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LEVI STRAUSS & CO - Quarter Report: 2012 May (Form 10-Q)

Table of Contents

 
 
 
 
 
 
 
 
 
 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
Form 10-Q
(Mark One)
 þ
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended May 27, 2012
or
 ¨
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 002-90139
_________________
LEVI STRAUSS & CO.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE
  
94-0905160
(State or Other Jurisdiction of
Incorporation or Organization)
  
(I.R.S. Employer
Identification No.)
1155 Battery Street, San Francisco, California 94111
(Address of Principal Executive Offices) (Zip Code)
(415) 501-6000
(Registrant’s Telephone Number, Including Area Code)
None
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
_________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ¨    No  þ
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  þ    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer or a smaller reporting company. See definition of “Large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
 
 
 
 
 
 
Large accelerated filer ¨
 
Accelerated filer ¨
 
Non-accelerated filer þ
 
Smaller reporting company ¨
 
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ¨    No  þ
The Company is privately held. Nearly all of its common equity is owned by descendants of the family of the Company’s founder, Levi Strauss, and their relatives. There is no trading in the common equity and therefore an aggregate market value based on sales or bid and asked prices is not determinable.
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Common Stock $.01 par value — 37,345,985 shares outstanding on July 5, 2012
 
 
 
 
 
 
 
 
 
 

Table of Contents

LEVI STRAUSS & CO. AND SUBSIDIARIES
INDEX TO FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MAY 27, 2012
 
 
 
 
Page
Number
 
 
 
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
Item 2.
 
Item 3.
 
Item 4.
 
 
 
 
 
 
Item 1.
 
Item 1A.
 
Item 2.
 
Item 3.
 
Item 4.
 
Item 5.
 
Item 6.
 
 

Table of Contents

PART I — FINANCIAL INFORMATION

Item 1.
CONSOLIDATED FINANCIAL STATEMENTS
LEVI STRAUSS & CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
 
(Unaudited)
 
 
 
May 27,
2012
 
November 27,
2011
 
(Dollars in thousands)
ASSETS
Current Assets:
 
 
 
Cash and cash equivalents
$
277,893

 
$
204,542

Trade receivables, net of allowance for doubtful accounts of $22,680 and $22,684
366,429

 
654,903

Inventories:
 
 
 
Raw materials
6,281

 
7,086

Work-in-process
8,736

 
9,833

Finished goods
491,080

 
594,483

Total inventories
506,097

 
611,402

Deferred tax assets, net
97,461

 
99,544

Other current assets
134,938

 
172,830

Total current assets
1,382,818

 
1,743,221

Property, plant and equipment, net of accumulated depreciation of $767,033 and $731,859
474,684

 
502,388

Goodwill
239,295

 
240,970

Other intangible assets, net
65,551

 
71,818

Non-current deferred tax assets, net
598,115

 
613,161

Other non-current assets
133,007

 
107,997

Total assets
$
2,893,470

 
$
3,279,555

 
 
 
 
LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS’ DEFICIT
Current Liabilities:
 
 
 
Short-term debt
$
65,679

 
$
154,747

Current maturities of capital leases
905

 
1,714

Accounts payable
164,675

 
204,897

Other accrued liabilities
196,519

 
256,316

Accrued salaries, wages and employee benefits
168,145

 
235,530

Accrued interest payable
6,232

 
9,679

Accrued income taxes
2,947

 
9,378

Total current liabilities
605,102

 
872,261

Long-term debt
1,690,405

 
1,817,625

Long-term capital leases
1,723

 
1,999

Postretirement medical benefits
135,614

 
140,108

Pension liability
392,193

 
427,422

Long-term employee related benefits
81,677

 
75,520

Long-term income tax liabilities
37,994

 
42,991

Other long-term liabilities
54,390

 
51,458

Total liabilities
2,999,098

 
3,429,384

Commitments and contingencies


 


Temporary equity
5,024

 
7,002

 
 
 
 
Stockholders’ Deficit:
 
 
 
Levi Strauss & Co. stockholders’ deficit
 
 
 
Common stock — $.01 par value; 270,000,000 shares authorized; 37,345,985 shares and 37,354,021 shares issued and outstanding
373

 
374

Additional paid-in capital
33,776

 
29,266

Retained earnings
192,716

 
150,770

Accumulated other comprehensive loss
(346,075
)
 
(346,002
)
Total Levi Strauss & Co. stockholders’ deficit
(119,210
)
 
(165,592
)
Noncontrolling interest
8,558

 
8,761

Total stockholders’ deficit
(110,652
)
 
(156,831
)
Total liabilities, temporary equity and stockholders’ deficit
$
2,893,470

 
$
3,279,555

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


3
Table of Contents

LEVI STRAUSS & CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
 
 
Three Months Ended
 
Six Months Ended
 
May 27,
2012
 
May 29,
2011
 
May 27,
2012
 
May 29,
2011
 
(Dollars in thousands)
(Unaudited)
Net revenues
$
1,047,157

 
$
1,092,922

 
$
2,212,118

 
$
2,213,615

Cost of goods sold
566,471

 
552,226

 
1,182,638

 
1,114,952

Gross profit
480,686

 
540,696

 
1,029,480

 
1,098,663

Selling, general and administrative expenses
435,056

 
475,720

 
873,639

 
934,813

Operating income
45,630

 
64,976

 
155,841

 
163,850

Interest expense
(32,411
)
 
(33,515
)
 
(70,984
)
 
(68,381
)
Loss on early extinguishment of debt
(8,206
)
 
—

 
(8,206
)
 
—

Other income (expense), net
10,697

 
(1,006
)
 
11,869

 
(6,965
)
Income before income taxes
15,710

 
30,455

 
88,520

 
88,504

Income tax expense
2,467

 
9,944

 
25,980

 
28,825

Net income
13,243

 
20,511

 
62,540

 
59,679

Net (income) loss attributable to noncontrolling interest
(10
)
 
460

 
(89
)
 
1,967

Net income attributable to Levi Strauss & Co.
$
13,233

 
$
20,971

 
$
62,451

 
$
61,646
































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


4
Table of Contents

LEVI STRAUSS & CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 
Six Months Ended
 
May 27,
2012
 
May 29,
2011
 
(Dollars in thousands)
(Unaudited)
Cash Flows from Operating Activities:
 
 
 
Net income
$
62,540

 
$
59,679

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
62,777

 
57,495

Asset impairments
233

 
2,382

Gain on disposal of property, plant and equipment
(151
)
 
(76
)
Unrealized foreign exchange (gains) losses
(19,463
)
 
9,300

Realized (gain) loss on settlement of forward foreign exchange contracts not designated for hedge accounting
(2,530
)
 
4,863

Employee benefit plans’ amortization from accumulated other comprehensive loss
858

 
(503
)
Employee benefit plans’ curtailment (gain) loss, net
(995
)
 
3,055

Noncash gain on extinguishment of debt, net of write-off of unamortized debt issuance costs
(3,643
)
 
—

Amortization of deferred debt issuance costs
2,223

 
2,138

Stock-based compensation
2,542

 
3,414

Allowance for doubtful accounts
3,740

 
1,354

Change in operating assets and liabilities:
 
 
 
Trade receivables
280,568

 
134,540

Inventories
95,336

 
(42,491
)
Other current assets
18,322

 
(38,850
)
Other non-current assets
(4,557
)
 
1,603

Accounts payable and other accrued liabilities
(73,242
)
 
(38,238
)
Income tax liabilities
(3,483
)
 
(4,386
)
Accrued salaries, wages and employee benefits and long-term employee related benefits
(95,576
)
 
(69,003
)
Other long-term liabilities
1,866

 
(1,018
)
Other, net
259

 
171

Net cash provided by operating activities
327,624

 
85,429

Cash Flows from Investing Activities:
 
 
 
Purchases of property, plant and equipment
(36,571
)
 
(75,713
)
Proceeds from sale of property, plant and equipment
202

 
135

Proceeds (payments) on settlement of forward foreign exchange contracts not designated for hedge accounting
2,530

 
(4,863
)
Other
—

 
(500
)
Net cash used for investing activities
(33,839
)
 
(80,941
)
Cash Flows from Financing Activities:
 
 
 
Proceeds from issuance of long-term debt
385,000

 
—

Repayments of long-term debt and capital leases
(407,203
)
 
(953
)
Proceeds from senior revolving credit facility
50,000

 
—

Repayments of senior revolving credit facility
(220,000
)
 
—

Short-term borrowings, net
6,566

 
527

Debt issuance costs
(6,972
)
 
—

Restricted cash
969

 
571

Repurchase of common stock
(479
)
 
(245
)
Dividend to stockholders
(20,036
)
 
(20,023
)
Net cash used for financing activities
(212,155
)
 
(20,123
)
Effect of exchange rate changes on cash and cash equivalents
(8,279
)
 
