##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 For the quarterly period endedJune 29, 2007
 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
 The Timberland Company
  Delaware
    
    02-0312554(State or Other Jurisdiction of
    
    (I.R.S. Employer Identification No.)Incorporation or Organization)200 Domain Drive, Stratham, New Hampshire
    
    03885(Address of Principal Executive Offices)
    
    (Zip Code)
 (603) 772-9500
  þ o
  þ o o
  o þ




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##### 



THE TIMBERLAND COMPANY
 FORM 10-Q
 TABLE OF CONTENTS
 Page(s)Part I Financial Information (unaudited)Item 1. Financial StatementsUnaudited Condensed Consolidated Balance Sheets -
June 29, 2007, December 31, 2006 and June 30, 2006 (as restated)
    
    
    3Unaudited Condensed Consolidated Statements of Operations -
For the Quarter and Six Months Ended June 29, 2007 and June 30, 2006 (as restated)
    
    
    4Unaudited Condensed Consolidated Statements of Cash Flows -
For the Six Months Ended June 29, 2007 and June 30, 2006 (as restated)
    
    
    5Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    6-19Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    19-29Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    29-30Item 4. Controls and Procedures
    
    
    30Part II Other InformationItem 1A. Risk Factors
    
    
    31Item 4. Submission of Matters to a Vote of Security Holders
    
    
    31Item 6. Exhibits
    
    
    32Signatures
    
    
    33Exhibit Index
    
    
    34Exhibits
    
    
    35-38EX-31.1 SECTION 302 CERTIFICATION OF THE PEOEX-31.2 SECTION 302 CERTIFICATION OF THE PFOEX-32.1 SECTION 906 CERTIFICATION OF THE CEOEX-32.2 SECTION 906 CERTIFICATION OF THE CFO




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##### Table of Contents



Page 3 
 PART I FINANCIAL INFORMATION
 
 Item 1. FINANCIAL STATEMENTS
 THE TIMBERLAND COMPANY
 
 UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
  June 29,
    
    
    December 31,
    
    
    June 30,2007
    
    
    2006
    
    
    2006(As Restated,See Note 2)AssetsCurrent assetsCash and equivalents
    
    $
    97,530
    
    
    $
    181,698
    
    
    $
    108,065Accounts receivable, net of allowance for doubtful accounts of $10,898
at June 29, 2007, $12,493 at December 31, 2006 and $9,870 at June 30,
2006
    
    
    134,776
    
    
    
    204,016
    
    
    
    125,719Inventory, net
    
    
    215,881
    
    
    
    186,765
    
    
    
    210,963Prepaid expense
    
    
    53,205
    
    
    
    42,130
    
    
    
    46,128Prepaid income taxes
    
    
    28,015
    
    
    
    12,353
    
    
    
    51Deferred income taxes
    
    
    15,431
    
    
    
    21,633
    
    
    
    16,712Derivative assets
    
    
    153
    
    
    
    176
    
    
    
    186Total current assets
    
    
    544,991
    
    
    
    648,771
    
    
    
    507,824Property, plant and equipment, net
    
    
    91,961
    
    
    
    94,640
    
    
    
    83,225Deferred income taxes
    
    
    21,674
    
    
    
    18,553
    
    
    
    3,752Goodwill
    
    
    45,021
    
    
    
    39,717
    
    
    
    39,533Intangible assets, net
    
    
    54,777
    
    
    
    47,865
    
    
    
    41,570Other assets, net
    
    
    12,816
    
    
    
    10,831
    
    
    
    11,926Total assets
    
    $
    771,240
    
    
    $
    860,377
    
    
    $
    687,830Liabilities and Stockholders EquityCurrent liabilitiesAccounts payable
    
    $
    80,604
    
    
    $
    110,031
    
    
    $
    92,286Accrued expensePayroll and related
    
    
    31,030
    
    
    
    38,476
    
    
    
    26,311Other
    
    
    58,446
    
    
    
    84,258
    
    
    
    50,820Income taxes payable
    
    
    884
    
    
    
    49,938
    
    
    
    Derivative liabilities
    
    
    2,890
    
    
    
    2,925
    
    
    
    5,000Total current liabilities
    
    
    173,854
    
    
    
    285,628
    
    
    
    174,417Other long-term liabilities
    
    
    41,413
    
    
    
    13,064
    
    
    
    13,400Stockholders equity
Preferred Stock, $.01 par value; 2,000,000 shares authorized; none issued
    
    
    
    
    
    
    
    
    
    
    Class A Common Stock, $.01 par value (1 vote per share); 120,000,000
shares authorized; 73,282,538 shares issued at June 29, 2007, 72,664,889
shares issued at December 31, 2006 and 72,413,990 shares issued at June
30, 2006
    
    
    733
    
    
    
    727
    
    
    
    724Class 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; 11,743,660 shares issued and outstanding at June 29, 2007,
December 31, 2006 and June 30, 2006
    
    
    117
    
    
    
    117
    
    
    
    117Additional paid-in capital
    
    
    245,159
    
    
    
    224,611
    
    
    
    216,917Retained earnings
    
    
    825,161
    
    
    
    838,462
    
    
    
    746,700Accumulated other comprehensive income
    
    
    17,600
    
    
    
    15,330
    
    
    
    11,307Treasury Stock at cost; 23,007,907 Class A shares at June 29, 2007,
22,428,168 Class A shares at December 31, 2006 and 21,052,985 Class A
shares at June 30, 2006
    
    
    (532,797
    )
    
    
    (517,562
    )
    
    
    (475,752
    )Total stockholders equity
    
    
    555,973
    
    
    
    561,685
    
    
    
    500,013Total liabilities and stockholders equity
    
    $
    771,240
    
    
    $
    860,377
    
    
    $
    687,830
 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.




