LEVI 10-Q Quarterly Report May 29, 2011

LEVI STRAUSS & CO

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10-Q 1 f59546e10vq.htm FORM 10-Q e10vq

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 29, 2011
or
o		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 (State or Other Jurisdiction of Incorporation or Organization)		94-0905160 (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 o 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 o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer o	Accelerated filer o	Non-accelerated filer þ	Smaller reporting company o

(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 o 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 — 37,324,857 shares outstanding on July 7, 2011

LEVI STRAUSS & CO. AND SUBSIDIARIES

INDEX TO FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED MAY 29, 2011


		Page
		Number

PART I — FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements (unaudited):
	Consolidated Balance Sheets as of May 29, 2011, and November 28, 2010		3
	Consolidated Statements of Operations for the Three and Six Months Ended May 29, 2011, and May 30, 2010		4
	Consolidated Statements of Cash Flows for the Six Months Ended May 29, 2011, and May 30, 2010		5
	Notes to Consolidated Financial Statements		6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		27
Item 4T.	Controls and Procedures		28

PART II — OTHER INFORMATION
Item 1.	Legal Proceedings		29
Item 1A.	Risk Factors		29
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		29
Item 3.	Defaults Upon Senior Securities		29
Item 4.	Removed and Reserved		29
Item 5.	Other Information		29
Item 6.	Exhibits		29
SIGNATURE			30
EX-31.1
EX-31.2
EX-32

PART I — FINANCIAL INFORMATION


Item 1.	*CONSOLIDATED FINANCIAL STATEMENTS*

LEVI STRAUSS & CO. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


	(Unaudited)
	May 29,			November 28,
	2011			2010
	(Dollars in thousands)

ASSETS
Current Assets:
Cash and cash equivalents	$	258,491		$	269,726
Restricted cash		3,737			4,028
Trade receivables, net of allowance for doubtful accounts of $23,401 and $24,617		428,521			553,385
Inventories:
Raw materials		7,358			6,770
Work-in-process		12,231			9,405
Finished goods		618,529			563,728

Total inventories		638,118			579,903
Deferred tax assets, net		141,426			137,892
Other current assets		143,595			106,198

Total current assets		1,613,888			1,651,132
Property, plant and equipment, net of accumulated depreciation of $722,138 and $683,258		509,757			488,603
Goodwill		243,306			241,472
Other intangible assets, net		78,998			84,652
Non-current deferred tax assets, net		552,727			559,053
Other assets		117,203			110,337

Total assets	$	3,115,879		$	3,135,249


LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS’ DEFICIT
Current Liabilities:
Short-term borrowings	$	51,610		$	46,418
Current maturities of long-term debt		—			—
Current maturities of capital leases		1,871			1,777
Accounts payable		233,716			212,935
Other accrued liabilities		229,110			275,443
Accrued salaries, wages and employee benefits		181,740			196,152
Accrued interest payable		9,571			9,685
Accrued income taxes		15,024			17,115

Total current liabilities		722,642			759,525
Long-term debt		1,843,585			1,816,728
Long-term capital leases		2,995			3,578
Postretirement medical benefits		141,253			147,065
Pension liability		332,475			400,584
Long-term employee related benefits		97,957			102,764
Long-term income tax liabilities		47,752			50,552
Other long-term liabilities		54,278			54,281

Total liabilities		3,242,937			3,335,077

Commitments and contingencies
Temporary equity		8,371			8,973

Stockholders’ Deficit:
Levi Strauss & Co. stockholders’ deficit
Common stock — $.01 par value; 270,000,000 shares authorized; 37,324,857 shares and 37,322,358 shares issued and outstanding		373			373
Additional paid-in capital		22,856			18,840
Retained earnings		74,723			33,346
Accumulated other comprehensive loss		(242,513	)		(272,168	)

Total Levi Strauss & Co. stockholders’ deficit		(144,561	)		(219,609	)
Noncontrolling interest		9,132			10,808

Total stockholders’ deficit		(135,429	)		(208,801	)

Total liabilities, temporary equity and stockholders’ deficit	$	3,115,879		$	3,135,249

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

LEVI STRAUSS & CO. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS


	Three Months Ended						Six Months Ended
	May 29,			May 30,			May 29,			May 30,
	2011			2010			2011			2010
	(Dollars in thousands)
	(Unaudited)

Net sales	$	1,074,400		$	957,959		$	2,174,285		$	1,973,966
Licensing revenue		18,522			18,570			39,330			37,769

Net revenues		1,092,922			976,529			2,213,615			2,011,735
Cost of goods sold		552,226			477,108			1,114,952			979,386

Gross profit		540,696			499,421			1,098,663			1,032,349
Selling, general and administrative expenses		475,720			430,199			934,813			855,876

Operating income		64,976			69,222			163,850			176,473
Interest expense		(33,515	)		(34,440	)		(68,381	)		(68,613	)
Loss on early extinguishment of debt		—			(16,587	)		—			(16,587	)
Other income (expense), net		(1,006	)		6,694			(6,965	)		19,157

Income before income taxes		30,455			24,889			88,504			110,430
Income tax expense		9,944			43,279			28,825			72,951

Net income (loss)		20,511			(18,390	)		59,679			37,479
Net loss attributable to noncontrolling interest		460			4,009			1,967			4,494

Net income (loss) attributable to Levi Strauss & Co.	$	20,971		$	(14,381	)	$	61,646		$	41,973

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

LEVI STRAUSS & CO. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS


	Six Months Ended
	May 29,			May 30,
	2011			2010
	(Dollars in thousands)
	(Unaudited)

Cash Flows from Operating Activities:
Net income	$	59,679		$	37,479
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		57,495			51,650
Asset impairments		2,382			1,166
(Gain) loss on disposal of property, plant and equipment		(76	)		51
Unrealized foreign exchange losses (gains)		9,300			(19,376	)
Realized loss on settlement of forward foreign exchange contracts not designated for hedge accounting		4,863			5,340
Employee benefit plans’ amortization from accumulated other comprehensive loss		(503	)		1,732
Employee benefit plans’ curtailment loss, net		3,055			100
Noncash gain on extinguishment of debt, net of write-off of unamortized debt issuance costs		—			(13,647	)
Amortization of deferred debt issuance costs		2,138			2,284
Stock-based compensation		3,414			2,875
Allowance for doubtful accounts		1,354			3,564
Change in operating assets and liabilities:
Trade receivables		134,540			129,489
Inventories		(42,491	)		(47,382	)
Other current assets		(38,850	)		(11,301	)
Other non-current assets		1,603			(16,851	)
Accounts payable and other accrued liabilities		(38,238	)		(30,251	)
Income tax liabilities		(4,386	)		56,525
Accrued salaries, wages and employee benefits and long-term employee related benefits		(69,003	)		(25,379	)
Other long-term liabilities		(1,018	)		18,510
Other, net		171			(159	)

Net cash provided by operating activities		85,429			146,419

Cash Flows from Investing Activities:
Purchases of property, plant and equipment		(75,713	)		(78,187	)
Proceeds from sale of property, plant and equipment		135			1,323
Payments on settlement of forward foreign exchange contracts not designated for hedge accounting		(4,863	)		(5,340	)
Acquisitions, net of cash acquired		—			(12,242	)
Other		(500	)		(114	)

Net cash used for investing activities		(80,941	)		(94,560	)

Cash Flows from Financing Activities:
Proceeds from issuance of long-term debt		—			909,390
Repayments of long-term debt and capital leases		(953	)		(865,076	)
Short-term borrowings, net		527			21,798
Debt issuance costs		—			(16,931	)
Restricted cash		571			(257	)
Repurchase of common stock		(245	)		—
Dividend to stockholders		(20,023	)		(20,013	)

Net cash (used for) provided by financing activities		(20,123	)		28,911

Effect of exchange rate changes on cash and cash equivalents		4,400			1,493

Net (decrease) increase in cash and cash equivalents		(11,235	)		82,263
Beginning cash and cash equivalents		269,726			270,804

Ending cash and cash equivalents	$	258,491		$	353,067

Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	$	64,651		$	82,453
Income taxes		30,467			26,317

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

LEVI STRAUSS & CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE QUARTERLY PERIOD ENDED MAY 29, 2011


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, skirts, jackets, footwear and related accessories, for men, women and children under the Levi’s ^® , Dockers ^® , Signature by Levi Strauss & Co. ^tm and Denizen ^tm brands. The Company markets its products in 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.”) 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 28, 2010, included in the Annual Report on Form 10-K filed by the Company with the Securities and Exchange Commission (“SEC”) on February 8, 2011.