4,400

Net increase (decrease) in cash and cash equivalents
73,351

 
(11,235
)
Beginning cash and cash equivalents
204,542

 
269,726

Ending cash and cash equivalents
$
277,893

 
$
258,491

 
 
 
 
Supplemental disclosure of cash flow information:
 
 
 
Cash paid during the period for:
 
 
 
Interest
$
68,466

 
$
64,651

Income taxes
22,306

 
30,467


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


5

LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTERLY PERIOD ENDED MAY 27, 2012
NOTE 1: SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Levi Strauss & Co. (the “Company”) is one of the world’s leading branded apparel companies. The Company designs and markets jeans, casual and dress pants, tops, shorts, skirts, jackets, footwear and related accessories, for men, women and children under the Levi’s®, Dockers®, Signature by Levi Strauss & Co.™ and Denizen® brands. The Company operates its business through three geographic regions: Americas, Europe and Asia Pacific.
Basis of Presentation and Principles of Consolidation
The unaudited consolidated financial statements of the Company and its wholly-owned and majority-owned foreign and domestic subsidiaries are prepared in conformity with generally accepted accounting principles in the United States (“U.S. GAAP”) for interim financial information. In the opinion of management, all adjustments necessary for a fair statement of the financial position and the results of operations for the periods presented have been included. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements of the Company for the year ended November 27, 2011, included in the Annual Report on Form 10-K filed by the Company with the Securities and Exchange Commission (“SEC”) on February 7, 2012.
The unaudited consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany transactions have been eliminated. Management believes the disclosures are adequate to make the information presented herein not misleading. The results of operations for the three and six months ended May 27, 2012, may not be indicative of the results to be expected for any other interim period or the year ending November 25, 2012.
The Company’s fiscal year ends on the last Sunday of November in each year, although the fiscal years of certain foreign subsidiaries end on November 30. Each quarter of both fiscal years 2012 and 2011 consists of 13 weeks. All references to years relate to fiscal years rather than calendar years.
Subsequent events have been evaluated through the issuance date of these financial statements.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and the related notes to consolidated financial statements. Estimates are based upon historical factors, current circumstances and the experience and judgment of the Company’s management. Management evaluates its estimates and assumptions on an ongoing basis and may employ outside experts to assist in its evaluations. Changes in such estimates, based on more accurate future information, or different assumptions or conditions, may affect amounts reported in future periods.
Recently Issued Accounting Standards
There have been no developments to recently issued accounting standards, including the expected dates of adoption and estimated effects on the Company’s consolidated financial statements, from those disclosed in the Company’s 2011 Annual Report on Form 10-K.




6



LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE QUARTERLY PERIOD ENDED MAY 27, 2012

NOTE 2: FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the Company’s financial instruments that are carried at fair value:
 
 
May 27, 2012
 
November 27, 2011
 
 
 
Fair Value  Estimated
Using
 
 
 
Fair Value  Estimated
Using
 
Fair Value
 
Level 1 Inputs(1)
 
Level 2 Inputs(2)
 
Fair Value
 
Level 1 Inputs(1)
 
Level 2 Inputs(2)
 
(Dollars in thousands)
Financial assets carried at fair value
 
 
 
 
 
 
 
 
 
 
 
Rabbi trust assets
$
18,811

 
$
18,811

 
$
—

 
$
18,064

 
$
18,064

 
$
—

Forward foreign exchange contracts, net(3)
32,382

 
—

 
32,382

 
25,992

 
—

 
25,992

Total
$
51,193

 
$
18,811

 
$
32,382

 
$
44,056

 
$
18,064

 
$
25,992

Financial liabilities carried at fair value
 
 
 
 
 
 
 
 
 
 
 
Forward foreign exchange contracts, net(3)
$
8,163

 
$
—

 
$
8,163

 
$
5,256

 
$
—

 
$
5,256

Total
$
8,163

 
$
—

 
$
8,163

 
$
5,256

 
$
—

 
$
5,256

_____________
 
(1)
Fair values estimated using Level 1 inputs are inputs which consist of quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. Rabbi trust assets consist of a diversified portfolio of equity, fixed income and other securities.

(2)
Fair values estimated using Level 2 inputs are inputs, other than quoted prices, that are observable for the asset or liability, either directly or indirectly and include among other things, quoted prices for similar assets or liabilities in markets that are active or inactive as well as inputs other than quoted prices that are observable. For forward foreign exchange contracts, inputs include foreign currency exchange and interest rates and, where applicable, credit default swap prices.

(3)
The Company’s over-the-counter forward foreign exchange contracts are subject to International Swaps and Derivatives Association, Inc. master agreements. These agreements permit the net-settlement of these contracts on a per-institution basis.
The following table presents the carrying value — including accrued interest — and estimated fair value of the Company’s financial instruments that are carried at adjusted historical cost:
 
 
May 27, 2012
 
November 27, 2011
 
Carrying
Value
 
Estimated Fair Value(1)
 
Carrying
Value
 
Estimated Fair Value(1)
 
(Dollars in thousands)
Financial liabilities carried at adjusted historical cost
 
 
 
 
 
 
 
Senior revolving credit facility
$
30,035

 
$
29,960

 
$
200,267

 
$
199,767

Senior term loan due 2014
324,853

 
317,558

 
324,663

 
316,562

8.875% senior notes due 2016
—

 
—

 
354,918

 
366,293

4.25% Yen-denominated Eurobonds due 2016
50,411

 
47,584

 
118,618

 
102,508

7.75% Euro senior notes due 2018
377,014

 
377,014

 
401,495

 
381,478

7.625% senior notes due 2020
526,446

 
557,946

 
526,446

 
519,883

6.875% senior notes due 2022
386,470

 
387,433

 
—

 
—

Short-term borrowings
66,370

 
66,370

 
54,975

 
54,975

Total
$
1,761,599

 
$
1,783,865

 
$
1,981,382

 
$
1,941,466

_____________
 
(1)
Fair value estimate incorporates mid-market price quotes.




7



LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE QUARTERLY PERIOD ENDED MAY 27, 2012

NOTE 3: DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
As of May 27, 2012, the Company had forward foreign exchange contracts to buy $859.4 million and to sell $482.5 million against various foreign currencies. These contracts are at various exchange rates and expire at various dates through August 2013.
The table below provides data about the carrying values of derivative instruments and non-derivative instruments:
 
 
May 27, 2012
 
November 27, 2011
 
Assets
 
(Liabilities)
 
Derivative Net Carrying Value
 
Assets
 
(Liabilities)
 
Derivative Net Carrying Value
 
Carrying
Value
 
Carrying
Value
 
 
Carrying
Value
 
Carrying
Value
 
 
(Dollars in thousands)
Derivatives not designated as hedging instruments
 
 
 
 
 
 
 
 
 
 
 
Forward foreign exchange contracts(1)
$
46,531

 
$
(14,149
)
 
$
32,382

 
$
31,906

 
$
(5,914
)
 
$
25,992

Forward foreign exchange contracts(2)
2,048

 
(10,211
)
 
(8,163
)
 
4,547

 
(9,803
)
 
(5,256
)
Total
$
48,579

 
$
(24,360
)
 
 
 
$
36,453

 
$
(15,717
)
 
 
Non-derivatives designated as hedging instruments
 
 
 
 
 
 
 
 
 
 
 
4.25% Yen-denominated Eurobonds due 2016
$
—

 
$
(44,724
)
 
 
 
$
—

 
$
(46,115
)
 
 
7.75% Euro senior notes due 2018
—

 
(375,930
)
 
 
 
—

 
(400,350
)
 
 
Total
$
—

 
$
(420,654
)
 
 
 
$
—

 
$
(446,465
)
 
 
_____________
 
(1)
Included in “Other current assets” or “Other non-current assets” on the Company’s consolidated balance sheets.
(2)
Included in “Other accrued liabilities” on the Company’s consolidated balance sheets.

The table below provides data about the amount of gains and losses related to derivative instruments and non-derivative instruments designated as net investment hedges included in “Accumulated other comprehensive loss” (“AOCI”) on the Company’s consolidated balance sheets, and in “Other income (expense), net” in the Company’s consolidated statements of income:
 
 
Gain or (Loss)
Recognized in AOCI
(Effective Portion)
 
Gain or (Loss) Recognized in Other
Income (Expense), net (Ineffective
Portion and Amount Excluded from
Effectiveness Testing)
 
As of
 
As of
 
Three Months Ended
 
Six Months Ended
May 27,
2012
November 27,
2011
May 27,
2012
 
May 29,
2011
 
May 27,
2012
 
May 29,
2011
 
(Dollars in thousands)
Forward foreign exchange contracts
$
4,637

 
$
4,637

 
$
—

 
$
—

 
—

 
—

Yen-denominated Eurobonds
(27,076
)
 
(28,525
)
 
(83
)
 
(453
)
 
2,523

 
(1,546
)
Euro senior notes
1,139

 
(23,281
)
 
—

 
—

 
—

 
—

Cumulative income taxes
8,452

 
18,476

 
 
 
 
 
 
 
 
Total
$
(12,848
)
 
$
(28,693
)
 
 
 
 
 
 
 
 
 


8



LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE QUARTERLY PERIOD ENDED MAY 27, 2012

The table below provides data about the amount of gains and losses related to derivatives not designated as hedging instruments included in “Other income (expense), net” in the Company’s consolidated statements of income:
 
 
Gain or (Loss)
 
Three Months Ended
 
Six Months Ended
 
May 27,
2012
 
May 29,
2011
 
May 27,
2012
 
May 29,
2011
 
(Dollars in thousands)
Forward foreign exchange contracts:
 
 
 
 
 
 
 
Realized
$
6,015

 
$
860

 
$
2,530

 
$
(4,863
)
Unrealized
15,318

 
1,405

 
3,551

 
(968
)
Total
$
21,333

 
$
2,265

 
$
6,081

 
$
(5,831
)
NOTE 4: DEBT
 
 
 
May 27,
2012
 
November 27,
2011
 
 
 
(Dollars in thousands)
 
 
 
 
 
 
Long-term debt
 
 
 
 
 
Secured:
 
 
 
 
 
Senior revolving credit facility
$
30,000

 
$
100,000

 
 
Unsecured:
 
 
 
 
 
Senior term loan due 2014
324,224

 
324,032

 
 
8.875% senior notes due 2016
—

 
350,000

 
 
4.25% Yen-denominated Eurobonds due 2016
50,251

 
118,243

 
 
7.75% Euro senior notes due 2018
375,930

 
400,350

 
 
7.625% senior notes due 2020
525,000

 
525,000

 
 
6.875% senior notes due 2022
385,000

 
—

 
 
Total unsecured
1,660,405

 
1,717,625

 
 
Total long-term debt
$
1,690,405

 
$
1,817,625

 
 
Short-term debt
 
 
 
 
 
Senior revolving credit facility
$
—

 
$
100,000

 
 
Short-term borrowings
65,679

 
54,747

 
 
Total short-term debt
$
65,679

 
$
154,747

 
 
Total long-term and short-term debt
$
1,756,084

 
$
1,972,372

 

Issuance of Senior Notes due 2022 and Tender, Redemption and Partial Repurchase of Senior Notes due 2016 and Yen-denominated Eurobonds due 2016

Senior Notes due 2022. On May 8, 2012, the Company issued $385.0 million in aggregate principal amount of 6.875% senior notes due 2022 (the “Senior Notes due 2022”) to qualified institutional buyers and to purchasers outside the United States in compliance with the Securities Act of 1933, as amended (the “Securities Act”). The notes are unsecured obligations that rank equally with all of the Company's other existing and future unsecured and unsubordinated debt. The Senior Notes due 2022 mature on May 1, 2022. Interest on the notes is payable semi-annually in arrears on May 1 and November 1, commencing on November 1, 2012. The Company may redeem some or all of the Senior Notes due 2022 prior to May 1, 2017, at a price equal to 100% of the principal amount plus accrued and unpaid interest and a “make-whole” premium; on or after this date, the Company may redeem all or any portion of the notes, at once or over time, at redemption prices specified in the indenture governing the notes,


9



LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE QUARTERLY PERIOD ENDED MAY 27, 2012

after giving the required notice under the indenture. In addition, at any time prior to May 1, 2015, the Company may redeem up to a maximum of 35% of the original aggregate principal amount of the Senior Notes due 2022 with the proceeds of certain equity offerings at a redemption price of 106.875% of the principal amount of the Senior Notes due 2022, plus accrued and unpaid interest, if any, to the date of redemption. Costs of approximately $7.4 million associated with the issuance of the notes, representing underwriting fees and other expenses, will be amortized to interest expense over the term of the notes.

Other Covenants. The indenture contains covenants that limit, among other things, the Company's and certain of the Company's subsidiaries' ability to incur additional debt, make certain restricted payments, consummate specified asset sales, enter into transactions with affiliates, incur liens, impose restrictions on the ability of its subsidiaries to pay dividends or make payments to the Company and its restricted subsidiaries, enter into sale and leaseback transactions, merge or consolidate with another person, and dispose of all or substantially all of the Company's assets. The indenture provides for customary events of default (subject in certain cases to customary grace and cure periods), which include nonpayment, breach of covenants in the indenture, payment defaults or acceleration of other indebtedness, a failure to pay certain judgments and certain events of bankruptcy and insolvency. Generally, if an event of default occurs, the trustee under the indenture or holders of at least 25% in principal amount of the then outstanding notes may declare all the notes to be due and payable immediately. Upon the occurrence of a change in control (as defined in the indenture), each holder of notes may require the Company to repurchase all or a portion of the notes in cash at a price equal to 101% of the principal amount of notes to be repurchased, plus accrued and unpaid interest, if any, thereon to the date of purchase. The offering and sale of the Senior Notes due 2022 have not been registered under the Securities Act, or any state securities laws. The Company filed a registration statement, which has been declared effective, to allow holders of the Senior Notes due 2022 to exchange the notes for the same principal amount of a new issue of notes with substantially identical terms, except that the exchange notes will generally be freely transferable under the Securities Act. The exchange offer expires 5:00 p.m., New York City time on July 12, 2012, unless extended by the Company.

Use of Proceeds — Tender offer, redemption and partial repurchase. On April 24, 2012, the Company commenced a cash tender offer for the outstanding principal amount of its $350.0 million Senior Notes due 2016. The tender offer expired May 21, 2012, and the Company redeemed all remaining notes that were not tendered in the offer on May 25, 2012. The Company purchased all of the outstanding Senior Notes due 2016 pursuant to the tender offer and subsequent redemption.

On May 11, 2012, the Company repurchased ¥5,116,500,000 in aggregate principal amount tendered of the Yen-denominated Eurobonds due 2016 for total consideration of $56.4 million including interest.

The tender offer, redemption, and partial repurchase described above, as well as underwriting fees associated with the new issuance, were primarily funded with the proceeds from the issuance of the Senior Notes due 2022. The Company recorded a net loss of $8.2 million on early extinguishment of debt, primarily comprised of a tender premium of $11.4 million and the write-off of $4.0 million of unamortized debt issuance costs, partially offset by a gain of $7.6 million related to the partial repurchase of Yen-denominated Eurobonds at a discount of their par value.
Senior Revolving Credit Facility
The Company’s unused availability under its senior secured revolving credit facility was $586.6 million at May 27, 2012, as the Company’s total availability of $664.2 million was reduced by $77.6 million of letters of credit and other credit usage allocated under the facility.
Interest Rates on Borrowings
The Company’s weighted-average interest rate on average borrowings outstanding during the three and six months ended May 27, 2012, was 7.17% and 7.08%, respectively, as compared to 6.84% in each of the same periods of 2011.




10



LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE QUARTERLY PERIOD ENDED MAY 27, 2012

NOTE 5: EMPLOYEE BENEFIT PLANS
The following table summarizes the components of net periodic benefit cost (income) and the changes recognized in “Accumulated other comprehensive loss” for the Company’s defined benefit pension plans and postretirement benefit plans:
 
 
Pension Benefits
 
Postretirement Benefits
 
Three Months Ended
 
Three Months Ended
 
May 27,
2012
 
May 29,
2011
 
May 27,
2012
 
May 29,
2011
 
(Dollars in thousands)
Net periodic benefit cost (income):
 
 
 
 
 
 
 
Service cost
$
2,247

 
$
2,604

 
$
100

 
$
119

Interest cost
14,435

 
15,126

 
1,658

 
1,907

Expected return on plan assets
(13,108
)
 
(13,057
)
 
—

 
—

Amortization of prior service (benefit) cost
(21
)
 
20

 
(4,089
)
 
(7,237
)
Amortization of actuarial loss
3,161

 
4,304

 
1,289

 
1,257

Curtailment (gain) loss(1)
(222
)
 
3,071

 
—

 
—

Net settlement loss
310

 
705

 
—

 
—

Net periodic benefit cost (income)
6,802

 
12,773

 
(1,042
)
 
(3,954
)
Changes in accumulated other comprehensive loss:
 
 
 
 
 
 
 
Actuarial loss (gain)(1)
74

 
(32,415
)
 
—

 
—

Amortization of prior service benefit (cost)
21

 
(20
)
 
4,089

 
7,237

Amortization of actuarial loss
(3,161
)
 
(4,304
)
 
(1,289
)
 
(1,257
)
Curtailment loss(1)
—

 
(3,071
)
 
—

 
—

Net settlement loss
(145
)
 
(360
)
 
—

 
—

Total recognized in accumulated other comprehensive loss
(3,211
)
 
(40,170
)
 
2,800

 
5,980

Total recognized in net periodic benefit cost (income) and accumulated other comprehensive loss
$
3,591

 
$
(27,397
)
 
$
1,758

 
$
2,026




11



LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE QUARTERLY PERIOD ENDED MAY 27, 2012

 
Pension Benefits
 
Postretirement Benefits
 
Six Months Ended
 
Six Months Ended
 
May 27,
2012
 
May 29,
2011
 
May 27,
2012
 
May 29,
2011
 
(Dollars in thousands)
Net periodic benefit cost (income):
 
 
 
 
 
 
 
Service cost
$
4,494

 
$
5,187

 
$
199

 
$
239

Interest cost
28,848

 
30,154

 
3,317

 
3,814

Expected return on plan assets
(26,117
)
 
(25,955
)
 
—

 
—

Amortization of prior service (benefit) cost
(41
)
 
85

 
(8,178
)
 
(14,473
)
Amortization of actuarial loss
6,303

 
11,034

 
2,578

 
2,513

Curtailment (gain) loss(1)
(995
)
 
3,055

 
—

 
—

Net settlement loss
417

 
716

 
—

 
—

Net periodic benefit cost (income)
12,909

 
24,276

 
(2,084
)
 
(7,907
)
Changes in accumulated other comprehensive loss:
 
 
 
 
 
 
 
Actuarial loss (gain)(1)
70

 
(32,415
)
 
—

 
—

Amortization of prior service benefit (cost)
41

 
(85
)
 
8,178

 
14,473

Amortization of actuarial loss
(6,303
)
 
(11,034
)
 
(2,578
)
 
(2,513
)
Curtailment loss(1)
(1
)
 
(3,071
)
 
—

 
—

Net settlement loss
(196
)
 
(338
)
 
—

 
—

Total recognized in accumulated other comprehensive loss
(6,389
)
 
(46,943
)
 
5,600

 
11,960

Total recognized in net periodic benefit cost (income) and accumulated other comprehensive loss
$
6,520

 
$
(22,667
)
 
$
3,516

 
$
4,053

_____________
 
(1)
On April 15, 2011, participants in the Company's U.S. pension plans ceased earning benefits. This event triggered a remeasurement of the U.S. pension plans resulting in a $32.0 million change in the plans' funded status and a $2.9 million curtailment loss attributable to the accelerated recognition of prior service cost.

NOTE 6: COMMITMENTS AND CONTINGENCIES
Forward Foreign Exchange Contracts
The Company uses over-the-counter derivative instruments to manage its exposure to foreign currencies. The Company is exposed to credit loss in the event of nonperformance by the counterparties to the forward foreign exchange contracts. However, the Company believes that its exposures are appropriately diversified across counterparties and that these counterparties are creditworthy financial institutions. Please see Note 3 for additional information.
Other Contingencies
Litigation.    There have been no material developments with respect to the information previously reported in the Company’s 2011 Annual Report on Form 10-K related to legal proceedings.

In the ordinary course of business, the Company has various pending cases involving contractual matters, facility- and employee-related matters, distribution questions, product liability claims, trademark infringement and other matters. The Company does not believe any of these pending legal proceedings will have a material impact on its financial condition, results of operations or cash flows.




12



LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE QUARTERLY PERIOD ENDED MAY 27, 2012

NOTE 7: DIVIDEND PAYMENT
The Company paid a cash dividend of $20.0 million in the second quarter of 2012. The Company does not have an established annual dividend policy. The Company will continue to review its ability to pay cash dividends at least annually, and dividends may be declared at the discretion of the Company's Board of Directors depending upon, among other factors, the income tax impact to the dividend recipients, the Company's financial condition and compliance with the terms of the Company's debt agreements.

NOTE 8: COMPREHENSIVE INCOME (LOSS)
The following is a summary of the components of total comprehensive income (loss), net of related income taxes:
 
 
Three Months Ended
 
Six Months Ended
 
May 27,
2012
 
May 29,
2011
 
May 27,
2012
 
May 29,
2011
 
(Dollars in thousands)
Net income
$
13,243

 
$
20,511

 
$
62,540

 
$
59,679

Other comprehensive income (loss):
 
 
 
 
 
 
 
Pension and postretirement benefits
321

 
21,335

 
617

 
21,850

Net investment hedge gains (losses)
15,320

 
(6,570
)
 
15,845

 
(15,460
)
Foreign currency translation (losses) gains
(25,068
)
 
14,363

 
(17,644
)
 
22,890

Unrealized (loss) gain on marketable securities
(449
)
 
93

 
819

 
667

Total other comprehensive (loss) income
(9,876
)
 
29,221

 
(363
)
 
29,947

Comprehensive income
3,367

 
49,732

 
62,177

 
89,626

Comprehensive income (loss) attributable to noncontrolling interest
53

 
(384
)
 
(201
)
 
(1,675
)
Comprehensive income attributable to Levi Strauss & Co.
$
3,314

 
$
50,116

 
$
62,378

 
$
91,301

The following is a summary of the components of “Accumulated other comprehensive loss,” net of related income taxes: 
 
 
May 27,
2012
 
November 27,
2011
 
 
 
(Dollars in thousands)
 
 
Pension and postretirement benefits
$
(255,067
)
 
$
(255,684
)
 
 
Net investment hedge losses
(12,848
)
 
(28,693
)
 
 
Foreign currency translation losses
(67,853
)
 
(50,209
)
 
 
Unrealized gain (loss) on marketable securities
272

 
(547
)
 
 
Accumulated other comprehensive loss
(335,496
)
 
(335,133
)
 
 
Accumulated other comprehensive income attributable to noncontrolling interest
10,579

 
10,869

 
 
Accumulated other comprehensive loss attributable to Levi Strauss & Co.
$
(346,075
)
 
$
(346,002
)
 




13



LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE QUARTERLY PERIOD ENDED MAY 27, 2012

NOTE 9: OTHER INCOME (EXPENSE), NET
The following table summarizes significant components of “Other income (expense), net”:
 
 
 
Three Months Ended
 
Six Months Ended
 
 
 
May 27,
2012
 
May 29,
2011
 
May 27,
2012
 
May 29,
2011
 
 
 
(Dollars in thousands)
 
 
Foreign exchange management gains (losses)(1)
$
21,333

 
$
2,265

 
$
6,081

 
$
(5,831
)
 
 
Foreign currency transaction (losses) gains
(12,237
)
 
(4,236
)
 
3,204

 
(3,294
)
 
 
Interest income
461

 
404

 
808

 
819

 
 
Other
1,140

 
561

 
1,776

 
1,341

 
 
Total other income (expense), net
$
10,697

 
$
(1,006
)
 
$
11,869

 
$
(6,965
)
 
_____________
 
(1)
Gains and losses on forward foreign exchange contracts primarily resulted from currency fluctuations relative to negotiated contract rates.

NOTE 10: INCOME TAXES
The effective income tax rate was 29.3% for the six months ended May 27, 2012, compared to 32.6% for the same period ended May 29, 2011. The reduction in the effective tax resulted from a $3.0 million discrete tax benefit related to our foreign operations.
As of May 27, 2012, the Company’s total gross amount of unrecognized tax benefits was $141.3 million, of which $88.8 million could impact the effective tax rate, if recognized. As of November 27, 2011, the Company’s total gross amount of unrecognized tax benefits was $143.4 million, of which $87.9 million could have impacted the effective tax rate, if recognized.

NOTE 11: RELATED PARTIES
Robert D. Haas, a director and Chairman Emeritus of the Company, is the President of the Levi Strauss Foundation, which is not a consolidated entity of the Company. During the three- and six-month periods ended May 27, 2012, the Company donated $1.6 million and $1.9 million, respectively, to the Levi Strauss Foundation as compared to $0.4 million and $0.7 million, respectively, for the same prior-year periods.




14



LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FOR THE QUARTERLY PERIOD ENDED MAY 27, 2012

NOTE 12: BUSINESS SEGMENT INFORMATION
The Company manages its business according to three regional segments, the Americas, Europe and Asia Pacific. The Company considers its chief executive officer to be the Company’s chief operating decision maker. The Company’s management, including the chief operating decision maker, manages business operations, evaluates performance and allocates resources based on the regional segments’ net revenues and operating income.

Business segment information for the Company is as follows:
 
 
 
Three Months Ended
 
Six Months Ended
 
 
 
May 27,
2012
 
May 29,
2011
 
May 27,
2012
 
May 29,
2011
 
 
 
(Dollars in thousands)
 
 
Net revenues:
 
 
 
 
 
 
 
 
 
Americas
$
605,169

 
$
599,074

 
$
1,252,463

 
$
1,191,260

 
 
Europe
253,897

 
281,108

 
543,349

 
592,712

 
 
Asia Pacific
188,091

 
212,740

 
416,306

 
429,643

 
 
Total net revenues
$
1,047,157

 
$
1,092,922

 
$
2,212,118

 
$
2,213,615

 
 
Operating income:
 
 
 
 
 
 
 
 
 
Americas
$
71,325

 
$
82,600

 
$
150,961

 
$
157,633

 
 
Europe
29,556

 
37,522

 
81,629

 
108,813

 
 
Asia Pacific
18,752

 
25,429

 
59,912

 
62,792

 
 
Regional operating income
119,633

 
145,551

 
292,502

 
329,238

 
 
Corporate expenses
74,003

 
80,575

 
136,661

 
165,388

 
 
Total operating income
45,630

 
64,976

 
155,841

 
163,850

 
 
Interest expense
(32,411
)
 
(33,515
)
 
(70,984
)
 
(68,381
)
 
 
Loss on early extinguishment of debt
(8,206
)
 
—

 
(8,206
)
 
—

 
 
Other income (expense), net
10,697

 
(1,006
)
 
11,869

 
(6,965
)
 
 
Income before income taxes
$
15,710

 
$
30,455

 
$
88,520

 
$
88,504

 



15
Table of Contents

Item 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 
Overview
We design, market and sell — directly or through third parties and licensees — products that include jeans, casual and dress pants, tops, shorts, skirts, jackets, footwear and related accessories for men, women and children under our Levi’s®, Dockers®, Signature by Levi Strauss & Co.™ (“Signature”) and Denizen® brands around the world.
Our business is operated through three geographic regions: Americas, Europe and Asia Pacific. Our products are sold in approximately 55,000 retail locations in more than 110 countries. We support our brands through a global infrastructure, developing, sourcing and marketing our products around the world. We distribute our Levi’s® and Dockers® products primarily through chain retailers and department stores in the United States and primarily through department stores, specialty retailers and nearly 1,800 franchised and other brand-dedicated stores outside of the United States. We also distribute our Levi’s® and Dockers® products through 496 company-operated stores located in 32 countries, including the United States, and through the online stores we operate. Our company-operated and online stores generated approximately 21% of our net revenues in the first half of 2012, as compared to 18% in the same period in 2011. In addition, we distribute our Levi’s® and Dockers® products through online stores operated by certain of our key wholesale customers and other third parties. We distribute products under our Signature and Denizen® brands primarily through mass channel retailers in the Americas and through franchised stores in Asia Pacific.
Our Europe and Asia Pacific businesses, collectively, contributed approximately 43% of our net revenues and 48% of our regional operating income in the six-month period in 2012. Sales of Levi’s® brand products represented approximately 83% of our total net sales in the six-month period in 2012.
Trends Affecting Our Business
During the second quarter of 2012, we remained focused on our key long-term strategies: grow our global brands through product innovation and consumer focus, enhance relationships with wholesale customers and expand our dedicated retail channels to drive sales growth, and capitalize on our global footprint to maximize opportunities in targeted growth markets. We are pursuing opportunities to increase our profitability by changing our operating model and organizational structure in certain areas of our business, which could have an adverse financial impact during the remainder of our fiscal year.
Economic challenges continue to impact most markets around the world, including having an increasingly adverse effect on the traditional growth markets in our Asia Pacific region, such as China and India, as well as the southern markets of Europe. Margins remained pressured by cotton costs during the quarter, although we expect this trend to improve during the second half of 2012.
Our Second Quarter 2012 Results
Our second quarter 2012 results reflect the ongoing global economic challenges but an improvement in cash flows from operations.
 
•
Net revenues. Consolidated net revenues decreased by 4% compared to the second quarter of 2011, and decreased 1% on a constant-currency basis, reflecting a decline in sales in our Asia Pacific and Europe regions.
•
Operating income. Consolidated operating income and operating margin declined compared to the second quarter of 2011. Gross margin declined due to the higher cost of cotton, which our price increases did not fully cover. This decline was partially offset by lower advertising and promotion expenses.
•
Cash flows. Cash flows provided by operating activities were $328 million for the six-month period in 2012 as compared to $85 million for the same period in 2011, primarily reflecting higher trade receivable collections and lower payments to vendors.

Refinancing of Debt

In May 2012 we completed an offering of $385 million aggregate principal amount of 6.875% Senior Notes due 2022. We used the net proceeds to complete a tender offer for our outstanding 8.875% Senior Notes due 2016. Additionally, we repurchased ¥5.1 billion aggregate principal amount of our 4.25% Yen-denominated Eurobonds due 2016, for total consideration of $56.4 million including accrued interest. As a result of these actions, we extended the maturity profile of our debt while securing a low weighted-average cost of borrowing.



16
Table of Contents

Financial Information Presentation
Fiscal year.    Our fiscal year ends on the last Sunday of November in each year, although the fiscal years of certain foreign subsidiaries end on November 30. Each quarter of fiscal years 2012 and 2011 consisted of 13 weeks.
Segments.    We manage our business according to three regional segments: the Americas, Europe and Asia Pacific.
Classification.    Our classification of certain significant revenues and expenses reflects the following:
 
•
Net revenues is primarily comprised of sales of products to wholesale customers, including franchised stores, and direct sales to consumers at our company-operated and online stores and at our company-operated shop-in-shops located within department stores. It includes discounts, allowances for estimated returns and incentives. Net revenues also includes royalties earned from the use of our trademarks by third-party licensees in connection with the manufacturing, advertising and distribution of trademarked products.
•
Cost of goods sold is primarily comprised of product costs, labor and related overhead, sourcing costs, inbound freight, internal transfers, and the cost of operating our remaining manufacturing facilities, including the related depreciation expense.
•
Selling costs include, among other things, all occupancy costs and depreciation associated with our company-operated stores and commissions associated with our company-operated shop-in-shops.
•
We reflect substantially all distribution costs in selling, general and administrative expenses, including costs related to receiving and inspection at distribution centers, warehousing, shipping to our customers, handling, and certain other activities associated with our distribution network.
Gross margins may not be comparable to those of other companies in our industry since some companies may include costs related to their distribution network and occupancy costs associated with company-operated stores in cost of goods sold.
Constant currency.    Constant-currency comparisons are based on translating local currency amounts in both periods at the foreign exchange rates used in the Company’s internal planning process for the current year. We routinely evaluate our financial performance on a constant-currency basis in order to facilitate period-to-period comparisons without regard to the impact of changing foreign currency exchange rates.
Results of Operations for Three and Six Months Ended May 27, 2012, as Compared to Same Periods in 2011
The following table summarizes, for the periods indicated, our consolidated statements of income, the changes in these items from period to period and these items expressed as a percentage of net revenues:
 
 
Three Months Ended
 
Six Months Ended
 
May 27,
2012
 
May 29,
2011
 
%
Increase
(Decrease)
 
May 27,
2012
 
May 29,
2011
 
May 27,
2012
 
May 29,
2011
 
%
Increase
(Decrease)
 
May 27,
2012
 
May 29,
2011
 
 
 
% of Net
Revenues
 
% of Net
Revenues
 
 
 
% of Net
Revenues
 
% of Net
Revenues
 
(Dollars in millions)
Net revenues
$
1,047.2

 
$
1,092.9

 
(4.2
)%
 
100.0
 %
 
100.0
 %
 
$
2,212.1

 
$
2,213.6

 
(0.1
)%
 
100.0
 %
 
100.0
 %
Cost of goods sold
566.5

 
552.2

 
2.6
 %
 
54.1
 %
 
50.5
 %
 
1,182.6

 
1,114.9

 
6.1
 %
 
53.5
 %
 
50.4
 %
Gross profit
480.7

 
540.7

 
(11.1
)%
 
45.9
 %
 
49.5
 %
 
1,029.5

 
1,098.7

 
(6.3
)%
 
46.5
 %
 
49.6
 %
Selling, general and administrative expenses
435.1

 
475.7

 
(8.5
)%
 
41.5
 %
 
43.5
 %
 
873.7

 
934.8

 
(6.5
)%
 
39.5
 %
 
42.2
 %
Operating income
45.6

 
65.0

 
(29.8
)%
 
4.4
 %
 
5.9
 %
 
155.8

 
163.9

 
(4.9
)%
 
7.0
 %
 
7.4
 %
Interest expense
(32.4
)
 
(33.5
)
 
(3.3
)%
 
(3.1
)%
 
(3.1
)%
 
(71.0
)
 
(68.4
)
 
3.8
 %
 
(3.2
)%
 
(3.1
)%
Loss on early extinguishment of debt
(8.2
)
 
—

 
—

 
(0.8
)%
 
—

 
(8.2
)
 
—

 
—

 
(0.4
)%
 
—

Other income (expense), net
10.7

 
(1.0
)
 
(1,163.3
)%
 
1.0
 %
 
(0.1
)%
 
11.9

 
(7.0
)
 
(270.4
)%
 
0.5
 %
 
(0.3
)%
Income before income taxes
15.7

 
30.5

 
(48.4
)%
 
1.5
 %
 
2.8
 %
 
88.5

 
88.5

 
—

 
4.0
 %
 
4.0
 %
Income tax expense
2.5

 
10.0

 
(75.2
)%
 
0.2
 %
 
0.9
 %
 
26.0

 
28.8

 
(9.9
)%
 
1.2
 %
 
1.3
 %
Net income
13.2

 
20.5

 
(35.4
)%
 
1.3
 %
 
1.9
 %
 
62.5

 
59.7

 
4.8
 %
 
2.8
 %
 
2.7
 %
Net (income) loss attributable to noncontrolling interest
—

 
0.5

 
(102.2
)%
 
—

 
—

 
—

 
1.9

 
(104.5
)%
 
—

 
0.1
 %
Net income attributable to Levi Strauss & Co.
$
13.2

 
$
21.0

 
(36.9
)%
 
1.3
 %
 
1.9
 %
 
$
62.5

 
$
61.6

 
1.3
 %
 
2.8
 %
 
2.8
 %



17
Table of Contents

Net revenues
The following table presents net revenues by reporting segment for the periods indicated and the changes in net revenues by reporting segment on both reported and constant-currency bases from period to period.
 
