##### 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 ended October 2, 2009
 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 
incorporation or organization)
    
    (I.R.S. Employer Identification No.)200 Domain Drive, Stratham, New Hampshire
    
    03885(Address of principal executive offices)
    
    (Zip Code)
 (603) 772-9500
  þ o
  o o
  Large Accelerated Filer þ
Accelerated Filer o
Non-Accelerated Filer o(Do not check if a smaller reporting company)
Smaller Reporting Company o  o þ




---



##### 



THE TIMBERLAND COMPANY
 FORM 10-Q
 TABLE OF CONTENTS
 Page(s)Part I Financial InformationItem 1. Financial StatementsUnaudited Condensed Consolidated Balance Sheets 
October 2, 2009, December 31, 2008 and September 26, 2008
    
    
    4Unaudited Condensed Consolidated Statements of Operations 
For the Quarters and Nine Months Ended October 2, 2009 and
September 26, 2008
    
    
    5Unaudited Condensed Consolidated Statements of Cash Flows 
For the Nine Months Ended October 2, 2009 and September 26, 2008
    
    
    6Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    7-18Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    18-29Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    29Item 4. Controls and Procedures
    
    
    29Part II Other InformationItem 1A. Risk Factors
    
    
    30Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    30Item 6. Exhibits
    
    
    31Signatures
    
    
    32Exhibit Index
    
    
    33Exhibits
    
    
    34-41EX-10.1 1991 Employee Stock Purchase Plan, as amendedEX-31.1 Section 302 Certification of CEOEX-31.2 Section 302 Certification of CFOEX-32.1 Section 906 Certification of CEOEX-32.2 Section 906 Certification of CFO




---



##### Table of Contents



Cautionary Note Regarding Forward-Looking Statements




---



##### Table of Contents



PART I FINANCIAL INFORMATION
 
 Item 1. FINANCIAL STATEMENTS
 
 THE TIMBERLAND COMPANY
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
 October 2,
    
    
    December 31,
    
    
    September 26,2009
    
    
    2008
    
    
    2008AssetsCurrent assetsCash and equivalents
    
    $
    112,851
    
    
    $
    217,189
    
    
    $
    62,686Accounts receivable, net of allowance for doubtful accounts of $13,578
at October 2, 2009, $14,482 at December 31, 2008 and $14,585 at
September 26, 2008
    
    
    270,272
    
    
    
    168,666
    
    
    
    267,246Inventory, net
    
    
    201,733
    
    
    
    179,688
    
    
    
    218,884Prepaid expense
    
    
    32,919
    
    
    
    37,139
    
    
    
    41,465Prepaid income taxes
    
    
    18,287
    
    
    
    16,687
    
    
    
    21,190Deferred income taxes
    
    
    23,512
    
    
    
    23,425
    
    
    
    21,826Derivative assets
    
    
    839
    
    
    
    7,109
    
    
    
    4,365Total current assets
    
    
    660,413
    
    
    
    649,903
    
    
    
    637,662Property, plant and equipment, net
    
    
    70,664
    
    
    
    78,526
    
    
    
    80,225Deferred income taxes
    
    
    13,825
    
    
    
    18,528
    
    
    
    20,132Goodwill
    
    
    44,353
    
    
    
    43,870
    
    
    
    43,870Intangible assets, net
    
    
    45,948
    
    
    
    47,996
    
    
    
    51,958Other assets, net
    
    
    15,161
    
    
    
    10,576
    
    
    
    11,670Total assets
    
    $
    850,364
    
    
    $
    849,399
    
    
    $
    845,517Liabilities and Stockholders EquityCurrent liabilitiesAccounts payable
    
    $
    89,681
    
    
    $
    96,901
    
    
    $
    94,834Accrued expensePayroll and related
    
    
    30,478
    
    
    
    32,587
    
    
    
    30,166Other
    
    
    88,256
    
    
    
    79,503
    
    
    
    81,839Income taxes payable
    
    
    18,224
    
    
    
    20,697
    
    
    
    23,529Derivative liabilities
    
    
    3,994
    
    
    
    2,386
    
    
    
    1,724Total current liabilities
    
    
    230,633
    
    
    
    232,074
    
    
    
    232,092Other long-term liabilities
    
    
    36,146
    
    
    
    40,787
    
    
    
    41,774Commitments and contingenciesStockholders equityPreferred 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; 74,265,471 shares issued at October 2, 2009,
73,806,026 shares issued at December 31, 2008 and 73,757,691 shares
issued at September 26, 2008
    
    
    743
    
    
    
    738
    
    
    
    738Class 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; 11,339,160 shares issued and outstanding at October 2, 2009,
and 11,529,160 shares issued and outstanding at December 31, 2008 and
September 26, 2008
    
    
    113
    
    
    
    115
    
    
    
