Timberland Q3 Profits Up 8.3% as U.S. Business Dips

The Timberland Company reported third quarter net income of $53.3 million, or diluted earnings per share (EPS) of $1.47, compared with third quarter 2002 net income of $49.2 million, or diluted EPS of $1.30.

Third quarter revenue increased 6.6% to $444.0 million,
reflecting strong growth in international markets (22.2% or 12.2% in constant dollars) which offset a modest decline in the U.S. (-1.7%). Overall, Timberland's international business grew to nearly 40% of Company revenues. Benefits from foreign exchange rate changes added $14.3 million (or 3.4%) to overall revenue growth.

Revenue growth for the quarter reflected global gains in both footwear and apparel. Footwear revenue expanded 8.4% to $341.8 million, driven by growth in boots and men's and women's casual footwear. Global apparel and accessories revenue grew 2.6% to $98.4 million, reflecting gains in the Company's U.S. Wholesale and Asian businesses.

Operating profit for the quarter increased 8.5% to $83.5
million, reflecting revenue growth and higher gross margins, which benefited from foreign exchange rate changes and reduced levels of footwear off-price sales and product returns.

Timberland's progress in developing its international business enabled the Company to take advantage of the strengthening of foreign currencies. For the quarter, foreign exchange rate changes contributed approximately $8.7 million to operating profits, which was leveraged to support continued investments against strategic priorities, including international business expansion.

EPS for the quarter expanded 13.1% to $1.47, reflecting profit gains and continued benefits from share repurchases.

Jeffrey B. Swartz, Timberland's President and Chief Executive Officer, stated, “Timberland delivered strong performance in the third quarter, reflecting continued progress against our strategic initiatives. Timberland's international business, which drove our revenue growth in the quarter, delivered solid gains in both Europe and Asia as we continued to enhance our premium integrated brand positioning in those regions. In the United States, our focus on driving footwear innovation across our portfolio, combined with the expansion of our wholesale apparel business, enabled us to deliver solid results in a competitive retail marketplace.”

“Overall, we are pleased to have delivered solid financial results in the third quarter and believe that we are on track towards achieving our performance goals for the second half of 2003 – and towards delivering strong revenue and earnings gains for the full year. Based on current trends, we believe that mid to high single-digit revenue growth represents an appropriate goal for our business for the balance of 2003. We also continue to target relatively flat operating margins for the second half of 2003 (excluding $6 million of one-time costs associated with last year's West Coast work stoppage). Looking ahead to 2004, we remain committed to delivering strong financial performance and intend to leverage solid revenue growth and operating margin gains to drive double-digit earnings growth and strong cash flow, consistent with our long-term financial objectives. We believe that the strategies we are pursuing will enable us to continue to deliver strong financial performance while capturing the great potential that we see for the Timberland enterprise.”

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

                                 For the               For the
                           Three Months Ended     Nine Months Ended
                          Sept. 26,  Sept. 27,  Sept. 26,  Sept. 27,
                             2003       2002       2003       2002
Revenue                    $443,960   $416,641   $926,690   $833,868
Cost of goods sold          241,160    233,801    498,886    465,256

   Gross profit             202,800    182,840    427,804    368,612

Operating expense
   Selling                   98,202     86,099    246,203    218,883
   General and
    administrative           21,072     19,761     59,487     52,880
     Total operating
      expense               119,274    105,860    305,690    271,763

      Operating income       83,526     76,980    122,114     96,849

Other expense (income)
   Interest expense             328        263        767        633
   Other, net                   305        491       (226 )   (1,565 )
      Total other expense
       (income)                 633        754        541       (932 )

   Income before income
    taxes                    82,893     76,226    121,573     97,781

Provision for income
 taxes                       29,620     27,060     43,158     34,712

   Income before
    cumulative effect
       of change in
        accounting
        principle          $ 53,273   $ 49,166   $ 78,415   $ 63,069

Cumulative effect of
 change in accounting
 principle                        -          -          -      4,913

      Net income            $53,273    $49,166    $78,415    $67,982

Earnings per share before
 cumulative effect of
 change in accounting
 principle
   Basic                      $1.51      $1.33      $2.20      $1.68
   Diluted                    $1.47      $1.30      $2.15      $1.64

Earnings per share after
 cumulative effect of
 change in accounting
 principle
   Basic                      $1.51      $1.33      $2.20      $1.81
   Diluted                    $1.47      $1.30      $2.15      $1.77