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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  x
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OFTHE SECURITIES
EXCHANGE ACT OF 1934
 For the quarterly period ended
    
    October 2, 2010
  o
    
    TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15 (d) OFTHE 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
 
  x o
 o o
  Large accelerated filer o   
    Accelerated filer x
    Non-accelerated filer o
    Smaller reporting company o(Do not check if a smaller reporting company)


o x






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##### 



LIZ CLAIBORNE, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
October 2, 2010
 PAGENUMBERPART I -
    
    FINANCIAL INFORMATIONItem 1.
    
    Financial Statements:Condensed Consolidated Balance Sheets as of October 2, 2010
(Unaudited), January 2, 2010 and October 3, 2009 (Unaudited)
    
    4Condensed Consolidated Statements of Operations for the Nine
and Three Month Periods Ended October 2, 2010 (Unaudited) and
October 3, 2009 (Unaudited)
    
    5Condensed Consolidated Statements of Cash Flows for the Nine
Month Periods Ended October 2, 2010 (Unaudited) and October 3,
2009 (Unaudited)
    
    6Notes to Condensed Consolidated Financial Statements (Unaudited)
    
    7  29Item 2.
    
    Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    30  49Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    49  50Item 4.
    
    Controls and Procedures
    
    50PART II -
    
    OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    50Item 1A.
    
    Risk Factors
    
    51  53Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    53Item 5.
    
    Other Information
    
    53Item 6.
    
    Exhibits
    
    54SIGNATURES


    
    55EX-10.1EX-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 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;
    
    continued 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;
    
    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;
    
    our ability to respond to constantly changing consumer demands and tastes and fashion
trends, across multiple 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;
    
    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 implementation of the licensing arrangements with J.C. Penney
Corporation, Inc. and J.C. Penney Company, Inc. and with QVC, Inc. discussed in this
report, 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 in our other
brand relationships or relationships with other retailers 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 and 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;
    
    our exposure to domestic and foreign currency fluctuations;
    
    our ability to complete the closure of our LIZ CLAIBORNE branded outlet operations on
terms satisfactory to us and the adverse effect such closure may have on our results of
operations and cash flows;
    
    limitations on our ability to utilize all or a portion of our US deferred tax assets if
we experience an ownership change; and




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
    
    the outcome of current and future litigations and other proceedings in which we are
involved, which may have a material adverse effect on our results of operations and cash
flows.




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4 
 PART I - FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 LIZ CLAIBORNE, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 October 2, 2010
    
    
    
    
    
    
    October 3, 2009(Unaudited)
    
    
    January 2, 2010
    
    
    (Unaudited)AssetsCurrent Assets:Cash and cash equivalents
    
    $
    16,392
    
    
    $
    20,372
    
    
    $
    25,173Accounts receivable - trade, net
    
    
    274,989
    
    
    
    263,508
    
    
    
    369,724Inventories, net
    
    
    380,435
    
    
    
    319,713
    
    
    
    409,964Deferred income taxes
    
    
    73
    
    
    
    769
    
    
    
    8,179Other current assets
    
    
    98,081
    
    
    
    267,499
    
    
    
    120,375Assets held for sale
    
    
    7,052
    
    
    
    15,070
    
    
    
    16,649Total current assets
    
    
    777,022
    
    
    
    886,931
    
    
    
    950,064Property and Equipment, Net
    
    
    386,153
    
    
    
    444,688
    
    
    
    494,725Intangibles, Net
    
    
    226,427
    
    
    
    231,229
    
    
    
    247,285Deferred Income Taxes
    
    
    6,380
    
    
    
    7,565
    
    
    
    2,474Other Assets
    
    
    41,553
    
    
    
    35,490
    
    
    
    31,066Total Assets
    
    $
    1,437,535
    
    
    $
    1,605,903
    
    
    $
    1,725,614Liabilities and Stockholders EquityCurrent Liabilities:Short-term borrowings
    
    $
    171,480
    
    
    $
    70,868
    
    
    $
    229,066Convertible Senior Notes
    
    
    73,662
    
    
    
    71,137
    
    
    
    --Accounts payable
    
    
    198,969
    
    
    
    144,942
    
    
    
    188,335Accrued expenses
    
    
    254,932
    
    
    
    343,288
    
    
    
    250,053Income taxes payable
    
    
    2,443
    
    
    
    5,167
    
    
    
    6,439Deferred income taxes
    
    
    7,150
    
    
    
    7,150
    
    
    
    --Total current liabilities
    
    
    708,636
    
    
    
    642,552
    
    
    
    673,893Long-Term Debt
    
    
    491,737
    
    
    
    516,146
    
    
    
    599,520Other Non-Current Liabilities
    
    
    196,880
    
    
    
    201,027
    
    
    
    159,779Deferred Income Taxes
    
    
    29,212
    
    
    
    26,299
    
    
    
    39,765Commitments and Contingencies (Note 10)Stockholders 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
    
    
    330,786
    
    
    
    319,326
    
    
    
    315,574Retained earnings
    
    
    1,447,935
    
    
    
    1,669,316
    
    
    
    1,711,028Accumulated other comprehensive loss
    
    
    (62,221
    )
    
    
    (69,371
    )
    
    
    (76,559
    )1,892,937
    
    
    
    2,095,708
    
    
    
    2,126,480Common stock in treasury, at cost  81,961,339,
81,488,984 and 81,420,425 shares
    
    
    (1,884,475
    )
    
    
    (1,879,160
    )
    
    
    (1,877,281
    )Total Liz Claiborne, Inc. stockholders equity
    
    
    8,462
    
    
    
    216,548
    
    
    
    249,199Noncontrolling interest
    
    
    2,608
    
    
    
    3,331
    
    
    
    3,458Total stockholders equity
    
    
    11,070
    
    
    
    219,879
    
    
    
    252,657Total Liabilities and Stockholders Equity
    
    $
    1,437,535
    
    
    $
    1,605,903
    
    
    $
    1,725,614




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5 LIZ CLAIBORNE, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
   Nine Months Ended

    
    Three Months EndedOctober 2, 2010
    
    
    October 3, 2009

    
    October 2, 2010
    
    
    October 3, 2009(39 Weeks)
    
    
    (39 Weeks)

    
    (13 Weeks)
    
    
    (13 Weeks)Net Sales
    
    $
    1,835,555
    
    
    $
    2,209,580
    
    
    $
    658,283
    
    
    $
    761,716Cost of goods sold
    
    
    933,462
    
    
    
    1,197,294
    
    
    
    320,633
    
    
    
    416,750Gross Profit
    
    
    902,093
    
    
    
    1,012,286
    
    
    
    337,650
    
    
    
    344,966Selling, general & administrative
expenses
    
    
    1,070,568
    
    
    
    1,205,939
    
    
    
    357,134
    
    
    
    403,948Goodwill impairment
    
    
    --
    
    
    
    2,785
    
    
    
    --
    
    
    
    --Impairment of other intangible assets
    
    
    2,594
    
    
    
    --
    
    
    
    --
    
    
    
    --Operating Loss
    
    
    (171,069
    )
    
    
    (196,438
    )
    
    
    (19,484
    )
    
    
    (58,982
    )Other income (expense), net
    
    
    12,262
    
    
    
    (11,471
    )
    
    
    (29,539
    )
    
    
    (10,097
    )Interest expense, net
    
    
    (47,170
    )
    
    
    (46,862
    )
    
    
    (12,618
    )
    
    
    (17,410
    )Loss Before Provision (Benefit) for Income
Taxes
    
    
    (205,977
    )
    
    
    (254,771
    )
    
    
    (61,641
    )
    
    
    (86,489
    )Provision (benefit) for income taxes
    
    
    6,242
    
    
    
    (5,830
    )
    
    
    875
    
    
    
    621Loss from Continuing Operations
    
    
    (212,219
    )
    
    
    (248,941
    )
    
    
    (62,516
    )
    
    
    (87,110
    )Discontinued operations, net of
income taxes
    
    
    (9,822
    )
    
    
    (15,639
    )
    
    
    (288
    )
    
    
    (3,602
    )Net Loss
    
    
    (222,041
    )
    
    
    (264,580
    )
    
    
    (62,804
    )
    
    
    (90,712
    )Net loss attributable to the noncontrolling interest
    
    
    (723
    )
    
    
    (554
    )
    
    
    (110
    )
    
    
    (171
    )Net Loss Attributable to Liz Claiborne, Inc.
    
    $
    (221,318
    )
    
    $
    (264,026
    )
    
    $
    (62,694
    )
    
    $
    (90,541
    )Earnings per Share:Basic and DilutedLoss from Continuing Operations Attributable
to Liz Claiborne, Inc.
    
    $
    (2.24
    )
    
    $
    (2.65
    )
    
    $
    (0.66
    )
    
    $
    (0.93
    )Net Loss Attributable to Liz Claiborne, Inc.
    
