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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, 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 October 1, 2004               
|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 November 5, 2004, 28,542,528 shares of the registrant's Class A Common Stock were outstanding and 5,871,830 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                                                                  |        
|                                        |         | Unaudited Condensed Consolidated Balance SheetsOctober 1, 2004, September 26, 2003 and December 31, 2003                        |                                                                                       | 1      
|                                        |         | Unaudited Condensed Consolidated Statements of IncomeFor the three and nine months ended October 1, 2004 and September 26, 2003 |                                                                                       | 2      
|                                        |         | Unaudited Condensed Consolidated Statements of Cash FlowsFor the nine months ended October 1, 2004 and September 26, 2003       |                                                                                       | 3      
|                                        |         | Notes to Unaudited Condensed Consolidated Financial Statements                                                                   |                                                                                       | 4-10   
|                                        | 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 2. |                                                                                                                                  | Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities      |        
|                                        | Item 6. |                                                                                                                                  | Exhibits and Reports on Form 8-K                                                      |        
|Signatures                              |         | 25                                                                                                                              
|Exhibit Index                           |         | 26                                                                                                                              
|Exhibits                                |         |                                                                                                                                 

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PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

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

|                                            |                                                                                                                                                                                                                                                                                                                                             | Oct. 1,
2004               |         | Sept. 26,
2003 |         | Dec. 31,
2003 |         
|------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------- | -------------- | ------- | ------------- | --------
|Assets                                      |                                                                                                                                                                                                                                                                                                                                             |                            |         |                |         |               |         
|Current assets                              |                                                                                                                                                                                                                                                                                                                                             |                            |         |                |         |               |         
|                                            | Cash and equivalents                                                                                                                                                                                                                                                                                                                        |                            | $       | 119,779        |         | $             | 35,902  
|                                            | Accounts receivable, net of allowance for doubtful accounts of $9,276 at October 1, 2004, $8,575 at September 26, 2003 and $7,704 at December 31, 2003                                                                                                                                                                                      |                            |         | 279,182        |         |               | 264,036 
|                                            | Inventory                                                                                                                                                                                                                                                                                                                                   |                            |         | 182,979        |         |               | 175,490 
|                                            | Prepaid expense                                                                                                                                                                                                                                                                                                                             |                            |         | 21,335         |         |               | 21,925  
|                                            | Deferred income taxes                                                                                                                                                                                                                                                                                                                       |                            |         | 22,400         |         |               | 21,256  
|                                            |                                                                                                                                                                                                                                                                                                                                             |                            |         |                |         |               |         
|                                            |                                                                                                                                                                                                                                                                                                                                             | Total current assets       |         |                | 625,675 |               |         
|                                            |                                                                                                                                                                                                                                                                                                                                             |                            |         |                |         |               |         
|Property, plant and equipment, net          |                                                                                                                                                                                                                                                                                                                                             |                            | 75,812  |                |         | 68,939        |         
|Goodwill                                    |                                                                                                                                                                                                                                                                                                                                             |                            | 14,163  |                |         | 14,163        |         
|Intangible assets                           |                                                                                                                                                                                                                                                                                                                                             |                            | 3,991   |                |         | 3,515         |         
|Other assets, net                           |                                                                                                                                                                                                                                                                                                                                             |                            | 9,496   |                |         | 7,103         |         
|                                            |                                                                                                                                                                                                                                                                                                                                             |                            |         |                |         |               |         
|Total assets                                |                                                                                                                                                                                                                                                                                                                                             | $                          | 729,137 |                | $       | 612,329       |         
|                                            |                                                                                                                                                                                                                                                                                                                                             |                            |         |                |         |               |         
|Liabilities and Stockholders' Equity        |                                                                                                                                                                                                                                                                                                                                             |                            |         |                |         |               |         
|Current liabilities                         |                                                                                                                                                                                                                                                                                                                                             |                            |         |                |         |               |         
|                                            | Accounts payable                                                                                                                                                                                                                                                                                                                            |                            | $       | 54,379         |         | $             | 50,236  
|                                            | Accrued expense                                                                                                                                                                                                                                                                                                                             |                            |         |                |         |               |         
|                                            |                                                                                                                                                                                                                                                                                                                                             | Payroll and related        |         |                | 42,996  |               |         
|                                            |                                                                                                                                                                                                                                                                                                                                             | Other                      |         |                | 67,970  |               |         
|                                            | Income taxes payable                                                                                                                                                                                                                                                                                                                        |                            |         | 39,976         |         |               | 34,358  
|                                            | Derivative liabilities                                                                                                                                                                                                                                                                                                                      |                            |         | 4,264          |         |               | 6,334   
|                                            |                                                                                                                                                                                                                                                                                                                                             |                            |         |                |         |               |         
|                                            |                                                                                                                                                                                                                                                                                                                                             | Total current liabilities  |         |                | 209,585 |               |         
|                                            |                                                                                                                                                                                                                                                                                                                                             |                            |         |                |         |               |         
|Deferred compensation and other liabilities |                                                                                                                                                                                                                                                                                                                                             |                            | 11,081  |                |         | 5,231         |         
|Deferred income taxes                       |                                                                                                                                                                                                                                                                                                                                             |                            | 8,086   |                |         | 6,689         |         
|Stockholders' equity                        |                                                                                                                                                                                                                                                                                                                                             |                            |         |                |         |               |         
|                                            | Preferred stock, $.01 par value; 2,000,000 shares authorized; none issued                                                                                                                                                                                                                                                                   |                            |         |               |         |               |        
|                                            | Class A Common Stock, $.01 par value (1 vote per share); 120,000,000 shares authorized; 44,931,106 shares issued at October 1, 2004, 42,715,007 shares issued at September 26, 2003 and 43,050,277 shares issued at December 31,
 2003                                                                                                      |                            |         | 449            |         |               | 427     
|                                            | 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; 5,871,830 shares issued and outstanding at October 1, 2004, 7,144,675 shares
issued and outstanding at September 26, 2003 and 6,942,834 shares issued and outstanding at December 31, 2003 |                            |         | 59             |         |               | 71      
|                                            | Additional paid-in capital                                                                                                                                                                                                                                                                                                                  |                            |         | 214,180        |         |               | 166,199 
|                                            | Deferred compensation                                                                                                                                                                                                                                                                                                                       |                            |         | (17,297        | )       |               | (6,395  
|                                            | Retained earnings                                                                                                                                                                                                                                                                                                                           |                            |         | 831,357        |         |               | 684,241 
|                                            | Accumulated other comprehensive income/(loss)                                                                                                                                                                                                                                                                                               |                            |         | 7,454          |         |               | (469    
|                                            | Treasury stock at cost; 16,167,868 Class A shares at October 1, 2004, 14,539,950 Class A shares at September 26, 2003 and 14,972,185 Class A shares at December 31, 2003                                                                                                                                                                    |                            |         | (535,817       | )       |               | (443,589
|                                            |                                                                                                                                                                                                                                                                                                                                             |                            |         |                |         |               |         
|                                            |                                                                                                                                                                                                                                                                                                                                             | Total stockholders' equity |         |                | 500,385 |               |         
|                                            |                                                                                                                                                                                                                                                                                                                                             |                            |         |                |         |               |         
|Total liabilities and stockholders' equity  |                                                                                                                                                                                                                                                                                                                                             | $                          | 729,137 |                | $       | 612,329       |         
|                                            |                                                                                                                                                                                                                                                                                                                                             |                            |         |                |         |               |         

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

1

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

|                                         |                            | For the Three Months Ended   |         | For the Nine Months Ended |        
|---------------------------------------- | -------------------------- | ---------------------------- | ------- | ------------------------- | -------
|
|Revenue                                  |                            | $                            | 493,933 |                           | $      
|Cost of goods sold                       |                            |                              | 250,161 |                           |        
|                                         |                            |                              |         |                           |        
|                                         | Gross profit               |                              |         | 243,772                   |        
|                                         |                            |                              |         |                           |        
|Operating expense                        |                            |                              |         |                           |        
|                                         | Selling                    |                              |         | 110,761                   |        
|                                         | General and administrative |                              |         | 26,994                    |        
|                                         |                            |                              |         |                           |        
|                                         |                            | Total operating expense      |         |                           | 137,755
|                                         |                            |                              |         |                           |        
|Operating income                         |                            |                              | 106,017 |                           |        
|                                         |                            |                              |         |                           |        
|Other expense/(income)                   |                            |                              |         |                           |        
|                                         | Interest expense           |                              |         | 147                       |        
|                                         | Other, net                 |                              |         | (548                      | )      
|                                         |                            |                              |         |                           |        
|                                         |                            | Total other expense/(income) |         |                           | (401   
|                                         |                            |                              |         |                           |        
|Income before provision for income taxes |                            |                              | 106,418 |                           |        
|Provision for income taxes               |                            |                              | 37,778  |                           |        
|                                         |                            |                              |         |                           |        
|Net income                               |                            | $                            | 68,640  |                           | $      
|                                         |                            |                              |         |                           |        
|Earnings per share                       |                            |                              |         |                           |        
|                                         | Basic                      |                              | $       | 1.96                      |        
|                                         |                            |                              |         |                           |        
|                                         | Diluted                    |                              | $       | 1.92                      |        
|                                         |                            |                              |         |                           |        
|Weighted-average shares outstanding      |                            |                              |         |                           |        
|                                         | Basic                      |                              |         | 34,962                    |        
|                                         |                            |                              |         |                           |        
|                                         | Diluted                    |                              |         | 35,712                    |        
|                                         |                            |                              |         |                           |        

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

2

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

|                                                        |                                                                               | For the Nine Months Ended                                    |                    
|------------------------------------------------------- | ----------------------------------------------------------------------------- | ------------------------------------------------------------ | -------------------
|
|Cash flows from operating activities:                   |                                                                               |                                                              |                    
|                                                        | Net income                                                                    |                                                              | $                  
|                                                        | Adjustments to reconcile net income to net cash used by operating activities: |                                                              |                    
|                                                        |                                                                               | Deferred income taxes                                        |                    
|                                                        |                                                                               | Amortization of deferred compensation                        |                    
|                                                        |                                                                               | Depreciation and other amortization                          |                    
|                                                        |                                                                               | Loss on disposal of property, plant and equipment            |                    
|                                                        |                                                                               | Tax benefit from stock option plans                          |                    
|                                                        |                                                                               | Increase/(decrease) in cash from changes in working capital: |                    
|                                                        |                                                                               |                                                              | 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 and equivalents |                                                                               |                                                              | (173               
|                                                        |                                                                               |                                                              |                    
|Net decrease in cash and equivalents                    |                                                                               |                                                              | (122,024           
|Cash and equivalents at beginning of period             |                                                                               |                                                              | 241,803            
|                                                        |                                                                               |                                                              |                    
|Cash and equivalents at end of period                   |                                                                               | $                                                            | 119,779            
|                                                        |                                                                               |                                                              |                    
|                                                        |                                                                              
|Supplemental disclosures of cash flow information:      |                                                                               |                                                              |                    
|                                                        | Interest paid                                                                 |                                                              | $                  
|                                                        | Income taxes paid                                                             |                                                              |                    
|                                                        |                                                                              

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3

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THE TIMBERLAND COMPANY        NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS        (Amounts in Thousands, Except Share and Per Share Data)

Note 1. Summary of Significant Accounting Policies

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain the adjustments necessary to present fairly The
Timberland Company's ("we", "our", "us", "Timberland" or the "Company") financial position, results of operations and changes in cash flows for the interim periods presented. Such adjustments consist
of normal recurring items. The unaudited condensed consolidated financial statements should be read in conjunction with our consolidated financial statements and notes thereto included in our Annual
Report on Form 10-K for the year ended December 31, 2003.

Our
revenue consists of sales to wholesale customers, retail store revenues, license fees and royalties. We record wholesale revenues when title passes and the risks and rewards of ownership have
passed to the customer, based on the terms of sale. Title passes generally upon shipment or upon receipt by the customer, depending on the country of sale and the agreement with the customer. Retail
store revenues are recorded at the time of the sale. License fees and royalties are recognized as earned per the terms of our licensing agreements.

In
accordance with Emerging Issues Task Force ("EITF") Issue No. 00-10, in the third quarter and the first nine months of 2004 we recorded approximately $1,520 and $3,704 of
reimbursement of shipping expenses within revenues and the related shipping costs within selling expense, respectively. In the third quarter of 2003 we recorded approximately $1,500 of reimbursement
of shipping expenses within revenues and the related shipping costs within selling expense. For the first six months of 2003, shipping reimbursements of $2,100 were recorded as an offset to selling
expenses. Shipping costs included in selling expense were approximately $4,800 and $4,700 for the third quarters
of 2004 and 2003, respectively, and $12,000 and $11,400 for the first nine months of 2004 and 2003, respectively.

We
maintain allowances for doubtful accounts for estimated losses resulting from the potential inability of our customers to make required payments. We estimate potential losses primarily based on our
historical rate of credit losses and our knowledge of the financial condition of our customers.

Note 2. Historical Financial Results

The results of operations for the three and nine months ended October 1, 2004 are not necessarily indicative of the results to be expected for the full
year. Historically, our revenue has been more heavily weighted to the second half of the year.

Note 3. Stock-based Compensation

We apply Accounting Principle Board ("APB") Opinion No. 25 and related interpretations in accounting for our stock plans. We follow Statement of Financial
Accounting Standards ("SFAS") No. 123 "Accounting for Stock-Based Compensation" and SFAS No. 148 "Accounting for Stock-Based CompensationTransitional and
DisclosureAn Amendment of FASB Statement No. 123" for disclosure purposes.

In
our consolidated financial statements, no compensation cost has been recognized for stock option grants issued under any of our stock option plans, however, the Company has recognized compensation
cost for restricted stock awards. Had compensation cost for stock option grants issued been determined

4

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under
the fair value method of SFAS No. 123, our net income and diluted earnings per share for the three and nine months ended October 1, 2004 and September 26, 2003 would have
been:

|                                                                                                                                           |  | For the Three
Months Ended |        | For the Nine
Months Ended
|------------------------------------------------------------------------------------------------------------------------------------------ |  | -------------------------- | ------ | -------------------------
|
|Net income as reported                                                                                                                     |  | $                          | 68,640 |                          
|Add: Stock-based employee compensation expense included in reported net income, net of related tax effect                                  |  |                            | 557    |                          
|Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effect |  |                            | 2,543  |                          
|                                                                                                                                           |  |                            |        |                          
|Pro forma net income                                                                                                                       |  | $                          | 66,654 |                          
|                                                                                                                                           |  |                            |        |                          
|Basic earnings per share, as reported                                                                                                      |  |                            | 1.96   |                          
|Pro forma basic earnings per share                                                                                                         |  |                            | 1.91   |                          
|Diluted earnings per share, as reported                                                                                                    |  |                            | 1.92   |                          
|Pro forma diluted earnings per share                                                                                                       |  |                            | 1.87   |                          

The
fair value of each stock option granted for the three months ended October 1, 2004 and September 26, 2003 under our plans was estimated on the date of grant using the Black-Scholes
option pricing model. The following weighted-average assumptions were used to value grants issued under the plans: expected volatility of 34.0% and 38.1%; risk-free interest rates of 2.8%
and 1.7%; expected lives of 5.3 and 4.4 years; and no dividend payments. The weighted-average fair values per share of stock options granted, exercise price equals market value, for the three
months ending October 1, 2004 and September 26, 2003 were $20.22 and $15.24, respectively.

The
following weighted-average assumptions were used to value grants issued under our plans for the nine months ended October 1, 2004 and September 26, 2003, respectively: expected
volatility of 36.4% and 41.1%; risk-free interest rates of 1.8% and 1.7%; expected lives of 4.7 and 5.0 years; and no dividend payments. The weighted-average fair values per share
of stock options granted, exercise price equals market value, for the nine months ending October 1, 2004 and September 26, 2003 were $20.66 and $15.42, respectively.

Note 4. Earnings Per Share

Basic earnings per share ("EPS") excludes dilution and is computed by dividing net income by the weighted-average number of common shares outstanding for the
periods presented. Diluted EPS reflects the potential dilution that would occur if securities such as stock options were exercised. Dilutive securities included in the calculation of diluted
weighted-average shares were 749,810 and 811,080 for the three months ended October 1, 2004 and September 26, 2003, respectively, and 882,745 and 827,807 for the first nine months of
2004 and 2003, respectively. Anti-dilutive securities excluded from the calculation of diluted weighted-average shares were 609,410 and 572,806 for the third quarters

5

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of
2004 and 2003, respectively, and 455,014 and 562,643 for the first nine months of 2004 and 2003, respectively.

Note 5. Goodwill and Other Intangible Assets

Our annual impairment tests, conducted as of July 1, 2004, have determined that no impairment of goodwill has occurred.

Information
regarding our other intangible assets and related expenses follows:

|As of October 1, 2004 |       | As of September 26, 2003 |   | As of December 31, 2003
|--------------------- | ----- | ------------------------ | - | -----------------------
|
|$                     | 8,595 |                          | $ | (4,604                 

Amortization
expense for the third quarters of 2004 and 2003 was $378 and $344, respectively, and $1,068 and $988 for the first nine months of 2004 and 2003, respectively. The estimated amortization
for existing intangible assets as of October 1, 2004, for each of the five succeeding fiscal years is as follows: 2004: $1,464; 2005: $1,334; 2006: $1,033; 2007: $704; 2008: $399. The
amortization period for other tangible assets and related expenses is five years.

Note 6. Derivatives

All derivatives entered into by the Company are designated as either cash flow or fair value hedges. Cash flow hedges are derivative contracts hedging forecasted
transactions. Fair value hedges are derivatives hedging existing foreign currency assets or liabilities. The change in value of cash flow hedges is recorded in other comprehensive income until the
hedged transaction affects earnings at which point the other comprehensive income is reclassified to earnings. The change in value of fair value hedges is recorded in earnings and is largely offset by
the change in the fair value of the underlying asset or liability. We are required to measure the effectiveness of our cash flow hedges. If it is determined that a cash flow hedge is not effective,
the ineffective portion of a derivative's change in fair value will be immediately recognized in earnings.

In
the normal course of business, the financial position and results of operations of the Company are routinely subject to currency rate movements in non-U.S. Dollar denominated assets,
liabilities and income as we purchase and sell goods in local currencies. We have established policies and business practices that should result in an appropriate level of protection against the
adverse effect of these exposures. We use derivative instruments, specifically forward contracts, to hedge a portion of our forecasted foreign currency transactions, typically for a period not greater
than 18 months. Those derivative instruments are viewed as risk management tools and are not used for trading or speculative purposes. As of October 1, 2004, we had forward contracts
maturing at various dates through January 2006 to sell the equivalent of $231,862 in foreign currencies at contracted rates and to buy the equivalent of $1,071 in foreign currencies at
contracted rates. As of September 26, 2003, we had forward contracts maturing at various dates through January 2005 to sell the equivalent of $236,715 in foreign currencies at contracted
rates and to buy the equivalent of $6,983 in foreign currencies at contracted rates.

6

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On
October 1, 2004, September 26, 2003 and December 31, 2003, we had $4,264, $6,334 and $16,058 in derivative liabilities, respectively. Those amounts reflect the fair value of
our cash flow hedges. The $4,264 derivative liability as of October 1, 2004 represents hedges in place through the fourth quarter of 2005.

Note 7. Comprehensive Income

Comprehensive income for the three and nine months ended October 1, 2004 and September 26, 2003 follows:

|                                                                       |  | For the Three
Months Ended |        | For the Nine
Months Ended
|---------------------------------------------------------------------- |  | -------------------------- | ------ | -------------------------
|
|Net income                                                             |  | $                          | 68,640 |                          
|Change in cumulative translation adjustment                            |  |                            | (99    | )                        
|Change in fair value of derivative financial instruments, net of taxes |  |                            | 3,019  |                          
|                                                                       |  |                            |        |                          
|Comprehensive income                                                   |  | $                          | 71,560 |                          
|                                                                       |  |                            |        |                          

For
the three months ended October 1, 2004 and September 26, 2003, the after tax hedging losses reclassified to earnings were $2,995 and $5,498, respectively, and for the nine months
ended October 1,
2004 and September 26, 2003, the after tax hedging losses reclassified to earnings were $6,262 and $12,577, respectively. The decrease in 2004 hedging losses compared to 2003 resulted from
exchange rate fluctuation.

Note 8. Business Segments and Geographic Information

We manage our business in three reportable segments, each sharing similar product, distribution, marketing and economic conditions. The reportable segments are
U.S. Wholesale, U.S. Consumer Direct and International. The U.S. Wholesale segment is comprised of the sale of products to wholesale customers in the United States. This segment also includes
royalties from licensed products sold in the United States and the management costs and expenses associated with our worldwide licensing efforts. The U.S. Consumer Direct segment includes the
Company-operated specialty and factory outlet stores in the United States and our e-commerce business. The International segment consists of the marketing, selling and distribution of
footwear, apparel and accessories and licensed products outside of the United States. Products are sold outside of the United States through our subsidiaries (which use wholesale and retail channels
to sell footwear and apparel and accessories), independent distributors and licensees.

The
Unallocated Corporate component of segment reporting consists primarily of the corporate finance, legal, information services and administrative expenses, United States distribution expenses, a
majority of United States marketing expenses and other costs incurred in support of company-wide activities. This segment now includes costs related to worldwide product development, which
were previously included in U.S. Wholesale. In the table below, Unallocated Corporate expenses for the

7

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three
months and nine months of 2003 increased by $4,006 and $11,733, respectively, to reflect this reclassification. For the three months and nine months of 2004 worldwide product development costs
were $5,385 and $16,341, respectively. Unallocated Corporate also includes other expense/(income), which is primarily interest expense, interest income and other miscellaneous expense/(income). Such
expenses are not allocated among the reported business segments.

The
accounting policies of the segments are the same as those described in the summary of significant accounting policies. We evaluate segment performance based on operating contribution, which
represents pre-tax income before unallocated corporate expenses, interest and other expenses, net; and on operating cash flow measurements. Total assets are disaggregated to the extent
that assets apply specifically to a single segment. Unallocated Corporate assets primarily consist of cash and equivalents, manufacturing/sourcing assets, computers and related equipment, and United
States transportation and distribution equipment.

For the Three Months Ended October 1, 2004 and September 26, 2003

|     |                                   | U.S.
Wholesale |   | U.S.
Consumer
Direct |  | International |        | Unallocated
Corporate |   | Consolidated
|---- | --------------------------------- | -------------- | - | -------------------- |  | ------------- | ------ | --------------------- | - | ------------
|2004 |                                   |                |   |                      |  |               |        |                       |   |             
|     | Revenue                           |                | $ | 234,287              |  | $             | 50,456 |                       | $ | 209,190     
|     | Operating income/(loss)           |                |   | 86,306               |  |               | 6,728  |                       |   | 60,547      
|     | Income/(loss) before income taxes |                |   | 86,306               |  |               | 6,728  |                       |   | 60,547      
|     | Total assets                      |                |   | 242,190              |  |               | 34,128 |                       |   | 292,141     
|     | Goodwill                          |                |   | 6,804                |  |               | 794    |                       |   | 6,565       
|2003 |                                   |                |   |                      |  |               |        |                       |   |             
|     | Revenue                           |                | $ | 221,011              |  | $             | 47,588 |                       | $ | 175,361     
|     | Operating income/(loss)           |                |   | 79,372               |  |               | 4,985  |                       |   | 40,373      
|     | Income/(loss) before income taxes |                |   | 79,372               |  |               | 4,985  |                       |   | 40,373      
|     | Total assets                      |                |   | 234,322              |  |               | 32,782 |                       |   | 257,388     
|     | Goodwill                          |                |   | 6,804                |  |               | 794    |                       |   | 6,565       

8

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For the Nine Months Ended October 1, 2004 and September 26, 2003

|     |                                   | U.S.
Wholesale |   | U.S.
Consumer
Direct |  | International |         | Unallocated
Corporate |   | Consolidated
|---- | --------------------------------- | -------------- | - | -------------------- |  | ------------- | ------- | --------------------- | - | ------------
|2004 |                                   |                |   |                      |  |               |         |                       |   |             
|     | Revenue                           |                | $ | 450,067              |  | $             | 122,823 |                       | $ | 473,030     
|     | Operating income/(loss)           |                |   | 156,240              |  |               | 12,679  |                       |   | 108,417     
|     | Income/(loss) before income taxes |                |   | 156,240              |  |               | 12,679  |                       |   | 108,417     
|2003 |                                   |                |   |                      |  |               |         |                       |   |             
|     | Revenue                           |                | $ | 421,319              |  | $             | 113,289 |                       | $ | 392,082     
|     | Operating income/(loss)           |                |   | 141,652              |  |               | 7,808   |                       |   | 66,477      
|     | Income/(loss) before income taxes |                |   | 141,652              |  |               | 7,808   |                       |   | 66,477      

Note 9. Inventory

Inventory consists of the following:

| |                 | October 1,
2004 |   | September 26,
2003 |  | December 31,
2003
| | --------------- | --------------- | - | ------------------ |  | -----------------
| | Materials       |                 | $ | 4,093              |  | $                
| | Work-in-process |                 |   | 1,875              |  |                  
| | Finished goods  |                 |   | 177,011            |  |                  
| |                 |                 |   |                    |  |                  
| | Total           |                 | $ | 182,979            |  | $                
| |                 |                 |   |                    |  |                  

Note 10. Restricted Stock Awards and Other

In 2003, our Board of Directors approved up to 97,500 shares of Class A Common Stock for performance based programs. On March 3, 2004, we issued
93,138 restricted shares of Class A Common Stock under the Company's 1997 Incentive Plan, as amended. The award of these restricted share grants was based on the achievement of specified
performance targets for the period from July 1, 2003 through December 31, 2003. These shares are subject to restrictions on sale and transferability, a risk of forfeiture and certain
other terms and conditions. These restrictions lapse equally three and four years
after the award date. We account for these restricted share grants under the provisions of APB No. 25 and record deferred compensation on our balance sheet for the unvested portion of the
grant.

In
2004, our Board of Directors approved future awards of restricted share grants of Class A Common Stock under the Company's 1997 Incentive Plan, as amended. The award of these restricted
share grants is based on achieving certain performance targets for the period January 1, 2004 through December 31, 2006. Should the minimum performance targets be achieved or exceeded,
targeted grants of up to 310,093, 199,575 and 190,199 shares will be made in 2005, 2006 and 2007, respectively. The number of shares granted will be affected by the market value per share at the time
of award. These restricted share grants are also accounted for under the provisions of APB No. 25. Accordingly, as of October 1, 2004, we have recorded deferred compensation on our
balance sheet based upon the Company's evaluation of the probability of achieving 2004 performance targets.

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As
of October 1, 2004, we have an outstanding loan receivable of $524 from an officer of the Company, due for payment in the fourth quarter of 2004. The loan is also described in Footnote 16 of
our Annual Report on Form 10-K for the year ended December 31, 2003.

Note 11. Income Taxes

The effective tax rate for the three and nine months ended October 1, 2004 was 35.5%. The effective tax rate for the three and nine months ended
September 26, 2003 was 35.7% and 35.5%, respectively

Note 12. Share Repurchase

On May 16, 2002, our Board of Directors approved an additional repurchase of up to 4,000,000 shares of our Class A Common Stock. This program was
completed during the third quarter of 2004. On September 23, 2003, our Board of Directors approved an additional repurchase of up to 4,000,000 shares of our Class A Common Stock. We have
repurchased 684,506 shares under this authorization. We may use repurchased shares to offset future issuances under the Company's stock-based employee incentive plans or for other purposes. From time
to time, we use Rule 10b5-1 plans to facilitate share repurchases. Shares repurchased totaled 978,231 during the quarter ended October 1, 2004.

Note 13. Litigation

We are involved in various litigation and legal matters that have arisen in the ordinary course of business. Management believes that the ultimate resolution of
any existing matter will not have a material adverse effect on our consolidated financial statements.

Note 14. Revolving Credit Agreement

On April 30, 2004, we entered into an amended and restated unsecured committed revolving credit agreement with a group of banks, which matures on
April 30, 2007 ("Agreement"), unless prior to April 30, 2006, we elect to extend the final maturity date to April 30, 2008. The new Agreement provides for $200,000 of committed
borrowings, of which up to $125,000 may be used for letters of credit. Under certain circumstances, we may increase the committed borrowing limit by $50,000 for a total commitment of $250,000. Under
the terms of the Agreement, we may borrow at interest rates based on eurodollar rates (approximately 1.75% at October 1, 2004), plus an applicable margin based on a fixed-charge coverage grid
of between 50 and 100 basis points that is adjusted quarterly. At October 1, 2004, the applicable margin under the facility was 60 basis points. We will pay a commitment fee of 12.5 to 25 basis
points per annum on the total commitment, based on a fixed-charge coverage grid that is adjusted quarterly. At October 1, 2004, the commitment fee was 15 basis points. The Agreement places
certain limitations on additional debt, stock repurchases, acquisitions, amount of dividends we may pay, and certain other financial and non-financial covenants. The primary financial
covenants relate to maintaining a minimum fixed charge coverage of 3:1, a leverage ratio of 1.5:1 and under certain conditions, a minimum level of earnings before income tax, depreciation and
amortization. We measure compliance with the financial and non-financial covenants and ratios as required by the terms of the Agreement on a fiscal quarter basis.

10

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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND  RESULTS OF OPERATIONS

The following discusses The Timberland Company's ("we", "our", "us", "Timberland" or the "Company") results of operations and liquidity and capital resources. The
discussion, including known trends and uncertainties identified by management, should be read in conjunction with the unaudited 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. We provide constant dollar revenue growth for total Company and International results because we use the
measure to understand revenue growth excluding any impact from foreign exchange rate changes.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance
with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues, expenses and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to
sales returns and allowances, realization of outstanding accounts receivable, the carrying value of inventories, derivatives, other contingencies, impairment of assets and the provision for income
taxes. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Historically, actual results have not been materially different from our estimates.
Because of the uncertainty inherent in these matters, actual results could differ from the estimates used in applying our 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. Our significant accounting policies are described in Note 1 to the Company's
consolidated financial statements of our Annual Report on Form 10-K for the year ended December 31, 2003. Our estimates, assumptions and judgments involved in applying the
critical accounting policies are described in the Management's Discussion and Analysis of Financial Condition and Results of Operations section of our Annual Report on Form 10-K for
the year ended December 31, 2003.

