##### 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 endedSeptember 26, 2008
 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
  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 Information (unaudited)Item 1.
    
    Financial StatementsUnaudited Condensed Consolidated Balance Sheets  September 26, 2008, December 31, 2007 and September 28, 2007
    
    
    4Unaudited Condensed Consolidated Statements of Operations  For the Quarter and Nine Months Ended September 26, 2008 and September 28, 2007
    
    
    5Unaudited Condensed Consolidated Statements of Cash Flows  For the Nine Months Ended September 26, 2008 and September 28, 2007
    
    
    6Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    7-15Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    15-25Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    25Item 4.
    
    Controls and Procedures
    
    
    26Part II  Other InformationItem 1A.
    
    Risk Factors
    
    
    27Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    28Item 6.
    
    Exhibits
    
    
    29Signatures
    
    
    30Exhibit Index
    
    
    31Exhibits
    
    
    32-35EX-31.1 SECTION 302 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICEREX-31.2 SECTION 302 CERTIFICATION OF PRINCIPAL FINANCIAL OFFICEREX-32.1 SECTION 906 CERTIFICATION OF CEOEX-32.2 SECTION 906 CERTIFICATION OF CFO




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##### Table of Contents



Cautionary Note Regarding Forward-Looking Statements




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##### Table of Contents



Part I  FINANCIAL INFORMATION
 
 Item 1. FINANCIAL STATEMENTS
 THE TIMBERLAND COMPANY
 
 UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
  September 26,
    
    
    December 31,
    
    
    September 28,2008
    
    
    2007
    
    
    2007AssetsCurrent assetsCash and equivalents
    
    $
    62,686
    
    
    $
    143,274
    
    
    $
    43,951Accounts receivable, net of allowance for doubtful accounts of $14,585
at September 26, 2008, $14,762 at December 31, 2007 and $14,684 at
September 28, 2007
    
    
    267,246
    
    
    
    188,091
    
    
    
    286,575Inventory, net
    
    
    218,884
    
    
    
    201,932
    
    
    
    259,207Prepaid expense
    
    
    41,465
    
    
    
    41,572
    
    
    
    42,081Prepaid income taxes
    
    
    21,190
    
    
    
    17,361
    
    
    
    21,309Deferred income taxes
    
    
    21,826
    
    
    
    24,927
    
    
    
    18,956Derivative assets
    
    
    4,365
    
    
    
    
    
    
    
    57Total current assets
    
    
    637,662
    
    
    
    617,157
    
    
    
    672,136Property, plant and equipment, net
    
    
    80,225
    
    
    
    87,919
    
    
    
    88,098Deferred income taxes
    
    
    20,132
    
    
    
    19,451
    
    
    
    23,008Goodwill
    
    
    43,870
    
    
    
    44,840
    
    
    
    44,792Intangible assets, net
    
    
    51,958
    
    
    
    54,382
    
    
    
    54,296Other assets, net
    
    
    11,670
    
    
    
    12,596
    
    
    
    12,810Total assets
    
    $
    845,517
    
    
    $
    836,345
    
    
    $
    895,140Liabilities and Stockholders EquityCurrent liabilitiesNotes payable
    
    $
    
    
    
    $
    
    
    
    $
    46,600Accounts payable
    
    
    94,834
    
    
    
    86,101
    
    
    
    104,185Accrued expensePayroll and related
    
    
    30,166
    
    
    
    29,752
    
    
    
    34,973Other
    
    
    81,839
    
    
    
    79,151
    
    
    
    79,046Income taxes payable
    
    
    23,529
    
    
    
    19,215
    
    
    
    12,243Derivative liabilities
    
    
    1,724
    
    
    
    3,816
    
    
    
    4,810Total current liabilities
    
    
    232,092
    
    
    
    218,035
    
    
    
    281,857Other long-term liabilities
    
    
    41,774
    
    
    
    41,150
    
    
    
    41,901Commitments 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; 73,757,691 shares issued at September 26, 2008,
73,393,951 shares issued at December 31, 2007 and 73,353,284 shares
issued at September 28, 2007
    
    
    738
    
    
    
    734
    
    
    
    734Class 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; 11,529,160 shares issued and outstanding at September 26,
2008, and 11,743,660 shares issued and outstanding at December 31, 2007
and September 28, 2007
    
    
    115
    
    
    
    117
    
    
    
    117Additional paid-in capital
    
    
    257,715
    
    
    
    251,063
    
    
    
    248,329Retained earnings
    
    
    904,901
    
    
    
    875,133
    
    
    
    851,026Accumulated other comprehensive income
    
    
    23,346
    
    
    
    20,106
    
    
    
    21,060Treasury Stock at cost; 27,766,651 Class A shares at September 26, 2008,
25,024,194 Class A shares at December 31, 2007 and 23,850,234 Class A
shares at September 28, 2007
    
    
    (615,164
    )
    
    
    (569,993
    )
    
    
    (549,884
    )Total stockholders equity
    
    
    571,651
    
    
    
    577,160
    
    
    
    571,382Total liabilities and stockholders equity
    
    $
    845,517
    
    
    $
    836,345
    
    
    $
    895,140
 The accompanying notes are an integral part of these unaudited condensed consolidated financial
statements.




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##### Table of Contents



THE TIMBERLAND COMPANY
 
 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
  For the Quarter Ended
    
    
    For the Nine Months EndedSeptember 26,
    
    
    September 28,
    
    
    September 26,
    
    
    September 28,2008
    
    
    2007
    
    
    2008
    
    
    2007Revenue
    
    $
    423,606
    
    
    $
    433,294
    
    
    $
    973,924
    
    
    $
    993,749Cost of goods sold
    
    
    226,595
    
    
    
    229,891
    
    
    
    527,109
    
    
    
    529,600Gross profit
    
    
    197,011
    
    
    
    203,403
    
    
    
    446,815
    
    
    
    464,149Operating expenseSelling
    
    
    114,100
    
    
    
    122,260
    
    
    
    315,539
    
    
    
    331,890General and administrative
    
    
    29,486
    
    
    
    28,943
    
    
    
    83,713
    
    
    
    90,385Restructuring and related costs
    
    
    185
    
    
    
    7,545
    
    
    
    1,054
    
    
    
    15,059Total operating expense
    
    
    143,771
    
    
    
    158,748
    
    
    
    400,306
    
    
    
    437,334Operating income
    
    
    53,240
    
    
    
    44,655
    
    
    
    46,509
    
    
    
    26,815Other incomeInterest income/(expense), net
    
    
    336
    
    
    
    (420
    )
    
    
    1,680
    
    
    
    1,376Other income/(expense), net
    
    
    (2,454
    )
    
    
    (1,128
    )
    
    
    2,929
    
    
    
    (310
    )Total other income/(expense), net
    
    
    (2,118
    )
    
    
    (1,548
    )
    
    
    4,609
    
    
    
    1,066Income before provision for income taxes
    
    
    51,122
    
    
    
    43,107
    
    
    
    51,118
    
    
    
    27,881Provision for income taxes
    
    
    20,464
    
    
    
    17,242
    
    
    
    21,350
    
    
    
    11,989Net income
    
    $
    30,658
    
    
    $
    25,865
    
    
    $
    29,768
    
    
    $
    15,892Earnings per shareBasic
    
    $
    .53
    
    
    $
    .42
    
    
    $
    .51
    
    
    $
    .26Diluted
    
    $
    .52
    
    
    $
    .42
    
    
    $
    .50
    
    
    $
    .26Weighted-average shares outstandingBasic
    
    
    58,078
    
    
    
    61,352
    
    
    
    58,868
    
    
    
    61,310Diluted
    
    
    58,471
    
    
    
    61,860
    
    
    
    59,271
    
    
    
    61,974
 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.




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##### Table of Contents



THE TIMBERLAND COMPANY
 
 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
  For the Nine Months EndedSeptember 26,
    
    
    September 28,2008
    
    
    2007Cash flows from operating activities:Net income
    
    $
    29,768
    
    
    $
    15,892Adjustments to reconcile net income to net cash used by operating activities:Deferred income taxes
    
    
    2,420
    
    
    
    1,978Share-based compensation
    
    
    6,225
    
    
    
    7,328Depreciation and other amortization
    
    
    24,239
    
    
    
    23,598Provision for losses on accounts receivable
    
    
    4,517
    
    
    
    6,705Provision for asset impairment
    
    
    
    
    
    
    5,817Tax expense from share-based compensation, net of excess benefit
    
    
    (1,161
    )
    
    
    (829
    )Unrealized (gain)/loss on derivatives
    
    
    (268
    )
    