    $
    (2.35
    )
    
    $
    (2.81
    )
    
    $
    (0.67
    )
    
    $
    (0.96
    )Weighted Average Shares, Basic and Diluted
    
    
    94,224
    
    
    
    93,855
    
    
    
    94,259
    
    
    
    93,908




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6 LIZ CLAIBORNE, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
   Nine Months EndedOctober 2, 2010

    
    October 3, 2009(39 Weeks)

    
    (39 Weeks)Cash Flows from Operating Activities:Net loss
    
    $
    (222,041
    )
    
    $
    (264,580
    )Adjustments to arrive at loss from continuing operations
    
    
    9,822
    
    
    
    15,639Loss from continuing operations
    
    
    (212,219
    )
    
    
    (248,941
    )Adjustments to reconcile loss from continuing operations to net
cash (used in) provided by operating activities:Depreciation and amortization
    
    
    110,356
    
    
    
    119,263Impairment of goodwill and other intangible assets
    
    
    2,594
    
    
    
    2,785Loss on asset disposals and impairments, including
streamlining initiatives, net
    
    
    24,935
    
    
    
    23,349Share-based compensation
    
    
    5,114
    
    
    
    6,689Foreign currency gains, net
    
    
    (11,125
    )
    
    
    --Other, net
    
    
    (667
    )
    
    
    101Changes in assets and liabilities:Increase in accounts receivable  trade, net
    
    
    (16,854
    )
    
    
    (19,363
    )(Increase) decrease in inventories, net
    
    
    (58,084
    )
    
    
    56,003(Increase) decrease in other current and non-current assets
    
    
    (7,625
    )
    
    
    26,439Increase (decrease) in accounts payable
    
    
    55,239
    
    
    
    (20,885
    )(Decrease) increase in accrued expenses and other non-current liabilities
    
    
    (86,979
    )
    
    
    843Net change in income tax assets and liabilities
    
    
    172,973
    
    
    
    94,615Net cash used in operating activities of discontinued operations
    
    
    (955
    )
    
    
    (13,917
    )Net cash (used in) provided by operating activities
    
    
    (23,297
    )
    
    
    26,981Cash Flows from Investing Activities:Purchases of property and equipment
    
    
    (48,663
    )
    
    
    (54,451
    )Proceeds from sale of property and equipment
    
    
    1,144
    
    
    
    --Payments for purchases of businesses
    
    
    (5,000
    )
    
    
    (8,755
    )Payments for in-store merchandise shops
    
    
    (1,436
    )
    
    
    (5,794
    )Investments in and advances to equity investee
    
    
    (4,033
    )
    
    
    --Other, net
    
    
    (257
    )
    
    
    (270
    )Net cash used in investing activities of discontinued operations
    
    
    (5,599
    )
    
    
    (564
    )Net cash used in investing activities
    
    
    (63,844
    )
    
    
    (69,834
    )Cash Flows from Financing Activities:Short-term borrowings, net
    
    
    (6,608
    )
    
    
    (9,541
    )Proceeds from borrowings under revolving credit agreement
    
    
    470,295
    
    
    
    --Repayment of borrowings under revolving credit agreement
    
    
    (361,648
    )
    
    
    --Proceeds from issuance of Convertible Senior Notes
    
    
    --
    
    
    
    90,000Principal payments under capital lease obligations
    
    
    (4,627
    )
    
    
    (3,246
    )Payment of deferred financing fees
    
    
    (15,001
    )
    
    
    (39,130
    )Net cash provided by financing activities
    
    
    82,411
    
    
    
    38,083Effect of Exchange Rate Changes on Cash and Cash Equivalents
    
    
    750
    
    
    
    4,512Net Change in Cash and Cash Equivalents
    
    
    (3,980
    )
    
    
    (258
    )Cash and Cash Equivalents at Beginning of Period
    
    
    20,372
    
    
    
    25,431Cash and Cash Equivalents at End of Period
    
    $
    16,392
    
    
    $
    25,173




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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, the
Companys international, retail-based operating segment.
    
    Partnered Brands segment  consists of one operating segment including
the wholesale apparel, wholesale non-apparel, outlet, concession, e-commerce and licensing
operations of the Companys wholesale-based brands including: AXCESS, CLAIBORNE
(mens), 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.




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8    NATURE OF OPERATIONS
  PRINCIPLES OF CONSOLIDATION
  USE OF ESTIMATES AND CRITICAL ACCOUNTING POLICIES
   RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS




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9 OTHER MATTERS




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10          Nine Months Ended
    
    
    Three Months EndedIn thousands
    
    October 2, 2010
    
    October 3, 2009
    
    October 2, 2010
    
    October 3, 2009(39 Weeks)
    
    (39 Weeks)
    
    (13 Weeks)
    
    (13 Weeks)Net sales
    
    $
    17,867
    
    
    $
    23,589
    
    
    $
    3,682
    
    
    $
    7,557Loss before benefit for
income
taxes
    
    $
    (4,369
    )
    
    $
    (11,506
    )
    
    $
    (899
    )
    
    $
    (2,082
    )Benefit for income taxes
    
    
    (762
    )
    
    
    --
    
    
    
    (34
    )
    
    
    --Loss from discontinued
operations, net of income
taxes
    
    $
    (3,607
    )
    
    $
    (11,506
    )
    
    $
    (865
    )
    
    $
    (2,082
    )(Loss) income on disposal of
discontinued operations, net
of income taxes
    
    $
    (6,215
    )
    
    $
    (4,133
    )
    
    $
    577
    
    
    $
    (1,520
    )




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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
    
    
    --
    
    
    
    (221,318
    )
    
    
    --
    
    
    
    (723
    )Restricted shares issued, net
of cancellations and
shares withheld for taxes
    
    
    6,377
    
    
    
    --
    
    
    
    (5,383
    )
    
    
    --Share-based compensation
    
    
    5,114
    
    
    
    --
    
    
    
    --
    
    
    
    --Dividend equivalent units vested
    
    
    (31
    )
    
    
    (63
    )
    
    
    68
    
    
    
    --Balance as of October 2, 2010
    
    $
    330,786
    
    
    $
    1,447,935
    
    
    $
    (1,884,475
    )
    
    $
    2,608
  CommonCapital in
    
    
    
    
    
    
    Stock inExcess of Par
    
    
    Retained
    
    
    Treasury, at
    
    
    NoncontrollingIn thousands
    
    Value
    
    
    Earnings
    
    
    Cost
    
    
    InterestBalance as of January 3, 2009
    
    $
    292,144
    
    
    $
    1,975,082
    
    
    $
    (1,873,300
    )
    
    $
    4,012Net loss
    
    
    --
    
    
    
    (264,026
    )
    
    
    --
    
    
    
    (554
    )Issuance of Convertible Senior Notes, net
    
    
    11,992
    
    
    
    --
    
    
    
    --
    
    
    
    --Restricted shares issued, net of
cancellations and
shares withheld for taxes
    
    
    4,778
    
    
    
    --
    
    
    
    (4,027
    )
    
    
    --Share-based compensation
    
    
    6,689
    
    
    
    --
    
    
    
    --
    
    
    
    --Dividend equivalent units vested
    
    
    (29
    )
    
    
    (28
    )
    
    
    46
    
    
    
    --Balance as of October 3, 2009
    
    $
    315,574
    
    
    $
    1,711,028
    
    
    $
    (1,877,281
    )
    
    $
    3,458




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12  Nine Months Ended
    
    Three Months EndedOctober 2, 2010
    
    
    October 3, 2009
    
    
    October 2, 2010
    
    
    October 3, 2009In thousands
    
    (39 Weeks)
    
    
    (39 Weeks)
    
    
    (13 Weeks)
    
    
    (13 Weeks)Net loss
    
    $
    (222,041
    )
    
    $
    (264,580
    )
    
    $
    (62,804
    )
    
    $
    (90,712
    )Other comprehensive income
(loss), net of income
taxes:Change in cumulative
translation
adjustment
    
    
    16,586
    
    
    
    (2,307
    )
    
    
    (10,216
    )
    
    
    (2,335
    )Change in cumulative
translation
adjustment on
Eurobond and other
instruments, net of
income taxes of
$2,435, $2,116, $344
and $1,083,
respectively
    
    
    (12,851
    )
    
    
    913
    
    
    
    14,050
    
    
    
    4,223Change in unrealized
gains (losses) on
available-for-sale
securities, net of
income taxes of $0,
$0, $0 and $0,
respectively
    
    
    (30
    )
    
    
    196
    
    
    
    (8
    )
    
    
    19Change in fair value
of cash flow hedges,
net of income taxes
of $1,760, $(1,007),
$(302) and $(699),
respectively
    
    
    3,445
    
    
    
    (8,645
    )
    
    
    (9,002
    )
    
    
    (3,410
    )Comprehensive loss
    
    
    (214,891
    )
    
    
    (274,423
    )
    
    
    (67,980
    )
    
    
    (92,215
    )Comprehensive loss
attributable to the
noncontrolling interest
    
    
    723
    
    
    
    554
    
    
    
    110
    
    
    
    171Comprehensive loss
attributable to
Liz Claiborne, Inc.
    