    115Additional paid-in capital
    
    
    264,484
    
    
    
    260,267
    
    
    
    257,715Retained earnings
    
    
    952,429
    
    
    
    918,039
    
    
    
    904,901Accumulated other comprehensive income
    
    
    12,195
    
    
    
    12,543
    
    
    
    23,346Treasury Stock at cost; 30,257,800 Class A shares at October 2, 2009,
and 27,766,651 Class A shares at December 31, 2008 and September 26,
2008
    
    
    (646,379
    )
    
    
    (615,164
    )
    
    
    (615,164
    )Total stockholders equity
    
    
    583,585
    
    
    
    576,538
    
    
    
    571,651Total liabilities and stockholders equity
    
    $
    850,364
    
    
    $
    849,399
    
    
    $
    845,517
 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.




---



##### Table of Contents



THE TIMBERLAND COMPANY
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 For the Quarter Ended
    
    
    For the Nine Months EndedOctober 2,
    
    
    September 26,
    
    
    October 2,
    
    
    September 26,2009
    
    
    2008
    
    
    2009
    
    
    2008Revenue
    
    $
    421,766
    
    
    $
    423,606
    
    
    $
    898,116
    
    
    $
    973,924Cost of goods sold
    
    
    227,254
    
    
    
    226,595
    
    
    
    491,407
    
    
    
    527,109Gross profit
    
    
    194,512
    
    
    
    197,011
    
    
    
    406,709
    
    
    
    446,815Operating expenseSelling
    
    
    107,314
    
    
    
    114,100
    
    
    
    284,609
    
    
    
    315,539General and administrative
    
    
    28,805
    
    
    
    29,486
    
    
    
    81,118
    
    
    
    83,713Impairment of intangible asset
    
    
    
    
    
    
    
    
    
    
    925
    
    
    
    Restructuring and related (credits)/costs
    
    
    (88
    )
    
    
    185
    
    
    
    (209
    )
    
    
    1,054Total operating expense
    
    
    136,031
    
    
    
    143,771
    
    
    
    366,443
    
    
    
    400,306Operating income
    
    
    58,481
    
    
    
    53,240
    
    
    
    40,266
    
    
    
    46,509Other income/(expense)Interest income
    
    
    106
    
    
    
    457
    
    
    
    845
    
    
    
    2,034Interest expense
    
    
    (117
    )
    
    
    (121
    )
    
    
    (355
    )
    
    
    (354
    )Other income/(expense), net
    
    
    2,626
    
    
    
    (2,454
    )
    
    
    3,629
    
    
    
    2,929Total other income/(expense), net
    
    
    2,615
    
    
    
    (2,118
    )
    
    
    4,119
    
    
    
    4,609Income before provision for income taxes
    
    
    61,096
    
    
    
    51,122
    
    
    
    44,385
    
    
    
    51,118Provision for income taxes
    
    
    23,339
    
    
    
    20,464
    
    
    
    9,995
    
    
    
    21,350Net income
    
    $
    37,757
    
    
    $
    30,658
    
    
    $
    34,390
    
    
    $
    29,768Earnings per shareBasic
    
    $
    .68
    
    
    $
    .53
    
    
    $
    .61
    
    
    $
    .51Diluted
    
    $
    .68
    
    
    $
    .52
    
    
    $
    .61
    
    
    $
    .50Weighted-average shares outstandingBasic
    
    
    55,744
    
    
    
    58,078
    
    
    
    56,385
    
    
    
    58,868Diluted
    
    
    55,908
    
    
    
    58,471
    
    
    
    56,692
    
    
    
    59,271
 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.




---



##### Table of Contents



THE TIMBERLAND COMPANY
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the Nine Months EndedOctober 2,
    
    
    September 26,2009
    
    
    2008Cash flows from operating activities:Net income
    
    $
    34,390
    
    
    $
    29,768Adjustments to reconcile net income to net cash used by operating activities:Deferred income taxes
    
    
    5,041
    
    
    
    2,420Share-based compensation
    
    
    4,163
    
    
    
    6,225Depreciation and other amortization
    
    
    21,582
    
    
    
    24,239Provision for losses on accounts receivable
    
    
    4,180
    
    
    
    4,517Provision for intangible assets impairment
    
    
    925
    
    
    
    Tax expense from share-based compensation, net of excess benefit
    
    
    (1,804
    )
    
    
    (1,161
    )Unrealized (gain)/loss on derivatives
    
    
    554
    
    
    
    (268
    )Other non-cash charges, net
    
    
    930
    
    
    
    964Increase/(decrease) in cash from changes in working capital:Accounts receivable
    
    
    (103,264
    )
    
    
    (82,671
    )Inventory
    
    
    (18,891
    )
    
    
    (17,063
    )Prepaid expense and other assets
    
    
    1,265
    
    
    
