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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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FORM 10-Q

|ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended June 27, 2003

OR

|o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from  to

Commission File Number 1-9548

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The Timberland Company

(Exact name of registrant as specified in its charter)

Delaware(State or other jurisdiction of
incorporation or organization)

02-0312554(I.R.S. Employer
Identification Number)200 Domain Drive,
Stratham, New Hampshire(Address of principal executive offices)

03885(Zip Code)


Registrant's telephone number, including area code: (603) 772-9500

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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 ý    No o

Indicate
by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes ý    No o

On
July 25, 2003, 28,441,902 shares of the registrant's Class A Common Stock were outstanding and 7,144,675 shares of the registrant's Class B Common Stock were
outstanding.

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THE TIMBERLAND COMPANY    FORM 10-Q

TABLE OF CONTENTS



|                                         |         |                                                                                                                |                                                                                       | Page(s)
|---------------------------------------- | ------- | -------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------- | -------
|Part I Financial Information (unaudited) |         |                                                                                                               
|                                         | Item 1. |                                                                                                                | Financial Statements                                                                  |        
|                                         |         | Condensed Consolidated Balance SheetsJune 27, 2003 and December 31, 2002 (audited)                            |                                                                                       | 1-2    
|                                         |         | Condensed Consolidated Statements of IncomeFor the Three and Six Months Ended June 27, 2003 and June 28, 2002 |                                                                                       | 3      
|                                         |         | Condensed Consolidated Statements of Cash FlowsFor the Six Months Ended June 27, 2003 and June 28, 2002       |                                                                                       | 4      
|                                         |         | Notes to Condensed Consolidated Financial Statements                                                           |                                                                                       | 5-10   
|                                         | Item 2. |                                                                                                                | Management's Discussion and Analysis of Financial Condition and Results of Operations |        
|                                         | Item 3. |                                                                                                                | Quantitative and Qualitative Disclosures About Market Risk                            |        
|                                         | Item 4. |                                                                                                                | Controls and Procedures                                                               |        
|Part II Other Information                |         |                                                                                                               
|                                         | Item 4. |                                                                                                                | Submission of Matters to a Vote of Security Holders                                   |        
|                                         | Item 6. |                                                                                                                | Exhibits and Reports on Form 8-K                                                      |        
|Signatures                               |         | 23                                                                                                            
|Exhibit Index                            |         | 24                                                                                                            
|Exhibits                                 |         |                                                                                                               

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PART I FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

THE TIMBERLAND COMPANY        CONDENSED CONSOLIDATED BALANCE SHEETS        ASSETS        (Dollars in Thousands)

|                                               |                                                                                                                        | June 27,
2003                     |          | December 31,
2002 |        
|---------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------- | --------------------------------- | -------- | ----------------- | -------
|
|Current assets                                 |                                                                                                                        |                                   |          |                   |        
|                                               | Cash and equivalents                                                                                                   |                                   | $        | 82,578            |        
|                                               | Accounts receivable, net of allowance for doubtful accounts of $7,144 at June 27, 2003 and $7,487 at December 31, 2002 |                                   |          | 121,995           |        
|                                               | Inventory                                                                                                              |                                   |          | 173,047           |        
|                                               | Prepaid expense                                                                                                        |                                   |          | 21,448            |        
|                                               | Deferred income taxes                                                                                                  |                                   |          | 18,919            |        
|                                               |                                                                                                                        |                                   |          |                   |        
|                                               |                                                                                                                        | Total current assets              |          |                   | 417,987
|                                               |                                                                                                                        |                                   |          |                   |        
|Property, plant and equipment                  |                                                                                                                        |                                   | 182,815  |                   |        
|Less accumulated depreciation and amortization |                                                                                                                        |                                   | (113,087 | )                 |        
|                                               |                                                                                                                        |                                   |          |                   |        
|                                               |                                                                                                                        | Net property, plant and equipment |          |                   | 69,728 
|                                               |                                                                                                                        |                                   |          |                   |        
|Goodwill                                       |                                                                                                                        |                                   | 14,163   |                   |        
|Intangible assets                              |                                                                                                                        |                                   | 3,516    |                   |        
|Other assets, net                              |                                                                                                                        |                                   | 7,234    |                   |        
|                                               |                                                                                                                        |                                   |          |                   |        
|Total assets                                   |                                                                                                                        | $                                 | 512,628  |                   | $      
|                                               |                                                                                                                        |                                   |          |                   |        

See accompanying notes to condensed consolidated financial statements.

1

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THE TIMBERLAND COMPANY        CONDENSED CONSOLIDATED BALANCE SHEETS        LIABILITIES AND STOCKHOLDERS' EQUITY        (Dollars in Thousands, Except Per Share Data)

|                                            |                                                                                                                                                                                                                                                                            | June 27,
2003              |                           | December 31,
2002 |        
|------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------------------------- | ----------------- | -------
|
|Current liabilities                         |                                                                                                                                                                                                                                                                            |                            |                           |                   |        
|                                            | Accounts payable                                                                                                                                                                                                                                                           |                            | $                         | 45,618            |        
|                                            | Accrued expense                                                                                                                                                                                                                                                            |                            |                           |                   |        
|                                            |                                                                                                                                                                                                                                                                            | Payroll and related        |                           |                   | 24,985 
|                                            |                                                                                                                                                                                                                                                                            | Other and interest         |                           |                   | 47,634 
|                                            | Income taxes payable                                                                                                                                                                                                                                                       |                            |                           | 4,739             |        
|                                            | Derivative liabilities                                                                                                                                                                                                                                                     |                            |                           | 11,428            |        
|                                            |                                                                                                                                                                                                                                                                            |                            |                           |                   |        
|                                            |                                                                                                                                                                                                                                                                            |                            | Total current liabilities |                   |        
|                                            |                                                                                                                                                                                                                                                                            |                            |                           |                   |        
|Deferred compensation and other liabilities |                                                                                                                                                                                                                                                                            |                            | 5,002                     |                   |        
|Deferred income taxes                       |                                                                                                                                                                                                                                                                            |                            | 6,573                     |                   |        
|Stockholders' equity                        |                                                                                                                                                                                                                                                                            |                            |                           |                   |        
|                                            | Preferred stock, $.01 par value; 2,000,000 shares authorized; none issued and outstanding                                                                                                                                                                                  |                            |                           |                  |        
|                                            | Class A Common Stock, $.01 par value (1 vote per share); 120,000,000 shares authorized; 42,531,964 shares issued at June 27, 2003 and 41,518,667 shares at December 31, 2002                                                                                               |                            |                           | 425               |        
|                                            | Class B Common Stock, $.01 par value (10 votes per share); convertible into Class A shares on a one-for-one basis; 20,000,000 shares authorized; 7,144,675 shares issued and outstanding at June 27, 2003 and 7,561,185 shares issued and outstanding at
December 31, 2002 |                            |                           | 71                |        
|                                            | Additional paid-in capital                                                                                                                                                                                                                                                 |                            |                           | 159,728           |        
|                                            | Deferred compensation                                                                                                                                                                                                                                                      |                            |                           | (4,229            | )      
|                                            | Retained earnings                                                                                                                                                                                                                                                          |                            |                           | 630,968           |        
|                                            | Accumulated other comprehensive income/(loss)                                                                                                                                                                                                                              |                            |                           | (4,737            | )      
|                                            | Less treasury stock at cost, 13,963,398 Class A shares at June 27, 2003 and 12,773,521 Class A shares at December 31, 2002                                                                                                                                                 |                            |                           | (415,577          | )      
|                                            |                                                                                                                                                                                                                                                                            |                            |                           |                   |        
|                                            |                                                                                                                                                                                                                                                                            | Total stockholders' equity |                           |                   | 366,649
|                                            |                                                                                                                                                                                                                                                                            |                            |                           |                   |        
|Total liabilities and stockholders' equity  |                                                                                                                                                                                                                                                                            | $                          | 512,628                   |                   | $      
|                                            |                                                                                                                                                                                                                                                                            |                            |                           |                   |        