    $
    (214,168
    )
    
    $
    (273,869
    )
    
    $
    (67,870
    )
    
    $
    (92,044
    )
  In thousands
    October 2, 2010
    January 2, 2010
    October 3, 2009Cumulative translation adjustment, net of income taxes
of $4,694, $7,129 and $15,999, respectively
    
    $
    (60,413
    )
    
    $
    (64,148
    )
    
    $
    (64,416
    )Unrealized gains (losses) on cash flow hedging
derivatives, net of income taxes of $73, $1,833 and
$2,325, respectively
    
    
    (2,119
    )
    
    
    (5,564
    )
    
    
    (11,792
    )Unrealized gains (losses) on available-for-sale
securities, net of income taxes of $0, $0 and $0,
respectively
    
    
    311
    
    
    
    341
    
    
    
    (351
    )Accumulated other comprehensive loss, net of income taxes
    
    $
    (62,221
    )
    
    $
    (69,371
    )
    
    $
    (76,559
    )
   In thousands
    October 2, 2010
    

    January 2, 2010
    

    October 3, 2009Raw materials
    
    $
    3,019
    
    
    $
    5,896
    
    
    $
    10,964Work in process
    
    
    309
    
    
    
    773
    
    
    
    2,028Finished goods
    
    
    377,107
    
    
    
    313,044
    
    
    
    396,972Total inventories, net
    
    $
    380,435
    
    
    $
    319,713
    
    
    $
    409,964




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##### Table of Contents



13   In thousands

    October 2, 2010
    

    January 2, 2010
    

    October 3, 2009Land and buildings
    
    $
    67,662
    
    
    $
    69,235
    
    
    $
    69,300Machinery and equipment
    
    
    318,215
    
    
    
    312,444
    
    
    
    334,147Furniture and fixtures
    
    
    258,705
    
    
    
    274,235
    
    
    
    291,107Leasehold improvements
    
    
    494,748
    
    
    
    529,281
    
    
    
    566,1001,139,330
    
    
    
    1,185,195
    
    
    
    1,260,654Less: Accumulated depreciation and
amortization
    
    
    753,177
    
    
    
    740,507
    
    
    
    765,929Total property and equipment, net
    
    $
    386,153
    
    
    $
    444,688
    
    
    $
    494,725
    WeightedAverageAmortizationIn thousands
    
    Period

    
    October 2, 2010
    
    
    January 2, 2010
    
    
    October 3, 2009Amortized intangible assets:Gross carrying amount:Licensed trademarks (a)
    
    
    --
    
    
    $
    --
    
    
    $
    --
    
    
    $
    32,154Owned trademarks
    
    
    4 years
    
    
    
    1,350
    
    
    
    1,000
    
    
    
    1,000Customer relationships
    
    
    13 years
    
    

    
    12,274
    
    
    
    12,220
    
    
    
    12,159Merchandising rights (b)
    
    
    4 years
    
    
    
    27,758
    
    
    
    35,025
    
    
    
    48,024Other
    
    
    4 years
    
    
    
    2,322
    
    
    
    2,322
    
    
    
    2,322Subtotal
    
    
    7 years
    
    
    
    43,704
    
    
    
    50,567
    
    
    
    95,659Accumulated amortization:Licensed trademarks
    
    
    
    
    
    
    --
    
    
    
    --
    
    
    
    (22,125
    )Owned trademarks
    
    
    
    
    
    
    (667
    )
    
    
    (517
    )
    
    
    (466
    )Customer relationships
    
    
    
    
    
    
    (4,187
    )
    
    
    (3,426
    )
    
    
    (3,161
    )Merchandising rights
    
    
    
    
    
    
    (20,682
    )
    
    
    (23,488
    )
    
    
    (30,346
    )Other
    
    
    
    
    
    
    (1,604
    )
    
    
    (1,487
    )
    
    
    (1,419
    )Subtotal
    
    
    
    
    
    
    (27,140
    )
    
    
    (28,918
    )
    
    
    (57,517
    )Net:Licensed trademarks
    
    
    
    
    
    
    --
    
    
    
    --
    
    
    
    10,029Owned trademarks
    
    
    
    
    
    
    683
    
    
    
    483
    
    
    
    534Customer relationships
    
    
    
    
    
    
    8,087
    
    
    
    8,794
    
    
    
    8,998Merchandising rights
    
    
    
    
    
    
    7,076
    
    
    
    11,537
    
    
    
    17,678Other
    
    
    
    
    
    
    718
    
    
    
    835
    
    
    
    903Total amortized intangible assets, net
    
    
    
    
    
    
    16,564
    
    
    
    21,649
    
    
    
    38,142Unamortized intangible assets:Owned trademarks
    
    
    
    
    
    
    209,863
    
    
    
    209,580
    
    
    
    209,143Total intangible assets
    
    
    
    
    
    $
    226,427
    
    
    $
    231,229
    
    
    $
    247,285




---



##### Table of Contents



14 
 (a)
    
    The decrease in the balance compared to October 3, 2009 reflected a non-cash
impairment charge of $9.5 million recorded in the fourth quarter of 2009 within the Companys
Partnered Brands segment related to the Companys licensed trademark intangible asset
associated with its licensed DKNY® JEANS and DKNY® ACTIVE brands.(b)
    
    The decrease in the balance compared to October 3, 2009 included non-cash impairment
charges of $2.6 million recorded in the second quarter of 2010 primarily within the Companys
Partnered Brands segment related to merchandising rights of its LIZ CLAIBORNE and licensed
DKNY® JEANS brands and a non-cash impairment charge of $4.7 million recorded in the fourth
quarter of 2009 within the Companys Partnered Brands segment primarily related to LIZ
CLAIBORNE merchandising rights.   (In millions)Fiscal Year
    
    Amortization Expense2010
    
    $
    6.32011
    
    
    4.52012
    
    
    3.12013
    
    
    1.92014
    
    
    1.3




---



##### Table of Contents



15    In thousands
    
    October 2, 2010
    
    January 2, 2010
    
    October 3, 20095.0% Notes, due July 2013 (a)
    
    $
    481,838
    
    
    $
    501,827
    
    
    $
    510,1826.0% Convertible Senior Notes, due June 2014 (b)
    
    
    73,662
    
    
    
    71,137
    
    
    
    70,323Revolving credit facility
    
    
    167,327
    
    
    
    66,507
    
    
    
    228,109Capital lease obligations
    
    
    14,052
    
    
    
    18,680
    
    
    
    19,729Other
    
    
    --
    
    
    
    --
    
    
    
    243Total debt
    
    
    736,879
    
    
    
    658,151
    
    
    
    828,586Less: Short-term borrowings (c)
    
    
    171,480
    
    
    
    70,868
    
    
    
    229,066Convertible Notes (d)
    
    
    73,662
    
    
    
    71,137
    
    
    
    --Long-term debt
    
    $
    491,737
    
    
    $
    516,146
    
    
    $
    599,520
 
 (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 October 2, 2010, January 2, 2010 and October 3, 2009 represented
principal of $90.0 million and an unamortized debt discount of $16.3 million, $18.9 million
and $19.7 million, respectively.(c)
    
    At October 2, 2010, the balance primarily consisted 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 October 2, 2010 and January 2, 2010. 5.0% Notes
 6.0% Convertible Senior Notes




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##### Table of Contents



16   Amended and Restated Revolving Credit Facility




---



##### Table of Contents



Total
    
    Borrowing
    
    Outstanding
    
    Letters of
    
    Available
    
    ExcessIn thousands
    
    Facility (a)
    
    Base (a)
    
    Borrowings
    
    Credit Issued
    
    Capacity
    
    Capacity (b)Revolving credit
facility
(a)
    
    $
    350,000
    
    
    $
    428,023
    
    
    $
    167,327
    
    
    $
    25,992
    
    
    $
    156,681
    
    
    $
    111,681
 
 (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
    
    October 2, 2010
    
    January 2, 2010
    
    October 3, 2009Financial Assets:Derivatives
    
    $
    774
    
    
    $
    586
    
    
    $
    2Financial Liabilities:Derivatives
    
    $
    (5,531
    )
    
    $
    (3,781
    )
    
    $
    (8,415
    )
   Total LossesFair Value Measured and Recorded at
    
    
    Nine Months
    
    
    Three MonthsNet Carrying
    
    
    Reporting Date Using:
    
    
    Ended
    
    
    EndedValue as of
    
    
    
    
    
    October 2,
    
    
    October 2,In thousands
    
    October 2, 2010
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    2010
    
    
    2010Property and
equipment
    
    $
    2,646
    
    
    $
    --
    
    
    $
    --
    
    
    $
    2,646
    
    
    $
    17,027
    
    
    $
    2,477Intangible assets
    
    
    --
    
    
    
    --
    
    
    
    --
    
    
    
    --
    
    
    
    2,594
    
    
    
    --Assets held for sale
    
    
    7,052
    
    
    
    --
    
    
    
    --
    
    
    
    7,052
    
    
    
    8,018
    
    
    
    8,018




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##### Table of Contents



18    Total LossesNet Carrying
    
    
    Fair Value Measured and
    
    
    Nine Months
    
    
    Three MonthsValue as of
    
    
    Recorded at Reporting Date Using:
    
    Ended
    
    
    EndedOctober 3,
    
    
    
    
    
    October 3,
    
    
    October 3,In thousands
    
    2009
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    2009
    
    
    2009Property and equipment
    
    $
    1,835
    
    
    $
    --
    
    
    $
    --
    
    
    $
    1,835
    
    
    $
    13,351
    
    
    $
    9,767
    October 2, 2010
    
    
    January 2, 2010
    
    
    October 3, 2009Carrying
    
    
    
