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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993 COMMISSION FILE NUMBER 1-9548
THE TIMBERLAND COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 02-0312554
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11 MERRILL INDUSTRIAL DRIVE
HAMPTON, NEW HAMPSHIRE 03842-5050
(Address of principal executive office) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE, IS (603) 926-1600
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Class A Common Stock, par value $.01 per share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of Class A Common Stock of the Registrant held
by non-affiliates of the Registrant was approximately $259,148,765 on March 15,
1994. For purposes of the foregoing sentence the term "affiliate" includes
each director and executive officer of the Registrant. See Item 12 of this
Form 10-K.
7,616,579 shares of Class A Common Stock and 3,237,121 shares of Class B
Common Stock of the Registrant were outstanding on March 15, 1994.
DOCUMENTS INCORPORATED BY REFERENCE:
Annual Report to security holders for the fiscal year ended December 31,
1993 (Part I, Item 1 regarding foreign and domestic sales; Part II, Items 5, 6,
7 and 8) and Proxy Statement for the 1994 Annual Meeting of Stockholders (Part
III).
The list of Exhibits appears on page 15 of this report.
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PART I
ITEM 1. BUSINESS
OVERVIEW
The Timberland Company was incorporated in Delaware on December 20,
1978, and is the successor to Abington Shoe Company, which was incorporated in
Massachusetts in 1933 (The Timberland Company, together with its subsidiaries,
is referred to herein as "Timberland" or the "Company," unless the context
indicates otherwise). The Company designs, develops, manufactures and markets
men's and women's premium quality footwear, apparel and accessories under the
Timberland [Registered]1 brand. These products are sold primarily through
better-grade department stores and other retail stores in the United States and
in more than 50 countries worldwide. In addition, the Company sells its
products through specialty stores devoted exclusively to Timberland
[Registered] products which are operated or licensed by it in the United
States, Europe, South America, Mexico, Australia, New Zealand and Asia.
Timberland also sells its products through Company-operated factory outlet
stores in the United States.
The Company has built its product lines to reflect classic rugged styles
which provide durability and quality. In marketing its products, the Company
has consistently stressed the workmanship and detailing incorporated into its
products, which are designed to provide lasting protection from the elements.
During 1993, the Company implemented a strategic decision to attempt to
lead the market by pre-emptively reducing prices for certain of its products
and to improve the price/value proposition for the consumer. By continuing to
improve its manufacturing and logistics process, the Company believes that it
will be able to more efficiently respond to consumer demand, to provide high
quality products at competitive prices and to increase its sales. The Company
increased its sales from $291.4 million in 1992 to $418.9 million in 1993.
CURRENT PRODUCTS
The Company's two major product categories are footwear (shoes and boots)
and apparel and accessories. During 1993, net sales attributable to the
footwear category totaled $349.5 million, as compared to $242.6 million and
$188.3 million in 1992 and 1991, respectively. During 1993, net sales
attributable to the apparel and accessories category totaled $69.4 million, as
compared to $48.8 million and $37.8 million in 1992 and 1991, respectively.
During 1993, the Company did not have sales to a single customer which equaled
or exceeded 10% of the Company's total net sales.
FOOTWEAR
Timberland offers men's and women's shoes and sandals featuring hand-sewn
construction, premium waterproof leather or water resistant fabric uppers and
selected use of waterproof fabric bootie construction. The Company's shoes and
sandals are based on classic styling and are designed for durability. In 1993,
the Company introduced a variety of new boat shoes, a variety
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1 TIMBERLAND is a registered trademark of The Timberland Company.
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of new styles in its waterproof Weatherbuck Collection and a new turf sandal,
as well as other new sandal styles.
In 1973, Timberland's predecessor, Abington Shoe Company, produced the
first pair of waterproof "mini-buck" leather boots under the Timberland
[Registered] brand. The Company now offers a variety of styles of boots for
men and women, including hikers and lightweight trail boots. In 1993, the
Company introduced a variety of new lightweight trail boots and bush hikers,
including an outdoor, multipurpose boot featuring a stretch waterproof fabric
internal fit system.
APPAREL AND ACCESSORIES
Timberland offers premium-quality apparel, consisting of rugged outerwear,
sweaters, shirts, pants, shorts and skirts. Incorporated into many of such
products are premium waterproof leathers, waterproof fabric, rust-proof
hardware, canvas, denim and other quality performance materials. During 1993,
in response to consumer demand, the Company redesigned its women's line of
apparel to better coordinate its sportswear and outerwear. The Company also
continued to offer its men's line of rugged apparel, with an emphasis on
performance-wear designed to protect against the elements.
Timberland's accessories collection includes luggage, briefcases,
wallets, handbags, belts, caps, hats, gloves and socks. For 1993,
introductions in the accessories collection included a variety of new styles in
each of its lines.
TIMBERLAND'S STRATEGY
During 1993, the Company pursued its strategy for growth by capitalizing
on its core business and continuing to expand its domestic and international
presence through building increased consumer awareness of the Timberland
[Registered] brand. Timberland believes that its integrated brand strategy,
which is to showcase the Timberland [Registered] brand as an integrated source
of footwear, apparel and accessories, is best carried out in specialty stores
and in concept shops or corners. Specialty stores are stores owned or licensed
by the Company which sell only Timberland [Registered] products. Concept shops
or corners are areas of third-party stores dedicated exclusively to the
presentation and merchandising of Timberland [Registered] products.
