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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995 COMMISSION FILE NUMBER 1-9548
THE TIMBERLAND COMPANY
(Exact name of registrant as specified in its charter)
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DELAWARE 02-0312554
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
200 DOMAIN DRIVE
STRATHAM, NEW HAMPSHIRE 03885
(Address of principal executive office) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE, IS (603) 772-9500
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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Class A Common Stock, par value $.01 per share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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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
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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 the 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 $169,421,492 on March 1,
1996. 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.
8,306,239 shares of Class A Common Stock and 2,734,451 shares of Class B
Common Stock of the Registrant were outstanding on March 1, 1996.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Registrant's Annual Report to security holders for the
fiscal year ended December 31, 1995 are incorporated by reference in Part I,
Item 1 regarding foreign and domestic sales and Part II, Items 5, 6, 7 and 8 of
this report. Portions of the Registrant's definitive Proxy Statement for the
1995 Annual Meeting of Stockholders to be filed pursuant to Regulation 14A are
incorporated by reference in Part III of this report.
The Exhibits Index appears on page 10 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, engineers, markets and
distributes men's and women's premium-quality footwear, apparel and accessories
under the Timberland(R) brand. Timberland(R) products are sold primarily through
better-grade department stores, independent retailers, athletic stores and other
retail stores in the United States and in more than 60 countries worldwide.
Timberland products are also sold through Timberland(R) specialty stores and
factory outlet stores devoted exclusively to Timberland products. These two
types of stores are operated by the Company in the United States and in parts of
Europe and by certain of the Company's distributors in parts of Europe, South
America, Mexico, the Middle East and the Asia/Pacific region.
The Company offers high-quality products that provide durability,
functional performance, comfort, classic styling and lasting protection from the
elements. The Company believes that the combination of these features
distinguishes the Timberland brand from competing brands and makes Timberland
products an outstanding value.
During 1995, the Company focused on improving its balance sheet through
better working capital management. As part of this focus, the Company enhanced
its business controls and exercised greater discipline in the day-to-day
operation of its business. The Company reorganized into profit centers for its
footwear, apparel and accessories, retail and international divisions. The
Company also realigned the structure of its domestic wholesale sales
organization from a structure organized by geographic regions to a structure
organized by distribution channels. In addition, the Company strengthened its
credit and cash collection procedures and policies. The Company closed two of
its manufacturing facilities, downsized a third facility, and reorganized and
consolidated the management of its remaining manufacturing facilities. The
Company shifted the production which was performed formerly by these facilities
to third party manufacturers. As a result of these actions, at the end of 1995,
the Company reported a reduction in inventory, debt levels and days sales
outstanding and an improvement in its cash position compared to the end of 1994.
In 1995, the Company also developed a marketing and merchandising strategy
that defines its footwear and apparel and accessories products within the dress
casual, rugged casual and performance categories. This strategy is designed to
further integrate the Timberland brand and make it easier for wholesale
customers to sell Timberland products to consumers based on end-user needs.
CURRENT PRODUCTS
The Company's products fall into two broad categories -- footwear (shoes,
boots and sandals) and apparel and accessories. The Company's footwear sales
represented 74.9%, 80.5% and 83.4% of total product sales for 1995, 1994 and
1993, respectively. Sales of apparel and accessories represented 25.1%, 19.5%
and 16.6% of total product sales for 1995, 1994 and 1993, respectively.
Footwear
In 1973, the first pair of waterproof leather boots under the Timberland
brand were produced. The Company currently offers a broad variety of footwear
products for men and women featuring premium waterproof or water resistant
leathers, fabric uppers, selected use of waterproof fabric linings and, in
certain models, hand-sewn construction.
The Company's footwear lines included over 240 models and colors for Spring
1995 and over 250 models and colors for Fall 1995. New footwear product
introductions in 1995 included a dressier line of waterproof Pinnacle
Weatherbucks, Gore-Tex(R) chukka boots, canvas boots and shoes, performance
sandals and the Treeline(TM) Aggressive Series of multi-purpose outdoor
footwear, which will be available at retail in Spring
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1996. The Company also expanded the number and levels of products featuring the
Active Comfort Technology(TM) (ACT(TM)) system, a moisture management and
climate control system developed by the Company.
In 1995, the Company focused the design and development of its footwear
lines for Fall 1996 into the dress casual, rugged casual and performance
categories. The dress casual category has been expanded from the classic
Weatherbuck collection and loafers to include cap toes, wing tips, tassel
slip-ons and oxfords for men and more fashion-focused hand-sewn wovens, pumps,
slip-ons and loafers for women. The rugged casual category includes rugged
hand-sewn shoes, Bush Hikers, classic work boots and boat shoes. Timberland(R)
performance footwear products include hiking boots, field boots and
multi-purpose outdoor footwear featuring the ACT system and other advanced
technologies.
The Company also designs, develops, engineers, markets and distributes,
under the Timberland(R) Work Division, a line of boots designed to fit the needs
of construction workers, carpenters, assembly-line workers and skilled workers
in other crafts and trades. These boots are sold in the United States and Italy
through leading consumer product and independent retail stores. The Company
expects to market these products under the name Timberland Mill River(TM)
beginning in Fall 1996.
Apparel and Accessories
Timberland(R) apparel products consist primarily of rugged outerwear,
sweaters, shirts, pants, shorts and skirts. These products feature, in certain
models, premium waterproof leathers, waterproof and water resistant fabric,
rust-proof hardware, canvas, denim, high-quality specialty cotton, wool and
other quality performance materials. During 1995, the Company implemented a
forecasting and delivery system designed specifically for its apparel products.
The Company's men's apparel offerings for 1995 were coordinated and merchandised
into apparel collections to compete in the collection sportswear market. The
Company targeted its women's apparel offerings for 1995 to focus on classic
items distributed principally through Timberland(R) specialty stores and several
premium retailers. For 1996, the Company plans to expand its Men's Collection
Sportswear line and to continue the limited focus of its women's line. The
Company plans to promote its apparel products in a manner consistent with its
dress casual, rugged casual and performance product categories.
Timberland(R) accessories products for 1995 focused principally on leather
goods -- luggage, briefcases, handbags, wardrobe accessories and other small
leather goods -- with a lesser focus on caps, hats and leather care products
and, through Timberland specialty stores only, gloves and socks. Beginning in
the second half of 1996, many Timberland accessories, including day packs,
travel gear, socks, legwear, gloves and leather care products, will be more
widely distributed through licensing arrangements with third parties, as further
described in the "Licensing" section of this report.
In 1995, the Company introduced City Year Gear(TM), a limited line of
T-shirts, caps and bags. City Year Gear products are sold exclusively through
Timberland specialty stores. Any profits from the sale of these products will
help support City Year(R), an urban youth corps sponsored partially by the
Company, and other Company-sponsored community service activities.
DISTRIBUTION
The Company's strategy is to distribute its products through its specialty
stores and through better-grade department stores, independent retailers and
athletic stores which reinforce the Timberland image of quality, performance and
service. For 1996, the Company plans to continue the integrated presentation of
the Timberland(R) brand, which will be based on showcasing Timberland(R)
footwear, apparel and accessories within the dress casual, rugged casual and
performance categories. The Company also plans to expand the presentation of its
Men's Collection Sportswear apparel offerings in selected collection sportswear
locations during 1996.
United States Operations
In 1995, 1994 and 1993, 70.2%, 73.5% and 70.8%, respectively, of the
Company's revenues were generated in the United States. The Company's wholesale
customer accounts within the United States range
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from better-grade department stores and retail stores to athletic and sporting
goods stores, marinas and specialty retailers. These accounts are serviced
through a combination of field and corporate-based sales teams and through the
Company's six showrooms. The Company's principal showroom is located on Fifth
Avenue in New York City. The Company's regional showrooms are located in
Chicago, Dallas, Atlanta, Denver and Seattle.
At the end of 1995, the Company had 157 concept shops featuring
Timberland(R) footwear and apparel, including 82 apparel shops in men's
collection sportswear departments. Concept shops are areas of third-party stores
dedicated exclusively to the presentation, merchandising and sale of
Timberland(R) products. Some existing concept shops were also expanded during
1995.
The Company operates footwear distribution facilities in Danville, Kentucky
and Hampton, New Hampshire. The Company also fills footwear orders from a
third-party operated distribution facility in Industry, California. All apparel
and accessories orders are centrally distributed from the Company's facility in
Grove City, Ohio. In 1995 and early 1996, the Company closed its Portsmouth, New
Hampshire and Wilmington, Massachusetts distribution facilities, as part of the
consolidation of its domestic distribution operations.
International Operations
In 1995, international revenues accounted for 29.8% of the Company's
revenues, compared to 26.5% in 1994 and 29.2% in 1993. Timberland products are
sold internationally through distributors and commission agents and by the
Company through its operating divisions in England, France, Germany, Italy,
Spain and Austria. The Company's European operating divisions provide sales,
administrative and, in some cases, warehousing support for the sale of
Timberland products to wholesale customers in their respective countries, and in
certain instances, to distributors and commission agents in other countries.