 
Three Months Ended
 
Six Months Ended
 
 
 
 
 
% Increase
(Decrease)
 
 
 
 
 
% Increase
(Decrease)
 
May 27,
2012
 
May 29,
2011
 
As
Reported
 
Constant
Currency
 
May 27,
2012
 
May 29,
2011
 
As
Reported
 
Constant
Currency
 
(Dollars in millions)
Net revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Americas
$
605.2

 
$
599.1

 
1.0
 %
 
2.0
 %
 
$
1,252.5

 
$
1,191.3

 
5.1
 %
 
6.0
 %
Europe
253.9

 
281.1

 
(9.7
)%
 
(1.5
)%
 
543.3

 
592.7

 
(8.3
)%
 
(2.4
)%
Asia Pacific
188.1

 
212.7

 
(11.6
)%
 
(8.9
)%
 
416.3

 
429.6

 
(3.1
)%
 
(1.7
)%
Total net revenues
$
1,047.2

 
$
1,092.9

 
(4.2
)%
 
(1.0
)%
 
$
2,212.1

 
$
2,213.6

 
(0.1
)%
 
2.3
 %
As compared to the same periods in the prior year, net revenues were affected unfavorably by changes in foreign currency exchange rates across all regions.
Americas.    On both reported and constant-currency bases, net revenues in our Americas region increased for the three- and six-month periods, with currency affecting net revenues unfavorably by approximately $6 million and $10 million, respectively.
For both periods, Levi’s® brand net revenues increased in our retail stores, due to the price increases we have implemented and the mix of higher-priced products. At wholesale, Levi’s® brand net revenues declined for the three-month period and increased for the six-month period, as the benefit of price increases we have implemented was offset by volume declines in certain wholesale customers and a decline in sales to lower-margin channels. In both periods, sales of our Denizen® and Signature brand products increased, while Dockers® brand net revenues declined, reflecting a decrease in sales to certain wholesale customers and to lower-margin channels.
Europe.    Net revenues in Europe decreased on both reported and constant-currency bases for the three- and six-month periods, with currency affecting net revenues unfavorably by approximately $23 million and $35 million, respectively.
For both periods, net revenues in the region decreased primarily due to reduced sales in our traditional wholesale channels and to franchisee stores, reflecting the ongoing depressed retail environment, most notably in southern Europe. This was partially offset by increased net revenues of our company-operated retail network, reflecting improved performance of our stores.
Asia Pacific.    Net revenues in Asia Pacific decreased on both reported and constant-currency bases for the three- and six-month periods, with currency affecting net revenues unfavorably by approximately $6 million in each period.
The net revenues decrease in both periods reflected the economic slowdown faced by most markets in the region during the second quarter. Net revenues declined in our Levi’s® and Denizen® brands.




18
Table of Contents

Gross profit
The following table shows consolidated gross profit and gross margin for the periods indicated and the changes in these items from period to period: 
 
Three Months Ended
 
Six Months Ended
 
May 27,
2012
 
May 29,
2011
 
%
Increase
(Decrease)
 
May 27,
2012
 
May 29,
2011
 
%
Increase
(Decrease)
 
(Dollars in millions)
Net revenues
$
1,047.2

 
$
1,092.9

 
(4.2
)%
 
$
2,212.1

 
$
2,213.6

 
(0.1
)%
Cost of goods sold
566.5

 
552.2

 
2.6
 %
 
1,182.6

 
1,114.9

 
6.1
 %
Gross profit
$
480.7

 
$
540.7

 
(11.1
)%
 
$
1,029.5

 
$
1,098.7

 
(6.3
)%
Gross margin
45.9
%
 
49.5
%
 
 
 
46.5
%
 
49.6
%
 
 
As compared to the same prior-year periods, the gross profit decrease for the three- and six-month periods ended May 27, 2012, primarily resulted from a decline in our gross margin as well as unfavorable currency effects of approximately $27 million and $41 million, respectively. The decrease in our gross margin was primarily due to the higher cost of cotton, which our price increases did not fully cover. The margin decline was partially offset by a decline in sales to lower-margin channels and the increased revenue contribution from our company-operated retail network, which generally has a higher gross margin than our wholesale business.
Selling, general and administrative expenses
The following table shows our selling, general and administrative expenses (“SG&A”) for the periods indicated, the changes in these items from period to period and these items expressed as a percentage of net revenues:
 
 
Three Months Ended
 
Six Months Ended
 
May 27,
2012
 
May 29,
2011
 
%
Increase
(Decrease)
 
May 27,
2012
 
May 29,
2011
 
May 27,
2012
 
May 29,
2011
 
%
Increase
(Decrease)
 
May 27,
2012
 
May 29,
2011
 
 
 
% of Net
Revenues
 
% of Net
Revenues
 
 
 
% of Net
Revenues
 
% of Net
Revenues
 
(Dollars in millions)
Selling
$
173.4

 
$
174.1

 
(0.4
)%
 
16.6
%
 
15.9
%
 
$
350.4

 
$
349.3

 
0.3
 %
 
15.8
%
 
15.8
%
Advertising and promotion
46.7

 
72.2

 
(35.3
)%
 
4.5
%
 
6.6
%
 
92.6

 
134.4

 
(31.1
)%
 
4.2
%
 
6.1
%
Administration
98.8

 
103.3

 
(4.4
)%
 
9.4
%
 
9.5
%
 
193.8

 
207.3

 
(6.5
)%
 
8.8
%
 
9.4
%
Other
116.2

 
126.1

 
(8.0
)%
 
11.1
%
 
11.5
%
 
236.9

 
243.8

 
(2.9
)%
 
10.7
%
 
11.0
%
Total SG&A
$
435.1

 
$
475.7

 
(8.5
)%
 
41.5
%
 
43.5
%
 
$
873.7

 
$
934.8

 
(6.5
)%
 
39.5
%
 
42.2
%

Currency contributed approximately $15 million and $19 million of the decrease in SG&A for the three- and six-month periods ended May 27, 2012, respectively, as compared to the same prior-year periods.
Selling.    Selling expenses reflect costs such as rents and headcount associated with the support and continued expansion of our company-operated store network. Currency favorably impacted selling expenses by $6 million and $9 million for the three- and six-month periods ended May 27, 2012, respectively, as compared to the same prior-year periods.
Advertising and promotion.    For both periods, the decrease in advertising and promotion expenses primarily reflected a reduction of our advertising activities in some markets.
Administration.    For both periods, the decrease in administration expenses was primarily due to a decline in incentive compensation expense related to lower achievement against our internally-set objectives, and a decline in pension expense primarily resulting from changes to the U.S. pension plans in the second quarter of 2011.
Other.    Other SG&A includes distribution, information resources, and marketing organization costs. These costs decreased primarily due to lower distribution costs.




