##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 For the quarterly period ended March 30, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number 1-9548
 The Timberland Company
 
  Delaware
    
    02-0312554(State or Other Jurisdiction of 
Incorporation or Organization)
    
    (I.R.S. Employer Identification No.)200 Domain Drive, Stratham, New Hampshire
    
    03885(Address of Principal Executive Offices)
    
    (Zip Code)
 (603) 772-9500
  o þ
  þ o o
  o þ




---



##### 



THE TIMBERLAND COMPANY
FORM 10-Q
TABLE OF CONTENTS
 Page(s)Part I Financial InformationItem 1.
    
    Financial Statements (Unaudited)Condensed Consolidated Balance Sheets 
March 30, 2007, March 31, 2006 (as restated) and December 31, 2006
    
    2Condensed Consolidated Statements of Income 
For the Three Months Ended March 30, 2007 and March 31, 2006 (as restated)
    
    3Condensed Consolidated Statements of Cash Flows 
For the Three Months Ended March 30, 2007 and March 31, 2006 (as restated)
    
    4Notes to Condensed Consolidated Financial Statements
    
    5-16Item 2.
    
    Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    17-24Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    24Item 4.
    
    Controls and Procedures
    
    25Part II Other InformationItem 1A.
    
    Risk Factors
    
    26Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    26Item 6.
    
    Exhibits
    
    27Signatures
    
    
    
    28Exhibit Index
    
    
    
    29Exhibits
    
    
    
    30-43EX-10.1 2007 Executive Long Term Incentive ProgramEX-31.1 CEO Certification Section 302EX-31.2 CFO Certification Section 302EX-32.1 CEO Certification Section 906EX-32.2 CFO Certification Section 906




---



##### Table of Contents



PART I FINANCIAL INFORMATION
 
 Item 1. FINANCIAL STATEMENTS
 
 THE TIMBERLAND COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS  UNAUDITED
 March 30, 2007
    
    
    December 31, 2006
    
    
    March 31, 2006(As Restated,See Note 2)AssetsCurrent assetsCash and equivalents
    
    $
    119,695
    
    
    $
    181,698
    
    
    $
    125,284Accounts receivable, net of allowance for doubtful accounts of $10,591
at March 30, 2007, $12,493 at December 31, 2006 and $8,009 at March 31,
2006
    
    
    199,695
    
    
    
    204,016
    
    
    
    192,087Inventory
    
    
    183,500
    
    
    
    186,765
    
    
    
    174,945Prepaid expense
    
    
    48,785
    
    
    
    42,130
    
    
    
    37,424Prepaid income taxes
    
    
    16,363
    
    
    
    12,353
    
    
    
    Deferred income taxes
    
    
    15,286
    
    
    
    21,633
    
    
    
    19,918Derivative assets
    
    
    83
    
    
    
    176
    
    
    
    2,099Total current assets
    
    
    583,407
    
    
    
    648,771
    
    
    
    551,757Property, plant and equipment, net
    
    
    92,955
    
    
    
    94,640
    
    
    
    81,998Deferred income taxes
    
    
    23,613
    
    
    
    18,553
    
    
    
    3,365Goodwill
    
    
    39,891
    
    
    
    39,717
    
    
    
    39,533Intangible assets, net
    
    
    47,256
    
    
    
    47,865
    
    
    
    40,216Other assets, net
    
    
    12,457
    
    
    
    10,831
    
    
    
    10,579Total assets
    
    $
    799,579
    
    
    $
    860,377
    
    
    $
    727,448Liabilities and Stockholders EquityCurrent liabilitiesAccounts payable
    
    $
    77,445
    
    
    $
    110,031
    
    
    $
    70,025Accrued expensePayroll and related
    
    
    31,268
    
    
    
    38,476
    
    
    
    28,375Other
    
    
    71,538
    
    
    
    84,258
    
    
    
    54,477Income taxes payable
    
    
    5,115
    
    
    
    49,938
    
    
    
    20,781Derivative liabilities
    
    
    2,600
    
    
    
    2,925
    
    
    