The Company continued to promote consumer demand for its products in 1993
through advertising campaigns which emphasized the workmanship and
detailing of its footwear, apparel and accessories and the protection which
these products offer against the elements. Timberland believes that the
premium quality, durability, functionality and classic styling of its products,
combined with its reputation for high-performance products and increased
consumer awareness of the Timberland [Registered] brand, will continue to
increase consumer demand for its products. Advertising through print and
television campaigns is used to present Timberland as an integrated,
world-class source of quality footwear, apparel and accessories for the rugged
outdoors. The Company reinforces this advertising with a variety of in-store
promotions, point-of-purchase displays and a cooperative advertising program
with its retailers, as well as retail sales clerk training and other incentive
programs and promotional campaigns.
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In response to consumers' heightened sensitivity to maximum value, the
Company is also exploring new ways in which it can improve the price/value
proposition to its customers. The Company believes that the continuing
implementation of its modular manufacturing program will assist in providing
the consumer with the highest quality footwear at the best prices (see
"Business -- Manufacturing"). During 1993, the Company lowered its prices on a
variety of styles in a number of product lines. The Company is committed to
maintaining a solid price/value relationship for its consumers.
The Company intends to continue its growth through a combination of
internal development and the development of business relationships with
independent manufacturers, suppliers, distributors and retailers capable of
reinforcing the Company's image and standards. The Company may, from time to
time, consider the possibility of acquiring other companies which produce or
distribute quality footwear, apparel, accessories or related products which
complement the Company's product lines.
DISTRIBUTION
U.S. OPERATIONS
In 1993, 1992 and 1991, 71%, 63%, and 59%, respectively, of the Company's
net sales were generated in the United States. The Company's strategy is to
distribute its products through specialty stores and through retailers who
reinforce the Timberland image of quality, performance and service. The
Company's customer accounts within the United States range from better-grade
department stores and retail stores to sporting goods stores, marinas and
specialty retailers. These accounts are serviced through a combination of
field and corporate-based sales teams.
The Company's principal showroom in the United States for wholesale
customers is located on Fifth Avenue in New York City. Its regional showrooms
are located in Chicago, Dallas, Atlanta, Denver and Seattle. The showrooms
located in Denver and Seattle were opened in 1993.
In 1993, the Company's domestic retail operations accounted for 8% of
the net sales of the Company compared to 10% in 1992 and 11% in 1991. The
Company operates nine Timberland [Registered] specialty stores located in
Atlanta; Boston; Chicago; Dallas; Newport, Rhode Island; New York City; San
Francisco; Sausalito, California; and Washington, D.C. The Company opened the
San Francisco, Dallas and Chicago specialty stores in 1993 and opened the
specialty store in Atlanta in February 1994. The specialty stores showcase the
Timberland [Registered] brand as an integrated source of footwear, apparel and
accessories. These stores also provide sales and consumer-trend information
which assists the Company in developing its marketing strategies, including
point-of-purchase materials. In addition, the training and customer service
programs established in the Company's specialty stores serve as a model which
may be adopted by the Company's other retail accounts. The Company also
operates ten factory outlet stores located in the United States, which
typically sell factory-second and close-out product offerings. The Company
carries material amounts of inventory in order to meet delivery and any other
requirements of its customers.
The Company established distribution facilities in Wilmington,
Massachusetts in 1993 and in Danville, Kentucky in early 1994. Currently,
orders are filled primarily from the Company's
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Hampton, New Hampshire distribution center and the Wilmington center. The
Company plans to make the Danville facility another principal distribution
center in 1994. The Company's long-term distribution strategy is to centralize
its points of distribution in order to cut costs and increase responsiveness to
consumer demand.
INTERNATIONAL
In 1993, international sales accounted for 29% of Timberland's net
sales compared to 37% in 1992 and 41% in 1991. Timberland sells its products
internationally through distributors, commission agents and seven subsidiaries.
The Company's subsidiaries located in England, France, Germany, Spain,
Austria, Australia and New Zealand provide sales, administrative and, in
certain instances, warehousing support for the sale of Timberland [Registered]
products to retailers in their respective countries, and in certain instances,
to distributors and commission agents in other countries.
Internationally, retail distribution of the Company's products occurs
through better-grade department stores, retail stores and specialty stores.
Timberland operates international specialty stores in London; Munich;
Dusseldorf; Vienna; Paris; Lyon, France; Sydney, Australia and Auckland, New
Zealand. Additionally, the Company grants licenses to operate international
specialty stores to certain third parties.
In December 1993, the Company entered into a nonbinding Memorandum of
Understanding with its Italian distributor outlining the contemplated
termination of the distributor's distribution rights and acquisition of certain
of its assets. Net sales to this distributor represented 4% of the Company's
consolidated revenues in 1993. Timberland intends to assume the distribution
of its own products in Italy, effective on the termination date.
Reference is hereby made to the information set forth in footnote 9,
entitled "Industry Segment and Geographical Area Information," appearing on
page 21 of the Company's 1993 Annual Report to Stockholders, which information
is incorporated herein by reference.
ADVERTISING AND MARKETING
The Company designs its domestic advertising campaigns to emphasize quality,
lasting protection from the elements and classic rugged style, placing
advertisements in popular, fashion and sports-focused national periodicals and
newspapers. The Company uses its retail specialty stores and concept shops as
effective vehicles to promote its integrated brand strategy, by showcasing an
integrated presentation of Timberland [Registered] products in settings designed
to complement the Timberland style. In an effort to broaden consumer exposure
during 1993, Timberland aired television advertisements in an expanded number
of major United States metropolitan areas. In 1993, the Company's print
advertising continued to win national awards. All advertising of the Company's
product lines is designed to reflect Timberland's basic theme of extending the
rugged, functional qualities of Timberland's original boots into a broad range
of footwear, apparel and accessories products, as well as to express the
Company's position on certain important social issues.