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. Certain prior-year amounts have been reclassified to conform to the current presentation. The results of operations for the three and six months ended May 29, 2011, may not be indicative of the results to be expected for any other interim period or the year ending November 27, 2011.

The Company’s fiscal year ends on the last Sunday of November in each year, although the fiscal years of certain foreign subsidiaries are fixed at November 30 due to local statutory requirements. Apart from these subsidiaries, each quarter of both fiscal years 2011 and 2010 consists of 13 weeks. All references to years relate to fiscal years rather than calendar years.

In the second quarter of 2011, the Company identified that certain of its leases contained embedded foreign currency derivatives that had not been accounted for in prior periods. The Company determined that the effect of not accounting for these embedded derivatives in its previously issued financial statements was not material, and, as the impact on the 2011 full-year financial statements is also not expected to be material, recorded a correcting entry in the second quarter of 2011. The correction had the effect of increasing the fair value of the Company’s derivative net assets and of recognizing other income. The correction had no effect on operating income or cash flows, and increased income before income taxes and net income in the second quarter of 2011 by $6.5 million and $4.7 million, respectively.

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.

LEVI STRAUSS & CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

FOR THE QUARTERLY PERIOD ENDED MAY 29, 2011

Pension and Postretirement Benefits

The Company has several non-contributory defined benefit retirement plans covering eligible employees. The Company also provides certain health care benefits for U.S. employees who meet age, participation and length of service requirements at retirement. In addition, the Company sponsors other retirement or post-employment plans for its foreign employees in accordance with local government programs and requirements. The Company retains the right to amend, curtail or discontinue any aspect of the plans, subject to local regulations.

The Company recognizes either an asset or a liability for any plan’s funded status in its consolidated balance sheets. The Company measures changes in funded status using actuarial models which utilize an attribution approach that generally spreads individual events either over the estimated service lives of the remaining employees in the plan, or, for plans where participants will not earn additional benefits by rendering future service — which, beginning in the second quarter of 2011, includes the Company’s U.S. plans — over the plan participants’ estimated remaining lives. The Company’s policy is to fund its retirement plans based upon actuarial recommendations and in accordance with applicable laws, income tax regulations and credit agreements. Net pension and postretirement benefit income or expense is generally determined using assumptions which include expected long-term rates of return on plan assets, discount rates, compensation rate increases (where applicable) and medical trend rates. The Company considers several factors including actual historical rates, expected rates and external data to determine the assumptions used in the actuarial models.

Pension benefits are primarily paid through trusts funded by the Company. The Company pays postretirement benefits to the healthcare service providers on behalf of the plan’s participants.

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 2010 Annual Report on Form 10-K, except for the following, which have been grouped by their required effective dates for the Company:

Second Quarter of 2012


	•	In May 2011, the FASB issued Accounting Standards Update No. 2011-04, “Fair Value Measurements (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs,” (“ASU 2011-04”). ASU 2011-04 changes the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements to ensure consistency between U.S. GAAP and IFRS. ASU 2011-04 also expands the disclosures for fair value measurements that are estimated using significant unobservable (Level 3) inputs. This new guidance is to be applied prospectively. The Company anticipates that the adoption of this standard will not materially expand its consolidated financial statement footnote disclosures.

First Quarter of 2013


	•	In June 2011, the FASB issued Accounting Standards Update No. 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income,” (“ASU 2011-05”). ASU 2011-05 eliminates the option to report other comprehensive income and its components in the statement of changes in equity. ASU 2011-05 requires that all nonowner changes in stockholders’ equity be presented in either a single continuous statement of comprehensive income or in two separate but consecutive statements. This new guidance is to be applied retrospectively. The Company anticipates that the adoption of this standard may materially change the presentation of its consolidated financial statements.

LEVI STRAUSS & CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

FOR THE QUARTERLY PERIOD ENDED MAY 29, 2011


NOTE 2:	GOODWILL AND OTHER INTANGIBLE ASSETS

The changes in the carrying amount of goodwill by business segment for the six months ended May 29, 2011, were as follows:


					Asia
	Americas		Europe		Pacific		Total
			(Dollars in thousands)

Balance, November 28, 2010	$	207,427	$	31,603	$	2,442	$	241,472
Foreign currency fluctuation		4		1,804		26		1,834

Balance, May 29, 2011	$	207,431	$	33,407	$	2,468	$	243,306

Other intangible assets, net, were as follows:


	May 29, 2011							November 28, 2010
	Gross		Accumulated					Gross		Accumulated
	Carrying Value		Amortization			Total		Carrying Value		Amortization			Total
			(Dollars in thousands)

Unamortized intangible assets:
Trademarks	$	42,743	$	—		$	42,743	$	42,743	$	—		$	42,743
Amortized intangible assets:
Acquired contractual rights		41,851		(18,531	)		23,320		45,712		(17,765	)		27,947
Customer lists		21,216		(8,281	)		12,935		20,037		(6,075	)		13,962

Total	$	105,810	$	(26,812	)	$	78,998	$	108,492	$	(23,840	)	$	84,652

For the three and six months ended May 29, 2011, amortization of these intangible assets was $3.0 million and $6.0 million, respectively, compared to $3.7 million and $7.6 million, respectively, in the same periods of 2010.

LEVI STRAUSS & CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

FOR THE QUARTERLY PERIOD ENDED MAY 29, 2011


NOTE 3:	FAIR VALUE OF FINANCIAL INSTRUMENTS

The following table presents the Company’s financial instruments that are carried at fair value:


	May 29, 2011						November 28, 2010
			Fair Value Estimated Using						Fair Value Estimated Using
			Level 1		Level 2				Level 1		Level 2
	Fair Value		Inputs ⁽¹⁾		Inputs ⁽²⁾		Fair Value		Inputs ⁽¹⁾		Inputs ⁽²⁾
			(Dollars in thousands)

Financial assets carried at fair value
Rabbi trust assets	$	19,978	$	19,978	$	—	$	18,316	$	18,316	$	—
Forward foreign exchange contracts, net ⁽³⁾		7,499		—		7,499		1,385		—		1,385

Total	$	27,477	$	19,978	$	7,499	$	19,701	$	18,316	$	1,385

Financial liabilities carried at fair value
Forward foreign exchange contracts, net ⁽³⁾	$	12,100	$	—	$	12,100	$	5,003	$	—	$	5,003

Total	$	12,100	$	—	$	12,100	$	5,003	$	—	$	5,003


(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 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 29, 2011				November 28, 2010
	Carrying		Estimated		Carrying		Estimated
	Value		Fair Value ⁽¹⁾		Value		Fair Value ⁽¹⁾
			(Dollars in thousands)

Financial liabilities carried at adjusted historical cost
Senior revolving credit facility	$	108,486	$	107,404	$	108,482	$	107,129
Senior term loan due 2014		323,920		314,204		324,423		311,476
8.875% senior notes due 2016		355,091		371,278		355,004		373,379
4.25% Yen-denominated Eurobonds due 2016		112,546		110,864		109,429		98,063
7.75% Euro senior notes due 2018		425,710		421,467		401,982		407,993
7.625% senior notes due 2020		526,668		533,231		526,557		542,307
Short-term borrowings		52,076		52,076		46,722		46,722

Total	$	1,904,497	$	1,910,524	$	1,872,599	$	1,887,069


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

LEVI STRAUSS & CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

FOR THE QUARTERLY PERIOD ENDED MAY 29, 2011


NOTE 4:	DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

As of May 29, 2011, the Company had forward foreign exchange contracts to buy $461.6 million and to sell $622.6 million against various foreign currencies. These contracts are at various exchange rates and expire at various dates through May 2012.

