<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 25, 1998
------------------
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 October 30, 1998, 9,144,403 shares of the registrant's Class A Common Stock
were outstanding and 2,338,162 shares of the registrant's Class B Common Stock
were outstanding.
<PAGE> 2
THE TIMBERLAND COMPANY
FORM 10-Q
TABLE OF CONTENTS
Page(s)
-------
Part I Financial Information (unaudited)
- ---------------------------
Condensed Consolidated Balance Sheets - 1-2
September 25, 1998 and December 31, 1997
Condensed Consolidated Statements of Income - 3
For the three and nine months ended September 25, 1998
and September 26, 1997
Condensed Consolidated Statements of Cash Flows - 4
For the nine months ended September 25, 1998 and
September 26, 1997
Notes to Condensed Consolidated Financial Statements 5-6
Management's Discussion and Analysis of Financial 7-11
Condition and Results of Operations
Part II Other Information 12
- -------------------------
<PAGE> 3
Form 10-Q
Page 1
Part I Financial Information
- ----------------------------
THE TIMBERLAND COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
September 25, December 31,
1998 1997
------------- ------------
<S> <C> <C>
Current assets
Cash and equivalents $ 19,341 $ 98,771
Accounts receivable, net of allowance
for doubtful accounts of $5,099 at
September 25, 1998 and $3,742
at December 31, 1997 177,262 75,793
Inventory 189,492 142,613
Prepaid expense 11,571 12,856
Deferred and refundable income taxes 12,885 11,973
--------- ---------
Total current assets 410,551 342,006
--------- ---------
Property, plant and equipment 127,625 116,503
Less accumulated depreciation and amortization (74,007) (63,593)
--------- ---------
Net property, plant and equipment 53,618 52,910
--------- ---------
Excess of cost over fair value of net assets
acquired, net 19,639 20,902
Other assets, net 5,587 4,185
--------- ---------
$ 489,395 $ 420,003
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 4
Form 10-Q
Page 2
THE TIMBERLAND COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
(Dollars in Thousands, Except Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
September 25, December 31,
1998 1997
------------- ------------
<S> <C> <C>
Current liabilities
Accounts payable $ 30,113 $ 20,390
Accrued expense
Payroll and related 22,002 28,233
Interest and other 51,757 32,786
Income taxes payable 20,814 17,686
--------- ---------
Total current liabilities 124,686 99,095
--------- ---------
Long-term debt 100,000 100,000
Deferred income taxes 5,894 6,013
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; 9,159,165 shares issued
at September 25, 1998 and 8,765,013 shares at December 31,
1997 92 88
Class B Common Stock, $.01 par value (10 votes per share);
convertible into Class A shares on a one-for-one basis;
15,000,000 shares authorized; 2,338,162 shares issued at
September 25, 1998 and 2,605,432 shares at December 31,
1997 23 26
Additional paid-in capital 71,650 68,568
Retained earnings 186,282 147,921
Accumulated other comprehensive gain (loss) -
cumulative translation adjustment 881 (1,595)
Less treasury stock at cost, 17,369 shares at September 25,
1998 and December 31, 1997 (113) (113)
--------- ---------
258,815 214,895
--------- ---------
$ 489,395 $ 420,003
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 5
Form 10-Q
Page 3
THE TIMBERLAND COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Amounts in Thousands, Except Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
For the For the
Three Months Ended Nine Months Ended
------------------ -----------------
September 25, September 26, September 25, September 26,
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenue $291,857 $274,699 $599,656 $557,563
Cost of goods sold 175,548 168,058 358,971 337,453
-------- -------- -------- --------
Gross profit 116,309 106,641 240,685 220,110
-------- -------- -------- --------
Operating expense
Selling 56,513 52,242 139,981 126,865
General and administrative 14,205 13,691 37,804 37,260
Amortization of goodwill 422 422 1,264 1,264
-------- -------- -------- --------
Total operating expense 71,140 66,355 179,049 165,389
-------- -------- -------- --------
Operating income 45,169 40,286 61,636 54,721
-------- -------- -------- --------
Other expense (income)
Interest expense 2,490 3,438 7,061 11,568
Other, net (108) 1,195 (1,838) 567
-------- -------- -------- --------
Total other expense 2,382 4,633 5,223 12,135
-------- -------- -------- --------
Income before income taxes 42,787 35,653 56,413 42,586
-------- -------- -------- --------