Additionally, certain of the Company's international distributors operate
specialty stores and concept shops devoted exclusively to Timberland products in
Europe, South America and the Asia/Pacific region. The Company's international
distributors opened nine such specialty stores and 24 such concept shops in
1995.
Reference is made to the information set forth in Note 13 to the Company's
consolidated financial statements, entitled "Industry Segment and Geographical
Area Information," appearing in the Company's 1995 Annual Report to security
holders, which information is incorporated herein by reference.
RETAIL
In 1995, revenues from the specialty and outlet stores operated by the
Company accounted for 19.6% of the Company's revenues, compared to 11.3% in 1994
and 10.2% in 1993. This increase reflects the expansion of the Company's retail
operations. In 1995, the Company opened six specialty stores, bringing to 29 the
total number of specialty stores operated by the Company worldwide. In addition
to providing an environment to showcase the Timberland(R) brand as an integrated
source of footwear, apparel and accessories, these specialty stores provide
sales and consumer-trend information which assists the Company in developing its
marketing strategies, including point-of-purchase marketing materials. The
training and customer service programs established in the Company's specialty
stores also serve as a model which may be adopted by the Company's other retail
accounts. In 1995, the Company opened fifteen outlet stores, bringing to 33 the
total number of outlet stores operated by the Company worldwide. These outlet
stores serve as the primary channel for the sale of factory-second and close-out
product offerings, and enable the Company to protect and control the integrity
of the Timberland brand and maximize the return associated with the sale of such
products.
LICENSING
In 1995, the Company sought to broaden the reach of the Timberland brand by
capitalizing on several licensing opportunities. These licensing agreements
enable the Company to expand the Timberland brand to appropriate and
well-defined product categories and geographical territories in which the
Company has not had an appreciable presence, in a manner designed to reduce the
risk and investment associated with pursuing such opportunities.
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Product Licensing
Under a licensing agreement with Timex Nederland B.V., Timberland offers a
line of outdoor watches which were available for distribution in late 1995.
During 1995 and early 1996, the Company entered into licensing agreements with
other industry leaders for the manufacture and distribution of several new
product categories, including: The Coleman Company for fabric and
leather-accented day packs and travel gear, Kayser-Roth Corporation for socks
and legwear and SWANY America for gloves. The Company anticipates that products
under each of these new licensing agreements will be available for distribution
beginning in late 1996.
Territory Licensing
In 1995, the Company entered into two license agreements with distributors
to expand the reach of the Timberland(R) brand. The Company appointed Inchcape
plc as the exclusive distributor and retailer of Timberland(R) products
throughout most of the Asia/Pacific region. The transaction also included
Inchcape's acquisition of the Company's Australian and New Zealand subsidiaries
and the operation of existing Timberland(R) specialty stores and concept shops
in these countries. In 1995, the Company also appointed Sao Paulo Alpargatas
S.A. as the exclusive distributor and retailer, as well as a non-exclusive
manufacturer, of Timberland products throughout much of South America. Both of
these agreements provide for the opening of new specialty stores and concept
shops devoted exclusively to Timberland products and require the licensee to
exceed minimum purchases of Timberland products during each year. The license
agreement with Sao Paulo Alpargatas S.A. also requires the licensee to achieve
specified annual minimum sales increases.
ADVERTISING AND MARKETING
The Company's advertising campaigns are designed to increase brand
awareness among consumers and to emphasize the features that distinguish the
Timberland brand from competing brands and make Timberland products an
outstanding value. During 1995, the Company's national and regional advertising
campaigns appeared mainly in various trade press outlets and active-lifestyle,
fashion and sports-focused consumer periodicals. The Company reinforced these
advertising campaigns with a variety of in-store promotions, point-of-purchase
marketing materials and a cooperative advertising program with its retailers, as
well as retail sales clerk training and other sales incentive programs and
promotional campaigns. Timberland's product and territory licensing arrangements
also require licensees to fund marketing campaigns, over which Timberland
maintains approval and design rights to ensure consistent and effective brand
presentation.
During 1995, the Company expanded its internal creative resource staff to
enhance the Company's corporate and promotional communication capabilities and
to better manage the presentation of the Timberland brand. The Company plans to
produce internally all advertising, product catalogs and point-of-purchase
marketing materials and all packaging and hang-tag designs for its 1996 product
offerings.
SEASONALITY
In 1995, as has traditionally been the case, the Company's revenues were
higher in the last two quarters of the year than in the first two quarters. The
Company expects this seasonality to continue in 1996.
