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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended September 27, 2002

or

For the transition period from                              to                             

Commission File Number 1-9548

The Timberland Company

(Exact name of registrant as specified in its charter)

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

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

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

        On October 25, 2002, 29,137,948 shares of the registrant's Class A Common Stock were outstanding and 7,711,185 shares of the registrant's Class B Common Stock were outstanding.

THE TIMBERLAND COMPANY
FORM 10-Q
TABLE OF CONTENTS

Part I Financial Information

Item 1. Financial Statements

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

See accompanying notes to condensed consolidated financial statements.

1

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

See accompanying notes to condensed consolidated financial statements.

2

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

See accompanying notes to condensed consolidated financial statements.

3

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

See accompanying notes to condensed consolidated financial statements.

4

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

1.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain the adjustments necessary to present fairly the Company's 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 the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K, for the year-ended December 31, 2001.

2.

The results of operations for the three and nine months ended September 27, 2002 are not necessarily indicative of the results to be expected for the full year. Historically, the Company's revenue has been more heavily weighted to the second half of the year.

3.

Dilutive securities included in the calculation of diluted weighted-average shares were 738,806 and 959,280 for the third quarter of 2002 and 2001, respectively, and 749,359 and 1,306,714 for the first nine months of 2002 and 2001, respectively. Anti-dilutive securities excluded from the calculation of diluted weighted-average shares were 818,780 and 840,930 for the third quarter of 2002 and 2001, respectively, and 807,680 and 703,430 for the first nine months of 2002 and 2001, respectively.

4.

In the second quarter of 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations." The Company adopted this standard effective January 1, 2002. SFAS No. 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. In addition, SFAS No. 141 requires that any excess of fair value of net assets over cost arising from acquisitions occurring prior to adoption of this statement will be recognized as the cumulative effect of a change in accounting principle. Accordingly, in the first quarter of 2002, the Company recognized a cumulative effect of a change in accounting principle gain of $4,913 ($0.13 per share diluted and basic) for the unamortized balance of the excess of fair value of net assets over cost as of December 31, 2001.

5.

In the second quarter of 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible Assets." The Company adopted this standard effective January 1, 2002. SFAS No. 142 requires the cessation of goodwill amortization and, instead, the carrying value of goodwill will be evaluated for impairment on an annual basis. The provisions of this accounting standard require the completion of a transitional impairment test within six months of adoption, with any impairments identified treated as a cumulative effect of a change in accounting principle. The Company has completed that transitional impairment test and has determined that no impairment of reported goodwill has occurred. Had goodwill not been amortized in 2001, the Company's net income, diluted earnings per share and basic earnings per share (after the cumulative effect of a change in accounting principle) for the three months ended September 28, 2001 would have been $48,708, $1.22 and $1.25, respectively, and for the nine months ended September 28, 2001 would have been $77,066, $1.90 and $1.96, respectively. There were no changes in the carrying amount of goodwill for the period ended September 27, 2002, compared with December 31, 2001.

Information regarding the Company's other intangible assets follows:

5

Amortization expense for the third quarter of 2002 and 2001 was $311 and $271, respectively, and $886 and $763 for the first nine months of 2002 and 2001, respectively. The estimated amortization for existing intangible assets as of September 27, 2002, for each of the five succeeding fiscal years is as follows: 2002: $1,212; 2003: $1,133; 2004: $909; 2005: $654; 2006: $354.

6.

In the normal course of business, the financial position and results of operations of the Company are routinely subject to currency rate movements on non-U.S. dollar denominated assets, liabilities and income as the Company sells goods in local currencies through its foreign subsidiaries. Derivative instruments, specifically forward contracts, are used by the Company in its hedging of forecasted foreign currency transactions, typically for a period not greater than 24 months. Those derivative instruments are viewed as risk management tools and are not used for trading or speculative purposes. As of September 27, 2002, the Company had forward contracts maturing at various dates through March, 2004 to buy and sell the equivalent of approximately $228,300 in foreign currencies at contracted rates. As of September 28, 2001, the Company had forward contracts maturing at various dates through 2002 to buy and sell the equivalent of approximately $121,000 in foreign currencies at contracted rates. The increase in the value of contracts held at September 27, 2002, compared with September 28, 2001, is the result of the Company hedging a larger percentage of its foreign currency exposure for the fourth quarter of 2002 than was hedged at September 28, 2001 for the fourth quarter of 2001. Additionally, the Company has elected to hedge a portion of its forecasted 2003 foreign currency exposure earlier in 2002 than was hedged at September 28, 2001 for 2002, as permitted in accordance with the Company's hedging policy. For the quarters ended September 27, 2002 and September 28, 2001, the Company recorded, in its income statement, after tax hedging (losses)/gains of $(3,716) and $808, respectively, and for the year to date periods ended September 27, 2002 and September 28, 2001, after tax hedging (losses)/gains of $(4,173) and $3,714, respectively.

7.

Business segment revenue, income (loss) before income taxes, total assets and goodwill for the three and nine months ended September 27, 2002 and September 28, 2001 follow:

For the Three Months Ended September 27, 2002 and September 28, 2001

6

For the Nine Months Ended September 27, 2002 and September 28, 2001

The 2002 and 2001 goodwill amounts exclude the unamortized balance of the excess of fair value of net assets over cost, as discussed in Note 4. Additionally, total assets for 2001 have been adjusted to reflect the current goodwill allocation method by segment. A discussion of segment revenue and profitability is contained in Management's Discussion and Analysis of Financial Condition and Results of Operations.

8.

Comprehensive income for the three and nine months ended September 27, 2002 and September 28, 2001 follows:

For the quarters ended September 27, 2002 and September 28, 2001, the after tax hedging (losses)/gains reclassified to earnings were $(3,960) and $1,140, respectively, and for the year to date periods ended September 27, 2002 and September 28, 2001, the after tax hedging (losses)/gains were $(3,651) and $4,899, respectively.

9.

Inventory consisted of the following: