10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended July 2, 2010

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                          to                         

Commission File Number 1-9548

The Timberland Company

(Exact name of registrant as specified in its charter)

Delaware	02-0312554
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)

200 Domain Drive, Stratham, New Hampshire	03885
(Address of principal executive offices)	(Zip Code)

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

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.

x Yes      o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

x Yes      o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer x	Accelerated Filer o
Non-Accelerated Filer o  (Do not check if a smaller reporting company)	Smaller Reporting Company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

o Yes      x No

On July 30, 2010, 41,550,103 shares of the registrant’s Class A Common Stock were outstanding and 10,889,160 shares of the registrant’s Class B Common Stock were outstanding.

Form 10-Q
Page 2

THE TIMBERLAND COMPANY

FORM 10-Q

TABLE OF CONTENTS

	Page(s)
Part I Financial Information
Item 1. Financial Statements
Unaudited Condensed Consolidated Balance Sheets - July 2, 2010, December 31, 2009 and July 3, 2009		5
Unaudited Condensed Consolidated Statements of Operations - For the Quarters and Six Months Ended July 2, 2010 and July 3, 2009		6
Unaudited Condensed Consolidated Statements of Cash Flows - For the Six Months Ended July 2, 2010 and July 3, 2009		7
Notes to Unaudited Condensed Consolidated Financial Statements		8-22
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		22-34
Item 3. Quantitative and Qualitative Disclosures About Market Risk	34
Item 4. Controls and Procedures	35
Part II Other Information
Item 1A. Risk Factors	35
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	36
Item 6. Exhibits	37
Signatures	38
Exhibit Index	39
Exhibits	40-51
EX-10.1
EX-31.1
EX-31.2
EX-32.1
EX-32.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

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Page 3

Cautionary Note Regarding Forward-Looking Statements

The Timberland Company (the “Company”) wishes to take advantage of The Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934, which provide a “safe harbor” for certain written and oral forward-looking statements to encourage companies to provide prospective information. Prospective information is based on management’s then current expectations or forecasts. Such information is subject to the risk that such expectations or forecasts, or the assumptions used in making such expectations or forecasts, may become inaccurate. The discussion in Part I, Item 1A, Risk Factors, of our Annual Report on Form 10-K for the year ended December 31, 2009 (the “Form 10-K”) and Part II, Item 1A, Risk Factors, of this Quarterly Report on Form 10-Q identifies important factors that could affect the Company’s actual results and could cause such results to differ materially from those contained in forward-looking statements made by or on behalf of the Company. The risks included in Part I, Item 1A, Risk Factors, of the Form 10-K and Part II, Item 1A of this Quarterly Report are not exhaustive. Other sections of the Form 10-K as well as this Quarterly Report may include additional factors which could adversely affect the Company’s business and financial performance. Moreover, the Company operates in a very competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for management to predict all such risk factors, nor can it assess the impact of all such risk factors on the Company’s business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. The Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

Forward-looking Information

As discussed above and in Part I, Item 1A, Risk Factors, of the Form 10-K and Part II, Item 1A of this Quarterly Report, investors should be aware of certain risks, uncertainties and assumptions that could affect our actual results and could cause such results to differ materially from those contained in forward-looking statements made by or on behalf of us. Statements containing the words “may,” “assumes,” “forecasts,” “positions,” “predicts,” “strategy,” “will,” “expects,” “estimates,” “anticipates,” “believes,” “projects,” “intends,” “plans,” “budgets,” “potential,” “continue,” “target” and variations thereof, and other statements contained in this Quarterly Report regarding matters that are not historical facts are forward-looking statements. 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 risks, uncertainties and assumptions. These risks, uncertainties and assumptions include, but are not limited to:

  •   Our ability to successfully market and sell our products in a highly competitive industry and in view of changing consumer trends and preferences, consumer acceptance of products, and other factors affecting retail market conditions, including the current global economic environment and global political uncertainties resulting from the continuing war on terrorism;

  •   Our ability to execute key strategic initiatives;

  •   Our ability to adapt to potential changes in duty structures in countries of import and export, including anti-dumping measures imposed by the European Union with respect to leather footwear imported from China and Vietnam;

  •   Our ability to manage our foreign exchange rate risks, and taxes, duties, import restrictions and other risks related to doing business internationally;

  •   Our ability to locate and retain independent manufacturers to produce lower cost, high-quality products with rapid turnaround times;

  •   Our reliance on a limited number of key suppliers and a global supply chain;

  •   Our ability to obtain adequate materials at competitive prices;

  •   Our reliance on the financial health of, and the appeal of our products to, our customers;

  •   Our reliance on the financial stability of third parties with which we do business, including customers, suppliers and distributors;

  •   Our ability to successfully invest in our infrastructure and products based upon advance sales forecasts;

Form 10-Q
Page 4

  •   Our ability to recover our investment in, and expenditures of, our retail organization through adequate sales at such retail locations; and

  •   Our ability to respond to actions of our competitors, some of whom have substantially greater resources than we have.

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

Form 10-Q
Page 5

PART I FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

THE TIMBERLAND COMPANY

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands)

	July 2,			December 31,			July 3,
	2010			2009			2009
Assets
Current assets
Cash and equivalents		$237,798			$289,839			$183,919
Accounts receivable, net of allowance for doubtful accounts of $11,130 at July 2, 2010, $12,175 at December 31, 2009 and $11,124 at July 3, 2009		86,836			149,178			100,126
Inventory, net		177,206			158,541			180,392
Prepaid expense		31,506			32,863			35,121
Prepaid income taxes		27,244			11,793			24,720
Deferred income taxes		27,085			26,769			19,024
Derivative assets		7,882			1,354			2,284
Total current assets		595,557			670,337			545,586
Property, plant and equipment, net		64,502			69,820			74,185
Deferred income taxes		18,683			14,903			17,480
Goodwill		38,958			44,353			43,870
Intangible assets, net		36,195			45,532			46,572
Other assets, net		12,670			14,962			14,971
Total assets		$766,565			$859,907			$742,664
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable		$78,946			$79,911			$ 71,423
Accrued expense
Payroll and related		27,678			43,512			22,395
Other		52,877			81,988			54,264
Income taxes payable		15,330			21,959			533
Deferred income taxes		388			48			-
Derivative liabilities		91			389			4,565
Total current liabilities		175,310			227,807			153,180
Other long-term liabilities		38,234			36,483			35,809
Commitments and contingencies
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; 75,072,360 shares issued at July 2, 2010, 74,570,388 shares issued at December 31, 2009 and 74,182,602 shares issued at July 3, 2009		751			746			742
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; 10,889,160 shares issued and outstanding at July 2, 2010, 11,089,160 shares issued and outstanding at December 31, 2009 and 11,417,660 shares issued and outstanding at July 3, 2009		109			111			114
Additional paid-in capital		272,820			266,457			264,257
Retained earnings		976,978			974,683			914,672
Accumulated other comprehensive income		9,478			15,048			9,088
Treasury Stock at cost; 33,511,452 Class A shares at July 2, 2010, 31,131,253 Class A shares at December 31, 2009 and 29,402,811 Class A shares at July 3, 2009		(707,115	)		(661,428	)		(635,198	)
Total stockholders’ equity		553,021			595,617			553,675
Total liabilities and stockholders’ equity		$766,565			$859,907			$742,664

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

Form 10-Q
Page 6

THE TIMBERLAND COMPANY

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in Thousands, Except Per Share Data)

	For the Quarter Ended								For the Six Months Ended
	July 2, 2010				July 3, 2009				July 2, 2010				July 3, 2009
Revenue		$	188,954			$	179,702			$	505,996			$	476,350
Cost of goods sold			95,446				104,194				254,505				264,153
Gross profit			93,508				75,508				251,491				212,197
Operating expense
Selling			86,124				85,027				178,820				177,295
General and administrative			28,942				26,896				56,341				52,313
Impairment of goodwill			5,395				-				5,395				-
Impairment of intangible assets			7,854				-				7,854				925
Gain on termination of licensing agreements			(1,500	)			-				(3,000	)			-
Restructuring			-				(17	)			-				(121	)
Total operating expense			126,815				111,906				245,410				230,412
Operating income/(loss)			(33,307	)			(36,398	)			6,081				(18,215	)
Other income/(expense), net
Interest income			148				299				221				739
Interest expense			(142	)			(117	)			(281	)			(238	)
Other, net			269				1,666				136				1,003
Total other income/(expense), net			275				1,848				76				1,504
Income/(loss) before income taxes			(33,032	)			(34,550	)			6,157				(16,711	)
Income tax provision/(benefit)			(9,580	)			(15,306	)			3,862				(13,344	)
Net income/(loss)		$	(23,452	)		$	(19,244	)		$	2,295			$	(3,367	)
Earnings/(Loss) per share
Basic		$	(.44	)		$	(.34	)		$	.04			$	(.06	)
Diluted		$	(.44	)		$	(.34	)		$	.04			$	(.06	)
Weighted-average shares outstanding
Basic			53,225				56,273				53,698				56,695
Diluted			53,225				56,273				54,184				56,695

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

Form 10-Q
Page 7

THE TIMBERLAND COMPANY

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

	For the Six Months Ended
	July 2, 2010			July 3, 2009
Cash flows from operating activities:
Net income/(loss)		$2,295			$  (3,367	)
Adjustments to reconcile net income/(loss) to net cash provided/(used) by operating activities:
Deferred income taxes		(4,811	)		5,224
Share-based compensation		3,647			2,580
Depreciation and other amortization		13,053			14,339
Provision for losses on accounts receivable		1,584			1,564
Impairment of goodwill		5,395			-
Impairment of intangible assets		7,854			925
Tax expense from share-based compensation, net of excess benefit		(303	)		(444	)
Unrealized (gain)/loss on derivatives		(176	)		289
Other non-cash charges, net		222			514
Increase/(decrease) in cash from changes in operating assets and liabilities, net of the effect of business combinations:
Accounts receivable		53,559			67,098
Inventory		(20,139	)		1,089
Prepaid expense and other assets		1,429			(1,802	)
Accounts payable		(700	)		(25,977	)
Accrued expense		(43,006	)		(35,674	)
Prepaid income taxes		(15,451	)		(8,032	)
Income taxes payable		(3,611	)		(24,678	)
Other liabilities		205			(226	)
Net cash provided/(used) by operating activities		1,046			(6,578	)
Cash flows from investing activities:
Acquisition of business, net of cash acquired		-			(1,554	)
Additions to property, plant and equipment		(7,289	)		(7,757	)
Other		(116	)		(380	)
Net cash used by investing activities		(7,405	)		(9,691	)
Cash flows from financing activities:
Common stock repurchases		(44,220	)		(19,388	)
Issuance of common stock		2,435			1,373
Excess tax benefit from share-based compensation		587			133
Other		(634	)		(177	)
Net cash used by financing activities		(41,832	)		(18,059	)
Effect of exchange rate changes on cash and equivalents		(3,850	)		1,058
Net decrease in cash and equivalents		(52,041	)		(33,270	)
Cash and equivalents at beginning of period		289,839			217,189
Cash and equivalents at end of period		$237,798			$183,919
Supplemental disclosures of cash flow information:
Interest paid		$276			$232
Income taxes paid		$26,891			$13,935

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

Form 10-Q
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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

Basis of Presentation

The unaudited condensed consolidated financial statements include the accounts of The Timberland Company and its subsidiaries (“we”, “our”, “us”, “its”, “Timberland” or the “Company”). These 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, 2009.

The financial statements included in this Quarterly Report on Form 10-Q are unaudited, but in the opinion of management, such financial statements include the adjustments, consisting of normal recurring adjustments, necessary to present fairly the Company’s financial position, results of operations and changes in cash flows for the interim periods presented. The results reported in these financial statements are not necessarily indicative of the results that may be expected for the full year due, in part, to seasonal factors. Historically, our revenue has been more heavily weighted to the second half of the year.

The Company’s fiscal quarters end on the Friday closest to the day on which the calendar quarter ends, except that the fourth quarter and fiscal year end on December 31. The second quarters and first six months of our fiscal year in 2010 and 2009 ended on July 2, 2010 and July 3, 2009, respectively.

New Accounting Pronouncements

In January 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2010-06 (“ASU No. 2010-06”), Improving Disclosures About Fair Value Measurements. This accounting standard update adds new requirements for fair value measurement disclosures about transfers into and out of Levels 1 and 2 and separate disclosures about purchases, sales, issuances, and settlements relating to Level 3 measurements. It also clarifies existing fair value disclosures about the level of disaggregation and inputs and valuation techniques used to measure fair value. ASU No. 2010-06 was effective for the Company beginning January 1, 2010 and its adoption did not have a material impact on the Company’s existing disclosures.

Note 2.  Fair Value Measurements

Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosures, establishes a fair value hierarchy that ranks the quality and reliability of the information used to determine fair value. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access. Fair values determined by Level 2 inputs utilize data points that are observable such as quoted prices, interest rates and yield curves. Level 3 inputs are unobservable data points for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. The Company recognizes and reports significant transfers between Level 1 and Level 2, and into and out of Level 3, as of the actual date of the event or change in circumstances that caused the transfer.

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Financial Assets and Liabilities

The following tables present information about our assets and liabilities measured at fair value on a recurring basis as of July 2, 2010 and December 31, 2009:

Description
	Level 1	Level 2	Level 3		Impact of Netting		July 2, 2010
Assets:
Cash equivalents:
Time deposits	$  -	$85,004		$  -		$  -	$85,004
Mutual funds	$  -	$36,992		$  -		$  -	$36,992
Foreign exchange forward contracts:
Derivative assets	$  -	$8,612		$  -		$(730)	$7,882
Cash surrender value of life insurance	$  -	$6,779		$  -		$  -	$6,779
Liabilities:
Foreign exchange forward contracts:
Derivative liabilities	$  -	$821		$  -		$(730)	$91
Description
	Level 1	Level 2	Level 3		Impact of Netting		December 31, 2009
Assets:
Cash equivalents:
Time deposits	$  -	$70,041		$  -		$  -	$70,041
Mutual funds	$  -	$95,871		$  -		$  -	$95,871
Foreign exchange forward contracts:
Derivative assets	$  -	$1,768		$  -		$(230)	$1,538
Cash surrender value of life insurance	$  -	$8,036		$  -		$  -	$8,036
Liabilities:
Foreign exchange forward contracts:
Derivative liabilities	$  -	$621		$  -		$(230)	$391

Cash equivalents, included in cash and equivalents on our unaudited condensed consolidated balance sheet, include money market mutual funds and time deposits placed with a variety of high credit quality financial institutions. Time deposits are valued based on current interest rates and mutual funds are valued at the net asset value of the fund. The carrying values of accounts receivable and accounts payable approximate their fair values due to their short-term maturities.

The fair value of the derivative contracts in the table above is reported on a gross basis by level based on the fair value hierarchy with a corresponding adjustment for netting for financial statement presentation purposes, where appropriate. The Company often enters into derivative contracts with a single counterparty and certain of these contracts are covered under a master netting agreement. The fair values of our foreign currency forward contracts are based on quoted market prices or pricing models using current market rates. As of December 31, 2009, the derivative contracts above include $184 of assets and $2 of liabilities included in other assets, net and other long-term liabilities, respectively, on our unaudited condensed consolidated balance sheet.