    Total current liabilities
    
    
    187,966
    
    
    
    285,628
    
    
    
    173,658Other long-term liabilities
    
    
    39,690
    
    
    
    13,064
    
    
    
    15,633Stockholders equityPreferred Stock, $.01 par value; 2,000,000 shares authorized; none issued
    
    
    
    
    
    
    
    
    
    
    Class A Common Stock, $.01 par value (1 vote per share); 120,000,000
shares authorized; 73,188,604 shares issued at March 30, 2007,
72,664,889 shares issued at December 31, 2006 and 72,381,887 shares
issued at March 31, 2006
    
    
    732
    
    
    
    727
    
    
    
    724Class B Common Stock, $.01 par value (10 votes per share); convertible
into Class A shares on a one-for-one basis; 20,000,000 shares
authorized; 11,743,660 shares issued and outstanding at March 30, 2007,
December 31, 2006 and March 31, 2006
    
    
    117
    
    
    
    117
    
    
    
    117Additional paid-in capital
    
    
    240,297
    
    
    
    224,611
    
    
    
    211,147Retained earnings
    
    
    844,387
    
    
    
    838,462
    
    
    
    763,322Accumulated other comprehensive income
    
    
    16,440
    
    
    
    15,330
    
    
    
    4,998Treasury Stock at cost; 22,888,588 Class A shares at March 30, 2007,
22,428,168 Class A shares at December 31, 2006 and 19,924,851 Class A
shares at March 31, 2006
    
    
    (530,050
    )
    
    
    (517,562
    )
    
    
    (442,151
    )Total stockholders equity
    
    
    571,923
    
    
    
    561,685
    
    
    
    538,157Total liabilities and stockholders equity
    
    $
    799,579
    
    
    $
    860,377
    
    
    $
    727,448
 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.




---



##### Table of Contents



THE TIMBERLAND COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME  UNAUDITED
 For the Three Months EndedMarch 30,
    
    
    March 31,2007
    
    
    2006(As Restated,See Note 2)Revenue
    
    $
    336,329
    
    
    $
    349,811Cost of goods sold
    
    
    174,750
    
    
    
    175,881Gross profit
    
    
    161,579
    
    
    
    173,930Operating expenseSelling
    
    
    110,083
    
    
    
    104,749General and administrative
    
    
    31,351
    
    
    
    28,634Restructuring costs
    
    
    6,526
    
    
    
    481Total operating expense
    
    
    147,960
    
    
    
    133,864Operating income
    
    
    13,619
    
    
    
    40,066Other incomeInterest income, net
    
    
    1,130
    
    
    
    1,105Other income/(expense), net
    
    
    (623
    )
    
    
    (571
    )Total other income
    
    
    507
    
    
    
    534Income before provision for income taxes
    
    
    14,126
    
    
    
    40,600Provision for income taxes
    
    
    4,873
    
    
    
    14,535Net income
    
    $
    9,253
    
    
    $
    26,065Earnings per share:Basic
    
    $
    .15
    
    
    $
    .41Diluted
    
    $
    .15
    
    
    $
    .40Weighted-average shares outstandingBasic
    
    
    61,099
    
    
    
    63,583Diluted
    
    
    61,995
    
    
    
    64,996
 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.




---



##### Table of Contents



THE TIMBERLAND COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  UNAUDITED
 For the Three Months EndedMarch 30,
    
    
    March 31,2007
    
    
    2006(As Restated,See Note 2)Cash flows from operating activities:Net income
    
    $
    9,253
    
    
    $
    26,065Adjustments to reconcile to net cash used by operating activities:Deferred income taxes
    
    
    1,287
    
    
    
    5,696Share-based compensation
    
    
    1,704
    
    
    
    5,271Depreciation and other amortization
    
    
    7,656
    
    
    
    6,500Tax benefit from share-based compensation, net of excess benefit
    
    
    653
    
    
    
    1,405Unrealized (gain)/loss on derivatives
    
    
    (232
    )
    
