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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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FORM 10-Q

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

For the quarterly period ended September 26, 2003

OR

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

For the transition period from  to

Commission File Number 1-9548

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The Timberland Company

(Exact name of registrant as specified in its charter)

Delaware(State or other jurisdiction of
incorporation or organization)

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

03885(Zip Code)


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

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Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ý    No o

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

On
October 24, 2003, 28,051,268 shares of the registrant's Class A Common Stock were outstanding and 6,961,877 shares of the registrant's Class B Common Stock
were outstanding.

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THE TIMBERLAND COMPANY    FORM 10-Q

TABLE OF CONTENTS



|                                         |         |                                                                                                                           |                                                                                       | Page(s)
|---------------------------------------- | ------- | ------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------- | -------
|Part I Financial Information (unaudited) |         |                                                                                                                          
|                                         | Item 1. |                                                                                                                           | Financial Statements                                                                  |        
|                                         |         | Condensed Consolidated Balance SheetsSeptember 26, 2003, December 31, 2002 (audited) and September 27, 2002              |                                                                                       | 1-2    
|                                         |         | Condensed Consolidated Statements of IncomeFor the three and nine months ended September 26, 2003 and September 27, 2002 |                                                                                       | 3      
|                                         |         | Condensed Consolidated Statements of Cash FlowsFor the nine months ended September 26, 2003 and September 27, 2002       |                                                                                       | 4      
|                                         |         | Notes to Condensed Consolidated Financial Statements                                                                      |                                                                                       | 5-10   
|                                         | Item 2. |                                                                                                                           | Management's Discussion and Analysis of Financial Condition and Results of Operations |        
|                                         | Item 3. |                                                                                                                           | Quantitative and Qualitative Disclosures About Market Risk                            |        
|                                         | Item 4. |                                                                                                                           | Controls and Procedures                                                               |        
|Part II Other Information                |         |                                                                                                                          
|                                         | Item 6. |                                                                                                                           | Exhibits and Reports on Form 8-K                                                      |        
|Signatures                               |         | 23                                                                                                                       
|Exhibit Index                            |         | 24                                                                                                                       
|Exhibits                                 |         |                                                                                                                          

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Part I FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

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

|                                               |                                                                                                                                                           | September 26,
2003                |          | December 31,
2002 |         | September 27,
2002 |        
|---------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------- | -------- | ----------------- | ------- | ------------------ | -------
|
|Current assets                                 |                                                                                                                                                           |                                   |          |                   |         |                    |        
|                                               | Cash and equivalents                                                                                                                                      |                                   | $        | 35,902            |         | $                  | 141,195
|                                               | Accounts receivable, net of allowance for doubtful accounts of $8,575 at September 26, 2003, $7,487 at December 31, 2002 and $8,715 at September 27, 2002 |                                   |          | 264,036           |         |                    | 132,110
|                                               | Inventory                                                                                                                                                 |                                   |          | 175,490           |         |                    | 122,417
|                                               | Prepaid expense                                                                                                                                           |                                   |          | 21,925            |         |                    | 21,493 
|                                               | Deferred income taxes                                                                                                                                     |                                   |          | 21,256            |         |                    | 24,568 
|                                               |                                                                                                                                                           |                                   |          |                   |         |                    |        
|                                               |                                                                                                                                                           | Total current assets              |          |                   | 518,609 |                    |        
|                                               |                                                                                                                                                           |                                   |          |                   |         |                    |        
|Property, plant and equipment                  |                                                                                                                                                           |                                   | 186,526  |                   |         | 176,415            |        
|Less accumulated depreciation and amortization |                                                                                                                                                           |                                   | (117,587 | )                 |         | (103,045           | )      
|                                               |                                                                                                                                                           |                                   |          |                   |         |                    |        
|                                               |                                                                                                                                                           | Net property, plant and equipment |          |                   | 68,939  |                    |        
|                                               |                                                                                                                                                           |                                   |          |                   |         |                    |        
|Goodwill                                       |                                                                                                                                                           |                                   | 14,163   |                   |         | 14,163             |        
|Intangible assets                              |                                                                                                                                                           |                                   | 3,515    |                   |         | 3,732              |        
|Other assets, net                              |                                                                                                                                                           |                                   | 7,103    |                   |         | 5,623              |        
|                                               |                                                                                                                                                           |                                   |          |                   |         |                    |        
|Total assets                                   |                                                                                                                                                           | $                                 | 612,329  |                   | $       | 538,671            |        
|                                               |                                                                                                                                                           |                                   |          |                   |         |                    |        

See accompanying notes to condensed consolidated financial statements.

1

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

|                                            |                                                                                                                                                                                                                                                                                                                                                | September 26,
2003         |                           | December 31,
2002 |         | September 27,
2002 |         
|------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------------------------- | ----------------- | ------- | ------------------ | --------
|
|Current liabilities                         |                                                                                                                                                                                                                                                                                                                                                |                            |                           |                   |         |                    |         
|                                            | Accounts payable                                                                                                                                                                                                                                                                                                                               |                            | $                         | 50,236            |         | $                  | 33,678  
|                                            | Accrued expense                                                                                                                                                                                                                                                                                                                                |                            |                           |                   |         |                    |         
|                                            |                                                                                                                                                                                                                                                                                                                                                | Payroll and related        |                           |                   | 41,785  |                    |         
|                                            |                                                                                                                                                                                                                                                                                                                                                | Other                      |                           |                   | 67,211  |                    |         
|                                            | Income taxes payable                                                                                                                                                                                                                                                                                                                           |                            |                           | 34,358            |         |                    | 20,134  
|                                            | Derivative liabilities                                                                                                                                                                                                                                                                                                                         |                            |                           | 6,334             |         |                    | 12,514  
|                                            |                                                                                                                                                                                                                                                                                                                                                |                            |                           |                   |         |                    |         
|                                            |                                                                                                                                                                                                                                                                                                                                                |                            | Total current liabilities |                   |         | 199,924            |         
|                                            |                                                                                                                                                                                                                                                                                                                                                |                            |                           |                   |         |                    |         
|Deferred compensation and other liabilities |                                                                                                                                                                                                                                                                                                                                                |                            | 5,231                     |                   |         | 3,072              |         
|Deferred income taxes                       |                                                                                                                                                                                                                                                                                                                                                |                            | 6,689                     |                   |         | 7,058              |         
|Stockholders' equity                        |                                                                                                                                                                                                                                                                                                                                                |                            |                           |                   |         |                    |         
|                                            | Preferred stock, $.01 par value; 2,000,000 shares authorized; none issued and outstanding                                                                                                                                                                                                                                                      |                            |                           |                  |         |                    |        
|                                            | Class A Common Stock, $.01 par value (1 vote per share); 120,000,000 shares authorized; 42,715,007 shares issued at September 26, 2003, 41,518,667 shares issued at December 31, 2002 and 41,176,607 shares issued at
September 27, 2002                                                                                                       |                            |                           | 427               |         |                    | 415     
|                                            | Class B Common Stock, $.01 par value (10 votes per share); convertible into Class A shares on a one-for-one basis; 20,000,000 shares authorized; 7,144,675 shares issued and outstanding at September 26, 2003, 7,561,185 shares
issued and outstanding at December 31, 2002 and 7,711,185 shares issued and outstanding at September 27, 2002 |                            |                           | 71                |         |                    | 76      
|                                            | Additional paid-in capital                                                                                                                                                                                                                                                                                                                     |                            |                           | 166,199           |         |                    | 142,883 
|                                            | Deferred compensation                                                                                                                                                                                                                                                                                                                          |                            |                           | (6,395            | )       |                    | (3,078  
|                                            | Retained earnings                                                                                                                                                                                                                                                                                                                              |                            |                           | 684,241           |         |                    | 605,826 
|                                            | Accumulated other comprehensive income/(loss)                                                                                                                                                                                                                                                                                                  |                            |                           | (469              | )       |                    | (9,837  
|                                            | Less treasury stock at cost, 14,539,950 Class A shares at September 26, 2003, 12,773,521 Class A shares at December 31, 2002 and 11,985,412 Class A shares at September 27, 2002                                                                                                                                                               |                            |                           | (443,589          | )       |                    | (363,500
|                                            |                                                                                                                                                                                                                                                                                                                                                |                            |                           |                   |         |                    |         
|                                            |                                                                                                                                                                                                                                                                                                                                                | Total stockholders' equity |                           |                   | 400,485 |                    |         
|                                            |                                                                                                                                                                                                                                                                                                                                                |                            |                           |                   |         |                    |         
|Total liabilities and stockholders' equity  |                                                                                                                                                                                                                                                                                                                                                | $                          | 612,329                   |                   | $       | 538,671            |         
|                                            |                                                                                                                                                                                                                                                                                                                                                |                            |                           |                   |         |                    |         