The cash surrender value of life insurance represents insurance contracts held as assets in a rabbi trust to fund the Company’s deferred compensation plan. These assets are included in other assets, net on our unaudited condensed consolidated balance sheet. The cash surrender value of life insurance is based on the net asset values of the underlying funds available to plan participants.

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Nonfinancial Assets

Goodwill and indefinite-lived intangible assets are tested for impairment annually at the end of our second quarter and when events occur or circumstances change that would, more likely than not, reduce the fair value of a business unit or an intangible asset with an indefinite-life below its carrying value. Events or changes in circumstances that may trigger interim impairment reviews include significant changes in business climate, operating results, planned investment in the business unit or an expectation that the carrying amount may not be recoverable, among other factors.

During the quarter ended July 2, 2010, management concluded that the carrying value of goodwill exceeded the estimated fair value for its IPath, North America Retail and Europe Retail reporting units and, accordingly, recorded an impairment charge of $5,395. Management also concluded that the carrying value of the IPath and howies trademarks and other intangible assets exceeded the estimated fair value and, accordingly, recorded an impairment charge of $7,854. The Company’s North America Wholesale and Europe Wholesale business units have fair values substantially in excess of their carrying value. See Note 9 to the unaudited condensed consolidated financial statements.

Impairment charges included in the second quarter of 2010 unaudited condensed consolidated statement of operations, by segment, are as follows:

	North America				Sub-	Europe						Sub-	Total
	IPath		Retail		Total	IPath		howies		Retail		Total	Company
Goodwill		$4,118		$794	$4,912		$       -		$  -		$483	$   483		$5,395
Trademarks		2,032		-	2,032		1,169		3,181		-	4,350		6,382
Other intangibles		1,228		-	1,228		-		244		-	244		1,472
		$7,378		$794	$8,172		$1,169		$3,425		$483	$5,077		$13,249

These non-recurring fair value measurements were developed using significant unobservable inputs (Level 3). For goodwill, the primary valuation technique used was the discounted cash flow analysis based on management’s estimates of forecasted cash flows for each business unit, with those cash flows discounted to present value using rates proportionate with the risks of those cash flows. In addition, management used a market-based valuation method involving analysis of market multiples of revenues and earnings before interest, taxes, depreciation and amortization for a group of similar publicly traded companies and, if applicable, recent transactions involving comparable companies. The Company believes the blended use of these models balances the inherent risk associated with either model if used on a stand-alone basis, and this combination is indicative of the factors a market participant would consider when performing a similar valuation. For trademark intangible assets, management used the relief-from-royalty method in which fair value is the discounted value of forecasted royalty revenue arising from a trademark using a royalty rate that an independent third party would pay for use of that trademark. Further information regarding the fair value measurements is provided below.

IPath
The IPath^® business unit has not met the revenue and earnings growth forecasted at its acquisition in April 2007. Accordingly, during the second quarter of 2010, management reassessed the financial expectations of this business as part of its long range planning process. The revenue and earnings growth assumptions were developed based on near term trends, potential opportunities and planned investment in the IPath^® brand. Management’s business plans and projections were used to develop the expected cash flows for the next five years and a 4% residual revenue growth rate applied thereafter. The analysis reflects a market royalty rate of 1.5% and a weighted average discount rate of 22%, derived primarily from published sources and adjusted for increased market risk. After the charges in the table above, there was $720 of finite-lived trademark intangible assets remaining at July 2, 2010. The carrying value of IPath goodwill was reduced to zero.

howies
howies has not met the revenue and earnings growth forecasted at its acquisition in December 2006. Accordingly, during the second quarter of 2010, management reassessed the financial expectations of this business as part of its long range planning process. The revenue and earnings growth assumptions were developed based on near term trends, potential opportunities and planned investment in the howies^® brand. Management’s business plans and projections were used to develop the expected cash flows for the next five years and a 4% residual revenue growth rate applied thereafter. The analysis reflects a market royalty rate of 2% and a weighted average discount rate of 24%, derived primarily from published sources and adjusted for increased market risk. After the charges in the table above, there was $1,200 of indefinite-lived trademark intangible assets remaining at July 2, 2010.

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Page 11

North America and Europe Retail
The Company’s retail businesses in North America and Europe have been negatively impacted by continued weakness in the macroeconomic environment, low consumer spending and a longer than expected economic recovery. The fair value of these businesses using the discounted cash flow analysis were based on management’s business plans and projections for the next five years and a 4% residual growth thereafter. The analysis reflects a weighted average discount rate in the range of 19%, derived primarily from published sources and adjusted for increased market risk. After the charges in the table above, the carrying value of the goodwill was zero at July 2, 2010.

On an ongoing basis, the Company evaluates the carrying value of the GoLite trademark, which is licensed to a third party, for events or changes in circumstances indicating the carrying value of the asset may not be recoverable. Factors considered include the ability of the licensee to obtain necessary financing, the impact of changes in economic conditions and an assessment of the Company’s ability to recover all contractual payments when due under the licensing arrangement. During the first quarter of 2009, using Level 3 input factors noted above, the Company determined that the carrying value of the GoLite trademark was impaired and recorded a pre-tax non-cash charge of approximately $925, which reduced the carrying value of the trademark to zero at April 3, 2009. The charge is reflected in our Europe segment.

Note 3.  Derivatives

In the normal course of business, the financial position and results of operations of the Company are impacted by currency rate movements in foreign currency denominated assets, liabilities and cash flows as we purchase and sell goods in local currencies. We have established policies and business practices that are intended to mitigate a portion of the effect of these exposures. We use derivative financial instruments, specifically forward contracts, to manage our currency exposures. These derivative instruments are viewed as risk management tools and are not used for trading or speculative purposes. Derivatives entered into by the Company are either designated as cash flow hedges of forecasted foreign currency transactions or are undesignated economic hedges of existing intercompany assets and liabilities, certain third party assets and liabilities, and non-US dollar-denominated cash balances.

Derivative instruments expose us to credit and market risk. The market risk associated with these instruments resulting from currency exchange movements is expected to offset the market risk of the underlying transactions being hedged. We do not believe there is a significant risk of loss in the event of non-performance by the counterparties associated with these instruments because these transactions are executed with a group of major financial institutions and have varying maturities through April 2011. As a matter of policy, we enter into these contracts only with counterparties having a minimum investment-grade or better credit rating. Credit risk is managed through the continuous monitoring of exposures to such counterparties.

Cash Flow Hedges

The Company principally uses foreign currency forward contracts as cash flow hedges to offset a portion of the effects of exchange rate fluctuations on certain of its forecasted foreign currency denominated sales transactions. The Company’s cash flow exposures include anticipated foreign currency transactions, such as foreign currency denominated sales, costs, expenses and inter-company charges, as well as collections and payments. The risk in these exposures is the potential for losses associated with the remeasurement of non-functional currency cash flows into the functional currency. The Company has a hedging program to aid in mitigating its foreign currency exposures and to decrease the volatility in earnings. Under this hedging program, the Company performs a quarterly assessment of the effectiveness of the hedge relationship and measures and recognizes any hedge ineffectiveness in earnings. A hedge is effective if the changes in the fair value of the derivative provide offset of at least 80 percent and not more than 125 percent of the changes in the fair value or cash flows of the hedged item attributable to the risk being hedged. The Company uses regression analysis to assess the effectiveness of a hedge relationship.

Forward contracts designated as cash flow hedging instruments are recorded in our unaudited condensed consolidated balance sheet at fair value. The effective portion of gains and losses resulting from changes in the fair value of these hedge instruments are deferred in accumulated other comprehensive income (“OCI”) and reclassified to earnings, in cost of goods sold, in the period that the hedged transaction is recognized in earnings. Cash flows associated with these contracts are classified as operating cash flows in the statement of cash flows. Hedge ineffectiveness is evaluated using the hypothetical derivative method, and the ineffective portion of the hedge is reported in our unaudited condensed consolidated statement of operations in other, net. The amount of hedge ineffectiveness reported in other, net for the quarters and six months ended July 2, 2010 and July 3, 2009 was not material.

Form 10-Q
Page 12

As of July 2, 2010, we had forward contracts maturing at various dates through April 2011 to sell the equivalent of $109,750 in foreign currencies at contracted rates. As of December 31, 2009, we had forward contracts maturing at various dates through January 2011 to sell the equivalent of $101,138 in foreign currencies at contracted rates. As of July 3, 2009, we had forward contracts maturing at various dates through April 2010 to sell the equivalent of $129,155 in foreign currencies at contracted rates. The contract amount represents the net amount of all purchase and sale contracts of a foreign currency.

	Notional Amount
Currency	July 2, 2010		December 31, 2009		July 3, 2009
Pound Sterling		$22,814		$20,657		$21,213
Euro		70,080		64,398		85,985
Japanese Yen		16,856		16,083		21,957
Total		$109,750		$101,138		$129,155

Other Derivative Contracts

We also enter into derivative contracts to manage foreign currency exchange risk on intercompany accounts receivable and payable, third-party accounts receivable and payable, and non-U.S. dollar-denominated cash balances using forward contracts. These forward contracts, which are undesignated hedges of economic risk, are recorded at fair value on the balance sheet, with changes in the fair value of these instruments recognized in earnings immediately. The gains or losses related to the contracts largely offset the remeasurement of those assets and liabilities. Cash flows associated with these contracts are classified as operating cash flows in the statement of cash flows.

As of July 2, 2010, we had forward contracts maturing at various dates through October 2010 to sell the equivalent of $38,496 in foreign currencies at contracted rates and to buy the equivalent of $(46,430) in foreign currencies at contracted rates. As of December 31, 2009, we had forward contracts maturing at various dates through April 2010 to sell the equivalent of $44,293 in foreign currencies at contracted rates and to buy the equivalent of $(22,572) in foreign currencies at contracted rates. As of July 3, 2009, we had forward contracts maturing at various dates through October 2009 to sell the equivalent of $39,219 in foreign currencies at contracted rates and to buy the equivalent of $(56,631) in foreign currencies at contracted rates. The contract amount represents the net amount of all purchase and sale contracts of a foreign currency.

	Notional Amount
Currency	July 2, 2010		December 31, 2009		July 3, 2009
Pound Sterling		$(18,221)		$(12,922)		$(16,989)
Euro		(6,558)		14,122		(16,043)
Japanese Yen		7,309		8,013		6,782
Canadian Dollar		4,855		8,204		5,995
Norwegian Kroner		2,711		2,335		1,559
Swedish Krona		1,970		1,969		1,284
Total		$(7,934)		$21,721		$(17,412)

Form 10-Q
Page 13

Fair Value of Derivative Instruments

The following table summarizes the fair values and presentation in the unaudited condensed consolidated balance sheets for derivatives, which consist of foreign exchange forward contracts, as of July 2, 2010, December 31, 2009 and July 3, 2009:

	Asset Derivatives						Liability Derivatives
	Fair Value						Fair Value
	July 2,		December 31,		July 3,		July 2,		December 31,		July 3,
Balance Sheet Location	2010		2009		2009		2010		2009		2009
Derivatives designated as hedge instruments:
Derivative assets		$8,437		$1,313		$2,099		$679		$224		$        -
Derivative liabilities		45		6		49		57		335		4,513
Other assets, net		-		184		-		-		-		-
Other long-term liabilities		-		-		-		-		2		-
		$8,482		$1,503		$2,148		$736		$561		$4,513
Derivatives not designated as hedge instruments:
Derivative assets		$124		$265		$185		$  -		$     -		$        -
Derivative liabilities		6		-		-		85		60		101
		$130		$265		$185		$85		$  60		$   101
Total derivatives		$8,612		$1,768		$2,333		$821		$621		$4,614

The Effect of Derivative Instruments on the Statements of Operations for the Quarters Ended July 2, 2010 and July 3, 2009

				Amount of
				Gain/(Loss)
	Amount of Gain/(Loss)		Location of Gain/(Loss)	Reclassified from
	Recognized in OCI on		Reclassified from	Accumulated OCI into
Derivatives in	Derivatives, Net of Taxes		Accumulated OCI into	Income
Cash Flow	(Effective Portion)		Income	(Effective Portion)
Hedging Relationships	2010	2009	(Effective Portion)	2010	2009
Foreign exchange forward contracts	$7,358	$(2,247)	Cost of goods sold	$273	$343

The Company expects to reclassify pre-tax gains of $7,746 to the income statement within the next twelve months.

		Amount of Gain/(Loss)
		Recognized in
Derivatives not Designated	Location of Gain/(Loss)Recognized	Income on Derivatives
as Hedging Instruments	In Income on Derivatives	2010	2009
Foreign exchange forward contracts	Other, net	$1,545	$223

Form 10-Q
Page 14

During the quarter ended July 3, 2009, the Company de-designated certain cash flow hedges due to settle in the quarter that related to its Japanese yen exposure. Included in other, net above is a net loss of approximately $14 related to these contracts.

The Effect of Derivative Instruments on the Statements of Operations for the Six Months Ended July 2, 2010 and July 3, 2009

				Amount of
				Gain/(Loss)
	Amount of Gain/(Loss)		Location of Gain/(Loss)	Reclassified from
	Recognized in OCI on		Reclassified from	Accumulated OCI into
Derivatives in	Derivatives, Net of Taxes		Accumulated OCI into	Income
Cash Flow	(Effective Portion)		Income	(Effective Portion)
Hedging Relationships	2010	2009	(Effective Portion)	2010	2009
Foreign exchange forward contracts	$7,358	$(2,247)	Cost of goods sold	$1,606	$7,659

		Amount of Gain/(Loss)
		Recognized in
Derivatives not Designated	Location of Gain/(Loss)Recognized	Income on Derivatives
as Hedging Instruments	In Income on Derivatives	2010	2009
Foreign exchange forward contracts	Other, net	$(622)	$2,647

Note 4.  Share-Based Compensation

Share-based compensation costs were as follows in the quarters and six months ended July 2, 2010 and July 3, 2009, respectively:

	For the Quarter Ended
	July 2, 2010		July 3, 2009
Cost of goods sold	$	107	$	270
Selling expense		672		956
General and administrative expense		1,310		543
Total share-based compensation	$	2,089	$	1,769
	For the Six Months Ended
	July 2, 2010		July 3, 2009
Cost of goods sold	$	188	$	358
Selling expense		1,171		1,424
General and administrative expense		2,288		798
Total share-based compensation	$	3,647	$	2,580

Form 10-Q
Page 15

Long Term Incentive Programs

2010 Executive Long Term Incentive Program

On March 3, 2010, the Management Development and Compensation Committee of the Board of Directors approved the terms of The Timberland Company 2010 Executive Long Term Incentive Program (“2010 LTIP”) with respect to equity awards to be made to certain of the Company’s executives and employees. On March 4, 2010, the Board of Directors also approved the 2010 LTIP with respect to the Company’s Chief Executive Officer. The 2010 LTIP was established under the Company’s 2007 Incentive Plan. The awards are subject to future performance, and consist of performance stock units (“PSUs”), equal in value to one share of the Company’s Class A Common Stock, and performance stock options (“PSOs”), with an exercise price of $19.45 (the closing price of the Company’s Class A Common Stock as quoted on the New York Stock Exchange on March 4, 2010, the date of grant). On May 13, 2010, additional awards were made under the 2010 LTIP consisting of PSUs equal in value to one share of the Company’s Class A Common Stock, and PSOs with an exercise price of $22.55 (the closing price of the Company’s Class A Common Stock as quoted on the New York Stock Exchange on May 13, 2010, the date of grant). Shares with respect to the PSUs will be granted and will vest following the end of the applicable performance period and approval by the Board of Directors, or a committee thereof, of the achievement of the applicable performance metric. The PSOs will vest in three equal annual installments following the end of the applicable performance period and approval by the Board of Directors, or a committee thereof, of the achievement of the applicable performance metric. The payout of the performance awards will be based on the Company’s achievement of certain levels of revenue growth and earnings before interest, taxes, depreciation and amortization (“EBITDA”), with threshold, budget, target and maximum award levels based upon actual revenue growth and EBITDA of the Company during the applicable performance periods equaling or exceeding such levels. The performance period for the PSUs is the three-year period from January 1, 2010 through December 31, 2012, and the performance period for the PSOs is the twelve-month period from January 1, 2010 through December 31, 2010. No awards shall be made or earned, as the case may be, unless the threshold goal is attained, and the maximum payout may not exceed 200% of the target award.