See accompanying notes to condensed consolidated financial statements.

2

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THE TIMBERLAND COMPANY        CONDENSED CONSOLIDATED STATEMENTS OF INCOME        (Amounts in Thousands, Except Per Share Data)        (Unaudited)

|                                                                              |                            | For the
Three Months Ended   |         | For the
Six Months Ended |       
|----------------------------------------------------------------------------- | -------------------------- | ---------------------------- | ------- | ------------------------ | ------
|
|Revenue                                                                       |                            | $                            | 211,733 |                          | $     
|Cost of goods sold                                                            |                            |                              | 112,957 |                          |       
|                                                                              |                            |                              |         |                          |       
|                                                                              | Gross profit               |                              |         | 98,776                   |       
|                                                                              |                            |                              |         |                          |       
|Operating expense                                                             |                            |                              |         |                          |       
|                                                                              | Selling                    |                              |         | 70,449                   |       
|                                                                              | General and administrative |                              |         | 19,266                   |       
|                                                                              |                            |                              |         |                          |       
|                                                                              |                            | Total operating expense      |         |                          | 89,715
|                                                                              |                            |                              |         |                          |       
|Operating income                                                              |                            |                              | 9,061   |                          |       
|                                                                              |                            |                              |         |                          |       
|Other expense/(income)                                                        |                            |                              |         |                          |       
|                                                                              | Interest expense           |                              |         | 222                      |       
|                                                                              | Other, net                 |                              |         | (103                     | )     
|                                                                              |                            |                              |         |                          |       
|                                                                              |                            | Total other expense/(income) |         |                          | 119   
|                                                                              |                            |                              |         |                          |       
|Income before income taxes                                                    |                            |                              | 8,942   |                          |       
|                                                                              |                            |                              |         |                          |       
|Provision for income taxes                                                    |                            |                              | 3,130   |                          |       
|                                                                              |                            |                              |         |                          |       
|Income before cumulative effect of change in accounting principle             |                            | $                            | 5,812   |                          | $     
|                                                                              |                            |                              |         |                          |       
|Cumulative effect of change in accounting principle                           |                            |                              |        |                          |       
|                                                                              |                            |                              |         |                          |       
|Net income                                                                    |                            | $                            | 5,812   |                          | $     
|                                                                              |                            |                              |         |                          |       
|Earnings per share before cumulative effect of change in accounting principle |                            |                              |         |                          |       
|                                                                              |                            | Basic                        |         | $                        | .16   
|                                                                              |                            |                              |         |                          |       
|                                                                              |                            | Diluted                      |         | $                        | .16   
|                                                                              |                            |                              |         |                          |       
|Earnings per share after cumulative effect of change in accounting principle  |                            |                              |         |                          |       
|                                                                              |                            | Basic                        |         | $                        | .16   
|                                                                              |                            |                              |         |                          |       
|                                                                              |                            | Diluted                      |         | $                        | .16   
|                                                                              |                            |                              |         |                          |       
|Weighted-average shares outstanding                                           |                            |                              |         |                          |       
|                                                                              |                            | Basic                        |         |                          | 35,678
|                                                                              |                            |                              |         |                          |       
|                                                                              |                            | Diluted                      |         |                          | 36,633
|                                                                              |                            |                              |         |                          |       

See accompanying notes to condensed consolidated financial statements.

3

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THE TIMBERLAND COMPANY        CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS        (Dollars in Thousands)        (Unaudited)

|                                                  |                                                                                          | For the
Six Months Ended                                           |                    
|------------------------------------------------- | ---------------------------------------------------------------------------------------- | ------------------------------------------------------------------ | -------------------
|
|Cash flows from operating activities:             |                                                                                          |                                                                    |                    
|                                                  | Net income                                                                               |                                                                    | $                  
|                                                  | Adjustments to reconcile net income to net cash provided/(used) by operating activities: |                                                                    |                    
|                                                  |                                                                                          | Deferred income taxes                                              |                    
|                                                  |                                                                                          | Depreciation and amortization                                      |                    
|                                                  |                                                                                          | Cumulative effect of change in accounting principle                |                    
|                                                  |                                                                                          | Tax benefit from stock option plans                                |                    
|                                                  |                                                                                          | Increase/(decrease) in cash from changes in working capital items: |                    
|                                                  |                                                                                          |                                                                    | Accounts receivable
|                                                  |                                                                                          |                                                                    | Inventory          
|                                                  |                                                                                          |                                                                    | Prepaid expense    
|                                                  |                                                                                          |                                                                    | Accounts payable   
|                                                  |                                                                                          |                                                                    | Accrued expense    
|                                                  |                                                                                          |                                                                    | Income taxes       
|                                                  |                                                                                          |                                                                    |                    
|                                                  |                                                                                          |                                                                    |                    
|                                                  |                                                                                          |                                                                    |                    
|Cash flows from investing activities:             |                                                                                          |                                                                    |                    
|                                                  | Additions to property, plant and equipment, net                                          |                                                                    |                    
|                                                  | Other, net                                                                               |                                                                    |                    
|                                                  |                                                                                          |                                                                    |                    
|                                                  |                                                                                          |                                                                    |                    
|                                                  |                                                                                          |                                                                    |                    
|Cash flows from financing activities:             |                                                                                          |                                                                    |                    
|                                                  | Common stock repurchases                                                                 |                                                                    |                    
|                                                  | Issuance of common stock                                                                 |                                                                    |                    
|                                                  |                                                                                          |                                                                    |                    
|                                                  |                                                                                          |                                                                    |                    
|                                                  |                                                                                          |                                                                    |                    
|Effect of exchange rate changes on cash           |                                                                                          |                                                                    | 1,466              
|                                                  |                                                                                          |                                                                    |                    
|Net decrease in cash and equivalents              |                                                                                          |                                                                    | (58,617            
|Cash and equivalents at beginning of period       |                                                                                          |                                                                    | 141,195            
|                                                  |                                                                                          |                                                                    |                    
|Cash and equivalents at end of period             |                                                                                          | $                                                                  | 82,578             
|                                                  |                                                                                          |                                                                    |                    
|                                                  |                                                                                         
|Supplemental disclosure of cash flow information: |                                                                                          |                                                                    |                    
|                                                  | Interest paid                                                                            |                                                                    | $                  
|                                                  | Income taxes paid                                                                        |                                                                    |                    
|                                                  |                                                                                         

See accompanying notes to condensed consolidated financial statements.