    
    26Other non-cash charges, net
    
    
    964
    
    
    
    3,897Increase/(decrease) in cash from changes in working capital:Accounts receivable
    
    
    (82,671
    )
    
    
    (79,458
    )Inventory
    
    
    (17,063
    )
    
    
    (69,202
    )Prepaid expense
    
    
    401
    
    
    
    1,202Accounts payable
    
    
    9,009
    
    
    
    (8,087
    )Accrued expense
    
    
    756
    
    
    
    (11,015
    )Income taxes prepaid and payable, net
    
    
    4,584
    
    
    
    (30,537
    )Other liabilities
    
    
    (3,239
    )
    
    
    1,176Net cash used by operating activities
    
    
    (21,519
    )
    
    
    (131,509
    )Cash flows from investing activities:Acquisition of business, net of cash acquired
    
    
    
    
    
    
    (12,811
    )Additions to property, plant and equipment
    
    
    (15,313
    )
    
    
    (20,264
    )Other
    
    
    3,627
    
    
    
    (1,640
    )Net cash used by investing activities
    
    
    (11,686
    )
    
    
    (34,715
    )Cash flows from financing activities:Common stock repurchases
    
    
    (45,081
    )
    
    
    (28,512
    )Net short-term borrowings
    
    
    
    
    
    
    46,600Issuance of common stock
    
    
    1,407
    
    
    
    11,957Excess tax benefit from share-based compensation
    
    
    179
    
    
    
    1,097Net cash (used)/provided by financing activities
    
    
    (43,495
    )
    
    
    31,142Effect of exchange rate changes on cash and equivalents
    
    
    (3,888
    )
    
    
    (2,665
    )Net decrease in cash and equivalents
    
    
    (80,588
    )
    
    
    (137,747
    )Cash and equivalents at beginning of period
    
    
    143,274
    
    
    
    181,698Cash and equivalents at end of period
    
    $
    62,686
    
    
    $
    43,951Supplemental disclosures of cash flow information:Interest paid
    
    $
    260
    
    
    $
    722Income taxes paid
    
    $
    15,697
    
    
    $
    37,071
 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.




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##### 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
   Note 2. Fair Value Measurements




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##### Table of Contents



Description
    
    Level 1
    
    Level 2
    
    Level 3
    
    Impact of Netting
    
    September 26, 2008Assets:Derivative contracts
    
    $
    
    
    
    $
    4,832
    
    
    $
    
    
    
    $
    (467
    )
    
    $
    4,365Liabilities:Derivative contracts
    
    $
    
    
    
    $
    2,191
    
    
    $
    
    
    
    $
    (467
    )
    
    $
    1,724
   Note 3. Derivatives
  Cash Flow Hedges




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##### Table of Contents



Other Derivative Contracts
   Note 4. Share-Based Compensation
  For the Quarter EndedSeptember 26,
    
    
    September 28,2008
    
    
    2007Cost of goods sold
    
    $
    361
    
    
    $
    462Selling expense
    
    
    1,038
    
    
    
    1,530General and administrative expense
    
    
    608
    
    
    
    878Total share-based compensation
    
    $
    2,007
    
    
    $
    2,870
 For the Nine Months EndedSeptember 26,
    
    
    September 28,2008
    
    
    2007Cost of goods sold
    
    $
    987
    
    
    $
    1,233Selling expense
    
    
    3,331
    
    
    
    3,688General and administrative expense
    
    
    1,907
    
    
    
    2,606Restructuring and related costs
    
    
    
    
    
    
    (199
    )Total share-based compensation
    
    $
    6,225
    
    
    $
    7,328




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##### Table of Contents



Stock Options
  For the Quarter Ended
    
    For the Nine Months EndedSeptember 26,
    
    September 28,
    
    September 26,
    
    September 28,2008
    
    2007
    
    2008
    
    2007Expected volatility
    
    
    33.7
    %
    
    
    27.9
    %
    
    
    32.3
    %
    
    
    29.2
    %Risk-free interest rate
    
    
    3.1
    %
    
    
    4.5
    %
    
    
    3.1
    %
    
    
    4.7
    %Expected life (in years)
    
    
    5.0
    
    
    
    4.0
    
    
    
    6.4
    
    
    
    4.7Expected dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
  Weighted-Weighted-
    