The maximum number of shares to be awarded with respect to PSUs under the 2010 LTIP is 527,800, which, if earned, will be settled in early 2013. Based on current estimates, unrecognized compensation expense with respect to the 2010 PSUs was $2,162 as of July 2, 2010. This expense is expected to be recognized over a weighted-average remaining period of 2.7 years.

The maximum number of shares subject to exercise with respect to PSOs under the 2010 LTIP is 737,640, which, if earned, will be settled, subject to the vesting schedule noted above, in early 2011. Based on current estimates, unrecognized compensation expense related to the 2010 PSOs was $2,048 as of July 2, 2010. This expense is expected to be recognized over a weighted-average remaining period of 2.7 years.

2009 Executive Long Term Incentive Program
On March 4, 2009, the Management Development and Compensation Committee of the Board of Directors approved the terms of The Timberland Company 2009 Executive Long Term Incentive Program (“2009 LTIP”) with respect to equity awards to be made to certain of the Company’s executives and employees. On March 5, 2009, the Board of Directors also approved the 2009 LTIP with respect to the Company’s Chief Executive Officer. The 2009 LTIP was established under the Company’s 2007 Incentive Plan. The awards are subject to future performance, and consist of PSUs, equal in value to one share of the Company’s Class A Common Stock, and PSOs, with an exercise price of $9.34 (the closing price of the Company’s Class A Common Stock as quoted on the New York Stock Exchange on March 5, 2009, the date of grant). On May 21, 2009, additional awards were made under the 2009 LTIP consisting of PSUs equal in value to one share of the Company’s Class A Common Stock, and PSOs with an exercise price of $12.93 (the closing price of the Company’s Class A Common Stock as quoted on the New York Stock Exchange on May 21, 2009, the date of grant). Shares with respect to the PSUs will be granted and will vest following the end of the applicable performance period and approval by the Board of Directors, or a committee thereof, of the achievement of the applicable performance metric. The PSOs will vest in three equal annual installments following the end of the applicable performance period and approval by the Board of Directors, or a committee thereof, of the achievement of the applicable performance metric. The payout of the performance awards will be based on the Company’s achievement of certain levels of EBITDA, with threshold, budget, target and maximum award levels based upon actual EBITDA of the Company during the applicable performance periods equaling or exceeding such levels. The performance period for the PSUs is the three-year period from January 1, 2009 through December 31, 2011, and the performance period for the PSOs was the twelve-month period from January 1, 2009 through December 31, 2009. No awards shall be made or earned, as the case may be, unless the threshold goal is attained, and the maximum payout may not exceed 200% of the target award.

The maximum number of shares to be awarded with respect to PSUs under the 2009 LTIP is 750,000, which, if earned, will be settled in early 2012. Based on current estimates, unrecognized compensation expense with respect to the 2009 PSUs

Form 10-Q
Page 16

was $1,679 as of July 2, 2010. This expense is expected to be recognized over a weighted-average remaining period of 1.7 years.

Based on actual performance, the number of shares subject to exercise with respect to PSOs under the 2009 LTIP is 599,619, which shares were settled on March 4, 2010, subject to the vesting schedule noted above.

The Company estimates the fair value of its PSOs on the date of grant using the Black-Scholes option valuation model, which employs the following assumptions:

	2010 LTIP			2009 LTIP
	For the Quarter			For the Quarter
	Ended July 2,			Ended July 3,
	2010			2009
Expected volatility		48.7	%		43.9	%
Risk-free interest rate		2.5	%		1.9	%
Expected life (in years)		5.0			5.0
Expected dividends		-			-

	2010 LTIP			2009 LTIP
	For the Six Months			For the Six Months
	Ended July 2, 2010			Ended July 3, 2009
Expected volatility		49.3	%		41.9	%
Risk-free interest rate		2.8	%		1.9	%
Expected life (in years)		6.3			6.4
Expected dividends		-			-

The following summarizes activity associated with stock options earned under the Company’s 2009 LTIP and excludes the performance-based awards noted above under the 2010 LTIP for which performance conditions have not been met:

						Weighted-
				Weighted-		Average
				Average		Remaining		Aggregate
				Exercise		Contractual		Intrinsic
	Shares			Price		Term		Value
Outstanding at January 1, 2010		-		$	-
Settled		599,619			9.52
Exercised		-			-
Expired or forfeited		(26,735	)		9.34
Outstanding at July 2, 2010		572,884		$	9.53		8.68	$	3,700
Vested or expected to vest at July 2, 2010		525,446		$	9.52		8.68	$	3,399
Exercisable at July 2, 2010		-			-		-		-

Unrecognized compensation expense related to the 2009 PSOs was $1,147 as of July 2, 2010. This expense is expected to be recognized over a weighted-average remaining period of 1.8 years.

Form 10-Q
Page 17

Stock Options

The Company estimates the fair value of its stock option awards on the date of grant using the Black-Scholes option valuation model, which employs the assumptions noted in the following table, for stock option awards excluding awards issued under the Company’s Long Term Incentive Programs discussed above:

	For the Quarter Ended						For the Six Months Ended
	July 2, 2010			July 3, 2009			July 2, 2010			July 3, 2009
Expected volatility		48.7	%		43.9	%		48.7	%		43.2	%
Risk-free interest rate		2.5	%		1.9	%		2.5	%		2.0	%
Expected life (in years)		5.0			5.0			5.0			6.2
Expected dividends		-			-			-			-

The following summarizes transactions for the six months ended July 2, 2010, under stock option arrangements excluding awards under the 2009 LTIP, which are summarized above, and the performance-based awards noted above under the 2010 LTIP for which performance conditions have not been met:

						Weighted-
				Weighted-		Average
				Average		Remaining		Aggregate
				Exercise		Contractual		Intrinsic
	Shares			Price		Term		Value
Outstanding at January 1, 2010		3,908,270		$	25.05
Granted		119,240			22.39
Exercised		(126,927	)		15.04
Expired or forfeited		(145,046	)		26.91
Outstanding at July 2, 2010		3,755,537		$	25.24		5.05	$	1,943
Vested or expected to vest at July 2, 2010		3,707,746		$	25.33		5.00	$	1,880
Exercisable at July 2, 2010		3,267,746		$	26.72		4.49	$	756

Unrecognized compensation expense related to nonvested stock options was $2,058 as of July 2, 2010. This expense is expected to be recognized over a weighted-average remaining period of 1.6 years.

Nonvested Shares

Changes in the Company’s nonvested shares and restricted stock units, excluding awards under the Company’s Long Term Incentive Programs discussed above, for the six months ended July 2, 2010 are as follows:

				Weighted-					Weighted-
				Average					Average
	Stock			Grant Date		Stock			Grant Date
	Awards			Fair Value		Units			Fair Value
Nonvested at January 1, 2010		86,102			$15.59		297,758			$13.74
Awarded		-			-		90,592			22.48
Vested		(30,061	)		10.25		(136,788	)		13.52
Forfeited		-			-		(13,903	)		15.11
Nonvested at July 2, 2010		56,041			$18.46		237,659			$17.11
Expected to vest at July 2, 2010		56,041			$18.46		215,550			$16.99

Unrecognized compensation expense related to nonvested restricted stock awards was $62 as of July 2, 2010. The expense is expected to be recognized over a weighted-average remaining period of 0.7 years. Unrecognized compensation expense related to nonvested restricted stock units was $3,049 as of July 2, 2010. The expense is expected to be recognized over a weighted-average remaining period of 1.4 years.

Form 10-Q
Page 18

Note 5.  Earnings/(Loss) Per Share

In June 2008, the FASB issued ASC 260-10-45-60 “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities” (“ASC 260-10-45-60”) which became effective for the Company beginning January 1, 2009. ASC 260-10-45-60 clarifies that share-based payment awards that entitle their holders to receive nonforfeitable dividends before vesting, regardless of whether paid or unpaid, should be considered participating securities and included in the computation of earnings per share pursuant to the two-class method. The adoption of ASC 260-10-45-60 did not have a material impact on the Company’s consolidated financial statements.

Basic earnings per share (“EPS”) excludes common stock equivalents 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 potentially dilutive securities such as stock options were exercised and nonvested shares vested, to the extent such securities would not be anti-dilutive.

Basic and diluted loss per share (“LPS”) exclude common stock equivalents and are computed by dividing net loss by the weighted-average number of common shares outstanding for the periods presented. Net loss for the quarters ended July 2, 2010 and July 3, 2009 were $(23,452) and $(19,244), respectively, and weighted-average shares outstanding for the quarters ended July 2, 2010 and July 3, 2009 were 53,225 and 56,273, respectively, resulting in a basic and diluted LPS of $(.44) and $(.34) for the quarters ended July 2, 2010 and July 3, 2009, respectively.

The following is a reconciliation of the number of shares (in thousands) for the basic and diluted EPS/(LPS) computations for the six months ended July 2, 2010 and July 3, 2009:

	For the Six Months Ended
	July 2, 2010						July 3, 2009
			Weighted		Per-					Weighted		Per-
	Net		- Average		Share		Net			- Average		Share
	Income		Shares		Amount		Loss			Shares		Amount
Basic EPS/(LPS)	$	2,295		53,698	$	.04	$	(3,367	)		56,695	$	(.06	)
Effect of dilutive securities:
Stock options and employee stock purchase plan shares	-			323	-			-			-		-
Nonvested shares	-			163	-			-			-		-
Diluted EPS/(LPS)	$	2,295		54,184	$	.04	$	(3,367	)		56,695	$	(.06	)

The following securities (in thousands) were outstanding as of July 2, 2010 and July 3, 2009, but were not included in the computation of diluted EPS/(LPS) as their inclusion would be anti-dilutive:

	For the Quarter Ended				For the Six Months Ended
	July 2, 2010		July 3, 2009		July 2, 2010		July 3, 2009
Anti-dilutive securities		2,967		4,683		2,491		4,694

Note 6.  Comprehensive Income/(Loss)

Comprehensive income/(loss) for the quarters and six months ended July 2, 2010 and July 3, 2009 is as follows:

	For the Quarter Ended						For the Six Months Ended
	July 2, 2010			July 3, 2009			July 2, 2010			July 3, 2009
Net income/(loss)		$(23,452	)		$(19,244	)		$2,295			$(3,367	)
Change in cumulative translation adjustment		(4,512	)		7,152			(11,990	)		3,382
Change in fair value of cash flow hedges, net of taxes		2,412			(5,699	)		6,466			(6,837	)
Change in other adjustments, net of taxes		6			-			(46	)		-
Comprehensive loss		$(25,546	)		$(17,791	)		$(3,275	)		$(6,822	)

Form 10-Q
Page 19

The components of accumulated other comprehensive income as of July 2, 2010, December 31, 2009 and July 3, 2009 were:

	July 2, 2010		December 31, 2009		July 3, 2009
Cumulative translation adjustment		$1,663		$13,653		$11,158
Fair value of cash flow hedges, net of taxes of $388 at July 2, 2010, $47 at December 31, 2009 and $(118) at July 3, 2009		7,370		904		(2,208)
Other adjustments, net of taxes of $105 at July 2, 2010, $147 at December 31, 2009 and $7 at July 3, 2009		445		491		138
Total		$9,478		$15,048		$9,088

Note 7.  Business Segments and Geographic Information

The Company has three reportable segments: North America, Europe and Asia. The composition of the segments is consistent with that used by the Company’s chief operating decision maker.

The North America segment is comprised of the sale of products to wholesale and retail customers in North America. It includes Company-operated specialty and factory outlet stores in the United States and our United States e-commerce business. This segment also includes royalties from licensed products sold worldwide, the related management costs and expenses associated with our worldwide licensing efforts, and certain marketing expenses and value-added services. Beginning in the first quarter of 2010, results for the North America segment include certain U.S. distribution expenses, customer operations and service costs, credit management and short-term incentive compensation costs that were recorded in Unallocated Corporate in prior quarters. These prior period costs have been reclassified to North America to conform to the current period presentation.

The Europe and Asia segments each consist of the marketing, selling and distribution of footwear, apparel and accessories outside of the United States. Products are sold outside of the United States through our subsidiaries (which use wholesale, retail and e-commerce channels to sell footwear, apparel and accessories), franchisees and independent distributors. Certain distributor revenue and operating income reflected in our Europe segment in prior periods has been reclassified to Asia to conform to the current period presentation. Additionally, certain expenses, primarily related to short-term incentive compensation costs previously reported in Unallocated Corporate, have been reclassified to Europe and Asia to conform to the current period presentation.

Unallocated Corporate consists primarily of corporate finance, information services, legal and administrative expenses, share-based compensation costs, global marketing support expenses, worldwide product development costs and other costs incurred in support of Company-wide activities. Unallocated Corporate also includes certain value chain costs such as sourcing and logistics, as well as inventory variances. Beginning in the first quarter of 2010, certain U.S. distribution expenses and short-term incentive compensation costs previously reported in Unallocated Corporate were reclassified to North America, Europe and Asia. Additionally, Unallocated Corporate includes total other income/(expense), net, which is comprised of interest income, interest expense, and other, net, which includes foreign exchange gains and losses resulting from changes in the fair value of financial derivatives not designated as hedges, currency gains and losses incurred on the settlement of local currency denominated assets and liabilities, and other miscellaneous non-operating income/(expense). Such income/(expense) is not allocated among the reportable 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 revenue and operating income. Total assets are disaggregated to the extent that assets apply specifically to a single segment. Unallocated Corporate assets primarily consist of cash and equivalents, tax assets, manufacturing/sourcing assets, computers and related equipment, and transportation and distribution equipment.

Operating income/(loss) shown below for the quarter and six months ended July 2, 2010 includes impairment charges of $8,172 and $5,077 in North America and Europe, respectively, related to goodwill and certain other intangible assets. Operating income for North America for the quarter and six months ended July 2, 2010 also includes gains related to the termination of licensing agreements of $1,500 and $3,000, respectively. Operating income for Europe for the six months ended July 3, 2009 includes an impairment charge of $925 related to a certain intangible asset. See Notes 2 and 9 to the unaudited condensed consolidated financial statements for additional information.