See accompanying notes to condensed consolidated financial statements.

2

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

|                                                                              |                            | For the
Three Months Ended   |         | For the
Nine Months Ended |        
|----------------------------------------------------------------------------- | -------------------------- | ---------------------------- | ------- | ------------------------- | -------
|
|Revenue                                                                       |                            | $                            | 443,960 |                           | $      
|Cost of goods sold                                                            |                            |                              | 241,160 |                           |        
|                                                                              |                            |                              |         |                           |        
|                                                                              | Gross profit               |                              |         | 202,800                   |        
|                                                                              |                            |                              |         |                           |        
|Operating expense                                                             |                            |                              |         |                           |        
|                                                                              | Selling                    |                              |         | 98,202                    |        
|                                                                              | General and administrative |                              |         | 21,072                    |        
|                                                                              |                            |                              |         |                           |        
|                                                                              |                            | Total operating expense      |         |                           | 119,274
|                                                                              |                            |                              |         |                           |        
|Operating income                                                              |                            |                              | 83,526  |                           |        
|                                                                              |                            |                              |         |                           |        
|Other expense/(income)                                                        |                            |                              |         |                           |        
|                                                                              | Interest expense           |                              |         | 328                       |        
|                                                                              | Other, net                 |                              |         | 305                       |        
|                                                                              |                            |                              |         |                           |        
|                                                                              |                            | Total other expense/(income) |         |                           | 633    
|                                                                              |                            |                              |         |                           |        
|Income before income taxes                                                    |                            |                              | 82,893  |                           |        
|                                                                              |                            |                              |         |                           |        
|Provision for income taxes                                                    |                            |                              | 29,620  |                           |        
|                                                                              |                            |                              |         |                           |        
|Income before cumulative effect of change in accounting principle             |                            | $                            | 53,273  |                           | $      
|                                                                              |                            |                              |         |                           |        
|Cumulative effect of change in accounting principle                           |                            |                              |        |                           |        
|                                                                              |                            |                              |         |                           |        
|Net income                                                                    |                            | $                            | 53,273  |                           | $      
|                                                                              |                            |                              |         |                           |        
|Earnings per share before cumulative effect of change in accounting principle |                            |                              |         |                           |        
|                                                                              |                            | Basic                        |         | $                         | 1.51   
|                                                                              |                            |                              |         |                           |        
|                                                                              |                            | Diluted                      |         | $                         | 1.47   
|                                                                              |                            |                              |         |                           |        
|Earnings per share after cumulative effect of change in accounting principle  |                            |                              |         |                           |        
|                                                                              |                            | Basic                        |         | $                         | 1.51   
|                                                                              |                            |                              |         |                           |        
|                                                                              |                            | Diluted                      |         | $                         | 1.47   
|                                                                              |                            |                              |         |                           |        
|Weighted-average shares outstanding                                           |                            |                              |         |                           |        
|                                                                              |                            | Basic                        |         |                           | 35,378 
|                                                                              |                            |                              |         |                           |        
|                                                                              |                            | Diluted                      |         |                           | 36,189 
|                                                                              |                            |                              |         |                           |        

See accompanying notes to condensed consolidated financial statements.