19
Table of Contents

Operating income
The following table shows operating income by reporting segment and corporate expenses for the periods indicated, the changes in these items from period to period and these items expressed as a percentage of net revenues:
 
 
Three Months Ended
 
Six Months Ended
 
 
May 27,
2012
 
May 29,
2011
 
%
Increase
(Decrease)
 
May 27,
2012
 
May 29,
2011
 
May 27,
2012
 
May 29,
2011
 
%
Increase
(Decrease)
 
May 27,
2012
 
May 29,
2011
 
 
 
 
% of Net
Revenues
 
% of Net
Revenues
 
 
 
% of Net
Revenues
 
% of Net
Revenues
 
 
(Dollars in millions)
 
Operating income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Americas
$
71.3

 
$
82.6

 
(13.7
)%
 
11.8
%
 
13.8
%
 
$
151.0

 
$
157.6

 
(4.2
)%
 
12.1
%
 
13.2
%
 
Europe
29.6

 
37.5

 
(21.2
)%
 
11.6
%
 
13.3
%
 
81.6

 
108.8

 
(25.0
)%
 
15.0
%
 
18.4
%
 
Asia Pacific
18.7

 
25.5

 
(26.3
)%
 
10.0
%
 
12.0
%
 
59.9

 
62.8

 
(4.6
)%
 
14.4
%
 
14.6
%
 
Total regional operating income
119.6

 
145.6

 
(17.8
)%
 
11.4
%
*
13.3
%
*
292.5

 
329.2

 
(11.2
)%
 
13.2
%
*
14.9
%
*
Corporate expenses
74.0

 
80.6

 
(8.2
)%
 
7.1
%
*
7.4
%
*
136.7

 
165.3

 
(17.4
)%
 
6.2
%
*
7.5
%
*
Total operating income
$
45.6

 
$
65.0

 
(29.8
)%
 
4.4
%
*
5.9
%
*
$
155.8

 
$
163.9

 
(4.9
)%
 
7.0
%
*
7.4
%
*
Operating margin
4.4
%
 
5.9
%
 
 
 
 
 
 
 
7.0
%
 
7.4
%
 
 
 
 
 
 
 
______________
 
* Percentage of consolidated net revenues
Currency unfavorably affected total operating income by approximately $12 million and $22 million for the three- and six-month periods ended May 27, 2012.
Regional operating income.    For both periods, the decrease in regional operating income and operating margin reflected the decline in gross margin and the unfavorable effects of currency, partially offset by lower SG&A.
Corporate.    Corporate expenses are selling, general and administrative expenses that are not attributed to any of our regional operating segments. Lower corporate expenses in both periods reflected the decrease in incentive compensation expense and the decline in pension expenses.
Interest expense
The weighted-average interest rate on average borrowings outstanding for the three- and six-month periods ended May 27, 2012, was 7.17% and 7.08% as compared to 6.84% in each of the same periods in 2011.
Loss on early extinguishment of debt
During the three months ended May 27, 2012, we recorded a $8.2 million net loss on early extinguishment of debt as a result of our debt refinancing activities during the period. The loss was primarily comprised of a tender premium of $11.4 million, the write-off of $4.0 million of unamortized debt issuance costs, partially offset by a gain of $7.6 million related to the partial repurchase of Yen-denominated Eurobonds due 2016 at a discount to their par value.
Other income (expense), net
Other income (expense), net, primarily consists of foreign exchange management activities and transactions. For the three- and six-month periods ended May 27, 2012, we recorded income of $10.7 million and $11.9 million, respectively, as compared to expense of $1.0 million and $7.0 million, respectively, for the same prior-year periods. The income in 2012 and expense in 2011 reflected gains and losses, respectively, on foreign exchange derivatives which generally economically hedge future cash flow obligations of our foreign operations.
Income tax expense
Our effective income tax rate was 29.3% for the six months ended May 27, 2012, compared to 32.6% for the same period ended May 29, 2011. The reduction in effective tax rate in 2012 as compared to 2011 is the result of a $3.0 million discrete tax benefit related to our foreign operations.



20
Table of Contents

Liquidity and Capital Resources
Liquidity outlook
We believe we will have adequate liquidity over the next twelve months to operate our business and to meet our cash requirements.
Cash sources
We are a privately-held corporation. We have historically relied primarily on cash flows from operations, borrowings under credit facilities, issuances of notes and other forms of debt financing. We regularly explore financing and debt reduction alternatives, including new credit agreements, unsecured and secured note issuances, equity financing, equipment and real estate financing, securitizations and asset sales. Key sources of cash include earnings from operations and borrowing availability under our revolving credit facility.
We are borrowers under a senior secured revolving credit facility. The facility is an asset-based facility, in which the borrowing availability is primarily based on the value of our U.S. Levi’s® trademarks and the levels of accounts receivable and inventory in the United States and Canada. The maximum availability under the facility is $850 million, of which $800 million is available to us for revolving loans in U.S. Dollars and $50 million is available to us for revolving loans either in U.S. Dollars or Canadian Dollars.
As of May 27, 2012, we had borrowings of $30.0 million under the facility, all of which is classified as long-term debt. Unused availability under the facility was $586.6 million, as our total availability of $664.2 million, based on collateral levels as defined by the agreement, was reduced by $77.6 million of other credit-related instruments.
As of May 27, 2012, we had cash and cash equivalents totaling approximately $277.9 million, resulting in a total liquidity position (unused availability and cash and cash equivalents) of $864.5 million.
Cash uses
Our principal cash requirements include working capital, capital expenditures, payments of principal and interest on our debt, payments of taxes, contributions to our pension plans and payments for postretirement health benefit plans, and, if market conditions warrant, occasional investments in, or acquisitions of, business ventures in our line of business. In addition, we regularly evaluate our ability to pay dividends or repurchase stock, all consistent with the terms of our debt agreements.
There have been no material changes to our estimated cash requirements for 2012 from those disclosed in our 2011 Annual Report on Form 10-K.
Cash flows
The following table summarizes, for the periods indicated, selected items in our consolidated statements of cash flows:
 
 
 
Six Months Ended
 
 
 
May 27,
2012
 
May 29,
2011
 
 
 
(Dollars in millions)
 
 
Cash provided by operating activities
$
327.6

 
$
85.4

 
 
Cash used for investing activities
(33.8
)
 
(80.9
)
 
 
Cash used for financing activities
(212.2
)
 
(20.1
)
 
 
Cash and cash equivalents
277.9

 
258.5

 
Cash flows from operating activities
Cash provided by operating activities was $327.6 million for the six-month period in 2012, as compared to $85.4 million for the same period in 2011. Cash provided by operating activities increased compared to the prior year due to an increase in cash received from customers, reflecting our higher beginning accounts receivable balance, and a decline in payments to vendors, reflecting our lower SG&A. We also used less cash for inventory as compared to prior year.


21
Table of Contents

Cash flows from investing activities
Cash used for investing activities was $33.8 million for the six-month period in 2012, as compared to $80.9 million for the same period in 2011. The decrease in cash used for investing activities as compared to the prior year primarily reflects the higher information technology costs in 2011 associated with the installation of our global enterprise resource planning system.
Cash flows from financing activities
Cash used for financing activities was $212.2 million for the six-month period in 2012, as compared to $20.1 million for the same period in 2011. Net cash used in 2012 primarily related to net repayments of our senior revolving credit facility. Cash used in both years include dividend payments to stockholders of $20.0 million.
Indebtedness
The borrower of substantially all of our debt is Levi Strauss & Co., the parent and U.S. operating company. Of our total debt of $1.8 billion as of May 27, 2012, we had fixed-rate debt of approximately $1.4 billion (80% of total debt) and variable-rate debt of approximately $0.4 billion (20% of total debt). As of May 27, 2012, our required aggregate debt principal payments on our unsecured long-term debt were $324.2 million in 2014, $50.3 million in 2016 and the remaining $1.3 billion in years after 2017. Short-term borrowings of $65.7 million at various foreign subsidiaries were expected to be either paid over the next twelve months or refinanced at the end of their applicable terms.
Our long-term debt agreements contain customary covenants restricting our activities as well as those of our subsidiaries. Currently, we are in compliance with all of these covenants.

Off-Balance Sheet Arrangements, Guarantees and Other Contingent Obligations
There have been no significant changes to our off-balance sheet arrangements or contractual commitments from those disclosed in our 2011 Annual Report on Form 10-K.

Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and the related notes. There have been no significant changes to our critical accounting policies from those disclosed in our 2011 Annual Report on Form 10-K.