Form 10-Q
Page 20

For the Quarter Ended July 2, 2010 and July 3, 2009

									Unallocated
	North America		Europe			Asia			Corporate			Consolidated
2010
Revenue		$91,995		$66,750			$30,209		$	-			$188,954
Operating income/(loss)		2,921		(11,812	)		2,630			(27,046	)		(33,307)
Income/(loss) before income taxes		2,921		(11,812	)		2,630			(26,771	)		(33,032)
Total assets		211,059		323,512			49,459			182,535			766,565
Goodwill		31,964		6,994			-			-			38,958
2009
Revenue		$86,314		$65,828			$27,560		$	-			$179,702
Operating income/(loss)		1,209		(10,574	)		(688	)		(26,345	)		(36,398)
Income/(loss) before income taxes		1,209		(10,574	)		(688	)		(24,497	)		(34,550)
Total assets		225,085		292,668			42,697			182,214			742,664
Goodwill		36,876		6,994			-			-			43,870

For the Six Months Ended July 2, 2010 and July 3, 2009

							Unallocated
	North America		Europe		Asia		Corporate			Consolidated
2010
Revenue		$213,853		$218,380		$73,763	$	-			$505,996
Operating income/(loss)		24,563		25,456		9,477		(53,415	)		6,081
Income/(loss) before income taxes		24,563		25,456		9,477		(53,339	)		6,157
2009
Revenue		$206,172		$205,358		$64,820	$	-			$476,350
Operating income/(loss)		10,770		19,222		1,202		(49,409	)		(18,215	)
Income/(loss) before income taxes		10,770		19,222		1,202		(47,905	)		(16,711	)

The following summarizes our revenue by product for the quarters and six months ended July 2, 2010 and July 3, 2009:

	For the Quarter Ended				For the Six Months Ended
	July 2,		July 3,		July 2,		July 3,
	2010		2009		2010		2009
Footwear		$131,589		$126,954		$357,150		$338,595
Apparel and accessories		52,069		47,241		137,758		125,905
Royalty and other		5,296		5,507		11,088		11,850
		$188,954		$179,702		$505,996		$476,350

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Note 8.  Inventory, net

Inventory, net consists of the following:

	July 2, 2010		December 31, 2009		July 3, 2009
Materials	$	9,102	$	7,944	$	8,368
Work-in-process		1,382		740		920
Finished goods		166,722		149,857		171,104
Total	$	177,206	$	158,541	$	180,392

Note 9.  Goodwill and Intangibles

The Company completed its annual impairment testing for goodwill and indefinite-lived intangible assets in the second quarter of 2010, and determined that the carrying values of certain goodwill and intangible assets, primarily related to its IPath^® and howies^® brands, exceeded fair value. Accordingly, the Company recorded non-cash impairment charges of $5,395 and $7,854 for goodwill and intangible assets, respectively, in its consolidated statement of operations. The impairment charge reduced the goodwill related to the IPath, North America retail, and Europe retail reporting units to zero. The charge of $7,854 reduced the trademark and other intangible assets of IPath and howies to their respective fair values of $720 and $1,200. See Note 2 to the unaudited condensed consolidated financial statements for additional information.

A summary of goodwill activity by segment follows:

	North America		Europe		Asia		Total
Balance at December 31, 2009	$	36,876	$	7,477		-	$	44,353
Impairment charges		(4,912)		(483)		-		(5,395)
Balance at July 2, 2010	$	31,964	$	6,994		-	$	38,958

Intangible assets consist of trademarks and other intangible assets. Other intangible assets consist of customer, patent and non-competition related intangible assets. Intangible assets consist of the following:

	July 2, 2010							December 31, 2009
			Accumulated			Net Book				Accumulated			Net Book
	Gross		Amortization			Value		Gross		Amortization			Value
Trademarks (indefinite-lived)		$32,370		$        -			$32,370		$35,841		$        -			$35,841
Trademarks (finite-lived)		4,608		(2,113	)		2,495		10,239		(4,149	)		6,090
Other intangible assets (finite-lived)		5,971		(4,641	)		1,330		10,723		(7,122	)		3,601
Total		$42,949		$(6,754	)		$36,195		$56,803		$(11,271	)		$45,532

Note 10.  Acquisition

On March 16, 2009, we acquired 100% of the stock of Glaudio Fashion B.V. (“Glaudio”) for approximately $1,500, net of cash acquired. Glaudio operates nine Timberland^® retail stores in the Netherlands and Belgium which sell Timberland^® footwear, apparel, leather goods and product-care products for men, women and kids. The acquisition was effective March 1, 2009, and its results have been included in our Europe segment from the effective date of the acquisition. The acquisition of Glaudio was not material to the results of operations, financial position or cash flows of the Company.

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Note 11.  Income Taxes

In February 2009, the Company received notification that our U.S. federal tax examinations for 2006 and 2007 had been completed. Accordingly, in the first quarter of 2009, we reversed approximately $6,400 of accruals related to uncertain tax positions. During the second quarter of 2009, we recorded a net benefit of approximately $140 in our tax provision related to the settlement of certain foreign tax audits.

In December 2009, we received a Notice of Assessment from the Internal Revenue Department of Hong Kong for approximately $17,600 with respect to the tax years 2004 through 2008. In connection with the assessment, the Company was required to make payments to the Internal Revenue Department of Hong Kong totaling approximately $900 in the first quarter of 2010 and $7,500 in the second quarter of 2010. We believe we have a sound defense to the proposed adjustment and will continue to firmly oppose the assessment. We believe that the assessment does not impact the level of liabilities for our income tax contingencies. However, actual resolution may differ from our current estimates, and such differences could have a material impact on our future effective tax rate and our results of operations.

Note 12.  Share Repurchase

On March 10, 2008, our Board of Directors approved the repurchase of up to 6,000,000 shares of our Class A Common Stock. Shares repurchased under this authorization totaled 301,866 and 1,324,259 for the quarter and six months ended July 2, 2010, respectively. As of July 2, 2010, there were no shares remaining available for repurchase under this authorization.

On December 3, 2009, our Board of Directors approved the repurchase of up to an additional 6,000,000 shares of our Class A Common Stock. Shares repurchased under this authorization totaled 1,022,767 for the quarter and six months ended July 2, 2010. As of July 2, 2010, 4,977,233 shares remained available for repurchase under this authorization.

From time to time, we use plans adopted under Rule 10b5-1 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, to facilitate share repurchases.

During the first quarter of 2010, 200,000 shares of our Class B Common Stock were converted to an equivalent amount of our Class A Common Stock.

Note 13.  Litigation

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

Note 14.  Subsequent Event

In July 2010, we received final approval associated with tax clearance for certain closed foreign operations. Accordingly, in the third quarter of 2010, we will record a net benefit of approximately $3,100 related to uncertain tax positions.

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

The following is management’s discussion and analysis of the financial condition and results of operations of The Timberland Company and its subsidiaries (“we”, “our”, “us”, “its”, “Timberland” or the “Company”), as well as our liquidity and capital resources. The discussion, including known trends and uncertainties identified by management, should be read in conjunction with the Company’s unaudited condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q, as well as our audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2009.

Included herein are discussions and reconciliations of Total Company, Europe and Asia revenue changes to constant dollar revenue changes. Constant dollar revenue changes, which exclude the impact of changes in foreign exchange rates, are not Generally Accepted Accounting Principle (“GAAP”) performance measures. The difference between changes in reported revenue (the most comparable GAAP measure) and constant dollar revenue changes is the impact of foreign currency exchange rate fluctuations. We calculate constant dollar revenue changes by recalculating current year revenue

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using the prior year’s exchange rates and comparing it to the prior year revenue reported on a GAAP basis. We provide constant dollar revenue changes for Total Company, Europe and Asia results because we use the measure to understand the underlying results and trends of the business segments excluding the impact of exchange rate changes that are not under management’s direct control. The limitation of this measure is that it excludes exchange rate changes that have an impact on the Company’s revenue. This limitation is best addressed by using constant dollar revenue changes in combination with the GAAP numbers. We have a foreign exchange rate risk management program intended to minimize both the positive and negative effects of currency fluctuations on our reported consolidated results of operations, financial position and cash flows. The actions taken by us to mitigate foreign exchange risk are reflected in cost of goods sold and other, net.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations are based upon our unaudited condensed 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, incentive compensation accruals, share-based compensation 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, or that result from, applying our critical accounting policies. Our significant accounting policies are described in Note 1 to the Company’s consolidated financial statements included in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2009. Our estimates, assumptions and judgments involved in applying the critical accounting policies are described in Part II, Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the year ended December 31, 2009.

During the quarter ended July 2, 2010, management concluded that the carrying value of goodwill exceeded the estimated fair value for its IPath, North America Retail and Europe Retail reporting units and, accordingly, recorded an impairment charge of $5.4 million. Management also concluded that the carrying value of the IPath and howies trademarks and other intangible assets exceeded the estimated fair value and, accordingly, recorded an impairment charge of $7.8 million. The Company's North America Wholesale and Europe Wholesale business units have fair values substantially in excess of their carrying value. See Notes 2 and 9 to the unaudited condensed consolidated financial statements.

These non-recurring fair value measurements were developed using significant unobservable inputs (Level 3). For goodwill, the primary valuation technique used was the discounted cash flow analysis based on the management's estimates of forecasted cash flows for each business unit, with those cash flows discounted to present value using rates proportionate with the risks of those cash flows. In addition, management used a market-based valuation method involving analysis of market multiples of revenues and earnings before interest, taxes, depreciation and amortization for a group of similar publicly traded companies and, if applicable, recent transactions involving comparable companies. The Company believes the blended use of these models balances the inherent risk associated with either model if used on a stand-alone basis, and this combination is indicative of the factors a market participant would consider when performing a similar valuation. For trademark intangible assets, management used the reflief-from-royalty method in which fair value is the discounted value of forecasted royalty revenue arising from a trademark using a royalty rate that an independent third party would pay for use of that trademark.

Our estimates of fair value are sensitive to changes in the assumptions used in our valuation analysis and, as a result, actual performance in the near and longer-term could be different from these expectations and assumptions. These differences could be caused by events such as strategic decisions made in response to economic and competitive conditions and the impact of economic factors on

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our customer base. If our future actual results are significantly lower than our current operating results or our estimates and assumptions used to calculate fair value are materially different, the value determined using the discounted cash flow analysis could result in a lower value. A significant decrease in value could result in a fair value lower than carrying value, which could result in impairment of our remaining goodwill. While we believe we have made reasonable estimates and assumptions used to calculate the fair value of the reporting units and other intangible assets, it is possible a material change could occur, which may ultimately result in the recording of an additional non-cash impairment charge.

These non-cash impairment charges do not have any direct impact on our liquidity, compliance with any covenants under our debt agreements or potential future results of operations. Our historical operating results may not be indicative of our future operating results. We will revise our estimates used in calculating the fair value of our reporting units as needed.

Overview

Our principal strategic goal is to become the authentic outdoor brand of choice globally by offering an integrated product selection that equips consumers to enjoy the experience of being in the outdoors. We sell our products to consumers who embrace an outdoor-inspired lifestyle through high-quality distribution channels, including our own retail stores, which reinforce the premium positioning of the Timberland^â brand.

Our ongoing efforts to achieve this goal include (i) enhancing our leadership position in our core Timberland^® footwear business through an increased focus on technological innovation and “big idea” initiatives like Earthkeepers, (ii) expanding our global apparel and accessories business by leveraging the brand’s equity and initiatives through a combination of in-house development and licensing arrangements with trusted partners, (iii) expanding our brands geographically, (iv) driving operational and financial excellence, (v) setting the standard for social and environmental responsibility and (vi) striving to be an employer of choice.

A summary of our second quarter of 2010 financial performance, compared to the second quarter of 2009, follows:

• Second quarter revenue increased 5.1%, or 5.8% on a constant dollar basis, to $189.0 million.

• Gross margin increased from 42.0% to 49.5%.

• Operating expenses were $126.8 million, an increase of 13.3% from $111.9 million in the prior year period. Operating expenses for the second quarter of 2010 include impairment charges of $13.2 million.

• We recorded an operating loss of $33.3 million in the second quarter of 2010, compared to an operating loss of $36.4 million in the prior year period. Operating loss for the second quarter of 2010 includes impairment charges of $13.2 million.

• Net loss was $23.5 million in the second quarter of 2010, compared to $19.2 million in the second quarter of 2009.

• Loss per share increased from $(.34) in the second quarter of 2009 to $(.44) in the second quarter of 2010.

• Cash at the end of the quarter was $237.8 million with no debt outstanding.

Results of Operations for the Quarter Ended July 2, 2010 as Compared to the Quarter Ended July 3, 2009

Revenue

In the second quarter of 2010, our consolidated revenues grew 5.1% to $189.0 million, reflecting growth across North America, Europe and Asia. Double-digit growth in Italy and Central Europe was partially offset by declines in the U.K. and France, while Taiwan and China continued to post strong growth for the quarter, leading the favorable year over year comparison in Asia. On a constant dollar basis, consolidated revenues increased 5.8%.

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Products

By product group, our footwear revenues increased 3.7% to $131.6 million compared to the prior year, and apparel and accessories revenues grew 10.2% to $52.1 million. Growth in footwear revenues was driven primarily by improved wholesale revenue in North America, driven by Timberland PRO^® products, and Europe, driven by performance footwear. This growth was partially offset by a decrease in retail footwear sales in Europe and North America. The improvement in apparel and accessories revenues compared to the prior year reflects revenue growth in North America, driven by SmartWool^® accessories, and in Asia, related to apparel sales in our own stores, partially offset by declines in our European apparel business. Royalty and other revenue decreased 3.8% to $5.3 million compared to the prior year period primarily due to a decline in licensed kids’ apparel in North America.

Channels

Wholesale revenue was $117.5 million in the second quarter of 2010, an 8.3% increase compared to the prior year quarter, driven primarily by double-digit growth in North America and Europe which was partially offset by double-digit declines in Asia.

Retail revenues were up slightly at $71.5 million in the second quarter of 2010, driven by growth in Asia which was partially offset by declines in Europe and North America. Comparable store sales were relatively flat compared to the second quarter of 2009 as growth in specialty and outlet stores across Asia was offset by declines in both Europe and North America. We had 224 and 220 Company-owned stores, shops and outlets worldwide at the end of the second quarters of 2010 and 2009, respectively.

Gross Profit

Gross profit as a percentage of sales, or gross margin, was 49.5% for the second quarter of 2010, a 750 basis point improvement compared to the second quarter of 2009. We saw gross margin improvement for the quarter in all regions, driven by lower product costs, declines in global close-out revenue, reduced provisions for inventory and sales returns, and favorable region and channel mix. While the benefits from mix and lower product costs continued in the second quarter, we believe that increased product costs as a result of higher leather, transportation and labor costs could adversely impact gross margin in the second half of 2010.

We include the costs of procuring inventory (inbound freight and duty, overhead and other similar costs) in cost of goods sold. These costs amounted to $14.9 million and $11.7 million for the second quarters of 2010 and 2009, respectively. The increase is principally the result of freight cost unfavorability quarter over quarter, partially offset by reduced logistics and apparel sourcing costs.

Operating Expense

Operating expense for the second quarter of 2010 was $126.8 million, an increase of $14.9 million, or 13.3%, when compared to the second quarter of 2009. Foreign exchange rate impacts were not material in the second quarter of 2010. The increase in operating expense was driven by a charge for impairment of goodwill and intangible assets of $13.2 million, an increase in general and administrative expense of $2.0 million and an increase in selling expense of $1.1 million. These increases were partially offset by a $1.5 million gain in the second quarter of 2010 related to the termination of a licensing agreement.

Selling expense was $86.1 million in the second quarter of 2010, an increase of 1.3% over the same period in 2009. Selling expense reflects higher incentive compensation costs and selling related expenses, partially offset by a decline in other employee compensation and store related costs.