Overview

Our strategy centers on expanding the penetration of the Timberland® brand among the growing number of consumers who choose to pursue an outdoor-inspired lifestyle.
To achieve this objective, we offer an integrated product selection of footwear, apparel and accessories that reinforces the functional performance benefits and classic styling that consumers have
come to expect from the Timberland brand. We sell these products through high quality distribution channels, including our own retail stores.

To
deliver against our long-term goals, we are focused on driving progress on key strategic fronts. These include enhancing our leadership position in footwear, capturing growth
opportunities in outdoor-inspired apparel, extending brand reach through development of the Timberland PRO® series and brand building licensing arrangements, expanding geographically and
driving operational and financial excellence while setting the standard for commitment to the community.

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Highlights
of our third quarter of 2004 financial performance, compared to the third quarter of 2003, include the following:



RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED OCTOBER 1, 2004 AND SEPTEMBER 26, 2003

Revenue

Consolidated revenue growth of 11.3% in the third quarter of 2004 reflected gains in both our U.S. and International businesses and benefits from foreign currency exchange rate
changes. Revenue from the U.S. business totaled $284.7 million in the third quarter of 2004, up 6.0% over the prior-year period. International revenues were $209.2 million,
19.3% ahead of the third quarter of 2003, or 10.6% in constant dollars. Overall, changes in currency exchange rates were responsible for 3.4% of consolidated revenue growth.



We have three reportable business segments (see Note 8): U.S. Wholesale, U.S. Consumer Direct and International.

Revenues
for our U.S. Wholesale business increased 6.0% to $234.3 million, driven by double-digit gains in women's casual, kids' and Timberland PRO® series footwear products offset
by a modest decline in boots. U.S. Wholesale business growth reflected sales gains in athletic and other national accounts, department store and discount channels.

U.S.
Consumer Direct revenues for the third quarter expanded $2.9 million, or 6.0%, to $50.5 million, reflecting a 1.3% comparable stores sales increase and the benefits from the
addition of five Timberland® outlet stores over the past year. Sales gains were driven by growth in boots, apparel, accessories and casual footwear.

International
revenues for the third quarter of 2004 increased 19.3% to $209.2 million, benefiting from strong growth in our men's casual, boots, kids' and women's casual footwear categories
and foreign exchange rate gains. These gains offset moderate constant dollar declines in apparel sales. Overall, International revenues increased to 42.4% of total consolidated revenues.

European
revenues were $172.8 million, up 19.0% compared to the prior-year period, with an increase of 9.4% on a constant dollar basis. Revenues were driven by growth in Northern
Europe, reflecting strong gains in developed markets such as the UK and double-digit growth in key expansion markets such as Germany and Scandinavia. European footwear sales gains were driven by
double-digit growth in boots, men's casual, kids' and women's casual products. While European apparel sales were down as expected, we continue to make progress in addressing recent performance in our
apparel business,

12

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leveraging
an enhanced focus on our loyalist consumer and capabilities from our international design center.

In
Asia, third quarter 2004 revenues grew 14.6%, or 10.4% in constant dollars, to $29.6 million, reflecting strong gains in key Southeast Asia markets such as Hong Kong and Taiwan and solid
growth in Japan. Sales growth continues to benefit from successful efforts to upgrade our retail and wholesale distribution. In the third quarter, we opened one specialty store and one shop in Japan,
one specialty store in Singapore and completed store refurbishments in several key locations across Asia. Sales growth was strong, with balanced growth in both footwear and apparel. Footwear growth
reflected gains in men's casual, kids' and women's casual, offset by a decline in boots.



Worldwide footwear revenue was $388.2 million in the third quarter of 2004, up $46.3 million or 13.6% from the prior-year period. Footwear revenues,
excluding the benefit of foreign exchange, increased 10.3%. Growth was driven by global gains in kids', men's casual, women's casual, boots and Timberland PRO® series footwear. Worldwide
footwear unit sales were up 15.4%, while the average price decreased by 1.6%, reflecting the impact of product and channel mix, offset by foreign exchange rate benefits.

Worldwide
apparel and accessories revenue for the 2004 third quarter grew by 3.1% to $101.4 million. Excluding the benefit of foreign exchange, apparel and accessories revenue decreased by
1.0%. Apparel and accessories unit sales remained flat while average selling prices increased 3.0%, reflecting favorable foreign currency impacts.



Revenue growth in the third quarter of 2004 reflected strong global gains across both our wholesale and consumer direct channels. Global wholesale revenues grew 11.7% to
$407.5 million while global consumer direct revenues increased 9.2% to $86.4 million. Worldwide, we opened four stores, shops and outlets and closed two in the third quarter of 2004.

Gross Profit

Gross profit as a percentage of sales, or gross margin, was 49.4% for the third quarter of 2004, 370 basis points higher than third quarter 2003 gross margin. Continued growth
in International sales allowed us to benefit from foreign exchange rate changes over the past year, which accounted for approximately 170 of the 370 basis point improvement. The balance of the gain
reflected continued benefits from enhanced supply chain execution, supporting lower product-related costs and additional full price sales through enhanced product availability, and from favorable
business mix.

We
include 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 $26.5 million and
$28.7 million for the third quarters of 2004 and 2003, respectively.

Operating Expense

Operating expense for the third quarter of 2004 was $137.8 million, 15.5% higher than the $119.3 million in the 2003 third quarter. As a percent of revenue,
operating expense increased 100 basis points to 27.9%. The operating expense rate increase was driven by a $12.6 million increase in selling expenses and a $5.9 million increase in
general and administrative expenses, which included $4.6 million, or 3.8%, in operating expense growth related to foreign exchange rate changes.

Selling
expense for the third quarter of 2004 was $110.8 million, $12.6 million, or 12.8%, higher than in the third quarter of 2003. The increase was driven by approximately
$8.3 million of incremental sales

13

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and
marketing expenditures, $1.8 million in distribution costs and $1.1 million of costs related to international retail expansion, offset by a decrease of $1.3 million in
incentive compensation programs and $0.5 million in product development costs. Foreign exchange rate changes added $3.6 million, or 3.6% to overall selling expense growth. The balance of
the increase was comprised of other costs related to Company-wide operations.

We
include the costs of physically managing inventory (warehousing and handling costs) in selling expense. These costs totaled $9.6 million and $8.6 million in the third quarters of 2004
and 2003, respectively.

Advertising
expense, which is also included in selling expense, was $11.3 million and $8.3 million in the third quarters 2004 and 2003, respectively. Advertising costs are expensed at
the time the advertising is used, predominantly in the season that the advertising costs are paid. Prepaid advertising recorded on our consolidated balance sheets on October 1, 2004 and
September 26, 2003 was $2.2 million and $2.1 million, respectively.

General
and administrative expense for the third quarter of 2004 was $27.0 million, $5.9 million, or 28.1%, higher than the prior-year period. As a percentage of revenue,
general and administrative expense increased by 80 basis points, compared with the prior-year. The increase was driven by approximately $3.0 million in corporate support principally
for strategic initiatives and Sarbanes-Oxley compliance efforts and $0.5 million in costs associated with our incentive compensation programs. Foreign exchange rate changes also added
$1.0 million, or 4.9%, to overall general and administrative expense growth.