The table below provides data about the carrying values of derivative instruments and non-derivative instruments designated as net investment hedges:


	May 29, 2011								November 28, 2010
	Assets		(Liabilities)						Assets		(Liabilities)
						Derivative								Derivative
	Carrying		Carrying			Net Carrying			Carrying		Carrying			Net Carrying
	Value		Value			Value			Value		Value			Value
	(Dollars in thousands)

Derivatives not designated as hedging instruments
Forward foreign exchange contracts ⁽¹⁾	$	9,666	$	(2,167	)	$	7,499		$	7,717	$	(6,332	)	$	1,385
Forward foreign exchange contracts ⁽²⁾		10,568		(22,668	)		(12,100	)		4,266		(9,269	)		(5,003	)

Total	$	20,234	$	(24,835	)				$	11,983	$	(15,601	)

Non-derivatives designated as hedging instruments
4.25% Yen-denominated Eurobonds due 2016	$	—	$	(50,473	)				$	—	$	(61,075	)
7.75% Euro senior notes due 2018		—		(424,320	)					—		(400,740	)

Total	$	—	$	(474,793	)				$	—	$	(461,815	)


(1)		Included in “Other current assets” or “Other 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 operations:


	Gain or (Loss)						Gain or (Loss) Recognized in Other
	Recognized in AOCI						Income (Expense), net (Ineffective
	(Effective Portion)						Portion and Amount Excluded from
	As of			As of			Effectiveness Testing)
	May 29,			November 28,			Three Months Ended					Six Months Ended
	2011			2010			May 29, 2011			May 30, 2010		May 29, 2011			May 30, 2010
	(Dollars in thousands)

Forward foreign exchange contracts	$	4,637		$	4,637		$	—		$	—	$	—		$	—
4.25% Yen-denominated Eurobonds due 2016		(25,931	)		(24,377	)		(453	)		825		(1,546	)		5,550
7.75% Euro senior notes due 2018		(47,251	)		(23,671	)		—			—		—			—
Cumulative income taxes		26,696			17,022

Total	$	(41,849	)	$	(26,389	)

LEVI STRAUSS & CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

FOR THE QUARTERLY PERIOD ENDED MAY 29, 2011

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 operations:


	Gain or (Loss) During
	Three Months Ended					Six Months Ended
	May 29,		May 30,			May 29,			May 30,
	2011		2010			2011			2010
			(Dollars in thousands)

Forward foreign exchange contracts:
Realized	$	860	$	(2,976	)	$	(4,863	)	$	(5,340	)
Unrealized		1,405		8,598			(968	)		15,945

Total	$	2,265	$	5,622		$	(5,831	)	$	10,605


NOTE 5:	DEBT


	May 29,		November 28,
	2011		2010
	(Dollars in thousands)

Long-term debt
Secured:
Senior revolving credit facility	$	108,250	$	108,250

Total secured		108,250		108,250

Unsecured:
Senior term loan due 2014		323,853		323,676
8.875% senior notes due 2016		350,000		350,000
4.25% Yen-denominated Eurobonds due 2016		112,162		109,062
7.75% Euro senior notes due 2018		424,320		400,740
7.625% senior notes due 2020		525,000		525,000

Total unsecured		1,735,335		1,708,478
Less: current maturities		—		—

Total long-term debt	$	1,843,585	$	1,816,728

Short-term debt
Short-term borrowings	$	51,610	$	46,418
Current maturities of long-term debt		—		—

Total short-term debt	$	51,610	$	46,418

Total long-term and short-term debt	$	1,895,195	$	1,863,146

Short-term Credit Lines and Standby Letters of Credit

As of May 29, 2011, the Company’s total availability of $378.0 million under its senior secured revolving credit facility was reduced by $83.5 million of letters of credit and other credit usage under the facility, yielding a net availability of $294.5 million.

LEVI STRAUSS & CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

FOR THE QUARTERLY PERIOD ENDED MAY 29, 2011

Interest Rates on Borrowings

The Company’s weighted-average interest rate on average borrowings outstanding was 6.84% during both the three and six months ended May 29, 2011, as compared to 7.40% and 7.33%, respectively, in each of the same periods of 2010.


NOTE 6:	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 29,			May 30,			May 29,			May 30,
	2011			2010			2011			2010
	(Dollars in thousands)

Net periodic benefit cost (income):
Service cost	$	2,604		$	1,927		$	119		$	118
Interest cost		15,126			14,888			1,907			2,169
Expected return on plan assets		(13,057	)		(11,522	)		—			—
Amortization of prior service cost (benefit) ⁽¹⁾		20			111			(7,237	)		(7,391	)
Amortization of actuarial loss		4,304			6,666			1,257			1,402
Curtailment loss ⁽²⁾		3,071			—			—			—
Net settlement loss		705			20			—			—

Net periodic benefit cost (income)		12,773			12,090			(3,954	)		(3,702	)

Changes in accumulated other comprehensive loss:
Actuarial (gain) loss ⁽²⁾		(32,415	)		179			—			—
Amortization of prior service (cost) benefit		(20	)		(111	)		7,237			7,391
Amortization of actuarial loss		(4,304	)		(6,666	)		(1,257	)		(1,402	)
Curtailment loss ⁽²⁾		(3,071	)		—			—			—
Net settlement loss		(360	)		—			—			—

Total recognized in accumulated other comprehensive loss		(40,170	)		(6,598	)		5,980			5,989

Total recognized in net periodic benefit cost (income) and accumulated other comprehensive loss	$	(27,397	)	$	5,492		$	2,026		$	2,287

LEVI STRAUSS & CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

FOR THE QUARTERLY PERIOD ENDED MAY 29, 2011


	Pension Benefits						Postretirement Benefits
	Six Months Ended						Six Months Ended
	May 29,			May 30,			May 29,			May 30,
	2011			2010			2011			2010
	(Dollars in thousands)

Net periodic benefit cost (income):
Service cost	$	5,187		$	3,914		$	239		$	236
Interest cost		30,154			29,877			3,814			4,338
Expected return on plan assets		(25,955	)		(23,090	)		—			—
Amortization of prior service cost (benefit) ⁽¹⁾		85			229			(14,473	)		(14,783	)
Amortization of actuarial loss		11,034			13,331			2,513			2,804
Curtailment loss ⁽²⁾		3,055			100			—			—
Net settlement loss		716			192			—			—

Net periodic benefit cost (income)		24,276			24,553			(7,907	)		(7,405	)

Changes in accumulated other comprehensive loss:
Actuarial (gain) loss ⁽²⁾		(32,415	)		303			—			—
Amortization of prior service (cost) benefit		(85	)		(229	)		14,473			14,783
Amortization of actuarial loss		(11,034	)		(13,331	)		(2,513	)		(2,804	)
Curtailment loss ⁽²⁾		(3,071	)		(13	)		—			—
Net settlement loss		(338	)		(151	)		—			—

Total recognized in accumulated other comprehensive loss		(46,943	)		(13,421	)		11,960			11,979

Total recognized in net periodic benefit cost (income) and accumulated other comprehensive loss	$	(22,667	)	$	11,132		$	4,053		$	4,574


(1)		Postretirement benefits amortization of prior service benefit recognized during each period relates primarily to the favorable impact of the February 2004 and August 2003 plan amendments.

(2)		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.

The estimated net loss for the Company’s defined benefit pension plans that will be amortized from “Accumulated other comprehensive loss” into net periodic benefit cost in 2011 is expected to be approximately $15.0 million. The assumptions used in the April 2011 remeasurement were not materially different from those disclosed in our 2010 Annual Report on Form 10-K.


NOTE 7:	COMMITMENTS AND CONTINGENCIES

Forward Foreign Exchange Contracts

The Company uses 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 4 for additional information.

LEVI STRAUSS & CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

FOR THE QUARTERLY PERIOD ENDED MAY 29, 2011

Other Contingencies

Litigation. There have been no material developments in the Company’s litigation matters since it filed its 2010 Annual Report on Form 10-K.

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


NOTE 8:	DIVIDEND PAYMENT

The Company paid a cash dividend of $20 million in the first quarter of 2011. The Company does not have an 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 tax impact to the dividend recipients, the Company’s financial condition and compliance with the terms of its debt agreements.


NOTE 9:	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 29,			May 30,			May 29,			May 30,
	2011			2010			2011			2010
	(Dollars in thousands)

Net income (loss)	$	20,511		$	(18,390	)	$	59,679		$	37,479

Other comprehensive income (loss):
Pension and postretirement benefits		21,335			3,254			21,850			1,023
Net investment hedge (losses) gains		(6,570	)		22,612			(15,460	)		44,843
Foreign currency translation gains (losses)		14,363			(25,853	)		22,890			(51,608	)
Unrealized gain on marketable securities		93			167			667			184

Total other comprehensive income (loss)		29,221			180			29,947			(5,558	)

Comprehensive income (loss)		49,732			(18,210	)		89,626			31,921
Comprehensive loss attributable to noncontrolling interest		(384	)		(4,370	)		(1,675	)		(5,462	)

Comprehensive income (loss) attributable to Levi Strauss & Co.	$	50,116		$	(13,840	)	$	91,301		$	37,383

LEVI STRAUSS & CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

FOR THE QUARTERLY PERIOD ENDED MAY 29, 2011

The following is a summary of the components of “Accumulated other comprehensive loss,” net of related income taxes:


	May 29,			November 28,
	2011			2010
	(Dollars in thousands)

Pension and postretirement benefits	$	(176,957	)	$	(198,807	)
Net investment hedge losses		(41,849	)		(26,389	)
Foreign currency translation losses		(14,164	)		(37,054	)
Unrealized gain on marketable securities		824			157