    401Accounts payable
    
    
    (8,099
    )
    
    
    9,009Accrued expense
    
    
    5,263
    
    
    
    756Prepaid income taxes
    
    
    (1,600
    )
    
    
    (3,829
    )Income taxes payable
    
    
    (7,208
    )
    
    
    8,413Other liabilities
    
    
    (175
    )
    
    
    (3,239
    )Net cash used by operating activities
    
    
    (62,748
    )
    
    
    (21,519
    )Cash flows from investing activities:Acquisition of business, net of cash acquired
    
    
    (1,554
    )
    
    
    Additions to property, plant and equipment
    
    
    (11,078
    )
    
    
    (15,313
    )Other
    
    
    (601
    )
    
    
    3,627Net cash used by investing activities
    
    
    (13,233
    )
    
    
    (11,686
    )Cash flows from financing activities:Common stock repurchases
    
    
    (29,285
    )
    
    
    (45,081
    )Issuance of common stock
    
    
    1,373
    
    
    
    1,407Excess tax benefit from share-based compensation
    
    
    136
    
    
    
    179Other
    
    
    (1,248
    )
    
    
    Net cash used by financing activities
    
    
    (29,024
    )
    
    
    (43,495
    )Effect of exchange rate changes on cash and equivalents
    
    
    667
    
    
    
    (3,888
    )Net decrease in cash and equivalents
    
    
    (104,338
    )
    
    
    (80,588
    )Cash and equivalents at beginning of period
    
    
    217,189
    
    
    
    143,274Cash and equivalents at end of period
    
    $
    112,851
    
    
    $
    62,686Supplemental disclosures of cash flow information:Interest paid
    
    $
    309
    
    
    $
    260Income taxes paid
    
    $
    15,460
    
    
    $
    15,697
 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.




---



##### Table of Contents



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




---



##### Table of Contents



Basis of Presentation
  Note 2. Fair Value Measurements
   Description
    
    Level 1
    
    Level 2
    
    Level 3
    
    Impact of Netting
    
    October 2, 2009Assets:Cash equivalents
    
    $
    63,116
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    63,116Derivative
contracts:Derivative assets
    
    $
    
    
    
    $
    1,126
    
    
    $
    
    
    
    $
    (178
    )
    
    $
    948Cash surrender value
of life insurance
    
    $
    
    
    
    $
    7,740
    
    
    $
    
    
    
    $
    
    
    
    $
    7,740Liabilities:Derivative
contracts:Derivative
liabilities
    
    $
    
    
    
    $
    4,402
    
    
    $
    
    
    
    $
    (178
    )
    
    $
    4,224




---



##### Table of Contents



Note 3. Derivatives
   Cash Flow Hedges




---



##### Table of Contents



Contract Amount
    
    
    MaturityCurrency
    
    (U.S. $ Equivalent)
    
    
    DatePounds Sterling
    
    $
    5,804
    
    
    
    2009Pounds Sterling
    
    
    14,131
    
    
    
    2010Pounds Sterling
    
    
    811
    
    
    
    2011Euro
    
    
    13,701
    
    
    
    2009Euro
    
    
    50,552
    
    
    
    2010Euro
    
    
    733
    
    
    
    2011Japanese Yen
    
    
    7,426
    
    
    
    2009Japanese Yen
    
    
    14,803
    
    
    
    2010Japanese Yen
    
    
    1,083
    
    
    
    2011$
    109,044
 Other Derivative Contracts
   Contract Amount
    
    
    MaturityCurrency
    
    (U.S. $ Equivalent)
    
    
    DatePounds Sterling
    
    $
    (15,901
    )
    
    
    2010Euro
    
    
    25,577
    
    
    
    2010Japanese Yen
    
    
    14,493
    
    
    
    2010Canadian Dollar
    
    
    10,403
    
    
    
    2010Norwegian Kroner
    
    
    5,145
    
    
    
    2010Swedish Krona
    
    
    3,694
    
    
    
    2010$
    43,411




---



##### Table of Contents



Fair Values of Derivative Instruments
 Asset Derivatives
    
    
    Liability DerivativesAs of October 2, 2009
    
    Balance Sheet Location
    
    Fair Value
    
    
    Balance Sheet Location
    
    Fair ValueDerivatives designated as hedging
instrumentsForeign exchange forward contracts
    
    Derivative assets
    
    $
    831
    
    
    Derivative liabilities
    
    $
    3,998Foreign exchange forward contracts
    
    Derivative liabilities
    
    
    154
    
    
    Derivative assets
    
    
    Foreign exchange forward contracts
    
    Other assets
    
    
    127
    
    
    Other long-term liabilities
    
    
    236Foreign exchange forward contracts
    
    Other long-term liabilities
    
    
    6
    
    
    Other assets
    
    
    18Total derivatives designated as
hedging instruments
    
    
    