3

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

|                                                  |                                                                                          | For the
Nine months Ended                                          |                    
|------------------------------------------------- | ---------------------------------------------------------------------------------------- | ------------------------------------------------------------------ | -------------------
|
|Cash flows from operating activities:             |                                                                                          |                                                                    |                    
|                                                  | Net income                                                                               |                                                                    | $                  
|                                                  | Adjustments to reconcile net income to net cash provided/(used) by operating activities: |                                                                    |                    
|                                                  |                                                                                          | Deferred income taxes                                              |                    
|                                                  |                                                                                          | Depreciation and amortization                                      |                    
|                                                  |                                                                                          | Cumulative effect of change in accounting principle                |                    
|                                                  |                                                                                          | Tax benefit from stock option plans                                |                    
|                                                  |                                                                                          | Increase/(decrease) in cash from changes in working capital items: |                    
|                                                  |                                                                                          |                                                                    | Accounts receivable
|                                                  |                                                                                          |                                                                    | Inventory          
|                                                  |                                                                                          |                                                                    | Prepaid expense    
|                                                  |                                                                                          |                                                                    | Accounts payable   
|                                                  |                                                                                          |                                                                    | Accrued expense    
|                                                  |                                                                                          |                                                                    | Income taxes       
|                                                  |                                                                                          |                                                                    |                    
|                                                  |                                                                                          |                                                                    |                    
|                                                  |                                                                                          |                                                                    |                    
|Cash flows from investing activities:             |                                                                                          |                                                                    |                    
|                                                  | Additions to property, plant and equipment                                               |                                                                    |                    
|                                                  | Other, net                                                                               |                                                                    |                    
|                                                  |                                                                                          |                                                                    |                    
|                                                  |                                                                                          |                                                                    |                    
|                                                  |                                                                                          |                                                                    |                    
|Cash flows from financing activities:             |                                                                                          |                                                                    |                    
|                                                  | Common stock repurchases                                                                 |                                                                    |                    
|                                                  | Issuance of common stock                                                                 |                                                                    |                    
|                                                  |                                                                                          |                                                                    |                    
|                                                  |                                                                                          |                                                                    |                    
|                                                  |                                                                                          |                                                                    |                    
|Effect of exchange rate changes on cash           |                                                                                          |                                                                    | 2,432              
|                                                  |                                                                                          |                                                                    |                    
|Net decrease in cash and equivalents              |                                                                                          |                                                                    | (105,293           
|Cash and equivalents at beginning of period       |                                                                                          |                                                                    | 141,195            
|                                                  |                                                                                          |                                                                    |                    
|Cash and equivalents at end of period             |                                                                                          | $                                                                  | 35,902             
|                                                  |                                                                                          |                                                                    |                    
|                                                  |                                                                                         
|Supplemental disclosure of cash flow information: |                                                                                          |                                                                    |                    
|                                                  | Interest paid                                                                            |                                                                    | $                  
|                                                  | Income taxes paid                                                                        |                                                                    |                    
|                                                  |                                                                                         

See accompanying notes to condensed consolidated financial statements.

4

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

Information regarding the Company's other intangible assets follows:

| |  |                              |  | As of September 26, 2003 |       | As of September 27, 2002
| |  | ---------------------------- |  | ------------------------ | ----- | ------------------------
|
| |  | Trademarks and related costs |  | $                        | 7,566 |                         



5

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| |                                                                        |  | For the
Three Months Ended |        | For the
Nine Months Ended |  
| | ---------------------------------------------------------------------- |  | -------------------------- | ------ | ------------------------- | -
|
| | Net income                                                             |  | $                          | 53,273 |                           | $
| | Change in cumulative translation adjustment                            |  |                            | 1,161  |                           |  
| | Change in fair value of derivative financial instruments, net of taxes |  |                            | 3,107  |                           |  
| |                                                                        |  |                            |        |                           |  
| | Comprehensive income                                                   |  | $                          | 57,541 |                           | $
| |                                                                        |  |                            |        |                           |  



6

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| |  | 2003                              |  | U.S.
Wholesale |         | U.S.
Consumer
Direct |   | International |  | Unallocated
Corporate |         | Consolidated
| |  | --------------------------------- |  | -------------- | ------- | -------------------- | - | ------------- |  | --------------------- | ------- | ------------
| |  | Revenue                           |  | $              | 221,011 |                      | $ | 47,588        |  | $                     | 175,361 |             
| |  | Income/(loss) before income taxes |  |                | 75,366  |                      |   | 4,985         |  |                       | 40,373  |             
| |  | Total assets                      |  |                | 234,322 |                      |   | 32,782        |  |                       | 257,388 |             
| |  | Goodwill                          |  |                | 6,804   |                      |   | 794           |  |                       | 6,565   |             
| |  | 2002                              |  |                |         |                      |   |               |  |                       |         |             
| |  | Revenue                           |  | $              | 227,695 |                      | $ | 45,419        |  | $                     | 143,527 |             
| |  | Income/(loss) before income taxes |  |                | 76,606  |                      |   | 5,468         |  |                       | 30,302  |             
| |  | Total assets                      |  |                | 257,780 |                      |   | 30,968        |  |                       | 206,104 |             
| |  | Goodwill                          |  |                | 6,804   |                      |   | 794           |  |                       | 6,565   |             



| |  | 2003                              |  | U.S.
Wholesale |         | U.S.
Consumer
Direct |   | International |  | Unallocated
Corporate |         | Consolidated
| |  | --------------------------------- |  | -------------- | ------- | -------------------- | - | ------------- |  | --------------------- | ------- | ------------
| |  | Revenue                           |  | $              | 421,319 |                      | $ | 113,289       |  | $                     | 392,082 |             
| |  | Income/(loss) before income taxes |  |                | 129,919 |                      |   | 7,808         |  |                       | 66,477  |             
| |  | 2002                              |  |                |         |                      |   |               |  |                       |         |             
| |  | Revenue                           |  | $              | 411,226 |                      | $ | 112,418       |  | $                     | 310,224 |             
| |  | Income/(loss) before income taxes |  |                | 122,558 |                      |   | 9,836         |  |                       | 53,927  |             



| |  |                 |  | September 26, 2003 |         | December 31, 2002 |   | September 27, 2002
| |  | --------------- |  | ------------------ | ------- | ----------------- | - | ------------------
| |  | Raw materials   |  | $                  | 2,637   |                   | $ | 2,065             
| |  | Work-in-process |  |                    | 2,037   |                   |   | 1,745             
| |  | Finished goods  |  |                    | 170,816 |                   |   | 118,607           
| |  |                 |  |                    |         |                   |   |                   
| |  |                 |  | $                  | 175,490 |                   | $ | 122,417           
| |  |                 |  |                    |         |                   |   |                   

7

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8

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For the
Three Months Ended

For the
Nine Months EndedBefore cumulative effect of change in accounting principle:

Sept. 26,
2003

Sept. 27,
2002

Sept. 26,
2003

Sept. 27,
2002Net income before cumulative effect of change in accounting principle, as reported

$
53,273

$
49,166

$
78,415

$
63,069Add: Stock-based employee compensation expense included in reported net income, net of related tax effect


304


170


843


633Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effect


2,011


2,496


6,108


7,221Pro forma net income before cumulative effect of change in accounting principle

$
51,566

$
46,840

$
73,150

$
56,481Basic earnings per share before cumulative effect of change in accounting principle, as reported

$
1.51

$
1.33

$
2.20

$
1.68Pro forma basic earnings per share before cumulative effect of change in accounting principle

$
1.46

$
1.26

$
2.05

$
1.50Diluted earnings per share before cumulative effect of change in accounting principle, as reported

$
1.47

$
1.30

$
2.15

$
1.64Pro forma diluted earnings per share before cumulative effect of change in accounting principle

$
1.42

$
1.24

$
2.00

$
1.47


9

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For the
Three Months Ended

For the
Nine Months EndedAfter cumulative effect of change in accounting principle:

Sept. 26,
2003

Sept. 27,
2002

Sept. 26,
2003

Sept. 27,
2002Net income after cumulative effect of change in accounting principle, as reported

$
53,273

$
49,166

$
78,415

$
67,982Add: Stock-based employee compensation expense included in reported net income, net of related tax effect


304


170


843


633Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effect


2,011


2,496


6,108


7,221Pro forma net income after cumulative effect of change in accounting principle

$
51,566

$
46,840

$
73,150

$
61,394Basic earnings per share after cumulative effect of change in accounting principle, as reported

$
1.51

$
1.33

$
2.20

$
1.81Pro forma basic earnings per share after cumulative effect of change in accounting principle

$
1.46

$
1.26

$
2.05

$
1.63Diluted earnings per share after cumulative effect of change in accounting principle, as reported

$
1.47

$
1.30

$
2.15

$
1.77Pro forma diluted earnings per share after cumulative effect of change in accounting principle

$
1.42

$
1.24

$
2.00

$
1.60




10

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Item 2.