    
    3,945Non-cash charges/(credits), net
    
    
    689
    
    
    
    (275
    )Increase/(decrease) in cash from changes in working capital:Accounts receivable
    
    
    5,519
    
    
    
    (21,676
    )Inventory
    
    
    3,532
    
    
    
    (7,521
    )Prepaid expense
    
    
    (6,355
    )
    
    
    (3,670
    )Accounts payable
    
    
    (33,306
    )
    
    
    (28,079
    )Accrued expense
    
    
    (19,454
    )
    
    
    (20,530
    )Income taxes
prepaid and payable, net
    
    
    (27,040
    )
    
    
    (26,869
    )Net cash used by operating activities
    
    
    (56,094
    )
    
    
    (59,738
    )Cash flows from investing activities:Additions to property, plant and equipment
    
    
    (5,220
    )
    
    
    (5,528
    )Other
    
    
    (667
    )
    
    
    (238
    )Net cash used by investing activities
    
    
    (5,887
    )
    
    
    (5,766
    )Cash flows from financing activities:Common stock repurchases
    
    
    (11,002
    )
    
    
    (35,902
    )Issuance of common stock
    
    
    9,922
    
    
    
    10,454Excess tax benefit from share-based compensation
    
    
    915
    
    
    
    2,270Net cash used by financing activities
    
    
    (165
    )
    
    
    (23,178
    )Effect of exchange rate changes on cash and equivalents
    
    
    143
    
    
    
    803Net decrease in cash and equivalents
    
    
    (62,003
    )
    
    
    (87,879
    )Cash and equivalents at beginning of period
    
    
    181,698
    
    
    
    213,163Cash and equivalents at end of period
    
    $
    119,695
    
    
    $
    125,284Supplemental disclosures of cash flow information:Interest paid
    
    $
    67
    
    
    $
    90Income taxes paid
    
    $
    28,729
    
    
    $
    31,979
 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.




---



##### Table of Contents



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




---



##### Table of Contents



The Fair Value Option for Financial Assets and
Financial Liabilities, Including an amendment of SFAS 115
 Note 2. Restatement
 Accounting for
Derivative Instruments and Hedging Activities
   BALANCE SHEET
 As of March 31, 2006As PreviouslyReported
    
    
    Adjustments
    
    
    As RestatedAssetsCurrent assetsCash and equivalents
    
    $
    125,284
    
    
    $
    
    
    
    $
    125,284Accounts receivable
    
    
    192,087
    
    
    
    
    
    
    
    192,087Inventory
    
    
    174,945
    
    
    
    
    
    
    
    174,945Prepaid expense
    
    
    37,424
    
    
    
    
    
    
    
    37,424Prepaid income taxes
    
    
    
    
    
    
    
    
    
    
    Deferred income taxes
    
    
    19,813
    
    
    
    105
    
    
    
    19,918Derivative assets
    
    
    2,099
    
    
    
    
    
    
    
    2,099Total current assets
    
    
    551,652
    
    
    
    105
    
    
    
    551,757Property, plant and equipment, net
    
    
    81,998
    
    
    
    

    
    
    
    81,998Deferred income taxes
    
    
    541
    
    
    
    2,824
    
    
    
    3,365Goodwill
    
    
    39,533
    
    
    
    
    
    
    
    39,533Intangible assets, net
    
    
    40,216
    
    
    
    
    
    
    
    40,216




---



##### Table of Contents



As of March 31, 2006As PreviouslyReported
    
    
    Adjustments
    
    
    As RestatedOther assets, net
    
    
    10,579
    
    
    
    
    
    
    
    10,579Total assets
    
    $
    724,519
    
    
    $
    2,929
    
    
    $
    727,448Liabilities and Stockholders EquityCurrent liabilitiesAccounts payable
    
    $
    70,025
    
    
    $
    
    
    
    $
    70,025Accrued expensePayroll and related
    
    
    25,512
    
    
    
    2,863
    
    
    
    28,375Other
    
    
    54,477
    
    
    
    
    
    
    
    54,477Income taxes payable
    
    
    18,228
    
    
    
