Timberland Sees Q2 Net Income Jump 18% on Strong International Effort

The Timberland Company reported revenue of $211.7 million for the second quarter, 10.5% higher than the $191.5 million reported for the second quarter of 2002. Constant dollar revenue growth, which excludes the impact of changes in foreign exchange rates, grew 5.3%.

Solid revenue growth, improvement in gross margins and continued benefits from share repurchases contributed to strong profit and earnings per share (EPS) gains. EPS for the quarter was $0.16 per share diluted ($0.16 basic), 23.1% above second quarter 2002 EPS of $0.13 per share diluted ($0.13 basic).

Revenue growth in the second quarter of 2003 was driven by double-digit sales gains in international markets and moderate growth in the United States. Domestic revenue for the second quarter of 2003 was $129.2 million, 2.6% higher than the $125.9 million reported for the second quarter of 2002. International revenue for the quarter increased 25.8% to $82.6 million, compared with $65.7 million for the prior-year period. On a constant dollar basis, international revenue increased 10.4%. International revenue comprised 39.0% of total second quarter 2003 revenue, compared with 34.3% for the second quarter of 2002.

Worldwide footwear revenue for the second quarter of 2003 was $162.5 million, 11.8% higher than the $145.4 million reported for the second quarter of 2002. Worldwide apparel and accessories revenue for the quarter increased 7.7% to $46.7 million, compared with $43.3 million for the 2002 second quarter. Worldwide royalty revenue for the second quarter decreased 9.4% to $2.5 million, compared with $2.8 million for the comparable prior-year period.

Worldwide wholesale revenue for the second quarter of 2003 was $149.4 million, 10.7% higher than the $134.9 million reported for the second quarter of 2002. Worldwide consumer direct revenue, which includes Timberland’s worldwide retail and U.S. e-commerce businesses, increased 10.2% to $62.4 million for the quarter, compared to the $56.6 million reported for the second quarter of 2002. U.S. wholesale revenue for the 2003 second quarter increased 3.3% to $96.3 million, compared with the $93.3 million reported for the second quarter of 2002. U.S. consumer direct revenue for the 2003 second quarter increased 0.8% to $32.9 million, compared with $32.6 million for the 2002 second quarter. Domestic comparable store sales for the quarter decreased by 1.9%.

Timberland’s net income was $5.8 million for the second quarter of 2003, compared with net income of $4.9 million for the prior-year period. Timberland’s second quarter ending cash balance increased to $82.6 million from $72.3 million in the second quarter of 2002, after financing operating requirements and share repurchases. The company repurchased 486 thousand shares in the second quarter at a cost of $24.7 million and 2.9 million shares over the past twelve months at a cost of $113.1 million. Timberland has 1.7 million shares remaining under its current four million share repurchase authorization. The Company may use Rule 10b5-1 plans to facilitate share repurchases.

Jeffrey B. Swartz, Timberland’s President and Chief Executive Officer, stated, “Timberland delivered strong results in the second quarter reflecting continued progress against our strategic objectives. Our financial results reflect gains across global markets and reinforce that we are on track toward delivering solid revenue and earnings gains in 2003. As we celebrate the 30th anniversary of the Timberland(R) brand, we intend to build on this momentum by driving a continued focus on product innovation, by amplifying our brand message to reinforce the values that will deepen our relationship with consumers and by delivering superior service to our retail partners.”

“Looking forward, we continue to believe that mid single-digit revenue growth represents an appropriate target for the second half of 2003, given macroeconomic conditions and comparisons to prior year results. We also remain committed to delivering moderate improvements in operating margins this year while investing to support our long-term goals for developing the Timberland brand.”

Note that comments made by Mr. Swartz are Timberland’s performance targets, based on current expectations. These comments are forward-looking, and actual results may differ materially.

                        THE TIMBERLAND COMPANY
        CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
             (Amounts in thousands, except per share data)

                                 For the              For the
                            Three Months Ended    Six Months Ended
                            June 27,  June 28,   June 27,   June 28,
                              2003      2002       2003       2002

Revenue                     $211,733  $191,529   $482,730   $417,227
Cost of goods sold           112,957   105,521    257,726    231,455

   Gross profit               98,776    86,008    225,004    185,772

Operating expense
   Selling                    70,449    63,537    148,001    132,784
   General and administrative 19,266    16,499     38,415     33,120
     Total operating
      expense                 89,715    80,036    186,416    165,904

      Operating income         9,061     5,972     38,588     19,868

Other expense (income)
   Interest expense              222       189        439        370
   Other, net                   (103)   (1,849)      (531)    (2,057)
      Total other expense
       (income)                  119    (1,660)       (92)    (1,687)

   Income before income
    taxes                      8,942     7,632     38,680     21,555

Provision for income taxes     3,130     2,709     13,538      7,652

   Income before cumulative
    effect of change in
    accounting principle     $ 5,812   $ 4,923   $ 25,142   $ 13,903

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

      Net income              $5,812    $4,923    $25,142    $18,816