4

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THE TIMBERLAND COMPANY        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Dollars in Thousands, Except Per Share Data)  (Unaudited)

Information regarding the Company's other intangible assets follows:

| |  |                                 |  | As of June 27, 2003 |       | As of June 28, 2002
| |  | ------------------------------- |  | ------------------- | ----- | -------------------
|
| |  | Trademarks and related expenses |  | $                   | 7,222 |                    



5

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| |                                                                        |  | For the
Three Months Ended |        | For the
Six Months Ended |  
| | ---------------------------------------------------------------------- |  | -------------------------- | ------ | ------------------------ | -
|
| | Net income                                                             |  | $                          | 5,812  |                          | $
| | Change in cumulative translation adjustment                            |  |                            | 4,016  |                          |  
| | Change in fair value of derivative financial instruments, net of taxes |  |                            | (1,411 | )                        |  
| |                                                                        |  |                            |        |                          |  
| | Comprehensive income                                                   |  | $                          | 8,417  |                          | $
| |                                                                        |  |                            |        |                          |  



6

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| |  | 2003                              |  | U.S.
Wholesale |         | U.S.
Consumer
Direct |   | International |  | Unallocated
Corporate |         | Consolidated
| |  | --------------------------------- |  | -------------- | ------- | -------------------- | - | ------------- |  | --------------------- | ------- | ------------
| |  | Revenue                           |  | $              | 96,306  |                      | $ | 32,870        |  | $                     | 82,557  |             
| |  | Income/(loss) before income taxes |  |                | 26,110  |                      |   | 1,223         |  |                       | 3,385   |             
| |  | Total assets                      |  |                | 168,221 |                      |   | 28,211        |  |                       | 177,465 |             
| |  | Goodwill                          |  |                | 6,804   |                      |   | 794           |  |                       | 6,565   |             
| |  | 2002                              |  |                |         |                      |   |               |  |                       |         |             
| |  | Revenue                           |  | $              | 93,266  |                      | $ | 32,613        |  | $                     | 65,650  |             
| |  | Income/(loss) before income taxes |  |                | 22,807  |                      |   | 2,796         |  |                       | 5,735   |             
| |  | Total assets                      |  |                | 172,686 |                      |   | 28,402        |  |                       | 144,594 |             
| |  | Goodwill                          |  |                | 6,804   |                      |   | 794           |  |                       | 6,565   |             



| |  | 2003                              |  | U.S.
Wholesale |         | U.S.
Consumer
Direct |   | International |  | Unallocated
Corporate |         | Consolidated
| |  | --------------------------------- |  | -------------- | ------- | -------------------- | - | ------------- |  | --------------------- | ------- | ------------
| |  | Revenue                           |  | $              | 200,308 |                      | $ | 65,701        |  | $                     | 216,721 |             
| |  | Income/(loss) before income taxes |  |                | 54,552  |                      |   | 2,823         |  |                       | 26,103  |             
| |  | 2002                              |  |                |         |                      |   |               |  |                       |         |             
| |  | Revenue                           |  | $              | 183,531 |                      | $ | 66,999        |  | $                     | 166,697 |             
| |  | Income/(loss) before income taxes |  |                | 45,952  |                      |   | 4,368         |  |                       | 23,625  |             



| |  |                 |  | June 27,
2003 |         | December 31,
2002 |   | June 28,
2002
| |  | --------------- |  | ------------- | ------- | ----------------- | - | -------------
| |  | Raw materials   |  | $             | 5,128   |                   | $ | 2,065        
| |  | Work-in-process |  |               | 1,868   |                   |   | 1,745        
| |  | Finished goods  |  |               | 166,051 |                   |   | 118,607      
| |  |                 |  |               |         |                   |   |              
| |  |                 |  | $             | 173,047 |                   | $ | 122,417      
| |  |                 |  |               |         |                   |   |              

7

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8

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Three Months Ended

Six Months EndedBefore cumulative effect of change in accounting principle:

June 27, 2003

June 28, 2002

June 27, 2003

June 28, 2002Net income before cumulative effect of change in accounting principle, as reported

$
5,812

$
4,923

$
25,142

$
13,903Stock-based compensation costs, net of tax


1,364


2,212


3,580


4,263Pro forma net income before cumulative effect of change in accounting principle

$
4,448

$
2,711

$
21,562

$
9,640Basic earnings per share before cumulative effect of change in accounting principle, as reported

$
.16

$
.13

$
.70

$
.37Pro forma basic earnings per share before cumulative effect of change in accounting principle

$
.12

$
.07

$
.60

$
.25Diluted earnings per share before cumulative effect of change in accounting principle, as reported

$
.16

$
.13

$
.69

$
.36Pro forma diluted earnings per share before cumulative effect of change in accounting principle

$
.12

$
.07

$
.59

$
.25


Three Months Ended

Six Months EndedAfter cumulative effect of change in accounting principle:

June 27, 2003

June 28, 2002

June 27, 2003

June 28, 2002Net income after cumulative effect of change in accounting principle, as reported

$
5,812

$
4,923

$
25,142

$
18,816Stock-based compensation costs, net of tax


1,364


2,212


3,580


4,263Pro forma net income after cumulative effect of change in accounting principle

$
4,448

$
2,711

$
21,562

$
14,553Basic earnings per share after cumulative effect of change in accounting principle, as reported

$
.16

$
.13

$
.70

$
.50Pro forma basic earnings per share after cumulative effect of change in accounting principle

$
.12

$
.07

$
.60

$
.38Diluted earnings per share after cumulative effect of change in accounting principle, as reported

$
.16

$
.13

$
.69

$
. 49Pro forma diluted earnings per share after cumulative effect of change in accounting principle

$
.12

$
.07

$
.59

$
.38


9

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10

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ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND  RESULTS OF OPERATIONS  (Unaudited)

The
following discusses The Timberland Company's (the "Company") results of operations and liquidity and capital resources. This discussion, including known trends and uncertainties identified by
management, should be read in conjunction with the condensed consolidated financial statements and related notes. Included is a discussion and reconciliation of total Company and International revenue
growth to constant dollar revenue growth. Constant dollar revenue growth, which excludes the impact of changes in foreign exchange rates, is not a Generally Accepted Accounting Principle ("GAAP")
performance measure. It is used by the Company in its analysis of its financial condition and results of operations.