We include the costs of physically managing inventory (warehousing and handling costs) in selling expense. These costs totaled $7.1 million and $8.0 million in the second quarters of 2010 and 2009, respectively.

In the second quarters of 2010 and 2009, we recorded $0.5 million and $0.3 million, respectively, of reimbursed shipping expenses within revenues and the related shipping costs within selling expense. Shipping costs are included in selling expense and were $2.8 million and $1.5 million for the quarters ended July 2, 2010 and July 3, 2009, respectively.

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Advertising expense, which is included in selling expense, was $5.5 million and $5.6 million in the second quarters of 2010 and 2009, respectively. A decrease in television and other media campaigns was partially offset by continued investment in out of home, Internet and digital media initiatives, as well as co-op advertising. Advertising expense includes co-op advertising costs, consumer-facing advertising costs such as print, television and Internet campaigns, production costs including agency fees, and catalog costs. Advertising costs are expensed at the time the advertising is used, predominantly in the season that the advertising costs are incurred. Prepaid advertising recorded on our unaudited condensed consolidated balance sheets as of July 2, 2010 and July 3, 2009 was $2.2 million and $2.3 million, respectively.

General and administrative expense for the second quarter of 2010 was $28.9 million, an increase of 7.6% compared to the $26.9 million reported in the second quarter of 2009, driven by increases in share-based and incentive compensation.

Total operating expense in the second quarter of 2010 also included an impairment charge of $7.8 million related to certain intangible assets, an impairment charge of $5.4 million related to goodwill, and a gain of $1.5 million associated with the termination of a licensing agreement. Of the total $13.2 million in impairment charges recorded in the second quarter of 2010, approximately $12.0 million relates to IPath and howies. See Note 2 to the unaudited condensed consolidated financial statements.

Operating Income/(Loss)

We recorded an operating loss of $33.3 million in the second quarter of 2010, compared to an operating loss of $36.4 million in the prior year period. Operating loss included impairment charges of $13.2 million and a gain of $1.5 million associated with the termination of a licensing agreement in the second quarter of 2010.

Other Income/(Expense) and Taxes

Interest income was $0.1 million and $0.3 million in the second quarters of 2010 and 2009, respectively, reflecting lower interest rates. Interest expense, which is comprised of fees related to the establishment and maintenance of our revolving credit facility and bank guarantees, and interest paid on short-term borrowings, was $0.1 million in each of the second quarters of 2010 and 2009.

Other, net, included foreign exchange gains of $1.0 million and $0.7 million in the second quarters of 2010 and 2009, respectively, resulting from changes in the fair value of financial derivatives, specifically forward contracts not designated as cash flow hedges, and the currency gains and losses incurred on the settlement of local currency denominated receivables and payables. These results were driven by the volatility of exchange rates within the second quarters of 2010 and 2009 and should not be considered indicative of expected future results.

The effective income tax rate for the second quarter of 2010 was 29.0%. The Company anticipates that its effective tax rate for 2010 will be lower than its overall statutory rate of 39%. The effective income tax rate for the second quarter of 2009 was 44.3%.

In December 2009, we received a Notice of Assessment from the Internal Revenue Department of Hong Kong for approximately $17.6 million with respect to the tax years 2004 through 2008. In connection with the assessment, the Company made required payments to the Internal Revenue Department of Hong Kong totaling approximately $7.5 million in the second quarter of 2010. We believe we have a sound defense to the proposed adjustment and will continue to firmly oppose the assessment. We believe that the assessment does not impact the level of liabilities for our income tax contingencies. However, actual resolution may differ from our current estimates, and such differences could have a material impact on our future effective tax rate and our results of operations.

Segments Review

We have three reportable business segments (see Note 7 to the unaudited condensed consolidated financial statements contained herein for additional information): North America, Europe and Asia. Beginning in the first quarter of 2010, certain U.S. distribution expenses and short-term incentive compensation costs previously reported in Unallocated Corporate were reclassified to North America, Europe and Asia to conform to the current period presentation. Additionally, certain distributor

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revenue and operating income reflected in our Europe segment in prior periods has been reclassified to Asia to conform to the current period presentation.

Revenue by segment for the quarter ended July 2, 2010 compared to the quarter ended July 3, 2009 is as follows (dollars in millions):

	For the Quarter Ended
	July 2,		July 3,
	2010		2009		% Change
North America		$  92.0		$  86.3		6.6%
Europe		66.8		65.8		1.4
Asia		30.2		27.6		9.6
		$189.0		$179.7		5.1

Operating income/(loss) by segment and as a percentage of revenue for the quarters ended July 2, 2010 and July 3, 2009 are included in the table below (dollars in millions). Segment operating income/(loss) is presented as a percentage of its respective segment revenue. Unallocated Corporate expenses are presented as a percentage of total revenue. North America and Europe include impairment charges of $8.1 million and $5.1 million, respectively, in the quarter ended July 2, 2010. Additionally, North America includes a gain of $1.5 million related to the termination of a licensing agreement in the quarter ended July 2, 2010.

	For the Quarter Ended
	July 2,					July 3,
	2010					2009
North America	$	2.9		3.2	%	$	1.2		1.4	%
Europe		(11.8	)	(17.7	)		(10.6	)	(16.1	)
Asia		2.6		8.7			(0.7	)	(2.5	)
Unallocated Corporate		(27.0	)	(14.3	)		(26.3	)	(14.7	)
	$	(33.3	)	(17.6	)	$	(36.4	)	(20.3	)

North America

North America revenues were $92.0 million in the second quarter of 2010, an increase of 6.6% as compared to the same period in 2009. Growth in apparel and accessories and double-digit growth in our Timberland PRO^® footwear line was partially offset by declines in other footwear. Within North America, our retail business had a decline in revenue of 2.5%, driven by a 3.9% decrease in comparable store sales. Growth in our specialty stores was offset by declines in our outlets. We had 66 stores at July 2, 2010 compared to 70 stores at July 3, 2009. Store declines were partially offset by strong growth in our e-commerce business.

Operating income for our North America segment was $2.9 million, compared to $1.2 million for the second quarter of 2009. The increase was driven by an 815 basis point improvement in gross margin, due primarily to favorable product mix, reduced product costs, less promotional activity in retail, and lower provisions for inventory and sales returns and allowances. Operating expense increased 25.3% driven by impairment charges of $8.1 million principally associated with our IPath reporting unit, partially offset by a gain of $1.5 million associated with the termination of a licensing agreement.

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Europe

Europe recorded revenues of $66.8 million in the second quarter of 2010, a 1.4% increase from the second quarter of 2009, and an increase of 5.7% on a constant dollar basis. Double-digit growth across Italy, Central Europe and Scandinavia, was offset by declines in the UK and France and unfavorable foreign exchange rate impacts. Strong growth in footwear through the wholesale channel was partially offset by weakness in the retail channels, which was driven by lower footwear sales. Retail revenue fell 10.4%, driven by comparable store sales declines of 4.3% and unfavorable foreign exchange rate impacts. We had 63 stores at both July 2, 2010 and July 3, 2009.

Timberland’s European segment recorded an operating loss of $11.8 million in the second quarter of 2010, compared to an operating loss of $10.6 million in the second quarter of 2009. A 165 basis point increase in gross margin resulted from improved profitability on close-outs, lower sales returns and allowances and lower product costs, partially offset by unfavorable foreign exchange rate impacts and product mix. The increase in gross margin was more than offset by a 6.7% increase in operating expenses, driven by an impairment charge of $5.1 million associated principally with our howies and IPath trademarks, partially offset by favorable foreign exchange impacts.

Asia

In Asia, revenues increased 9.6%, or 4.8% in constant dollars, to $30.2 million in the second quarter of 2010 due to continued strong growth in Taiwan, due in part to the impact of new retail stores, and China. Retail revenues were up 23.2%, driven by strong apparel sales and favorable foreign exchange rate impacts. Comparable store sales grew 11.4%, and we added eight new stores year over year. We had 95 stores at July 2, 2010 compared to 87 stores at July 3, 2009.

We had operating income in our Asia segment of $2.6 million for the second quarter of 2010, compared to an operating loss of $0.7 million for the second quarter of 2009, driven by a 950 basis point improvement in gross margin, reflecting favorable foreign exchange rate impacts, lower levels of sales returns and allowances and favorable mix impacts. This improvement was partially offset by an increase in operating expenses of 6.3% due to unfavorable foreign exchange impacts, as well as higher employee and store related costs.

Corporate Unallocated

Our Unallocated Corporate expenses, which include central support and administrative costs not allocated to our business segments, increased 2.7% to $27.0 million, which reflects higher incentive compensation costs and consulting costs associated with technology initiatives partially offset by favorability in certain supply chain costs which are not allocated to our reported segments.

Results of Operations for the Six Months Ended July 2, 2010 as Compared to the Six Months Ended July 3, 2009

Revenue

In the first six months of 2010, our consolidated revenues grew 6.2% to $506.0 million, reflecting growth across North America, Europe and Asia and favorable foreign exchange rate impacts. Nearly every market in Europe and Asia delivered top-line growth for the first six months of 2010 compared to the prior year period. Double-digit growth in Italy, Germany, Scandinavia and Spain, as well as strong growth in the UK, were partially offset by declines in our European distributor business. Revenue in China more than doubled in the first six months and Taiwan posted double-digit growth for the first six months, leading the favorable year over year improvement in Asia. On a constant dollar basis, consolidated revenues increased 4.2%.

Products

By product group, our footwear revenues increased 5.5% to $357.1 million compared to the prior year and apparel and accessories revenues grew 9.4% to $137.8 million. Growth in footwear revenues was driven primarily by improved wholesale revenue in Europe and North America and benefits from foreign exchange. Footwear revenue growth in North America was driven by double-digit growth in our Timberland PRO^® and performance lines, partially offset by declines in other footwear. The improvement in apparel and accessories revenues compared to the prior year reflects revenue growth in North America and Asia related to sales of apparel and accessories in our own stores and through our wholesale partners,

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partially offset by declines in our European wholesale apparel business. Royalty and other revenue decreased 6.4% to $11.1 million compared to the prior year period, primarily due to a decline in licensed kids’ apparel in Europe.

Channels

Wholesale revenue was $349.4 million in the first six months of 2010, a 6.8% increase compared to the first six months of 2009, driven primarily by growth across all regions and favorable foreign exchange rate impacts. During the first six months of 2010, we saw solid performance in North America and Europe, as well as double-digit growth in Asia.

Retail revenues grew 4.9% to $156.6 million in the first six months of 2010, driven by favorable foreign exchange rate impacts, comparable store sales growth and the net addition of 4 stores. Comparable store sales were up 2.1% compared to the first six months of 2009, with growth in our specialty and outlet stores across Europe and Asia, and our specialty stores in North America.

Gross Profit

Gross profit as a percentage of sales, or gross margin, was 49.7% for the first six months of 2010, a 520 basis point improvement compared to the first six months of 2009. Gross margin improved for the first half of the year across all regions, and was driven by favorable mix impacts, better pricing, in part due to less promotional activity in retail, lower product costs and reduced provisions for inventory and sales returns. While the Company expects the benefits from product mix to continue, it believes that increased product costs as a result of higher leather, transportation and labor costs could adversely impact gross margin in the second half of 2010.

We include the costs of procuring inventory (inbound freight and duty, overhead and other similar costs) in cost of goods sold. These costs amounted to $25.8 million and $25.6 million for the first six months of 2010 and 2009, respectively. The increase is principally the result of freight cost unfavorability, partially offset by reduced logistics and apparel sourcing costs.

Operating Expense

Operating expense for the first six months of 2010 was $245.4 million, an increase of $15.0 million, or 6.5%, when compared to the first six months of 2009. Foreign exchange rate impacts were not material in the first six months of 2010. The change in operating expense was driven by increases of $12.3 million in impairment charges, $4.0 million in general and administrative expenses and $1.5 million in selling expense. These increases were partially offset by a $3.0 million gain related to the termination of licensing agreements during the first six months of 2010.

Selling expense was $178.8 million in the first six months of 2010, an increase of less than 1% over the same period in 2009. Selling expense reflects decreased advertising spend and fixed asset write-offs compared to the prior year period offset by increased selling related expenses and higher incentive compensation costs.

We include the costs of physically managing inventory (warehousing and handling costs) in selling expense. These costs totaled $15.4 million and $17.4 million in the first six months of 2010 and 2009, respectively.

In the first six months of 2010 and 2009, we recorded $1.1 million and $0.9 million, respectively, of reimbursed shipping expenses within revenues and the related shipping costs within selling expense. Shipping costs are included in selling expense and were $8.0 million and $6.3 million for the six months ended July 2, 2010 and July 3, 2009, respectively.

Advertising expense, which is included in selling expense, was $9.3 million and $10.2 million in the first six months of 2010 and 2009, respectively. A decrease in television campaigns, as well as the associated productions costs, was partially offset by continued investment in Internet and other initiatives, as well as co-op advertising. Advertising expense includes co-op advertising costs, consumer-facing advertising costs such as print, television and Internet campaigns, production costs including agency fees, and catalog costs.

General and administrative expense for the first six months of 2010 was $56.3 million, an increase of 7.7% compared to the $52.3 million reported in the first six months of 2009, driven by increases in incentive compensation and other employee related costs of $4.1 million, partially offset by reductions in discretionary spending.

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Total operating expense in the first six months of 2010 also includes an impairment charge of $7.8 million related to certain intangible assets, an impairment charge of $5.4 million related to goodwill, and a gain of $3.0 million associated with the termination of licensing agreements. Total operating expense in the first six months of 2009 included a charge of $0.9 million for the impairment of a trademark, and restructuring credits of $0.1 million.

Operating Income/(Loss)

We recorded operating income of $6.1 million in the first six months of 2010, compared to an operating loss of $18.2 million in the prior year period. The improvement year over year was driven by solid revenue growth and a 520 basis point improvement in gross margin. Operating income in the first six months of 2010 included a goodwill and intangible asset impairment charge of $13.2 million and gains on termination of licensing agreements of $3.0 million, compared to a $0.9 million intangible asset impairment charge and restructuring credits of $0.1 million included in operating loss in the first six months of 2009.

Other Income/(Expense) and Taxes

Interest income was $0.2 million and $0.7 million in the first six months of 2010 and 2009, respectively, reflecting lower interest rates. Interest expense, which is comprised of fees related to the establishment and maintenance of our revolving credit facility and bank guarantees, and interest paid on short-term borrowings, was $0.3 million and $0.2 million in the first six months of 2010 and 2009, respectively.

Other, net, included foreign exchange gains of $0.5 million and $0.4 million in the first six months of 2010 and 2009, respectively, resulting from changes in the fair value of financial derivatives, specifically forward contracts not designated as cash flow hedges, and the currency gains and losses incurred on the settlement of local currency denominated receivables and payables. These results were driven by the volatility of exchange rates within the first six months of 2010 and 2009 and should not be considered indicative of expected future results.

The effective income tax rate for the first six months of 2010 was 62.7%. The Company anticipates that its effective tax rate for 2010 will be lower than its overall statutory rate of 39%. The effective income tax rate for the first six months of 2009 was 79.9%. The rate in 2009 was impacted by the release of approximately $6.5 million in specific tax reserves due to the closure of certain audits in the first six months of 2009 and the geographic mix of our profits.