    
    
    
    Carrying
    
    
    
    
    
    
    CarryingIn thousands
    
    Fair Value
    
    
    Value
    
    
    Fair Value
    
    
    Value
    
    
    Fair Value
    
    
    Value5.0% Notes, due July 2013 (a)
    
    $
    398,546
    
    
    $
    481,838
    
    
    $
    392,615
    
    
    $
    501,827
    
    
    $
    356,619
    
    
    $
    510,1826.0% Convertible Senior Notes, due June
2014 (a)
    
    
    167,245
    
    
    
    73,662
    
    
    
    160,738
    
    
    
    71,137
    
    
    
    144,149
    
    
    
    70,323Revolving credit facility (b)
    
    
    167,327
    
    
    
    167,327
    
    
    
    66,507
    
    
    
    66,507
    
    
    
    228,109
    
    
    
    228,109
 
 (a)
    
    Carrying values include unamortized debt discount.(b)
    
    Borrowings under the revolving credit facility bear interest based on a market rate;
accordingly, its fair value approximates its carrying value.   Buying/Sourcing




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##### Table of Contents



19  Acquisitions
  Other




---



##### Table of Contents



20   2010 Actions
   2009 Actions




---



##### Table of Contents



21  Nine Months Ended
    
    
    Three Months EndedOctober 2, 2010
    
    
    October 3, 2009
    
    
    October 2, 2010
    
    
    October 3, 2009In thousands
    
    (39 Weeks)
    
    
    (39 Weeks)
    
    
    (13 Weeks)
    
    
    (13 Weeks)Domestic-Based Direct Brands
    
    $
    20,068
    
    
    $
    23,738
    
    
    $
    8,677
    
    
    $
    11,383International-Based Direct
Brands
    
    
    6,249
    
    
    
    18,315
    
    
    
    3,163
    
    
    
    3,892Partnered Brands
    
    
    44,348
    
    
    
    31,632
    
    
    
    11,607
    
    
    
    11,230Total
    
    $
    70,665
    
    
    $
    73,685
    
    
    $
    23,447
    
    
    $
    26,505
  ContractPayroll and
    
    
    Termination
    
    
    AssetIn thousands
    
    Related Costs
    
    
    Costs
    
    
    Write-Downs
    
    
    Other Costs
    
    
    TotalBalance at January
2, 2010
    
    $
    32,696
    
    
    $
    22,821
    
    
    $
    --
    
    
    $
    7,204
    
    
    $
    62,7212010 provision
    
    
    12,609
    
    
    
    26,448
    
    
    
    22,428
    
    
    
    9,180
    
    
    
    70,6652010 asset
write-downs
    
    
    --
    
    
    
    --
    
    
    
    (22,428
    )
    
    
    --
    
    
    
    (22,428
    )Translation
difference
    
    
    (784
    )
    
    
    (93
    )
    
    
    --
    
    
    
    (199
    )
    
    
    (1,076
    )2010 spending
    
    
    (41,764
    )
    
    
    (22,877
    )
    
    
    --
    
    
    
    (9,729
    )
    
    
    (74,370
    )Balance at October
2, 2010
    
    $
    2,757
    
    
    $
    26,299
    
    
    $
    --
    
    
    $
    6,456
    
    
    $
    35,512




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##### Table of Contents



22   Nine Months Ended
    
    
    Three Months EndedOctober 2, 2010
    
    
    October 3, 2009
    
    
    October 2, 2010
    
    October 3, 2009In thousands
    
    (39 Weeks)
    
    
    (39 Weeks)
    
    
    (13 Weeks)
    
    
    (13 Weeks)Loss from continuing operations
    
    $
    (212,219
    )
    
    $
    (248,941
    )
    
    $
    (62,516
    )
    
    $
    (87,110
    )Net loss attributable to the noncontrolling
interest
    
    
    (723
    )
    
    
    (554
    )
    
    
    (110
    )
    
    
    (171
    )Loss from continuing operations attributable to
Liz Claiborne, Inc.
    
    
    (211,496
    )
    
    
    (248,387
    )
    
    
    (62,406
    )
    
    
    (86,939
    )Loss from discontinued operations, net of income
taxes
    
    
    (9,822
    )
    
    
    (15,639
    )
    
    
    (288
    )
    
    
    (3,602
    )Net loss attributable to Liz Claiborne, Inc.
    
    $
    (221,318
    )
    
    $
    (264,026
    )
    
    $
    (62,694
    )
    
    $
    (90,541
    )Basic weighted average shares outstanding
    
    
    94,224
    
    
    
    93,855
    
    
    
    94,259
    
    
    
    93,908Stock options and nonvested shares(a)(b)
    
    
    --
    
    
    
    --
    
    
    
    --
    
    
    
    --Convertible Notes(c)
    
    
    --
    
    
    
    --
    
    
    
    --
    
    
    
    --Diluted weighted average shares outstanding
    
    
    94,224
    
    
    
    93,855
    
    
    
    94,259
    
    
    
    93,908Earnings per share:Basic and dilutedLoss from continuing operations attributable to
Liz Claiborne, Inc.
    
    $
    (2.24
    )
    
    $
    (2.65
    )
    
    $
    (0.66
    )
    
    $
    (0.93
    )Loss from discontinued operations attributable
to Liz Claiborne, Inc.
    
    $
    (0.11
    )
    
    $
    (0.16
    )
    
    $
    (0.01
    )
    
    $
    (0.03
    )Net loss attributable to Liz Claiborne, Inc.
    
    $
    (2.35
    )
    
    $
    (2.81
    )
    
    $
    (0.67
    )
    
    $
    (0.96
    )
 
 (a)
    
    Because the Company incurred a loss from continuing operations for the nine and
three months ended October 2, 2010 and October 3, 2009, all outstanding stock options and
nonvested shares are antidilutive for such periods. Accordingly, for the nine and three months
ended October 2, 2010 and October 3, 2009, approximately 6.8 million and 6.9 million
outstanding stock options, respectively, and approximately 0.9 million and 1.1 million
outstanding nonvested shares, respectively, were excluded from the computation of diluted loss
per share.(b)
    
    Excludes approximately 0.1 million and 0.4 million nonvested shares for the
nine and three months ended October 2, 2010 and October 3, 2009, respectively, for which the
performance criteria have not yet been achieved.(c)
    
    Because the Company incurred a loss from continuing operations for the nine
and three months ended October 2, 2010, approximately 9.8 million and 7.1 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. The
Convertible Notes were not dilutive for the nine and three months ended October 3, 2009 as
they were not convertible for such periods.  Licensing-Related Transactions




---



##### Table of Contents



23    Condensed Consolidated Statements of Cash Flows Supplementary Disclosures
   Related Party Transactions
   
    
    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




---



##### Table of Contents



24 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, the Companys
international, retail-based operating segment.
    
    Partnered Brands segment  consists of one operating segment including the
wholesale apparel, wholesale non-apparel, outlet, concession, e-commerce and licensing
operations of the Companys wholesale-based brands including: AXCESS, CLAIBORNE
(mens), 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.
  OperatingDollars in thousands
    
    Net Sales
    
    % to Total
    
    Loss
    
    % of SalesNine Months Ended October 2, 2010 (39 weeks)Domestic-Based Direct Brands
    
    $
    773,273
    
    
    
    42.1
    %
    
    $
    (18,323
    )
    
    
    (2.4
    )%International-Based Direct Brands
    
    
    531,159
    
    
    
    29.0
    %
    
    
    (69,632
    )
    
    
    (13.1
    )%Partnered Brands
    
    
    531,123
    
    
    
    28.9
    %
    
    
    (83,114
    )
    
    
    (15.6
    )%Totals
    
    $
    1,835,555
    
    
    
    100.0
    %
    
    $
    (171,069
    )
    
    
    (9.3
    )%Nine Months Ended October 3, 2009 (39 weeks)Domestic-Based Direct Brands
    
    $
    780,895
    
    
    
    35.4
    %
    
    $
    (37,659
    )
    
    
    (4.8
    )%International-Based Direct Brands
    
    
    621,449
    
    
    
    28.1
    %
    
    
    (69,471
    )
    
    
    (11.2
    )%Partnered Brands
    
    
    807,236
    
    
    
    36.5
    %
    
    
    (89,308
    )
    
    
    (11.1
    )%Totals
    
    $
    2,209,580
    
    
    
    100.0
    %
    
    $
    (196,438
    )
    
    
    (8.9
    )%
 OperatingIncomeDollars in thousands
    
    Net Sales
    
    % to Total
    
    (Loss)
    
    % of SalesThree Months Ended October 2, 2010 (13 weeks)Domestic-Based Direct Brands
    
    $
    290,501
    
    
    
    44.1
    %
    
    $
    4,701
    
    
    
    1.6
    %International-Based Direct Brands
    
    
    187,456
    
    
    
    28.5
    %
    
    
    (13,999
    )
    
    
    (7.5
    )%Partnered Brands
    
    
    180,326
    
    
    