    2,553
    
    
    
    20,781Total current liabilities
    
    
    168,242
    
    
    
    5,416
    
    
    
    173,658Other long-term liabilities
    
    
    15,633
    
    
    
    
    
    
    
    15,633Stockholders equityPreferred Stock
    
    
    
    
    
    
    
    
    
    
    Class A common stock
    
    
    724
    
    
    
    
    
    
    
    724Class B common stock
    
    
    117
    
    
    
    
    
    
    
    117Additional paid-in capital
    
    
    206,771
    
    
    
    4,376
    
    
    
    211,147Retained earnings
    
    
    768,191
    
    
    
    (4,869
    )
    
    
    763,322Accumulated other comprehensive income
    
    
    6,992
    
    
    
    (1,994
    )
    
    
    4,998Treasury stock
    
    
    (442,151
    )
    
    
    

    
    
    
    (442,151
    )Total stockholders equity
    
    
    540,644
    
    
    
    (2,487
    )
    
    
    538,157Total liabilities and stockholders equity
    
    $
    724,519
    
    
    $
    2,929
    
    
    $
    727,448




---



##### Table of Contents



STATEMENT OF INCOME
 Quarter Ended March 31, 2006As PreviouslyReported
    
    
    Adjustments
    
    
    As RestatedRevenue
    
    $
    349,811
    
    
    $
    
    
    
    $
    349,811Cost of goods sold
    
    
    173,708
    
    
    
    2,173
    
    
    
    175,881Gross profit
    
    
    176,103
    
    
    
    (2,173
    )
    
    
    173,930Operating expenseSelling
    
    
    104,740
    
    
    
    9
    
    
    
    104,749General and administrative
    
    
    28,629
    
    
    
    5
    
    
    
    28,634Restructuring costs
    
    
    481
    
    
    
    
    
    
    
    481Total operating expense
    
    
    133,850
    
    
    
    14
    
    
    
    133,864Operating income
    
    
    42,253
    
    
    
    (2,187
    )
    
    
    40,066Other incomeInterest income, net
    
    
    1,105
    
    
    
    
    
    
    
    1,105Other income/(expense), net
    
    
    1,202
    
    
    
    (1,773
    )
    
    
    (571
    )Total other income
    
    
    2,307
    
    
    
    (1,773
    )
    
    
    534Income before provision for income taxes
    
    
    44,560
    
    
    
    (3,960
    )
    
    
    40,600Provision for income taxes
    
    
    15,373
    
    
    
    (838
    )
    
    
    14,535Net income
    
    $
    29,187
    
    
    $
    (3,122
    )
    
    $
    26,065Earnings per share:Basic
    
    $
    .46
    
    
    $
    (.05
    )
    
    $
    .41Diluted
    
    $
    .45
    
    
    $
    (.05
    )
    
    $
    .40Weighted-average shares outstanding:Basic
    
    
    63,583
    
    
    
    
    
    
    
    63,583Diluted
    
    
    64,996
    
    
    
    
    
    
    
    64,996




---



##### Table of Contents



STATEMENT OF CASH FLOWS
 Quarter Ended March 31, 2006As PreviouslyReported
    
    
    Adjustments
    
    
    As RestatedCash flows from operating activities:Net income
    
    $
    29,187
    
    
    $
    (3,122
    )
    
    $
    26,065Adjustments to reconcile to net cash used by operating activities:Deferred income taxes
    
    
    4,215
    
    
    
    1,481
    
    
    
    5,696Share-based compensation
    
    
    5,255
    
    
    
    16
    
    
    
    5,271Depreciation and other amortization
    
    
    6,500
    
    
    
    
    
    
    
    6,500Tax benefit from share-based compensation, net of excess benefit
    
    
    1,405
    
    
    
    
    
    
    
    1,405Unrealized loss on derivatives
    
    
    
    
    
    
    3,945
    
    
    
    3,945Non-cash charges/(credits), net
    
    
    (275
    )
    
    
    
    
    