    $
    1,118
    
    
    
    
    $
    4,252Derivatives not designated as hedging
instrumentsForeign exchange forward contracts
    
    Derivative assets
    
    $
    8
    
    
    Derivative liabilities
    
    $
    150Total derivatives not designated as
hedging instruments
    
    
    
    $
    8
    
    
    
    
    $
    150Total derivatives
    
    
    
    $
    1,126
    
    
    
    
    $
    4,402
 The Effect of Derivative Instruments on the Statement of Operations for the Quarters Ended
October 2, 2009 and September 26, 2008
 Amount of Gain/(Loss)Amount of Gain/(Loss)
    
    Location of Gain/(Loss)
    
    Reclassified fromRecognized in OCI on
    
    Reclassified from
    
    Accumulated OCI intoDerivatives
    
    Accumulated OCI into
    
    IncomeDerivatives in Cash Flow
    
    (Effective Portion)
    
    Income
    
    (Effective Portion)Hedging Relationships
    
    2009
    
    2008
    
    (Effective Portion)
    
    2009
    
    2008Foreign exchange forward contracts
    
    $
    (2,939
    )
    
    $
    2,563
    
    
    Cost of goods sold
    
    $
    (3,794
    )
    
    $
    (1,320
    )
 Location of Gain/(Loss)
    
    Amount of Gain/(Loss)Recognized in
    
    Recognized inDerivatives not Designated
    
    Income on
    
    Income on Derivativesas Hedging Instruments
    
    Derivatives
    
    2009
    
    2008Foreign exchange forward contracts
    
    Other income/(expense), net
    
    $
    (1,651
    )
    
    $
    (1,642
    )




---



##### Table of Contents



The Effect of Derivative Instruments on the Statement of Operations for the Nine Months Ended
October 2, 2009 and September 26, 2008
 Amount of Gain/(Loss)Amount of Gain/(Loss)
    
    Location of Gain/(Loss)
    
    Reclassified fromRecognized in OCI on
    
    Reclassified from
    
    Accumulated OCI intoDerivatives
    
    Accumulated OCI into
    
    IncomeDerivatives in Cash Flow
    
    (Effective Portion)
    
    Income
    
    (Effective Portion)Hedging Relationships
    
    2009
    
    2008
    
    (Effective Portion)
    
    2009
    
    2008Foreign exchange forward contracts
    
    $
    (2,939
    )
    
    $
    2,563
    
    
    Cost of goods sold
    
    $
    3,865
    
    
    $
    (7,107
    )
  Location of Gain/(Loss)
    
    Amount of Gain/(Loss)Recognized in
    
    Recognized inDerivatives not Designated
    
    Income on
    
    Income on Derivativesas Hedging Instruments
    
    Derivatives
    
    2009
    
    2008Foreign exchange forward contracts
    
    Other income/(expense), net
    
    $
    996
    
    
    $
    799
   Note 4. Share-Based Compensation
  For the Quarter EndedOctober 2, 2009
    
    
    September 26, 2008Cost of goods sold
    
    $
    252
    
    
    $
    361Selling expense
    
    
    846
    
    
    
    1,038General and administrative expense
    
    
    485
    
    
    
    608Total share-based compensation
    
    $
    1,583
    
    
    $
    2,007
 For the Nine Months EndedOctober 2, 2009
    
    
    September 26, 2008Cost of goods sold
    
    $
    611
    
    
    $
    987Selling expense
    
    
    2,270
    
    
    
    3,331General and administrative expense
    
    
    1,282
    
    
    
    1,907Total share-based compensation
    
    $
    4,163
    
    
    $
    6,225




---



##### Table of Contents



Performance-based Awards
    For the NineMonths EndedOctober 2, 2009Expected volatility
    
    
    41.9
    %Risk-free interest rate
    
    
    1.9
    %Expected life (in years)
    
    
    6.4Expected dividends
    
    
    




---



##### Table of Contents



Stock Options
  For the Quarter Ended
    
    For the Nine Months EndedOctober 2,
    
    September 26,
    
    October 2,
    
    September 26,2009
    
    2008
    
    2009
    
    2008Expected volatility
    
    
    45.9
    %
    
    
    33.7
    %
    
    
    43.3
    %
    
    
    32.3
    %Risk-free interest rate
    
    
    2.5
    %
    
    
    3.1
    %
    
    
    2.0
    %
    
    
    3.1
    %Expected life (in years)
    
    
    5.0
    
    
    
    5.0
    
    
    
    6.2
    
    
    
    6.4Expected dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
  Weighted-Weighted-
    
    
    AverageAverage
    
    
    Remaining
    
    
    AggregateExercise
    
    
    Contractual
    
    
    IntrinsicShares
    
    
    Price
    
    
    Term
    
    
    ValueOutstanding at January 1, 2009
    
    
    4,163,628
    
    
    $
    26.03Granted
    
    
    395,179
    
    
    