    27.4
    %
    
    
    (10,186
    )
    
    
    (5.6
    )%Totals
    
    $
    658,283
    
    
    
    100.0
    %
    
    $
    (19,484
    )
    
    
    (3.0
    )%Three Months Ended October 3, 2009 (13 weeks)Domestic-Based Direct Brands
    
    $
    270,496
    
    
    
    35.5
    %
    
    $
    (7,365
    )
    
    
    (2.7
    )%International-Based Direct Brands
    
    
    224,353
    
    
    
    29.5
    %
    
    
    (19,167
    )
    
    
    (8.5
    )%Partnered Brands
    
    
    266,867
    
    
    
    35.0
    %
    
    
    (32,450
    )
    
    
    (12.2
    )%Totals
    
    $
    761,716
    
    
    
    100.0
    %
    
    $
    (58,982
    )
    
    
    (7.7
    )%




---



##### Table of Contents



25  OperatingDollars in thousands
    
    Net Sales
    
    % to Total
    
    Loss
    
    % of SalesNine Months Ended October 2, 2010 (39 weeks)Domestic
    
    $
    1,206,569
    
    
    
    65.7
    %
    
    $
    (95,094
    )
    
    
    (7.9
    )%International
    
    
    628,986
    
    
    
    34.3
    %
    
    
    (75,975
    )
    
    
    (12.1
    )%Totals
    
    $
    1,835,555
    
    
    
    100.0
    %
    
    $
    (171,069
    )
    
    
    (9.3
    )%Nine Months Ended October 3, 2009 (39 weeks)Domestic
    
    $
    1,490,434
    
    
    
    67.5
    %
    
    $
    (100,334
    )
    
    
    (6.7
    )%International
    
    
    719,146
    
    
    
    32.5
    %
    
    
    (96,104
    )
    
    
    (13.4
    )%Totals
    
    $
    2,209,580
    
    
    
    100.0
    %
    
    $
    (196,438
    )
    
    
    (8.9
    )%
 OperatingDollars in thousands
    
    Net Sales
    
    % to Total
    
    Loss
    
    % of SalesThree Months Ended October 2, 2010 (13 weeks)Domestic
    
    $
    437,689
    
    
    
    66.5
    %
    
    $
    (4,850
    )
    
    
    (1.1
    )%International
    
    
    220,594
    
    
    
    33.5
    %
    
    
    (14,634
    )
    
    
    (6.6
    )%Totals
    
    $
    658,283
    
    
    
    100.0
    %
    
    $
    (19,484
    )
    
    
    (3.0
    )%Three Months Ended October 3, 2009 (13 weeks)Domestic
    
    $
    506,871
    
    
    
    66.5
    %
    
    $
    (29,133
    )
    
    
    (5.7
    )%International
    
    
    254,845
    
    
    
    33.5
    %
    
    
    (29,849
    )
    
    
    (11.7
    )%Totals
    
    $
    761,716
    
    
    
    100.0
    %
    
    $
    (58,982
    )
    
    
    (7.7
    )%




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26  Foreign Currency Contracts Designated as Hedging InstrumentsIn thousands
    
    Asset Derivatives
    
    
    Liability DerivativesBalance Sheet
    
    
    Notional
    
    
    
    
    
    
    Balance Sheet
    
    
    NotionalPeriod
    
    Location
    
    
    Amount
    
    
    Fair Value
    
    
    Location
    
    
    Amount
    
    
    Fair ValueOctober 2, 2010
    
    Other current assets
    
    $
    14,565
    
    
    $
    774
    
    
    Accrued expenses
    
    $
    124,739
    
    
    $
    5,531January 2, 2010
    
    Other current assets
    
    
    26,408
    
    
    
    586
    
    
    Accrued expenses
    
    
    74,634
    
    
    
    3,091October 3, 2009
    
    Other current assets
    
    
    --
    
    
    
    --
    
    
    Accrued expenses
    
    
    116,669
    
    
    
    7,827
 Foreign Currency Contracts Not Designated as Hedging InstrumentsIn thousands
    
    Asset Derivatives
    
    
    Liability DerivativesBalance Sheet
    
    
    Notional
    
    
    
    
    
    
    Balance Sheet
    
    
    NotionalPeriod
    
    Location
    
    
    Amount
    
    
    Fair Value
    
    
    Location
    
    
    Amount
    
    
    Fair ValueOctober 2, 2010
    
    Other current assets
    
    $
    --
    
    
    $
    --
    
    
    Accrued expenses
    
    $
    --
    
    
    $
    --January 2, 2010
    
    Other current assets
    
    
    --
    
    
    
    --
    
    
    Accrued expenses
    
    
    12,015
    
    
    
    690October 3, 2009
    
    Other current assets
    
    
    1,938
    
    
    
    2
    
    
    Accrued expenses
    
    
    11,979
    
    
    
    588
  Location of Gain or
    
    
    
    
    
    
    Amount of Gain orAmount of Gain or
    
    
    (Loss) Reclassified
    
    
    Amount of Gain or
    
    
    (Loss) Recognized(Loss) Recognized
    
    
    from Accumulated
    
    
    (Loss) Reclassified
    
    
    in Operations onin Accumulated
    
    
    OCI into Operations
    
    
    from Accumulated
    
    
    DerivativeOCI on Derivative
    
    
    (Effective and
    
    
    OCI into Operations
    
    
    (IneffectiveIn
thousands
    
    (Effective Portion)
    
    Ineffective Portion)
    
    
    (Effective Portion)
    
    Portion)Nine months ended
October 2, 2010
    
    $
    1,174
    
    
    Cost of goods sold
    
    $
    (4,031
    )
    
    $
    (277)Nine months ended
October 3, 2009
    
    
    (6,886
    )
    
    Cost of goods sold
    
    
    2,766
    
    
    
    (1,003)Three months ended
October 2, 2010
    
    
    (7,787
    )
    
    Cost of goods sold
    
    
    1,517
    
    
    
    (153)Three months ended
October 3, 2009
    
    
    (7,246
    )
    
    Cost of goods sold
    
    
    (3,137
    )
    
    
    (879)




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##### Table of Contents



27       Stock Options
  Nine Months EndedValuation Assumptions:
    
    October 2, 2010
    
    October 3, 2009Weighted-average fair value of options granted
    
    $3.00
    
    $2.06Expected volatility
    
    56.9% to 58.8%
    
    48.7% to 74.8%Weighted-average volatility
    
    58.4%
    
    65.9%Expected term (in years)
    
    5.0
    
    5.2Dividend yield
    
    
    
    Risk-free rate
    
    0.3% to 5.3%
    
    0.5% to 5.0%Expected annual forfeiture
    
    12.6%
    
    11.8%




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##### Table of Contents



28  Weighted
    
    Weighted Average
    
    AggregateAverage Exercise
    
    Remaining
    
    Intrinsic ValueShares
    
    
    Price
    
    Contractual Term
    
    (In thousands)Outstanding at January 2, 2010
    
    
    4,918,630
    
    
    
    $  19.27
    
    
    
    4.9
    
    
    $
    4,736Granted
    
    
    2,550,000
    
    
    
    5.97Cancelled
    
    
    (653,534
    )
    
    
    16.56Outstanding at October 2, 2010
    
    
    6,815,096
    
    
    
    $  14.55
    
    
    
    5.1
    
    
    $
    7,161Vested or expected to vest at October 2, 2010
    
    
    6,004,109
    
    
    
    $  15.79
    
    
    
    4.9
    
    
    $
    5,942Exercisable at October 2, 2010
    
    
    2,232,346
    
    
    
    $  32.24
    
    
    
    3.1
    
    
    $
    39
   Restricted Stock
  WeightedAverage GrantShares
    
    

    Date Fair ValueNonvested stock at January 2, 2010 (a)
    
    
    1,132,856
    
    
    
    $
    16.58Granted
    
    
    373,000
    
    
    
    
    6.91Vested
    
    
    (270,926
    )
    
    
    
    30.23Cancelled
    
    
    (253,645
    )
    
    
    
    9.28Nonvested stock at October 2, 2010 (a)
    
    
    981,285
    
    
    
    $
    11.03Expected to vest as of October 2, 2010
    
    
    618,877
    
    
    
    $
    10.77
 
 (a)
    
    In the second and third quarters of 2008, performance shares were granted to a
group of key executives. These shares are subject to certain service and performance
conditions, a portion of which were measured as of fiscal 2008 year-end and the remainder will
be measured at fiscal 2010 year-end. The shares which were contingently issuable based on 2008
performance were deemed not earned and were cancelled. The ultimate amount of earned shares
measured at fiscal 2010 year-end will be determined by the extent of achievement of the
performance criteria set forth in the performance share agreements and will range from 0 
200% of target.   The Levy Group, Inc. L.C. Licensing, Inc. and Liz Claiborne, Inc.




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29




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30 
 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, our international,
retail-based operating segment.
    
    Partnered Brands segment  consists of one operating segment including the
wholesale apparel, wholesale non-apparel, outlet, concession, e-commerce and licensing
operations of our wholesale-based brands including: AXCESS, CLAIBORNE (mens), DANA
BUCHMAN, KENSIE, LIZ CLAIBORNE, LIZ CLAIBORNE NEW YORK, MAC & JAC, MARVELLA, MONET, TRIFARI
and our licensed DKNY® JEANS and DKNY® ACTIVE brands.
  