Accumulated other comprehensive loss		(232,146	)		(262,093	)
Accumulated other comprehensive income attributable to noncontrolling interest		10,367			10,075

Accumulated other comprehensive loss attributable to Levi Strauss & Co.	$	(242,513	)	$	(272,168	)


NOTE 10:	OTHER INCOME (EXPENSE), NET

The following table summarizes significant components of “Other income (expense), net”:


	Three Months Ended						Six Months Ended
	May 29,			May 30,			May 29,			May 30,
	2011			2010			2011			2010
	(Dollars in thousands)

Foreign exchange management gains (losses) ⁽¹⁾	$	2,265		$	5,622		$	(5,831	)	$	10,605
Foreign currency transaction (losses) gains ⁽²⁾		(4,236	)		1,027			(3,294	)		8,203
Interest income		404			700			819			1,292
Other		561			(655	)		1,341			(943	)

Total other income (expense), net	$	(1,006	)	$	6,694		$	(6,965	)	$	19,157


(1)		In 2011, the Company recorded losses on its forward foreign exchange contracts in both the three- and six-month periods, primarily due to the depreciation of the U.S. Dollar against various foreign currencies, most notably the Swedish Krona and the Australian Dollar. For the three- and six-month periods, these losses were offset fully and partially, respectively, by the correction recorded for embedded foreign currency derivatives in certain of the Company’s leases. Please see Note 1 for additional information. Gains in 2010 were primarily due to the appreciation of the U.S. Dollar against the Euro, the Japanese Yen and the Australian Dollar.

(2)		Foreign currency transaction losses in 2011 were primarily due to the depreciation of the U.S. Dollar against the Euro. Foreign currency transaction gains in 2010 were primarily due to the appreciation of the U.S. Dollar against the Euro and the Japanese Yen.


NOTE 11:	INCOME TAXES

The effective income tax rate was 32.6% for the six months ended May 29, 2011, compared to 66.1% for the same period ended May 30, 2010. The reduction in the effective tax rate was primarily driven by two significant discrete income tax charges recognized in the second quarter of 2010, as described below.

During the second quarter of 2010, the Company recorded a discrete tax expense of $14.2 million to recognize a valuation allowance to fully offset the amount of deferred tax assets in Japan and another discrete tax expense of $14.0 million to recognize the reduction in deferred tax assets as a result of the enactment of the Patient Protection and Affordable Care Act (the “Health Care Act”).

LEVI STRAUSS & CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

FOR THE QUARTERLY PERIOD ENDED MAY 29, 2011

As of May 29, 2011, the Company’s total gross amount of unrecognized tax benefits was $147.9 million, of which $89.3 million would impact the effective tax rate, if recognized. As of November 28, 2010, the Company’s total gross amount of unrecognized tax benefits was $150.7 million, of which $87.2 million would have impacted the effective tax rate, if recognized.


NOTE 12:	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 29, 2011, the Company donated $0.4 million and $0.7 million, respectively, to the Levi Strauss Foundation as compared to $0.3 million and $0.5 million, respectively, for the same prior-year periods.


NOTE 13:	BUSINESS SEGMENT INFORMATION

The Company manages its business according to three regional segments: the Americas, Europe and Asia Pacific. Each regional segment is managed by a senior executive who reports directly to the chief operating decision maker: the Company’s chief executive officer. 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.

In the first quarter of 2011, accountability for certain information technology, human resources, advertising and promotion, and marketing staff costs of a global nature, that in prior years were captured in the Company’s geographic regions, was centralized under corporate management in conjunction with the Company’s key strategy of driving productivity. Beginning in 2011, these costs have been classified as corporate expenses. These costs were not significant to any of the Company’s regional segments individually in any of the periods presented herein, and accordingly business segment information for prior years has not been revised.

LEVI STRAUSS & CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

FOR THE QUARTERLY PERIOD ENDED MAY 29, 2011

Business segment information for the Company is as follows:


	Three Months Ended						Six Months Ended
	May 29,			May 30,			May 29,			May 30,
	2011			2010			2011			2010
	(Dollars in thousands)

Net revenues:
Americas	$	599,074		$	557,962		$	1,191,260		$	1,103,211
Europe		281,108			240,130			592,712			546,253
Asia Pacific		212,740			178,437			429,643			362,271

Total net revenues	$	1,092,922		$	976,529		$	2,213,615		$	2,011,735

Operating income:
Americas	$	82,600		$	84,917		$	157,633		$	160,980
Europe		37,522			31,598			108,813			97,983
Asia Pacific		25,429			16,896			62,792			47,549

Regional operating income		145,551			133,411			329,238			306,512
Corporate expenses		80,575			64,189			165,388			130,039

Total operating income		64,976			69,222			163,850			176,473
Interest expense		(33,515	)		(34,440	)		(68,381	)		(68,613	)
Loss on early extinguishment of debt		—			(16,587	)		—			(16,587	)
Other income (expense), net		(1,006	)		6,694			(6,965	)		19,157

Income before income taxes	$	30,455		$	24,889		$	88,504		$	110,430


NOTE 14:	SUBSEQUENT EVENT

On June 16, 2011, the Company announced that effective September 1, 2011, R. John Anderson will cease to be the Company’s President and Chief Executive Officer and will be succeeded by Charles V. Bergh. Mr. Bergh entered into an employment agreement with the Company on June 9, 2011, and on June 16, 2011, Mr. Anderson entered into a Transition Services, Separation Agreement and Release of All Claims with the Company. Mr. Anderson will continue to serve in his current position until September 1, 2011. Charges associated with the separation agreement will be recorded in the Company’s third quarter financial statements.


Item 2.	*MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS*

Overview

We design and market jeans, casual and dress pants, tops, skirts, jackets, footwear and related accessories for men, women and children under our Levi’s ^® , Dockers ^® , Signature by Levi Strauss & Co. ^tm (“Signature”) and Denizen ^tm brands around the world. We also license our trademarks in many countries throughout the world for a wide array of products, including accessories, pants, tops, footwear and other products.

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 our online stores operated by us, and 498 company-operated stores located in 31 countries, including the United States. These stores generated approximately 18% of our net revenues in the first half of 2011, as compared to the first half of 2010, when company-operated stores generated 16% of our net revenues. 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 the Signature brand primarily through mass channel retailers in the United States and Canada and franchised stores in Asia Pacific. We currently distribute our Denizen ^tm products through franchised stores in Asia Pacific, and starting in the second half of 2011, will distribute them through certain wholesale channels in the United States and Mexico.

Our Europe and Asia Pacific businesses, collectively, contributed approximately 46% of our net revenues and 52% of our regional operating income in the six-month period in 2011. Sales of Levi’s ^® brand products represented approximately 83% of our total net sales in the six-month period in 2011.

Trends Affecting Our Business

During the second quarter of 2011, we remained focused on our key long-term strategies: build upon our leadership position in the jean and khaki categories through product and marketing innovation, enhance relationships with wholesale customers and expand our dedicated store network to drive sales growth, capitalize on our global footprint, and increase our productivity.

Most markets around the world continued to feel the lingering impact of the challenged economy during the quarter. We expect that the impact of increasing prices and tightened supply of raw materials, such as cotton, will contribute to ongoing pricing pressure throughout the supply chain during 2011 and thereafter. Our response to these conditions may include additional product price increases or enhanced support of our supply chain partners to maintain a sufficient flow of product. The conditions within our industry and our response to them may impact our margins, working capital, and sales volumes.

Our Second Quarter 2011 Results

Our second quarter 2011 results reflect net revenue growth and the effects of the strategic investments we have made in line with our long-term strategies.


	•	Net revenues. Our consolidated net revenues increased by 12% compared to the second quarter of 2010, an increase of 8% on a constant-currency basis, reflecting growth in each of our geographic regions. Increased net revenues were primarily associated with our Levi’s ^® brand, through the expansion and performance of our dedicated store network globally and growth in wholesale revenues in the Americas and Europe.

	•	Operating income. Our operating income and operating margin declined compared to the second quarter of 2010, as the benefits from the increase in our net revenues were offset primarily by a lower gross margin, reflecting higher sales discounts and the higher cost of cotton, and our continued investment in retail expansion.


	•	Cash flows. Cash flows provided by operating activities were $85 million for the six-month period in 2011 as compared to $146 million for the same period in 2010, primarily reflecting our inventory build and a contribution to our pension plans in 2011.

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 are fixed at November 30 due to local statutory requirements. Apart from these subsidiaries, each quarter of fiscal years 2011 and 2010 consisted of 13 weeks.

Segments . We manage our business according to three regional segments: the Americas, Europe and Asia Pacific. In the first quarter of 2011, accountability for certain information technology, human resources, advertising and promotion, and marketing staff costs of a global nature, that in prior years were captured in our geographic regions, was centralized under corporate management in conjunction with our key strategy of driving productivity. Beginning in 2011, these costs have been classified as corporate expenses. These costs were not significant to any of our regional segments individually in any of the periods presented herein, and accordingly business segment information for prior years has not been revised.

Classification . Our classification of certain significant revenues and expenses reflects the following:


	•	Net sales 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.

	•	Licensing revenue consists of 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 commission payments 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.

Our 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 29, 2011, as Compared to Same Periods in 2010

The following table summarizes, for the periods indicated, our consolidated statements of operations, 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 29,			May 30,												May 29,			May 30,
							%			2011			2010									%			2011			2010
	May 29,			May 30,			Increase			% of Net			% of Net			May 29,			May 30,			Increase			% of Net			% of Net
	2011			2010			(Decrease)			Revenues			Revenues			2011			2010			(Decrease)			Revenues			Revenues
													(Dollars in millions)

Net sales	$	1,074.4		$	958.0			12.2	%		98.3	%		98.1	%	$	2,174.3		$	1,974.0			10.1	%		98.2	%		98.1	%
Licensing revenue		18.5			18.5			(0.3	)%		1.7	%		1.9	%		39.3			37.7			4.1	%		1.8	%		1.9	%

Net revenues		1,092.9			976.5			11.9	%		100.0	%		100.0	%		2,213.6			2,011.7			10.0	%		100.0	%		100.0	%
Cost of goods sold		552.2			477.1			15.7	%		50.5	%		48.9	%		1,114.9			979.3			13.8	%		50.4	%		48.7	%

Gross profit		540.7			499.4			8.3	%		49.5	%		51.1	%		1,098.7			1,032.4			6.4	%		49.6	%		51.3	%
Selling, general and administrative expenses		475.7			430.2			10.6	%		43.5	%		44.1	%		934.8			855.9			9.2	%		42.2	%		42.5	%

Operating income		65.0			69.2			(6.1	)%		5.9	%		7.1	%		163.9			176.5			(7.2	)%		7.4	%		8.8	%
Interest expense		(33.5	)		(34.4	)		(2.7	)%		(3.1	)%		(3.5	)%		(68.4	)		(68.6	)		(0.3	)%		(3.1	)%		(3.4	)%
Loss on early extinguishment of debt		—			(16.6	)		(100.0	)%		—			(1.7	)%		—			(16.6	)		(100.0	)%		—			(0.8	)%
Other income (expense), net		(1.0	)		6.7			(115.0	)%		(0.1	)%		0.7	%		(7.0	)		19.2			(136.4	)%		(0.3	)%		1.0	%

Income before income taxes		30.5			24.9			22.4	%		2.8	%		2.5	%		88.5			110.5			(19.9	)%		4.0	%		5.5	%
Income tax expense		10.0			43.3			(77.0	)%		0.9	%		4.4	%		28.8			73.0			(60.5	)%		1.3	%		3.6	%

Net income (loss)		20.5			(18.4	)		211.5	%		1.9	%		(1.9	)%		59.7			37.5			59.2	%		2.7	%		1.9	%
Net loss attributable to noncontrolling interest		0.5			4.0			88.5	%		—			0.4	%		1.9			4.5			(56.2	)%		0.1	%		0.2	%

Net income (loss) attributable to Levi Strauss & Co.	$	21.0		$	(14.4	)		245.8	%		1.9	%		(1.5	)%	$	61.6		$	42.0			46.9	%		2.8	%		2.1	%

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 29,		May 30,		As			Constant			May 29,		May 30,		As			Constant
	2011		2010		Reported			Currency			2011		2010		Reported			Currency
	(Dollars in millions)

Net revenues:
Americas	$	599.1	$	558.0		7.4	%		6.6	%	$	1,191.3	$	1,103.2		8.0	%		7.3	%
Europe		281.1		240.1		17.1	%		9.4	%		592.7		546.2		8.5	%		7.7	%
Asia Pacific		212.7		178.4		19.2	%		11.9	%		429.6		362.3		18.6	%		12.2	%

Total net revenues	$	1,092.9	$	976.5		11.9	%		8.3	%	$	2,213.6	$	2,011.7		10.0	%		8.3	%

Total net revenues increased on both reported and constant-currency bases for the three- and six-month periods ended May 29, 2011, as compared to the same prior-year periods. Reported amounts were affected favorably 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 favorably by approximately $5 million and $8 million, respectively.

For both periods, the region’s increased net revenues were driven by the Levi’s ^® brand, reflecting a higher volume of sales in our retail stores and at wholesale. Higher net revenues in the region also reflected the price increases we have implemented. The improved Levi’s ^® brand performance was partially offset by declines in the three-month period of net sales from our U.S. Dockers ^® brand.

Europe . Net revenues in Europe increased on both reported and constant-currency bases for the three- and six-month periods, with currency affecting net revenues favorably by approximately $18 million and $5 million, respectively.

The increase in the region’s net revenues was driven by the expansion and improved performance of our company-operated retail network throughout the region and higher sales in our traditional wholesale channels. Growth primarily reflected the success of our Levi’s ^® brand women’s products.

Asia Pacific . Net revenues in Asia Pacific increased on both reported and constant-currency bases for the three- and six-month periods, with currency affecting net revenues favorably by approximately $13 million and $22 million, respectively.

The net revenues increase in both periods was primarily from our Levi’s ^® brand, driven by the continued expansion of our brand-dedicated retail network in China and India as well as other of our emerging markets, offset by the continued decline of net revenues in Japan. Sales of our Denizen ^tm brand products were partially offset by corresponding declines in Signature brand sales as we transition the brand in the region.

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 29,			May 30,			Increase			May 29,			May 30,			Increase
	2011			2010			(Decrease)			2011			2010			(Decrease)
	(Dollars in millions)

Net revenues	$	1,092.9		$	976.5			11.9	%	$	2,213.6		$	2,011.7			10.0	%
Cost of goods sold		552.2			477.1			15.7	%		1,114.9			979.3			13.8	%

Gross profit	$	540.7		$	499.4			8.3	%	$	1,098.7		$	1,032.4			6.4	%

Gross margin		49.5	%		51.1	%					49.6	%		51.3	%

As compared to the same prior-year periods, the gross profit increase for the three- and six-month periods ended May 29, 2011, was driven by the increase in our net revenues and favorable currency impact of approximately $20 million and $22 million, respectively, partially offset by a decline in our gross margin. The gross margin decrease was primarily due to an increase in sales discounts, in both our Levi’s ^® and Dockers ^® brands, to drive sales and manage inventory, and the higher cost of cotton. These factors were partially offset by the increased revenue contribution from our company-operated retail network, which generally has a higher gross margin than our wholesale business, and our price increases.

Selling, general and administrative expenses

The following table shows our selling, general and administrative (“SG&A”) 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 29,			May 30,										May 29,			May 30,
					%			2011			2010							%			2011			2010
	May 29,		May 30,		Increase			% of Net			% of Net			May 29,		May 30,		Increase			% of Net			% of Net
	2011		2010		(Decrease)			Revenues			Revenues			2011		2010		(Decrease)			Revenues			Revenues
	(Dollars in millions)

Selling	$	174.1	$	147.7		17.8	%		15.9	%		15.1	%	$	349.3	$	304.0		14.9	%		15.8	%		15.1	%
Advertising and promotion		72.2		71.1		1.5	%		6.6	%		7.3	%		134.4		129.6		3.7	%		6.1	%		6.4	%
Administration		103.3		98.6		4.8	%		9.5	%		10.1	%		207.3		193.4		7.2	%		9.4	%		9.6	%
Other		126.1		112.8		11.9	%		11.5	%		11.5	%		243.8		228.9		6.5	%		11.0	%		11.4	%

Total SG&A	$	475.7	$	430.2		10.6	%		43.5	%		44.1	%	$	934.8	$	855.9		9.2	%		42.2	%		42.5	%

Currency drove approximately $16 million and $15 million of the increase in SG&A expenses for the three- and six-month periods ended May 29, 2011, respectively, as compared to the same prior-year periods.

Selling . In both periods, currency drove approximately $7 million of the increase. Higher selling expenses across all business segments primarily reflected additional costs, such as rents and increased headcount, associated with the continued expansion of our company-operated store network. We had 45 more company-operated stores at the end of the second quarter of 2011 than we did at the end of the second quarter of 2010.

Advertising and promotion . For both periods, the increase in advertising and promotion expenses was attributable to the effects of currency. Expenses in both periods in 2011 and 2010 included campaign spend in support of our U.S. Levi’s ^® and U.S. Dockers ^® brands and, with respect to expenses in 2011, our recently-launched Denizen ^tm brand.

Administration . Higher administration expenses in both periods included increased spending on various corporate initiatives, and with respect to the six-month period, an increase in incentive compensation expense related to higher projected funding.

Other . Other SG&A expenses include distribution, information resources, and marketing organization costs. These costs increased primarily due to an increase in severance costs for headcount reductions as well as increased marketing project costs related to our strategic initiatives.

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 29,			May 30,												May 29,			May 30,
							%			2011			2010									%			2011			2010
	May 29,			May 30,			Increase			% of Net			% of Net			May 29,			May 30,			Increase			% of Net			% of Net
	2011			2010			(Decrease)			Revenues			Revenues			2011			2010			(Decrease)			Revenues			Revenues
	(Dollars in millions)

Operating income:
Americas	$	82.6		$	84.9			(2.7	)%		13.8	%		15.2	%	$	157.6		$	161.0			(2.1	)%		13.2	%		14.6	%
Europe		37.5			31.6			18.7	%		13.3	%		13.2	%		108.8			98.0			11.1	%		18.4	%		17.9	%
Asia Pacific		25.5			16.9			50.5	%		12.0	%		9.5	%		62.8			47.5			32.1	%		14.6	%		13.1	%

Total regional operating income		145.6			133.4			9.1	%		13.3	%*		13.7	%*		329.2			306.5			7.4	%		14.9	%*		15.2	%*
Corporate expenses		80.6			64.2			25.5	%		7.4	%*		6.6	%*		165.3			130.0			27.2	%		7.5	%*		6.5	%*

Total operating income	$	65.0		$	69.2			(6.1	)%		5.9	%*		7.1	%*	$	163.9		$	176.5			(7.2	)%		7.4	%*		8.8	%*

Operating margin		5.9	%		7.1	%											7.4	%		8.8	%


*		Percentage of consolidated net revenues

Currency favorably affected total operating income by approximately $4 million and $7 million for the three- and six-month periods, respectively.

Regional operating income .


	•	Americas. For both periods, the decrease in operating margin and operating income primarily reflected the region’s decline in gross margin, the effects of which were partially offset by higher net revenues.

	•	Europe. For both periods, the increase in operating margin and operating income was primarily due to higher net revenues and the favorable impact of currency.

	•	Asia Pacific. For both periods, the increase in operating margin and operating income primarily reflected the region’s improved gross margin and higher net revenues as well as the favorable impact of currency.

Corporate . Corporate expenses are selling, general and administrative expenses that are not attributed to any of our regional operating segments. Higher corporate expenses in both periods included an increase in severance costs for headcount reductions, increased costs associated with various corporate initiatives and higher marketing project costs, and with respect to the six-month period, increased incentive compensation expense due to higher projected funding.

Interest expense

Interest expense decreased to $33.5 million and $68.4 million for the three- and six-month periods ended May 29, 2011, respectively, from $34.4 million and $68.6 million for the same periods in 2010. A decline in interest expense driven by lower average borrowing rates, resulting from our debt refinancing activity that occurred in the second quarter of 2010, was partially offset by an increase in interest expense on our deferred compensation plans.

The weighted-average interest rate on average borrowings outstanding was 6.84% for both the three- and six-month periods ended May 29, 2011, as compared to 7.40% and 7.33%, respectively, for each of the same periods in 2010.

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 29, 2011, we recorded expense of $1.0 million and $7.0 million, respectively, as compared to income of $6.7 million and $19.2 million for the same prior-year periods.

The net expense in the three-month period in 2011 reflected losses on our foreign currency denominated balances, offset primarily by gains relating to the effect of a correcting entry to record embedded foreign currency derivatives in certain of our leases. The expense in the six-month period in 2011 primarily reflected losses on foreign exchange derivatives which generally economically hedge future cash flow obligations of our foreign operations. The income in 2010 primarily reflected gains on foreign exchange derivatives.

Income tax expense

Our effective income tax rate was 32.6% for the six months ended May 29, 2011, compared to 66.1% for the same period ended May 30, 2010. Twenty-six percentage points of the higher 2010 effective tax rate were driven by two significant discrete income tax charges recognized in the second quarter of 2010, as described below.

During the second quarter of 2010, we recorded a discrete tax expense of $14.2 million to recognize a valuation allowance to fully offset the amount of deferred tax assets in Japan and another discrete tax expense of $14.0 million to recognize the reduction in deferred tax assets as a result of the enactment of the Patient Protection and Affordable Care Act (the “Health Care Act”).

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 an amended and restated senior secured revolving credit facility. The maximum availability under the facility is $750 million secured by certain of our domestic assets and certain U.S. trademarks associated with the Levi’s ^® brand and other related intellectual property. The facility includes a $250 million trademark tranche and a $500 million revolving tranche. The revolving tranche increases as the trademark tranche is repaid, up to a maximum of $750 million when the trademark tranche is repaid in full. Upon repayment of the trademark tranche, the secured interest in the U.S. trademarks will be released. As of May 29, 2011, we had borrowings of $108.3 million under the trademark tranche and no outstanding borrowings under the revolving tranche. Unused availability under the revolving tranche was $294.5 million, as our total availability of $378.0 million, based on collateral levels as defined by the agreement, was reduced by $83.5 million of other credit-related instruments such as documentary and standby letters of credit allocated under the facility.

Under the facility, we are required to meet a fixed charge coverage ratio as defined in the agreement of 1.0:1.0 when unused availability is less than $100 million. This covenant will be discontinued upon the repayment in full and termination of the trademark tranche described above, at which time our availability under the facility will be reduced by a required unfunded availability reserve of $50 million.

As of May 29, 2011, we had cash and cash equivalents totaling approximately $258.5 million, resulting in a total liquidity position (unused availability and cash and cash equivalents) of $553.0 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 2011 from those disclosed in our 2010 Annual Report on Form 10-K, except for our projected pension plan contributions. Based on changes in discount rates and the updated valuation of our pension assets, as well as our current evaluation of alternative methods available to us for measuring our pension funding obligation, we now expect our required contribution amount in 2011 to be approximately $70 million.

Cash flows

The following table summarizes, for the periods indicated, selected items in our consolidated statements of cash flows:


	Six Months Ended
	May 29,			May 30,
	2011			2010
	(Dollars in millions)

Cash provided by operating activities	$	85.4		$	146.4
Cash used for investing activities		(80.9	)		(94.6	)
Cash (used for) provided by financing activities		(20.1	)		28.9
Cash and cash equivalents		258.5			353.1

Cash flows from operating activities

Cash provided by operating activities was $85.4 million for the six-month period in 2011, as compared to $146.4 million for the same period in 2010. Cash provided by operating activities declined compared to the prior year due to higher cash used for inventory, our pension plan contribution in the first quarter of 2011, and higher payments to vendors, reflecting the increase in our SG&A expenses. This decline was partially offset by an increase in cash collected from customers, reflecting our higher net revenues, and a decrease in cash paid for interest related to our refinancing activities in May 2010.

Cash flows from investing activities

Cash used for investing activities was $80.9 million for the six-month period in 2011, as compared to $94.6 million for the same period in 2010. As compared to the prior year, the decrease in cash used for investing activities primarily reflects the 2010 costs associated with the remodeling of the Company’s headquarters, partially offset by investments made in our information technology systems associated with the installation of our global enterprise resource planning system in 2011. Cash used for investing activities in 2010 also reflected final payment for an acquisition in 2009.

Cash flows from financing activities

Cash used for financing activities was $20.1 million for the six-month period in 2011, compared to cash provided of $28.9 million for the same period in 2010. Cash used in 2011 primarily related to our dividend payment to stockholders of $20.0 million. Net cash provided in 2010 reflected our May 2010 refinancing activities.

Indebtedness

We had fixed-rate debt of approximately $1.5 billion (77% of total debt) and variable-rate debt of approximately $0.4 billion (23% of total debt) as of May 29, 2011. The borrower of substantially all of our debt is Levi Strauss & Co., the parent and U.S. operating company. Our long-term debt agreements contain customary covenants

restricting our activities as well as those of our subsidiaries. We are in compliance with all of these covenants. There have been no substantial changes to our required aggregate debt principal payments for each of the next five years and thereafter from those disclosed in our 2010 Annual Report on Form 10-K.