BACKLOG
At December 31, 1995, Timberland's backlog of orders from its customers was
approximately $102 million, compared to $132 million at December 31, 1994 and
$69 million at December 31, 1993. While all orders in the backlog are subject to
cancellation by customers, the Company expects that the majority of such orders
will be filled in 1996. The Company does not believe that its backlog of orders
at year-end is representative of the orders which will be filled during 1996,
due to the shift towards "at-once orders" being adopted by many retailers.
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MANUFACTURING
During 1995, approximately 40% of the unit volume of the Company's footwear
products was manufactured by the Company, compared to approximately 60% during
1994. The remainder of the Company's footwear products and all of its apparel
and accessories were produced by independent manufacturers in Asia, Europe and
the Americas. Over 20% and 15% of the unit volume of the Company's footwear
products was produced in Thailand and Taiwan, respectively.
During 1995, the Company closed its footwear manufacturing facilities
located in Boone, North Carolina and Mountain City, Tennessee, and downsized its
footwear manufacturing facility in the Dominican Republic. The Company increased
its use of independent manufacturers to replace most of the manufacturing
operations conducted formerly at its manufacturing facilities. This
restructuring was a result of the Company's overall effort to improve product
quality, to reduce manufacturing overhead and product costs, and to increase the
Company's flexibility to meet consumer demand for particular product lines. The
Company currently plans to retain its internal manufacturing capability in order
to continue benefiting from expertise the Company has gained with respect to the
footwear manufacturing methods and from the research and development activities
conducted at its manufacturing facilities.
As part of the Company's efforts to improve the reliability and quality of
the manufacturing operations conducted by the Company and its independent
manufacturers, the Company in 1995 reorganized and consolidated the management
of these functions and expanded its quality control group. The Company's quality
and production standards were reviewed and updated, and product quality audits
were conducted at the factories and distribution centers to ensure such
standards were being met. In 1995, the Company also opened offices in Bangkok,
Thailand and Taichung, Taiwan in order to more closely supervise the Company's
sourcing activities conducted in the Asia/Pacific region. In addition, the
Company enhanced and expanded the data available through its information systems
to enable the Company to better match product supply and demand.
To the extent the Company manufactures its products outside the United
States or is dependent upon foreign operations with unaffiliated parties, the
Company is subject to the usual risks of doing business abroad. These risks
potentially include, among other risks, import restrictions, anti-dumping
investigations, political or labor disturbances, expropriation and acts of war.
RAW MATERIALS
During 1995, the Company consolidated its base of raw materials suppliers;
however, only two suppliers provided more than 10% each of the Company's leather
purchases for 1995. The Company has no reason to believe that leather will not
continue to be available from these or alternative sources. The Company also
began to establish a central network of suppliers through which the Company's
manufacturing facilities and independent manufacturers could purchase raw
materials. The Company believes that this approach will reduce the cost and
provide greater consistency of the raw materials procured to produce
Timberland(R) products, and increase compliance with the Company's production
standards.
TRADEMARKS AND TRADE NAMES; PATENTS; RESEARCH & DEVELOPMENT
The Company's principal trade name is The Timberland Company and the
Company's principal trademarks are Timberland and [TIMBERLAND LOGO], which have
been registered in the United States and in certain foreign countries. Other
Company trademarks or registered trademarks are Treeline; Weathergear;
[WORK LOGO]; [MILL RIVER LOGO]; More Quality Than You May Ever Need;
Active Comfort Technology; ACT; Mountain to River; Toporelief; Topozoic; Boots,
Shoes, Clothing, Wind, Water, Earth & Sky; Wind, Water, Earth & Sky; Elements;
The Elements of Design are the Elements themselves, Wind, Water, Earth and Sky;
Nothing Can Stop You; Blackridge Mountain; Blackridge Mountain Logo Design;
Mill River; Mill River Logo Design; TBL 30; Timberland 1049; Trail Grip; and
Tims. The Company regards its trade name and trademarks as valuable assets and
believes that they are important factors in marketing its products,
particularly in the case of the Timberland(R) brand. It is the policy of the
Company to protect and defend vigorously its trade name and
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trademarks against infringement under the laws of the United States and other
countries. In addition, the Company seeks to protect and defend vigorously its
patents, designs, copyrights and all other of its proprietary rights under
applicable laws.
The Company conducts research, design and development efforts for its
footwear, apparel and accessories. The Company tests a number of its products
under actual field conditions to evaluate and improve product performance. The
Company's expenses relating to research, design and development, however, have
not represented a material expenditure relative to its other expenses.