    
    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
and outlet stores and concession stores located outside of the US and e-commerce sites).
  Market Environment / Global Economic Uncertainty




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31 Competitive Profile
    Recent Initiatives
   Distribution of Our Liz Claiborne Brands




---



##### Table of Contents



32 Cost Reduction Initiatives
   Liquidity
     Discontinued Operations




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33   Overall Results for the Nine Months Ended October 2, 2010
 Net Sales
   Gross Profit and Loss from Continuing Operations
  Balance Sheet
  International Operations




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##### Table of Contents



RESULTS OF OPERATIONS
  NINE MONTHS ENDED OCTOBER 2, 2010 COMPARED TO NINE MONTHS ENDED OCTOBER 3, 2009
  Nine Months Ended
    
    
    VarianceOctober 2, 2010
    
    
    October 3, 2009Dollars in millions
    
    (39 Weeks)
    
    
    (39 Weeks)
    
    
    $
    
    
    %Net Sales
    
    $
    1,835.6
    
    
    $
    2,209.6
    
    
    $
    (374.0
    )
    
    
    (16.9
    )%Gross Profit
    
    
    902.1
    
    
    
    1,012.3
    
    
    
    (110.2
    )
    
    
    (10.9
    )%Selling, general & administrative
expenses
    
    
    1,070.6
    
    
    
    1,205.9
    
    
    
    135.3
    
    
    
    11.2
    %Impairment of goodwill and other
intangible assets
    
    
    2.6
    
    
    
    2.8
    
    
    
    0.2
    
    
    
    7.1
    %Operating Loss
    
    
    (171.1
    )
    
    
    (196.4
    )
    
    
    25.3
    
    
    
    12.9
    %Other income (expense), net
    
    
    12.3
    
    
    
    (11.5
    )
    
    
    23.8
    
    
    
    *Interest expense, net
    
    
    (47.2
    )
    
    
    (46.9
    )
    
    
    (0.3
    )
    
    
    (0.6
    )%Provision (benefit) for income taxes
    
    
    6.2
    
    
    
    (5.8
    )
    
    
    (12.0
    )
    
    
    *Loss from Continuing Operations
    
    
    (212.2
    )
    
    
    (249.0
    )
    
    
    36.8
    
    
    
    14.8
    %Discontinued operations, net of income
taxes
    
    
    (9.8
    )
    
    
    (15.6
    )
    
    
    5.8
    
    
    
    37.2
    %Net Loss
    
    
    (222.0
    )
    
    
    (264.6
    )
    
    
    42.6
    
    
    
    16.1
    %Net loss attributable to the
noncontrolling interest
    
    
    (0.7
    )
    
    
    (0.6
    )
    
    
    0.1
    
    
    
    16.7
    %Net Loss Attributable to Liz Claiborne,
Inc.
    
    $
    (221.3
    )
    
    $
    (264.0
    )
    
    $
    42.7
    
    
    
    16.2
    %
 
 *   Not meaningful. Net Sales




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##### Table of Contents



35   
    
    Domestic-Based Direct Brands net sales were $773.3 million, a decrease
of $7.6 million, or 1.0%, reflecting the following:
 -
    
    Net sales for JUICY COUTURE were $376.8 million, flat
compared to 2009, reflecting an increase in wholesale
non-apparel and outlet operations, offset by a
decrease in wholesale apparel operations.We ended the first nine months of 2010 with 70
specialty stores and 40 outlet stores, reflecting the
net addition over the last 12 months of 5 specialty
stores and 7 outlet stores. Key operating metrics for
our JUICY COUTURE retail operations included the
following:
 
    
    Average retail square footage in the first nine
months of 2010 was approximately 340 thousand square
feet, a 6.2% increase compared to 2009;
    
    Sales productivity was $519 per average square foot
as compared to $536 for the first nine months of 2009;
and
    
    Comparable store net sales in our Company-owned
stores decreased by 0.2% in the first nine months of
2010. Comparable direct-to-consumer net sales are
equivalent to comparable store sales, as 12 months
have not elapsed from the launch of the Company-owned
website.
 -
    
    Net sales for LUCKY BRAND were $275.8 million, a 10.3%
decrease compared to 2009, reflecting decreases in
specialty retail, partially resulting from reduced
average selling prices due to the aggressive
liquidation of inventory, in addition to decreases in
wholesale apparel and wholesale non-apparel
operations.We ended the first nine months of 2010 with 189
specialty stores and 37 outlet stores, reflecting the
net closure over the last 12 months of 4 specialty
stores and 9 outlet stores. Key operating metrics for
our LUCKY BRAND retail operations included the
following:
 
    
    Average retail square footage in the first nine
months of 2010 was approximately 579 thousand square
feet, a 0.8% decrease compared to 2009;
    
    Sales productivity was $254 per average square foot
as compared to $290 for the first nine months of 2009;
    
    Comparable store net sales in our Company-owned
stores decreased by 13.9% in the first nine months of
2010; and
    
    Comparable e-commerce net sales increased by 1.5%;
inclusive of e-commerce net sales, comparable
direct-to-consumer sales decreased 12.7%.
 -
    
    Net sales for KATE SPADE were $120.7 million, a 24.1%
increase compared to 2009, driven by increases in
retail and wholesale operations.We ended the first nine months of 2010 with 40
specialty stores and 29 outlet stores, reflecting the
net closure over the last 12 months of 7 specialty
stores. Key operating metrics for our KATE SPADE
retail operations included the following:
 
    
    Average retail square footage in the first nine
months of 2010 was approximately 138 thousand square
feet, a 10.5% decrease compared to 2009;
    
    Sales productivity was $418 per average square foot
as compared to $331 for the first nine months of 2009;
    
    Comparable store net sales in our Company-owned
stores increased by 17.7% in the first nine months of
2010; and
    
    Comparable e-commerce net sales increased by 91.6%;
inclusive of e-commerce net sales, comparable
direct-to-consumer sales increased 30.9%.




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##### Table of Contents



36 
    
    International-Based Direct Brands, comprised of our MEXX retail-based
lifestyle brand, net sales were $531.2 million, a decrease of $90.3
million, or 14.5%, compared to 2009, primarily due to decreases in our
MEXX Europe wholesale and retail operations, partially offset by an
increase in our MEXX Canada retail operations.We ended the first nine months of 2010 with 171 specialty stores, 93
outlet stores and 149 concessions, reflecting the net addition over
the last 12 months of 14 specialty stores and the net closure of 7
outlet stores and 53 concessions (inclusive of the conversion of 3
concessions to specialty retail formats). Key operating metrics for
our MEXX retail operations included the following:
 -
    
    Average retail square footage in the first nine months
of 2010 was approximately 1.553 million square feet, a
3.7% increase compared to 2009;-
    
    Sales productivity was $194 per average square foot as
compared to $221 for the first nine months of 2009;-
    
    Comparable store net sales in our Company-owned stores
decreased by 6.2% in the first nine months of 2010;
and-
    
    Comparable e-commerce and concession net sales
increased by 2.0%; inclusive of e-commerce and
concession net sales, comparable direct-to-consumer
sales decreased 5.0%.
 
    
    Partnered Brands net sales were $531.1 million, a decrease of $276.1 million, or 34.2%, reflecting:
 -
    
    A $176.8 million, or 21.9%, decrease related to brands that have been licensed or
exited, primarily due to a $167.4 million decrease in sales in our LIZ CLAIBORNE
family of brands as we transitioned from the legacy department store model to the
licensing model under the JCPenney and QVC arrangements;-
    
    A net $75.8 million, or 9.4%, decrease related to reduced sales of our ongoing
Partnered Brands business, primarily related to our licensed DKNY® JEANS brand and
our AXCESS and MONET brands; and-
    
    A $23.5 million, or 2.9%, decrease related to reduced sales in our outlet operations.
  -
    
    New stores become comparable after 14 full fiscal months of operations
(on the 1st 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 1st day of the 13th full fiscal month).
  Domestic International
 Gross Profit




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##### Table of Contents



37  Selling, General & Administrative Expenses
 
    
    A $112.9 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 transition to the licensing model
under the JCPenney and QVC arrangements;
    
    A $30.6 million decrease in our International-Based Direct Brands
segment, including a $14.9 million decrease in shipping and handling
expenses, a $9.3 million decrease in concession fees and a $5.3
million decrease in payroll related expenses;
    
    A $1.5 million decrease in our Domestic-Based Direct Brands segment;
    
    A $1.3 million decrease due to the impact of fluctuations in foreign
currency exchange rates in our international operations; and
    
    An $11.0 million increase in expenses associated with our streamlining
initiatives and brand-exiting activities.
  Impairment of Goodwill and Other Intangible Assets
  Operating Loss
 
    
    Domestic-Based Direct Brands operating loss in the first nine months
of 2010 was $18.4 million ((2.4)% of net sales), compared to an
operating loss of $37.6 million ((4.8)% of net sales) in 2009. The
decreased operating loss reflected a decrease in SG&A, including
reduced payroll related expenses of $12.9 million and increased gross
profit.
    
