounts payable (10,735) 15,856
Accrued expenses 16,630 21,158
Income taxes (15,876) 6,539
--------- ---------
Net cash used in operating activities (51,806) (136,637)
--------- ---------
Cash flows from investing activities:
Proceeds from distributorship transaction 24,000 -
Proceeds from sale of equipment 1,756 -
Additions to property, plant and equipment, net (12,354) (16,548)
Acquisition of Italian distributor - (14,086)
Other, net (911) 667
--------- ---------
Net cash provided by (used) in investing activities 12,491 (29,967)
--------- ---------
Cash flows from financing activities:
Net borrowings under short-term credit facilities 35,487 99,075
Proceeds from long-term obligations 525 65,000
Payments on long-term and capital lease obligations (921) (505)
Issuance of common stock 1,210 1,015
--------- ---------
Net cash provided by financing activities 36,301 164,585
--------- ---------
Effect of exchange rate changes on cash 343 (79)
--------- ---------
Net decrease in cash and equivalents (2,671) (2,098)
Cash and equivalents at beginning of period 6,381 3,281
--------- ---------
Cash and equivalents at end of period $ 3,710 $ 1,183
========= =========
Supplemental disclosures of cash flow information:
Interest paid $ 12,618 $ 6,195
Income taxes paid 8,031 1,322
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 8
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, 1994.
Certain prior period amounts have been reclassified for consistent
presentation with the current period presentation.
2. The results of operations for the nine months ended September 29, 1995
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.
3. Recognition of Revenues
Revenues consist of sales to customers, license fees and royalties.
Sales are recognized upon shipment of product to customers. License
fees and royalties are recognized when earned. Such license
fees and royalties are included in revenues and aggregated $1.3
million and $6.1 million for the three and nine month periods ended
September 29, 1995, respectively, and $.1 million and $.6 million for
the three and nine month periods ended September 30, 1994, respectively.
<TABLE>
4. Inventories consist of the following (in thousands):
<CAPTION>
September 29, 1995 December 31, 1994
------------------ -----------------
<S> <C> <C>
Raw materials $ 15,827 $ 19,806
Work-in-process 4,970 13,137
Finished goods 200,405 185,276
-------- --------
$221,202 $218,219
======== ========
</TABLE>
5. Indebtedness
On July 21, 1995, the Company amended the revolving credit agreement
to provide for up to $50 million in letters of credit under the
overall $125 million committed facility.
6. Other Income
On January 26, 1995, the Company appointed Inchcape plc ("Inchcape")
as the exclusive distributor of Timberland products throughout most of
the Asia/Pacific region. The agreement included Inchcape's acquisition
of the Company's Australian and New Zealand subsidiaries and future
consideration provided to Inchcape for the total sum of $24 million.
The transaction resulted in a first quarter non recurring pre-tax gain
of approximately $7.4 million.
<PAGE> 9
Form 10-Q
Page 7
THE TIMBERLAND COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
During the third quarter, the agreement was amended to include South
Korea. In addition to the expansion of territories and other
modifications, the amended agreement eliminated the future
consideration provided to Inchcape included in the original
agreement. This resulted in a non-recurring pre-tax gain of
$4.7 million in the third quarter of 1995. In 1994, revenues
of the Company's Australian and New Zealand subsidiaries combined
accounted for less than 2% of total consolidated revenues.
7. Legal Proceedings
The Company is involved in litigation and various legal matters,
including U.S. Customs claims, which have arisen in the ordinary
course of business. Management believes that the ultimate resolution
of any existing matter will not have a material effect on the Company's
consolidated financial statements.
The Company and two of its officers and directors have been named as
defendants in two actions filed in the United States District Court
for the District of New Hampshire, one filed by Jerrold Schaffer on
December 12, 1994, and the other filed by Gershon Kreuser on
January 4, 1995. On April 24, 1995, the District Court granted the
plaintiffs' motion, assented to by the defendants, to consolidate the
two suits. The plaintiffs filed a single consolidated amended
complaint with the District Court on June 23, 1995. The
amended complaint alleges that the defendants violated the federal
securities laws by making material misstatements and omissions in
certain of the Company's public filings and statements in 1994.