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

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

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

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 26, 2003 AND SEPTEMBER 27, 2002

Revenue



Total
Company revenue for the third quarter of 2003 was $444.0 million, an increase of $27.3 million, or 6.6%, compared with the $416.6 million in revenue reported for the third
quarter of 2002. Revenue growth for the third quarter reflected global gains in both footwear and apparel, as well as global growth across wholesale and retail channels. Overall, revenue gains were
driven by the Company's International business, which contributed a $31.8 million revenue increase, including $14.3 million of benefit related to favorable foreign currency impacts.
Total Company constant dollar revenue increased 3.1%, compared with the prior year.

International
revenue growth was driven by increased footwear sales in Europe, particularly Men's and Women's Casual and Boots, offsetting relatively softer performance in apparel, and by double-digit
constant dollar growth in Asia, benefiting from strategies to upgrade the Company's retail and wholesale distribution. Domestically, revenue decreased 1.7%, as a 4.8% increase in U.S. Consumer Direct
revenue was offset by a 2.9% decrease in U.S. Wholesale revenue. U.S. Consumer Direct footwear sales increases were partially offset by a decline in apparel and accessories revenue and reflected
increased levels of store promotions in a competitive environment. U.S. Wholesale results were driven by footwear sales, which declined in part due to planned later timing of certain Fall deliveries
and to lower levels of off-price sales. Within U.S. Wholesale footwear, growth in Women's Casual products was offset by declines in Outdoor Performance, Kids' and Men's Casual sales. U.S.

11

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Wholesale
footwear decreases were partially offset by gains in apparel and accessories sales, driven by higher levels of off-price sales, reflecting inventory control efforts and gains in
the Timberland PRO series apparel.



Domestic
revenue, comprised of the U.S. Wholesale and U.S. Consumer Direct segments, for the third quarter of 2003 was $268.6 million, a decrease of $4.5 million, or 1.7%, compared with
the same period in 2002. U.S. Wholesale segment revenue decreased 2.9% for the quarter, compared with the same period in 2002, reflecting decreases in footwear unit sales, impacted by planned later
timing of certain Fall deliveries and lower levels of off-price sales. This decrease was partially offset by lower product returns and increased apparel and accessories revenue, primarily
in off-price sales, reflecting inventory control efforts. U.S. Consumer Direct segment revenue increased 4.8%, compared with the same period in 2002. On a comparable store basis, domestic
retail sales increased 1.1%. The increase in revenue, compared with the prior year, was driven by an increase in footwear unit sales and, to a lesser degree, apparel and accessories unit sales growth,
in part due to increased levels of store promotions, reflecting a competitive retail marketplace. These increases were partially offset by a decline in average selling prices due to mix of products
sold and promotional markdowns.

International
segment revenue for the third quarter of 2003 was $175.4 million, an increase of $31.8 million, or 22.2%, compared with the third quarter of 2002. On a constant dollar
basis, International revenue increased 12.2%, compared with the same period in 2002. International revenue represented 39.5% of total revenue for the quarter, compared with 34.4% for the third quarter
of 2002. The increase in revenue over the prior year was driven by the $14.3 million impact of foreign exchange, which drove up average selling prices, and footwear unit sales growth in both
the International wholesale and retail channels, partially offset by a decrease in European apparel and accessories unit sales. Geographically, constant dollar revenue increases were driven by growth
in Europe and double-digit gains in Asia, benefiting from strategies to upgrade the Company's retail and wholesale distribution. Revenue growth reflected gains in developing markets such as Germany,
Spain and Japan, as well as growth in established markets such as the U.K. and Italy.



Worldwide
footwear revenue for the third quarter of 2003 was $341.8 million, an increase of $26.5 million, or 8.4%, compared with the same period in 2002. The increase was primarily
attributable to International unit sales and the impact of foreign exchange, partially offset by a decrease in U.S. Wholesale unit sales, as discussed previously. In total, footwear unit sales
increased 2.0% and footwear average selling prices increased 6.2%, compared with the prior year. The increase in footwear average selling prices was principally due to the impact of foreign exchange
and, to a lesser degree, lower levels of U.S. Wholesale off-price sales and fewer product returns. By category, Boots and
Men's and Women's Casual products drove the revenue increases over the prior year. These increases were partially offset by decreases in Outdoor Performance, Kids' and the Timberland PRO
series, compared with the same period last year. Worldwide footwear revenue represented 77.6% and 76.7% of total product revenue for the third quarters of 2003 and 2002, respectively.

Worldwide
apparel and accessories revenue for the third quarter of 2003 was $98.4 million, an increase of $2.5 million, or 2.6%, compared with the same period in 2002. The increase was
primarily attributable to the impact of foreign exchange, U.S. Wholesale unit sales growth, supported by gains in the Timberland PRO series and higher levels of off-price
sales, reflecting inventory control efforts, and to gains in Asia. These increases were partially offset by a decline in European unit sales, reflecting a competitive European marketplace. In total,
apparel and accessories unit sales increased 1.8% and average selling prices increased 0.8% over the same period last year. Worldwide apparel and

12

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accessories
revenue represented 22.4% and 23.3% of total product revenue for the third quarters of 2003 and 2002, respectively.

Worldwide
royalty revenue for the third quarter of 2003 was $3.8 million, a decrease of $1.6 million, or 30.5%, compared with the same period last year. The decrease was driven by the
transition of the Company's distributor relationship in Greece from a royalty based arrangement to a wholesale based agreement, the conversion of the Company's Canadian footwear business from a
royalty based distributor agreement in 2002 to a wholly-owned subsidiary in 2003, as well as changes related to the transition of certain product licensing agreements.



