Declines in Timberland casual footwear business

01 May '09

4 min read

The Timberland Company reported first-quarter 2009 net income of $15.9 million and earnings per share of $0.27. These results compare to first-quarter 2008 net income of $18.0 million and earnings per share of $0.30.

First-Quarter 2009 Results Summary:
Revenue declined 12.9% to $296.6 million for the quarter, 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 first-quarter 2009 revenue by approximately $22 million, or 6.4%, due to the strengthening of the U.S. dollar.

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.

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