COMPETITION
The Company does not believe any of its principal competitors offers a
complete line of products that provide the same quality and performance as the
complete line of Timberland(R) footwear, apparel and accessories products. The
Company does, however, have a variety of major competitors in each of its
separate footwear, apparel and accessories product offerings.
The Company's footwear and apparel and accessories products are marketed in
highly competitive environments which are 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, including athletic shoe companies, many of which compete
directly with some of the Company's products. In addition, the Company faces
competition from retailers that are establishing products under private labels
which compete with the Company's products.
The Company has at least nine major competitors in classic work boot sales,
at least seven major competitors in sales of rugged casual footwear sales, at
least twelve major competitors in sales of performance boots and sandals, and at
least thirteen major competitors in sales of dress casual footwear. The
Company's major competitors for its footwear products are located principally in
the United States. The Company also faces competition from many international
footwear manufacturers.
The Company's line of men's and women's apparel faces competition from at
least ten major apparel companies in the United States and from a variety of
major apparel companies internationally. The Company's men's and women's lines
of footwear and apparel face competition from at least two direct mail companies
in the United States.
The Company's accessories products line faces competition from at least
seven major companies in the United States and from several major accessories
companies internationally.
Product quality, performance, design, styling and pricing, as well as
consumer awareness, 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, because Timberland(R) products are designed
primarily for functionality and performance, demand for Timberland products
(except for the new, more fashion-focused models introduced under Timberland's
Fall 1996 dress casual footwear line) is less sensitive to changing trends in
fashion than other products that are designed specifically to meet such trends.
ENVIRONMENTAL MATTERS
Compliance with federal, state and local environmental regulations have not
had, nor are they expected to have, any material effect on the capital
expenditures, earnings or competitive position of the Company, based on
information and circumstances currently known to the Company.
EMPLOYEES
As of December 31, 1995, the Company had approximately 5,500 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.
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ITEM 2. PROPERTIES
The Company owns a facility in Hampton, New Hampshire, which served as the
Company's headquarters until November 1994 and currently is used for 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, which are due in 2014. These bonds bear
interest at 6.20% through 1999 and thereafter at rates adjusted every five
years, through maturity. These bonds are secured by a mortgage on such real
estate and by a security interest on assets located there.
The Company also leases distribution facilities in Grove City, Ohio and
Wilmington, Massachusetts, for the distribution of certain products, under lease
agreements which expire in May 1998 and April 1996, respectively. In February
1996, the Company acquired its distribution facility in Danville, Kentucky.
Since April 1994, the Company has leased property in Stratham, New
Hampshire that serves as its worldwide headquarters, under a lease which expires
in July 1999, with options to extend the expiration. The Company considers its
current headquarters facilities adequate and suitable for its present needs. The
Company leases its manufacturing facilities which are located in Isabela, Puerto
Rico and Santiago, Dominican Republic. These manufacturing facilities are
occupied under 11 leasing arrangements which expire at various times through
February 1998.
The Company leases 19 domestic specialty stores, ten international
specialty stores, six domestic showrooms, 29 domestic factory outlet stores, and
four international factory outlet stores. The Company's subsidiaries also lease
office and warehouse space to meet their individual requirements.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in various litigation and legal matters which have
arisen in the ordinary course of business. Management believes that the ultimate
resolution of any existing matter will not have a material adverse effect on the
Company's consolidated financial statements.
The Company and two of its officers and directors have been named as
defendants in two actions filed in the United States District Court for the
District of New Hampshire, one filed by Jerrold Schaffer on December 12, 1994,
and the other filed by Gershon Kreuser on January 4, 1995. On April 24, 1995,
the District Court granted plaintiffs' motion, assented to by defendants, to
consolidate the two actions. On June 23, 1995, plaintiffs filed a consolidated
amended complaint (the "Amended Complaint") with the District Court. The Amended
Complaint alleges that defendants violated the federal securities laws by making
material misstatements and omissions in certain of the Company's public filings
and statements in 1994. Specifically, the Amended Complaint alleges that such
statements and omissions had the effect of artificially inflating the market
price for the Company's Class A Common Stock until the disclosure by the Company
on December 9, 1994 of its expectation that results for the fourth quarter were
not likely to meet analysts' anticipated levels. Damages are unspecified. On
March 18, 1996, the Court denied defendants' motion to dismiss the Amended
Complaint. On March 19, 1996, the Court granted plaintiffs' motion for class
certification for all purchasers of the Company's Class A Common Stock between
May 12, 1994 and December 9, 1994. Management believes this action is without
merit and intends to defend it vigorously. Accordingly, at this time, management
does not expect the outcome of such litigation to have a material adverse effect
on the Company's consolidated financial statements.