Specifically, the amended complaint alleges that such statements and
omissions had the effect of artificially inflating the market price
for the Company's Common Stock until the disclosure by the
Company on December 9, 1994 of its expectation that results for
the fourth quarter were not likely to meet analysts' anticipated
levels. Damages are unspecified. The amended complaint seeks class
action status for all purchasers of the Company's Common Stock
between May 12, 1994 and December 9, 1994. The defendants filed
a motion to dismiss the plaintiffs' Complaint with the District
Court on August 25, 1995. The plaintiffs served their opposition to the
defendants' motion to dismiss on October 27, 1995. Further briefing on
the motion will be completed by November 17, 1995.
While this action is in its early stages, based on an initial review,
and after consultation with counsel, management believes the
allegations are without merit. Accordingly, management does not
expect the outcome of such litigation to have a material adverse
effect on the consolidated financial statements. The Company is
defending this proceeding vigorously.
8. Restructuring Charge
During the second quarter of 1995, the Company closed its
manufacturing facilities in Boone, North Carolina and Mountain City,
Tennessee, reduced its manufacturing operations in the Dominican
Republic and downsized its corporate office workforce due to a
reorganized management structure. These actions resulted in a
one-time pre-tax charge of $16.0 million. The Company has two
remaining manufacturing facilities: one in Puerto Rico and one in the
Dominican Republic. All other product is sourced by the Company from
contract manufacturers.
<PAGE> 10
Form 10-Q
Page 8
THE TIIMBERLAND COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Of the total charge for restructuring, $10.4 million relates to
anticipated losses associated with the disposal of assets and is a
non-cash item; $2.6 million relates to payments for contractual
lease obligations and anticipated expenditures to close idle
facilities; and $3.0 million relates to anticipated payments for
severance and other employee liabilities.
The Company has substantially completed these restructuring actions,
with the exception of the sale of certain manufacturing equipment which
may not occur until 1996. Cash expenditures related to the
restructuring plan of $2.6 million have been incurred as of
September 29, 1995. The Company has funded the restructuring plan
from internal sources and available borrowing capacity.
<PAGE> 11
Form 10-Q
Page 9
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 revenues for the
periods indicated.
<TABLE>
<CAPTION>
For the For the
Three Months Ended Nine Months Ended
---------------------------- ----------------------------
Sept. 29, Sept. 30, Sept. 29, Sept. 30,
1995 1994 1995 1994
--------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 70.1 65.6 69.8 67.3
----- ----- ----- -----
Gross profit 29.9 34.4 30.2 32.7
----- ----- ----- -----
Operating expenses
Selling 18.0 15.2 22.1 18.3
General and administrative 5.3 5.1 7.3 6.8
Amortization of goodwill .2 .2 .3 .2
Restructuring charge - - 3.3 -
----- ----- ----- -----
Total operating expenses 23.5 20.4 33.0 25.2
----- ----- ----- -----
Operating income (loss) 6.4 14.0 (2.9) 7.5
----- ----- ----- -----
Other expense (income)
Interest expense 3.0 2.0 3.6 2.2
Other, net (2.0) .1 (2.3) .1
----- ----- ----- -----
Total other expense 1.0 2.2 1.3 2.3
----- ----- ----- -----
Income (loss) before income taxes 5.3 11.8 (4.2) 5.2
Provision (benefit) for income taxes 2.0 4.5 (1.6) 2.0
----- ----- ----- -----
Net income (loss) 3.3% 7.3% (2.6)% 3.2%
===== ===== ===== =====
<FN>
Note: Percentages may not add due to rounding.
</TABLE>
<PAGE> 12
Form 10-Q
Page 10
Third Quarter 1995 Compared with Third Quarter 1994
- ---------------------------------------------------
Revenues for the third quarter of 1995 were $212.6 million, a decrease of 4.3%
compared to the $222.2 million reported in the comparable prior year period.
The revenue decline primarily occurred in the Company's domestic wholesale
footwear business as a result of fewer units sold. The revenue decline can be
attributable to a generally depressed retail environment. The Company believes
that having too few new products offered in the overall product mix also may
have adversely impacted revenues.
Footwear revenues decreased $20.9 million, or 11.7%, in the third quarter of
1995, compared to the same period in 1994, primarily as a result of fewer unit
sales. Apparel and accessories revenues increased $10.0 million, or 22.7%, in
the third quarter of 1995, compared to the same period in 1994, due to an
increase in unit sales. Retail revenue represented 17.5% of
total revenues in the current quarter, compared to 8.8% in the third quarter of
1994, reflecting the Company's growing retail organization and, in particular,
the factory outlet business, where 20 new stores were added since the third
quarter last year. Domestic revenues declined $18.1 million, or 11.3%,
compared to the third quarter of 1994. International revenues for the third
quarter of 1995 increased $8.5 million, or 13.7%, compared to the same period
in the prior year, and comprised 33.3% of total third quarter revenue in 1995
versus 28.0% in the third quarter of 1994. The growth in international
revenues was driven largely by the Company's Italian branch, which the Company
has been operating since May of 1994. Revenues from the Company's Italian
operations were up 39% over the third quarter of 1994.