    
    AverageAverage
    
    
    Remaining
    
    
    AggregateExercise
    
    
    Contractual
    
    
    IntrinsicShares
    
    
    Price
    
    
    Term
    
    
    ValueOutstanding at January 1, 2008
    
    
    4,614,603
    
    
    $
    27.31Granted
    
    
    547,375
    
    
    
    15.49Exercised
    
    
    (80,000
    )
    
    
    10.29Expired or forfeited
    
    
    (794,507
    )
    
    
    27.44Outstanding at September 26, 2008
    
    
    4,287,471
    
    
    $
    26.10
    
    
    
    6.1
    
    
    $
    2,067Vested or expected to vest at
September 26, 2008
    
    
    4,097,943
    
    
    $
    26.26
    
    
    
    6.0
    
    
    $
    1,897Exercisable at September 26, 2008
    
    
    3,176,889
    
    
    $
    27.24
    
    
    
    5.2
    
    
    $
    1,200
  Nonvested Shares and Restricted Stock Units
  Weighted-AverageGrant DateShares
    
    

Fair ValueNonvested at January 1, 2008
    
    
    380,022
    
    
    $
    28.82Awarded
    
    
    216,590
    
    
    
    14.80Vested
    
    
    (125,278
    )
    
    
    33.77Forfeited
    
    
    (23,381
    )
    
    
    14.70Nonvested at September 26, 2008
    
    
    447,953
    
    
    $
    21.40




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##### Table of Contents



Note 5. Earnings Per Share (EPS)
   For the Quarter EndedSeptember 26, 2008
    
    September 28, 2007Weighted-
    
    Per-
    
    
    
    
    
    Weighted-
    
    Per-Net
    
    Average
    
    Share
    
    Net
    
    Average
    
    ShareIncome
    
    Shares
    
    Amount
    
    Income
    
    Shares
    
    AmountBasic EPS
    
    $
    30,658
    
    
    
    58,078
    
    
    $
    .53
    
    
    $
    25,865
    
    
    
    61,352
    
    
    $
    .42Effect of dilutive securities:Stock options and
employee stock purchase plan
shares
    
    
    
    
    
    
    45
    
    
    
    
    
    
    
    
    
    
    
    209Nonvested shares
    
    
    
    
    
    
    348
    
    
    
    
    
    
    
    
    
    
    
    299Diluted EPS
    
    $
    30,658
    
    
    
    58,471
    
    
    $
    .52
    
    
    $
    25,865
    
    
    
    61,860
    
    
    $
    .42
 For the Nine Months EndedSeptember 26, 2008
    
    September 28, 2007Weighted-
    
    Per-
    
    
    
    
    
    Weighted-
    
    Per-Net
    
    Average
    
    Share
    
    Net
    
    Average
    
    ShareIncome
    
    Shares
    
    Amount
    
    Income
    
    Shares
    
    AmountBasic EPS
    
    $
    29,768
    
    
    
    58,868
    
    
    $
    .51
    
    
    $
    15,892
    
    
    
    61,310
    
    
    $
    .26Effect of dilutive securities:Stock options and
employee stock purchase plan
shares
    
    
    
    
    
    
    50
    
    
    
    
    
    
    
    
    
    
    
    320Nonvested shares
    
    
    
    
    
    
    353
    
    
    
    
    
    
    
    
    
    
    
    344Diluted EPS
    
    $
    29,768
    
    
    
    59,271
    
    
    $
    .50
    
    
    $
    15,892
    
    
    
    61,974
    
    
    $
    .26
  For the Quarter Ended
    
    For the Nine Months EndedSeptember 26,
    
    September
    
    September 26,
    
    September 28,2008
    
    28, 2007
    
    2008
    
    2007Anti-dilutive securities
    
    
    4,235
    
    
    
    3,858
    
    
    
    4,324
    
    
    
    3,605




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##### Table of Contents



Note 6. Comprehensive Income
  For the Quarter Ended
    
    
    For the Nine Months EndedSeptember 26,
    
    
    September 28,
    
    
    September 26,
    
    
    September 28,2008
    
    
    2007
    
    
    2008
    
    
    2007Net income
    
    $
    30,658
    
    
    $
    25,865
    
    
    $
    29,768
    
    
    $
    15,892Change in cumulative translation adjustment
    
    
    (10,304
    )
    