Worldwide
wholesale revenue for the third quarter of 2003 was $364.9 million, an increase of $21.2 million, or 6.2%, compared with the same period in 2002. The increase in revenue was
driven by increases in International footwear unit sales, the impact of foreign exchange and U.S. Wholesale apparel and accessories sales volume, partially offset by decreases in the U.S. Wholesale
footwear business, as discussed previously. Worldwide consumer direct revenue, which includes the Company's worldwide retail and U.S. e-commerce businesses, for the quarter was
$79.1 million, an increase of $6.2 million, or 8.4%, compared with the same period in 2002. The increase was primarily due to worldwide footwear unit sales increases. U.S. Consumer
Direct comparable store sales gains were 1.1%, aided by increased levels of store promotions. During the quarter, the Company opened 4 retail stores and closed 9 retail stores, worldwide.
Internationally, the Company will continue to target
new store additions but, given the U.S. retail climate and the promotional market environment, will focus on controlling new store growth and enhancing profitability at current U.S. locations.

Gross Profit

Gross
profit as a percentage of revenue for the third quarter of 2003 was 45.7%, an increase of 1.8 percentage points from the 43.9% reported for the third quarter of 2002. Overall, gross
margin rates benefited approximately 1.1 percentage points from foreign exchange rate changes, which should continue to aid gross margins for the balance of 2003, and lower levels of U.S.
footwear off-price sales and product returns. The year over year impact of increases in leather hide prices had a moderate negative impact on third quarter gross margin rates. Overall, the
Company plans to leverage gross margin gains in the second half of 2003, when compared with the prior year, offsetting expense investments.

The
Company includes the costs of procuring inventory (sourcing costs, inbound freight and duty, overhead and other similar costs) in cost of goods sold. These costs amounted to $28.7 million
and $30.1 million in the third quarters of 2003 and 2002, respectively.

Operating Expense

Operating
expense was $119.3 million for the third quarter of 2003, up $13.4 million, or 12.7%, from the $105.9 million reported for the third quarter of 2002. Operating expense
as a percentage of revenue for the quarter increased to 26.9%, from 25.4% for the third quarter of 2002. The dollar increase was in part due to foreign exchange rate changes, which added
$2.8 million in operating expense, or 0.6 percentage points, compared with the prior year. $6.1 million of the increase was related to growth in International operations,
primarily investments in selling costs and, to a lesser degree, marketing and volume related costs such as freight. The remaining $4.5 million increase was primarily driven by increased costs
related to the Company's incentive compensation programs and, to a lesser degree, increased distribution costs, particularly freight on increased year over year shipments. Overall, the Company is
targeting operating expense growth at or above the year to date growth rate for the balance of 2003, driven in part by the activities related to the global marketing campaign.

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Selling
expense was $98.2 million, an increase of $12.1 million, or 14.1%, compared with the same period last year. Within this category of expense, approximately $2.6 million of
the increase was due to foreign exchange and approximately $3.9 million was related to investments in International operating costs, store support and rents. The remainder of the increase was
primarily in costs related to the Company's incentive compensation programs and, to a lesser degree, distribution costs, particularly freight on increased year over year shipments.

The
Company includes the costs of housing inventory (warehousing and handling costs) in selling expense. These costs amounted to $8.8 million and $8.5 million in the third quarters of
2003 and 2002, respectively.

Advertising
expense, which is also included in selling expense, was $8.3 million and $9.0 million in the third quarters of 2003 and 2002, respectively. Advertising costs are expensed at
the time the advertising is used, which is predominantly in the season that the advertising costs are incurred. As of September 26, 2003, December 31, 2002 and September 27, 2002,
the Company had $2.1 million, $0.6 million and $0.8 million of prepaid advertising on its consolidated balance sheets, respectively. These amounts reflect, in part, prepayments for magazine
advertising space and sales materials, such as catalogs, which are expensed at the time the space is used and the catalogs are distributed.

General
and administrative expense, at $21.1 million, increased $1.3 million, or 6.6%, compared with the same period last year. As a percentage of revenue, general and administrative
expense remained flat to the prior year. The dollar increase was driven by costs related to the Company's incentive compensation programs.

Operating Income/Income Before Income Taxes

Operating
income was $83.5 million for the third quarter of 2003, up $6.5 million, or 8.5%, from the $77.0 million reported for the third quarter of 2002. As a percentage of
revenue, operating income was 18.8%, compared with 18.5% for the prior year. This improvement reflects 6.6% revenue growth and improved gross margin rates, partially offset by expense investments, as
discussed previously. The Company is targeting relatively flat operating margins for the second half of 2003, compared with the prior year, after adjusting for the negative impact of the fourth
quarter 2002 U.S. west coast port work stoppage, which added approximately $6.0 million in incremental freight costs in the fourth quarter of 2002.

Income
before income taxes decreased in the U.S. Wholesale segment, compared with the prior year. The decrease was primarily driven by U.S. Wholesale revenue declines, as discussed previously. Gains
in footwear gross margin rates, driven by lower levels of off-price sales and product
returns, were offset by investment in product development and by lower apparel gross margin rates, impacted by higher levels of off-price sales.

U.S.
Consumer Direct segment income before income taxes declined compared with the prior year primarily as a result of the continuing promotional market environment, which pressured overall store
returns. U.S. Consumer Direct revenue was up 4.8%, compared with the same period in 2002, and comparable store sales increased 1.1%, with unit volume increases in both footwear and apparel and
accessories. The revenue increase was offset by lower gross margin rates due to product mix and promotional markdowns. Additionally, operating expense rates increased due to the modest sales volume
increase and promotional costs.

Internationally,
operating income increased $10.1 million, with approximately $8.7 million of the increase due to foreign exchange impacts. The Company's progress in developing its
International business has enabled the Company to leverage the strengthening of foreign currencies to support continued investment in that business. A constant dollar revenue increase of 12.2% drove
the remaining improvement in operating income, partially offset by lower gross margin rates, driven by

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product
and channel mix and promotional costs, as well as increases in operating expense rates, reflecting investments in store related costs and enhanced organization capabilities.

The
Unallocated Corporate segment is comprised of the Company's corporate administrative costs, supply chain costs, corporate marketing and brand management and other costs not allocated to the
Company's businesses. Unallocated Corporate costs increased $1.7 million compared to the prior year, reflecting higher incentive compensation related costs, partially offset by a
$1.9 million decrease in supply chain costs and a leveraging of corporate administrative costs, compared with the prior year.

Other, net, Interest and Taxes

Other,
net was $0.3 million of expense in the third quarter of 2003, compared with $0.5 million of expense in the third quarter of 2002. Other, net includes interest income of
$0.2 million and $0.1 million in the third quarters of 2003 and 2002, respectively. Interest expense, which is comprised of fees related to the establishment and maintenance of the
Company's revolving credit facility and to interest paid on short-term borrowings, was $0.3 million in the third quarters of 2003 and 2002.