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Internationally, the Company participates in a variety of direct and
cooperative advertising efforts. This advertising uses and adapts for the
international markets many of the same promotional themes that are used in the
United States.
During 1993, Timberland was again the primary sponsor of the annual
1,049-mile Iditarod [Registered]2 sled dog race from Anchorage to Nome, Alaska
and continued its "Tough Enough" for The Last Great Race on Earth [Registered]
2 promotional program to build upon its association with this unique event.
The Company outfitted five Iditarod mushers entirely in Timberland [Registered]
outerwear, apparel and footwear, including five-time Iditarod winner Rick
Swenson. Through its sponsorship of the Iditarod [Registered] race and similar
events, the Company seeks to promote the Timberland image of superior product
quality and performance beyond its traditional advertising and promotional
efforts. The Company also sponsors, at times in conjunction with its
international distributors and subsidiaries, individual sailors and sailing
teams from various countries, including the United States and New Zealand.
In 1993, the Company continued to publish Elements[Registered]3, a
color print magazine, which features articles by prominent writers about their
outdoor experiences. The topics covered include sailing, hiking and the
Iditarod [Registered] sled dog race. Elements [Registered] is distributed
biannually to the Company's preferred domestic and international consumers.
SEASONALITY
In 1993, as has traditionally been the case, the Company's sales were
higher in the last two quarters of the year than in the first two quarters.
The Company expects this sales trend to continue in 1994.
BACKLOG
At December 31, 1993, Timberland's backlog of orders from its customers
was approximately $69 million compared to $60 million at December 31, 1992.
While all orders in the backlog are subject to cancellation by the customers,
the Company expects that the majority of such orders will be filled in 1994.
The Company does not believe that its backlog of orders at year end is
representative of the orders which will be filled during 1994, due to the shift
towards "at once" orders being adopted by many retailers.
MANUFACTURING
The Company manufactures the majority of its footwear products in its
own factories. The Company also uses independent manufacturers to provide the
additional production capacity and flexibility to meet increased consumer
demand. During 1993, approximately 70% of the Company's footwear products were
manufactured in the Company's leased facilities located in
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2 IDITAROD and THE LAST GREAT RACE ON EARTH are registered trademarks of the
Iditarod Trail Committee, Inc.
3 ELEMENTS is a registered trademark of The Timberland Company.
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Tennessee, North Carolina, Puerto Rico and the Dominican Republic, compared to
79% during 1992. The remainder of the Company's footwear unit volume was
sourced from manufacturers in the Far East, Europe and North America.
The Company sources all of its apparel and accessories from independent
manufacturers located in Europe, the Far East and North America. As a result,
the apparel and accessories operations of the Company are substantially
dependent upon foreign operations with unaffiliated parties and are subject to
the usual risks of doing business abroad. These risks potentially include
political or labor disturbances, expropriation, acts of war and other similar
events.
The Company believes that, because it manufactures the majority of its
footwear in the United States, the Company has less exposure to potential U.S.
import restrictions and duties than do many of its competitors which import the
majority of their products from the Far East, South America and Europe. With
respect to the Company's operations in the Dominican Republic, the Company is
subject to the usual risks of doing business abroad.
During 1993, the Company began implementation of certain cost savings
programs, such as modular manufacturing, to enhance materials management and
reduce manufacturing cycle times. The modular manufacturing program aims to
improve quality, productivity and asset utilization by rearranging certain
manufacturing facilities and functions. Another expected benefit of modular
manufacturing is the reduction of the amount of inventory that the Company must
carry to meet delivery and other requirements of its customers.
RAW MATERIALS
The Company purchases its raw materials from a number of domestic and
foreign sources. The Company has three suppliers located in the United States
that, together, supply more than 70% of the Company's requirements for leather.
The Company has no reason to believe that leather will not continue to be
available from these or alternative sources.
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TRADEMARKS AND TRADE NAMES; PATENTS; RESEARCH & DEVELOPMENT
The Company's principal trademarks and trade names are Timberland[Registered]
and the Timberland stylized tree design logo [Logo]4, which have been
registered in the United States and in certain foreign countries. Other
Company trademarks are HydroTech[Registered]4, Elements[Registered],
Weathergear[Registered]4 and More Quality Than You May Ever Need[Registered]4.
The Company regards these trademarks and trade names as valuable assets and
believes that they are important factors in marketing its products,
particularly in the case of the Timberland[Registered] brand which is essential
to the Company's integrated brand strategy. It is the policy of the Company to
defend its trademarks and trade names against infringement to the fullest
extent practicable under the laws of the United States and other countries. In
addition, the Company seeks to protect and defend vigorously its patents,
designs, proprietary rights and copyrights under applicable laws.
The Company conducts research, design and development efforts for its
footwear, apparel and accessories. In connection with these efforts, the
Company continues to explore innovative ways to bring new products from the
design stage to the marketplace in the most expedient manner possible. While
Timberland continues to be a leader in product innovation, its expenses
relating to research, design and development have not represented a material
expenditure relative to other expenses of the Company.
Timberland tests a number of its products under actual field conditions
in order to evaluate performance characteristics. The Company receives product
evaluation information from a broad range of users, frequently referred to as
"Team Timberland." These users include mushers who participate in the
Iditarod[Registered] sled dog race and a number of world class sailors.
Through these and other relationships, Timberland is able to measure the
performance of its products in the outdoors and to obtain ideas for improving
its products' performance based upon the experience and competitive needs of
these athletes.