In December 2009, we received a Notice of Assessment from the Internal Revenue Department of Hong Kong for approximately $17.6 million with respect to the tax years 2004 through 2008. In connection with the assessment, the Company made required payments to the Internal Revenue Department of Hong Kong totaling approximately $8.4 million in the first six months of 2010. We believe we have a sound defense to the proposed adjustment and will continue to firmly oppose the assessment. We believe that the assessment does not impact the level of liabilities for our income tax contingencies. However, actual resolution may differ from our current estimates, and such differences could have a material impact on our future effective tax rate and our results of operations.

Segments Review

Revenue by segment for the six months ended July 2, 2010 compared to the six months ended July 3, 2009 is as follows (dollars in millions):

	For the Six Months Ended
	July 2,		July 3,
	2010		2009		% Change
North America	$	213.9	$	206.2		3.7	%
Europe		218.4		205.4		6.3
Asia		73.7		64.8		13.8
	$	506.0	$	476.4		6.2

Operating income/(loss) by segment and as a percentage of revenue for the six months ended July 2, 2010 and July 3, 2009 are included in the table below (dollars in millions). Segment operating income is presented as a percentage of its respective segment revenue. Unallocated Corporate expenses are presented as a percentage of total revenue. North America

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includes impairment charges of $8.1 million and a gain related to the termination of licensing agreements of $3.0 million in the six months ended July 2, 2010. Europe includes impairment charges of $5.1 million and $0.9 million in the six months ended July 2, 2010 and July 3, 2009, respectively.

	For the Six Months Ended
	July 2,					July 3,
	2010					2009
North America		$24.6		11.5	%	$	10.8		5.2	%
Europe		25.4		11.7			19.2		9.4
Asia		9.5		12.8			1.2		1.9
Unallocated Corporate		(53.4	)	(10.6	)		(49.4	)	(10.4	)
		$ 6.1		1.2		$	(18.2	)	(3.8	)

North America

North America revenues were $213.9 million in the first six months of 2010, an increase of 3.7% as compared to the same period in 2009. Growth in apparel and accessories and double-digit growth in our Timberland PRO^® and performance footwear lines was partially offset by declines in other footwear. Within North America, our retail business grew 1.2%, driven by growth in our e-commerce business, as comparable store sales were flat.

Operating income for our North America segment was $24.6 million, compared to $10.8 million for the first six months of 2009. The increase was driven by an 800 basis point improvement in gross margin, due primarily to favorable product mix, reduced product costs, less promotional activity in retail, and lower provisions for inventory and sales returns and allowances. Operating expenses increased 9.2% reflecting goodwill and intangible asset impairment charges of $8.1 million, primarily related to IPath, and increases in certain marketing initiatives and selling related costs. These items were partially offset by a gain of $3.0 million associated with the termination of licensing agreements and a reduction of $0.7 million associated with fixed asset write-offs taken in 2009 related to our e-commerce business and underperforming retail stores.

Europe

Europe recorded revenues of $218.4 million in the first six months of 2010, which was a 6.3% increase from the first six months of 2009, and an increase of 3.6% on a constant dollar basis. Growth across our major markets in Europe, in particular Italy, Germany and the UK, was partially offset by weakness in certain distributor markets, such as Greece, Turkey and the Middle East. Both wholesale and retail channels showed growth in footwear with the majority coming from the wholesale channel. Strength in retail apparel sales was offset by apparel revenue declines in the wholesale channel. Retail growth of 4.1% was driven by comparable store sales growth of almost 1% and favorable foreign exchange rate impacts.

Timberland’s European segment recorded operating income of $25.4 million in the first six months of 2010, compared to operating income of $19.2 million in the first six months of 2009. Improvement in Europe was driven by a 180 basis point increase in gross margin from favorable product and channel mix, as well as lower product costs. The increase in margin was partially offset by a 5.1% increase in operating expenses, due principally to the impact of a $5.1 million impairment charge related primarily to our howies and IPath trademarks. Operating expense for the 2009 period included a charge of $0.9 million for the impairment of the GoLite trademark. In addition, Europe incurred higher employee related costs, which were partially offset by reduced discretionary spending.

Asia

In Asia, revenues increased 13.8%, or 9.3% in constant dollars, to $73.7 million in the first six months of 2010 due to strong growth in footwear and apparel in both wholesale and retail channels. Retail revenues were up 12.0%, driven by comparable store sales growth of 8.0%, the addition of 8 stores, and favorable foreign exchange rate impacts.

We had operating income in our Asia segment of $9.5 million for the first six months of 2010, compared to operating income of $1.2 million for the first six months of 2009, driven by a 460 basis point improvement in gross margin, reflecting favorable foreign exchange rate impacts and lower levels of sales returns and allowances.

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Corporate Unallocated

Our Unallocated Corporate expenses, which include central support and administrative costs not allocated to our business segments, increased 8.1% to $53.4 million in the first six months of 2010, which reflects higher incentive compensation and other employee related costs partially offset by decreased advertising costs.

 Reconciliation of Total Company, Europe and Asia Revenue Increases/(Decreases) To Constant Dollar Revenue Increases/(Decreases)

Total Company Revenue Reconciliation:

	For the Quarter						For the Six Months
	Ended July 2, 2010						Ended July 2, 2010
	$ Millions						$ Millions
	Change			% Change			Change		% Change
Revenue increase (GAAP)	$	9.3			5.1	%	$	29.6		6.2	%
(Decrease)/increase due to foreign exchange rate changes		(1.1	)		-0.7	%		9.6		2.0	%
Revenue increase in constant dollars	$	10.4			5.8	%	$	20.0		4.2	%

Europe Revenue Reconciliation:

	For the Quarter						For the Six Months
	Ended July 2, 2010						Ended July 2, 2010
	$ Millions						$ Millions
	Change			% Change			Change		% Change
Revenue increase (GAAP)		$0.9			1.4	%		$13.0		6.3	%
(Decrease)/increase due to foreign exchange rate changes		(2.9	)		-4.3	%		5.5		2.7	%
Revenue increase in constant dollars		$3.8			5.7	%		$7.5		3.6	%

Asia Revenue Reconciliation:

	For the Quarter					For the Six Months
	Ended July 2, 2010					Ended July 2, 2010
	$ Millions					$ Millions
	Change		% Change			Change		% Change
Revenue increase (GAAP)	$	2.6		9.6	%	$	8.9		13.8	%
Increase due to foreign exchange rate changes		1.3		4.8	%		2.9		4.5	%
Revenue increase in constant dollars	$	1.3		4.8	%	$	6.0		9.3	%

The difference between changes in reported revenue (the most comparable GAAP measure) and constant dollar revenue changes is the impact of foreign currency. We calculate constant dollar revenue changes by recalculating current year revenue using the prior year’s exchange rates and comparing it to the prior year revenue reported on a GAAP basis. We provide constant dollar revenue changes for Total Company, Europe and Asia results because we use the measure to understand the underlying results and trends of the business segments excluding the impact of exchange rate changes that are not under management’s direct control. We have a foreign exchange rate risk management program intended to minimize both the positive and negative effects of currency fluctuations on our reported consolidated results of operations, financial position and cash flows. The actions taken by us to mitigate foreign exchange risk are reflected in cost of goods sold and other, net.

Accounts Receivable and Inventory

Accounts receivable were $86.8 million at July 2, 2010, compared with $149.2 million as of December 31, 2009 and $100.1 million as of July 3, 2009. Days sales outstanding were 41 days as of July 2, 2010, compared with 35 days as of December 31, 2009 and 50 days as of July 3, 2009. Wholesale days sales outstanding were 55 days for the second quarter of 2010, 45 days at December 31, 2009 and 66 days for the second quarter of 2009. The decrease in accounts receivable was driven by a shift in the pattern of revenue to earlier in the quarter, and maintaining our collection discipline despite the macro-economic environment.

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Inventory was $177.2 million as of July 2, 2010, compared with $158.5 million at December 31, 2009 and $180.4 million as of July 3, 2009. The reduction in inventory is driven by improved planning, resulting in less excess and obsolete inventory.

Liquidity and Capital Resources

Net cash provided by operations for the first half of 2010 was $1.0 million, compared with cash used of $6.6 million for the first half of 2009. The increase in cash generation was due primarily to the improvement in our profitability.

Net cash used for investing activities was $7.4 million in the first half of 2010, compared with $9.7 million in the first half of 2009. Cash used in the first half of 2009 included approximately $1.5 million for the acquisition of Glaudio.

Net cash used by financing activities was $41.8 million in the first half of 2010, compared with $18.1 million in the first half of 2009. Cash flows used for financing activities reflect share repurchases of $44.2 million in the first six months of 2010, compared with $19.4 million in the first six months of 2009. We received cash inflows of $2.4 million in the first half of 2010 from the exercise of employee stock options, compared with $1.4 million from such exercises in the first half of 2009.

We are exposed to the credit risk of those parties with which we do business including counterparties on our derivative contracts and our customers. Derivative instruments expose us to credit and market risk. The market risk associated with these instruments resulting from currency exchange movements is expected to offset the market risk of the underlying transactions being hedged. We do not believe there is a significant risk of loss in the event of non-performance by the counterparties associated with these instruments because these transactions are executed with a group of major financial institutions and have varying maturities through April 2011. As a matter of policy, we enter into these contracts only with counterparties having a minimum investment-grade or better credit rating. Credit risk is managed through the continuous monitoring of exposures to such counterparties.

Additionally, consumer spending continues to be affected by the current macro-economic environment, particularly the disruption of the credit and stock markets and high unemployment. Continued deterioration, or lack of improvement, in the markets and economic conditions generally could adversely impact our customers and their ability to access credit.

We may utilize our committed and uncommitted lines of credit to fund our seasonal working capital needs. We have not experienced any restrictions on the availability of these lines and the adverse capital and credit market conditions are not expected to significantly affect our ability to meet our liquidity needs.

We have an unsecured committed revolving credit agreement with a group of banks, which matures on June 2, 2011 (“Agreement”). The Agreement provides for $200 million of committed borrowings, of which up to $125 million may be used for letters of credit. Any letters of credit outstanding under the Agreement ($1.8 million at July 2, 2010) reduce the amount available for borrowing under the Agreement. Upon approval of the bank group, we may increase the committed borrowing limit by $100 million for a total commitment of $300 million. Under the terms of the Agreement, we may borrow at interest rates based on Eurodollar rates (approximately 0.5% at July 2, 2010), plus an applicable margin based on a fixed-charge coverage grid of between 13.5 and 47.5 basis points that is adjusted quarterly. As of July 2, 2010, the applicable margin under the facility was 47.5 basis points. We pay a utilization fee of an additional 5 basis points if our outstanding borrowings under the facility exceed $100 million. We also pay a commitment fee of 6.5 to 15 basis points per annum on the total commitment, based on a fixed-charge coverage grid that is adjusted quarterly. As of July 2, 2010, the commitment fee was 15 basis points. The Agreement places certain limitations on additional debt, stock repurchases, acquisitions, and the amount of dividends we may pay, and includes certain other financial and non-financial covenants. The primary financial covenants relate to maintaining a minimum fixed-charge coverage ratio of 2.25:1 and a maximum leverage ratio of 2:1. 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.

We have uncommitted lines of credit available from certain banks which totaled $30 million at July 2, 2010. Any borrowings under these lines would be at prevailing money market rates. Further, we have an uncommitted letter of credit facility of $80 million to support inventory purchases. These arrangements may be terminated at any time at the option of the banks or at our option.

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As of July 2, 2010 and July 3, 2009, we had no borrowings outstanding under any of our credit facilities.

Management believes that our operating costs, capital requirements and funding for our share repurchase program for the balance of 2010 will be funded through our current cash balances, our existing credit facilities (which place certain limitations on additional debt, stock repurchases, acquisitions and on the amount of dividends we may pay, and also contain certain other financial and operating covenants) and cash from operations, without the need for additional financing. However, as discussed in the sections entitled “Cautionary Statements for Purposes of the “Safe Harbor” Provisions of the Private Securities Litigation Reform Act of 1995” and “Forward Looking Information” on page 2 of this Quarterly Report on Form 10-Q and in Part II, Item 1A, Risk Factors, of this Quarterly Report on Form 10-Q, several risks and uncertainties could require that the Company 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. However, if the need arises, our ability to obtain any additional financing will depend upon prevailing market conditions, our financial condition and the terms and conditions of such financing. The continued volatility in the credit markets could result in significant increases in borrowing costs for any new debt we may require.

Off-Balance Sheet Arrangements
Letters of Credit

As of July 2, 2010, December 31, 2009 and July 3, 2009, we had letters of credit outstanding of $15.9 million, $16.6 million and $17.2 million, respectively. These letters of credit were issued principally in support of real estate commitments.

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. Our principal risks related 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.

New Accounting Pronouncements

A discussion of new accounting pronouncements, none of which had a material impact on our operations, financial condition or liquidity, is included in Note 1 to the unaudited condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

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 interest rate movements on borrowings and investments and currency rate movements on non-U.S. dollar denominated assets, liabilities and cash flows. We regularly assess these risks and have established policies and business practices that should mitigate a portion of the adverse effect of these and other potential exposures.

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 to manage the impact of foreign currency fluctuations on a portion of our foreign currency transactions. These 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 of less than three 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 lender’s cost of funds, plus an applicable spread, or prevailing money market rates. As of July 2, 2010 and July 3, 2009, we had no short-term or long-term debt outstanding.

Our foreign currency exposure is generated primarily from our European operating subsidiaries and, to a lesser degree, our Asian and Canadian operating subsidiaries. We seek to mitigate the impact of these foreign currency fluctuations through a risk management program that includes the use of derivative financial instruments, primarily foreign currency forward contracts. These derivative instruments are carried at fair value on our balance sheet. The Company has implemented a program that qualifies for hedge accounting treatment to aid in mitigating our foreign currency exposures and decreasing the volatility of our earnings. The foreign currency forward contracts under this program will expire in 10 months or less. Based upon a sensitivity analysis as of July 2, 2010, a 10% change in foreign exchange rates would cause the fair value of our

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Page 35

derivative instruments to increase/decrease by approximately $9.4 million, compared to an increase/decrease of $12.2 million at December 31, 2009 and an increase/decrease of $11.4 million at July 3, 2009.

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, 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 as of the end of the period covered by this report.

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 July 2, 2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Part II - OTHER INFORMATION

Item 1A.  RISK FACTORS

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in the section entitled “Cautionary Statements for Purposes of the “Safe Harbor” Provisions of the Private Securities Litigation Reform Act of 1995” on page 2 of our Annual Report on Form 10-K for the year ended December 31, 2009 (our “Annual Report on Form 10-K”), in the section entitled “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K, and in the section entitled “Risk Factors” in Part II, Item 1A of any Quarterly Report on Form 10-Q filed subsequent to our Annual Report on Form 10-K, which could materially affect our business, financial condition or future results. The risks described in this Quarterly Report on Form 10-Q, in our Annual Report on Form 10-K, and in any Quarterly Report on Form 10-Q filed subsequent to our Annual Report on Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.