Provision for income taxes 13,692 10,696 18,052 12,776
-------- -------- -------- --------
Net income $ 29,095 $ 24,957 $ 38,361 $ 29,810
======== ======== ======== ========
Basic earnings per share $ 2.53 $ 2.20 $ 3.35 $ 2.65
======== ======== ======== ========
Average shares outstanding 11,489 11,324 11,442 11,256
======== ======== ======== ========
Diluted earnings per share $ 2.47 $ 2.11 $ 3.24 $ 2.55
======== ======== ======== ========
Average shares outstanding 11,761 11,807 11,832 11,703
======== ======== ======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 6
Form 10-Q
Page 4
THE TIMBERLAND COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the
Nine Months Ended
-----------------
September 25, September 26,
1998 1997
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 38,361 $ 29,810
Adjustments to reconcile net income
to net cash provided (used) by operating activities:
Deferred income taxes (1,004) (8,103)
Depreciation and amortization 14,431 15,420
Increase (decrease) in cash from changes in working
capital items:
Accounts receivable (99,631) (64,816)
Inventory (46,623) (11,981)
Prepaid expense 1,384 (425)
Accounts payable 9,460 8,421
Accrued expense 11,550 15,080
Income taxes 3,084 14,322
-------- --------
Net cash used by operating activities (68,988) (2,272)
-------- --------
Cash flows from investing activities:
Additions to property, plant and equipment, net (12,689) (11,626)
Other, net (1,034) (2,538)
-------- --------
Net cash used by investing activities (13,723) (14,164)
-------- --------
Cash flows from financing activities:
Payments on long-term debt - (42,454)
Issuance of common stock 3,083 3,372
-------- --------
Net cash provided (used) by financing activities 3,083 (39,082)
-------- --------
Effect of exchange rate changes on cash 198 (333)
-------- --------
Net decrease in cash and equivalents (79,430) (55,851)
Cash and equivalents at beginning of period 98,771 93,336
-------- --------
Cash and equivalents at end of period $ 19,341 $ 37,485
======== ========
Supplemental disclosures of cash flow information:
Interest paid $ 4,806 $ 8,749
Income taxes paid 15,955 5,812
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 7
Form 10-Q
Page 5
THE TIMBERLAND COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Thousands)
(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, 1997.
2. The results of operations for the three and nine months ended September 25,
1998 are not necessarily indicative of the results to be expected for the
full year. Historically, the Company's revenue has been more heavily
weighted to the second half of the year.
3. Inventory consisted of the following:
September 25, 1998 December 31, 1997
------------------ -----------------
Raw materials $ 6,987 $ 8,010
Work-in-process 7,211 4,103
Finished goods 175,294 130,500
-------- --------
$189,492 $142,613
======== ========
4. Comprehensive Income
The Company adopted Statement of Financial Accounting Standards ("SFAS")
No. 130 "Reporting Comprehensive Income" in 1998. SFAS No. 130 requires the
reporting of comprehensive income, which, in the case of the Company, is
the combination of reported net income and the change in the cumulative
translation adjustment which is a component of stockholders' equity. SFAS
No. 130 has no impact on the Company's reported net income. Comprehensive
income for the three months and nine months ended September 25, 1998 and
September 26, 1997 follows:
<TABLE>
<CAPTION>
For the For the
Three Months Ended Nine Months Ended
------------------ -----------------
September 25, September 26, September 25, September 26,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income $29,095 $24,957 $38,361 $29,810
Change in cumulative
translation adjustment 2,719 (137) 2,476 (3,913)
------- ------- ------- -------
Comprehensive income $31,814 $24,820 $40,837 $25,897
======= ======= ======= =======
</TABLE>
<PAGE> 8
Form 10-Q
Page 6
THE TIMBERLAND COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Thousands)
(Unaudited)
5. Indebtedness
On April 30, 1998, 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,
expires on June 19, 2001 and provides for $100,000 of committed borrowings
of which up to $80,000 may be used for letters of credit. Under the terms
of the Agreement, the Company may borrow at interest rates based upon the
lenders' cost of funds. The Agreement provides for a facility fee of 0.20%
per annum on the full commitment, places limitations on the payment of
dividends and incurrence of additional debt, and also contains certain
other financial and operating covenants.