COMPETITION
The Company does not believe that it has any major competitors who offer a
full complement of products which directly compete with Timberland's integrated
brand. The Company does, however, have a variety of separate major competitors
in sales of its separate lines of footwear, apparel and accessories.
The Company's footwear lines are marketed in a highly competitive
environment, and the footwear industry is subject to rapid changes in consumer
preference. Although the footwear industry is fragmented to a great degree,
many of the Company's competitors are larger and have substantially greater
resources than the Company.
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4 [Logo], HYDROTECH, WEATHERGEAR and MORE QUALITY THAN YOU MAY EVER
NEED are registered trademarks of The Timberland Company.
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The Company's major competitors for its boot products are located
principally in the United States. The Company has at least four major
competitors in classic boot sales, at least two major competitors in sport boot
sales and at least seven major competitors in hiking boot sales.
In the boat shoe market, the Company faces competition from at least three
companies located in the United States. Other casual shoes produced by the
Company face competition from at least four other primary competitors in the
United States.
Internationally, the Company faces competition from many manufacturers of
footwear. As in the United States, some of these manufacturers attempt to copy
the Company's styles.
Each of the Company's lines of men's and women's apparel faces competition
from at least four major apparel companies, the majority of which are located
in the United States. Timberland's accessories face strong competition
primarily from three companies in the United States.
Product performance and quality, including continuing technological
improvements, product identity through marketing and promotion, and product
design, styling and pricing are all important elements of competition in the
footwear, apparel and accessories markets served by the Company. Although
changing fashion trends generally affect demand for particular footwear,
apparel and accessories products, the Company believes that demand for its
products is less sensitive to changing trends in fashion because its products
are designed primarily for functionality and performance.
ENVIRONMENTAL MATTERS
Compliance with federal, state and local provisions which have been enacted
or adopted regulating the discharge of materials into the environment, or
otherwise relating to the protection of the environment, have not had, nor are
they expected to have, any material effect on the capital expenditures,
earnings or competitive position of the Company.
EMPLOYEES
At December 31, 1993, the Company had approximately 6,700 employees
worldwide. Management considers its employee relations to be good. None of
the Company's employees is represented by a labor union, and the Company has
never suffered a material interruption of business caused by labor disputes.
ITEM 2. PROPERTIES
The Company owns property in Hampton, New Hampshire, currently housing
its principal executive offices. This facility is used for offices as well as
warehousing and distribution of certain of the Company's products. In
connection with the purchase financing for such property, industrial revenue
bonds are outstanding in the principal amount of $5,345,000, due in 2014. The
bonds bear interest at 6.75% through November 30, 1994, and thereafter at rates
adjusted every five years, through maturity. The bonds are collateralized by a
mortgage on such real estate and by a security interest on specified equipment
at the Company's headquarters and distribution center. The Company also leases
office space in two additional buildings in Hampton, New Hampshire,
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under leases expiring in January 1997. Although its headquarters facilities
currently meet the Company's immediate needs, the Company is examining the
continued suitability and adequacy of such facilities.
The Company leases approximately 389,000 square feet of production
facilities, which are located in Mountain City, Tennessee; Boone, North
Carolina; Isabela, Puerto Rico and Santiago, Dominican Republic. These
production facilities are occupied under eleven leasing arrangements which
expire at various times from April 1994 to February 1997. The Company is
currently negotiating an extension of the leasing arrangement that expires in
April 1994. Although its production facilities are adequate and suitable to
meet the Company's current needs, the Company is examining the continued
suitability and adequacy of its production facilities. (Also see "Business --
Manufacturing.")
The Company leases ten factory outlet stores located in the United States;
nine domestic specialty stores; six domestic showrooms; and eight international
specialty stores. (Also see "Business -- Distribution.")
The Company's international subsidiaries also lease office and warehouse
space to meet their individual requirements.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in litigation and various legal matters, including
U.S. customs claims, which have arisen in the ordinary course of business.
Management believes that the ultimate resolution of any existing matter will
not have a material effect on the Company's financial statements.
On February 15, 1994, a complaint was filed by Michael Germano in
United States District Court for the district of New Hampshire in which the
Company and one of its officers were named as defendants in a purported class
action lawsuit brought on behalf of purchasers of the Company's stock between
November 15, 1993 and February 10, 1994. The suit alleges material
misstatements and omissions in the Company's public filings and statements in
1993. The named plaintiff contends he suffered damages as a result of his
December 1993 purchase of 50 shares of the Company's Class A Common Stock. To
date, the court has not approved the formation of a class nor has the plaintiff
specified damages sought in this action. While the suit is in its preliminary
stages, based on an initial review, and after consultation with counsel,
management believes the allegations are without merit. Accordingly, management
does not expect the outcome of such litigation to have a material adverse
effect on the Company's financial statements. The Company intends to defend
this proceeding vigorously.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of the fiscal year covered by this report, no
matter was submitted to a vote of security holders through the solicitation of
proxies or otherwise.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
The following information is submitted as to the executive officers of the
Company:
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Name Age Position
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Sidney W. Swartz 58 Chairman of the Board, President, Chief Executive
Officer and Director
Jeffrey B. Swartz 34 Executive Vice President, Chief Operating Officer and Director
Keith D. Monda 47 Senior Vice President-Finance and Administration and
Chief Financial Officer
Kenneth A. Snyder 46 Senior Vice President-Domestic Sales
Edmund J. Feeley 33 Senior Vice President-Manufacturing and Operations
Jane E. Owens 40 Vice President and General Counsel
Edward J. Suleski, Jr. 37 Corporate Controller and Chief Accounting Officer
All executive officers serve at the discretion of the Board of Directors.