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Item 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

ISSUER PURCHASES OF EQUITY SECURITIES(1)

For the Three Fiscal Months Ended July 2, 2010

					Total Number		Maximum Number
					of Shares		of Shares
					Purchased as Part		That May Yet
	Total Number				of Publicly		Be Purchased
	of Shares		Average Price		Announced		Under the Plans
Period*	Purchased **		Paid per Share		Plans or Programs		or Programs
April 3 – April 30		-	$	-		-		6,301,866
May 1 – May 28		477,413		20.54		477,413		5,824,453
May 29 – July 2		847,220		17.97		847,220		4,977,233
Q2 Total		1,324,633	$	18.90		1,324,633

Footnote (1)

			Approved
	Announcement		Program		Expiration
	Date		Size (Shares)		Date
Program 1		03/10/2008		6,000,000	None
Program 2		12/09/2009		6,000,000	None

During the quarter ended July 2, 2010, 301,866 shares were repurchased under Program 1, which brought the total repurchased under the program to 6,000,000 shares. On December 3, 2009, our Board of Directors approved the repurchase of up to an additional 6,000,000 shares of our Class A Common Stock. During the quarter ended July 2, 2010, 1,022,767 shares were repurchased under this authorization. See Note 12 to our unaudited condensed consolidated financial statements in this Form 10-Q for additional information.

* Fiscal month

** Based on trade date - not settlement date

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Item 6.  EXHIBITS

Exhibits.

Exhibit 10.1 – The Timberland Company 2007 Incentive Plan, as amended, filed herewith.

Exhibit 31.1 – Principal Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.

Exhibit 31.2 – Principal Financial Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.

Exhibit 32.1 – Chief Executive Officer Certification Pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, furnished herewith.

Exhibit 32.2 – Chief Financial Officer Certification Pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, furnished herewith.

Exhibit 101.INS – XBRL Instance Document

Exhibit 101.SCH – XBRL Taxonomy Extension Schema Document

Exhibit 101.CAL – XBRL Taxonomy Extension Calculation Linkbase Document

Exhibit 101.DEF – XBRL Taxonomy Extension Definition Linkbase Document

Exhibit 101.LAB – XBRL Taxonomy Extension Label Linkbase Document

Exhibit 101.PRE – XBRL Taxonomy Extension Presentation Linkbase Document

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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: August 6, 2010	By:	/s/ JEFFREY B. SWARTZ
		Jeffrey B. Swartz
		Chief Executive Officer
Date: August 6, 2010	By:	/s/ CARRIE W. TEFFNER
		Carrie W. Teffner
		Chief Financial Officer

Form 10-Q
Page 39

EXHIBIT INDEX

Exhibit	Description
Exhibit 10.1	The Timberland Company 2007 Incentive Plan, as amended, filed herewith.
Exhibit 31.1	Principal Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.
Exhibit 31.2	Principal Financial Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.
Exhibit 32.1	Chief Executive Officer Certification Pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, furnished herewith.
Exhibit 32.2	Chief Financial Officer Certification Pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, furnished herewith.
Exhibit 101.INS	XBRL Instance Document
Exhibit 101.SCH	XBRL Taxonomy Extension Schema Document
Exhibit 101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
Exhibit 101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
Exhibit 101.LAB	XBRL Taxonomy Extension Label Linkbase Document
Exhibit 101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

EX-10.1

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Page 40

Exhibit 10.1

THE TIMBERLAND COMPANY
2007 INCENTIVE PLAN
(as amended)

1.       DEFINED TERMS

          Exhibit A, which is incorporated by reference, defines the terms used in the Plan and sets forth certain operational rules related to those terms.

2.       PURPOSE

          The Plan has been established to advance the interests of the Company by providing for the grant to Participants of Stock-based and other incentive Awards.

3.       ADMINISTRATION

          The Administrator has discretionary authority, subject only to the express provisions of the Plan, to interpret the Plan; determine eligibility for and grant Awards; determine, modify or waive the terms and conditions of any Award; prescribe forms, rules and procedures; and otherwise do all things necessary to carry out the purposes of the Plan. In the case of any Award intended to be eligible for the performance-based compensation exception under Section 162(m), the Administrator will exercise its discretion consistent with qualifying the Award for that exception. Determinations of the Administrator made under the Plan will be conclusive and will bind all parties.

4.       LIMITS ON AWARDS UNDER THE PLAN

        (a) Number of Shares. Subject to Section 7(b), a maximum of 8,000,000 shares of Stock may be delivered in satisfaction of Awards under the Plan. The number of shares of Stock delivered in satisfaction of Awards shall, for purposes of the preceding sentence, be determined net of: (1) shares of Stock withheld by the Company in payment of the exercise price of the Award, (2) shares of Stock withheld in satisfaction of tax withholding requirements with respect to the Award, (3) shares of Restricted Stock that are forfeited to the Company, (4) shares of Stock subject to an Award, where cash is delivered to a Participant in lieu of such shares, and (5) shares of Stock remaining under an Award that terminates without having been exercised in full (in the case of an Award required exercise by a Participant for delivery of shares of Stock). To the extent consistent with the requirements of Section 422 and with other applicable legal requirements (including applicable stock exchange requirements), Stock issued under awards of an acquired company that are converted, replaced, or adjusted in connection with the acquisition shall not reduce the number of shares available for Awards under the Plan.

        (b) Type of Shares. Stock delivered by the Company under the Plan may be authorized but unissued Stock or previously issued Stock acquired by the Company. No fractional shares of Stock will be delivered under the Plan.

        (c) Section 162(m) Limits. The maximum number of shares of Stock for which Stock Options may be granted to any person in any calendar year and the maximum number of shares of Stock subject to SARs granted to any person in any calendar year will each be 1,000,000. The maximum number of shares subject to other Awards granted to any person in any calendar year will be 1,000,000. The maximum amount payable to any person in any year under Cash Awards will be $6,000,000. The foregoing provisions will be construed in a manner consistent with Section 162(m).

5.       ELIGIBILITY AND PARTICIPATION

          The Administrator will select Participants from among those key Employees and directors of, and consultants and advisors to, the Company or its Affiliates who, in the opinion of the Administrator, are in a position to make a significant contribution to the success of the Company and its Affiliates; provided, that, subject to such express exceptions, if any, as the Administrator may establish, eligibility shall be further limited to those persons as to whom the use of a Form S-8 registration Statement is permissible. Eligibility for ISOs is limited to employees of the Company or of a “parent corporation” or “subsidiary corporation” of the Company as those terms are defined in Section 424 of the Code.

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6.     RULES APPLICABLE TO AWARDS

      (a) All Awards

          (1) Award Provisions. The Administrator will determine the terms of all Awards, subject to the limitations provided herein. By accepting (or, under such rules as the Administrator may prescribe, being deemed to have accepted) an Award, the Participant agrees to the terms of the Award and the Plan. Notwithstanding any provision of this Plan to the contrary, awards of an acquired company that are converted, replaced or adjusted in connection with the acquisition may contain terms and conditions that are inconsistent with the terms and conditions specified herein, as determined by the Administrator.

          (2) Term of Plan. No Awards may be made after February 27, 2017, but previously granted Awards may continue beyond that date in accordance with their terms.

          (3) Transferability. Neither ISOs nor, except as the Administrator otherwise expressly provides in accordance with the second sentence of this Section 6(a)(3), other Awards may be transferred other than by will or by the laws of descent and distribution, and during a Participant’s lifetime ISOs (and, except as the Administrator otherwise expressly provides in accordance with the second sentence of this Section 6(a)(3), other non-transferable Awards requiring exercise) may be exercised only by the Participant. To the extent provided in the immediately preceding sentence, the Administrator may permit Awards other than ISOs to be transferred by gift, subject to such limitations as the Administrator may impose.

          (4) Vesting, Etc. The Administrator may determine the time or times at which an Award will vest or become exercisable and the terms on which an Award requiring exercise will remain exercisable. Unless the Administrator expressly provides otherwise, an Award requiring exercise will cease to be exercisable, and all other Awards to the extent not already fully vested will be forfeited, immediately upon the cessation (for any reason, including but not limited to death) of the Participant’s employment or other service relationship with the Company and its Affiliates. Without limiting the foregoing, the Administrator may at any time accelerate the vesting or exercisability of an Award, regardless of any adverse or potentially adverse tax consequences resulting from such acceleration.

          (5) Taxes. The Administrator will make such provision for the withholding of taxes as it deems necessary. The Administrator may, but need not, hold back shares of Stock from an Award or permit a Participant to tender previously owned shares of Stock in satisfaction of tax withholding requirements (but not in excess of the minimum withholding required by law).

          (6) Dividend Equivalents, Etc. The Administrator may provide for the payment of amounts in lieu of cash dividends or other cash distributions with respect to Stock subject to an Award. Any entitlement to dividend equivalents or similar entitlements shall be established and administered consistent either with exemption from, or compliance with, the requirements of Section 409A to the extent applicable.

          (7) Rights Limited. Nothing in the Plan will be construed as giving any person the right to continued employment or service with the Company or its Affiliates, or any rights as a stockholder except as to shares of Stock actually issued under the Plan. The loss of existing or potential profit in Awards will not constitute an element of damages in the event of termination of Employment for any reason, even if the termination is in violation of an obligation of the Company or any Affiliate to the Participant.

          (8) Section 162(m). This Section 6(a)(8) applies to any Performance Award intended to qualify as performance-based for the purposes of Section 162(m), other than a Stock Option or SAR. In the case of any Performance Award to which this Section 6(a)(8) applies, the Plan and such Award will be construed to the maximum extent permitted by law in a manner consistent with qualifying the Award for such exception. With respect to such Performance Awards, the Administrator will preestablish, in writing, one or more specific Performance Criteria no later than 90 days after the commencement of the period of service to which the performance relates (or at such earlier time as is required to qualify the Award as performance-based under Section 162(m)). Prior to grant, vesting or payment of the Performance Award, as the case may be, the Administrator will certify whether the applicable Performance Criteria have been attained and such determination will be final and conclusive. No Performance Award to which this Section 6(a)(8) applies may be granted after the first meeting of the stockholders of the Company held in 2012 until the listed performance measures set forth in the definition of “Performance Criteria”

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Page 42

(as originally approved or as subsequently amended) have been resubmitted to and reapproved by the stockholders of the Company in accordance with the requirements of Section 162(m), unless such grant is made contingent upon such approval.

          (9) Coordination with Other Plans. Awards under the Plan may be granted in tandem with, or in satisfaction of or substitution for, other Awards under the Plan or awards made under other compensatory plans or programs of the Company or its Affiliates. For example, but without limiting the generality of the foregoing, awards under other compensatory plans or programs of the Company or its Affiliates may be settled in Stock (including, without limitation, Unrestricted Stock) if the Administrator so determines, in which case the delivery of such Stock shall be treated as awarded under the Plan (and shall reduce the number of shares thereafter available under the Plan in accordance with the rules set forth in Section 4). In any case where an award is made under another plan or program of the Company or its Affiliates and such award is intended to qualify for the performance-based compensation exception under Section 162(m), and such award is settled by the delivery of Stock or another Award under the Plan, the applicable Section 162(m) limitations under both the other plan or program and under the Plan shall be applied to the Plan as necessary (as determined by the Administrator) to preserve the availability of the Section 162(m) performance-based compensation exception with respect thereto.

          (10) Section 409A. Each Award shall contain such terms as the Administrator determines, and shall be construed and administered, such that the Award either (i) qualifies for an exemption from the requirements of Section 409A, or (ii) satisfies such requirements.

          (11) Certain Requirements of Corporate Law. Awards shall be granted and administered consistent with the requirements of applicable Delaware law relating to the issuance of stock and the consideration to be received therefore, and with the applicable requirements of the stock exchanges or other trading systems on which the Stock is listed or entered for trading, in each case as determined by the Administrator.

      (b) Awards Requiring Exercise

          (1) Time And Manner Of Exercise. Unless the Administrator provides otherwise, an Award requiring exercise by the holder will not be deemed to have been exercised until the Administrator receives a notice of exercise (in form acceptable to the Administrator) signed by the appropriate person and accompanied by any payment required under the Award. If the Award is exercised by any person other than the Participant, the Administrator may require satisfactory evidence that the person exercising the Award has the right to do so.

          (2) Exercise Price. The exercise price (or the base value from which appreciation is to be measured) of each Award requiring exercise shall be 100% (in the case of an ISO granted to a ten-percent shareholder within the meaning of subsection (b)(6) of Section 422, 110%) of the fair market value of the Stock subject to the Award, determined as of the date of grant, or such higher amount as the Administrator may determine in connection with the grant. No such Award, once granted, may be repriced other than in accordance with the applicable stockholder approval requirements of the New York Stock Exchange. Fair market value shall be determined by the Administrator consistent with the applicable requirements of Section 422 and Section 409A.

          (3) Payment Of Exercise Price. Where the exercise of an Award is to be accompanied by payment, payment of the exercise price shall be by cash or check acceptable to the Administrator, or, if so permitted by the Administrator and if legally permissible, (i) through the delivery of shares of Stock that have been outstanding for at least six months (unless the Administrator approves a shorter period) and that have a fair market value equal to the exercise price, (ii) through a broker-assisted exercise program acceptable to the Administrator, (iii) by other means acceptable to the Administrator, or (iv) by any combination of the foregoing permissible forms of payment. The delivery of shares in payment of the exercise price under clause (i) above may be accomplished either by actual delivery or by constructive delivery through attestation of ownership, subject to such rules as the Administrator may prescribe.

          (4) Maximum Term. Awards requiring exercise will have a maximum term not to exceed ten (10) years from the date of grant.

Form 10-Q
Page 43

7. EFFECT OF CERTAIN TRANSACTIONS

       (a) Mergers, etc. Except as otherwise provided in an Award, the following provisions shall apply in the event of a Covered Transaction:

          (1) Assumption or Substitution. If the Covered Transaction is one in which there is an acquiring or surviving entity, the Administrator may provide for the assumption of some or all outstanding Awards or for the grant of new awards in substitution therefore by the acquirer or survivor or an affiliate of the acquirer or survivor.

          (2) Cash-Out of Awards. If the Covered Transaction is one in which holders of Stock will receive upon consummation a payment (whether cash, non-cash or a combination of the foregoing), the Administrator may provide for payment (a “cash-out”), with respect to some or all Awards or any portion thereof, equal in the case of each affected Award or portion thereof to the excess, if any, of (A) the fair market value of one share of Stock (as determined by the Administrator in its reasonable discretion) times the number of shares of Stock subject to the Award or such portion, over (B) the aggregate exercise or purchase price, if any, under the Award or such portion (in the case of an SAR, the aggregate base price above which appreciation is measured), in each case on such payment terms (which need not be the same as the terms of payment to holders of Stock) and other terms, and subject to such conditions, as the Administrator determines; provided, that the Administrator shall not exercise its discretion under this Section 7(a)(2) with respect to an Award or portion thereof providing for “nonqualified deferred compensation” subject to Section 409A in a manner that would constitute an extension or acceleration of, or other change in, payment terms if such change would be inconsistent with the requirements of Section 409A.

          (3) Acceleration of Certain Awards. If the Covered Transaction (whether or not there is an acquiring or surviving entity) is one in which there is no assumption, substitution or cash-out, each Award requiring exercise will become fully exercisable, and the delivery of any shares of Stock remaining deliverable under each outstanding Award of Stock Units (including Restricted Stock Units and Performance Awards to the extent consisting of Stock Units) will be accelerated and such shares will be delivered, prior to the Covered Transaction, in each case on a basis that gives the holder of the Award a reasonable opportunity, as determined by the Administrator, following exercise of the Award or the delivery of the shares, as the case may be, to participate as a stockholder in the Covered Transaction; provided, that to the extent acceleration pursuant to this Section 7(a)(3) of an Award subject to Section 409A would cause the Award to fail to satisfy the requirements of Section 409A, the Award shall not be accelerated and the Administrator in lieu thereof shall take such steps as are necessary to ensure that payment of the Award is made in a medium other than Stock and on terms that as nearly as possible, but taking into account adjustments required or permitted by this Section 7, mirror the prior terms of the Award.

