The Timberland Company (NYSE: TBL) today reported fourth quarter net income of $39.5 million and diluted earnings per share (EPS) of $1.10, compared with fourth quarter 2002 net income of $27.1 million and diluted EPS of $0.73.
Fourth quarter revenue increased 16.4% to $415.3 million, driven by strong global gains in footwear. Global footwear revenue expanded 20.7% to $320.3 million, driven by strong growth in boots, men's and women's casual, kids' and outdoor performance categories. Global apparel and accessories revenue grew 2.9% to $91.0 million, driven by gains in the Company's Asian business, which offset declines in European apparel impacted by comparisons to strong prior year performance.
Revenue results reflected strong gains in both U.S. (+11.1%) and international markets (+30.7% or +17.1% in constant dollars). U.S. revenue growth benefited from growth in the U.S. consumer direct business (+11.2%), driven by a 5.9% increase in comparable store sales. Favorable foreign exchange rate changes also added $12.9 million (or 3.6%) to overall revenue growth.
Operating profit for the quarter increased 48.2% to $62.2 million. 2002 fourth quarter operating profit was negatively impacted by approximately $6 million of incremental transportation costs related to the West Coast work stoppage. Excluding this impact, 2003 fourth quarter operating profit rose 29.6%. Profit gains reflected strong revenue growth and significant improvement in gross margin, which benefited from lower product related costs, lower levels of off-price sales and favorable foreign exchange rate changes. For the quarter, foreign exchange rate changes contributed approximately $3.1 million to operating profit, which was leveraged to support continued investments against strategic priorities, including international business expansion and global brand building efforts.
EPS for the quarter expanded 50.7% to $1.10, reflecting profit gains and continued benefits from share repurchases. In the fourth quarter, the Company bought back 391 thousand shares at a total cost of $19.7 million. For the full year, Timberland repurchased 2,291 thousand shares at a total cost of $103.8 million. The Company currently has 4.6 million shares remaining under existing share repurchase programs.
A disciplined approach to asset management drove strong gains in cash management and return on capital. Timberland ended the quarter with $241.8 million in cash and no debt outstanding while driving improvements in annual inventory turns and receivables management. Timberland's annual return on capital reached 30.4%.
For the full year, Timberland posted revenue of $1,342.1 million (+12.7% versus prior year, or +8.0% in constant dollars), operating profit of $184.3 million (+32.8% versus prior year) and generated nearly $200 million in net operating cash flow – all records for the Company.
Jeffrey B. Swartz, Timberland's President and Chief Executive Officer, stated, #'Timberland's fourth quarter capped an outstanding year for our Company driven by strong performance across global markets. In the United States, our focus on driving footwear innovation across our portfolio, combined with significantly improved performance in Timberland's consumer direct business, enabled us to deliver double-digit revenue gains in a competitive retail marketplace. Timberland's international business also posted strong results, reflecting double-digit constant dollar sales gains in Europe and Asia as we continue to benefit from efforts to enhance our premium integrated brand positioning in those regions.''
#'Overall, we are pleased to have delivered strong financial results in 2003 and believe that we are on track for solid business growth in 2004. We remain committed to delivering solid revenue growth, double-digit profit gains and strong cash flow in 2004 and beyond and believe that the strategies we are pursuing will enable us to continue to deliver strong financial performance while capturing the great potential that we see for the Timberland enterprise.''
Note that comments made by Mr. Swartz are Timberland's performance targets, based on current expectations. These comments are forward-looking, and actual results may differ materially.