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##### Table of Contents



Page 4 THE TIMBERLAND COMPANY
 
 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
  For the Quarter Ended
    
    
    For the Six Months EndedJune 29,
    
    
    June 30,
    
    
    June 29,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(As Restated,
    
    
    
    
    
    
    (As Restated,See Note 2)
    
    
    
    
    
    
    See Note 2)Revenue
    
    $
    224,126
    
    
    $
    226,605
    
    
    $
    560,455
    
    
    $
    576,416Cost of goods sold
    
    
    124,959
    
    
    
    123,854
    
    
    
    299,709
    
    
    
    299,735Gross profit
    
    
    99,167
    
    
    
    102,751
    
    
    
    260,746
    
    
    
    276,681Operating expenseSelling
    
    
    99,547
    
    
    
    95,119
    
    
    
    209,630
    
    
    
    199,868General and administrative
    
    
    30,091
    
    
    
    27,376
    
    
    
    61,442
    
    
    
    56,010Restructuring costs
    
    
    988
    
    
    
    431
    
    
    
    7,514
    
    
    
    912Total operating expense
    
    
    130,626
    
    
    
    122,926
    
    
    
    278,586
    
    
    
    256,790Operating income/(loss)
    
    
    (31,459
    )
    
    
    (20,175
    )
    
    
    (17,840
    )
    
    
    19,891Other incomeInterest income, net
    
    
    666
    
    
    
    666
    
    
    
    1,796
    
    
    
    1,771Other income/(expense), net
    
    
    1,441
    
    
    
    (6,382
    )
    
    
    818
    
    
    
    (6,953
    )Total other income/(expense), net
    
    
    2,107
    
    
    
    (5,716
    )
    
    
    2,614
    
    
    
    (5,182
    )Income/(loss) before provision/(benefit) for income taxes
    
    
    (29,352
    )
    
    
    (25,891
    )
    
    
    (15,226
    )
    
    
    14,709Provision/(benefit) for income taxes
    
    
    (10,126
    )
    
    
    (9,269
    )
    
    
    (  5,253
    )
    
    
    5,266Net income/(loss)
    
    $
    (19,226
    )
    
    $
    (16,622
    )
    
    $
    (9,973
    )
    
    $
    9,443Earnings/(loss) per shareBasic
    
    $
    (.31
    )
    
    $
    (.26
    )
    
    $
    (.16
    )
    
    $
    .15Diluted
    
    $
    (.31
    )
    
    $
    (.26
    )
    
    $
    (.16
    )
    
    $
    .15Weighted-average shares outstandingBasic
    
    
    61,473
    
    
    
    63,035
    
    
    
    61,288
    
    
    
    63,308Diluted
    
    
    61,473
    
    
    
    63,035
    
    
    
    61,288
    
    
    
    64,566
 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.




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##### Table of Contents



Page 5 THE TIMBERLAND COMPANY
 
 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
  For the Six Months EndedJune 29,
    
    
    June 30,2007
    
    
    2006(As Restated,See Note 2)Cash flows from operating activities:Net income/(loss)
    
    $
    (9,973
    )
    
    $
    9,443Adjustments to reconcile net income/(loss) to net cash used by
operating activities:Deferred income taxes
    
    
    3,080
    
    
    
    8,515Share-based compensation
    
    
    4,458
    
    
    
    10,154Depreciation and other amortization
    
    
    15,634
    
    
    
    13,309Tax benefit from share-based compensation, net of excess benefit
    
    
    608
    
    
    
    1,494Unrealized (gain)/loss on derivatives
    
    
    (12
    )
    
    
    10,858Non-cash charges/(credits), net
    
    
    (1,695
    )
    
    
    (2,269
    )Increase/(decrease) in cash from changes in working capital:Accounts receivable
    
    
    71,005
    
    
    
    47,979Inventory
    
    
    (28,512
    )
    
    
    (42,415
    )Prepaid expense
    
    
    (10,069
    )
    
    
    (11,328
    )Accounts payable
    
    
    (29,520
    )
    
    
    (6,136
    )Accrued expense
    
    
    (33,032
    )
    
    
    (27,749
    )Income taxes prepaid and payable, net
    
    
    (39,389
    )
    
    
    (47,465
    )Net cash used by operating activities
    
    
    (57,417
    )
    
    
    (35,610
    )Cash flows from investing activities:Acquisition of business, net of cash acquired
    
    
    (12,813
    )
    
    
    (30
    )Additions to property, plant and equipment
    
    
    (11,601
    )
    
    
    (12,613
    )Other
    
    
    (1,303
    )
    
    
    (3,655
    )Net cash used by investing activities
    
    
    (25,717
    )
    
    
    (16,298
    )Cash flows from financing activities:Common stock repurchases
    
    
    (13,527
    )
    
    
    (69,919
    )Issuance of common stock
    
    
    11,693
    
    
    
    12,128Excess tax benefit from share-based compensation
    
    
    1,071
    
    
    
    2,305Net cash used by financing activities
    
    
    (763
    )
    
    
    (55,486
    )Effect of exchange rate changes on cash and equivalents
    
    
    (271
    )
    
    
    2,296Net decrease in cash and equivalents
    
    
    (84,168
    )
    
    
    (105,098
    )Cash and equivalents at beginning of period
    
    
    181,698
    
    
    
    213,163Cash and equivalents at end of period
    
    $
    97,530
    
    
    $
    108,065Supplemental disclosures of cash flow information:Interest paid
    
    $
    168
    
    
    $
    258Income taxes paid
    
    $
    31,960
    
    
    $
    40,597
 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.




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##### Table of Contents



Page 6 THE TIMBERLAND COMPANY
 
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  Note 1. Summary of Significant Accounting Policies
 Basis of Presentation
        New Accounting Pronouncements
 Fair Value Measurements




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##### Table of Contents



Page 7 The Fair Value Option for Financial Assets and
Financial Liabilities, Including an amendment of FASB Statement 115
 Amendment of FASB
Interpretation No. 39 . Accounting for
Derivative Instruments and Hedging Activities
 Note 2. Restatement
 Accounting for Derivative Instruments and Hedging
Activities
     Table of Contents  Page 8  BALANCE SHEET
 As of June 30, 2006As
Previously
    
    
    
    
    
    
    AsReported
    
    
    Adjustments
    
    
    RestatedAssetsCurrent assets
Cash and equivalents
    
    $
    108,065
    
    
    $
    
    
    
    $
    108,065Accounts receivable, net of allowance for doubtful accounts
    
    
    125,719
    
    
    
    
    
    
    
    125,719Inventory, net
    
    
    210,963
    
    
    
    
    
    
    
    210,963Prepaid expense
    
    
    46,128
    
    
    
    
    
    
    
    46,128Prepaid income taxes
    
    
    
    
    
    
    51
    
    
    
    51Deferred income taxes
    
    
    16,964
    
    
    
    (252
    )
    
    
    16,712Derivative assets
    
    
    186
    
    
    
    
    
    
    
    186Total current assets
    
    
    508,025
    
    
    
    (201
    )
    
    
    507,824Property, plant and equipment, net
    
    
    83,225
    
    
    
    
    
    
    
    83,225Deferred income taxes
    
    
    1,252
    
    
    
    2,500
    
    
    
    3,752Goodwill
    
    
    39,533
    
    
    
    
    
    
    
    39,533Intangible assets, net
    
    
    41,570
    
    
    
    
    
    
    
    41,570Other assets, net
    
    
    11,926
    
    
    
    
    
    
    
    11,926Total assets
    
    $
    685,531
    
    
    $
    2,299
    
    
    $
    687,830Liabilities and Stockholders EquityCurrent liabilities
Accounts payable
    
    $
    92,286
    
    
    $
    
    
    
    $
    92,286Accrued expensePayroll and related
    
    
    23,631
    
    
    
    2,680
    
    
    
    26,311Other
    
    
    50,820
    
    
    
    
    
    
    
    50,820Income taxes payable
    
    
    156
    
    
    
    (156
    )
    
    
    Derivative liabilities
    
    
    5,000
    
    
    
    
    
    
    
    5,000Total current liabilities
    
    
    171,893
    
    
    
    2,524
    
    
    
    174,417Other long-term liabilities
    
    
    13,400
    
    
    
    
    
    
    
    13,400Stockholders equityPreferred Stock
    
    
    
    
    
    
    
    
    
    
    Class A common stock
    
    
    724
    
    
    
    
    
    
    
    724Class B common stock
    
    
    117
    
    
    
    
    
    
    
    117Additional paid-in capital
    
    
    213,187
    
    
    
    3,730
    
    
    
    216,917Retained earnings
    
    
    755,218
    
    
    
    (8,518
    )
    
    
    746,700Accumulated other comprehensive income
    
    
    6,744
    
    
    
    4,563
    
    
    
    11,307Treasury stock
    
    
    (475,752
    )
    
    
    
    
    
    
    (475,752
    )Total stockholders equity
    
    
    500,238
    
    
    
    (225
    )
    
    
    500,013Total liabilities and stockholders equity
    
    $
    685,531
    
    
    $
    2,299
    
    
    $
    687,830
    Table of Contents  Page 9 STATEMENT OF OPERATIONS
 Quarter Ended June 30, 2006AsPreviously
    
    
    
    
    
    
    AsReported
    
    
    Adjustments
    
    
    RestatedRevenue
    
    $
    226,605
    
    
    $
    
    
    
    $
    226,605Cost of goods sold
    
    
    123,784
    
    
    
    70
    
    
    
    123,854Gross profit
    
    
    102,821
    
    
    
    (70
    )
    
    
    102,751Operating expenseSelling
    
    
    95,614
    
    
    
    (495
    )
    
    
    95,119General and administrative
    
    
    27,639
    
    
    
    (263
    )
    
    
    27,376Restructuring costs
    
    
    431
    
    
    
    
    
    
    
    431Total operating expense
    
    
    123,684
    
    
    
    (758
    )
    
    
    122,926Operating loss
    
    
    (20,863
    )
    
    
    688
    
    
    
    (20,175
    )Other incomeInterest income, net
    
    
    666
    
    
    
    
    
    
    
    666Other income/(expense), net
    
    
    392
    
    
    
    (6,774
    )
    
    
    (6,382
    )Total other income
    
    
    1,058
    
    
    
    (6,774
    )
    
    
    (5,716
    )Loss before benefit for income taxes
    
    
    (19,805
    )
    
    
    (6,086
    )
    
    
    (25,891
    )Benefit for income taxes
    
    
    (6,833
    )
    
    
    (2,436
    )
    
    
    (9,269
    )Net loss
    
    $
    (12,972
    )
    
    $
    (3,650
    )
    
    $
    (16,622
    )Loss per share:Basic
    
    $
    (.21
    )
    
    $
    (.06
    )
    
    $
    (.26
    )Diluted
    
    $
    (.21
    )
    
    $
    (.06
    )
    
    $
    (.26
    )Weighted-average shares outstanding:Basic
    
    
    63,035
    
    
    
    
    
    
    
    63,035Diluted
    
    
    63,035
    
    
    
    
    
    
    
    63,035
    Table of Contents  Page 10 Six Months Ended June 30, 2006AsPreviously
    
    
    
    
    
    
    AsReported
    
    
    Adjustments
    
    
    RestatedRevenue
    
    $
    576,416
    
    
    $
    
    
    
    $
    576,416Cost of goods sold
    
    
    297,492
    
    
    
    2,243
    
    
    
    299,735Gross profit
    
    
    278,924
    
    
    
    (2,243
    )
    
    
    276,681Operating expenseSelling
    
    
    200,354
    
    
    
    (486
    )
    
    
    199,868General and administrative
    
    
    56,268
    
    
    
    (258
    )
    
    
    56,010Restructuring costs
    
    
    912
    
    
    
    
    
    
    
    912Total operating expense
    
    
    257,534
    
    
    
    (744
    )
    
    
    256,790Operating income
    
    
    21,390
    
    
    
    (1,499
    )
    
    
    19,891Other incomeInterest income, net
    
    
    1,771
    
    
    
    
    
    
    
    1,771Other income/(expense), net
    
    
    1,593
    
    
    
    (8,546
    )
    
    
    (6,953
    )Total other income
    
    
    3,364
    
    
    
    (8,546
    )
    
    
    (5,182
    )Income before provision for income taxes
    
    
    24,754
    
    
    
    (10,045
    )
    
    
    14,709Provision for income taxes
    
    
    8,540
    
    
    
    (3,274
    )
    
    
    5,266Net income
    
    $
    16,214
    
    
    $
    (6,771
    )
    
    $
    9,443Earnings per share:Basic
    
    $
    .26
    
    
    $
    (.11
    )
    
    $
    .15Diluted
    
    $
    .25
    
    
    $
    (.10
    )
    
    $
    .15Weighted-average shares outstanding:Basic
    
    
    63,308
    
    
    
    

    
    
    
    63,308Diluted
    
    
    64,566
    
    
    
    

    
    
    
    64,566
    Table of Contents  Page 11 STATEMENT OF CASH FLOWS
 Six Months Ended June 30, 2006AsPreviously
    
    
    
    
    
    
    AsReported
    
    
    Adjustments
    
    
    RestatedCash flows from operating activities:Net income
    
    $
    16,214
    
    
    $
    (6,771
    )
    
    $
    9,443Adjustments to reconcile to net cash used by operating activities:Deferred income taxes
    
    
    9,185
    
    
    
    (670
    )
    
    
    8,515Share-based compensation
    
    
    10,967
    
    
    
    (813
    )
    
    
    10,154Depreciation and other amortization
    
    
    13,309
    
    
    
    
    
    
    
    13,309Tax benefit from share-based compensation, net of excess benefit
    
    
    1,494
    
    
    
    
    
    
    
    1,494Unrealized loss on derivatives
    
    
    
    
    
    
    10,858
    
    
    
    10,858Non-cash charges/(credits), net
    
    
    (2,269
    )
    
    
    
    
    
    
    (2,269
    )Increase/(decrease) in cash from changes in working capital:Accounts receivable
    
    
 47,979
 

    
    
     
    
    
    
    47,979Inventory
    
    
    (42,415
    )
    
    
    
    
    
    
    (42,415
    )Prepaid expense
    
    
    (11,328
    )
    
    
    
    
    
    
    (11,328
    )Accounts payable
    
    
    (6,136
    )
    
    
    
    
    
    
    (6,136
    )Accrued expense
    
    
    (27,749
    )
    
    
    
    
    
    
    (27,749
    )Income taxes prepaid and payable, net
    
    
    (44,861
    )
    
    
    (2,604
    )
    
    
    (47,465
    )Net cash used by operating activities
    
    
    (35,610
    )
    
    
    
    
    
    
    (35,610
    )Net cash used by investing activities
    
    
    (16,298
    )
    
    
    
    
    
    
    (16,298
    )Net cash used by financing activities
    
    
    (55,486
    )
    
    
    
    
    
    
    (55,486
    )Effect of exchange rate changes on cash and equivalents
    
    
    2,296
    
    
    
    
    
    
    
    2,296Net decrease in cash and equivalents
    
    
    (105,098
    )
    
    
    
    
    
    
    (105,098
    )Cash and equivalents at beginning of period
    
    
    213,163
    
    
    
    
    
    
    
    213,163Cash and equivalents at end of period
    
    $
    108,065
    
    
    
    
    
    
    $
    108,065
 Note 3. Income Taxes
 Accounting for
Uncertainty in Income Taxes  an Interpretation of FASB Statement No. 109
    Table of Contents  Page 12
     Note 4. Share-Based Compensation
 Share-Based Payment
      Table of Contents  Page 13
 Stock Options
  For the Quarter Ended
    
    For the Six Months EndedJune 29, 2007
    
    June 30, 2006
    
    June 29, 2007
    
    June 30, 2006Expected volatility
    
    
    30.0
    %
    
    
    30.5
    %
    
    
    29.5
    %
    
    
    30.2
    %Risk-free interest rate
    
    
    4.8
    %
    
    
    5.0
    %
    
    
    4.7
    %
    
    
    4.7
    %Expected life (in years)
    
    
    8.0
    
    
    
    4.9
    
    
    
    4.9
    
    
    
    4.2Expected dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
  Weighted-Weighted-
    
    
    AverageAverage
    
    
    Remaining
    
    
    AggregateExercise
    
    
    Contractual
    
    
    IntrinsicShares
    
    
    Price
    
    
    Term
    
    
    ValueOutstanding at January 1, 2007
    
    
    5,253,794
    
    
    $
    27.07Granted
    
    
    682,531
    
    
    
    26.96Exercised
    
    
    (577,165
    )
    
    
    18.76Expired or forfeited
    
    
    (340,635
    )
    
    
    31.28Outstanding at June 29, 2007
    
    
    5,018,525
    
    
    $
    27.72
    
    
    
    6.6
    
    
    $
    9,353Vested or expected to vest at
June 29, 2007
    
    
    4,821,305
    
    
    $
    27.60
    
    
    
    6.4
    
    
    $
    9,351Exercisable at June 29, 2007
    
    
    3,228,273
    
    
    $
    26.06
    
    
    
    5.6
    
    
    $
    9,313
  Nonvested Shares
  Weighted-AverageGrant DateShares
    
    
    Fair ValueNonvested at January 1, 2007
    
    
    932,476
    
    
    $
    32.59Vested
    
    
    (305,596
    )
    
    
    36.69Forfeited
    
    
    (143,996
    )
    
    
    30.59Nonvested at June 29, 2007
    
    
    482,884
    
    
    $
    30.59
      Table of Contents  Page 14     Note 5. Cash Incentive Awards
   Note 6. Earnings/(Loss) Per Share (EPS)
    Table of Contents  Page 15 For the Six Months EndedJune 30, 2006June 29, 2007
    
    (As Restated)Weighted-
    
    Per-
    
    
    
    
    
    Weighted-
    
    Per-Net
    
    Average
    
    Share
    
    Net
    
    Average
    
    Share(Loss)
    
    Shares
    
    Amount
    
    Income
    
    Shares
    
    AmountBasic EPS
    
    $
    (9,973
    )
    
    
    61,288
    
    
    $
    (.16
    )
    
    $
    9,443
    
    
    
    63,308
    
    
    $
    .15Effect of dilutive
securities:Stock options and
employee stock purchase plan
shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,029Nonvested shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    229Diluted EPS
    
    $
    (9,973
    )
    
    
    61,288
    
    
    $
    (.16
    )
    
    $
    9,443
    
    
    
    64,566
    
    
    $
    .15
  For the Quarter Ended
    
    For the Six Months EndedJune 29, 2007
    
    June 30, 2006
    
    June 29, 2007
    

June 30, 2006Anti-dilutive securities
    
    
    4,290
    
    
    
    3,982
    
    
    
    4,305
    
    
    
    1,431
 Note 7. Comprehensive Income/(Loss)
  For the Quarter Ended
    
    
    For the Six Months EndedJune 30, 2006
    
    
    
    
    
    
    June 30, 2006June 29, 2007
    
    
    (As Restated)
    
    
    June 29, 2007
    
    
    (As Restated)Net income/(loss)
    
    $
    (19,226
    )
    
    $
    (16,622
    )
    
    $
    (9,973
    )
    
    $
    9,443Change in cumulative translation adjustment
    
    
    1,160
    
    
    
    6,309
    
    
    
    2,270
    
    
    
    8,353Comprehensive income/(loss)
    
    $
    (18,066
    )
    
    $
    (10,313
    )
    
    $
    (7,703
    )
    
    $
    17,796
 Note 8. Business Segments and Geographic Information
    Table of Contents  For the Quarter Ended June 29, 2007 and June 30, 2006
 U.S.U.S.
    