Recently Issued Accounting Standards
See Note 1 to our unaudited consolidated financial statements included in this report for recently issued accounting standards, including the expected dates of adoption and estimated effects on our consolidated financial statements.
FORWARD-LOOKING STATEMENTS
Certain matters discussed in this report, including (without limitation) statements under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contain forward-looking statements. Although we believe that, in making any such statements, our expectations are based on reasonable assumptions, any such statement may be influenced by factors that could cause actual outcomes and results to be materially different from those projected.
These forward-looking statements include statements relating to our anticipated financial performance and business prospects and/or statements preceded by, followed by or that include the words “believe”, “anticipate”, “intend”, “estimate”, “expect”, “project”, “could”, “plans”, “seeks” and similar expressions. These forward-looking statements speak only as of the date stated and we do not undertake any obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, even if experience or future events make it clear that any expected results expressed or implied by these forward-looking statements will not be realized. Although we believe that the expectations reflected in these forward-looking statements are reasonable, these expectations may not prove to be correct or we may not achieve the financial results, savings or other benefits anticipated in the forward-looking statements. These forward-looking statements are necessarily estimates reflecting the best judgment of our senior management and involve a number of risks and uncertainties, some of which may be beyond our control. These risks and uncertainties, including those disclosed under “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended November 27, 2011, and our other filings with the Securities and Exchange Commission, could cause actual results to differ materially from those suggested by the forward-looking statements and include, without limitation:
 



22
Table of Contents

•
changes in the level of consumer spending for apparel in view of general economic and environmental conditions and pricing trends, and our ability to plan for and respond to the impact of those changes;
•
consequences of impacts to the businesses of our wholesale customers caused by factors such as lower consumer spending, pricing changes, general economic conditions and changing consumer preferences;
•
our ability to mitigate the variability of costs related to manufacturing, sourcing, and raw materials supply, such as cotton, and to manage consumer response to such mitigating actions;
•
consequences of the actions we take to support our supply chain partners as a response to the fluctuating costs of manufacturing, sourcing, and raw materials supply;
•
our and our wholesale customers’ decisions to modify strategies and adjust product mix, and our ability to manage any resulting product transition costs;
•
our ability to gauge and adapt to changing U.S. and international retail environments and fashion trends and changing consumer preferences in product, price-points and shopping experiences;
•
our ability to respond to price, innovation and other competitive pressures in the apparel industry and on our key customers;
•
our ability to increase the number of dedicated stores for our products, including through opening and profitably operating company-operated stores;
•
our effectiveness in increasing productivity and efficiency in our operations;
•
our ability to implement, stabilize and optimize our enterprise resource planning system throughout our business without disruption or to mitigate such disruptions;
•
consequences of foreign currency exchange rate fluctuations;
•
the impact of the variables that affect the net periodic benefit cost and future funding requirements of our postretirement benefits and pension plans;
•
our dependence on key distribution channels, customers and suppliers;
•
our ability to utilize our tax credits and net operating loss carryforwards;
•
ongoing or future litigation matters and disputes and regulatory developments;
•
changes in or application of trade and tax laws; and
•
political, social and economic instability in countries where we do business.
Our actual results might differ materially from historical performance or current expectations. We do not undertake any obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
 
Item 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in our primary market risk exposures or how those exposures are managed from the information disclosed in our 2011 Annual Report on Form 10-K.


23
Table of Contents

Item 4.
CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934) that are designed to provide reasonable assurance that information required to be disclosed in the reports we file or submit to the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.
We updated our evaluation, under the supervision and with the participation of management, including our chief executive officer and our chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of May 27, 2012. Based on that evaluation, our chief executive officer and our chief financial officer concluded that as of May 27, 2012, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Controls
We maintain a system of internal control over financial reporting that is designed to provide reasonable assurance that our books and records accurately reflect our transactions and that our established policies and procedures are followed. There were no changes to our internal control over financial reporting during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


24
Table of Contents

PART II — OTHER INFORMATION
 
Item 1.
LEGAL PROCEEDINGS
Litigation.    There have been no material developments with respect to the information previously reported in our 2011 Annual Report on Form 10-K related to legal proceedings.
In the ordinary course of business, we have various pending cases involving contractual matters, facility- and employee-related matters, distribution questions, product liability claims, trademark infringement and other matters. We do not believe any of these pending legal proceedings will have a material impact on our financial condition, results of operations or cash flows.
 
Item 1A.
RISK FACTORS
There have been no material changes in our risk factors from those disclosed in our 2011 Annual Report on Form 10-K.

Item 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On May 8, 2012, the Company issued 987 Restricted Stock Units to members of the Board of Directors in connection with the dividend equivalent provisions of our 2006 Equity Incentive Plan.
 
Item 3.
DEFAULTS UPON SENIOR SECURITIES
None.
 
Item 4.
MINE SAFETY DISCLOSURES
None.
 
Item 5.
OTHER INFORMATION
None.



25
Table of Contents

Item 6.
EXHIBITS
 
4.1
  
Indenture, dated as of May 8, 2012, between the Registrant and Wells Fargo Bank, National Association, as trustee, governing the 6 7/8% Senior Notes due 2022. Incorporated by reference to Exhibit 4.1 to Registrant's Current Report on Form 8-K filed with the Commission on May 11, 2012.
 
 
 
4.2
  
First Supplemental Indenture, dated as of May 8, 2012 to the Indenture dated as of March 17, 2006, each between the Registrant and Wilmington Trust Company, as trustee, governing the 8 7/8% Senior Notes due 2016. Incorporated by reference to Exhibit 4.2 to Registrant's Current Report on Form 8-K filed with the Commission on May 11, 2012.
 
 
 
4.3
  
Registration Rights Agreement, dated May 8, 2012 between the Registrant and Merrill Lynch, Pierce, Fenner & Smith Incorporated in relation to the 6 7/8% Senior Notes due 2022. Incorporated by reference to Exhibit 4.3 to Registrant's Current Report on Form 8-K filed with the Commission on May 11, 2012.
 
 
 
10.1
 
Purchase Agreement, dated April 24, 2012, between the Registrant and Merrill Lynch, Pierce, Fenner & Smith Incorporated relating to the private placement of 6 7/8% Senior Notes due 2022. Incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K filed with the Commission on April 27, 2012.

 
 
 
10.2
 
Amendment to Employment Agreement, effective as of May 8, 2012, between the Registrant and Charles V. Bergh. Incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K filed with the Commission on May 11, 2012.*

 
 
 
31.1
  
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
 
 
 
31.2
  
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
 
 
 
32
  
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith.
 
 
 
101.INS
  
XBRL Instance Document. Furnished herewith.
 
 
 
101.SCH
  
XBRL Taxonomy Extension Schema Document. Furnished herewith.
 
 
 
101.CAL
  
XBRL Taxonomy Extension Calculation Linkbase Document. Furnished herewith.
 
 
 
101.DEF
 
XBRL Taxonomy Extension Definition Linkbase Document. Furnished herewith.
 
 
 
101.LAB
  
XBRL Taxonomy Extension Label Linkbase Document. Furnished herewith.
 
 
 
101.PRE
  
XBRL Taxonomy Extension Presentation Linkbase Document. Furnished herewith.
 
 
 
* Management contract, compensatory plan or arrangement.

 



26
Table of Contents

SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
Date:
July 10, 2012
 
LEVI STRAUSS & Co.
 
 
 
(Registrant)
 
 
 
 
 
 
 
 
 
 
By:
/s/    HEIDI L. MANES
 
 
 
Heidi L. Manes
Vice President and Controller
(Principal Accounting Officer)



27
Table of Contents

EXHIBIT INDEX
 


4.1
  
Indenture, dated as of May 8, 2012, between the Registrant and Wells Fargo Bank, National Association, as trustee, governing the 6 7/8% Senior Notes due 2022. Incorporated by reference to Exhibit 4.1 to Registrant's Current Report on Form 8-K filed with the Commission on May 11, 2012.
 
 
 
4.2
  
First Supplemental Indenture, dated as of May 8, 2012 to the Indenture dated as of March 17, 2006, each between the Registrant and Wilmington Trust Company, as trustee, governing the 8 7/8% Senior Notes due 2016. Incorporated by reference to Exhibit 4.2 to Registrant's Current Report on Form 8-K filed with the Commission on May 11, 2012.
 
 
 
4.3
  
Registration Rights Agreement, dated May 8, 2012 between the Registrant and Merrill Lynch, Pierce, Fenner & Smith Incorporated in relation to the 6 7/8% Senior Notes due 2022. Incorporated by reference to Exhibit 4.3 to Registrant's Current Report on Form 8-K filed with the Commission on May 11, 2012.
 
 
 
10.1
 
Purchase Agreement, dated April 24, 2012, between the Registrant and Merrill Lynch, Pierce, Fenner & Smith Incorporated relating to the private placement of 6 7/8% Senior Notes due 2022. Incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K filed with the Commission on April 27, 2012.

 
 
 
10.2
 
Amendment to Employment Agreement, effective as of May 8, 2012, between the Registrant and Charles V. Bergh. Incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K filed with the Commission on May 11, 2012.*
 
 
 
31.1
  
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
 
 
 
31.2
  
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
 
 
 
32
  
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith.
 
 
 
101.INS
  
XBRL Instance Document. Furnished herewith.
 
 
 
101.SCH
  
XBRL Taxonomy Extension Schema Document. Furnished herewith.
 
 
 
101.CAL
  
XBRL Taxonomy Extension Calculation Linkbase Document. Furnished herewith.
 
 
 
101.DEF
 
XBRL Taxonomy Extension Definition Linkbase Document. Furnished herewith.
 
 
 
101.LAB
  
XBRL Taxonomy Extension Label Linkbase Document. Furnished herewith.
 
 
 
101.PRE
  
XBRL Taxonomy Extension Presentation Linkbase Document. Furnished herewith.
 
 
 
* Management contract, compensatory plan or arrangement.

  



28