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 2010 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 2010 Annual Report on Form 10-K except for the following:


	•	We no longer consider our accounting policy on derivative and foreign exchange management activities to be critical; and

	•	We measure changes in the funded status of our pension and postretirement benefits plans using actuarial models which utilize an attribution approach that generally spreads individual events either over the estimated service lives of the remaining employees in the plan, or, for plans where participants will not earn additional benefits by rendering future service, over the plan participants’ estimated remaining lives.

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 28, 2010, 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:


	•	consequences of impacts to the businesses of our wholesale customers caused by factors such as lower consumer spending, pricing changes and general economic conditions and changing consumer preferences;


	•	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;

	•	our ability to mitigate 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 rising costs of manufacturing, sourcing, and raw materials supply;

	•	our ability to mitigate the impact of a slowdown in the Japanese economy due to the natural disasters and related events in that country;

	•	our adjustment to organizational changes including the continued globalization of our brand management and the introduction of a new chief executive officer;

	•	our ability to grow our Dockers ^® brand and to expand our Denizen ^tm brand into new markets and channels;

	•	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 effect 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 2010 Annual Report on Form 10-K.


Item 4T.	*CONTROLS AND PROCEDURES*

Evaluation of Disclosure Controls and Procedures

As of May 29, 2011, we updated our evaluation of the effectiveness of the design and operation of our disclosure controls and procedures for purposes of filing reports under the Securities and Exchange Act of 1934 (the “Exchange Act”). This controls evaluation was done under the supervision and with the participation of management, including our chief executive officer and our chief financial officer. Our chief executive officer and our chief financial officer concluded that at May 29, 2011, our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) are effective to provide reasonable assurance that information that we are required to disclose in the reports that 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. Our disclosure controls and procedures are designed to provide reasonable assurance 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.

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.

PART II — OTHER INFORMATION


Item 1.	*LEGAL PROCEEDINGS*

Litigation. There have been no material developments in our litigation matters since we filed our 2010 Annual Report on Form 10-K.

In the ordinary course of business, we have various pending cases involving contractual matters, employee-related matters, distribution questions, product liability claims, trademark infringement and other matters. We do not believe there are any pending legal proceedings that will have a material impact on our financial condition or results of operations.


Item 1A.	*RISK FACTORS*

There have been no material changes in our risk factors from those disclosed in our 2010 Annual Report on Form 10-K.


Item 2.	*UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS*

None.


Item 3.	*DEFAULTS UPON SENIOR SECURITIES*

None.


Item 4.	*REMOVED AND RESERVED*


Item 5.	*OTHER INFORMATION*

None.


Item 6.	*EXHIBITS*


10	.1	Employment Agreement between the Company and Charles V. Bergh, dated June 9, 2011. Incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed with the Commission on June 16, 2011.
10	.2	Transition Services, Separation Agreement and Release of All Claims between John Anderson and the Company, dated June 16, 2011. Incorporated by reference to Exhibit 10.2 to Registrant’s Current Report on Form 8-K filed with the Commission on June 16, 2011.
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.

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.

LEVI STRAUSS & C o .
(Registrant)


	By:	/s/ Heidi L. Manes

Heidi L. Manes

Vice President and Controller

(Principal Accounting Officer)

Date: July 12, 2011

EXHIBIT INDEX


10	.1	Employment Agreement between the Company and Charles V. Bergh, dated June 9, 2011. Incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed with the Commission on June 16, 2011.
10	.2	Transition Services, Separation Agreement and Release of All Claims between John Anderson and the Company, dated June 16, 2011. Incorporated by reference to Exhibit 10.2 to Registrant’s Current Report on Form 8-K filed with the Commission on June 16, 2011.
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.

TABLE OF CONTENTS

Part I Financial Informationprint Item 1. Consolidated Financial Statementsprint Note 1: Significant Accounting Policiesprint Note 2: Goodwill and Other Intangible Assetsprint Note 3: Fair Value Of Financial Instrumentsprint Note 4: Derivative Instruments and Hedging Activitiesprint Note 5: Debtprint Note 6: Employee Benefit Plansprint Note 7: Commitments and Contingenciesprint Note 8: Dividend Paymentprint Note 9: Comprehensive Income (loss)print Note 10: Other Income (expense), Netprint Note 11: Income Taxesprint Note 12: Related Partiesprint Note 13: Business Segment Informationprint Note 14: Subsequent Eventprint Item 2. Management S Discussion and Analysis Of Financial Condition and Results Of Operationsprint Item 3. Quantitative and Qualitative Disclosures About Market Riskprint Item 4T. Controls and Proceduresprint Part II Other Informationprint Item 1. Legal Proceedingsprint Item 1A. Risk Factorsprint Item 2. Unregistered Sales Of Equity Securities and Use Of Proceedsprint Item 3. Defaults Upon Senior Securitiesprint Item 4. Removed and Reservedprint Item 5. Other Informationprint Item 6. Exhibitsprint

