The Timberland Company reported first quarter net income of $31.1 million and diluted earnings per share (EPS) of $0.87, compared with first quarter 2003 net income of $19.3 million and diluted EPS of $0.53.
First quarter revenue increased 18.7% to $321.8 million, driven by strong gains across global markets. International results (+28.7% or +14.6% in constant dollars) reflected double-digit constant dollar sales gains in Europe and Asia and continued progress in key markets such as Canada. U.S. revenue growth (+9.0%) benefited from strong wholesale results (+7.1%) and continued gains in Timberland's consumer direct business (+15.1% on a 6.1% comparable store sales increase). Overall revenue growth benefited from favorable foreign exchange rate changes — which added $18.9 million (or 7.0%) to first quarter revenue – and from additional selling days in Q1 2004, compared with the prior year.
Global footwear revenue expanded 23.6% to $239.4 million, driven by strong growth in men's and women's casual, boots and kids' categories. Global apparel and accessories revenue grew 7.6% to $79.3 million, driven by gains in Asian and U.S. Timberland(R) brand apparel, which offset constant dollar declines in European and U.S. Timberland PRO(R) series apparel.
Operating profit for the quarter increased 61.7% to $47.8 million, and operating margin rose 3.9 percentage points to 14.8%. Profit gains reflected strong revenue growth and significant improvement in gross margin, which benefited from favorable product mix, lower product related costs and favorable foreign exchange rate changes. For the quarter, foreign exchange rate changes contributed approximately $12.8 million to operating profit, which was leveraged to support continued investments against strategic priorities, including international retail expansion, product development initiatives and global brand building efforts.
EPS for the quarter expanded 64.2% to $0.87, reflecting profit gains and continued benefits from share repurchases. In the first quarter, the Company bought back 333 thousand shares at a total cost of $20.1 million. The Company currently has 4.3 million shares remaining under existing share repurchase programs.
Timberland ended the quarter with $160.6 million in cash and no debt outstanding while driving improvements in annual inventory turns and receivables management. Timberland's annualized return on capital reached 32.1%.
Jeffrey B. Swartz, Timberland's President and Chief Executive Officer, stated, “Timberland delivered record revenue and profit results in the first quarter, driven by strong performance across global markets and continued benefits from our focus on supply chain execution. In the United States, our focus on driving footwear innovation across our portfolio, combined with strong performance in Timberland's consumer direct business, enabled us to deliver solid revenue gains in a competitive retail marketplace. Timberland's international business also posted strong results, reflecting double-digit constant dollar sales gains in Europe, Asia and Canada as we continue to benefit from efforts to enhance our premium integrated brand positioning in those regions.”
“Overall, we are pleased to have delivered strong financial results in the first quarter. We believe that we are on track for solid performance in 2004 and are targeting mid to high single-digit revenue growth for the balance of this year. We remain committed to delivering solid revenue growth, double-digit profit gains and strong cash flow in 2004 and beyond and believe that the strategies we are pursuing will enable us to continue to deliver strong financial performance while capturing the great potential that we see for the Timberland(R) brand.”
THE TIMBERLAND COMPANY CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Amounts in Thousands, Except Per Share Data) (Unaudited) For the Three Months Ended April 2, March 28, 2004 2003 Revenue $321,777 $270,997 Cost of goods sold 155,326 144,769 Gross profit 166,451 126,228 Operating expense Selling 95,352 77,552 General and administrative 23,341 19,149 Total operating expense 118,693 96,701 Operating income 47,758 29,527 Other expense (income) Interest expense 233 217 Other, net (760) (428) Total other (income) (527) (211) Income before income taxes 48,285 29,738 Provision for income taxes 17,141 10,408 Net income $31,144 $19,330 Earnings per share Basic $0.89 $0.54 Diluted $0.87 $0.53