    
    5,438
    
    
    
    (2,948
    )
    
    
    7,708Change in
fair value of cash flow hedges, net of taxes
    
    
    8,813
    
    
    
    (1,978
    )
    
    
    6,188
    
    
    
    (1,978
    )Comprehensive income
    
    $
    29,167
    
    
    $
    29,325
    
    
    $
    33,008
    
    
    $
    21,622
  September 26,
    
    
    December 31,
    
    
    September 28,2008
    
    
    2007
    
    
    2007Cumulative translation adjustment
    
    $
    20,783
    
    
    $
    23,731
    
    
    $
    23,038Fair value of cash flow hedges, net of taxes of $132
at September 26, 2008 and $191 at December 31, 2007
    
    
    2,563
    
    
    
    (3,625
    )
    
    
    (1,978
    )Total
    
    $
    23,346
    
    
    $
    20,106
    
    
    $
    21,060
 Note 7. Business Segments and Geographic Information




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##### Table of Contents



For the Quarter Ended September 26, 2008 and September 28, 2007
 UnallocatedNorth America
    
    Europe
    
    Asia
    
    Corporate
    
    Consolidated2008Revenue
    
    $
    184,516
    

    
    $
    199,933
    
    
    $
    39,157
    
    
    $
    
    
    
    $
    423,606Operating income/(loss)
    
    
    44,850
    
    
    
    51,467
    
    
    
    (760
    )
    
    
    (42,317
    )
    
    
    53,240Income/(loss) before income taxes
    
    
    44,850
    
    
    
    51,467
    
    
    
    (760
    )
    
    
    (44,435
    )
    
    
    51,122Total assets
    
    
    330,260
    
    
    
    315,793
    
    
    
    79,886
    
    
    
    119,578
    
    
    
    845,517Goodwill
    
    
    36,876
    
    
    
    6,994
    
    
    
    
    
    
    
    
    
    
    
    43,8702007Revenue
    
    $
    202,436
    
    
    $
    191,555
    
    
    $
    39,303
    
    
    $
    
    
    
    $
    433,294Operating income/(loss)
    
    
    37,516
    
    
    
    47,121
    
    
    
    1,340
    
    
    
    (41,322
    )
    
    
    44,655Income/(loss) before income taxes
    
    
    37,516
    
    
    
    47,121
    
    
    
    1,340
    
    
    
    (42,870
    )
    
    
    43,107Total assets
    
    
    380,094
    
    
    
    319,870
    
    
    
    73,221
    
    
    
    121,955
    
    
    
    895,140Goodwill
    
    
    37,798
    
    
    
    6,994
    
    
    
    
    
    
    
    
    
    
    
    44,792For the Nine Months Ended September 26, 2008 and September 28, 2007UnallocatedNorth America
    
    Europe
    
    Asia
    
    Corporate
    
    Consolidated2008Revenue
    
    $
    421,807
    
    
    $
    443,406
    
    
    $
    108,711
    
    
    $
    
    
    
    $
    973,924Operating income/(loss)
    
    
    75,733
    
    
    
    76,364
    
    
    
    (1,399
    )
    
    
    (104,189
    )
    
    
    46,509Income/(loss) before income taxes
    
    
    75,733
    
    
    
    76,364
    
    
    
    (1,399
    )
    
    
    (99,580
    )
    
    
    51,1182007Revenue
    
    $
    461,936
    
    
    $
    425,513
    
    
    $
    106,300
    
    
    $
    
    
    
    $
    993,749Operating income/(loss)
    
    
    63,277
    
    
    
    77,325
    
    
    
    952
    
    
    
    (114,739
    )
    
    
    26,815Income/(loss) before income taxes
    
    
    63,277
    
    
    
    77,325
    
    
    
    952
    
    
    
    (113,673
    )
    
    
    27,881
  For the Quarter Ended
    
    
    For the Nine Months EndedSeptember 26,
    
    
    September 28,
    
    
    September 26,
    
    
    September 28,2008
    
    
    2007
    
    
    2008
    
    
    2007Footwear
    
    $
    313,544
    
    
    $
    310,300
    
    
    $
    693,094
    
    
    $
    700,448Apparel and accessories
    
    
    102,678
    
    
    
    116,237
    
    
    
    263,244
    
    
    
    278,146Royalty and other
    
    
    7,384
    
    
    