Sidney W. Swartz has served the Company as Chairman of the Board, Chief
Executive Officer and President since June 1986, when he and his family trust
became the sole stockholders of the Company. During the prior 20 years, Mr.
Swartz, as the owner of 50% of the Company, was responsible for the
manufacturing, marketing, distribution and financial aspects of the Company.
Jeffrey B. Swartz has served the Company as Executive Vice President since
March 1990 and Chief Operating Officer since May 1991. From June 1986 to
February 1990, Mr. Swartz served the Company in a variety of positions,
including Senior Vice President of International Operations, Vice
President-Operations/Manufacturing, Vice President-International and General
Manager of International Business. Jeffrey Swartz is the son of Sidney W.
Swartz.
Keith D. Monda joined the Company in December 1993 as Senior Vice
President-Finance and Administration and Chief Financial Officer. From May
1990 to December 1993, Mr. Monda was Executive Vice President of Finance and
Administration of J. Crew Group, Inc.; from July 1989 to May 1990, he was
Senior Vice President and Chief Financial Officer of Bunge Corporation (an
integrated food company); and from April 1986 to July 1989, he was Vice
President of Finance and Chief Financial Officer of the chemical division of
Pfizer, Inc.
Kenneth A. Snyder joined the Company in June 1990 as Divisional Vice
President of Domestic Sales. In February 1991, Mr. Snyder assumed the office
of Senior Vice President-Domestic Sales. From October 1989 until May 1990, Mr.
Snyder was Vice President of Sales of New Balance Athletic Company; and from
November 1988 until September 1989, he was Vice President of Sales of Stride
Rite Corporation.
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Edmund J. Feeley joined the Company in February 1993 as Senior Vice
President-Manufacturing and Operations. From May 1990 to January 1993, Mr.
Feeley was a Principal of Booz, Allen and Hamilton, a general management and
consulting firm, where he had also been a Senior Associate from May 1987 to
April 1990.
Jane E. Owens joined the Company as Vice President and General Counsel in
September 1992. From June 1990 until August 1992, Ms. Owens was counsel for
Reebok International Ltd.; and from March 1988 until June 1990, she was a
partner in the law firm of Gaston & Snow.
Edward J. Suleski, Jr. joined the Company in February 1992 as its
International Controller. In June 1992, Mr. Suleski was appointed Corporate
Controller for the Company, and in March 1994, he was named Chief Accounting
Officer. From September 1988 to February 1992, Mr. Suleski held various
positions with Wang Laboratories, Inc., including Senior Finance Manager for
North American Operations Accounting and Reporting, Senior Finance Manager,
Eastern Region Pricing and Contracts and Financial Controller for Wang Ireland,
Ltd.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information required by this item is included in the Registrant's 1993
Annual Report to Stockholders under the caption "Quarterly Market Information
and Related Matters" on page 13 and is incorporated herein by reference. The
closing sales price of the Registrant's Class A Common Stock on March 15, 1994
was $34.125.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item is included in the Registrant's 1993
Annual Report to Stockholders under the caption "Five Year Summary of Selected
Financial Data" on page 10 and is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by this item is included in the Registrant's 1993
Annual Report to Stockholders under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" on pages 11 and 12
and is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is included in the Registrant's 1993
Annual Report to Stockholders on pages 14 through 23 and is incorporated herein
by reference.
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On August 11, 1992, the Audit Committee of the Board of Directors of the
Company recommended to the Board of Directors that the Company appoint Deloitte
& Touche as the Company's independent accountants. By Unanimous Consent dated
August 12, 1992, the Board of Directors appointed Deloitte & Touche as the
Company's independent accountants to replace Arthur Andersen & Co. for fiscal
year 1992. The Company's management did not consult with Deloitte & Touche on
any accounting, auditing or reporting matter prior to their appointment as
independent accountants for the Company. During the two fiscal years ended
December 31, 1991 and the interim period subsequent to December 31, 1991, there
had been no disagreements with Arthur Andersen on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure or any reportable events. Arthur Andersen's report on the Company's
financial statements for such two years contained no adverse opinion or
disclaimer of opinion and was not qualified or modified as to uncertainty,
audit scope or accounting principles.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Reference is made to the information set forth under the caption, "Executive
Officers of the Registrant," in Item 4A of Part I of this report and to
information under the captions, "Information with Respect to Nominees" and
"Executive Compensation," in the Registrant's definitive proxy statement (the
"Registrant's 1994 Proxy Statement") relating to its 1994 Annual Meeting of
Stockholders, to be filed with the Commission within 120 days after the close
of the Registrant's fiscal year ended December 31, 1993, which information is
incorporated herein by reference. Reference is also made to the information
set forth in the Registrant's 1994 Proxy Statement with respect to compliance
with Section 16(a) of the Exchange Act, which information is incorporated herein
by reference.
ITEM 11. EXECUTIVE COMPENSATION
Reference is made to the information set forth in the Registrant's 1994
Proxy Statement under the caption "Executive Compensation," which information
is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Reference is made to the information set forth under the caption, "Security
Ownership of Certain Beneficial Owners and Management," in the Registrant's
1994 Proxy Statement which information is incorporated herein by reference. For
purposes of calculating the aggregate market value of the Class A Common Stock
on March 15, 1994, the shares owned by The Sidney W. Swartz 1982 Family Trust
have not been considered owned by an affiliate.
-13-
14
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Reference is made to the information set forth under the caption, "Certain
Relationships and Related Transactions," in the Registrant's 1994 Proxy
Statement, which information is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
List of Financial Statements and Financial Statement Schedules.