The
preparation of financial statements in accordance with accounting principles generally accepted in the United States requires assumptions and estimates that affect the reported amounts of assets
and liabilities, disclosures in the financial statements and related notes and the reporting of revenue and expense. The accompanying management discussion is based upon a consistent application of
accounting policies and methodology in developing assumptions and estimates. The Company believes that the estimates, assumptions and judgments involved in applying the critical accounting policies
described in the Management's Discussion and Analysis of Financial Condition and Results of Operations section of the Company's Annual Report on Form 10-K for the year ended
December 31, 2002 have the greatest potential impact on the Company's financial statements. Because of the uncertainty inherent in these matters, actual results could differ from the estimates
used in applying these critical accounting policies. Currently, the Company is not aware of any reasonably likely events or circumstances that would result in materially different amounts being
reported.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 27, 2003 AND JUNE 28, 2002

Revenue

Overview

Total Company revenue for the second quarter of 2003 was $211.7 million, an increase of $20.2 million, or 10.5%, compared with the $191.5 million in
revenue reported for the second quarter of 2002. The Company's International business contributed $16.9 million of the increase, of which $10.1 million was related to favorable foreign
currency impacts, primarily from the strengthening of the euro. Total Company constant dollar revenue growth was 5.3% for the quarter, compared with the prior year, primarily driven by growth in
Spain, the U.K. and Italy, as well as growth in Asia. Domestically, revenue increased 2.6%, with U.S. Wholesale revenue increasing 3.3% and U.S. Consumer Direct increasing 0.8%. Within the U.S.
Wholesale business, modest growth in footwear revenue, and double-digit gains in apparel and accessories revenue drove the 3.3% increase in revenue. Footwear gains were driven by increased sales of
Boots, Women's Casual and the Timberland PRO series products. Footwear revenue also benefited from higher levels of price realization reflecting lower levels of off-price sales. Apparel
and accessories increases were driven by positive retailer reaction to the Timberland apparel Spring line and to the rollout of the Company's new Timberland PRO series apparel line. In
the U.S. Consumer Direct segment, increased footwear and, to a lesser degree, e-commerce revenue, offset the decline in apparel and accessories revenue. Overall, the business was affected
by the continuing weakness in the U.S. retail climate and a promotional market environment.

11

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Domestic
revenue, comprised of the U.S. Wholesale and U.S. Consumer Direct segments, for the second quarter of 2003 was $129.2 million, an increase of $3.3 million, or 2.6%, compared
with the same period in 2002. Domestic revenue represented 61.0% of total revenue for the quarter, compared with
65.7% for the second quarter of 2002. The U.S. Wholesale segment revenue increased 3.3% for the quarter, compared with the same period in 2002, reflecting increases in footwear average selling prices,
benefiting from favorable product mix and lower levels of off-price sales and, to a lesser degree, growth in apparel and accessories unit sales, in part due to the Company's new Timberland
PRO series apparel line introduced in the Fall of 2002. The U.S. Consumer Direct segment revenue increased 0.8%, compared with the same period in 2002. On a comparable store basis,
domestic retail sales decreased 1.9%. This decrease was offset by the addition of 5 stores in the second half of 2002. The increase in revenue compared with the prior year was primarily due to an
increase in footwear unit sales, partially offset by a decline in apparel and accessories average selling prices due to mix of products sold and promotional markdowns, reflecting continued weakness in
the U.S. retail climate. The Company will continue to focus on enhancing profitability at current store locations and anticipates ending the year with a store count equal to 2002 year end.

International
segment revenue for the second quarter of 2003 was $82.6 million, an increase of $16.9 million, or 25.8%, compared with the second quarter of 2002. On a constant dollar
basis, International revenue increased 10.4%, compared with the same period in 2002. International revenue represented 39.0% of total revenue for the quarter, compared with 34.3% for the second
quarter of 2002. The increase in revenue over the prior year was driven by the impact of foreign exchange and unit volume increases, primarily in footwear and, to a lesser degree, apparel and
accessories. Average selling prices were down slightly, reflective of a general slowdown in the European marketplace and the impact of SARS on the Asian wholesale and retail markets. Geographically,
constant dollar revenue increases were driven by solid gains in Spain, the U.K. and Italy, combined with double-digit growth in Asia.

Products

Worldwide footwear revenue for the second quarter of 2003 was $162.5 million, an increase of $17.1 million, or 11.8%, compared with the same period in 2002. The
increase was primarily attributable to International unit sales, the impact of foreign exchange and, to a lesser degree, higher domestic average selling prices. In total, footwear unit sales increased
6.5% and footwear average selling prices increased 4.9%, compared with the prior year. The increase in footwear average selling prices was principally due to the impact of foreign exchange and, to a
lesser degree, lower levels of U.S. Wholesale off-price sales. By category, Boots, Women's Casual, the Timberland PRO series and Men's Casual drove the revenue increases over
the prior year. These increases were partially offset by a decrease in Kids', in part due to lower levels of off-price sales, compared with the same period last year. Worldwide footwear
revenue represented 77.7% and 77.0% of total product revenue for the second quarters of 2003 and 2002, respectively.

Worldwide
apparel and accessories revenue for the second quarter of 2003 was $46.7 million, an increase of $3.4 million, or 7.7%, compared with the same period in 2002. The increase was
primarily attributable to the impact of foreign exchange and International unit sales increases and, to a lesser degree, U.S. Wholesale double-digit revenue increases in the Timberland®
apparel line and the rollout of Timberland PRO series apparel. These increases were partially offset by a decline in U.S. Consumer Direct average selling prices, as discussed previously.
In total, apparel and accessories unit sales increased 6.6% and average selling prices increased 1.1% over the same period last year. Worldwide apparel and accessories revenue represented 22.3% and
23.0% of total product revenue for the second quarters of 2003 and 2002, respectively.

12

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Worldwide
royalty revenue for the second quarter of 2003 was $2.5 million, a decrease of $0.3 million, or 9.4%, compared with the same period last year. The decrease was driven primarily
by the Company's decision to maximize the potential of the Company's Canadian footwear business by changing it from a distributor royalty arrangement in 2002 to a wholly-owned subsidiary in 2003.

Channels

Worldwide wholesale revenue for the second quarter of 2003 was $149.4 million, an increase of $14.4 million, or 10.7%, compared with the same period in 2002. The
increase in revenue was primarily due to increases in worldwide footwear unit sales and the impact of foreign exchange. Additionally, as mentioned previously, U.S. Wholesale average selling prices
increased, reflecting favorable product mix and lower levels of off-price sales. Worldwide consumer direct revenue, which includes the Company's worldwide retail and U.S. e-commerce
businesses, for the quarter was $62.4 million, an increase of $5.8 million, or 10.2%, compared with the same period in 2002. The increase was primarily due to worldwide unit sales
increases in both footwear and apparel and accessories and, to a lesser degree, the impact of foreign exchange, partially offset by a decline in U.S. Consumer Direct apparel and accessories average
selling prices, as discussed previously. During the quarter, the Company opened 5 retail stores and closed 2 retail stores, worldwide. Internationally, the Company will continue to target new store
additions but, given the U.S. retail climate and the promotional market environment, will focus on controlling new store growth and enhancing profitability at current U.S. locations.