    
    (275
    )Increase/(decrease) in cash from changes in working capital:Accounts receivable
    
    
    (21,676
    )
    
    
    
    
    
    
    (21,676
    )Inventory
    
    
    (7,521
    )
    
    
    
    
    
    
    (7,521
    )Prepaid expense
    
    
    (3,670
    )
    
    
    
    
    
    
    (3,670
    )Accounts payable
    
    
    (28,079
    )
    
    
    
    
    
    
    (28,079
    )Accrued expense
    
    
    (20,530
    )
    
    
    
    
    
    
    (20,530
    )Income taxes prepaid and payable, net
    
    
    (24,549
    )
    
    
    (2,320
    )
    
    
    (26,869
    )Net cash used by operating activities
    
    
    (59,738
    )
    
    
    
    
    
    
    (59,738
    )Net cash used by investing activities
    
    
    (5,766
    )
    
    
    
    
    
    
    (5,766
    )Net cash used by financing activities
    
    
    (23,178
    )
    
    
    
    
    
    
    (23,178
    )Effect of exchange rate changes on cash and equivalents
    
    
    803
    
    
    
    
    
    
    
    803Net decrease in cash and equivalents
    
    
    (87,879
    )
    
    
    
    
    
    
    (87,879
    )Cash and equivalents at beginning of period
    
    
    213,163
    
    
    
    
    
    
    
    213,163Cash and equivalents at end of period
    
    $
    125,284
    
    
    
    
    
    
    $
    125,284
 Note 3. Income Taxes
 Accounting for
Uncertainty in Income Taxes  an Interpretation of FASB Statement No. 109




---



##### Table of Contents



Note 4. Share-Based Compensation
 Share-Based Payment




---



##### Table of Contents



Stock Options
  For the Three Months EndedMarch 30, 2007
    
    March 31, 2006Expected volatility
    
    
    29.3
    %
    
    
    30.1
    %Risk-free interest rate
    
    
    4.7
    %
    
    
    4.6
    %Expected life (in years)
    
    
    4.0
    
    
    
    4.0Expected dividends
    
    
    
    
    
    
    
  Weighted-AverageExerciseShares
    
    
    PriceOutstanding at January 1, 2007
    
    
    5,253,794
    
    
    $
    27.07Granted
    
    
    537,350
    
    
    
    27.12Exercised
    
    
    (523,715
    )
    
    
    18.97Expired or forfeited
    
    
    (107,918
    )
    
    
    31.14Outstanding at March 30, 2007
    
    
    5,159,511
    
    
    $
    27.81Vested or expected to vest at
March 30, 2007
    
    
    4,956,217
    
    
    $
    27.68Exercisable at March 30, 2007
    
    
    3,255,969
    
    
    $
    25.97
 Nonvested Shares
  Weighted-AverageGrant DateShares
    
    
    Fair ValueUnvested at January 1, 2007
    
    
    932,476
    
    
    $
    32.59Vested
    
    
    (105,596
    )
    
    
    31.34Forfeited
    
    
    (108,177
    )
    
    
    30.36Unvested at March 30, 2007
    
    
    718,703
    
    
    $
    33.11
 
    Table of Contents  Note 5. Cash Incentive Awards
    Table of Contents  Note 6. Earnings Per Share (EPS)
  March 31, 2006March 30, 2007
    
    (As Restated)Weighted-
    
    Per-
    
    
    
    
    
    Weighted-
    
    Per-Average
    
    Share
    
    Net
    
    Average
    
    ShareNet Income
    
    Shares
    
    Amount
    
    Income
    
    Shares
    
    AmountBasic EPS
    
    $
    9,253
    
    
    
    61,099
    
    
    $
    .15
    
    
    $
    26,065
    
    
    
    63,583
    
    
    $
    .41Effect of dilutive
securities:Stock options and employee
stock purchase plan shares
    
    
    
    
    
    
    442
    
    
    
    
    
    
    
    
    
    
    
    1,189Nonvested shares
    
    
    
    
    
    
    454
    
    
    
    
    
    
    
    
    
    
    