Operating Income

Operating income for the third quarter of 2004 was $106.0 million, $22.5 million, or 26.9% higher than third quarter 2003. Operating income as a percentage of
revenue expanded 270 basis points to 21.5%.

Operating
income for our U.S. Wholesale segment was $86.3 million, $6.9 million, or 8.7% higher than the prior-year period. Revenue growth of 6.0% was complemented by a 120
basis point improvement in gross margin, offset by a 30 basis point increase in operating expense as a percentage of sales reflecting increased support behind brand building efforts. The gross margin
improvement was
driven by lower product costs resulting from enhanced supply chain execution and relatively lower markdown rates.

Our
U.S. Consumer Direct segment's operating income for the 2004 third quarter increased to $6.7 million, driven by 6.0% revenue growth and a 250 basis point expansion in gross margin,
reflecting improvement in our footwear, apparel and accessories businesses.

Operating
income for our International segment grew by 50.0% to $60.5 million for the quarter. Revenue growth of 19.3% and a 580 basis point gross margin improvement drove much of the increase.
Both benefited from favorable foreign exchange rate changes. The expansion in gross margin also reflected lower product costs resulting from enhanced supply chain execution, favorable product mix
reflecting strong footwear sales and lower markdown. Operating expense rates for our International segment remained relatively flat as strong revenue growth offset increased investment in retail,
marketing and international product development capability.

Our
Unallocated Corporate expenses, which include central support and administrative costs, not allocated to our business segments, increased to $47.6 million, or 9.6% of total revenue, a 30
basis point increase. Increased support of key brand building initiatives, including the launch of our new Make it Better campaign was partially offset by the efficient execution of our
supply chain operations, which produced favorable variances against our standard costs.

14

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Interest, Other, net and Taxes

Interest expense, which is comprised of fees related to the establishment and maintenance of our revolving credit facility plus interest paid on short-term
borrowings and interest on short-term debt, was $0.1 million and $0.3 million for the third quarters of 2004 and 2003, respectively. The reduction in interest expense from
prior period reflects a reduction in borrowing in the third quarter of 2004 and lower fees on our new credit facility.

Other,
net includes interest income of $0.3 million and $0.2 million in the third quarters of 2004 and 2003, respectively. Interest income in 2004 reflects higher average investments and
higher interest rates than in 2003.

The
effective income tax rate was 35.5% in the third quarter of 2004, compared to 35.7% in the third quarter 2003.

RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED OCTOBER 1, 2004 AND SEPTEMBER 26, 2003

Revenue

Consolidated revenue growth of 12.9% in the first nine months of 2004 reflected strong constant dollar growth in our U.S. and International businesses and benefits from foreign
currency exchange rate changes. Revenue from the U.S. business totaled $572.9 million in the first nine months of 2004, up 7.2% over the prior-year. International revenues were
$473.0 million, 20.6% ahead of the first nine months of 2003, or 10.5% in constant dollars. Overall, changes in currency exchange rates were responsible for 4.3% of consolidated revenue growth.



Revenues for our U.S. Wholesale business increased 6.8% to $450.1 million. Growth in our women's casual, kids', outdoor performance and men's casual footwear and apparel
categories was partially offset by a moderate decline in boots. U.S. Wholesale business growth reflected gains in athletic and other national accounts, independent, department store and discount
channels.

U.S.
Consumer Direct revenues for the first nine months of 2004 expanded 8.4%, to $122.8 million, supported by a 1.9% increase in comparable store sales and the addition of five factory outlet
stores over the last year. Sales gains were driven by increases in apparel and accessories, boots, men's and women's casual and outdoor performance footwear, which offset declines in kids' footwear.

International
revenues for the first nine months of 2004 increased 20.6%, or 10.5% in constant dollars, to $473.0 million, driven by strong sales gains in Europe and Asia and continued progress
in building our business in other key markets such as Canada. Overall, International revenues increased to 45.2% of total consolidated revenues.

European
revenues grew 19.0%, or 7.9% on a constant dollar basis, to $376.3 million, reflecting solid gains across wholesale and retail channels. Sales growth was driven by strong gains in the
U.K., Germany and our European distributor business, and growth in other key markets, including Benelux, Scandinavia and France. European revenue growth reflected strong footwear performance, driven
by gains in boots, men's casual, kids' and women's casual. Footwear revenue growth offset constant dollar declines in European apparel and accessories revenue. We are taking several steps to
strengthen our European apparel business, including enhancing our focus on our heritage consumer in product development and increasing our capability to tailor apparel offerings to the European market
through the international design center that we opened in London in June 2003.

In
Asia, for the first nine months of 2004 revenues grew 23.4%, or 17.5% in constant dollars, to $81.4 million, driven by growth in Hong Kong, Japan, Taiwan, our distributor business and
Malaysia.

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This
growth reflects continued benefits from our successful efforts to upgrade Timberland's retail and wholesale distribution throughout the region. Sales growth was driven by strong gains in both
footwear and apparel. Footwear growth reflected gains in men's casual, women's casual and kids' categories, which offset declines in boots.



Worldwide footwear revenue was $800.9 million in the first nine months of 2004, up $102.9 million or 14.7% from the prior-year period. Footwear
revenues, excluding the benefit of foreign exchange, increased 10.8%. Growth was driven by global gains in kids', men's casual, women's casual, boots, outdoor performance and in Timberland
PRO® series footwear categories. Worldwide footwear unit sales were up 17.9% while the average price decreased by 2.7% reflecting the impact of product mix, offset by foreign exchange rate
benefits.

Worldwide
apparel and accessories revenue for the 2004 first nine months grew by 7.6% to $235.4 million. Excluding the benefit of foreign exchange, apparel and accessories revenue grew by 1.5%
supported by a 1.6% increase in apparel sales and gains in accessories revenue. Apparel and accessories unit sales expanded 3.6% while average selling prices increased 3.9%, due primarily to favorable
foreign currency impact and product mix changes.



Revenue growth in the first nine months of 2004 reflected strong global gains across both our wholesale and consumer direct channels. Global wholesale revenues grew 12.7% to
$816.3 million while global consumer direct revenues increased 13.3% to $229.7 million. Worldwide, we opened 14 stores, shops and outlets and closed 14 in the first nine months of 2004
and transferred seven South Korean shops to our new distributor for that country, Kolon Fashion and Culture.

Gross Profit

Gross profit as a percentage of sales, or gross margin, was 50.2% for the first nine months of 2004, 400 basis points higher than first nine months 2003 gross margin. Gross
margin benefited from continued growth in our International business. The growth in International sales allowed us to benefit from significant foreign exchange rate changes over the past year, which
accounted for approximately 210 of the 400 basis point improvement. The balance of the gain came from continued strong supply chain execution, which helped to drive lower product related costs and
from favorable product mix, driven by strong footwear sales.

We
include 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 $68.9 million and
$64.5 million for the first nine months of 2004 and 2003, respectively.

Operating Expense

Operating expense for the first nine months of 2004 was $358.9 million, 17.4% higher than the $305.7 million in the first nine months of 2003. As a percent of
revenue, operating expense increased 130 basis points to 34.3%. The operating expense rate increase was driven by a $41.2 million increase in selling expenses and a $12.0 million
increase in general and administrative expenses, which included $13.1 million, or 4.3%, in operating expense growth related to foreign exchange rate changes.

Selling
expense for the first nine months of 2004 was $287.4 million, $41.2 million or 16.7%, higher than the first nine months of 2003. Within this category of expense, approximately
$16.7 million of the increase related to incremental sales and marketing expenditures, $4.6 million to international retail expansion, $3.6 million to higher distribution costs,
primarily freight on increased year-over-year

16

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shipments,
$1.3 million to increased incentive compensation costs and $0.6 million to investments in enhanced product development capability. Foreign exchange rate changes added
$11.0 million, or 4.5% to overall selling expense growth. The balance of the increase was comprised of other costs related to Company-wide operations.