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.
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ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
The following information is submitted as to the executive officers of the
Company:
NAME AGE POSITION
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Sidney W. Swartz..................... 60 Chairman of the Board, President, Chief Executive
Officer and Director
Jeffrey B. Swartz.................... 36 Executive Vice President, Chief Operating Officer
and Director
Keith D. Monda....................... 49 Senior Vice President-Finance and Administration
and Chief Financial Officer
Gregory W. VanWormer................. 40 Senior Vice President-General Manager
Apparel/Retail
Dennis W. Hagele..................... 52 Vice President-Finance and Corporate Controller
(Chief Accounting Officer)
Jane E. Owens........................ 42 Vice President and General Counsel
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 then sole security holders 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 as 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.
Gregory W. VanWormer joined the Company in May 1994 as Senior Vice
President-Retail. Effective January 1, 1995, Mr. VanWormer's title was changed
to Senior Vice President-General Manager Apparel/Retail. From August 1991 to
April 1994, Mr. VanWormer was the Vice President-General Merchandise Manager of
G.H. Bass & Co.; and from June 1988 to June 1991, he held the following
positions with C.M.L. Inc.: Vice President-General Merchandise Manager of
Carroll Reed (a retail company) and President of The Gokey Company (a retail,
catalog and manufacturing company).
Dennis W. Hagele joined the Company in October 1994 as Vice
President-Finance and Corporate Controller. From July 1993 to September 1994,
Mr. Hagele was an independent financial consultant; and from August 1981 to June
1993, he was Assistant Controller of Sara Lee Corporation.
Jane E. Owens joined the Company in September 1992 as Vice President and
General Counsel. From June 1990 to August 1992, Ms. Owens was Counsel for Reebok
International Ltd.; and from March 1988 to June 1990, she was a partner in the
law firm of Gaston & Snow.
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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 1995
Annual Report to security holders under the caption "Quarterly Market
Information and Related Matters" and is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item is included in the Registrant's 1995
Annual Report to security holders under the caption "Five Year Summary of
Selected Financial Data" 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 1995
Annual Report to security holders under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" 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 1995
Annual Report to security holders and is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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 caption, "Information with Respect to Nominees" in the
Registrant's definitive proxy statement (the "Registrant's 1996 Proxy
Statement") relating to its 1996 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, 1995, which information is incorporated herein by
reference. Reference is also made to the information set forth in the
Registrant's 1996 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 under the caption "Executive
Compensation," in the Registrant's 1996 Proxy Statement, 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 1996
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 1, 1996, the shares owned by The Sidney W. Swartz 1982 Family Trust,
The Swartz Foundation and The Sidney and Judith Swartz Charitable Remainder
Unitrust have not been considered owned by an affiliate.
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 1996 Proxy
Statement, which information is incorporated herein by reference.
9
11
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 1995 Annual Report to security holders are incorporated by
reference in this report:
PAGE
----
ANNUAL REPORT
Consolidated Balance Sheets as of December 31, 1995 and December 31,
1994.................................................................. 18
For the years ended December 31, 1995, 1994 and 1993:
Consolidated Statements of Operations.............................. 19
Consolidated Statements of Changes in Stockholders' Equity......... 20
Consolidated Statements of Cash Flows.............................. 21
Notes to Consolidated Financial Statements......................... 22
Independent Auditors' Report............................................ 35
(a)(2) Financial Statement Schedule. The following additional financial
data should be read in conjunction with the Consolidated Financial Statements in
the Registrant's 1995 Annual Report to security holders:
FORM 10-K
PAGE
---------
Report of Independent Public Accountants on Schedule................ F-1
Schedule VIII -- Valuation and Qualifying Accounts.................. F-2
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 1995.
(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 the
Company with the Securities and Exchange Commission in accordance with the
provisions of Rule 12b-32 of the Securities Exchange Act of 1934, as amended.
EXHIBIT DESCRIPTION PAGE NO.
- ------- ------------ --------
(3) Articles of incorporation and by-laws
3.1 Restated Certificate of Incorporation (1)
3.2 By-Laws, as amended May 19, 1993 (5)
(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(3)
(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(8)
10.3 The Company's 1991 Employee Stock Purchase Plan, as amended(2)
10.4 The Company's 1991 Stock Option Plan for Non-Employee Directors(3)
10.5 The Timberland Company Long Term Incentive Plan for Senior Management(5)
10.6 The Timberland Company Annual Bonus Plan for Exempt Employees(5)
10
12
EXHIBIT DESCRIPTION PAGE NO.