    224Diluted EPS
    
    $
    9,253
    
    
    
    61,995
    
    
    $
    .15
    
    
    $
    26,065
    
    
    
    64,996
    
    
    $
    .40
  March 30, 2007
    
    March 31, 2006Options to purchase shares of common stock
    
    
    3,306
    
    
    
    1,177
 Note 7. Comprehensive Income
  For the Three Months EndedMarch 31, 2006March 30, 2007
    
    
    (As Restated)Net income
    
    $
    9,253
    
    
    $
    26,065Change in cumulative translation adjustment
    
    
    1,110
    
    
    
    2,044Comprehensive income
    
    $
    10,363
    
    
    $
    28,109
 Note 8. Business Segments and Geographic Information
    Table of Contents   
     For the Three Months Ended March 30, 2007 and March 31, 2006
 U.S.
    
    
    
    
    
    UnallocatedU.S. Wholesale
    
    Consumer Direct
    
    International
    
    Corporate
    
    Consolidated2007Revenue
    
    $
    105,215
    
    
    $
    33,991
    
    
    $
    197,123
    
    
    $
    
    
    
    $
    336,329Operating income/(loss)
    
    
    17,380
    
    
    
    1,041
    
    
    
    36,187
    
    
    
    (40,989
    )
    
    
    13,619Income/(loss) before income taxes
    
    
    17,380
    
    
    
    1,041
    
    
    
    36,187
    
    
    
    (40,482
    )
    
    
    14,126Total assets
    
    
    221,528
    
    
    
    31,634
    
    
    
    375,887
    
    
    
    170,530
    
    
    
    799,579Goodwill
    
    
    32,047
    
    
    
    804
    
    
    
    7,040
    
    
    
    
    
    
    
    39,8912006Revenue
    
    $
    127,356
    
    
    $
    33,060
    
    
    $
    189,395
    
    
    $
    
    
    
    $
    349,811Operating income/(loss)
    
    
    36,540
    
    
    
    183
    
    
    
    47,283
    
    
    
    (43,940
    )
    
    
    40,066Income/(loss) before income taxes
    
    
    36,540
    
    
    
    183
    
    
    
    47,283
    
    
    
    (43,406
    )
    
    
    40,600Total assets
    
    
    219,223
    
    
    
    30,821
    
    
    
    342,301
    
    
    
    135,103
    
    
    
    727,448Goodwill
    
    
    31,745
    
    
    
    794
    
    
    
    6,994
    
    
    
    
    
    
    
    39,533
  2007
    
    
    2006Footwear
    
    $
    235,637
    
    
    $
    253,948Apparel and accessories
    
    
    95,406
    
    
    
    91,400Royalty and other
    
    
    5,286
    
    
    
    4,463$
    336,329
    
    
    $
    349,811




---



##### Table of Contents



Note 9. Inventory
  March 30, 2007
    
    
    December 31, 2006
    
    
    March 31, 2006Materials
    
    $

    5,536
    
    
    $
    5,386
    
    
    $
    2,880Work-in-process
    
    
    1,301
    
    
    
    1,333
    
    
    
    677Finished goods
    
    
    176,663
    
    
    
    180,046
    
    
    
    171,388Total
    
    $

    183,500
    
    
    $
    186,765
    
    
    $
    174,945
 Note 10. Restructuring and Related Costs
  ®




---



##### Table of Contents



European
    
    
    
    
    
    
    NorthPuerto Rico
    
    
    Shared
    
    
    
    
    
    
    AmericanManufacturing
    
    
    Service
    
    
    Global
    
    
    ApparelFacility
    
    
    Center
    
    
    Reorganization
    
    
    Licensing
    
    
    TotalRestructuring liabilities as of December 31,
2006
    
    $
    475
    
    
    $
    368
    
    
    $
    2,969
    
    
    $
    
    
    
    $
    3,812Severance and employment related
charges/(credits)
    
    
    

    
    
    
    (48
    )
    
    
    3,480
    
    
    
    3,293
    
    
    