The
effective tax rates for the quarters ended September 26, 2003 and September 27, 2002 were 35.7% and 35.5%, respectively. During the third quarter of 2003, the Company adjusted its
full year 2003 effective tax rate to 35.5%.

RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 26, 2003 AND SEPTEMBER 27, 2002

Revenue



Total
Company revenue for the first nine months of 2003 was $926.7 million, an increase of $92.8 million, or 11.1%, compared with the $833.9 million in revenue reported for the
first nine months of 2002. Revenue growth reflected global gains in both footwear and apparel, as well as global growth across wholesale and retail channels. Overall, revenue gains were driven by the
Company's International business, which contributed an $81.9 million revenue increase, including $43.2 million of benefit related to favorable foreign currency impacts. Total Company
constant dollar revenue growth was 12.5% in the first nine months of 2003, compared with the prior year.

International
revenue growth was driven by increased European footwear sales across all product categories and modest growth in apparel and accessories, along with double-digit constant dollar growth
in Asia. Domestically, revenue increased 2.1%, with U.S. Wholesale revenue increasing 2.5% and U.S. Consumer Direct increasing 0.8%. Within the U.S. Wholesale business, revenue increased 9.1% in the
first six months of 2003, driven by moderate growth in footwear revenue, along with double-digit increases in apparel and accessories revenue, impacted by positive retailer response to Spring product
offerings and first quarter weather trends favorable to the Company in the northeastern region of the United States. These increases were partially offset by third quarter footwear revenue declines,
in part due to planned later timing of certain Fall deliveries and to lower levels of off-price sales, partially offset by continued double-digit growth in apparel and accessories revenue,
compared with the prior year. The increase in U.S. Consumer Direct revenue was driven by increases in footwear revenue, partially offset by a decline in apparel and accessories revenue.



Domestic
revenue, comprised of the U.S. Wholesale and U.S. Consumer Direct segments, for the first nine months of 2003 was $534.6 million, an increase of $11.0 million, or 2.1%, compared
with the same period in 2002. The U.S. Wholesale segment revenue increased 2.5% in the first nine months, compared with the same period in 2002. This increase reflected moderate growth in footwear
unit sales

15

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in
the first six months of 2003, partially offset by third quarter 2003 decreases in footwear unit sales, impacted by planned later timing of certain Fall deliveries and lower levels of
off-price sales. For the first nine months of 2003, U.S. Wholesale apparel and accessories unit sales increased at double-digit levels, partially offset by a reduction in average selling
prices, in part due to increased off-price sales. The U.S. Consumer Direct segment revenue increased 0.8%, compared with the same period in 2002. The increase in revenue, compared with the
prior year, was driven by increases in footwear unit sales. These increases were partially offset by a decline in footwear and apparel and accessories average selling prices, primarily due to mix of
products sold and promotional markdowns. On a comparable store basis, domestic retail sales decreased 1.4%.

International
segment revenue for the first nine months of 2003 was $392.1 million, an increase of $81.9 million, or 26.4%, compared with the first nine months of 2002. On a constant
dollar basis, International revenue increased 12.5%, compared with the same period in 2002. International revenue comprised 42.3% of total revenue for the first nine months, compared with 37.2% for
the first nine months of 2002. The increase in revenue over the prior year was driven by a $43.2 million impact from foreign exchange, which increased average selling prices, and unit volume
increases in footwear in the International wholesale channels. Geographically, constant dollar revenue increases were driven by gains in Italy, Spain, Germany and the U.K., as well as double-digit
constant dollar growth in Asia.



Worldwide
footwear revenue for the first nine months of 2003 was $698.0 million, an increase of $74.7 million, or 12.0%, compared with the same period in 2002. The increase reflected
growth in International wholesale unit sales and the favorable impact of foreign exchange. In total, footwear unit sales increased 5.9% and footwear average selling prices increased 5.7%, compared
with the prior year. The increase in footwear average selling prices was principally due to the impact of foreign exchange.
By category, the Company drove worldwide revenue increases in Boots, Women's and Men's Casual, and the Timberland PRO series, offsetting declines in Outdoor Performance. Worldwide
footwear revenue represented 76.1% and 75.8% of total product revenue for the first nine months of 2003 and 2002, respectively.

Worldwide
apparel and accessories revenue for the first nine months of 2003 was $218.8 million, an increase of $19.9 million, or 10.0%, compared with the same period in 2002. The
increase was primarily attributable to the favorable impact of foreign exchange, U.S. Wholesale double-digit revenue increases and the rollout of the Timberland PRO series apparel,
partially offset by a decline in U.S. Consumer Direct average selling prices, as discussed previously. In total, apparel and accessories unit sales increased 6.0% and average selling prices increased
3.7% over the same period last year. As with footwear, the increase in average selling prices was driven primarily by the impact of foreign exchange. Worldwide apparel and accessories revenue
represented 23.9% and 24.2% of total product revenue for the first nine months of 2003 and 2002, respectively.

Worldwide
royalty revenue for the first nine months of 2003 was $9.9 million, a decrease of $1.7 million, or 14.9%, compared with the same period last year. The decrease was driven
primarily by the same reasons cited in the third quarter discussion.



Worldwide
wholesale revenue for the first nine months of 2003 was $724.0 million, an increase of $77.0 million, or 11.9%, compared with the same period in 2002. The increase in revenue
reflected International footwear unit sales growth, the impact of foreign exchange and, to a lesser degree, U.S. Wholesale apparel and accessories growth.

Worldwide
consumer direct revenue, which includes the Company's worldwide retail and U.S. e-commerce businesses, for the first nine months of 2003 was $202.7 million, an increase of

16

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$15.8 million,
or 8.5%, compared with the same period in 2002. The increase was primarily due to growth in the International retail footwear and apparel businesses, increases in U.S. Consumer
Direct footwear unit sales and the impact of foreign exchange, partially offset by the decrease in U.S. Consumer Direct apparel and accessories revenue, as discussed previously. During the nine months
of 2003, the Company opened 17 retail stores and closed 15 retail stores, worldwide.

Gross Profit

Gross
profit as a percentage of revenue for the first nine months of 2003 was 46.2%, an increase of 2.0 percentage points from the 44.2% reported for the first nine months of 2002. Overall,
gross margins benefited from lower product costs, reduced levels of off-price sales at higher margins, the favorable impact of foreign exchange and mix of merchandise sold. The year over
year impact of increases in leather hide prices had a modest negative impact on the first nine months gross margin rates. Overall, the Company is targeting improvement in gross margin rates for the
balance of 2003, when compared with the prior year, which should offset expense investments.

The
Company includes the costs of procuring inventory (sourcing costs, inbound freight and duty, overhead and other similar costs) in cost of goods sold. These costs amounted to $64.5 million
and $65.7 million for the first nine months of 2003 and 2002, respectively.