    Consumer
    
    
    
    
    
    UnallocatedWholesale
    
    Direct
    
    International
    
    Corporate
    
    Consolidated2007Revenue
    
    $
    78,541
    
    
    $
    32,557
    
    
    $
    113,028
    
    
    $
    
    
    
    $
    224,126Operating income/(loss)
    
    
    9,860
    
    
    
    (866
    )
    
    
    (5,476
    )
    
    
    (34,977
    )
    
    
    (31,459
    )Income/(loss) before income taxes
    
    
    9,860
    
    
    
    (866
    )
    
    
    (5,476
    )
    
    
    (32,870
    )
    
    
    (29,352
    )Total assets
    
    
    234,357
    
    
    

    31,894
    

    
    
    349,628
    

    
    
    155,361

    
    
    
    771,240Goodwill
    
    
    35,125

    

    
    
    794

    
    
    
    9,102

    

    
    
    

    
    
    
    45,0212006Revenue
    
    $
    88,216
    
    
    $
    33,239
    
    
    $
    105,150
    
    
    $
    
    
    
    $
    226,605Operating income/(loss)
    
    
    14,908
    
    
    
    (175
    )
    
    
    843
    
    
    
    (35,751
    )
    
    
    (20,175
    )Income/(loss) before income taxes
    
    
    14,908
    
    
    
    (175
    )
    
    
    843
    
    
    
    (41,467
    )
    
    
    (25,891
    )Total assets
    
    
    234,097
    
    
    
    30,203
    
    
    
    323,175
    
    
    
    100,355
    
    
    
    687,830Goodwill
    
    
    31,745
    
    
    
    794
    
    
    
    6,994
    
    
    
    
    
    
    
    39,533
    Table of Contents  Page 17 For the Six Months Ended June 29, 2007 and June 30, 2006
 U.S.U.S.
    
    Consumer
    
    
    
    
    
    UnallocatedWholesale
    
    Direct
    
    International
    
    Corporate
    
    Consolidated2007Revenue
    
    $
    183,756
    
    
    $
    66,548
    
    
    $
    310,151
    
    
    $
    
    
    
    $
    560,455Operating income/(loss)
    
    
    27,240
    
    
    
    175
    
    
    
    30,711
    
    
    
    (75,966
    )
    
    
    (17,840
    )Income/(loss) before income taxes
    
    
    27,240
    
    
    
    175
    
    
    
    30,711
    
    
    
    (73,352
    )
    
    
    (15,226
    )2006Revenue
    
    $
    215,572
    
    
    $
    66,299
    
    
    $
    294,545
    
    
    $
    
    
    
    $
    576,416Operating income/(loss)
    
    
    51,448
    
    
    
    8
    
    
    
    48,126
    
    
    
    (79,691
    )
    
    
    19,891Income/(loss) before income taxes
    
    
    51,448
    
    
    
    8
    
    
    
    48,126
    
    
    
    (84,873
    )
    
    
    14,709
  For the Quarter Ended
    
    
    For the Six Months EndedJune 29,2007
    
    
    June 30,2006
    
    
    June 29,2007
    
    
    June 30,2006Footwear
    
    $
    154,511
    
    
    $
    150,764
    
    
    $
    390,148
    
    
    $
    404,712Apparel and accessories
    
    
    66,503
    
    
    
    71,527
    
    
    
    161,909
    
    
    
    162,927Royalty and other
    
    
    3,112
    
    
    
    4,314
    
    
    
    8,398
    
    
    
    8,777$
    224,126
    
    
    $
    226,605
    
    
    $
    560,455
    
    
    $
    576,416
 Note 9. Inventory
  June 29, 2007
    
    
    December 31, 2006
    
    
    June 30, 2006Materials
    
    $
    5,713
    
    
    $
    5,386
    
    
    $
    3,372Work-in-process
    
    
    1,699
    
    
    
    1,333
    
    
    
    1,064Finished goods
    
    
    208,469
    
    
    
    180,046
    
    
    
    206,527Total
    
    $
    215,881
    
    
    $
    186,765
    
    
    $
    210,963
 Note 10. Acquisitions
    Table of Contents  Page 18  Note 11. Restructuring and Related Costs
  ®
    Table of Contents  Page 19  European
    
    
    
    
    
    
    NorthPuerto Rico
    
    
    Shared
    
    
    
    
    
    
    AmericanManufacturing
    
    
    Service
    
    
    Global
    
    
    ApparelFacility
    
    
    Center
    
    
    Reorganization
    
    
    Licensing
    
    
    TotalRestructuring
liabilities as of
December 31, 2006
    
    $
    475
    
    
    $
    368
    
    
    $
    2,969
    
    
    $
    
    
    
    $
    3,812Severance and
employment related
charges/(credits)
    
    
    
    
    
    
    (48
    )
    
    
    4,548
    
    
    
    3,213
    
    
    
    7,713Severance and
employment related
cash payments
    
    
    (198
    )
    
    
    (68
    )
    
    
    (5,555
    )
    
    
    (932
    )
    
    
    (6,753
    )Restructuring
liabilities as of
June 29, 2007
    
    $
    277
    
    
    $
    252
    
    
    $
    1,962
    
    
    $
    2,281
    
    
    $
    4,772
  Note 12. Share Repurchase
   Note 13. Litigation
  
 Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Critical Accounting Policies
    Table of Contents  Page 20 Accounting for Uncertainty in Income Taxes  an
Interpretation of FASB Statement No. 109
   Overview
 â
   
    
    Second quarter revenue decreased 1.1%, or 3.0% on a constant dollar basis, to $224.1
million. Gains in international markets, primarily in mens and womens casual footwear,
growth in the U.S. industrial category, and revenues from the Howies and
IPATH acquisitions were offset by anticipated declines in boots and kids
sales, as well as Timberland®apparel.
    