6. Subsequent Event
On October 15, 1998, the Company announced that the Board of Directors
authorized the repurchase of up to one million shares of the Company's
Class A Common Stock, from time to time, in the discretion of management,
and as market and business conditions may warrant. The Company may use
repurchased shares to offset shares which may be issued under the Company's
stock-based employee incentive plans.
<PAGE> 9
Form 10-Q
Page 7
THE TIMBERLAND COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Unaudited)
RESULTS OF OPERATIONS
- ---------------------
Third Quarter 1998 Compared With Third Quarter 1997
- ---------------------------------------------------
Revenue for the third quarter of 1998 was $291.9 million, an increase of $17.2
million, or 6.2%, compared with the $274.7 million reported for the third
quarter of 1997.
Domestic revenue for the third quarter of 1998 was $199.2 million, an increase
of $1.5 million, or 0.8%, from the same period in 1997. The increase was
attributable to a unit sales increase in footwear and to licensed product
royalty revenue growth partially offset by a decrease in North American apparel
and accessories revenue, as discussed below.
International revenue for the third quarter of 1998 was $92.7 million, an
increase of $15.6 million, or 20.3%, compared with the third quarter of 1997.
International revenue comprised 31.8% of total revenue for the third quarter of
1998, compared with 28.0% for the third quarter of 1997. Internationally, growth
in European revenue resulted from increases in footwear unit sales and apparel
and accessories revenue over last year.
Footwear revenue for the third quarter of 1998 was $227.2 million, an increase
of $16.5 million, or 7.8%, from the same period in 1997. Footwear unit sales
increased 18.2% while average selling price decreased 8.8%. The decrease in
average selling price was primarily due to two factors. The first was the
introduction of tiered pricing in many categories. Tiered pricing is a strategy
in which the Company identifies price points where it is appropriate to compete
and then designs product to meet specific product related and gross margin
targets. The second factor was the impact of a larger proportion of the footwear
revenue mix being comprised of kids' footwear, which generally has lower average
selling prices than adult footwear.
Revenue attributable to apparel and accessories decreased $1.6 million, or 2.6%,
to $60.3 million in the third quarter of 1998, compared with the same period in
1997. Much of this reduction was from our domestic wholesale accounts and from
off-price sales. European apparel and accessories revenue increased 9.9%.
Revenue from Company-owned retail and factory outlet stores for the third
quarter of 1998 was $51.4 million, compared with $47.8 million for the third
quarter of 1997. Total domestic retail and factory outlet store revenue, of
which the majority of worldwide revenue is comprised, increased 9.5% compared
with the same period in 1997. Comparable domestic retail and factory outlet
store revenue increased 11.7%.
Gross profit as a percentage of revenue for the third quarter of 1998 was 39.9%,
an increase of 1.1 percentage points from the 38.8% reported for the third
quarter of 1997. The improvement in gross margin was due primarily to both a
larger proportion of revenue being generated in Europe, where margins on sales
are generally higher than on domestic sales, and to the sale of recently
introduced higher margin products.
Operating expense was $71.1 million for the third quarter of 1998, up $4.8
million, or 7.2%, from the $66.4 million reported for the third quarter of 1997.
Operating expense as a percentage of revenue for the third quarter of 1998
increased to 24.4% from 24.2% for the third quarter of 1997. The majority of the
dollar increase was due to advertising and promotional expenses and to
distribution expense to support higher sales volumes. General and administrative
expense decreased as a percentage of revenue compared to the third quarter of
1997.
