The Timberland Company first quarter revenue declined 12.9% to $296.6 million, reflecting declines in Timberland brand apparel, in part due to the transition to a licensing model for the company’s North American wholesale apparel business, and declines in Timberland branded casual footwear, partially offset by continued growth in SmartWool brand products.


Foreign exchange rate changes decreased Q1 revenue by approximately $22 million, or 6.4%, due to the strengthening of the U.S. dollar.

 

First quarter 2009 net income was $15.9 million, or 27 cents per share, compared to net income of $18.0 million, or 30 cents per share, in the year-ago period.

 

North America revenue declined 13.0% to $119.9 million, reflecting soft consumer spending in the U.S.  Europe revenue decreased 15.0% to $140.0 million but was down only 1.7% on a constant dollar basis. European results reflect declines in the apparel and casual footwear businesses, partially offset by strong sales of men’s and women’s boots. Asia revenue decreased 2.9% to $36.8 million, and decreased 6.2% on a constant dollar basis driven by declines in the apparel business and the casual footwear business, partially offset by strengthening of the men’s boots business.

 

Global footwear revenue decreased 10.5% to $211.6 million, primarily due to declines in the casual footwear business, which offset strength in the boots business in the European and Asian markets. Apparel and accessories revenue decreased 19.7% to $78.7 million, due to softness in the European market as well as the company’s transition to a licensing model for its North American wholesale apparel business.


Global wholesale revenue decreased 14.4% to $218.6 million. Worldwide consumer direct revenue decreased 8.1% to $78.0 million, reflecting the adverse impact of a stronger U.S. dollar and a difficult worldwide retail environment, especially in North America.

 

Operating income for the first quarter of 2009 was $18.2 million, compared to $23.2 million in the prior year period. The 2009 first quarter included a $0.9 million non-cash intangible asset impairment charge. In the quarter, foreign exchange rate changes decreased operating income by approximately $1 million due to the strengthening of the U.S. dollar.


In the first quarter of 2009, the effective tax rate was 11.0% compared to 39.0% in the first quarter of 2008. During the first quarter of 2009, the company recorded a net non-cash tax benefit of $6.4 million, which was reflected in income tax expense. The benefit resulted from the reversal of tax reserves for the completion of certain tax audits for our 2006 to 2007 tax years.


In connection with its stock buyback program, Timberland repurchased approximately 1 million shares in the first quarter of 2009 at a total cost of $10.0 million.


Timberland ended the quarter with $159.2 million in cash and no debt. Inventory at quarter end was $162.8 million, down 9.7% versus 2008 first-quarter levels, reflecting the company’s focus on maintaining clean inventory levels in the face of challenging market conditions. Accounts receivable decreased 14.6% to $172.3 million, compared to the prior year.

The company anticipates that 2009 will continue to be challenging due to the uncertainty around consumer spending patterns and the financial health of the retail industry. Given the volatile nature of current economic conditions, the company believes there is not sufficient visibility to set expectations for the performance of the business.


Jeffrey B. Swartz, Timberland’s President and CEO, stated, “As 2009 begins to unfold, we are seeing consumers becoming more selective in their purchases, and turning increasingly to trusted authentic brands like Timberland. The Timberland brand heritage, known for quality, durability and values-coupled with our long held financial conservatism-provides a strong foundation that gives us stability in this difficult economic environment. This foundation allows us to continue to stay committed to our brand-invigorating strategies and positions us well for growth when the economy recovers.”



































































































































































































THE TIMBERLAND COMPANY
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Thousands, Except Per Share Data)
   
For the Quarter Ended
April 3, 2009 March 28, 2008
Revenue $296,648 $340,402
Cost of goods sold 159,959 182,798
 
Gross profit 136,689 157,604
 
Operating expense
Selling 92,268 106,122
General and administrative 25,417 27,688
Impairment of intangible asset 925 –
Restructuring and related costs (104) 552
Total operating expense 118,506 134,362
 
Operating income 18,183 23,242
 

Other income/(expense)


Interest income/(expense), net

319 568
Other income/(expense), net (663) 5,762
Total other income/(expense), net (344) 6,330
 
Income before provision for income taxes 17,839 29,572

 


 

Provision for income taxes

1,962


11,533


 


 

Net income

$15,877


$18,039

 
Earnings per share
Basic $0.28 $0.30
Diluted $0.27 $0.30