Gross Profit

Gross
profit as a percentage of revenue for the second quarter of 2003 was 46.7%, an increase of 1.7 percentage points from the 44.9% reported for the second quarter of 2002. Overall, gross
margins benefited from lower product costs, higher margins from reduced levels of off-price sales
and mix of merchandise sold. Additionally, gross margin rates benefited from the increased percentage of higher margin International revenue as a share of the total Company business. Foreign exchange
had a modest negative impact on gross margins due to the effects of previously established hedge positions but, at current rates, should aid gross margins for the balance of 2003. The year over year
impact of increases in leather hide prices had a moderate negative impact on second quarter gross margin rates. Overall, the Company is targeting improvement in gross margin rates for the balance of
2003, when compared with the prior year, after adjusting for the negative impact of the fourth quarter 2002 U.S. west coast port work stoppage, which added approximately $6.0 million in
additional freight charges.

The
Company includes the costs of procuring inventory (sourcing costs, inbound freight and duty, overhead and other similar costs) in cost of goods sold. These costs amounted to $21.6 million
and $21.4 million in the second quarters of 2003 and 2002, respectively.

Operating Expense

Operating
expense was $89.7 million for the second quarter of 2003, up $9.7 million, or 12.1%, from the $80.0 million reported for the second quarter of 2002. Operating expense as
a percentage of revenue for the quarter increased to 42.4%, from 41.8% for the second quarter of 2002. The dollar increase was, in part due to foreign exchange rate changes, which added
$4.4 million in operating expense, or 2.1 percentage points, compared with the prior year. Of the remaining $5.3 million of year over year increase, $4.9 million was
related to growth in International operations, primarily investments in selling costs.

Selling
expense was $70.4 million, an increase of $6.9 million, or 10.9%, compared with the same period last year. This increase was consistent with the Company's rate of revenue growth.
Within this category of expense, approximately $3.5 million of the increase was due to foreign exchange and approximately $2.6 million was related to investments in International new
store operating costs, store

13

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support
and rents. The remainder of the increase was primarily in distribution costs, particularly freight on increased year over year shipments, product development costs and U.S. Consumer Direct
store operating costs. These increases were partially offset by lower corporate costs, primarily bad debt expense and lower marketing and brand management related costs.

The
Company includes the costs of housing inventory (warehousing and handling costs) in selling expense. These costs amounted to $6.9 million and $6.8 million in the second quarters of
2003 and 2002, respectively. Advertising expense, which is also included in selling expense, was $3.8 million and
$4.2 million in the second quarters of 2003 and 2002, respectively. Advertising costs are expensed as incurred.

General
and administrative expense, at $19.3 million, increased $2.8 million, or 16.8%, compared with the same period last year. Approximately $0.9 million of the dollar increase
was related to foreign exchange. The remainder of the increase was primarily due to investment in International operations in support of the growth of the business, information technology services,
depreciation, insurance and charitable contributions.

Operating Income/Income Before Income Taxes

Operating
income was $9.1 million for the second quarter of 2003, up $3.1 million, or 51.7%, from the $6.0 million reported for the second quarter of 2002. As a percentage of
revenue, operating income was 4.3%, compared with 3.1% for the prior year. This improvement was primarily driven by the 10.5% revenue increase and by improved gross margin rates, partially offset by
expense investments, as discussed previously. The Company is targeting relatively flat operating margins for the balance of 2003, compared with the prior year, after adjusting for the negative impact
of the fourth quarter 2002 U.S. west coast port work stoppage, which added approximately $6.0 million in incremental freight costs in the fourth quarter of 2002.

Income
before income taxes increased in the U.S. Wholesale segment, compared with the prior year. The increase in operating income was driven by a 2.4 percentage point improvement in gross
margin rates, reflecting lower levels of off-price sales and mix of merchandise sold, and, to a lesser degree, lower expense rates. The U.S. Consumer Direct segment operating income
declined compared with the prior year primarily as a result of the continuing overall weakness in the U.S. retail climate and a promotional market environment, which pressured overall store returns
and contributed to a 1.9% decrease in comparable store sales. U.S. Consumer Direct revenue was up 0.8%, compared with the same period in 2002, and gross margin rates decreased primarily due to
promotional markdowns. Operating expenses increased 5.3%. Internationally, constant dollar revenue increased 10.4% while operating income decreased from lower gross margin rates, reflecting
challenging European economic conditions and the effect of SARS on the Asian market, as well as increases in operating expense rates, reflecting investments in store related costs and enhanced
organization capability. Foreign exchange had a minimal impact on second quarter income before income taxes, as revenue increases were offset by operating expense increases and the impact of
previously established hedge positions. The Unallocated Corporate segment is comprised of the Company's corporate administrative costs, supply chain costs, corporate marketing and brand management and
other costs not allocated to the Company's businesses. Unallocated Corporate losses before income taxes decreased compared to the prior year, primarily due to a $2.3 million reduction in supply
chain costs, a $0.7 million reduction in bad debt expense and a $0.8 million reduction in marketing costs, compared with the same period last year, partially offset by a decrease in
other income due to the prior year strengthening of foreign exchange rates that resulted in a favorable translation of intercompany balances.

14

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Other, net, Interest and Taxes

Other,
net was $0.1 million of income in the second quarter of 2003, compared with $1.8 million of income in the second quarter of 2002. The decrease was primarily due to the effect of
the rapid strengthening of foreign exchange rates in 2002, versus the dollar, on the translation of intercompany balances. Other, net includes interest income of $0.2 million and
$0.3 million in the second quarters of 2003 and 2002, respectively. Interest expense, which is comprised of fees related to the establishment and maintenance of the Company's revolving credit
facility and to interest paid on short term borrowings, was $0.2 in the second quarters of 2003 and 2002.

The
effective tax rates for the quarters ended June 27, 2003 and June 28, 2002 were 35.0% and 35.5%, respectively. During the fourth quarter of 2002, the Company adjusted its full year
2002 effective tax rate to 35.0%, equal to the estimated rate for 2003.

RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 27, 2003 AND JUNE 28, 2002

Revenue



Total Company revenue for the first six months of 2003 was $482.7 million, an increase of $65.5 million, or 15.7%, compared with the
$417.2 million in revenue reported for the first six months of 2002. The Company's International business contributed $50.0 million of the increase, of which $28.9 million was
related to favorable foreign currency impacts, primarily from the strengthening of the euro. Total Company constant dollar revenue growth was 8.8% in the first half, compared with the prior year,
primarily driven by growth in Italy, Spain, Germany and the U.K., as well as growth in Asia. Domestically, revenue increased 6.2%, with U.S. Wholesale revenue increasing 9.1% and U.S. Consumer Direct
decreasing 1.9%. Within the U.S. Wholesale business, moderate growth in footwear revenue drove the increase, along with double-digit increases in apparel and accessories revenue, impacted by positive
retailer response to Spring product offerings and first quarter weather trends favorable to the Company in the northeastern region of the United States. The decline in U.S. Consumer Direct revenue was
primarily due to the continuing overall weakness in the U.S. retail climate and a promotional market environment, resulting in a 3.1% comparable store sales decrease.