<PAGE> 10
Form 10-Q
Page 8
Interest expense for the third quarter of 1998 decreased by $0.9 million to $2.5
million from the comparable period in 1997, resulting from a reduction in
long-term debt throughout 1997.
The effective tax rate for the third quarter of 1998 was 32% compared with a tax
rate of 30% for the same period last year. The increase in the tax rate was
attributable to a decrease in the percentage of pre-tax income derived from the
Company's Puerto Rico based manufacturing operations.
Nine Months Ended September 25, 1998 Compared With Nine Months Ended
- --------------------------------------------------------------------
September 26, 1997
- ------------------
Revenue for the first nine months of 1998 was $599.7 million, an increase of
$42.1 million, or 7.5%, from the $557.6 million reported for the comparable
period in 1997.
Gross profit as a percentage of revenue for the first nine months of 1998 was
40.1%, compared with 39.5% for the comparable period in 1997. This improvement
was attributable to a higher proportion of international revenue, the
introduction of higher margin products and fewer off-price sales.
Operating expense for the first nine months of 1998 increased by $13.7 million
to $179.0 million from $165.4 million for the comparable period in 1997. The
increase was primarily attributable to marketing expenses, distribution and
selling expenses to support higher sales volumes and to product development
expenditures.
Interest expense for the first nine months of 1998 was $7.1 million, a decrease
of $4.5 million from the comparable period in 1997, due to a reduction in
long-term debt.
The effective tax rate for the first nine months of 1998 was 32%, compared with
a tax rate of 30% for the same period last year. This increase is due to the
same factor cited in the third quarter discussion above.
<PAGE> 11
Form 10-Q
Page 9
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Cash used by operations during the first nine months of 1998 was $69.0 million
compared with $2.3 million used during the same period in 1997. The use of cash
in 1998 was primarily due to accounts receivable increasing $99.6 million and
inventory increasing $46.6 million from year end 1997. The increases in the
first nine months of 1998 in receivables and inventory, compared to the first
nine months of 1997, were the result of lower beginning balances in 1998 versus
1997 and actual and anticipated increases in sales volume. Days sales
outstanding at September 25, 1998 and September 26, 1997 were 55 and 54 days,
respectively. Wholesale days sales outstanding decreased to 61 days at September
25, 1998 from 62 days at September 26, 1997. Inventory was $189.5 million at
September 25, 1998, compared with $142.6 million at December 31, 1997 and $168.8
million at September 26, 1997. Inventory turns were 3.4 times for the third
quarter of 1998, compared with 3.5 times for the third quarter of 1997.
During the first nine months of 1998, $13.7 million of cash was used in
investing activities, compared with $14.2 million used during the same period in
1997. Capital expenditures for the first nine months of 1998 were $12.7 million,
compared with $11.6 million for the same period in 1997. During the first nine
months of 1998, $3.1 million of cash was provided by financing activities.
During the first nine months of 1997, $39.1 million of cash was used, primarily
to prepay unsecured notes and Industrial Revenue Bonds.
The Company has available unsecured revolving and committed lines of credit as
sources of financing for its seasonal and other working capital requirements.
The Company's debt-to-capital ratio was 27.9% at September 25, 1998, compared
with 31.8% at December 31, 1997 and 43.0% at September 26, 1997.
On October 15, 1998, the Company announced that the Board of Directors
authorized the repurchase of up to one million shares of the Company's Class A
Common Stock, from time to time, in the discretion of management, and as market
and business conditions may warrant. The Company may use repurchased shares to
offset shares which may be issued under the Company's stock-based employee
incentive plans.
Management believes that the Company's capital needs for 1998 will be met
through its existing credit facilities and cash flows from operations without
the need for additional permanent financing. However, as discussed in an exhibit
to the Company's Form 10-K for the year ended December 31, 1997, entitled
"Cautionary Statements for Purposes of the Safe Harbor Provisions of the Private
Securities Litigation Reform Act of 1995", various risks and uncertainties could
cause the Company to need to raise additional capital through equity and/or debt
financing. The availability and terms of any such financing would be subject to
prevailing market conditions and other factors at that time.