    Gross margin decreased from 45.3% to 44.2%, driven by lower margins on close-out and
off-price sales and higher product costs primarily due to anti-dumping duties on footwear
imported into the EU from China and Vietnam.
    
    Operating expenses were $130.6 million, up 6.3% from the prior year period. The
increase reflects increased costs associated with share-based and incentive compensation,
International business expansion, new business initiatives, foreign exchange rate impacts,
and restructuring, partially offset by decreased marketing and corporate support expenses.
    
    We recorded an operating loss of $31.5 million in the second quarter of 2007 compared to
an operating loss of $20.2 million in the prior year period. These results reflected gross
profit pressures from close-out activity and off-price sales, as well as the costs of
incentive compensation, International expansion and investments in new businesses.
    Table of Contents  Page 21 
 
    
    Net loss was $19.2 million in the second quarter of 2007 compared to $16.6 million in
the second quarter of 2006. Loss per share increased from $(.26) in the second quarter of
2006 to $(.31) in the second quarter of 2007. Excluding restructuring and related costs in
both periods, loss per share increased from $(.26) to $(.30).
    
    Cash at the end of the quarter was $97.5 million with no debt outstanding.
    Results of Operations for the Quarter Ended June 29, 2007 and June 30, 2006
 Revenue
  Segments Review
  ® ® ® ®
 ®
    Table of Contents  Page 22 ®
 Products
 ®  ®
 Channels
 ®
 Gross Profit
   Operating Expense
    Table of Contents  Page 23    ®
 Operating Income/(Loss)
  ®
    Table of Contents  Page 24 Other Income/(Expense) and Taxes
    Results of Operations for the Six Months Ended June 29, 2007 and June 30, 2006
 Revenue
  Segments Review
 ® ® ® ®
 ®
 ®
 Products
 ® ® ®
    Table of Contents  Page 25 Channels
 ®
 Gross Profit
   Operating Expense
      ®
    Table of Contents  Page 26 Operating Income/(Loss)
  ® ®
    Other Income/(Expense) and Taxes
    Table of Contents  Page 27 Reconciliation of Total Company, International, Europe and Asia Revenue Increases/(Decreases)
To Constant Dollar Revenue Increases/(Decreases)
  For the Quarter
    
    For the Six MonthsEnded June 29, 2007
    
    Ended June 29, 2007$ Millions
    
    
    
    
    
    $ MillionsChange
    
    % Change
    
    Change
    
    % ChangeRevenue decrease (GAAP)
    
    $
    (2.5
    )
    
    
    -1.1
    %
    
    $
    (16.0
    )
    
    
    -2.8
    %Increase due to foreign exchange rate changes
    
    
    4.3
    
    
    
    1.9
    %
    
    
    16.1
    
    
    
    2.8
    %Revenue decrease in constant dollars
    
    $
    (6.8
    )
    
    
    -3.0
    %
    
    $
    (32.1
    )
    
    
    -5.6
    %
  For the Quarter
    
    For the Six MonthsEnded June 29, 2007
    
    Ended June 29, 2007$ Millions
    
    
    
    
    
    $ MillionsChange
    
    % Change
    
    Change
    
    % ChangeRevenue increase (GAAP)
    
    $
    7.9
    
    
    
    7.5
    %
    
    $
    15.6
    
    
    
    5.3
    %Increase due to foreign exchange rate changes
    
    
    4.3
    
    
    
    4.1
    %
    
    
    16.1
    
    
    
    5.5
    %Revenue increase/(decrease) in constant dollars
    
    $
    3.6
    
    
    
    3.4
    %
    
    $
    (0.5
    )
    
    
    -0.2
    %
  For the Quarter
    
    For the Six MonthsEnded June 29, 2007
    
    Ended June 29, 2007$ Millions
    
    
    
    
    
    $ MillionsChange
    
    % Change
    
    Change
    
    % ChangeRevenue increase (GAAP)
    
    $
    6.3
    
    
    
    8.9
    %
    
    $
    8.1
    
    
    
    3.6
    %Increase due to foreign exchange rate changes
    
    
    4.9
    
    
    
    7.0
    %
    
    
    16.8
    
    
    
    7.6
    %Revenue increase/(decrease) in constant dollars
    
    $
    1.4
    
    
    
    1.9
    %
    
    $
    (8.7
    )
    
    
    -4.0
    %
  For the Quarter
    
    For the Six MonthsEnded June 29, 2007
    
    Ended June 29, 2007$ Millions
    
    
    
    
    
    $ MillionsChange
    
    % Change
    
    Change
    
    % ChangeRevenue increase (GAAP)
    
    $
    1.6
    
    
    