    11.27Exercised
    
    
    (102,800
    )
    
    
    8.41Expired or forfeited
    
    
    (385,059
    )
    
    
    24.13Outstanding at October 2, 2009
    
    
    4,070,948
    
    
    $
    25.22
    
    
    
    5.6
    
    
    $
    799Vested or expected to vest at
October 2, 2009
    
    
    4,014,165
    
    
    $
    25.39
    
    
    
    5.5
    
    
    $
    753Exercisable at October 2, 2009
    
    
    3,379,496
    
    
    $
    27.27
    
    
    
    4.9
    
    
    $
    92
  Nonvested Shares
  Weighted-
    
    
    
    
    
    
    Weighted-Average
    
    
    
    
    
    
    AverageStock
    
    
    Grant Date
    
    
    Stock
    
    
    Grant DateAwards
    
    
    Fair Value
    
    
    Units
    
    
    Fair ValueNonvested at January 1, 2009
    
    
    278,553
    
    
    $
    25.39
    
    
    
    182,600
    
    
    $
    14.45Awarded
    
    
    62,399
    
    
    
    9.34
    
    
    
    179,671
    
    
    
    13.01Vested
    
    
    (239,644
    )
    
    
    25.52
    
    
    
    (53,099
    )
    
    
    14.83Forfeited
    
    
    (15,206
    )
    
    
    10.99
    
    
    
    (12,085
    )
    
    
    13.57Nonvested at October 2, 2009
    
    
    86,102
    
    
    $
    15.59
    
    
    
    297,087
    
    
    $
    13.54
  Note 5. Earnings Per Share (EPS)




---



##### Table of Contents



For the Quarter EndedOctober 2, 2009
    
    
    September 26, 2008Weighted-
    
    
    Per-
    
    
    
    
    
    
    Weighted-
    
    
    Per-Net
    
    
    Average
    
    
    Share
    
    
    Net
    
    
    Average
    
    
    ShareIncome
    
    
    Shares
    
    
    Amount
    
    
    Income
    
    
    Shares
    
    
    AmountBasic EPS
    
    $
    37,757
    
    
    
    55,744
    
    
    $
    .68
    
    
    $
    30,658
    
    
    
    58,078
    
    
    $
    .53Effect of dilutive
securities:Stock options and
employee stock
purchase plan
shares
    
    
    
    
    
    
    26
    
    
    
    
    
    
    
    
    
    
    
    45
    
    
    
    Nonvested shares
    
    
    
    
    
    
    138
    
    
    
    
    
    
    
    
    
    
    
    348
    
    
    
    (.01
    )Diluted EPS
    
    $
    37,757
    
    
    
    55,908
    
    
    $
    .68
    
    
    $
    30,658
    
    
    
    58,471
    
    
    $
    .52
 For the Nine Months EndedOctober 2, 2009
    
    
    September 26, 2008Weighted-
    
    
    Per-
    
    
    
    
    
    
    Weighted-
    
    
    Per-Net
    
    
    Average
    
    
    Share
    
    
    Net
    
    
    Average
    
    
    ShareIncome
    
    
    Shares
    
    
    Amount
    
    
    Income
    
    
    Shares
    
    
    AmountBasic EPS
    
    $
    34,390
    
    
    
    56,385
    
    
    $
    .61

    
    
    $
    29,768
    
    
    
    58,868
    
    
    $

    .51Effect of dilutive
securities:Stock options and
employee stock
purchase plan
shares
    
    
    
    
    
    
    23
    
    
    
    
    
    
    
    
    
    
    
    50
    
    
    
    Nonvested shares
    
    
    
    
    
    
    284
    
    
    
    
    
    
    
    
    
    
    
    353
    
    
    
    (.01
    )Diluted EPS
    
    $
    34,390
    
    
    
    56,692
    
    
    $
    .61
    
    
    $
    29,768
    
    
    
    59,271
    
    
    $
    .50
  For the Quarter Ended
    
    For the Nine Months EndedOctober 2, 2009
    
    September 26, 2008
    
    October 2, 2009
    
    September 26, 2008Anti-dilutive securities
    
    
    3,994
    
    
    
    4,235
    
    
    
    4,056
    
    
    
    4,324




---



##### Table of Contents



Note 6. Comprehensive Income
  For the Quarter Ended
    
    
    For the Nine Months EndedOctober 2, 2009
    
    
    September 26, 2008
    
    
    October 2, 2009
    
    
    September 26, 2008Net income
    
    $
    37,757
    
    
    $
    30,658
    
    
    $
    34,390
    
    
    $
    29,768Change in cumulative translation adjustment
    
    
    3,838
    
    
    
    (10,304
    )
    
    
    7,220
    
    
    