- ------- ----------- --------
10.7 The Timberland Company Retirement Earnings 401(k) Plan and Trust
Agreements, filed herewith
10.8 The Timberland Company Profit Sharing Plan and Trust Agreements, filed
herewith
10.9 (a) Lease dated March 23, 1987 between The Outdoor Footwear Company and
Corporacion Sublistatica, S.A.(1)
(b) Lease dated November 21, 1988 between 745 Associates and The
Timberland Company(4)
(c) (i) Lease dated July 20, 1992 among Louise Minges, Mitchell Minges and
The Timberland Company(4)
(ii) Amendment dated July 16, 1993 to Lease(5)
(d) Lease dated March 31, 1981 between the Puerto Rico Industrial
Development and The Timberland Company(4)
(e) Lease dated September 7, 1992 between Corporacion Zona Franca
Industrial De Santiago, Inc. and The Recreational Footwear Company(4)
(f) Lease dated December 2, 1992 between Corporacion Zona Franca
Industrial De Santiago, Inc. and The Recreational Footwear Company(4)
(g) Lease dated as of June 29, 1993 between Timberland Dominicana, S.A.
and Santiago Norte, S.A. (Pisano) Industrial Park(5)
(h) Lease dated as of November 30, 1993 between Timberland Dominicana,
S.A. and Santiago Norte, S.A. (Pisano) Industrial Park(5)
(i) Lease dated as of December 16, 1993 between Timberland Dominicana,
S.A. and Santiago Norte, S.A. (Pisano) Industrial Park(5)
(j) Lease dated as of March 31, 1993 between Talbot Operations, Inc. and
The Timberland Company(5)
(k) (i) Sublease dated March 31, 1994 between Hewlett-Packard Company and
The Timberland Company(6)
(ii) Amendment No. 1 dated July 15, 1994 to Sublease(7)
10.10 (a) Amended and Restated Note Agreements dated as of April 1, 1994
regarding $35,000,000 9.70% Senior Notes due December 1, 1999(6)
(b) Amendment No. 1 dated as of April 1, 1995 to Amended and Restated Note
Agreements(9)
(c) Amendment No. 2 dated as of June 28, 1995 to Amended and Restated Note
Agreements(9)
10.11 Termination of Credit Agreement among The Timberland Company, certain
banks and Chase Manhattan Bank, N.A. as Agent, dated as of December 15,
1994(7)
10.12 (a) Note Agreements dated as of April 1, 1994 regarding $65,000,000 7.16%
Senior Notes due April 15, 2000(6)
(b) Amendment No. 1 dated as of April 1, 1995 to Note Agreements(9)
(c) Amendment No. 2 dated as of June 28, 1995 to Note Agreements(9)
10.13 (a) Amended and Restated Credit Agreement dated as of March 14, 1995 among
The Timberland Company, certain banks listed therein and Morgan
Guaranty Trust Company of New York, as Agent(7)
(b) Amendment No. 3 dated as of July 21, 1995 to the Amended and Restated
Credit Agreement, which also incorporates Amendment No. 1 dated as of
April 19, 1995 and Amendment No. 2 dated as of June 28, 1995(9)
10.14 (a) Note Agreements dated as of December 15, 1994 regarding $106,000,000
8.94% Senior Notes due December 15, 2001(7)
(b) Amendment No. 1 dated as of April 1, 1995 to Note Agreements(9)
(c) Amendment No. 2 dated as of June 28, 1995 to Note Agreements(9)
11
13
EXHIBIT DESCRIPTION PAGE NO.
- ------- ----------- --------
(13) Annual Report to security holders
13. Portions of 1995 Annual Report to security holders as incorporated herein
by reference, filed herewith
(21) Subsidiaries
21. List of subsidiaries of the Registrant, filed herewith
(23) Consent of experts and counsel
23. Consent of Deloitte & Touche LLP to the incorporation by reference of
their report included in the Registrant's 1995 Annual Report to security
holders
(27) Financial Data Schedule
27. Financial Data Schedules, filed herewith
(99) Additional Exhibit
99. Cautionary Statements for Purposes of the "Safe Harbor" Provisions of the
Private Securities Litigation Reform Act of 1995
- ---------------
(1) Filed as exhibits to Registration Statement on Form S-1, numbered 33-14319,
and incorporated herein by reference.
(2) Filed on June 21, 1995, as an exhibit to Registration Statement on Form S-8,
numbered 33-60459, and incorporated herein by reference.
