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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF 
THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended
    
    April 2, 2011
  o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF 
THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from

    to
 1-10689
 LIZ CLAIBORNE, INC.
  Delaware
    
    13-2842791(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer
Identification No.)1441 Broadway, New York, New York
    
    10018(Address of principal executive offices)
    
    (Zip Code)
 (212) 354-4900
 (Registrants telephone number, including area code)
 Not Applicable
 (Former name, former address and former fiscal year, if changed since last report)
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



LIZ CLAIBORNE, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
April 2, 2011
 PAGENUMBERPART I -
    
    FINANCIAL INFORMATIONItem 1.
    
    Financial Statements:Condensed Consolidated Balance Sheets as of April 2, 2011
(Unaudited), January 1, 2011 and April 3, 2010 (Unaudited)
    
    4Condensed Consolidated Statements of Operations for the Three
Month Periods Ended April 2, 2011 (Unaudited) and April 3, 2010
(Unaudited)
    
    5Condensed Consolidated Statements of Cash Flows for the Three
Month Periods Ended April 2, 2011 (Unaudited) and April 3, 2010
(Unaudited)
    
    6Notes to Condensed Consolidated Financial Statements (Unaudited)
    
    7  26Item 2.
    
    Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    27  40Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    41Item 4.
    
    Controls and Procedures
    
    42PART II -
    
    OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    42Item 1A.
    
    Risk Factors
    
    42  44Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    45Item 5.
    
    Other Information
    
    45Item 6.
    
    Exhibits
    
    46SIGNATURES
    
    
    
    47EX-4.1EX-4.2EX-4.3EX-4.4EX-10.1EX-10.2EX-10.3EX-10.4EX-31.AEX-31.BEX-32.AEX-32.B




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STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
  
    
    our ability to continue to have the necessary liquidity, through cash flows from
operations and availability under our amended and restated revolving credit facility, may
be adversely impacted by a number of factors, including the level of our operating cash
flows, our ability to maintain established levels of availability under, and to comply with
the financial and other covenants included in, our amended and restated revolving credit
facility and the borrowing base requirement in our amended and restated revolving credit
facility that limits the amount of borrowings we may make based on a formula of, among
other things, eligible accounts receivable and inventory; the minimum availability covenant
in our amended and restated revolving credit facility that requires us to maintain
availability in excess of an agreed upon level and whether holders of our Convertible Notes
issued in June 2009 will, if and when such notes are convertible, elect to convert a
substantial portion of such notes, the par value of which we must
currently settle in cash;
    
    general economic conditions in the United States, Europe and other parts of the world;
    
    levels of consumer confidence, consumer spending and purchases of discretionary items,
including fashion apparel and related products, such as ours;
    
    restrictions in the credit and capital markets, which would impair our ability to access
additional sources of liquidity, if needed;
    
    changes in the cost of raw materials, labor, advertising and transportation which could
impact prices of our products;
    
    our dependence on a limited number of large US department store customers, and the risk
of consolidations, restructurings, bankruptcies and other ownership changes in the retail
industry and financial difficulties at our larger department store customers;
    
    our ability to successfully implement our long-term strategic plans;
    
    our ability to effect a turnaround of our MEXX Europe business;
    
    our ability to successfully re-launch our LUCKY BRAND product offering and our ability
to enhance our JUICY COUTURE product offering;
    
    our ability to anticipate and respond to constantly changing consumer demands and tastes
and fashion trends, across multiple brands, product lines, shopping channels and
geographies;
    
    our ability to attract and retain talented, highly qualified executives, and maintain
satisfactory relationships with our employees, both union and non-union;
    
    exposure to multiemployer union pension plan liability as a result of current market
conditions and possible withdrawal liabilities;
    
    our ability to adequately establish, defend and protect our trademarks and other
proprietary rights;
    
    our ability to successfully develop or acquire new product lines or enter new markets or
product categories, and risks related to such new lines, markets or categories;
    
    risks associated with the licensing arrangements with J.C. Penney Corporation, Inc. and
J.C. Penney Company, Inc. and with QVC, Inc., including, without limitation, our ability to
efficiently change our operational model and infrastructure as a result of such licensing
arrangements, our ability to continue a good working relationship with these licensees and
possible changes or disputes in our other brand relationships or relationships with other
retailers and existing licensees as a result;
    
    the impact of the highly competitive nature of the markets within which we operate, both
within the US and abroad;
    
    our reliance on independent foreign manufacturers, including the risk of their failure
to comply with safety standards or our policies regarding labor practices;
    
    risks associated with our agreement with Li & Fung Limited, which results in a single
foreign buying/sourcing agent for a significant portion of our products;
    
    a variety of legal, regulatory, political and economic risks, including risks related to
the importation and exportation of product, tariffs and other trade barriers, to which our
international operations are subject;
    
    our ability to adapt to and compete effectively in the current quota environment in
which general quota has expired on apparel products but political activity seeking to
re-impose quota has been initiated or threatened;




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
    
    our exposure to domestic and foreign currency fluctuations;
    
    risks associated with material disruptions in our information technology systems;
    
    risks associated with privacy breaches;
    
    limitation on our ability to utilize all or a portion of our US deferred tax assets if
we experience an ownership change; and
    
    the outcome of current and future litigations and other proceedings in which we are
involved.




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4 
 PART I
- FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 LIZ CLAIBORNE, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
  April 2, 2011
    
    
    
    
    
    
    April 3, 2010(Unaudited)
    
    
    January 1, 2011
    
    
    (Unaudited)AssetsCurrent Assets:Cash and cash equivalents
    
    $
    15,849
    
    
    $
    22,714
    
    
    $
    13,127Accounts receivable - trade, net
    
    
    203,721
    
    
    
    208,081
    
    
    
    252,799Inventories, net
    
    
    303,794
    
    
    
    289,439
    
    
    
    313,033Deferred income taxes
    
    
    4,209
    
    
    
    3,916
    
    
    
    407Other current assets
    
    
    92,858
    
    
    
    87,773
    
    
    
    113,022Assets held for sale
    
    
    --
    
    
    
    --
    
    
    
    15,070Total current assets
    
    
    620,431
    
    
    
    611,923
    
    
    
    707,458Property and Equipment, Net
    
    
    364,010
    
    
    
    375,529
    
    
    
    417,896Goodwill and Intangibles, Net
    
    
    228,187
    
    
    
    228,110
    
    
    
    229,843Deferred Income Taxes
    
    
    3,205
    
    
    
    3,217
    
    
    
    8,543Other Assets
    
    
    39,964
    
    
    
    38,880
    
    
    
    32,738Total Assets
    
    $
    1,255,797
    
    
    $
    1,257,659
    
    
    $
    1,396,478Liabilities and Stockholders (Deficit) EquityCurrent Liabilities:Short-term borrowings
    
    $
    133,453
    
    
    $
    26,951
    
    
    $
    34,733Convertible Senior Notes
    
    
    75,470
    
    
    
    74,542
    
    
    
    71,960Accounts payable
    
    
    186,834
    
    
    
    195,541
    
    
    
    124,075Accrued expenses
    
    
    245,202
    
    
    
    268,605
    
    
    
    286,042Income taxes payable
    
    
    1,048
    
    
    
    2,348
    
    
    
    2,565Deferred income taxes
    
    
    4,904
    
    
    
    4,893
    
    
    
    7,164Total current liabilities
    
    
    646,911
    
    
    
    572,880
    
    
    
    526,539Long-Term Debt
    
    
    505,124
    
    
    
    476,319
    
    
    
    484,224Other Non-Current Liabilities
    
    
    194,629
    
    
    
    197,357
    
    
    
    193,550Deferred Income Taxes
    
    
    33,637
    
    
    
    32,784
    
    
    
    27,311Commitments and Contingencies (Note 10)Stockholders (Deficit) Equity:Preferred stock, $0.01 par value, authorized shares
 50,000,000, 
issued shares  none
    
    
    --
    
    
    
    --
    
    
    
    --Common stock, $1.00 par value, authorized shares 
250,000,000, 
issued shares  176,437,234
    
    
    176,437
    
    
    
    176,437
    
    
    
    176,437Capital in excess of par value
    
    
    335,894
    
    
    
    331,808
    
    
    
    327,316Retained earnings
    
    
    1,321,432
    
    
    
    1,417,785
    
    
    
    1,597,478Accumulated other comprehensive loss
    
    
    (74,770
    )
    
    
    (66,302
    )
    
    
    (55,179
    )1,758,993
    
    
    
    1,859,728
    
    
    
    2,046,052Common stock in treasury, at cost 81,846,165,
81,892,589 and 81,935,665 shares
    
    
    (1,883,497
    )
    
    
    (1,883,898
    )
    
    
    (1,884,271
    )Total Liz Claiborne, Inc. stockholders (deficit)
equity
    
    
    (124,504
    )
    
    
    (24,170
    )
    
    
    161,781Noncontrolling interest
    
    
    --
    
    
    
    2,489
    
    
    
    3,073Total stockholders (deficit) equity
    
    
    (124,504
    )
    
    
    (21,681
    )
    
    
    164,854Total Liabilities and Stockholders (Deficit) Equity
    
    $
    1,255,797
    
    
    $
    1,257,659
    
    
    $
    1,396,478




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5 LIZ CLAIBORNE, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
   Three Months EndedApril 2, 2011
    
    
    April 3, 2010(13 Weeks)
    
    
    (13 Weeks)Net Sales
    
    $
    513,242
    
    
    $
    584,160Cost of goods sold
    
    
    244,482
    
    
    
    313,311Gross Profit
    
    
    268,760
    
    
    
    270,849Selling, general & administrative expenses
    
    
    318,956
    
    
    
    329,555Operating Loss
    
    
    (50,196
    )
    
    
    (58,706
    )Other (expense) income, net
    
    
    (22,057
    )
    
    
    19,793Interest expense, net
    
    
    (12,550
    )
    
    
    (15,452
    )Loss Before (Benefit) Provision for Income Taxes
    
    
    (84,803
    )
    
    
    (54,365
    )(Benefit) provision for income taxes
    
    
    (1,289
    )
    
    
    1,584Loss from Continuing Operations
    
    
    (83,514
    )
    
    
    (55,949
    )Discontinued operations, net of income taxes
    
    
    (12,831
    )
    
    
    (16,089
    )Net Loss
    
    
    (96,345
    )
    
    
    (72,038
    )Net loss attributable to the noncontrolling interest
    
    
    --
    
    
    
    (258
    )Net Loss Attributable to Liz Claiborne, Inc.
    
    $
    (96,345
    )
    
    $
    (71,780
    )Earnings per Share:Basic and DilutedLoss from Continuing Operations Attributable to Liz
Claiborne, Inc.
    
    $
    (0.88
    )
    
    $
    (0.59
    )Net Loss Attributable to Liz Claiborne, Inc.
    
    $
    (1.02
    )
    
    $
    (0.76
    )Weighted Average Shares, Basic and Diluted
    
    
    94,399
    
    
    
    94,170




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6 LIZ CLAIBORNE, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
   Three Months EndedApril 2, 2011
    
    
    April 3, 2010(13 Weeks)
    
    
    (13 Weeks)Cash Flows from Operating Activities:Net loss
    
    $
    (96,345
    )
    
    $
    (72,038
    )Adjustments to arrive at loss from continuing operations
    
    
    12,831
    
    
    
    16,089Loss from continuing operations
    
    
    (83,514
    )
    
    
    (55,949
    )Adjustments to reconcile loss from continuing operations to net
cash (used in) 
provided by operating activities:Depreciation and amortization
    
    
    32,564
    
    
    
    35,355Loss on asset disposals and impairments, including
streamlining initiatives, net
    
    
    3,387
    
    
    
    2,055Share-based compensation
    
    
    1,780
    
    
    
    1,772Foreign currency losses (gains), net
    
    
    20,984
    
    
    
    (19,023
    )Other, net
    
    
    (310
    )
    
    
    161Changes in assets and liabilities:Decrease in
accounts receivable  trade, net
    
    
    7,941
    
    
    
    4,907(Increase) decrease in inventories, net
    
    
    (12,121
    )
    
    
    5,364Increase in other current and non-current assets
    
    
    (772
    )
    
    
    (3,829
    )Decrease in accounts payable
    
    
    (9,111
    )
    
    
    (18,594
    )Decrease in accrued expenses and other non-current liabilities
    
    
    (38,707
    )
    
    
    (60,029
    )Net change in income tax assets and liabilities
    
    
    (244
    )
    
    
    160,397Net cash used in operating activities of discontinued operations
    
    
    (12,736
    )
    
    
    (5,447
    )Net cash (used in) provided by operating activities
    
    
    (90,859
    )
    
    
    47,140Cash Flows from Investing Activities:Purchases of property and equipment
    
    
    (16,170
    )
    
    
    (9,612
    )Payments for purchases of businesses
    
    
    --
    
    
    
    (5,000
    )Payments for in-store merchandise shops
    
    
    (889
    )
    
    
    (401
    )Investments in and advances to equity investee
    
    
    --
    
    
    
    (4,033
    )Other, net
    
    
    (145
    )
    
    
    (32
    )Net cash provided by (used in) investing activities of
discontinued operations
    
    
    200
    
    
    
    (484
    )Net cash used in investing activities
    
    
    (17,004
    )
    
    
    (19,562
    )Cash Flows from Financing Activities:Short-term borrowings, net
    
    
    --
    
    
    
    (34,614
    )Proceeds from borrowings under revolving credit agreement
    
    
    269,789
    
    
    
    --Repayment of borrowings under revolving credit agreement
    
    
    (163,845
    )
    
    
    --Principal payments under capital lease obligations
    
    
    (1,030
    )
    
    
    (1,066
    )Proceeds from exercise of stock options
    
    
    9
    
    
    
    --Payment of deferred financing fees
    
    
    (919
    )
    
    
    (2,028
    )Net cash provided by (used in) financing activities
    
    
    104,004
    
    
    
    (37,708
    )Effect of Exchange Rate Changes on Cash and Cash Equivalents
    
    
    (3,006
    )
    
    
    2,885Net Change in Cash and Cash Equivalents
    
    
    (6,865
    )
    
    
    (7,245
    )Cash and Cash Equivalents at Beginning of Period
    
    
    22,714
    
    
    
    20,372Cash and Cash Equivalents at End of Period
    
    $
    15,849
    
    
    $
    13,127




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7 LIZ CLAIBORNE, INC. AND SUBSIDIARIES
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      
    
    Domestic-Based Direct Brands segment - consists of the specialty
retail, outlet, wholesale apparel, wholesale non-apparel (including accessories, jewelry
and handbags), e-commerce and licensing operations of the Companys three domestic,
retail-based operating segments: JUICY COUTURE, KATE SPADE and LUCKY
BRAND.
    
    International-Based Direct Brands segment - consists of the specialty
retail, outlet, concession, wholesale apparel, wholesale non-apparel (including
accessories, jewelry and handbags), e-commerce and licensing operations of MEXX Europe and
MEXX Canada, the Companys two international, retail-based
operating segments.
    
    Partnered Brands segment - consists of one operating segment including
the wholesale apparel, wholesale non-apparel, licensing, outlet, concession and e-commerce
operations of the Companys AXCESS, CLAIBORNE, DANA BUCHMAN, KENSIE, LIZ CLAIBORNE,
LIZ CLAIBORNE NEW YORK, MAC & JAC, MARVELLA, MONET, TRIFARI and the Companys licensed
DKNY®
JEANS and
DKNY®
ACTIVE brands, among others.




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8     NATURE OF OPERATIONS
  PRINCIPLES OF CONSOLIDATION
  USE OF ESTIMATES AND CRITICAL ACCOUNTING POLICIES
   OTHER MATTERS




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9




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10    Three Months EndedIn thousands
    
    April 2, 2011
    
    
    April 3, 2010(13 Weeks)
    
    
    (13 Weeks)Net sales
    
    $
    14,858
    
    
    $
    29,720Loss before benefit for income taxes
    
    $
    (3,696
    )
    
    $
    (10,017
    )Benefit for income taxes
    
    
    (2
    )
    
    
    (737
    )Loss from discontinued operations, net of income taxes
    
    $
    (3,694
    )
    
    $
    (9,280
    )Loss on disposal of discontinued operations, net of income taxes
    
    $
    (9,137
    )
    
    $
    (6,809
    )
   CommonCapital in
    
    
    
    
    
    Stock inExcess of Par
    
    
    Retained
    
    
    Treasury, at
    
    
    NoncontrollingIn thousands
    
    Value
    
    
    Earnings
    
    
    Cost
    
    
    InterestBalance as of January 1, 2011
    
    $
    331,808
    
    
    $
    1,417,785
    
    
    $
    (1,883,898
    )
    
    $
    2,489Net loss
    
    
    --
    
    
    
    (96,345
    )
    
    
    --
    
    
    
    --Exercise of stock options
    
    
    (10
    )
    
    
    --
    
    
    
    19
    
    
    
    --Restricted shares issued, net of
cancellations and
shares withheld for taxes
    
    
    129
    
    
    
    --
    
    
    
    130
    
    
    
    --Share-based compensation
    
    
    1,780
    
    
    
    --
    
    
    
    --
    
    
    
    --Dividend equivalent units vested
    
    
    (302
    )
    
    
    (8
    )
    
    
    252
    
    
    
    --Tendered subsidiary shares for
noncontrolling interest (a)
    
    
    2,489
    
    
    
    --
    
    
    
    --
    
    
    
    (2,489
    )Balance as of April 2, 2011
    
    $
    335,894
    
    
    $
    1,321,432
    
    
    $
    (1,883,497
    )
    
    $
    --
 
 (a)
    
    The Company acquired 85.0% of the equity of Lucky Brand Dungarees, Inc.
(Lucky Brand) on June 8, 1999 and 12.7% of the remaining
equity of Lucky Brand from 2005 to 2010. The aggregate purchase price for the
remaining 2.3% of the original shares consisted of a payment made in 2008 that
was based on a multiple of Lucky Brands 2007 earnings and a 2011 contingent payment based
on a multiple of Lucky Brands 2010 earnings, net of the 2008
payment. Based on Lucky Brands 2010 earnings, no final payment was required,
and LUCKY BRAND became a wholly-owned subsidiary in January 2011.




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11  CommonCapital in
    
    
    
    
    
    Stock inExcess of Par
    
    
    Retained
    
    

    Treasury, at
    
    
    NoncontrollingIn thousands
    
    Value
    
    
    Earnings
    
    
    Cost
    
    
    InterestBalance as of January 2, 2010
    
    $
    319,326
    
    
    $
    1,669,316
    
    
    $
    (1,879,160
    )
    
    $
    3,331Net loss
    
    
    --
    
    
    
    (71,780
    )
    
    
    --
    
    
    
    (258
    )Restricted shares issued, net
of cancellations and
shares withheld for taxes
    
    
    6,233
    
    
    
    --
    
    
    
    (5,162
    )
    
    
    --Share-based compensation
    
    
    1,772
    
    
    
    --
    
    
    
    --
    
    
    
    --Dividend equivalent units vested
    
    
    (15
    )
    
    
    (58
    )
    
    
    51
    
    
    
    --Balance as of April 3, 2010
    
    $
    327,316
    
    
    $
    1,597,478
    
    
    $
    (1,884,271
    )
    
    $
    3,073
  Three Months EndedApril 2, 2011
    
    
    April 3, 2010In thousands
    
    (13 Weeks)
    
    
    (13 Weeks)Net loss
    
    $
    (96,345
    )
    
    $
    (72,038
    )Other comprehensive loss, net of income taxes:Change in cumulative translation adjustment
    
    
    21,561
    
    
    
    24,822Change in cumulative translation adjustment on Eurobond
and other instruments, net of income taxes of $1,367 and
$(689), respectively
    
    
    (24,183
    )
    
    
    (18,186
    )Change in unrealized losses on available-for-sale
securities, net of income taxes of $0 and $0, respectively
    
    
    (17
    )
    
    
    --Change in fair value of cash flow hedges, net of income
taxes of $(198) and $874, respectively
    
    
    (5,829
    )
    
    
    7,556Comprehensive loss
    
    
    (104,813
    )
    
    
    (57,846
    )Comprehensive loss attributable to the noncontrolling interest
    
    
    --
    
    
    
    258Comprehensive loss attributable to Liz Claiborne, Inc.
    
    $
    (104,813
    )
    
    $
    (57,588
    )
  In thousands
    
    April 2, 2011
    
    
    January 1, 2011
    
    
    April 3, 2010Cumulative translation adjustment, net of income taxes
of $(2,272), $(905) and $7,818, respectively
    
    $
    (66,593
    )
    
    $
    (63,971
    )
    
    $
    (57,512
    )Unrealized (losses) gains on cash flow hedging
derivatives, net of income taxes of $689, $491 and $959,
respectively
    
    
    (8,446
    )
    
    
    (2,617
    )
    
    
    1,992Unrealized gains on available-for-sale securities, net
of income taxes of $0, $0 and $0, respectively
    
    
    269
    
    
    
    286
    
    
    
    341Accumulated other comprehensive loss, net of income taxes
    
    $
    (74,770
    )
    
    $
    (66,302
    )
    
    $
    (55,179
    )
   In thousands
    
    April 2, 2011
    
    
    January 1, 2011
    
    
    April 3, 2010Raw materials
    
    $
    1,770
    
    
    $
    2,365
    
    
    $
    4,652Work in process
    
    
    --
    
    
    
    69
    
    
    
    41Finished goods
    
    
    302,024
    
    
    
    287,005
    
    
    
    308,340Total inventories, net
    
    $
    303,794
    
    
    $
    289,439
    
    
    $
    313,033




---



##### Table of Contents



12   In thousands
    
    April 2, 2011
    
    
    January 1, 2011
    
    
    April 3, 2010Land and buildings
    
    $
    67,207
    
    
    $
    67,207
    
    
    $
    70,814Machinery and equipment
    
    
    320,153
    
    
    
    316,569
    
    
    
    308,660Furniture and fixtures
    
    
    259,020
    
    
    
    261,709
    
    
    
    264,419Leasehold improvements
    
    
    481,616
    
    
    
    488,663
    
    
    
    521,3101,127,996
    
    
    
    1,134,148
    
    
    
    1,165,203Less: Accumulated depreciation and
amortization
    
    
    763,986
    
    
    
    758,619
    
    
    
    747,307Total property and equipment, net
    
    $
    364,010
    
    
    $
    375,529
    
    
    $
    417,896
    WeightedAverageAmortizationIn thousands
    
    Period
    
    
    April 2, 2011
    
    
    January 1, 2011
    
    
    April 3, 2010Amortized intangible assets:Gross carrying amount:Owned trademarks
    
    4 years
    
    $
    1,479
    
    
    $
    1,479
    
    
    $
    1,000Customer relationships
    
    13 years
    
    
    12,374
    
    
    
    12,319
    
    
    
    12,294Merchandising rights (a)
    
    4 years
    
    
    29,871
    
    
    
    29,048
    
    
    
    35,162Other
    
    4 years
    
    
    2,322
    
    
    
    2,322
    
    
    
    2,322Subtotal
    
    7 years
    
    
    46,046
    
    
    
    45,168
    
    
    
    50,778Accumulated amortization:Owned trademarks
    
    
    
    
    
    
    (843
    )
    
    
    (753
    )
    
    
    (566
    )Customer relationships
    
    
    
    
    
    
    (4,726
    )
    
    
    (4,453
    )
    
    
    (3,698
    )Merchandising rights
    
    
    
    
    
    
    (22,837
    )
    
    
    (21,744
    )
    
    
    (25,101
    )Other
    
    
    
    
    
    
    (1,679
    )
    
    
    (1,643
    )
    
    
    (1,526
    )Subtotal
    
    
    
    
    
    
    (30,085
    )
    
    
    (28,593
    )
    
    
    (30,891
    )Net:Owned trademarks
    
    
    
    
    
    
    636
    
    
    
    726
    
    
    
    434Customer relationships
    
    
    
    
    
    
    7,648
    
    
    
    7,866
    
    
    
    8,596Merchandising rights
    
    
    
    
    
    
    7,034
    
    
    
    7,304
    
    
    
    10,061Other
    
    
    
    
    
    
    643
    
    
    
    679
    
    
    
    796Total amortized intangible assets, net
    
    
    
    
    
    
    15,961
    
    
    
    16,575
    
    
    
    19,887Unamortized intangible assets:Owned trademarks
    
    
    
    
    
    
    210,778
    
    
    
    210,127
    
    
    
    209,956Total intangible assets
    
    
    
    
    
    
    226,739
    
    
    
    226,702
    
    
    
    229,843Goodwill
    
    
    
    
    
    
    1,448
    
    
    
    1,408
    
    
    
    --Total goodwill and intangibles, net
    
    
    
    
    
    $
    228,187
    
    
    $
    228,110
    
    
    $
    229,843




---



##### Table of Contents



13 
 (a)
    
    The decrease in the balance from April 3, 2010 included a non-cash impairment
charge of $2.6 million recorded in the second quarter of 2010 primarily within the Companys
Partnered Brands segment principally related to merchandising rights of its LIZ CLAIBORNE and
licensed DKNY® JEANS brands.   Fiscal Year
    
    Amortization Expense(In millions)2011
    
    $
    5.02012
    
    
    3.62013
    
    
    2.42014
    
    
    1.72015
    
    
    1.0




---



##### Table of Contents



14   In thousands
    
    April 2, 2011
    
    
    January 1, 2011
    
    
    April 3, 20105.0% Euro Notes, due July 2013 (a)
    
    $
    497,398
    
    
    $
    467,498
    
    
    $
    471,0386.0% Convertible Senior Notes, due June 2014 (b)
    
    
    75,470
    
    
    
    74,542
    
    
    
    71,960Revolving credit facility
    
    
    129,173
    
    
    
    22,735
    
    
    
    30,306Capital lease obligations
    
    
    12,006
    
    
    
    13,037
    
    
    
    17,613Total debt
    
    
    714,047
    
    
    
    577,812
    
    
    
    590,917Less: Short-term borrowings (c)
    
    
    133,453
    
    
    
    26,951
    
    
    
    34,733Convertible Notes (d)
    
    
    75,470
    
    
    
    74,542
    
    
    
    71,960Long-term debt
    
    $
    505,124
    
    
    $
    476,319
    
    
    $
    484,224
 
 (a)
    
    The change in the balance of these euro-denominated notes reflected the impact
of changes in foreign currency exchange rates.(b)
    
    The balance at April 2, 2011, January 1, 2011 and April 3, 2010 represented
principal of $90.0 million and an unamortized debt discount of $14.5 million, $15.5 million
and $18.0 million, respectively.(c)
    
    At April 2, 2011, the balance consisted primarily of outstanding borrowings under
the Companys amended and restated revolving credit facility and obligations under capital
leases.(d)
    
    The Convertible Notes were reflected as a current liability since they were
convertible at April 2, 2011, January 1, 2011 and
April 3, 2010, respectively. Euro Notes
   Convertible Notes




---



##### Table of Contents



15  Amended and Restated Revolving Credit Facility




---



##### Table of Contents



16  Total
    
    
    Borrowing
    
    
    Outstanding
    
    
    Letters of
    
    

    Available
    
    
    ExcessIn thousands
    

Facility (a)
    
    
    Base (a)
    
    
    Borrowings
    
    
    Credit Issued
    
    
    Capacity
    
    
    Capacity (b)Revolving credit
facility
(a)
    
    
    $ 350,000
    
    
    
    $ 296,724
    
    
    
    $ 129,173
    
    
    
    $ 28,633
    
    
    
    $ 138,918
    
    
    
    $ 93,918
 
 (a)
    
    Availability under the Amended Agreement is the lesser of $350.0 million or a
borrowing base comprised primarily of eligible accounts receivable and inventory.(b)
    
    Excess capacity represents available capacity reduced by the minimum required
aggregate borrowing availability under the Amended Agreement of $45.0 million. Capital Lease
    Level 1 
    
    Quoted market prices in active markets for identical assets or liabilities;Level 2 
    
    Inputs other than Level 1 inputs that are either directly or indirectly observable; andLevel 3 
    
    Unobservable inputs developed using estimates and assumptions developed by the
Company, which reflect those that a market participant would use.
  Level 2In thousands

    April 2, 2011
    
    
    January 1, 2011
    
    
    April 3, 2010Financial Assets:Derivatives
    
    $
    --
    
    
    $
    --
    
    
    $
    2,751Financial Liabilities:Derivatives
    
    $
    (6,487
    )
    
    $
    (3,463
    )
    
    $
    (1,405
    )
   Fair Value Measured and
Recorded at
    
    
    Total LossesNet Carrying
    
    
    Reporting Date Using:
    
    
    for the ThreeValue as of
    
    
    
    
    
    Months EndedIn thousands
    
    April 2, 2011
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    April 2, 2011Property and equipment
    
    $
    299
    
    
    $
    --
    
    
    $
    --
    
    
    $
    299
    
    
    $
    3,066




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##### Table of Contents



17  Fair Value Measured and Recorded
    
    
    Total LossesNet Carrying
    
    
    at Reporting Date Using:
    
    
    for the ThreeValue as of
    
    
    
    
    
    Months EndedIn thousands
    

April
3, 2010
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    

April
3, 2010Property and equipment
    
    $
    790
    
    
    $
    --
    
    
    $
    --
    
    
    $
    790
    
    
    $
    1,623
    April 2, 2011
    
    
    January 1, 2011
    
    
    April 3, 2010In thousands
    
    Fair Value
    
    
    Carrying 
Value
    
    
    Fair Value
    
    
    Carrying 
Value
    
    
    Fair Value
    
    
    Carrying 
Value5.0% Euro Notes, due July
2013 (a)
    
    $
    432,958
    
    
    $
    497,398
    
    
    $
    397,177
    
    
    $
    467,498
    
    
    $
    388,239
    
    
    $
    471,0386.0% Convertible Senior Notes, due June
2014 (a)
    
    
    154,890
    
    
    
    75,470
    
    
    
    197,306
    
    
    
    74,542
    
    
    
    201,453
    
    
    
    71,960Revolving credit facility (b)
    
    
    129,173
    
    
    
    129,173
    
    
    
    22,735
    
    
    
    22,735
    
    
    
    30,306
    
    
    
    30,306
 
 (a)
    
    Carrying values include unamortized debt discount.(b)
    
    Borrowings under the revolving credit facility bear interest based on market rate;
accordingly, its fair value approximates its carrying value.   Buying/Sourcing




---



##### Table of Contents



18 Leases
  Other
     2011 Actions
  2010 Actions
  ® ®
 2009 Actions




---



##### Table of Contents



19     Three Months EndedApril 2, 2011
    
    
    April 3, 2010In thousands
    
    (13 Weeks)
    
    
    (13 Weeks)Domestic-Based Direct Brands
    
    $
    2,446
    
    
    $
    4,844International-Based Direct Brands
    
    
    848
    
    
    
    1,519Partnered Brands
    
    
    1,102
    
    
    
    7,220Total
    
    $
    4,396
    
    
    $
    13,583
  ContractPayroll and
    
    
    Termination
    
    
    AssetIn thousands
    
    Related Costs
    
    
    Costs
    
    
    Write-Downs
    
    
    Other Costs
    
    
    TotalBalance at January 1, 2011
    
    $
    1,279
    
    
    $
    29,578
    
    
    $
    --
    
    
    $
    4,538
    
    
    $
    35,3952011 provision
    
    
    2,087
    
    
    
    888
    
    
    
    934
    
    
    
    487
    
    
    
    4,3962011 asset write-downs
    
    
    --
    
    
    
    --
    
    
    
    (934
    )
    
    
    --
    
    
    
    (934
    )Translation difference
    
    
    284
    
    
    
    33
    
    
    
    --
    
    
    
    232
    
    
    
    5492011 spending
    
    
    (1,924
    )
    
    
    (5,856
    )
    
    
    --
    
    
    
    (559
    )
    
    
    (8,339
    )Balance at April 2, 2011
    
    $
    1,726
    
    
    $
    24,643
    
    
    $
    --
    
    
    $
    4,698
    
    
    $
    31,067




---



##### Table of Contents



20   Three Months EndedApril 2, 2011
    
    
    April 3, 2010In thousands
    
    (13 Weeks)
    
    
    (13 Weeks)Loss from continuing operations
    
    $
    (83,514
    )
    
    $
    (55,949
    )Net loss attributable to the noncontrolling interest
    
    
    --
    
    
    
    (258
    )Loss from continuing operations attributable to Liz Claiborne, Inc.
    
    
    (83,514
    )
    
    
    (55,691
    )Loss from discontinued operations, net of income taxes
    
    
    (12,831
    )
    
    
    (16,089
    )Net loss attributable to Liz Claiborne, Inc.
    
    $
    (96,345
    )
    
    $
    (71,780
    )Basic weighted average shares outstanding
    
    
    94,399
    
    
    
    94,170Stock options and nonvested shares(a)(b)
    
    
    --
    
    
    
    --Convertible Notes(c)
    
    
    --
    
    
    
    --Diluted weighted average shares outstanding(a)(b)(c)
    
    
    94,399
    
    
    
    94,170Loss per share:Basic and dilutedLoss from continuing operations attributable to Liz Claiborne, Inc.
    
    $
    (0.88
    )
    
    $
    (0.59
    )Loss from discontinued operations attributable to Liz Claiborne, Inc.
    
    $
    (0.14
    )
    
    $
    (0.17
    )Net loss attributable to Liz Claiborne, Inc.
    