    6,725Severance and employment related cash payments
    
    
    (145
    )
    
    
    

    
    
    
    (1,503
    )
    
    
    (711
    )
    
    
    (2,359
    )Restructuring liabilities as of March 30, 2007
    
    $
    330
    
    
    $
    320
    
    
    $
    4,946
    
    
    $
    2,582
    
    
    $
    8,178
  Note 11. Share Repurchase
   Note 12. Litigation
  Note 13. Subsequent Event




---



##### Table of Contents



Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Critical Accounting Policies
 Accounting for Uncertainty in Income Taxes  an Interpretation of FASB Statement No. 109




---



##### Table of Contents



Recent Developments
   Overview
 â
   
    
    First quarter revenue decreased 3.9% from the prior year quarter to $336.3 million
largely due to continued sales declines in boots and kids in the U.S. and Europe.
    
    Gross margin declined 170 basis points driven by the impact of the sales decline in
boots and kids, lower margin on off-price and discounted sales in the U.S. and Asia, and
higher product costs due primarily to anti-dumping duties on footwear imported into the EU
from China and Vietnam.
    
    Operating expenses increased 10.5% from $133.9 million to $148.0 million. Excluding
restructuring and related costs of $6.5 million in 2007 and $0.5 million in 2006, operating
expenses increased 6.0%. Higher operating expenses were largely the result of the impact
of international expansion, costs associated with new businesses and specialty categories,
and changes in foreign exchange rates, partially offset by lower share-based compensation
costs.
    
    Operating profit for the quarter was $13.6 million compared to $40.1 million in the
first quarter of 2006. This includes a restructuring charge of $6.5 million, of which $3.2
million relates to costs associated with our global reorganization and $3.3 million is
associated with the licensing of our Timberland®brand apparel in North America.
The decline results primarily from the decline in boots and kids and higher operating
expenses as noted above.




---



##### Table of Contents




    
    Net income was $9.3 million in the first quarter of 2007 compared to $26.1 million in
the first quarter of 2006.
    
    Diluted EPS decreased from $.40 in the first quarter of 2006 to $.15 in the first
quarter of 2007. Excluding restructuring and related costs in both periods, diluted EPS
decreased from $.41 to $.22.
    
    Cash at the end of the quarter was $119.7 million with no debt outstanding.
     Results of Operations for the Three Months Ended March 30, 2007 and March 31, 2006
 Revenue
  Segments Review
  ® ® ®




---



##### Table of Contents



®
  Products
 ® ® ® ®
 Channels
  Gross Profit
   Operating Expense




---



##### Table of Contents



®
     Operating Income




---



##### Table of Contents



Other Income and Taxes
    Reconciliation of Total Company, Total International and Europe Revenue Changes To Constant
Dollar Revenue Changes
  For the Three MonthsEnded March 30, 2007$ MillionsChange
    
    % ChangeRevenue decrease (GAAP)
    
    $
    (13.5
    )
    
    
    (3.9
    %)Increase due to foreign exchange rate changes
    
    
    11.8
    
    
    
    3.3
    %Revenue decrease in constant dollars
    
    $
    (25.3
    )
    
    
    (7.2
    %)
  For the Three MonthsEnded March 30, 2007$ MillionsChange
    
    % ChangeRevenue increase (GAAP)
    
    $
    7.7
    
    
    
    4.1
    %Increase due to foreign exchange rate changes
    
    
    11.8
    
    
    
    6.2
    %Revenue decrease in constant dollars
    
    $
    (4.1
    )
    
    
    (2.1
    %)
  For the Three MonthsEnded March 30, 2007$ MillionsChange
    
    % ChangeRevenue increase (GAAP)
    
    $
    1.8
    
    
    
    1.2
    %Increase due to foreign exchange rate changes
    
    
    11.9
    
    
    
    7.9
    %Revenue decrease in constant dollars
    
    $
    (10.1
    )
    
    
    (6.7
    %)




---



##### Table of Contents



Reconciliation of Diluted EPS to Diluted EPS Excluding Restructuring and Related Costs
 For The Three Months EndedMarch 31,March 30,
    