(3) Filed as exhibits to the Annual Report on Form 10-K for the fiscal year
ended December 31, 1991, and incorporated herein by reference.
(4) Filed as exhibits to the Annual Report on Form 10-K for the fiscal year
ended December 31, 1992, and incorporated herein by reference.
(5) Filed as exhibits to the Annual Report on Form 10-K for the fiscal year
ended December 31, 1993, and incorporated herein by reference.
(6) Filed as exhibits to the Quarterly Report on Form 10-Q for the fiscal period
ended July 1, 1994, and incorporated herein by reference.
(7) Filed as exhibits to the Annual Report on Form 10-K for the fiscal year
ended December 31, 1994, and incorporated herein by reference.
(8) Filed on June 21, 1995, as an exhibit to Registration Statement on Form S-8,
numbered 33-60457, and incorporated herein by reference.
(9) Filed as exhibits to the Quarterly Report on Form 10-Q for the fiscal period
ended June 30, 1995, and incorporated herein by reference.
Pursuant to paragraph 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 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.
12
14
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
/S/ SIDNEY W. SWARTZ
By:.................................
SIDNEY W. SWARTZ, PRESIDENT
March 28, 1996
Pursuant to the requirements of the Securities Exchange Act 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
- ------------------------------------------ ------------------------------ ---------------
SIDNEY W. SWARTZ Chairman of the Board, March 28, 1996
........................................ President and Chief
(SIDNEY W. SWARTZ) Executive Officer (Principal
Executive Officer)
JEFFREY B. SWARTZ Executive Vice President, March 28, 1996
........................................ Chief Operating Officer and
(JEFFREY B. SWARTZ) Director
KEITH D. MONDA Senior Vice President-Finance March 28, 1996
........................................ and Administration and Chief
(KEITH D. MONDA) Financial Officer
DENNIS W. HAGELE Vice President-Finance and March 28, 1996
........................................ Corporate Controller (Chief
(DENNIS W. HAGELE) Accounting Officer)
ROBERT M. AGATE Director March 28, 1996
........................................
(ROBERT M. AGATE)
JOHN F. BRENNAN Director March 28, 1996
........................................
(JOHN F. BRENNAN)
ABRAHAM ZALEZNIK Director March 28, 1996
........................................
(ABRAHAM ZALEZNIK)
13
15
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, 1995 and 1994 and for the three years in the period
ended December 31, 1995, and have issued our report thereon dated February 7,
1996; such consolidated financial statements and report are included in your
1995 Annual Report to security holders and are incorporated herein by reference.
Our audits also included the consolidated financial statement schedule of The
Timberland Company, listed in Item 14. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion based on our audit. In our opinion, such consolidated financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
/s/ DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 7, 1996
F-1
16
SCHEDULE VIII
THE TIMBERLAND COMPANY
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
ADDITIONS
-------------------------
BALANCE AT CHARGED TO CHARGED TO DEDUCTIONS BALANCE AT
BEGINNING COSTS AND OTHER NET OF END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS WRITE-OFFS PERIOD
----------- --------- ---------- ---------- ---------- ----------
Allowance for doubtful accounts:
Year ended
December 31, 1995............... $2,704 $3,697 -- $3,743 $2,658
December 31, 1994............... 1,014 1,938 -- 248 2,704
December 31, 1993............... 1,821 1,131 -- 1,938 1,014
Group insurance reserve:
Year ended
December 31, 1995............... $1,810 $5,467 -- $4,503 $2,774
December 31, 1994............... 1,319 7,983 -- 7,492 1,810
December 31, 1993............... 1,401 5,752 -- 5,834 1,319
F-2
17
Timberland; [TIMBERLAND LOGO]; Treeline; Weathergear; [WORK LOGO];
[MILL RIVER LOGO]; More Quality Than You May Ever Need; Active Comfort
Technology; ACT; Mountain to River; Toporelief; Topozoic; Boots, Shoes,
Clothing, Wind, Water, Earth & Sky; Wind, Water, Earth & Sky; Elements; The
Elements of Design are the Elements themselves, Wind, Water, Earth and Sky;
Nothing Can Stop You; Blackridge Mountain; Blackridge Mountain Logo Design;
Mill River; Mill River Logo Design; TBL 30; Timberland 1049; Trail Grip; and
Tims are trademarks or registered trademarks of The Timberland Company.
Gore-Tex is a registered trademark of W.L. Gore & Associates, Inc.
(C) The Timberland Company 1996
All Rights Reserved.