Gross profit as a percentage of revenues for the third quarter of 1995 was
29.9%, compared to 34.4% for the third quarter of 1994. Gross margin was
depressed by a change in product sales mix; although first quality
inventory represented a substantial majority of total revenues, off-price sales
comprised a greater percentage of total revenues than in the same quarter
last year. In addition, lower production levels in the Company's
manufacturing facilities had a negative effect on overhead cost absorption,
which further depressed gross margins.
Operating expenses were $49.9 million in the third quarter of 1995, compared
to $45.4 million in the third quarter of 1994. Operating expenses as a
percentage of revenue in the third quarter of 1995 were 23.5%, compared to
20.4% in the third quarter of 1994. This dollar increase was primarily due to
higher operating costs associated with the Company's growing retail
organization described above.
Interest expense for the third quarter of 1995 increased by $2.0 million to
$6.5 million over the comparable prior year period, primarily as a result of
increased borrowings to support higher inventory levels through the year and
higher interest rates.
Other income of $4.2 million for the third quarter of 1995 reflects an
amendment to the Company's agreement with Inchcape plc for distribution rights
in Asia-Pacific. The amended agreement expands Inchcape's territories to
include South Korea. Together with other modifications, this amendment
resulted in a $4.7 million non-recurring pre-tax gain for the third quarter of
1995.
Nine Months ended September 29, 1995 Compared with Nine Months ended
- --------------------------------------------------------------------
September 30, 1994.
- -------------------
Revenues for the first nine months of 1995 were $479.3 million, an increase
of 4.7% over the $457.8 million for the comparable period of 1994. The
increase in revenues is due to an increase in the number of footwear,
apparel and accessory units sold. Revenues were adversely impacted by a
generally depressed retail environment. The Company believes that having too
few new products offered in the overall product mix also may have adversely
impacted revenues.
<PAGE> 13
Form 10Q
Page 11
Revenues for the first nine months of 1995 include $6.1 million of licensing
fees and royalties, $5.2 million of which are non-recurring, received in
connection with licensing agreements, compared to $.6 million for the
comparable prior year period.
Gross profit as a percentage of revenues for the first nine months of 1995 was
30.2%, compared to 32.7% for the comparable prior year period. This
decline is attributable to the same factors causing the decline in the gross
margin percentage for the third quarter of 1995 discussed above.
During the second quarter of 1995, the Company closed its manufacturing
facilities in Boone, North Carolina and Mountain City, Tennessee, reduced
its manufacturing operations in the Dominican Republic and downsized its
corporate office workforce as part of a reorganization of its management
structure. Approximately 1,800 positions were eliminated. These actions
resulted in a one-time pre-tax charge of $16.0 million. The Company has
two remaining manufacturing facilities: one in Puerto Rico and one in the
Dominican Republic. All other product is sourced by the Company from contract
manufacturers.
Of the total charge for restructuring, $10.4 million relates to anticipated
losses associated with the disposal of assets and is a non-cash item; $2.6
million relates to payments for contractual lease obligations and
anticipated expenditures to close idle facilities; and $3.0 million relates
to anticipated payments for severance and other employee liabilities.
The Company has substantially completed these restructuring actions, with the
exception of the sale of certain manufacturing equipment which may not occur
until 1996. Cash expenditures related to the restructuring plan of $2.6
million have been incurred as of September 29, 1995. The Company has funded
the costs of the restructuring plan from internal sources and available
borrowing capacity. The restructuring plan began lowering operating costs in
the third quarter of 1995 and is expected to increase savings going forward.
Based on recent manufacturing plant production levels, annual savings are
expected to approximate $7 million. Savings from the planned action will be
used to repay indebtedness and for general Corporate and working capital
purposes.
Excluding the one-time pretax restructuring charge, operating expenses for
the first nine months of 1995 increased $27.0 million to $142.3 million, from
$115.3 million for the comparable prior year period. The increase in operating
expenses is principally a result of the Company's growing retail organization,
the inclusion of the Company's Italian operations for a full nine months, and
the larger core infrastructure which was designed to support higher revenue
levels. As a percentage of revenues, operating expenses, exclusive of the
restructuring charge, increased to 29.7% in 1995 from 25.2% in 1994.