    (2,948
    )Change in fair value of cash flow hedges,
net of taxes
    
    
    (731
    )
    
    
    8,813
    
    
    
    (7,568
    )
    
    
    6,188Comprehensive income
    
    $
    40,864
    
    
    $
    29,167
    
    
    $
    34,042
    
    
    $
    33,008
  October 2, 2009
    
    
    December 31, 2008
    
    
    September 26, 2008Cumulative translation adjustment
    
    $
    14,996
    
    
    $
    7,776
    
    
    $
    20,783Fair value of cash flow hedges, net of taxes of $(155)
at October 2, 2009, $244 at December 31, 2008 and $132
at September 26, 2008
    
    
    (2,939
    )
    
    
    4,629
    
    
    
    2,563Other adjustments, net of taxes of $7 at October 2, 2009 and December 31, 2008
    
    
    138
    
    
    
    138
    
    
    
    Total
    
    $
    12,195
    
    
    $
    12,543
    
    
    $
    23,346
 Note 7. Business Segments and Geographic Information




---



##### Table of Contents



For the Quarter Ended October 2, 2009 and September 26, 2008
 UnallocatedNorth America
    
    Europe
    
    Asia
    
    Corporate
    
    Consolidated2009Revenue
    
    $
    188,247
    
    
    $
    195,244
    
    
    $
    38,275
    
    
    $
    
    
    
    $
    421,766Operating income/(loss)
    
    
    47,286
    
    
    
    42,013
    
    
    
    4,119
    
    
    
    (34,937
    )
    
    
    58,481Income/(loss) before income taxes
    
    
    47,286
    
    
    
    42,013
    
    
    
    4,119
    
    
    
    (32,322
    )
    
    
    61,096Total assets
    
    
    320,014
    
    
    
    341,065
    
    
    
    60,675
    
    
    
    128,610
    
    
    
    850,364Goodwill
    
    
    36,876
    
    
    
    7,477
    
    
    
    
    
    
    
    
    
    
    
    44,3532008Revenue
    
    $
    184,516
    
    
    $
    199,933
    
    
    $
    39,157
    
    
    $
    
    
    
    $
    423,606Operating income/(loss)
    
    
    44,073
    
    
    
    51,467
    
    
    
    (760
    )
    
    
    (41,540
    )
    
    
    53,240Income/(loss) before income taxes
    
    
    44,073
    
    
    
    51,467
    
    
    
    (760
    )
    
    
    (43,658
    )
    
    
    51,122Total assets
    
    
    330,260
    
    
    
    308,751
    
    
    
    79,616
    
    
    
    126,890
    
    
    
    845,517Goodwill
    
    
    36,876
    
    
    
    6,994
    
    
    
    
    
    
    
    
    
    
    
    43,870
 For the Nine Months Ended October 2, 2009 and September 26, 2008
 UnallocatedNorth America
    
    Europe
    
    Asia
    
    Corporate
    
    Consolidated2009Revenue
    
    $
    394,419
    
    
    $
    400,913
    
    
    $
    102,784
    
    
    $
    
    
    
    $
    898,116Operating income/(loss)
    
    
    67,404
    
    
    
    62,210
    
    
    
    5,351
    
    
    
    (94,699
    )
    
    
    40,266Income/(loss) before income taxes
    
    
    67,404
    
    
    
    62,210
    
    
    
    5,351
    
    
    
    (90,580
    )
    
    
    44,3852008Revenue
    
    $
    421,807
    
    
    $
    443,406
    
    
    $
    108,711
    
    
    $
    
    
    
    $
    973,924Operating income/(loss)
    
    
    74,935
    
    
    
    76,364
    
    
    
    (1,399
    )
    
    
    (103,391
    )
    
    
    46,509Income/(loss) before income taxes
    
    
    74,935
    
    
    
    76,364
    
    
    
    (1,399
    )
    
    
    (98,782
    )
    
    
    51,118
  For the Quarter Ended
    
    
    For the Nine Months EndedOctober 2, 2009
    
    
    September 26, 2008
    
    
    October 2, 2009
    
    
    September 26, 2008Footwear
    
    $
    319,145
    
    
    $
    313,544
    
    
    $
    657,739
    
    
    $
    693,094Apparel and accessories
    
    
    95,824
    
    
    
    102,678
    
    
    
    221,729
    
    
    
    263,244Royalty and other
    
    
    6,797
    
    
    
    7,384
    
    
    
    18,648
    
    
    
    17,586$
    421,766
    
    
    $
    423,606
    
    
    $
    898,116
    
    
    $
    973,924




---



##### Table of Contents



Note 8. Inventory, net
  October 2, 2009
    
    
    December 31, 2008
    
    
    September 26, 2008Materials
    
    $
    8,824
    
    
    $
    7,708
    
    
    $
    9,137Work-in-process
    
    
    935
    
    
    
    825
    
    
    
    1,138Finished goods
    
    
    191,974
    
    
    
    171,155
    
    
    
    208,609Total
    
    $
    201,733
    
    
    $
    179,688
    
    
    $
    218,884
 Note 9. Acquisition
 ® ®
 Note 10. Income Taxes
  Note 11. Share Repurchase
   Note 12. Litigation
  
 Item 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS




---



##### Table of Contents



Form 10-QPage 19
  Critical Accounting Policies
  Overview
 â
   
    
    Revenue decreased slightly to $421.8 million, but rose 1.7% on a constant dollar basis.
    