    
    20062007
    
    
    (As Restated)Diluted EPS, as reported
    
    $
    0.15
    
    
    $
    0.40Per share impact of restructuring and related costs
    
    
    0.07
    
    
    
    0.01Diluted EPS excluding restructuring and related costs
    
    $
    0.22
    
    
    $
    0.41
  Accounts Receivable and Inventory
  ® ® ® ®
 Liquidity and Capital Resources




---



##### Table of Contents



Aggregate Contractual Obligations
  Off Balance Sheet Arrangements
   New Accounting Pronouncements
  
 Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK




---



##### Table of Contents



Item 4. CONTROLS AND PROCEDURES




---



##### Table of Contents



Part II OTHER INFORMATION
 
 Item 1A. RISK FACTORS
  
 Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 ISSUER PURCHASES OF EQUITY SECURITIES(1)
 For the Three Fiscal Months Ended March 30, 2007Total Number
    
    
    Maximum Numberof Shares
    
    
    of SharesPurchased as Part
    
    
    That May YetTotal Number
    
    
    
    
    
    
    of Publicly
    
    
    be Purchasedof Shares
    
    
    Average Price
    
    
    Announced
    
    
    Under the PlansPeriod*
    
    Purchased **
    
    
    Paid per Share
    
    
    Plans or Programs
    
    
    or ProgramsJanuary 1  January 26
    
    
    141,291
    
    
    $
    29.98
    
    
    
    141,291
    
    
    
    3,404,694January 27  February 23
    
    
    99,777
    
    
    
    29.56
    
    
    
    99,777
    
    
    
    3,304,917February 24   March 30
    
    
    107,320
    
    
    
    26.64
    
    
    
    107,320
    
    
    
    3,197,597Q1 Total
    
    
    348,388
    
    
    $
    28.83
    
    
    
    348,388
 
 Footnote (1) ApprovedAnnouncement
    
    Program
    
    ExpirationDate
    
    Size (Shares)
    
    DateProgram 1
    
    
    02/09/2006
    
    
    
    6,000,000
    
    
    None
  
 *
    
    Fiscal month**
    
    Based on trade date  not settlement date




---



##### Table of Contents



Item 6. EXHIBITS
  Exhibit 10.1
    
    
    
    The Timberland Company 2007 Executive Long Term Incentive Program, filed
herewith.Exhibit 31.1
    
    
    
    Principal Executive Officer Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002, filed herewith.Exhibit 31.2
    
    
    
    Principal Financial Officer Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002, filed herewith.Exhibit 32.1
    
    
    
    Chief Executive Officer Certification Pursuant to Section 1350, Chapter 63
of Title 18, United States Code, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, furnished herewith.Exhibit 32.2
    
    
    
    Chief Financial Officer Certification Pursuant to Section 1350, Chapter 63
of Title 18, United States Code, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, furnished herewith.




---



##### Table of Contents



SIGNATURES
  THE TIMBERLAND COMPANY
(Registrant)By:
    /s/ JEFFREY B. SWARTZDate: June 28, 2007
    
    Jeffrey B. SwartzChief Executive OfficerBy:
    /s/ JOHN CRIMMINSDate: June 28, 2007
    
    John CrimminsActing Chief Financial Officer, Vice
President, Corporate Controller and Chief
Accounting Officer




---



##### Table of Contents



EXHIBIT INDEX
 Exhibit
    
    DescriptionExhibit 10.1
    
    The Timberland Company 2007 Executive Long Term Incentive Program, filed herewith.Exhibit 31.1
    
    Principal Executive Officer Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002, filed herewith.Exhibit 31.2
    
    Principal Financial Officer Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002, filed herewith.Exhibit 32.1
    
    Chief Executive Officer Certification Pursuant to Section 1350, Chapter 63 of
Title 18, United States Code, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, furnished herewith.Exhibit 32.2
    
    Chief Financial Officer Certification Pursuant to Section 1350, Chapter 63 of
Title 18, United States Code, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, furnished herewith.