    International-Based Direct Brands operating loss in the first nine
months of 2010 was $69.6 million ((13.1)% of net sales), compared to
an operating loss of $69.5 million ((11.2)% of net sales) in 2009.
Compared to the prior year period, the operating loss reflected: (i)
decreased gross profit; (ii) a $14.9 million reduction in shipping and
handling expenses; (iii) a $9.3 million reduction in concession fees;
(iv) a $5.3 million decrease in payroll related expenses; and (v) a
$3.1 million decrease in the operating loss resulting from
fluctuations in foreign currency exchange rates.
    
    Partnered Brands operating loss in the first nine months of 2010 was
$83.1 million ((15.6)% of net sales), compared to an operating loss of
$89.3 million ((11.1)% of net sales) in 2009. The decreased operating
loss reflected reduced SG&A, including a reduction related to the LIZ
CLAIBORNE transition to the licensing model under the JCPenney and QVC
arrangements, partially offset by reduced gross profit.
 Domestic International




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##### Table of Contents



38 Other Income (Expense), Net
 Interest Expense, Net
 Provision (Benefit) for Income Taxes
 Loss from Continuing Operations
 Discontinued Operations, Net of Income Taxes
 Net Loss Attributable to Liz Claiborne Inc.




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##### Table of Contents



39 THREE MONTHS ENDED OCTOBER 2, 2010 COMPARED TO THREE MONTHS ENDED OCTOBER 3, 2009
  Three Months Ended
    
    
    VarianceOctober 2, 2010
    
    
    October 3, 2009Dollars in millions
    
    (13 Weeks)
    
    
    (13 Weeks)
    
    
    $
    
    
    %Net Sales
    
    $
    658.3
    
    
    $
    761.7
    
    
    $
    (103.4
    )
    
    
    (13.6
    )%Gross Profit
    
    
    337.7
    
    
    
    345.0
    
    
    
    (7.3
    )
    
    
    (2.1
    )%Selling, general & administrative
expenses
    
    
    357.2
    
    
    
    404.0
    
    
    
    46.8
    
    
    
    11.6
    %Operating Loss
    
    
    (19.5
    )
    
    
    (59.0
    )
    
    
    39.5
    
    
    
    66.9
    %Other expense, net
    
    
    (29.5
    )
    
    
    (10.1
    )
    
    
    (19.4
    )
    
    
    *Interest expense, net
    
    
    (12.6
    )
    
    
    (17.4
    )
    
    
    4.8
    
    
    
    27.6
    %Provision for income taxes
    
    
    0.9
    
    
    
    0.6
    
    
    
    (0.3
    )
    
    
    (50.0
    )%Loss from Continuing Operations
    
    
    (62.5
    )
    
    
    (87.1
    )
    
    
    24.6
    
    
    
    28.2
    %Discontinued operations, net of income
taxes
    
    
    (0.3
    )
    
    
    (3.6
    )
    
    
    3.3
    
    
    
    91.7Net Loss
    
    
    (62.8
    )
    
    
    (90.7
    )
    
    
    27.9
    
    
    
    30.8
    %Net loss attributable to the
noncontrolling interest
    
    
    (0.1
    )
    
    
    (0.2
    )
    
    
    (0.1
    )
    
    
    (50.0
    )%Net Loss Attributable to Liz Claiborne, Inc.
    
    $
    (62.7
    )
    
    $
    (90.5
    )
    
    $
    27.8
    
    
    
    30.7
    %
 
 *   Not meaningful. Net Sales
  
    
    Domestic-Based Direct Brands net sales were $290.5 million, an increase of $20.0 million, or 7.4%,
reflecting the following:
 -
    
    Net sales for JUICY COUTURE were $148.1 million, an 11.3% increase compared to 2009,
reflecting increases in wholesale non-apparel and outlet operations.Key operating metrics for our JUICY COUTURE retail operations included the following:
 
    
    Average retail square footage in the third quarter of 2010 was approximately 342
thousand square feet, a 6.2% increase compared to 2009;
    
    Sales productivity was $192 per average square foot as compared to $191 for the
third quarter of




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40 2009; and
    
    Comparable store net sales in our Company-owned stores increased by 1.3% in the
third quarter of 2010. Comparable direct-to-consumer net sales are equivalent to
comparable store sales, as 12 months have not elapsed from the launch of the
Company-owned website.
 -
    
    Net sales for LUCKY BRAND were $97.8 million, a 5.5% decrease compared to 2009,
reflecting decreases in specialty retail, outlet and wholesale non-apparel
operations, partially offset by increases in wholesale apparel and e-commerce
operations.Key operating metrics for our LUCKY BRAND retail operations included the following:
 
    
    Average retail square footage in the third quarter of 2010 was approximately 564
thousand square feet, a 4.2% decrease compared to 2009;
    
    Sales productivity was $87 per average square foot as compared to $95 for the
third quarter of 2009;
    
    Comparable store net sales in our Company-owned stores decreased by 10.2% in the
third quarter of 2010; and
    
    Comparable e-commerce net sales increased by 29.0%; inclusive of e-commerce net
sales, comparable direct-to-consumer sales decreased 7.5%.
 -
    
    Net sales for KATE SPADE were $44.6 million, a 31.2% increase compared to 2009,
primarily driven by increases in wholesale non-apparel, e-commerce and specialty
retail operations.Key operating metrics for our KATE SPADE retail operations included the following:
 
    
    Average retail square footage in the third quarter of 2010 was approximately 139
thousand square feet, a 10.6% decrease compared to 2009;
    
    Sales productivity was $151 per average square foot as compared to $121 for the
third quarter of 2009;
    
    Comparable store net sales in our Company-owned stores increased by 18.6% in the
third quarter of 2010; and
    
    Comparable e-commerce net sales increased by 97.1%; inclusive of e-commerce net
sales, comparable direct-to-consumer sales increased 31.8%.
 
    
    International-Based Direct Brands net sales were $187.5 million, a decrease of $36.9 million, or 16.4%, compared to 2009, primarily due to
decreases in our MEXX Europe wholesale and retail operations, partially offset by an increase in our MEXX Canada retail and wholesale
operations. Excluding the impact of fluctuations in foreign currency exchange rates, net sales were $198.8 million, an 11.4% decrease as
compared to 2009.Key operating metrics for our MEXX retail operations included the following:
 -
    
    Average retail square footage in the third quarter of 2010 was approximately 1.562 million square
feet, a 3.1% increase compared to 2009;-
    
    Sales productivity was $63 per average square foot as compared to $72 for the third quarter of 2009;-
    
    Comparable store net sales in our Company-owned stores decreased by 2.6% in the third quarter of
2010; and-
    
    Comparable e-commerce and concession net sales increased by 4.0%; inclusive of e-commerce and
concession net sales, comparable direct-to-consumer sales decreased 1.7%.
 
    
    Partnered Brands net sales were $180.3 million, a decrease of $86.5 million, or 32.4%, reflecting:
 -
    
    An $82.3 million, or 30.8%, decrease related to brands that have been licensed or
exited, substantially all of which was due to a decrease in sales in our LIZ CLAIBORNE
family of brands as we transitioned from the legacy department store model to the
licensing model under the JCPenney and QVC arrangements, inclusive of a $3.6 million
increase in our licensing operations;-
    
    A $5.6 million, or 2.1%, decrease related to reduced sales in our outlet operations; and-
    
    A net $1.4 million, or 0.5%, increase related to increased sales of our ongoing
Partnered Brands business, primarily related to our licensed DKNY® JEANS brand,
partially offset by a decrease in our AXCESS brand.




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41 Domestic International
 Gross Profit
 Selling, General & Administrative Expenses
 
    
    A $47.7 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 transition to the licensing model under the JCPenney
and QVC arrangements;
    
    An $8.6 million decrease due to the impact of fluctuations in foreign
currency exchange rates in our international operations;
    
    A $3.9 million decrease in our International-Based Direct Brands
segment, including a $7.1 million decrease in shipping and handling
expenses and a $2.8 million decrease in concession fees, partially
offset by a $6.9 million increase in marketing expenses;
    
    A $7.5 million increase in expenses associated with our streamlining
initiatives and brand-exiting activities; and
    
    A $5.9 million increase in our Domestic-Based Direct Brands segment.
  Operating Loss
 
    
    Domestic-Based Direct Brands operating income was $4.7 million (1.6%
of net sales), compared to an operating loss of $7.4 million ((2.7)%
of net sales) in 2009. The period-over-period change reflected an
increase in gross profit, in addition to a $2.8 million decrease in
expenses associated with our streamlining initiatives and brand
exiting activities.
    
    International-Based Direct Brands operating loss was $14.0 million
((7.5)% of net sales), compared to an operating loss of $19.2 million
((8.5)% of net sales) in 2009. The decreased operating loss reflected
(i) a $7.1 million reduction in shipping and handling expenses; (ii) a
$1.7 million decrease resulting from fluctuations in foreign currency
exchange rates; (iii) decreased gross profit; and (iv) a $6.9 million
increase in marketing expenses.
    