    $
    (1.02
    )
    
    $
    (0.76
    )
 
 (a)
    
    Because the Company incurred a loss from continuing operations for the three
months ended April 2, 2011 and April 3, 2010, all outstanding stock options and nonvested
shares are antidilutive for such periods. Accordingly, for the three months ended April 2,
2011 and April 3, 2010, approximately 7.5 million and 6.0 million outstanding stock options,
respectively and approximately 0.9 million and 0.9 million outstanding nonvested shares,
respectively, were excluded from the computation of diluted loss per share.(b)
    
    Excludes approximately 1.0 million and 0.2 million nonvested shares for the three
months ended April 2, 2011 and April 3, 2010, respectively, for which the performance criteria
have not yet been achieved.(c)
    
    Because the Company incurred a loss from continuing operations for the three months
ended April 2, 2011 and April 3, 2010, approximately 8.4 million and 10.8 million potentially
dilutive shares issuable upon conversion of the Convertible Notes were considered antidilutive
for such periods, and were excluded from the computation of diluted loss per share.  Condensed Consolidated Statements of Cash Flows Supplementary Disclosures
    Related Party Transactions




---



##### Table of Contents



21    
    
    Domestic-Based Direct Brands segment  consists of the specialty retail,
outlet, wholesale apparel, wholesale non-apparel (including accessories, jewelry and
handbags), e-commerce and licensing operations of the Companys three domestic,
retail-based operating segments: JUICY COUTURE, KATE SPADE and LUCKY BRAND.
    
    International-Based Direct Brands segment  consists of the specialty retail,
outlet, concession, wholesale apparel, wholesale non-apparel (including accessories,
jewelry and handbags), e-commerce and licensing operations of MEXX Europe and MEXX Canada,
the Companys two international, retail-based operating segments.
    
    Partnered Brands segment  consists of one operating segment including the
wholesale apparel, wholesale non-apparel, licensing, outlet, concession and e-commerce
operations of the Companys AXCESS, CLAIBORNE, DANA BUCHMAN, KENSIE, LIZ CLAIBORNE,
LIZ CLAIBORNE NEW YORK, MAC & JAC, MARVELLA, MONET, TRIFARI and the Companys licensed
DKNY® JEANS and DKNY® ACTIVE brands, among others.
  Dollars in thousands
    
    Net Sales
    
    
    % to Total
    
    
    Operating Loss
    
    
    % of SalesThree Months Ended April 2, 2011 (13 weeks)Domestic-Based Direct Brands
    
    $
    258,022
    
    
    
    50.3
    %
    
    $
    (18,866
    )
    
    
    (7.3
    )%International-Based Direct Brands
    
    
    165,120
    
    
    
    32.2
    %
    
    
    (29,848
    )
    
    
    (18.1
    )%Partnered Brands
    
    
    90,100
    
    
    
    17.5
    %
    
    
    (1,482
    )
    
    
    (1.6
    )%Totals
    
    $
    513,242
    
    
    
    100.0
    %
    
    $
    (50,196
    )
    
    
    (9.8
    )%Three Months Ended April 3, 2010 (13 weeks)Domestic-Based Direct Brands
    
    $
    242,861
    
    
    
    41.6
    %
    
    $
    (9,973
    )
    
    
    (4.1
    )%International-Based Direct Brands
    
    
    181,162
    
    
    
    31.0
    %
    
    
    (29,463
    )
    
    
    (16.3
    )%Partnered Brands
    
    
    160,137
    
    
    
    27.4
    %
    
    
    (19,270
    )
    
    
    (12.0
    )%Totals
    
    $
    584,160
    
    
    
    100.0
    %
    
    $
    (58,706
    )
    
    
    (10.0
    )%




---



##### Table of Contents



22  Dollars in thousands
    
    Net Sales
    
    
    % to Total
    
    
    Operating Loss
    
    
    % of SalesThree Months Ended April 2, 2011 (13 weeks)Domestic
    
    $
    323,280
    
    
    
    63.0
    %
    
    $
    (26,368
    )
    
    
    (8.2
    )%International
    
    
    189,962
    
    
    
    37.0
    %
    
    
    (23,828
    )
    
    
    (12.5
    )%Totals
    
    $
    513,242
    
    
    
    100.0
    %
    
    $
    (50,196
    )
    
    
    (9.8
    )%Three Months Ended April 3, 2010 (13 weeks)Domestic
    
    $
    380,309
    
    
    
    65.1
    %
    
    $
    (28,372
    )
    
    
    (7.5
    )%International
    
    
    203,851
    
    
    
    34.9
    %
    
    
    (30,334
    )
    
    
    (14.9
    )%Totals
    
    $
    584,160
    
    
    
    100.0
    %
    
    $
    (58,706
    )
    
    
    (10.0
    )%
     Foreign Currency Contracts Designated as Hedging InstrumentsIn thousands
    
    Asset Derivatives
    
    
    Liability DerivativesBalance Sheet
    
    
    Notional
    
    
    
    
    
    

    Balance Sheet
    
    
    NotionalPeriod
    
    Location
    
    
    Amount
    
    
    Fair Value
    
    
    Location
    
    
    Amount
    
    
    Fair ValueApril 2, 2011
    
    Other current assets
    
    $
    --
    
    
    $
    --
    
    
    Accrued expenses
    
    $
    97,788
    
    
    $
    6,417January 1, 2011
    
    Other current assets
    
    
    1,500
    
    
    
    --
    
    
    Accrued expenses
    
    
    120,504
    
    
    
    3,463April 3, 2010
    
    Other current assets
    
    
    68,076
    
    
    
    2,751
    
    
    Accrued expenses
    
    
    14,089
    
    
    
    808Foreign Currency Contracts Not Designated as Hedging InstrumentsIn thousands
    
    Asset Derivatives
    
    
    Liability DerivativesBalance Sheet
    
    
    Notional
    
    
    
    
    
    

    Balance Sheet
    
    
    NotionalPeriod
    
    Location
    
    
    Amount
    
    
    Fair Value
    
    
    Location
    
    
    Amount
    
    
    Fair ValueApril 2, 2011
    
    Other current assets
    
    $
    --
    
    
    $
    --
    
    
    Accrued expenses
    
    $
    6,500
    
    
    $
    70January 1, 2011
    
    Other current assets
    
    
    --
    
    
    
    --
    
    
    Accrued expenses
    
    
    --
    
    
    
    --April 3, 2010
    
    Other current assets
    
    
    --
    
    
    
    --
    
    
    Accrued expenses
    
    
    6,882
    
    
    
    597




---



##### Table of Contents



23  Location of Gain orAmount of
    
    
    (Loss) Reclassified
    
    
    Amount of Gain or
    
    
    Amount of Loss(Loss) or Gain
    
    
    from Accumulated
    
    
    (Loss) Reclassified
    
    
    Recognized inRecognized in
    
    
    OCI into Operations

    
    
    from Accumulated
    
    
    Operations onAccumulated OCI on
    
    
    (Effective and
    
    
    OCI into Operations
    
    
    DerivativeDerivative
    
    
    Ineffective
    
    
    (Effective
    
    
    (IneffectiveIn thousands
    
    (Effective Portion)
    
    
    Portion)
    
    
    Portion)
    
    
    Portion)Three months ended
April 2, 2011
    
    $
    (5,613
    )
    
    Cost of goods sold
    
    $
    414
    
    
    $
    (74
    )Three months ended
April 3, 2010
    
    
    3,788
    
    
    Cost of goods sold
    
    
    (4,642
    )
    
    
    (359
    )
         Stock Options




---



##### Table of Contents



24 Three Months EndedValuation Assumptions:
    
    April 2, 2011
    
    April 3, 2010Weighted-average fair value of options granted
    
    $2.50
    
    $3.57Expected volatility
    
    56.9% to 58.8%
    
    56.9% to 58.8%Weighted-average volatility
    
    58.4%
    
    58.4%Expected term (in years)
    
    5.0
    
    5.0Dividend yield
    
    --
    
    --Risk-free rate
    
    0.3% to 5.3%
    
    0.3% to 5.3%Expected annual forfeiture
    
    12.6%
    
    12.6%
   Weighted
    
    
    Weighted Average
    
    
    AggregateAverage Exercise
    
    
    Remaining
    
    
    Intrinsic ValueShares
    
    
    Price
    
    
    Contractual Term
    
    
    (In thousands)Outstanding at January 1, 2011
    
    
    6,897,146
    
    
    $
    14.39
    
    
    
    4.9
    
    
    $
    9,653Granted
    
    
    902,500
    
    
    
    4.97Exercised
    
    
    (2,250
    )
    
    
    4.10
    
    
    