    Gross margin decreased 40 basis points to 46.1%.
    
    Operating expenses were down 5.4% to $136.0 million.
    
    Operating income increased 9.8% to $58.5 million.
    
    Net income increased from $30.7 million to $37.8 million.
    
    Diluted earnings per share increased from $.52 to $.68.
    
    Cash at the end of the quarter was $112.9 million with no debt outstanding.




---



##### Table of Contents



Form 10-QPage 20 
 Results of Operations for the Quarter Ended October 2, 2009 as Compared to the Quarter Ended
September 26, 2008
 Revenue
 ® ®
 Products
 ® ® ® ®
 Channels
 ®
  Gross Profit
   Operating Expense




---



##### Table of Contents



Form 10-QPage 21       Operating Income/(Loss)
  Other Income/(Expense) and Taxes




---



##### Table of Contents



Form 10-QPage 22 Segments Review
   For the Quarter EndedOctober 2,
    
    September 26,
    
    %2009
    
    2008
    
    ChangeNorth America
    
    $
    188.3
    
    
    $
    184.5
    
    
    
    2.0
    %Europe
    
    
    195.2
    
    
    
    199.9
    
    
    
    (2.3
    )Asia
    
    
    38.3
    
    
    
    39.2
    
    
    
    (2.3
    )$
    421.8
    
    
    $
    423.6
    
    
    
    (0.4
    )
  For the Quarter EndedOctober 2,
    
    
    
    
    
    September 26,2009
    
    
    
    
    
    2008North America
    
    $
    47.3
    
    
    25.1
    %
    
    $
    44.1
    
    
    23.9
    %Europe
    
    
    42.0
    
    
    21.5
    
    
    
    51.5
    
    
    25.7Asia
    
    
    4.1
    
    
    10.8
    
    
    
    (0.8
    )
    
    (1.9
    )Unallocated corporate
    
    
    (34.9
    )
    
    (8.3
    )
    
    
    (41.6
    )
    
    (9.8
    )$
    58.5
    
    
    13.9
    
    
    $
    53.2
    
    
    12.6
 North America
 ® ®
  Europe
 ®




---



##### Table of Contents



Form 10-QPage 23  Asia
   Corporate Unallocated
  Results of Operations for the Nine Months Ended October 2, 2009 as Compared to the Nine Months
Ended September 26, 2008
 Revenue
 ® ®
 Products
 ® ®
 Channels




---



##### Table of Contents



Form 10-QPage 24  Gross Profit
   Operating Expense
        Operating Income/(Loss)




---



##### Table of Contents



Form 10-QPage 25  Other Income/(Expense) and Taxes
    Segments Review
   For the Nine Months EndedOctober 2,
    
    September 26,
    
    %2009
    
    2008
    
    ChangeNorth America
    
    $
    394.4
    
    
    $
    421.8
    
    
    
    (6.5
    )%Europe
    
    
    400.9
    
    
    
    443.4
    
    
    
    (9.6
    )Asia
    
    
    102.8
    
    
    
    108.7
    
    
    
    (5.5
    )$
    898.1
    
    
    $
    973.9
    
    
    
    (7.8
    )
  For the Nine Months EndedOctober 2,
    
    
    
    
    
    September 26,2009
    
    
    
    
    
    2008North America
    
    $
    67.4
    
    
    17.1
    %
    
    $
    74.9
    
    
    17.8
    %Europe
    
    
    62.2
    
    
    15.5
    
    
    
    76.4
    
    
    17.2Asia
    
    
    5.4
    
    
    5.2
    
    
    
    (1.4
    )
    
    (1.3
    )Unallocated corporate
    
    
    (94.7
    )
    
    (10.5
    )
    
    
    (103.4
    )
    
    (10.6
    )$
    40.3
    
    
    4.5
    
    
    $
    46.5
    
    
    4.8
 North America




---



##### Table of Contents



Form 10-QPage 26 ® ®
  Europe
   Asia
   Corporate Unallocated
  Reconciliation of Total Company, Europe and Asia Revenue Increases/(Decreases) To Constant
Dollar Revenue Increases/(Decreases)
  For the Quarter
    