    Partnered Brands operating loss in the third quarter was $10.2 million
((5.6)% of net sales), compared to an operating loss of $32.4 million
((12.2)% of net sales) in 2009. The decreased operating loss reflected
reduced SG&A, as discussed above, partially offset by reduced gross
profit and a $4.5 million increase in expenses associated with our
streamlining initiatives and brand exiting activities.
 Domestic International




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42  Other Expense, Net
 Interest Expense, Net
 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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43




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




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45  Commitments and Capital Expenditures
  
    
    On January 26, 2006, we acquired 100% of the equity of Westcoast Contempo
Fashions Limited and Mac & Jac Holdings Limited, which collectively design, market and sell
the Mac & Jac, Kensie and Kensiegirl apparel lines (Mac & Jac). The purchase price
totaled 26.2 million Canadian dollars (or $22.7 million), which included the retirement of
debt at closing and fees, but excluded contingent payments to be determined based upon a
multiple of Mac & Jacs earnings in fiscal years 2006, 2008, 2009 and 2010. In May of 2009,
we paid the former owners of Mac & Jac $3.8 million based on 2008 fiscal year earnings. We
estimate that the remaining contingent payment based on 2010 earnings will be in the range
of approximately $0-$5.0 million, which will be accounted for as additional purchase price
when paid.
    
    On June 8, 1999, we acquired 85.0% of the equity of Lucky Brand Dungarees, Inc.
(Lucky Brand), whose core business consists of the Lucky Brand Dungarees line of women
and mens denim-based sportswear. The total purchase price consisted of aggregate cash
payments of $126.2 million and additional payments made from 2005 to 2009 totaling $65.0
million for 12.3% of the remaining equity of Lucky Brand. We acquired 0.4% of the equity of
Lucky Brand in January of 2010 for a payment of $5.0 million. The remaining 2.3% of the
original shares outstanding will be settled for an aggregate purchase price composed of the
following two installments: (i) a payment made in 2008 of $15.7 million that was based on a
multiple of Lucky Brands 2007 earnings, which we have accounted for as additional purchase
price and (ii) a 2011 payment that will be based on a multiple of Lucky Brands 2010
earnings, net of the 2008 payment, which we estimate will be in the range of approximately
$0-$5.0 million.




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##### Table of Contents



46   In thousands
    
    
    October 2, 2010
    
    
    January 2, 2010
    
    
    October 3, 20095.0% Notes (a)
    
    $
    481,838
    
    
    $
    501,827
    
    
    $
    510,1826.0% Convertible Senior Notes(b)
    
    
    73,662
    
    
    
    71,137
    
    
    
    70,323Revolving credit facility
    
    
    167,327
    
    
    
    66,507
    
    
    
    228,109Capital lease obligations
    
    
    14,052
    
    
    
    18,680
    
    
    
    19,729Other
    
    
    --
    
    
    
    --
    
    
    
    243Total debt
    
    $
    736,879
    
    
    $
    658,151
    
    
    $
    828,586
 
 (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 October 2, 2010, January 2, 2010 and October 3, 2009, represented
principal of $90.0 million and an unamortized debt discount of $16.3 million, $18.9 million
and $19.7 million, respectively.    Total
    
    Borrowing
    
    Outstanding
    
    Letters of
    
    Available
    
    ExcessIn thousands
    
    Facility (a)
    
    Base (a)
    
    Borrowings
    
    Credit Issued
    
    Capacity
    
    Capacity (b)Revolving credit facility (a)
    
    $
    350,000
    
    
    $
    428,023
    
    
    $
    167,327
    
    
    $
    25,992
    
    
    $
    156,681
    
    
    $
    111,681
 
 (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.
 Off-Balance Sheet Arrangements




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47   Hedging Activities
   Foreign Currency Contracts Designated as Hedging InstrumentsIn thousands
    
    Asset Derivatives
    
    
    Liability DerivativesBalance
    
    
    
    
    
    
    
    
    
    BalanceSheet
    
    Notional
    
    
    
    
    
    
    Sheet
    
    NotionalPeriod
    
    Location
    
    Amount
    
    
    Fair Value
    
    
    Location
    
    Amount
    
    
    Fair ValueOctober 2, 2010
    
    Other current assets
    
    $
    14,565
    
    
    $
    774
    
    
    Accruedexpenses
    
    
    $
    124,739
    
    
    $
    5,531January 2, 2010
    
    Other currentassets
    
    
    26,408
    
    
    
    586
    
    
    Accruedexpenses
    
    
    
    74,634
    
    
    
    3,091October 3, 2009
    
    Other currentassets
    
    
    --
    
    
    
    --
    
    
    Accruedexpenses
    
    
    
    116,669
    
    
    
    7,827Foreign Currency Contracts Not Designated as Hedging InstrumentsIn thousands
    
    Asset Derivatives
    
    
    Liability DerivativesBalance
    
    
    
    
    
    
    
    
    
    BalanceSheet
    
    Notional
    
    
    
    
    
    
    Sheet

    
    NotionalPeriod
    
    Location

    
    Amount
    
    
    Fair Value
    
    
    Location
    
    Amount
    
    
    Fair ValueOctober 2, 2010
    
    Other currentassets
    
    $

    --
    
    
    $
    --
    
    
    Accruedexpenses
    
    
    $
    --
    
    
    $
    --January 2, 2010
    
    Other currentassets
    
    
    --
    
    
    
    --
    
    
    Accruedexpenses
    
    
    
    12,015
    
    
    
    690October 3, 2009
    
    Other currentassets
    
    
    1,938
    
    
    
    2
    
    
    Accruedexpenses
    
    
    
    11,979
    
    
    
    588




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48  Amount of GainLocation of Gain or
    
    Amount of Gain
    
    or (Loss)Amount of Gain or
    
    (Loss) Reclassified
    
    or (Loss)
    
    Recognized in(Loss) Recognized
    
    from Accumulated
    
    Reclassified from
    
    Operations onin Accumulated
    
    OCI into Operations

    
    Accumulated OCI

    
    DerivativeOCI on Derivative
    
    (Effective and
    
    into Operations
    
    (IneffectiveIn thousands
    
    (Effective Portion)
    
    Ineffective Portion)
    
    (Effective Portion)
    
    Portion)Nine months ended
October 2, 2010
    
    $
    1,174
    
    
    Cost of goods sold
    
    $

    (4,031
    )
    
    $

    (277
    )Nine months ended
October 3, 2009
    
    
    (6,886
    )
    
    Cost of goods sold
    
    
    2,766
    
    
    
    (1,003
    )Three months ended
October 2, 2010
    
    
    (7,787
    )
    
    Cost of goods sold
    
    
    1,517
    
    
    
    (153
    )Three months ended
October 3, 2009
    
    
    (7,246
    )
    
    Cost of goods sold
    
    
    (3,137
    )
    
    
    (879
    )
    USE OF ESTIMATES AND CRITICAL ACCOUNTING POLICIES




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##### Table of Contents



49  ACCOUNTING PRONOUNCEMENTS
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   In millions
    
    October 2, 2010
    
    January 2, 2010
    
    October 3, 2009Variable rate debt
    
    
    $167.3
    
    
    
    $66.5
    
    
    
    $228.1Average interest rate
    
    
    4.55%
    
    
    
    6.87%
    
    
    
    6.85%




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##### Table of Contents



50   
 ITEM 4. CONTROLS AND PROCEDURES
   
 PART II - OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
 The Levy Group, Inc. L.C. Licensing, Inc. and Liz Claiborne, Inc.
 Angela Tyler (individually and on behalf of all others
similarly situated) v. Liz Claiborne, Inc, Trudy F. Sullivan and William L. McComb




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##### Table of Contents



51 
 ITEM 1A. RISK FACTORS
   Our ability to continue to have the liquidity necessary, through cash flows from operations and
availability under our second 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 other covenants included
in, our second 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.




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52




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53   We may not be able to complete the closure of our Liz Claiborne branded outlet operations on terms
satisfactory to us, and such closure may have an adverse effect on our results of operations and
cash flows.
  
 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)July 4, 2010 - July 31, 2010
    
    
    3.8
    
    
    $
    4.74
    
    
    
    --
    
    
    $
    28,749August 1, 2010 - September 4, 2010
    
    
    11.4
    
    
    
    4.48
    
    
    
    --
    
    
    
    28,749September 5, 2010 - October 2, 2010
    
    
    --
    
    
    
    --
    
    
    
    --
    
    
    
    28,749Total -13 Weeks Ended October 2, 2010
    
    
    15.2
    
    
    $
    4.54
    
    
    
    --
    
    
    $
    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



54 
 ITEM 6. EXHIBITS
 10.1
    
    Form of Award for Liz Claiborne,
Inc. 2010 Profitability Incentive Awards.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



55 
 SIGNATURES
  DATE:
    
    November 4, 2010LIZ CLAIBORNE, INC.
    
    LIZ CLAIBORNE, INC.By:
    
    /s/ Andrew Warren
    
    By:
    
    /s/ Elaine H. GoodellANDREW WARREN
    
    
    
    ELAINE H. GOODELLChief Financial Officer
    
    
    
    Vice President - Corporate Controller and(Principal financial officer)
    
    
    
    Chief Accounting Officer(Principal accounting officer)