Exhibits

EX-31.1 EX-31.2 EX-32

DIRECTORS	AGE	BIO
William A Burck	53	William A. Burck has been a Director of the Company since June 2021 and serves as Chair of the Compensation Committee and as a member of the Nominating and Corporate Governance Committee. Mr. Burck is Global Co-Managing Partner of the law firm Quinn Emanuel Urquhart & Sullivan, LLP, where he has been a partner since 2012. Mr. Burck served as Deputy Staff Secretary, Special Counsel and Deputy White House Counsel to President George W. Bush from 2005 to 2009. Mr. Burck previously served in the Criminal Division of the U.S. Department of Justice, as an Assistant United States Attorney in the Southern District of New York, and as a law clerk for Supreme Court Justice Anthony M. Kennedy. Mr. Burck is a leading trial lawyer and corporate counselor who brings to the Board his decades of experience advising companies, boards of directors, senior executives and government officials in complex litigation and business matters. His experience, including government service, strengthens the Board’s insight on regulatory issues and important constitutional questions.
Tony Abbott AC	66	Tony Abbott AC has been a Director of the Company since November 2023 and serves as a member of the Nominating and Corporate Governance Committee. Mr. Abbott served as the 28 th Prime Minister of Australia from 2013 to 2015. Mr. Abbott was Leader of the Liberal Party of Australia from 2009 to 2015 and a member of parliament from 1994 to 2019. Mr. Abbott was an advisor to the UK Board of Trade from September 2020 to August 2024. In addition, he has served as the Australian Commissioner of the Global Tech Security Commission since 2023 and served on the Board of Trustees of the Global Warming Policy Foundation since 2023, the Advisory Board of The Alliance for Responsible Citizenship since 2023, the Council for the Australian War Memorial since 2019 and the Board of the Ramsay Center for Western Civilisation since 2016. Mr. Abbott brings to the Board decades of executive leadership, expertise in matters of trade, economic and public policy, and a strong international business development network.
Roland A Hernandez	66	Roland A. Hernandez has been a Director of the Company since March 2019 and serves as Chair of the Audit Committee and as a member of the Nominating and Corporate Governance Committee. Since 2001, Mr. Hernandez has been the Founding Principal and Chief Executive Officer of Hernandez Media Ventures, a company engaged in the acquisition and management of media assets. Mr. Hernandez was President and Chief Executive Officer of Telemundo Group, Inc. from 1995 to 2000 and its Chairman from 1998 to 2000. Mr. Hernandez also serves on the Board of Directors of U.S. Bancorp and Take-Two Interactive Software, Inc. Mr. Hernandez previously served on the Boards of Directors of Belmond Ltd., MGM Resorts International, The Ryland Group, Inc., Sony Corporation, Vail Resorts, Inc. and Wal-Mart Stores Inc. He serves on the Advisory Board of Harvard Law School. As a veteran media owner and executive, Mr. Hernandez offers strong leadership, operational and strategic expertise. His significant experience on public company boards of directors is a valuable resource to the Board, in particular relating to financial reporting, accounting and corporate governance matters.
Paul D Ryan	54	Paul D. Ryan has been a Director of the Company since March 2019 and serves as Chair of the Nominating and Corporate Governance Committee and a member of the Compensation Committee. He is a General Partner of the private equity firm Solamere Capital, LLC and Chair of the firm’s Executive Partner Group. He is Vice Chairman of Teneo Strategy LLC and also serves on the Advisory Boards of Robert Bosch Gmbh and Paradigm Operations L.P. and the Boards of Directors of Xactus (formerly UniversalCIS) and SHINE Medical Technologies, LLC. Mr. Ryan served as Chairman of the Board of Directors of Executive Network Partnering Corporation from 2020 to 2022. He has been a Professor of the Practice, Political Science and Economics, at the University of Notre Dame since 2019. Mr. Ryan was the 54 th Speaker of the U.S. House of Representatives from 2015 to 2019, Chairman of the House Ways and Means Committee from January 2015 to October 2015 and Chairman of the House Budget Committee from 2011 to 2015. Mr. Ryan served as a Member of the U.S. House of Representatives from 1999 to 2019. In 2012, he was selected to serve as former Governor Mitt Romney’s Vice-Presidential nominee. A proven leader and policy expert, Mr. Ryan’s extensive experience provides the Company with perspectives on strategy and operations in regulated industries. He offers the Board valuable insight on leadership, public policy and strategic development.
Margaret Peggy L Johnson	62	Margaret “Peggy” L. Johnson has been a Director of the Company since November 2023 and serves as a member of the Audit Committee and the Compensation Committee. Ms. Johnson has been the Chief Executive Officer of Agility Robotics, a robotics engineering company, since March 2024. Ms. Johnson previously served as the Chief Executive Officer of Magic Leap, Inc., a U.S. augmented reality company, from August 2020 to October 2023. She served as Executive Vice President of Business Development at Microsoft Corporation, where she was responsible for strategic deals and partnerships across various industries, from 2014 to 2020. Before Microsoft, Ms. Johnson was Executive Vice President of Qualcomm Technologies, Inc. and President of Global Market Development at Qualcomm Incorporated. Ms. Johnson has served on the Board of Directors of BlackRock, Inc. since 2018 and served on the Board of Directors of Live Nation Entertainment, Inc. from 2013 to 2018. She was an Advisor to Huntington’s Disease Society of America, San Diego Chapter from 2010 to 2020. Ms. Johnson brings to the Board a wealth of expertise and leadership experience across the technology sector, providing the Company with unique insight into emerging technologies and over three decades of business operations and strategic development experience.
Lachlan K Murdoch	65	Lachlan K. Murdoch has been Executive Chair of the Board since January 2019 and Chief Executive Officer of the Company since October 2018. Mr. L.K. Murdoch served as Executive Chairman of Twenty-First Century Fox, Inc. (“21CF”), the Company’s former parent, from 2015 to March 2019, its Co-Chairman from 2014 to 2015 and a Director since 1996. He served as Executive Chairman of NOVA Entertainment, an Australian media company, from 2009 to 2022 and has served as the Executive Chairman of Illyria Pty Ltd, a private company, since 2005. Mr. L.K. Murdoch was a Director of Ten Network Holdings Limited, an Australian media company, from 2010 to 2014 and its Non-Executive Chairman from 2012 to 2014, after serving as its Acting Chief Executive Officer from 2011 to 2012. He has served as a Director of News Corporation (“News Corp”) since 2013, where he served as its Co-Chairman from 2014 to 2023 and its Chair since 2023. Mr. L.K. Murdoch is the son of Mr. K. Rupert Murdoch, who stepped down as Chair and was appointed Chairman Emeritus of the Company in November 2023. Mr. L.K. Murdoch brings to the Board a wealth of knowledge regarding the Company’s operations and the media industry, as well as management and strategic skills. With his extensive experience leading the Company and 21CF and his expertise in the media industry, Mr. L.K. Murdoch leads the Board in developing corporate strategies, directing the corporate agenda and overseeing the Company’s operations.
Chase Carey	70	Chase Carey has been a Director of the Company since March 2019. Mr. Carey is the Lead Independent Director and serves as a member of the Audit Committee and the Compensation Committee. He served as Chief Executive Officer of Formula 1 Group from 2017 to 2021 and as its Chairman from 2016 to 2022. Mr. Carey served 21CF in numerous roles, including as Vice Chairman of the 21CF Board from July 2016 to March 2019, Executive Vice Chairman from July 2015 through June 2016, President and Chief Operating Officer and Deputy Chairman from 2009 through June 2015, Co-Chief Operating Officer from 1996 to 2002, a consultant from 2016 to 2018 and a Director from 1996 to 2007. Mr. Carey served on the Supervisory Board of Sky Deutschland, a German media company, from 2010 to 2014 and as its Chairman from 2010 to 2013. Mr. Carey was a Director of Sky plc from 2003 to 2009 and from 2013 to 2018. He was a Director of Saban Capital Acquisition Corp. from 2016 to 2019 and Chief Executive Officer, President and a Director of DIRECTV from 2003 to 2009. Mr. Carey provides the Board with extensive executive experience and operational expertise in the media and sports industries. Having served in a variety of leadership positions at 21CF and its affiliates for over 30 years, Mr. Carey has a broad and deep understanding of the Company and its operations.

Name and Principal Position	Fiscal Year	Salary		Bonus		Stock Awards		Option Awards		Non-Equity Incentive Plan Compensation		Change in Pension Value and Nonqualified Deferred Compensation Earnings		All Other Compensation	Total
Lachlan K. Murdoch Executive Chair and Chief Executive Officer	2024	$	3,000,000	$	—		$9,349,947		$2,750,000		$ 6,000,000		$ 904,000	$ 1,802,078	$	23,806,025
	2023	$	3,000,000	$	—		$9,168,582		$2,750,000		$ 4,447,500		$ 646,000	$ 1,765,820	$	21,777,902
	2022	$	3,000,000	$	—		$8,211,824		$2,750,000		$ 6,270,000		$ —	$ 1,516,857	$	21,748,681
John P. Nallen Chief Operating Officer	2024	$	2,000,000	$	—		$4,249,971		$1,250,000		$ 3,000,000		$ 1,733,000	$ 145,356	$	12,378,327
	2023	$	2,000,000	$	—		$4,167,486		$1,250,000		$ 2,223,750		$ 924,000	$ 117,350	$	10,682,586
	2022	$	2,000,000	$	—		$3,732,621		$1,250,000		$ 3,135,000		$ —	$ 105,073	$	10,222,694
Steven Tomsic Chief Financial Officer	2024	$	1,750,000	$	—		$2,549,949		$ 750,000		$ 2,750,000		$ —	$ 39,185	$	7,839,134
	2023	$	1,750,000	$	—		$2,500,493		$ 750,000		$ 1,853,125		$ —	$ 26,461	$	6,880,079
	2022	$	1,500,000	$	—		$1,493,016		$ 500,000		$ 2,612,500		$ —	$ 31,256	$	6,136,772
Adam Ciongoli Chief Legal and Policy Officer	2024	$	1,016,346	$	—		$4,630,657		$ 750,000		$ 2,750,000		$ —	$ 19,670	$	9,166,672
		$	—	$	—		$ —		$ —		$ —		$ —	$ —	$	—
		$	—	$	—		$ —		$ —		$ —		$ —	$ —	$	—
K. Rupert Murdoch Former Chair	2024	$	1,923,077	$	2,295,082		$6,466,372		$2,122,314		$ —		$ 8,130,000	$ 233,098	$	21,169,943
	2023	$	5,000,000	$	—		$5,834,521		$1,750,000		$ 4,447,500		$ 5,709,000	$ 200,879	$	22,941,900
	2022	$	5,000,000	$	—		$5,225,715		$1,750,000		$ 6,270,000		$ —	$ 191,059	$	18,436,774
Viet D. Dinh Former Chief Legal and Policy Officer	2024	$	1,500,000	$	1,500,000		$ —		$ —		$ —		$ —	$24,329,545	$	27,329,545
	2023	$	3,000,000	$	—		$4,167,486		$1,250,000		$ 2,223,750		$ —	$ 99,955	$	10,741,190
	2022	$	3,000,000	$	—		$3,732,621		$1,250,000		$ 3,135,000		$ —	$ 71,848	$	11,189,469

Customer name	Ticker
The Gap, Inc.	GPS
Nordstrom, Inc.	JWN
Ross Stores, Inc.	ROST
The TJX Companies, Inc.	TJX

Supplier name	Ticker
Expeditors International of Washington, Inc.	EXPD
Eastman Chemical Company	EMN
Matson, Inc.	MATX

Owner	Position	Direct Shares	Indirect Shares
NALLEN JOHN	-	338,408	0
NALLEN JOHN	-	249,424	150,000
CAREY CHASE	-	230,499	0
Tomsic Steven	-	110,568	0
MURDOCH KEITH RUPERT	-	65,727	128,964
DINH VIET D	-	56,161	0
Ciongoli Adam G.	-	29,897	0
HERNANDEZ ROLAND A	-	9,646	3,000
MURDOCH KEITH RUPERT	-	0	1,200,860
MURDOCH KEITH RUPERT	-	0	128,964

LEVI 10-Q Quarter ended May 29, 2011

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Exhibits