Segments

Domestic revenue, comprised of the U.S. Wholesale and U.S. Consumer Direct segments, for the first six months of 2003 was $266.0 million, an increase of
$15.5 million, or 6.2%, compared with the same period in 2002. Domestic revenue represented 55.1% of total revenue for the first half, compared with 60.0% for the first half of 2002. The U.S.
Wholesale segment revenue increased 9.1% in the first half, compared with the same period in 2002, primarily due to growth in footwear unit sales and, to a lesser degree, growth in apparel and
accessories unit sales. These increases were principally a result of positive retailer response to Spring product offerings, weather trends favorable to the Company in the northeastern region of the
United States in the first quarter and, to a lesser degree, in the second quarter, increased footwear average selling prices, benefiting from lower levels of off-price sales. The U.S.
Consumer Direct segment revenue decreased 1.9%, compared with the same period in 2002. On a comparable store basis, domestic retail sales decreased 3.1%. The decrease in revenue, compared with the
prior year, was primarily due to the continuing overall weakness in the U.S. retail climate and a promotional market environment, which resulted in a decline in apparel and accessories average selling
prices and, to a lesser degree, a reduction in apparel and accessories unit sales. These were partially offset by increased footwear unit sales.

International
segment revenue for the first six months of 2003 was $216.7 million, an increase of $50.0 million, or 30.0%, compared with the first six months of 2002. On a constant
dollar basis,

15

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International
revenue increased 12.7%, compared with the same period in 2002. International revenue comprised 44.9% of total revenue for the first half, compared with 40.0% for the first half of 2002.
The increase in revenue over the prior year was driven primarily by the impact of foreign exchange, which increased average selling prices, and unit volume increases in footwear in the European
wholesale channel and, to a lesser degree, unit volume increases in apparel and accessories in both Europe and Asia. Geographically, constant dollar revenue increases were driven by gains in Italy,
Spain, Germany and the U.K., as well as growth in Asia.



Worldwide
footwear revenue for the first six months of 2003 was $356.2 million, an increase of $48.2 million, or 15.6%, compared with the same period in 2002. The increase reflected the
impact of foreign exchange and, to a lesser degree, U.S. Wholesale and European wholesale unit sales. In total, footwear unit sales increased 10.0% and footwear average selling prices increased 5.1%,
compared with the prior year. The increase in footwear average selling prices was principally due to the impact of foreign exchange. By category, the Company experienced worldwide revenue increases in
Women's and Men's Casual, the Timberland PRO series, Boots and Kids'. Worldwide footwear revenue represented 74.7% and 74.9% of total product revenue for the first six months of 2003 and
2002, respectively.

Worldwide
apparel and accessories revenue for the first six months of 2003 was $120.4 million, an increase of $17.4 million, or 16.9%, compared with the same period in 2002. The increase
was primarily attributable to the favorable benefit of foreign exchange, U.S. Wholesale double-digit revenue increases in the Timberland® apparel line, the rollout of the Timberland
PRO series apparel and European unit sales increases, partially offset by a decline in U.S. Consumer Direct average selling prices and unit sales, as discussed previously. In total,
apparel and accessories unit sales increased 9.2% and average selling prices increased 7.0% over the same period last year. As with footwear, the increase in average selling prices was driven
primarily by the impact of foreign exchange. Worldwide apparel and accessories revenue represented 25.3% and 25.1% of total product revenue for the first six months of 2003 and 2002, respectively.

Worldwide
royalty revenue for the first six months of 2003 was $6.1 million, a decrease of $0.1 million, or 1.4%, compared with the same period last year. The decrease was driven
primarily by the
Company's decision to maximize the potential of the Company's Canadian footwear business by changing it from a distributor royalty arrangement in 2002 to a wholly-owned subsidiary in 2003.



Worldwide
wholesale revenue for the first six months of 2003 was $359.2 million, an increase of $55.8 million, or 18.4%, compared with the same period in 2002. The increase in revenue
reflected the impact of foreign exchange and, to a lesser degree, U.S. and European footwear unit sales growth.

Worldwide
consumer direct revenue for the first six months of 2003 was $123.6 million, an increase of $9.7 million, or 8.5%, compared with the same period in 2002. The increase was
primarily due to the impact of foreign exchange, growth in the International retail apparel and accessories business and increases in U.S. Consumer Direct footwear unit sales, partially offset by the
decrease in U.S. Consumer Direct apparel and accessories revenue, as discussed previously. During the first half, the Company opened 13 retail stores and closed 6 retail stores, worldwide.

Gross Profit

Gross
profit as a percentage of revenue for the first six months of 2003 was 46.6%, an increase of 2.1 percentage points from the 44.5% reported for the first six months of 2002. Overall, gross
margins benefited from lower product costs, higher margins from a reduced level of off-price sales and mix of merchandise sold. The year over year impact of increases in leather hide
prices had a modest negative

16

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impact
on first half gross margin rates. The reduced levels of off-price sales reflect solid sell-through trends, aided by weather conditions favorable to the Company in the
northeastern region of the United States in the first quarter of 2003. Overall, the Company is targeting improved gross margin rates for the balance of 2003, when compared with the prior year, after
adjusting for the negative impact of the fourth quarter 2002 U.S. west coast port work stoppage.

The
Company includes the costs of procuring inventory (sourcing costs, inbound freight and duty, overhead and other similar costs) in cost of goods sold. These costs amounted to $41.9 million
for the first six months of 2003 and 2002.

Operating Expense

Operating
expense was $186.4 million for the first six months of 2003, up $20.5 million, or 12.4%, from the $165.9 million reported for the first six months of 2002. Operating
expense as a percentage of revenue for the first half decreased to 38.6%, from 39.8% for the first half of 2002, reflecting a growth rate less than the Company's 15.7% revenue increase. The dollar
increase was primarily due to growth in International operations, which has had significant revenue growth and maintain higher operating expense structures, and to foreign exchange rate changes, which
added $9.6 million in operating expense, compared with the prior year.

Selling
expense was $148.0 million, an increase $15.2 million, or 11.5%, compared with the same period last year. Within this category of expense, approximately $8.1 million of
the increase was due to foreign exchange and approximately $8.9 million was related to the Company's International operations, primarily variable selling costs such as store payroll, percentage
rents, agent fees and freight, and, in addition, field marketing costs. These increases were partially offset by lower corporate marketing and brand management related costs, including consulting and
promotions, lower incentive compensation, and lower bad debt expense.

The
Company includes the costs of housing inventory (warehousing and handling costs) in selling expense. These costs amounted to $13.8 million and $13.1 million for the first six months
of 2003 and 2002, respectively. Advertising expense, which is also included in selling expense, was $11.1 million for the first six months of 2003, $1.8 million higher than the same
period in 2002. The increase in advertising was primarily related to cooperative advertising, as the Company has allocated more funds closer to the point of sale than in the prior year. Advertising
cost are expensed as incurred.