NEW ACCOUNTING PRONOUNCEMENTS
- -----------------------------
During 1997, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 130 "Reporting Comprehensive
Income" and SFAS No. 131 "Disclosures about Segments of an Enterprise and
Related Information". In February 1998, the FASB issued SFAS No. 132,
"Employers' Disclosures about Pensions and other Postretirement Benefits". SFAS
No. 130 has been adopted as of January 1, 1998. SFAS No. 131 and No. 132 may
require additional disclosures in the Company's financial statements for the
year ending December 31, 1998.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". This statement is effective for the
Company's fiscal year beginning January 1, 2000. The Company has not determined
the effect on the consolidated financial statements of adopting SFAS No. 133.
<PAGE> 12
Form 10-Q
Page 10
YEAR 2000 READINESS DISCLOSURE
- ------------------------------
The Year 2000 issue is primarily the result of computer programs using two
digits rather than four to refer to a year. These programs may not properly
recognize a year that begins with "20" instead of "19". This could cause an
inability of computer programs to process transactions or engage in normal
business activities.
State Of Readiness. In the fourth quarter of 1996, the Company made a
- ------------------- preliminary assessment of the capabilities of its systems to
recognize and process dates properly in the Year 2000 and beyond. Based on the
findings of this assessment, the Company established a centralized project
office and formed a multi-disciplinary project team responsible for the
development, management and coordination of a global Year 2000 compliance
strategy and for building awareness and understanding of Year 2000 issues
throughout the Company.
The Company's Year 2000 compliance strategy includes several overlapping phases:
* INVENTORY involves identifying all hardware, software and external business
--------- partners (including customers, suppliers and service providers)
that could have a date-related impact on the following functional systems
and/or business operations: (i) enterprise business systems, which
encompass order processing, inventory and financial systems; (ii) technical
systems, including desktops, networks, voice and mid-range computers; (iii)
departmental hardware and software applications used by individual business
units; and (iv) facilities and other non-information technology systems.
* ANALYSIS involves, for each of the above inventory categories, identifying
-------- the relevant date on which the inventory would first encounter a
year 2000 date, determining Year 2000 compliance and assessing the level
and likelihood of potential risk and exposure to the Company of non-
compliance.
* CONVERSION involves developing and executing a plan to bring inventory into
---------- compliance.
* TESTING involves executing test routines on each inventory item for
------- compliance, both by itself and on an integrated basis with every
other system with which it shares information.
* IMPLEMENTATION involves putting compliant inventory back into the
-------------- production environment.
The Company has completed the inventory, analysis and conversion phases for its
enterprise business systems. Most of these systems were purchased as packaged
applications from external vendors. Completion of testing and implementation is
planned to occur in the first half of 1999. The Company has also completed
the inventory phase and much of the analysis phase for all other systems.
Conversion, testing and implementation of these systems are underway, with
attention being dedicated first to the most critical inventory. Completion of
testing and implementation is planned for the second quarter of 1999 for
technical systems and throughout 1999 for departmental applications and for
facilities and non-information technology systems.
In addition to requesting warranty compliance from its external business
partners, the Company is in the process of requesting information on their
business partners' Year 2000 compliance and contingency plans to assess the
potential risks of non-compliance and the resulting impact on the Company. This
process will continue throughout 1999. The Company is requesting that new
external business partners certify, in writing, that they are Year 2000
compliant. However, the Company will not be able to independently verify that
such external business partners are, in fact, Year 2000 compliant.
<PAGE> 13
Form 10-Q
Page 11
Costs. Total expenditures related to the Company's Year 2000 compliance efforts
- ----- are currently estimated to be approximately $5.0 million from 1997
through 2000. This estimate does not include the compensation of Company
employees and other similar internal costs, nor the time and costs that may be
incurred by the Company as a result of the failure of any third parties to
become Year 2000 compliant. These costs are being funded through operating cash
flows and are expected to be immaterial to the Company's operating results. This
estimate is based on the Company's current assessment of its Year 2000
compliance needs and is subject to change as the Company proceeds with its
compliance efforts. As of September 25, 1998, the Company has incurred
approximately $1.5 million relating to the Company's Year 2000 initiatives.