    
    
    
    
    8Cancelled/expired
    
    
    (295,575
    )
    
    
    27.42Outstanding at April 2, 2011
    
    
    7,501,821
    
    
    $
    12.74
    
    
    
    5.0
    
    
    $
    4,719Vested or expected to vest at April 2, 2011
    
    
    6,461,809
    
    
    $
    13.90
    
    
    
    4.9
    
    
    $
    4,145Exercisable at April 2, 2011
    
    
    2,619,821
    
    
    $
    27.42
    
    
    
    3.4
    
    
    $
    56
   Restricted Stock
  Weighted 
Average GrantShares
    
    
    Date Fair ValueNonvested stock at January 1, 2011 (a)
    
    
    1,691,591
    
    
    $
    9.24Granted (b)
    
    
    498,600
    
    
    
    5.10Vested
    
    
    (87,128
    )
    
    
    12.51Cancelled (a)
    
    
    (193,279
    )
    
    
    15.38Nonvested stock at April 2, 2011 (b)
    
    
    1,909,784
    
    
    $
    7.39Expected to vest as of April 2, 2011
    
    
    1,090,353
    
    
    $
    8.31




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##### Table of Contents



25 
 (a)
    
    Includes performance shares granted in the second and third quarters of 2008.
These shares were granted to a group of key executives and were subject to certain service and
performance conditions, a portion of which were measured as of fiscal 2008 year-end and the
remainder were measured at fiscal 2010 year-end. The shares which were contingently issuable
based on 2008 and 2010 performance were deemed not earned and cancelled.(b)
    
    Includes performance shares granted to a group of key executives with certain
performance conditions measured through July 2013.   LC Footwear, L.L.C., et al. v. L.C. Licensing, Inc., et al.




---



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26




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##### Table of Contents



27 
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF  FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 OVERVIEW
 Business Segments
  
    
    Domestic-Based Direct Brands segment  consists of the specialty retail,
outlet, wholesale apparel, wholesale non-apparel (including accessories, jewelry and
handbags), e-commerce and licensing operations of our three domestic, retail-based
operating segments: JUICY COUTURE, KATE SPADE and LUCKY BRAND.
    
    International-Based Direct Brands segment  consists of the specialty retail,
outlet, concession, wholesale apparel, wholesale non-apparel (including accessories,
jewelry and handbags), e-commerce and licensing operations of MEXX Europe and MEXX Canada,
our two international, retail-based operating segments.
    
    Partnered Brands segment  consists of one operating segment including the
wholesale apparel, wholesale non-apparel, licensing, outlet, concession and e-commerce
operations of our AXCESS, CLAIBORNE, DANA BUCHMAN, KENSIE, LIZ CLAIBORNE, LIZ
CLAIBORNE NEW YORK, MAC & JAC, MARVELLA, MONET, TRIFARI and our licensed DKNY® JEANS and
DKNY® ACTIVE brands, among others.
 C
  
    
    Domestic (wholesale customers, licensing, Company-owned specialty retail and
outlet stores located in the US and e-commerce sites); and
    
    International (wholesale customers, licensing, Company-owned specialty retail,
outlet and concession stores located outside of the US and e-commerce sites).
  Market Environment




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##### Table of Contents



28 Competitive Profile
    Recent Developments
     Discontinued Operations




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29    Overall Results for the Three Months Ended April 2, 2011
 Net Sales
   Gross Profit and Loss from Continuing Operations
  Balance Sheet




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##### Table of Contents



30 International Operations
  RESULTS OF OPERATIONS
  THREE MONTHS ENDED APRIL 2, 2011 COMPARED TO THREE MONTHS ENDED APRIL 3, 2010
  Three Months Ended
    
    
    VarianceApril 2, 2011
    
    
    April 3, 2010Dollars in millions
    
    (13 Weeks)
    
    
    (13 Weeks)
    
    
    $
    
    
    %Net Sales
    
    $
    513.2
    
    
    $
    584.2
    
    
    $
    (71.0
    )
    
    
    (12.2
    )%Gross Profit
    
    
    268.8
    
    
    
    270.8
    
    
    
    (2.0
    )
    
    
    (0.7
    )%Selling, general & administrative
expenses
    
    
    319.0
    
    
    
    329.5
    
    
    
    10.5
    
    
    
    3.2
    %Operating Loss
    
    
    (50.2
    )
    
    
    (58.7
    )
    
    
    8.5
    
    
    
    14.5
    %Other (expense) income, net
    
    
    (22.0
    )
    
    
    19.8
    
    
    
    (41.8
    )
    
    
    *Interest expense, net
    
    
    (12.6
    )
    
    
    (15.5
    )
    
    
    2.9
    
    
    
    18.7
    %(Benefit) provision for income taxes
    
    
    (1.3
    )
    
    
    1.5
    
    
    
    2.8
    
    
    
    *Loss from Continuing Operations
    
    
    (83.5
    )
    
    
    (55.9
    )
    
    
    (27.6
    )
    
    
    (49.4
    )%Discontinued operations, net of income
taxes
    
    
    (12.8
    )
    
    
    (16.1
    )
    
    
    3.3
    
    
    
    20.5
    %Net Loss
    
    
    (96.3
    )
    
    
    (72.0
    )
    
    
    (24.3
    )
    
    
    (33.8
    )%Net loss attributable to the
noncontrolling interest
    
    
    
    
    
    
    (0.2
    )
    
    
    (0.2
    )
    
    
    *Net Loss Attributable to Liz Claiborne,
Inc.
    
    $
    (96.3
    )
    
    $
    (71.8
    )
    
    $
    (24.5
    )
    
    
    (34.1
    )%
 
 *   Not meaningful. Net Sales




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31   
    
    Domestic-Based Direct Brands net sales were $258.0 million, an increase of $15.2 million, or 6.2%, reflecting the
following:
 
    
    Net sales for JUICY COUTURE were $115.3 million, a 1.2% decrease compared to 2010, which primarily
reflected decreases in our wholesale apparel and specialty retail operations, partially offset by an
increase in our outlet and e-commerce operations.We ended the quarter with 76 specialty retail stores, 51 outlet stores and 5 concessions, reflecting
the net addition over the last 12 months of 10 specialty retail stores, 20 outlet stores and 5
concessions. Key operating metrics for our JUICY COUTURE retail operations included the following:
 
    
    Average retail square footage in the first three months of 2011 was approximately 414 thousand
square feet, a 27.3% increase compared to 2010;
    
    Sales productivity was $137 per average square foot as compared to $173 for the first three
months of 2010; and
    
    Comparable direct-to-consumer net sales, inclusive of e-commerce and concessions, decreased 11.8%
in the first three months of 2011. Until September 2010, the JUICY COUTURE website was operated by a
third party, and our sales to that third party were reflected as wholesale sales. JUICY COUTURE
e-commerce comparable sales calculations for the first three months of 2010 were based on the retail
sales data provided by the third party operator.
 
    
    Net sales for LUCKY BRAND were $83.5 million, an 8.9% decrease compared to 2010, reflecting
decreases in our wholesale apparel, outlet and wholesale non-apparel operations, partially offset by
an increase in our e-commerce operations.We ended the quarter with 185 specialty retail stores and 39 outlet stores, reflecting the net
closure over the last 12 months of 7 specialty retail stores and 7 outlet stores. Key operating
metrics for our LUCKY BRAND retail operations included the following:
 
    
    Average retail square footage in the first three months of 2011 was approximately 569 thousand
square feet, a 4.6% decrease compared to 2010;
    
    Sales productivity was $85 per average square foot as compared to $86 for the first three months
of 2010; and
    
    Comparable direct-to-consumer net sales increased by 4.0% in the first three months of 2011.
 
    
    Net sales for KATE SPADE were $59.2 million, a 71.7% increase compared to 2010, driven by increases
in e-commerce, specialty retail, wholesale non-apparel, outlet and wholesale apparel operations.We ended the quarter with 43 specialty retail stores and 29 outlet stores, reflecting the net
addition over the last 12 months of 5 specialty retail stores. Key operating metrics for our KATE
SPADE retail operations included the following:
 
    
    Average retail square footage in the first three months of 2011 was approximately 143 thousand
square feet, a 3.4% increase compared to 2010;
    
    Sales productivity was $177 per average square foot as compared to $115 for the first three
months of 2010; and
    
    Comparable direct-to-consumer net sales increased by 74.6% in the first three months of 2011.