(a)(1) Financial Statements. The following financial statements,
appearing in the Company's Annual Report to Stockholders for the year ended
December 31, 1993, are incorporated by reference in this Form 10-K:
ANNUAL REPORT
PAGE
----
Consolidated Balance Sheets as of December 31, 1993,
and December 31, 1992 14
For the years ended December 31, 1993, 1992 and 1991:
Consolidated Statements of Income 15
Consolidated Statements of Changes in Stockholders' Equity 16
Consolidated Statements of Cash Flows 17
Notes to Consolidated Financial Statements 18
(a)(2) Financial Statement Schedules. The following additional
financial data should be read in conjunction with the Consolidated Financial
Statements in the Registrant's 1993 Annual Report to Stockholders:
FORM 10-K
PAGE
----
Report of Independent Public Accountants on Schedules F-1
Report of Independent Public Accountants on Schedules F-2
Schedule VIII - Valuation and Qualifying Accounts F-3
Schedule X - Supplementary Income Statement Information F-3
-14-
15
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable, and have therefore
been omitted.
(b) No reports on Form 8-K were filed by the Company during the fourth
quarter of 1993.
(c) Listed below are all the Exhibits filed as part of this report,
some of which are incorporated by reference from documents previously filed by
Timberland with the Commission in accordance with the provisions of Rule 12b-32
of the Securities Exchange Act of 1934, as amended.
EXHIBIT DESCRIPTION
- ------- -----------
(3) Articles of incorporation and by-laws
3.1 Restated Certificate of Incorporation (1)
3.2 By-Laws, as amended May 19, 1993,
filed herewith
(4) Instruments defining the rights of security holders, including indentures
(See also Exhibits 3.1 and 3.2)
4.1 Specimen stock certificate for shares of
the Company's Class A Common Stock (9)
(10) Material Contracts
10.1 Agreement dated as of August 29, 1979
between The Timberland Company and
Sidney W. Swartz (1)
10.2 The Company's 1987 Stock Option Plan, as
amended, filed herewith
10.3 The Company's 1991 Employee Stock
Purchase Plan (8)
10.4 The Company's 1991 Stock Option Plan
for Non-Employee Directors (9)
10.5 The Timberland Company Long Term Incentive
Plan for Senior Management, filed herewith
10.6 The Timberland Company Annual Bonus Plan
for Exempt Employees, filed herewith
-15-
16
EXHIBIT DESCRIPTION
- ------- -----------
10.7 The Timberland Retirement Earnings 401(k)
Plan and Trust Agreements, dated as of
February 1, 1991 (9)
10.8 The Timberland Company Profit Sharing Plan
and Trust Agreements, dated as of
January 1, 1991 (9)
10.9 (a) Lease dated March 23, 1987 between
The Outdoor Footwear Company and
Corporacion Sublistatica, S.A. (1)
(b) Lease dated January 11, 1993 between
Thomas M. Moulton, Trustee of the
Fairview Nominee Trust, and The
Timberland Company (10)
(c) Lease dated January 11, 1993 between
Thomas M. Moulton, Trustee of the
Fairview Nominee Trust, and The
Timberland Company (10)
-16-
17
EXHIBIT DESCRIPTION
- ------- -----------
(d) Lease dated November 21, 1988 between
745 Associates and The Timberland Company (10)
(e) (i) Lease dated July 20, 1992 among Louise
Minges, Mitchell Minges and
The Timberland Company (10)
(ii) Amendment dated July 16, 1993 to lease
dated July 20, 1992 among Louise Minges,
Mitchell Minges and The Timberland Company,
filed herewith
(f) Lease dated January 3, 1984 between the
Industrial Development Board of the County
of Johnson, Tennessee, and The Timberland
Company, and subsequent amendments (10)
(g) Lease dated March 23, 1987 between
Corporacion Sublistatica, S.A. and
The Outdoor Footwear Company (10)
(h) Lease dated March 31, 1981 between the
Puerto Rico Industrial Development and
The Timberland Company (10)
(i) Lease dated September 7, 1992 between
Corporacion Zona Franca Industrial
De Santiago, Inc. and The Recreational
Footwear Company (10)
(j) Lease dated December 2, 1992 between
Corporacion Zona Franca Industrial
De Santiago, Inc. and The Recreational
Footwear Company (10)
-17-
18
EXHIBIT DESCRIPTION
- ------- -----------
(k) Lease dated as of February 1, 1994 between
Melville Corporation and The Timberland Company,
filed herewith
(l) Lease dated as of June 29, 1993 between
Timberland Dominicana, S.A. and Santiago Norte, S.A.
(Pisano) Industrial Park, filed herewith
(m) Lease dated as of November 30, 1993 between
Timberland Dominicana, S.A. and Santiago Norte, S.A.
(Pisano) Industrial Park, filed herewith
(n) Lease dated as of December 16, 1993 between
Timberland Dominicana, S.A. and Santiago Norte, S.A.