We
include the costs of physically managing inventory (warehousing and handling costs) in selling expense. These costs totaled $25.4 million and $23.5 million in the first nine months of
2004 and 2003, respectively.

Advertising
expense, which is also included in selling expense, was $25.0 million and $18.7 million in the first nine months 2004 and 2003, respectively. Advertising costs are expensed
at the time the advertising is used, predominantly in the season that the advertising costs are paid.

General
and administrative expense for the first nine months of 2004 was $71.4 million, $12.0 million, or 20.1%, higher than the prior-year period. As a percentage of
revenue, general and administrative expense increased by 40 basis points compared with the prior period. The dollar increase was driven by approximately $4.2 million in corporate support
principally for strategic initiatives and Sarbanes-Oxley compliance efforts and $2.5 million in costs associated with the Company's incentive compensation programs. Foreign exchange rate
changes also added $2.1 million, or 3.6%, to overall general and administrative expense growth.

Operating Income

Operating income for the first nine months of 2004 was $165.9 million, $43.7 million, or 35.8% higher than the first nine months of 2003. Operating income as a
percentage of revenue expanded 270 basis points to 15.9%.

Operating
income for our U.S. Wholesale segment was $156.2 million, $14.6 million, or 10.3% higher than the prior-year period. Revenue growth of 6.8% was complemented by a
180 basis point improvement in gross margin, partially offset by a 70 basis point increase in operating expense as
a percentage of sales. The margin improvement was driven by lower product costs resulting from enhanced supply chain execution and relatively lower markdown rates.

Our
U.S. Consumer Direct segment's operating income for the first nine months of 2004 increased by 62.4% to $12.7 million, driven by 8.4% revenue growth, a 250 basis point expansion in gross
margin and cost efficiencies that resulted in a 90 basis point decrease in U.S. Consumer Direct's operating expense rate.

Operating
income for our International segment grew by 63.1% to $108.4 million for the first nine months of 2004. Revenue growth of 20.6% and a 570 basis point gross margin improvement drove
much of the increase. Both benefited from favorable foreign exchange rate changes. The expansion in gross margin also reflected lower product costs resulting from enhanced supply chain execution.
Operating expense rates for our International segment decreased by 30 basis points as strong revenue growth offset increased investment in retail, international product development capability and
marketing.

Our
Unallocated Corporate expenses, which include central support and administrative costs not allocated to our business segments, increased to $111.5 million or 10.7% of total revenue, a 50
basis point increase. Increased incentive compensation accruals, increased support of key brand building initiatives, including the launch of our new Make it Better marketing campaign and
investments in enhanced product development capability were partially offset by the efficient execution of our supply chain operations, which produced favorable variances against our standard costs.

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Interest, Other, net and Taxes

Interest expense, which is comprised of fees related to the establishment and maintenance of our revolving credit facility plus interest paid on short-term
borrowings and interest on short-term debt, was $0.5 million and $0.8 for the first nine months of 2004 and 2003, respectively. The reduction in interest expense reflects lower
costs on our new credit facility and a reduction in short term borrowings.

Other,
net includes interest income of $1.2 million and $0.8 million in the first nine months of 2004 and 2003, respectively. Interest income in 2004 reflects lower interest rates, but
higher average investments than in 2003.

The
effective income tax rate for the first nine months ended October 1, 2004 and September 26, 2003 was 35.5%.

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

Total Company Revenue Reconciliation:

|                                              |  | For the Three Months
Ended October 1, 2004 |      | For the Nine Months
Ended October 1, 2004
|--------------------------------------------- |  | ------------------------------------------ | ---- | -----------------------------------------
|
|Revenue increase (GAAP)                       |  | $                                          | 50.0 |                                          
|Increase due to foreign exchange rate changes |  |                                            | 15.3 |                                          
|Revenue increase in constant dollars          |  |                                            | 34.7 |                                          

International Revenue Reconciliation:

|                                              |  | For the Three Months
Ended October 1, 2004 |      | For the Nine Months
Ended October 1, 2004
|--------------------------------------------- |  | ------------------------------------------ | ---- | -----------------------------------------
|
|Revenue increase (GAAP)                       |  | $                                          | 33.8 |                                          
|Increase due to foreign exchange rate changes |  |                                            | 15.3 |                                          
|Revenue increase in constant dollars          |  |                                            | 18.5 |                                          

Management
provides constant dollar revenue growth for total Company and International results because we use the measure to understand revenue growth excluding any impact from foreign exchange rate
changes.

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LIQUIDITY AND CAPITAL RESOURCES

Accounts Receivable and Inventory

Accounts receivable increased 5.7% to $279.2 million at October 1, 2004, compared with $264.0 million reported at September 26, 2003. The increase
in receivables in the third quarter of 2004 compared to the third quarter of 2003 was slightly below our rate of sales growth. Days sales outstanding improved three days from 54 to 51 days for
the periods ended September 26, 2003 and October 1, 2004, respectively. Wholesale days outstanding improved four days from 59 to 55 days for the third quarters ended
September 26, 2003 and October 1, 2004, respectively.

Inventory
increased 4.3% to $183.0 million at October 1, 2004 from $175.5 million at September 26, 2003. The twelve month rolling annual inventory turns were 4.7 times
through the third quarter of 2004, compared with 4.5 times through the third quarter of 2003, reflecting continued improvement in our inventory control efforts.

Cash From Operations

Net cash used by operations for the first nine months of 2004 was $48.9 million, compared with $28.4 million for the first nine months of 2003. The use of cash in
the first nine months of 2004, compared with 2003 was primarily due to an increase in incentive based compensation payments and increases in accounts receivable and inventory resulting from higher
revenues, offset by higher net income.

Net
cash used for investing activities amounted to $17.1 million in the first nine months of 2004, compared with $9.8 million in the first nine months of 2003. Capital expenditures in
2004 were $15.6 million versus $10.6 million in 2003, which was primarily due to our new European headquarters
facility and global retail store expansion. Depreciation expense for the nine months of 2004 and 2003 was $15.3 million and $14.9 million, respectively.

Net
cash used for financing activities was $55.8 million in the first nine months of 2004, compared with $69.5 million in the first nine months of 2003. Cash flows from financing
activities reflected share repurchases of $75.0 million in the first nine months of 2004, compared with $84.2 million in the first nine months of 2003. We received cash inflows of
$19.2 million in the first nine months of 2004 from the issuance of common stock related to the exercise of employee stock options, compared with $14.7 million in the first nine months
of 2003.

On
April 30, 2004, we entered into an amended and restated unsecured committed revolving credit agreement with a group of banks, which matures on April 30, 2007 ("Agreement"), unless
prior to April 30, 2006, we elect to extend the final maturity date to April 30, 2008. The new Agreement provides for $200 million of committed borrowings, of which up to
$125 million may be used for letters of credit. Under certain circumstances, we may increase the committed borrowing limit by $50 million for a total commitment of $250 million.
Under the terms of the Agreement, we may borrow at interest rates based on eurodollar rates (approximately 1.75% at October 1, 2004), plus an applicable margin based on a fixed-charge coverage
grid of between 50 and 100 basis points that is adjusted quarterly. At October 1, 2004, the applicable margin under the facility was 60 basis points. We will pay a commitment fee of 12.5 to 25
basis points per annum on the total commitment, based on a fixed-charge coverage grid that is adjusted quarterly. At October 1, 2004, the commitment fee was 15 basis points. The Agreement
places certain limitations on additional debt, stock repurchases, acquisitions, amount of dividends we may pay, and certain other financial and non-financial covenants. The primary
financial covenants relate to maintaining a minimum fixed charge coverage of 3:1, a leverage ratio of 1.5:1 and under certain conditions, a minimum level of earnings before income tax, depreciation
and amortization. We measure compliance with the financial and non-financial covenants and ratios as required by the terms of the Agreement on a fiscal quarter basis.