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32 
 
    
    International-Based Direct Brands net sales were $165.1 million, a decrease of $16.0 million, or 8.9%,
compared to 2010, primarily due to a decrease in our MEXX Europe retail operations due to reduced traffic
and, to a lesser extent, a decrease in MEXX Europe wholesale operations. These declines were partially
offset by an increase in our MEXX Canada retail operations.We ended the quarter with 173 specialty retail stores, 89 outlet stores and 129 concessions, reflecting the
net addition over the last 12 months of 14 specialty retail stores and the net closure of
 57 concessions  and 4 outlet stores. Key operating metrics for our MEXX retail operations included the following:
 -
    
    Average retail square footage in the first three months of 2011 was approximately 1.473
million square feet, a 4.4% decrease compared to 2010;-
    
    Sales productivity was $56 per average square foot as compared to $60 for the first three
months of 2010; and-
    
    Comparable direct-to-consumer net sales decreased by 4.9% in the first three months of 2011.
 
    
    Partnered Brands net sales were $90.1 million, a decrease of $70.0
million or 43.7%, compared to 2010, reflecting the following:
 -
    
    A $58.4 million, or 36.5%, decrease related to brands
that have been licensed or exited, substantially all
of which was related to a decrease in sales of our LIZ
CLAIBORNE family of brands as we transitioned from the
legacy department store model to the licensing model
under the arrangements with JCPenney in the US and
Puerto Rico and with QVC; and-
    
    A net $11.6 million, or 7.2%, decrease related to
reduced sales of our other Partnered Brands, primarily
related to our licensed DKNY® JEANS brand and our
AXCESS brand.
 Comparable direct-to-consumer net sales are calculated as follows:
 
    
    New stores become comparable after 14 full fiscal months of operations (on the
first day of the 15th full fiscal month);
    
    Except in unusual circumstances, closing stores become non-comparable one full
fiscal month prior to the scheduled closing date;
    
    A remodeled store will be changed to non-comparable when there is a 20.0% or
more increase/decrease in its selling square footage (effective at the start of the fiscal
month when construction begins). The store becomes comparable again after 14 full fiscal
months from the re-open date;
    
    A store that relocates becomes non-comparable when the new location is
materially different from the original location (in respect to selling square footage
and/or traffic patterns);
    
    Stores that are acquired are not comparable until they have been reflected in
our results for a period of 12 months; and
    
    E-commerce sales are comparable after 12 full fiscal months from the website
launch date (on the first day of the 13th full month).
  Domestic International
 Gross Profit




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##### Table of Contents



33 Selling, General & Administrative Expenses
  
    
    A $21.2 million decrease in our Partnered Brands segment and corporate SG&A, inclusive of a decrease
associated with our LIZ CLAIBORNE family of brands as we transitioned to the licensing model under the
arrangements with JCPenney in the US and Puerto Rico and with QVC;
    
    A $9.3 million decrease in expenses associated with our streamlining initiatives and brand-exiting activities;
    
    A $2.9 million decrease in our International-Based Direct Brands segment, including a decrease in concession
fees and an increase in advertising expenses;
    
    A $21.6 million increase in our Domestic-Based Direct Brands segment, primarily due to increased retail
expansion and an increase in advertising expenses; and
    
    A $1.3 million increase due to the impact of fluctuations in foreign currency exchange rates in our
international operations.
  Operating Loss
  
    
    Domestic-Based Direct Brands operating loss was $18.9 million ((7.3)%
of net sales), compared to an operating loss of $10.0 million ((4.1)%
of net sales) in 2010. The period-over-period change in operating loss
reflected (i) an increase in SG&A related to retail expansion,
including an increase of $7.3 million related to advertising and
professional fees; and (ii) an increase in payroll related expenses of
$3.2 million, partially offset by increased gross profit and a
decrease in expenses associated with our streamlining initiatives and
brand-exiting activities.
    
    International-Based Direct Brands operating loss was $29.8 million
((18.1)% of net sales), compared to an operating loss of $29.4 million
((16.3)% of net sales) in 2010. The period-over-period change in
operating loss reflected (i) decreased gross profit; (ii) an increase
in advertising expenses; (iii) a $0.4 million increase in the
operating loss resulting from fluctuations in foreign currency
exchange rates; and (iv) a reduction in concession fees.
    
    Partnered Brands operating loss in the first quarter was $1.5 million
((1.6)% of net sales), compared to an operating loss of $19.3 million
((12.0)% of net sales) in 2010. The decreased operating loss reflected
reduced SG&A, including a reduction related to the LIZ CLAIBORNE
family of brands as we transitioned to the licensing model under the
arrangements with JCPenney in the US and Puerto Rico and with QVC,
partially offset by reduced gross profit.
 Domestic International
 Other (Expense) Income, Net




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34 Interest Expense, Net
  (Benefit) Provision for Income Taxes
  Loss from Continuing Operations
  Discontinued Operations, Net of Income Taxes
  Net Loss Attributable to Liz Claiborne Inc.
  FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES
 Cash Requirements
 Sources of Cash




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35




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##### Table of Contents



36   Cash and Debt Balances.
 Accounts Receivable
 Inventories
 Borrowings
 Net cash (used in) provided by operating activities
 Net cash used in investing activities




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37 Net cash provided by (used in) financing activities
 Commitments and Capital Expenditures
     In thousands
    
    April 2, 2011
    
    
    January 1, 2011
    
    
    April 3, 20105.0% Euro Notes (a)
    
    $
    497,398
    
    
    $
    467,498
    
    
    $
    471,0386.0% Convertible Senior Notes(b)
    
    
    75,470
    
    
    
    74,542
    
    
    
    71,960Revolving credit facility
    
    
    129,173
    
    
    
    22,735
    
    
    
    30,306Capital lease obligations
    
    
    12,006
    
    
    
    13,037
    
    
    
    17,613Total debt
    

$
    714,047
    
    
    $
    577,812
    
    
    $
    590,917
 
 (a)
    
    The change in the balance of these euro-denominated notes reflected the impact
of changes in foreign currency exchange rates.(b)
    
    The balance at April 2, 2011, January 1, 2011 and April 3, 2010 represented
principal of $90.0 million and an unamortized debt discount of $14.5 million, $15.5 million
and $18.0 million, respectively.




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##### Table of Contents



38  Total
    
    
    Borrowing
    
    
    Outstanding
    
    
    Letters of Credit
    
    
    Available
    
    
    ExcessIn thousands
    
    Facility (a)
    
    
    Base (a)
    
    
    Borrowings
    
    
    Issued
    
    
    Capacity
    
    
    Capacity (b)Revolving credit
facility
(a)
    
    
    $ 350,000
    
    
    
    $ 296,724
    
    
    
    $ 129,173
    
    
    $ 28,633
    
    
    
    $ 138,918
    
    
    
    $ 93,918
 
 (a)
    
    Availability under the Amended Agreement is the lesser of $350.0 million or a
borrowing base comprised primarily of eligible accounts receivable and inventory.(b)
    
    Excess capacity represents available capacity reduced by the minimum required
aggregate borrowing availability under the Amended Agreement of $45.0 million.  In thousands
    
    As Reported
    
    
    Pro Forma (a)5.0% Euro Notes
    
    $
    497,398
    
    
    $
    314,7826.0% Convertible Senior Notes
    
    
    75,470
    
    
    
    75,47010.5% Senior Secured Notes
    
    
    
    
    
    
    220,094Revolving credit facility
    
    
    129,173
    
    
    
    129,173Capital lease obligations
    
    
    12,006
    
    
    
    12,006Total debt
    
    $
    714,047
    
    
    $
    751,525
 
 (a)
    
    Reflects (i) the repurchase of
128.5 million Euro Notes at an April 2, 2011 exchange rate of
1.4232 US Dollars per euro, less unamortized discount; and (ii) the issuance of the Senior
Notes, including a premium of 0.625% at issuance with respect to $15.0 million of the Senior
Notes, with the remainder issued at par. This information is for
illustrative purposes only and does not purport to represent what our
long-term debt balances would have been had these transactions occured as of April 2, 2011.    Off-Balance Sheet Arrangements




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##### Table of Contents



39    Hedging Activities
   Foreign Currency Contracts Designated as Hedging InstrumentsIn thousands
    
    Asset Derivatives
    
    
    Liability DerivativesPeriod
    

Balance SheetLocation

    
    Notional 
Amount
    
    
    Fair Value
    
    
    Balance SheetLocation

    
    Notional 
Amount
    
    
    Fair ValueApril 2, 2011
    
    Other current assets
    
    $
    --
    
    
    $
    --
    
    
    Accrued expenses
    
    $
    97,788
    
    
    $
    6,417January 1, 2011
    
    Other current assets
    
    
    1,500
    
    
    