    For the Nine MonthsEnded October 2, 2009
    
    Ended October 2, 2009$ Millions
    
    
    
    
    
    $ MillionsChange
    
    % Change
    
    Change
    
    % ChangeRevenue decrease (GAAP)
    
    $
    (1.8
    )
    
    
    -0.4
    %
    
    $
    (75.8
    )
    
    
    -7.8
    %Decrease due to foreign exchange rate changes
    
    
    (9.0
    )
    
    
    -2.1
    %
    
    
    (41.8
    )
    
    
    -4.3
    %Revenue increase/(decrease) in constant dollars
    
    $
    7.2
    
    
    
    1.7
    %
    
    $
    (34.0
    )
    
    
    -3.5
    %




---



##### Table of Contents



Form 10-QPage 27  For the Quarter
    
    For the Nine MonthsEnded October 2, 2009
    
    Ended October 2, 2009$ Millions
    
    
    
    
    
    $ MillionsChange
    
    % Change
    
    Change
    
    % ChangeRevenue decrease (GAAP)
    
    $
    (4.7
    )
    
    
    -2.3
    %
    
    $
    (42.5
    )
    
    
    -9.6
    %Decrease due to foreign exchange rate changes
    
    
    (11.3
    )
    
    
    -5.6
    %
    
    
    (44.3
    )
    
    
    -10.0
    %Revenue increase in constant dollars
    
    $
    6.6
    
    
    
    3.3
    %
    
    $
    1.8
    
    
    
    0.4
    %
  For the Quarter
    
    For the Nine MonthsEnded October 2, 2009
    
    Ended October 2, 2009$ Millions
    
    
    
    
    
    $ MillionsChange
    
    % Change
    
    Change
    
    % ChangeRevenue decrease (GAAP)
    
    $
    (0.9
    )
    
    
    -2.3
    %
    
    $
    (5.9
    )
    
    
    -5.5
    %Increase due to foreign exchange rate changes
    
    
    2.6
    
    
    
    6.8
    %
    
    
    4.3
    
    
    
    3.9
    %Revenue decrease in constant dollars
    
    $
    (3.5
    )
    
    
    -9.1
    %
    
    $
    (10.2
    )
    
    
    -9.4
    %
  Accounts Receivable and Inventory
   Liquidity and Capital Resources




---



##### Table of Contents



Form 10-QPage 28




---



##### Table of Contents



Form 10-QPage 29 Off-Balance Sheet Arrangements
 Letters of Credit
   New Accounting Pronouncements
  
 Item 3.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
     
 Item 4.
    
    CONTROLS AND PROCEDURES




---



##### Table of Contents



Part II OTHER INFORMATION
 
 Item 1A. RISK FACTORS
  
 Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 ISSUER PURCHASES OF EQUITY SECURITIES(1)
 For the Three Fiscal Months Ended October 2, 2009
 Total Number
    
    
    Maximum Numberof Shares
    
    
    of SharesPurchased as Part
    
    
    that May YetTotal Number
    
    
    
    
    
    
    of Publicly
    
    
    Be Purchasedof Shares
    
    
    Average Price
    
    
    Announced
    
    
    Under the PlansPeriod*
    
    Purchased **
    
    
    Paid per Share
    
    
    Plans or Programs
    
    
    or ProgramsJuly 4  July 31
    
    
    16,500
    
    
    $
    13.61
    
    
    
    16,500
    
    
    
    2,934,973August 1  August 28
    
    
    337,630
    
    
    
    13.29
    
    
    
    337,630
    
    
    
    2,597,343August 29  October 2
    
    
    401,280
    
    
    
    13.43
    
    
    
    401,280
    
    
    
    2,196,063Total
    
    
    755,410
    
    
    $
    13.37
    
    
    
    755,410
 Footnote (1)
 ApprovedAnnouncement
    
    Program
    
    ExpirationDate
    
    Size (Shares)
    
    DateProgram 1
    
    
    03/10/2008
    
    
    
    6,000,000
    
    
    None
 
 *
    
    Fiscal month**
    
    Based on trade date  not settlement date




---



##### Table of Contents



Item 6. EXHIBITS
  Exhibit 10.1 
    
    The Timberland Company 1991 Employee Stock Purchase Plan, as amended,
filed herewith.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



SIGNATURES
  THE TIMBERLAND COMPANY
(Registrant)Date: November 5, 2009
    By:
    /s/ JEFFREY B. SWARTZJeffrey B. SwartzChief Executive OfficerDate: November 5, 2009
    By:
    /s/ CARRIE W. TEFFNERCarrie W. TeffnerChief Financial Officer




---



##### Table of Contents



EXHIBIT INDEX
 Exhibit
    
    DescriptionExhibit 10.1
    
    The Timberland Company 1991 Employee Stock Purchase Plan, as amended, filed herewith.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.