    5.8
    %
    
    $
    7.8
    
    
    
    13.2
    %Decrease due to foreign exchange rate changes
    
    
    (0.7
    )
    
    
    -2.5
    %
    
    
    (0.7
    )
    
    
    -1.2
    %Revenue increase in constant dollars
    
    $
    2.3
    
    
    
    8.3
    %
    
    $
    8.5
    
    
    
    14.4
    %
  Reconciliation of Diluted EPS to Diluted EPS Excluding Restructuring and Related Costs
 For the Quarter
    
    For the Six MonthsEnded
    
    EndedJune 30,
    
    
    
    
    
    June 30,2006
    
    
    
    
    
    2006June 29,
    
    (As
    
    June 29,
    
    (As2007
    
    Restated)
    
    2007
    
    Restated)Diluted EPS, as reported
    
    $
    (.31
    )
    
    $
    (.26
    )
    
    $
    (.16
    )
    
    $
    .15Per share impact of restructuring and related costs
    
    
    .01
    
    
    
    
    
    
    
    .08
    
    
    
    .01Diluted EPS excluding restructuring and related costs
    
    $
    (.30
    )
    
    $
    (.26
    )
    
    $
    (.08
    )
    
    $
    .16
    Table of Contents  Accounts Receivable and Inventory
  ® ®  ®
 Liquidity and Capital Resources
    Table of Contents  Page 29 Aggregate Contractual Obligations
  Off-Balance Sheet Arrangements
   New Accounting Pronouncements
  
 Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    Table of Contents  Page 30  
 Item 4. CONTROLS AND PROCEDURES
    
    
    The Company supplemented its accounting staff by hiring key accounting
personnel with the technical accounting expertise necessary to evaluate and document
complex transactions.
    
    The Company has engaged outside consultants to provide support and
technical expertise regarding the documentation, initial and ongoing testing of its
hedges and the application of hedge accounting to enhance its existing internal financial control policies and
procedures and to ensure the hedges are accounted for in accordance with generally
accepted accounting principles.
    Table of Contents  Page 31 
 Part II OTHER INFORMATION
 
 Item 1A. RISK FACTORS
  
 Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 (a)
    
    We held our Annual Meeting of Stockholders on May 17, 2007 (the Annual Meeting).(b)
    
    At the Annual Meeting, proxies were solicited pursuant to Regulation 14A of the Securities
Exchange Act of 1934 and all nominees for director were elected as indicated by the following
schedule of votes cast for each director. The holders of Class A Common Stock elected the
following directors:
 Total Votes for
    
    Total Votes WithheldNominee
    
    Each Director
    
    from Each DirectorIan W. Diery
    
    
    41,078,303
    
    
    
    2,129,808Irene M. Esteves
    
    
    41,078,146
    
    
    
    2,129,965John A. Fitzsimmons
    
    
    41,090,614
    
    
    
    2,117,497
  Total Votes for
    
    Total Votes WithheldNominee
    
    Each Director
    
    from Each DirectorSidney W. Swartz
    
    
    160,113,255
    
    
    
    531,456Jeffrey B. Swartz
    
    
    160,105,668
    
    
    
    539,043Virginia H. Kent
    
    
    158,804,402
    
    
    
    1,840,309Kenneth T. Lombard
    
    
    160,254,883
    
    
    
    389,828Edward W. Moneypenny
    
    
    158,542,671
    
    
    
    2,102,040Peter R. Moore
    
    
    157,181,346
    
    
    
    3,463,365Bill Shore
    
    
    158,327,800
    
    
    
    2,316,911Terdema L. Ussery, II
    
    
    160,396,994
    
    
    
    247,717
    Table of Contents  Page 32 
 Item 6. EXHIBITS
  Exhibit 31.1 

    Principal Executive Officer Certification Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002, filed herewith.Exhibit 31.2 
    Principal Financial Officer Certification Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002, filed herewith.Exhibit 32.1 
    Chief Executive Officer Certification Pursuant to Section 1350, Chapter
63 of Title 18, United States Code, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, furnished herewith.Exhibit 32.2 
    Chief Financial Officer Certification Pursuant to Section 1350, Chapter
63 of Title 18, United States Code, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, furnished herewith.
    Table of Contents  Page 33 
 SIGNATURES
  THE TIMBERLAND COMPANY
(Registrant)Date: August 8, 2007
    By:
    /s/ JEFFREY B. SWARTZJeffrey B. SwartzChief Executive Officer Date: August 8, 2007
    By:
    /s/ JOHN CRIMMINSJohn CrimminsActing Chief Financial Officer, Vice President, Corporate Controller
and Chief Accounting Officer
    Table of Contents  Page 34  
 EXHIBIT INDEX
 Exhibit
    
    DescriptionExhibit 31.1
    
    Principal Executive Officer Certification Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002, filed herewith.Exhibit 31.2
    
    Principal Financial Officer Certification Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002, filed herewith.Exhibit 32.1
    
    Chief Executive Officer Certification Pursuant to Section
1350, Chapter 63 of Title 18, United States Code, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
furnished herewith.Exhibit 32.2
    
    Chief Financial Officer Certification Pursuant to Section
1350, Chapter 63 of Title 18, United States Code, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
furnished herewith.