Operating Expense

Operating
expense was $305.7 million for the first nine months of 2003, up $33.9 million, or 12.5%, from the $271.8 million reported for the first nine months of 2002, reflecting
a growth rate comparable to the Company's 11.1% revenue increase. Operating expense as a percentage of revenue for the first nine months increased to 33.0%, from 32.6% for the first nine months of
2002. The dollar increase was primarily due to growth in International operations, which maintain higher operating expense structures, and to foreign exchange rate changes, which added
$12.4 million in operating expense, compared with the prior year. Overall, the Company is targeting operating expense growth at or above the year to date growth rate for the balance of 2003,
driven in part by the activities related to the global marketing campaign.

Selling
expense was $246.2 million, an increase of $27.3 million, or 12.5%, compared with the same period last year. Within this category of expense, approximately $10.7 million
of the increase was due to foreign exchange and $15.2 million was related to the Company's International operations, primarily costs such as store payroll, percentage rents, agent fees, freight
and field marketing costs. Additionally, costs related to the Company's incentive compensation programs increased over the prior year.

The
Company includes the costs of housing inventory (warehousing and handling costs) in selling expense. These costs amounted to $23.5 million and $21.5 million for the first nine months
of 2003 and 2002, respectively.

Advertising
expense, which is also included in selling expense, was $18.7 million for the first nine months of 2003, $1.2 million, or 6.6% higher than the same period in 2002, as the
Company increased investment in brand building activities, particularly at the point of sale. Advertising costs are expensed at the time the advertising is used, which is predominantly in the season
that the advertising costs are incurred.

General
and administrative expense, at $59.5 million, increased $6.6 million, or 12.5%, compared with the same period last year. Approximately $1.5 million of the dollar increase
was related to foreign exchange. The remainder of the increase was primarily due to investment in International operations in support of the growth of the business, information technology services,
travel, depreciation, insurance, costs related to the Company's incentive compensation programs and charitable contributions.

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Operating Income/Income Before Income Taxes

Operating
income was $122.1 million for the first nine months of 2003, up $25.3 million, or 26.1%, from the $96.8 million reported for the first nine months of 2002. As a
percentage of revenue, operating income was 13.2%, compared with 11.6% for the prior year. This improvement was primarily driven by the 11.1% revenue increase, by improved gross margin rates and by
comparable operating expense rates, as discussed previously. The Company is targeting relatively flat operating margins for the second half of 2003, compared with the prior year, after adjusting for
the negative impact of the fourth quarter 2002 U.S. west coast port work stoppage, which added approximately $6.0 million in incremental freight costs in the fourth quarter of 2002.

Income
before income taxes increased in the U.S. Wholesale segment in the first nine months of 2003, compared with the prior year. The increase was driven by a 2.5% revenue increase, as discussed
previously, supported by improved gross margin rates and comparable year over year expense rates. The U.S. Consumer Direct segment income before income taxes declined compared with the prior year.
U.S. Consumer Direct revenue increased 0.8%, compared with the same period in 2002, while gross margin rates decreased and operating expense rates increased, for similar reasons as discussed
previously.

Internationally,
the improvement in income before income taxes was driven by the impact of foreign exchange and a 12.5% constant dollar revenue increase, partially offset by a decrease in gross margin
rates. The decrease in gross margin rates, driven by product mix and a lesser mix of retail in the
business, was in part due to the challenging European market conditions (which has impacted apparel and accessories sales), the impact of SARS on Asian retail markets and, to a lesser degree,
operating expense investments in store related costs, marketing and enhanced organizational capabilities.

The
Unallocated Corporate segment costs decreased compared to the prior year, driven by a $7.9 million decrease in supply chain costs, partially offset by higher incentive compensation related
costs and by a decrease in other income.

Other, net, Interest and Taxes

Other,
net was $0.2 million of income in the first nine months of 2003, compared with $1.6 million of income in the first nine months of 2002. The decrease was primarily due to the rapid
strengthening of foreign exchange rates in the first half of 2002, versus the dollar, on the translation of intercompany balances. Other, net includes interest income of $0.8 million in the
first nine months of 2003 and 2002. Interest expense, which is comprised of fees related to the establishment and maintenance of the Company's revolving credit facility and to interest paid on short
term borrowings, was $0.8 million in the first nine months of 2003 and $0.6 million in the first nine months of 2002.

The
effective tax rate for the first nine months ended September 26, 2003 and September 27, 2002 was 35.5%.

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

Total Company Revenue Reconciliation:

|                                              |  | For the Three Months
Ended Sept. 26, 2003 |      | For the Nine Months
Ended Sept. 26, 2003 |    
|--------------------------------------------- |  | ----------------------------------------- | ---- | ---------------------------------------- | ---
|
|Revenue increase (GAAP)                       |  | $                                         | 27.3 |                                          | 6.6
|Increase due to foreign exchange rate changes |  |                                           | 14.3 |                                          | 3.4
|Revenue increase in constant dollars          |  |                                           | 13.0 |                                          | 3.1

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International Revenue Reconciliation:

|                                              |  | For the Three Months
Ended Sept. 26, 2003 |      | For the Nine Months
Ended Sept. 26, 2003 |     
|--------------------------------------------- |  | ----------------------------------------- | ---- | ---------------------------------------- | ----
|
|Revenue increase (GAAP)                       |  | $                                         | 31.8 |                                          | 22.2
|Increase due to foreign exchange rate changes |  |                                           | 14.3 |                                          | 10.0
|Revenue increase in constant dollars          |  |                                           | 17.5 |                                          | 12.2

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

LIQUIDITY AND CAPITAL RESOURCES

Accounts Receivable and Inventory

Accounts
receivable increased 4.9% to $264.0 million at September 26, 2003, compared with the $251.8 million reported at September 27, 2002, primarily due to the impact of
foreign exchange rate changes, which added approximately 6.0% to accounts receivable growth. Days sales outstanding remained unchanged at 54 days at September 26, 2003 and
September 27, 2002. Inventory increased 2.5% to $175.5 million at September 26, 2003, compared with the $171.2 million reported at September 27, 2002, which was less
than year to date wholesale revenue increases, reflecting inventory control efforts. Twelve month rolling annual inventory turns improved from 4.2 times for the third quarter of 2002 to 4.5 times for
the third quarter of 2003.

