The Timberland Company reported fourth-quarter earnings vaulted 69.4% to $22.3 million, or 40 cents a share, from $13.1 million, or 23 cents, a year ago. Revenue eased 0.7% to $387.8 million from $390.6 million a year ago and were down 3.9% on a constant dollar basis, reflecting declines in the boots business partially offset by strong growth in the SmartWool brand and performance footwear.
Foreign exchange rate changes increased fourth-quarter 2009 revenue by approximately $12.3 million due to the weakening of the U.S. dollar relative to the Euro, Japanese Yen, and British Pound.
North America revenue decreased 6.5% to $215.7 million compared to the prior year period, due to a decline in the boots business partially offset by growth in Timberland brand apparel, SmartWool® apparel and accessories, and men’s performance footwear. Europe revenue increased 17.1% to $128.4 million versus 2008 fourth-quarter levels, and increased 8.3% on a constant dollar basis. European results reflect benefits from foreign exchange, continued strength in the boots business, growth in all categories of women’s footwear, and the net addition of 9 retail stores since the fourth quarter of 2008. Asia revenue decreased 13.4% to $43.6 million compared to the prior year period, and decreased 17.6% on a constant dollar basis, driven by declines in boots, casual footwear, apparel, and the net closure of 8 retail stores since the fourth quarter of 2008.
Global footwear revenue decreased 2.8% to $273.4 million from the fourth quarter of 2008, as declines in the boots business in North America and Asia offset growth in the European boots business. Apparel and accessories revenue increased 2.9% to $106.8 million compared to the prior year period, due to solid growth in the SmartWool apparel and accessories businesses.
Worldwide consumer direct revenue increased 3.7% to $138.2 million from the fourth quarter of 2008, driven by an improvement in apparel and casual footwear, partially offset by a decline in boots. Global wholesale revenue was down 3.0% to $249.5 million compared to the prior year period, primarily due to a decline in the kids boots business and Timberland® apparel.
Operating income for the fourth quarter of 2009 was $37.2 million compared to operating income of $23.1 million in the prior year period. This was driven by an increase in gross margin primarily due to supply chain cost favorability as well as benefits from foreign exchange, partially offset by increased operating expenses due to higher incentive-based compensation costs.
In the fourth quarter of 2009 the effective tax rate was 39.9% compared to 48.9% in the fourth quarter of 2008. The tax rate for the full-year 2009 was 30.4% compared to 44.1% in 2008, due to the release of certain tax reserves.
In connection with its stock buyback program, the company repurchased approximately 872 thousand shares in the fourth quarter of 2009 at a cost of approximately $15 million.
The company ended the quarter with $289.8 million in cash and no debt. Accounts receivable decreased 11.6% to $149.2 million compared to the prior year period, due to strong collections in all regions. Inventory at quarter end was $158.5 million, down 11.8% versus 2008 fourth-quarter levels, reflecting the company’s continued focus on working capital.
For the full-year 2009, Timberland reported net income of $56.6 million and diluted EPS of $1.01. These results compare to full-year 2008 net income of $42.9 million and diluted EPS of $0.73.
Jeffrey B. Swartz, Timberland’s President and Chief Executive Officer, stated, “In 2009 we saw solid results in our classic boot business in Europe, substantial growth in our SmartWool brand and significant improvement during the fourth quarter in the performance footwear category, all indicative of Timberland’s strength as an authentic outdoor brand. During these difficult economic times we have worked hard to continue making great product, build our relationship with consumers around the world and maintain a strong balance sheet, all of which we believe leave us well-positioned to capture the long-term potential of the Timberland brand.”
| For the Quarter Ended | For the Year Ended | |||||||||
| December 31, 2009 | December 31, 2008 | December 31, 2009 | December 31, 2008 | |||||||
| Revenue | $387,760 | $390,626 | $1,285,876 | $1,364,550 | ||||||
| Cost of goods sold | 191,547 | 216,708 | 682,954 | 743,817 | ||||||
| Gross profit | 196,213 | 173,918 | 602,922 | 620,733 | ||||||
| Operating expense | ||||||||||
| Selling | 123,378 | 122,191 | 407,987 | 437,730 | ||||||
| General and administrative | 35,654 | 29,475 | 116,772 | 113,011 | ||||||
| Litigation settlement | – | (2,630) | – | (2,630) | ||||||
| Impairment of intangible asset | – | 1,884 | 925 | 2,061 | ||||||
| Restructuring and related costs | (27) | (129) | (236) | 925 | ||||||
| Total operating expense | 159,005 | 150,791 | 525,448 | 551,097 | ||||||
| Operating income | 37,208 | 23,127 | 77,474 | 69,636 | ||||||
| Other income/(expense), net | ||||||||||
| Interest income/(expense), net | (85) | 39 | 405 | 1,719 | ||||||
| Other income/(expense), net | (123) | 2,526 | 3,506 | 5,455 | ||||||
| Total other income/(expense), net | (208) | 2,565 | 3,911 | 7,174 | ||||||
| Income before provision for income taxes | 37,000 | 25,692 | 81,385 | 76,810 | ||||||
Provision for income taxes | 14,746 | 12,554 | 24,741 | 33,904 | ||||||
Net income | $22,254 | $13,138 | $56,644 | $42,906 | ||||||
| Earnings per share | ||||||||||
| Basic | $0.40 | $0.23 | $1.01 | $0.73 | ||||||
| Diluted | $0.40 | $0.23 | ||||||||