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We
had uncommitted lines of credit available from certain banks totaling $30 million at October 1, 2004. Borrowings under these lines were at prevailing money market rates (2.3% at
October 1, 2004). Further, we had an uncommitted letter of credit facility of $75 million to support inventory purchases. These arrangements may be terminated at any time at the option
of the banks or the Company.

Management
believes that our capital needs for 2004 will be met through our current cash balances, our existing credit facilities and cash from operations, without the need for additional permanent
financing. However, as discussed in the exhibit to our Annual Report on Form 10-K 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. From time to time the
Company considers acquisition opportunities which, if pursued, could also result in the need for additional 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

As of October 1, 2004 and September 26, 2003, we had letters of credit outstanding of $18.8 million and $16.0 million, respectively. These letters
of credit were issued predominantly for the purchase of inventory. As of October 1, 2004, the Company had $232.9 million in hedging contracts outstanding, all of which are due to settle
within the next 16 months (see Note 6 to the consolidated financial statements included in Item 8 to our Annual Report on Form 10-K).

We
have the following off-balance sheet arrangements:

(Dollars
in Millions)

October 1, 2004

Total Amounts
CommittedLines of credit

$
Letters of credit


18.8Hedging contracts


232.9Total

$
251.7


We
use funds from operations and unsecured committed and uncommitted lines of credit as the primary sources of financing for our seasonal and other working capital requirements.
Long-term debt, if required, is generally used to finance long-term investments. Our principal risks to these sources of financing are the impact on our financial condition
from economic downturns, a decrease in the demand for our products, increases in the prices of materials and a variety of other factors. We anticipate that capital requirements for 2004 will be met
through the use of our current cash balances, through our existing credit facility (which places certain limitations on additional debt, stock repurchases, acquisitions and on the amount of dividends
we may pay, and also contains certain other financial and operating covenants) and through cash flow from operations, without the need for additional permanent financing. However, if the need arises,
our ability to obtain any additional credit facilities will depend upon prevailing market conditions, our financial condition and the terms and conditions of such additional facilities.

Forward-looking Information

As discussed in Exhibit 99.1 entitled "Cautionary Statements for Purposes of the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995," of our
Annual Report on Form 10-K for the year ended December 31, 2003, investors should be aware of factors that could affect our actual results and could cause such results to
differ materially from those contained in

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forward-looking
statements made by or on behalf of us. 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. These factors include, but are not limited to:



We
undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

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Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In the normal course of business, our financial position and results of operations are routinely subject to a variety of risks, including market risk associated
with currency rate movements on non-U.S. dollar denominated assets, liabilities and income and interest rate movements on borrowings and investments. We regularly assess these risks and
have established policies and business practices that should result in an appropriate level of protection against the adverse effect of these and other potential exposures.

Our
foreign currency exposure is generated primarily from our European operating subsidiaries offset by purchases of inventory denominated in euro and, to a lesser degree, our Asian and Canadian
operating subsidiaries. We seek to minimize the impact of these foreign currency fluctuations by hedging the related transactions with foreign currency forward contracts. Currently, these foreign
currency forward contracts will expire in 16 months or less. Based upon sensitivity analysis as of October 1, 2004, a 10% change in foreign exchange rates would cause the fair value of
our financial instruments to increase/decrease by approximately $23.5 million, compared with $23.8 million at September 26, 2003.

We
utilize cash from operations and U.S. dollar denominated borrowings to fund our working capital and investment needs. Short-term debt, if required, is used to meet working capital
requirements and long-term debt, if required, is generally used to finance long-term investments. In addition, we use derivative instruments in our hedging of foreign currency
transactions. The derivative instruments are viewed as risk management tools and are not used for trading or speculative purposes. Cash balances are invested in high-grade securities with
terms under 3 months.

We
have available unsecured committed and uncommitted lines of credit as sources of financing for our working capital requirements. Borrowings under these credit agreements bear interest at variable
rates based on either lenders' cost of funds, plus an applicable spread, or prevailing money market rates. At October 1, 2004 and September 26, 2003 we had no short-term or
long-term debt outstanding.

Item 4. CONTROLS AND PROCEDURES

We maintain a system of disclosure controls and procedures which are designed to ensure that information required to be disclosed by us in reports we file or
submit under the Securities Exchange Act of 1934 (the "Exchange Act") is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's
rules and forms. These disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed under the federal securities laws is accumulated
and communicated to our management on a timely basis to allow decisions regarding required disclosure.

Based
on their evaluation as of October 1, 2004, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures, as defined in
Rules 13a-15(e) and 15d-15(e) under the Exchange Act were effective.

There
were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, that occurred during the
quarter ended October 1, 2004, that has materially affected, or is reasonably likely to materially effect, our internal control over financial reporting.

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Part II OTHER INFORMATION

Item 2. CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES

ISSUER PURCHASES OF EQUITY SECURITIES(1)
For the three fiscal months ended October 1, 2004

|Period*             |  | Total Number
Of Shares
Purchased ** |  | Average price
paid per share |       | Total number
of shares
purchased as part
of publicly
announced
plans or programs |         | Maximum number
of shares
that may yet
be purchased
under the plans
or programs
|------------------- |  | ----------------------------------- |  | ---------------------------- | ----- | -------------------------------------------------------------------------------- | ------- | ------------------------------------------------------------------------------
|July 3July 30      |  | 77,040                              |  | $                            | 58.14 |                                                                                  | 77,040  |                                                                               
|July 31August 27   |  | 526,290                             |  |                              | 54.82 |                                                                                  | 526,290 |                                                                               
|August 28October 1 |  | 374,901                             |  |                              | 57.38 |                                                                                  | 374,901 |                                                                               
|                    |  |                                     |  |                              |       |                                                                                  |         |                                                                               
|Q3 Total            |  | 978,231                             |  |                              | 56.06 |                                                                                  | 978,231 |                                                                               

Footnote (1)

|          |  | Announcement
Date |  | Approved
Program
Size (shares) |  | Expiration
Date
|--------- |  | ----------------- |  | ------------------------------ |  | ---------------
|Program 1 |  | 5/20/2002         |  | 4,000,000                      |  | None           
|Program 2 |  | 10/16/2003        |  | 4,000,000                      |  | None           

No
existing programs expired or were terminated during the reporting period. Program 1 was completed on August 16, 2004. See Note 12 to our Unaudited Consolidated Financial Statements in this Form
10-Q for additional information.

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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, 2004 |  | By: | /s/BRIAN P. MCKEONBrian P. McKeon
Executive Vice PresidentFinance and Administration,
Chief Financial Officer
|Date: November 10, 2004 |  | By: | /s/JOHN CRIMMINSJohn Crimmins
Vice President, Corporate Controller and Chief Accounting Officer               

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EXHIBIT INDEX

|Exhibit      |  | Description                                                                                                                                                                                          
|------------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit 10.1 |  | The Timberland Company Deferred Compensation Plan, as amended.                                                                                                                                       
|Exhibit 31.1 |  | Principal Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.                                                                                 
|Exhibit 31.2 |  | Principal Financial Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.                                                                                 
|Exhibit 32.1 |  | Chief Executive Officer Certification Pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, furnished herewith.
|Exhibit 32.2 |  | Chief Financial Officer Certification Pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, furnished herewith.

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