Interest expense for the first nine months of 1995 increased by $7.5 million
over the comparable prior year period, primarily as a result of increased
borrowings to support higher inventory levels and higher interest rates.
For the first nine months of 1995, other expense (income) includes a
non-recurring pre-tax gain of $12.1 million resulting from the Company's
appointment on January 26, 1995 of Inchcape plc as the exclusive distributor of
Timberland products throughout most of the Asia/Pacific region. The agreement,
which was amended in the third quarter to expand the territory to include South
Korea and to eliminate certain future consideration to Inchcape, included
Inchcape's acquisition of the Company's Australian and New Zealand subsidiaries
for a total sum of $24 million.
<PAGE> 14
Form 10Q
Page 12
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company generated cash flows from operations during the third quarter of
1995, and reduced debt by over $7.0 million from the second quarter of 1995.
Because the third quarter is traditionally the time of peak working capital
requirements, it is highly unusual to generate cash in that period. In terms
of cash generation, this is the strongest third quarter the Company has had as
a public company.
Cash used by operations during the first nine months of 1995 was $51.8 million,
compared to $136.6 million in the same period in 1994. Accounts receivable
increased $34.0 million from December 31, 1994, and decreased $30.9 million
from September 30, 1994, primarily as the result of the decline in third
quarter 1995 wholesale revenues compared with third quarter of 1994. Wholesale
days sales outstanding improved to 79 days at September 29, 1995 from
84 days at September 30, 1994. Inventories increased $3.0 million since
December 31, 1994. Inventory turns declined to 1.8 times for the third quarter
of 1995, compared to 2.3 times for the same period in 1994.
During the first nine months of 1995, $12.6 million of cash was provided from
investing activities, due primarily to $24 million of cash proceeds received
from the agreement with Inchcape plc. These proceeds were partially offset by
capital expenditures for the first nine months of 1995 of $12.4 million,
compared to $16.5 million for the same period in 1994. The increase in the
level of total borrowings since year end 1994 is due primarily to the higher
receivable level, resulting from the typical third quarter peak selling
period. The Company uses unsecured revolving and committed lines of credit
as the primary sources of financing for its seasonal and other working capital
requirements. On July 21, 1995, the Company amended the revolving credit
agreement, which extends through the end of February 1997, to provide for up
to $50 million in letters of credit under the overall $125 million
committed facility. The Company's debt to capital ratio was 66.0% at
September 29, 1995, compared to 61.4% at December 31, 1994 and 64.5% at
September 30, 1994.
Management believes that the Company's capital needs for 1995 will be met
through the credit facilities and cash flows from operations, without the need
for additional permanent financing.
<PAGE> 15
Form 10Q
Page 13
Part II Other Information
- -------------------------
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K -- There were no reports on Form 8-K filed
during the period covered by this report.
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
--------------------------
(Registrant)
Date: November 14, 1995
Keith D. Monda
--------------------------
Keith D. Monda
Senior Vice President -
Finance and Administration
and Chief Financial Officer
Date: November 14, 1995
Dennis W. Hagele
--------------------------
Dennis W. Hagele
Vice President Finance
and Corporate Controller
(Chief Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONDENSED CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 29, 1995 AND THE
CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER
29, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-29-1995
<EXCHANGE-RATE> 1
<CASH> 3,710
<SECURITIES> 0
<RECEIVABLES> 162,443
<ALLOWANCES> 6,125
<INVENTORY> 221,202
<CURRENT-ASSETS> 411,156
<PP&E> 92,106
<DEPRECIATION> 40,148
<TOTAL-ASSETS> 500,950
<CURRENT-LIABILITIES> 143,235
<BONDS> 206,642
<COMMON> 0
0
110
<OTHER-SE> 140,428
<TOTAL-LIABILITY-AND-EQUITY> 500,950
<SALES> 479,323
<TOTAL-REVENUES> 479,323
<CGS> 334,716
<TOTAL-COSTS> 334,716
<OTHER-EXPENSES> 17,264
<LOSS-PROVISION> 3,168
<INTEREST-EXPENSE> 17,300
<INCOME-PRETAX> (19,989)
<INCOME-TAX> (7,595)
<INCOME-CONTINUING> (12,394)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (12,394)
<EPS-PRIMARY> (1.11)
<EPS-DILUTED> 0
</TABLE>