Risks. The Company presently does not anticipate that a material business
- ------ disruption will occur as a result of Year 2000 issues. However, to the
extent the Company is unable to resolve Year 2000 issues, the Company's
business, financial position and results of operations could be materially
adversely affected.
The Company believes that the greatest potential risk is the failure of its
external business partners to achieve Year 2000 compliance in a timely manner.
Among other things, the Company's principal leather suppliers and footwear
manufacturers could be unable to manufacture or deliver materials and products
in a timely manner, and customers may lose the capability to order products via
electronic data interchange (EDI).
The Company's Year 2000 compliance efforts are subject to additional risks,
including, among others: unexpected problems identified in testing results;
delays in system conversion or implementation; the Company's failure to
identify fully all Year 2000 dependencies in its systems and in the systems of
its external business partners; and the failure of parts of the global
infrastructure, including national banking systems, power, transportation
facilities, communications and governmental activities, to be fully functional
after 1999.
As the Company's testing and implementation of its enterprise business systems
and assessment of its technical systems and departmental applications are
underway, and as responses from many of its external business partners are
pending, the Company cannot fully and accurately quantify the impact of its
most reasonably likely worst case Year 2000 scenario at the present time.
Contingency Plans. The Company is in the process of developing Year 2000
- ------------------ contingency plans to address its most critical operational
areas at the Company level, and has developed Year 2000 contingency plans for
certain issues at the individual inventory level. The Company is also
communicating with its external business partners to determine their Year 2000
contingency plans and to coordinate, to the extent possible, with such plans. By
the close of the first quarter of 1999, the Company expects to more completely
define these issues, quantify their potential impact and complete the
development of contingency plans. However, the necessity, timing and cost of any
contingency plans must be evaluated on a case-by-case basis and may vary
considerably, and testing results and external business partner responses may
require changes in or additions to such plans. Furthermore, there may be no
practical alternative course of action available to the Company for some issues,
such as infrastructure failures.
The Company's statements of its expectations regarding the current status, date
of completion and costs of its Year 2000 compliance programs are forward-looking
statements. These statements are management's best estimates based on
information currently available. Therefore, they are inherently subject to risks
and uncertainties, including those described above, which could cause actual
results to differ and which may have a material adverse effect on the Company's
business, financial position, results of operations or capital or liquidity
needs.
<PAGE> 14
Form 10-Q
Page 12
Part II Other Information
- -------------------------
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit Description
------- -----------
27 Financial Data Schedule
(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 6, 1998 /s/ Geoffrey J. Hibner
---------------- ---------------------------
Geoffrey J. Hibner
Senior Vice President -
Finance and Administration
and Chief Financial Officer
Date: November 6, 1998 /s/ 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 25, 1998 AND THE
CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER
25, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-25-1998
<CASH> 19,341
<SECURITIES> 0
<RECEIVABLES> 182,361
<ALLOWANCES> 5,099
<INVENTORY> 189,492
<CURRENT-ASSETS> 410,551
<PP&E> 127,625
<DEPRECIATION> 74,007
<TOTAL-ASSETS> 489,395
<CURRENT-LIABILITIES> 124,686
<BONDS> 100,000
0
0
<COMMON> 115
<OTHER-SE> 258,700
<TOTAL-LIABILITY-AND-EQUITY> 489,395
<SALES> 599,656
<TOTAL-REVENUES> 599,656
<CGS> 358,971
<TOTAL-COSTS> 358,971
<OTHER-EXPENSES> 1,264
<LOSS-PROVISION> 1,784
<INTEREST-EXPENSE> 7,061
<INCOME-PRETAX> 56,413
<INCOME-TAX> 18,052
<INCOME-CONTINUING> 38,361
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 38,361
<EPS-PRIMARY> 3.35
<EPS-DILUTED> 3.24
</TABLE>