General
and administrative expense, at $38.4 million, increased $5.3 million, or 16.0%, compared with the same period last year. Approximately $1.5 million of the dollar increase
was related to foreign exchange. The remainder of the increase was primarily due to the same reasons cited in the second quarter discussion.

Operating Income/Income Before Income Taxes

Operating
income was $38.6 million for the first six months of 2003, up $18.7 million, or 94.2%, from the $19.9 million reported for the first six months of 2002. As a percentage
of revenue, operating income was 8.0%, compared with 4.8% for the prior year. This improvement was primarily driven by the 15.7% revenue increase and by improved gross margin and operating expense
rates, as discussed previously. The Company is targeting moderate improvements in operating margins for the full year 2003, compared with the prior year, after adjusting for the negative impact of the
fourth quarter 2002 U.S. west coast port work stoppage. The Company anticipates that, as a percentage of sales, balance of year operating expense increases will likely offset gross margin rate
increases, after adjusting for the negative impact of last year's west coast work stoppage.

Income
before income taxes increased in the U.S. Wholesale segment in the first half of 2003, compared with the prior year. The increase in operating income was driven by a 9.1% revenue increase,

17

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as
discussed previously, supported by improved gross margin rates and lower expense rates. The U.S. Consumer Direct segment operating income declined compared with the prior year. U.S. Consumer Direct
revenue decreased 1.9%, compared with the same period in 2002. Gross margin rates remained primarily flat to the prior year. Operating expense, as a percentage of revenue, increased compared to the
prior year due to the decrease in revenue, as the dollars were relatively flat year over year. Internationally, the improvement in operating income was driven by the impact of foreign exchange and a
12.7% constant dollar increase, partially offset by a decrease in gross margin rates, resulting in part from a lower retail mix of business and the impact of SARS on Asian markets and, to a lesser
degree, operating expense investments in store related costs, marketing and enhanced organizational capabilities. The Unallocated Corporate segment losses before income taxes decreased compared to the
prior year, primarily due to the same reasons cited in the second quarter discussion.

Other, net, Interest and Taxes

Other,
net was $0.5 million of income in the first six months of 2003, compared with $2.1 million of income in the first six months of 2002. The decrease was primarily due to the rapid
strengthening of foreign exchange rates in the second quarter of 2002, versus the dollar, on the translation of intercompany balances. Other, net includes interest income of $0.6 million in the
first six months of 2003 and 2002. Interest expense, which is comprised of fees related to the establishment and maintenance of the Company's revolving credit facility and to interest paid on short
term borrowings, was $0.4 million in the first six months of 2003 and 2002.

The
effective tax rate for the first six months ended June 27, 2003 and June 28, 2002 was 35.0% and 35.5%, respectively. During the fourth quarter of 2002, the Company adjusted its full
year effective tax rate to 35.0%, equal to the estimated rate for 2003.

RECONCILIATION OF TOTAL AND INTERNATIONAL REVENUE INCREASES TO CONSTANT DOLLAR REVENUE INCREASES

Total Company Revenue Reconciliation:

|                                              |  | Second Quarter |      | First Half
|--------------------------------------------- |  | -------------- | ---- | ----------
|
|Revenue increase (GAAP)                       |  | $              | 20.2 |           
|Increase due to foreign exchange rate changes |  |                | 10.1 |           
|Revenue increase in constant dollars          |  |                | 10.1 |           

International Revenue Reconciliation:

|                                              |  | Second Quarter |      | First Half
|--------------------------------------------- |  | -------------- | ---- | ----------
|
|Revenue increase (GAAP)                       |  | $              | 16.9 |           
|Increase due to foreign exchange rate changes |  |                | 10.1 |           
|Revenue increase in constant dollars          |  |                | 6.8  |           

Management
provides constant dollar revenue growth for total Company and International results because many investors find it useful to understand revenue growth excluding any impact from foreign
exchange rate changes.

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LIQUIDITY AND CAPITAL RESOURCES



Accounts
receivable increased 7.9% to $122.0 million at June 27, 2003, compared with the $113.0 million reported at June 28, 2002, reflecting wholesale revenue increases.
Days sales outstanding decreased by 1 day, from 53 days at June 28, 2002 to 52 days at June 27, 2003. Inventory increased 8.0% to $173.0 million at
June 27, 2003, compared with the $160.3 million reported at June 28, 2002, consistent with the Company's second quarter revenue increase and impacted by early receipt of footwear
inventory, reflecting improved factory reliability. Twelve month rolling annual inventory turns improved from 4.0 times for the second quarter of 2002 to 4.6 times for the second quarter of 2003.

Cash From Operations

Net cash used by operations for the first six months of 2003 was $10.8 million, compared with $4.8 million provided during the same period in 2002. The use of
cash from inventory increased versus the prior year primarily due to early receipt of footwear inventory. The increased use of cash from accruals primarily resulted from lower compensation related
accruals at June 27, 2003, compared with December 31, 2002, than in the comparable period for the prior year. The use of cash for taxes, primarily payments, is consistent with the prior
year. The source of cash from accounts receivable, compared with the prior year, reflects the normal seasonal pattern of lower receivables, compared with year end. The source of cash from the change
in accounts payable, compared with the use in the prior year, was primarily due to the timing of inventory receipt and payments, as discussed previously. On an absolute basis, net cash used during the
first half was driven by seasonal spending on inventory, the aforementioned change in accruals and the first half payment of income taxes, partially offset by the seasonal decrease in receivables and
the timing related increase in payables, compared with December 31, 2002.

Net
cash used by investing activities amounted to $5.8 million for the first six months of 2003 and $5.6 million for the first six months of 2002. Capital expenditures for the first half
were $6.6 million, compared with $6.4 million for the same period in 2002 (depreciation expense for the first six months of 2003 and 2002 was $10.4 million and
$9.5 million, respectively). Net cash used by financing activities was $43.5 million for the first half, compared with $34.2 million used for the first half of 2002. Cash flows
from financing activities reflected stock repurchases of $54.3 million in the first half of 2003 and $42.4 million in the first half of 2002.

The
Company has available unsecured revolving, committed and uncommitted lines of credit as sources of financing for its seasonal and other working capital requirements. The unsecured committed
revolving credit agreement (the "Agreement") is effective until May 3, 2004. It is the Company's intent to enter into a new agreement at that time. The Agreement requires the Company to comply
with certain financial and non-financial covenants. The primary financial covenants relate to maintaining minimum fixed charge coverage of 3:1 and leverage ratios of 1.5:1 and a maximum
consolidated total funded debt percentage of 40%-50%, depending upon the fiscal quarter. The primary non-financial covenants place certain limitations on additional debt, stock
repurchases, acquisitions and the amount of dividends the Company may pay. The Company measures compliance with the financial and non-financial covenants and ratios as required by the
terms of the Agreement on a fiscal quarter basis. The Company had no debt outstanding at June 27, 2003, December 31, 2002 and June 28, 2002.