(Pisano) Industrial Park, filed herewith
(o) Lease dated as of March 8, 1993 between Watauga
Committee of 100, Inc. and The Timberland
Company, filed herewith
(p) Lease dated as of March 31, 1993 between
Talbot Operations, Inc. and The Timberland Company,
filed herewith
10.10 Credit Agreement dated as of October 4, 1991
among The Timberland Company, Morgan
Guaranty Trust Company of New York and
The First National Bank of Boston, as Co-
Agents, and Morgan Guaranty Trust Company
of New York, as Administrative Agent (9)
10.11 (i) Credit Agreement dated as of May 13, 1993
among The Timberland Company, Morgan
Guaranty Trust Company of New York, for
itself and as Administrative Agent, ABN AMRO
Bank N.V., The First National Bank of Boston,
Barclays Bank PLC and The Northern
Trust Company (the "May Credit Agreement"),
filed herewith
-18-
19
EXHIBIT DESCRIPTION
- ------- -----------
(ii) Amendment dated November 15, 1993 to the
May Credit Agreement, filed herewith
10.12 Credit Agreement dated as of November 15, 1993
among The Timberland Company, certain banks listed
therein and The Chase Manhattan Bank, N.A. as Agent,
filed herewith
10.13 (i) Note Agreements dated as of September 30,
1989 regarding $35,000,000 9.70% Senior
Notes due December 1, 1999
(the "Senior Note Agreements")(6)
(ii) Amendment dated September 15, 1993
to the Senior Note Agreements,
filed herewith
(13) Annual Report to security holders
13. Portions of 1993 Annual Report to Stockholders,
as incorporated herein by reference, filed herewith
(16) Letter Regarding Change in Certifying Accountant
16. Letter dated March 21, 1994 from Arthur
Andersen & Co. regarding change in
certifying accountant, filed herewith
(21) Subsidiaries
21. List of subsidiaries of the Registrant, filed herewith
(23) Consent of experts and counsel
23.1 The Consent of Deloitte & Touche to
the incorporation by reference of their
report included in Registrant's Annual
Report to Stockholders for the fiscal
years ended December 31, 1993 and
1992, filed herewith
23.2 The Consent of Arthur Andersen & Co. to
the incorporation by reference of their report
included in Registrant's Annual Report to
Stockholders for the fiscal year ended
December 31, 1991, filed herewith
-19-
20
- -------------------------------
(1) Filed as exhibits to Registration Statement on Form S-1, numbered
33-14319, and incorporated herein by reference.
(2) Filed on September 30, 1987, as an exhibit to Registration Statement on
Form S-8, numbered 33-17552, and incorporated herein by reference.
(3) Filed on December 21, 1987, as an exhibit to Registration Statement on
Form S-8, numbered 33-19183, and incorporated herein by reference.
(4) Filed as exhibits to the Annual Report on Form 10-K for the fiscal year
ended December 31, 1987, and incorporated herein by reference.
(5) Filed as exhibits to the Annual Report on Form 10-K for the fiscal year
ended December 31, 1988, and incorporated herein by reference.
(6) Filed as exhibits to the Annual Report on Form 10-K for the fiscal year
ended December 31, 1989, and incorporated herein by reference.
(7) Filed as exhibits to the Annual Report on Form 10-K for the fiscal year
ended December 31, 1990, and incorporated herein by reference.
(8) Filed on July 9, 1991, as an exhibit to Registration Statement on Form
S-8, numbered 33-41660, and incorporated herein by reference.
(9) Filed as exhibits to the Annual Report on Form 10-K for the fiscal year
ended December 31, 1991, and incorporated herein by reference.
(10) Filed as exhibits to the Annual Report on Form 10-K for the fiscal year
ended December 31, 1992, and incorporated herein by reference.
-20-
21
Pursuant to Item 4(iii) of Item 601, Regulation S-K, the Registrant has filed
as Exhibits only the instruments defining the rights of holders of long-term
debt of the Registrant and its consolidated subsidiaries with respect to which
the total amount of securities authorized thereunder exceeds 10% of the total
assets of the Registrant and its subsidiaries on a consolidated basis. The
Registrant agrees to furnish to the Commission upon its request copies of other
instruments defining the rights of holders of long-term debt of the Registrant
and its subsidiaries, with respect to which the total amount of securities
authorized does not exceed 10% of such assets. The Registrant also agrees to
furnish to the Commission upon its request copies of any omitted schedule or
exhibit to any Exhibit filed herewith.
-21-
22
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
THE TIMBERLAND COMPANY
March 22, 1994 By: /s/ Sidney W. Swartz
-----------------------------
Sidney W. Swartz, President
Pursuant to the requirements of the Securities Exchange of 1934, as amended,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
------------------------------------------------------------------------------------------
Chairman of the Board, President,
/s/ Sidney W. Swartz Chief Executive Officer and Director March 22, 1994
- --------------------------
(Sidney W. Swartz)
(PEO)
Executive Vice President, Chief
/s/ Jeffrey B. Swartz Operating Officer and Director March 22, 1994
- --------------------------
(Jeffrey B. Swartz)
Senior Vice President-Finance
and Administration and Chief
/s/ Keith D. Monda Financial Officer March 22, 1994
- --------------------------
(Keith D. Monda)
(CFO)
Corporate Controller and
/s/ Edward J. Suleski, Jr. Chief Accounting Officer March 22, 1994
- --------------------------
(Edward J. Suleski, Jr.)
(CAO)
/s/ Robert M. Agate Director March 22, 1994
- --------------------------
(Robert M. Agate)
/s/ John F. Brennan Director March 22, 1994
- --------------------------
(John F. Brennan)
/s/ Thomas R. Schwarz Director March 22, 1994
- --------------------------
(Thomas R. Schwarz)
/s/ Abraham Zaleznik Director March 22, 1994
- --------------------------
(Abraham Zaleznik)
-22-
23
Item 14(d)
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of The Timberland Company:
We have audited the consolidated financial statements of The Timberland Company
as of December 31, 1993 and 1992, and for the years then ended, and have
issued our report thereon dated Feruary 15, 1994; such consolidated financial
statments and report are included in your 1993 Annual Report to Stockholders
and are incorporated herein by reference. Our audits also included the
consolidated financial statement schedules of The Timberland Company, listed in
Item 14. These financial statement schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, such 1993 and 1992 consolidated financial statement
schedules, when considered in relation to the basic consolidated financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.