    --
    
    
    Accrued expenses
    
    
    120,504
    
    
    
    3,463April 3, 2010
    
    Other current assets
    
    
    68,076
    
    
    
    2,751
    
    
    Accrued expenses
    
    
    14,089
    
    
    
    808Foreign Currency Contracts Not Designated as Hedging InstrumentsIn thousands
    
    Asset Derivatives
    
    
    Liability DerivativesPeriod
    
    Balance SheetLocation

    
    Notional Amount
    
    
    Fair Value
    
    
    Balance SheetLocation

    
    Notional Amount
    
    
    Fair ValueApril 2, 2011
    
    Other current assets
    
    $
    --
    
    
    $
    --
    
    
    Accrued expenses
    
    $
    6,500
    
    
    $
    70January 1, 2011
    
    Other current assets
    
    
    --
    
    
    
    --
    
    
    Accrued expenses
    
    
    --
    
    
    
    --April 3, 2010
    
    Other current assets
    
    
    --
    
    
    
    --
    
    
    Accrued expenses
    
    
    6,882
    
    
    
    597




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40  Location of Gain orAmount of
    
    
    (Loss) Reclassified
    
    
    Amount of Gain or
    
    
    Amount of Loss(Loss) or Gain
    
    
    from Accumulated
    
    
    (Loss) Reclassified
    
    
    Recognized inRecognized in
    
    
    OCI into Operations
    
    
    from Accumulated
    
    
    Operations onAccumulated OCI on
    
    
    (Effective and
    
    
    OCI into Operations
    
    
    DerivativeDerivative
    
    
    Ineffective
    
    
    (Effective
    
    
    (IneffectiveIn thousands
    
    (Effective Portion)
    
    
    Portion)
    
    
    Portion)
    
    
    Portion)Three months
ended
April 2, 2011
    
    $
    (5,613
    )
    
    Cost of goods sold
    
    $
    414
    
    
    $
    (74
    )Three months ended
April 3, 2010
    
    
    3,788
    
    
    Cost of goods sold
    
    
    (4,642
    )
    
    
    (359
    )
    USE OF ESTIMATES AND CRITICAL ACCOUNTING POLICIES




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##### Table of Contents



41 
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   Dollars in millions
    
    April 2, 2011
    
    
    January 1, 2011
    
    
    April 3, 2010Variable rate debt
    
    
    $129.2
    
    
    
    $22.7
    
    
    
    30.3Average interest rate
    
    
    4.73%
    
    
    
    4.65%
    
    
    
    7.10%




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##### Table of Contents



42 
 ITEM 4. CONTROLS AND PROCEDURES
   
 PART
II - OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
 Angela Tyler (individually and on behalf of all others
similarly situated) v. Liz Claiborne, Inc, Trudy F. Sullivan and William L. McComb
 LC Footwear, L.L.C., et al. v. L.C. Licensing, Inc., et al.
   
 ITEM 1A. RISK FACTORS




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##### Table of Contents



43   Our ability to continue to have the necessary liquidity, through cash flows from operations and
availability under our Amended Agreement, may be adversely impacted by a number of factors,
including the level of our operating cash flows, our ability to maintain established levels of
availability under, and to comply with the financial and other covenants included in, our Amended
Agreement and the borrowing base requirement in our Amended Agreement that limits the amount of
borrowings we may make based on a formula of, among other things, eligible accounts receivable and
inventory; the minimum availability covenant in our Amended Agreement that requires us to maintain
availability in excess of an agreed upon level and whether holders of our Convertible Notes issued
in June 2009 will, if and when such notes are convertible, elect to convert a substantial portion
of such notes, the par value of which we must currently settle in cash.




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44




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##### Table of Contents



45 
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  MaximumApproximateTotal Number of
    
    
    Dollar Value ofShares Purchased as
    
    
    Shares that MayTotal Number
    
    
    
    
    
    
    Part of Publicly
    
    
    Yet Be Purchasedof Shares
    
    
    
    
    
    
    Announced Plans or
    
    
    Under the Plans orPurchased
    
    
    Average Price
    
    
    Programs
    
    
    ProgramsPeriod
    
    (In thousands) (a)
    
    
    Paid Per Share
    
    
    (In thousands)
    
    
    (In thousands) (b)January 2, 2011 - January 29, 2011
    
    
    --
    
    
    $
    --
    
    
    
    --
    
    
    $
    28,749January 30, 2011 - March 5, 2011
    
    
    18.7
    
    
    
    5.39
    
    
    
    --
    
    
    
    28,749March 6, 2011 - April 2, 2011
    
    
    --
    
    
    
    --
    
    
    
    --
    
    
    
    28,749Total -13 Weeks Ended April 2, 2011
    
    
    18.7
    
    
    $
    5.39
    
    
    
    --
    
    
    $
    28,749
 
 (a)
    
    Includes shares withheld to cover tax-withholding
requirements relating to the vesting of restricted stock
issued to employees pursuant to the Companys
shareholder-approved stock incentive plans.(b)
    
    The Company initially announced the authorization of a
share buyback program in December 1989. Since its
inception, the Companys Board of Directors has authorized
the purchase under the program of an aggregate of $2.275
billion of the Companys stock. The Amended Agreement
currently restricts the Companys ability to repurchase
stock. 
 ITEM 5. OTHER INFORMATION




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##### Table of Contents



46 
 ITEM 6. EXHIBITS
 4.1
    
    Indenture, dated as of April 7, 2011, among Registrant, the
Guarantors party thereto and U.S. Bank National Association, as
Trustee and Collateral Agent.4.2
    
    Registration Rights Agreement, dated as of April 7, 2011, by and
among Registrant, the Guarantors party thereto and Merrill Lynch,
Pierce, Fenner & Smith Incorporated, as representative of the
several Initial Purchasers.4.3
    
    Intercreditor Agreement, dated as of April 7, 2011, by and between
JPMorgan Chase Bank, N.A., as U.S. collateral agent under the
Credit Agreement, and U.S. Bank National Association, as trustee
and collateral Agent under the Indenture, acknowledged by
Registrant and Registrants domestic subsidiaries listed on the
signature pages thereof.4.4
    
    Pledge and Security Agreement, dated as of April 7, 2011, by and
among Registrant, the other Grantors listed on the signature pages
thereof and U.S. Bank National Association, as Collateral Agent.10.1
    
    Dealer Manager Agreement, dated March 8, 2011, between Registrant
and J.P.Morgan Securities Ltd. and Merrill Lynch International, as
Dealer Mangers.10.2
    
    The First Amendment and Consent to the Second Amended and Restated
Credit Agreement and Second Amendment to the US Pledge and Security
Agreement, dated as of March 25, 2011, among Registrant, Liz
Claiborne Canada, Inc., Mexx Europe B.V. and Juicy Couture Europe
Limited, as Borrowers, the several lenders party thereto, JPMorgan
Chase Bank, N.A., as Administrative Agent and U.S. Collateral
Agent, J.P. Morgan Europe Limited, as European Administrative Agent
and European Collateral Agent, and JPMorgan Chase Bank, N.A.,
Toronto Branch, as Canadian Administrative Agent and Canadian
Collateral Agent.10.3
    
    Purchase Agreement, dated April 1, 2011, by and among Registrant
and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as
Representative of the several Initial Purchasers.10.4
    
    Purchase Agreement, dated April 5, 2011, by and among Registrant
and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as
Representative of the several Initial Purchasers.10.5
    
    Form of Executive Severance Agreement (incorporated herein by
reference to Exhibit 99.1 to Registrants Current Report on Form
8-K dated January 28, 2011).31(a)
    
    Certification of Chief Executive Officer Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.31(b)
    
    Certification of Chief Financial Officer Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.32(a)*
    
    Certification of Chief Executive Officer Pursuant to Section 18
U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.32(b)*
    
    Certification of Chief Financial Officer Pursuant to Section 18
U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
 
 *
    
    A signed original of the written statement required by Section 906 has
been provided to the Company and will be retained by the Company and
forwarded to the SEC or its staff upon request.




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##### Table of Contents



47 
 SIGNATURES
   LIZ CLAIBORNE, INC.
    
    LIZ CLAIBORNE, INC.By:
    
    /s/ Andrew Warren
    
    By:
    
    /s/ Elaine H. GoodellANDREW WARREN
    
    
    
    ELAINE H. GOODELLChief Financial Officer
(Principal financial officer)
    
    
    
    Vice President - Corporate
Controller and 

Chief Accounting Officer

(Principal accounting officer)