As
discussed in the Company's Annual Report on Form 10-K for the year ended December 31, 2002, management believes that the Company's capital needs for 2003 will be met
through its current cash balances, its existing credit facilities and cash from operations, without the need for additional permanent financing. However, as discussed in an exhibit to the Company's
Form 10-K for the year ended December 31, 2002, entitled "Cautionary Statements for Purposes of the Safe Harbor Provisions of the Private Securities Litigation Reform Act of
1995," several risks and uncertainties could cause the

19

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Company
to need to raise additional capital through equity and/or debt financing. The availability and terms of any such financing would be subject to prevailing market conditions and other factors at
that time.

OFF-BALANCE SHEET ARRANGEMENTS AND AGGREGATE CONTRACTUAL OBLIGATIONS

The
Company has the following off-balance sheet arrangements and aggregate contractual obligations: operating leases; letters of credit; hedging contracts; and deferred compensation
liability. Detailed information on these obligations and commitments was disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2002. Deferred
compensation liability information was disclosed in the Company's consolidated balance sheets and was discussed in the footnotes to the Company's Annual Report on Form 10-K for the
year ended December 31, 2002. As of June 27, 2003, there has not been any significant change to the lease commitments by year reported in the Company's Annual Report on
Form 10-K for the year ended December 31, 2002. As of June 27, 2003 and June 28, 2002, the Company had letters of credit outstanding of $41.0 million and
$36.0 million, respectively. As of June 27, 2003, the Company had $141.9 million in hedging contracts outstanding, all of which are due to settle within the next 12 months
(see Note 6). The Company's deferred compensation liability was $4.7 million as of June 27, 2003, compared with $3.1 million at December 31, 2002. The liability
increased primarily due to contributions to the plan.

NEW ACCOUNTING PRONOUNCEMENTS

In
April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities." This statement amends SFAS No. 133 for decisions made
(1) as part of the Derivatives Implementation Group process that effectively required amendments to SFAS No. 133, (2) in connection with other FASB projects dealing with financial
instruments, and (3) in connection with implementation issues raised in relation to the application of the definition of a derivative. This statement is effective for contracts entered into or
modified after June 30, 2003 and for hedging relationships designated after June 30, 2003, with certain exceptions. The Company has not identified any matters in the statement that would
materially impact the Company's consolidated financial statements.

In
May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity." This statement establishes standards for
how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its
scope as a liability (or an asset in some circumstances). Many of those instruments were previously classified as equity instruments. This statement is not applicable to the Company at this time.

FORWARD-LOOKING INFORMATION

The
statements contained in this report, which are not historical facts, including, without limitation, statements that relate to future performance and/or statements regarding the Company's
anticipated results or business level for 2003 or any other future period, may be deemed to constitute forward-looking statements within the meaning of the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995. Such statements are based on current expectations only and actual future results may differ materially from those expressed or implied by such forward-looking
statements due to certain factors. Such factors include, but are not limited to, the Company's ability to: (i) successfully market and sell its products in view of changing consumer trends,
consumer acceptance of products, and other factors affecting retail market conditions, including the current U.S. economic environment and the global economic and political uncertainties resulting
from the continuing war on terrorism; (ii) manage its foreign exchange rate risks; (iii) obtain adequate raw materials at competitive prices; and (iv) other factors, including
those detailed from time to time in the Company's Securities

20

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and
Exchange Commission reports, including its Annual Report on Form 10-K filed on March 27, 2003. The Company undertakes no obligation to update publicly any forward-looking
statements, whether as a result of new information, future events, or otherwise.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The
Company's current policies and business practices regarding derivative instruments are consistent with its disclosure in its Annual Report on Form 10-K for the year ended
December 31, 2002. At June 27, 2003, December 31, 2002 and June 28, 2002, the Company had no short-term or long-term debt outstanding. The Company's
foreign currency exposure is generated primarily from its European operating subsidiaries and, to a lesser degree, its Asian operating subsidiaries. Based upon sensitivity analysis, a 10% change in
foreign exchange rates would cause the fair value of the Company's financial instruments to increase/decrease by approximately $11.6 million, compared with $23.0 million at
June 28, 2002. The decrease at June 27, 2003 is due to the amount of foreign currency forward contracts held at June 27, 2003, compared with June 28, 2002 (see
Note 6).

ITEM 4. CONTROLS AND PROCEDURES

The
Company's management, under the supervision and with the participation of the Company's principal executive officer and principal financial officer, have evaluated the Company's disclosure
controls and procedures as of June 27, 2003, and they have concluded that these controls and procedures are effective. During the period covered by this report, there have been no significant
changes in the Company's internal control over financial reporting that have materially affected, or are reasonably likely to materially affect the Company's internal control over financial reporting.

21

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Part II OTHER INFORMATION

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Nominee

Total Votes
for Each Director

Total Votes Withheld
from Each DirectorRobert M. Agate

23,090,996

496,692John F. Brennan

23,243,916

343,772Abraham Zaleznik

23,000,068

587,620


The holders of Class A Common Stock and the holders of Class B Common Stock voting together as a single class elected the following directors:

Nominee

Total Votes
for Each Director

Total Votes Withheld
from Each DirectorSidney W. Swartz

98,843,570

355,968Jeffrey B. Swartz

98,866,070

333,468John E. Beard

93,171,028

6,028,510Ian W. Diery

98,880,962

318,576John A. Fitzsimmons

98,715,735

483,803Virginia H. Kent

98,918,361

281,177Bill Shore

93,683,256

5,516,282


There were no abstentions or broker non-votes with respect to the election of the director nominees.

The
holders of Class A Common Stock and the holders of Class B Common Stock, voting together as a single class, also approved a proposal to amend the Company's 1997 Incentive Plan to
increase the
number of shares reserved for issuance from 6,000,000 to 8,000,000. A total of 87,575,606 votes were cast in favor, 8,889,058 votes were cast against, 52,302 votes were abstentions, and 2,682,572
votes were broker non-votes.

Item 6. EXHIBITS AND REPORTS ON FORM 8-K







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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.

|                      |  |  | The Timberland Company(Registrant)                                                                            
|--------------------- |  |  | --------------------------------------------------------------------------------------------------------------
|Date: August 11, 2003 |  |  | /s/BRIAN P. MCKEONBrian P. McKeon
Executive Vice President-Finance and Administration, Chief Financial Officer
|Date: August 11, 2003 |  |  | /s/JOHN D. CRIMMINSJohn D. Crimmins
Vice President, Corporate Controller and Chief Accounting Officer         

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EXHIBIT INDEX

|Exhibit      |  | Description                                                                                   
|------------ |  | ----------------------------------------------------------------------------------------------
|Exhibit 31.1 |  | Principal Executive Officer Certification Pursuant to Sarbanes-Oxley Act of 2002, Section 302.
|Exhibit 31.2 |  | Principal Financial Officer Certification Pursuant to Sarbanes-Oxley Act of 2002, Section 302.
|Exhibit 32.1 |  | Principal Executive Officer Certification Pursuant to Sarbanes-Oxley Act of 2002, Section 906.
|Exhibit 32.2 |  | Principal Financial Officer Certification Pursuant to Sarbanes-Oxley Act of 2002, Section 906.

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