          (4) Termination of Awards Upon Consummation of Covered Transaction. Each Award will terminate upon consummation of the Covered Transaction, other than the following: (i) Awards assumed pursuant to Section 7(a)(1) above; (ii) Awards converted pursuant to the proviso in Section 7(a)(3) above into an ongoing right to receive payment other than Stock; and (iii) outstanding shares of Restricted Stock (which shall be treated in the same manner as other shares of Stock, subject to Section 7(a)(5) below).

          (5) Additional Limitations. Any share of Stock and any cash or other property delivered pursuant to Section 7(a)(2) or Section 7(a)(3) above with respect to an Award may, in the discretion of the Administrator, contain such restrictions, if any, as the Administrator deems appropriate to reflect any performance or other vesting conditions to which the Award was subject and that did not lapse (and were not satisfied) in connection with the Covered Transaction. In the case of Restricted Stock that does not vest in connection with the Covered Transaction, the Administrator may require that any amounts delivered, exchanged or otherwise paid in respect of such Stock in connection with the Covered Transaction be placed in escrow or otherwise made subject to such restrictions as the Administrator deems appropriate to carry out the intent of the Plan.

       (b) Change in and Distributions With Respect to Stock

                    (1) Basic Adjustment Provisions. In the event of a stock dividend, stock split or combination of shares (including a reverse stock split), recapitalization or other change in the Company’s capital structure, the Administrator shall make appropriate adjustments to the maximum number of shares specified in Section 4(a) that may be delivered under the Plan and to the maximum share limits described in Section 4(c), and shall also make appropriate adjustments to the number and kind of shares of stock or securities subject to Awards then outstanding or subsequently granted, any exercise prices relating to Awards and any other provision of Awards affected by such change.

Form 10-Q
Page 44

                    (2) Certain Other Adjustments. The Administrator may also make adjustments of the type described in Section 7(b)(1) above to take into account distributions to stockholders other than those provided for in Section 7(a) and 7(b)(1), or any other event, if the Administrator determines that adjustments are appropriate to avoid distortion in the operation of the Plan and to preserve the value of Awards made hereunder, having due regard for the qualification of ISOs under Section 422, the requirements of Section 409A, and for the performance-based compensation rules of Section 162(m), where applicable.

                    (3) Continuing Application of Plan Terms. References in the Plan to shares of Stock will be construed to include any stock or securities resulting from an adjustment pursuant to this Section 7.

8.   LEGAL CONDITIONS ON DELIVERY OF STOCK

          The Company will not be obligated to deliver any shares of Stock pursuant to the Plan or to remove any restriction from shares of Stock previously delivered under the Plan until: (i) the Company is satisfied that all legal matters in connection with the issuance and delivery of such shares have been addressed and resolved; (ii) if the outstanding Stock is at the time of delivery listed on any stock exchange or national market system, the shares to be delivered have been listed or authorized to be listed on such exchange or system upon official notice of issuance; and (iii) all conditions of the Award have been satisfied or waived. If the sale of Stock has not been registered under the Securities Act of 1933, as amended, the Company may require, as a condition to exercise of the Award, such representations or agreements as counsel for the Company may consider appropriate to avoid violation of such Act. The Company may require that certificates evidencing Stock issued under the Plan bear an appropriate legend reflecting any restriction on transfer applicable to such Stock, and the Company may hold the certificates pending lapse of the applicable restrictions.

9.   AMENDMENT AND TERMINATION

          The Administrator may at any time or times amend the Plan or any outstanding Award for any purpose which may at the time be permitted by law, and may at any time terminate the Plan as to any future grants of Awards; provided, that except as otherwise expressly provided in the Plan the Administrator may not, without the Participant’s consent, alter the terms of an Award so as to affect materially and adversely the Participant’s rights under the Award, unless the Administrator expressly reserved the right to do so at the time of the Award. Any amendments to the Plan shall be conditioned upon stockholder approval only to the extent, if any, such approval is required by law (including the Code and applicable stock exchange requirements), as determined by the Administrator.

10.   OTHER COMPENSATION ARRANGEMENTS

          The existence of the Plan or the grant of any Award will not in any way affect the Company’s right to Award a person bonuses or other compensation in addition to Awards under the Plan.

11.   MISCELLANEOUS

          (a)      Waiver of Jury Trial. By accepting an Award under the Plan, each Participant waives any right to a trial by jury in any action, proceeding or counterclaim concerning any rights under the Plan and any Award, or under any amendment, waiver, consent, instrument, document or other agreement delivered or which in the future may be delivered in connection therewith, and agrees that any such action, proceedings or counterclaim shall be tried before a court and not before a jury. By accepting an Award under the Plan, each Participant certifies that no officer, representative, or attorney of the Company has represented, expressly or otherwise, that the Company would not, in the event of any action, proceeding or counterclaim, seek to enforce the foregoing waivers.

          (b)      Limitation of Liability. Notwithstanding anything to the contrary in the Plan, neither the Company, any Affiliate, nor the Administrator, nor any person acting on behalf of the Company, any Affiliate, or the Administrator, shall be liable to any Participant or to the estate or beneficiary of any Participant or to any other holder of an Award by reason of any acceleration of income, or any additional tax, asserted by reason of the failure of an Award to satisfy the requirements of Section 422 or Section 409A or by reason of Section 4999 of the Code; provided, that nothing in this Section 11(b) shall limit the ability of the Administrator or the Company to provide by separate express written agreement with a Participant for a gross-up payment or other payment in connection with any such tax or additional tax.

Form 10-Q
Page 45

EXHIBIT A

Definition of Terms

          The following terms, when used in the Plan, will have the meanings and be subject to the provisions set forth below:

          “Administrator”: The Compensation Committee, except that the Compensation Committee may delegate (i) to one or more of its members such of its duties, powers and responsibilities as it may determine; (ii) to one or more officers of the Company the power to grant rights or options to the extent permitted by Section 157(c) of the Delaware General Corporation Law; and (iii) to such Employees or other persons as it determines such ministerial tasks as it deems appropriate. In the event of any delegation described in the preceding sentence, the term “Administrator” shall include the person or persons so delegated to the extent of such delegation.

          “Affiliate”: Any corporation or other entity that stands in a relationship to the Company that would result in the Company and such corporation or other entity being treated as one employer under Section 414(b) and Section 414(c) of the Code, except that in determining eligibility for the grant of a Stock Option or SAR by reason of service for an Affiliate, Sections 414(b) and 414(c) of the Code shall be applied by substituting “at least 50%” for “at least 80%” under Section 1563(a)(1), (2) and (3) of the Code and Treas. Regs. § 1.414(c)-2; provided, that to the extent permitted under Section 409A, “at least 20%” shall be used in lieu of “at least 50%”; and further provided, that the lower ownership threshold described in this definition (50% or 20% as the case may be) shall apply only if the same definition of affiliation is used consistently with respect to all compensatory stock options or stock awards (whether under the Plan or another plan). The Company may at any time by amendment provide that different ownership thresholds (consistent with Section 409A) apply but any such change shall not be effective for twelve (12) months.

          “Award”: Any or a combination of the following:

               (i) Stock Options.

               (ii) SARs.

               (iii) Restricted Stock.

               (iv) Unrestricted Stock.

               (v) Stock Units, including Restricted Stock Units.

               (vi) Performance Awards.

               (vii) Cash Awards.

               (viii) Awards (other than Awards described in (i) through (vii) above) that are convertible into or otherwise based on Stock.

          “Board”: The Board of Directors of the Company.

          “Cash Award”: An Award denominated in cash.

          “Code”: The U.S. Internal Revenue Code of 1986 as from time to time amended and in effect, or any successor statute as from time to time in effect.

          “Compensation Committee”: The Management Development and Compensation Committee of the Board.

          “Company”: The Timberland Company.

          “Covered Transaction”: Any of (i) a consolidation, merger, or similar transaction or series of related transactions, including a sale or other disposition of stock, in which the Company is not the surviving corporation or which results in the

Form 10-Q
Page 46

acquisition of all or substantially all of the Company’s then outstanding common stock by a single person or entity or by a group of persons and/or entities acting in concert, (ii) a sale or transfer of all or substantially all the Company’s assets, or (iii) a dissolution or liquidation of the Company. Where a Covered Transaction involves a tender offer that is reasonably expected to be followed by a merger described in clause (i) (as determined by the Administrator), the Covered Transaction shall be deemed to have occurred upon consummation of the tender offer.

          “Employee”: Any person who is employed by the Company or an Affiliate.

          “Employment”: A Participant’s employment or other service relationship with the Company and its Affiliates. Employment will be deemed to continue, unless the Administrator expressly provides otherwise, so long as the Participant is employed by, or otherwise is providing services in a capacity described in Section 5 to the Company or its Affiliates. If a Participant’s employment or other service relationship is with an Affiliate and that entity ceases to be an Affiliate, the Participant’s Employment will be deemed to have terminated when the entity ceases to be an Affiliate unless the Participant transfers Employment to the Company or its remaining Affiliates.

          “ISO”: A Stock Option intended to be an “incentive stock option” within the meaning of Section 422. Each option granted pursuant to the Plan will be treated as providing by its terms that it is to be a non-incentive stock option unless, as of the date of grant, it is expressly designated as an ISO.

          “Participant”: A person who is granted an Award under the Plan.

          “Performance Award”: An Award subject to Performance Criteria. The Committee in its discretion may grant Performance Awards that are intended to qualify for the performance-based compensation exception under Section 162(m) and Performance Awards that are not intended so to qualify.

          “Performance Criteria”: Specified criteria, other than the mere continuation of Employment or the mere passage of time, the satisfaction of which is a condition for the grant, exercisability, vesting or full enjoyment of an Award. For purposes of Awards that are intended to qualify for the performance-based compensation exception under Section 162(m), a Performance Criterion will mean an objectively determinable measure of performance relating to any or any combination of the following (measured either absolutely or by reference to an index or indices and determined either on a consolidated basis or, as the context permits, on a divisional, subsidiary, line of business, project or geographical basis or in combinations thereof): (i) sales; revenues; assets; expenses; earnings before or after deduction for all or any portion of interest, taxes, depreciation, or amortization, whether or not on a continuing operations or an aggregate or per share basis; return on equity, investment, capital or assets; gross margin; inventory levels or turns; one or more operating ratios; borrowing levels, leverage ratios or credit rating; market share; capital expenditures; cash flow; stock price; stockholder return; sales of particular products or services; customer acquisition or retention; or other objective operating contributions; or (ii) acquisitions and divestitures (in whole or in part); joint ventures and strategic alliances; spin-offs, split-ups and the like; reorganizations; or recapitalizations, restructurings, financings (issuance of debt or equity) or refinancings; or other transactions that involve a change in the equity ownership of the Company. A Performance Criterion and any targets with respect thereto determined by the Administrator need not be based upon an increase, a positive or improved result or avoidance of loss. To the extent consistent with the requirements for satisfying the performance-based compensation exception under Section 162(m), the Administrator may provide in the case of any Award intended to qualify for such exception that one or more of the Performance Criteria applicable to such Award will be adjusted in an objectively determinable manner to reflect events (for example, but without limitation, acquisitions or dispositions) occurring during the performance period that affect the applicable Performance Criterion or Criteria.

          “Plan”: The Timberland Company 2007 Incentive Plan as from time to time amended and in effect.

          “Restricted Stock”: Stock subject to restrictions requiring that it be redelivered or offered for sale to the Company if specified conditions are not satisfied.

          “Restricted Stock Unit”: A Stock Unit that is, or as to which the delivery of Stock or cash in lieu of Stock is, subject to the satisfaction of specified performance or other vesting conditions.

          “Section 409A”: Section 409A of the Code.

          “Section 422”: Section 422 of the Code.

Form 10-Q
Page 47

          “Section 162(m)”: Section 162(m) of the Code.

          “SAR”: A right entitling the holder upon exercise to receive an amount (payable in shares of Stock of equivalent value) equal to the excess of the fair market value of the shares of Stock subject to the right over the fair market value of such shares at the date of grant.

          “Stock”: Common Stock of the Company, par value $.01 per share.

          “Stock Option”: An option entitling the holder to acquire shares of Stock upon payment of the exercise price.

          “Stock Unit”: An unfunded and unsecured promise, denominated in shares of Stock, to deliver Stock or cash measured by the value of Stock in the future.

          “Unrestricted Stock”: Stock not subject to any restrictions under the terms of the Award.

EX-31.1

Form 10-Q
Page 48

Exhibit 31.1

RULE 13a-14(a) CERTIFICATION IN
ACCORDANCE WITH SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002

I, Jeffrey B. Swartz, certify that:

1.           I have reviewed this report on Form 10-Q of The Timberland Company;

2.           Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.           Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.           The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)           Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)           Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)           Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)           Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.           The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)           All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)           Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 6, 2010	/s/ JEFFREY B. SWARTZ
	Jeffrey B. Swartz
	Chief Executive Officer

EX-31.2

Form 10-Q
Page 49

Exhibit 31.2

RULE 13a-14(a) CERTIFICATION IN
ACCORDANCE WITH SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002

I, Carrie W. Teffner, certify that:

1.           I have reviewed this report on Form 10-Q of The Timberland Company;

2.           Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.           Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.           The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)           Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)           Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)           Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)           Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.           The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)           All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)           Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 6, 2010	/s/ CARRIE W. TEFFNER
	Carrie W. Teffner
	Chief Financial Officer

EX-32.1

Form 10-Q
Page 50

Exhibit 32.1

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

          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, the undersigned, as Chief Executive Officer of The Timberland Company (the “Company”), does hereby certify that to the undersigned’s knowledge:

          1.           The Company’s Quarterly Report on Form 10-Q for the period ended July 2, 2010 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

          2.           The information contained in the Company’s Quarterly Report on Form 10-Q for the period ended July 2, 2010 fairly presents, in all material respects, the financial condition and results of operations of the Company.

  /s/ JEFFREY B. SWARTZ Jeffrey B. Swartz

Chief Executive Officer

Date: August 6, 2010

The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) and is not being filed as part of the Form 10-Q or as a separate disclosure document.

A signed original of this written statement, required by Section 906, has been provided to The Timberland Company and will be retained by The Timberland Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Form 10-Q
Page 51

Exhibit 32.2

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

          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, the undersigned, as Chief Financial Officer of The Timberland Company (the “Company”), does hereby certify that to the undersigned’s knowledge:

          1.           The Company’s Quarterly Report on Form 10-Q for the period ended July 2, 2010 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

          2.           The information contained in the Company’s Quarterly Report on Form 10-Q for the period ended July 2, 2010 fairly presents, in all material respects, the financial condition and results of operations of the Company.

  /s/ CARRIE W. TEFFNER

Carrie W. Teffner

Chief Financial Officer

Date: August 6, 2010

The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) and is not being filed as part of the Form 10-Q or as a separate disclosure document.

A signed original of this written statement, required by Section 906, has been provided to The Timberland Company and will be retained by The Timberland Company and furnished to the Securities and Exchange Commission or its staff upon request.