Cash From Operations

Net
cash used for operations for the first nine months of 2003 was $28.4 million, compared with $12.9 million used during the same period in 2002. The use of cash from accounts
receivable and inventory increased compared with the prior year primarily due to the Company's revenue increase and the impact of foreign exchange rates, partially offset by a disciplined approach to
asset management, which minimized the increase in the balance from year end, compared with the prior year. The decreased source of cash from accruals resulted from, in part, higher compensation
related, hedging contract and freight accruals at December 31, 2002, compared with December 31, 2001. Additionally, incentive compensation accruals increased as of September 26,
2003, compared with the prior year, representing the expected company-wide bonus program payouts to be made in the subsequent year. The source of cash from taxes is primarily due to taxes
payable on the increased year over year improvement in pre-tax income. The decrease in the source of cash from the change in accounts payable, compared with the prior year, was primarily
due to the timing of inventory receipt and payments. On an absolute basis, net cash used during the first nine months of 2003 was driven by seasonal spending on inventory and increased receivables,
along with the impact of foreign exchange, partially offset by the related seasonal and volume driven increases in payables and taxes, plus incentive compensation related and other accruals, compared
with December 31, 2002.

Net
cash used for investing activities amounted to $9.8 million for the first nine months of 2003 and $11.4 million for the first nine months of 2002. Capital expenditures for the first
nine months were $10.6 million, compared with $11.7 million for the same period in 2002 (depreciation expense for the first nine months of 2003 and 2002 was $14.9 million and
$14.3 million, respectively). Net cash used for financing activities was $69.5 million for the first nine months, compared with $62.9 million used for the first nine months of
2002. Cash flows from financing activities reflected stock repurchases of $84.2 million in the first nine months of 2003 and $72.4 million in the first nine months of 2002.

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The
Company has available unsecured revolving, committed and uncommitted lines of credit as sources of financing for its seasonal and other working capital requirements. The unsecured committed
revolving credit agreement (the "Agreement") is effective until May 3, 2004. It is the Company's intent to enter into a new agreement at or before that time. The Agreement requires the Company
to comply with certain financial and non-financial covenants. The primary financial covenants relate to maintaining minimum fixed charge coverage of 3:1 and leverage ratios of 1.5:1 and a
maximum consolidated total funded debt percentage of 40%-50%, depending upon the fiscal quarter. The primary non-financial covenants place certain limitations on additional
debt, stock repurchases, acquisitions and the amount of dividends the Company may pay. The Company measures compliance with the financial and non-financial covenants and ratios as required
by the terms of the Agreement on a fiscal quarter basis. The Company had no debt outstanding at September 26, 2003, December 31, 2002 and September 27, 2002.

As
discussed in the Company's Annual Report on Form 10-K for the year ended December 31, 2002, management believes that the Company's capital needs for 2003 will be met
through its current cash balances, its existing credit facilities and cash from operations, without the need for additional permanent financing. However, as discussed in an exhibit to the Company's
Form 10-K for the year ended December 31, 2002, entitled "Cautionary Statements for Purposes of the Safe Harbor Provisions of the Private Securities Litigation Reform Act of
1995," several risks and uncertainties could cause the Company to need to raise additional capital through equity and/or debt financing. The availability and terms of any such financing would be
subject to prevailing market conditions and other factors at that time.

OFF-BALANCE SHEET ARRANGEMENTS AND AGGREGATE CONTRACTUAL OBLIGATIONS

The
Company has the following off-balance sheet arrangements and/or aggregate contractual obligations: operating leases; letters of credit; hedging contracts; and deferred compensation
liability. Detailed information on these obligations and commitments was disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2002. Deferred
compensation liability information was recorded, and other information was disclosed, in the Company's consolidated balance sheets and was discussed in the footnotes to the Company's Annual Report on
Form 10-K for the year ended December 31, 2002.

As
of September 26, 2003, there has not been any significant change to the lease commitments by year reported in the Company's Annual Report on Form 10-K for the year ended
December 31, 2002. As of September 26, 2003 and September 27, 2002, the Company had letters of credit outstanding of $16.0 million and $22.0 million, respectively.
As of September 26, 2003, the Company had $243.7 million in hedging contracts outstanding, all of which are due to settle within the next 16 months (see Note 7). The
Company's deferred compensation liability was $4.9 million as of September 26, 2003, compared with $3.1 million at December 31, 2002. The liability increased primarily due
to contributions to the plan.

NEW ACCOUNTING PRONOUNCEMENTS

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

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

FORWARD-LOOKING INFORMATION

The
statements contained in this report, which are not historical facts, including, without limitation, statements that relate to future performance and/or statements regarding the Company's
anticipated results or business level for 2003 or any other future period, may be deemed to constitute forward-looking statements within the meaning of the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995. Such statements are based on current expectations only and actual future results may differ materially from those expressed or implied by such forward-looking
statements due to certain factors. Such factors include, but are not limited to, the Company's ability to: (i) successfully market and sell its products in view of changing consumer trends,
consumer acceptance of products, and other factors affecting retail market conditions, including the current U.S. economic environment and the global economic and political uncertainties resulting
from the continuing war on terrorism; (ii) manage its foreign exchange rate risks; (iii) obtain adequate raw materials at competitive prices; and (iv) other factors, including
those detailed from time to time in the Company's Securities and Exchange Commission reports, including its Annual Report on Form 10-K filed on March 27, 2003. The Company
undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The
Company's current policies and business practices regarding derivative instruments are consistent with its disclosure in its Annual Report on Form 10-K for the year ended
December 31, 2002. At September 26, 2003, December 31, 2002 and September 27, 2002, the Company had no short-term or long-term debt outstanding. The
Company's foreign currency exposure is generated primarily from its European operating subsidiaries and, to a lesser degree, its Asian operating subsidiaries. Based upon sensitivity analysis, a 10%
change in foreign exchange rates would cause the fair value of the Company's financial instruments to increase/decrease by approximately $23.8 million, compared with $23.6 million at
September 27, 2002.

Item 4. CONTROLS AND PROCEDURES

The
Company's management, under the supervision and with the participation of the Company's principal executive officer and principal financial officer, have evaluated the Company's disclosure
controls and procedures as of September 26, 2003, and they have concluded that these controls and procedures are effective. During the period covered by this report, there have been no
significant changes in the Company's internal control over financial reporting that have materially affected, or are reasonably likely to materially affect the Company's internal control over
financial reporting.

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Part II OTHER INFORMATION

Item 6. EXHIBITS AND REPORTS ON FORM 8-K







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SIGNATURES

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

|                        |  |  | The Timberland Company(Registrant)                                                                            
|----------------------- |  |  | --------------------------------------------------------------------------------------------------------------
|Date: November 10, 2003 |  |  | /s/BRIAN P. MCKEONBrian P. McKeon
Executive Vice President-Finance and Administration, Chief Financial Officer
|Date: November 10, 2003 |  |  | /s/JOHN D. CRIMMINSJohn D. Crimmins
Vice President, Corporate Controller and Chief Accounting Officer         

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EXHIBIT INDEX

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

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