    6,757
    
    
    
    17,586
    
    
    
    15,155Total
    
    $
    423,606
    
    
    $
    433,294
    
    
    $
    973,924
    
    
    $
    993,749




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##### Table of Contents



Note 8. Inventory, net
  September 26, 2008
    
    
    December 31, 2007
    
    
    September 28, 2007Materials
    
    $
    9,137
    
    
    $
    5,581
    
    
    $
    5,693Work-in-process
    
    
    1,138
    
    
    
    933
    
    
    
    1,426Finished goods
    
    
    208,609
    
    
    
    195,418
    
    
    
    252,088Total
    
    $
    218,884
    
    
    $
    201,932
    
    
    $
    259,207
 Note 9. Notes Payable
    Note 10. Restructuring and Related Costs
  Liability at
    
    
    
    
    
    
    
    
    
    
    Liability atDecember 31,
    
    
    
    
    
    
    Cash
    
    
    September 26,Restructuring Program
    
    2007
    
    
    Net Charges
    
    
    Payments
    
    
    2008Global Efficiency Review
    
    $
    5,638
    
    
    $
    132
    
    
    $
    4,796
    
    
    $
    974Global Retail Portfolio Review
    
    
    2,470
    
    
    
    1,134
    
    
    
    3,040
    
    
    
    564North American Apparel Licensing
    
    
    1,171
    
    
    
    (60
    )
    
    
    877
    
    
    
    234Global Reorganization
    
    
    33
    
    
    
    
    
    
    
    33
    
    
    
    Puerto Rico Manufacturing Facility
    
    
    160
    
    
    
    (152
    )
    
    
    8
    
    
    
    Total
    
    $
    9,472
    
    
    $
    1,054
    
    
    $
    8,754
    
    
    $
    1,772




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##### Table of Contents



Note 11. Share Repurchase
    Note 12. Litigation
  
 Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
   Critical Accounting Policies




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##### Table of Contents



Overview
 â
   
    
    Third quarter revenue decreased 2.2%, or 4.4% on a constant dollar basis, to $423.6
million.
    
    Gross margin decreased from 46.9% to 46.5%.
    
    Operating expenses were $143.8 million, down 9.4% from $158.7 million in the prior year
period.
    
    We recorded operating income of $53.2 million in the third quarter of 2008, compared to
$44.7 million in the prior year period.
    
    Net income was $30.7 million in the third quarter of 2008, compared to $25.9 million in
the third quarter of 2007.
    
    Diluted earnings per share increased from $.42 in the third quarter of 2007 to $.52 in
the third quarter of 2008. Excluding restructuring and related costs in both periods,
diluted earnings per share increased from $.49 to $.52.
    
    Cash at the end of the quarter was $62.7 million with no debt outstanding.
  Results of Operations for the Quarter Ended September 26, 2008 as Compared to the Quarter Ended
September 28, 2007
 Revenue




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##### Table of Contents



® ® ®
 Segments Review
  ® ® ®
   Products
 ® ® ® ®
 Channels
 ®




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##### Table of Contents



Gross Profit
   Operating Expense




---



##### Table of Contents



Operating Income/(Loss)
      Other Income/(Expense) and Taxes




---



##### Table of Contents



Results of Operations for the Nine Months Ended September 26, 2008 as Compared to the Nine
Months Ended September 28, 2007
 Revenue
 ® ® ®
 Segments Review
 ® ® ®
   Products
 ®
 Channels
 ®




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##### Table of Contents



Gross Profit
   Operating Expense




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##### Table of Contents



®
 Operating Income/(Loss)
      Other Income/(Expense) and Taxes




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##### Table of Contents



Reconciliation of Total Company, Europe and Asia Revenue Increases/(Decreases) To Constant
Dollar Revenue Increases/(Decreases)
  For the Quarter
    
    For the Nine Months EndedEnded September 26, 2008
    
    September 26, 2008$ Millions
    
    
    
    
    
    $ MillionsChange
    
    % Change
    
    Change
    
    % ChangeRevenue decrease (GAAP)
    
    $
    (9.7
    )
    
    
    -2.2
    %
    
    $
    (19.8
    )
    
    
    -2.0
    %Increase due to foreign exchange rate changes
    
    
    9.6
    
    
    
    2.2
    %
    
    
    34.7
    
    
    
    3.5
    %Revenue decrease in constant dollars
    
    $
    (19.3
    )
    
    
    -4.4
    %
    
    $
    (54.5
    )
    
    
    -5.5
    %
  For the Quarter
    
    For the Nine Months EndedEnded September 26, 2008
    
    September 26, 2008$ Millions
    
    
    
    
    
    $ MillionsChange
    
    % Change
    
    Change
    
    % ChangeRevenue increase (GAAP)
    
    $
    8.4
    
    
    
    4.4
    %
    
    $
    17.9
    
    
    
    4.2
    %Increase due to foreign exchange rate changes
    
    
    7.7
    
    
    
    4.0
    %
    
    
    26.4
    
    
    
    6.2
    %Revenue increase/(decrease) in constant dollars
    
    $
    0.7
    
    
    
    0.4
    %
    
    $
    (8.5
    )
    
    
    -2.0
    %
  For the Quarter
    
    For the Nine MonthsEnded September 26, 2008
    
    Ended September 26, 2008$ Millions
    
    
    
    
    
    $ MillionsChange
    
    % Change
    
    Change
    
    % ChangeRevenue (decrease)/increase (GAAP)
    
    $
    (0.1
    )
    
    
    -0.4
    %
    
    $
    2.4
    
    
    
    2.3
    %Increase due to foreign exchange rate changes
    
    
    2.0
    
    
    
    5.0
    %
    
    
    7.5
    
    
    
    7.1
    %Revenue decrease in constant dollars
    
    $
    (2.1
    )
    
    
    -5.4
    %
    
    $
    (5.1
    )
    
    
    -4.8
    %
  Reconciliation of Diluted EPS to Diluted EPS Excluding Restructuring and Related Costs
 For the Quarter Ended
    
    For the Nine Months EndedSeptember 26,
    
    September 28,
    
    September 26,
    
    September 28,2008
    
    2007
    
    2008
    
    2007Diluted EPS, as reported
    
    $
    .52
    
    
    $
    .42
    
    
    $
    .50
    
    
    $
    .26Per share impact of
restructuring and
related costs
    
    
    .00
    
    
    
    .07
    
    
    
    .01
    
    
    
    .13Diluted EPS excluding
restructuring and
related costs
    
    $
    .52
    
    
    $
    .49
    
    
    $
    .51
    
    
    $
    .39




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##### Table of Contents



Accounts Receivable and Inventory
  .
 Liquidity and Capital Resources




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##### Table of Contents



Off-Balance Sheet Arrangements
 Letters of Credit
   New Accounting Pronouncements
  
 Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK




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##### Table of Contents



Item 4. CONTROLS AND PROCEDURES




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##### Table of Contents



Part II  OTHER INFORMATION
 
 Item 1A. RISK FACTORS
   We conduct business outside the United States which exposes us to foreign currency, import
restrictions, taxes, duties and other risks.
     Due to the current global economic crisis, our business could be adversely impacted by the
financial instability of third parties with which we do business.




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##### Table of Contents



Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 ISSUER PURCHASES OF EQUITY SECURITIES(1)
 For the Three Fiscal Months Ended September 26, 2008
 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 ProgramsJune 28  July 25
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    5,766,857July 26  August 22
    
    
    457,325
    
    
    
    16.21
    
    
    
    457,325
    
    
    
    5,309,532August 23   September 26
    
    
    740,630
    
    
    
    17.16
    
    
    
    740,630
    
    
    
    4,568,902Q3 Total
    
    
    1,197,955
    
    
    $
    16.80
    
    
    
    1,197,955
 Footnote (1)
 ApprovedAnnouncement
    
    Program
    
    ExpirationDate
    
    Size (Shares)
    
    DateProgram 1
    
    
    03/10/2008
    
    
    
    6,000,000
    
    
    None
 
 No existing programs expired or were terminated during the reporting period.*
    
    Fiscal month**
    
    Based on trade date  not settlement date




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##### Table of Contents



Item 6. EXHIBITS
 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.




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##### Table of Contents



SIGNATURES
  THE TIMBERLAND COMPANY
(Registrant)Date: November 5, 2008
    By:
    /s/ JEFFREY B. SWARTZJeffrey B. SwartzChief Executive OfficerDate: November 5, 2008
    By:
    /s/ JOHN CRIMMINSJohn CrimminsChief Financial Officer




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##### Table of Contents



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.