DELOITTE & TOUCHE
/s/ Deloitte & Touche
Boston, Massachusetts
February 15, 1994
F-1
24
Item 14(d)
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Timberland Company:
We have audited the consolidated statements of income, changes in stockholders'
equity and cash flows of The Timberland Company (a Delaware corporation) and
subsidiaries for the year ended December 31, 1991 (incorporated by reference in
this Form 10K). These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations and the cash flows of The
Timberland Company and subsidiaries for the year ended December 31, 1991, in
conformity with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedules listed in the index above for the
year ended December 31, 1991, are the responsibility of the Company's
management and are presented for purposes of complying with the Securities and
Exchange Commission's rules and are not part of the basic financial statements.
These schedules have been subjected to the auditing procedures applied in the
audit of the basic financial statements and, in our opinion, fairly state in
all material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
Arthur Andersen & Co.
/s/ Arthur Andersen & Co.
Boston, Massachusetts,
February 12, 1992.
F-2
25
SCHEDULE VIII
THE TIMBERLAND COMPANY
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
Additions
Balance at --------------------------------- Deductions Balance at
Beginning Charged to Costs Charged to Net End
of Period and Expenses Other Accounts Write-Offs of Period
--------- ------------ -------------- ---------- ---------
Description
- -----------
Allowance for
doubtful accounts:
Year ended
December 31, 1993 $1,821 $1,131 $ - $1,938 $1,014
December 31, 1992 1,675 1,374 - 1,228 1,821
December 31, 1991 904 1,107 - 336 1,675
Group insurance
reserve:
Year ended
December 31, 1993 $1,401 $5,752 $ - $5,834 $1,319
December 31, 1992 1,127 3,946 - 3,672 1,401
December 31, 1991 737 3,012 - 2,622 1,127
- --------------------------------------------------------------------------------------------------------------------------
SCHEDULE X
SUPPLEMENTAL INCOME STATEMENT INFORMATION
(IN THOUSANDS)
Charged to Costs and Expenses
-----------------------------
Year ended December 31,
-----------------------
1993 1992 1991
---- ---- ----
Maintenance and repairs $8,356 $5,817 $4,466
Advertising Costs 24,143 11,040 9,194
F-3
26
EXHIBIT INDEX
-------------
(3) Articles of incorporation and by-laws
3.2 By-Laws, as amended May 19, 1993,
filed herewith
(10) Material Contracts
10.2 The Company's 1987 Stock Option Plan, as
amended, filed herewith
10.5 The Timberland Company Long Term Incentive
Plan for Senior Management, filed herewith
10.6 The Timberland Company Annual Bonus Plan
for Exempt Employees, filed herewith
27
EXHIBIT INDEX
-------------
10.9(e) (ii) Amendment dated July 16, 1993 to Lease
Dated July 20, 1992 among Louise Minges,
Mitchell Minges and The Timberland Company,
filed herewith
10.9(k) Lease dated as of February 1, 1994 between
Melville Corporation and The Timberland Company,
filed herewith
28
EXHIBIT INDEX
-------------
10.9(l) Lease dated as of June 29, 1993 between
Timberland Dominicana, S.A. and Santiago Norte, S.A.
(Pisano) Industrial Park, filed herewith
10.9(m) Lease dated as of November 30, 1993 between
Timberland Dominicana, S.A. and Santiago Norte, S.A.
(Pisano) Industrial Park, filed herewith
10.9(n) Lease dated as of December 16, 1993 between
Timberland Dominicana, S.A. and Santiago Norte, S.A.
(Pisano) Industrial Park, filed herewith
10.9(o) Lease dated as of March 8, 1993 between Watauga
Committee of 100, Inc. and The Timberland
Company, filed herewith
10.9(p) Lease dated as of March 31, 1993 between
Talbot Operations, Inc. and The Timberland Company,
filed herewith
10.11 (i) Credit Agreement dated as of May 13, 1993
among The Timberland Company, Morgan
Guaranty Trust Company of New York, for
itself and as Administrative Agent, ABN AMRO
Bank N.V., The First National Bank of Boston,
Barclays Bank PLC and The Northern
Trust Company (the "May Credit Agreement"),
filed herewith
(ii) Amendment dated November 15, 1993 to the
May Credit Agreement, filed herewith
10.12 Credit Agreement dated as of November 15, 1993
among The Timberland Company, certain banks listed
therein and The Chase Manhattan Bank, N.A. as Agent,
filed herewith
29
EXHIBIT INDEX
-------------
10.13 (ii) Amendment dated September 15, 1993
to the Senior Note Agreements,
filed herewith
(13) Annual Report to security holders
13. Portions of 1993 Annual Report to Stockholders,
as incorporated herein by reference, filed herewith
(16) Letter Regarding Change in Certifying Accountant
16. Letter dated March 21, 1994 from Arthur
Andersen & Co. regarding change in
certifying accountant, filed herewith
(21) Subsidiaries
21. List of subsidiaries of the Registrant, filed herewith
(23) Consent of experts and counsel
23.1 The Consent of Deloitte & Touche to
the incorporation by reference of their
report included in Registrant's Annual
Report to Stockholders for the fiscal
years ended December 31, 1993 and
1992, filed herewith
23.2 The Consent of Arthur Andersen & Co. to
the incorporation by reference of their report
included in Registrant's Annual Report to
Stockholders for the fiscal year ended
December 31, 1991, filed herewith