Timberland Revenues Rise 2.5% on Growth Overseas

 

Net income jumped 38.1% to  $52.2 million, or diluted earnings per share of $1.00, compared to $37.8 million and diluted earnings per share of 68 cents for the year earlier quarter.

Foreign exchange rate changes decreased third-quarter 2010 revenue by approximately $11.4 million, or 2.7%.

Europe revenue increased 5.0% to $204.1 million versus 2009 third-quarter levels, and increased 12.3% on a constant dollar basis. Growth in Scandinavia, distributor markets, and Germany was partially offset by unfavorable foreign exchange rates as well as declines in the Benelux region and Italy. North America revenue declined 3.6% to $181.5 million compared to the prior year period, impacted by decreased sales of wholesale footwear. Asia revenue increased 19.7% to $46.7 million compared to the prior year period, and increased 13.3% on a constant dollar basis. This increase was driven by continued expansion in China and Taiwan as well as favorable foreign exchange rates compared to the prior year period.
    
Global footwear revenue was essentially flat at $319.8 million compared to the third quarter of 2009. Apparel and accessories revenue increased 11.1% to $106.4 million compared to the prior year period, due to increased sales of Timberland brand apparel in Asia and SmartWool accessories in North America. Royalty and other revenue declined 9.8% to $6.1 million compared to the prior year period.
   
Global wholesale revenue was up 1.9% to $348.7 million compared to the prior year period, reflecting growth in Europe and Asia, partially offset by declines in North America. Worldwide consumer direct revenue increased 5.2% compared to the prior year period, driven by comparable store sales growth in all three regions and the net addition of 8 new retail stores since the third quarter of 2009. Global retail comparable store sales improved 7.2%. The company had 225 stores, shops, and outlets worldwide at the end of the third quarter of 2010 compared to 217 at the end of the third quarter of 2009.
   
Operating income for the third quarter of 2010 increased 13.8% to $66.5 million compared to operating income of $58.5 million in the prior year period. The improvement was driven by a significant improvement in gross margin across all regions due to fewer and more profitable closeout sales as well as favorable mix.
   
In the third quarter of 2010, the effective tax rate was 27.6% compared to 38.2% in the third quarter of 2009.
  
In connection with its stock buyback program, the company repurchased approximately 1.7 million shares in the third quarter of 2010 at a cost of approximately $30.0 million.
   
The company ended the quarter with $108.8 million in cash and no debt. Accounts receivable was flat at $269.0 million compared to the prior year period. Inventory at quarter end was $239.8 million, up 18.9% versus 2009 third-quarter levels.

Jeffrey B. Swartz, Timberland’s President and Chief Executive Officer, stated, “We are pleased to report revenue growth and significant earnings improvement for the third quarter. Our 2010 financial results to date are a clear indication that our focused strategic investments to strengthen the Timberland brand and business are paying off. We see concrete evidence across our portfolio from strong retail comps and continued wholesale growth to significant improvement in the sales of our outdoor and Earthkeepers collections, supported by our largest-ever marketing campaign, Nature Needs Heroes. We continue to position Timberland as a brand that engages consumers, demonstrates environmental leadership and delivers superior returns for our shareholders.” 

THE TIMBERLAND COMPANY
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Thousands, Except Per Share Data)
	For the Quarter Ended				For the Nine Months Ended
	October 1, 2010		October 2, 2009		October 1, 2010		October 2, 2009
Revenue	$432,344		$421,766		$938,340		$898,116
Cost of goods sold	225,775		227,254		480,280		491,407
Gross profit	206,569		194,512		458,060		406,709
Operating expense
Selling	106,637		107,314		285,457		284,609
General and administrative	33,397		28,805		89,738		81,118
Impairment of goodwill	–		–		5,395		–
Impairment of intangible asset	–		–		7,854		925
Gain on termination of licensing agreements	–		–		(3,000)		–
Restructuring	–		(88)		–		(209)
Total operating expense	140,034		136,031		385,444		366,443
Operating income	66,535		58,481		72,616		40,266
Other income/(expense), net
Interest, net	(49)		(11)		(109)		490
Other, net	5,603		2,626		5,739		3,629
Total other income/(expense), net	5,554		2,615		5,630		4,119
Income before income taxes	72,089		61,096		78,246		44,385
Income tax provision	19,894		23,339		23,756		9,995
Net income	$52,195		$37,757		$54,490		$34,390
Earnings per share
Basic	$1.01		$0.68		$1.03		$0.61
Diluted	$1.00		$0.68		$1.02		$0.61